Tutor Perini Corporation — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Tutor Perini is a general contractor operating through Civil, Building and Specialty Contractors segments. Dollar amounts are in millions unless noted.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $1,276.4 | $1,125.3 | $2,527.2 | $2,083.8 |
| Gross profit / margin | $117.8 / 9.2% | $100.9 / 9.0% | $228.8 / 9.1% | $189.4 / 9.1% |
| Income (loss) from construction operations | $57.7 | $(341.7) | $104.9 | $(318.8) |
| Net income (loss) attributable to Tutor Perini | $18.7 | $(320.5) | $36.1 | $(320.9) |
| Diluted EPS | $0.37 | $(6.38) | $0.71 | $(6.40) |
| Operating cash flow | Six-month: $58.2 | Prior-year six-month: $(111.5) |
The 2019 comparisons include a $379.9 million non-cash goodwill impairment charge. Excluding that charge, 2019 construction-operations income was $38.2 million for Q2 and $61.1 million for the first half; adjusted diluted EPS was $0.18 and $0.17, respectively. 2020 had no corresponding adjustment. 2020 construction-operations income included a $13.2 million adverse arbitration ruling in Specialty Contractors. Management estimated COVID-19 reduced revenue by $130 million in Q2 and $190 million in the first half, and diluted EPS by $0.13 and $0.17, respectively.
- Segments: First-half revenue was Civil $1,055.6 million, Building $954.8 million and Specialty Contractors $516.8 million. Civil growth was strongest; Specialty Contractors recorded a $3.1 million first-half operating loss.
- Backlog: $10.0 billion at June 30, down from $11.2 billion at December 31, 2019 as recognized revenue exceeded new awards. Remaining performance obligations were $9.0 billion: Civil $5.1 billion, Building $1.7 billion and Specialty Contractors $2.2 billion.
- Cash and working capital: Cash and equivalents were $182.6 million, but only $57.7 million was available for general corporate purposes; the balance was joint-venture cash. Restricted cash and investments totaled $84.3 million. Working capital was $1.3 billion, with a 1.50 current ratio.
- Debt: Total debt was $836.4 million, including $320.8 million classified as current and $515.6 million long-term. The $350 million revolving facility had $250 million available; the company reported compliance with covenants. Debt-to-equity was 0.57.
Changes, outlook and risks
Revenue rose 13% in Q2 and 21% year to date versus 2019, primarily from greater activity on infrastructure and selected building projects. Operating cash flow improved by $169.7 million year over year for the first half, reflecting earnings, collections and approximately $40 million collected on disputed balances; this was partly offset by a $68.5 million working-capital investment. New awards were $1.3 billion for the first half versus $4.2 billion a year earlier, reflecting award timing and COVID-related delays. Backlog therefore declined.
Management described its multi-year growth outlook as favorable, particularly in Civil and Specialty Contractors, and expected bidding and awards on prospective projects later in 2020 or in 2021. It gave no specific financial guidance and said the pandemic’s future effects could not be reliably predicted. Projects were disrupted by suspensions, reduced productivity, absenteeism and added health-and-safety requirements; most Civil projects continued as essential work. Risks include renewed restrictions, delayed or canceled awards, constrained public funding, slower customer payments, project cost or schedule overruns, and joint-venture or counterparty performance.
Debt maturity and liquidity deserve attention: The $200 million convertible notes mature June 15, 2021. If still outstanding on December 17, 2020, a spring-forward provision accelerates the credit facility’s maturity to that date. The company said it was evaluating refinancing or retirement options and expected new credit arrangements in Q3 2020. It believed available liquidity would cover the next 12 months, subject to no material adverse events, including worsening pandemic effects.
Contingencies and unusual items: Contract assets included $729.2 million of claims and $348.0 million of unapproved change orders, whose recovery and timing may depend on agreement or dispute resolution. Revenue was reduced by prior-period contract estimate changes of $19.8 million in Q2 and $35.6 million for the first half. In the Alaskan Way Viaduct dispute, the joint venture appealed a $57.2 million verdict for WSDOT; Tutor Perini had accrued its $25.7 million share, payable if the verdict is upheld. The company also reported a continuing federal investigation involving Five Star Electric for which it could not estimate potential loss. The George Washington Bridge Bus Station recovery claims remained subject to bankruptcy proceedings and litigation.
Investor verification priorities
- Confirm progress, terms and completion of refinancing or other action addressing the December 2020 spring-forward maturity.
- Track unrestricted corporate cash, joint-venture cash availability, working-capital needs and collections, especially disputed receivables.
- Assess whether claims and unapproved change orders are recoverable and whether further estimate revisions affect earnings or cash flow.
- Monitor backlog conversion, new awards and public-sector funding, including any renewed COVID-19 project disruption.
- Follow the Alaskan Way appeal, Five Star investigation, and George Washington Bridge Bus Station proceedings and their potential financial effects.