Tutor Perini Corp (TPC) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2009 Tutor Perini Corporation Earnings Conference Call. My name is Anne, and I will be your coordinator for today's call.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session following the presentation. I would now like to turn the presentation over to Mr. Ken Burk, Executive Vice President and CFO.

Good afternoon, everyone. Thank you for joining us on Tutor Perini's third quarter 2009 conference call. With us today are Ronald Tutor, Chairman and CEO, and our President, Robert Band. Before we start, I'd like to remind our listeners that our comments will contain forward-looking statements, including statements about future guidance.

Management may also make additional forward-looking statements in response to your questions. These types of risks 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 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 actual results may differ materially.

These risks and uncertainties are discussed in detail in our filings with the SEC, including Tutor Perini's annual report on Form 10-K for the fiscal year ended December 31, 2008, our definitive proxy statement filed on April 17th, 2009, as well as in today's news release. Our statements on this call are made as of today, November 5th, 2009, 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 or in expectations or otherwise.

With those formalities out of the way, it's my pleasure to turn the call over to Ron Tutor.

Thanks, Ken. Good afternoon, everyone, and thank you for joining us on the call today. This quarter, we generated momentum in our Civil Group, with a 51% growth in civil backlog. We expect that by year end it should be double what it was at the end of 2008.

This is continuing evidence that our strategy to grow our civil business will provide or will -- excuse me, will position the Company for long-term growth and provide a more diversified base of business in both the public and private sectors, while achieving a better balance between building and civil markets. We ended the quarter with a backlog of $4.9 billion for the total Company.

New awards this quarter include a $240 million solar panel manufacturing plant in California, a $178 million civil infrastructure project at the World Trade Center site in New York City, and a $124 million segmental bridge in northern California for Caltrans.

Currently, we have approximately $2.1 billion of pending awards with customers who have indicated their preference for us to build their projects. We recently were the low bidder at $215 million for the Caldecott Tunnel project near Oakland, California, and expect an award shortly.

In addition, we are in negotiations for a contract to build a correctional facility in Pennsylvania, with an approximate value of $400 million. We expect both of these projects to enter our backlog in the fourth quarter. With the exception of certain gaming and hospitality awards that have financing contingencies, most of the other pending awards should enter our backlog over the next few quarters.

As we look ahead to 2010, our civil business is expected to continue to provide us with the best growth opportunities. Our recent number of winning bids, combined with a number of very attractive bidding prospects, indicate that approximately 40% of our operating income in 2010 could be delivered from the Civil Group.

This is up from 20% estimated for 2009. We estimate the size of prospective opportunities in our civil infrastructure target market for roads, bridges and mass transit projects to be $2.4 billion for the remainder of 2009 and $18.7 billion for 2010.

In spite of the sluggishness in the non-residential building markets, we have seen some bright spots, where in Rudolph and Sletten won a solar project in an $85 million research facility in northern California, and Keating, in addition to the correctional facility, was awarded a $62 million casino in Pennsylvania.

Fortunately, we are able to leverage the strength of our Building Group as we pursue large public works projects without diluting our focus on existing private clients. For the Building Group, we have identified and are continuing to track approximately $20 billion in targeted projects, most of which could be bid and proposed in 2010.

A significant portion of this market, and I add a significant portion much more than in the past, is in the public sector, and including education, municipal office and transportation buildings, healthcare industrial buildings and certain gaming and hospitality possibilities outside the state of Nevada.

Las Vegas continues to be a depressed market for new construction. With the exception of the eventual completion of projects like Echelon and Fontainebleau, which have been stopped, it is likely to take years before any significant building resumes in Las Vegas.

Regarding the Fontainebleau Hotels, the owners filed for bankruptcy in June and it appears the court is moving toward conducting an auction sometime after the 1st of the year. MGM City Center will begin its phased opening this month, and will be finished in the first quarter of 2010, on schedule. Cosmopolitan should be completed later in 2010.

Neither project have we experienced any funding issues or slow payments, to date. McCarran Airport Terminal 3 continues to be an outstanding project for us and continues to generate results better than expected. The project is scheduled to be completed in the fourth quarter of 2011 until the first quarter 2012 in that timeframe.

As for Management Services, we continue to look forward to demonstrating our leadership position in Guam. We are finally beginning to see some of the larger proposal opportunities surface, which should contribute to earnings in a more meaningful way in the second half of 2010.

Bob Band will cover more details about our prospect for Management Services in a few minutes. Last quarter, we shared our improvement in backlog profit margins as evidence that our strategy to self-perform a higher content of work and grow our public works and civil business is in fact taking hold. We have improved our total backlog profit margin to 8.1% from a pre-merger margin of 4.3%.

Contributing significantly to this increase is a shift in our contract backlog mix toward public works. Our current backlog mix by customer type is approximately 53% public and 47% private, compared with 12% public and 88% private before the merger.

Now I would like Bob Band to share more details of our Management Services Group. Bob?

Thanks, Ron. The strategic realignment of US forces, including the relocation of 8,000 US Marines and their dependents from Okinawa to Guam is starting to generate large project opportunities for the Company.

Our team will submit its proposal to the US Navy later this month for an indefinite delivery, indefinite quantity, IDIQ contract. The Navy intends to award at least three IDIQ contracts covering a base year and four one-year option periods. Total value of all awards under this contract is a maximum of $4 billion. The work under this project will include wharf repairs and new construction, aircraft parking aprons, taxiways, runways and hangars, as well as general and special-purpose buildings.

Selection is anticipated for early 2010. In addition, separate competitive construction opportunities on Guam for infrastructure, utilities, housing, medical, education and other facilities are anticipated throughout 2010 and '11 and beyond. Regarding work in Iraq and Afghanistan, it continues on a very competitive basis. Perini Management Services was recently awarded a $12 million overhead cover project in Iraq.

We were also recently awarded a $500 million maximum value IDIQ contract by the US Coast Guard, which covers a base year and six one-year option periods. It is anticipated that this contract will generate new work opportunities beginning in 2010. We were recently advised by the US Fish and Wildlife and Department of the Interior that PMSI was included among four competitors shortlisted for a multiyear design, build multiple award task order contract, a MATOC, to the east territories of the US. The total approximate value of the work in the east is $1 billion, to be shared by the two contractors to be selected in December of 2009.

We are attracting significant US Department of State and Defense projects expected to be bid in 2010, as well as private work through surety and multinational clients. Now Ken will give you the financial details for the quarter.

Thanks, Bob. Our net income was $26.7 million for the third quarter of '09, as compared to net income of $34.1 million for the third quarter of '08. Diluted earnings per share were $0.54 for the third quarter of 2009, as compared to $1.01 for the third quarter of 2008. On a pro forma basis, including Tutor-Saliba, net income and diluted earnings per share for the third quarter of '08 were $30 million and $0.59, respectively.

We ended the third quarter with the backlog at $4.9 billion. The breakdown by business group of our backlog at September 30th, 2009, is as follows. Building, $3.8 billion, Civil, $863 million, Management Services, $199 million. The breakdown of backlog by end market type is as follows. The Building Group, gaming and hospitality, $1.1 billion, transportation facilities, $900 million, health care, $766 million, municipal buildings, $537 million, industrial buildings, $243 million, education, $141 million, and other buildings, $134 million.

For the Civil Group, mass transit, $488 million, bridges, 240 -- excuse me, $204 million, highways and other civil, $171 million. Management Services backlog is predominantly all government contracts.

In the third quarter of 2009, revenues were $1.17 billion, a decrease from $1.41 billion reported in the third quarter a year ago. On a pro forma basis, including Tutor-Saliba, revenues were $1.65 billion for the third quarter of '08. On a reportable segment basis, revenues from our building group were $1 billion, a decrease of 21% from $1.3 billion in the third quarter of '08. The reduction in revenue is a result of reduced volume of new awards in the group and completion of large hospitality and gaming work compared to the third quarter of '08.

Revenues from our Civil Group were $72.6 million, which decreased 2% from $74.1 million reported in the third quarter of '08. With the significant increase in Civil Group backlog in the third quarter of this year, we expect a significant civil revenue growth, beginning in the fourth quarter of this year.

Management Services revenues were $78.4 million for the quarter, up 77% from $44.2 million a year ago. This is a favorable result -- this favorable result can be attributed to the increase of work in Iraq and Guam and the addition of Black with the merger.

Our total gross profit was $85.4 million, compared to $85.5 million in the third quarter of '08. Our total gross margin, profit margin, increased 20%, to 7.3%, from 6.1% in the third quarter of '08.

The increase in margin is a result of a higher mix of public works projects and a higher content of self-performed work. General and administrative expenses were $42.9 million, up 29% from $33.2 million in the third quarter of '08. The increase in expenses was primarily due to a partial period of Tutor-Saliba corporate G&A in the third quarter of '08 and one-time charges for integration of Tutor-Saliba and acquisition-related expenses.

Through our integration efforts this year, we estimate that we have reduced our G&A for 2010 by $12 million. We had income from construction operations of $42.5 million in the third quarter of '09, a 19% decrease from $52.3 million in the third quarter of '08. Overall, our operating margin decreased from 3.7% to 3.6% year over year, primarily due to the increased G&A expenses I mentioned earlier.

Building Group income from construction operations for the quarter was $38.8 million, an increase of 10% from $35.2 million in the third quarter of '08. This increase was due primarily to the improved profit contribution from McCarron Airport and the addition of Keating this year.

Civil Group income from construction operations was $6.3 million in the third quarter of '09, a decrease of $3.7 million from $10 million in the third quarter of '08. This decrease is primarily due to the $5.3 million in favorable closeout profit recognition for projects in Q3 '08 that did not occur in the same period this year.

Management Services income from construction operations was $8.5 million in the third quarter of '09, a decrease of 30% from $12.1 million in the third quarter of '08. The decrease again is primarily due to favorable closeout for projects in Afghanistan during last year in Q3, which did not occur again in this period for 2009.

Other income was $474,000 in the third quarter of 2009, compared to $2.7 million in the third quarter of '08. This is due primarily to lower interest earnings on available cash that was invested in 2009. Interest expense increased to $2 million in the third quarter of '09, from $1.1 million in the third quarter of '08, due primarily to higher average debt balance during the third quarter of '09.

The provision for income taxes was $14.3 million, compared to $19.8 million in the third quarter of '08. The decrease is primarily a result of adjustments between the tax provision and tax returns for the prior year. Looking at our balance sheet, at September 30th, 2009, our working capital stood at $283.6 million, up from $225 million at December 31, 2008. This represents a current ratio of 1.19 to one.

As of September 30th, 2009, we had $335.7 million in cash and cash equivalents, compared to $386.2 million at December 31, 2008. The decrease in our cash balance at September 30th is primarily due to the completion schedule of hospitality and gaming projects.

At September 30th, 2009, long-term debt, excluding current portions, stood at $85.9 million, compared to $61.6 million in December 31, 2008. The increase is primarily due to the financing of transportation equipment.

At September 30th, 2009, we had $241.6 million available under our credit facilities. Guidance for 2009 is estimated to be within the ranges previously provided, which is revenues are estimated to be in the range of $5 billion to $5.5 billion, and diluted earnings per share are estimated to be in the range of $2.60 to $2.70 per share.

We are initiating guidance for 2010 with revenues estimated to be in the range of $3.7 billion to $4.2 billion and 1010 diluted earnings per share estimated to be in the range of $2.40 to $2.60 per share. With that, I'll turn the call back over to Ron for his closing comments.

Thanks, Ken. As we look forward, we expect to continue integrating and leveraging our resources across all of our operations, as we execute our strategy to grow our Civil Group and be a more vertically integrated company.

We have generated momentum with our Civil Group this quarter and we expect to continue the growth of this business into the foreseeable future. We will continue to place greater emphasis on earning higher margins, and we'll come through this year, in my opinion, a much stronger and even more diversified general contractor.

In spite of the ongoing economic challenges and softness in the credit markets, we remain confident in our strategy and long-term growth potential, as one of the very few pure general contractors with size and scale, to deliver the largest civil and our building works, regardless of their complexity.

That concludes our prepared remarks. Bob Band, Ken Burk and I will now take your questions.

(Operator Instructions). And the first question comes from the line of Richard Paget with Morgan Joseph. Please proceed.

Good afternoon, guys.

Hi, Richard.

Wondered if you could give us an update about the bid market, if you've seen any changes, or is it still the case that, just given the large project focus that you guys have, you're not seeing as many bids at the table? Has it gotten more competitive at all over the last quarter or so?

And then, with you guys starting to book more contracts, do you think that is, particularly in this quarter, just reflective of kind of the inherent lumpiness of construction awards, or is the actual large project market starting to heat up more?

I would say, as far as the large project market, it's definitely heating up. We are, best put, inundated with major project opportunities. We typically do not even follow or look at the civil works projects under $100 million, unless there's something specific and complicated about it that gets our interest.

We think, at least what I can see -- this is Ron Tutor -- over the next 12 to 18 months, our plate will be full of opportunities to compete and bid upon, so we really believe that we can continue this momentum in civil work and continue to build that sector up to where it becomes the significant piece of Tutor Perini moving forward.

Secondarily, going back to your question on how we see the competition, I'll answer it the same way I did a year ago and six months ago. There are no new large entrees into the major civil work business. And by major, I'm talking about those projects in the $175 million, $200 million and up, be it $400 million, $500 million. There are only, to be every benefit of the doubt, maybe 10 to 12 in the United States, both financially and physically qualified to bid those. Our Caldecott Tunnel project that we were low bidder out of four bidders contained us and three other joint ventures. That's typical of what we bid against, us and three other bidders, four bidders, two bidders, three bidders. There are no new entrees.

It is the same people we were bidding against a year ago, and in most case five years ago. It is unlike the building business, which requires very limited capital and mostly subcontracted work performance. Our civil sector operates on requiring a large amount of capital, as well as the equipment and the expertise to self-perform the work. It separates it. That's why our margins are significantly higher. I hope I answered it.

Yes, thanks. And how should we think about City Center as it winds down? Are there going to be any major adjustments one way or the other once you guys have finalized the contract?

Well, I meet with the principals of MGM every three weeks. I would like to believe by the integrity in the process that I've witnessed that there's not going to be anything extraordinary. We continue to get paid on a very timely basis. We continue to work through the issues with the principals of MGM on a very businesslike basis, and I have no reason to believe that it won't be amicably concluded.

Were any incentive awards for timing or completion?

The only thing you get from a Las Vegas casino is when you get done on time in spite of all their changes is you get three attaboys and you get paid.

Okay. I'll get back in queue. Thanks.

And the next question comes from the line of Avi Fisher, with BMO Capital Markets. Please proceed. Okay, and the next question comes from the line of -- just one moment, please.

Did we lose Avi?

Avi, no, he's still in the queue, but he is not the next one. One moment. The next person is John Rogers, with DA Davidson. Please proceed.

Hi. How are you?

Hi, John.

Hi, John.

A couple of things. First of all, in terms of what you have in backlog right now relative to your revenue expectations for the fourth quarter and especially into 2010, is all of that work booked now? In other words, if you need to book a lot more work to hit those numbers and if you get any of this work in Guam or some of the other additional civil work, is there upside to these numbers, or is that more out into 2011?

Hi, John. It's Ken Burk. I think it's fair to say, as we have always done, we do a bottoms-up forecast, which obviously starts with our existing book of business and backlog. And then we do layer in assumptions based on current market conditions of new work expectations. So, to answer your question, in 2010 in particular, we do have assumptions of new business that needs to be acquired to be able to achieve the results that we've given guidance for.

Okay, and --

For 2009 --

Well, 2009 is almost done, but we have very little profit that we need, if at all, to be able to achieve our estimates for 2009.

Okay. And then as it relates to your cash, Ken, you said at the end of the quarter it was $335 million?

Yes, it was right at $336 million, I believe.

Okay. And as you finish off I guess especially City Center, and I don't know if you're billed ahead on Cosmo, as well, does that cash continue to come down or are we bottoming out here?

We're bottoming out. There's not going to be a continued depletion. We're so close to the end of City Center and it's on an audible basis. Very little, if any, reductions will take place. If anything, we're getting significant cash flow from new civil work. I don't see that dropping off.

Okay. And then I guess just finally in terms o the Guam business, you mentioned that some of the awards potentially will go out to bid late this year, in the first part of 2010. Bob, did you say when the work actually would begin some of those, especially the large task orders?

Well, in this MAT contract on Guam, the proposal includes a priced seed project, so one of the awardees will get that project right off the bat, and then the work will flow. But, again, it's probably going to flow later in '10 and '11 than earlier. And our forecast anticipates that type of flow.

Okay. Oh, and I'm sorry, one other thing. Ron, on the acquisition front, you've done obviously a lot of things lately, or over the last year. What are your thoughts now?

We are opening our eyes to potential for another significant acquisition in 2010. We haven't been actively in the market this year, as we frankly worked very hard at accomplishing this integration and really truly refocusing the entire direction of Tutor Perini. But we talked the other day, I believe 2010 we will look to make another strategic acquisition that further strengthens us. If there's one out there, we'll find it. We're looking.

Okay, great. I'll get back in queue. Thanks.

And the next question comes from the line of Steven Fisher with UBS. Please proceed.

Hi, good afternoon.

Hey, Steve.

Just on the guidance, I wonder if you can give us a sense of whether it's going to be more back end loaded or evenly spread throughout the year.

Well, Steve, as you know, we don't give the quarterly guidance. We give a full-year guidance, and, as I indicated to John earlier, we do have the tendency to get new business, revenue and profit, so I really can't give you any more guidance than that, which I'm sure doesn't surprise you.

Okay. I just didn't know if there was any particular quarters where you know there's going to be some specific closeouts that we should we be aware of, or as City Center --

Not that would swing, necessarily, the profit margins. I think based on the way we've got these things loaded, we indicated earlier, we are going to see a very nice increase. I think it almost doubled in the fourth quarter of this year for civil with the new business that we have. So you're going to see a very nice growth in revenues and profitability in civil, starting in the fourth quarter, and you'll see it very significantly in 2010.

And on that point, you mentioned that civil could be about 40% of the profits in 2010. Can you give us any sense of what either of the other segments could be? I guess I only need one.

Well, we've mentioned in our press release that over half of the profit is going to be generated from Management Services and civil.

Okay.

And we're obviously trying to share and demonstrate just the balance and the progress that we've made with implementing our strategy to not only diversify, but to generate a higher margin content.

And, Bob, the Guam contract that you mentioned, I'm assuming that is going to be funded by the US government. So can that go ahead without the funding contributions of the Japanese? It sounds like there might be some uncertainties, but I'm wondering if the US piece can go forward without the Japanese funding.

Yes. That's correct. That can go forward.

Okay, that's good. And then I guess, just lastly here, a clarification on the Caldecott project, and you mentioned it as $214 million. I saw in the result that there's a second component to it that could take it up to $257 million. Just wondering what that other --

That's really a misnomer. The way Caltrans bids certain of their big civil projects, they call it an A plus B, where you, quote, "schedule," at a predetermined rate. You really don't get paid any of that. It's only for bid comparison purposes. So while you see another $40 million component, it's not real dollars. It's really the $214 million plus that will be awarded.

Okay. And, actually, if I could just get one more in, the correctional facility, is that a fixed price, and would it have the same vertical integration that civil projects have?

No. Yes, it is a fixed price, but we would not be doing anywhere near the significant amount of work in it that we would do in a civil project. It would be more along the lines of a traditional building project, where we did certain of the work and subcontracted the preponderance.

And then how competitive was bidding on that one relative to kind of the small cluster you see on civil projects?

We had four bidders on a $400 million job. Really, the reality is, once you get up to a certain side, even in the building business, the competition drops off, because they require significant financial guarantee, as well as typically prequalification in that you've performed work of that magnitude, although there's more builders than civil works companies.

The sky gets rarified the bigger and bigger and more complicated the buildings go, as evidenced when we bid the Terminal 3 job at McCarron Airport, which is probably the biggest public building bid in the US to date. That was $1.2 billion. There was only one other bid.

Okay, good. Thanks a lot.

And the next question comes from the line of Avi Fisher with BMO Capital Markets. Please proceed.

Hello. Can you hear me now?

Yes, we can hear you.

I hope you guys are doing okay. Thanks for taking my questions. It looks like McCarron burned about $100 million in revenues in the quarter. Is this the ongoing ramp revenue on the project? Last quarter, you talked about we were getting close to the steel erection and the cladding and it would really speed up.

First, I believe that we did more than $100 million.

Okay.

We're building right now at about $45 million a month.

Okay.

And we, the steel erection was completed in July. If you've flown into Las Vegas, the cladding is ongoing. It is my belief that it will be fully cladded and closed by the first quarter of 2010 and the building continues to ramp up. We are ahead of schedule and doing extremely well, with respect to both schedule and cost.

And the date you said when it would open, I think you said early 2012 or late 2011. When is your completion date expected?

I can't remember the exact month. All I know is we're about four months ahead of schedule.

Right, because I knew you were ahead of schedule, and then it seemed like --

We are, but even that's conservative. I'm not certain we're not further ahead of schedule on that. And then, remember, with a job of this size, there is the physical completion of the work, when we accomplish all of our costs and, in effect, since we're on a percentage of completion, once you complete your costs, you earn all your profits. Then, for the next four to six months you have startup, testing and turnover, where over that six-month period you've got a certificate of occupancy, you're essentially done, but you spend $3 million, $4 million, over that six months to turn it over to the owner. So there's really two types of completions, the substantial completion where the work is done, and the ultimate turnover that's the result of the startup, testing and commissioning.

And what happens to the margins once the substantial is done? Does the product substantially stop flowing through the P&L?

Well, at that point, you've earned all your profit basically, Avi.

Okay, that's helpful. Thanks. And then, Bob, in terms of the work you're doing in Afghanistan, if I recall, your margins in the Iraq overhead work where a really substantial part of that, as I understand, was from harvesting the contingencies on some of the security work. Are the contingencies the same in Afghanistan as they were in Iraq?

Well, we're pretty much complete on all work in Afghanistan, with just the closeout of one job left to go, so I'd say we've pretty much seen most of the uptick from Afghanistan. Of course, Iraq is still ongoing. Significant work in Iraq is still ongoing.

And have the contingencies in Iraq changed?

No. We still have contingencies on the work.

Okay. And then are there any -- in terms of the City Center project, are there any awards or lump-sum benefits associated with that completion?

No.

Okay, and thanks. And then what about in terms of other one-time issues? The costs of the associated move -- costs associated with the move to LA?

It's baked in, it's done.

It's done. That's already out of it.

Correct.

And what was the impact this quarter?

Well, we didn't really break down, but we have one-time charges of about $1.3 million this quarter for integration, some severance, things like that, that's all. But that's not just related to any kind of move. The move is just more of the symbolic element of the headquarters in Los Angeles now.

Right. And then in terms of OSHA had this testimony associated with Nevada Construction. I know you guys weren't named in that at all, but is there any -- have you been contacted by them regarding that? Are you involved at all in any way that you can talk about at all?

Well, let me put it this way, they haven't contacted our main office, and if they've spoken to our Nevada operation, they haven't made me aware of it.

Again, it was mostly to do with the OSHA administrative stuff. I just wanted to know if they had contacted you.

No, they haven't.

It seems like when I do my channel checks, it seems like you won every award you bid on. Were there a substantial number of awards you bid on that you weren't winning?

Sure. We bid an $80 million highway job -- or, I should way we bid a $70 million highway job and everybody else bid a $50 million. We just don't publicize it when we get beat.

Right, of course.

There was a number of civil jobs, and it's typical when we get into the smaller, more competitively bid jobs. There was a job in San Francisco, close by the I-80 job we just completed, and we bid it, and I think there were 10 bidders, and the bids ranged from $50 million to our $67 million, so I believe in that one we were eighth out of 11.

Got you. It's highly competitive.

When you get down into that level where you have very good family businesses and local and regional companies, it's just another world as opposed to high-risk $200 million, $300 million, $400 million jobs, which is a totally different character of contract.

Got you. And who was the owner of the Pennsylvania correctional facility? Is that a private company?

No. The State of Pennsylvania.

State of Pennsylvania, and just two other quick questions. What were the receivables at the end of the quarter? Do you have that number yet?

I think we're at $1.272 billion.

The reason I'm asking, it seems like receivables really jumped in I think 3Q. Yes, in 3Q '08. Was that associated with the acquisition, McCarron?

No, that's incorrect. You're comparing it year over year?

No, from 2Q to 3Q '08, I'm sorry.

From '08?

In 2Q '08 is $1 billion and 3Q is $1.5 billion.

Avi, if you have any follow-up, let's talk on that.

Okay, and that's all the questions I have. I appreciate your time. Thank you.

Bye-bye.

(Operator Instructions). And the next question comes from the line of [Ben Gorman] with Bishop Rosen & Company. Please proceed.

Yes, hi. I was just wondering, the move to Los Angeles from Massachusetts, what impact did it have on your personnel that's been in place in your Massachusetts headquarters? Did you have large turnover, a lot of people lost?

No, actually, quite the contrary. We still maintain our operation, our Management Services business, which is run by Bob Band, our President. We have very little headcount reduction in Framingham as a result of the move, so we still have an operation in Framingham.

And one other thing, how about the stimulus package that was passed recently? What impact, if any, did it have on your company?

Nothing of any substance yet. We believe it's getting out into the marketplace more and more, but we really haven't seen major impacts yet. We'll be looking for it over the next three to six months, because many of our public owners are relying on stimulus funds to partially fund matching state and counties for some very large work we're tracking.

So I think the stimulus funding being delivered to the various states is just about beginning to hit now, which will even open up more projects to bid.

Good.

Government moves slowly, as we all know.

Okay, very good. Thank you.

Ladies and gentlemen, this concludes today's question and answer session. I would now like to turn the call back over to Mr. Ken Burk for closing remarks.

I don't have any closing remarks. Ron, do you have anything?

Thank you, everybody. We'll catch you on the next quarter.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.