Business Context and Reporting Period
Company: Perini Corporation (Tutor Perini Corp)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 2007
Overview: Perini is a leading construction services company operating through three segments: Building, Civil, and Management Services. The company focuses on large, complex projects in hospitality, gaming, public works, and government sectors.
Key Financial Metrics
All figures in thousands, except per share data.
| Metric | Three Months Ended June 30, 2007 |
Six Months Ended June 30, 2007 |
|---|---|---|
| Revenues | $1,151,620 | $2,138,976 |
| Gross Profit | $64,902 | $122,799 |
| Income from Construction Operations | $40,721 | $73,461 |
| Net Income | $27,578 | $50,231 |
| Diluted EPS | $1.01 | $1.84 |
| Cash and Cash Equivalents | $342,971 (Balance Sheet) | $342,971 (Balance Sheet) |
| Operating Cash Flow (6mo) | N/A | $150,406 |
| Total Debt (Current + Long-term) | $25,551 | $25,551 |
| Working Capital | $235,843 | $235,843 |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 61.6% ($439.1 million) for the quarter and 61.4% ($813.8 million) for the six months compared to 2006. This was driven primarily by the Building segment, which saw a 79.4% quarterly increase due to the conversion of backlog in the hospitality and gaming markets.
- Profitability Surge: Net income increased 505% for the quarter and 295% for the six months. Income from construction operations rose 378.8% for the quarter.
- Segment Performance:
- Building: Strong revenue and profit growth.
- Civil: Revenues declined 11.9% (quarterly) due to project timing; income turned to a loss of $2.0 million due to downward profit adjustments on New York region projects.
- Management Services: Revenues declined 33.9% (quarterly) following the completion of an Exelon nuclear plant contract, but income increased 263.6% due to favorable performance on work in Iraq.
- Expense Reduction: Corporate general and administrative expenses decreased significantly, aided by lower stock-based compensation expense compared to the prior year.
- Debt Reduction: Total debt decreased by approximately $23.2 million year-to-date following the full repayment of a term loan in February 2007.
Guidance, Outlook, and Risks
- Backlog: Total backlog of uncompleted work was approximately $8.7 billion at June 30, 2007, up from $8.5 billion at year-end 2006. New awards in the quarter totaled approximately $1.3 billion.
- Liquidity: The company entered into an Amended and Restated Credit Agreement in February 2007, providing a $125 million revolving facility (expandable to $175 million). As of June 30, 2007, $113.5 million was available to borrow.
- Legal Proceedings & Contingencies:
- Los Angeles MTA Matter: A joint venture dispute involving False Claims Act allegations. A jury awarded damages in December 2006, but the case is subject to appeal and further proceedings. No provision for loss has been recorded as the ultimate impact is indeterminable.
- Siemens Transportation Matter: Arbitration disputes were settled in June 2007 with no significant impact on results.
- Central Artery/Tunnel Project: The company is pursuing claims totaling approximately $104 million (exclusive of interest) against the Massachusetts Highway Department. Management estimates cost recovery is included in revenue recorded to date.
- U.S. Attorney Investigation: The company is a "subject" in an investigation regarding contracting with disadvantaged businesses in NYC. The U.S. Attorney's Office is considering a civil settlement; the potential impact cannot be evaluated.
- Forward-Looking Risks: Risks include the ability to convert backlog to revenue, project delays, litigation outcomes, and changes in government appropriations.
Investor Verification Checklist
- Backlog Conversion: Verify the sustainability of revenue growth as the company converts its $8.7 billion backlog, particularly in the Building segment.
- Civil Segment Profitability: Monitor the Civil segment for continued profit adjustments on New York region projects, which recently resulted in a loss.
- Legal Exposure: Assess the potential financial impact of the Los Angeles MTA litigation and the ongoing U.S. Attorney investigation, as no specific loss provisions have been recorded.
- Central Artery Claims: Track the status of the $104 million claim against the Massachusetts Highway Department to ensure anticipated recoveries are realized.
- Debt Covenants: Confirm continued compliance with the new credit agreement covenants, including the 2.5:1 leverage ratio and 1.5:1 fixed charge coverage ratio.