Business Context and Reporting Period
Company: Tutor Perini Corp (Perini Corporation)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and six months ended June 30, 2003
Business Overview: A construction company operating in Building and Civil segments. The company completed the acquisition of James A. Cummings, Inc. on January 23, 2003, and a tender offer for its $21.25 Preferred Stock on June 9, 2003.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended June 30, 2003 |
Six Months Ended June 30, 2003 |
Six Months Ended June 30, 2002 |
|---|---|---|---|
| Revenues | $286,336 | $577,596 | $589,677 |
| Gross Profit | $14,370 | $28,073 | $25,362 |
| Income from Operations | $4,506 | $9,401 | $11,417 |
| Net Income | $3,618 | $15,037 | $9,905 |
| Net Income Available to Common | $9,759 | $20,647 | $8,843 |
| Diluted EPS | $0.41 | $0.89 | $0.38 |
| Cash and Equivalents | $46,028 | $46,028 | $38,552 |
| Long-term Debt | $25,652 | $25,652 | $12,123 |
| Working Capital | $114,585 | $114,585 | $115,908 |
Note: Net Income Available to Common Stockholders includes a $6.658 million reversal of accrued preferred dividends due to the tender offer.
Material Changes vs. Prior Period
- Revenue: Six-month revenues decreased 2.1% to $577.6 million. This was driven by a 42.4% decline in Civil construction revenues ($91.3M vs $158.5M), partially offset by a 12.8% increase in Building revenues ($486.3M vs $431.2M) due to the Cummings acquisition.
- Profitability: Operating income decreased 17.7% to $9.4 million for the six months, primarily due to higher corporate G&A expenses ($4.3M vs $2.9M) and lower civil construction volume.
- Net Income: Net income increased 51.8% to $15.0 million. This increase is largely attributable to a $7.0 million federal tax benefit recognized in Q1 2003 related to net operating loss carryforwards.
- EPS: Diluted EPS rose to $0.89 from $0.38. This significant increase is driven by the $6.7 million reversal of accrued preferred dividends added back to income available to common shareholders following the tender offer.
- Debt: Long-term debt increased to $25.7 million from $12.1 million at year-end 2002, primarily to fund the preferred stock tender offer.
Guidance, Outlook, and Risks
Outlook and Management Commentary
- Backlog: Construction backlog increased to $1.234 billion at June 30, 2003, from $990 million at year-end 2002. Management anticipates an improving new work award period for the remainder of 2003.
- Strategy: The acquisition of Cummings is expected to continue contributing positively to operating results and expand market presence in the Southeast.
- Liquidity: The company amended its credit facility to $50 million with $30.2 million available at June 30, 2003. Management does not plan to resume dividends on the $21.25 Preferred Stock in the foreseeable future to preserve working capital.
Risks and Contingencies
- Legal Proceedings:
- Central Artery/Tunnel ("Big Dig"): Pending claims against the Massachusetts Highway Department. A Disputes Review Board (DRB) has awarded $17.4M for time delays (upheld by court) and $17.1M for inefficiencies. Additional claims totaling $122M are pending. Provisional payments of $23.75M received.
- Los Angeles MTA: Jury awarded MTA $63.0M against a joint venture; case is on appeal. No provision recorded.
- San Francisco Airport: City Attorney filed suit alleging fraud and overcharges seeking $30M plus treble damages. Perini sold its interest in the joint venture in 1997 and is indemnified by the managing partner.
- Polo Towers (Las Vegas): Lawsuit alleging legionella contamination in water system seeking over $8.0M. Insurance carrier is defending.
- Preferred Stock Class Action: Shareholders seek damages of at least $15.9M (trebled) alleging breach of fiduciary duty regarding the tender offer and dividend suspension.
- Market Risk: No material change in exposure to market risk since December 31, 2002.
Investor Verification Checklist
- Tax Benefit Sustainability: Verify the $7.0 million federal tax benefit recognized in Q1 2003 and the company's ability to utilize net operating loss carryforwards.
- Preferred Stock Dividend Reversal: Confirm the impact of the $6.7 million reversal of accrued dividends on EPS and the remaining $9.8 million in dividends in arrears.
- Legal Exposure: Assess the potential financial impact of the "Big Dig" claims (pending $122M) and the Los Angeles MTA appeal ($63M award).
- Civil Segment Volatility: Monitor the 42% year-over-year decline in Civil construction revenues and the pace of new contract awards.
- Liquidity Position: Review the $30.2 million availability under the credit facility and the company's decision to suspend preferred dividends to fund growth and working capital.