Tutor Perini Corporation — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing provides annual results, not separate fourth-quarter financial results. Tutor Perini is a diversified construction contractor operating through Civil, Building, and Specialty Contractors segments.
Financial and operating performance
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $4.642 billion | $5.319 billion |
| Gross profit | $466.4 million | $486.2 million |
| Income from construction operations | $226.8 million | $262.3 million |
| Income before taxes | $159.8 million | $174.3 million |
| Net income attributable to Tutor Perini | $91.9 million | $108.4 million |
| Diluted earnings per share | $1.79 | $2.12 |
| Cash from operating activities | $(148.5) million | $172.8 million |
| Cash and cash equivalents | $202.2 million | $374.3 million |
| Total debt, as reported on balance sheet | $993.7 million | $1.025 billion |
| Backlog at year-end | $8.236 billion | $8.346 billion |
Revenue declined about 13% year over year, mainly due to lower Building segment project activity as projects finished or neared completion. Construction operations income and diluted EPS also fell. Gross profit was approximately 10.0% of revenue, versus 9.1% in 2020 (calculated from reported amounts). The effective tax rate increased to 16.0% from 12.6%; 2020 benefited from CARES Act net operating loss carrybacks.
Operating cash flow turned negative, principally from working-capital investment: accounts payable fell and costs and estimated earnings in excess of billings (CIE) increased. Working capital was $2.1 billion; the current ratio was 2.17, compared with 1.80 in 2020. Cash immediately available for general corporate purposes was $60.2 million; other cash was held by joint ventures for joint-venture uses. The company reported $148 million available under its $175 million revolving facility and was in compliance with its credit covenants at year-end.
Segment results
| Segment | 2021 revenue | 2021 construction income (loss) | 2021 operating margin | Change in backlog vs. 2020 |
|---|---|---|---|---|
| Civil | $2.096 billion | $266.2 million | 12.7% | Down 5% to $4.554 billion |
| Building | $1.428 billion | $28.7 million | 2.0% | Up 36% to $2.309 billion |
| Specialty Contractors | $1.118 billion | $(10.0) million | (0.9)% | Down 26% to $1.373 billion |
Material changes, outlook, and risks
- Backlog and awards: New awards rose to $4.5 billion from $2.4 billion, while total backlog was broadly flat. About $4 billion, or 46% of year-end backlog, was expected to convert to revenue in 2022. Backlog shifted toward Building, which management says carries a substantially lower margin; management therefore expected a greater proportion of 2022 revenue from Building at lower operating margins.
- Estimate changes and project items: 2021 construction income included significant negative estimate impacts on Northeast transportation and mass-transit work, including approximately $63.1 million across a transportation project affecting all three segments and $16.2 million on another Specialty Contractors project. Favorable items included $45.3 million of adjustments on Civil mass-transit projects and a $20.1 million favorable legal judgment on a completed Specialty Contractors project. Changes in estimates can reverse as claims and change orders are negotiated, but outcomes and timing are uncertain.
- Claims and contract assets: CIE was $1.357 billion, including $833.4 million of claims and $418.1 million of unapproved change orders. Management estimated $795.2 million of CIE would be collected beyond one year. Delayed dispute resolution and collection contributed to weak 2021 operating cash flow.
- Management outlook: Management anticipated substantially improved operating cash generation in 2022, based on expected project collections and resolution of outstanding claims and change orders, assuming the pandemic did not worsen. It cited the $1.2 trillion Infrastructure Investment and Jobs Act, including $550 billion in new spending, as a potential source of long-term project opportunities. Timing of funding, awards, project starts, and collections remains uncertain; the filing gives no specific revenue or earnings guidance.
- COVID-19 and execution: The pandemic delayed bids, awards, projects, and legal proceedings; increased costs and working-capital needs; and affected customers’ ability to pay. Inflation, material and labor availability, weather, schedule delays, and fixed-price contract cost overruns could pressure margins and cash flow.
- Debt and refinancing: The company had approximately $1.0 billion of debt, including $500 million principal of 6.875% senior notes due in 2025 and a term loan. Debt obligations of $539.9 million are scheduled for 2025, subject to the reported payment schedule. The credit facility is secured by substantially all company assets, and covenant noncompliance could reduce liquidity or accelerate repayment.
- Legal contingencies: In the SR 99 matter, a jury awarded WSDOT $57.2 million; the company recorded a $166.8 million pretax charge in 2019 for its share and other write-downs. The appeal was pending, with a decision expected in the second half of 2022. Separately, the company is pursuing substantial claims relating to the George Washington Bridge Bus Station project; recovery estimates are included in recorded revenue. Outcomes and cash recovery are uncertain.
- Other risks and controls: Government customers represented 66% of 2021 revenue; 77% of backlog was fixed-price. Management identified contract-estimate, litigation, customer-payment, staffing, cybersecurity, government-funding, and joint-venture risks. The auditor issued an unqualified opinion on the financial statements and reported effective internal control over financial reporting.
Important facts for investors to verify
- Whether the large CIE balance, especially claims and unapproved change orders, is resolved and collected on the timing and amounts management anticipates.
- Whether operating cash flow improves in 2022, and how much cash is freely available after excluding joint-venture and restricted balances.
- Whether backlog converts to profitable revenue, particularly given the increased mix of lower-margin Building work and declines in Civil and Specialty Contractors backlog.
- Updates and potential cash exposure in the SR 99 and George Washington Bridge Bus Station proceedings, including the collectability of recorded recoveries.
- Progress on major project estimates, cost overruns, inflation and labor constraints, and compliance with debt covenants ahead of the 2025 maturity concentration.