UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 1-6314
Tutor Perini Corporation
(Exact Name of Registrant as Specified in its Charter)
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MASSACHUSETTS |
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04-1717070 |
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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15901 OLDEN STREET, SYLMAR, CALIFORNIA |
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91342-1093 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
(818) 362-8391
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, $1.00 par value |
TPC |
The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☒ |
Accelerated filer ☐ |
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Non-accelerated filer ☐ |
Smaller reporting company ☐ |
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Emerging growth company ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of common stock, $1.00 par value per share, of the registrant outstanding at July 22, 2020 was 50,771,288.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. – FINANCIAL INFORMATION
Item 1. Financial Statements
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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(in thousands, except per common share amounts) |
2020 |
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2019 |
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2020 |
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2019 |
||||
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REVENUE |
$ |
1,276,427 |
|
$ |
1,125,275 |
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$ |
2,527,156 |
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$ |
2,083,762 |
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COST OF OPERATIONS |
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(1,158,673) |
|
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(1,024,332) |
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(2,298,322) |
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(1,894,349) |
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GROSS PROFIT |
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117,754 |
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100,943 |
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228,834 |
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189,413 |
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General and administrative expenses |
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(60,058) |
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(62,797) |
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(123,911) |
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(128,354) |
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Goodwill impairment |
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— |
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(379,863) |
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— |
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(379,863) |
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INCOME (LOSS) FROM CONSTRUCTION OPERATIONS |
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57,696 |
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(341,717) |
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104,923 |
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(318,804) |
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Other income (expense) |
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(797) |
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|
900 |
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(316) |
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1,322 |
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Interest expense |
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(16,464) |
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(17,522) |
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(32,900) |
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(33,947) |
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INCOME (LOSS) BEFORE INCOME TAXES |
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40,435 |
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(358,339) |
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71,707 |
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(351,429) |
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Income tax (expense) benefit |
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(9,576) |
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42,900 |
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(14,710) |
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|
40,712 |
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NET INCOME (LOSS) |
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30,859 |
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(315,439) |
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|
56,997 |
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(310,717) |
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LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
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12,150 |
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5,091 |
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20,917 |
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10,169 |
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NET INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION |
$ |
18,709 |
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$ |
(320,530) |
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$ |
36,080 |
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$ |
(320,886) |
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BASIC EARNINGS (LOSS) PER COMMON SHARE |
$ |
0.37 |
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$ |
(6.38) |
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$ |
0.71 |
|
$ |
(6.40) |
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DILUTED EARNINGS (LOSS) PER COMMON SHARE |
$ |
0.37 |
|
$ |
(6.38) |
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$ |
0.71 |
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$ |
(6.40) |
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WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: |
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|
|
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BASIC |
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50,667 |
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50,224 |
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50,502 |
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50,161 |
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DILUTED |
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50,935 |
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50,224 |
|
|
50,885 |
|
|
50,161 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
UNAUDITED
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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(in thousands) |
2020 |
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2019 |
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2020 |
|
2019 |
||||
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NET INCOME (LOSS) |
$ |
30,859 |
|
$ |
(315,439) |
|
$ |
56,997 |
|
$ |
(310,717) |
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OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
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Defined benefit pension plan adjustments |
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424 |
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331 |
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847 |
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661 |
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Foreign currency translation adjustments |
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1,655 |
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|
810 |
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(2,358) |
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1,158 |
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Unrealized gain in fair value of investments |
|
1,306 |
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|
686 |
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1,848 |
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|
1,359 |
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TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
|
3,385 |
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|
1,827 |
|
|
337 |
|
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3,178 |
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COMPREHENSIVE INCOME (LOSS) |
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34,244 |
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(313,612) |
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57,334 |
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(307,539) |
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LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
|
13,004 |
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5,248 |
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19,751 |
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|
10,428 |
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COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION |
$ |
21,240 |
|
$ |
(318,860) |
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$ |
37,583 |
|
$ |
(317,967) |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
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As of June 30, |
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As of December 31, |
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(in thousands, except share and per share amounts) |
2020 |
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2019 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents ($92,056 and $103,850 related to variable interest entities ("VIEs")) |
$ |
182,599 |
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$ |
193,685 |
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Restricted cash |
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8,892 |
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8,416 |
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Restricted investments |
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75,382 |
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70,974 |
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Accounts receivable ($129,081 and $91,090 related to VIEs) |
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1,586,560 |
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1,354,519 |
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Retainage receivable ($98,304 and $89,132 related to VIEs) |
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581,495 |
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562,375 |
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Costs and estimated earnings in excess of billings ($26,392 and $22,764 related to VIEs) |
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1,149,103 |
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1,123,544 |
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Other current assets ($55,286 and $58,128 related to VIEs) |
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222,392 |
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197,473 |
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Total current assets |
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3,806,423 |
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3,510,986 |
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PROPERTY AND EQUIPMENT ("P&E"), net of accumulated depreciation of $417,575 and $388,147 (net P&E of $34,669 and $49,919 related to VIEs) |
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504,722 |
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509,685 |
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GOODWILL |
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205,143 |
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205,143 |
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INTANGIBLE ASSETS, NET |
|
140,674 |
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|
155,270 |
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OTHER ASSETS |
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106,641 |
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|
104,693 |
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TOTAL ASSETS |
$ |
4,763,603 |
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$ |
4,485,777 |
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LIABILITIES AND EQUITY |
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CURRENT LIABILITIES: |
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Current maturities of long-term debt, net of unamortized discount and debt issuance costs totaling $11,911 and $0 |
$ |
320,790 |
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$ |
124,054 |
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Accounts payable ($110,676 and $93,848 related to VIEs) |
|
770,515 |
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682,699 |
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Retainage payable ($19,589 and $13,967 related to VIEs) |
|
278,045 |
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252,181 |
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Billings in excess of costs and estimated earnings ($434,608 and $422,847 related to VIEs) |
|
962,446 |
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844,389 |
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Accrued expenses and other current liabilities ($16,212 and $25,402 related to VIEs) |
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209,576 |
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206,533 |
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Total current liabilities |
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2,541,372 |
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2,109,856 |
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LONG-TERM DEBT, less current maturities, net of unamortized discount and debt issuance costs totaling $5,190 and $23,343 |
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515,629 |
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|
710,422 |
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DEFERRED INCOME TAXES |
|
41,329 |
|
|
35,686 |
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OTHER LONG-TERM LIABILITIES |
|
201,132 |
|
|
199,288 |
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TOTAL LIABILITIES |
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3,299,462 |
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|
3,055,252 |
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COMMITMENTS AND CONTINGENCIES (NOTE 11) |
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EQUITY |
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Stockholders' equity: |
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Preferred stock - authorized 1,000,000 shares ($1 par value), none issued |
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— |
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— |
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Common stock - authorized 75,000,000 shares ($1 par value), issued and outstanding 50,771,288 and 50,278,816 shares |
|
50,771 |
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50,279 |
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Additional paid-in capital |
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1,124,672 |
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1,117,972 |
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Retained earnings |
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350,071 |
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|
313,991 |
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Accumulated other comprehensive loss |
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(40,597) |
|
|
(42,100) |
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Total stockholders' equity |
|
1,484,917 |
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|
1,440,142 |
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Noncontrolling interests |
|
(20,776) |
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(9,617) |
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TOTAL EQUITY |
|
1,464,141 |
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|
1,430,525 |
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TOTAL LIABILITIES AND EQUITY |
$ |
4,763,603 |
|
$ |
4,485,777 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
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Six Months Ended June 30, |
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(in thousands) |
2020 |
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2019 |
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Cash Flows from Operating Activities: |
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Net income (loss) |
$ |
56,997 |
|
$ |
(310,717) |
|
Adjustments to reconcile net income (loss) to net cash provided by (used) in operating activities: |
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|
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Goodwill impairment |
|
— |
|
|
379,863 |
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Depreciation |
|
34,180 |
|
|
26,543 |
|
Amortization of intangible assets |
|
14,596 |
|
|
1,771 |
|
Share-based compensation expense |
|
8,264 |
|
|
10,078 |
|
Change in debt discount and deferred debt issuance costs |
|
7,046 |
|
|
6,442 |
|
Deferred income taxes |
|
5,423 |
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(50,321) |
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Loss (gain) on sale of property and equipment |
|
31 |
|
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(1,479) |
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Changes in other components of working capital |
|
(68,471) |
|
|
(177,471) |
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Other long-term liabilities |
|
1,295 |
|
|
3,209 |
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Other, net |
|
(1,131) |
|
|
596 |
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
58,230 |
|
|
(111,486) |
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|
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Cash Flows from Investing Activities: |
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|
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|
|
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Acquisition of property and equipment |
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(31,386) |
|
|
(39,346) |
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Proceeds from sale of property and equipment |
|
1,082 |
|
|
3,629 |
|
Investment in securities |
|
(13,319) |
|
|
(13,660) |
|
Proceeds from maturities and sales of investments in securities |
|
10,985 |
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|
8,131 |
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NET CASH USED IN INVESTING ACTIVITIES |
|
(32,638) |
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|
(41,246) |
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Cash Flows from Financing Activities: |
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Proceeds from debt |
|
752,843 |
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|
716,139 |
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Repayment of debt |
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(757,141) |
|
|
(527,159) |
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Cash payments related to share-based compensation |
|
(994) |
|
|
(2,363) |
|
Distributions paid to noncontrolling interests |
|
(30,910) |
|
|
(4,000) |
|
Contributions from noncontrolling interests |
|
— |
|
|
5,379 |
|
Debt modification costs |
|
— |
|
|
(504) |
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
(36,202) |
|
|
187,492 |
|
|
|
|
|
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|
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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(10,610) |
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|
34,760 |
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Cash, cash equivalents and restricted cash at beginning of period |
|
202,101 |
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|
119,863 |
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Cash, cash equivalents and restricted cash at end of period |
$ |
191,491 |
|
$ |
154,623 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
(1) Basis of Presentation
The Condensed Consolidated Financial Statements do not include footnotes and certain financial information normally presented annually under generally accepted accounting principles in the United States (“GAAP”). Therefore, they should be read in conjunction with the audited consolidated financial statements and the related notes included in Tutor Perini Corporation’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2019. The results of operations for the three and six months ended June 30, 2020 may not be indicative of the results that will be achieved for the full year ending December 31, 2020.
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the Company’s consolidated financial position as of June 30, 2020 and its consolidated statements of operations and cash flows for the interim periods presented. Intercompany balances and transactions have been eliminated.
(2) Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, and issued subsequent amendments to the initial guidance within ASU 2019-04 and ASU 2019-05 (collectively, “ASU 2016-13”). The amendments in ASU 2016-13 replace the incurred loss impairment methodology with the current expected credit loss model, which requires consideration of a broader range of reasonable and supportable information to estimate credit losses. The Company adopted this ASU effective January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position, results of operations or cash flows.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide temporary optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions to ease the potential accounting and financial reporting burden associated with transitioning away from reference rates that are expected to be discontinued, including the London Interbank Offered Rate (“LIBOR”). ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. The adoption of the new standard has not had and is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
The following new accounting pronouncement requires implementation in future periods.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), modifying Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). The amendments in ASU 2019-12, among other things, remove certain exceptions to the general principles in ASC 740 and seek more consistent application by clarifying and amending the existing guidance. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020. The Company is currently evaluating the new standard, which is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
7
(3) Revenue
Disaggregation of Revenue
The following tables disaggregate revenue by end market, customer type and contract type, which the Company believes best depict how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors for the three and six months ended June 30, 2020 and 2019.
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|
Three Months Ended |
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Six Months Ended |
||||||||
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|
|
June 30, |
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June 30, |
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(in thousands) |
|
2020 |
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2019 |
|
2020 |
|
2019 |
||||
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Civil segment revenue by end market: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mass transit (includes transportation and tunneling projects) |
|
$ |
354,809 |
|
$ |
243,620 |
|
$ |
651,952 |
|
$ |
389,870 |
|
Bridges |
|
|
89,100 |
|
|
86,467 |
|
|
141,284 |
|
|
155,774 |
|
Highways |
|
|
35,591 |
|
|
60,244 |
|
|
68,173 |
|
|
101,287 |
|
Military defense facilities |
|
|
35,042 |
|
|
13,140 |
|
|
58,652 |
|
|
23,421 |
|
Water |
|
|
29,548 |
|
|
4,658 |
|
|
53,292 |
|
|
14,326 |
|
Other |
|
|
24,886 |
|
|
65,529 |
|
|
82,252 |
|
|
122,474 |
|
Total Civil segment revenue |
|
$ |
568,976 |
|
$ |
473,658 |
|
$ |
1,055,605 |
|
$ |
807,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
June 30, |
|
June 30, |
||||||||
|
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Building segment revenue by end market: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial facilities |
|
$ |
106,899 |
|
$ |
115,193 |
|
$ |
239,948 |
|
$ |
224,546 |
|
Hospitality and gaming |
|
|
107,942 |
|
|
53,576 |
|
|
226,929 |
|
|
122,885 |
|
Municipal and government |
|
|
79,223 |
|
|
68,580 |
|
|
148,725 |
|
|
130,542 |
|
Mass transit (includes transportation projects) |
|
|
66,552 |
|
|
41,211 |
|
|
124,399 |
|
|
70,388 |
|
Education facilities |
|
|
47,038 |
|
|
47,062 |
|
|
78,660 |
|
|
89,590 |
|
Health care facilities |
|
|
32,418 |
|
|
60,796 |
|
|
68,307 |
|
|
141,023 |
|
Mixed use |
|
|
13,101 |
|
|
9,316 |
|
|
23,073 |
|
|
24,591 |
|
Other |
|
|
19,848 |
|
|
32,584 |
|
|
44,744 |
|
|
58,219 |
|
Total Building segment revenue |
|
$ |
473,021 |
|
$ |
428,318 |
|
$ |
954,785 |
|
$ |
861,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
June 30, |
|
June 30, |
||||||||
|
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Specialty Contractors segment revenue by end market: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mass transit (includes transportation and tunneling projects) |
|
$ |
118,634 |
|
$ |
100,016 |
|
$ |
267,305 |
|
$ |
181,411 |
|
Commercial and industrial facilities |
|
|
20,499 |
|
|
43,618 |
|
|
74,004 |
|
|
87,641 |
|
Multi-unit residential |
|
|
37,611 |
|
|
19,225 |
|
|
64,104 |
|
|
30,614 |
|
Education facilities |
|
|
10,338 |
|
|
14,036 |
|
|
26,895 |
|
|
25,616 |
|
Mixed use |
|
|
10,536 |
|
|
18,036 |
|
|
24,338 |
|
|
28,705 |
|
Health care facilities |
|
|
4,283 |
|
|
9,248 |
|
|
6,805 |
|
|
20,899 |
|
Other |
|
|
32,529 |
|
|
19,120 |
|
|
53,315 |
|
|
39,940 |
|
Total Specialty Contractors segment revenue |
|
$ |
234,430 |
|
$ |
223,299 |
|
$ |
516,766 |
|
$ |
414,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
Three Months Ended June 30, 2019 |
||||||||||||||||||||
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
|
|
|
|
|
|
Specialty |
|
|
|
||
|
(in thousands) |
Civil |
|
Building |
|
Contractors |
|
Total |
|
Civil |
|
Building |
|
Contractors |
|
Total |
||||||||
|
Revenue by customer type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local agencies |
$ |
503,828 |
|
$ |
157,748 |
|
$ |
113,623 |
|
$ |
775,199 |
|
$ |
381,438 |
|
$ |
133,798 |
|
$ |
114,255 |
|
$ |
629,491 |
|
Federal agencies |
|
42,590 |
|
|
34,648 |
|
|
11,292 |
|
|
88,530 |
|
|
26,979 |
|
|
44,396 |
|
|
2,761 |
|
|
74,136 |
|
Private owners |
|
22,558 |
|
|
280,625 |
|
|
109,515 |
|
|
412,698 |
|
|
65,241 |
|
|
250,124 |
|
|
106,283 |
|
|
421,648 |
|
Total revenue |
$ |
568,976 |
|
$ |
473,021 |
|
$ |
234,430 |
|
$ |
1,276,427 |
|
$ |
473,658 |
|
$ |
428,318 |
|
$ |
223,299 |
|
$ |
1,125,275 |
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020 |
|
Six Months Ended June 30, 2019 |
||||||||||||||||||||
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
|
|
|
|
|
|
Specialty |
|
|
|
||
|
(in thousands) |
Civil |
|
Building |
|
Contractors |
|
Total |
|
Civil |
|
Building |
|
Contractors |
|
Total |
||||||||
|
Revenue by customer type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local agencies |
$ |
899,873 |
|
$ |
303,764 |
|
$ |
246,496 |
|
$ |
1,450,133 |
|
$ |
638,545 |
|
$ |
278,484 |
|
$ |
211,326 |
|
$ |
1,128,355 |
|
Federal agencies |
|
79,251 |
|
|
66,621 |
|
|
21,048 |
|
|
166,920 |
|
|
50,137 |
|
|
84,547 |
|
|
10,530 |
|
|
145,214 |
|
Private owners |
|
76,481 |
|
|
584,400 |
|
|
249,222 |
|
|
910,103 |
|
|
118,470 |
|
|
498,753 |
|
|
192,970 |
|
|
810,193 |
|
Total revenue |
$ |
1,055,605 |
|
$ |
954,785 |
|
$ |
516,766 |
|
$ |
2,527,156 |
|
$ |
807,152 |
|
$ |
861,784 |
|
$ |
414,826 |
|
$ |
2,083,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
Three Months Ended June 30, 2019 |
||||||||||||||||||||
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
|
|
|
|
|
|
Specialty |
|
|
|
||
|
(in thousands) |
Civil |
|
Building |
|
Contractors |
|
Total |
|
Civil |
|
Building |
|
Contractors |
|
Total |
||||||||
|
Revenue by contract type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price |
$ |
455,928 |
|
$ |
114,229 |
|
$ |
205,531 |
|
$ |
775,688 |
|
$ |
349,945 |
|
$ |
136,250 |
|
$ |
187,826 |
|
$ |
674,021 |
|
Guaranteed maximum price |
|
281 |
|
|
248,738 |
|
|
4,038 |
|
|
253,057 |
|
|
1,644 |
|
|
185,050 |
|
|
7,315 |
|
|
194,009 |
|
Unit price |
|
111,790 |
|
|
629 |
|
|
18,442 |
|
|
130,861 |
|
|
116,285 |
|
|
2,800 |
|
|
20,183 |
|
|
139,268 |
|
Cost plus fee and other |
|
977 |
|
|
109,425 |
|
|
6,419 |
|
|
116,821 |
|
|
5,784 |
|
|
104,218 |
|
|
7,975 |
|
|
117,977 |
|
Total revenue |
$ |
568,976 |
|
$ |
473,021 |
|
$ |
234,430 |
|
$ |
1,276,427 |
|
$ |
473,658 |
|
$ |
428,318 |
|
$ |
223,299 |
|
$ |
1,125,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020 |
|
Six Months Ended June 30, 2019 |
||||||||||||||||||||
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
|
|
|
|
|
|
Specialty |
|
|
|
||
|
(in thousands) |
Civil |
|
Building |
|
Contractors |
|
Total |
|
Civil |
|
Building |
|
Contractors |
|
Total |
||||||||
|
Revenue by contract type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price |
$ |
864,899 |
|
$ |
219,827 |
|
$ |
454,047 |
|
$ |
1,538,773 |
|
$ |
592,811 |
|
$ |
250,609 |
|
$ |
343,090 |
|
$ |
1,186,510 |
|
Guaranteed maximum price |
|
589 |
|
|
486,511 |
|
|
6,587 |
|
|
493,687 |
|
|
3,878 |
|
|
392,182 |
|
|
10,921 |
|
|
406,981 |
|
Unit price |
|
183,148 |
|
|
1,163 |
|
|
39,593 |
|
|
223,904 |
|
|
201,163 |
|
|
8,028 |
|
|
39,186 |
|
|
248,377 |
|
Cost plus fee and other |
|
6,969 |
|
|
247,284 |
|
|
16,539 |
|
|
270,792 |
|
|
9,300 |
|
|
210,965 |
|
|
21,629 |
|
|
241,894 |
|
Total revenue |
$ |
1,055,605 |
|
$ |
954,785 |
|
$ |
516,766 |
|
$ |
2,527,156 |
|
$ |
807,152 |
|
$ |
861,784 |
|
$ |
414,826 |
|
$ |
2,083,762 |
Changes in Contract Estimates that Impact Revenue
Changes to the total estimated contract revenue or cost for a given project, either due to unexpected events or revisions to management’s initial estimates, are recognized in the period in which they are determined. Revenue was negatively impacted during the three- and six-month periods ended June 30, 2020 related to performance obligations satisfied (or partially satisfied) in prior periods by $19.8 million and $35.6 million, respectively. Likewise, revenue was negatively impacted during the three- and six-month periods ended June 30, 2019 related to performance obligations satisfied (or partially satisfied) in prior periods by $14.6 million and $27.7 million, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and exclude unexercised contract options. As of June 30, 2020, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $5.1 billion, $1.7 billion and $2.2 billion for the Civil, Building and Specialty Contractors segments, respectively. As of June 30, 2019, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $5.5 billion, $1.7 billion and $2.2 billion for the Civil, Building and Specialty Contractors segments, respectively. The Company typically recognizes revenue on Civil segment projects over a period of three to five years, whereas for projects in the Building and Specialty Contractors segments, the Company typically recognizes revenue over a period of one to three years.
(4) Contract Assets and Liabilities
The Company classifies contract assets and liabilities that may be settled beyond one year from the balance sheet date as current, consistent with the length of time of the Company’s project operating cycle.
9
Contract assets include amounts due under retainage provisions, costs and estimated earnings in excess of billings and capitalized contract costs. The amounts as included on the Condensed Consolidated Balance Sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
As of December 31, |
||
|
(in thousands) |
|
2020 |
|
2019 |
||
|
Retainage receivable |
|
$ |
581,495 |
|
$ |
562,375 |
|
Costs and estimated earnings in excess of billings: |
|
|
|
|
|
|
|
Claims |
|
|
729,170 |
|
|
705,993 |
|
Unapproved change orders |
|
|
348,043 |
|
|
362,264 |
|
Other unbilled costs and profits |
|
|
71,890 |
|
|
55,287 |
|
Total costs and estimated earnings in excess of billings |
|
|
1,149,103 |
|
|
1,123,544 |
|
Capitalized contract costs |
|
|
88,185 |
|
|
80,294 |
|
Total contract assets |
|
$ |
1,818,783 |
|
$ |
1,766,213 |
Retainage receivable represents amounts invoiced to customers where payments have been partially withheld pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project. Retainage agreements vary from project to project, and balances could be outstanding for several months or years depending on a number of circumstances such as contract-specific terms, project performance and other variables that may arise as the Company makes progress toward completion.
Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. Costs and estimated earnings in excess of billings result when either: (1) the appropriate contract revenue amount has been recognized over time in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract, or (2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. The Company routinely estimates recovery related to claims and unapproved change orders as a form of variable consideration at the most likely amount it expects to receive and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Claims and unapproved change orders are billable upon the agreement and resolution between the contractual parties and after the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions; decreases normally result from resolutions and subsequent billings. As discussed in Note 11, the resolution of these claims and unapproved change orders may require litigation or other forms of dispute resolution proceedings. Other unbilled costs and profits are billable in accordance with the billing terms of each of the existing contractual arrangements and, as such, the timing of contract billing cycles can cause fluctuations in the balance of unbilled costs and profits. Ultimate resolution of other unbilled costs and profits typically involves incremental progress toward contractual requirements or milestones.
Capitalized contract costs primarily represent costs to fulfill a contract that (1) directly relate to an existing or anticipated contract, (2) generate or enhance resources that will be used in satisfying performance obligations in the future and (3) are expected to be recovered through the contract, and are included in other current assets. Capitalized contract costs are generally expensed to the associated contract over the period of anticipated use on the project. During the three and six months ended June 30, 2020, $12.5 million and $22.8 million, respectively, of previously capitalized contract costs were amortized and recognized as expense on the related contracts. During the three and six months ended June 30, 2019, $8.6 million and $14.3 million, respectively, of previously capitalized contract costs were amortized and recognized as expense on the related contracts.
Contract liabilities include amounts owed under retainage provisions and billings in excess of costs and estimated earnings. The amount as reported on the Condensed Consolidated Balance Sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
As of December 31, |
||
|
(in thousands) |
|
2020 |
|
2019 |
||
|
Retainage payable |
|
$ |
278,045 |
|
$ |
252,181 |
|
Billings in excess of costs and estimated earnings |
|
|
962,446 |
|
|
844,389 |
|
Total contract liabilities |
|
$ |
1,240,491 |
|
$ |
1,096,570 |
10
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Retainage payable represents amounts invoiced to the Company by subcontractors where payments have been partially withheld pending the completion of certain milestones, other contractual conditions or upon the completion of the project. Generally, retainage payable is not remitted to subcontractors until the associated retainage receivable from customers is collected.
Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date. The balance may fluctuate depending on the timing of contract billings and the recognition of contract revenue. Revenue recognized during the three and six months ended June 30, 2020 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $470.8 million and $565.9 million, respectively. Revenue recognized during the three and six months ended June 30, 2019 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $289.4 million and $391.9 million, respectively.
(5) Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
As of December 31, |
||
|
(in thousands) |
|
2020 |
|
2019 |
||
|
Cash and cash equivalents available for general corporate purposes |
|
$ |
57,651 |
|
$ |
43,760 |
|
Joint venture cash and cash equivalents |
|
|
124,948 |
|
|
149,925 |
|
Cash and cash equivalents |
|
|
182,599 |
|
|
193,685 |
|
Restricted cash |
|
|
8,892 |
|
|
8,416 |
|
Total cash, cash equivalents and restricted cash |
|
$ |
191,491 |
|
$ |
202,101 |
Cash equivalents include short-term, highly liquid investments with maturities of three months or less when acquired. Cash and cash equivalents consist of amounts available for the Company’s general purposes, the Company’s proportionate share of cash held by the Company’s unconsolidated joint ventures and 100% of amounts held by the Company’s consolidated joint ventures. In both cases, cash held by joint ventures is available only for joint venture-related uses, including future distributions to joint venture partners.
Amounts included in restricted cash are primarily held as collateral to secure insurance-related contingent obligations, such as insurance claim deductibles, in lieu of letters of credit.
11
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(6) Earnings Per Common Share (EPS)
Basic EPS and diluted EPS are calculated by dividing net income attributable to Tutor Perini Corporation by the following: for basic EPS, the weighted-average number of common shares outstanding during the period; and for diluted EPS, the sum of the weighted-average number of both outstanding common shares and potentially dilutive securities, which for the Company can include restricted stock units, unexercised stock options and the Convertible Notes, as defined in Note 9. In accordance with ASC 260, Earnings Per Share, the settlement of the principal amount of the Convertible Notes has no impact on diluted EPS because the Company has the intent and ability to settle the principal amount in cash. See Note 9 for further discussion of the Convertible Notes. The Company calculates the effect of the potentially dilutive restricted stock units and stock options using the treasury stock method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
(in thousands, except per common share data) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Net income (loss) attributable to Tutor Perini Corporation |
$ |
18,709 |
|
$ |
(320,530) |
|
$ |
36,080 |
|
$ |
(320,886) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic |
|
50,667 |
|
|
50,224 |
|
|
50,502 |
|
|
50,161 |
|
Effect of dilutive restricted stock units and stock options |
|
268 |
|
|
— |
|
|
383 |
|
|
— |
|
Weighted-average common shares outstanding, diluted |
|
50,935 |
|
|
50,224 |
|
|
50,885 |
|
|
50,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Tutor Perini Corporation per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.37 |
|
$ |
(6.38) |
|
$ |
0.71 |
|
$ |
(6.40) |
|
Diluted |
$ |
0.37 |
|
$ |
(6.38) |
|
$ |
0.71 |
|
$ |
(6.40) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive securities not included above |
|
2,209 |
|
|
4,191 |
|
|
2,209 |
|
|
4,354 |
For the three and six months ended June 30, 2019, all outstanding restricted stock units and stock options were excluded from the calculation of weighted-average diluted shares outstanding due to the net loss for the period.
(7) Income Taxes
The Company’s effective income tax rate was 23.7% and 20.5% for the three and six months ended June 30, 2020, respectively. The effective income tax rate for the six months ended June 30, 2020 primarily reflects the favorable impact of the 2019 net operating loss (“NOL”), which is allowed to be carried back up to five years as a result of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted on March 27, 2020. Under the CARES Act, the Company’s NOL generated in 2019 may be carried back to tax years when the federal statutory tax rate was 35% rather than the current rate of 21%, consequently generating a larger tax benefit from the NOL due to the enactment of the CARES Act. The favorable impact resulting from the enactment of the CARES Act was partially offset by the unfavorable impact of the vesting of restricted stock units for which a large portion of the share-based compensation expense recognized in prior periods will not be deductible for income tax purposes. For the three and six months ended June 30, 2020, the effective income tax rates differed from the federal statutory rate also as a result of state income taxes, with the increases partially offset by earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company.
For the three and six months ended June 30, 2019, the Company recognized income tax benefits of $42.9 million and $40.7 million, with effective income tax rates of 12.0% and 11.6%, respectively. The Company’s provisions for income taxes and effective tax rates for the three and six months ended June 30, 2019 were significantly impacted by the goodwill impairment charge of $379.9 million. Of the total goodwill impairment charge, approximately $209.5 million pertained to goodwill that was not tax deductible and yielded permanent differences between book income and taxable income. The Company recognized a tax benefit totaling $50.4 million as a result of the impairment charge. The adjusted effective income tax rates, which exclude the tax benefit resulting from the goodwill impairment charge, were 34.7% and 34.0% for the three and six months ended June 30, 2019, respectively, and primarily reflected the unfavorable impact of expired stock options for which the share-based compensation expense recognized in prior periods will not be deductible for income taxes. For the three and six months ended June 30, 2019, the adjusted effective income tax rates were higher
12
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
than the federal statutory rate also as a result of state income taxes, with the increases partially offset by earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company.
(8) Goodwill and Intangible Assets
Goodwill
The following table presents the changes in the carrying amount of goodwill since its inception through June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
|
(in thousands) |
Civil |
|
|
Building |
|
Contractors |
|
Total |
|||
|
Gross goodwill |
$ |
492,074 |
|
$ |
424,724 |
|
$ |
156,193 |
|
$ |
1,072,991 |
|
Accumulated impairment |
|
(286,931) |
|
|
(424,724) |
|
|
(156,193) |
|
|
(867,848) |
|
Balance as of December 31, 2019 |
|
205,143 |
|
|
— |
|
|
— |
|
|
205,143 |
|
Current year activity |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance as of June 30, 2020 |
$ |
205,143 |
|
$ |
— |
|
$ |
— |
|
$ |
205,143 |
The Company tests the goodwill allocated to its reporting units for impairment annually on October 1, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company performed its annual impairment test in the fourth quarter of 2019 using a weighted-average of an income and a market approach. These approaches utilize various valuation assumptions, and small changes to the assumptions could have a significant impact on the concluded fair value. Based on this assessment, the Company concluded goodwill was not impaired since the estimated fair value of the Civil reporting unit exceeded its carrying value. In addition, the Company determined that no triggering events occurred and no circumstances changed since the date of our annual impairment test that would more likely than not reduce the fair value of the Civil reporting unit below its carrying amount.
During the first half of 2020, the novel coronavirus (“COVID-19”) pandemic, as well as the actions taken to contain and mitigate its public health effects, caused disruptions in domestic and global economies and financial markets. The vast majority of the Company’s projects, especially in its Civil reporting unit, have been designated as essential business, which allows the Company to continue its work on those projects. As such, the Civil reporting unit’s operations were not materially impacted during the three and six months ended June 30, 2020. However, due to the fluidity of the pandemic, uncertainties as to its scope and duration, and ongoing changes in the way that governments, businesses and individuals react and respond to the COVID-19 pandemic, the Company is unable at this time to accurately predict the pandemic’s future impact on the Company’s business, financial condition or performance. Among other things, governments could prohibit the continuation of certain projects that to date have been designated as “essential” or could impose health, safety and other operational requirements on such projects that could result in delays to or suspensions of such projects. In addition, employees and contractors working on such projects could be unable or unwilling to continue working on them, perhaps for extended periods. The COVID-19 pandemic also could negatively affect the ability of counterparties or joint venture partners to make required payments on a timely basis or at all.
The Company will continue to monitor events and circumstances for changes that indicate the Civil reporting unit goodwill would need to be reevaluated for impairment during future interim periods prior to the annual impairment test. These future events and circumstances include, but are not limited to, changes in the overall financial performance of the Civil reporting unit, impacts to our business as a result of the COVID-19 pandemic, as well as other quantitative and qualitative factors which could indicate potential triggering events for possible impairment.
13
Intangible Assets
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2020 |
|
Weighted |
|||||||||||
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
Average |
||
|
|
|
|
|
|
Accumulated |
|
Impairment |
|
Carrying |
|
Amortization |
|||
|
(in thousands) |
Cost |
|
|
Amortization |
|
Charge |
|
Value |
|
Period |
||||
|
Trade names (non-amortizable) |
$ |
117,600 |
|
$ |
— |
|
$ |
(67,190) |
|
$ |
50,410 |
|
Indefinite |
|
|
Trade names (amortizable) |
|
74,350 |
|
|
(22,511) |
|
|
(23,232) |
|
|
28,607 |
|
20 years |
|
|
Contractor license |
|
6,000 |
|
|
— |
|
|
(6,000) |
|
|
— |
|
N/A |
|
|
Customer relationships |
|
39,800 |
|
|
(21,575) |
|
|
(16,645) |
|
|
1,580 |
|
12 years |
|
|
Construction contract backlog |
|
149,290 |
|
|
(89,213) |
|
|
— |
|
|
60,077 |
|
3 years |
|
|
Total |
$ |
387,040 |
|
$ |
(133,299) |
|
$ |
(113,067) |
|
$ |
140,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019 |
|
Weighted |
|||||||||||
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
Average |
||
|
|
|
|
|
|
Accumulated |
|
Impairment |
|
Carrying |
|
Amortization |
|||
|
(in thousands) |
Cost |
|
|
Amortization |
|
Charge |
|
Value |
|
Period |
||||
|
Trade names (non-amortizable) |
$ |
117,600 |
|
$ |
— |
|
$ |
(67,190) |
|
$ |
50,410 |
|
Indefinite |
|
|
Trade names (amortizable) |
|
74,350 |
|
|
(21,267) |
|
|
(23,232) |
|
|
29,851 |
|
20 years |
|
|
Contractor license |
|
6,000 |
|
|
— |
|
|
(6,000) |
|
|
— |
|
N/A |
|
|
Customer relationships |
|
39,800 |
|
|
(21,048) |
|
|
(16,645) |
|
|
2,107 |
|
12 years |
|
|
Construction contract backlog |
|
149,290 |
|
|
(76,388) |
|
|
— |
|
|
72,902 |
|
3 years |
|
|
Total |
$ |
387,040 |
|
$ |
(118,703) |
|
$ |
(113,067) |
|
$ |
155,270 |
|
|
|
Amortization expense for the three and six months ended June 30, 2020 was $8.8 million and $14.6 million, respectively. Amortization expense for the three and six months ended June 30, 2019 was $0.9 million and $1.8 million, respectively. As of June 30, 2020, amortization expense is estimated to be $19.5 million for the remainder of 2020, $26.4 million in 2021, $22.0 million in 2022 and $2.5 million per year for the years 2023 through 2025.
The Company performed an annual impairment assessment of its non-amortizable trade names in the fourth quarter of 2019 using a qualitative approach to determine whether conditions existed to indicate that it was more likely than not that the fair value of non-amortizable trade names is less than their carrying values. Based on this assessment, the Company concluded that it was more likely than not that the fair value of the non-amortizable trade names was greater than their carrying values, and therefore a quantitative analysis was not required. In addition, no triggering events occurred and no circumstances changed since the date of our annual impairment test that would indicate impairment of the Company’s non-amortizable trade names.
14
(9) Financial Commitments
Long-Term Debt
Long-term debt as reported on the Condensed Consolidated Balance Sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
As of December 31, |
||
|
(in thousands) |
2020 |
|
2019 |
||
|
2017 Senior Notes |
$ |
494,810 |
|
$ |
494,365 |
|
2017 Credit Facility |
|
100,000 |
|
|
114,000 |
|
Convertible Notes |
|
188,089 |
|
|
182,292 |
|
Equipment financing and mortgages |
|
44,917 |
|
|
39,159 |
|
Other indebtedness |
|
8,603 |
|
|
4,660 |
|
Total debt |
|
836,419 |
|
|
834,476 |
|
Less: Current maturities |
|
320,790 |
|
|
124,054 |
|
Long-term debt, net |
$ |
515,629 |
|
$ |
710,422 |
The following table reconciles the outstanding debt balance to the reported debt balances as of June 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2020 |
|
As of December 31, 2019 |
||||||||||||||
|
(in thousands) |
Outstanding Debt |
|
Unamortized Discount and Issuance Costs |
|
Debt, as reported |
|
Outstanding Debt |
|
Unamortized Discount and Issuance Costs |
|
Debt, as reported |
||||||
|
2017 Senior Notes |
$ |
500,000 |
|
$ |
(5,190) |
|
$ |
494,810 |
|
$ |
500,000 |
|
$ |
(5,635) |
|
$ |
494,365 |
|
Convertible Notes |
|
200,000 |
|
|
(11,911) |
|
|
188,089 |
|
|
200,000 |
|
|
(17,708) |
|
|
182,292 |
The unamortized issuance costs related to the 2017 Credit Facility were $2.9 million and $3.7 million as of June 30, 2020 and December 31, 2019, respectively, and are included in other assets in the Condensed Consolidated Balance Sheets.
2017 Senior Notes
On April 20, 2017, the Company issued $500 million in aggregate principal amount of 6.875% Senior Notes due 2025 (the “2017 Senior Notes”) in a private placement offering. Interest on the 2017 Senior Notes is payable in arrears semi-annually in May and November of each year, beginning in November 2017.
Prior to May 1, 2020, the Company could have redeemed the 2017 Senior Notes at a redemption price equal to 100% of their principal amount plus a “make-whole” premium described in the indenture. In addition, prior to May 1, 2020, the Company also could have redeemed up to 40% of the original aggregate principal amount of the notes at a redemption price of 106.875% of their principal amount with the proceeds received by the Company from any offering of the Company’s equity. Since May 1, 2020, the Company may redeem the 2017 Senior Notes at specified redemption prices described in the indenture. Upon a change of control, holders of the 2017 Senior Notes may require the Company to repurchase all or part of the 2017 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.
The 2017 Senior Notes are senior unsecured obligations of the Company and are guaranteed by substantially all of the Company’s existing and future subsidiaries that also guarantee obligations under the Company’s 2017 Credit Facility, as defined below. In addition, the indenture for the 2017 Senior Notes provides for customary covenants, including events of default and restrictions on the payment of dividends and share repurchases.
2017 Credit Facility
On April 20, 2017, the Company entered into a credit agreement (the “2017 Credit Facility”) with SunTrust Bank, now known as Truist Bank, as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2017 Credit Facility provides for a $350 million revolving credit facility (the “2017 Revolver”) and a sublimit for the issuance of letters of credit and swingline loans up to the aggregate amount of $150 million and $10 million, respectively, both maturing on April 20, 2022 unless any of the Convertible Notes, as defined below, are outstanding on December 17, 2020, in which case all such borrowings will mature on
15
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
December 17, 2020 (the “spring-forward provision”), provided however (i) if the Convertible Notes are refinanced in full with the proceeds of permitted refinancing indebtedness in accordance with the terms of the 2017 Credit Facility, the maturity date for the 2017 Credit Facility will remain April 20, 2022 and (ii) if the Company issues “New Convertible Notes” (as defined in the 2017 Credit Facility) and retires the Convertible Notes in full, the maturity date for the 2017 Credit Facility will be the earlier of (x) April 20, 2022 or (y) 90 days prior to the maturity date for such New Convertible Notes. The 2017 Credit Facility also permits additional borrowings in an aggregate amount of $150 million, which can be in the form of increased capacity on the 2017 Revolver or the establishment of one or more term loans.
Borrowings under the 2017 Revolver bear interest, at the Company’s option, at a rate equal to (a) LIBOR plus a margin of between 1.50% and 3.00% or (b) a base rate (determined by reference to the highest of (i) the administrative agent’s prime lending rate, (ii) the federal funds effective rate plus 50 basis points, (iii) the LIBOR rate for a one-month interest period plus 100 basis points and (iv) 0%), plus a margin of between 0.50% and 2.00%, in each case based on the Consolidated Leverage Ratio (as defined in the 2017 Credit Facility). In addition to paying interest on outstanding principal under the 2017 Credit Facility, the Company will pay a commitment fee to the lenders under the 2017 Revolver in respect of the unutilized commitments thereunder. The Company will pay customary letter of credit fees. If an event of default occurs and is continuing, the otherwise applicable margin and letter of credit fees will be increased 2% per annum. The weighted-average annual interest rate on borrowings under the 2017 Revolver was approximately 3.66% during the six months ended June 30, 2020.
The 2017 Credit Facility contains customary covenants for credit facilities of this type, including maximum consolidated leverage ratios ranging from 4.00:1.00 to 3.25:1.00 over the life of the facility and a minimum consolidated fixed charge coverage ratio of 1.25:1.00. On May 7, 2019, certain provisions of the 2017 Credit Facility were amended, including setting the maximum leverage ratio at 3.50:1.00 for the remainder of its term, thus eliminating the step down from 3.50:1:00 to 3.25:1.00. Substantially all of the Company’s subsidiaries unconditionally guarantee the obligations of the Company under the 2017 Credit Facility; additionally, the obligations are secured by a lien on all personal property of the Company and its subsidiaries guaranteeing these obligations.
As of June 30, 2020, there was $250 million available under the 2017 Revolver, and the Company had not utilized the 2017 Credit Facility for letters of credit. The Company was in compliance with the financial covenants under the 2017 Credit Facility as of June 30, 2020.
As a result of the spring-forward provision mentioned above, the facility will mature on December 17, 2020 if the Convertible Notes remain outstanding at that time. The Company does not have call rights that allow it to unilaterally redeem the Convertible Notes. Due to the spring-forward provision in the 2017 Credit Facility, all borrowings under the facility are included in “Current maturities of long-term debt” on the Condensed Consolidated Balance Sheet as of June 30, 2020. The Company continues to evaluate options to address the spring-forward provision and refinancing or retirement of the outstanding Convertible Notes.
Convertible Notes
On June 15, 2016, the Company issued $200 million of 2.875% Convertible Senior Notes due June 15, 2021 (the “Convertible Notes”) in a private placement offering. The Convertible Notes are unsecured obligations of the Company and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company. The Convertible Notes bear interest at a rate of 2.875% per year, payable in cash semi-annually in June and December, and are included in “Current maturities of long-term debt” on the Condensed Consolidated Balance Sheet as of June 30, 2020.
Prior to January 15, 2021, the Convertible Notes will be convertible only under the following circumstances: (1) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for such trading day was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (2) if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion rate of 33.0579 (or $39.32) on each applicable trading day; or (3) upon the occurrence of specified corporate events. On or after January 15, 2021 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
The Convertible Notes will be convertible at an initial conversion rate of 33.0579 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $30.25. The conversion rate will be subject to adjustment for some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company is required to increase, in certain circumstances, the
16
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
conversion rate for a holder who elects to convert their Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” described in the indenture. Upon conversion, and at the Company’s election, the Company may satisfy its conversion obligation with cash, shares of its common stock or a combination thereof. As of June 30, 2020, the conversion provisions of the Convertible Notes have not been triggered.
Interest Expense
Interest expense as reported in the Condensed Consolidated Statements of Operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
(in thousands) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Cash interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest on 2017 Senior Notes |
$ |
8,593 |
|
$ |
8,594 |
|
$ |
17,187 |
|
$ |
17,187 |
|
Interest on 2017 Credit Facility |
|
2,338 |
|
|
3,682 |
|
|
4,753 |
|
|
6,327 |
|
Interest on Convertible Notes |
|
1,438 |
|
|
1,438 |
|
|
2,875 |
|
|
2,875 |
|
Other interest |
|
535 |
|
|
541 |
|
|
1,039 |
|
|
1,116 |
|
Total cash interest expense |
|
12,904 |
|
|
14,255 |
|
|
25,854 |
|
|
27,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash interest expense:(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of discount and debt issuance costs on Convertible Notes |
|
2,933 |
|
|
2,671 |
|
|
5,797 |
|
|
5,279 |
|
Amortization of debt issuance costs on 2017 Credit Facility |
|
402 |
|
|
387 |
|
|
804 |
|
|
749 |
|
Amortization of debt issuance costs on 2017 Senior Notes |
|
225 |
|
|
209 |
|
|
445 |
|
|
414 |
|
Total non-cash interest expense |
|
3,560 |
|
|
3,267 |
|
|
7,046 |
|
|
6,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
$ |
16,464 |
|
$ |
17,522 |
|
$ |
32,900 |
|
$ |
33,947 |
____________________________________________________________________________________________________
(a)The combination of cash and non-cash interest expense produces effective interest rates that are higher than contractual rates. Accordingly, the effective interest rates for the 2017 Senior Notes and the Convertible Notes were 7.13% and 9.39%, respectively, for the six months ended June 30, 2020.
(10) Leases
The Company leases certain office space, construction and office equipment, vehicles and temporary housing generally under non-cancelable operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet, and the Company generally recognizes lease expense for these leases on a straight-line basis over the lease term. As of June 30, 2020, the Company’s operating leases have remaining lease terms ranging from less than one year to 10 years, some of which include options to renew the leases. The exercise of lease renewal options is generally at the Company’s sole discretion. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.
17
The following table presents components of lease expense for the three and six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
June 30, |
|
June 30, |
||||||||
|
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Operating lease expense |
|
$ |
3,661 |
|
$ |
3,921 |
|
$ |
7,428 |
|
$ |
7,702 |
|
Short-term lease expense(a) |
|
|
23,056 |
|
|
16,486 |
|
|
40,321 |
|
|
33,057 |
|
|
|
|
26,717 |
|
|
20,407 |
|
|
47,749 |
|
|
40,759 |
|
Less: Sublease income |
|
|
329 |
|
|
262 |
|
|
658 |
|
|
521 |
|
Total lease expense |
|
$ |
26,388 |
|
$ |
20,145 |
|
$ |
47,091 |
|
$ |
40,238 |
____________________________________________________________________________________________________
(a)Short-term lease expense includes all leases with lease terms ranging from less than one month to one year. Short-term leases include, among other things, construction equipment rented on an as-needed basis as well as temporary housing.
The following table presents supplemental balance sheet information related to operating leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
As of December 31, |
||
|
(dollars in thousands) |
Balance Sheet Line Item |
2020 |
|
2019 |
||
|
Assets |
|
|
|
|
|
|
|
ROU assets |
Other assets |
$ |
38,909 |
|
$ |
40,156 |
|
Total lease assets |
|
$ |
38,909 |
|
$ |
40,156 |
|
Liabilities |
|
|
|
|
|
|
|
Current lease liabilities |
Accrued expenses and other current liabilities |
$ |
10,255 |
|
$ |
11,392 |
|
Long-term lease liabilities |
Other long-term liabilities |
|
31,869 |
|
|
31,900 |
|
Total lease liabilities |
|
$ |
42,124 |
|
$ |
43,292 |
|
Weighted-average remaining lease term (in years) |
|
|
5.0 |
|
|
5.0 |
|
Weighted-average discount rate |
|
|
6.77% |
|
|
5.96% |
The following table presents supplemental cash flow information and non-cash activity related to operating leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
||||
|
|
|
June 30, |
||||
|
(in thousands) |
|
2020 |
|
2019 |
||
|
Operating cash flow information: |
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities |
|
$ |
(7,386) |
|
$ |
(7,622) |
|
Non-cash activity: |
|
|
|
|
|
|
|
ROU assets obtained in exchange for lease liabilities |
|
$ |
4,923 |
|
$ |
6,040 |
The following table presents maturities of operating lease liabilities on an undiscounted basis as of June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
Year (in thousands) |
|
Operating Leases |
|
|
2020 (excluding the six months ended June 30, 2020) |
|
$ |
7,039 |
|
2021 |
|
|
10,588 |
|
2022 |
|
|
9,294 |
|
2023 |
|
|
7,582 |
|
2024 |
|
|
5,701 |
|
Thereafter |
|
|
10,053 |
|
Total lease payments |
|
|
50,257 |
|
Less: Imputed interest |
|
|
8,133 |
|
Total |
|
$ |
42,124 |
18
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(11) Commitments and Contingencies
The Company and certain of its subsidiaries are involved in litigation and other legal proceedings and forms of dispute resolution in the ordinary course of business, including but not limited to disputes over contract payment and/or performance-related issues (such as disagreements regarding delay or a change in the scope of work of a project and/or the price associated with that change) and other matters incidental to the Company’s business. In accordance with ASC 606, the Company makes assessments of these types of matters on a routine basis and, to the extent permitted by ASC 606, estimates and records recovery related to these matters as a form of variable consideration at the most likely amount the Company expects to receive, as discussed further in Note 4. In addition, the Company is contingently liable for litigation, performance guarantees and other commitments arising in the ordinary course of business, which are accounted for in accordance with ASC 450, Contingencies. Management reviews these matters regularly and updates or revises its estimates as warranted by subsequent information and developments. These assessments require judgments concerning matters that are inherently uncertain, such as litigation developments and outcomes, the anticipated outcome of negotiations and the estimated cost of resolving disputes. Consequently, these assessments are estimates, and actual amounts may vary from such estimates. In addition, because such matters are typically resolved over long periods of time, the Company’s assets and liabilities may change over time should the circumstances dictate. The description of the legal proceedings listed below include management’s assessment of those proceedings. Management believes that, based on current information and discussions with the Company’s legal counsel, the ultimate resolution of other matters is not expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
A description of the material pending legal proceedings, other than ordinary routine litigation incidental to the business is as follows:
Five Star Electric Matter
In the third quarter of 2015, Five Star Electric Corp. (“Five Star”), a wholly owned subsidiary of the Company that was acquired in 2011, entered into a tolling agreement (which has since expired) related to an ongoing investigation being conducted by the United States Attorney’s Office for the Eastern District of New York (“USAO EDNY”). Five Star has been cooperating with the USAO EDNY since late June 2014, when it was first made aware of the investigation, and has provided information requested by the government related to its use of certain minority-owned, women-owned, small and disadvantaged business enterprises and certain of Five Star’s employee compensation, benefit and tax practices.
As of June 30, 2020, the Company cannot predict the ultimate outcome of the investigation and cannot reasonably estimate the potential loss or range of loss that Five Star or the Company may incur or the impact of the results of the investigation on Five Star or the Company.
Alaskan Way Viaduct Matter
In January 2011, Seattle Tunnel Partners (“STP”), a joint venture between Dragados USA, Inc. and the Company, entered into a design-build contract with the Washington State Department of Transportation (“WSDOT”) for the construction of a large-diameter bored tunnel in downtown Seattle, King County, Washington to replace the Alaskan Way Viaduct, also known as State Route 99. The Company has a 45% interest in STP.
The construction of the large-diameter bored tunnel required the use of a tunnel boring machine (“TBM”). In December 2013, the TBM struck a steel pipe, installed by WSDOT as a well casing for an exploratory well. The TBM was significantly damaged and was required to be repaired. STP has asserted that the steel pipe casing was a differing site condition that WSDOT failed to properly disclose. The Disputes Review Board mandated by the contract to hear disputes issued a decision finding the steel casing was a Type I (material) differing site condition. WSDOT did not accept that finding.
The TBM was insured under a Builder’s Risk Insurance Policy (the “Policy”) with Great Lakes Reinsurance (UK) PLC and a consortium of other insurers (the “Insurers”). STP submitted the claims to the Insurers and requested interim payments under the Policy. The Insurers refused to pay and denied coverage. In June 2015, STP filed a lawsuit in the King County Superior Court, State of Washington seeking declaratory relief concerning contract interpretation, as well as damages as a result of the Insurers’ breach of their obligations under the terms of the Policy. STP is also asserting extra-contractual and statutory claims against the Insurers. WSDOT is deemed a plaintiff since WSDOT is an insured under the Policy and had filed its own claim for damages. Hitachi Zosen (“Hitachi”), the manufacturer of the TBM, joined the case as a plaintiff for costs incurred to repair the damages to the TBM.
19
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
In September 2018, rulings received on pre-trial motions effectively limited potential recovery under the Policy for STP, WSDOT and Hitachi. However, on December 19, 2018, the Court of Appeal granted the Company’s request for a discretionary appeal of those rulings. The appeal is expected to be heard in late 2020. STP submitted damages to the Insurers in the King County lawsuit in the amount of $532 million. STP also sought these damages from WSDOT related to the pipe-strike by the TBM in a related lawsuit in Thurston County (see following paragraph).
In March 2016, WSDOT filed a complaint against STP in Thurston County Superior Court alleging breach of contract, seeking $57.2 million in delay-related damages and seeking declaratory relief concerning contract interpretation. STP filed its answer to WSDOT’s complaint and filed a counterclaim against WSDOT and Hitachi, as the TBM designer, seeking damages of $667 million. On October 3, 2019, STP and Hitachi entered into a settlement agreement which released and dismissed the claims that STP and Hitachi had against each other. The jury trial between STP and WSDOT commenced on October 7, 2019 and concluded on December 13, 2019, with a jury verdict in favor of WSDOT awarding them $57.2 million in damages. Judgment was entered on January 10, 2020, and a notice of appeal was filed by STP on January 17, 2020. The appeal is expected to be heard in 2021.
The Company recorded the impact of the jury verdict during the fourth quarter of 2019, resulting in a pre-tax charge of $166.8 million. The charge includes a pre-tax accrual of $25.7 million (which is the Company’s 45% proportionate share of the $57.2 million in damages awarded by the jury to WSDOT). Payment of damages will only be made if the adverse verdict is upheld on appeal, as the payment is secured by a bond for the course of the appeal. Other than the possible future payment in cash of $25.7 million in damages, the charge is for non-cash write-downs primarily related to the costs and estimated earnings in excess of billings and receivables that the Company previously recorded to reflect its expected recovery in this case.
With respect to STP’s direct and indirect claims against the Insurers, management has included in receivables an estimate of the total anticipated recovery concluded to be probable.
George Washington Bridge Bus Station Matter
In August 2013, Tutor Perini Building Corporation (“TPBC”) entered into a contract with the George Washington Bridge Bus Station Development Venture, LLC (the “Developer”) to renovate the George Washington Bridge Bus Station, a mixed-use facility owned by the Port Authority of New York and New Jersey (the “Port Authority”) that serves as a transit facility and retail space. The $100 million project experienced significant design errors and associated delays, resulting in damages to TPBC and its subcontractors, including WDF and Five Star, wholly owned subsidiaries of the Company. The project reached substantial completion on May 16, 2017.
On February 26, 2015, the Developer filed a demand for arbitration, subsequently amended, seeking $30 million in alleged damages and declaratory relief that TPBC’s requests for additional compensation are invalid due to lack of notice. TPBC denied the Developer’s claims and filed a counterclaim in March 2018. TPBC seeks in excess of $113 million in the arbitration, which includes unpaid contract balance claims, the return of $29 million retained by the Developer in alleged damages, as well as extra work claims, pass-through claims and delay claims.
Hearings on the merits commenced on September 24, 2018 before the arbitration panel. On June 4, 2019, the arbitration panel, as confirmed by the U.S. District Court in the Southern District of New York, issued a writ of attachment for $23 million of the $29 million discussed above. On October 7, 2019, the Developer filed for bankruptcy protection in the Southern District of New York under Chapter 11 of the Bankruptcy Code. The filing for bankruptcy stayed the pending arbitration proceedings. TPBC appeared in the bankruptcy proceedings on October 8, 2019 and filed a Proof of Claim in the amount of $113 million on December 13, 2019.
On June 5, 2020, the Developer, secured lenders and the Port Authority announced that they had reached a settlement of their disputes. As part of the settlement, the Port Authority waived the enforcement of its right to seek a “cure” pursuant to its lease agreement with the Developer which requires construction costs be paid prior to any sale of the leasehold, the sole asset in the Developer’s bankruptcy estate to be distributed in this bankruptcy. On July 14, 2020, the bankruptcy court conducted a hearing to determine (1) whether to approve the settlement agreement between the Developer, secured lenders and the Port Authority; and (2) whether TPBC can assert third-party beneficiary rights to the lease agreement and require that prior to the sale of the leasehold, any outstanding costs owed to contractors for the cost of building the project must be paid pursuant to the lease agreement’s “cure” provisions. At this hearing, the bankruptcy court indicated that it will issue a formal order approving the settlement and denying TPBC’s third-party beneficiary rights under the lease agreement. TPBC plans to appeal the decision, once it is formally issued, to challenge the denial of its third-party beneficiary rights under the lease agreement’s “cure” provisions and to avoid being subordinate to the claims of the secured lenders in the bankruptcy proceedings.
20
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Separately, on July 2, 2018, TPBC filed a lawsuit against the Port Authority, as owner of the project, and STV Incorporated, as designer, seeking the same $113 million in damages pursuant to the lease agreement between the Port Authority and the Developer. On August 20, 2018, the Port Authority filed a motion to dismiss, which was denied by the court on July 1, 2019. The Port Authority appealed this decision on July 15, 2019, and the appeal is expected to be decided in 2021. On December 2, 2019, the Court of Appeal denied the Port Authority’s request to stay the trial court action pending the appeal. As a result, the lawsuit is proceeding against the Port Authority before the trial court. On January 13, 2020, the court dismissed STV Incorporated from the case.
On January 27, 2020, TPBC filed separate litigation in the U.S. District Court for the Southern District of New York in which TPBC asserted related claims against individual owners of the Developer for their wrongful conversion of project funds and against certain lenders that received interest payments from project funds and other amounts earmarked to pay the contractors. On June 1, 2020, the defendants filed motions to dismiss, and a decision remains pending from the court.
As of June 30, 2020, the Company has concluded that the potential for a material adverse financial impact due to the Developer’s claims is remote. With respect to TPBC’s claims against the Developer, its owners and the Port Authority, management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date.
(12) Share-Based Compensation
As of June 30, 2020, there were 1,185,089 shares of common stock available for grant under the Tutor Perini Corporation Omnibus Incentive Plan. During the first six months of 2020 and 2019, the Company granted the following share-based instruments: (1) restricted stock units totaling 75,000 and 175,000 with weighted-average fair values per share of $13.93 and $20.41, respectively; (2) stock options totaling 75,000 and 85,000 with weighted-average fair values per share of $3.94 and $7.57, respectively, and weighted-average per share exercise prices of $25.70 and $25.62, respectively; and (3) unrestricted stock units totaling 194,177 and 98,591 with weighted-average fair values per share of $8.60 and $15.72, respectively. During the six months ended June 30, 2019, 750,000 stock options with a weighted-average per share exercise price of $20.33 expired.
The fair value of restricted and unrestricted stock units is based on the closing price of the Company’s common stock on the New York Stock Exchange on the date of the grant and the fair value of stock options is based on the Black-Scholes model. The fair value of stock options granted during the first six months of 2020 was determined using the Black-Scholes model based on the following weighted-average assumptions: (i) expected life of 6.0 years, (ii) expected volatility of 44.91%, (iii) risk-free rate of 1.56%, and (iv) no quarterly dividends. Certain performance-based awards contain market condition components and are valued on the date of grant using a Monte Carlo simulation model.
For the three and six months ended June 30, 2020, the Company recognized, as part of general and administrative expenses, costs for share-based payment arrangements totaling $3.8 million and $8.3 million, respectively, and $4.6 million and $10.1 million for the three and six months ended June 30, 2019, respectively. As of June 30, 2020, the balance of unamortized share-based compensation expense was $14.8 million, which is expected to be recognized over a weighted-average period of 1.7 years.
(13) Employee Pension Plans
The Company has a defined benefit pension plan and an unfunded supplemental retirement plan. Effective June 1, 2004, all benefit accruals under these plans were frozen; however, the current vested benefit was preserved. The pension disclosure presented below includes aggregated amounts for both of the Company’s plans.
21
The following table sets forth a summary of the net periodic benefit cost for the three and six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
(in thousands) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Interest cost |
$ |
758 |
|
$ |
948 |
|
$ |
1,516 |
|
$ |
1,896 |
|
Expected return on plan assets |
|
(1,006) |
|
|
(1,043) |
|
|
(2,012) |
|
|
(2,086) |
|
Amortization of net loss |
|
592 |
|
|
463 |
|
|
1,184 |
|
|
926 |
|
Other |
|
231 |
|
|
225 |
|
|
462 |
|
|
450 |
|
Net periodic benefit cost |
$ |
575 |
|
$ |
593 |
|
$ |
1,150 |
|
$ |
1,186 |
The Company contributed $2.2 million and $2.0 million to its defined benefit pension plan during each of the six-month periods ended June 30, 2020 and 2019, respectively, and expects to contribute an additional $1.9 million by the end of 2020.
(14) Fair Value Measurements
The fair value hierarchy established by ASC 820, Fair Value Measurement, prioritizes the use of inputs used in valuation techniques into the following three levels:
Level 1 inputs are observable quoted prices in active markets for identical assets or liabilities
Level 2 inputs are observable, either directly or indirectly, but are not Level 1 inputs
Level 3 inputs are unobservable
The following fair value hierarchy table presents the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2020 |
|
As of December 31, 2019 |
||||||||||||||||||||
|
|
|
Fair Value Hierarchy |
|
|
|
|
Fair Value Hierarchy |
|
|
|
||||||||||||||
|
(in thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
||||||||
|
Cash and cash equivalents(a) |
|
$ |
182,599 |
|
$ |
— |
|
$ |
— |
|
$ |
182,599 |
|
$ |
193,685 |
|
$ |
— |
|
$ |
— |
|
$ |
193,685 |
|
Restricted cash(a) |
|
|
8,892 |
|
|
— |
|
|
— |
|
|
8,892 |
|
|
8,416 |
|
|
— |
|
|
— |
|
|
8,416 |
|
Restricted investments(b) |
|
|
— |
|
|
75,382 |
|
|
— |
|
|
75,382 |
|
|
— |
|
|
70,974 |
|
|
— |
|
|
70,974 |
|
Investments in lieu of retainage(c) |
|
|
98,837 |
|
|
1,208 |
|
|
— |
|
|
100,045 |
|
|
89,572 |
|
|
1,219 |
|
|
— |
|
|
90,791 |
|
Total |
|
$ |
290,328 |
|
$ |
76,590 |
|
$ |
— |
|
$ |
366,918 |
|
$ |
291,673 |
|
$ |
72,193 |
|
$ |
— |
|
$ |
363,866 |
____________________________________________________________________________________________________
(a)Includes money market funds and short-term investments with maturity dates of three months or less when acquired.
(b)Restricted investments, as of June 30, 2020, consist of investments in U.S. government agency securities of $37.5 million, corporate debt securities of $36.8 million and corporate certificates of deposits of $1.1 million with maturities of up to five years, and are valued based on pricing models, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets and are therefore classified as Level 2 assets. As of December 31, 2019, restricted investments consisted of investments in corporate debt securities of $35.8 million, U.S. government agency securities of $33.8 million and corporate certificates of deposits of $1.4 million with maturities of up to five years. The amortized cost of these available-for-sale securities at June 30, 2020 and December 31, 2019 was not materially different from the fair value.
(c)Investments in lieu of retainage are included in retainage receivable and as of June 30, 2020 are comprised of money market funds of $98.8 million and municipal bonds of $1.2 million. The fair values of the money market funds are measured using quoted market prices; therefore, they are classified as Level 1 assets. The fair values of municipal bonds are measured using readily available pricing sources for comparable instruments; therefore, they are classified as Level 2 assets. As of December 31, 2019, investments in lieu of retainage consisted of money market funds of $89.6 million and municipal bonds of $1.2 million. The amortized cost of these available-for-sale securities at June 30, 2020 and December 31, 2019 was not materially different from the fair value.
The carrying values of receivables, payables and other amounts arising out of normal contract activities, including retainage, which may be settled beyond one year, are estimated to approximate fair value. Of the Company’s long-term debt, the fair value of the 2017 Senior Notes was $484.4 million and $485.0 million as of June 30, 2020 and December 31, 2019, respectively. The fair value of the
22
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Convertible Notes was $190.7 million and $193.4 million as of June 30, 2020 and December 31, 2019, respectively. The fair values of the 2017 Senior Notes and Convertible Notes were determined using Level 1 inputs, specifically current observable market prices. The reported value of the Company’s remaining borrowings approximates fair value as of June 30, 2020 and December 31, 2019.
(15) Variable Interest Entities (VIEs)
The Company may form joint ventures or partnerships with third parties for the execution of projects. In accordance with ASC 810, Consolidation (“ASC 810”), the Company assesses its partnerships and joint ventures at inception to determine if any meet the qualifications of a VIE. The Company considers a joint venture a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, the Company reassesses its initial determination of whether a joint venture is a VIE.
ASC 810 also requires the Company to determine whether it is the primary beneficiary of the VIE. The Company concludes that it is the primary beneficiary and consolidates the VIE if the Company has both (a) the power to direct the economically significant activities of the VIE and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The Company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if the Company is the primary beneficiary. The Company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. In accordance with ASC 810, management’s assessment of whether the Company is the primary beneficiary of a VIE is performed continuously.
As of June 30, 2020, the Company had unconsolidated VIE-related current assets and liabilities of $3.4 million and $3.3 million, respectively, included in the Company’s Condensed Consolidated Balance Sheet. As of December 31, 2019, the Company had unconsolidated VIE-related current assets and liabilities of $1.5 million and $1.4 million, respectively, included in the Company’s Condensed Consolidated Balance Sheet. The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments. There were no future funding requirements for the unconsolidated VIEs as of June 30, 2020.
As of June 30, 2020, the Company’s Condensed Consolidated Balance Sheet included current and noncurrent assets of $401.1 million and $36.4 million, respectively, as well as current liabilities of $581.1 million related to the operations of its consolidated VIEs. As of December 31, 2019, the Company’s Condensed Consolidated Balance Sheet included current and noncurrent assets of $365.0 million and $52.0 million, respectively, as well as current liabilities of $556.1 million related to the operations of its consolidated VIEs.
Below is a discussion of some of the Company’s more significant or unique VIEs.
The Company established a joint venture to construct the Purple Line Extension Section 2 (Tunnels and Stations) and Section 3 (Stations) mass-transit projects in Los Angeles, California with a combined value of approximately $2.8 billion. The Company has a 75% interest in the joint venture with the remaining 25% held by O&G Industries, Inc. The joint venture was initially financed with contributions from the partners and, per the terms of the joint venture agreement, the partners may be required to provide additional capital contributions in the future. The Company has determined that this joint venture is a VIE for which the Company is the primary beneficiary.
The Company also established a joint venture with Parsons Corporation (“Parsons”) to construct the Newark Liberty International Airport Terminal One project, a $1.4 billion transportation infrastructure project in Newark, New Jersey. The Company has an 80% interest in the joint venture with the remaining 20% held by Parsons. The joint venture was initially financed with contributions from the partners and, per the terms of the joint venture agreement, the partners may be required to provide additional capital contributions in the future. The Company has determined that this joint venture is a VIE for which the Company is the primary beneficiary.
23
(16) Changes in Equity
A reconciliation of the changes in equity for the three and six months ended June 30, 2020 and 2019 is provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Other |
|
|
|
|
|
|
||
|
|
Common |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Noncontrolling |
|
Total |
||||||
|
(in thousands) |
Stock |
|
Capital |
|
Earnings |
|
Loss |
|
Interests |
|
Equity |
||||||
|
Balance - March 31, 2020 |
$ |
50,577 |
|
$ |
1,120,487 |
|
$ |
331,362 |
|
$ |
(43,128) |
|
$ |
(16,370) |
|
$ |
1,442,928 |
|
Net income |
|
— |
|
|
— |
|
|
18,709 |
|
|
— |
|
|
12,150 |
|
|
30,859 |
|
Other comprehensive income |
|
— |
|
|
— |
|
|
— |
|
|
2,531 |
|
|
854 |
|
|
3,385 |
|
Share-based compensation |
|
— |
|
|
4,185 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,185 |
|
Issuance of common stock, net |
|
194 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
194 |
|
Distributions to noncontrolling interests |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17,410) |
|
|
(17,410) |
|
Balance - June 30, 2020 |
$ |
50,771 |
|
$ |
1,124,672 |
|
$ |
350,071 |
|
$ |
(40,597) |
|
$ |
(20,776) |
|
$ |
1,464,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Other |
|
|
|
|
|
|
||
|
|
Common |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Noncontrolling |
|
Total |
||||||
|
(in thousands) |
Stock |
|
Capital |
|
Earnings |
|
Loss |
|
Interests |
|
Equity |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2019 |
$ |
50,279 |
|
$ |
1,117,972 |
|
$ |
313,991 |
|
$ |
(42,100) |
|
$ |
(9,617) |
|
$ |
1,430,525 |
|
Net income |
|
— |
|
|
— |
|
|
36,080 |
|
|
— |
|
|
20,917 |
|
|
56,997 |
|
Other comprehensive income (loss) |
|
— |
|
|
— |
|
|
— |
|
|
1,503 |
|
|
(1,166) |
|
|
337 |
|
Share-based compensation |
|
— |
|
|
7,692 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,692 |
|
Issuance of common stock, net |
|
492 |
|
|
(992) |
|
|
— |
|
|
— |
|
|
— |
|
|
(500) |
|
Distributions to noncontrolling interests |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(30,910) |
|
|
(30,910) |
|
Balance - June 30, 2020 |
$ |
50,771 |
|
$ |
1,124,672 |
|
$ |
350,071 |
|
$ |
(40,597) |
|
$ |
(20,776) |
|
$ |
1,464,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Other |
|
|
|
|
|
|
||
|
|
Common |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Noncontrolling |
|
Total |
||||||
|
(in thousands) |
Stock |
|
Capital |
|
Earnings |
|
Loss |
|
Interests |
|
Equity |
||||||
|
Balance - March 31, 2019 |
$ |
50,180 |
|
$ |
1,105,184 |
|
$ |
701,325 |
|
$ |
(44,200) |
|
$ |
(17,310) |
|
$ |
1,795,179 |
|
Net income (loss) |
|
— |
|
|
— |
|
|
(320,530) |
|
|
— |
|
|
5,091 |
|
|
(315,439) |
|
Other comprehensive income |
|
— |
|
|
— |
|
|
— |
|
|
1,670 |
|
|
157 |
|
|
1,827 |
|
Share-based compensation |
|
— |
|
|
5,312 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,312 |
|
Issuance of common stock, net |
|
99 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
99 |
|
Contributions from noncontrolling interests |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,581 |
|
|
2,581 |
|
Balance - June 30, 2019 |
$ |
50,279 |
|
$ |
1,110,496 |
|
$ |
380,795 |
|
$ |
(42,530) |
|
$ |
(9,481) |
|
$ |
1,489,559 |
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Other |
|
|
|
|
|
|
||
|
|
Common |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Noncontrolling |
|
Total |
||||||
|
(in thousands) |
Stock |
|
Capital |
|
Earnings |
|
Loss |
|
Interests |
|
Equity |
||||||
|
Balance - December 31, 2018 |
$ |
50,026 |
|
$ |
1,102,919 |
|
$ |
701,681 |
|
$ |
(45,449) |
|
$ |
(21,288) |
|
$ |
1,787,889 |
|
Net income (loss) |
|
— |
|
|
— |
|
|
(320,886) |
|
|
— |
|
|
10,169 |
|
|
(310,717) |
|
Other comprehensive income |
|
— |
|
|
— |
|
|
— |
|
|
2,919 |
|
|
259 |
|
|
3,178 |
|
Share-based compensation |
|
— |
|
|
10,095 |
|
|
— |
|
|
— |
|
|
— |
|
|
10,095 |
|
Issuance of common stock, net |
|
253 |
|
|
(2,518) |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,265) |
|
Contributions from noncontrolling interests |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,379 |
|
|
5,379 |
|
Distributions to noncontrolling interests |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,000) |
|
|
(4,000) |
|
Balance - June 30, 2019 |
$ |
50,279 |
|
$ |
1,110,496 |
|
$ |
380,795 |
|
$ |
(42,530) |
|
$ |
(9,481) |
|
$ |
1,489,559 |
(17) Other Comprehensive Income (Loss)
ASC 220, Comprehensive Income, establishes standards for reporting comprehensive income and its components in the consolidated financial statements. The Company reports the change in pension benefit plan assets/liabilities, cumulative foreign currency translation and change in fair value of investments as components of accumulated other comprehensive income (loss) (“AOCI”).
The components of other comprehensive income (loss) and the related tax effects for the three and six months ended June 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
||||||||||||||
|
|
June 30, 2020 |
|
June 30, 2019 |
||||||||||||||
|
(in thousands) |
Before-Tax Amount |
|
Tax (Expense) Benefit |
|
Net-of-Tax Amount |
|
Before-Tax Amount |
|
Tax (Expense) Benefit |
|
Net-of-Tax Amount |
||||||
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plan adjustments |
$ |
592 |
|
$ |
(168) |
|
$ |
424 |
|
$ |
464 |
|
$ |
(133) |
|
$ |
331 |
|
Foreign currency translation adjustments |
|
1,973 |
|
|
(318) |
|
|
1,655 |
|
|
1,072 |
|
|
(262) |
|
|
810 |
|
Unrealized gain in fair value of investments |
|
1,602 |
|
|
(296) |
|
|
1,306 |
|
|
867 |
|
|
(181) |
|
|
686 |
|
Total other comprehensive income |
|
4,167 |
|
|
(782) |
|
|
3,385 |
|
|
2,403 |
|
|
(576) |
|
|
1,827 |
|
Less: Other comprehensive income attributable to noncontrolling interests(a) |
|
854 |
|
|
— |
|
|
854 |
|
|
157 |
|
|
— |
|
|
157 |
|
Total other comprehensive income attributable to Tutor Perini Corporation |
$ |
3,313 |
|
$ |
(782) |
|
$ |
2,531 |
|
$ |
2,246 |
|
$ |
(576) |
|
$ |
1,670 |
(a)The only component of other comprehensive income (loss) attributable to noncontrolling interests is foreign currency translation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Six Months Ended |
||||||||||||||
|
|
June 30, 2020 |
|
June 30, 2019 |
||||||||||||||
|
(in thousands) |
Before-Tax Amount |
|
Tax (Expense) Benefit |
|
Net-of-Tax Amount |
|
Before-Tax Amount |
|
Tax (Expense) Benefit |
|
Net-of-Tax Amount |
||||||
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plan adjustments |
$ |
1,183 |
|
$ |
(336) |
|
$ |
847 |
|
$ |
926 |
|
$ |
(265) |
|
$ |
661 |
|
Foreign currency translation adjustment |
|
(2,954) |
|
|
596 |
|
|
(2,358) |
|
|
1,551 |
|
|
(393) |
|
|
1,158 |
|
Unrealized gain in fair value of investments |
|
2,359 |
|
|
(511) |
|
|
1,848 |
|
|
1,725 |
|
|
(366) |
|
|
1,359 |
|
Total other comprehensive income |
|
588 |
|
|
(251) |
|
|
337 |
|
|
4,202 |
|
|
(1,024) |
|
|
3,178 |
|
Less: Other comprehensive income (loss) attributable to noncontrolling interests(a) |
|
(1,166) |
|
|
— |
|
|
(1,166) |
|
|
259 |
|
|
— |
|
|
259 |
|
Total other comprehensive income attributable to Tutor Perini Corporation |
$ |
1,754 |
|
$ |
(251) |
|
$ |
1,503 |
|
$ |
3,943 |
|
$ |
(1,024) |
|
$ |
2,919 |
(a)The only component of other comprehensive income (loss) attributable to noncontrolling interests is foreign currency translation.
25
The changes in AOCI balances by component (after tax) attributable to Tutor Perini Corporation during the three and six months ended June 30, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
||||||||||
|
|
Defined |
|
|
|
Unrealized |
|
Accumulated |
||||
|
|
Benefit |
|
Foreign |
|
Gain (Loss) in |
|
Other |
||||
|
|
Pension |
|
Currency |
|
Fair Value of |
|
Comprehensive |
||||
|
(in thousands) |
Plan |
|
Translation |
|
Investments, Net |
|
Income (Loss) |
||||
|
Attributable to Tutor Perini Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2020 |
$ |
(37,403) |
|
$ |
(7,364) |
|
$ |
1,639 |
|
$ |
(43,128) |
|
Other comprehensive income before reclassifications |
|
— |
|
|
801 |
|
|
1,335 |
|
|
2,136 |
|
Amounts reclassified from AOCI |
|
424 |
|
|
— |
|
|
(29) |
|
|
395 |
|
Total other comprehensive income |
|
424 |
|
|
801 |
|
|
1,306 |
|
|
2,531 |
|
Balance as of June 30, 2020 |
$ |
(36,979) |
|
$ |
(6,563) |
|
$ |
2,945 |
|
$ |
(40,597) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020 |
||||||||||
|
|
Defined |
|
|
|
Unrealized |
|
Accumulated |
||||
|
|
Benefit |
|
Foreign |
|
Gain (Loss) in |
|
Other |
||||
|
|
Pension |
|
Currency |
|
Fair Value of |
|
Comprehensive |
||||
|
(in thousands) |
Plan |
|
Translation |
|
Investments, Net |
|
Income (Loss) |
||||
|
Attributable to Tutor Perini Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019 |
$ |
(37,826) |
|
$ |
(5,371) |
|
$ |
1,097 |
|
$ |
(42,100) |
|
Other comprehensive income (loss) before reclassifications |
|
— |
|
|
(1,192) |
|
|
1,881 |
|
|
689 |
|
Amounts reclassified from AOCI |
|
847 |
|
|
— |
|
|
(33) |
|
|
814 |
|
Total other comprehensive income (loss) |
|
847 |
|
|
(1,192) |
|
|
1,848 |
|
|
1,503 |
|
Balance as of June 30, 2020 |
$ |
(36,979) |
|
$ |
(6,563) |
|
$ |
2,945 |
|
$ |
(40,597) |
The changes in AOCI balances by component (after tax) attributable to Tutor Perini Corporation during the three and six months ended June 30, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
||||||||||
|
|
Defined |
|
|
|
Unrealized |
|
Accumulated |
||||
|
|
Benefit |
|
Foreign |
|
Gain (Loss) in |
|
Other |
||||
|
|
Pension |
|
Currency |
|
Fair Value of |
|
Comprehensive |
||||
|
(in thousands) |
Plan |
|
Translation |
|
Investments, Net |
|
Income (Loss) |
||||
|
Attributable to Tutor Perini Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2019 |
$ |
(38,340) |
|
$ |
(6,069) |
|
$ |
209 |
|
$ |
(44,200) |
|
Other comprehensive income before reclassifications |
|
— |
|
|
653 |
|
|
714 |
|
|
1,367 |
|
Amounts reclassified from AOCI |
|
331 |
|
|
— |
|
|
(28) |
|
|
303 |
|
Total other comprehensive income |
|
331 |
|
|
653 |
|
|
686 |
|
|
1,670 |
|
Balance as of June 30, 2019 |
$ |
(38,009) |
|
$ |
(5,416) |
|
$ |
895 |
|
$ |
(42,530) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019 |
||||||||||
|
|
Defined |
|
|
|
Unrealized |
|
Accumulated |
||||
|
|
Benefit |
|
Foreign |
|
Gain (Loss) in |
|
Other |
||||
|
|
Pension |
|
Currency |
|
Fair Value of |
|
Comprehensive |
||||
|
(in thousands) |
Plan |
|
Translation |
|
Investments, Net |
|
Income (Loss) |
||||
|
Attributable to Tutor Perini Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018 |
$ |
(38,670) |
|
$ |
(6,315) |
|
$ |
(464) |
|
$ |
(45,449) |
|
Other comprehensive income before reclassifications |
|
— |
|
|
899 |
|
|
1,379 |
|
|
2,278 |
|
Amounts reclassified from AOCI |
|
661 |
|
|
— |
|
|
(20) |
|
|
641 |
|
Total other comprehensive income |
|
661 |
|
|
899 |
|
|
1,359 |
|
|
2,919 |
|
Balance as of June 30, 2019 |
$ |
(38,009) |
|
$ |
(5,416) |
|
$ |
895 |
|
$ |
(42,530) |
26
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(18) Business Segments
The Company offers general contracting, pre-construction planning and comprehensive project management services, including planning and scheduling of manpower, equipment, materials and subcontractors required for the timely completion of a project in accordance with the terms and specifications contained in a construction contract. The Company also offers self-performed construction services: site work, concrete forming and placement, steel erection, electrical, mechanical, plumbing, and HVAC (heating, ventilation and air conditioning). As described below, the Company’s business is conducted through three segments: Civil, Building and Specialty Contractors. These segments are determined based on how the Company’s Chairman and Chief Executive Officer (chief operating decision maker) aggregates business units when evaluating performance and allocating resources.
The Civil segment specializes in public works construction and the replacement and reconstruction of infrastructure. The contracting services provided by the Civil segment include construction and rehabilitation of highways, bridges, tunnels, mass-transit systems, and water management and wastewater treatment facilities.
The Building segment has significant experience providing services for private and public works customers in a number of specialized building markets, including: high-rise residential, hospitality and gaming, transportation, health care, commercial and government offices, sports and entertainment, education, correctional facilities, biotech, pharmaceutical, industrial and technology.
The Specialty Contractors segment specializes in electrical, mechanical, plumbing, HVAC, fire protection systems and pneumatically placed concrete for a full range of civil and building construction projects in the industrial, commercial, hospitality and gaming, and mass-transit end markets. This segment provides the Company with unique strengths and capabilities that allow the Company to position itself as a full-service contractor with greater control over scheduled work, project delivery, and cost and risk management.
To the extent that a contract is co-managed and co-executed among segments, the Company allocates the share of revenues and costs of the contract to each segment to reflect the shared responsibilities in the management and execution of the project.
27
The following tables set forth certain reportable segment information relating to the Company’s operations for the three and six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments |
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
|
|
|
Consolidated |
||
|
(in thousands) |
Civil |
|
|
Building |
|
Contractors |
|
Total |
|
Corporate |
|
Total |
|||||
|
Three Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
644,685 |
|
$ |
490,317 |
|
$ |
234,497 |
|
$ |
1,369,499 |
|
$ |
— |
|
$ |
1,369,499 |
|
Elimination of intersegment revenue |
|
(75,709) |
|
|
(17,296) |
|
|
(67) |
|
|
(93,072) |
|
|
— |
|
|
(93,072) |
|
Revenue from external customers |
$ |
568,976 |
|
$ |
473,021 |
|
$ |
234,430 |
|
$ |
1,276,427 |
|
$ |
— |
|
$ |
1,276,427 |
|
Income (loss) from construction operations |
$ |
65,398 |
|
$ |
17,789 |
|
$ |
(11,388) |
|
$ |
71,799 |
(a) |
$ |
(14,103) |
(b) |
$ |
57,696 |
|
Capital expenditures |
$ |
18,951 |
|
$ |
186 |
|
$ |
255 |
|
$ |
19,392 |
|
$ |
301 |
|
$ |
19,693 |
|
Depreciation and amortization(c) |
$ |
21,775 |
|
$ |
428 |
|
$ |
995 |
|
$ |
23,198 |
|
$ |
2,767 |
|
$ |
25,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
541,117 |
|
$ |
433,559 |
|
$ |
223,299 |
|
$ |
1,197,975 |
|
$ |
— |
|
$ |
1,197,975 |
|
Elimination of intersegment revenue |
|
(67,459) |
|
|
(5,241) |
|
|
— |
|
|
(72,700) |
|
|
— |
|
|
(72,700) |
|
Revenue from external customers |
$ |
473,658 |
|
$ |
428,318 |
|
$ |
223,299 |
|
$ |
1,125,275 |
|
$ |
— |
|
$ |
1,125,275 |
|
Income (loss) from construction operations |
$ |
(164,472) |
|
$ |
(3,810) |
|
$ |
(159,795) |
|
$ |
(328,077) |
(d) |
$ |
(13,640) |
(b) |
$ |
(341,717) |
|
Capital expenditures |
$ |
24,439 |
|
$ |
150 |
|
$ |
110 |
|
$ |
24,699 |
|
$ |
235 |
|
$ |
24,934 |
|
Depreciation and amortization(c) |
$ |
10,285 |
|
$ |
497 |
|
$ |
1,061 |
|
$ |
11,843 |
|
$ |
2,754 |
|
$ |
14,597 |
____________________________________________________________________________________________________
(a)During the three months ended June 30, 2020, income (loss) from construction operations was impacted by $13.2 million (an unfavorable after-tax impact of $9.5 million, or $0.19 per diluted share) due to an adverse arbitration ruling pertaining to an electrical project in New York in the Specialty Contractors segment.
(b)Consists primarily of corporate general and administrative expenses.
(c)Depreciation and amortization is included in income (loss) from construction operations.
(d)During the three months ended June 30, 2019, the Company recorded a non-cash goodwill impairment charge of $379.9 million in income (loss) from construction operations (an unfavorable after-tax impact of $329.5 million, or $6.56 per diluted share) resulting from an interim impairment test the Company performed as of June 1, 2019.
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments |
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
|
|
|
Consolidated |
||
|
(in thousands) |
Civil |
|
|
Building |
|
Contractors |
|
Total |
|
Corporate |
|
Total |
|||||
|
Six Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
1,224,771 |
|
$ |
995,400 |
|
$ |
516,949 |
|
$ |
2,737,120 |
|
$ |
— |
|
$ |
2,737,120 |
|
Elimination of intersegment revenue |
|
(169,166) |
|
|
(40,615) |
|
|
(183) |
|
|
(209,964) |
|
|
— |
|
|
(209,964) |
|
Revenue from external customers |
$ |
1,055,605 |
|
$ |
954,785 |
|
$ |
516,766 |
|
$ |
2,527,156 |
|
$ |
— |
|
$ |
2,527,156 |
|
Income (loss) from construction operations |
$ |
111,519 |
|
$ |
21,305 |
|
$ |
(3,109) |
|
$ |
129,715 |
(a) |
$ |
(24,792) |
(b) |
$ |
104,923 |
|
Capital expenditures |
$ |
30,143 |
|
$ |
198 |
|
$ |
728 |
|
$ |
31,069 |
|
$ |
317 |
|
$ |
31,386 |
|
Depreciation and amortization(c) |
$ |
40,391 |
|
$ |
855 |
|
$ |
1,988 |
|
$ |
43,234 |
|
$ |
5,542 |
|
$ |
48,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
924,739 |
|
$ |
869,802 |
|
$ |
414,826 |
|
$ |
2,209,367 |
|
$ |
— |
|
$ |
2,209,367 |
|
Elimination of intersegment revenue |
|
(117,587) |
|
|
(8,018) |
|
|
— |
|
|
(125,605) |
|
|
— |
|
|
(125,605) |
|
Revenue from external customers |
$ |
807,152 |
|
$ |
861,784 |
|
$ |
414,826 |
|
$ |
2,083,762 |
|
$ |
— |
|
$ |
2,083,762 |
|
Income (loss) from construction operations |
$ |
(122,727) |
|
$ |
(677) |
|
$ |
(167,283) |
|
$ |
(290,687) |
(d) |
$ |
(28,117) |
(b) |
$ |
(318,804) |
|
Capital expenditures |
$ |
38,451 |
|
$ |
205 |
|
$ |
233 |
|
$ |
38,889 |
|
$ |
457 |
|
$ |
39,346 |
|
Depreciation and amortization(c) |
$ |
19,655 |
|
$ |
1,000 |
|
$ |
2,125 |
|
$ |
22,780 |
|
$ |
5,534 |
|
$ |
28,314 |
____________________________________________________________________________________________________
(a)During the six months ended June 30, 2020, income (loss) from construction operations was impacted by $13.2 million (an unfavorable after-tax impact of $9.5 million, or $0.19 per diluted share) due to an adverse arbitration ruling pertaining to an electrical project in New York in the Specialty Contractors segment.
(b)Consists primarily of corporate general and administrative expenses.
(c)Depreciation and amortization is included in income (loss) from construction operations.
(d)During the six months ended June 30, 2019, the Company recorded a non-cash goodwill impairment charge of $379.9 million in income (loss) from construction operations (an unfavorable after-tax impact of $329.5 million, or $6.57 per diluted share) resulting from an interim impairment test the Company performed as of June 1, 2019.
A reconciliation of segment results to the consolidated income (loss) before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
(in thousands) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Income (loss) from construction operations |
$ |
57,696 |
|
$ |
(341,717) |
|
$ |
104,923 |
|
$ |
(318,804) |
|
Other income (expense) |
|
(797) |
|
|
900 |
|
|
(316) |
|
|
1,322 |
|
Interest expense |
|
(16,464) |
|
|
(17,522) |
|
|
(32,900) |
|
|
(33,947) |
|
Income (loss) before income taxes |
$ |
40,435 |
|
$ |
(358,339) |
|
$ |
71,707 |
|
$ |
(351,429) |
29
Total assets by segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
As of |
||
|
(in thousands) |
June 30, 2020 |
|
December 31, 2019 |
||
|
Civil |
$ |
3,084,528 |
|
$ |
2,791,402 |
|
Building |
|
1,083,421 |
|
|
995,298 |
|
Specialty Contractors |
|
664,161 |
|
|
635,180 |
|
Corporate and other(a) |
|
(68,507) |
|
|
63,897 |
|
Total assets |
$ |
4,763,603 |
|
$ |
4,485,777 |
____________________________________________________________________________________________________
(a)Consists principally of cash, equipment, tax-related assets and insurance-related assets, offset by the elimination of assets related to intersegment revenue.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discusses our financial position as of June 30, 2020 and the results of our operations for the three and six months ended June 30, 2020 and should be read in conjunction with other information, including the unaudited Condensed Consolidated Financial Statements and notes included in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10-Q, the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the year ended December 31, 2019, and the information contained under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in Part II, Item 1A below.
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results, which are intended to be covered by the safe harbor provision for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. Words such as “achieve,” “anticipate,” “assumes,” “believes,” “continue,” “could,” “estimate,” “expects,” “forecast,” “hope,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “would,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Although such statements are based on currently available financial and economic data as well as management’s estimates and expectations, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors potentially contributing to such differences include, among others:
The impact of the COVID-19 pandemic and related events that are beyond our control, including possible effects on our business and operations, customers and suppliers, and employees, contractors and subcontractors, which could affect adversely our projects and the geographic regions in which we conduct business;
A significant slowdown or decline in economic conditions;
Revisions of estimates of contract risks, revenue or costs; the timing of new awards; or the pace of project execution may result in losses or lower than anticipated profit;
Unfavorable outcomes of existing or future litigation or dispute resolution proceedings against customers (project owners, developers, general contractors, etc.), subcontractors or suppliers, as well as failure to promptly recover significant working capital invested in projects subject to such matters;
The requirement to perform extra, or change order, work resulting in disputes or claims or adversely affecting our working capital, profits and cash flows;
Risks and other uncertainties associated with assumptions and estimates used to prepare financial statements;
Inability to retain key members of our management, to hire and retain personnel required to complete projects or implement succession plans for key officers;
Client cancellations of, or reductions in scope under, contracts reported in our backlog;
Failure to meet contractual schedule requirements, which could result in higher costs and reduced profits or, in some cases, exposure to financial liability for liquidated damages and/or damages to customers;
Failure to meet our obligations under our debt agreements;
Decreases in the level of government spending for infrastructure and other public projects;
Downgrades in our credit ratings;
Failure of our joint venture partners to perform their venture obligations, which could impose additional financial and performance obligations on us, resulting in reduced profits or losses;
Increased competition and failure to secure new contracts;
Impairment of our goodwill or other indefinite-lived intangible assets;
Economic, political and other risks, including civil unrest, security issues, labor conditions, corruption and other unforeseeable events in countries where we do business, resulting in unanticipated losses;
Possible systems and information technology interruptions, including due to cyberattack, systems failures or other similar events;
The impact of inclement weather conditions on projects;
Failure to comply with laws and regulations related to government contracts;
Potential dilutive impact of our Convertible Notes in our diluted earnings per share calculation;
Uncertainty from the expected discontinuance of the London Interbank Offered Rate and transition to any other interest rate benchmark; and
Conversion of our outstanding Convertible Notes that could dilute ownership interests of existing stockholders and could adversely affect the market price of our common stock.
Executive Overview
COVID-19 Update
In the first quarter of 2020, the outbreak of a novel strain of coronavirus, COVID-19, was declared a pandemic. Efforts in the United States to prevent the spread of COVID-19 and mitigate its impacts intensified in March 2020. All 50 states in the United States declared states of emergency, and various countries around the world, including the United States, took steps to restrict travel. Many states and cities within the United States also enacted temporary closures of businesses, issued stay-at-home orders and implemented other restrictive measures in response to the pandemic. The COVID-19 pandemic did not have an impact on our business until mid-March 2020. The pandemic continued to impact certain projects through the middle to latter part of the second quarter, when certain states and cities began easing some restrictions to allow for the gradual re-opening and expansion of business activities and most of our affected projects of significance resumed more normalized operations. The pace of easing and the continued level of restrictions have varied across regions based on the rates of new COVID-19 cases and hospitalizations, and this variability is expected to continue until rates decrease to levels that are more acceptable to public health officials.
For the three and six months ended June 30, 2020, the Company estimates that the COVID-19 pandemic reduced revenue by $130 million and $190 million, respectively, income from construction operations by $9 million and $12 million, respectively, and diluted earnings per common share by $0.13 and $0.17, respectively. These estimated impacts primarily affected the results of the lower-margin Building and Specialty Contractors segments, as certain projects in the Specialty Contractors segment in New York and certain projects in the Building segment in California and Arkansas experienced reduced project execution activities and productivity primarily due to temporary project suspensions and restarts. The higher-margin Civil segment was not significantly impacted by the COVID-19 pandemic during the first half of 2020. The vast majority of our projects have been considered essential business activities, which has allowed projects to continue while implementing new health and safety requirements.
Due to the fluidity of the COVID-19 pandemic, uncertainties as to its scope and duration, and ongoing changes in the way that governments, businesses and individuals react and respond to the pandemic, the Company is unable at this time to accurately predict the pandemic’s future impact on the Company’s business, results of operations, financial condition or liquidity. Among other things, governments could prohibit the continuation of certain projects that to date have been designated as “essential” or could impose health, safety and other operational requirements on such projects that could result in delays to or suspensions of such projects. In addition, employees and contractors working on such projects could be unable or unwilling to continue working on them, perhaps for extended periods. The COVID-19 pandemic also could negatively affect the ability of counterparties or joint venture partners to make required payments on a timely basis or at all.
Operating Results
Despite the impacts from the COVID-19 pandemic described above, consolidated revenue for the three and six months ended June 30, 2020 was $1.3 billion and $2.5 billion, an increase of 13% and 21%, respectively, compared to $1.1 billion and $2.1 billion for the same periods in 2019. The growth was primarily attributable to increased activities on several infrastructure projects in California, Minnesota, and the Northeast, and certain building projects in California and Oklahoma. The increases were partially offset by the COVID-19 impacts mentioned above.
Income from construction operations for the three and six months ended June 30, 2020 was $57.7 million and $104.9 million, respectively, compared to a loss from construction operations of $341.7 million and $318.8 million for the same periods in 2019. Adjusted income from construction operations for the three and six months ended June 30, 2019, which is a non-GAAP financial measure and excludes the $379.9 million non-cash goodwill impairment charge, was $38.2 million and $61.1 million, respectively. (For a discussion of non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most nearly comparable GAAP financial measures, see the section below titled Non-GAAP Financial Measures.) The increase for both periods was primarily driven by contributions from the above-mentioned infrastructure projects. For the six-month period of 2020, the increase was also partially driven by the absence of prior year unfavorable adjustments that totaled $20.0 million on certain electrical and mechanical projects in New York, none of which were individually material. The increases for both the second quarter and year-to-date 2020 periods were partially offset by the $13.2 million impact of an unfavorable arbitration ruling related to an electrical project in New York, incremental non-cash amortization expense of $7.9 million and $12.8 million for the three and six months ended June 30, 2020, respectively, related to the increased equity interest in a joint venture that the Company acquired in the fourth quarter of 2019, and the COVID-19 impacts mentioned above.
The provision for income taxes was $9.6 million and $14.7 million for the three and six months ended June 30, 2020, respectively, compared to an income tax benefit of $42.9 million and $40.7 million for the same periods in 2019. The effective tax rate was 23.7% and 20.5% for the three and six months ended June 30, 2020, respectively, compared to 12.0% and 11.6% for the comparable periods in 2019. The income tax benefits in the 2019 periods include the $50.4 million tax benefit recognized as a result of the goodwill impairment charge. See Corporate, Tax and Other Matters below for a discussion of the changes in the effective tax rate.
Diluted earnings per common share for the three and six months ended June 30, 2020 was $0.37 and $0.71, respectively, compared to a loss per share of $6.38 and $6.40 for the same periods in 2019. The COVID-19 pandemic had an estimated negative impact on diluted earnings per common share of $0.13 and $0.17 for the three and six months ended June 30, 2020. Adjusted diluted earnings per common share, which is a non-GAAP financial measure and excludes the goodwill impairment charge (and the associated tax benefit) for the three and six months ended June 30, 2019, was $0.18 and $0.17, respectively. The increase in adjusted diluted earnings per common share for both periods was principally due to the factors discussed above that drove the increase in income from construction operations.
Consolidated new awards for the three and six months ended June 30, 2020 totaled $0.7 billion and $1.3 billion, respectively, compared to $0.9 billion and $4.2 billion for the same periods in 2019. The lower volume of new awards in both current year periods was due to the timing of bidding for and awards of prospective project opportunities, which the Company expects will occur later in 2020 or in 2021. The Civil and Building segments were the primary contributors to the new award activity in the second quarter of 2020. The most significant new awards included more than $300 million of additional funding for various mass-transit projects, over $235 million for various building projects in California, the largest of which was a $69 million education building, and $67 million for various civil infrastructure projects in the Midwest. The COVID-19 pandemic has resulted in and could potentially continue to result in delays in the bidding and awarding of certain projects the Company is pursuing due to customer funding constraints and administrative challenges.
Consolidated backlog as of June 30, 2020 was $10.0 billion compared to $11.2 billion at December 31, 2019. Backlog declined as a result of the higher current year revenue generated from near-record backlog at the end of 2019 outpacing current year new awards. As of June 30, 2020, the mix of backlog by segment was approximately 55% for Civil, 23% for Building and 22% for Specialty Contractors.
The following table presents the Company’s backlog by business segment, reflecting changes from December 31, 2019 to June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at |
|
New |
|
Revenue |
|
Backlog at |
||||
|
(in millions) |
December 31, 2019 |
|
Awards(a) |
|
Recognized |
|
June 30, 2020(b) |
||||
|
Civil |
$ |
6,037.2 |
|
$ |
555.3 |
|
$ |
(1,055.6) |
|
$ |
5,536.9 |
|
Building |
|
2,790.3 |
|
|
443.0 |
|
|
(954.8) |
|
|
2,278.5 |
|
Specialty Contractors |
|
2,393.6 |
|
|
306.4 |
|
|
(516.8) |
|
|
2,183.2 |
|
Total |
$ |
11,221.1 |
|
$ |
1,304.7 |
|
$ |
(2,527.2) |
|
$ |
9,998.6 |
(a)New awards consist of the original contract price of projects added to backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.
(b)Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 3 of the Notes to Condensed Consolidated Financial Statements. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog sometimes may include awards for which a contract has not yet been executed or a notice to proceed has not been issued, but for which there are no remaining major uncertainties that the project will proceed (e.g., adequate funding is in place).
Because the COVID-19 pandemic remains fluid and uncertain, the Company cannot assess the degree to which it might experience future adverse impacts. The general outlook for the Company’s growth over the next several years remains favorable, particularly in the Civil and Specialty Contractors segments, but the impact of the COVID-19 pandemic could adversely affect future performance and operations. In addition, the Company’s growth could be impacted by project delays or the timing of project commencements, ramp-up activities and completions. We anticipate that we will continue to win our share of significant new awards resulting from long-term capital spending plans by state, local and federal customers, as well as bipartisan support for infrastructure investments and limited competition for some of the largest project opportunities. In recent elections, voters in numerous states approved dozens of long-term transportation funding measures totaling approximately $200 billion in long-term funding. The largest of these were in Los Angeles County, where Measure M, a half-cent sales tax increase, was approved and is expected to generate $120 billion of funding over 40 years, and in Seattle, Washington, where Sound Transit 3 was passed and is expected to generate $54 billion of funding over 25 years. As state and local governments respond to the economic burdens of the COVID-19 pandemic, they may delay or cancel planned infrastructure investments due to reduced revenues from income and sales taxes, fuel taxes and tolls. The extent of such effects, their duration, and how state and local governments will respond remains uncertain, just as the scope and duration of the COVID-19 pandemic remains uncertain. The possibility of additional federal financial assistance or stimulus programs directed
toward assisting state and local governments or specifically targeting significant investments in infrastructure have been discussed as possible additional pieces of the federal government’s ongoing response to the COVID-19 pandemic. Such additional federal financial assistance or stimulus programs could favorably impact the Company’s current work and prospective opportunities, though the timing and magnitude of such additional federal government actions, if any, remain uncertain. Meanwhile, several large, long-duration civil infrastructure programs with which we are already involved continue to progress. Finally, the COVID-19 pandemic’s dramatic impact on the U.S. economy has led to interest rates that remain at record low levels and may be conducive to continued, and potentially increased, spending on infrastructure projects.
For a more detailed discussion of operating performance of each business segment, corporate general and administrative expenses and other items, see Results of Segment Operations, Corporate, Tax and Other Matters and Liquidity and Capital Resources below.
Non-GAAP Financial Measures
To supplement our unaudited condensed consolidated financial statements presented under generally accepted accounting principles in the United States (“GAAP”), we are presenting certain non-GAAP financial measures. We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations, and they are among the indicators management uses as a basis for evaluating the Company’s financial performance as well as for forecasting future periods. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results, including underlying trends.
These non-GAAP financial measures, which exclude the non-cash goodwill impairment charge incurred in the second quarter of 2019 (as well as the tax benefit associated with that charge), include adjusted income (loss) from construction operations, adjusted net income attributable to Tutor Perini Corporation, adjusted diluted earnings per common share and adjusted effective income tax rate. We also reference adjusted operating margin for each segment, which is a non-GAAP financial measure that we define as adjusted income (loss) from construction operations as a percentage of revenue. These non-GAAP financial measures are not intended to replace the presentation of our financial results in accordance with GAAP, and they may not be comparable to other similarly titled non-GAAP financial measures presented by other companies. Reconciliations of these non-GAAP financial measures to the most nearly comparable GAAP financial measures are presented below. There were no adjustments for the three and six months ended June 30, 2020; therefore, the non-GAAP financial measures do not differ from GAAP results in those periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial Measures |
||||||||||||||
|
|
|
|
|
|
|
|
Specialty |
|
|
|
|
Consolidated |
||
|
(in millions) |
Civil |
|
|
Building |
|
Contractors |
|
Corporate |
|
Total |
||||
|
Three Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from construction operations, as reported |
$ |
(164.5) |
|
$ |
(3.8) |
|
$ |
(159.8) |
|
$ |
(13.6) |
|
$ |
(341.7) |
|
Plus: Goodwill impairment charge |
|
210.2 |
|
|
13.5 |
|
|
156.2 |
|
|
— |
|
|
379.9 |
|
Adjusted income (loss) from construction operations |
$ |
45.7 |
|
$ |
9.7 |
|
$ |
(3.6) |
|
$ |
(13.6) |
|
$ |
38.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from construction operations, as reported |
$ |
(122.7) |
|
$ |
(0.7) |
|
$ |
(167.3) |
|
$ |
(28.1) |
|
$ |
(318.8) |
|
Plus: Goodwill impairment charge |
|
210.2 |
|
|
13.5 |
|
|
156.2 |
|
|
— |
|
|
379.9 |
|
Adjusted income (loss) from construction operations |
$ |
87.5 |
|
$ |
12.8 |
|
$ |
(11.1) |
|
$ |
(28.1) |
|
$ |
61.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||
|
|
June 30, |
|
June 30, |
||||||||||
|
(in millions, except per common share amounts and percentages) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||
|
Net income (loss) attributable to Tutor Perini Corporation, as reported |
$ |
18.7 |
|
$ |
(320.5) |
|
|
$ |
36.1 |
|
$ |
(320.9) |
|
|
Plus: Goodwill impairment charge |
|
— |
|
|
379.9 |
|
|
|
— |
|
|
379.9 |
|
|
Less: Tax benefit provided on goodwill impairment charge |
|
— |
|
|
(50.4) |
|
|
|
— |
|
|
(50.4) |
|
|
Adjusted net income attributable to Tutor Perini Corporation |
$ |
18.7 |
|
$ |
9.0 |
|
|
$ |
36.1 |
|
$ |
8.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share, as reported |
$ |
0.37 |
|
$ |
(6.38) |
|
|
$ |
0.71 |
|
$ |
(6.40) |
|
|
Plus: Goodwill impairment charge |
|
— |
|
|
7.56 |
|
|
|
— |
|
|
7.57 |
|
|
Less: Tax benefit provided on goodwill impairment charge |
|
— |
|
|
(1.00) |
|
|
|
— |
|
|
(1.00) |
|
|
Adjusted diluted earnings per common share |
$ |
0.37 |
|
$ |
0.18 |
|
|
$ |
0.71 |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate, as reported |
|
23.7 |
% |
|
(12.0) |
% |
|
|
20.5 |
% |
|
(11.6) |
% |
|
Tax effect of goodwill impairment charge |
|
— |
% |
|
46.7 |
% |
|
|
— |
% |
|
45.6 |
% |
|
Adjusted effective income tax rate |
|
23.7 |
% |
|
34.7 |
% |
|
|
20.5 |
% |
|
34.0 |
% |
Results of Segment Operations
The results of our Civil, Building and Specialty Contractors segments are discussed below.
Civil Segment
Revenue, income (loss) from construction operations and adjusted income from construction operations for the Civil segment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
(in millions) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Revenue |
$ |
569.0 |
|
$ |
473.7 |
|
$ |
1,055.6 |
|
$ |
807.2 |
|
Income (loss) from construction operations, as reported |
|
65.4 |
|
|
(164.5) |
|
|
111.5 |
|
|
(122.7) |
|
Plus: Goodwill impairment charge |
|
— |
|
|
210.2 |
|
|
— |
|
|
210.2 |
|
Adjusted income from construction operations |
$ |
65.4 |
|
$ |
45.7 |
|
$ |
111.5 |
|
$ |
87.5 |
Revenue for the three and six months ended June 30, 2020 increased 20% and 31%, respectively, compared to the same periods in 2019. The revenue growth for both periods was primarily due to overall increased project execution activities on various mass-transit projects in California and Minnesota. The COVID-19 pandemic had an insignificant impact on revenue in both periods (an estimated $15 million and $25 million, respectively).
Excluding the goodwill impairment charge in the second quarter of 2019, adjusted income from construction operations for the three and six months ended June 30, 2020 increased 43% and 27%, respectively, compared to the same periods in 2019. The increase was primarily driven by the volume growth mentioned above and improved performance on certain projects, partially offset by the impact of incremental non-cash amortization expense of $7.9 million and $12.8 million for the three and six months ended June 30, 2020, respectively, related to the increased equity interest in a joint venture that the Company acquired in the fourth quarter of 2019. The COVID-19 pandemic resulted in insignificant impacts on income from construction operations in both current year periods (an estimated $2 million in each period).
Operating margin was 11.5% and 10.6% for the three and six months ended June 30, 2020, respectively, compared to operating margin of (34.7)% and (15.2)% and adjusted operating margin of 9.6% and 10.8% for the same periods in 2019, which excludes the impact of the goodwill impairment charge. The difference in adjusted operating margin for the second quarter of 2020 was primarily driven by improved performance on several ongoing projects, partially offset by the aforementioned incremental amortization expense. For the first half of 2020, the difference in adjusted operating margin was principally driven by the same incremental amortization expense.
New awards in the Civil segment totaled $377 million and $555 million for the three and six months ended June 30, 2020, respectively, compared to $149 million and $1.8 billion for the same periods in 2019. The increased level of new awards in the second quarter of 2020 was primarily driven by more than $300 million of additional funding for various mass-transit projects, as well as
$67 million for various projects in the Midwest. The substantially lower volume of new awards in the first half of 2020 compared to the same period in 2019 was due to the timing of bidding for and awards of prospective project opportunities, which the Company expects will occur later in 2020 or 2021, whereas the prior year first-half period included the $1.4 billion Purple Line Section 3 Stations project in California. Several large Civil segment opportunities are expected to bid and potentially be awarded to the Company later this year and in 2021. However, the COVID-19 pandemic is resulting in revenue shortfalls for many state and local government agencies that could result in the deferral or cancellation of certain new projects, depending on the allocation and prioritization of state and local funding, as well as the availability, timing and magnitude of anticipated supplemental funding from the federal government.
Backlog for the Civil segment was $5.5 billion as of June 30, 2020 compared to $6.2 billion as of June 30, 2019. The higher backlog in the prior year period was primarily driven by the Purple Line Section 3 Stations project awarded in the first quarter of 2019. The segment continues to experience strong demand reflected in a large, multi-year pipeline of prospective projects, substantial anticipated funding from various voter-approved transportation measures and public agencies’ long-term spending plans. The Civil segment is well-positioned to continue capturing its share of these prospective projects.
Building Segment
Revenue, income (loss) from construction operations and adjusted income from construction operations for the Building segment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
(in millions) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Revenue |
$ |
473.0 |
|
$ |
428.3 |
|
$ |
954.8 |
|
$ |
861.8 |
|
Income (loss) from construction operations, as reported |
|
17.8 |
|
|
(3.8) |
|
|
21.3 |
|
|
(0.7) |
|
Plus: Goodwill impairment charge |
|
— |
|
|
13.5 |
|
|
— |
|
|
13.5 |
|
Adjusted income from construction operations |
$ |
17.8 |
|
$ |
9.7 |
|
$ |
21.3 |
|
$ |
12.8 |
Revenue for the three and six months ended June 30, 2020 increased 10% and 11%, respectively, compared to the same periods in 2019 primarily due to increased project execution activities on various projects in California, Oklahoma and the Northeast. The increases were partially offset by reduced activity on certain projects in California that are completed or nearing completion. Revenue grew in both periods of 2020 despite the negative impact of the COVID-19 pandemic, which resulted in delays on certain projects that impacted revenue by approximately $80 million and $115 million for the three and six months ended June 30, 2020, respectively.
Excluding the goodwill impairment charge in the second quarter of 2019, adjusted income from construction operations for the three and six months ended June 30, 2020 increased 84% and 66%, respectively, compared to the same periods in 2019. The increase for both periods was principally driven by the factors mentioned above that drove the increases in revenue. The COVID-19 pandemic resulted in insignificant impacts on income from construction operations in both current year periods (an estimated $2 million and $3 million, respectively).
Operating margin was 3.8% and 2.2% for the three and six months ended June 30, 2020, respectively, compared to operating margin of (0.9)% and (0.1)% and adjusted operating margin of 2.3% and 1.5% for the same periods in 2019, which excludes the impact of the goodwill impairment charge. The increase in adjusted operating margin for both periods was driven by the factors mentioned above that drove the increases in revenue and income from construction operations.
New awards in the Building segment totaled $260 million and $443 million for the three and six months ended June 30, 2020, respectively, compared to $328 million and $1.4 billion for the same periods in 2019. The lower volume of new awards in both periods of 2020 was due to the timing of prospective project opportunities, which are expected to be awarded later this year or in 2021, whereas the first half of 2019 included several sizeable new awards, such as the Choctaw Casino and Resort project in Oklahoma, a large hospitality and gaming project in California and the Southland Gaming Casino and Hotel project in Arkansas. Significant new awards in the second quarter of 2020 included over $235 million for various building projects in California, the largest of which was a $69 million education building. The COVID-19 pandemic is impacting demand in certain end markets, such as hospitality and gaming, which has resulted in and could continue to result in reduced project opportunities in those markets.
Backlog for the Building segment was $2.3 billion as of June 30, 2020 compared to $2.9 billion as of June 30, 2019. The decrease was driven by revenue growth for the segment that exceeded new awards, which were impacted by the timing of bidding and award activities, including in some instances delays as a result of the COVID-19 pandemic. The Building segment continues to have a large volume of prospective projects across various end markets and geographic locations. Barring any further adverse impacts from the
COVID-19 pandemic, demand for our building construction services is expected to continue due to ongoing customer spending supported by a favorable interest rate environment.
Specialty Contractors Segment
Revenue, loss from construction operations and adjusted loss from construction operations for the Specialty Contractors segment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
(in millions) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Revenue |
$ |
234.4 |
|
$ |
223.3 |
|
$ |
516.8 |
|
$ |
414.8 |
|
Loss from construction operations, as reported |
|
(11.4) |
|
|
(159.8) |
|
|
(3.1) |
|
|
(167.3) |
|
Plus: Goodwill impairment charge |
|
— |
|
|
156.2 |
|
|
— |
|
|
156.2 |
|
Adjusted loss from construction operations |
$ |
(11.4) |
|
$ |
(3.6) |
|
$ |
(3.1) |
|
$ |
(11.1) |
Revenue for the three and six months ended June 30, 2020 increased 5% and 25%, respectively, compared to the same periods in 2019. The increase for the year-to-date period was principally driven by an overall increase in project execution activities on various electrical and mechanical projects in the Northeast. Revenue grew in both periods of 2020 despite the impact of the COVID-19 pandemic, which resulted in delays on certain projects that negatively impacted revenue by approximately $35 million and $50 million for the three and six months ended June 30, 2020, respectively.
Loss from construction operations for the three and six months ended June 30, 2020 was $11.4 million and $3.1 million, respectively, compared to a loss from construction operations of $159.8 million and $167.3 million for same periods in 2019. Excluding the impact of the goodwill impairment charge in the second quarter of 2019, adjusted loss from construction operations was $3.6 million and $11.1 million for the three and six months ended June 30, 2019, respectively. The increase in adjusted loss from construction operations for the second quarter of 2020 was primarily due to the $13.2 million unfavorable arbitration ruling pertaining to an electrical project in New York and the negative impact of the COVID-19 pandemic (an estimated $5 million), partially offset by increased activity on various projects in the Northeast. For the first half of 2020, the decreased loss from construction operations was primarily due to the absence of the prior year unfavorable adjustments described in the Executive Overview and net increased activity on various projects in the Northeast, partially offset by the $13.2 million unfavorable arbitration ruling and the negative impact of the COVID-19 pandemic (an estimated $7 million).
Operating margin was (4.9)% and (0.6)% for the three and six months ended June 30, 2020, respectively, compared to operating margin of (71.6)% and (40.3)% and adjusted operating margin of (1.6)% and (2.7)% for the same periods in 2019, which excludes the impact of the goodwill impairment charge. The changes in adjusted operating margins for both periods were mainly attributable to the aforementioned factors that drove the changes in revenue and adjusted income (loss) from construction operations.
New awards in the Specialty Contractors segment totaled $81 million and $306 million for the three and six months ended June 30, 2020, respectively, compared to $439 million and $918 million for the same periods in 2019. The COVID-19 pandemic has resulted in and could continue to result in reduced demand from certain commercial and government customers that are experiencing funding constraints.
Backlog for the Specialty Contractors segment was $2.2 billion as of June 30, 2020 compared to $2.3 billion as of June 30, 2019. The Specialty Contractors segment continues to be increasingly focused on servicing the Company’s growing backlog of large Civil and Building segment projects, but it also remains well-positioned to capture its share of new projects for external customers, leveraging the size and scale of our business units that operate in New York, Texas, Florida and California and the strong reputation held by these business units for high-quality work on large, complex projects.
Corporate, Tax and Other Matters
Corporate General and Administrative Expenses
Corporate general and administrative expenses were $14.1 million and $24.8 million during the three and six months ended June 30, 2020, respectively, compared to $13.6 million and $28.4 million during the three and six months ended June 30, 2019, respectively. The decrease in the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to lower compensation-related expenses.
Other Income (Expense), Interest Expense and Income Tax (Expense) Benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
(in millions) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Other income (expense) |
|
$ |
(0.8) |
|
$ |
0.9 |
|
$ |
(0.3) |
|
$ |
1.3 |
|
Interest expense |
|
|
(16.5) |
|
|
(17.5) |
|
|
(32.9) |
|
|
(33.9) |
|
Income tax (expense) benefit |
|
|
(9.6) |
|
|
42.9 |
|
|
(14.7) |
|
|
40.7 |
Interest expense decreased $1.0 million for both the three and six months ended June 30, 2020 compared to the same periods in 2019. The decreases in the 2020 periods were primarily due to lower average interest rates on our line of credit.
The effective income tax rate for the three and six months ended June 30, 2020 was 23.7% and 20.5%, respectively, compared to 12.0% and 11.6%, respectively, for the same periods in 2019. The effective income tax rate for the six months ended June 30, 2020 primarily reflects the favorable impact of the 2019 net operating loss (“NOL”), which is allowed to be carried back up to five years as a result of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted on March 27, 2020. Under the CARES Act, the Company’s NOL generated in 2019 may be carried back to tax years when the federal statutory tax rate was 35% rather than the current rate of 21%, consequently generating a larger tax benefit from the NOL due to the enactment of the CARES Act. The favorable impact resulting from the enactment of the CARES Act was partially offset by the unfavorable impact of the vesting of restricted stock units for which a large portion of the share-based compensation expense recognized in prior periods will not be deductible for income tax purposes. The Company’s provisions for income taxes and effective tax rates for the 2019 periods were significantly impacted by the goodwill impairment charge. For the three months ended June 30, 2019, the Company recognized a tax benefit of $42.9 million on a loss before income taxes of $358.3 million. The lower effective tax rates in the 2019 periods primarily resulted from the $379.9 million goodwill impairment charge discussed above of which approximately $209.5 million was not deductible for income tax purposes. The Company recognized a tax benefit totaling $50.4 million as a result of the impairment charge. The adjusted effective income tax rates, which exclude the tax benefit resulting from the goodwill impairment charge, were 34.7% and 34.0%, respectively, for the three and six months ended June 30, 2019 and primarily reflected the unfavorable impact of expired stock options for which the share-based compensation expense recognized in prior periods will not be deductible for income taxes. For a further discussion of income taxes, refer to Note 7 of the Notes to Condensed Consolidated Financial Statements.
Liquidity and Capital Resources
Liquidity is provided by available cash and cash equivalents, cash generated from operations, credit facilities and access to capital markets. We have a committed line of credit totaling $350 million, which may be used for revolving loans, letters of credit and/or general purposes. We believe that cash generated from operations, along with our unused credit capacity of $250 million and available cash balances as of June 30, 2020, will be sufficient to fund any working capital needs and debt maturities for the next 12 months, provided that we are not adversely impacted by unanticipated future events, including material increases in the negative impact of the COVID-19 pandemic as discussed in COVID-19 Update above. In addition, we expect that liquidity will continue to be positively impacted in 2020 by improved cash flow generation from project execution activities, settlements of disputed matters and certain provisions of the CARES Act, which enable the Company to accelerate the collection of tax refunds associated with the 2019 NOL carryback and allow the deferral of certain 2020 Social Security payroll tax liabilities until the end of 2021 and 2022. For a discussion of our 2017 Credit Facility and our Convertible Notes, see the section entitled Debt below.
Cash and Working Capital
Cash and cash equivalents were $182.6 million as of June 30, 2020 compared to $193.7 million as of December 31, 2019. Cash immediately available for general corporate purposes was $57.7 million and $43.8 million as of June 30, 2020 and December 31, 2019, respectively, with the remainder being amounts held by our consolidated joint ventures and also our proportionate share of cash held by our unconsolidated joint ventures. Cash held by our joint ventures was available only for joint venture-related uses, including distributions to joint venture partners. In addition, our restricted cash and restricted investments, held primarily to secure insurance-related contingent obligations, totaled $84.3 million as of June 30, 2020 compared to $79.4 million as of December 31, 2019.
During the six months ended June 30, 2020, net cash provided by operating activities was $58.2 million (with $92.2 million provided in the second quarter) due primarily to cash generated from earnings sources, partially offset by investment in working capital. In the second quarter of 2020, strong cash contributions associated with increased project execution activities on certain, higher-margin projects with favorable billing terms, driven by the Company’s near-record backlog at the end of 2019, were enhanced by the resolution and collection of approximately $40 million of disputed balances and a modest decrease in working capital. For the first half of 2020, the $58.2 million cash provided by operating activities resulted from the strong cash contributions associated with the increased project execution activities mentioned above and the resolution and collection of approximately $40 million of disputed balances noted above, which more than offset an increase of $68.5 million in investment in working capital. The increase in working
capital for the first six months of 2020 primarily reflects an increase in accounts receivable due to timing of collections, partially offset by increases in billings in excess of costs and estimated earnings (“BIE”) and accounts payable due to timing of payments to suppliers and subcontractors. During the six months ended June 30, 2019, net cash used in operating activities was $111.5 million due primarily to investments in project working capital that exceeded cash generated from earnings sources. The change in working capital primarily resulted from an increase in accounts receivable due to timing of collections.
Cash flow from operating activities increased $169.7 million when comparing the first six months of 2020 with the same period of 2019. The substantial increase in cash from operating activities in the first half of 2020 compared to 2019 reflects the significant increase in cash from earnings sources as well as a considerable reduction in investment in working capital as a result of improved collections associated with substantial growth in project billings and, to a lesser degree, increases in accounts payable and accrual balances due to the increased project activity.
Cash used for investing activities during the first six months of 2020 and 2019 was $32.6 million and $41.2 million, respectively, primarily due to the acquisition of property and equipment for projects.
For the first six months of 2020, net cash used in financing activities was $36.2 million, which was primarily driven by $30.9 million of cash distributions to noncontrolling interests and a $4.3 million net repayment of borrowings. Net cash provided by financing activities for the comparable period in 2019 was $187.5 million, which was primarily driven by increased net borrowings of $189.0 million.
At June 30, 2020, we had working capital of $1.3 billion, a ratio of current assets to current liabilities of 1.50 and a ratio of debt to equity of 0.57, compared to working capital of $1.4 billion, a ratio of current assets to current liabilities of 1.66 and a ratio of debt to equity of 0.58 at December 31, 2019.
Debt
Summarized below are the key terms of the 2017 Credit Facility as of June 30, 2020. For additional information regarding our outstanding debt, refer to Note 9 of the Notes to Condensed Consolidated Financial Statements, as applicable.
2017 Credit Facility
On April 20, 2017, we entered into a credit agreement (the “2017 Credit Facility”) with SunTrust Bank, now known as Truist Bank, as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2017 Credit Facility provides for a $350 million revolving credit facility (the “2017 Revolver”) and a sublimit for the issuance of letters of credit and swingline loans up to the aggregate amount of $150 million and $10 million, respectively, both maturing on April 20, 2022 unless any of the Convertible Notes are outstanding on December 17, 2020, in which case all such borrowings will mature on December 17, 2020 (the “spring-forward provision”), provided however (i) if the Convertible Notes are refinanced in full with the proceeds of permitted refinancing indebtedness in accordance with the terms of the 2017 Credit Facility, the maturity date for the 2017 Credit Facility will remain April 20, 2022 and (ii) if the Company issues “New Convertible Notes” (as defined in the 2017 Credit Facility) and retires the Convertible Notes in full, the maturity date for the 2017 Credit Facility will be the earlier of (x) April 20, 2022 or (y) 90 days prior to the maturity date for such New Convertible Notes. The 2017 Credit Facility also permits additional borrowings in an aggregate amount of $150 million, which can be in the form of increased capacity on the 2017 Revolver or the establishment of one or more term loans. On May 7, 2019, certain provisions of the 2017 Credit Facility were amended, including setting the maximum leverage ratio at 3.50:1.00. For additional information regarding the terms of our 2017 Credit Facility, refer to Note 9 of the Notes to Condensed Consolidated Financial Statements.
As a result of the spring-forward provision mentioned above, the facility will mature on December 17, 2020 if the Convertible Notes remain outstanding at that time. The Company does not have call rights that allow it to unilaterally redeem the Convertible Notes. Due to the spring-forward provision in the 2017 Credit Facility, all borrowings under the facility, as well as the outstanding balance for the Convertible Notes due June 15, 2021, are included in “Current maturities of long-term debt” on the Condensed Consolidated Balance Sheet as of June 30, 2020. The Company continues to evaluate options to address the spring-forward provision and refinancing or retirement of the outstanding Convertible Notes. New credit arrangements are expected to be finalized in the third quarter of 2020.
The table below presents our actual and required consolidated fixed charge coverage ratio and consolidated leverage ratio under the 2017 Credit Facility for the period, which are calculated on a rolling four-quarter basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended June 30, 2020 |
||
|
|
|
Actual |
|
Required |
|
Fixed charge coverage ratio |
|
4.90 to 1.00 |
|
> or = 1.25 : 1.00 |
|
Leverage ratio |
|
2.33 to 1.00 |
|
< or = 3.50 : 1.00 |
As of June 30, 2020, we were in compliance and expect to continue to be in compliance with the covenants under the 2017 Credit Facility.
Contractual Obligations
There have been no material changes in our contractual obligations from those described in our Annual Report on Form 10-K for the year ended December 31, 2019.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. Our critical accounting policies are also identified and discussed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a detailed discussion of our accounting policies related to goodwill.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in our exposure to market risk from that described in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2019.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (a) were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. – OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of our business, we are involved in various legal proceedings. We disclose information about certain pending legal proceedings pursuant to SEC rules and as we otherwise determine to be appropriate. For information on such pending matters, see Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2019, updated by Note 11 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
The risk factor discussed below is intended to supplement the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019. It updates and replaces the risk factor previously disclosed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business, financial condition and results of operations.
The World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. Government declared a national emergency in March 2020. The COVID-19 pandemic has created volatility, uncertainty and economic disruption for the Company, our customers, subcontractors and suppliers, and the markets in which we do business. The scope and impact of the COVID-19 pandemic continues to evolve. Extraordinary and wide-ranging actions have been taken by international, federal, state and local public health and governmental authorities to contain and combat the spread of COVID-19, including stay-at-home or shelter-in-place orders, social distancing measures and travel restrictions for individuals and orders for many businesses to cease or curtail normal operations unless their work is deemed essential or critical.
While we have not experienced project cancellations as a result of the COVID-19 pandemic, we have experienced disruptions to our business operations as the pandemic has spread through the geographies where we do business. For example, beginning in mid-March of 2020, work on some non-essential construction projects was suspended or curtailed by certain customers, primarily in our Building and Specialty Contractors segments, though the vast majority of our projects in the Civil segment have been designated as essential business, allowing us to continue our work on those projects. In addition, we have modified certain business and workforce practices and implemented new protocols to promote social distancing and enhance health and safety measures on our projects and in our offices to conform to regulatory requirements and best practices encouraged by governmental and regulatory authorities, all of which has negatively affected our operations and resulted in increases in operating expenses. We have also experienced absenteeism due to illness, quarantine or fear by our employees or those of our subcontractors on certain projects, which has resulted in some disruption of our work. The COVID-19 impacts to date have been primarily productivity inefficiencies due to project suspensions or absenteeism on certain projects, as well as additional costs associated with the new health and safety measures implemented in response to the pandemic. Any ongoing project suspensions, personnel absenteeism, or reduced work schedules or shifts required to comply with quarantines or other social distancing measures could continue to adversely affect our operations. In addition, as a result of COVID-19 containment efforts, we have experienced delays in certain bidding activities and also in legal proceedings and settlement discussions where we have claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price. Consequently, our ability to resolve and recover on these types of claims may be delayed, which may adversely affect our liquidity and financial results.
It remains too early to assess the full impact that the COVID-19 pandemic, and the actions taken in response to it, will have on our employees, our operating segments and practices, our customers, subcontractors and suppliers, and the regions that we serve, or on our financial condition and results of operations as a whole. The full impact depends on many factors that remain uncertain and subject to ongoing volatility, or that are not yet identifiable, and in many cases are out of our control. These factors could include, among other things: (1) the duration of the COVID-19 pandemic and the types and magnitude of adverse impacts on the U.S. and global economies; (2) the health and welfare of our employees, and those of our customers, subcontractors and suppliers; (3) evolving business and government actions in response to the pandemic, including stay-at-home measures, changes to what are considered “essential” businesses, social distancing measures, travel bans and additional health and safety requirements that we may be required to observe in order to continue working on our projects; (4) the varying impact that the pandemic may have on industries we serve and on government spending for infrastructure projects, including reduced government spending on infrastructure as a result of lower revenues from taxes, tolls and fares; (5) the response of our customers or prospective customers to the pandemic, including further delays, stoppages or terminations of existing projects or potential new awards; (6) increases in our receivables if our customers fail to pay, delay making payments, request financial concessions or if we experience delays in resolving claims and disputes (e.g., further delays in court proceedings or settlement discussions); (7) limitations and higher costs associated with obtaining financing; (8) potential challenges with suppliers that could limit the availability or cost of materials; (9) potential interruptions to our information systems and technology or breaches in our data security due to increasing use of remote communications and access; and (10) the timing of finding effective treatments, a vaccine or a cure for COVID-19. Such events may result in fewer or delayed project bidding opportunities or additional or further delays on existing projects.
Any of these events or impacts we have experienced or identified could cause or contribute to the risks and uncertainties facing the Company and our customers and could materially and adversely affect our business or portions thereof, and our financial condition and results of operations. The COVID-19 pandemic, and the volatile economic conditions stemming from the pandemic, as well as reactions to future pandemics or resurgences of COVID-19, could also aggravate or heighten the risks posed by other risk factors that we identify in our Annual Report on Form 10-K for the year ended December 31, 2019, which in turn could materially and adversely affect our business, financial condition and results of operations. There may be other adverse consequences to our business, financial condition and results of operations from the spread of COVID-19 that are not presently known or that have not yet become apparent.
As a result, we cannot assure you that if COVID-19 continues to spread, it would not have a further adverse impact on our business, financial condition and results of operations.
Item 4. Mine Safety Disclosures
Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires domestic mine operators to disclose violations and orders issued under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) by the federal Mine Safety and Health Administration. We do not act as the owner of any mines but we may act as a mining operator as defined under the Mine Act where we may be an independent contractor performing services or construction of such mine.
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95.
Item 5. Other Information
None.
Item 6. Exhibits
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Exhibits |
Description |
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3.1 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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95 |
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101.INS |
XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
XBRL Taxonomy Extension Schema Document. |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document. |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document. |
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104 |
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL (included as Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Tutor Perini Corporation |
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Dated: July 29, 2020 |
By: |
/s/ Gary G. Smalley |
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Gary G. Smalley |
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Executive Vice President and Chief Financial Officer |
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43
TUTOR PERINI CORPORATION
AMENDED AND RESTATED ARTICLES OF ORGANIZATION
(as filed on July 8, 2020)
Article I
The name by which the corporation shall be known is: TUTOR PERINI CORPORATION
Article II
The purposes for which the corporation is formed are as follows:
To carry on a general contracting and construction business; to carry on a general mining business; to carry on a general business with respect to oil, gas and other natural resources; to carry on a general real estate development and operations business; to carry on a general business of promoting, conducting or producing any one or more lawful athletic or amusement activities and exhibitions; to carry on a general business of manufacturing or otherwise producing, acquiring, preparing for market, buying and selling, dealing in and with and disposing of any and all kinds of construction, sporting and amusement equipment, materials and supplies and any and all products and by-products thereof, any and all ingredients, supplies and items in any stage of production, used or useful in combination with, in substitution for or otherwise in connection with or of which any one or more such products, by-products, ingredients, supplies or items form or are suitable to form, a component part and all related machinery, appliances, apparatus and tools; to acquire, hold, use and dispose of property of whatever kind and wherever situated, and rights and interests therein, including going enterprises and the acquisition of interests in and obligations of other concerns (wherever and however organized) or of individuals, and while the owner thereof to exercise all the rights, powers and privileges of ownership in the same manner and to the same extent that an individual might; to discover, invent or acquire rights and interests in inventions, designs, patents, patent rights and licenses, trademarks, trade names, copyrights and trade secrets in any field, whether or not cognate to any other activity of the corporation and to hold, use, sell, license the use of or otherwise utilize, deal in or dispose of the same; to lend money, credit or security to, to guarantee or assume obligations of and to aid in any other manner other concerns (wherever and however organized) or individuals, any obligation of which or any interest in which is held by this corporation or in the affairs or prosperity of which this corporation has a lawful interest, and to do all acts and things designed to protect, improve or enhance the value of any such obligation or interest; to join with others in any enterprise conducive to the success of the corporation, in such manner and on such terms and conditions as may be agreed upon; and in general, whether as principal or as agent or contractor for others and in any manner, to do every act and thing and to carry on any and all businesses and activities in any way connected with any of the foregoing which may lawfully be done or carried on by business corporations wherever such one or more businesses or activities may be so done and to exercise all the powers conferred by the laws of The Commonwealth of Massachusetts upon business corporations, provided, however, that the corporation is not organized for any purpose which prevents the provisions of Chapter 156 B of the General Laws of said Commonwealth and acts in amendment thereof and in addition thereto, from being applicable to it.
Article III
The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue is as follows:
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WITHOUT PAR VALUE |
WITH PAR VALUE |
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TYPE |
NUMBER OF SHARES |
TYPE |
NUMBER OF SHARES |
PAR VALUE |
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Common |
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Common |
112,500,000 |
$1.00 |
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Preferred |
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Preferred |
1,000,000 |
$1.00 |
Article IV
If more than one class is authorized, a description of each of the different classes of stock with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each class thereof and any series now established:
Two classes of stock are authorized, Common Stock having a par value of $1.00 per share and Preferred Stock having a par value of $1.00 per share. Stock of any class or series authorized pursuant hereto may be issued from time to time by authority of the Board of Directors for such consideration as from time to time may be fixed by vote of the Board of Directors.
A. The Preferred Stock may consist of one or more series. The Board of Directors may, from time to time, establish and designate the different series and the variations in the relative rights and preferences as between the different series as provided in Section II hereof, but in all other respects all shares of the Preferred Stock shall be identical. In the event that at any time the Board of Directors shall have established and designated one or more series of Preferred Stock consisting of a number of shares less than all of the authorized number of shares of Preferred Stock, the remaining authorized shares of Preferred Stock shall be deemed to be shares of an undesignated series of Preferred Stock until designated by the Board of Directors as being a part of a series previously established or a new series then being established by the Board of Directors.
B. Subject to the provisions of this Description of Classes of Stock, the Board of Directors is authorized to establish one or more series of Preferred Stock and, to the extent now or hereafter permitted by the laws of the Commonwealth of Massachusetts, to fix and determine the preferences, voting powers, qualifications and special or relative rights or privileges of each series including, but not limited to:
(1) the number of shares to constitute such series and the distinctive designation thereof;
(2) the dividend rate on the shares of such series and the preferences, if any, and the special and relative rights of such shares of such series as to dividend;
(3) whether or not the shares of such series shall be redeemable, and, if redeemable, the price, terms and manner of redemption;
(4) the preferences, if any, and the special and relative rights of the shares of such series upon liquidation of the corporation;
(5) whether or not the shares of such series shall be subject to the operation of a sinking or purchase fund and, if so, the terms and provisions of such fund;
(6) whether or not the shares of such series shall be convertible into shares of any other class or of any other series of the same or any other class of stock of the corporation and, if so, the conversion price or ratio and other conversion rights;
(7) the conditions under which the shares of such series shall have separate voting rights or no voting rights; and
(8) such other designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such series to the full extent now and hereafter permitted by the laws of the Commonwealth of Massachusetts.
Notwithstanding the fixing of the number of shares constituting a particular series, the Board of Directors may at any time authorize the issuance of additional shares of the same series.
C. Holders of Preferred Stock shall be entitled to receive, when and as delivered by the Board of Directors, but only out of funds legally available for the payment of dividends, cash dividends at the rates fixed by the Board of Directors for the respective series, payable on such dates in each year as the Board of Directors shall fix for the respective series as provided in Section II (hereinafter referred to as "dividend dates"). Until all accrued dividends on each series of Preferred Stock shall have been paid through the last preceding dividend date on each such series, no dividend or distribution shall be made to holders of Common Stock other than a dividend payable in Common Stock of the corporation. Dividends on shares of any cumulative series of Preferred Stock shall accumulate from and after the day on which such shares are issued, but arrearage in the payment thereof shall not bear interest. Nothing herein contained shall be deemed to limit the right of the corporation to purchase or otherwise acquire at any time any shares of its capital stock.
For purposes of this Description of Class of Stock, the amount of dividends "accrued" on any shares of any cumulative series of Preferred Stock as at any
dividend date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such dividend date, whether or not earned or declared. The amount of dividends "accrued" on any noncumulative series of Preferred Stock shall mean only those dividends declared by the Board of Directors, unless otherwise specified for such series by the Board of Directors pursuant to Section II.
D. Upon the voluntary or involuntary liquidation of the corporation, before any payment or distribution of the assets of the corporation shall be made to or set apart for any other class of stock, the holders of Preferred Stock shall be entitled to payment of the amount of the preference payable upon such liquidation of the corporation fixed by the Board of Directors for the respective series as provided in Section II. If, upon any such liquidation, the assets of the corporation shall be insufficient to pay in full to the holders of the Preferred Stock the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among the holders of each series of Preferred Stock ratably in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full. The voluntary sale, conveyance, exchange or transfer of all or substantially all of the property and assets of the corporation, the merger or consolidation of the corporation into or with any other corporation, or the merger of any other corporation into it, shall not be deemed to be a liquidation of the corporation for the purpose of this Section IV.
E. Any shares of Preferred Stock which shall at any time have been redeemed or which shall at any time have been surrendered for conversion or exchange or for cancellation, pursuant to any sinking or purchase fund provisions with respect to any series of Preferred Stock, shall be retired and shall thereafter have the status of authorized and unissued shares of Preferred Stock undesignated as to series.
F. The Common Stock shall have exclusive voting power except as required by law and except to the extent the Board of Directors shall, at the time any series of Preferred Stock is established, determine that the shares of such series shall vote (i) together as a single class with shares of Common Stock and/or with shares of Preferred Stock (or one or more other series thereof) on all or certain matters presented to the stockholders and/or upon the occurrence of any specified event or condition, and/or (ii) exclusively on certain matters or, upon the occurrence of any specified even or condition, on all or certain matters. The Board of Directors, in establishing a series of Preferred Stock and fixing the voting rights thereof, may determine that the voting power of each share of such series may be greater or less than the voting power of each share of the Common Stock or of other series of Preferred Stock notwithstanding that the shares of such series of Preferred Stock may vote as a single class with the shares of other series of Preferred Stock and/or with the shares of Common Stock.
Article V
The restrictions, if any, imposed by the articles of organization upon the transfer of shares of stock of any class are as follows:
None.
Article VI
Other lawful provisions for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders are as follows:
A. The directors may make, amend or repeal the by-laws in whole or in part, except with respect to any provision thereof which by law or the by-laws requires action by the stockholders.
B. Meetings of the stockholders may be held anywhere in the United States.
C. Except as specifically authorized by statute, no stockholder shall have any right to examine any property or any books, accounts or other writings of the corporation if there is reasonable ground for belief that such examination will for any reason be adverse to the interests of the corporation, and a vote of the board of directors refusing permission to make such examination and setting forth that in the opinion of the board of directors such examination would be adverse to the interests of the corporation shall be prima facie evidence that such examination would be adverse to the interests of the corporation. Every such examination shall be subject to such reasonable regulations as the board of directors may establish in regard thereto.
D. The board of directors may specify the manner in which the accounts of the corporation shall be kept and may determine what constitutes net earnings, profits and surplus, what amounts, if any, shall be reserved for any corporate purpose, and what amounts, if any, shall be declared as dividends. Unless the board of directors otherwise specifies, the excess of the consideration of any share of its capital stock with par value issued by it over such par value shall be paid in surplus. All surplus shall be available for any corporate purpose, including the payment of dividends.
E. The corporation may purchase or otherwise acquire, hold, sell or otherwise dispose of shares of its own capital stock, and such purchase or holding shall not be deemed a reduction of its capital stock. The corporation may reduce its capital stock in any manner authorized by law. Such reduction may be effected by the cancellation and retirement of any shares of capital stock held by it. Upon any reduction of capital or capital stock, no stockholder shall have any right to demand any distribution from the corporation, except as and to the extent that the stockholders shall so have provided at the time of authorizing such reduction.
F. Each director and officer of the corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account of the
corporation, reports made to the corporation by any of its officers or employees or by counsel, accountants, appraisers or other experts or consultants selected with reasonable care by the directors, or upon other records of the corporation.
G. The directors shall have the power to fix from time to time their compensation.
H. The corporation may enter into contracts and otherwise transact business as vendor, purchaser or otherwise with its directors, officers and stockholders and with corporations, joint stock companies, trusts, firms and associations in which they are or may be or become interested as directors, officers, shareholders, members, trustees, beneficiaries or otherwise as freely as though such adverse interest did not exist even though the vote, action or presence of such director, officer or stockholder may be necessary to obligate the corporation upon such contract or transaction; and no such contract or transaction shall be avoided and no such director, officer or stockholder shall be held liable to account to the corporation or to any creditor or stockholder of the corporation for any profit or benefit realized by him through any such contract or transaction by reason of such adverse interest nor by reason of any fiduciary relationship of such director, officer or stockholder to the corporation arising out of such office or stock ownership; provided (in the case of directors and officers but not in the case of any stockholder who is not a director or officer of the corporation) the nature of the interest of such director or officer, though not necessarily the details or extent thereof, be known by or disclosed to the directors. Ownership of beneficial interest in a minority of the stock or securities of another corporation, joint stock company, trust, firm or association shall not be deemed to constitute an interest adverse to this corporation in such other corporation, joint stock company, trust, firm or association and need not be disclosed. A general notice that a director or officer of the corporation is interested in any corporation, joint stock company, trust, firm or association shall be a sufficient disclosure as to such director or officer with respect to all contracts and transactions with that corporation, joint stock company, trust, firm, or association. In any event the authorizing or ratifying vote of a majority of the capital stock of the corporation outstanding and entitled to vote passed at a meeting duly called and held for the purposes shall validate any such contract or transaction as against all stockholders of the corporation, whether of record or not at the time of such vote, and as against all creditors and other claimants, under the corporation, and no contract or transaction shall be avoided by reason of any provision of this paragraph which would be valid but for these provisions.
I. The terms and conditions upon which a sale or exchange of all the property and assets, including the good will of the corporation, or any part thereof, is voted may include the payment therefor in whole or in part in shares, notes, bonds or other certificates of interest or indebtedness of any voluntary association, trust, joint stock company or corporation. Such vote or a subsequent vote may in the event of or in contemplation of proceedings for the dissolution of the corporation also provide, subject to the rights of creditors and preferred stockholders, for the distribution pro rata among the stockholders of the corporation, of the proceeds of any such sale or
exchange, whether such proceeds be in cash or in securities as aforesaid (at values to be determined by the board of directors).
J. No director of this corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability; provided, however, that this Article shall not eliminate or limit any liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Sections 61 or 62 of the Massachusetts Business Corporation Law, or (iv) with respect to any transaction from which the director derived an improper personal benefit.
No amendment or repeal of this Article shall adversely affect the rights and protection afforded to a director of this corporation under this Article for acts or omissions occurring while this Article is in effect.
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Ronald N. Tutor, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of Tutor Perini Corporation (the “registrant”); |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: July 29, 2020 |
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/s/ Ronald N. Tutor |
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Ronald N. Tutor |
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Chairman and Chief Executive Officer |
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Gary G. Smalley, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of Tutor Perini Corporation (the “registrant”); |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: July 29, 2020 |
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/s/ Gary G. Smalley |
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Gary G. Smalley |
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Executive Vice President and Chief Financial Officer |
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Tutor Perini Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald N. Tutor, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: July 29, 2020 |
/s/ Ronald N. Tutor |
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Ronald N. Tutor |
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Chairman and Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to Tutor Perini Corporation and will be retained by Tutor Perini Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Tutor Perini Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary G. Smalley, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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(1) |
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: July 29, 2020 |
/s/ Gary G. Smalley |
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Gary G. Smalley |
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Executive Vice President and Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to Tutor Perini Corporation and will be retained by Tutor Perini Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
MINE SAFETY DISCLOSURE
Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires domestic mine operators to disclose violations and orders issued under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) by the federal Mine Safety and Health Administration (“MSHA”). We do not act as the owner of any mines but we may act as a mining operator as defined under the Mine Act where we may be an independent contractor performing services or construction of such mine. Due to timing and other factors, the data below may not agree with the mine data retrieval system maintained by MSHA.
The following table provides information for the quarter ended June 30, 2020.
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(1) |
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United States mine. |
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(2) |
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The total number of violations received from MSHA under §104 of the Mine Act, which includes citations for health or safety standards that could significantly and substantially contribute to a serious injury if left unabated. |
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(3) |
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The total number of orders issued by MSHA under §104(b) of the Mine Act, which represents a failure to abate a citation under §104(a) within the period of time prescribed by MSHA. |
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(4) |
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The total number of citations and orders issued by MSHA under §104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards. |
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(5) |
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The total number of flagrant violations issued by MSHA under §110(b)(2) of the Mine Act. |
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(6) |
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The total number of orders issued by MSHA under §107(a) of the Mine Act for situations in which MSHA determined an imminent danger existed. |
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(7) |
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A written notice from the MSHA regarding a pattern of violations, or a potential to have such pattern under §104(e) of the Mine Act. |