Jorge Casado - VP, IR Ronald Tutor - Chairman & CEO Gary Smalley - EVP & CFO

Steven Fisher - UBS Tate Sullivan - Sidoti & Company John Rogers - D.A. Davidson Mike Shlisky - Seaport Global Securities

Welcome to the Tutor Perini Corporation Fourth Quarter and Fiscal Year 2015 Earnings Conference Call. My name is Shea, and I will be your coordinator for today. [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 go ahead.

Good afternoon and thank you all for your participation. Joining us on the call today are Ronald Tutor, our Chairman and CEO and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I would like to remind everyone that during today's call we will be making forward-looking statements, which reflect our current analysis of existing trends and information. There is an inherent risk that our actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences in our annual report on Form 10-K which is being filed today February 29, 2016. 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. As you are probably aware we've faced a number of unique and unfortunate challenges in 2015 that prevented us from achieving our budget expectations for the year. Most significant of these were the project charges recorded at Five Star Electric. In particular during the fourth quarter many of Five Stars project claims and changes were reviewed and restated at amounts below their previously reported levels. Based on certain developments during the quarter including the lack of success or progress in certain negotiation efforts we performed a detailed review and determined through that review process that Five Star management's expected recoveries on a number of projects were no longer achievable. As a result we took some necessary and significant charges on various projects work in process. Based on certain management performance issues at Five Star including that lack of discipline that led to these charges, I took action replace certain key members of the management team with stronger, more effective and responsible personnel. I believe that these changes together with the detailed review we perform and our close ongoing coordination with the new management team will result in better performance and accountability going forward at Five Star. Other issues that impacted us in 2015 included the major loss on the tower C concrete superstructure project in New York which of course we referred to I believe in the second quarter. The Brightwater litigation charge pertaining to a longstanding lawsuit matter that predated our 2011 acquisition of Frontier Kemper for which our appeal was denied and delays on both the SR99 project in Seattle and the California High Speed Rail Project in Fresno. Gary will discuss the impact of these as well as all our financials in more detail later. Despite the challenges mentioned there are positive things to report for the year. The Civil segments revenue grew a strong 12% for the year and they contributed the majority of the company's pretax income. About a 169 million before the Brightwater charge in corporate G&A. In addition the Building segments revenue grew 20% and they won a very large volume of new awards during the year which resulted in strong backlog growth. Finally, we are seeing a large volume of bidding opportunities in the years across our Civil and Building segments. With the issues that affected us last year thankfully behind us I'm pleased to report that we are already off to an excellent start in 2016 with a major new award for the Civil segment and another for the Building segment. The Civil group was awarded the $663 million New York Metropolitan Transit Authority East Side Access, CM007 project at late January and the Building Group was awarded the $285 million Pechanga Resort and Casino expansion, a previous long term customer in California earlier this month. The CMO [Technical Difficulty] transformed two very large caverns carved out of rock into a terminal station beneath the existing Grand Central Terminal. With more than 12 miles of track work from Queens to Manhattan concluding eight tracks and four platforms. The project is beginning immediately and will continue for the next 3.5 years bolstering our outlook for continued civil growth and profitability. Our fourth quarter results were highlighted by continued strong revenue growth and improve profitability in our building segment. In fact this was the 6th consecutive quarter of double digit revenue growth for the building group in the first year of double digit revenue growth for the group since 2008. For the year the company experienced revenue growth particularly in the civil and building segment slightly offset by revenue decline in the specialty contractors segment. We have maintained our backlog at 7.5 million as of the end of 2015, a level consistent with that reported at the third quarter. As mentioned we have already booked several significant new awards in 2016. So I expect our backlog to grow in the first quarter. To put our backlog in context at the time of the merger that created tooter Tutor Perini our backlog was 8.3 billion which was a record at the time. So as you can see with recent new awards and others expected in the next quarter. We are approaching a new record backlog for the company. More importantly our mix of work in backlog today is vastly different than it was in 2008 when close to 90% of our work was comprised of building projects with much of those in Las Vegas. Today nearly 2/3rds of our backlog is comprised of higher margin civil and specially projects that are geographically dispersed. That strong current backlog together with a large volume of pending awards and significant prospective work continues to support a favorable long term outlook for growth. I will get into segment specific details later regarding our backlog pending award and prospective work. The civil segment was active in the fourth quarter on various large projects including the New York MTA East Side Access namely CMO6, CS179 and CSCQ32 as a sense of their value that is close to a $1 billion of existing work being executed. The Hudson Yards platform for related which is in the current budget of $600 million. The San Francisco Central Subway and the Verrazano-Narrows Bridge upper deck replacement amongst others. Work has finally commenced on the California High Speed Rail and in the first quarter the project is being prosecuted in many different locations as we begin to make up lost time. Our civil work at Hudson Yards Platform and the Amtrak tunnel extension continues to make good progress but tunnel extension and steel frame and foundation work on the platform should be substantially complete in the second quarter of this year particularly the tunnel expansion which will be complete and the foundation and steel frame for buildings being built in the platform. However the balance of work mainly lighting, fire protection and ventilation on the platform will probably continue into mid-2017. With respect to SR99 or the Alaskan Way Viaduct we completed the tunnel boring machine repairs and testing and successfully resume tunneling operations just prior to Christmas. In mid-January the Washington State DoT issued a suspension order to our joint venture mainly due to issues related to a sinkhole. The suspension was lifted last week and we have since resumed tunneling operations. We believe that the suspension order was unnecessary so since the sinkhole occurred in a self-contained area constructed for the tunnel drive start [ph], the incident was promptly mitigated within hours and it had never posed any risk to the public or adjacent structures. We reserved our rights during the suspension and we'll handle it accordingly. In addition our previously stated view remains unchanged with respect to culpability and the ultimate outcome of this dispute over the tunnel boring machine repair and delay costs. We are now focused on completing the tunnel drive and delivering a quality finished project. Our civil group has added a substantial amount of work recently on at least on the East Coast, so any impact to our budget caused by the recent suspension is expected to be offset. The building segment was very active in the fourth quarter especially projects like the $800 million technology facility I mentioned previously. In Northern California, San Diego Courthouse, by a technical facility in Southern California, the Chumash Casino in Central California and many other building projects ongoing. Our California building subsidiary route off and sled and rebounded with an excellent year in 2015. They accounted for more than half of the building segments overall revenue and they continue to win significant new work as recently announced. In New York, our work on various buildings at Hudson Yards continues to advance, tower C is nearing its expected completion this spring. Of course the tower C concrete which we alluded to earlier has already been completed. Work is well underway on tower D and the retail gallery. We awarded the contract and booked our portion of the scope in the backlog in the fourth quarter in which we are managing the approximately $650 million work contained in tower D. We're within days of finalizing a contract for the retail gallery and expect to book that into backlog in the first quarter with a projected value of $600 million. As mentioned earlier the specialty contractor segment experienced a quarter of significantly reduced profitability due to the charges contained within Five Star Electric. Despite this our electrical and mechanical businesses in New York continued to successfully support many of our building and civil projects as well as our New York civil MTA projects. Overall we booked approximately 1.1 billion of new awards and adjustments to existing contracts which resulted in an ending backlog of 7.5 million for the company. Our book to burn was 0.94 and our backlog composition is now 37% civil, 37% building and 26% special. Again nearly 2/3rds of our backlog continues to be higher margin civil and specially work. Our pending awards at the end of the fourth quarter totaled 3.6 billion compared to 4.5 billion at the end of the third quarter. The decrease was mainly due to the award Hudson Yards Tower D as well as a few other fourth quarter awards. Of the remaining pending awards the retail gallery at Hudson Yards represents approximately $600 million and in addition several building projects in California and Florida. Next I will discuss our fourth quarter new awards and backlog by segment. Our Civil segment had new awards and adjustments totaling 374 million and ended with a backlog of 2.7 billion down 23% compared to the fourth quarter last year. The largest civil awards included the $ 80 million MTA East Side Access and the $70 million U.S. 301 highway in Delaware. I will also note that two weeks ago we were identified as the low bidder on another section of U.S. Highway 301 in the amount of 35 million. And of course subsequent to the fourth quarter as previously stated we were awarded the $664 million New York MTA East Side access CMO07. Building segment had new awards and adjustments totaling 577 million and ended with a backlog of 2.8 million up 27% compared to fourth quarter last year. The largest building awards included a 137 million of incremental funding for a technology project in California. Two luxury residential towers worth 131 million and the AquaBlu development project all in Florida and $81 million health care and a $58 million retail facility expansion in California as well as the previously mentioned tower D at Hudson Yards. Especially Contractor segment had new awards and adjustments totaling 176 million and ended with a backlog of 1.9 billion down 7% compared fourth quarter last year. Next I will talk about the volume of prospective projects by segment. Overall the volume has increased to $35 billion of projects expected to be bid and awarded over the next 12 to 18 months. We’re of course tracking various new civil opportunity and continue to experience very strong demand from our services across customers from all our segments. The Civil segments bidding volume has increased to $20 billion compared to $19 billion last quarter, the largest prospects include previously pre-qualified efforts for a $1.3 billion subway extension in Los Angeles, a $1.2 billion highway widening project. In Orange County and a $450 million bridge in Washington D.C. In addition there are various other significant project opportunities, West Coast to East Coast and even in Texas. The building segments bidding volume continues to be 12 billion including nearly 4 billion of opportunities for Rudolph and Sletten in California and another 4 billion for our South Florida operation as well as a significant an NFL Stadium in Los Angeles. The specialty contractors segment continues to have a bidding volume of approximately $3 billion much of which is for various electrical and mechanical opportunities in New York City where all of our subsidiaries are busy to a point of reaching capacity later this year. Based on our backlog recent awards and market outlook we’re confirming our guidance for 2016 with revenue expected to be in the range of 5.1 billion to 5.6 billion and diluted earnings per share of $1.90 to $2.20. The guidance assumes a tax rate of 41% and 49.600 million shares outstanding, approximately 80% of revenue supporting our guidance is already in our fourth quarter backlog. I will now turn the call over to Gary Smalley to review the details of our financial results.

Thank you, Ron. Good afternoon everyone. I will begin by discussing our results for the year after which I'll touch on the fourth quarter results. I will then provide some comments on our balance sheet and cash flows including the discussion of the recent amendment to our credit facility. Revenue for the year was 4.9 billion up 10% compared to last year and our highest annual revenue since 2009. The revenue increase was driven by strong double digit growth in our civil and building groups. The civil segments revenue was 1.9 billion in 2015, an increase of 12% compared to $1.7 billion in the prior year. This was principally the result of progress on many projects in the New York including the CMO006 and CS179 mass transit projects and the JFK runway project and increased activity on various bridge projects in the Midwest. The increase was partially offset by decreased activity on certain tunnel projects on the West Coast. The building segments revenue for the year was $1.8 billion up 20% compared to 1.5 billion in 2014. The growth was primarily driven by increased activity on various building projects in California including the large confidential technology campus and the San Diego Courthouse. Increased activity on a large hospitality project in Florida was also a major contributor. Specialty contractor segment revenue was $1.2 billion compared to $1.3 billion in 2014. The modest decline was primarily due to electrical projects at the World Trade Center to mechanical projects at United Nations in New York. As well as decreased activity on various smaller electrical projects in the Southern United States that have been and impacted by the low price of oil. This decrease was partially offset by increased activity on various electrical projects at Hudson Yards, two large mass transit projects and various other electrical mechanical and concrete placement projects all in New York. Our G&A for the year was $251 million versus $264 million in 2014. Reduced compensation expense was a primary contributor to lower G&A in 2015. Our income from construction operations was $105 million compared to $242 million last year. The biggest contributors to the decrease for the $46 million project charges that Ron mentioned at Five Star and the specialty contractor segment, the $24 million impact in 2015 of the loss recorded in the building segment for the tower C concrete project and the non-cash $24 million Brightwater charge in the civil segment related to the adverse appellate court decision that Ron commented upon earlier. In addition delays on the SR99 project impacted our 2015 civil segment results by approximately $18 million. Civil segment income from construction operations was $145 million compared to $221 million in 2014. The decline was primarily due to the Brightwater charge, decreased activity on certain tunnel projects on the West Coast including the delays on SR99, reduced activity on certain higher margin projects as well as prior year net favorable adjustments of $70 million related to two legal rulings. The decline was partially offset by increased activity as well as favorable adjustments in 2015 totaling $40 million on the JFK Runway project in New York. Resulting civil segment operating margin was 7.7% in 2015 compared to 13.1% in 2014. Excluding the Brightwater charge and the favorable adjustments on the JFK Runway project Civil segment operating margin in 2015 was 8.2%. Excluding the prior year net favorable adjustments Civil segment operating margin would have been 12.2% in 2014. Though certain higher margin projects that I mentioned earlier contributed to the stronger segment margin in 2014. The building segment had a loss from construction operations of $1 million in 2015 compared to income from construction operations of $25 million in 2014. The decrease was primarily due to the impact in 2015 of loss now complete tower C concrete project. In prior year favorable adjustments that totaled $11 million for a large hospitality and gaming project. Building segment operating margin was a negative tenth of a percent in 2015 compared to 1.6% in 2014. Excluding the impact of the tower C concrete project loss operating margin in 2015 was 1.3%, excluding the prior year favorable adjustments that I just mentioned building segment operating margin in 2014 would have been 0.9%. Specialty contractors, income from construction operations was $60 million compared to $51 million in 2014. he decrease was due to the charges on various Five Star Electric projects, none of which were individually material but which again collectively totaled $46 billion. It is important to note that nearly all of these projects are complete or nearing completion. Specialty contractor segment operating margin was 1.3% in 2015 compared to 3.9% in 2014. Excluding the impact of the Five Star Project adjustments especially contractors segment operating margin would have been 4.8% in 2015. Other income for the year was $12 million compared to other expense of $10 million in 2014. The improvement was principally due to reduced acquisition related earn out expense. Interest expense for the year was $44 million, a level essentially flat with what it was last year. Net income for 2015 was $45 million down from last year's $108 million mainly due to the reasons I previously mentioned that significantly impacted our operating income. Our adjusted net income which excludes the Brightwater charge was $59 million. The various unfavorable impacts were modestly offset by lower than anticipated tax rate for the year of 38.7% compared to 42.4% in 2014. The largest driver of the lower tax rate was a positive resolution of certain state tax matters. Our 2015 GAAP diluted earnings per share was $0.91 compared to $2.20 a year ago but slightly above the EPS range we've provided on January 22, when we preannounced preliminary 2015 EPS. Our adjusted EPS which excludes a 28% [ph] impact for the Brightwater litigation was $1.19. Aside from this non-GAAP adjustment the other factors mentioned earlier that impacted our results in 2015 netted to $0.85. The Five Star write downs were $0.53, tower C concrete charges including the reversal of previously recognized profit totaled $0.28 for 2015. The delays on SR99 resulted in lower than expected EPS of about $0.20. These were partially offset by favorable adjustments of $0.16 for the JFK Runway project. Also you may recall that in 2014 we had some favorable adjustments for certain projects in the civil and building segments which contributed $0.33 of the $2.20 of EPS reported last year. Now for the fourth quarter results, revenue for the quarter remains strong at $1.2 billion which was comparable to our fourth quarter revenue of last year. Civil segment revenue was $441 million down very slightly from $449 million for the same quarter last year mainly due to reduced activity on the JFK Runway project. As we mentioned last quarter that project was completed in Q3 of 2015 well ahead of schedule. Segment revenue reflected continued progress in many other projects in the New York area including CMO06, CS179, Verrazano-Narrows Bridge and Amtrak Tunnel extension as well as a number of bridge projects in the Midwest. Building segment revenue for the fourth quarter was $477 million up 13% compared to $422 million for the same quarter of 2014. As a result of strong execution activity on a variety of projects including the large technology campus project and several other building projects in California and Florida. Especially contractor segment revenue was $283 million compared to $331 million for the same quarter last year, the decline was primarily due to reduced activity on certain mechanical projects in New York as well as electrical projects at the World Trade Center. Despite the revenue reduction for the quarter we are encouraged by the large volume of work already in backlog and underway, new work recently awarded in New York as well as a large volume of opportunities for additional work throughout the segment. Our fourth quarter G&A was $51 million compared to $65 million for the same quarter of last year again the decrease was precisely due to lower performance based incentive compensation. Fourth quarter operating income was $50 million compared to $64 million in the same quarter last year which resulted in operating margin of 1.3% this quarter compared to 5.4% for the fourth quarter of 2014. The reduction in operating income and operating margin was mostly due to charges on the various Five Star projects and to a lesser extent due to delays on the SR99 project and the slow pace on the California High Speed Rail Project that as Ron said earlier will be picking up steam this year. Other income in the fourth quarter was approximately $7 million, this reflects reduced acquisition related earn out expense. Interest expense for the fourth quarter was $11 million compared $12 million for the same quarter last year. Net income for the fourth quarter was $9 million down from last year $28 million mainly due to the Five Star Electric charges and delays on the SR99 project partially offset by lower tax rate for the quarter of 25.5% compared to almost 49% for the fourth quarter of 2014. As we mentioned the lower tax rate was mainly the result of the positive resolution of certain state income tax issues. Our fourth quarter diluted EPS was $0.18 compared to $0.56 a year ago. Let's shift gears now and talk about our balance sheet and cash flows, a project working capital grew 6% in 2015 actually lower than our revenue growth while our accounts receivable at year-end actually declined slightly year over year in spite of the company's 10% revenue growth. The increase in our costs and estimated earnings in excess of billings during the year well exceeded the growth rate, the increase in the cost and excess account has certainly gotten our attention and we are working hard to drive it down. Note that just three years ago the cost and excess balance was about half of what it currently is. We expect to reach that level by no later than the fourth quarter of 2017. We’re focused on making significant progress in resolving numerous claims on unapproved change orders as well as billing and collecting other unbilled amounts which will allow us to convert these unbilled costs to cash but this focus and the traction we are getting from our efforts we are optimistic that the cash provided by operating activities for 2016 will grow significantly from the $14 million of operating cash flow that we generated in 2015. We know that our focus on working capital management especially converting our unbilled cost to cash will also enable us to achieve our goal of reducing our indebtedness. Our total debt as of December 31, 2015 was $823 million compared to $865 million at the end of 2014. This decline was due to as we continue to pay down our obligations. However, we're not satisfied with reducing debt by only $42 million a year as we did in 2015. As we make significant progress in monetizing our unbilled costs we expect to significantly reduce our outstanding debt consistent with the previously mentioned collections, continuing with the debt discussion last week we finalized an amendment to our existing credit facility which includes our term loan and revolver. You can read about the details of our new agreement in 10-K that we filed this afternoon but I want to give you some color, some background on the amendment. You may recall that in the third quarter of last year we've reached a debt covenant, it was leverage ratio as a result of the unexpected court decision on the legacy Brightwater litigation matter that was announced shortly before we filed. We received a waiver from our syndicated banks very quickly but we communicated to all of them at that time and they understood and agreed that we would need to come back to them for an amendment to the credit agreement carving out the impact of the Brightwater court decision. This is because our debt covenants are in a rotating four quarter basis. So an adverse earnings impact like Brightwater or tower C concrete project before it, or the Five Star charges after it will stay with us for rotating four quarters no matter how healthy our backlog, our current period earnings are. So with the magnitude of Five Star write downs in the fourth quarter we needed another waiver for the fourth quarter and the amendment to carve out Brightwater and reset the covenants to allow some headroom set that we will not reach any covenant in future quarters. Again the cumulative impact tower C concrete Brightwater and Five Star made this necessary along with the rolling four quarter nature of the covenant tests. We finalized the waiver and amendment last week with unanimous consent of the banks. The season follow-up cost for the waiver and amendment for the fourth quarter were significantly higher than just the waiver for the third quarter, but most of these costs relate to the amendment and can be capitalized and amortized in accordance with GAAP thereby reducing the current year earnings impact. Again you can read about the details in the 10-K but under the amendment our borrowing costs will be elevated in the tiered structure until we meet the covenant requirements of the credit facility that apply to us prior to the amendment and besides carving out Brightwater and resetting the leverage ratio covenant we also have new covenants that we need to comply with including some around the liquidity and additional principal payment requirements that kick in the fourth quarter of this year. The maturity of the facility has also changed so it now expires in May of 2018 instead of June of 2019. We expect to be able to meet the new covenants outlined in the amendment and required additional principal requirements are actually lower will say slower than what we are targeting internally for the pay down of our debt. Lastly, I should add that the additional expenses associated with amendment have been considered have not resulted in a change to our $1.90, $2.20 guidance for 2016 two that Ron indicated earlier that we are confirming. This concludes my prepared remarks. I'll now turn the call back over to Ron.

Thanks, Gary. Well I'm obviously disappointed with the financial results for 2015, I feel good that the issues which impacted us and we mentioned specifically are behind us and our path is clear to return to normal growth and some increased profitability. Our Civil markets are continuing to grow as evidenced by the increased volume of bidding opportunities and we continue to maintain a significant part of that growth as we deliver the profits we expect. We believe the new highway bill will be realized in the near future and that should only add to the growth we expect. The building markets are stronger than ever in California, New York and Florida which are our primary building markets where several major projects are pending and we believe some significant announcements we will make in the next 60 to 90 days particularly in Florida. Specialty contractor segment margins are increasing with particular respect to New York City where there is simply more work than there are qualified contractors able to build it. Finally because of our strong backlog the recent new awards and the significant opportunities across all our businesses, the outlook for 2016 and beyond remain strong. With that I will turn it over to the operator for the usual question and answers. Thank you.

[Operator Instructions]. Our first question comes from Steven Fisher from UBS.

Can you just give us a little more detail on the expected work down of the cost in excess of billings? I mean as of Q3 you had a fairly even split between unbilled cost and approved change orders and claims. So how does that look as of the end of the year? And how do you see that getting work down? Is this going to be more 2017 weighted versus 2016 and you gave sort of a by Q4 '17 you will be cutting half, but just kind of a little more detail on that please.

I think when you look at the case Steve, you'll find that there's a little bit more in claims in unapproved change order, so a bit of a shift from Q3. This is part of the normal course of resolution with some of these claims be in some of the change orders being disputed in shifting to claims. You know on a go forward basis as I mentioned we have a collection plan and we're very much focused, it's full core press on resolving our claims on unapproved change orders with respect to what our targets are I'll defer to Ron on that and let him help out on this part.

Well since that seems to be my primary job right now, the reality is that our specialty groups has developed about half of all of our unbilled receivables, outstanding changes and as a result the collections lie primarily there. I've taken over Five Star Electric, give the orders on a day to day basis and I am gauging with Five Star in WDF and to a much lesser extent the other specialty contractors with the collection of monies do, I think to reduce our unbilled receivables in half by the end of 2017 in my mind it's a worst case scenario. I expect to reduce it significantly more than that and the real issues are the residue of the World Trade Center where Five Star was directed to proceed with an enormous amount of extra work, they did not get commitments of payment and we woke up and we had $100 million of costs tied up in a project where we were doing extra work and performing changes with lags in payments that were just unacceptable. Simply put I've replaced all of the key people at Five Star with the exception of two senior operating executives and been in the process of reorganizing so such a thing cannot take place. To the credit of most of our owners they understand and I believe a significant part of those unbilled will be removed this year and whatever isn't should be accomplished no later than mid-year 2017. As far as some of the significant claims within our civil work group, although I'm intimately familiar and support them we believe there is an opportunity to settle a number of them this year. So our goal is to do more than cut that $900 million in unbilled receivables, change orders and process etcetera. Our absolute mandate is to reduce that by more than half with an outside date of 2017. So you can judge me on how well we do that.

And then how do you specifically expect to work down the debt if you do generate these collections over the course of the next two years I mean -- it sounds like you'll pay down the debt as you go along, is that right? Is that going to be reductions of the revolving outstandings or pay down to term loans?

As we receive the money and I believe our collections will be heavily weighted to 2016 with a significant part of that money collected in 2016, a major part of that will go to reduce debt and reduce our requirements for the bank facility and as a result all the stress that goes along with it.

Okay. And then maybe one last question on the cash flow. How you guys thinking about cash flow generation on an ongoing basis once you get this worked off and I guess the civil business being still pretty strong and ramping I mean can you do one times net income and operating cash flow or is there going to be more of a drag here or how should we think about what the business can generate on an ongoing basis and normalized operations?

I think with the goal being to reduce the unbilled receivables to a fraction of what they are currently by next year. I think the real impetus here in management is to take away control of cash flow from our subsidiaries, mandate resolves and to the extent practical, minimize litigation but more importantly collect billings, resolve changes and if they can't be take harsh steps with our owners to owners to enforce collections and resolves. So we never find ourselves in this absurd situation again and what I'd like to believe that if we can make $2 or more continuing forward and hopefully more that it won't be paper [ph] it will not be a unbilled receivables it will be in cash.

Our next question comes from Tate Sullivan from Sidoti & Company.

Just can we talk about pending orders and pipeline, a little bit, you said the retail gallery should be coming this current quarter and then in the pending order balance at 3.6 billion do you still include tower D and Hudson Yards in there or am I wrong in there?

Tower D is already executed. We haven't executed contract for tower D, we're in hopes that within the next two weeks we will sign the contract for the retail gallery at Hudson Yards.

Excuse me tower E, is tower E still in there?

Right now I don't know what the situation is tower D and if I had to hazard a guess we wouldn't be doing tower E.

And can you -- by working on so many parts of the Hudson Yards project I mean are you on a great position the keep working on the gateway project if it comes to fruition? And can you give an update on that project?

You're talking about the Amtrak Tunnel as it goes forward. Well we have negotiated two major [indiscernible] with Amtrak. We were in hopes of one more through the [Technical Difficulty] ground before it hits the Hudson. We think we're very well situated to take a significant role in that project as you know its size and we've taken the Amtrak Tunnel all the way across Hudson Yards and are looking at hopefully taking it the next part of the way right up to in fact the Hudson.

Our next question comes from John Rogers from D.A. Davidson.

I guess Ron, with the changes in the specialty segment that you’ve made now, what is the reasonable margin expectations for that business over the next couple of years I mean as you work your way through it?

Prior to G&A you mean or net profit after their respective G&A?

Either way.

So you don't try to figure out their G&As, they should regularly deliver between 6% and 7.5% pretax. A business that can't deliver that in that specialty group, we shouldn't be in.

And then on the buildings business now, I mean especially with Rudolph and Sletten and some of the projects in Florida where you’ve got more than I guess control position and the strength of the market. Can we ever see margins there back into maybe not mid-single digits but 3% - 4%, is that possible?

Well let's just say the double digit margins we earned on the McCarran Airport at a 1.2 billion [ph] are a thing of the past because unfortunately it doesn't appear that any building owners public or private will ever go to competitive bids. So I'm afraid like it or not the building business will be limited in the near future to at outside 4% and that will be more the exception and I think 3% will be more of the rule. New York City has a significantly lower margin attached to its work but I continually rationalize that because everything there cost twice as much, you achieve more returns on your management because of the cost of the work. But it just really is what it is, it's a very low margin, low risk but low margin business.

And then just on the Seattle SR99 project I mean you mentioned the shortfall in 2015, that project I assume is still profitable though at this point in expected to be?

It still is and we’re reviewing those costs now, we are again driving tunnel as we speak and hopefully we'll be able to maintain that drive so that in 2017 we can complete the project but in as much as it's the biggest tunnel ever driven in North America, there's a certain measure of risk that goes along with it.

Our next question comes from Mike Shlisky from Seaport Global.

I wanted to just ask a quick question about the new Eastside Access project, you said it's going to take 3.5 years to get going, can you just give us a sense for how it's going to ramp the timing of when you think it will have its best margins, what part of that 3.5 years I guess not the very last quarter but obviously just the full life of that project?

That job will start out very quickly and we believe we will be going full tilt by May 1, we'll probably start the work in April, ramp up rapidly. It's an existing chamber where we can go to work right away and I would think that $663 million will essentially have to be completed within three years. The 39 months because really the last six months are more commissioning start up and turn over than they are actual work. So it should be some intense revenue generation over the next 2.5 to 3 years.

I also wanted to touch on specialty just for a second. You had mentioned there was probably more work than there are folks to do the work in certain parts of the country in your business. Are you getting any pushback on the cost of labor and are people asking for or getting raises if they have the ability to kind of do that or you find if you can keep your cost under control as these pass along to the customer?

Well keep in mind if we’re union contractor for Marilee in New York City. So we have no issues with our managers and our supervision because they are company managers and employees. When you refer to the labor in the field which drives most of our major awards they're all in New York City building Trades Unions and their costs are just extraordinarily high and that's a given, however that's what we have abide by because we're a union contract. Now there is no question there's a significant movement in New York City for much of the smaller work even including work in Manhattan that is going non-union. Tutor Perini does not participate as a nonunion contractor. However that is the option that owners look at. However in fairness all of the mega projects as well as almost all of the public works still maintains a union commitment through project labor agreements and the labor minimums established within the contracts. So our public sector work in New York City is protected as far as being union going forward. And I don't think you'll see any non-union contractors building the 500 million and up type [ph] buildings but there's no question, the $100 million and $150 million buildings are looking at nonunion alternatives as we speak.

My last question Gary, this is for you probably [ph] in the case somewhere but your other assets, other long term assets, just want to make sure I knew a fairly big jump in that quarter over quarter and from the prior year. I'm not sure what that’s all about, can you just explain the jump to 200 million there?

Mike, I don't recall off hand Mike. I will have to get back to you on that.

Why don’t we find out and maybe you could call us in--

There is nothing unusual in the accounts, Mike.

Our next question comes from Andrew Kaslow [ph] from Deutsche Bank.

I guess first when you kind of look at the capital structure and now I guess I'm sure the term is going to be before the notes but how are you guys kind of thinking about refinancing you know I would intimate the strategy -- get rid of some of this trap cash [ph] and then pay down debt and then refinance but what's kind of the potential target and clearly there's been some backing up of deals, so just curious how you guys are thinking about when it timing wise you would potentially address the maturities in the capital structure?

We expect to pay off the term loans by 2017 and reduce the revolver needs and then my guess is probably in the first quarter of '17 depending if my collections are as successful as I expect them to be and then we'll address the bond issues and terms of a reduction of that debt and then a refinancing of the balance or just how to do it. But the key element is nothing more than a collection of all the money that goddamn people owe us everywhere and whatever it takes to collect it be assured we’re collecting and in so doing we will reduce the debt to a level that's easily handled.

And going forward I mean clearly you know you guys attribute some of that growth in the cost in excess to the World Trade Center but you know what kind of like a normalized level of working capital for that line item if you were to kind of throw out a number?

I lost you, a normal level of working capital for what?

Just on a go forward basis, you attribute a lot of the inflation in that line item to the World Trade Center.

Well unfortunately ours is a business with a certain level of claims and litigation that you can never get away from, we have had a history of always winning with very few exceptions but candidly you have to be prepared to always carry $200 million to $250 million of claims and/or litigation and stage such you're always cleaning them up in hopes of reducing it but you're never ever completely out of it. When you have 500 contracts all over the U.S. with 200 different owners, it's just part of the business. However, there really is no excuse for the level it got to and the real key commitment has to be to reduce it back to what we talked about and what it should have always been.

And then if you could just comment on your backlog and you know clearly there's a lot of different pockets of stress in the world with commodity inflation etcetera, do you have any direct/indirect exposure to either municipalities that are heavily vested in the outcome of oil prices or if you can just comment on any concerns about counter parties etcetera?

We really have nothing we do as anything to do with oil prices. The closest thing I could think of is our [indiscernible] group in Texas had maybe $70 million or $80 million in contracts with Exxon at their expansion, they've been tabled or reduced. Everywhere else the truth of it is the oil collapse has been a boon to our profitability because we've got many of these long term oil contracts that at $4 gallon fuel prices they were buying for $2 a gallon on our civil work. So it's at no negative impact, if anything laughingly is at a positive impact because none of our public agencies have anything to do with oil. There is dissolved tax base in Washington D.C. driven grants. And we see that infrastructure continuing to ramp up regardless of a republican or democratic president. But the only thing the parties can agree on is rebuild the infrastructure.

And just final question just housekeeping item, you know CapEx budget for this year, any particular number you guys are thinking about?

Nothing significant, most of our CapEx today revolves around replacing vehicles which might be 3 million to 5 million a year or buying equipment for a specific job where the cost of all the equipment purchased and written off is in the project contract. So I don't see CapEx as a big item.

Yes we don't expect it to be more than $20 million for 2016, that’s where we have it right now.

We have a follow-up question coming from Steven Fisher from UBS.

Just a couple of follow ups here, can you just set the stage a little more clearly on seasonality because historically we've had a little volatility around that particularly in Q1 because Q1 typically is usually a depressed due to weather but this year the weather has been kind of mild. So is this Q1 like a 2012 and 2015 or more like a 2013 and 2014 and then the second question is do you expect revenues to grow in each of your segments this year?

I think we've predicted growth I don't recall exactly but -- what you respond to the growth as far as the first quarter other than New York City which is been its usual poor, we've had good weather and I don't expect the first quarter to be as bad as our worst first quarters. What did we project first quarter? $0.13? We don’t see the first quarter as being a difficult bogey this year. We've had good weather and good results. Even though I don't know that I'm supposed to respond to that. Hell, I don’t know what I'm supposed to answer any more, I get too forthright and then the lawyers yell at me.

As far as to answer your questions Steven on revenue growth, we expect there to be more revenue growth in civil and building than in specialty but all of them will nose up somewhat and that’s answering the question to the lower end of the range. As you get up to up the range then you know there will be growth across all the segments and more significant growth.

We’ve a follow-up question coming from John Rogers from D.A. Davidson.

Maybe for Gary as well, what do you expect for D&A this year? Depreciation and amortization.

Yes what we're looking at right now together we're looking at about $46 million, so that’s about $2 million higher than we had for '15.

And then second part maybe I guess maybe for Ron, and I know you don't want to negotiate over the phone but have you assumed that you're going to have to take it any sort of discount to what you're asking for on some of these receivables to accelerate the collections?

Certain ones, yes, others, no but I'm contemplated the effects of all of it. What it simply is changing is our owners will have to deal with me as opposed to some of our people who are no longer with the company. There was virtually no one left at Five Star that dealt with these issues. And it is me and an individual I appointed as an Interim CEO and I'm their every week. We will collect all of that money or any owner that's listening in on the call you are forthrightly forewarned.

We do have a follow-up coming from Mike Shlisky from Seaport Global.

I just want to ask a quick question on repayment of debt. Does your guidance assume at the outset now, at this point that there's no debt repaid and as you collect stuff you will be able to raise your guidance or is there some element of debt repayment and interest reduction in '15 guidance already?

We’ve been fairly conservative in what we've expected in our debt pay down for the year. So there's a very minor amount that we put out there. Like anything that we do pay down as we get these collections in, as we resolve these change orders and claims that should go to reducing our interest expense. So we have assumed a little bit but not a substantial amount.

Thank you. At this time we have no further questions. I will turn the call back over to Ron Tutor for closing comments.

Thank you everybody. We'll catch you next quarter and I appreciate your patience.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.