Tutor Perini Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Tutor Perini is a construction and construction-management contractor operating through Civil, Building and Specialty Contractors segments. Its work includes infrastructure, public facilities and complex commercial projects.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $3.880 billion | $3.791 billion |
| Gross profit | $140.6 million | $29.6 million |
| Gross margin | 3.6% | 0.8% |
| Loss from construction operations | $114.6 million | $204.8 million |
| Net loss attributable to Tutor Perini | $171.2 million | $210.0 million |
| Diluted loss per share | $3.30 | $4.09 |
| Cash provided by operating activities | $308.5 million | $207.0 million |
| Capital expenditures | $53.0 million | $59.8 million |
| Interest expense | $85.2 million | $69.6 million |
Revenue rose about 2%, but the company remained loss-making. Segment construction results were Civil income of $198.6 million, Building loss of $91.2 million, and Specialty Contractors loss of $144.8 million. The Building segment’s 2023 loss included $72.2 million of an $83.6 million non-cash charge from an adverse legal ruling; $11.4 million of that charge affected Specialty Contractors.
Operating cash flow reached a company record, mainly reflecting lower project working-capital investment and improved collections, including collections on disputed matters. Cash and cash equivalents were $380.6 million, but only $145.1 million was immediately available for general corporate purposes; the balance was held by joint ventures for joint-venture uses. Restricted cash and investments totaled $144.4 million.
Working capital was $1.4 billion, down from $1.7 billion; the current ratio was 1.66, versus 1.87. Total reported debt was $899.7 million, including $117.4 million current, and debt-to-equity was 0.70. The company had $175 million available under its revolver and reported compliance with its leverage covenant at year-end.
Backlog and changes versus prior year
Year-end backlog increased 28% to $10.16 billion from $7.93 billion, supported by $6.11 billion of 2023 awards. Approximately $4 billion, or 40%, of year-end backlog was expected to convert to revenue in 2024. The $2.95 billion Brooklyn Jail award was the largest new award and materially increased Building backlog; the project also includes more than $630 million of Specialty Contractors work.
Backlog mix shifted: Civil was $4.24 billion, down from $4.42 billion; Building was $4.18 billion, up from $2.22 billion; and Specialty Contractors was $1.74 billion, up from $1.29 billion. State and local agencies represented 76% of backlog, and government customers overall nearly 90%. Fixed-price contracts were 56% of backlog, down from 74%, while guaranteed-maximum-price contracts rose to 36% from 14%.
Compared with 2022, revenue increased modestly and the net loss narrowed, but results were still affected by legal outcomes, settlements and project estimate revisions. Management reported $122.2 million of net unfavorable impacts from adverse legal judgments or decisions in 2023, versus $147.8 million in 2022. Settlements had a net favorable impact of $8.4 million in 2023, compared with a net unfavorable impact of $85.4 million in 2022. Other project estimate changes had an aggregate net negative impact of $117.2 million, versus $96.8 million in 2022.
Outlook, risks and unusual items
Management described the multi-year revenue outlook as favorable, citing infrastructure funding, public-agency spending plans and the $1.2 trillion Bipartisan Infrastructure Law. It expects strong operating cash flow in 2024 from project activity and anticipated collections, including resolution of claims and unapproved change orders. The filing gives no numerical revenue or earnings guidance and cautions that timing of awards, project execution and delays may affect growth. Commercial-office demand may remain pressured by remote and hybrid work, inflation and higher interest rates.
Debt refinancing is a central near-term risk. The $500 million 6.875% Senior Notes mature May 1, 2025. If they remain outstanding at specified dates, spring-forward provisions could accelerate maturities of portions of the Term Loan B and the revolver. The company said it expected to complete a refinancing by the end of April 2024, with higher interest rates likely, but gave no assurance of acceptable terms. It paid a required $91 million Term Loan B prepayment in February 2024. Variable-rate borrowings were approximately $373.5 million at year-end; the average 2023 Term Loan B and revolver rates were about 10.1% and 11.8%.
Key operating risks include estimation and recovery of claims and unapproved change orders, cost overruns on fixed-price and GMP projects, schedule and labor constraints, government funding or contract changes, and dependence on customer collections. Contract assets included $562.6 million of claims and $512.8 million of unapproved change orders; management estimated approximately $549 million of costs and estimated earnings in excess of billings would be collected beyond one year. These balances and recoveries depend on negotiation and dispute resolution.
Litigation remains material. The adverse George Washington Bridge Bus Station-related ruling caused the $83.6 million non-cash charge and closed certain recovery avenues; a separate lawsuit against individual developer owners remains pending, with management’s estimated recovery included in revenue. In the Alaskan Way Viaduct matter, the company’s 45%-owned joint venture has claims against insurers and its design firm; trials were scheduled for 2024 and 2025, respectively. The filing states management considers anticipated recovery on those claims probable, but outcomes remain uncertain.
Other notable matters include the CEO’s planned transition to Executive Chairman at the end of 2024, with a new CEO expected; management’s estimate-sensitive percentage-of-completion accounting; and the potential for higher interest costs. Management and the auditor reported effective internal control over financial reporting, and the financial statements received an unqualified audit opinion.
Most important facts for investors to verify
- Progress, terms and completion of the Senior Notes refinancing, and the effect of the spring-forward maturity provisions on liquidity.
- Whether operating cash flow and general-purpose cash remain sufficient after debt payments, distinguishing company-available cash from joint-venture and restricted balances.
- Collection and resolution of the $1.08 billion combined claims and unapproved-change-order contract assets, including balances expected to be collected beyond one year.
- Project cost estimates, legal outcomes and further adjustments, particularly in Building and Specialty Contractors and on projects with disputed change orders.
- Conversion of the expanded backlog into revenue and profit, including execution and funding of the Brooklyn Jail project and the concentration in government customers.
- Developments in the pending litigation and the timing and amount of any recoveries recorded in revenue or receivables.