TPC

Business Context and Reporting Period

Company: Tutor Perini Corporation
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2011
Business Overview: Tutor Perini provides diversified general contracting, construction management, and design-build services globally. Operations are conducted through three segments: Civil (public works/infrastructure), Building (hospitality, healthcare, commercial), and Management Services (U.S. military and federal agencies).

Key Financial Metrics

Note: Working Capital calculated as Total Current Assets minus Total Current Liabilities.

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 28.9% ($249.8 million) year-over-year. The Building segment drove this decline with a 35.8% drop due to the substantial completion of large hospitality and gaming projects in Las Vegas (e.g., MGM CityCenter). Conversely, the Civil segment saw a 3.3% revenue increase.
• Profitability Compression: Income from Construction Operations fell 45.9% to $18.5 million. The Building segment income dropped 59.4%, while the Civil segment income rose 45.8% due to favorable performance on infrastructure projects.
• Increased Interest Expense: Interest expense surged 380.0% to $7.2 million, primarily due to the issuance of $300 million in 7.625% senior unsecured notes in October 2010.
• Cash Flow: Net cash used in operating activities was $47.7 million, an improvement from the $60.3 million used in Q1 2010. However, investing activities consumed $81.7 million, largely due to the acquisition of Fisk Electric Company.

Guidance, Outlook, and Material Events

• Acquisitions:
  • Fisk Electric Company: Acquired on January 3, 2011, for approximately $109.2 million. Fisk adds electrical construction capabilities and $190 million in backlog.
  • Anderson Companies: Acquired on April 4, 2011 (subsequent event), for $64.6 million. Anderson strengthens the Building segment in the southeastern U.S. with $475 million in backlog.
• Backlog: Total backlog stood at approximately $4.2 billion as of March 31, 2011, a slight decrease from $4.3 billion at year-end 2010.
• Debt and Liquidity: On May 4, 2011, the Company entered a new Credit Agreement providing up to $260 million in revolving credit plus a $99.6 million supplemental facility. As of May 4, 2011, $359.5 million was available to borrow. The Company holds $88.1 million in auction rate securities classified as long-term investments due to market liquidity constraints.
• Legal Contingencies: Significant ongoing litigation includes claims related to the MGM CityCenter project (mechanic's lien reduced to $313 million), the Central Artery/Tunnel Project in Boston, and the Queensridge condominium project in Las Vegas. Management does not expect these matters to have a material adverse effect on financial statements at this time.
• Stock Repurchase: The $100 million common stock repurchase program expired on March 31, 2011, with no repurchases made in Q1 2011.

Investor Verification Checklist

• Project Completion Timing: Verify the impact of the substantial completion of Las Vegas hospitality projects on future revenue recognition and margin stability in the Building segment.
• Acquisition Integration: Monitor the integration and financial performance of Fisk Electric and Anderson Companies to ensure projected synergies are realized.
• Litigation Outcomes: Track the resolution of the MGM CityCenter, Central Artery/Tunnel, and Queensridge disputes, as final settlements could materially impact receivables and profitability.
• Debt Servicing: Assess the impact of increased interest expenses from the 2010 senior notes on future net income and cash flow.
• Liquidity of Investments: Review the status of the $88.1 million auction rate securities investment and the Company's ability to access these funds if needed.