Tutor Perini Corporation

Good day ladies and gentlemen and welcome to the Tutor Perini Corporation second quarter 2020 earnings conference call. My name is Victor 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 or technical assistance during the conference call, 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, sir.

Hello, everyone, and thank you for your participation. With us on the call today are Ronald Tutor, Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before discussing our results, I will 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 most recent Form 10-K, which was filed on February 26, 2020, and in the Form 10-Q that we are filing today. 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 are incorporated in our earnings release which we issued earlier today and filed with the SEC and which is also posted in the investor relations section of our website. With that said, I will turn the call over to Ronald Tutor.

Thank you, Jorge. Good afternoon and thank you all for joining us. We experienced a very solid momentum following our strong first quarter results, which enabled us to deliver very good results for the second quarter as well. This was despite a full quarter of adverse COVID-19 impacts, which, though not inconsequential, did not prevent us from achieving budget expectations so far this year. Gary later on will talk about that impact and the impact of a poor ruling on a litigation that hurt us in the quarter, but in spite of it, we were able to maintain almost the full budget and be ahead of budget for the first two quarters. Our revenue grew 13% year over year in the second quarter, driven by strong growth in both our civil and building segments as we continue to advance several large projects. including the three Purple Line projects in Los Angeles, the California High Speed Rail, and the Minneapolis Southwest Light Rail, amongst others. On a year-to-date basis, we have delivered strong double-digit revenue growth across the entire business. Extraordinary operating cash of $92 million was the most noteworthy aspect of our second quarter results. An outstanding accomplishment that was the second highest quarter result since our merger in 2008 and the fifth best quarter of operating cash across all quarters since that time. Our performance was largely driven by strong collections on major civil projects but also by projects, excuse me, by progress made on settlements which brought in approximately $40 million of cash. Our excellent cash generation in the second quarter puts us well ahead of budget expectations for operating cash through the first half of 2020. Importantly, we anticipate even stronger operating cash generation in the second half of the year, specific both to earnings and other settlements teed up and in the process. Our operating income for the second quarter was up an impressive 51%, but compared to our adjusted operating income for the same quarter last year, which excludes the impact of the goodwill impairment charge that we took that quarter. The significant increase in operating income was the result of continued progress on several higher margin civil projects that I mentioned earlier. I will point out here that none of our major civil projects have been thus far materially impacted by the COVID-19 pandemic. And the impact on certain projects and other segments appears to be largely behind us at this point. Our operating income this quarter would have been significantly higher had it not been for a $13 million charge we were required to take in the specialty contractor segment. due to that adverse arbitration result I spoke about earlier on an electrical project in New York in our specialty group, which will still result in the collection of $3 million of cash despite that same ruling. Despite operating in a COVID-19 environment, our civil and building segments delivered profits ahead of budget for the quarter. which helped to overcome the shortfall we once again experienced in the specialty contractor segment. Mostly a result of the charge I mentioned on that appropriate arbitration. Gary will provide you with all of the financial details of the quarter in a moment, including specifics around the COVID-19 impacts, but I will reiterate that our results for the second quarter were very good. and particularly outstanding for operating cash. I remain confident that we will produce even stronger results over the remainder of this year and into next year as our major projects continue to advance. I mentioned last quarter that the vast majority of our projects have been deemed essential services, which has allowed project activities to continue despite all the issues of COVID-19. Because of this, and particularly since our higher margin projects have not been significantly affected by the pandemic, we still expect that it will not prevent us from achieving our planned results for 2020. However, I will caution, as I did last year, that there is still considerable uncertainty about the duration of the pandemic and how it could eventually impact our business. Our backlog was still $10 billion at the end of the second quarter, still at a high level that will continue to provide for revenue growth and strong profits. As expected, our backlog is lower this year compared to the same period last year due to our strong revenue burn in 2020 and a relatively lower volume of new awards in the first half of this year compared to last year. The second quarter of 2020 included $717 million of new awards and adjustments. The most significant of these included more than $300 million of additional funding from recently approved change orders in our civil group, over $235 million at Rudolph and Slatton for various building projects in California, the largest of which was a $69 million education building and another $67 million at Lunda Construction in the Midwest for various civil infrastructure projects. Several major bid opportunities over the next year have been temporarily deferred while public agencies await federal supplemental funding. However, we continue to be extremely busy working on our other bids that have not been affected. Last week we submitted our bid for the Honolulu Rail Transit P3 project and we anticipate a team selection award of that project in the fourth quarter of this year. Recall that only one other team is competing for this project. In August we will be submitting our proposal to the LAMTA for the initial planning and design services of what will eventually be the $8 billion Sepulveda Transit Corridor P3 project. As a reminder, this project will be executed under a design support general contractor framework through which design support and preliminary design can ultimately lead to a negotiated general contract at the end of the quarter excuse me, at the end of the design period with approval process. In August, London Construction will be bidding on the $850 million I-69 project in Indiana with an award expected later this year or early next. In addition, our bid for the LAMTA's $400 million LAX Airport Metro Connector is expected to be submitted and awarded in the fourth quarter of this year. Other major upcoming bids include the $2 billion Newark Airport Air Train with selection award expected in the second quarter of 2021, the $2 billion JFK Airport Landside Roadway Development Project, which we believe will be awarded later next year the $1.4 billion Porter Bridge replacement in New Jersey which has recently been funded and we expect to bid early next year and the $1.2 billion Metro North Penn Station access project in New York for which we are one of only three teams shortlisted. We expect to bid that project early next year. In Northern California, we continue to talk to the owners about the $2 billion Bay Area Rapid Transit, or BART, Silicon Valley Phase II extension, which is anticipated to bid in the third quarter of next year with an award in the fourth quarter of 2021. Black Construction, our subsidiary in Guam, already has a substantial $500 million backlog, which as we've spoken, Two at great length with the Marines moving from Okinawa and that $10 billion program now finally in place and accelerating. We will be bidding on over $2 billion of opportunities on the island of Guam over the next 18 months, substantial portion of which is for the U.S. Navy and that Marine transfer. Other sizable Sybil opportunities that we are tracking for bids further down the road include the $4 billion West Santa Ana Transit Corridor and the $1.5 billion East San Fernando Valley Corridor, both for Los Angeles MTA. The $3.5 billion Port Authority New York City Bus Terminal, the $2.5 billion Dunbarton Bridge Rail Corridor in Northern California, and the $2 billion LaGuardia Air Train project. As we have been pointing out for some time, the volume of prospective civil opportunities of significant size remains unprecedented. However, while COVID-19 has impacted the funding and timing of these prospective projects, there are still a significant number of opportunities considered critical that are likely to be funded in prior to work. Prioritized for completion. It is widely expected that the federal government will approve a substantial supplemental funding package aimed at supporting state and local transportation agencies' critical infrastructure needs, which we hope should help backfill any funding gaps for the more complex projects we are pursuing. Our building segments larger prospective opportunities include an $800 million new hospital in Northern California, the $500 million Burbank Airport Terminal replacement, the $350 million Harbor UCLA Lawrence outpatient facility, a $350 million hospitality and gaming project in New Orleans, the $300 million Hudson County Courthouse in New Jersey upon which we've already proposed in our waiting results and a $265 million veterans home facility in Northern California. Our specialty contractors group remains focused on supporting our large civil projects and also continues to experience solid demand for the electrical and mechanical services from our customers, particularly in New York and Texas. The specialty contractors' workload is accelerating alongside the progress of our major civil projects, and I expect that while we will see improved and sustained and better operating results from the specialty group this year and beyond, as new work in this segment is more profitable and more consistent. without the disputes that have plagued them from the past. As mentioned earlier, we have made some notable progress this quarter on certain settlements which helped contribute to our strong operating cash. We continue to be persistent and determined in our efforts to collect the monies owed to us. Through the COVID-19 pandemic has caused delays with our owners where many of them have gone home and still not come back to work. These delays have started to ease as certain of those COVID restrictions have been lifted and we have numerous mediations and dates in place over the next 60 to 90 days that should allow significant progress for the balance of the year and concluding several of these claims and collecting the cash that's appropriate. We remain confident in the cash flow going beyond the second quarter all the way till the end of the year. Finally, our year-to-date earnings per share results are ahead of budget expectations for the first two quarters. And we have thus far been able to offset the adverse impacts of COVID-19 with strong continuing contributions from our large higher margin civil projects, being mindful of the uncertainties around COVID-19 and its potential to affect our business. However, based on our current assessment of market conditions and our forecast for the remainder of the year, we are maintaining our 2020 earnings per share guidance in the range of $1.80 to $2.10. With that, I turn the call over to Gary Smalley to present the details of our financial results.