Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation fourth quarter 2019 earnings conference call. My name is Omer, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will be opening the call for a question and answer session. As a reminder, this conference call is being recorded for replay purposes. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I will now turn the conference over to your host for today, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.

Hello, everyone, and thank you for your participation today. Joining us on the call are Ronald Tutor, Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I'll remind everyone that during today's call, we will be making forward-looking statements which are based on management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find our disclosures about risk factors that could potentially contribute to such differences in our Form 10-K, which is being filed today, February 26, 2020. 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. In addition, during today's call, we will be discussing certain non-GAAP financial measures. The appropriate GAAP financial reconciliations can be found in our earnings release, and Form 10-K, and also in our unaudited investors report, all of which are posted in the investor relations section of our website. With that said, I will turn the call over to Ronald Tutor.

Thanks, Jorge. Good afternoon and thank you for joining us. As you read in our earnings release, our fourth quarter results were negatively impacted by the substantial SR99 charge that we took in December as a result of the adverse jury verdict. While we are appealing that decision and are optimistic, we will eventually prevail. The charge we were required to take nonetheless significantly reduced our earnings for the quarter. In fact, it really eliminated our earnings. In addition, the specialty contractors group again experienced project charges on certain electrical mechanical projects in the fourth quarter. particularly the mechanical group and provided us substantial operating losses that again affected our fourth quarter results. To say the least, I'm dissatisfied with the performance of the entire specialty group, specifically more so the mechanical. However, we continue to make improvements and changes that should result in a better performance in 2020. On the brighter side, our backlog increased in the fourth quarter to 11.2 billion, a growth of 21% year-over-year with strong double-digit growth across all our segments. Our backlog growth was driven by 1.5 billion of new awards and adjustments in the fourth quarter and 6.4 billion for the full year of 2019. Significant fourth quarter awards included the $432 million Division 20 portal widening project for the LAMTA in Los Angeles, over $375 million of various electrical and mechanical projects, the $263 million Miami-Dade County Courthouse P3 project, for which we received a notice to proceed, The $79 million Apex Technology and Life Science Building and the $79 million East Bay Library. In addition, our London subsidiary received a $50 million 10th Avenue Bridge Rehab Project in Minnesota. We expect our backlog will continue to grow later this year and into next year, driven by not only strong customer demand, but one major and significant billion dollar plus after another with the continued limited competition I've spoken to for the last two years. Our operating cash was another positive of the fourth quarter and was also strong for the year with 25.2 million generated in the quarter and 136.5 million generated in 2019. The second half of 2019 was particularly strong with $248 million of operating cash generated during that period. That was in line with our expectations for the year and I'm satisfied with our results and confident that in 2020 we will once again have another solid year with strong cash generation. In addition to collections from our projects generating cash, we expect to continue to make the progress previously discussed in resolving our claims, under-billings, and unapproved change orders to collect the substantial cash presently owed to us. With regard to the California high-speed rail and our Purple Line 2 and 3 stations and Purple Line Three Tunnels, whose, by the way, aggregate value exceed $5 billion. The jobs continue to progress very well. High Speed Rail is finally preparing to be in full production by June of this year with our extending the completion date from the end of 22, excuse me, the end of 21 to the first quarter of 23. Once again, we are in discussions with the owner I would also remind everyone that that contract is more than double during the time in which the contract has been extended. Purple lines two and three, including the separate purple line Three Tunnel Contract have all started. Purple Line 2 is assembling the two tunnel machines and preparing to turn under and begin to mine in April. And both stations, Wilshire, Beverly and Wilshire, and excuse me, Century City have commenced excavation and support. Purple Line 3 stations is in design with a potential construction start at the end of 2020. Purple Line 3 tunnels, a $420 million project. Engineering is nearing completion. Equipment has been ordered, and site preparation is underway. All of the above contracts continue to meet budget, and although we have suffered compensable delays on high-speed rail, are progressing very well toward completion. and I might add significantly with no claims and no under billings. As I've said before, few contractors apart from us and a handful have the capabilities, the financial and physical resources to successfully compete for and execute the extraordinary large civil projects being put into the marketplace by government in the United States. Accordingly, we remain in a very positive position with significantly increasing market demand against a backdrop of lessened competition for these very large projects. To give you a sense of the size and number of major jobs, I would add, for example, we just recently learned we are one of three teams shortlisted to compete for the $1.2 billion Metro North Penn Station Access Job in New York. That bids later this year. Further, we have been pre-qualified to offer a construction management proposal on the $6 to $7 billion Sepulveda Transit Corridor project in Los Angeles. That award will be made in April or May of this year. The project is a design support negotiated general contract culminating on a notice to proceed with a construction within 36 to 42 months. If that were not enough, we are pre-qualified for the Newark Air Train, which is a $2 billion air train that runs right across the front of our Newark terminal. In addition, We are in the process of bidding the $1.5 billion Honolulu Rail Transit project, which will bid in the second quarter, more than likely May, and be awarded by the fourth quarter. And we are one of only two bidders. As well, I've had meetings and expect to be pre-qualified for the $2.5 billion Bay Area Rapid Transit or Silicon Valley Extension. which bids in the second quarter of next year with an award in the third quarter. Continuing on on the East Coast, we also have a $2 billion JFK landside roadway development and, of course, the LaGuardia Air Train. I could go on and on and I have another paragraph in front of me, but what it really boils down to is there an enormity of billion-dollar-plus jobs, and the only limit is our physical capacity, which we do have a capacity restraint. For our building group, larger new project opportunities include two healthcare projects in California, totaling $1.2 billion, the UC Davis Replacement Hospital and the Harbor Torrance Outpatient Hospital. In addition, there is a $500 million Burbank Airport Terminal replacement and a number of odds and ends buildings that equate to the 300 to 500 range each. Our specialty contractors group continues to be extremely driven by volume presented, but also challenged by the struggles we've had maintaining profitability and commitment. I believe the newer work that we have won is at significantly elevated margins and the changes in staff and management should deliver better results than we've been burdened with for the last few years. Over the next five years, the New York City Transit, although not one of our better owners, is putting $52 billion worth of transit work out on the marketplace. It all falls within our expertise, both Tutor Perini Civil and Five Star Electric. With the absolute limit of competition, never has an owner deserved higher prices. We anticipate strong revenue growth across all segments in 2020 with improved margin performance, and we are projecting guidance for 2020 at a range of $1.80 to $2.10. With that, I turn it over to Gary Smalley.