Business Context and Reporting Period
Company: Tutor Perini Corporation (formerly Perini Corporation)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and nine months ended September 30, 2009
Overview: Tutor Perini is a leading construction services company operating through three segments: Building, Civil, and Management Services. The period reflects the integration of the Tutor-Saliba merger (completed Sept 2008) and the acquisition of Keating Building Corporation (completed Jan 2009). The company changed its name and stock symbol to "TPC" in May 2009.
Key Financial Metrics
| Metric (in thousands) | Q3 2009 | Q3 2008 | 9M 2009 | 9M 2008 |
|---|---|---|---|---|
| Revenues | $1,168,769 | $1,412,635 | $4,069,799 | $4,057,358 |
| Gross Profit | $85,366 | $85,507 | $300,489 | $223,067 |
| Income from Construction Ops | $42,461 | $52,263 | $168,855 | $133,826 |
| Net Income | $26,684 | $34,106 | $104,562 | $87,816 |
| Diluted EPS | $0.54 | $1.01 | $2.13 | $2.96 |
| Cash & Equivalents (Total) | $335,739 | $386,172 | $335,739 | $400,689 |
| Total Debt | $114,391 | $80,254 | $114,391 | $80,254 |
| Working Capital | $283,635 | $225,049 | $283,635 | $225,049 |
Note: Debt figures derived from Balance Sheet (Current Maturities + Long-term Debt). Working Capital derived from Current Assets minus Current Liabilities.
Material Changes vs. Prior Period
- Revenue Trends: Q3 2009 revenues decreased 17.3% ($243.8M) compared to Q3 2008, driven by a 21.4% drop in Building segment revenues due to the completion of large gaming/hospitality projects. However, the nine-month 2009 revenue increased slightly (0.3%) to $4.07B, as growth in Civil (+34.4%) and Management Services (+117.4%) segments offset the Building decline.
- Profitability: Net income for Q3 2009 fell 21.8% to $26.7M. Conversely, nine-month net income rose 19.1% to $104.6M, reflecting improved margins and the inclusion of Tutor-Saliba and Keating results.
- Cash Flow: Operating cash flow turned negative for the nine months ended Sept 30, 2009, using $52.1M, compared to a positive $31.2M in the prior year. This was primarily due to the timing of receivables on large projects. Investing activities used $30.0M, largely for the Keating acquisition and property purchases.
- Debt & Liquidity: Total debt increased by $34.1M to $114.4M due to new financing for transportation equipment ($35M) and Guam operations ($9.7M). Despite this, available borrowing capacity under the Credit Agreement remains at $241.6M.
Outlook, Risks, and Contingencies
- Backlog: Total backlog decreased to $4.9 billion at Sept 30, 2009, from $6.7 billion at year-end 2008. The decline is attributed to the completion of large projects and a reduced volume of new non-residential building work due to economic conditions.
- Economic Risks: Management cites severe disruptions in credit markets and state/local government budget shortfalls as primary risks, leading to project deferrals and cancellations. The company notes that the $1.8B backlog decrease reflects these economic headwinds.
- Legal Proceedings:
- Fontainebleau Matter: A subsidiary (DPH) has filed liens for approx. $42M on the Fontainebleau Las Vegas project, which is 70% complete and in Chapter 11 bankruptcy. Work stopped in May 2009.
- UCLA Westwood Hospital: TSP is seeking $36M for itself and $171M for subcontractors; the Owner has filed a cross-complaint seeking $62.2M.
- U.S. Attorney Settlement: A civil settlement of $9.75M regarding the Eastern District of New York investigation was agreed upon; this amount was fully reserved in prior years.
- Securities Litigation: The Isham/Rollman securities class action was dismissed without prejudice in October 2009; plaintiffs have not yet refiled.
- Investments: The company holds $101.2M in auction rate securities (ARS), classified as long-term investments due to market illiquidity. Management does not expect this to materially affect short-term liquidity.
Investor Verification Checklist
- Backlog Conversion: Verify the ability to convert the $4.9B backlog into revenue given the current economic climate and credit market constraints.
- Operating Cash Flow: Monitor the reversal of negative operating cash flow ($52.1M used in 9M 2009) and the timing of receivables on large projects.
- Legal Exposure: Track the resolution of the Fontainebleau bankruptcy ($42M claim) and the UCLA Westwood Hospital litigation ($207M total claim).
- Segment Performance: Assess the sustainability of the Building segment's revenue decline versus the growth in Civil and Management Services.
- Debt Covenants: Confirm compliance with financial covenants under the Credit Agreement, particularly given the recent increase in debt levels.