TPC

Tutor Perini Corporation - Q2 2010 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2010, for Tutor Perini Corporation, a diversified general contractor and construction manager. The Company operates through three primary segments: Building, Civil, and Management Services. The reporting period reflects the Company's strategic shift toward higher-margin public works projects following the substantial completion of large hospitality and gaming projects in late 2009.

Key Financial Metrics

Note: Total Debt is the sum of Current Maturities of Long-term Debt ($31,014) and Long-term Debt ($82,939). Working Capital is Total Current Assets ($1,679,044) minus Total Current Liabilities ($1,334,333).

Material Changes vs. Prior Period

• Revenue Decline: Revenues for the six months ended June 30, 2010, decreased by 38.7% ($1.12 billion) compared to the same period in 2009. This was primarily driven by a 47.3% drop in the Building segment due to the completion of the CityCenter project in Las Vegas in December 2009.
• Civil Segment Growth: Conversely, the Civil segment saw a 72.6% revenue increase year-over-year, attributed to an increased number of public works projects under construction in the metropolitan New York area.
• Profitability: Net income for the six-month period decreased 31.1% to $53.7 million. Income from Construction Operations fell 28.8% to $90.0 million. However, operating profit margins improved in the second quarter of 2010 due to the changing mix of active projects.
• Cash Flow: Operating cash flow turned positive at $12.7 million for the six months ended June 30, 2010, compared to a negative $40.6 million in the prior year period, driven by increased volume in the Civil segment.

Outlook, Risks, and Contingencies

Backlog: The Company reported a backlog of approximately $4.3 billion as of June 30, 2010. New awards in the quarter included a $480 million courthouse in San Diego and significant infrastructure projects in New York.

Share Repurchases: The Company repurchased 617,091 shares for $11.2 million during the quarter. As of June 30, $57 million remained under the $100 million repurchase program.

Material Litigation and Contingencies:

• MGM CityCenter: The Company filed a $491 million mechanic's lien and lawsuit against MGM Mirage regarding unpaid amounts. MGM has asserted counterclaims and offsets, though the Company disputes the validity of these offsets.
• UCLA Westwood Hospital: A consolidated lawsuit involving claims of $36 million for the Company and $171 million for subcontractors against the University of California, Los Angeles. Trial is scheduled for February 2011.
• Fontainebleau: Following the bankruptcy of the Fontainebleau project, the Company obtained a default judgment of approximately $45 million against the general contractor, Turnberry West. Recovery depends on the distribution of proceeds from the property sale.
• Auction Rate Securities (ARS): The Company holds $100.3 million in ARS classified as long-term investments due to market liquidity constraints. A pre-tax impairment charge of $0.4 million was recorded in Q2 2010.

Investor Verification Checklist

• CityCenter Receivables: Verify the collectability of the $491 million receivable from MGM CityCenter and the status of ongoing litigation and potential offsets.
• Backlog Conversion: Monitor the rate at which the $4.3 billion backlog is converted to revenue, particularly in the Building segment which is recovering from the CityCenter completion.
• Liquidity of ARS: Assess the impact of the $100.3 million illiquid Auction Rate Securities on long-term liquidity and potential future impairment charges.
• Legal Reserves: Review the financial impact of pending litigation outcomes, specifically the UCLA Westwood and Fontainebleau matters, as final settlements may vary from current estimates.
• Debt Covenants: Confirm continued compliance with the Amended Credit Agreement covenants, particularly given the shift in project mix and revenue volatility.