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

Steven Fisher - UBS Alex Rygiel - FBR Capital Markets John Rogers - D.A. Davidson

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation Second Quarter 2016 Earnings Conference Call. My name is Brock [ph] and I'll be your coordinator today. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. If anyone should require operator assistance during the conference, please press star then 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.

Good afternoon and thank you all for your participation today. Joining us on the call are Ronald Tutor, our Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during today's we will be making forward-looking statements which reflect our current analysis of existing trend and information. There is an inherent risk that our actual results could differ materially. You can find the discussion of our risk factors which could potentially contribute to such differences in our Form 10-Q which has been filed today, and in our annual report on Form 10-K which was filed on 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.

Thank you, Jorge. Good afternoon everyone and thank you for joining us. Our second quarter results reflected improved profitability in both our Civil and Building segments compared to last year, continued strong revenue growth in our Building segment, some level of reduced corporate overhead expenses, and importantly, continued progress toward our goals to reduce our unbilled cost. We will get into more detail on that later in the call. In the second quarter, the Civil Group delivered a strong operating margin and as usual generated most of our operating income due to significant progress and favorable performance on various large projects including California high-speed rail and the Alaskan Way Viaduct replacement program in Seattle. In July, the Seattle Tunnel successfully completed another planned maintenance stop for the tunnel boring machine ahead of schedule, during which our team performed various equipment checks and replacements and we again resumed tunneling. And the TBM has now consistently maintained the desired production. Concrete operations for the double-deck highway behind are keeping pace and are in close proximity to the tunnel drive itself. We continue to expect that SR 99 will contribute significant revenue over the remainder of this year and into the second quarter next year. The Civil segment's top revenue contributors for the quarter included the New York Metropolitan Transit Authority East Side Access project, the Hudson Yards Platform, the San Francisco MTA Central Subway project, and the aforementioned SR 99. Our work on the San Francisco Transit Authority project continues to go well, and our work on California high-speed rail continues to ramp up as the rail authority finally delivered properties previously held up by right-of-way delay. The Building Group delivered yet another consecutive quarter of double-digit revenue growth and continued to drive the Company's overall revenue increase through increased work on various significant projects focused in California and Florida. The Group's top revenue contributors in the second quarter included that very large technology office facility in Northern California, a viaduct facility in Southern California, San Diego Courthouse, the Panorama Towers project in Miami, the Washington Hospital in Northern California, and the Chumash Hotel and Casino in Central California. Work at Hudson Yards in New York continues, with Tower C achieving a certificate of occupancy and Tower D coming out of the ground. The platform continues to work toward a first quarter of 2018 completion. The Specialty Contractor segment experienced reduced profitability this quarter due to both reduced revenue as work completes and certain continuing write-downs of existing work, and delays in backlog replacement. Because of the strong demand and limited available special contractor resources, particularly in the New York City region, we continue to be aggressive in utilizing our specialty contractor support in our own project pursuits and incorporating appropriately higher margins as a result. In the second quarter we experienced a short-term pause in new award activity across our businesses following what you may recall as a particularly strong quarter last quarter. Year to date we are tracking at about the same level of new awards compared to last year, with $2.2 billion of new awards booked so far. The Civil and Building segments have been the major contributors to our new award activity this year, and as a result, our backlog for the second quarter decreased modestly year over year to $7.3 billion. Our backlog composition remained similar to last quarter, 41% Civil, 34% Building, and 25% Specialty. In addition to our strong backlog, the volume of prospective work has continued to increase and now stands at $42 billion across our businesses. The significant volume of prospects, together with our strong backlog, continues to support what we believe to be positive long-term outlook for continued growth in profitability. Our Civil segment had new awards and adjustments totaling $93 million in end of the quarter, with backlog of $3 billion, about level with $3.1 billion in the second quarter last year. In addition, in July we were low bidder for the $107 million I-264 highway interchange improvement project in Norfolk, Virginia, and we anticipate the award of that project by the Virginia DOT shortly. Building segment had new awards and adjustments totaling $150 million and ended with a backlog of $2.5 billion, stable compared to the second quarter of last year. New awards included approximately 17 -- excuse me --$74 million for Maryland Lives Casino expansion and $41 million of additional work at that large technology office facility in California. Specialty Contract segment had new awards and adjustments totaling $175 million and ended with a backlog of $1.8 billion, excuse me, compared to $2.1 billion for the second quarter last year. Now I will provide some details regarding our increasing volume of prospective projects across all our businesses. The total volume now stands at $42 billion in projects we are tracking to be bid and awarded over the next one to two years, compared to $37 billion that's reported last quarter. We continue to experience strong demand for our service from customers across our business line, particularly in California, New York and Florida. The Civil segment's bidding volume remains at $21 billion plus. Large projects include the $1.7 billion Los Angeles Purple Line segment two subway extension projects for which bids were submitted in June with the contract award hopefully expected in early 2017 once a selection is made, the $1.5 billion I-405 highway improvement project in Orange County, California, which is expected to bid this fall with the contract award prior to yearend, a $600 million bridge project in New York called the GWB Suspender Oaks that we expect to bid later this year, and a $550 million bridge in Washington, D.C. called South Capitol Street Bridge that will also bid later this year. Building segment's bidding volume grew significantly and now stands at $18 billion, compared to $13 billion last quarter. This volume now includes $9 billion of opportunities in California, $3 billion in South Florida, a potential hospitality and gaming project in Las Vegas, Nevada, and a major football stadium also in Las Vegas, Nevada. Specialty contractor's bidding volume continues to be approximately $3 billion, consisting various electrical and mechanical project opportunities distributed over our areas of influence, namely California, Texas, Florida and New York City. In addition, there are tremendous project opportunities continuing to develop in the New York metropolitan region not yet reflected in our volume of prospective work. For example, portions of the $24 billion gateway program, which is part of the planned improvements to the northeast corridor currently in preliminary engineering, environmental review and permitting stages, with funding coming together from various sponsoring federal and state government agencies. The project will include a two-track rail tunnel beneath the Hudson River, to connect service between Newark, New Jersey and New York's Penn Station. Based on our existing backlog and our continued favorable market outlook, reflected by the volume of bids, we are reaffirming 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 continues to assume a tax rate of 41% and 49.6 million shares outstanding. I will now turn the call over to Gary Smalley to review the details of our financial results.

Thank you, Ron, and good afternoon everyone. I'll first provide some additional color on Ron's comment regarding the progress we are making with our unbilled cost reduction efforts, prior to discussing other aspects of our operating results for the second quarter. Just as a reminder to everyone, the goal that we communicated during our fourth quarter call in late February was to reduced our unbilled costs, the cost in estimated earnings in excess of billing identified on our balance sheet, from $905 million at the end of 2015 to about half that amount by the end of 2017 or two years later. Our intense focus on resolving various claims and unapproved change orders, as well as renewed emphasis on increasing our billing activities and collecting other unbilled amounts, enabled us to reduce unbilled costs by $47 million in the first quarter of this year. Through our continued efforts, we're able to further reduce our unbilled costs by another $47 million in the second quarter. The $94 million reduction in unbilled cost year to date denote solid progress toward our two-year plan and is consistent with our expectations. We main highly focused on converting unbilled cost on our balance sheet to cash by aggressively resolving billing and collecting these amounts that we are due, which we will eventually use a significant portion of to pay down debt. In addition to reducing our unbilled costs, we increased our billings in excess of cost by $40 million, which is another indicator of our focus on improving the timing of our project cash generation. Staying for a moment with the balance sheet, although our receivables have increased 18% in the first half of 2016, this growth does not signal any collection issues. By far the biggest driver in the increase -- in the timing -- is the increase of the timing of the billings. In other words, billings were much higher in June than last December. Note that the two largest contributors to the growth in the receivables balance, whether for the quarter or for the six-month period, are the California high-speed rail project and the large technology project in Northern California. So the receivables growth actually gives us confidence as to the underlying strength of future cash collections. Keep in mind too that some of the growth in receivables was due to our continued success of being to bill unbilled costs, which is also a positive. More specifically, about half of the $47 million reduction in unbilled costs for the second quarter had been collected as of June 30, with the other half still in accounts receivable and soon to be collected. So now let's talk cash. Our operating cash flow for the first six months of 2016 was a positive $5 million, compared to a negative cash flow from operations of more than $31 million. This $36 million improvement in operating cash flow for the first six months was spread evenly between the first and second quarters, which demonstrates we are making consistent progress in this area. When you factor in our reduced capital expenditures for the first six months of the year, our free cash flow has improved an even more impressive $57 million in the first half of 2016, compared to the same period of last year. As for operating cash flow for the quarter, at first glance it may not appear as impressive as the $60 million we generated in the first quarter. However, if you look deeper into the numbers, you will see some very positive trends in improvement in fundamentals, whether we're looking at quarter-over-quarter or six-month data. By far the biggest change in cash flow generation when comparing the first and second quarters was the change in accounts payable. In the second quarter we paid down payables by nearly $40 million, compared to an increase of $58 million in the first quarter. Though this was certainly not a cash flow generator in the second quarter, it's actually quite positive for us. As we move to the P&L for the quarter, let me remind everyone that our operating results tend to be seasonal due to weather. Cold winters in New York and the Midwest, even when fairly mild, can negatively impact our results for the first quarter and the first month of the second quarter. Therefore, historically we have delivered significantly stronger results in the second half of the year compared to the first half. This year should be no different. Our second quarter revenue was $1.3 billion, consistent with our second quarter revenue for last year and our expectations. Civil segment revenue was $466 million, compared to $534 million for the second quarter of 2015. The reduction was mainly due to reduced activity on the JFK runway project which completed last fall, and to a lesser extent, the Hudson Yards platform project which as Ron mentioned is progressing toward completion in 2018. Segment revenue included strong incremental contributions from various projects such as the SR 99 project in Seattle and the San Francisco MTA project, which partially offset revenue reductions. Second quarter revenue for the Buildings segment was $524 million, a strong 16% compared to $451 million for the same quarter of 2015. This was due to continued strong execution activity on various projects including the large technology facility project and several other building projects in California and also in Florida. Specialty contractor segment revenue was essentially flat at $319 million, compared to $327 million for the comparable quarter of last year. Our second quarter G&A was $61 million, down 10% compared to $68 million for the same quarter of last year. The decrease included the impact of reduced incentive compensation and legal expense. Second quarter operating income was $41 million, an increase of 58% compared to $31 million for the second quarter of 2015. This resulted in operating margin of 3.7% this quarter, compared to 2.4% for the prior-year second quarter. Last year second quarter operating income was unfavorably impacted by an adjustment of approximately $15 million related to changes in the estimated cost to complete the Tower C concrete building project in New York. The strong increase in operating income and operating margin for the second quarter this year was primarily due to improved project execution from both the Civil and Building groups. Civil segment income from construction operations was $45 million, compared to $46 million for the second quarter of last year. The slight decrease included impact of the reduced activity mentioned earlier for the JFK runway project. Second quarter operating margin for the segment was 9.7%, up compared to 8.7% for the same quarter of 2015. The increase was primarily due to favorable performance on two large tunnel projects. The Building segment's income from construction operations was $13 million, up substantially compared to an operating loss of $13 million for the second quarter of 2015. The segment's second quarter operating margin was 2.5%, compared to a negative 2.8% from the same quarter of last year. The strong increase in the Building segment's operating income and the notable margin improvement were mainly attributable to the strong increased volume mentioned earlier on projects in California and Florida, as well as the prior-year [inaudible] I mentioned. Specialty Contractor's income from construction operations was $5 million for the second quarter of 2016, compared to $14 million in the same quarter of 2015. The segment's operating margin was 1.7%, compared to 4.2% last year. The decrease in the operating income and margin was principally due to certain project write-downs that we recorded this quarter. Interest expense for the quarter was $15.5 million, compared to $11.3 million for the same quarter of 2015. Nearly 90% of the higher interest expense for this quarter resulted from significantly higher borrowing rates, nearly 400 basis points, under the terms of our amended credit agreement. This was mostly the result of higher rates imposed on us by our lenders with the first amendment to credit facility in late February. They have since been mitigated a bit going forward with the second amendment to the facility that was executed in June. The impact of the higher borrowing rates was somewhat offset by a reduction in our average borrowings. An increase to non-cash amortization primarily associated with the two amendments to our credit facility in the first half of 2016 has also significantly contributed to the higher interest expense this year. We estimate that interest expense for the full year of 2016 will be approximately $58 million, including approximately $11 million or $0.13 per share of non-cash interest expense. Net income for the quarter was $21 million, close to double the net income reported for the second quarter of last year. This was mainly due to the reasons I mentioned earlier that drove our increased operating income. Our resulting diluted EPS for the second quarter was $0.43, up significantly from the $0.24 reported for the same quarter a year ago and consistent with our budget and our expectations. I should note that our EPS for the first six months of the year is ahead of our budgeted performance. The effective tax rate for the second quarter was 40.3%, a modest improvement from the 41.1% for the second quarter of 2015, primarily due to various expense and interest adjustments related to tax uncertainties. We continue to anticipate a 41% tax rate for the full year of 2016. Finally, our total debt as of June 30, 2016 was $801 million, compared to $818 million as of December 31 last year and $893 million as of June 30, 2015. This is even with the most recent convertible debt offering. We expect to make further progress in reducing our debt level as we collect substantial cash that we are owed throughout the balance of this year and beyond in accordance with our previously stated goal. Regarding the convertible debt offering, with the $200 million of proceeds, we paid down $125 million of the term loan balance and $69 million of the revolver. This allowed us to replace higher-cost debt with lower-cost debt because of the convertible 2-7/8% coupon rate. The pay-down of the term loan balance also enabled us to negotiate more favorable interest rates with our lenders for the remaining balance of the term loan and for the revolver, which, as I mentioned, we did as part of the second amendment to the credit facility. We consider the convertible debt offering to be the initial step towards what will eventually a more comprehensive and favorable refinancing of our bank credit facility of senior notes. With that, Ron, I'll turn the call back over to you.

Thanks, Gary. As our progress continues toward our goals, I'm confident we will produce significantly better operating results in the second half of this year, as you typically might expect. I am particularly optimistic as we continue to make substantial progress on collecting the large amounts of unbilled receivables that we are owed, specifically relating to both claims settlements and change order resolve that are outstanding. All of the senior management of TPC continues to intensely focus on reducing these costs and cash generation initiatives. The Civil Group will continue driving our profitability and the Building Group continues to grow revenue and bring their earnings back in line with our expectations. We expect these groups to maintain or improve upon their recent margins for the remainder of the year and experience notable improvement in our specialty contractor's operations, particularly those standard in New York City. With our existing strong backlog and the many bid opportunities we are finding in the coming quarters, we expect to continue to deliver strong results. With that, I'll turn it over to the operator for question and answers. Thank you.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question today comes from Steven Fisher of UBS. Please go ahead. Steven Fisher - UBS: Thanks. Good afternoon.

Hi, Steven. Steven Fisher - UBS: Hi, Ron. In your closing comments there you mentioned that in the second half of the year you expect margins to be as good or improving from where they were I guess in the first half of the year. Can you just give a little more color by segment? Is the real improvement you expect mainly in the specialty business and you expect Building and Civil to kind of remain where they are? A little more color there by segment if --

That's a good question, Steve. I expect the Civil segment to product certain higher margins from certain projects that are doing significantly better than anticipated. And the Specialty, frankly, to improve just because of the write-downs and reorganizations that are ongoing. But if I had to state where the majority of it would come, would be the Civil end. Steven Fisher - UBS: Okay, that's helpful. And can you talk a little more broadly then about where you are in the process of turning around the Specialty business? Was this kind of a step backwards with these additional write-downs this quarter? Can you get that business back to 4% margins or so over the course of the next year? What's happening there?

I think the major reorganization that I'm managing, to be candid, it's focused in New York City, with the two acquired companies functioning in New York, Five Star and WDF. I believe that by the first quarter next year, my original goal with the end of this year, I've moved it back to the first quarter of next year, that my reorganization will be complete, all the lines of authority set in place, and hopefully I'll be able to withdraw from the day-to-day because the right people will be in place. The blessing is that market continues to be extremely strong and both companies are major players. We've just got to organize them in a manner in which they deliver the profits, not just the revenues. Steven Fisher - UBS: Sorry, why is it taking longer than expected? What's the key cause there?

The usual problem, people. I removed many of the key people in place at Five Star. We've been quietly replacing, moving up others into higher positions. And it's just taken time as we tried to clean up the practices of the past and get the Company functioning more geared how we operate at TPC as opposed to how they previously performed. It's been a cultural change, it has not been easy. Steven Fisher - UBS: Okay. Just on the bookings, obviously a light quarter, but you mentioned the first half, we kind of have to look at it over in a half-year basis. How quickly do you think the Civil bookings could start to ramp back up? I know you mentioned Virginia Department of Transportation, not sure how big that project is, but how quickly can these bookings start ramping back up?

We're waiting to hear on the Los Angeles MTA Purple Line project. It's over $1.6 billion. And we're one of three, which I like our chances. However, we probably won't know until the end of this year. And we've got three or four half-a-billion-dollar projects we're currently bidding, from New York City to Washington, D.C. to Florida. So I'm not concerned. The Civil business will remain strong. And you're right in that we need to back-heel some backlog and we're in hopes that some of these large projects and lesser ones will fill that role. Steven Fisher - UBS: Is there any election year issues that are holding up decisions at your customers, thinking about on the Civil side?

Really not that I'm aware of. It usually ramping up to the election year and then six to nine months thereafter, new project fundings are harder to get through for all the obvious reasons. But most of what we're bidding on has been approved for a year. It takes a while for it to slow down the pipeline. So as of now, I don't think the election is impacting us. It could at a later time, but not right now. Steven Fisher - UBS: Okay. Thanks, Ron.

The next question is from Alex Rygiel of FBR. Please go ahead. Alex Rygiel - FBR Capital Markets: Thank you. Ron, can you talk a little bit about the very, very strong --

-- by segments, our Buildings segment, which is primarily negotiated work, much of it comes from past customers continuing to build, continues to be under pressure. There is a significant number of major building contractors in that that does not take a major investment of capital or equipment, merely people. The risks are de minimis compared to the Civil business. And as such, the margins are under constant pressure. Where I might rattle off 15 or 18 major builders in the U.S., all U.S.-based, competitive and aggressive, when I go to the Civil business, I'd be hard-pressed to come up with five or six U.S.-based major aggressive civil contractors capable of completing on the billion-dollar jobs that we try to pursue. Now of course we have the constant influx of foreign companies, but anybody in our industry that's aware knows how they continue to fail from a profitability standpoint, and more importantly, from a performance standpoint. So we look forward over the next few years to their diminishing role, which should hopefully enhance ours and our U.S. peers' position of increased profitability as our civil work ramps up. There's no doubt in my mind that regardless of who's president, there is a definite demand and need for continued growth in infrastructure. And whether it's here in California with proposition are going before the voters, the Water Bill that's trying to push through Sacramento, there's tens of billions of dollars of major civil works programs that fit right in our alleyway. So I'm very optimistic that those will continue. And we're one of that handful that can take a leadership role. The Special program -- excuse me. The Specialty subsidiaries are somewhere in between the Building Group and the Civil Group. They have more competition by region. However, for the very large work, their competition diminishes also. So I'd call the Building end the one extreme, the Civil at the other, and the Specialty somewhere in between, if that answers it. Alex Rygiel - FBR Capital Markets: It does. Very helpful. And then as it relates to the current quarter new awards, was that sort of an industry trend? Is that a little bit more company-specific? Did you lose some market share? Was it just lumpy based upon sort of the projects that you were bidding on and therefore not that big of a surprise to you internally?

No, it wasn't really a surprise. We proposed on the Rams stadium. It was $2.5 billion we were told. We were rated second. So they gave it to one of our competitors. At the same time we proposed on the Purple Line at $1.6 billion plus. We're waiting to find out in a number of jobs. It's just the nature of our business, we're lumpy. One quarter we could be awarded $200 million worth of work, the next quarter $3 billion. It just depends when these big projects bid and award. Alex Rygiel - FBR Capital Markets: And last question, as it relates to the California high-speed rail job, when do you expect peak construction and when do you expect the completion?

We think it'll peak probably first quarter next year on a very sizable scale. And we're predicting summer of 2019. Alex Rygiel - FBR Capital Markets: Thank you.

[Operator Instructions] Our next question today comes from John Rogers of D.A. Davidson. Please go ahead. John Rogers - D.A. Davidson: Hi, good afternoon.

Hi, John. John Rogers - D.A. Davidson: Just a couple of follow-ups. In terms of the cash flow, seasonally, will we see the same sort of patterns that had picked up quite a bit in the second half, that we saw last year?

Yes, John, that's what we're looking at right now. We don't really guide by quarter, but because of the revenue growth that we are expecting, we would only expect our cash flows to increase, and also we're going to be continuing to pursue those unbilled costs, which should contribute to the cash flow. John Rogers - D.A. Davidson: Okay. But as it relates to project collections and things like that, I mean the normal seasonal pattern, I think, is stronger in the second half, and just want --

That's correct.

Without a doubt, it has been for 20 years I've been running the place [ph]. John Rogers - D.A. Davidson: Okay. Good. And then just on the high-speed rail, is that part of the increase as well in the -- it sounds like in the third and fourth quarters in terms of the Civil business, that ramp-up --

Yes. John Rogers - D.A. Davidson: -- in the first quarter. Okay.

Without a question. John Rogers - D.A. Davidson: Okay. And then lastly, in terms of -- I know what you said, Ron, about the elections, but California, I guess I've seen some reports that they're trying to get figured out what they're going to do in terms of their budgets, and is there a backlog of projects, specifically Civil projects there? And is there any risk to delays especially on the I-405?

I really -- the I-405 I believe was funded and that bids in September. And I'm sure you're familiar with Proposition R, that the mayor and all of our local politicians are trying to push through, which would be a $20 billion plus program managed by the MTA in Southern California, as well as the governor still pushing the northern completion of high-speed rail at some $20 billion, as well as the water transmission issues in the state. California is finally waking up and at a statewide level appears to be on the verge of another set of major civil works public programs, and we're certainly in hopes that they continue and deliver, because that will put them right in our backyard. John Rogers - D.A. Davidson: Okay. Right. Thank you.

There are no further questions at this time. I'll turn the call back over to Ronald Tutor for closing comments.

Thank you very much, ladies and gentlemen. We'll catch you next quarter.

This concludes today's teleconference. You may now disconnect your lines. Thank you for your participation.