Tutor Perini Corp (TPC) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the first-quarter 2012 Tutor Perini Corporation earnings conference call. My name is Derek and I'll be your operator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the conference.

(Operator Instructions)

As a reminder this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Mike Kershaw, Chief Financial Officer. Please proceed.

Thanks, Derek, appreciate it. Good afternoon, everyone. Thank you for joining us on Tutor Perini's first-quarter conference call. With us today is Ron Tutor, our Chairman, and our President, and Bob Band. Before we start I'd like to remind our listeners that our comments today 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 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 involve risks and uncertainties that could cause actual results to differ materially from anticipated results.

The Company cautions 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 10K for the fiscal year ending December 31, 2011, our definitive proxy statement filed April 19, 2012, as well as in today's news release.

Our statements made on this call are as of today, May 4, 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. Having said that, it's my pleasure to turn the call over now to our Chairman and CEO, Ron Tutor.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us on the call. The first quarter of 2012, we experienced our usual slow start at the beginning of the fiscal year due primarily to the seasonality, winter, snow, and weather in most of our areas of operation. That has historically created a slow first quarter both in revenue and in profit.

We had two very specific non-recurring items that impacted our earnings this quarter. We sold three of our auction rate securities, namely the [ang] backed securities which were the most volatile and high risk, and as such realized a $2.7 million pre-tax loss or a net $0.04 per share. And as a result eliminated any future risk of impairment on these securities. The remaining securities are solid, guaranteed, and we believe functioning in a manner that's acceptable to us.

In addition, we identified a very specific and highly technical tax issue related to certain stock-based compensation that went back over the last three years creating a discrete impact on our tax provisions for the quarter of $3.6 million or $0.07 a share that went back and corrected the 2008, 2009 and '10 years as well as '11. Excluding these two non-recurring items, diluted earnings per share would have been $0.08 for the quarter which is more in line with our expectations for the first quarter.

Our Civil segment continues to be a significant area of future growth. The volume of large infrastructure product bidding opportunities remains significant. For example, we have been selected as one of a limited number of bidders on three of the most significant projects in the US. The $3 billion-plus Tappan Zee bridge replacement in New York, the $1.5 billion East End Crossing P3 project for the Indiana Finance Authority, and the $5 billion California high-speed rail project and all its components.

To be short-listed on these high profile projects is a testament to our technical capabilities, experience, and financial wherewithal. These projects represent the size, scale, and complexity that we best believe suits our Company. In addition to these three major projects currently bidding, all of which by October 1, we are in the process and have turned in recently one of a number of bids in New York City that over the next three months should approximate an additional $2.5 billion in hard money bids for further New York City work.

We estimate further the size of our prospective opportunities continuing in civil infrastructure to be another $15 billion to $17 billion over the next 12 months. In the non-residential building markets we are continuing to see major opportunities. For example, during the first quarter we were awarded two casino projects with a combined contract value of $180 million and we expect to book an Indian casino in Northern California where all agreements are in place and should be able to announce within the next week to 10 days another $172 million.

We are seeing a pick up in gaming opportunities in the Eastern US and parts of the West and we believe, of course, we are positioned to take advantage of that. We continue to progress on construction preparation for the Hudson Yards development in Midtown Manhattan.

We expect to add approximately $1 billion dollars in backlog for this project in the second quarter, namely a residential tower and a 2 million square foot-plus office tower, all breaking ground in 2012. Work has begun on the residential tower and we expect the office tower to break ground in October. We have specifically identified and are tracking approximately $20 billion of targeted project in our building segment that we expect to propose on in the next 12 months, 60% of which are private sector and 40% public sector.

Our integrated service capabilities, including project management, specialty contracting and civil construction continue to increase our control over price and schedule and represent the kind of competitive advantage we believe we need to continue to succeed on large-scale awards. The specialty contractor segment has an active pipeline of more than $4 billion in targeted projects that will be bid and awarded in the next 12 months.

Our Building and Civil groups continue to utilize our specialty contractor in a continuation of our integrated approach to bidding large-scale work. We ended the quarter with $5.9 billion of backlog, a 3% decrease over the prior quarter. Our total backlog mix is 37% Building, 36% Civil, 22% Specialty, and the balance Management Services. New contract awards and adjustment to contracts in process during the first quarter added $721 million to backlog.

Those major awards during the quarter were a $97 million casino in Louisiana, an $82 million casino in Arizona, $72 million of civil infrastructure in the Midwest, a $49 million mechanical subcontract for the Alaskan Way Viaduct in Seattle, a $30 million electrical contract in Texas, and a $26 million educational facility in Oklahoma.

Currently we have approximately $4.3 billion in pending award, including $2.5 billion in mixed-use buildings, $1.1 billion in hospitality and gaming, $308 million in education, $189 million in correctional facilities, $160 million in healthcare, and $147 million of highway and transportation. These awards are expected to enter our backlog over the next two quarters. Now, I'd like Bob Band to share the details of Management Services.

In the Management Services segment, we are continuing to participate in nine multi-year indefinite delivery, indefinite quantity contracts for a diverse array of US government agencies. The aggregate program value for these IDIQ contracts is in excess of $15 billion for all participants.

These programs include the US Navy program for the relocation of US Marines from Okinawa to Guam; the US State Department worldwide construction program for containerized housing and offices; two USAID contracts, one for vertical structures and another for water and energy both in Afghanistan; the Central Command MATOC contract for the US Army Corps of Engineers, Middle East district.

US Coast Guard Department of Homeland Security work for agencies such as FEMA and ICE; and the Fish and Wildlife Service multiple award contract for the US Department of Interior; as well as two contracts with the Air Force, SATOC and HERC, which cover both the US and international bases.

We are actively pursuing work under all these programs which provide us with greater visibility into our new work pipeline throughout 2012 and beyond. We estimate the size of prospective opportunities in our Management Services group target market to be approximately $3 billion for projects that will be bid and awarded over the next 12 to 18 months. And we continue to seek additional multiple-award contracts from US government agencies.

It's interesting to note that on April 26, 2012, the US and Japan reached a further agreement on the long-stalled plan to move 9,000 Marines off of Okinawa and stationing 5,000 of them and their dependents on Guam. The Japanese government has now agreed to pay $3.1 billion of the $8.6 billion cost of expanding military facilities in Guam.

Work currently in backlog continues to produce solid results. The $115 million task order under the US Department of State for containerized housing and office facilities in Southern Iraq is achieving good progress and the $75 million task order for the US Navy MAC for an aircraft parking apron at Anderson Air Force Base in Guam is well under way. In Iraq we have recently been awarded and have been issued a notice to proceed on a $55 million overhead cover project by the US Army Corps of Engineers.

In Haiti we recently announced we've been awarded a $12.7 million electrification project by USAID which we believe will be the first of many projects that we will be successful upon in Haiti. We anticipate increased activity in Haiti and Afghanistan and Guam as well as increased contract completion assignments in the US for our surety clients. Now Mike Kershaw will give you the financial details for the quarter.

Thanks, Bob. Revenues for the quarter were $912 million, a 48% increase from $615 million reported in the first quarter a year ago. Our revenue growth in the first quarter is primarily driven by recent acquisitions.

Our total gross profit was $86 million, an increase of 38% from $62 million in the first quarter of 2011. Overall gross profit margins decreased from 10.2% to 9.4%. General and administrative expenses were $69 million, up from $44 million in the first quarter of 2011. The increase reflects companies that were acquired that were not included in the first quarter of 2011.

We had income from construction operations of $17 million, an 8% decrease from $18.5 million in the first quarter of 2011. Operating margins were at 1.9% down from 3% a year ago. Our resulting net loss was $1.2 million as compared to net income of $6.9 million in the first quarter of 2011. Diluted loss per share was $0.03 as compared to $0.14 of earnings last year.

As Ron mentioned, results for the first quarter included a $2.7 million loss related to our sale of auction rate security holdings and the $3.6 million impact of discrete tax adjustments. Excluding those non-recurring items the resulting net income would have been $4 million and diluted income per share would have been $0.08.

I'd like to point out in our press release we've added a table that covers revenue and operating income by group. Revenues from our Building group were $341 million, a 6% decrease from the first quarter of 2011. The Building group experienced a decline in volume primarily due to the substantial completion of a large successful public works project in Las Vegas and the completion of large hospitality and gaming projects in New York and Las Vegas. This decrease was mostly offset by the addition of Anderson.

The Building group reported a loss from construction operations of $8.9 million down from an income of $11.3 million in the first quarter of 2011 due primarily to the underlying change in mix of work from public to the more competitive private market, increased G&A from the Anderson acquisition, and costs associated with the mobilization of operations on the East Coast where we have several high-quality pending awards led by the recently announced Hudson Yards development project.

Revenues from our Civil group were $249 million, an increase of 99% from $125 million reported in the first quarter of 2011. The increase is primarily due to the acquisitions of Frontier-Kemper and Lunda. Civil group income from construction operations was $16.9 million in the quarter, a 29% increase from $13.1 million in the first quarter of 2011.

Operating margins were 6.8% compared to 10.4%. The decrease in margins is primarily due to work performed under unapproved change orders and claims during the period which we expect will provide additional profit in the future when these change orders are approved, and the substantial completion of several successful public work projects on the East Coast during early 2011.

Revenues from our Specialty Contractors group were $267 million and income from construction operations was $19.7 million, the majority of which was generated by the recent acquisitions. Operating margins were 7.4% for the quarter reflecting the performance in some of our New York-area projects.

Revenues from Management Services were $55 million, an increase of 45% from $38 million reported in the first quarter of 2011. The increase is due primarily to continued progress on a containerized housing project in Iraq and an Air Force base project in the eastern United States.

Management Services income from construction operations was $1.9 million, a decrease of 27% from $2.6 million in the first quarter of 2011. Operating margins decreased to 3.4% compared to 7%, primarily due to substantial completion of a successful US military facility project in Iraq in early 2011 and increased competition on new work.

Interest expense increased to $11.1 million from $7.2 million in the first quarter of 2011, due primarily to increased interest expense on our term loan which was entered in August 2011. The provision for income taxes was $4.8 million compared to $4 million in the first quarter of 2011. The effective tax rate for the first quarter increased from 36.5% in 2011 to 133.7%.

As discussed earlier, the 2012 provision for income taxes includes non-recurring discrete items of $3.6 million related to an increase in unrecognized tax benefit and an adjustment, both associated with certain stock-based compensation items identified during the current period. We expect our 2012 fiscal year tax rate to approximate 38% excluding those discrete items.

At this time we're reaffirming guidance for 2012 with estimated revenues in the range of $4.5 billion to $5 billion and excluding the recurring non-recurring items, diluted earnings remains in an estimated range of $2.10 to $2.30 per share. We still expect our earnings to be weighted towards the back half of the year based on the anticipated timing of new awards and the start of project execution.

Looking now at balance sheet, at March 31, 2012, our working capital stood at $596 million which includes $190 million in cash and cash equivalents, up $39 million from $557 million of working capital at December 2011 which included $204 million in cash and cash equivalents. The current ratio increased from 1.4 at December to 1.47.

During the first quarter of 2012, operating activities used $25 million of cash primarily due to cash used in the Building and Specialty Contractors group, partially offset by cash provided in the Civil group. At March 31, 2012, long-term debt, excluding the current portion, stood at $617 million, which is an increase of $5 million from our December numbers. I'll now turn the call back over to Ron for his closing comments.

Thank you, Mike. We believe that 2012 will be a solid year of both earnings growth but more importantly, the building of our backlog for the years 2013 through 2015. As pointed out previously, we are among a group of selected limited bidder on a number of major civil and building projects of which we are very optimistic about our chances. In addition to the three major civil projects we pre-qualified for to bid over the next 120 days, I pointed out over $3 billion of work in New York City we are quoting in virtually the same time frame.

These projects are between three and five years in duration and we look upon that as the basis for our next three to four years of revenue as we build around these major opportunities with the more normal and smaller projects. These significant opportunities, as well as a remarkable pipeline of continuing civil work, supports our optimism as we move forward. That concludes our remarks. We will all now take your questions.

(Operator Instructions)

Steven Fisher, UBS.

So it sounds like you're expecting to do around $2.10 in the next three quarters, although really more second-half weighted. So I guess the first question is how much better do you expect the second quarter to be versus the first quarter ex the two issues? And then what are the most important things that have to happen to be able to achieve that ramp up over the course of the year?

Well, the ramp up is every year. If you go back over the last five years, our first quarter is always a small quarter, almost without exception. So what we expect is our units to make their budgets and when you realize that we only missed our first quarter budget by $0.03 or $0.04 other than the non-recurring items, it isn't as dire as the first quarter looks. So we expect to make our guidance on the basis of just doing what we said we're going to do and hopefully adding some more work and getting run-off as an aside.

We also have some very significant events that are in none of our projections, namely a couple of major litigations that we hope to conclude this year that could significantly infill those profits, so we're still optimistic, to put it bluntly.

Okay. Are you anticipating anything from the major infrastructure projects you mentioned in the guidance for the year?

No. Those are all, would be awarded by the third to fourth quarter and they won't impact this year either way. Those are really all, as I said, hopefully with some successes, those will insure 2013, '14 and '15.

Okay and you mentioned the Hudson Yards already under way, I guess $172 million gaming project really sounds like it's in the bag. So should we assume that this is the low point in revenues in the Building segment?

I don't know how we could be any lower unless we started paying owners to build their work. As you can see our Building segments have hit an all-time low and we're hoping to build them back up to some degree of normalcy by the year-end.

Okay, I'll take that as a yes. And then how many change orders are you negotiating and what are some of the issues that lead to them?

Well let me say that under GAAP, we get, we have probably all in between $60 million and $75 million of extra work alone in our Civil group. And under GAAP, even though we're an entitled change, with a written directive from an owner and an agreement to pay, we cannot take any profit on these changes until their concluded price is agreed and a final change is executed. So they are really nothing more than changes in process. We have one transit job in New York that has a $22 million change.

It's ongoing for 18 months of negotiations and audit that we hope to conclude by the end of the year. Its been enormously slow. There's no questioned entitlement but we cannot say we have our contracted margin until its concluded, so these changes have an impact but it's the nature of the beast. Right now, we have an extraordinary amount of them. The good news is they're changes and we'll get paid. The bad news is we can't take in any operating profit on them until they're settled.

Okay, so what you're saying is the customers have agreed in principle to pay them and you're just working out the legal issues related to that?

Not even the legal. It's really more how much they pay.

Okay, and so you mentioned New York Transit. Is that one in the guidance? And what confidence do you have that it will be this year since its been 18 months and going?

Well, I don't, it's not in the guidance because we haven't included it. Every assurance in the world from New York Transit that they will wrap us up and pay us by the third quarter which means it's 50/50. They're all entitled. We have executed documents agreeing to pay but one of the negatives of New York is everything moves very, very slowly.

Okay, I'll give someone else a chance. Thanks a lot.

John Rogers, D.A. Davidson.

A couple of things. First of all, just back falling on the question about the Building segment. At $340 million and a slight operating loss, is that -- what do you need there to make money in that business in terms of a revenue rate? And I know all projects are different, but do you need $1 billion dollars-plus to make money?

I would say in order to make that segment meaningful we would have to do between $2.5 billion and $3 billion a year. Otherwise you begin to question why we're in it for the amount of return given the amount of revenue and effort. We have always been able to maintain that. The last couple of years it's just wound down. We believe we're in the process of restoring it, but I can't honestly say we have yet.

I think John, the other thing in there is also the mix between public and private.

Sure.

Historically, the public stuff has generated higher margins so that's another factor that plays in. There's no real straight answer as to -- there's not one number that we could give you.

Let's put it this way. In our projection for the year the Building business's contribution is so minor as to be laughable.

Okay. And in terms of the larger projects that you're bidding this year, I assume the owners are covering bid preparation costs for the most part, but in the private sector, if you win or lose the job does it have a significant immediate impact on earnings?

No, doesn't have any.

Okay.

We don't get a private job. Typically, we will put a certain amount of effort into a private job but minimal compared to civil. On the big civil jobs, we simply don't propose on a major design build where there's no stipend. In the private side, like at Hudson Yards with Related, they agreed to pay us all of our proposal costs in support for budgeting and pre-construction. And they continue to even though the work hasn't started.

So although we have invested a fairly sizeable amount of money in re-establishing a New York building office and moving people there to support the Hudson Yards effort, I think it would be fair to say that most of those costs directly associated with the job have been paid by the job.

Okay.

And John, when they aren't being paid by the job or under a stipend, they're expensed as we go so there's never a big write-off if we end up losing a job. You have to expense those under GAAP as you incur them.

Okay.

To the extent they are not, there's some kind of mechanism for getting recovered from the customer.

Okay, understood. And just on the Hudson Yards work, is it -- the terms of that, is it essentially similar to the casino, the Las Vegas casino work a few years ago in that most of it is cost plus?

It's all cost plus with an option for the owner to convert it to cost plus with a guaranteed maximum price.

But presumably with the specialty contracting capabilities now, I'm guessing that you have the opportunity to get better margins than you saw in the casino work?

Yes. We have also negotiated the use of our specialty contractors in the job at specialty contractor margins and offering them two choices. Our specialty contractors either bid directly or they bid against competition with the option for them to convert it to cost plus with a guaranteed max and a very acceptable level of fee.

Okay. And then just lastly, on the Management Services side of the business, a couple of years ago, you'd talked about possibly going after some large private sector programs, oil-type programs. Is that on the horizon at all or is it still--

Perfect timing. Bob, do you want to handle it?

Well you know, John, we've been tracking oil field services work. We've nibbled around the edges for many years. We've done large crude oil storage facilities in Morocco and liquid propane storage and bottling plants in Angola, so we have credentials. We are looking at some more in Iraq in that industry right now and it ties in pretty well because it includes overhead cover protection.

Okay, and Bob, is that something we would hear on this year?

Oh, yes, it's on my bid list. One of those estimates are being worked on right now.

Okay, good luck. Thank you.

Avi Fisher, BMO Capital Markets.

I'm confused about the limited profitability in the Building segment given that you have like $2 billion in backlog there. So I wondered if you could quantify how much building backlog is there on work that hasn't started and isn't going to start this year.

No, it's an active backlog. I don't know how much of it is running out this year versus next year. Is that what you want to know out of the $2 billion?

Yes, I'm confused why there's going to be limited profitability on it given this fairly large backlog.

Well it is and it isn't, once you realize how large -- this is an organization that has been doing well in excess of $3 billion down to $2 billion with the overhead accordingly and we've been also compressed by reduced fees in this market. Our building divisions have been under tremendous pressure, the Las Vegas Terminal 3, which was extraordinarily profitable, is done. They have no more to give.

I guess when you had $8 billion in backlog in the Building segment you were burning it at low teen margins and now you have $2 billion burning at low teen margins and I guess that's what's surprising to me.

No, it's not Building, there is no Building backlog burning at low teens. Our Building backlog, the only thing that burned at that level was Las Vegas Terminal 3. When we were as big as we were with Las Vegas, Keating and we were burning $3.5 billion a year. Other than certain select public building projects, almost all of our work went, including the Cosmopolitan, MGM, at between 4% and 4.5% margins.

We are now operating at more like 2.5% margins with the margin squeeze. So there is a significantly reduced level of profitability today versus back when. That's why given our overhead the margins are so thin today.

Right, but I guess it's $340 million of revenues on a $2.2 billion of backlog is a surprisingly low burn rate so I'm just curious should we expect --

No, not really. If you look at the burn rate over 18 months, $340 million a quarter is about where it is.

Okay. We'll have to just, I'll just have to take that --

Well remember the first quarter is historically the lowest burn rate because so much of our work is back east and in areas governed by weather. You look back in history no matter how disappointing it is, the first quarter is always demonstrably less revenue which then of course drives profit.

Ron, I touched my shovel once this winter. It was a very warm winter here. It's actually very good construction weather out here.

Well that's true. It's one of those rare winters where it was.

Any sense, is specialty subcontracting, is the specialty contractors margins, is that what we should be expecting, is that a normal margin?

What is that margin?

7.5%. What we've said before is we expected specialty to be in the 6% to 8% range.

Closer to 8%. Specialty contractors were making a significant amount of money.

Yes.

Some of them is working for ourselves. We're probably bidding $1 billion dollars worth of electrical and mechanical in New York City in the next 90 days in conjunction with our Civil group is the lead. So rest assured, our specialty group is one of our most significant drivers of both margin and ultimately profit of all of them.

And are those projects public or private?

Public.

They're public.

Everything in New York that we're bidding right now is public, with the exception of Hudson Yards, which since the first major one won't break ground until October, we have not anticipated any electrical or mechanical until next year.

And I heard that you were going to try to do the Hudson Yards without union labor. Is that accurate?

No.

Okay.

I haven't got a death wish. (laughter)

Just sort of general questions on what you're seeing. I'm curious what you guys are seeing in your major markets in terms of the availability and cost of labor and materials.

We see materials, which has been flat for a year, still flat going nowhere, in fact increased competition on materials. Labor is absolutely flat, very little if any increases in labor. In fact one of the things we've been talking to the unions at Hudson Yards for three solid months is a reduction in labor costs where the unions have been very open and decent in talking so accordingly. I think there's a recognition, particularly in the building markets, that labor has to cooperate if they are ever going to get it out of the doldrums.

Yes. And I guess finally on the Civil work, surprised to hear that you have unapproved change orders. I know you're pretty aggressive in making sure you don't work until they're approved. Are there any specific projects outside of New York where projects are burning at lower profitability than you bid at?

No. I wouldn't say that's even taking place in New York if we ever get our change orders paid.

Avi, when we said they're unapproved, they've been approved in scope. It's just pricing that we're disputing.

So the value --

The value, yes.

Avi, the way it works when we call it an unapproved change. The owner issues a change order document called Change Order #3 where they direct you to proceed with the extra work, agree to pay, and you then, maybe let's say it takes three months because some of these are in the tens of millions. You present a proposal, then you negotiate, you don't come to agreement, then they audit and you finally sometimes they will pay money on account if it's significant, other times not. The contract doesn't dictate.

So we find ourself -- and New York is probably the worst place in the country for protracted delays in payment, but you ultimately get paid. The problem is GAAP does not permit you, if you've got $60 million in changes and you're entitled to earn 15% or $9 million, all we can do is pay the costs. We cannot take any margin into our balance sheet until it's finally settled with a price attached and execute. So normally that's always there. It's just that right now we have more significant dollars than we ever had before.

Got you. Well I always appreciate your insights into the market. I wish we could talk more about it but I don't want to get in the way of the weekend so I'll turn it over.

Call me during the week. You can always call me.

Thanks, Ron. Have a good weekend.

You too.

John Rogers, D.A. Davidson.

Hi. Just two quick things. First of all I guess Mike, what was D&A in the quarter?

Depreciation and amortization in the quarter was $15.8 million.

$15.8 million. Okay. And is that a good run rate for the year?

Yes.

And then secondly, I guess Ron, because it's always a source of questions, your thoughts on the stock and near plans here?

Nothing any different. God willing and the purchasers, I'm probably a week to 10 days away from executing and selling my movie interests. If for any reason that, awful as it might sound doesn't go through, I'd probably have another stock sale in June or July.

Okay. Thank you. Appreciate it.

Steven Fisher, UBS.

Thanks. On the Management Services margins, since they're now lower than they've been in a while and you mentioned some increased competition on recently awarded projects. How much of that margin pressure is the increased competition versus underutilization from the completion of other projects?

Steve, the best way to answer that is, I'd say a little over 30% of the revenue came from an air base job that we're doing jointly with Civil. So the way the contract accounting goes, the profit on their piece, which is much larger than ours, ends up in their income statement. So that's one element. And the other element is on the increased competition, we see increased competition but we haven't changed our margin objectives. It just impacts us in the rate of winning jobs, follow me?

Yes.

Okay.

So you basically need to see more work in order for the margins to go up?

Need to match more work because it's a scalable operation, can handle $200 million, $300 million, $400 million a quarter easily.

Okay, on that note then, how quickly do you expect, Bob, some of this Guam work to start coming out for bid?

Well it was good news that the Japanese have once again agreed to fund a major piece of the military facilities. I'm not sure how quickly that will come out but it should accelerate it. There's tremendous USAID programs. As the military shrinks its role in Afghanistan -- remember USAID, this is a historical formula -- the USAID increases its spend rate.

We're very well-positioned with two major USAID contracts just for Afghanistan, vertical structures and power and energy, water and energy. So we should see, I mean we've got some significant jobs that have bid and we're waiting to hear and are bidding in those regards.

Got it and then I guess the containerized housing IDIQ contract that you have?

Yes.

How steady is the flow of projects coming out of that? The bid opportunities, I guess

Well that was -- in 2011 a lot of our bidding was focused on that program and it's continuing to produce bid opportunities. There is another MATOC that the State Department will issue that we've already qualified for which is a form of that dealing with just a slight skew on the deliverable. So yes, we think that's going to be a good generator, not just in Iraq but also Afghanistan as well, and other locations.

Okay, great. Thank you.

Yes.

At this time I'm showing no further questions in queue. I'd like to turn the call back over to Mr. Ron Tutor for any closing remarks.

No closing remarks. Thank you, everyone, for our first-quarter call in 2012. We'll look forward to the next one.

Ladies and gentlemen that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.