Tutor Perini Corp. 10-Q Summary: Period Ended September 30, 2010
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for Tutor Perini Corporation, a diversified general contractor and construction manager. The report covers the three and nine-month periods ended September 30, 2010. The Company operates through three primary segments: Building, Civil, and Management Services. The filing reflects a strategic shift toward higher-margin public works projects in the Civil segment following the substantial completion of large hospitality and gaming projects in the Building segment during 2009.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended Sep 30, 2010 | Nine Months Ended Sep 30, 2010 | Nine Months Ended Sep 30, 2009 |
|---|---|---|---|
| Revenues | $731,806 | $2,511,257 | $4,069,799 |
| Income from Construction Operations | $49,960 | $139,968 | $168,855 |
| Net Income | $30,933 | $84,591 | $104,562 |
| Diluted EPS | $0.65 | $1.73 | $2.13 |
| Cash and Cash Equivalents | $213,077 | $213,077 (Ending Balance) | $335,739 (Ending Balance) |
| Total Debt | $101,251 | $101,251 (Ending Balance) | $116,105 (Ending Balance) |
| Working Capital | $351,216 | $351,216 (Ending Balance) | $303,118 (Ending Balance) |
Note: Total Debt calculated as Current Maturities of Long-term Debt ($21,855) plus Long-term Debt ($79,396). Working Capital calculated as Total Current Assets ($1,528,049) minus Total Current Liabilities ($1,176,833).
Material Changes vs. Prior Period
- Revenue Decline: Revenues for the nine months ended September 30, 2010, decreased by 38.3% ($1.56 billion) compared to the same period in 2009. This was primarily driven by a 47.7% drop in the Building segment due to the completion of large hospitality projects in 2009.
- Civil Segment Growth: Despite the overall revenue decline, the Civil segment saw an 89.8% revenue increase ($232.8 million) and a 60.4% increase in operating income, driven by new public works projects in the New York metropolitan area.
- Profitability: While Net Income decreased by 19.1% year-over-year for the nine-month period, operating margins improved in the third quarter of 2010 due to the favorable mix of active projects.
- Cash Flow: Net cash used in operating activities was $35.9 million for the nine months ended September 30, 2010, an improvement from the $52.1 million used in the prior year period. This was largely due to the timing of receivable collections on large projects.
Guidance, Outlook, and Material Events
- Backlog: Total backlog of uncompleted work was approximately $4.0 billion at September 30, 2010, down from $4.3 billion at year-end 2009. Management noted pending awards and prospects that could enter backlog in the near future.
- Subsequent Events (Post-Sept 30):
- Debt Offering: On October 20, 2010, the Company completed a private placement of $300 million in 7.625% senior unsecured notes due 2018, netting approximately $293.2 million.
- Acquisition: On November 1, 2010, the Company acquired Superior Gunite for $33.5 million in cash plus earn-out consideration to increase self-performed work capabilities.
- Dividend: A special cash dividend of $1.00 per share was declared on October 25, 2010.
- Share Repurchases: The Company repurchased 2.16 million shares for $39.4 million during the nine-month period. Approximately $28.8 million remained available under the repurchase program as of September 30, 2010.
- Legal Contingencies: Significant litigation remains pending, most notably the MGM CityCenter Matter. As of September 30, 2010, the Company had approximately $384 million in contract receivables related to this project. MGM has settled with subcontractors at a discount, reducing pass-through billings, but the Company does not expect this to impact recorded profit. Other significant matters include disputes with the Los Angeles MTA, the Central Artery/Tunnel Project (PKC), and the UCLA Westwood Replacement Hospital.
Investor Verification Checklist
- MGM CityCenter Receivables: Verify the collectability of the $384 million in receivables and the impact of ongoing subcontractor settlements on the final revenue recognition.
- Auction Rate Securities (ARS): Review the $94.0 million investment in ARS classified as long-term. Confirm the liquidity status and fair value assumptions given the market freeze on these instruments.
- Backlog Conversion: Assess the Company's ability to convert the $4.0 billion backlog into revenue, considering the shift from private hospitality projects to public works.
- Legal Exposure: Monitor the resolution of the UCLA Westwood and Central Artery/Tunnel Project claims, which involve significant potential recoveries or liabilities.
- Debt Covenants: Confirm continued compliance with the Amended Credit Agreement covenants, particularly following the issuance of the new $300 million notes.