Q2 2020 Tutor Perini Corp Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the tutor Perini Corporation second quarter 2020 earnings Conference call. My name is better and I'll be your coordinator for today.
This time, all participants are they listen only mode.
Following management's prepared remarks, we'll be opening the call for a question answer session.
As a reminder, this conference call is being recorded for replay purposes.
Anyone should require operator, which of course that you're starting to conference call. Please press star zero when your telephone keypad.
I will now turn the conference over to your host for today Mr. Jorge Posada, Vice President Investor Relations. Please proceed sir.
Hello, everyone and thank you for your participation with us on the call today, our Ronald tutor, Chairman and CEO, and Gary Smalley Executive Vice President and CFO.
Before discussing our results.
I 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's inherent risk that our actual results could differ materially you can find our disclosures about risk factors that could potentially contribute to such differences in our most recent form 10-K, which was filed on February 26, 2020 and in the form 10-Q that we're filing today.
The company assumes no obligation to update forward looking statements, whether as a result of new information future events or otherwise other than as required by law.
In addition, during today's call, we will be discussing certain non-GAAP financial measures the appropriate GAAP financial reconciliations or incorporated in our earnings release, which we issued earlier today and filed with the FCC and which is also posted in the Investor Relations section of our website with that said I will turn the call over to Ronald tutor.
Thank you Hey, good afternoon, and thank you all joining us.
We experienced a very solid momentum following our strong first quarter results, which enable us to deliver very good results for the second quarter as well.
This was despite a full quarter of adverse cobot 19 impact, which go not inconsequential did not prevent us from achieving budget expectations. So for this year.
Gary laid rod will talk about that impact and the impact.
A poor ruling on a litigation.
That hurt us in the quarter, but in spite of it we were able to maintain almost the full budget and be ahead of budget for the first two quarters.
Our revenue grew 13% year over year in the second quarter, driven by strong growth in both our civil and building SEC segments. As we continue to advance several large projects, including the including the three purple line projects in Los Angeles, The California high speed.
Feed rail.
And the Minneapolis southwest light rail amongst others.
On a year to date basis, we have delivered strong double digit revenue growth across the entire business.
Extraordinary operating cash up $92 million was the most noteworthy aspect the barge second quarter results.
An outstanding accomplishment that was the second highest quarter result, since our merger in 2008.
And the fifth best quarter of operating cash across all quarters since that time.
Our performance was largely driven by strong collections on major civil projects, but also by projects price excuse me, but progress made on settlements, which brought in approximately $40 million a cash.
Our excellent cash generation in the second quarter puts us well ahead of budget budget expectations for operating cash through the first step up 2020.
Importantly, we anticipate even stronger operating cash generation in the second half the year specific both earnings and others settlements teed up and in the process.
Our operating income for the second quarter was up an impressive 51%, but compared to our.
Adjusted operating income for the same quarter.
Last year, which excludes the impact of the goodwill impairment charge that we took that core.
A significant increase in operating income was the result of continued progress on several higher margin civil projects that I mentioned earlier.
I will point out here that none of our major civil projects have been thus far materially impacted by the cobot 19 pandemic and the impact.
On certain projects in other segments appears to be largely behind us at this point.
Our operating income this quarter would've been significantly higher had not been for 13 million dollar charge, we were required to take in the specialty contractor segment due to that adverse arbitration result, I spoke about earlier.
On on electrical project in New York in our specialty group.
Which will still result in the collection of 3 million of cash despite that same rule.
Despite operating in a cobot 19 environment, our civil and building segments delivered <unk> Proppants ahead of budget for the quarter, which helped overcome the short shortfall. We once again experienced in the specialty contractor segment.
Mostly the result of the charge I mentioned on that appropriate arbitration.
Gary will provide you with all of <unk> financial details of the quarter in a moment, including specifics around the globe at 19 impacts, but I will reiterate that our results for the second quarter were very good.
And particularly outstanding for operating cash.
Remain confident that we will produce even stronger results over the remainder this year and into next year.
Major projects continue to advance.
I mentioned that last quarter that the vast majority of our project have been deemed to central services, which has allowed project activities to continue despite all the issues go but 90.
Because of this and particularly since our higher margin projects have not been significantly affected by the pandemic, we still expect that it will not prevent us from achieving or planned results for 2020.
However, I would caution as I did last year that there's still considerable uncertainty about the duration duration of the pandemic and how it could eventually impact our business.
Our backlog was still 10 mill 10 $10 billion at the end of the second quarter.
Still at a high level that will continue to provide for revenue growth and strong profits.
As expected our backlog is lower this year compared to the same period last year due to our strong revenue bird in 2020 in a relatively lower volume <unk> New awards in the first after this year.
Compared to last year.
The second quarter of 2020 included 717 million of New awards and adjustment.
The most significant to these included more than $300 million of additional funding from recently approved change orders in our civil group.
Over $235 million at Rudolph and Sletten for various building projects in California, the largest of which was 69 million dollar education building and another $67 million at London construction in the Midwest for various civil business.
Picture project.
Several major bid opportunities over the next year had been temporarily deferred well public agencies await federal supplemental funding.
However, we continue to be extremely busy working on our other bids that have not been effect.
Last week, we submitted our bid for the holiday Lou Rail Transit P. three project and we anticipate a team selection award of that project in the fourth quarter of this year.
Recall that only one other team is competing for this project.
In August we will be submitting our proposal to the L.A.M.T.A.
For the initial planning and design services of what will eventually be the $8 billion suppose over the trends at quarter be three project.
As a reminder, this project will be executed under a design support general contractor framework through.
Through which design supported.
Eliminate redesign can ultimately need lead to a negotiated general contract at the end of the quarter excuse me at the end of the design period with approval process.
In August Lunda construction will be bidding on the $850 million I 69 project in Indiana.
With an award expected later this year or early next.
In addition, our bid for the L.A.M.T.H. 400 million dollar El <unk> Airport Metro connector is expected to be submitted and awarded in the fourth quarter of this year.
Other major upcoming bids include the $2 billion Newark Airport Airtrain.
Selection award expected in the second quarter 2021.
The 2 billion dollar JFK Airport landside roadway development project.
Which we believe will be awarded later next year, the 1.4 billion dollar Porter bridge replacement.
New Jersey, which has recently been funded.
And we expect to bid early next year and the 1.2 billion dollar Metro North Penn station access project in New York for which we are one of only three teams shortlisted.
We expect to bid that project early next year in Northern California.
We continue to talk to the owners about the 2 billion dollar Bay area rapid transit or barge silicone Valley phase two extension.
Which is anticipated to bid in the third quarter and next year with an award in the fourth quarter of 2021.
Black construction or subsidiary in Guam already has a substantial 500 million dollar backlog, which as we've spoken to at great length with the Marines moving from Okinawa and that and then that $10 billion program now finally in place and accelerating we will.
The bidding on over to billions of dollars of opportunities on the island of Guam over the next 18 months substantial portion of which is for the U.S. Navy and that marine transfer.
Other sizable CIBIL opportunities that we are tracking for bids further down. The road include the 4 billion dollar West Santa Ana trends at corridor, and the $1.5 billion East San Fernando Valley Corridor, both for Los Angeles empty.
The three and a half billion dollar Port Authority, New York City bus terminal, the two and a half billion dollar done Barton Bridge rail quarter, Northern California and.
And the 2 billion dollar Laguardia Air Trade project.
As we had been pointing out for some time the volume of perspective civil opportunities of significant size remains unprecedented.
However, while Cove and 19 has that impacted the funding and timing of these prospective projects.
There are still a significant number of opportunities considered critical that are likely to be funded in private door prioritized for completion.
It is widely expected that the federal government will approve a substantial supplemental funding package.
Aimed at supporting state and local transportation agencies critical infrastructure needs, which we hope should help backfill and the funding gaps for the more complex projects we are pursuing.
Our building segments larger prospective opportunities include an 800 million dollar do hospital in Northern California.
The 500 million dollar Burbank Airport terminal replacement.
The 350 million dollar Harbor, you CLA Torrance outpatient facility.
A 350 million dollar hospitality and gaming project in New Orleans.
The 300 million dollar Hudson County Courthouse in New Jersey, upon which we've already propose an are waiting results and a 265 million dollar veterans owned facility in Northern California.
Our specialty contractors group remains focused on supporting our large civil projects and also continues to experience solid demand for the electrical and mechanical services from our customers, particularly in New York indexes.
Specialty contractors workload is accelerating alongside the progress of our major civil projects and I expect that well, we will see improved in sustained and better operating results from the specialty group this year and beyond as new work in this segment is.
More profitable and more consistent without the disputes that plagued them from the past.
As mentioned earlier, we have made some notable progress this quarter on certain settlements, which helped contribute to our strong operating cash.
We continue to be just persistent in determined in our efforts to collect monies owed to us.
Through the Cove at 19 pet pandemic has caused delays with our owners where many of them, it's gone home and still not come back to work.
These delays have started to ease as certain of those covert restrictions have been linked lifted.
And we have numerous mediations in dates in place over the next 60 to 90 days that should allow significant progress for the balance of the year in concluding several of these claims and collecting the cash that's appropriate.
We remain confident in the cash flow going beyond the second quarter, all or wait till the end of the year.
Finally, our year to date earnings per share results are ahead of budget expectations for the first two quarters.
And we have thus far been able to offset the adverse impact of Cove at 19 was strong.
Continuing contributions from our large higher margin civil projects being mindful of the uncertainties around Cove at 19, and its potential to affect our business.
However, based on our current assessment of market conditions in our forecast for the remainder of the year, we're maintaining our 2020 earnings per share guidance.
The range of $1.80 to two Ted.
That I turn the call over to Gary Smalley to present, the details of our financial results.
Thank you Ron good afternoon, everyone.
I will begin with the discussion of our results for the second quarter, followed by some commentary on our balance sheet cash flow and then our 2020 guidance assumptions.
In my discussions today comparisons to last year's results will be on a pre goodwill impairment basis to better compared the normal operating results of each segment between the two periods.
As he mentioned earlier a reconciliation of these non-GAAP financial measures to the most nearly comparable GAAP measures is provided in the press release, we issued earlier.
Revenue for the second quarter was $1.3 billion up approximately $150 million or 13% compared to revenue of 1.1 billion for the same quarter of last year.
The growth was driven by increased activities on the large infrastructure projects that my Ron mentioned earlier.
As well as on certain building projects in California in Oklahoma.
Our revenue grew in spite of the covert 19 pandemic, which impacted our revenue by an estimated $130 million in the second quarter, mostly due to some projects suspensions or delays that lasted through the middle to latter part of the quarter.
Note that very few of our projects are currently delayed by cobot.
The cobot revenue impacts by segment for the second quarter were as follows.
15 million for civil.
$80 million per building and 35 million for specialty.
Civil segment revenue for the quarter was $569 million up a strong 20% compared to the second quarter of last year driven by contributions from the projects I just referred to.
Revenue for the building segment was for 473 million up 10% compared to the same quarter of two 2019.
Predominantly due to increased activities on various newer projects in California.
Specialty contractor segment revenue for the quarter was 234 million up 5% year over year.
Income from construction operations for the second quarter was $58 million, an increase of 51% compared to adjusted income.
From construction operations of $38 billion for the same quarter of last year.
The significant increase was mostly due to contributions associated with the significant volume growth, we experienced this quarter and the civil and building segments.
Income from construction operations was negatively affected by $9 million for the quarter due to covert.
But the segment breakdown as follows two.
$2 million for civil.
$2 million for building and $5 million for specialty contractors.
As Ron mentioned earlier, we took a charge of $30 million in the specialty contractor segment due to an adverse arbitration ruling on electrical project in New York, but we'll still collect $3 million from the decision.
So income this quarter would've been $22 million higher had it not been for the project charge and the covert 19 impacts.
Civil segment income from construction operations was $65 million compared to adjusted income from construction operations of $46 million for the same quarter of last year.
The segment's income grew 43% year over year.
Primarily because of strong contributions from our large mass transit projects in California.
In addition to the 2 million dollar coven impact in the quarter. The civil segment's income was also reduced by nearly $8 million of incremental noncash amortization expense this quarter related to an increased equity interest in a joint venture that we acquired in the fourth quarter.
2019.
Even with the additional amortization expense.
Civil segment's operating margin was strong at 11.5% for the second quarter of 2020 compared to an adjusted operating margin.
Of 9.7% for the same quarter of last year.
Civil segment operating margin was at the high end of the 10% to 12% range margin range. We typically see for the segment. We expect to remain at the upper end of this range or even higher for 2020.
Building segment income from construction operations was $18 million.
Up an outstanding 84% compared to adjusted income from construction operations of $10 million for the second quarter of last year.
The strong increase was mostly driven by contributions from certain projects in California, Oklahoma and the northeast.
The building segment second quarter operating margin was 3.8% compared to an adjusted operating margin of 2.3% for the second quarter 2019.
The elevated margin for this year second quarter reflects contributions.
From certain higher margin projects.
Building segment operating margin for the full year 2020 is expected to be in the 2% to 3% range.
Specialty contractors loss from construction operations for the second quarter was $11 million compared to an adjusted loss from construction operations of $4 million, so same quarter of last year.
The larger loss in this years second quarter was principally due to the $13 million charge related to the unfavorable arbitration ruling that Ron and I mentioned earlier.
We are optimistic that as the segments newer higher margin projects continue to accelerate the group's operating results will improve substantially.
[noise] interest expense for the second quarter of 2020.
Well $616 million compared to $17 million for the same quarter of last year.
But the reduction primarily due to a lower average interest rate this year on our line of credit.
Tax expense for the second quarter of 2020 was $10 million with an effective tax rate of 23.7% compared to a tax benefit of $43 million for the second quarter 2019, which largely resulted from the goodwill impairment charge recorded that period.
Net income attributable to tutor perini for the second quarter of 2020 was $18.7 million or 37 cents per diluted share compared to adjusted net income attributable to tutor perini of $9 million or 18 cents per diluted share for the same quarter of last year.
The doubling of net income in essence. This year second quarter was due to factors I mentioned that drove the increases in revenue and income from construction operations.
As Ron indicated earlier on a year to date basis, our EPS of 71 cents is ahead of budget.
And this is even after a 17% year to date EPS impact from covert 19, and the 19 cents impact from the adverse arbitration ruling in the second quarter.
So we cannot be certain as to how to what extent koeppen 19 might affect our business in the future. We believe that barring any significant worsening of the worsening of the pandemic the largest impacts.
Hopefully be behind us at this point.
Next lets discuss operating cash clearly a bright spot in the quarter.
Our second quarter cash generation of $92 million will simply outstanding.
It was the highest second quarter operating cash result, since our merger in 2008.
With the next best second quarter result, being $73 million 10 years ago.
The $92 million of operating cash is a significant improvement over the $30 million that we generated in the second quarter of last year.
In this year second quarter.
Strong cash contributions associated with increased project execution activities on certain higher margin projects driven by our near near record backlog at the end of last year or enhanced by progress made on the resolution collection of disputed balances and a modest decrease in working capital.
As Rob noted progress on certain settlements for the quarter resulted in a collection of approximately $40 million that contributed to our second quarter cash flow.
Our excellent second quarter cash flow combined with better than expected operating cash result.
In the first quarter of this year resulted in positive year to date operating cash flow of $58 million.
Which is well ahead of our budgeted expectations in nearly $170 million better than the operating cash performance through the first six months of last year.
For the first half of this year the $58 million of operating cash resulted from the strong cash contributions associated with the same increased project execution activities that we mentioned as well as the progress made on the resolution and collection of dispute the balances, which more than offset to a working capital increase of $69 million.
In other words, the quality of our cash generation this quarter and in the first half of this year is very high driven mostly by collections on improved project performance into lesser extent on on the settlements.
It is evident that what we are now seen as the fruition of our concerted efforts to significantly improve cash generation.
Although we've had strong operating cash generation. So far this year, we expect that it will be even better over the remainder of the year.
We're tracking favorably to achieve our goal of generating operating cash that exceeds net income for 2020, which would mark the fourth time in the last five years that we have done this.
As a reminder, last quarter I mentioned that our operating.
Cash generation for the remainder of 2020, well also be positively impacted by the cares Act, which allows for the acceleration of the refund for 2019 net operating loss and the deferral of the employee or a portion of FICA payments for the last three quarters of 2020 with half of this Mount amount payable at the end of 2021 and the other half payable at.
End of 2022.
We estimate that operating cash for the last two quarters of 2020 will be enhanced by approximately $35 million by the cares act $15 million for the NFL and approximately $20 million for the FICA payment deferrals.
Our total debt as of June Thirtyth, 2020 was $836 million level with the balance at the end of 2019.
And down 13% compared to $956 billion at the end of the second quarter of last year.
During the second quarter of this year, we pay down a revolver by $75 million. So it was down to $100 million as of June thirtyth.
As many of you know our credit facility includes a spring forward maturity provision whereby it will mature on December 17th of 2020, if our convertible notes are still have standing at that time.
We continue to explore available options to address the spring forward provision and the outstanding convertible notes.
Once we have firmed up a path forward, which we expect will occur in the current third quarter, we will make an announcement.
We remain well within the limits of in in compliance with our debt covenants at the end of the second quarter and in fact, the lowest bank.
Covenant leverage ratio that we've had in nearly nine years.
We anticipate that we will continue to be comfortably within our covenant limits going forward.
Ron mentioned earlier that we're maintaining our EPS guidance range for 2020 at $1.80 to $2.10 per share given our strong results through the first half the year.
We still believe that our guidance factors in the inherent uncertainties that are common in our business such as unanticipated delays in project Awards and project execution and unfavorable adjustments to our estimates to complete projects that may occur from time to time.
Our decision to maintain our guidance also assumes that the vast majority of our projects will continue to operate during the balance of the covert 19 pandemic and our hope that the worst of covert nineteens impacts are behind us.
Now, let me provide an update on a couple of the assumptions in our guidance.
DNA expense for 2020.
Yes, now expected to be approximately $260 million to $270 million.
Capital expenditures for this year are expected to be approximately 50 million of which about $35 million will still be for owner funded project specific equipment. Apart from these all of our assumptions remain unchanged from what I indicated last quarter.
With that Ron I'll turn the call back over to you.
Thanks, Gary.
To recap despite the impact of Cove at 19, we delivered.
Very good second quarter results highlighted by the extraordinary cash generation as well as solid earnings and margins that are track a tracking favorably against our budget on a year to date basins.
For the most part things continue to be business as usual on our project step for new enhanced health and safety measures that have been implemented on most of our major projects, particularly in New York and New Jersey due to the pandemic.
I'm still confident in our ability to achieve our guidance for 2020.
And look for forward are reporting even stronger results in the second half of the year as we usually do.
And that second half the year, we fully expect to have significantly stronger cash flow.
I will conclude by commenting that it's an exciting time to be tutor perini, whether as an employee.
An executive or otherwise invested in our future.
Fortunately amid the habich being reclassified covert 19 across various industries, we continue performing well and are well positioned as an industry leader and Fortunately industry that has not been severely impacted by Cove at 90.
Our backlog is as robust as ever and our market opportunities have never been better.
Selling best where project complexity is greatest and the size is significant we favor working on the largest most complex infrastructure projects in the country, which offers significant long term career opportunities and on the intellectually challenging work environment.
We believe we're in a multi year period of solid growth and increasing profits with extremely limited competition for the largest opportunities.
Yet.
And we are now also begin a period of strong and significantly improve cash generation something that we've been waiting too long for.
And working hard to accomplish.
That said, thank you and with that I'll turn the call over back to the operator for questions.
Thank you.
Ladies and gentlemen, we will now have a question answer session. If you would like to ask a question. Please press star one on your telephone keypad confirmation Tony will indicate that your line is and the question Q.
Some of those with news speaker equipment could you maybe necessary for you to pick up your had said before pressing the star teams. One moment. Please while we now poll for questions.
Our first question comes from Stephen Central you'd be US. Please proceed with your question.
Thanks, Good afternoon, guys, Hi, Stephen I say, hi, very nice to see the cash flow coming through I will get to that and then it I just want to ask it maybe Gary can you just bridge the first half versus the second half implied from the earnings perspective since.
You are implying about 53 cents a higher earnings in the second half versus the first half I don't think you'd get maybe 15 to 20 cents from the absence of that $13 million write off and then I'm not sure here I guess you'd add back the 17 cents of covert impact.
If that's all correct, what's the rest of the other 20 cents to get into the second half to the midpoint of the guidance.
Yes, we continue to see in the second half progress being picked up in the larger higher margin civil projects infrastructure projects that round noted.
Keep in mind that we're always out of the gay slow with weather and we picked up momentum as the your progress is so we just expect.
More and more volume as the year progresses.
That's just imagine in fact, Stephen it's always been that way. If you look back over the years first quarters. The worst second quarter is usually mediocre and the third and fourth quarters are always the biggest revenue and profit.
Okay and are you anticipating getting that.
That 190 million and 17 cents fully back in the second half of the year.
What are you talking about but you're talking revenue was 190 million.
Yes, not wasn't that what you said the.
Impacts was in the first half of the year.
Yes, the impact of Covidien first half the year, that's what you're referring to was 109 galeon Im keep keep in mind that are our budget is what we measure ourselves against and also how we project, where we're going to be with respect to the.
You signed up for the year and through the first six months revenue is nearly on track even with the impacts it's it's almost dead on.
Even with a 190 million impacted reflecting some of the conservatism I guess that we factored in and we are comfortably ahead of EPS, where we.
We're in the budget for the first six months.
Okay and be very direct all of this large civil work design build the <unk> three and a half billion at Purple line, two and three in Los Angeles, The newer terminal, California high speed rail or six major projects all of which are big our accelerate.
In revenue that are high profit, they're all maintaining their margins and that's where the increases are coming from that are able to frankly pick up any glitches or or several months or anything that affects the short term because the revenue and cost from those major works or what.
Driving everything and I focus more on the profitability of those jobs in the higher margins as we evolve from much of the lower margin work into the higher margin work given the same revenue so long in a short of it barring anything unforeseen, we're still supportive and believe in our projection.
Got it that's helpful and then on the cash flow. So it sounds like second half also be stronger than the first half you've got $35 million you mentioned <unk> Gary of.
No well and that spike it benefits what other specific settlement payments do you have in the expectation there versus just sort of collection of regular receivables and are there any specific project advance payment that you have embedded in there we have a number of them and I I I'm not sure I want to get into the specifics.
But we have a particularly large job where we have a milestone we hit where we get paid $58 million.
That occurs in September we have a mediation.
And next week on a large claim we have were the owners essentially admitted entitlements and we're now haggling over how much they pay which has a value of $30 million. We have another mediation on $60 million worth of entitlements admitted it's a matter of weather.
We can agree on costs. There is all hold slew of specifics, including a final release of retention that has been delayed two years, that's all armani and exceeds $30 million. That's why I run both Gary and I remain confident that are are confident that our cash flow for the balance.
Your will even be more significant.
Okay, and then just maybe in terms of the actual Deo T process I guess, how obviously, there's been some strain on some state level budgets and I'm curious, what you're seeing in how that may be affecting or not affecting.
Bidding.
Timeframe, the nature of the projects or how how they're choosing whether they need to prioritize things differently, how our budgets and any constraints affecting sort of project timing and planning for the duties well. There's no question that I talked to all our major owners regularly about these.
All of these significant jobs that I mentioned earlier, specifically in the budgets for we're talking to them all the time, they're calling us for information, we're guiding their budgets and.
Thanks have been pushed back without a question until we see action from Washington until the government puts together and other bill that takes the pain away from the New York trends, it's the port authorities that.
Lay M.T. Ace all of these major agencies, the fact, the world's transferred or or the U.S. as transportation, there and they're simply putting them back 90 120 days.
We just did a 2 billion plus job in Hawaii, we're about to turn in that large M.T. a job.
Many of these that were ticketed the bid the latter part of this year first year have been put back six months in anticipation of another bill providing that support the all the cities and states.
On top of that Theres, the infrastructure build up that both the Republicans continue to talk about but the Democrats have been very specific and their support of a 2 billion dollar infrastructure Bill. So there's just a lot in place to try to fight through the issues of the pandemic by feeding.
Money into infrastructure, but.
The short of it is yes. It has pushed back bid opportunities, they're not gone because they're all funded design and ready to go out but until they get their houses an order financially I think most of our major owners are just wait and see with Washington DC.
Okay. Thanks, Ron appreciate it sure.
Thank you.
Next question comes from Alliqua Young with B. Riley SBR. Please proceed with your question.
Thanks, and nice quarter gentlemen.
Thanks, Alex.
Ron can you touch upon the state of the market from a competitive standpoint, right now are any peers getting concerned about the future in doesn't appear as if they are getting more aggressive on bids, possibly driving down the mark.
Hi, good opportunities in advance of.
Maybe some uncertainty.
No I think it's quite the opposite.
There are so few would I would call peers, let me be charitable and say we bid against one another company on the Honolulu Rail project. It's over 2 billion and that company consisted of a Spanish company into Japanese companies in joint venture.
We have one other proposals are on the 8 billion dollar L.L.A.M.T., a job, which we're very confident in and that is a U.S. firmed owned by an Italian company.
Everywhere, we are bidding there is one other bid or may be on occasion to other bidders and the one thing that's universal is that our peers have not done well on the large complicated work.
As a result, you saw granite withdraw from all major work you saw fluor withdraw from all major work you saw skanska, whether U.S. operation some two and a half years ago withdraw from all major work, although with a lack of competition I fully expect them.
The come back in at some point after their reorganization is complete.
Either back to lower fluor have ever been a factor and it's no surprise no. There. It if anything it's quite the contrary I think most of US who see how we operate have raised our prices and the attitude is most of the results on these very large jobs have been very poor so with.
Our exception and I will get into why we've done extremely well and we continue to raise our margins and the way I read the marketplace Nobody's dropping margins there more afraid of losses than they are procuring backlog.
Margins are up everywhere nobody's cutting fees.
And Gary maybe can you remind us what your options are to settle year converts by year end, what the timing looks like.
Yes, we've.
One thing we've got.
A lot of cash that has come in and we continue to expect more cash to come and that is certainly.
And option.
We are looking at just just everything you can can imagine Alex.
Looking at doing different types of refinancing as well.
But really just rather not comment further on what we're doing other than.
We are looking at options, where zeroing in on what we think is the best option will we'll move on something.
We expect to anyway during the third quarter and soon as we decide on something then we'll make an announcement.
I would also add that what I said earlier I remain confident confident with the knowledge.
Of the of the issues, we're dealing with and the cash we're collecting.
I believe irrespective of any third party transaction, we will have the money in house to pay off the converts without without a doubt.
Excellent and then Gary one last question from a modeling standpoint, how should we think about depreciation and amortization for the full year 2020.
Yes, Theres no change there were still looking at 109 million.
For the two together.
Perfect.
Thank you very much.
Well.
Thank you.
Our next question comes from Brent Thielman with da Davidson. Please proceed with your question.
Great. Thank you.
Hey, Ron I appreciate the color on and sort of the bidding environment second local budget Thats just curious your debt deeper into this sort of carbon environment you look at your own.
Backlog of business and several anything in there that causes you concerned just from a funding perspective, where do you feel like that's pretty solidified no I talk I talked to all our owners all the existing contracts are fully funded.
Whether it's a port authority in New York on New work, the New York Transit or L.A.M.T.A., they're fully funded at the inception of the contract award and there has been no sense of any issues, even with extra work and funding extra work. It's really the new work that has just been to.
Heard until they get stabilized.
Okay and that it was a little surprised that having a thought traffic down you might have been a net benefit to the civil group and it sounds like covered overall has been under the headwind.
Does that just been confined to a few projects overall, it's just well that's affected us dramatically in New York to be Canada.
Now that New York appears to be out from under it we had jobs that that basically last half their crews and efficiencies in the tunnels that New York Transit, we lost a number of people in revenue associated on the Newark terminal, even though we were maintain a large field force we law.
Probably 100 people on the job due to Cove. It. So we've had impact it's just that the owners have been supportive. The jobs have continued we've literally monitored fevers in new Jersey, we've monitored individuals we've taken whatever steps it took to keep the jobs going and it appears.
Everywhere, but Los Angeles, the worst is behind US now, let's say angeles's reared its head, but all our work is going in Los Angeles and candidly. If we have three to 350 people in the field driving Donaldson stations, maybe we've had eight or 10 instances of Covidien Cove it really.
They did quarantines, so it's always there and it always has some level of impact.
But not demonstrably in the big picture, but you wake up and you lose 100 million or revenue and eight or 9 million of deferred margin.
And it affect you when you're looking at earnings per share and that sort of thing, but but overall, we continue to work.
Yeah, Ryan I'd, just interject this Brent.
Yeah keep keep in mind that the the covert impact for for civil was for the quarter was only 15, one $515 million of revenue and $2 million of of pre tax income so.
You all the things Ron said are correct, what we worked around it so that the financial impact has been.
I've been very minimal.
Okay. Okay.
Maybe just one for the buildings group.
Ron.
Just thinking about some of the sectors there convention centers lodging.
It might get tougher spot to be in in the years ahead I'm, just curious kind of your thoughts and outlook for that business group and and kind of how you think about moving those resources to.
Over the next few years, just given that backdrop as you know the building group is not a large contributor to our.
Income or a large revenue generator, but not large income and a significant part of their income is in our fixed price building work, which we continue to do.
I don't see too many hotels and casinos.
Going to be built in the next few years, we have the one that was shut down in South Carolina Unmothballed for the time being that was a $190 million project that was well underway but stopped.
I see the building business, having a difficult time sustaining revenue and profitability.
Let's say or after next year for the next few years and until the country decides what it's going to build and what it isn't obviously everything to do with airlines as well as hotels is virtually frozen. So I don't have a crystal ball to tell you when it couldn't get back to normal I assume it's.
Some point it will when that point as I can't really.
Okay, well thanks, congrats on the quarter in Brent one thing in the meantime, it's a as blessing to have the the $10 billion of backlog that we have so that Tom as things settle down with covert 19 in the impacts are fully known.
We continue to work off that.
Off that fully funded backlog.
Yep Yep, Thanks, Gary.
Thank you.
There are no further questions at this time I'd like to turn the floor back over to management for any closing remarks.
Oh, nothing further to add thank you everybody and we'll catch in next quarter.
Okay.
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