Tutor Perini Corp (TPC) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation Second Quarter 2018 Earnings Conference Call. My name is Doug, and I will be your coordinator for today. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

(Operator Instructions) I would now like to turn the conference over to your host for today, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.

Hello, and thank you all for joining us today. With us on the call are Ronald Tutor, our Chairman and CEO; and Gary Smalley, Executive Vice President and CFO.

Before we discuss our second quarter results, I will remind everyone that during today's call, we will be making forward-looking statements, which reflect management's current assessments of existing trends and information. There is an inherent risks that actual results could differ materially. Please refer to Tutor Perini's most recent 10-K and 10-Q filings for disclosures about risk factors that could potentially contribute to such differences.

The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.

With that, I will turn the call over to our Chairman and CEO, Ronald Tutor.

Thanks, Jorge. Good afternoon, and thank you for joining us. We delivered solid second quarter results of $0.49 per share that exceeded our expectations, with strong operating margins in our Civil and Building segments. We also achieved our fourth consecutive quarter of double-digit the year-over-year backlog growth, driven by new awards that total $1.3 billion.

Our total backlog grew 15% year-over-year to a new record high of $8.7 billion. The backlog growth was broad-based across all our segments, reflecting increases of 12%, 15% and 24%, respectively, for our Civil, Building and Specialty Contractors segments.

Our new awards in the second quarter resulted in a book-to-burn ratio of 1.2. The most significant new awards included the $410 million Purple Line Section 3 tunnels in Los Angeles, the $172 million Baruch Houses project in New York for WDF, the $93 million Broadway Bridge Rehab by our New York Civil Group, the $59 million visiting quarters project in Charleston, South Carolina for the Roy Anderson Company, and the $53 million CS086 tunnel systems installation project in New York for Five Star Electric.

In addition, we are awaiting contract award and notice to proceed for the previously low-bid $800 million Southwest Light Rail Transit project in Minneapolis, pending finalization of railroad agreements which we expect to accomplish in September or October of this year.

Furthermore, our subsidiary, Frontier-Kemper, was recently a low bidder on $121 million tunneling project in Los Angeles for the Department of Water and Power. And our Gulf Coast building subsidiary, Roy Anderson, recently won a $68 million industrial revitalization project in Mississippi.

In addition, our Florida Building Group was a recently low bidder on a $42 million FIS service facility at the Fort Lauderdale Airport, where we have been working consistently in the last 10 years.

It bears repeating, as we have communicated in the past, that the continuing and significant backlog growth we have been experiencing for the past year has occurred ahead of any anticipated favorable impacts of state and local funding measures as well as the purported sizable federal government program, which has not yet been defined.

Our revenue and earnings results for the second quarter reflects some of the same project delay and timing issues that we have continued to experience, particularly with respect to the high-speed rail program. However, we still expect that certain other projects ramp up later this year, particularly the recently awarded Newark Airport Terminal 1; the Purple Line Section 2, which is now beginning to start construction on all its phases; the California High-Speed Rail, which continues to work over the 31-mile; and the I-74 Bridge being built by Lunda Construction between Iowa and Illinois.

These results for the third and fourth quarter should be significantly better than those in the first half of the year, realizing that the projects that are added are over $2 billion of higher-margin Civil work, as well as an airport terminal for the Port Authority of New York in Newark, where we're the only bidder and it has a Civil works type margin.

The bidding environment remains very active across all our segments and continues to increase over the coming years, as I predicted and it seems with no limits in sight. Later this month, we expect to bid, and literally within 2 weeks, the $1.6 billion Purple Line Section 3 station in Los Angeles. And our New York City office will be bidding over $500 million of Civil projects in New York over the next 60 days, including the Throgs Neck Bridge deck replacement. Later in the year, we'll find the $950 million Portal swing bridge replacement in New York; the $750 million Harry Nice Bridge replacement at Maryland; Tunnel Phase 3 in Hudson Yards; and a continuing stream of work that keeps our New York office very busy.

The New York City MTA recently unveiled a comprehensive plan to modernize its transit system, with a focus on upgrading its antiquated signal system. This plan proposed a spending as much as $19 million over the next 5 years and $18 billion more in the years after that. With funding sources yet to be determined, the plan continues to provide insight into the enormity of scale and project opportunities that are forthcoming.

The Building segment has various near-term prospective opportunities, including 2 large educational buildings valued at $500 million; 2 health care projects at $400 million and a hospitality project worth $350 million, all in California.

In addition, the Building business has more than $600 million of pending awards on contracts in the final stages of execution.

Demand for our Specialty Contractors services increases throughout the country. No more evident it is than New York City. The New York City Housing Authority, or NYCHA, recently released its latest physical needs assessment in which it estimated that the agency will need to spend $31.8 billion over the next 5 years to make various repairs and replacements of mechanical and other systems at its 177,000 public housing units. NYCHA is a significant customer of WDF and Five Star Electric, our mechanical and electrical subsidiaries, respectively, so we anticipate significant new opportunities with this customer alone.

Needless to say, all of the work in New York City continues to aggressively grow in size and scope. The only negative in New York is dealing with those agencies is their inability to pay timely as well as address issues on a timely basis, so we continue to structure our meetings on the basis that we will support your growth. However, we insist on better payment processes if we are to continue to bid your work.

Despite all of this increased demand, we continue to maintain a disciplined position, only bidding the various larger jobs wherein we get the kind of margins we expect to be appropriate.

Now I will go over some of the major projects that contributed during the second quarter, beginning with the Civil segment in the New York region. Our most active Civil projects in New York City included CM007, CQ33 and CS179. All are part of the East Side Access project being completed by the New York Transit Authority.

In addition, of course, we just started work on a $1.4 billion Newark Airport Terminal 1 project, with a projected commencement of steel erection in November of 2018. That job is scheduled to complete in 39 months from April of 2018, so you can understand the generation of revenues and profits that should flow from its construction.

In California, our major Civil projects include the San Francisco MTA Central Subway Project scheduled to complete in the fourth quarter of 2019; the California High-Speed Rail Project, where we continually press the agency to complete their evaluations of site and delivery of ground we need to complete the contract. As a matter of fact, we are now in the process of reinstituting our forces and adding back people we have had to lay off because of the delays caused by owner right-of-way issues. And it appears that we'll be in a significant construction mode by October 1.

Purple Line Section 2 extension. We have commenced work on street closure and the tunnel launch pit in Century City, with an eye toward in March or April, putting the 2 tunnel machines in the launch pit and commencing tunneling by June of 2019.

We are also in the process of starting the Wilshire/Rodeo Station in October of 2018 so that given by first quarter, all components of Purple Line 2, both stations and the tunnels, should commence work.

In the Midwest, Lunda Construction continues to move on its work on the I-74 Bridge.

And in Seattle, we are in the final 60 days of final testing and commissioning of the systems and the turnover of the SR99 tunnel, which we maintain will be done on or before October 1.

Several healthcare facility projects in California were among Rudolph and Sletten in the Building segment's top revenue contributors. In this second quarter, those included El Camino Hospital, the Precision Cancer Building at UCF (sic) [UCSF] Medical Center.

Other Building segment contributors was the Rosewood Miramar Beach Resort in Montecito, the Palisades Village retail mixed-use project in Pacific Palisades and a large technology campus in Silicon Valley expected to ramp up later this year.

As a reminder, work on Newark Airport Terminal 1 is being split 50-50 between the Civil and Buildings groups. Because that project is lump-sum with a significant Civil segment type profit margin as the job progresses, it should positively impact the Building segment's operating margin, of course, as well as contributing to the Civil margins of Eastern Civil.

In addition to the prime contract, our subcontractors, Five Star Electric and WDF Mechanical, we have awarded them $360 million of subcontracted electrical and mechanical work to be performed on the Newark Airport Terminal 1 project.

Those margins would be in addition, of course, to the margins that we would enjoy on the prime contract.

The Specialty Contractors segment. Major contributors to the second quarter included Fisk's work on the Transbay Transit Center in San Francisco and SR99 in Seattle, as well as Five Star Electric's work on the East Side Access contracts previously mentioned.

Based on our results to date and our midyear forecast, we are narrowing our 2018 guidance with diluted earnings per share now expected in the range of $1.90 to $2.05 per share.

With that, I'll turn the call over to Gary to present the details of our financial results.

Thank you, Ron. Good afternoon, everyone. I will begin by discussing our results for the second quarter followed by some comments on our balance sheet, cash flow and our guidance assumptions.

Revenue for the second quarter was $1.1 billion compared to $1.2 billion in the second quarter of last year. The decrease was due to reduced activities on certain Building segment projects in California and Florida that are now complete and a net reduction of project activities on various Civil segment mass transit projects in New York and California. Revenue was also lower due to the timing on work on certain projects as well as continuing delays on the California High-Speed Rail Project.

Segment revenues were $402 million, $447 million and $271 million for the Civil, Building and Specialty Contractors segment, respectively. Civil and Building segment revenues were lower compared to the second quarter last year because of the reasons I mentioned, and the Specialty Contractors segment revenue was slightly lower due to reduced activities on various electrical projects in New York.

As Ron mentioned, our project execution activities are increasing on various major projects, including the Newark Airport and the Purple Line Extension projects, so we still expect that our Civil and Building segment revenues will increase in the third and fourth quarters.

G&A for the second quarter was $64 million, down about 7% compared to the second quarter of 2018. The decrease was principally due to lower compensation and legal expenses.

Income from construction operations for the second quarter was $55 million, an increase of 61% compared to the same quarter of last year, reflecting favorable operating margins in the Civil and Building segments and improved, although still lower than acceptable, operating margin in the Specialty Contractors segment. Recall that our results for the prior year second quarter were impacted by unfavorable adjustments on certain projects in the Specialty Contractors segment.

As a result of favorable project execution, Civil segment income from construction operations was $49 million in the second quarter, down 15%, 1-5 percent on lower volume compared to the same quarter in 2017 but with a solid operating margin of 12.3% that matched last year's second quarter margin.

Building segment income from construction operations more than doubled to $13 million compared to last year's second quarter result, with a corresponding operating margin of 2.8% compared to 1.2% for the comparable quarter last year.

The increased operating income was largely due to improved profitability on projects in California and certain higher-margin projects in Texas and at Newark, partially offset by the lower volume mentioned earlier.

Specialty Contractors segment income from construction operations was $7 million, a significant improvement compared to a loss from construction operations of $14 million in the prior year second quarter, that resulted from the unfavorable adjustments that I just mentioned. The segment's operating margin was 2.8% this quarter compared to a negative 5% in last year's second quarter.

We still expect that as various legacy projects are completed in the Specialty Contractors segment and are replaced by newer, higher-margin projects, the segment's operating margin should soon improve to the lower end of the 5% to 7% range that we consider the norm and what we consider to be acceptable for the segment.

Interest expense for the second quarter was $16 million compared to $23 million in the prior year second quarter. The prior-year period included certain debt extinguishment costs associated with the refinancing of our credit facility last April.

Cash expense for the second quarter of 2018 was $12 million, which reflects an effective tax rate of 30% compared to tax expense of $20 million and effective tax rate of just under 38% for the same quarter of last year. We continue to expect the effective tax rate for the year will be in the 29% to 30% range, reflecting the impact of the new 21% federal statutory rate, offset by the loss of certain tax deductions.

Net income attributable to Tutor Perini for the second quarter was $25 million or $0.49 per diluted share, compared to $30 million or $0.59 per diluted share for the same quarter last year. Recall that last year's second quarter results included a gain of $37 million related to a legal settlement that contributed $21.9 million of net income, and $0.43 of the reported $0.59 per diluted share last second quarter.

Now we'll move on to discuss our balance sheet and operating cash. Our project working capital grew slightly in the second quarter of 2018 primarily because of an increase in costs in excess of billings, or unbilled costs, and a decrease in our accounts payable and retainage payable. Although our unbilled costs increased once again this quarter, our actual net costs in excess of billings have continued to decrease due to a larger increase in our billings in excess of costs, or advanced billings.

We remain committed to significantly reducing our unbilled costs, and as mentioned last quarter, anticipate meaningful reductions to begin in the latter part of this year and especially in 2019. The increase this quarter in our unbilled costs was once again due to additional costs incurred on certain projects that have some of the larger unbilled positions as these projects advance closer toward completion.

We generated $11 million of operating cash in the second quarter of 2018 compared to the usage of $2 million in the second quarter of last year. We anticipate stronger cash generation in the second half of this year like we experienced for the same period last year and continue to target and expect operating cash generation to be in excess of net income, as it has been for both of the past 2 years.

Our total debt as of June 30, 2018, was $823 million compared to $736 million at the end of 2017. This reflects an increase in our revolver from its 0 balance at year-end due to the expected seasonally lower cash generation during the first half of this year.

Lastly, let me review the assumptions related to the 2018 guidance that Ron provided. We still expect revenue growth in 2018 for our Civil and Building segments and for the company overall. For the remainder of 2018, the Civil segment's operating margin should continue to be in the 10% to 12% range and the Building segment's operating margin should be 2% or better.

For the Specialty Contractors segment, we still expect that by the end of 2018, their operating margin should approach the lower end of the 5% to 7% range.

As I noted earlier, we still anticipate an effective tax rate of 29% to 30% for 2018. We also forecast that there will be approximately 51 million diluted shares outstanding. Interest expense for the year is now estimated to be around $62 million, of which $12 million to be noncash.

Depreciation and amortization expense is still estimated at $55 million. We now expect that our G&A for 2018 will be approximately level with last year's G&A instead of increasing modestly, although the G&A margin this year will still be lower than last year's due to anticipated revenue growth.

And finally, we also now anticipate that noncontrolling interest in 2018 will be approximately $10 million to $15 million compared to $6 million in 2017.

With that, Ron, I'll turn the call back over to you.

Thank you, Gary. The outlook still remains very favorable for our long-term growth and improved profitability, well supported by our record backlog and the continuing opportunities and lack of competition we face regularly and a market demand and funding that continues to flow, in my opinion, almost beyond the capacity of our industry. I continue to be confident that we will deliver the stronger performance through the remainder of this year and even a better year next year, most assured. With that, I'll turn the call over to the operator for questions-and-answers. And thank you.

(Operator Instructions) Our first question comes from the line of Alex Rygiel with B. Riley FBR.

Your guidance was trimmed a little bit at the top end for as it relates to the EPS range for 2018. So I'm curious what your thoughts are with regards to what changed in the last sort of 3 months. And has it given you a little bit more of a cautious view on the earnings power of the company in 2018?

My primary concern is we have a very profitable contract in high-speed rail, and the earnings capacity contained within that contract has not diminished. I'm just now beginning to push the agency to release us to go forward with the work. And the only unpredictability is the amount of revenue and the costs associated with it that we can generate in the balance of this year. An enormous amount of the work has been shifted into next year, and the reason I pulled back the upper limits was strictly an issue of being able to perform the work necessary on high-speed rail to support my initial analysis. Having said that, we are now generating revenue and cost on Purple Line 2, and that's beginning to increase. And the Newark terminal is significant and we're going full bore with no delays on an accelerated pace. And then, we were just awarded the Purple Line 3 tunnels, another high-margin civil job, which we hope to start by October 1. So all of this high-margin major work just continues to make me more optimistic. But my only hedge is the time frames in which we'll generate that revenue and profit. So to make an otherwise long statement shorter, I pulled back the upper end and feel some degree of confidence that we will still make the lower end.

And Ron, can you comment a little bit upon sort of your view on how the recent tariffs and risk of future tariffs could impact your P&L as well as your customer spending plans?

Well, the tariffs, even though they're not certainly defined, and the biggest area that affects us is steel. Many of our jobs have Buy America requirements. So where the tariffs affect us, when they drive the Chinese steel up and make the bones as Chinese steel, then it enables U.S. factories to raise their prices. So it has a cost impact with, let's say, for example, our Purple Line Station 2 project, which is $1,371,000,000, had a total of $31 million worth of steel in the entire job. I believe we protected ourselves, bought the steel before any of this. But I believe the grand total of impact on that amount of steel today would be between $3 million and $4.5 million. So although it's talked about a lot, it really truly does not have a dramatic impact. And to give you another example, on the Newark terminal, we awarded a $77 million steel contract on Newark terminal to a local subcontractor who is buying American steel and had no hedges on tariff and, in fact, guaranteed the price. So we're always wary of the tariffs, but so far, it's really had no impact on us.

Our next question comes from the line of Steven Fisher with UBS.

Gary, I think, you may have given some color on the revenue expectations for the second half of the year but I'm not sure I caught it. I'm just wondering if you can kind of frame what you think the second half revenues would be versus the first half. And we've now had 4 quarters in a row of double-digit backlog growth, so just kind of curious on when that should start to translate into double-digit revenue growth.

For the first part of your question, Steve, we expect that the revenue growth in the latter part of the year, the third and fourth quarter of '18, is going to happen. It's going to be significant. We expect that the growth that we've seen in the third and fourth quarters will overcome the reductions that we saw in the first half of the year. This is particularly for the Civil and the Building segments and overall for the company. As far as the higher backlog and when we anticipate that to kick in to higher revenue, we expect that to be right away. As far as double-digit revenue, latter part of this year, early next year is when we expect to start to see double-digit backlog -- revenue growth.

Okay. That's helpful. And then, I guess, you've sort of focused the revenue in the second half on Building and Civil. What about the Specialty side? I mean, when do you think that could flip to becoming positive?

Yes. Ron, do you want to take that?

Yes, I'll take it. The Specialty side is not as predictable as the Civil or Building. However, all of these major Civil awards, when you see Newark terminal, we signed $1,371,000,000 contract, we turned around and award $360 million of high-margin subcontracts to Five Star Electric and WDF. We signed our Purple Line 2 with $1,337,000,000, and we award $210 million to Fisk Electric and Desert Mechanical. So almost every one of these major awards, although the prime contract goes to us, it has a significant secondary impact on our major subcontract. So as our revenue ramps up and our profitability follows, it seems to reason with the level of margins that I review in their proposals, that they will follow and should also exhibit substantial growth both in margin and revenue.

Okay. That's helpful. And then, Gary, on cash flow. It sounds like you're looking for free cash in excess of net income. To what extent does that include any potential legal settlements within that? Or is that just sort of flow of profitability?

No, this is just the flow of profitability, what we're looking at. And also collection of some of our unbilleds will impact that also, but that's not necessarily tied to legal settlements.

Okay. And then, can you just sort of give us an update on what you experienced in the quarter on any legal activity and what you expect in the next quarter or so on legal activity?

We've settled 2 or 3 smaller issues in New York in a range of $3 million to $4 million. Nothing consequential. We have a $75 million claim teed up in California, where a public agency has written us a letter talking about their desire to immediately settle. They've asked for more information. We said we'll give it to them. We're in the midst of a structured disputes review board presentation in New York on another very significant claim with New York Transit. We expect to prevail in the DRB. That should hopefully be prior to the end of November, at which time we've been assured by transit management that they will abide by the decision of the DRB and settle that. I go to a mediation in, I believe, in September -- I can't recall, it's either September or October, on the insurance company issues on SR99. And again, we have our lawsuit with Wash DOT, which is supposed to try in June of 2019. And by the way, the insurance case has been postponed from October this year to February of next year. So the entire SR99 litigates and/or settles in 2019. We're in trial now as we speak on the [Nova] Tutor Perini claim on the Navy pier job in Seattle. That's been ongoing for 5 years. We've got $4 million in unbilleds attached to that. We should have a decision by the end of October. That's enough. I could go on forever, but unfortunately, there's so many of them that they're all teed up. And one of the key elements is that this year, we're not adding to it. We're closing out. So we put an end to this madness of not being paid.

Did anything go against you this quarter?

No, which is always good news.

Our next question comes from the line of Sean Eastman with KeyBanc Capital Markets.

I guess, for me, just -- I've been hearing that it's really only been recently that a lot of the FAST Act funding momentum has hit the market for contractors. So I'm just curious, your commentary was obviously bullish, but I'm just curious if you guys are seeing any acceleration in the bidding environment on the Civil side or more of the same. And sort of based on those market conditions, I'm hoping to get some color on what to expect in terms of the backlog trajectory through the second half of the year. Obviously, really strong bookings in the first half, but I'm wondering if we could see the backlog continue to trend up.

Well, I would hope so. We're bidding in 2 weeks. The Purple Line 3 stations. We very aggressively beat our peers on Purple Line 2. We then beat them on Purple Line 3 tunnels. I'd be very disappointed if we didn't beat them in the stations. So with any good fortune at all, we're looking at $1.6 billion at the end of this month. Unfortunately, we won't know until December or January, which is a result of their process and how they award. We have $1.5 billion project in Newark. We have another one at LaGuardia. One of our issues right now as we continue to increase the backlog is the constant debate of how much more work can we really handle. And if I had a target, I'd like to think we'll cross the $10 billion backlog threshold. But how much we go beyond that is a real debate within our own management because all of these major projects require a lot of talent to run, and we've had very good fortunes over the last 20 years running major projects successfully. But when you run out of people, you just don't pick up that quality on the street. So that's the only negative I can tell you. I expect backlog to cross that threshold, if not by the end of the year, first quarter next year, which, from our standpoint, will be a very desirable place to be, particularly in light of the increased margins. But we can't continue to grow at that same rate indefinitely.

I think that's good answer. So just speaking to reaching TPC's capacity and the industry is getting there as well, I'm just curious where those labor resources and talent resources are the tightest. Is it in a particular part of the country? Particular type of person? I'm just curious where you're starting to bump up against that kind of capacity level.

It isn't really geographic because the labor force, being a union contractor, virtually everywhere but a few pockets in the South. We have not had an issue of running out of a union, workmen or health. And when we think the unions are strained and the quality of health is not there, we simply increase our labor estimates and hedge against those failures. The difficulty is in the qualified management because when you look at $1 billion jobs, and I run most of our biggest jobs, the challenge intellectually and technically is such that very few companies and very few individuals that have the capacity to run those jobs successfully. It's really not geographic because our management, as I am, are in airplanes all the time. So if we get a job in Iowa, I may move 10 families from California, Nevada, into Iowa and they're mobile. The real challenge is, in addition to our own training programs and our own people in house, is constantly recruiting more management from outside, increasing our investment in training. So as this work continues to grow in an industry absolutely limited in its capacities and abilities, that's a challenge. And that's my biggest concern.

Yes. And lastly for me, just drilling down on the Specialty segment. Still struggling a little bit this quarter. It sounds like perhaps there's a bit of a kind of utilization issue. I was just curious if we can get an update on the pass back towards that 5% level. Kind of what's in place at that point? What happens between what we're seeing this quarter and that 5% target?

Well, I think it's entirely appropriate to expect and even demand that we reach that level or more. I never thought the 7% was unreasonable. But I suppose we should walk before we run. We have -- and I hate to use the term, but we basically almost worn out the bad work we inherited from the early times of the transactions. And I expect by the end of this year, although we have some very profitable work ongoing, some of the negatives we will have worn out and put behind us. So I really expect to start 2019 in the Specialty Group with an enormous backlog of very profitable work, which I expect them to fully deliver the levels we've talked about, namely 5% to 7%.

(Operator Instructions) Our next question comes from the line of Bill Newby with D. A. Davidson.

I guess, pleasantly surprised by the Building margins in the quarter. I guess, as we've seen Newark start to ramp more and become a bigger mix there, I mean, can we see those push higher through the end of the year and into '19?

In the Building Group?

Yes.

Is that, Bill? Let me say that I never looked for anything significant out of the Building Group. However, I will remind you that in a moment of weakness, I bequeath half of Newark to the Building Group, and the margins on Newark will be such that it will distort upward the Building Group's profitability. And the key element is I don't want anybody believe that, that can be sustained in a typical CM model that currently resides in our Building Group. They will just be the beneficiary of their 50% interest in a highly profitable Newark terminal. So they're mired in their 1.5% to 2.5% with the exception of Newark, which could have an explosive impact on their earnings for the 3 years of its work. Then, they'll go back to their 1.5% to 2.5%.

I appreciate that, Ron. I guess, is there any guidance you can give as we try to think about the upper end of that range through the next 3 years here?

Not at this point, but we'll look at that. And I would certainly hope by the end of the year, we'll project. I think, the biggest single element that we're working on constantly is the resolve and collections of our enormity of our unbilled receivables. And that is really key as we settle and close and reduce any potentials for write-downs. As we project forward, we've got to close out and collect that money. So I think by the end of the year, we'll certainly have our arms around 2019 with really a pretty good handle on 2020 because we've been a beneficiary of such large awards that extend over 3 to 5 additional years. There's a degree of predictability.

I appreciate that. I guess, just one more from me on the backlog. Ron, you mentioned, I mean, a goal of $10 billion by the end of this year, early '19. Do you have enough capacity still in the Civil business to sustain the current mix there? I mean, I guess, in other words, should Civil still be 55-ish percent of the backlog as you get to $10 billion?

Probably. The real driver of backlog will always be the Civil business. It's an arena we're dominant. We're a major player. The Building business is so competitive and the fees are so poor. It's very dangerous to look for a great degree of revenue when your margins are razor-thin. So we will always be driven by our Civil backlog as well as our Civil capacity. On the same token, that's where the limits come in. So I don't know whether I confused you, but I think what I tried to say is the $10 billion backlog is reasonable. And if we went from $8 billion to $10 billion in 18 months, don't look for us to go from $10 billion to $12 billion over the next 18.

There are no further questions in the queue. I'd like to hand the call back to management for closing comments.

Thank you, everybody, for your patience. Until we meet again.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.