Tutor Perini Corporation — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022. Tutor Perini is a U.S.-based construction contractor operating through Civil, Building and Specialty Contractors segments. It reported work on more than 1,300 projects. All amounts below are U.S. dollars.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $3.791 billion | $4.642 billion |
| Gross profit / gross margin | $29.6 million / 0.8% | $466.4 million / 10.0% |
| Loss from construction operations | $204.8 million | Income of $226.8 million |
| Net loss attributable to Tutor Perini | $210.0 million | Net income of $91.9 million |
| Diluted loss per share | $4.09 | Diluted earnings per share of $1.79 |
| Cash from operating activities | $207.0 million | Cash used of $148.5 million |
| Capital expenditures | $59.8 million | $38.6 million |
| Backlog at year-end | $7.929 billion | $8.236 billion |
Revenue declined approximately 18% year over year. Construction operations swung to a loss, driven by project charges, adverse legal outcomes and settlements, unapproved change orders and lower project volume. Specialty Contractors recorded a $168.0 million loss from construction operations; Civil and Building remained slightly profitable, at $21.1 million and $7.2 million, respectively.
Cash and cash equivalents were $259.4 million, but only $47.7 million was immediately available for general corporate purposes; most of the remainder was held by joint ventures for joint-venture uses. Working capital was $1.7 billion, down from $2.1 billion; the current ratio was 1.87, versus 2.17. Reported total debt was $958.4 million, including $70.3 million classified as current. The company had $175 million available under its revolving facility and expected a $44.0 million Term Loan B prepayment in Q2 2023.
Material changes versus FY2021
- Revenue fell by $851.1 million, reflecting reduced activity on completed or near-completion projects and delays or non-awards of replacement work.
- Operating results deteriorated sharply: construction operations moved from $226.8 million of income to a $204.8 million loss, and attributable net income moved to a $210.0 million loss.
- Management cited aggregate adverse legal judgments or decisions of $147.8 million, net unfavorable settlements of $85.4 million, and net unfavorable project-estimate changes of $96.8 million. These categories should be read in context of the filing’s project-level detail and may not be additive to other described adjustments.
- Operating cash flow improved by $355.5 million, principally from working-capital movements and improved collections. Accounts receivable declined, while billings in excess of costs and estimated earnings increased.
- Backlog decreased 3.7% to $7.929 billion; 2022 new awards were $3.484 billion, compared with $4.5 billion reported for 2021.
Outlook, commentary and risks
- Management described the multiyear growth outlook as favorable and expects to pursue significant infrastructure opportunities, supported by the $1.2 trillion Bipartisan Infrastructure Law. It identified pending major projects with anticipated 2023 awards totaling more than $3 billion, while emphasizing that timing and awards are uncertain. This is not a quantified revenue or earnings forecast.
- The company estimated that approximately $4 billion, or 45%, of year-end backlog would be recognized as 2023 revenue. Backlog can be reduced, delayed or canceled and does not ensure profitability.
- Management expected strong operating cash flows to continue into 2023, based on projected project collections and resolution of claims and unapproved change orders. It also expected its shift toward faster settlements and collections—especially in New York Specialty Contractors—to support cash generation; settlements may yield less than previously estimated recoveries.
- Management changed its collections and operating approach in New York, replaced key WDF leadership, increased project selectivity and adopted risk-diversification measures. Certain settlements accelerated cash recovery but contributed to lower 2022 earnings; much of the resulting cash was expected to be collected in 2023.
- Leverage and covenant compliance are significant risks. The company required credit-agreement amendments in October 2022 and March 2023 to adjust the maximum first-lien net leverage ratio. It reported a 3.36-to-1.00 ratio at year-end against the covenant then applicable. The March 10, 2023 amendment was subsequent to fiscal year-end and established stepped-down covenant limits through 2023.
- Other principal risks include contract-cost estimation and fixed-price exposure, disputed claims and collection delays, litigation and arbitration, rising variable interest rates, labor and project-execution constraints, government funding and contract termination, and possible project delays or cancellations. The company reported $422.4 million of variable-rate borrowings at year-end.
- The filing reports effective disclosure controls and internal control over financial reporting, and the auditor issued unqualified opinions on the financial statements and internal controls. The auditor identified construction-contract revenue, receivables and contract assets and liabilities as a critical audit matter because of the significant estimation involved.
Important facts for investors to verify
- Progress and cash realization on the $2.012 billion of contract assets, including $677.4 million of claims and $601.7 million of unapproved change orders; management estimated $706.0 million of costs and estimated earnings in excess of billings would be collected beyond one year.
- Whether expected 2023 collections and settlements materialize, and how settlement proceeds compare with previously recorded recoveries.
- Updates on significant legal proceedings, including the George Washington Bridge Bus Station claims and appeals, and the remaining Alaskan Way Viaduct insurance dispute.
- New project awards, starts and backlog conversion—especially whether the anticipated large Civil awards replace revenue from projects nearing completion.
- Debt, interest expense, required principal prepayments and compliance with the amended leverage covenants as their limits step down during 2023.