Tutor Perini Corp (TPC) 2007 Q4 法說會逐字稿

Good day everyone and welcome to the Perini Corporation fourth quarter and year-end conference call. Today's conference is being recorded. At this time I would like to turn the call over to Mr. Crocker Coulson.

Good afternoon everyone, thanks for joining us on Perini's fourth quarter 2007 conference call. With us today on the call are Perini's President, Mr. Bob Band; the Company's Chief Financial Officer, Ken Burk and Dick Rizzo, Vice Chairman of Perini Building Company, the largest business unit of the Company.

Our agenda for today follows our usual format. First, Bob Band is going to discuss the highlights of the fourth quarter, some new contract wins and other successes. After that, Ken Burk will review the Company's fourth quarter financial results in detail and provide update to guidance. Then Bob is going to come back and make some closing remarks, and at that point we're going to open up the call to your questions.

Before we start, I would like to remind our listeners that our comments today will contain forward-looking statements and management may make some additional forward-looking statements in response to your questions. These types of written and oral disclosures are made pursuant to the Safe Harbor provision contained in the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements do involve risks and uncertainties that could cause actual results to differ materially from anticipated results. The Company cautions that any such forward-looking statements are based upon assumptions that the Company believes are reasonable but that are subject to a wide range of risks and uncertainties and actual results may differ materially. These types of statements and underlying factors related to the statements are listed in filed information with the SEC, including Perini's annual report on Form 10-K for the fiscal year ended December 31, 2006 as well as in today's press release. Our statements on this call are made as of today, February 26, 2008 and the Company undertakes no obligation to update any of these forward-looking statements contained in the call, whether as a result of new information, future events, changes in expectations or otherwise.

With those formalities out of the way, it's now my pleasure to turn this call over to Bob Band.

Thanks, Crocker. Good afternoon everyone and thank you for joining us on the call today. We closed 2007 with an exceptional fourth quarter with revenues of $1.2 billion, up 32% from a year ago and net income of $22.9 million up 18% from a year ago. For the full year, we reported the highest revenues and net income in our 114-year history. In 2007, revenues were $4.6 billion, up 52% from $3 billion in 2006 and net income was $97.1 million, up 134% from $41.5 million a year ago.

Our success in both the fourth quarter and the full year was a result of our Building and Management Services segments achieving outstanding operating performance in 2007. Our Building business continued to convert our significant backlog of work into revenues, profit and cash flow, as anticipated. Management Services made a solid contribution to our performance this year and continued its fine work on overhead coverage protection systems as well as fuel and water storage projects in Iraq. Ken Burk will review our financial results in more detail later in the call.

During the fourth quarter we successfully converted $1.2 billion of our backlog into revenues. The backlog of uncompleted construction work at December 31, 2007 was $7.6 billion, down approximately 2.6% from September 30, 2007 and down approximately 10.5% from backlog of $8.5 billion reported at December 31, 2006. This burn-off of backlog is a normal part of our business and can continue as we work through our major building projects until we sign up a number of the large prospects that we're now pursuing. One key area of focus going forward is sustaining the momentum of our business.

The December 31, 2007 backlog includes new contract awards and adjustments to contracts in process added during the fourth quarter totaling $1 billion which include approximately $497 million of various new work awards at Rudolf and Sletten, $281 million of additional work in the hospitality and gaming markets in Las Vegas, Maryland and [Maryland] and $230 million of new work in the Civil segment. For the full year 2007, we were awarded $3.75 billion in new contracts and changes to contracts in process, most of which came in the Building segment.

The recent turmoil in credit markets and slowdown in residential construction have fueled concerns about the economy at large and the outlook for the nonresidential building market. While some forecasts anticipate nonresidential construction to be flat or down slightly in 2008, our outlook for future growth remains positive. This is due to the healthy pipeline of new prospects in each of our key markets and geographic areas. Many of the major projects we are pursuing have a gaming element and are planned years in advance by existing operators of large gaming and hospitality programs rather than by small or private developers. Currently we have targeted prospects totaling approximately $13.5 billion in the gaming and hospitality market that could be awarded in 2008 or 2009.

In addition, spending on education, health care and civil transportation projects continue to make those areas very attractive markets for Perini. For example, we have identified approximately $5.4 billion in targeted projects that could be awarded in 2008 or 2009 in the education, health care and office and industrial building markets in California or in Florida. In the fourth quarter, our Building segment continued to work on each of our complex large-scale projects. During the quarter, we added $247 million in additional work scope to our largest project, MGM Project City Center in Las Vegas, bringing contract value $5.5 billion for that contract alone. We're making good progress on each of the main structures at the 66-acre site. We have poured the 36th floor of the 61-story [Kelly] Tower Hotel Casino and are in the process of installing curtain walls on the 24th and 25th floors. We are up to the 51st floor on the VDara Condo Hotel and the 23rd floor of the Mandarin Tower. We began pouring decks at both the Twin Veer Towers and are up to the seventh floor at the West Tower and the fourth floor at the East Tower.

We are preparing to pour the fourth floor at the Harmon Hotel and structural steel erection continues at the retail and entertainment district. Our work at the $1.8 billion Cosmopolitan Resort and Casino in Las Vegas continues unabated. The owner has advised us that they have entered into an agreement in principle with a new equity investor and are currently working on the necessary agreements. All current amounts due to us have been paid and we have an interim agreement with Deutsche Bank for payments continuing on a monthly basis. Work is proceeding on schedule, structural steel is 80% complete and we're up to the fifth floor in the West Tower and up to the third floor in the East Tower. This project has a prominent location on this strip just south of the Bellagio and we are confident that the Cosmopolitan Resort and Casino will be completed on the original time line at the end of 2009.

The $379 million Trump International Hotel and Tower in Las Vegas is complete except for the some work in the restaurant. This project will be turned over in early 2008. At the $510 million MGM Grand at Foxwoods in Connecticut, we have turned over the junior ballroom, meeting rooms and half the floors in the tower which are now being used for furniture installation. By the end of this week, we will turn over the main ballroom and all three function areas. We are now in the final phase of our $795 million joint venture contract for the Gaylord National Resort and Convention Center in Prince George's County, Maryland. The convention center has been turned over to the owner and has already been used for an event. We have also turned over about half of the hotel rooms and expect to turn over all remaining rooms by the end of March.

As we complete these two major projects in the Northeast, we are actively pursuing new work to fully engage our Northeast building teams. We're proposing on several significant hospitality and gaming projects in New York, New Jersey and Pennsylvania, some of which are prospects for current and previous customers. We are in discussions with MGM concerning their announced megaproject in Atlantic City, the East Coast counterpart of City Center, Las Vegas. The Las Vegas market remains healthy and there are several active prospects with construction starts beginning in late 2008 and 2009, including the Plaza, a multibillion dollar replica of the framed Plaza Hotel in New York. We are actively pursuing a number of these project opportunities.

In addition to gaming and hospitality projects, we are planning to bid on the $1 billion expansion of the McCarran Airport in Las Vegas, which could leverage our expertise in both building and civil construction.

In California, Rudolph and Sletten continues to build on its reputation for quality and expertise in building health care and educational facilities, corporate campuses and biotech labs. In 2007, Rudolph and Sletten was ranked the number one builder of health care facilities in California by California Construction Magazine. The $497 million in new work added to Rudolph and Sletten's backlog in the fourth quarter of 2007 includes a $229 million office complex for J. Paul Company in California, a $120 million expansion of a medical center also in California and other industrial building work which are primarily being performed for repeat clients. In addition, Rudolph and Sletten is poised to benefit from the approval of four gaming compacts in California which were approved in February of 2008. These measures allow the Pechanga, Morongo, [Sequan] and the Agua Cailente bands of Native Americans to expand their existing gaming operations. We believe we are in an excellent position to win substantial new work in this area, especially since we have worked with three of these tribes in the past. There are also some opportunities for Native American gaming projects in Florida for our James A. Cummings unit as well.

Rudolph and Sletten recently signed a letter of intent with the Dry Creek Ranch Area band of [Pomo] Indians for 600,000 square foot resort hotel and casino in Sonoma County, California. This project currently budgeted at $350 million is not yet in our backlog. In Florida, James A. Cummings has approximately $190 million of new pending awards of education and health care projects which should enter backlog in 2008.

Our Civil segment incurred a loss of $13 million in 2007. This was primarily due to charge we recorded for a pending civil settlement with the U.S. Attorney's office in New York concerning the investigation regarding contracting with disadvantaged minority and women-owned businesses. We have fully cooperated and are actively engaged in discussions with the U.S. Attorney on this matter and hope to finalize a civil settlement in 2008. We plan to get our civil business back to profitability in 2008.

As I noted earlier, we added $230 million in new civil projects to our backlog this quarter, including a $139 million transit project in New York City and an $87 million project to construct the express toll lanes along a section of I-95 in Maryland. We are actively bidding on a number of attractive civil projects in the Northeast, Baltimore and the Washington D.C. areas.

Our Management Services segment delivered another quarter of excellent performance due to our work with the Army Corps of Engineers and the U.S. State Department for work on overhead coverage systems and upgrading fuel and water storage infrastructure at military bases in Iraq. We're currently in talks regarding additional work with our end users. In January, we were among 10 contractors each awarded a sustainment, restoration and modernization acquisition task order, known as SATOC, from the U.S. Air Force. We have not yet received any task orders under this IDIQ contract which is currently funded at the $4 billion level. We're also pursuing additional task order base work on our [HERC] project for the Air Force in the United Kingdom and under the CENTCOM program for the U.S. Army Corps of Engineers in Iraq.

2007 was an extremely successful year for Perini. We successfully executed on each of our major building projects and converted backlog into record revenues and profits. We have a diverse pipeline of new projects available in each of our geographic regions and primary markets that will allow us to continue to grow our business in the future.

With that, I will turn the call over to Ken, who will give you the financial details for the quarter.

Thank you Bob. I will now review the fourth quarter and year end financial results in some detail.

As Bob mentioned earlier, our backlog at December 31, 2007 totaled $7.6 billion, down 2.6% from $7.8 billion at September 30, 2007 and down 10.5% from $8.5 billion at December 31, 2006. Backlog by segment is Building $7 billion, Civil $458 million and Management Services $128 million. In the fourth quarter of 2007, revenues were $1.25 billion, an increase of 32% from $944 million reported in the fourth quarter of '06. On a reportable segment basis, revenues from our Building segment were $1.16 billion, an increase of 45% from $801 million in the fourth quarter of '06. This increase was primarily due to the conversion of our substantial Building segment backlog into revenues from our hospitality and gaming projects.

Also I would like to point out that our building businesses in California and Florida have increased revenues by 29% and 89%, respectively, in the fourth quarter compared with the fourth quarter of '06. Most of this revenue is derived from our health care and education projects in these markets.

Revenues from our Civil segment were $52 million, down 31% from $75 million in the fourth quarter of '06 due primarily to the timing of the startup of new work.

Management Services revenues were $31 million, down 55% from $69 million a year ago. This decline was primarily due to the completion of our nuclear power plant maintenance and modification contract with Excelon at the end of 2006 and a decreased volume of work in Iraq.

Our total gross profit increased 9% to $62.2 million from $56.9 million in the fourth quarter of '06. This increase is due to the profitable revenue growth in each of our building construction companies.

General and administrative expenses were $28.2 million, up 9% from $25.9 million in the fourth quarter of '06. This was primarily the result of increases in the building, construction and corporate, general and administrative expenses. Total G&A expenses were 2.3% of revenues compared to 2.7% in the fourth quarter of '06 which reflect an improvement in overhead efficiency with the 32% increase in revenues from the same period. Income from construction operations was $34 million in the fourth quarter of 2007, an increase of 10% from $31 million in the fourth quarter of '06.

Breaking down income from construction operations by segment, the Building segment income from construction operations for the quarter was $34.6 million, an increase of 75% from $19.8 million in the fourth quarter of '06. This increase was due primarily to increased revenues as discussed earlier. Operating margin for the Building segment was 3% in the fourth quarter, up from 2.5% in the fourth quarter of '06. Once again, we have realized significant profitability improvement in all of our building companies. The Civil segment loss from construction operations was $5 million in the fourth quarter of 2007 compared to an income of from construction operations of $2.3 million in the fourth quarter of '06. The loss in the current quarter was due primarily to a downward profit adjustment on a bridge rehabilitation project in the metropolitan New York area and the anticipated civil settlement that Bob discussed earlier.

Management services income from construction operations was $10.9 million in the fourth quarter of 2007 compared to $13.7 million in the fourth quarter of 2006. Management services operating margin was 35% for the quarter versus 20% a year ago. This increase in margin was manly due to effective logistics and risk management on projects in Iraq. Other income was $5.8 million in the fourth quarter of 2007 compared to $1.3 million in the fourth quarter of 2006. This increase was primarily the result of higher interest income due to the significant positive cash flow from operations in 2007 resulting in an increased amount of cash available for short-term investments.

Looking at interest expense, it was $0.4 million compared to $0.9 million in the fourth quarter of 2006. This decline was the result of decreased borrowings on our term loan which was paid in full in conjunction with the closing of our new credit agreement last year in February. The provision for income taxes was $16.5 million compared to $12 million in the fourth quarter of '06. For the full year 2007, our effective tax rate is at 37.1% compared to 40.4% for 2006. Net income was $22.9 million in the fourth quarter of 2007 compared to $19.3 million in the same quarter a year ago. Diluted earnings per share were $0.83 in the fourth quarter of 2007 versus $0.72 for the same period of 2006.

Looking at the full year, we generated revenues of $4.6 billion, up 52% from last year and at the high-end of our guidance range of $4.4 billion to $4.6 billion. Net income was $97.1 million, up 134% from $41.5 million in 2006 and diluted earnings per share were $3.54 compared to $1.54 in 2006, exceeding our guidance of $3.30 to $3.45.

Looking at our balance sheet, at December 31, 2007 our working capital stood at $293.5 million, up from $194 million in 2006. This represents a current ratio of 1.24 to 1, up from 1.22 to 1 at the end of '06. As of December 31, 2007 we had $459.2 million in cash and cash equivalents compared to the December 31, '06 cash balance of $225.5 million. The $233.7 million increase in cash and cash equivalents was a result of a $281.5 million in operating cash flows due to the substantial increase in our Building segment revenues combined with favorable performance by the Management Services segment. In 2007, cash used by investing activities was $25.6 million primarily for the purchase of construction equipment and property to be used in support of our construction operations. Cash used by financing activities was $22.2 million, of which $22.5 million was used to pay the outstanding balance of our term loan.

At December 31, 2007 long-term debt stood at $13.4 million, excluding current portion, and we had $113.5 million available under our credit facility. Stockholders equity increased 51% to $368.3 million from $243.9 million in '06. We believe that our strong financial position and credit arrangements provide us with resources to meet our liquidity and working capital requirements and implement our plans in the future. Finally, we are affirming our initial guidance for 2008 revenues in the range of $5 billion to $5.4 billion and diluted earnings per share estimated to range from $3.50 to $3.75. I will turn the call back over to Bob for his closing comments.

Thanks, Ken. The fourth quarter marked our ninth consecutive quarter of record revenues for Perini and our full-year results were also a record in terms of revenues and profits. Our Building segment continues to live up to its reputation for on-time delivery of large-scale complex projects in the hospitality and gaming market in Las Vegas, California, Connecticut and Maryland. Rudolph and Sletten excelled in its execution of health care and industrial building construction as well as Native American gaming projects. James A. Cummings had a record year in terms of revenue and profits due to its expertise in the education market in Florida. Our Management Services segment also performed well this year due to its work in Iraq on overhead coverage systems and the design and construction of water and fuel storage projects.

Our backlog remains strong at $7.6 billion. It includes approximately 92% cost plus fee and guaranteed maximum price contracts. This provides excellent visibility as to revenues, profits and cash flow due to our consistent and steady execution of our large-scale projects. We have attractive opportunities for new projects in each of our geographic regions and primary markets and have a positive outlook for sustained growth. We have an active acquisition program and continue to screen companies. Given our success, particularly with James A. Cummings and Rudolph and Sletten, we are confident in our ability to identify successful candidates and integrate them into the Perini family.

That concludes our prepared remarks. Ken Burk and Dick Rizzo and I are happy to take your questions at this time.

(OPERATOR INSTRUCTIONS). John Rogers, D.A. Davidson.

Good afternoon. A couple of things. First of all, and I apologize, I know you said it, but cash at the end of the year was how much?

$459.2 million, including equivalents.

Ken, what was your depreciation in the quarter?

Depreciation in the quarter was -- for the quarter, was $2.2 million.

Okay. And Bob you talked about a number of projects that were closing out in the first quarter -- Trump, MGM and the convention center. Is there opportunities for the significant bonuses, or is there any risk of closing those projects out?

We don't see any risks in the closeout. There are opportunities for incentives on some of our projects and we negotiate and build those once we reach agreement with the owners right at the end.

Your feeling on these three?

I will let Dick respond in terms of the incentives on projects that we're finishing up.

We have the opportunity to earn bonuses business on all of our closing -- projects that are closing out -- Foxwoods, Maryland, the Gaylord piece and the Trump piece. Based on how we stand right now with our scheduling, I think we will be in a good position to take advantage of that as we close these projects out.

Lastly, you talked about the Plaza and the other MGM projects -- one in Atlantic City, one in Las Vegas -- and I think, Bob, you said $13.5 billion in total targets in gaming. Can you give us a sense -- I know it's always up to the owner, but when you expect that they may be able to move ahead with actually assigning awards here? I know MGM said the other day, they expect to name an architect within weeks on the Las Vegas project. But any comments on the others?

Dick?

Yes. We have been told by both clients that a decision on the contract will be made in the next three to four weeks. So we should know at least within that time as to whether we have been successful or not. It will be very soon, John.

Dick, you're referring to the Plaza and the MGM -- ?

Plaza and the MGM City Center, Atlantic City.

Okay, so those two projects. And then what about the Kerzner one, too?

The Kerzner one is further out because their schedule for construction is not to start until after MGM Las Vegas City Center is virtually complete. We have been designated verbally on that project and are in pre-construction services with them right now. But I don't anticipate you will have a formal contract in hand for us to put in backlog for at least another six months to a year maybe.

Richard Paget, Morgan Joseph.

That Kerzner project, could you remind us, is that around a $2 billion project?

The last I had seen published, and I cannot share with you because of confidentiality what our latest budget has been on that, but I saw a number higher than that. It was about $2.5 billion. But again, that is just what they have published I think. I don't think there is enough scope definition yet to really put our arms around it, or them to put their arms around it.

Generally speaking maybe you could get into a little bit more detail. I know that some people with the economy get a little bit concerned about some of the gaming prospects, but you mention there was a $13 billion plus in prospects for you guys in particular. I wondered if maybe you could talk about the market in the past and how -- the construction market for the (inaudible) and how it has weathered any cyclical downturn and whether it really has made a difference?

That is a tough one.

Let me jump in here. If you think back on the economy leading up to now, we have had a very strong run, Richard. And the last time we saw any kind of a contraction at all was after 9/11 after the impact on travel with destination resorts, although nothing in our backlog was canceled. It was just a slowdown in the maturing of projects to construction. But I don't think in recent years we have seen any economic or cyclical impact on this stuff.

If you look at all of the indicators for Las Vegas, particularly everything is positive. All of the travel is up, businesses are up, airport traffic is up and I don't see anybody out there saying that it's going to change in the long-term. In the short-term, you may get some minor adjustment because of the sense of people with dispensable income being concerned about their present time. But no one has predicted any kind of a downswing in Las Vegas that I have seen.

And for the longer-term large capital projects?

Absolutely not.

So with that 13.5 right now, how would that compare to maybe a year ago when people thought it was a stronger environment?

I would say it's even better now (multiple speakers).

I think it's even better. I don't recall what we said -- we track this on a quarterly basis, and I don't remember, Bob, what it was a year ago, but I don't think it was as good as this, it has been this year. It's very positive.

I think from what I have seen is that there's actually better visibility of more specific targets, and I think it has become really because of our position in the marketplace, we are having a lot more dialogue earlier in the process, which I think what we have said is really one of our competitive strengths in our business is that we're able to work with the clients upstream, and I think we're getting the benefit of that I would say probably more on the short term.

Well said, Ken.

Moving over to the Civil segment, I know there's been a lot of concern about state-level tax receipts and how that can impact some of that market. How are you seeing the bid environment in that segment?

The bid opportunities in civil are very strong, and as you know it's a prime the pump area anyway. So we always look at the Civil business as a recession proof type business. So we really have not seen the slowdown in opportunities.

I think add to that, Richard, we are seeing quite a bit of competition for the smaller projects, let's say less than $100 million, which we used to not say that those were small, but we are seeing more competition. We're seeing more competition, for example, in Florida. But for the larger projects, I think we see pretty good prospects.

And then on the tax rate jumping up in the fourth quarter, was that just end of year adjustments?

Yes, primarily, primarily just the final tuning and adjustments for year end provision.

So going forward, we still use the 36.5, 37?

I think that's a reasonable thing to do.

Steven Fisher, UBS.

In the event that you were to be selected for these couple of gaming projects in the next three or four weeks, when might that result into a booking into the backlog.

Let me talk a little bit about what the clients in both those programs are saying. On the Plaza, they are expecting to start some physical construction in the fourth quarter of this year, as well as City Center Atlantic City, both anticipating a fourth-quarter start. But we would start to generate revenue -- if we were fortunate enough to be selected, we would start to generate revenue based on that schedule in the fourth quarter as well.

As far as, Steve, entering these into backlog, what we would require would be a very good clear letter of intent and be able to confirm financing, leading up to really a contract to be able to enter in. Dick, could you share what you would think in terms of timing of actually executing a contract?

The LOIs that you refer to, Ken, would probably be in our hands if we were again successful in landing this work; probably within the next 90 to 120 days. It probably takes that long to get the terms and conditions of each of these agreements under wrap. But I would say that is reasonable based on that schedule.

If you were to be selected, would you be likely to put a press release for these?

We would, we would.

Do you know how many other competitors you are bidding against?

One in each case.

Great. Moving on, in terms of cash, your cash balance has continued to grow nicely and you mentioned you continue to screen the acquisition candidates. Can you just talk about where your interest acquisitions lies today and what kind of timing you might expect?

Steve we're looking at companies that kind of span the spectrum of work that we do. Companies in the building side of course are easier to integrate and usually easier to evaluate. Civil are the most difficult. We've also been looking at expansion opportunities for PMSI to diversify away from government spending programs. However, as we progress through this process, it's hard to say which area we would pull the trigger in first. I would say that it is highly likely that we would close at least one transaction in 2008.

You mentioned you're still in discussions with the Army on the option contracts for the Iraq work. Is that right? They haven't exercised the option yet?

That's right. On some of the work that we were awarded a quarter ago, the option period is still outstanding. It was nominally 120 days from notice to proceed and there has been a few adjustments in that. But the key is that we're working with them to get those options exercised.

Lastly, on the Civil side of things, your civil -- the backlog has ramped up quite nicely again. I am wondering what the contract structure there is. And you mentioned about I guess 8% of your backlog is fixed-price. I am assuming the Civil business would fall into that fixed price. Is all of that work fixed-price?

That is correct.

Is it kind of a lump sum turnkey?

It's not turnkey. Turnkey implies that you're providing more than construction, that you are providing design as well. These are lump sum fixed-price contracts, conventional firm fixed price.

The only element of it is, there are adjustable quantity provisions, Steve, in these, which basically are typical for civil construction given that there's open items sometimes given the civil nature of the work.

How is this environment of still pricing in construction materials, how do you capture that risk in these lump sum contracts.

It's like anything, Steve. You make an assumption of what the likely escalation is over time, you look at what your spend is over time because we have all cost loaded schedules in our jobs and we are able to assess the escalation as the job progresses through its cycle. That's what we do. Of course in some of the high escalation materials, like petroleum derivatives and petroleum product and what not, you have to make aggressive assumptions that there will be sharp increases in these items because that's simply the environment that we're in.

[Brian Gaines], [Springhouse].

Can you tell us how much of the $7 billion in the building side, how much of that backlog is MGM City Center, and also how much is the Cosmopolitan?

The Cosmo is about $1.4 million, rough number, in the backlog. City Center I would have to do a little homework and you can certainly shoot me an e-mail. We have that broken up by pieces.

We have it by segment. We have in the backlog for gaming and hospitality for example is $5.4 billion as of the end of December '07. But we would have to come back to you on the details of that backlog.

You only have $7 billion in building backlog, so you're not saying $5.4 billion is City Center --I'm confused.

$5.4 billion is our total hospitality gaming backlog of that $7 billion in the Building segment.

Got it. Roughly, could you guesstimate what you think City Center is?

I'm going to guess it's closing in on about $2 billion.

Are there any other significant projects besides those two that are maybe over $1 billion in the backlog?

No, those are the two key projects.

Avi Fisher, BMO Capital Markets.

Excuse me, good afternoon, thanks for taking my questions. Cosmopolitan continuing unabated you said. You said the owner has equity lined up or something. Who is the owner of the project? It is still Bruce Eichner?

It's still the LLC that is managed by Bruce Eichner, and they have shared with us, and Deutsche Bank is also aware of this, that they have cut a deal in principal with new equity investors. So we're not at liberty to discuss any more than that, but that is a good step.

Do you have any sense on when such a resolution, a final resolution, would be announced on this?

I don't have any sense of that. Do you, Dick?

I don't, I really don't. I think it's pretty imminent, though. I don't think it's months away, I think it's probably weeks away.

As far as I remember from your press release, it says you are current with Deutsche Bank on a month-to-month basis?

It's a rolling 90-day agreement, so there's constantly three months of billings authorization ahead of us. So it's not the kind of agreement where the rug gets pulled out overnight.

Gotcha. So it sounds like, given the outlook, it might be weeks away. You might only hit one more rolling 90-day agreement?

Right, exactly.

Maybe so, yes.

I appreciate that color. In terms of the Civil segment, you said there were a downward adjustment in New York project. How much was that downward adjustment and how much was the Civil reserve for the settlement?

The additional reserve for the settlement was $2 million.

How much was it last quarter? Do you remember?

$8 million.

So $8 million last quarter, $2 million this quarter. Can you give us some color on what the adjustment on -- I guess is that the Tappan Zee bridge?

We don't discuss the individual project-by-project elements, but it was a bridge resurfacing program, right.

What was that adjustment?

Just related to delay costs that probably aren't reimbursable.

What was it quantified? How much was it?

It was about $2.4 million.

Does that now kind of -- do you expect to continue to have downward adjustments on that project, or this is --?

If we expected that, we would take it now.

Was any of that weather-related?

No.

In terms of -- you already gave a tax rate guidance. I apologize, I just want to clarify what you said the cash flow from operations and financing and investment for the year. You gave it for the year and I'm trying to flip to the page. You said it was at [281.5] for CFO?

Yes.

And then 25.6 use for CFI and 22.2 for cash flow from financing. Is that what you said?

That is correct, and the quarter, you have the --.

I will just back into it for the quarter. I was hoping you could provide a little bit of clarification, because you have been talking about some of these MGM projects and you lumped -- or from my understanding, as I understood it, you were lumping Plaza in there, which I thought was an LI project, and I just want to clarify. And then on Kerzner, what I heard on MGM. MGM City Center and Plaza are two projects you expect where a contract will be announced in the next three to four weeks?

Yes.

Could you give an estimation of how much those projects are worth to the contractor?

Both in the $3 billion plus range.

And you're one of two -- for each of these projects, you're one of two contractors on it.

Correct.

Now I had MGM said on their call that they had just announced, they're going to announce an architect for the Kerzner project in the next two weeks and that they would break ground on that sooner than -- probably in late '08 or early '09.

They have moved it up some because of the positive nature of their sense of the market. But, they have not discuss that with us yet.

And you had said that you have an agreement in principle. Is that one step short of a contract? Does that mean no other (multiple speakers)?

They have been working with us on the pre-construction and budgeting and scheduling on the project.

Will another contractor bid on that work?

That's their choice, if they do desire to do so. Hopefully, we don't allow them to do that.

I hear what you're saying. And typically how long after an architect is announced is a contractor announced, or is there no typical?

I don't think there is a typical. Normally, it's almost simultaneous because they really try to work hand in hand with each other.

I have two quick more questions. You had mentioned a $1 billion expansion of the McCarran Airport. What type of contractor would that be? I know most of your work in Las Vegas is cost-plus. Would that be a fixed price contract?

Yes, that would be a fixed-price bid contract, yes.

Finally on the settlement issue New York, would that -- and again, I'm not really sure if this was ever an issue, but was there a heightened bid scrutiny before the settlement? Will this eliminate a heightened bid scrutiny after the settlement, or was there never any heightened bid scrutiny?

I will say, this would just put that particular issue behind us. That's all.

I appreciate the answer. I know I asked a few questions. Thanks for the time.

Ross Haberman, Haberman Fund.

Two very brief questions. What was the D&A, the depreciation and amortization, for the year?

For the year, it's almost $11 million.

I'm sorry, I missed the cash. You said 400 and how much million in the cash (multiple speakers)?

Cash and cash equivalents was $459.2 million.

And as an aside, you did not have any of those auction rate preferreds in that cash or cash equivalent number?

No, not in that number. We had classified that in the balance sheet as short-term investments, and that was at $8 million.

You did have some of that, okay, $8 million. Thanks, guys, the best of luck.

John Rogers, D.A. Davidson.

Just a follow-up. On the management services side of the business and the work in Iraq, how much is left to do there at this high margin level? When do we start to see margins return -- I don't know (inaudible) more normal (multiple speakers).

John, we're projecting margins in the low teens on the remaining work in 2008.

We have been looking for that for awhile and you keep -- seem to get replacement work there.

If work is awarded at a pace that allows us to say leverage the manpower on one job with another, there are ways to enhance margin. If we are awarded work in a very secure area versus a less secure area, that has an impact. So it's somewhat variable. But as we close these contracts down, it probably won't be as variable anymore.

Okay. In terms of the acquisition (inaudible) of the $459 million in cash, some of that is deposits. How much cash do you have available or do you think about it in terms to use for acquisitions before you would have to go into your line of credit?

We like to think of our cash balance, we have about $200 million plus of real stick to the ribs cash, maybe a little more than that.

That's not required for working capital or anything, or funding for any of these upcoming projects?

Right.

Lastly, in terms of the acquisitions, are you seeing more opportunities out there, given some of the concerns about the cycle or in some sectors?

There's opportunities. We look for profitable companies where the management team wants to stay and grow the business where the ownership is at a level or senior in age and wants out of the business. And so we have a certain model that we have used and there are many opportunities that fit that model.

And is it more or less than maybe what you were looking at a year ago?

I would say it's a pretty constant flow.

(OPERATOR INSTRUCTIONS). It appears we have no further questions.

I would like to thank everybody for joining us on the call and we're looking forward to the next quarter. Thank you very much.

Once again that does conclude our conference for today. Thank you all for your participation.