Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation Fourth Quarter 2019 Earnings Conference Call. My name is Omar, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following managements prepared remarks we will be opening the call for a question-and-answer session. As a reminder, today's conference call is being recorded for replay purposes. [Operator Instructions] I will now turn the conference over to your host for today Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.

Hello, everyone and thank you for your participation today. Joining us on the call are Ronald Tutor, Chairman and CEO; and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I'll remind everyone that during today's call, we will be making forward-looking statements, which are based on management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find our disclosures about risk factors that could potentially contribute to such differences in our Form 10-K, which is being filed today February 26, 2020. The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law. In addition, during today's call, we will be discussing certain non-GAAP financial measures. The appropriate GAAP financial reconciliations can be found in our earnings release and Form 10-K and also in our unaudited investor’s report all of which are posted in the Investor Relations section of our website. With that said, I will turn the call over to Ronald Tutor.

Thanks, Jorge. Good afternoon and thank you for joining us. As you read in our earnings release our fourth quarter results were negatively impacted by the substantial SR 99 charge that we took in December as a result of the adverse jury verdict. While we are appealing that decision and are optimistic we will eventually prevail the charge we were required to take nonetheless significantly reduced our earnings for the quarter. In fact they really eliminated our earnings. In addition the Specialty Contractors Group again experienced project charges on certain electrical mechanical projects in the fourth quarter particularly the mechanical group and provided us substantial operating losses that again affected our fourth quarter results. To say the least, I'm dissatisfied with the performance of the entire Specialty Group, specifically, more so the mechanical. However, we continue to make improvements and changes that should result in a better performance in 2020. On the brighter side our backlog increased in the fourth quarter to $11.2 billion a growth of 21% year-over-year with strong double-digit growth across all our segments. Our backlog growth was driven by $1.5 billion of new awards and adjustments in the fourth quarter and $6.4 billion for the full year of 2019. Significant fourth quarter awards included the $432 million Division 20 Portal Widening Project for the LA MTA in Los Angeles; over $375 million of various electrical mechanical projects; $263 million Miami-Dade County Courthouse P3 project for which we received the notice to proceed; a $79 million APEX technology and life science building in the $79 million East Bay Library. In addition, our London subsidiary received a $50 million 10th Avenue Bridge Rehab project in Minnesota. We expect our backlog will continue to grow later this year and into next year driven by not only strong customer demand, but one major and significant $1 billion-plus after another with the continued limited competition I have spoken to for the last two years. Our operating cash was another positive of the fourth quarter and was also strong for the year with $25.2 million generated in the quarter and $136.5 million generated in 2019. The second half of 2019 was particularly strong with $248 million of operating cash generated during that period. That was in line with our expectations for the year and I'm satisfied with our results and confident that in 2020 we will once again have another solid year with strong cash generation. In addition to collections from our projects generating cash, we expect to continue to make the projects -- excuse me the progress previously discussed in resolving our claims, underbillings and unapproved change orders to collect a substantial cash presently owed to us. With regard to the California High-Speed Rail and our Purple Line 2 and three stations and Purple Line 3 tunnels whose by the way aggregate value exceed $5 billion, the jobs continue to progress very well. High-Speed Rail is finally preparing to be in full production by June of this year. With our extending the completion date from the end of 2022 -- excuse me, the end of 2021 to the first quarter of 2023 once again we are in discussions with the owner to resolve payment for that further delay. However, it seems certain that given all of the results and resolves over the last 90 days that that should be the final end date for High-Speed Rail. I would also remind everyone that that contract is more than doubled during the time in which the contract has been extended. Purple Lines 2 and 3 including the separate Purple Line 3 tunnel contract have all started. Purple Line 2 is assembling the two tunnel machines and preparing to turn under and begin to mine in April. And both stations Wilshire Beverly and -- and excuse me Century City have commenced excavation and support. Purple Line three stations is in design with a potential construction start at the end of 2020. Purple Line three tunnels a $420 million project is -- the engineering is nearing completion equipment has been ordered and site preparation is underway. All of the above contracts continue to meet budget and although we have suffered compensable delays on High-Speed Rail are progressing very well toward completion and I might add significantly with no claims and no underbillings. As I've said before few contractors apart from us and a handful have the capabilities the financial and physical resources to successfully compete for and execute the extraordinarily large civil projects being put into the marketplace by government in the United States. Accordingly we remain in a very positive position with significantly increasing market demand against a backdrop of lessened competition for these very large projects. To give you a sense of the size and number of major jobs, I would add for example we just recently learned we are one of three teams shortlisted to compete, for the $1.2 billion, Metro-North Penn Station Access job, in New York. That bids later this year. Further, we have been pre-qualified to offer a construction management proposal, on the $6 billion to $7 billion, Sepulveda Transit Corridor project in Los Angeles. That award will be made in April or May of this year. The project is a design support, negotiated general contract, culminating on a notice to proceed, with the construction within 36 to 42 months. If that were not enough, we are pre-qualified for the Newark AirTrain, which is a $2 billion AirTrain that runs right across the front of our Newark Terminal. In addition, we are in the process of bidding the $1.5 billion, Honolulu Rail Transit project, which we'll bid in the second quarter more than likely May. And be awarded by the fourth quarter. And we're one of only two bidders, as well have had meetings and expect to be pre-qualified for the $2.5 billion, Bay Area Rapid Transit or Silicon Valley Extension, which bids in the second quarter of next year with an award in the third quarter. Continuing on, on the East Coast we also have a $2 billion JFK, landside roadway development and of course the LaGuardia, AirTrain. I could go on and on, and I have another paragraph in front of me. But what it really boils down to is there's enormity of million -- $1 billion-plus jobs, and the only limit is our physical capacity, which we do have, a capacity restraint. For our building group, larger new project opportunities include, two health care projects, in California, totaling $1.2 billion, the UC Davis Replacement Hospital in a Harbor Torrance, outpatient hospital. In addition, there is a $500 million Burbank Airport terminal replacement. And a number of odds-and-ends buildings that equate to the $300 million to $500 million range each. Our Specialty Contractors Group continues to be extremely driven by volume presented. But also challenged by the struggles we've had maintaining profitability, and commitment. I believe, the newer work that we've won is at significantly elevated margins. And the changes in staff in management should deliver better results, than we've been burdened with, for the last few years. Over the next five years, the New York City Transit, although, not one of our better owners is putting $52 billion worth of transit work out on the marketplace, that all falls within our expertise, both Tutor Perini Civil and Five Star Electric. With the absolute limited competition, never has an owner deserved higher prices. We anticipate strong revenue growth across all segments, in 2020, with improved margin performance. And we are projecting guidance for 2020, at a range of $1.80 to $2.10. With that, I turn it over to, Gary Smalley.

Thank you, Ron. Good afternoon, everyone. I will be discussing our results for the year, after which I will review the fourth quarter. I'll then provide some comments on, our cash flow and balance sheet and our 2020 guidance assumptions. As a reminder, we have provided in our earnings release and 10-K a reconciliation of certain non-GAAP financial measures to the most nearly comparable GAAP measures. The non-GAAP measures exclude the impact of the goodwill impairment charge that we took in the second quarter of 2019, as well as the tax benefit associated with that charge. Accordingly, for the full year of 2019, I will be discussing our adjusted income or loss from construction operations, adjusted net income, and adjusted EPS on a pre-impairment basis, to enable users of our financials, to better understand our operating results. Revenue for 2019 was $4.5 billion, consistent with the revenue reported last year. However, it is important to note, that the SR99 charge, which Ron mentioned earlier, reduced our revenue for 2019, as well as for the fourth quarter of 2019, by approximately $124 million. With this revenue reduction, our Civil segment revenue for the year was $1.8 billion still up 12% year-over-year, driven by increased activities on certain mass transit projects, in California and Minnesota that are early in their project life cycles, as well as increased activity on the Newark Airport Project. Revenue was down modestly for the Building and Specialty Contractors segments, compared to 2018. For the Building segment, the decrease was primarily due to reduced activities on health care projects in California. And hospitality and gaming projects in various states, partially offset by increased activities on the Newark Airport Project. And an industrial revitalization project in Mississippi. For the Specialty Contractors segment, the decrease resulted mostly from the timing of revenue burn, as newer work is expected to drive revenue growth for the segment. G&A for the year was $227 million, down 14 -- excuse me 14% compared to last year, with the reduction mainly due to a one-time gain of $38 million related to our acquisition of an additional 25% interest in the, Civil segment joint venture. Note that the billings and cash collections associated with this gain, will be reflected in our cash flow, mostly during 2020 and 2021. Adjusted income from construction operations for 2019, on a consolidated basis, was $15 million down significantly, compared to last year, primarily due to the $167 million SR99 charge which mostly impacted the Civil segment. Consequently, despite income contributions associated with the strong Civil segment revenue growth, adjusted income from construction operations for the Civil segment was $59 million. Building segment adjusted income from construction operations was $37 million, down 15% compared to 2018, mainly due to the absence of a couple of prior year immaterial favorable project closeout adjustments, partially offset by increased contributions in 2019, from other projects including the Newark Airport. The Specialty Contractors segment experienced an adjusted loss from construction operations, of $16 million for the year, mostly as a result of net unfavorable adjustments that totaled $41.5 million on certain electrical mechanical projects in New York, none of which were individually material. Other income in 2019 was $7 million compared to $4 million in 2018. The increase was due to a net gain on the sale of property and equipment in 2019. Interest expense in 2019 was $67 million compared to $64 million in the prior year with the increase due to a higher average balance on our revolver. The goodwill impairment in SR99 charges we took in 2019 resulted in a tax benefit of $66 million for the year compared to tax expense of $35 million in 2018. Adjusted net loss attributable to Tutor Perini for 2019 was $57.2 million or $1.14 per diluted share compared to net income attributable to Tutor Perini of $83.4 million or $1.66 per diluted share for 2018. Again our net income and earnings results in 2019 were primarily impacted by the significant after tax SR99 charge of $119.4 million or $2.30 per diluted share. I'll also note here that the net unfavorable adjustments in the Specialty segment equated to a $0.60 impact to the earnings for the year, $0.60 per share impact. Now for the fourth quarter results. Revenue for the fourth quarter was $1.2 billion level with the revenue for the same quarter last year even though as I mentioned earlier, the fourth quarter of 2019 was negatively impacted by the $124 million revenue adjustment associated with the SR99 charge. Civil segment revenue for the quarter was $448 million, down about $41 million compared to the fourth quarter of 2018 but again adversely affected by the SR99 charge. Several of our large Civil projects including California High-Speed Rail, the Purple Line projects, Newark Airport and the Minneapolis Light Rail will be contributing to the substantial revenue growth that we expect for both the segment and company in 2020. Revenue for the Building segment was $465 million essentially level compared to the fourth quarter of 2018. Several newer Building segment projects, many of which are in the early stages are expected to generate significant revenue in 2020 as construction activities advance. Specialty Contractors segment revenue was $265 million, up a strong 18% year-over-year primarily due to the increased activity on several electrical and mechanical projects in New York, New Jersey and California that are contributing significantly to the group's results. We anticipate even larger revenue contributions in 2020 from various projects in the Specialty segment that are in the early stages and are accelerating this year. Loss from construction operations for the fourth quarter was $94 million, compared to $91 million of income from construction operations for the same quarter of last year. The significant decrease was mostly due to the SR99 charge. For the Civil segment, the SR99 charge was the primary reason that the segment reported a loss from construction operations of $79 million for the segment in the fourth quarter compared to $75 million of income from construction operations for the same quarter last year. We expect to return to normalized profitability and higher margins for Civil in 2020 with operating margins near or even above the upper end of our historical 8% to 12% Civil segment range of profitability as several of the group's larger projects contribute even more substantially to our results over the coming quarters. We also still expect that our higher margin Civil group will continue to lead the company's overall earnings growth in 2020 and beyond. Building segment income from construction operations was $17 million, up modestly compared to last year's fourth quarter even with the flat year-over-year revenue for the quarter. The Building segment's fourth quarter operating margin was 3.6%, compared to 3.4% for the same quarter of 2018. We anticipate that the Building segment will deliver a higher full year margin in 2020 in the mid-2% range as several of the group's newer higher margin projects continue to advance. This compares to the 2.1% full year margin they produced in 2019. Specialty Contractors loss from construction operations for the fourth quarter was $13 million compared to $17 million of income from construction operations in the same quarter of last year. The substantial decrease was principally due to the impact of approximately $15 million of net unfavorable adjustments in the fourth quarter on certain electrical and mechanical projects in New York as well as the impact of $11 million of the $167 million SR99 charge. We expect that the Specialty segment will deliver better operating performance in 2020, given our focus on driving improvements in the group. Interest expense for the fourth quarter of 2019 was $16 million level with the same quarter of last year. The SR99 charge resulted in a tax benefit for the fourth quarter of $30 million, which compared to a tax expense of $20 million in the fourth quarter of 2018. Net loss attributable to Tutor Perini for the fourth quarter of 2019 was $86.1 million or $1.71 per diluted share compared to net income attributable to Tutor Perini of $49.4 million or $0.98 per diluted share for the fourth quarter of last year. The substantial reduction in net income and the EPS in this year's fourth quarter was again mostly due to the SR99 charge. Before shifting gears and discussing our operating cash and balance sheet just a clarification, the EPS impact of the SR99 charge was $2.38. I think I may have said $2.30 per diluted share previously. On to operating cash. We generated $25 million of operating cash in the fourth quarter and $136.5 million as Ron noted for the full year of 2019 including $248 million that was generated during the second half of the year. As Ron mentioned, this was a strong result in line with our expectations for the year and certainly an improvement compared to the $21 million we generated for 2018. We continue to expect healthy operating cash generation in excess of net income for 2020 from collection settlement activities as well as regular project execution activities. Our total debt as of December 31, 2019 was $834 million compared to our debt at the end of the third quarter -- excuse me comparable to our debt at the end of the third quarter. As you may know our credit facility includes a spring-forward maturity provision, whereby, it will mature on December 17, 2020 if our convertible notes are still outstanding at that time. Our goal is to take out the convertible notes from cash generation during the year. However, we are discussing all options and various backup plans with our lenders. We will determine the financing alternative that is best suited to our needs and provides the most favorable terms. And because of the spring-forward maturity of our credit facility, all borrowings under the facility are included in current debt on our balance sheet at the end of 2019. This has no impact at all on our operations. I will note that we are well within the limits and in compliance with our debt covenants for the fourth quarter and we expect that we will continue to be comfortably within our covenant limits as we go forward. Earlier, Ron mentioned our initial EPS guidance range for 2020 of $1.80 to $2.10 per diluted share. We acknowledge that this guidance range is below the Street's 2020 consensus expectations. In the past, our ability to achieve guidance has been consistently challenged for various reasons including: delays as to when projects are awarded, delays as to when projects start up after they're awarded, and project execution activities falling short of the expectations or owners actions that impact the project schedule. The uncertainties of our industry are not going away. So, we need to do a better job of anticipating more of the surprises that have frequently impacted our ability to consistently meet or exceed guidance. We believe that our guidance range takes appropriate account of the inherent uncertainties in our business. Now let me provide some assumptions associated with our guidance. G&A expense for 2020 is expected to be approximately in the range of $270 million to $280 million. Interest expense is budgeted at approximately $71 million for the year in line with our expectation that we will collect cash and reduce debt, but it also factors in additional non-cash interest associated with addressing our convertible notes this year. About $20 million of the $71 million of interest expense will be non-cash interest expense. Depreciation and amortization for 2020 is anticipated to be approximately $109 million, of which $28 million represents amortization of an intangible asset established as a result of our increased joint venture interest on the Civil segment project. Our effective tax rate for 2020 is expected to be in the range of 26% to 28%. Net income attributable to non-controlling interest for 2020 is anticipated to be approximately $41 million. Our weighted average shares outstanding for the year should be approximately $51.5 million. Finally, capital expenditures in 2020 are expected to be approximately $56 million, of which $30 million will be for owner-funded project-specific equipment. With that Ron, I'll turn the call back over to you.

Make no bones about it. 2019 was an extremely disappointing year starting with a jury verdict that was hard to fathom given knowledge of the facts and the continued issues with our specialty group. Having so stated, we did achieve very strong operating cash results and backlog growth continues to expand in the higher-margin positive work we've discussed. I might add just as a point of clarity, the five newest projects in California starting with High-Speed Rail and four projects for the Los Angeles Metropolitan Transit districts the five of which totaled $5.4 billion are well under construction without a single underbilling or claim, which is where this company will be driven to no matter what it takes. I further expect another strong year of cash generation as we continue to make progress and resolving the day-to-day issues of disputes resolution with our owner reduction of unbilled receivables and simply collecting the cash we are owed. I continue to be optimistic, if for no other reason, the significant and overwhelming amount of work that is out in the industry to bid with to be very nice, very limited competition and margins that are particularly positive. We believe we will capture our share of all of that work. And as long as we continue to successfully execute those mega projects that will support the long period of growth and increased profitability that I foresee for the company. With that, I turn over the call to the operator for questions. Thank you.

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question is from Brent Thielman, D.A. Davidson. Please proceed with your question.

Hey, great. Thanks. Good afternoon.

Hi, Brent.

Ron, could you give us an update maybe on the magnitude of the collections and any timing we can think about here for this year that you're after?

It's slow, but we're in the process of resolving the San Francisco MTA project. They have come forward with another $30 million to resolve other issues there fully committing to taking that unbilled receivable down. We think it will be eliminated by June. It should have been done by January, but it always seems there is a reason why we can't do it today, but we'll do it tomorrow. There is no turning back. They've admitted in writing all the entitlements. They're doing the best they can. I'm convinced the integrity is in place, and we continue to settle all of the issues such that I expect San Francisco MTA to be cleaned up by the second quarter. We continue to negotiate or in a process on a number of projects. The Five Star versus the United Nations and their builder that arbitration ended. We will be waiting for results in the next 60 days. We had a litigation for breach of fiduciary against a former executive of one of our subsidiaries for a significant amount of money. That litigation is over and we're awaiting the results. We've got litigation over-waiting results that date back to March last year. So, the process is slower than I could have ever imagined. But we don't go away. And setting aside the incredible verdict on SR99, we expect to resolve most of these in our favor, if not all.

Okay. And I guess since you mentioned, it can you kind of remind us the timing of the appeals process? And what we can kind of look toward for that regarding SR99?

I think it's typically a two-year appeal process. In this case, the jury and frankly in my opinion the judge, so violated what was appropriate. All the appellate court, I would hope would do is look at the written record, and say that jury overruled a Disputes Review Board that ruled unanimously we were entitled to the money and ignored the definition of a differing site condition in our contract, which again would have said they owed us the money. And just said irregardless of the fact, you're not owed the money. It's -- as incredible as this may seem, and as angry as I may sound, it's all the way it is. However, this is America. This is our court system. My guess, it will take two years. And then, what we would hope would happen, but it's certainly not guarantees, it would be remanded for a new trial, which would probably extend it another two years. So all that means is if we win our appeal we retry the case.

Okay. And the asset of MTA has been a good story, I guess in this regard. I mean, you're getting collections here. It sounds like we'll see some cash then here in the first quarter from them or at least first half.

First half.

First half, okay. And what's left overall I mean potentially to collect from that owner?

There's probably $60 million still to collect and we hope to get a significant amount of it before if not all of it before June which would be the second quarter.

Okay. And then just on the guidance, I mean, obviously you've got large backlogs across all segments. I mean, should we assume you should see double-digit growth across all these businesses in 2020?

When you say double-digit growth earnings or revenue?

Just revenue. Just given the visibility you've got in a lot of these projects it seems to be moving forward.

With all these huge projects and the enormity of our backlog, it doesn't produce revenue that quickly. So I'm looking for probably high single digits to possibly double digits for 2020 and 2021. The key element will be the significantly higher margins and the fact that whether I say it or not, we have introduced significant contingencies to our earnings cover the continuing unforeseen issues that seem to crop up.

Okay. And last one probably for Gary. The G&A down this quarter could you just talk through what's included or excluded from that?

Yeah. That was also the $38 million gain that we had on the – acquiring the additional interest in the joint venture that I mentioned.

Okay. Okay. Great. I will back-out. Thank you.

Our next question is from Alex Rygiel, B. Riley FBR. Please proceed with your question.

Good evening, evening.

Hi, Alex.

Hi, Alex.

Ron to kind of follow-up over those previous questions in the past you've provided us a nice outline of anticipated cash collections over certain different time periods being sort of year-end 2019 1Q of 2020 and late 2020 or into 2021. Can you update us on those?

I wish, I could I didn't think of it and I didn't update our prior projections. You've heard about the ones that adjudicated. The only thing, I'd have to do is take the prior ones and see where they are time-wise. We have a tendency whether its negotiations or trial dates for every day I'm given the slip. So I can't – I really can't respond now. But I suppose, if I had time I could go back and get a current update for you Alex within the next 30 days.

And Gary maybe can you be a little bit more specific in kind of what your thought process is with regards to the time line of settling the converts?

Yeah, we've had a lot of discussions with our banks and some other interested parties who also have some ideas. And look we're looking at probably the spring to begin in earnest as far as specific activity. We want to give it just a little bit of time as you can appreciate Alex to see the timing of the cash collections to see, because that helps with the options the more cash that you have. So if the pace of cash collections mimics, which we – what we think it should be then that certainly helps in the settlement process and the timing of it. So I wouldn't expect anything before the – what we'll say mid-second quarter maybe by the end of the second quarter but my guess is probably early third quarter time frame.

And can you give us an update sort of on the first half of 2020, how cash flow looks associated with milestone payments and advances and such? Are we in a positive scenario there or a negative scenario there?

Yeah. We expect to be in a positive scenario. Alex, we don't really guide on cash flow other than to say that cash flow will exceed net income. We were out of the gate very slow last year with cash collections. We don't think – and the cash flow in the opening part of the year particularly the first quarter is never the strongest for us. But we don't expect to be as negative as we were to open last year. We see positive signs to have it more positive relatively more positive than the first quarter. Certainly, through the first part of the year, we expect to see some very good positive trends.

Very helpful. Thank you.

You’re welcome.

Our next question is from Steven Fisher, UBS. Please proceed with your question.

Thanks. Good afternoon.

Hi, Steven.

Hi, Steven.

Hey, guys. So Gary, just to maybe talk about the cash flow in the fourth quarter you mentioned the $25 million. When you include the CapEx it was – looked like it was around maybe $3 million of free cash flow for the quarter. It sounded like you guys are thinking of it as stronger than that. So if you could maybe help us just isolate what were the onetime payments, if there were any in the quarter that may have weighed on cash flow relative to what the normal flow was? And how was the normal flow relative to what your expectations would have been for the fourth quarter?

Yeah. There's not really any payments – onetime payments that impacted Steven. It's really more of a timing issue. Some of it is timing on just regular execution activities. It's the timing of collection where some things came in, in January rather than in December. Then there is a certain element of it on some of the collections, the older stuff that we've been settling, got delayed where it looked like things were going to come in November maybe December that they were extended. So it's really nothing more than that.

Okay. I mean, were there anything big that was already collected in January that you can call out?

No. I mean not anything unusual. No collections of the disputed items just a normal pace of collections on normal recurring type project execution activity. So nothing that, we've targeted that continues to be extended as Ron was saying a little while ago.

Okay. And then just following up on the question on the converts. I think you said that you intend to settle it with cash collected from operations. And I know you want to take some extra time to generate some cash from the settlement. I guess if we take $2 of earnings or so and your share count, so you'd be around $100 million of cash collected. I think your converts are somewhere correct me, if I'm wrong in the $200 million area. So is the expectation that you would need to generate roughly another $100 million from collections of some of the claims to address those converts?

Yeah. I think that math works at least at a high level. I think that's a reasonable way to look at it.

Okay. And then on the guidance if I take -- Ron I think you said maybe towards upper single-digit revenue growth and use the margins that you talked about and I know you didn't give specifics for the Specialty Group, but I don't get down as low as the guidance range. I know Gary you mentioned something about contingencies. So, are there large specific contingencies that you have baked into the guidance at this point already or--?

I've been so disappointed in our Specialty Group that I put a significant broad-based contingency against their earnings. They are a very key strategic part of our Civil Group going forward. And to say they've been an incredible disappointment in their execution would be an understatement. I've made a lot of personnel changes. I've made a lot of culture changes. I've done everything, but I'm not satisfied yet we're out of the woods. So, the only way I hedged against being embarrassed was that put a significant contingency against the Specialty Group. And that's why you're probably seeing earnings less than you would have otherwise anticipated.

Thanks Ron. So, do you assume that they -- in that guidance then, are you assuming that they make money in 2020?

Yes. If they don't make money, they better all be looking for a job, every last goddamn one of them.

And so there's been at least a couple of tries to address this as you mentioned still challenging. What's really the core issue here now after the management change? And does it make sense? I know you said it's a strategic part of the business. Does it really make sense to keep it? Can you still have the value-added to the Civil business by contracting with them separately under someone else's ownership?

No, unfortunately and I'll try to give you a better picture. When we acquired our two New York subsidiaries, Five Star and WDF in 2012 and Fisk Electric in Texas in 2011, we woke up in 2015, I cursed with the memory -- we wrote off $45 million at Five Star and we have had significant write-downs on old work. Now, there's nobody that's left out of any of those companies. They've all been replaced. The problem is from a period of about 2012 to 2016 that's when our under-billings exploded in New York, primarily in that Specialty Group and we are still wearing them out even though there's new people. They've had some execution issues in the last few years, but we think we have good people in place. And given the kind of scrutiny they're now working under, we think they will continue. And we will turn it around. The real problem is the reason we went into the specialty business, the enormity of our jobs are such if we don't have an electrical arm for example in both $1.300 billion LAMTA stations, it was $150 million and $175 million electrical component. When you bid at arm's length with an electrical contractor over whom you have no control and they know you're their only -- you're their general contractor and they're your only bidder, you have no control over their margins; you can't compete with our biggest competitor, Kiewit, who's fully vertically integrated as are we. And then we become at the mercy of our subcontractors instead of supported by. So, fortunately or unfortunately as the case may be, I'm convinced we have no alternative, but to maintain a large specialty presence to support our Civil bids. If it were not for that I'd agree with you wholeheartedly and I'd be out of the Specialty business as fast as you could imagine.

Okay. Thanks Ron. And then just a couple of last number questions Gary. So, just the fourth quarter Civil margins is the right number to have in the model, just a hair under 8% if you add back the SR 99 revenues and charges? Is that the way to think about it? And then just the cadence of 2020 or the first quarter tends to seasonally be pretty light and if 8% is the right number to think about for Q4 margins and you're talking about potentially 12% for the year in 2020, how do we ramp up to that? I just want to make sure we level set the expectation of cadence over the course of the year.

Yes, Steve, we had a closeout type issue if you will in Civil legacy item that we cleared in the fourth quarter also that brought the margin down a little bit. So, I think if you add back about $10 million to equalize your margin I think that's -- that gets you closer to what we expect to see out of the gate in the first quarter of 2020. And so the ramp up isn't as much as what you're thinking with the 8% to 12%.

Okay. Thanks a lot.

We have reached the end of the question-and-answer session and I will now turn the call back over to Ron Tutor for closing remarks.

Thank you everybody. See you next quarter.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.