Tutor Perini Corporation — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020; the filing also reports unaudited fourth-quarter results. Tutor Perini provides civil construction, building construction, and specialty contracting services. Its work is concentrated in large public infrastructure and complex building projects.
Financial performance
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $5.319 billion | $4.451 billion |
| Gross profit / margin | $486.2 million / 9.1% | $241.8 million / 5.4% |
| Income (loss) from construction operations | $262.3 million | $(365.0) million |
| Net income (loss) attributable to Tutor Perini | $108.4 million | $(387.7) million |
| Diluted EPS | $2.12 | $(7.72) |
| Net cash from operating activities | $172.8 million | $136.5 million |
| Year-end backlog | $8.346 billion | $11.221 billion |
FY2020 revenue grew 19.5%. The improvement in operating results reflected higher project activity and the absence of 2019’s $379.9 million non-cash goodwill impairment and $166.8 million SR 99 legal charge. Excluding the impairment, 2019 income from construction operations was $14.9 million; the company reported no 2020 adjustments to its non-GAAP measures. FY2020 results also included a $25.7 million favorable arbitration gain, two adverse legal or arbitration charges totaling $28.4 million in Specialty Contractors, and a $14.5 million federal tax benefit associated with CARES Act NOL carrybacks.
Fourth quarter: Revenue was $1.350 billion, versus $1.178 billion in Q4 2019. Gross profit was $132.4 million versus a $62.7 million gross loss. Income from construction operations was $74.4 million versus a $94.1 million loss; net income attributable to Tutor Perini was $35.5 million versus an $86.1 million loss. Diluted EPS was $0.69 versus $(1.71).
Liquidity and debt: Year-end current assets were $4.080 billion and current liabilities $2.264 billion, for working capital of $1.816 billion and a 1.80 current ratio. Cash and cash equivalents totaled $374.3 million, but only $210.8 million was immediately available for general corporate purposes; the balance included joint-venture cash. Restricted cash and investments totaled $156.5 million, including $69.9 million set aside to repay convertible notes. Total debt was $1.025 billion, with $100.2 million classified as current; debt-to-equity was 0.66. The $175 million revolving facility was undrawn at year-end. Management said available cash, operating cash generation, and unused credit capacity should cover working capital and debt maturities for the next 12 months, subject to adverse events.
Material changes and outlook
- Backlog fell 25.6% to $8.346 billion as revenue exceeded new awards. Awards were $2.443 billion, down from $6.375 billion in 2019. Civil represented 57% of backlog, Building 20%, and Specialty Contractors 23%; approximately $4 billion, or 47%, was expected to convert to revenue in 2021.
- COVID-19 reduced productivity, delayed or deferred work, and increased costs. Management estimated more than $50 million of incremental costs, an approximately $290 million negative revenue impact, a $21 million negative impact on income from construction operations, and a $0.41 negative impact on 2020 diluted EPS. The company is seeking customer recovery for some costs; certain relief had already been received.
- Management said growth prospects remained favorable over several years, particularly in Civil and Specialty Contractors, but warned revenue could decline in 2021. Upcoming project completions may not be offset by new work quickly enough, and pandemic-related funding and award delays remain possible. The filing gives no formal earnings or revenue guidance.
- Management cited long-term infrastructure funding measures and potential federal support as opportunities, while noting their timing and magnitude are uncertain. Government customers generated approximately 60% of revenue in each of 2018–2020.
Risks, contingencies, and unusual items
- Construction revenue and profit depend on estimates of total project costs, claims, change orders, incentives, and completion progress. At year-end, contract assets included $752.8 million of claims and $415.5 million of unapproved change orders; management estimated $756.2 million of costs and estimated earnings in excess of billings would be collected beyond one year.
- Legal outcomes and recoveries remain uncertain. The SR 99 joint venture appealed a $57.2 million verdict for WSDOT; Tutor Perini’s 45% share of the damages is $25.7 million if the verdict is upheld. The company also disclosed a federal investigation involving its Five Star Electric subsidiary for which it could not estimate a potential loss. Other significant project claims include the George Washington Bridge Bus Station dispute.
- Fixed-price work comprised 76% of year-end backlog, exposing the company to cost overruns, schedule delays, labor constraints, and unrecovered change-order costs. Backlog may be reduced or cancelled and may not yield expected margins.
- The August 2020 refinancing established a $425 million Term Loan B and a $175 million revolver, and repaid the former credit facility and most convertible notes. The remaining $69.9 million principal of convertible notes was due June 2021 and backed by restricted cash. The credit agreement is secured by substantially all relevant assets and includes leverage covenants; the company reported compliance at year-end. Interest-rate exposure and the LIBOR transition are additional risks.
- The company reported a $35.9 million unfunded defined-benefit pension obligation. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Revenue recognition and goodwill valuation were identified as critical audit matters.
Key facts for investors to verify
- Whether new awards recover after the 2020 decline and whether backlog converts on schedule, particularly the estimated $4 billion expected in 2021.
- Collection timing and recoverability of claims, unapproved change orders, retainage, and other contract assets, including the amounts expected beyond one year.
- Developments in the SR 99 appeal, Five Star investigation, and other material disputes, and their potential effects on cash and reported earnings.
- How much reported cash is usable by the parent company, and whether the company maintains liquidity and covenant compliance as debt maturities and project working-capital needs evolve.
- The extent to which COVID-related costs and delays are recovered from customers, and whether project productivity, customer funding, and awards improve as management expects.