Tutor Perini Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Comparisons are with the three months ended March 31, 2021, unless otherwise noted. Amounts are in U.S. dollars.
Business context and key financial metrics
Tutor Perini provides general contracting, project management and self-performed construction services through its Civil, Building and Specialty Contractors segments.
| Metric | Q1 2022 | Q1 2021 / prior balance |
|---|---|---|
| Revenue | $952.2 million | $1,207.6 million |
| Gross profit / gross margin | $50.3 million / 5.3% | $110.5 million / 9.2% |
| Construction operations income (loss) | ($9.9) million | $49.7 million |
| Net income (loss) attributable to Tutor Perini | ($21.6) million | $16.0 million |
| Diluted EPS | ($0.42) | $0.31 |
| Operating cash flow | $120.7 million | ($46.7) million |
| Cash and cash equivalents at period end | $316.5 million | $202.2 million at Dec. 31, 2021 |
| Total debt at period end | $1,003.1 million | $993.7 million at Dec. 31, 2021 |
| Working capital / current ratio | $2.1 billion / 2.12 | $2.1 billion / 2.17 at Dec. 31, 2021 |
| Backlog at period end | $8.28 billion | $8.24 billion at Dec. 31, 2021 |
Cash immediately available for general corporate purposes was $75.8 million; much of reported cash was held by joint ventures and was available only for joint-venture purposes. The company had $134 million available on its $175 million revolving facility and reported compliance with its debt covenants. The reported first-lien net leverage ratio was 1.35, versus a maximum of 2.25.
Material changes versus the prior period
- Revenue declined about 21%, reflecting lower execution on projects completed or nearing completion, lower activity in the Northeast and pandemic-related award delays.
- Results included a $25.5 million pretax, noncash charge following an adverse ruling on a Civil bridge-project dispute in New York.
- A further $17.6 million of current-period earnings impact arose from negotiated lower-margin, lower-risk change orders on a California mass-transit project. Management expects this temporary impact to reverse over the project’s remaining life.
- Civil revenue fell 18% and the segment recorded a $1.0 million operating loss; Building revenue fell 19%, while operating income was $9.5 million; Specialty Contractors revenue fell 29% and the segment recorded a $3.9 million operating loss.
- Operating cash flow improved by $167.5 million year over year, which management attributed principally to better collections, lower investment in project working capital and resolution of certain disputed change orders.
- New awards were $996 million, compared with $959 million a year earlier. Backlog was broadly steady sequentially; segment backlog was $4.61 billion Civil, $2.30 billion Building and $1.37 billion Specialty Contractors.
Outlook, management commentary and risks
- The filing provides no specific numeric earnings or revenue guidance. Management said it anticipates improved operating cash generation for the remainder of 2022, based on expected collections and resolution of claims and change orders.
- Management described the multi-year growth outlook as favorable, citing long-term public infrastructure plans and the Infrastructure Investment and Jobs Act. It cautioned that award timing, project ramp-up and completions could delay or limit revenue growth; expected infrastructure funding had not yet fully flowed to customers.
- COVID-19 effects included labor shortages, lower productivity, project delays, slower dispute resolution and collection delays. Management said these effects had begun to moderate but remained difficult to predict.
- Contract estimates and recoveries are significant areas of uncertainty: at March 31, contract assets included $788.9 million of claims and $482.9 million of unapproved change orders. These amounts depend on customer agreement or dispute resolution and may require litigation.
- In the Alaskan Way Viaduct matter, the company’s 45% share of a $57.2 million judgment against its joint venture could require a $25.7 million cash payment if the adverse verdict is upheld on appeal. The company also records an estimate of probable recovery from insurers.
- In the George Washington Bridge Bus Station matter, a court dismissed the company’s claim against the Port Authority on statutory notice grounds on April 11, 2022; the company intends to appeal. Other claims and proceedings remain pending.
- Management cited risks including inflation, contract cost and schedule estimates, litigation outcomes and recoveries, customer funding and payment delays, labor availability, interest rates, project awards, and joint-venture obligations. No material changes to the risk factors in the 2021 Form 10-K were reported.
Important facts for investors to verify
- Whether the $25.5 million bridge-dispute charge and the $17.6 million mass-transit project impact develop as management describes, including the expected reversal of the latter.
- Recoverability and collection timing of claims, unapproved change orders, retention and other contract assets, and the effect of any settlements on cash flow.
- Outcomes and potential cash exposure from the Alaskan Way Viaduct appeal and the George Washington Bridge Bus Station proceedings.
- How much reported cash is accessible for corporate purposes versus restricted to joint-venture use, and whether covenant compliance and revolving-credit availability are maintained.
- Whether new awards and infrastructure funding convert into project starts and revenue quickly enough to offset completed or declining projects.