Tutor Perini (TPC) Q3 2019 Earnings Call Transcript

Tutor Perini (TPC -0.14%)
Q3 2019 Earnings Call
Nov 06, 2019, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation third-quarter 2019 earnings conference call. My name is Kevin, and I'll be your coordinator for today. [Operator instructions] As a reminder, this conference call is being recorded for replay purposes. [Operator instructions] I would now turn the call over to our host for today, Mr.

Jorge Casado, vice president of investor relations. Please proceed.

Jorge Casado -- Vice President of Investor Relations

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 most recent 10-K, which was filed on February 27th, 2019. 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 unaudited investors' report, which is posted in the Investor Relations section of our website.

With that said, I will turn the call over to Ronald Tutor.

Ronald Tutor -- Chairman and Chief Executive Officer

Thank you, Jorge. Good afternoon, and thank you all for joining us. As you saw in our earnings release and as we had expected and hoped, our operating cash generation was extraordinary in the third quarter setting a new quarterly record that shattered the previous record by 38%. Our strong cash flow was driven by significant collections associated with several settlements, which we discussed during our last earnings call as well by progress made toward resolving other disputes and overall effective management of our working capital as we continue advancing our larger projects.

Of course, I'm pleased with the progress we have made on cash generation and expect that operating cash to be strong again in the fourth quarter, and particularly strong in 2020 the next year. Despite the fact that our third-quarter earnings were reduced once again by weather, delays on Newark, owner milestone delays on Purple Line Section 2, and a delayed start on the Minneapolis Southwest Rail. I still remain confident in our ability to achieve the lower end of our 2019 earnings projections. In addition, significant negotiations have taken place in the first three quarters of 2019, including the previously announced resolve of all delays to date, and the immediate payment for those delays on the high-speed rail.

Furthermore, we are negotiating significant changes that have been added to the project by the owner, with the extension of over 12 miles of intrusion barrier walls, as well as, what we call the North to Madera extension. However, once again, it's a very successful job that should have been done in 2018 and appears to be heading to the 2022 completion. And as such, it delays, not only the revenue by four years, but of course, the profits associated with the project. As I have said before, there is no diminishment of profit.

In fact, it's an extremely successful and profitable job. Unfortunately, as a public company, it simply moves those earnings back year by year. We continue to be in an enviable advantageous position with significantly increasing market demand among an obvious lack and diminished number of competitors for major civil works. Our reach and success is reflected by our strong backlog growth this year, and the opportunities ahead of us are substantial, including several very large pending awards, and a tremendous number of other sizable projects expected to be bid and awarded.

As an example, in the Los Angeles metro rail system, which is right now the biggest construction project in America that promises many billions of dollars worth of work over the next years -- 10 years, Tutor Perini has been a low bidder and awarded the first three major projects to the tune of $3 billion. And we are the low bidder and believe will be awarded prior to December 15th, the Division 20 job for another $440 million. As we did for many years in the '80s and '90s, we believe we will be consistently prevailing in that enormous operation called LA Metro and will be the backbone of our growth going forward. Of course, as we all know, the growth, the backlog, and the margins are driven by our civil group.

I might also add as just a bit of color for those of you that are watching our public peers, without mentioning by name one by one over the last 12 months, has announced enormous losses and essentially said to the world, including the marketplace, we are withdrawing from large design-build civil work lump sum projects, as the risks are too great. Well, that leaves us in only a handful remaining in the extraordinary marketplace called U.S. infrastructure. We feel this will be significant in not only our continued growth in revenue but much more impact on our profitability.

We booked $690 million of new awards in the third quarter and finished the quarter with a backlog of $10.9 billion, up 28% year over year. Significant awards included $178 million military housing project in Guam for Black Construction; three electrical projects for Fisk in Texas; collectively valued at $99 million, and Rudolph and Sletten $59 million of incremental funding for an education building in Los Angeles, and the $51 million Bayside Performance Park in San Diego. Additionally, our fourth-quarter new award bookings are already on pace to surpass our third-quarter bookings, as we anticipate adding into backlog two pending awards that we recently announced. Those being the $440 million Division 20 portal widening and turnback facility, which I mentioned earlier, and the new P3 Miami-Dade County Courthouse with a value in excess of $260 million.

As a reminder, over three-fourths of our backlog is comprised of higher-margin civil and specialty projects. Accordingly, our backlog growth has been and will continue to be strong this year, and we expect further backlog growth next year, but more significantly, increased profits as margins are driven up. We believe that as a result of that tremendous demand and lack of competition, we will generate continued strong revenue growth, but more importantly, higher operating margins and increased earnings in 2020 and the years to follow. In mid-November, actually, the 19th, our civil group expects to bid the $400 million 8th Avenue communication-based train control project for New York City transit.

Other sizable upcoming civil bids include two large projects from Los Angeles MTA, the $4-plus billion West Santa Ana Transit Corridor, and a $1.5 billion East San Fernando Valley Corridor, both of which are expected to bid in the latter part of 2020. In addition, we will be looking forward to the port authority of New York putting out the $3.5 billion bus terminal in Manhattan, the $2 billion Brooklyn-Queens Expressway, and the $1.2 billion Penn Station access by the MTA, as well as, the $1.4 billion Portal swing bridge replacement, and the $450 million Raritan River lift bridge, both in New Jersey bidding next year. We've also been positioning to compete for various other large civil opportunities that will be presented to us next year for proposals, and those include two air train projects for the port authority of New York, one at Newark, where we are currently building their $1.4 billion terminal and one at JFK, each of which are $2 billion. Other major projects we are tracking for pursuit include the $7 billion Sepulveda Transit Corridor project for which we are providing prequalification documents in the next two weeks, the $400 million LAX Airport Metro Connector, which will be a design-build lump sum, which we are also calling filing for Los Angeles Metro, and well over $15 billion of P3 projects all over the country.

We're in various qualification stages with our financial partners, and those will probably propose over the next two years. The specialty contractors group continues to bid and win new projects at higher margins than the past because they too have the same situation as us, Diminished competition, less capacity, margins are driven up. That group will be bidding on more than $2.9 billion of mechanical and electrical projects in New York, Texas, California, and Florida between November of '19 and the end of 2020. Since the arrival of Jean Abiassi, our new CEO of the Building and Specialty Contractors Group, he and I have had the opportunity to travel and work together to thoroughly assess the challenges and opportunities that we're facing in both groups.

And he will be focusing 100% of his time to begin to bring those groups where we need them to be and that's consistently profitable in a level of return acceptable to the parent company. Next, I will review some significant projects that contributed to our third-quarter results. In Los Angeles, major work is progressing on the $1.3 million Purple Line Section 2 project, as we have sunk the shaft at Century City and the tunnel shaft across the street, and will begin to place and assemble the tunnel machines before the end of December. We expect to commence tunneling with both tunnel boring machines by February/March of 2020.

In addition, we are completing major utility relocations and have started work on support of excavation and excavation of the Wilshire/Rodeo station. Also I might add, as we were awarded Purple Line 3 tunnels and stations in two separate contracts. The TBMs were procured and are currently in manufacturing on Purple Line 3 tunnels, which is a $420 million tunnel-only contract and should arrive at the project site next spring with tunneling work expected to commence by the end of next year. In British Columbia, Frontier-Kemper's work on the $273 million Kemano tunnel project continues to progress with about two kilometers of the new tunnel drive completed with five to go, which should be accomplished in the next 18 months.

In the Midwest, Lunda Construction continues to advance major work on the $800 million Minneapolis Southwest Light Rail and is also making significant progress on the $337 million I-74 project in Iowa. In the Northeast, our most active projects include the $1.4 billion Newark Airport Terminal at the New Jersey Airport, the $665 million CM007 for the New York Transit Authority, which is nearing completion, the $660 million CS179 train control and systems contract with New York transit and the $318 million CQ33 also on the east side access in New York transit, and last but not least, the $190 million Canton Viaduct bridges in Maryland. As a matter of interest, we topped out the newer terminal steel erection on October 24th and the port and our company celebrated that topping out, as this customer in the building business. We anticipate a notable acceleration of project activities in the fourth quarter, and continuing throughout the coming year on several large projects include -- including many of those just mentioned.

However, because of the temporary progress delays I spoke of earlier on several projects this past quarter and the corresponding impact of those delays have had on our earnings, we now expect our 2019 earnings per share, excluding the impact of goodwill will be lower than previously anticipated, and as such, we are revising our 2019 adjusted earnings guidance to a range of $1.40 to $1.55. Finally, I will provide an update on the progress we are making in resolving our disputes and unbilled receivables of the five significant matters we indicated we had settled during our last earnings call, which totaled $125 million. We have, thus far, collected $101 million from three of those matters and still expect to collect $24 million between the Fontainebleau and the I-695 in the fourth quarter. Regarding the negotiations, we mentioned last quarter on 900 -- nine other individual issues, totaling $257 million.

We reached a partial settlement with the San Francisco Metropolitan Transit Authority in the third quarter on the Central Subway Project, and as a result, collected $31 million for the damages dictated by over two years of delay for which the owner accepted full responsibility and paid accordingly. We have a balance of other significant issues, but with the owner's commitment and payment of all delays, we are well on our way and expect by January of 2020 to resolve the preponderance of the other issues with very little in the way of disputes. As I've said before with negotiations, there could be no certainty that the amounts offered will ultimately satisfy us. However, all of these cases are entitlements to receive additional amounts have been agreed, and we are discussing the amounts that we [Inaudible].

I might also add in the significance of settlements to date, every single one of them accumulated the total exceeded what we had booked. We are also currently in arbitration or litigation on several individual claims that should be concluded prior to March 31st, 2020. The most significant of these is our litigation with the Washington Department of Transportation regarding the SR99 tunnels, which is now expected to conclude on or before December 15th of this year with a judgment rendered on or about that time. Counting the current cases being arbitrated, litigated, in settlement, discussions or mediations, we expect resolution on disputes, be it litigated or discussed, with book amounts totaling $618 million to be concluded by the end of 2020, and a balance of disputes deferred until 2021 and 2022, typically because of the time involved on the eastern seaboard with getting court dates.

The moral of those pieces of information is everything is finally coming home to roost, whether it would be negotiations, mediations or outright litigations, these will be concluded, and with our history of successes in litigation, we are confident. Meanwhile, we continue to focus on executing effectively on our work in backlog, while pursuing significant new opportunities, which will drive our growth in the years ahead. I can speak to the newer terminal, high-speed rail, all three Purple Line 2 and 3 jobs, including the tunnels, the total of which are probably $7 billion of work that reports directly to me. We have no claims.

We have no disputes. The jobs are moving the way they should, and all appear to be extremely profitable. With that, I will turn the call over to Gary to present the details of our financial results.

Gary Smalley -- Executive Vice President and Chief Financial Officer

Thanks, Ron. Good afternoon, everyone. I will begin with a discussion of our results for the third quarter, followed by some commentary on our balance sheet, cash flow, and then, revised guidance assumptions. Revenue for the third quarter was $1.2 billion, up 6% year over year, the strongest quarterly revenue growth we have had in four years.

We expect further revenue growth in the fourth quarter and for the next several years. Civil segment revenue for the third quarter was $525 million, up a strong 22% year over year, driven by increased activity on several newer projects that continue advancing and are contributing meaningfully. Revenue through the building segment was $415 million, down 9% compared to the third quarter of 2018, but the reduction due to the timing of revenue burn for newer work. Several newer building segment projects, most of which are currently in early stages, are expected to generate significant revenue next year, as construction activities pick up.

Specialty contractors segment revenue was $249 million, up 6% year over year, primarily due to increased activity on a newer, large mechanical project in New York that has begun to contribute significantly to the group's results. We anticipate even larger contributions from various projects in the specialty segment that are in the early stages and are accelerating over the remainder of this year and into 2020. Gross profit for the third quarter of 2019 was $115 million, up 4% compared to the third quarter of last year, with a corresponding gross margin of 9.7% that is essentially the same as last year's third quarter. G&A for the quarter was $67 million, up 5% compared to last year, mainly due to higher legal and personnel-related expenses.

As a result, income from construction operations for the third quarter was $48 million, essentially leveled, but up slightly compared to the same quarter of last year. civil segment income from construction operations for the third quarter was $51 million, up 23% compared to the same quarter of last year, consistent with the increase of the segment's revenue in this quarter. The segment's operating margin for the third quarter of 2019 was 9.7%, leveled with last quarter, and up marginally compared to the third quarter of last year. We anticipate higher margins in the Civil segment, as several of the group's larger and newer projects contribute more substantially to our results over the coming quarters.

Building segment income from construction operations was $8 million compared to $9 million in last year's third quarter with a decline reflective of the segment's lower volume. The building segment's third-quarter operating margin was 1.8% compared to 1.9% for the same quarter of 2018. We anticipate that building segment will report higher margins in 2020, as several of the group's newer higher-margin projects continue to advance. Specialty contractors income from construction operations was $7 million compared to $12 million in the same quarter of last year.

The decrease was principally due to the net impact of adjustments on certain electrical projects in Newark. Operating margin for the specialty contractors segment was 2.9% compared to 4.9% for the same quarter of last year. While we were pleased to see a return to profitability for this segment in the third quarter, the group's profitability remains below the 5% to 7% margin level that we expect for longer-term. As Ron mentioned earlier, we are working diligently to stabilize and improve the specialty group's performance.

Interest expense for the third quarter of 2019 was $17 million, compared to $16 million in the same quarter of last year. The increase was primarily driven by higher average revolver balance during this year's third quarter, compared to the prior-year period. Effective tax rate for the third quarter was 17.3%, compared to 22.5% for the same period of 2018. The lower rate for this year's third quarter primarily reflects the favorable impact of tax to return provision adjustments, a smaller unfavorable impact of share-based compensation related charges and a higher content of earnings from noncontrolling interests.

Net income attributable to Tutor Perini for the third quarter of 2019 was $19.3 million or $0.38 per diluted share, compared to $21.3 million or $0.42 per diluted share for the third quarter of last year. The lower net income in this year's third quarter was due to the higher income attributable to noncontrolling interest, compared to the same quarter of 2018, where we consolidate the revenue but only pick up our proportionate share of their earnings. Also, keep in mind that, as Ron noted earlier, namely that the third-quarter revenue shortfall that drove our revised EPS earnings guidance for 2019 does not represent lost earnings but simply profit that did not materialize as quickly as we expected. So, it just shifted into future periods.

Next, I'll shift gears and discuss our balance sheet and operating cash. Our project working capital decreased significantly by 10% in the third quarter, compared to the second quarter primarily because of an increase in billings and excess of costs or advanced billings, which was partially offset by an increase in retained as receivables. As I mentioned last quarter, we have been successful and continuing to advance build several of our large fixed-priced projects. Our operating cash generation third quarter of $223 million was beyond the outstanding operating cash flow that we predicted for the third quarter at our last earnings call.

This quarter's operating cash flow completely eclipsed our previous quarterly record of $162 million set in the fourth quarter of 2017. As Ron mentioned, our record cash flow for the third quarter was the result of collections of several of the items we discussed last quarter that we had recently settled, collections of other settlement amounts, and our continued focus on improving working capital management, including the advanced billing of various projects. Although we do not expect another record operating cash flow for the fourth quarter, we do fully expect to close the year strong and finish this year with operating cash flow well in excess of net income, excluding the second quarter goodwill impairment charge. As a result, 2019 should mark three of the last four years that our operating cash flow has exceeded net income and we anticipate more of the same for next year and beyond.

Our total debt as of September 30th, 2019 was $836 million, a substantial reduction of $120 million or 13%, compared to $956 million at the end of the second quarter. The decrease reflects a significant paydown of our revolver balance, enabled by the strong cash that we generated in the third quarter. We're well within the limits of and in compliance with our debt covenants for the third quarter, and we do not expect any issues related to covenant compliance going forward. Ron mentioned earlier, our revised adjusted EPS guidance for 2019.

All of the previous assumptions associated with our guidance remain the same, except for our estimated adjusted effective tax rate for 2019. We now anticipate this rate to be between 26% and 27% for the year, slightly lower than the previously expected rate for the reasons I mentioned earlier that resulted in the lower tax rate for the third quarter. With that, Ron, I'll turn the call back over to you.

Ronald Tutor -- Chairman and Chief Executive Officer

Thank you, Gary. Without reiterating the obvious that our cash flow was remarkable and we expect it to continue and the fact our backlog is at record highs and we seem to be able to dominate the low-bid atmosphere in both Los Angeles and New York, I am extremely optimistic about 2020 and '21 for one simple reason. Our civil group has always achieved and always led Tutor Perini with significant earnings and maintained budgets and maintained the earnings expected. With our struggles in the building group and the issues contained within our specialty group, it has always been a problem and never been consistent, which is why we always earn money, but on a number of years not quite what we should have and may have disappointed not only ourselves but our shareholders.

But I would remind everyone, as our disappointments relate to so many cents a share, our public competitors are writing off hundreds of millions of dollars in the same timeframes for their inability to do the same jobs we're excelling at. Given that in mind, I expect the next two to three years to have more enormous opportunities than we can even accomplish, and we'll continue to raise the margins until somebody finally beats us. With that, I'll turn the call back to you.

Questions & Answers:

Operator

[Operator instructions]Our first question today is coming from Alex Rygiel from B. Riley FBR. Your line is now live.

Alex Rygiel -- B. Riley FBR -- Analyst

Thank you, Ron. Great quarter on cash collection and congratulations.

Ronald Tutor -- Chairman and Chief Executive Officer

Thanks.

Alex Rygiel -- B. Riley FBR -- Analyst

Could you -- just to clarify, could you repeat on the cash collections, that $257 million that you had identified on your second-quarter conference call that you're going to collect by the end of March 2020? On this call today, did you just say that you expect most of this to be resolved by the end of January?

Ronald Tutor -- Chairman and Chief Executive Officer

No. No.

Alex Rygiel -- B. Riley FBR -- Analyst

Or was that in reference to the L.A.

Gary Smalley -- Executive Vice President and Chief Financial Officer

That's SFMTA.

Ronald Tutor -- Chairman and Chief Executive Officer

That's SFMTA only. Yeah, we did -- go ahead.

Alex Rygiel -- B. Riley FBR -- Analyst

OK. And your visibility and confidence on the remaining balance to get to that $257 million by the end of March, how confident are you on that front?

Ronald Tutor -- Chairman and Chief Executive Officer

Absolutely, confident.

Alex Rygiel -- B. Riley FBR -- Analyst

How many other projects make up that remaining balance there?

Gary Smalley -- Executive Vice President and Chief Financial Officer

It's about -- I feel -- it's between -- it maybe eight or nine, something like that. It's not quite a dozen.

Ronald Tutor -- Chairman and Chief Executive Officer

We even had a job, as I project and I list -- I have my own list of every single unbilled receivable claim and litigation, and we had ticketed our Andrews Air Force Base claim, where we have sued the government for $39 million. We took it for an adjudication to 2023 and the government called and said before we waste any money with lawyers, they'd like a mediation in January or February of next year. So, what's happening and will continue to happen on a quarterly basis, one by one, three by three, five by five, they're all coming to a hit. And if we do what we've always done in the past, we will prevail on, if not every single one most of them.

And we'll report it, as they come up, whether it's news releases or quarterly call.

Gary Smalley -- Executive Vice President and Chief Financial Officer

Alex, if I could add this. On this particular one, Andrews, that Ron was mentioning, that's not -- it wasn't last quarter and we have not adjusted the $257 million to include in this quarter. It could be, as Ron is saying that the $257 million then was accelerated at least with respect to that one, where it could even be larger, but it's not in the $257 million.

Alex Rygiel -- B. Riley FBR -- Analyst

OK. And then, you announced that you had $700 million of awards subsequent to the end of the quarter. Ron, can you repeat and quantify the value of the projects that you're low bid on right now? I got a little confused there in the call. Thank you.

Ronald Tutor -- Chairman and Chief Executive Officer

Well, the biggest single one is the Division 20 turnback, again, for Los Angeles MTA that's $440 million. And then, there were -- if I recall a couple of building jobs -- oh, excuse me, we have the Miami-Dade County Courthouse, which was $260 million, which we have given a notice of award. It's a P3 job, and the only thing remaining is our P3 financial partners are doing final terms, and the two of those constitute $700 million. And by the way, the Division 20, we've been told, will award on or before December 10th.

Alex Rygiel -- B. Riley FBR -- Analyst

And lastly, given the increase in P3 opportunities in front of you. Can you comment on terms and conditions and risks that you see within those projects? And how they compare to maybe terms and conditions and risks over the last couple of years?

Ronald Tutor -- Chairman and Chief Executive Officer

Well, what I would add is the times are very extraordinary. So, I spent a lot of my time, visiting with the principles of our largest owners, namely: the Port Authority, I don't talk to New York transit, Jack Frost, our president that seems to be in their office every week. But I'm explaining to our owners, for those of them that don't understand that whether it's a P3, a design-build or a design-bid-build, they all function around the general contractor. There may be a dozen financial leads in the P3 market, but they can't do anything without a giant like us to guarantee price and guarantee schedule and delivery.

So, the handful of us left control that. And let me simply add, I meet with all our owners and agencies and say, if your terms are not changed to be contractor-friendly, with reasonable liquidated damage, significant paid upfront mobilizations, clauses that mandate resolves as you go, we simply won't bid. And for the first time, they get it, and the greatest example is the Newark terminal, where we're the only bidder that finally proposed. And because they had to get it built, they award it.

The time for owners dictating terms has passed. We don't get reasonable terms, we wave goodbye. I got a call from the largest subway district in Canada, the principles of the agency, who are desperate for competition and there's not much left in Canada, and asked because we're the biggest transit builder in the U.S., would we consider coming to their city and bidding their work? My response is, it's very nice. Perini was in Canada for 50 years in one of its biggest contractors.

We are so busy here within the states of New York and California that even though it sounds wonderful and it's the work we do every day, no, we're not going anywhere. There's more work in the U.S. that any simplistic review will tell you who in the world is going to build it.

Alex Rygiel -- B. Riley FBR -- Analyst

Thank you.

Operator

Thank you. Our next question today is coming from Steven Fisher from UBS. Your line is now live.

Steven Fisher -- UBS -- Analyst

Thanks, good afternoon.

Ronald Tutor -- Chairman and Chief Executive Officer

Hi, Steven. I know your voice.

Steven Fisher -- UBS -- Analyst

Yeah. Hey, Ron. Just -- it's good to see, obviously, the strong cash flow in the quarter. Can you just break that $223 million down for us in terms of how much was the dispute collections versus just ongoing profit conversion versus advanced payments? I think, Gary, you did mention there was some of that in the quarter.

So, just kind of break it to those three buckets, if you can?

Gary Smalley -- Executive Vice President and Chief Financial Officer

Yeah. Steve, there are a lot of moving parts, but for the settlements that we have announced, we had $101 million plus the $30 million for SFMTA. So certainly, we had some smaller settlements also that brought in cash during the quarter. We also had advanced billings that totaled about $180 million for the quarter.

So, that is indicative of billings in excess of cost, and I would say then, we also have other uses of working capital at the projects that offset some of those amounts, but those are some of the biggest factors driving the --

Ronald Tutor -- Chairman and Chief Executive Officer

We settled to be direct. We settled $126 million with California High-Speed Rail, and they prepaid it for the settlement of all delays. To date, we settled $31 million with San Francisco MTA, as they assume responsibility for all the delays to date. And just to support Gary, there are so many other miscellaneous.

We had a number of settlements in the $5 million, $7 million, $8 million range. I've got three that we've settled and I'm waiting for documents to come through.

Steven Fisher -- UBS -- Analyst

That's very helpful.

Ronald Tutor -- Chairman and Chief Executive Officer

That's why we continue.

Steven Fisher -- UBS -- Analyst

Yeah. Just kind of building on that. Just curious about what the base case for sort of minimum collections are? Or is this starting point that $24 million that you mentioned from Fontainebleau and 695? And then, is there some degree or some level of advanced billings that you expect already based on some of these additional awards?

Ronald Tutor -- Chairman and Chief Executive Officer

Well, yes, they'll be. We basically mandate that the jobs we get -- we expect to get mobilization or what we call advanced billings. We expect to work off the owners' money, not ours. And those contracts that don't afford those, we think seriously about not quoting unless there's no competition.

Then, we overcompensate in margin if they won't give us a decent contract. But having said that, I think we covered the settlements of claims.

Gary Smalley -- Executive Vice President and Chief Financial Officer

Right. So, Steve, besides the advanced billings that we expect to continue, not quite at the clip that we had in this last quarter, but the remaining $24 million that you mentioned, and then, we are talking about $257 million that would be collected by the end of the third quarter -- excuse me, first quarter of next year, end of March. So --

Ronald Tutor -- Chairman and Chief Executive Officer

So we clarify. Let me correct that. There's $257 million that will be adjudicated.

Gary Smalley -- Executive Vice President and Chief Financial Officer

That's right.

Ronald Tutor -- Chairman and Chief Executive Officer

We haven't collected it yet. We just believe that it will be consummated one way or the other. One is a large lawsuit, the rest are a whole series of settlements, where we're in various stages of agreement where we got to come to a number that we've agreed to.

Steven Fisher -- UBS -- Analyst

That is very helpful. And then, Gary, it looks like your Q4 margins in civil are implied to have a pretty solid rebound there. I'm getting somewhere in the low teens levels. Is that the way you're thinking about it? I think in your comments, you said there's some of the newer projects that will be getting going.

So, does that take you directly to that 13%? And is that sort of a starting point to build on as you go through 2020? Or is it sort of going to level off at that kind of 13-ish percent or so?

Gary Smalley -- Executive Vice President and Chief Financial Officer

You know, after segment overhead, we do expect to be around that range. We're hopeful that longer term, we drive it higher than that.

Ronald Tutor -- Chairman and Chief Executive Officer

We'll be significantly higher going forward. We have historically, for the last 10 years, our civil group has landed, let's say, between 11% and 13% as is with those margins. I can tell you the margins of all our new backlog is significantly higher than what our norm was over the last 10 years. So, as that Newark finally gets going and generates significant revenue and cost, I expect to expand on the 13%, somewhat significantly.

But it will require that the Purple Line tunnels and stations get going, high-speed rail gets released, which is significantly better. Newark is continuing. The only thing we fight in Newark is most incredible array of rain on a regular basis. But other than that, the real answer is everything that we've been awarded in the last two years, as it margins significantly higher than what has generated the 11% to 13% in the past.

How is that for sticking my neck out?

Steven Fisher -- UBS -- Analyst

Love it. And then maybe, Ron, just sort of big picture here. You offered some interesting perspective about the industry in general and you acknowledged that 2019 was a pretty volatile year with moving parts on project timing, changes, and special items as a guidance. Just kind of wondering how you think about the potential for reduced volatility and the outcomes in 2020 versus 2019? And related to that, next quarter, we'll get your 2020 guidance.

So curious, how you're going to approach that?

Ronald Tutor -- Chairman and Chief Executive Officer

I think one of the things -- the good news is, even in our specialty group with all the problems we've had, their early projections for 2020 are outstanding. We review the entirety of their work in process. They believe and I'm almost a secondary believer that the worst is behind them, and their results will do better. But candidly I think as we move forward, with all the increased revenue and significantly higher margins, we have to do a better job of anticipating the unanticipated, which translates, we have to hold more reserves, we have to be better about reporting what we're going to make, not just based on all of our projections with some reserve for problems, but we've had a history of we do sometimes make our projections and others we don't.

And oftentimes, it's weather, it's job delays, it's writedowns, just a whole series of things. However, as a public company, you project $2 and you make $1.50 and you're [Inaudible]. It's interesting, I look to all my public peers and they virtually self-destructed in the same marketplace. We continue to make money and have announced to the world, they're out, they're not doing anymore.

And by the way, they lost hundreds of millions of dollars. So, we've got to learn from that and we've got to be more accurate in our projections, and whatever it takes to be more accurate, we've got to utilize it. I'll shoulder the responsibility for that.

Gary Smalley -- Executive Vice President and Chief Financial Officer

Yeah. Steve, just to expand on that a little bit. Ron, I haven't talked even this week about, obviously, as we put 2020 guidance out there or -- and this is consistent with what Ron is saying. We just need to build in larger cushions to absorb some of those impacts that are impossible to predict.

Steven Fisher -- UBS -- Analyst

Sure. All right. Well, thanks a lot, guys. We'll talk to you soon.

Ronald Tutor -- Chairman and Chief Executive Officer

Thanks, Steve.

Operator

Our next question today is coming from Brent Thielman from D.A. Davidson. Your line is now live.

Brent Thielman -- D.A. Davidson -- Analyst

Great. Thanks and congrats as well on the collections and cash flow. Maybe I'll pick up off that last point, Gary. I guess, you know, you are talking 2020 specifics yet, but you've got a really large backlog with jobs moving in various stages.

And I guess, is there any initial thoughts on the kind of growth rates you expect to see next year?

Gary Smalley -- Executive Vice President and Chief Financial Officer

No. We don't want to talk about 2020 this time because we haven't firmed up and applied that cushion to it, but we do expect there to be a significant growth rate. We do have this large backlog, as you mentioned. We're just coming down a little bit from our record backlog.

We expect a new record backlog sometime in 2020. And as that starts to burn as higher margin, as well as, Ron had indicated, revenue should go up and margins should go up, so earnings should go up appreciably.

Brent Thielman -- D.A. Davidson -- Analyst

OK. And then, I guess, with the jobs that didn't necessarily progress this quarter, I think, in civil, I guess, at this point in Q4, have you started seeing those move?

Ronald Tutor -- Chairman and Chief Executive Officer

Have I started what?

Brent Thielman -- D.A. Davidson -- Analyst

The jobs that we're not advancing, that were -- the temporary progress delays that we had. Are you starting to see them advance in the fourth quarter?

Ronald Tutor -- Chairman and Chief Executive Officer

Well, I know southeast rail -- the light rail project in Minneapolis has finally gotten started. They were just one difficult delay to start after another. And what should have been going three, four months ago is finally getting going on any scale. Purple Lines 2 and 3 -- Purple Line 3, although awarded other than engineering revenue and costs and mobilization, we really haven't started construction.

And we won't start construction until fourth quarter of 2020. Now, the Purple Line 3 tunnels, we have tunnel machines coming and we expect tunneling to commence next year. The problem jobs timing-wise, interestingly enough, are among our most profitable. Newark, for those of you that live in New Jersey or nearby New York City, the rain and weather delays beyond the norm for the last year have -- we've lost 120 days out of the last 400 days in rain, winds, and weather.

And of course, all the revenue cost and margin that goes with it. Are we done? No, we're still fighting weather in Newark and it could potentially extend the cost -- or excuse me, the schedule as much as six months. However, it won't affect our profit. It will just affect schedule and the ability to earn the same margin within a shortened period of time.

So, it affects our EPS. High-speed rail, which started at $960 million and appears to be heading north of $2 billion in a final contract price has been delayed and delayed. And as I said in the last call, we have agreed with High-speed rail on virtually all the delays. They've compensated us for all delays.

We've revised our completion date to the end of 2021. They're still trying to get their easements and right-of-ways procured, but it appears in December, as I said earlier, we'll begin to once again build momentum at High-speed rail so that we can conclude the balance of the work. We're approximately 50% complete with 50% to go. So you can imagine the kind of revenue that should generate over the next two years.

Brent Thielman -- D.A. Davidson -- Analyst

OK. Thanks for that detail. And I guess, my last question, and I guess, with all this work within civil still to come and potentially be booked over the next 12-plus months, are you able to find the people, or more importantly, the right people to manage all this?

Ronald Tutor -- Chairman and Chief Executive Officer

Well, I and all my executives, I swear I'm like a college recruiter looking for all Americans. I'm interviewing top people every day. The only good news, if it's really good news is, as you know, many of our peers have exited this type of work, very large complicated civil work. So, all of their managers are available and I see resume after resume and I am interviewing, and I have brought in a number of executives, project executives.

But I tell them you have to serve an apprenticeship with Tutor Perini, where you go out on one of our very large job, you're given a section to prove yourself, and you work under one of our project execs ultimately reporting to me. That prove-yourself period is approximately one year. So, we are recruiting, we've literally infused over $1 million into our training program. We're doing everything we can to build up our physical capacity because there's no question the market is there for us if we have the people.

That's the only really inhibiting factor, but we will grow our revenue as we are. But at some point, when you recognize the limited competition, we will run out of gas. Hard to fathom as that is, it's a new world.

Brent Thielman -- D.A. Davidson -- Analyst

OK. Thank you. I appreciate it.

Operator

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing remarks.

Ronald Tutor -- Chairman and Chief Executive Officer

No, that's very good. Thank you, everyone.

Gary Smalley -- Executive Vice President and Chief Financial Officer

Talk to you next quarter.

Operator

[Operator sign-off]

Duration: 53 minutes

Call participants:

Jorge Casado -- Vice President of Investor Relations

Ronald Tutor -- Chairman and Chief Executive Officer

Gary Smalley -- Executive Vice President and Chief Financial Officer

Alex Rygiel -- B. Riley FBR -- Analyst

Steven Fisher -- UBS -- Analyst

Brent Thielman -- D.A. Davidson -- Analyst

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