Overview

Perini Corporation is a leading construction services company, based on revenues, as ranked by Engineering News-Record, offering diversified general contracting, construction management and design-build services to private clients and public agencies throughout the world. We have provided construction services since 1894 and have established a strong reputation within our markets for executing large, complex projects on time and within budget while adhering to strict quality control measures. We offer general contracting, pre-construction planning and comprehensive project management services, including the planning and scheduling of the manpower, equipment, materials and subcontractors required for a project. We also offer self-performed construction services including site work, concrete forming and placement, steel erection and electrical and mechanical, plumbing and HVAC.

Our business is conducted through three segments: building, civil, and management services. Our building segment focuses on large, complex projects in the hospitality and gaming, municipal offices, sports and entertainment, educational, transportation, corrections, healthcare, biotech, pharmaceutical and high-tech markets, and electrical and mechanical, plumbing and HVAC services as a subcontractor to the Company and other general contractors. Our civil segment specializes in public works construction, primarily in the western, northeastern and mid-Atlantic United States, including the repair, replacement and reconstruction of the public infrastructure such as highways, bridges, mass transit systems and wastewater treatment facilities. Our management services segment, including the recently acquired Tutor-Saliba operation in Guam (see "Recent Developments" below), provides diversified construction, design-build and maintenance services to the U.S. military and government agencies, as well as to surety companies and multi-national corporations in the United States and overseas.

Significant Accounting Policies

Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Our critical accounting policies are also identified and discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. We have made no significant changes to these policies during the third quarter of 2008, except as noted below.

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements," ("SFAS No. 157") which clarifies the definition of fair value, describes methods used to appropriately measure fair value, and expands fair value disclosure requirements. SFAS No. 157 applies under other accounting pronouncements that currently require or permit fair value measurements. We adopted SFAS No. 157 on January 1, 2008, as required. In February 2008, the FASB issued FASB Staff Position No. SFAS 157-2, "Effective Date of FASB Statement No. 157," which amends SFAS No. 157 by delaying its effective date by one year for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Therefore, the application of SFAS No. 157 relating to our non-financial assets and non-financial liabilities will be adopted prospectively beginning January 1, 2009. See Note 5, "Fair Value Measurements" for additional information.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - including an Amendment of SFAS No. 115," ("SFAS No. 159"). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. We adopted SFAS No. 159 on January 1, 2008, as required. We did not elect the fair value measurement option for any of our financial assets or liabilities. Therefore, the adoption of SFAS No. 159 had no impact on the Company's financial statements.

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations," ("SFAS No. 141(R)").

SFAS No. 141(R) establishes principles and requirements for how an acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS No. 141(R) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for us beginning January 1, 2009 and we will apply the provisions of SFAS No. 141(R) prospectively to any business combinations for which the acquisition date is on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of Accounting Research Bulletin No. 51," ("SFAS No. 160"). SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for us beginning January 1, 2009 and we will apply the provisions of SFAS No. 160 prospectively as of that date.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - An Amendment of SFAS No. 133," ("SFAS No. 161"). SFAS No. 161 is effective for us beginning January 1, 2009. SFAS No. 161 applies only to financial statement disclosures, and we do not expect the adoption of SFAS No. 161 to have a material impact on our consolidated financial statements and related disclosures.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles," ("SFAS No. 162"). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. This statement will be effective 60 days following the Securities and Exchange Commission's approval of the Public Company Accounting Oversight Board's amendments to AU
Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." We do not expect the adoption of SFAS No. 162 to have a material impact on our consolidated financial statements.

Recent Developments

Merger With Tutor-Saliba Corporation

On September 8, 2008, we completed the acquisition of Tutor-Saliba Corporation ("Tutor-Saliba") pursuant to an agreement and plan of merger between the Company, Tutor-Saliba, Ronald N. Tutor and shareholders of Tutor-Saliba. Subsequent to the approval of the merger by the Company's shareholders, the Company issued 22,987,293 shares of its common stock to the shareholders of Tutor-Saliba in exchange for 100% of the outstanding capital stock of Tutor-Saliba. Mr. Tutor serves as our chairman and Chief Executive Officer. In addition, Mr. Tutor controls two trusts that collectively owned 96% of the outstanding stock of Tutor-Saliba prior to the merger. As a result of the merger, Mr. Tutor, through these two trusts, is the beneficial owner of approximately 43% of our outstanding common stock. These shares are subject to certain restrictions contained in a shareholders agreement between Mr. Tutor, the Company and other former Tutor-Saliba shareholders as described in our Current Report on Form 8-K as filed with the SEC on April 7, 2008.

The Company's operating results for the three month and nine month periods ended September 30, 2008 include the operating results of Tutor-Saliba from the date of acquisition. Similar to the Company, Tutor-Saliba operates in the same three segments: building, civil and management services, including Tutor-Saliba's existing operations in Guam. See Note 3 of Notes to Consolidated Condensed Financial Statements for additional information.

In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", we assess the potential amount of impairment, if any, of goodwill and indefinite-lived intangible assets at least annually and whenever events or changes indicate that the carrying value may not be recoverable. As a result of the

recently completed acquisition of Tutor-Saliba, we are in the process of completing the annual impairment test to assess the potential amount of impairment, if any, of the goodwill and indefinite-lived intangible assets initially recorded in the transaction. Impairment assessment inherently involves judgments as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. The Company is evaluating the impact of current global economic and financial market conditions, including severe disruptions in the credit markets, on the construction markets in which the Company operates. In order to complete the testing for impairment, we are reviewing our estimates of future cash flows relating to the reporting units of Tutor-Saliba. To the extent the value of goodwill or intangible assets is impaired, we will be required to incur a non-cash charge to the Statement of Income relating to such impairment.

Amended Credit Facility

Effective September 8, 2008, we entered into a Third Amended and Restated Credit Agreement (the "Amended Agreement") with Bank of America, as Agent. The Amended Agreement amends and replaces in its entirety an existing credit agreement dated May 7, 2008 which provided for a $125 million revolving credit facility and an additional $117.3 million under a supplementary facility. The Amended Agreement allows us to borrow up to $155 million on a revolving credit basis, with a $50 million sublimit for letters of credit, and an additional $111.3 million at September 30, 2008 under a supplementary facility (the "Supplementary Facility") to the extent that the $155 million base facility has been fully drawn. Subject to certain conditions, we have the option to increase the base facility by up to an additional $45 million. The total amount available to borrow under the Supplementary Facility reduces upon the sale of all or any portion of the $111.7 million of auction rate securities held in our investment portfolio as of September 8, 2008. This Supplementary Facility provides us with access to a source of liquidity through May 6, 2009. For a description of additional material terms of the Amended Agreement, see Note 8 of Notes to Consolidated Condensed Financial Statements.

Grant of Restricted Stock Units and Stock Options

On September 5, 2008, the Compensation Committee of our Board of Directors approved the grant of 750,000 restricted stock units and 495,000 nonqualified stock options to certain of our employees and directors under our 2004 Stock Option and Incentive Plan. We are accounting for both of these stock-based compensation items in accordance with SFAS No. 123(R), "Share-Based Payment", beginning in the third quarter of 2008. The grant date fair value of each of the restricted stock units is $26.19, the closing price of our common stock on September 5, 2008. The grant date fair value of each of the nonqualified stock options is $14.63, based on utilization of the Black-Scholes-Merton model to determine the grant date fair value. We recognized a $0.5 million pretax charge in the third quarter of 2008 for compensation cost related to these equity awards granted in the third quarter of 2008.

Backlog of $8.3 Billion

Our backlog of uncompleted construction work at September 30, 2008 was approximately $8.3 billion, as compared to the $7.6 billion backlog reported at December 31, 2007. The September 30, 2008 backlog includes approximately $1.2 billion of backlog, before elimination of intercompany amounts, added in the third quarter of 2008 due to the acquisition of Tutor-Saliba. The September 30, 2008 backlog also includes new contract awards and adjustments to contracts in process added during the third quarter of 2008 totaling approximately $1.95 billion, which includes a $1.2 billion contract to build the new Terminal 3 at McCarran International Airport in Las Vegas and approximately $193 million in additional work in the hospitality and gaming market in Las Vegas. Our management services segment added $360 million of new awards primarily for work in Iraq, including continued overhead cover protection projects, and a runway project in Guam. Our civil segment was awarded a $73 million contract for a new roadway project in Virginia.

                     Backlog at     New Business     Revenue        Backlog at
                    Dec. 31, 2007     Awarded       Recognized    Sept. 30, 2008
                                           (In millions)
Building            $  6,981.7      $  3,980.0     $ (3,757.0)    $   7,204.7
Civil               457.9           352.5          (192.8)        617.6

Results of Operations

Comparison of the Third Quarter of 2008 with the Third Quarter of 2007

Revenues increased by $169.9 million to $1,412.6 million, gross profit increased by $21.6 million, income from construction operations increased by $18.8 million, and net income increased by $10.1 million (or 42.1%) to $34.1 million in 2008. While a part of these increases reflect the inclusion of Tutor-Saliba's operating results for one month in the third quarter of 2008 since the completion of the acquisition, the strong performance in the third quarter of 2008 was led by our building and management services along with an improved profit contribution from our civil segment. The increase in revenues and profit primarily reflects the conversion of our substantial building segment backlog into revenues and profit as expected, bolstered by the positive impact of the Tutor-Saliba operating results across all of our operating segments. Basic earnings per common share were $1.03 for the third quarter of 2008, compared to $0.89 for the third quarter of 2007. Diluted earnings per common share were $1.01 for the third quarter of 2008, compared to $0.87 for the third quarter of 2007.

                            Revenues for the
                     Three Months Ended Sept. 30,                  %
                         2008             2007        Increase   Change
                                  (In millions)
Building            $  1,294.3        $  1,145.1      $  149.2   13.0 %
Civil               74.1              63.0            11.1       17.6 %

Overall revenues increased by $169.9 million (or 13.7%), from $1,242.7 million in 2007 to $1,412.6 million in 2008. This increase was due primarily to an increase in building construction revenues of $149.2 million (or 13%), from $1,145.1 million in 2007 to $1,294.3 million in 2008, primarily as a result of the conversion of our substantial building segment backlog into revenues as expected, led by an increased volume of work in the hospitality and gaming market in Las Vegas. Civil construction revenues increased by $11.1 million (or 17.6%), from $63.0 million in 2007 to $74.1 million in 2008. Management services revenues increased by $9.6 million (or 27.7%), from $34.6 million in 2007 to $44.2 million in 2008, due primarily to the addition of Tutor-Saliba's work in Guam.

                      Income (Loss) from Construction
                            Operations for the           Increase
                      Three Months Ended Sept. 30,      (Decrease)     %
                         2008               2007        In Income    Change
                                    (In millions)
Building            $   35.2           $    33.3        $   1.9      5.7 %
Civil               10.0               (6.8)            16.8
Management Services 12.1               12.8             (0.7)        (5.5)%
Subtotal            $   57.3           $    39.3        $  18.0      45.8 %

Less: Corporate     (5.0)              (5.8)            0.8          13.8%
Total               $    52.3          $    33.5        $  18.8      56.1%

Income from construction operations (excluding corporate) increased by $18.0 million (or 45.8%), from $39.3 million in 2007 to $57.3 million in 2008. Building construction income from operations increased by $1.9 million (or 5.7%), from $33.3 million in 2007 to $35.2 million in 2008, due primarily to an increase in revenues discussed above, which was partly offset by a $3.2 million increase in building construction-related general and administrative expenses, due primarily to a $3.0 million increase resulting from the addition of Tutor-Saliba, and a $0.6 million increase due to marketing and preconstruction efforts relating to potential projects in Dubai. Civil construction income from operations improved by $16.8 million, from a loss of $6.8 million in 2007 to a profit of $10.0 million in 2008. The addition of Tutor-Saliba made a positive impact on the 2008 civil construction income from operations along with improved operating performances from both our New York Civil and Cherry Hill operations. The loss in 2007 was due primarily to recording a charge with respect to the matter discussed in Note 6(c) of Notes to Consolidated Condensed Financial Statements. This matter has not been settled. As a result, the potential for a further charge (or credit) exists; however, management believes that the amount of such further charge or credit, if any, will not be material to the financial results of the Company or of the civil segment. Management services income from operations decreased by $0.7 million (or 5.5%), from $12.8 million in 2007 to $12.1 million in 2008, primarily reflecting the extraordinary operating results recorded in 2007 due to favorable performance on work in Iraq. Overall income from construction operations was favorably impacted by a $0.8 million decrease in corporate general and administrative expenses, from $5.8 million in 2007 to $5.0 million in 2008, due primarily to a $1.2 million decrease in the provision for corporate incentive compensation and in corporate stock-based compensation expense resulting from certain restricted stock units granted in 2006 and 2007, net of a $0.4 million increase in legal fees related to the matters discussed in Note 6(h) of Notes to Consolidated Condensed Financial Statements.

Other income decreased by $1.8 million, from $4.4 million in 2007 to $2.6 million in 2008, due primarily to a $1.3 million gain on sale of parcels of developed land held for sale recorded in 2007, and a $0.6 million decrease in interest income earned from our cash investments.

Interest expense increased by $0.6 million, from $0.4 million in 2007 to $1.0 million in 2008, due primarily to the debt assumed in conjunction with the acquisition of Tutor-Saliba.

The provision for income taxes increased by $6.3 million, from $13.5 million in 2007 to $19.8 million in 2008, due primarily to the increase in pretax income in 2008. The effective tax rate for the third quarter of 2008 was 36.7%, as compared to 36.0% for the third quarter of 2007.

Comparison of the Nine Months Ended September 30, 2008 with the Nine Months Ended September 30, 2007

Revenues increased by $675.8 million to $4,057.4 million, gross profit increased by $36.4 million, income from construction operations increased by $26.8 million, and net income increased by $13.6 million (or 18.2%) to $87.8 million in 2008. While a part of the increases reflect the inclusion of Tutor-Saliba's

operating results for one month in 2008, our strong performance in 2008 was led by our building and management services segments. The increase in revenues and profit primarily reflects the conversion of our substantial building segment backlog into revenues and profit as expected. In addition, our management services segment also made a significant contribution to our 2008 operating results and our civil segment made an improved contribution to our 2008 operating results. Basic earnings per common share were $3.01 for the first nine months of 2008, compared to $2.77 for the first nine months of 2007. Diluted earnings per common share were $2.96 for the first nine months of 2008, compared to $2.71 for the first nine months of 2007.

                            Revenues for the
                      Nine Months Ended Sept. 30,      Increase      %
                        2008              2007        (Decrease)   Change
                                   (In millions)
Building            $  3,757.0       $   3,084.7      $ 672.3      21.8 %
Civil               192.8            183.2            9.6          5.2 %

Overall revenues increased by $675.8 million (or 20%), from $3,381.6 million in 2007 to $4,057.4 million in 2008. This increase was due primarily to an increase in building construction revenues of $672.3 million (or 21.8%), from $3,084.7 million in 2007 to $3,757.0 million in 2008, primarily as a result of the conversion of our substantial building segment backlog into revenues as expected, led by an increased volume of work in the hospitality and gaming, healthcare and office building markets in Las Vegas and California. The addition of Tutor-Saliba resulted in a $107.5 million (or 3.5%) increase in building revenues in 2008. Civil construction revenues increased by $9.6 million (or 5.2%), from $183.2 million in 2007 to $192.8 million in 2008, due primarily to the addition of Tutor-Saliba. Management services revenues decreased by $6.1 million (or 5.4%), from $113.7 million in 2007 to $107.6 million in 2008, due primarily to a decreased volume of work in Iraq partly offset by the addition of Tutor-Saliba's operation in Guam.

                      Income (Loss) from Construction
                             Operations for the           Increase
                       Nine Months Ended Sept. 30,       (Decrease)      %
                         2008               2007         In Income    Change
                                     (In millions)
Building            $   112.1          $     92.8        $  19.3      20.8 %
Civil               13.6               (8.0)             21.6
Management Services 23.7               38.5              (14.8)       (38.4)%
Subtotal            $   149.4          $    123.3        $   26.1      21.2 %

Less: Corporate     (15.6)             (16.3)            0.7          4.3 %
Total               $   133.8          $    107.0        $   26.8      25.0 %

Income from construction operations (excluding corporate) increased by $26.1 million (or 21.2%), from $123.3 million in 2007 to $149.4 million in 2008. Building construction income from operations increased by $19.3 million (or 20.8%), from $92.8 million in 2007 to $112.1 million in 2008, due primarily to the significant increase in revenues discussed above, including the addition of Tutor-Saliba. Building construction income from operations was reduced by an $8.0 million increase in building construction-related general and administrative expenses, due primarily to increases driven by changes in revenue volume, a $3.0 million increase resulting from the addition of Tutor-Saliba, and a $0.6 million increase due to marketing and preconstruction efforts relating to potential projects in Dubai. Civil construction income from operations increased by $21.6 million, from a loss of $8.0 million in 2007 to a profit of $13.6 million in

2008. The addition of Tutor-Saliba made a positive impact on the 2008 civil construction income from operations along with improved operating performances from both our New York Civil and Cherry Hill operations. The loss in 2007 was due primarily to recording a charge with respect to the matter discussed in Note 6(c) of Notes to Consolidated Condensed Financial Statements. Excluding this charge, the civil construction segment would have been at or near breakeven in 2007, due primarily to (i) downward profit adjustments recorded on two projects in the metropolitan New York area, and (ii) higher civil construction-related general and administrative expenses, due primarily to a decrease in the number of active projects, as well as an increase in legal fees relating to open legal matters. The matter discussed in Note 6(c) of Notes to Consolidated Condensed Financial Statements has not been settled. As a result, the potential for a further charge (or credit) exists; however, management believes that the amount of such further charge or credit, if any, will not be material to the financial results of the Company or of the civil segment. Management services income from operations decreased by $14.8 million (or 38.4%), from $38.5 million in 2007 to $23.7 million in 2008, primarily reflecting the extraordinary operating results recorded in 2007 due to favorable performance on work in Iraq. Also, management services income from operations decreased in part due to the decrease in revenues discussed above. Overall income from operations was favorably impacted by a $0.7 million decrease in corporate general and administrative expenses, from $16.3 million in 2007 to $15.6 million in 2008, due primarily to a decrease in corporate stock-based compensation expense resulting from certain restricted stock units granted in 2006 and 2007, partly offset by a $1.3 million increase in outside professional fees related to the audit of our financial statements and an increase in legal fees related to the matters discussed in Note 6(h) of Notes to Consolidated Condensed Financial Statements.

Other income decreased by $2.9 million, from $9.6 million in 2007 to $6.7 million in 2008, as a $1.2 million increase in interest income as a result of the positive cash flow we generated from operating activities in 2007 and in the first nine months of 2008 was more than offset by recognition of a $2.7 million loss due to the adjustment of certain of our investments in auction rate securities to fair value in 2008, and a $1.3 million gain in 2007 on the sale of parcels of developed land held for sale recorded in 2007. For further discussion regarding auction rate securities, see Item 3 captioned "Quantitative and Qualitative Disclosures About Market Risk."

Interest expense increased by $0.3 million, from $1.5 million in 2007 to $1.8 million in 2008. A reduction in interest expense due to the February 2007 repayment of our term loan in full in conjunction with the closing of a new credit agreement was more than offset by increases in interest expense due to more extensive equipment financing in 2008 and to the debt assumed in conjunction with the acquisition of Tutor-Saliba.

The provision for income taxes increased by $10.1 million, from $40.8 million in 2007 to $50.9 million in 2008, due primarily to the increase in pretax income in 2008. The effective tax rate for the first nine months of 2008 was 36.7%, as compared to 35.4% for the first nine months of 2007. The change in the effective tax rate reflects the changes of certain tax contingencies in both years.

Potential Impact of Current Economic Conditions

Current economic and financial market conditions in the United States and overseas, including severe disruptions in the credit markets, could adversely affect our results of operations in future periods, particularly if there is a prolonged economic recession or depression or if government efforts to stabilize and revitalize credit markets and financial institutions are not effective. The current instability in the financial markets has made it difficult for certain of our customers, including state and local governments, to access the credit markets to obtain financing or refinancing, as the case may be, to fund new construction projects on satisfactory terms or at all. State and local . . .