Ronald Tutor: Well, in the short-term, we paid the term loan from $420 million to $260 million give or take a million. We intend to reduce the bond issue when we reset the bonds be it private or public, significantly less than the $500 million, and that’s current. So that takes place in 60 days. So as we continue to collect cash, there’s no reason to even stay with those levels of debt. We’ll reduce it as it’s appropriate, given the liquidity needs and the excess of cash.
Gary Smalley: And as far as how that looks structurally, Abe, it really depends on. We’re — it’s a little too early for us to know that right now, we’re looking at all options and we’re progressing down different paths. And so we’ll know a little bit more in maybe a couple of weeks. But if it’s on the public side, we expect, as Ron said, a much reduced bond issuance. And if it’s on the private side, then it could take a lot of different forms with respect to that loan. And we’re not taking off the books the possibility of a complete recapitalization. It really depends on the demand out there and the terms. So, again, we’re looking at all options right now.
Abe Landa: That was very thorough. Thank you for that. And you answered my follow-up question on potentially the term loan. I guess you also provided your costs and excess of billings. Good to see that trend lower. Longer-term, where do you expect those? What’s like a normalized level of costs and excess of billings, and when do you expect to reach those levels?
Ronald Tutor: Assuming we get our revenue back up to $5.5 billion or more, which was where it was and should be back there hopefully within the next 12 months to 15 months. I think a normalized amount of CIE is always going to hover around 5% of revenue. So if it was me to project $250 million to $300 million of costs in excess, disputed matters, however you want to classify them, would be something reasonable. Ours got out of control, exacerbated by a two-year hiatus in the courts, thanks to COVID, where our world just stopped as they accumulated and didn’t resolve. Conversely, by the end of this year, we expect CIE to be reduced dramatically from where it is even now. Everything’s finally coming to an end. The owners either have a trial date or they’re asking for mediation. It can’t be stalled off anymore.
Gary Smalley: Yes. So Abe, the — as Ron was saying the — is 5% that’s really more focused on those things that are in dispute resolution. And we’re always going to have a little bit of CIE that is more timing-related or short-term being negotiated with unimproved change orders that are not being disputed.
Ronald Tutor: There’s three components to it.
Gary Smalley: So the 5% is really the disputed bucket that Ron mentioned.
Abe Landa: And then it’s expected something on top of that. So maybe like 10%, something like $500 million, $600 million, something like that, maybe —
Ronald Tutor: No, no, no.
Abe Landa: No, thus [ph] far.
Ronald Tutor: 5% for disputes. I’d add no more than 2% for timing and open changes in negotiations. See, the disputed claims is always the LION’s share of it. So if you wanted to add another $100 million on top of $250 million to $300 million that should be the maximum.
Abe Landa: That’s very clear. And last one is just you kind of mentioned that there’s $32 billion of projects out there with limited competition. You’re kind of saying typically you only see one to two bidders. I mean what have you seen as your typical like win rate? And then given the limited competition, how do you expect go-forward that’s going to change your longer-term margins, working capital requirements, changes in disputes, et cetera, anything help us think about the company going forward.
Ronald Tutor: One of the things that has happened in the last three years and unfortunately, we got practically everything we bid over a period of 14, 15 months, it resulted in $11.5 billion of new work, all of which got rejected over budget, all of which is coming back out to bid. What we’ve also done, given the limited competition, we are going to every owner because once you get over $1 billion there’s only two or three companies, including foreigners in the U.S. that can even bid it, let alone do it. So we go into their terms and we dictate changes of terms on the theory, if you have any owners’ terms, you either change them or you won’t bid. And they’re usually faced with two bidders. So if one of them withdraws, they only get one bid.
So we’ve been able to affect almost every change that is required on owners’ contract terms. Adhere to four in the past when they had four or five bidders on every job, the owner’s attitude, well, then don’t bid, if you don’t like our contract. Well, the worm is turned.
Abe Landa: And do you have like a typical win rate or is it given two to three, it’s 50 to a third, something like that.
Ronald Tutor: I can’t give you a win rate. I would say if we took all the billion dollars and up that we bid, I could probably dig it out, but I’d guess we’re a 50% win rate or better.
Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to CEO, Ronald Tutor, for closing comments.
Ronald Tutor: Thank you so much for your patience. Hopefully, we’ve given you information that’s helpful. And until the next quarter, thank you.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
