SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
FORM10-Q☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
(Mark One)
| | | | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | June 30, 2021 |
| or |
| ☐ | TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ___________ to ___________ |
Commission File Number: 1-6314
(Exact
nameName of
registrantRegistrant as
specifiedSpecified in its
charter)Charter)MASSACHUSETTS
| | |
MASSACHUSETTS
| | 04-1717070
|
(State or other jurisdictionOther Jurisdiction of
incorporationIncorporation or organization) | | (I.R.S. Employer
Identification No.)
Organization) |
15901 OLDEN STREET,SYLMAR,CALIFORNIA
| | |
| (Address of Principal Executive Offices) |
04-1717070
| | |
(I.R.S. Employer Identification No.)
|
91342-1093
(Address of principal executive offices)
(Zip code)
(Registrant’s
telephone number, including area code)Telephone Number, Including Area Code)
None
(Former
name, former addressName, Former Address and
former fiscal year,Former Fiscal Year, if
changed since last report)Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $1.00 par value | TPC | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Large accelerated filer☒ | ☐ | | Accelerated filer☐ | ☒ | | |
| | |
Non-AcceleratedNon-accelerated filer☐
| ☐ | | Smaller reporting company | ☐ | | |
| | |
Emerging growth company☐ | ☐ | | | | | |
| | | | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of common stock, $1.00 par value per share, of the registrant outstanding at
November 3, 2017July 29, 2021 was
49,781,010.51,072,182.
TUTORPERINI CORPORATION AND SUBSIDIARIES | | | | | | | | | | | |
| | | Page Numbers |
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| | | 7-23 |
| | | 24-30 |
| | | 30 |
| | | 30 |
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| | | 30 |
| | | 30 |
| | | 30 |
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| | | 31 |
| | | 32 |
PART I. –FINANCIAL INFORMATION Item 1.
– Financial Statements
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONSINCOME
| | | | | | | | | |
| | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | |
| September 30, | | September 30, | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
(in thousands, except per common share amounts) | 2017 | | 2016 | | 2017 | | 2016 | (in thousands, except per common share amounts) | 2021 | | 2020 | | 2021 | | 2020 |
REVENUE | $ | 1,199,505 | | $ | 1,332,978 | | $ | 3,564,140 | | $ | 3,726,477 | REVENUE | $ | 1,219,243 | | | $ | 1,276,427 | | | $ | 2,426,838 | | | $ | 2,527,156 | |
COST OF OPERATIONS | | (1,081,254) | | | (1,208,310) | | | (3,240,332) | | (3,386,947) | COST OF OPERATIONS | (1,091,754) | | | (1,158,673) | | | (2,188,894) | | | (2,298,322) | |
GROSS PROFIT | | 118,251 | | | 124,668 | | | 323,808 | | 339,530 | GROSS PROFIT | 127,489 | | | 117,754 | | | 237,944 | | | 228,834 | |
General and administrative expenses | | (69,179) | | | (63,749) | | | (203,674) | | (189,660) | General and administrative expenses | (58,736) | | | (60,058) | | | (119,487) | | | (123,911) | |
INCOME FROM CONSTRUCTION OPERATIONS | | 49,072 | | | 60,919 | | | 120,134 | | 149,870 | INCOME FROM CONSTRUCTION OPERATIONS | 68,753 | | | 57,696 | | | 118,457 | | | 104,923 | |
Other income, net | | 967 | | | 2,048 | | 42,373 | | 5,214 | |
| Other income (expense) | | Other income (expense) | 1,431 | | | (797) | | | 1,606 | | | (316) | |
Interest expense | | (15,643) | | | (15,041) | | | (53,726) | | (44,655) | Interest expense | (17,938) | | | (16,464) | | | (35,748) | | | (32,900) | |
INCOME BEFORE INCOME TAXES | | 34,396 | | | 47,926 | | | 108,781 | | 110,429 | INCOME BEFORE INCOME TAXES | 52,246 | | | 40,435 | | | 84,315 | | | 71,707 | |
Provision for income taxes | | (9,096) | | | (19,125) | | | (37,084) | | (44,868) | |
| Income tax expense | | Income tax expense | (10,635) | | | (9,576) | | | (17,599) | | | (14,710) | |
NET INCOME | | 25,300 | | | 28,801 | | | 71,697 | | 65,561 | NET INCOME | 41,611 | | | 30,859 | | | 66,716 | | | 56,997 | |
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | | (1,716) | | | ��— | | | (4,253) | | — | LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 10,446 | | | 12,150 | | | 19,517 | | | 20,917 | |
NET INCOME ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 23,584 | | $ | 28,801 | | $ | 67,444 | | $ | 65,561 | NET INCOME ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 31,165 | | | $ | 18,709 | | | $ | 47,199 | | | $ | 36,080 | |
BASIC EARNINGS PER COMMON SHARE | $ | 0.47 | | $ | 0.59 | | $ | 1.36 | | $ | 1.33 | BASIC EARNINGS PER COMMON SHARE | $ | 0.61 | | | $ | 0.37 | | | $ | 0.93 | | | $ | 0.71 | |
DILUTED EARNINGS PER COMMON SHARE | $ | 0.47 | | $ | 0.57 | | $ | 1.33 | | $ | 1.32 | DILUTED EARNINGS PER COMMON SHARE | $ | 0.61 | | | $ | 0.37 | | | $ | 0.92 | | | $ | 0.71 | |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: | | | | | | | | | | | WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: | | | |
BASIC | | 49,775 | | 49,185 | | | 49,602 | | 49,132 | BASIC | 50,999 | | | 50,667 | | | 50,956 | | | 50,502 | |
DILUTED | | 50,587 | | 50,100 | | | 50,768 | | 49,649 | DILUTED | 51,375 | | | 50,935 | | | 51,362 | | | 50,885 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATEDSTATEMENTS OF COMPREHENSIVE INCOME | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | |
| September 30, | | September 30, | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 | (in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
NET INCOME | $ | 25,300 | | $ | 28,801 | | $ | 71,697 | | $ | 65,561 | NET INCOME | $ | 41,611 | | | $ | 30,859 | | | $ | 66,716 | | | $ | 56,997 | |
| | | | | | | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | | | | | | | | | | | | |
| OTHER COMPREHENSIVE INCOME, NET OF TAX: | | OTHER COMPREHENSIVE INCOME, NET OF TAX: | |
Defined benefit pension plan adjustments | | 269 | | | 248 | | | 806 | | | 819 | Defined benefit pension plan adjustments | 491 | | | 424 | | | 983 | | | 847 | |
Foreign currency translation adjustments | | 726 | | | (411) | | | 1,321 | | | 261 | Foreign currency translation adjustments | 400 | | | 1,655 | | | 772 | | | (2,358) | |
Unrealized gain (loss) in fair value of investments | | 12 | | | (79) | | | (12) | | | (224) | Unrealized gain (loss) in fair value of investments | 219 | | | 1,306 | | | (964) | | | 1,848 | |
Unrealized loss in fair value of interest rate swap | | — | | | — | | | — | | | (24) | |
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | | 1,007 | | | (242) | | | 2,115 | | | 832 | |
| TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX | | TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX | 1,110 | | | 3,385 | | | 791 | | | 337 | |
| | | | | | | | | | | | |
COMPREHENSIVE INCOME | | 26,307 | | | 28,559 | | | 73,812 | | | 66,393 | COMPREHENSIVE INCOME | 42,721 | | | 34,244 | | | 67,507 | | | 57,334 | |
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | | (1,716) | | | — | | | (4,253) | | | — | LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 10,726 | | | 13,004 | | | 20,093 | | | 19,751 | |
COMPREHENSIVE INCOME ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 24,591 | | $ | 28,559 | | $ | 69,559 | | $ | 66,393 | COMPREHENSIVE INCOME ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 31,995 | | | $ | 21,240 | | | $ | 47,414 | | | $ | 37,583 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATEDBALANCE SHEETS | | | | | |
| | | | | |
| As of September 30, | | As of December 31, | | | | | | | | | | |
(in thousands, except share and per share amounts) | 2017 | | 2016 | (in thousands, except share and per share amounts) | As of June 30,
2021 | | As of December 31,
2020 |
| ASSETS | | | | | | ASSETS |
CURRENT ASSETS: | | | | | CURRENT ASSETS: | |
Cash and cash equivalents ($79,111 and $0 related to variable interest entities ("VIEs")) | $ | 221,878 | | $ | 146,103 | |
| Cash and cash equivalents ($91,700 and $105,735 related to variable interest entities (“VIEs”)) | | Cash and cash equivalents ($91,700 and $105,735 related to variable interest entities (“VIEs”)) | $ | 231,129 | | | $ | 374,289 | |
Restricted cash | | 17,424 | | 50,504 | Restricted cash | 2,884 | | | 77,563 | |
Restricted investments | | 48,775 | | — | Restricted investments | 85,545 | | | 78,912 | |
Accounts receivable ("AR") including retainage of $574,710 and $569,391 (AR of $36,317 and $0 related to VIEs) | | 1,857,870 | | 1,743,300 | |
Costs and estimated earnings in excess of billings | | 902,312 | | 831,826 | |
Other current assets | | 70,781 | | | 66,023 | |
| Accounts receivable ($85,873 and $86,012 related to VIEs) | | Accounts receivable ($85,873 and $86,012 related to VIEs) | 1,372,054 | | | 1,415,063 | |
| Retainage receivable ($139,617 and $122,335 related to VIEs) | | Retainage receivable ($139,617 and $122,335 related to VIEs) | 683,966 | | | 648,441 | |
| Costs and estimated earnings in excess of billings ($90,294 and $39,846 related to VIEs) | | Costs and estimated earnings in excess of billings ($90,294 and $39,846 related to VIEs) | 1,346,974 | | | 1,236,734 | |
| Other current assets ($49,867 and $51,746 related to VIEs) | | Other current assets ($49,867 and $51,746 related to VIEs) | 252,735 | | | 249,455 | |
Total current assets | | 3,119,040 | | | 2,837,756 | Total current assets | 3,975,287 | | | 4,080,457 | |
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $345,546 and $313,783 | | 447,588 | | | 477,626 | |
PROPERTY AND EQUIPMENT (“P&E”), net of accumulated depreciation of $475,207 and $434,294 (net P&E of $4,550 and $12,840 related to VIEs) | | PROPERTY AND EQUIPMENT (“P&E”), net of accumulated depreciation of $475,207 and $434,294 (net P&E of $4,550 and $12,840 related to VIEs) | 456,693 | | | 489,217 | |
GOODWILL | | 585,006 | | 585,006 | GOODWILL | 205,143 | | | 205,143 | |
INTANGIBLE ASSETS, NET | | 90,340 | | 92,997 | INTANGIBLE ASSETS, NET | 105,801 | | | 123,115 | |
OTHER ASSETS | | 40,811 | | | 45,235 | OTHER ASSETS | 149,176 | | | 147,685 | |
TOTAL ASSETS | $ | 4,282,785 | | $ | 4,038,620 | TOTAL ASSETS | $ | 4,892,100 | | | $ | 5,045,617 | |
| | | | | | | |
LIABILITIES AND EQUITY | | | | | LIABILITIES AND EQUITY |
CURRENT LIABILITIES: | | | | | CURRENT LIABILITIES: | |
Current maturities of long-term debt | $ | 30,951 | | $ | 85,890 | |
Accounts payable ("AP") including retainage of $267,110 and $258,294 (AP of $4,826 and $0 related to VIEs) | | 949,675 | | 994,016 | |
Billings in excess of costs and estimated earnings ($91,750 and $0 related to VIEs) | | 403,635 | | 331,112 | |
Accrued expenses and other current liabilities | | 124,385 | | | 107,925 | |
| Current maturities of long-term debt, net of unamortized discount and debt issuance costs totaling $0 and $2,040 | | Current maturities of long-term debt, net of unamortized discount and debt issuance costs totaling $0 and $2,040 | $ | 36,941 | | | $ | 100,188 | |
| Accounts payable ($86,263 and $116,461 related to VIEs) | | Accounts payable ($86,263 and $116,461 related to VIEs) | 692,835 | | | 794,611 | |
| Retainage payable ($30,681 and $26,439 related to VIEs) | | Retainage payable ($30,681 and $26,439 related to VIEs) | 331,341 | | | 315,135 | |
| Billings in excess of costs and estimated earnings ($344,239 and $362,427 related to VIEs) | | Billings in excess of costs and estimated earnings ($344,239 and $362,427 related to VIEs) | 764,029 | | | 839,222 | |
| Accrued expenses and other current liabilities ($7,096 and $9,595 related to VIEs) | | Accrued expenses and other current liabilities ($7,096 and $9,595 related to VIEs) | 200,138 | | | 215,207 | |
Total current liabilities | | 1,508,646 | | | 1,518,943 | Total current liabilities | 2,025,284 | | | 2,264,363 | |
LONG-TERM DEBT, less current maturities, net of unamortized
discounts and debt issuance costs totaling $54,699 and $56,072 | | 855,325 | | | 673,629 | |
LONG-TERM DEBT, less current maturities, net of unamortized discount and debt issuance costs totaling $18,712 and $20,209 | | LONG-TERM DEBT, less current maturities, net of unamortized discount and debt issuance costs totaling $18,712 and $20,209 | 933,303 | | | 925,277 | |
DEFERRED INCOME TAXES | | 132,335 | | 131,007 | DEFERRED INCOME TAXES | 85,386 | | | 82,966 | |
OTHER LONG-TERM LIABILITIES | | 155,553 | | | 162,018 | OTHER LONG-TERM LIABILITIES | 237,697 | | | 230,066 | |
TOTAL LIABILITIES | | 2,651,859 | | | 2,485,597 | TOTAL LIABILITIES | 3,281,670 | | | 3,502,672 | |
| | | | | | |
CONTINGENCIES AND COMMITMENTS (NOTE 7) | | | | | |
| | | | | |
| COMMITMENTS AND CONTINGENCIES (NOTE 11) | | COMMITMENTS AND CONTINGENCIES (NOTE 11) | 0 | | 0 |
EQUITY | | | | | EQUITY | |
Stockholders' Equity: | | | | | |
Preferred stock - authorized 1,000,000 shares ($1 par value), none issued | | — | | — | |
Common stock - authorized 75,000,000 shares ($1 par value),
issued and outstanding 49,781,010 and 49,211,353 shares | | 49,781 | | 49,211 | |
| Stockholders' equity: | | Stockholders' equity: | |
| Preferred stock - authorized 1,000,000 shares ($1 par value), NaN issued | | Preferred stock - authorized 1,000,000 shares ($1 par value), NaN issued | 0 | | | 0 | |
| Common stock - authorized 112,500,000 shares ($1 par value), issued and outstanding 51,072,182 and 50,827,205 shares | | Common stock - authorized 112,500,000 shares ($1 par value), issued and outstanding 51,072,182 and 50,827,205 shares | 51,072 | | | 50,827 | |
Additional paid-in capital | | 1,080,371 | | 1,075,600 | Additional paid-in capital | 1,130,368 | | | 1,127,385 | |
Retained earnings | | 541,069 | | 473,625 | Retained earnings | 469,584 | | | 422,385 | |
Accumulated other comprehensive loss | | (43,298) | | | (45,413) | Accumulated other comprehensive loss | (46,526) | | | (46,741) | |
Total Stockholders' Equity | | 1,627,923 | | | 1,553,023 | |
| Total stockholders' equity | | Total stockholders' equity | 1,604,498 | | | 1,553,856 | |
Noncontrolling interests | | 3,003 | | | — | Noncontrolling interests | 5,932 | | | (10,911) | |
TOTAL EQUITY | | 1,630,926 | | | 1,553,023 | TOTAL EQUITY | 1,610,430 | | | 1,542,945 | |
| | | | | | |
TOTAL LIABILITIES AND EQUITY | $ | 4,282,785 | | $ | 4,038,620 | TOTAL LIABILITIES AND EQUITY | $ | 4,892,100 | | | $ | 5,045,617 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS | | | | | |
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Six Months Ended June 30, |
(in thousands) | 2017 | | 2016 | (in thousands) | 2021 | | 2020 |
Cash Flows from Operating Activities: | | | | | | Cash Flows from Operating Activities: | | | |
Net income | $ | 71,697 | | $ | 65,561 | Net income | $ | 66,716 | | | $ | 56,997 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |
Depreciation | | 37,806 | | 44,638 | Depreciation | 44,821 | | | 34,180 | |
Amortization of intangible assets | | 2,657 | | 2,657 | Amortization of intangible assets | 17,314 | | | 14,596 | |
Share-based compensation expense | | 16,057 | | 10,109 | Share-based compensation expense | 5,033 | | | 8,264 | |
Excess income tax benefit from share-based compensation | | — | | (10) | |
Change in debt discounts and deferred debt issuance costs | | 14,725 | | 7,124 | Change in debt discounts and deferred debt issuance costs | 3,868 | | | 7,046 | |
Deferred income taxes | | 642 | | (8,636) | Deferred income taxes | 2,213 | | | 5,423 | |
(Gain) loss on sale of property and equipment | | (376) | | 300 | |
| Loss on sale of property and equipment | | Loss on sale of property and equipment | 360 | | | 31 | |
| Changes in other components of working capital | | Changes in other components of working capital | (278,943) | | | (68,471) | |
Other long-term liabilities | | (2,876) | | (8,555) | Other long-term liabilities | 6,801 | | | 1,295 | |
Other | | 4,785 | | (353) | |
Changes in other components of working capital | | (143,213) | | | (18,669) | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | 1,904 | | | 94,166 | |
| Other, net | | Other, net | 515 | | | (1,131) | |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | | NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (131,302) | | | 58,230 | |
| | | | | | | | |
Cash Flows from Investing Activities: | | | | | Cash Flows from Investing Activities: | |
Acquisition of property and equipment excluding financed purchases | | (9,712) | | (10,273) | |
| Acquisition of property and equipment | | Acquisition of property and equipment | (18,860) | | | (31,386) | |
Proceeds from sale of property and equipment | | 1,440 | | 1,139 | Proceeds from sale of property and equipment | 3,623 | | | 1,082 | |
Investments in securities restricted in use | | (48,657) | | — | |
Change in restricted cash | | 33,080 | | | (2,872) | |
| Investments in securities | | Investments in securities | (18,096) | | | (13,319) | |
| Proceeds from maturities and sales of investments in securities | | Proceeds from maturities and sales of investments in securities | 10,497 | | | 10,985 | |
NET CASH USED IN INVESTING ACTIVITIES | | (23,849) | | | (12,006) | NET CASH USED IN INVESTING ACTIVITIES | (22,836) | | | (32,638) | |
| | | | | | | | |
Cash Flows from Financing Activities: | | | | | Cash Flows from Financing Activities: | |
Proceeds from issuance of convertible notes | | — | | 200,000 | |
Proceeds from debt | | 1,991,457 | | 1,003,092 | Proceeds from debt | 308,181 | | | 752,843 | |
Repayment of debt | | (1,866,072) | | (1,174,679) | Repayment of debt | (367,007) | | | (757,141) | |
Excess income tax benefit from share-based compensation | | — | | 10 | |
Issuance of common stock and effect of cashless exercise | | (11,147) | | (423) | |
| Cash payments related to share-based compensation | | Cash payments related to share-based compensation | (1,625) | | | (994) | |
Distributions paid to noncontrolling interests | | (2,500) | | — | Distributions paid to noncontrolling interests | (7,250) | | | (30,910) | |
Contributions from noncontrolling interests | | 1,250 | | — | Contributions from noncontrolling interests | 4,000 | | | 0 | |
Debt issuance and extinguishment costs | | (15,268) | | | (14,868) | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | | 97,720 | | | 13,132 | |
| NET CASH USED IN FINANCING ACTIVITIES | | NET CASH USED IN FINANCING ACTIVITIES | (63,701) | | | (36,202) | |
| | | | | | | | |
Net increase in cash and cash equivalents | | 75,775 | | 95,292 | |
Cash and cash equivalents at beginning of period | | 146,103 | | | 75,452 | |
Cash and cash equivalents at end of period | $ | 221,878 | | $ | 170,744 | |
| Net decrease in cash, cash equivalents and restricted cash | | Net decrease in cash, cash equivalents and restricted cash | (217,839) | | | (10,610) | |
| Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | 451,852 | | | 202,101 | |
| Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | $ | 234,013 | | | $ | 191,491 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Condensed Consolidated Financial Statements do not include footnotes and certain financial information normally presented annually under
generally accepted accounting principles
generally accepted in the United States (“GAAP”). Therefore, they should be read in conjunction with the audited consolidated financial statements and the related notes included in
the Company’sTutor Perini Corporation’s (the “Company”) Annual Report on Form 10-K for the year ended December 31,
2016.2020. The results of operations for the three and
ninesix months ended
SeptemberJune 30,
20172021 may not be indicative of the results that will be achieved for the full year ending December 31,
2017.2021.
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the Company’s consolidated financial position as of
SeptemberJune 30,
20172021 and its consolidated
resultsstatements of
operationsincome and cash flows for the interim periods presented.
All significant intercompanyIntercompany balances and transactions
of consolidated subsidiaries have been eliminated.
There were no material events that occurred subsequentCertain amounts in the notes to the
date of thecondensed consolidated financial statements
upof prior years have been reclassified to conform to the
filing of this Form 10-Q. current year presentation.
(2)Recent Accounting Pronouncements In May 2014,December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606)2019-12,Simplifying the Accounting for Income Taxes(“ASU 2019-12”), as amended by subsequent ASUs (collectively, “ASU 2014-09”modifying Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). ASU 2014-09 amends the existing accounting standards for revenue recognition and establishes principles for recognizing revenue upon the transfer of promised goods or services to customers based on the expected consideration to be received in exchange for those goods or services. The guidance will be effective for the Company as of January 1, 2018. The amendments may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application (modified retrospective method). The Company expects to adopt this new standard using the modified retrospective method. The Company is currently reviewing contracts in order to determine the impact, if any, that the adoption of ASU 2014-09 will have on its consolidated financial statements. Based on the Company’s evaluation of ASU 2014-09, the Company currently does not expect it to have a material impact on its results of operations. The Company is identifying and implementing changes to the Company’s business processes, systems and internal controls to support the adoption of this new standard and the related disclosure requirements. The adoption of the standard is also expected to impact the presentation of the consolidated balance sheet. The impact primarily relates to reclassifications among financial statement accounts to align with the new standard. The Company will continue its evaluation of ASU 2014-09 (including how it may impact future contracts, as well as any new or emerging interpretations of the standard) through the date of adoption.In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, seeking to eliminate diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in ASU 2016-15 address eight specific cash flow issues including2019-12, among other things, remove certain exceptions to the classification of debt prepaymentgeneral principles in ASC 740 and extinguishment costs inseek more consistent application by clarifying and amending the cash flow statement. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period provided any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. existing guidance. The Company adopted this accounting standard during the three months ended September 30, 2017 and has applied the provisions retrospectively to the beginning of the fiscal years presented in the Condensed Consolidated Financial Statements.ASU effective January 1, 2021. The adoption of this guidanceASU 2019-12 did not have a material impact on the Company’s consolidated financial statements.
In May 2017,position, results of operations or cash flows.
(3)Revenue
Disaggregation of Revenue
The following tables disaggregate revenue by end market, customer type and contract type, which the
FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): ScopeCompany believes best depicts how the nature, amount, timing and uncertainty of Modification Accounting. This ASU clarifies the scope of modification accounting under Topic 718 with respect to changes to the terms or conditions of a share-based payments award. Under this new guidance, modification accounting would not apply if a change to an award does not affect the total current fair value, vesting conditions or the classification of the award. This guidance will be effectiveits revenue and cash flows are affected by economic factors for the Company as of January 1, 2018, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.three and six months ended June 30, 2021 and 2020. | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in thousands) | 2021 | 2020 | | 2021 | 2020 |
| Civil segment revenue by end market: | | | | | |
| Mass transit (includes certain transportation and tunneling projects) | $ | 366,534 | | $ | 354,809 | | | $ | 675,409 | | $ | 651,952 | |
| Bridges | 65,775 | | 89,100 | | | 111,942 | | 141,284 | |
| Military defense facilities | 44,585 | | 35,042 | | | 94,121 | | 58,652 | |
| Water | 24,800 | | 29,548 | | | 51,610 | | 53,292 | |
| Highways | 29,726 | | 35,591 | | | 41,052 | | 68,173 | |
| Other | 23,932 | | 24,886 | | | 56,793 | | 82,252 | |
| Total Civil segment revenue | $ | 555,352 | | $ | 568,976 | | | $ | 1,030,927 | | $ | 1,055,605 | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in thousands) | 2021 | 2020 | | 2021 | 2020 |
| Building segment revenue by end market: | | | | | |
| Commercial and industrial facilities | $ | 101,960 | | $ | 106,899 | | | $ | 232,012 | | $ | 239,948 | |
| Hospitality and gaming | 86,145 | | 107,942 | | | 186,712 | | 226,929 | |
| Municipal and government | 74,475 | | 79,223 | | | 146,384 | | 148,725 | |
| Education facilities | 46,143 | | 47,038 | | | 84,460 | | 78,660 | |
| Mass transit (includes transportation projects) | 34,344 | | 66,552 | | | 60,879 | | 124,399 | |
| Mixed use | 16,127 | | 13,101 | | | 35,676 | | 23,073 | |
| Health care facilities | 13,598 | | 32,418 | | | 24,007 | | 68,307 | |
| Other | 9,868 | | 19,848 | | | 19,763 | | 44,744 | |
| Total Building segment revenue | $ | 382,660 | | $ | 473,021 | | | $ | 789,893 | | $ | 954,785 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in thousands) | 2021 | 2020 | | 2021 | 2020 |
| Specialty Contractors segment revenue by end market: | | | | | |
| Mass transit (includes certain transportation and tunneling projects) | $ | 148,045 | | $ | 118,634 | | | $ | 329,208 | | $ | 267,305 | |
| Commercial and industrial facilities | 36,637 | | 20,499 | | | 75,386 | | 74,004 | |
| Multi-unit residential | 30,649 | | 37,611 | | | 73,444 | | 64,104 | |
| Water | 17,514 | | 16,090 | | | 38,668 | | 25,928 | |
| Education facilities | 18,425 | | 10,338 | | | 31,781 | | 26,895 | |
| Mixed use | 13,940 | | 10,536 | | | 23,479 | | 24,338 | |
| Other | 16,021 | | 20,722 | | | 34,052 | | 34,192 | |
| Total Specialty Contractors segment revenue | $ | 281,231 | | $ | 234,430 | | | $ | 606,018 | | $ | 516,766 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, 2021 | | Three Months Ended
June 30, 2020 |
| (in thousands) | Civil | Building | Specialty
Contractors | Total | | Civil | Building | Specialty
Contractors | Total |
| Revenue by customer type: | | | | | |
| State and local agencies | $ | 481,333 | | $ | 92,275 | | $ | 124,080 | | $ | 697,688 | | | $ | 503,828 | | $ | 157,748 | | $ | 113,623 | | $ | 775,199 | |
| Federal agencies | 49,335 | | 49,287 | | 5,704 | | 104,326 | | | 42,590 | | 34,648 | | 11,292 | | 88,530 | |
| Private owners | 24,684 | | 241,098 | | 151,447 | | 417,229 | | | 22,558 | | 280,625 | | 109,515 | | 412,698 | |
| Total revenue | $ | 555,352 | | $ | 382,660 | | $ | 281,231 | | $ | 1,219,243 | | | $ | 568,976 | | $ | 473,021 | | $ | 234,430 | | $ | 1,276,427 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended
June 30, 2021 | | Six Months Ended
June 30, 2020 |
| (in thousands) | Civil | Building | Specialty
Contractors | Total | | Civil | Building | Specialty
Contractors | Total |
| Revenue by customer type: | | | | | |
| State and local agencies | $ | 871,835 | | $ | 168,856 | | $ | 267,004 | | $ | 1,307,695 | | | $ | 899,873 | | $ | 303,764 | | $ | 246,496 | | $ | 1,450,133 | |
| Federal agencies | 100,968 | | 99,648 | | 26,941 | | 227,557 | | | 79,251 | | 66,621 | | 21,048 | | 166,920 | |
| Private owners | 58,124 | | 521,389 | | 312,073 | | 891,586 | | | 76,481 | | 584,400 | | 249,222 | | 910,103 | |
| Total revenue | $ | 1,030,927 | | $ | 789,893 | | $ | 606,018 | | $ | 2,426,838 | | | $ | 1,055,605 | | $ | 954,785 | | $ | 516,766 | | $ | 2,527,156 | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, 2021 | | Three Months Ended
June 30, 2020 |
| (in thousands) | Civil | Building | Specialty
Contractors | Total | | Civil | Building | Specialty
Contractors | Total |
| Revenue by contract type: | | | | | |
| Fixed price | $ | 461,068 | | $ | 95,349 | | $ | 246,290 | | $ | 802,707 | | | $ | 455,928 | | $ | 114,229 | | $ | 205,531 | | $ | 775,688 | |
| Guaranteed maximum price | 498 | | 247,402 | | 2,563 | | 250,463 | | | 281 | | 248,738 | | 4,038 | | 253,057 | |
| Unit price | 88,516 | | (1,564) | | 28,703 | | 115,655 | | | 111,790 | | 629 | | 18,442 | | 130,861 | |
| Cost plus fee and other | 5,270 | | 41,473 | | 3,675 | | 50,418 | | | 977 | | 109,425 | | 6,419 | | 116,821 | |
| Total revenue | $ | 555,352 | | $ | 382,660 | | $ | 281,231 | | $ | 1,219,243 | | | $ | 568,976 | | $ | 473,021 | | $ | 234,430 | | $ | 1,276,427 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended
June 30, 2021 | | Six Months Ended
June 30, 2020 |
| (in thousands) | Civil | Building | Specialty
Contractors | Total | | Civil | Building | Specialty
Contractors | Total |
| Revenue by contract type: | | | | | |
| Fixed price | $ | 880,224 | | $ | 179,798 | | $ | 539,758 | | $ | 1,599,780 | | | $ | 864,899 | | $ | 219,827 | | $ | 454,047 | | $ | 1,538,773 | |
| Guaranteed maximum price | 1,768 | | 517,856 | | 3,693 | | 523,317 | | | 589 | | 486,511 | | 6,587 | | 493,687 | |
| Unit price | 141,249 | | (1,453) | | 57,000 | | 196,796 | | | 183,148 | | 1,163 | | 39,593 | | 223,904 | |
| Cost plus fee and other | 7,686 | | 93,692 | | 5,567 | | 106,945 | | | 6,969 | | 247,284 | | 16,539 | | 270,792 | |
| Total revenue | $ | 1,030,927 | | $ | 789,893 | | $ | 606,018 | | $ | 2,426,838 | | | $ | 1,055,605 | | $ | 954,785 | | $ | 516,766 | | $ | 2,527,156 | |
Changes in Contract Estimates that Impact Revenue
Changes to the total estimated contract revenue or cost for a given project, either due to unexpected events or revisions to management’s initial estimates, are recognized in the period in which they are determined. Revenue was negatively impacted during the three and six month periods ended June 30, 2021 related to performance obligations satisfied (or partially satisfied) in prior periods by $8.9 million and $29.0 million, respectively. Likewise, revenue was negatively impacted during the three and six month periods ended June 30, 2020 related to performance obligations satisfied (or partially satisfied) in prior periods by $19.8 million and $35.6 million, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and exclude unexercised contract options. As of June 30, 2021, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $4.3 billion, $1.5 billion and $1.5 billion for the Civil, Building and Specialty Contractors segments, respectively. As of June 30, 2020, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $5.1 billion, $1.7 billion and $2.2 billion for the Civil, Building and Specialty Contractors segments, respectively. The Company typically recognizes revenue on Civil segment projects over a period of three to five years, whereas for projects in the Building and Specialty Contractors segments, the Company typically recognizes revenue over a period of one to three years.
(4)Contract Assets and Liabilities
The Company classifies contract assets and liabilities that may be settled beyond one year from the balance sheet date as current, consistent with the length of time of the Company’s project operating cycle.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Contract assets include amounts due under retainage provisions, costs and estimated earnings in excess of billings and capitalized contract costs. The amounts as included on the Condensed Consolidated Balance Sheets consisted of the following:
| | | | | | | | |
| (in thousands) | As of June 30,
2021 | As of December 31,
2020 |
| Retainage receivable | $ | 683,966 | | $ | 648,441 | |
| Costs and estimated earnings in excess of billings: | | |
| Claims | 821,206 | | 752,783 | |
| Unapproved change orders | 430,138 | | 415,489 | |
| Other unbilled costs and profits | 95,630 | | 68,462 | |
| Total costs and estimated earnings in excess of billings | 1,346,974 | | 1,236,734 | |
| Capitalized contract costs | 82,625 | | 74,452 | |
| Total contract assets | $ | 2,113,565 | | $ | 1,959,627 | |
Retainage receivable represents amounts invoiced to customers where payments have been partially withheld pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project. Retainage agreements vary from project to project, and balances could be outstanding for several months or years depending on a number of circumstances such as contract-specific terms, project performance and other variables that may arise as the Company makes progress toward completion.
Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. Costs and estimated earnings in excess of billings result when either: (1) the appropriate contract revenue amount has been recognized over time in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract, or (2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. The Company routinely estimates recovery related to claims and unapproved change orders as a form of variable consideration at the most likely amount it expects to receive and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Claims and unapproved change orders are billable upon the agreement and resolution between the contractual parties and after the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions; decreases normally result from resolutions and subsequent billings. As discussed in Note 11, the resolution of these claims and unapproved change orders may require litigation or other forms of dispute resolution proceedings. Other unbilled costs and profits are billable in accordance with the billing terms of each of the existing contractual arrangements and, as such, the timing of contract billing cycles can cause fluctuations in the balance of unbilled costs and profits. Ultimate resolution of other unbilled costs and profits typically involves incremental progress toward contractual requirements or milestones.
Capitalized contract costs primarily represent costs to fulfill a contract that (1) directly relate to an existing or anticipated contract, (2) generate or enhance resources that will be used in satisfying performance obligations in the future and (3) are expected to be recovered through the contract, and are included in other current assets. Capitalized contract costs are generally expensed to the associated contract over the period of anticipated use on the project. During the three and six months ended June 30, 2021, $13.4 million and $25.3 million, respectively, of previously capitalized contract costs were amortized and recognized as expense on the related contracts. During the three and six months ended June 30, 2020, $12.5 million and $22.8 million, respectively, of previously capitalized contract costs were amortized and recognized as expense on the related contracts.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Contract liabilities include amounts owed under retainage provisions and billings in excess of costs and estimated earnings. The amount as reported on the Condensed Consolidated Balance Sheets consisted of the following:
| | | | | | | | |
| (in thousands) | As of June 30,
2021 | As of December 31,
2020 |
| Retainage payable | $ | 331,341 | | $ | 315,135 | |
| Billings in excess of costs and estimated earnings | 764,029 | | 839,222 | |
| Total contract liabilities | $ | 1,095,370 | | $ | 1,154,357 | |
Retainage payable represents amounts invoiced to the Company by subcontractors where payments have been partially withheld pending the completion of certain milestones, other contractual conditions or upon the completion of the project. Generally, retainage payable is not remitted to subcontractors until the associated retainage receivable from customers is collected.
Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date. The balance may fluctuate depending on the timing of contract billings and the recognition of contract revenue. Revenue recognized during the three and six months ended June 30, 2021 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $321.0 million and $458.8 million, respectively. Revenue recognized during the three and six months ended June 30, 2020 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $470.8 million and $565.9 million, respectively.
(5)Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows:
| | | | | | | | |
| (in thousands) | As of June 30,
2021 | As of December 31,
2020 |
| Cash and cash equivalents available for general corporate purposes | $ | 103,523 | | $ | 210,841 | |
| Joint venture cash and cash equivalents | 127,606 | | 163,448 | |
| Cash and cash equivalents | 231,129 | | 374,289 | |
| Restricted cash | 2,884 | | 77,563 | |
| Total cash, cash equivalents and restricted cash | $ | 234,013 | | $ | 451,852 | |
Cash equivalents include short-term, highly liquid investments with maturities of three months or less when acquired. Cash and cash equivalents consist of amounts available for the Company’s general purposes, the Company’s proportionate share of cash held by the Company’s unconsolidated joint ventures and 100% of amounts held by the Company’s consolidated joint ventures. In both cases, cash held by joint ventures is available only for joint venture-related uses, including future distributions to joint venture partners.
Restricted cash includes amounts held as collateral to secure insurance-related contingent obligations, such as insurance claim deductibles, in lieu of letters of credit. As of December 31, 2020, restricted cash also included $69.9 million held to repay the outstanding principal balance of Convertible Notes, as defined in Note 9, which matured on June 15, 2021 and were repaid.
(6)Earnings Per Common Share (EPS) Basic EPSearnings per common share (“EPS”) and diluted EPS are calculated by dividing net income attributable to Tutor Perini Corporation by the following: for basic EPS, the weighted-average number of common shares outstanding during the period; and for diluted EPS, the sum of the weighted-average number of both outstanding common shares and potentially dilutive securities, which for the Company can include restricted stock units, unexercised stock options and the Convertible Notes, as defined in Note 6. The Company calculates9. In accordance with ASC 260, Earnings Per Share, the effectsettlement of these potentially dilutive securities using the treasury stock method. | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands, except per common share amounts) | 2017 | | 2016 | | 2017 | | 2016 |
Net income attributable to Tutor Perini Corporation | $ | 23,584 | | $ | 28,801 | | $ | 67,444 | | $ | 65,561 |
| | | | | | | | | | | |
Weighted-average common shares outstanding, basic | | 49,775 | | | 49,185 | | | 49,602 | | | 49,132 |
Effect of dilutive restricted stock units and stock options | | 812 | | | 915 | | | 1,166 | | | 517 |
Weighted-average common shares outstanding, diluted | | 50,587 | | | 50,100 | | | 50,768 | | | 49,649 |
| | | | | | | | | | | |
Earnings per common share: | | | | | | | | | | | |
Basic earnings per common share | $ | 0.47 | | $ | 0.59 | | $ | 1.36 | | $ | 1.33 |
Diluted earnings per common share | $ | 0.47 | | $ | 0.57 | | $ | 1.33 | | $ | 1.32 |
| | | | | | | | | | | |
Anti-dilutive shares not included above | | 912 | | | 610 | | | 752 | | | 1,339 |
With regard to diluted EPS and the impactprincipal amount of the Convertible Notes has had no impact on the diluted EPS calculation, because the Company has had the intent and ability to settle the principal amount in cash, and upon maturity on June 15, 2021, the Company repaid the remaining principal balance of the Convertible Notes in cash, per Accounting Standards Codification (“ASC”) 260, Earnings Per Share, the settlement
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
cash. See Note 9 for further discussion of the
principal amount has no impact on diluted EPS.(4) Convertible Notes. The Company calculates the effect of the potentially dilutive restricted stock units and stock options using the treasury stock method.
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in thousands, except per common share data) | 2021 | 2020 | | 2021 | 2020 |
| Net income attributable to Tutor Perini Corporation | $ | 31,165 | | $ | 18,709 | | | $ | 47,199 | | $ | 36,080 | |
| | | | | |
| Weighted-average common shares outstanding, basic | 50,999 | | 50,667 | | | 50,956 | | 50,502 | |
| Effect of dilutive restricted stock units and stock options | 376 | | 268 | | | 406 | | 383 | |
| Weighted-average common shares outstanding, diluted | 51,375 | | 50,935 | | | 51,362 | | 50,885 | |
| | | | | |
| Net income attributable to Tutor Perini Corporation per common share: | | | | | |
| Basic | $ | 0.61 | | $ | 0.37 | | | $ | 0.93 | | $ | 0.71 | |
| Diluted | $ | 0.61 | | $ | 0.37 | | | $ | 0.92 | | $ | 0.71 | |
| | | | | |
| Anti-dilutive securities not included above | 1,810 | | 2,209 | | | 1,725 | | 2,209 | |
The Company’s effective income tax rate was 20.4% and 20.9% for the three and ninesix months ended SeptemberJune 30, 2017 was 26.4% and 34.1%, respectively, compared to 39.9% and 40.6% for the three and nine months ended September 30, 2016,2021, respectively. The effective income tax rate for both of the 2017 periods was favorably impacted bylower than the release of tax liabilities as a result of a statute expiration and21% federal statutory rate primarily due to earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company. Company, with the decrease mostly offset by state income taxes (net of the federal tax benefit).
The Company’s effective tax rate for the ninethree and six months ended SeptemberJune 30, 20172020 was also favorably impacted by the tax benefits associated with share-based compensation. During the first quarter of 2017, the Company recognized tax benefits associated with share-based compensation under the provisions of ASU 2016-09, Improvement to Employee Share-Based Payment Accounting23.7% and 20.5%, as discussed in Note 9. This tax benefit is the result of a greater tax deduction for share-based compensation expense for awards that vested or were exercised in the first quarter of 2017 relative to the share-based compensation expense recognized under GAAP for these same awards. respectively. The effective income tax rate for the thirdthree months ended June 30, 2020 was higher than the 21% federal statutory rate primarily due to state income taxes (net of the federal tax benefit), partially offset by earnings attributable to noncontrolling interests. The effective income tax rate for the six months ended June 30, 2020 was lower than the 21% federal statutory rate primarily due to the favorable tax rate differential realized on the 2019 net operating loss carryback under the Coronavirus Aid, Relief, and Economic Security Act and earnings attributable to noncontrolling interests. These favorable tax rate items for the first half of 2020 were partially offset by state income taxes (net of the federal tax benefit) and share-based compensation expense that was not deductible for income tax purposes.
(8)Goodwill and Intangible Assets
Goodwill
The following table presents the changes in the carrying amount of goodwill since its inception through June 30, 2021:
| | | | | | | | | | | | | | |
| (in thousands) | Civil | Building | Specialty
Contractors | Total |
| Gross goodwill as of December 31, 2020 | $ | 492,074 | | $ | 424,724 | | $ | 156,193 | | $ | 1,072,991 | |
| Accumulated impairment as of December 31, 2020 | (286,931) | | (424,724) | | (156,193) | | (867,848) | |
| Goodwill as of December 31, 2020 | 205,143 | | 0 | | 0 | | 205,143 | |
| Current year activity | 0 | | 0 | | 0 | | 0 | |
| Goodwill as of June 30, 2021 | $ | 205,143 | | $ | 0 | | $ | 0 | | $ | 205,143 | |
The Company tests the goodwill allocated to its Civil reporting unit for impairment annually on October 1, or more frequently if events or circumstances indicate it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company performed its annual impairment test in the fourth quarter of
20162020 using a weighted-average of an income and a market approach. These approaches utilize various valuation assumptions, and small changes to the assumptions could have a significant impact on the concluded fair value. Based on this assessment, the Company concluded goodwill was
favorably impacted by return-to-provision adjustments.(5) Costs
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
0t impaired since the estimated fair value of the Civil reporting unit exceeded its carrying value. In addition, the Company determined that no triggering events occurred and Estimated Earningsno circumstances changed since the date of our annual impairment test that would more likely than not reduce the fair value of the Civil reporting unit below its carrying amount.
The Company will continue to monitor events and circumstances for changes that indicate the Civil reporting unit goodwill would need to be reevaluated for impairment during future interim periods prior to the annual impairment test. These future events and circumstances include, but are not limited to, changes in
Excessthe overall financial performance of
BillingsCoststhe Civil reporting unit, impacts to our business as a result of the COVID-19 pandemic, as well as other quantitative and qualitative factors which could indicate potential triggering events for possible impairment.
Intangible Assets
Intangible assets consist of the following:
| | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2021 | | Weighted Average Amortization Period |
| (in thousands) | Cost | Accumulated
Amortization | Accumulated Impairment Charge | Carrying Value | |
| Trade names (non-amortizable) | $ | 117,600 | | $ | — | | $ | (67,190) | | $ | 50,410 | | | Indefinite |
| Trade names (amortizable) | 74,350 | | (24,998) | | (23,232) | | 26,120 | | | 20 years |
| Contractor license | 6,000 | | — | | (6,000) | | — | | | N/A |
| Customer relationships | 39,800 | | (22,630) | | (16,645) | | 525 | | | 12 years |
| Construction contract backlog | 149,290 | | (120,544) | | — | | 28,746 | | | 3 years |
| Total | $ | 387,040 | | $ | (168,172) | | $ | (113,067) | | $ | 105,801 | | | |
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 | | Weighted Average Amortization Period |
| (in thousands) | Cost | Accumulated
Amortization | Accumulated Impairment Charge | Carrying Value | |
| Trade names (non-amortizable) | $ | 117,600 | | $ | — | | $ | (67,190) | | $ | 50,410 | | | Indefinite |
| Trade names (amortizable) | 74,350 | | (23,754) | | (23,232) | | 27,364 | | | 20 years |
| Contractor license | 6,000 | | — | | (6,000) | | — | | | N/A |
| Customer relationships | 39,800 | | (22,103) | | (16,645) | | 1,052 | | | 12 years |
| Construction contract backlog | 149,290 | | (105,001) | | — | | 44,289 | | | 3 years |
| Total | $ | 387,040 | | $ | (150,858) | | $ | (113,067) | | $ | 123,115 | | | |
Amortization expense for the three and six months ended June 30, 2021 was $10.7 million and $17.3 million, respectively. Amortization expense for the three and six months ended June 30, 2020 was $8.8 million and $14.6 million, respectively. As of June 30, 2021, amortization expense is estimated earningsto be $18.1 million for the remainder of 2021, $14.9 million in excess2022, $2.5 million per year for the years 2023 through 2026 and $12.4 million thereafter.
The Company performed its annual impairment test for non-amortizable trade names during the fourth quarter of billings,2020. Based on this assessment, the Company concluded that its non-amortizable trade names were not impaired. In addition, the Company determined that no triggering events occurred and no circumstances changed since the date of our annual impairment test that would indicate impairment of its non-amortizable trade names.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(9)Financial Commitments
Long-Term Debt
Long-term debt as reported on the Condensed Consolidated Balance Sheets consisted of the following:
| | | | | |
| | | | | |
| As of September 30, | | As of December 31, |
(in thousands) | 2017 | | 2016 |
Claims | $ | 505,069 | | $ | 477,425 |
Unapproved change orders | | 295,204 | | | 207,475 |
Other unbilled costs and profits | | 102,039 | | | 146,926 |
Total costs and estimated earnings in excess of billings | $ | 902,312 | | $ | 831,826 |
| | | | | | | | |
| (in thousands) | As of June 30,
2021 | As of December 31,
2020 |
| 2017 Senior Notes | $ | 495,749 | | $ | 495,271 | |
| Term Loan B | 408,414 | | 408,458 | |
| 2020 Revolver | 0 | | 0 | |
Convertible Notes(a) | 0 | | 67,878 | |
| Equipment financing and mortgages | 48,781 | | 47,594 | |
| Other indebtedness | 17,300 | | 6,264 | |
| Total debt | 970,244 | | 1,025,465 | |
Less: Current maturities(a) | 36,941 | | 100,188 | |
| Long-term debt, net | $ | 933,303 | | $ | 925,277 | |
Claims and unapproved change orders are billable upon the resolution of any disputed or open items between the contractual parties and the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions where recovery is concluded to be both probable and reliably estimable; decreases normally result from resolutions and subsequent billings. For both claims and unapproved change orders, the Company recognizes revenue, but
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TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
not profit. Other unbilled costs and profits are billable in accordance with(a)The Company repaid the billing terms of eachremaining principal balance of the existing contractual arrangements and, as such, the timingConvertible Notes at maturity on June 15, 2021. As of contract billing cycles can cause fluctuations inDecember 31, 2020, the balance of unbilled costs and profits. Ultimate resolution of other unbilled costs and profits typically involves the passage of time and, often, incremental progress toward contractual requirements or milestones.
(6) Financial Commitments
Long-Term Debt
Long-term debt consisted of the following as of the dates ofConvertible Notes was included in current maturities on the Condensed Consolidated Balance Sheets presented:
Sheet. | | | | | |
| | | | | |
| As of September 30, | | As of December 31, |
(in thousands) | 2017 | | 2016 |
2017 Senior Notes | $ | 492,545 | | $ | — |
2017 Credit Facility | | 146,942 | | | — |
2010 Senior Notes | | — | | | 298,120 |
2014 Revolver | | — | | | 147,990 |
Term Loan | | — | | | 54,650 |
Convertible Notes | | 159,314 | | | 152,668 |
Equipment financing, mortgages and acquisition-related notes | | 83,156 | | | 101,558 |
Other indebtedness | | 4,319 | | | 4,533 |
Total debt | | 886,276 | | | 759,519 |
Less – current maturities | | (30,951) | | | (85,890) |
Long-term debt, net | $ | 855,325 | | $ | 673,629 |
The following table reconciles the outstanding debt balancebalances to the reported debt balances as of SeptemberJune 30, 20172021 and December 31, 2016:
2020: | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| As of September 30, 2017 | | As of December 31, 2016 |
(in thousands) | Outstanding Long-Term Debt | | Unamortized Discounts and Issuance Costs | | Long-Term Debt, as reported | | Outstanding Long-Term Debt | | Unamortized Discounts and Issuance Costs | | Long-Term Debt, as reported |
2017 Senior Notes | $ | 500,000 | | $ | (7,455) | | $ | 492,545 | | $ | — | | $ | — | | $ | — |
2017 Credit Facility | | 153,500 | | | (6,558) | | | 146,942 | | | — | | | — | | | — |
2010 Senior Notes | | — | | | — | | | — | | | 300,000 | | | (1,880) | | | 298,120 |
2014 Revolver | | — | | | — | | | — | | | 152,500 | | | (4,510) | | | 147,990 |
Term Loan | | — | | | — | | | — | | | 57,000 | | | (2,350) | | | 54,650 |
Convertible Notes | | 200,000 | | | (40,686) | | | 159,314 | | | 200,000 | | | (47,332) | | | 152,668 |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2021 | | As of December 31, 2020 |
| (in thousands) | Outstanding Debt | Unamortized Discounts and Issuance Costs | Debt,
as reported | | Outstanding Debt | Unamortized Discounts and Issuance Costs | Debt,
as reported |
| 2017 Senior Notes | $ | 500,000 | | $ | (4,251) | | $ | 495,749 | | | $ | 500,000 | | $ | (4,729) | | $ | 495,271 | |
| Term Loan B | 422,875 | | (14,461) | | 408,414 | | | 423,938 | | (15,480) | | 408,458 | |
| Convertible Notes | 0 | | 0 | | 0 | | | 69,918 | | (2,040) | | 67,878 | |
Debt Transactions
The unamortized issuance costs related to the 2020 Revolver were $2.4 million and $2.6 million as of June 30, 2021 and December 31, 2020, respectively, and are included in other assets on the Condensed Consolidated Balance Sheets.
2020 Credit Agreement
On August 18, 2020, the Company entered into a new credit agreement (the “2020 Credit Agreement”) with BMO Harris Bank N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders. The 2020 Credit Agreement provides for a $425.0 million term loan B facility (the “Term Loan B”) and a $175.0 million revolving credit facility (the “2020 Revolver”), with sublimits for the issuance of letters of credit and swing line loans up to the aggregate amounts of $75.0 million and $10.0 million, respectively. The Term Loan B will mature on August 18, 2027 and the 2020 Revolver will mature on August 18, 2025, in each case, unless any of the 2017 Senior Notes
are outstanding on January 30, 2025 (which is 91 days prior to the maturity of the 2017 Senior Notes), in which case, both the Term Loan B and the 2020 Revolver will mature on January 30, 2025 (subject to certain further exceptions).
The 2020 Credit Agreement permits the Company to repay any or all borrowings outstanding under the 2020 Credit Agreement at any time prior to maturity without penalty, except that the Company must pay a 1.00% premium in respect to the Term Loan B in connection with any transactions that reduce the yield applicable to the Term Loan B within the first twelve months after August 18, 2020 (subject to certain further exceptions). The 2020 Credit Agreement requires the Company to make regularly scheduled payments of principal on the Term Loan B in quarterly installments equal to 0.25% of the initial principal amount of the Term Loan B. The 2020 Credit Agreement also requires the Company to make prepayments on the Term Loan B in connection with certain asset sales, receipts of insurance proceeds, incurrences of unpermitted indebtedness and annual excess cash flow (subject to certain exceptions).
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Subject to certain exceptions, at any time prior to maturity, the 2020 Credit Agreement provides the Company with the right to increase the commitments under the 2020 Revolver and/or to establish one or more term loan facilities in an aggregate amount up to (i) the greater of $173.5 million and 50% LTM EBITDA (as defined in the 2020 Credit Agreement) plus (ii) additional amounts if (A) in the case of pari passu first lien secured indebtedness, the First Lien Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 1.35:1.00, (B) in the case of junior lien secured indebtedness, the Total Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 3.50:1.00 and (C) in the case of unsecured indebtedness, (x) the Total Net Leverage Ratio does not exceed 3.50:1.00 or (y) the Fixed Charge Coverage Ratio (as defined in the 2020 Credit Agreement) is no less than 2.00:1.00.
Borrowings under the 2020 Credit Agreement bear interest, at the Company’s option, at a rate equal to (i) (a) LIBOR or (b) a base rate (determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 50 basis points and (3) the LIBOR rate for a one-month interest period plus 100 basis points) plus, (ii) an applicable margin. The margin applicable to the Term Loan B is between 4.50% and 4.75% for LIBOR and between 3.50% and 3.75% for base rate (which was initially 4.75% for LIBOR and 3.75% for base rate), and, in each case, is based on the Total Net Leverage Ratio. The margin applicable to the 2020 Revolver is between 4.25% and 4.75% for LIBOR and 3.25% and 3.75% for base rate (which was initially 4.75% for LIBOR and 3.75% for base rate), and, in each case, is based on the First Lien Net Leverage Ratio. In addition to paying interest on outstanding principal under the 2020 Credit Agreement, the Company will pay a commitment fee to the lenders under the 2020 Revolver in respect of the unutilized commitments thereunder. The Company will pay customary letter of credit fees. If a payment or bankruptcy event of default occurs and is continuing, the otherwise applicable margin on overdue amounts will be increased by 2% per annum. The agreement includes provisions for the replacement of LIBOR with an alternative benchmark rate in the event LIBOR is discontinued. The weighted-average annual interest rate on borrowings under the 2020 Revolver was 6.50% during the six months ended June 30, 2021.
The 2020 Credit Agreement requires, with respect to the 2020 Revolver only, the Company and its restricted subsidiaries to maintain a maximum First Lien Net Leverage Ratio of 2.75:1:00, stepping down to 2.25:1.00 beginning the quarter ending March 31, 2022. The 2020 Credit Agreement also includes certain customary representations and warranties, affirmative covenants and events of default. Subject to certain exceptions, substantially all of the Company’s existing and future material wholly-owned subsidiaries unconditionally guarantee the obligations of the Company under the 2020 Credit Agreement; additionally, subject to certain exceptions, the obligations are secured by a lien on substantially all of the assets of the Company and its subsidiaries guaranteeing these obligations.
As of June 30, 2021, the entire $175 million was available under the 2020 Revolver and the Company had not utilized the 2020 Revolver for letters of credit. The Company was in compliance with the financial covenants under the 2020 Credit Agreement for the period ended June 30, 2021.
Termination of 2017 Credit Facility
On August 18, 2020, the Company used proceeds from the Term Loan B to repay outstanding amounts under its credit agreement (the “2017 Credit Facility”) with SunTrust Bank, now known as Truist Bank, as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders, at which time the 2017 Credit Facility was terminated.
Repurchase and Repayment of Convertible Notes
On June 15, 2016, the Company issued $200 million of 2.875% Convertible Senior Notes due June 15, 2021 (the “Convertible Notes”) in a private placement offering. On August 19, 2020, the Company used proceeds from the Term Loan B to repurchase $130.1 million aggregate principal amount of the Convertible Notes for an aggregate purchase price of $132.4 million (including accrued and unpaid interest to the repurchase date). The Company repaid the remaining $69.9 million principal balance of the Convertible Notes at maturity on June 15, 2021 using proceeds from the Term Loan B, which were held in a restricted cash account for this purpose. None of the Convertible Notes remained outstanding as of June 30, 2021.
2017 Senior Notes
On April 20, 2017, the Company issued $500 million in aggregate principal amount of 6.875% Senior Notes due
May 1, 2025 (the “2017 Senior Notes”) in a private
placement.placement offering. Interest on the 2017 Senior Notes is payable in arrears semi-annually in May and November of each year, beginning in November 2017.
Prior to May 1, 2020, the Company may redeem the 2017 Senior Notes at a redemption price equal to 100%
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The Company may redeem the 2017 Senior Notes at specified redemption prices described in the indenture. Upon a change of control, holders of the 2017 Senior Notes may require the Company to repurchase all or part of the 2017 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.
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TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The 2017 Senior Notes are senior unsecured obligations of the Company and are guaranteed by substantially all of the Company’s existing and future subsidiaries that also guarantee obligations under the Company’s 20172020 Credit Facility,Agreement, as defined below.above. In addition, the indenture for the 2017 Senior Notes provides for customary covenants, including events of default and restrictions on the payment of dividends and share repurchases.
2017 Credit Facility
On April 20, 2017, the Company entered into a credit agreement (the “2017 Credit Facility”) with SunTrust Bank as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2017 Credit Facility provides for a $350 million revolving credit facility (the “2017 Revolver”) and a sublimit for the issuance of letters of credit and swingline loans up to the aggregate amount of $150 million and $10 million, respectively, both maturing on April 20, 2022, unless any of the Convertible Notes, as defined below, are outstanding on December 17, 2020, in which case all such borrowings will mature on December 17, 2020 (subject to certain further exceptions). In addition, the 2017 Credit Facility permits additional borrowings in an aggregate amount of $150 million, which can be in the form of increased capacity on the 2017 Revolver or the establishment of one or more term loans.
Borrowings under the 2017 Revolver bear interest, at the Company’s option, at a rate equal to a margin over (a) the London Interbank Offered Rate (“LIBOR”) plus a margin of between 1.50% and 3.00% or (b) a base rate (determined by reference to the highest of (i) the administrative agent’s prime lending rate, (ii) the federal funds effective rate plus 50 basis points, (iii) the LIBOR rate for a one-month interest period plus 100 basis points and (iv) 0%), plus a margin of between 0.50% and 2.00%, in each case based on the Consolidated Leverage Ratio (as defined in the 2017 Credit Facility). In addition to paying interest on outstanding principal under the 2017 Credit Agreement, the Company will pay a commitment fee to the lenders under the 2017 Revolver in respect of the unutilized commitments thereunder. The Companywill pay customary letter of credit fees. If an event of default occurs and is continuing, the otherwise applicable margin and letter of credit fees will be increased by 2% per annum. The weighted-average annual interest rate on borrowings under the 2017 Revolver was approximately 3.86% during the first nine months of 2017.
The 2017 Credit Facility contains customary covenants for credit facilities of this type, including maximum consolidated leverage ratios ranging from 4.00:1.00 to 3.25:1.00 over the life of the facility and a minimum consolidated fixed charge coverage ratio of 1.25:1.00. Substantially all of the Company’s subsidiaries unconditionally guarantee the obligations of the Company under the 2017 Credit Facility; additionally, the obligations are secured by a lien on all personal property of the Company and its subsidiaries guaranteeing these obligations.
As of September 30, 2017, there was $197 million available under the 2017 Revolver, and the Company had not utilized the 2017 Credit Facility for letters of credit. The Company was in compliance with the financial covenants under the 2017 Credit Facility as of September 30, 2017.
Repurchase and Redemption of 2010 Senior Notes and Termination of 2014 Credit Facility
On April 20, 2017, the Company used proceeds from the 2017 Senior Notes and 2017 Revolver to repurchase or redeem its 2010 Senior Notes, to pay off its Term Loan and 2014 Revolver, and to pay accrued but unpaid interest and fees. In addition, the indenture governing the 2010 Senior Notes was satisfied and discharged, and the Company terminated the 2014 Credit Facility.
2010 Senior Notes
On October 20, 2010, the Company issued $300 million of 7.625% Senior Notes due November 1, 2018 (the “2010 Senior Notes”) in a private placement offering. As discussed above, on April 20, 2017, the Company repurchased or redeemed the 2010 Senior Notes in full and the related indenture was satisfied and discharged.
2014 Credit Facility
On June 5, 2014, the Company entered into a Sixth Amended and Restated Credit Agreement, as amended (the “2014 Credit Facility”), with Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2014 Credit Facility provided for a $300 million revolving credit facility (the “2014 Revolver”), a $250 million term loan (the “Term Loan”) and a sublimit for the issuance of letters of credit up to the aggregate amount of $150 million, all maturing on May 1, 2018. Borrowings under both the 2014 Revolver and the Term Loan bore interest based either on Bank of America’s prime lending rate or the London Interbank Offered Rate (“LIBOR”), each plus an applicable margin ranging from 1.25% to 3.00%, contingent upon the latest Consolidated Leverage Ratio.
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TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
As discussed above, on April 20, 2017, the Company repaid all borrowings under the 2014 Credit Facility and concurrently terminated the facility.
Convertible Notes
On June 15, 2016, the Company issued $200 million of 2.875% Convertible Senior Notes due June 15, 2021 (the “Convertible Notes”) in a private placement offering. The Convertible Notes are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company. The Convertible Notes bear interest at a rate of 2.875% per year, payable in cash semi-annually in June and December.
Prior to January 15, 2021, the Convertible Notes will be convertible only under the following circumstances: (1) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for such trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (2) if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion rate of 33.0579 (or $39.32) on each applicable trading day; or (3) upon the occurrence of specified corporate events. On or after January 15, 2021 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
The Convertible Notes will be convertible at an initial conversion rate of 33.0579 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $30.25. The conversion rate will be subject to adjustment for some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company is required to increase, in certain circumstances, the conversion rate for a holder who elects to convert their Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” described in the indenture. Upon conversion, and at the Company’s election, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock. As of September 30, 2017, the conversion provisions of the Convertible Notes have not been triggered.
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TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Interest Expense
Interest expense as reported in the Condensed Consolidated Statements of Operations consistsIncome consisted of the following:
| | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in thousands) | 2021 | 2020 | | 2021 | 2020 |
| Cash interest expense: | | | | | |
| Interest on 2017 Senior Notes | $ | 8,593 | | $ | 8,593 | | | $ | 17,187 | | $ | 17,187 | |
| Interest on Term Loan B | 6,115 | | N/A | | 12,209 | | N/A |
| Interest on 2020 Revolver | 552 | | N/A | | 673 | | N/A |
| Interest on 2017 Credit Facility | N/A | 2,338 | | | N/A | 4,753 | |
| Interest on Convertible Notes | 418 | | 1,438 | | | 921 | | 2,875 | |
| Other interest | 409 | | 535 | | | 890 | | 1,039 | |
| Total cash interest expense | 16,087 | | 12,904 | | | 31,880 | | 25,854 | |
| | | | | |
Non-cash interest expense:(a) | | | | | |
| Amortization of discount and debt issuance costs on Convertible Notes | 941 | | 2,933 | | | 2,040 | | 5,797 | |
| Amortization of discount and debt issuance costs on Term Loan B | 527 | | N/A | | 1,066 | | N/A |
| Amortization of debt issuance costs on 2020 Revolver | 142 | | N/A | | 284 | | N/A |
| Amortization of debt issuance costs on 2017 Credit Facility | N/A | 402 | | | N/A | 804 | |
| Amortization of debt issuance costs on 2017 Senior Notes | 241 | | 225 | | | 478 | | 445 | |
| Total non-cash interest expense | 1,851 | | 3,560 | | | 3,868 | | 7,046 | |
| | | | | |
| Total interest expense | $ | 17,938 | | $ | 16,464 | | | $ | 35,748 | | $ | 32,900 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
Cash interest expense: | | | | | | | | | | | |
Interest on 2017 Senior Notes | $ | 8,593 | | $ | — | | $ | 15,373 | | $ | — |
Interest on 2017 Credit Facility | | 2,035 | | | — | | | 3,526 | | | — |
Interest on 2010 Senior Notes | | — | | | 5,719 | | | 6,926 | | | 17,156 |
Interest on 2014 Credit Facility | | — | | | 3,553 | | | 4,455 | | | 15,943 |
Interest on Convertible Notes | | 1,438 | | | 1,438 | | | 4,313 | | | 1,677 |
Other interest | | 802 | | | 556 | | | 2,495 | | | 2,755 |
Cash portion of loss on extinguishment | | — | | | — | | | 1,913 | | | — |
Total cash interest expense | | 12,868 | | | 11,266 | | | 39,001 | | | 37,531 |
| | | | | | | | | | | |
Non-cash interest expense:(a) | | | | | | | | | | | |
Amortization of debt issuance costs on 2017 Senior Notes | | 185 | | | — | | | 326 | | | — |
Amortization of debt issuance costs on 2017 Credit Facility | | 322 | | | — | | | 603 | | | — |
Amortization of discount and debt issuance costs on 2010 Senior Notes | | — | | | 251 | | | 308 | | | 750 |
Amortization of debt issuance costs on 2014 Credit Facility | | — | | | 1,458 | | | 1,703 | | | 3,969 |
Amortization of discount and debt issuance costs on Convertible Notes | | 2,268 | | | 2,066 | | | 6,646 | | | 2,405 |
Non-cash portion of loss on extinguishment | | — | | | — | | | 5,139 | | | — |
Total non-cash interest expense | | 2,775 | | | 3,775 | | | 14,725 | | | 7,124 |
| | | | | | | | | | | |
Total interest expense | $ | 15,643 | | $ | 15,041 | | $ | 53,726 | | $ | 44,655 |
(a)The combination of cash and non-cash interest expense produces effective interest rates that are higher than contractual rates. Accordingly, the effective interest rates for the 2017 Senior Notes, Term Loan B and the Convertible Notes were 7.13%, 6.49% and 9.39%, respectively, for the ninesix months ended SeptemberJune 30, 2017.
(7) Contingencies2021.(10)Leases
The Company leases certain office space, construction and office equipment, vehicles and temporary housing generally under non-cancelable operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet, and the Company generally recognizes lease expense for these leases on a straight-line basis over the lease term. As of June 30, 2021, the Company’s operating leases have remaining lease terms ranging from less than one year to 17 years, some of which include options to renew the leases. The exercise of lease renewal options is generally at the Company’s sole discretion. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The following table presents components of lease expense for the three and six months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in thousands) | 2021 | 2020 | | 2021 | 2020 |
| Operating lease expense | $ | 3,707 | | $ | 3,661 | | | $ | 7,425 | | $ | 7,428 | |
Short-term lease expense(a) | 18,301 | | 23,056 | | | 39,426 | | 40,321 | |
| 22,008 | | 26,717 | | | 46,851 | | 47,749 | |
| Less: Sublease income | 176 | | 329 | | | 346 | | 658 | |
| Total lease expense | $ | 21,832 | | $ | 26,388 | | | $ | 46,505 | | $ | 47,091 | |
(a)Short-term lease expense includes all leases with lease terms ranging from less than one month to one year. Short-term leases include, among other things, construction equipment rented on an as-needed basis as well as temporary housing.
The following table presents supplemental balance sheet information related to operating leases:
| | | | | | | | | | | |
| (dollars in thousands) | Balance Sheet Line Item | As of June 30,
2021 | As of December 31,
2020 |
| Assets | | | |
| Right-of-use assets | Other assets | $ | 57,265 | | $ | 55,897 | |
| Total lease assets | | $ | 57,265 | | $ | 55,897 | |
| Liabilities | | | |
| Current lease liabilities | Accrued expenses and other current liabilities | $ | 8,332 | | $ | 7,661 | |
| Long-term lease liabilities | Other long-term liabilities | 52,667 | | 51,336 | |
| Total lease liabilities | | $ | 60,999 | | $ | 58,997 | |
| Weighted-average remaining lease term | | 11.9 years | 12.5 years |
| Weighted-average discount rate | | 9.39 | % | 9.22 | % |
The following table presents supplemental cash flow information and non-cash activity related to operating leases:
| | | | | | | | |
| Six Months Ended
June 30, |
| (in thousands) | 2021 | 2020 |
| Operating cash flow information: | | |
| Cash paid for amounts included in the measurement of lease liabilities | $ | (6,855) | | $ | (7,386) | |
| Non-cash activity: | | |
| Right-of-use assets obtained in exchange for lease liabilities | $ | 5,780 | | $ | 4,923 | |
The following table presents maturities of operating lease liabilities on an undiscounted basis as of June 30, 2021:
| | | | | |
Year (in thousands) | Operating Leases |
| 2021 (excluding the six months ended June 30, 2021) | $ | 6,803 | |
| 2022 | 12,192 | |
| 2023 | 9,384 | |
| 2024 | 7,518 | |
| 2025 | 6,704 | |
| Thereafter | 66,403 | |
| Total lease payments | 109,004 | |
| Less: Imputed interest | 48,005 | |
| Total | $ | 60,999 | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(11)Commitments and Contingencies
The Company and certain of its subsidiaries are involved in litigation and areother legal proceedings and forms of dispute resolution in the ordinary course of business, including but not limited to disputes over contract payment and/or performance-related issues (such as disagreements regarding delay or a change in the scope of work of a project and/or the price associated with that change) and other matters incidental to the Company’s business. In accordance with ASC 606, the Company makes assessments of these types of matters on a routine basis and, to the extent permitted by ASC 606, estimates and records recovery related to these matters as a form of variable consideration at the most likely amount the Company expects to receive, as discussed further in Note 4. In addition, the Company is contingently liable for commitmentslitigation, performance guarantees and performance guaranteesother commitments arising in the ordinary course of business. The Companybusiness, which are accounted for in accordance with ASC 450, Contingencies. Management reviews these matters regularly and certain ofupdates or revises its customers have made claims arising from the performance under their contracts. The Company recognizes certain significant claims for recovery of incurred cost when it is probable that the claim will result in additional contract revenueestimates as warranted by subsequent information and when the amount of the claim can be reliably estimated.developments. These assessments require judgments concerning matters that are inherently uncertain, such as litigation developments and outcomes, the anticipated outcome of negotiations the number of future claims, and the estimated cost of both pendingresolving disputes. Consequently, these assessments are estimates, and future claims.actual amounts may vary from such estimates. In addition, because most contingenciessuch matters are typically resolved over long periods of time, the Company’s assets and liabilities may change inover time should the future due to various factors.circumstances dictate. The description of the legal proceedings listed below include management’s assessment of those proceedings. Management believes that, based on current information and discussions with the Company’s legal counsel, the ultimate resolution of theseother matters is not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.Several matters are in the litigation and dispute resolution process. The following discussion provides a background and current status
A description of the
more significant matters.Long Island Expressway/Cross Island Parkway Matter
The Company reconstructed the Long Island Expressway/Cross Island Parkway Interchange for the New York State Department of Transportation (the “NYSDOT”). The $130 million project was substantially completed in January 2004 and was accepted by the NYSDOT as complete in February 2006. The Company incurred significant added costs in completing its work and suffered extended schedule costs due to numerous design errors, undisclosed utility conflicts, lack of coordination with local agencies andmaterial pending legal proceedings, other interferences for which the Company believes the NYSDOT is responsible.
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In March 2011, the Company filed its claim and complaint with the New York State Court of Claims and servedthan ordinary routine litigation incidental to the New York State Attorney General’s Office, seeking damages in the amount of $53.8 million. In May 2011, the NYSDOT filed a motion to dismiss the Company’s claim on the grounds that the Company had not provided required documentation for project closeout and filing of a claim. In September 2011, the Company reached agreement on final payment with the Comptroller’s Office on behalf of the NYSDOT, which resulted in an amount of $0.5 million payable to the Company and formally closed out the project allowing the Company to re-file its claim. The Company re-filed its claim in the amount of $53.8 million with the NYSDOT in February 2012 and with the Court of Claims in March 2012. In May 2012, the NYSDOT served its answer and counterclaims in the amount of $151 million alleging fraud in the inducement and punitive damages related to disadvantaged business enterprise (“DBE”) requirements for the project. The Court subsequently ruled that NYSDOT’s counterclaims may only be assertedis as a defense and offset to the Company’s claims and not as affirmative claims. In November 2014, the Appellate Division First Department affirmed the dismissal of the City’s affirmative defenses and affirmative counterclaims based on DBE fraud. The Company does not expect the counterclaims to have any material effect on its consolidated financial statements.
Management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.
Fontainebleau Matter
Desert Mechanical, Inc. (“DMI”) and Fisk Electric Company (“Fisk”), wholly owned subsidiaries of the Company, were subcontractors on the Fontainebleau Project in Las Vegas (“Fontainebleau”), a hotel/casino complex with approximately 3,800 rooms. In June 2009, Fontainebleau filed for bankruptcy protection, under Chapter 11 of the U.S. Bankruptcy Code, in the Southern District of Florida.
DMI and Fisk filed liens in Nevada for approximately $44 million, representing unreimbursed costs to date and lost profits, including anticipated profits. Other unaffiliated subcontractors have also filed liens. In June 2009, DMI filed suit against Turnberry West Construction, Inc., the general contractor, in the 8th Judicial District Court, Clark County, Nevada (the “District Court”), and in May 2010, the court entered an order in favor of DMI for approximately $45 million.
In January 2010, the Bankruptcy Court approved the sale of the property to Icahn Nevada Gaming Acquisition, LLC, and this transaction closed in February 2010. As a result of a July 2010 ruling relating to certain priming liens, there was approximately $125 million set aside from this sale that is available for distribution to satisfy the creditor claims based on seniority. At that time, the total estimated sustainable lien amount was approximately $350 million. The project lender filed suit against the mechanic’s lien claimants, including DMI and Fisk, alleging that certain mechanic’s liens are invalid and that all mechanic’s liens are subordinate to the lender’s claims against the property. The Nevada Supreme Court ruled in October 2012 in an advisory opinion at the request of the Bankruptcy Court that lien priorities would be determined in favor of the mechanic lien holders under Nevada law.
In October 2013, a settlement was reached by and among the Statutory Lienholders and the other interested parties. The Bankruptcy Court appointed a mediator to facilitate the execution of that settlement agreement, but the parties were unable to settle. During the third quarter of 2017, DMI filed a motion seeking permission to file an action in Nevada; the motion was granted by the Bankruptcy Court.
Management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.
Honeywell Street/Queens Boulevard Bridges Matter
In 1999, the Company was awarded a contract for reconstruction of the Honeywell Street/Queens Boulevard Bridges project for the City of New York (the “City”). In June 2003, after substantial completion of the project, the Company initiated an action to recover $8.8 million in claims against the City on behalf of itself and its subcontractors. In March 2010, the City filed counterclaims for $74.6 million and other relief, alleging fraud in connection with the DBE requirements for the project. In May 2010, the Company served the City with its response to the City’s counterclaims and affirmative defenses. In August 2013, the Court granted the Company’s motion to dismiss the City’s affirmative defenses and counterclaims relating to fraud.
follows:
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In January 2017, the Court granted the City’s motion for summary judgment and dismissed the Company’s claim against the City. The Company has filed a notice of appeal. The Court also granted the Company’s motion for summary judgment for release of retention plus interest from 2010 for an aggregate amount of approximately $1.2 million.
The Company does not expect ultimate resolution of this matter to have a material effect on its consolidated financial statements.
Westgate Planet Hollywood Matter
Tutor-Saliba Corporation (“TSC”), a wholly owned subsidiary of the Company, was contracted to construct a timeshare development project in Las Vegas, which was substantially completed in December 2009. The Company’s claims against the owner, Westgate Planet Hollywood Las Vegas, LLC (“WPH”), relate to unresolved owner change orders and other claims. The Company filed a lien on the project in the amount of $23.2 million and filed its complaint with the District Court, Clark County, Nevada. Several subcontractors have also recorded liens, some of which have been released by bonds and some of which have been released as a result of subsequent payment. WPH has posted a mechanic’s lien release bond for $22.3 million.
WPH filed a cross-complaint alleging non-conforming and defective work for approximately $51 million, primarily related to alleged defects, misallocated costs and liquidated damages. WPH revised the amount of their counterclaims to approximately $45 million.
Following multiple post-trial motions, final judgment was entered in this matter on March 20, 2014. TSC was awarded total judgment in the amount of $19.7 million on its breach of contract claim, which includes an award of interest up through the date of judgment, plus attorney’s fees and costs. WPH was awarded total judgment in the amount of $3.1 million on its construction defect claims, which includes interest up through the date of judgment. WPH and its Sureties have filed a notice of appeal. TSC has filed a notice of appeal on the defect award. In July 2014, the Court ordered WPH to post an additional supersedeas bond on appeal, in the amount of $1.7 million, in addition to the lien release bond of $22.3 million, which increases the security up to $24.0 million. In May 2017, the Nevada Supreme Court issued its ruling on the appeal by WPH and its Sureties. With only minor adjustments, the Nevada Supreme Court affirmed the lower district court’s judgment, and following further proceedings in the lower district court, the anticipated final recovery to the Company is estimated to exceed $20 million, including interest and recovery of certain attorneys’ fees and costs.
The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements. Management has made an estimate of the total anticipated recovery on this project and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.
U.S. Department of Commerce, National Oceanic and Atmospheric Administration Matter
Rudolph and Sletten, Inc. (“R&S”), a wholly owned subsidiary of the Company, entered into a contract with the United States Department of Commerce, National Oceanic and Atmospheric Administration (“NOAA”) for the construction of a 287,000 square-foot facility for NOAA’s Southwest Fisheries Science Center Replacement Headquarters and Laboratory in La Jolla, California. The contract work began on May 24, 2010 and was substantially completed in September 2012. R&S incurred significant additional costs as a result of design errors and omissions, NOAA’s unwillingness to correct design flaws in a timely fashion and a refusal to negotiate the time and pricing associated with change order work. R&S filed claims against NOAA for contract adjustments related to the unresolved owner change orders, delays, design deficiencies and other claims.
In March 2017, the parties agreed to a proposed settlement, which was subsequently approved and paid by the government in the third quarter of 2017. The settlement did not have a material impact on the Company’s financial results for the three and nine months ended September 30, 2017.
Five Star Electric Matter
In the third quarter of 2015, Five Star Electric Corp.
("(“Five
Star"Star”), a wholly owned subsidiary of the Company that was acquired in 2011, entered into a tolling agreement (which has since expired) related to an ongoing investigation being conducted by the United States Attorney’s Office for the Eastern District of New York (“USAO EDNY”). Five Star has been cooperating with the USAO EDNY since late June 2014, when it was first made aware of the investigation, and has provided information requested by the government related to its use of certain minority-owned, women-owned, small and disadvantaged business enterprises and certain of Five Star’s employee compensation, benefit and tax practices.
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As of SeptemberJune 30, 2017,2021, the Company cannot predict the ultimate outcome of the investigation and cannot reasonably estimatehas concluded that the potential loss or range of loss thatfor a material adverse financial impact on Five Star or the Company may incur or the impact of the resultsas a result of the investigation on Five Star or the Company.
is remote.
Alaskan Way Viaduct Matter
In January 2011, Seattle Tunnel Partners (“STP”), a joint venture between Dragados USA, Inc. and the Company, entered into a design-build contract with the Washington State Department of Transportation (“WSDOT”) for the construction of a
large diameterlarge-diameter bored tunnel in downtown Seattle, King County, Washington to replace the Alaskan Way Viaduct, also known as State Route 99.
The Company has a 45% interest in STP.
The construction of the
large diameterlarge-diameter bored tunnel required the use of a tunnel boring machine (“TBM”). In December 2013, the TBM struck a steel pipe, installed by WSDOT as a well casing for an exploratory well. The TBM was
significantly damaged and was required to be
shut down for repair.repaired. STP has asserted that the steel pipe casing was a differing site condition that WSDOT failed to properly disclose. The Disputes Review Board mandated by the contract to hear disputes issued a decision finding the steel casing was a Type I
(material) differing site condition. WSDOT
hasdid not
acceptedaccept that finding.
The TBM was insured under a Builder’s Risk Insurance Policy (the “Policy”) with Great Lakes Reinsurance (UK) PLC and a consortium of other insurers (the “Insurers”). STP submitted the claims to the Insurers and requested interim payments under the Policy. The Insurers refused to pay and denied coverage. In June 2015, STP filed a lawsuit in the King County Superior Court, State of Washington
(“Washington Superior Court”) seeking declaratory relief concerning contract interpretation, as well as damages as a result of the Insurers’ breach of their obligations under the terms of the Policy.
STP is also asserting extra-contractual and statutory claims against the Insurers. STP submitted damages to the Insurers in the King County lawsuit in the amount of $532 million. WSDOT is deemed a plaintiff since WSDOT is an insured under the Policy and had filed its own claim for damages. Hitachi Zosen (“Hitachi”), the manufacturer of the TBM,
has also joined the case as a plaintiff for costs incurred to repair the damages to the TBM.
Trial is scheduledIn September 2018, rulings received on pre-trial motions effectively limited potential recovery under the Policy for
October 2018. Discovery is ongoing.STP, WSDOT
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and Hitachi. On August 2, 2021, the Court of Appeal reversed in part and affirmed in part the effective limitations in the September 2018 rulings. STP also sought $532 million of damages from WSDOT related to the pipe-strike by the TBM in a related lawsuit in Thurston County (see following paragraph).
In March 2016, WSDOT filed a complaint against STP in Thurston County Superior Court foralleging breach of contract, alleging STP’s delaysseeking $57.2 million in delay-related damages and failure to perform andseeking declaratory relief concerning contract interpretation. STP filed its answer to WSDOT’s complaint and filed a counterclaim against WSDOT and Hitachi. TrialHitachi, as the TBM designer, seeking damages of $667 million. On October 3, 2019, STP and Hitachi entered into a settlement agreement which released and dismissed the claims that STP and Hitachi had against each other. The jury trial between STP and WSDOT commenced on October 7, 2019 and concluded on December 13, 2019, with a jury verdict in favor of WSDOT awarding them $57.2 million in damages. Judgment was entered on January 10, 2020, and a notice of appeal was filed by STP on January 17, 2020.
The Company recorded the impact of the jury verdict during the fourth quarter of 2019, resulting in a pre-tax charge of $166.8 million. The charge includes a pre-tax accrual of $25.7 million (which is setthe Company’s 45% proportionate share of the $57.2 million in damages awarded by the jury to WSDOT). Payment of damages will only be made if the adverse verdict is upheld on appeal, as the payment is secured by a bond for the course of the appeal. Other than the possible future payment in cash of $25.7 million in damages, the charge was for non-cash write-downs primarily related to the costs and estimated earnings in excess of billings and receivables that the Company previously recorded to reflect its expected recovery in this case.
With respect to STP’s direct and indirect claims against the Insurers, management has included in receivables an estimate of the total anticipated recovery concluded to be probable.
George Washington Bridge Bus Station Matter
In August 2013, Tutor Perini Building Corp. (“TPBC”) entered into a contract with the George Washington Bridge Bus Station Development Venture, LLC (the “Developer”) to renovate the George Washington Bridge Bus Station, a mixed-use facility owned by the Port Authority of New York and New Jersey (the “Port Authority”) that serves as a transit facility and retail space. The $100 million project experienced significant design errors and associated delays, resulting in damages to TPBC and its subcontractors, including WDF and Five Star, wholly owned subsidiaries of the Company. The project reached substantial completion on May 16, 2017.
On February 26, 2015, the Developer filed a demand for arbitration, subsequently amended, seeking $30 million in alleged damages and declaratory relief that TPBC’s requests for additional compensation are invalid due to lack of notice. TPBC denied the Developer’s claims and filed a counterclaim in March 2018. TPBC seeks in excess of $113 million in the arbitration, which includes unpaid contract balance claims, the return of $29 million retained by the Developer in alleged damages, as well as extra work claims, pass-through claims and delay claims.
Hearings on the merits commenced on September 24, 2018 before the arbitration panel. On June
2018. Discovery is ongoing.4, 2019, the arbitration panel, as confirmed by the U.S. District Court in the Southern District of New York, issued a writ of attachment for $23 million of the $29 million discussed above. On October 7, 2019, the Developer filed for bankruptcy protection in the Southern District of New York under Chapter 11 of the Bankruptcy Code. The filing for bankruptcy stayed the pending arbitration proceedings. TPBC appeared in the bankruptcy proceedings on October 8, 2019 and filed a Proof of Claim in the amount of $113 million on December 13, 2019.
On June 5, 2020, the Developer, secured lenders and the Port Authority announced that they had reached a settlement of their disputes. As part of the settlement, the Port Authority waived the enforcement of its right to seek a “cure” pursuant to its lease agreement with the Developer which requires construction costs be paid prior to any sale of the leasehold, the sole asset in the Developer’s bankruptcy estate to be distributed in this bankruptcy. On July 14, 2020, the bankruptcy court conducted a hearing to determine (1) whether to approve the settlement agreement between the Developer, secured lenders and the Port Authority; and (2) whether TPBC can assert third-party beneficiary rights to the lease agreement and require that prior to the sale of the leasehold, any outstanding costs owed to contractors for the cost of building the project must be paid pursuant to the lease agreement’s “cure” provisions. On August 12, 2020, the bankruptcy court approved the settlement and denied TPBC’s third-party beneficiary rights under the lease agreement. On August 20, 2020, TPBC filed an appeal with the U.S. District Court for the Southern District of New York seeking to challenge the denial of its third-party beneficiary rights under the lease agreement’s “cure” provisions to avoid being subordinate to the claims of the secured lenders in the bankruptcy proceedings. The appeal was heard on March 12, 2021, and a decision remains pending with the District Court.
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Separately, on July 2, 2018, TPBC filed a lawsuit against the Port Authority, as owner of the project, seeking the same $113 million in damages pursuant to the lease agreement between the Port Authority and the Developer. On August 20, 2018, the Port Authority filed a motion to dismiss all causes of action, which was denied by the court on July 1, 2019. The Port Authority appealed this decision on July 15, 2019. On February 18, 2021, the Appellate Division affirmed in part and reversed in part the trial court's denial of the Port Authority's motion to dismiss TPBC’s causes of action. On March 29, 2021, the Port Authority filed a new motion to dismiss on additional grounds.
On January 27, 2020, TPBC filed separate litigation in the U.S. District Court for the Southern District of New York in which TPBC asserted related claims against individual owners of the Developer for their wrongful conversion of project funds and against lenders that received interest payments from project funds and other amounts earmarked to pay the contractors. On June 1, 2020, the defendants filed motions to dismiss, which were granted in part and denied in part, resulting in the lender defendants being dismissed from the lawsuit and the lawsuit against the individual owners of the Developer continuing.
As of SeptemberJune 30, 2017,2021, the Company has concluded that the potential for a material adverse financial impact due to the Insurers’ denial of coverage and WSDOT’s legal actionsDeveloper’s claims is neither probable nor remote, and the potential loss or range of loss is not reasonably estimable.remote. With respect to STP’sTPBC’s claims against the Insurers, WSDOTDeveloper, its owners, certain lenders and Hitachi,the Port Authority, management has includedmade an estimate of the total anticipated recovery concluded to be both probableon this project, and reliably estimable,such estimate is included in receivables or costs and estimated earnings in excess of billingsrevenue recorded to date. To the extent new facts become known or the final recoveries vary from the estimate, the impact
(12)Share-Based Compensation
As of
the change will be reflected in the financial statements at that time.(8) Other Income, Net
On May 31, 2017, the Company entered into a settlement agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), as successor in interest to BancJune 30, 2021, there were 1,307,945 shares of America Securities LLC and Bank of America, N.A. (collectively “BofA”), to resolve the pending litigation between the Company and Merrill Lynch. The litigation, which was filed by the Company in 2011, related to the purchase by the Company of certain auction-rate securities from BofA.
On June 6, 2017, the Company received the $37.0 million cash settlement payment agreed to in the settlement agreement, and the pending litigation was dismissed with prejudice. Neither party made any admission of liability or wrongdoing, and the settlement agreement includes mutual releases of all claims and liabilities related to the subject matter of the pending litigation.
The Company recognized the settlement as a gain during the second quarter of 2017 and reported it as a component of other income, net in its Condensed Consolidated Statement of Operationscommon stock available for the nine months ended September 30, 2017.
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(9) Share-Based Compensation
On April 3, 2017, the Company adoptedgrant under the Tutor Perini Corporation Omnibus Incentive Compensation Plan (“Compensation Plan”), which was approved by the Company’s shareholders on May 24, 2017. The Compensation Plan provides for various types of share-based grants, including restricted and unrestricted stock units and stock options. Restricted and unrestricted stock units give the holder the right to exchange their stock units for shares of the Company’s common stock on a one-for-one basis. Stock options give the holder the right to purchase shares of the Company’s common stock at an exercise price equal to the fair value of the Company’s common stock on the date of the stock option’s award. Restricted stock units and stock options are usually subject to certain service and performance conditions and may not be sold or otherwise transferred until those restrictions have been satisfied; however, unrestricted stock units have no such restrictions. The term for stock options is limited to 10 years from the date of grant. The Compensation Plan allows for 2,335,000 shares of the Company’s common stock to be issued. As of September 30, 2017, there were 1,839,364 shares available to be granted under this plan.
The Company’s Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (“Incentive Plan”) is still active. The Incentive Plan is described, and informational disclosures are provided, in the Notes to Consolidated Financial Statements included in the Form 10-K for the year ended December 31, 2016. As of September 30, 2017, there were 405,529 shares authorized to be issued under the Incentive Plan; however, as discussed in the Company’s Definitive Proxy Statement (Schedule 14A) filed on April 13, 2017, the Company will not issue these shares. As of September 30, 2017, the Incentive Plan had an aggregate of 4,360,018 of restricted stock units and stock options from outstanding, historical awards that either have not vested or have vested but have not been exercised.
Plan. During the first ninesix months of 20172021 and 2016,2020, the Company issued, in total from both the Compensation Plan and the Incentive Plan,granted the following share-based instruments: (1) restricted stock units of 1,055,000totaling 280,000 and 483,387 at75,000 with weighted-average fair values per share prices of $30.03$18.59 and $19.14,$13.93, respectively; and (2) stock options totaling 100,000 and 75,000 with weighted-average fair values per share of 530,000$15.21 and 274,000 at$3.94, respectively, and weighted-average per share exercise prices of $24.64$19.24 and $16.20,$25.70, respectively; and (3) unrestricted stock units of 99,155totaling 96,668 and 64,603 at194,177 with weighted-average fair values per share prices of $26.26$15.62 and $21.67,$8.60, respectively.
Effective January 1, 2017,
The fair value of restricted stock units and unrestricted stock is based on the closing price of the Company’s common stock on the New York Stock Exchange on the date of the grant and the fair value of stock options is based on the Black-Scholes model. The fair value of stock options granted during the first six months of 2021 was determined using the Black-Scholes model based on the following weighted-average assumptions: (i) expected life of 6.5 years, (ii) expected volatility of 73.74%, (iii) risk-free rate of 1.44%, and (iv) 0 quarterly dividends. Certain performance-based awards contain market condition components and are valued on the date of grant using a Monte Carlo simulation model. Certain restricted stock unit grants are classified as liabilities because they contain a guaranteed minimum payout. The Company recognized liabilities for these awards totaling approximately $2.9 million and $2.4 million as of June 30, 2021 and December 31, 2020, respectively. The Company paid approximately $0.3 million to settle liability classified awards during each of the six month periods ended June 30, 2021 and 2020.
For the three and six months ended June 30, 2021, the Company
prospectively adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies several aspectsrecognized, as part of the accountinggeneral and administrative expenses, costs for share-based payment transactions, including the accountingarrangements totaling $2.6 million and $5.0 million, respectively, and $3.8 million and $8.3 million for the income tax effectthree and six months ended June 30, 2020, respectively. As of share-based transactions andJune 30, 2021, the forfeiturebalance of share-based instruments. Upon this adoption, the Company elected an accounting policy requiring forfeitures of share-based instruments to be accounted for upon occurrence. As a result, the Company will recognize the full grant-date fair value of share-based awards throughout the requisite service period, with any adjustments for forfeitures recognized only if and when a forfeiture occurs. This policy notwithstanding, the Company will continue to assess the probability that performance targets will be achieved, and will adjustunamortized share-based compensation expense accordingly. During the nine months ended September 30, 2017, a total of 20,985 performance-based restricted stock units, withwas $13.8 million, which is expected to be recognized over a weighted-average per share priceperiod of $23.91, and 19,466 performance-based stock options, with a weighted-average per share exercise price of $26.56, were forfeited; however, the impact of these forfeitures was not recognized during this period because it was previously recognized in the fourth quarter of 2016 in accordance with the provisions of ASC 718, Compensation-Stock Compensation.2.2 years.
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(10) (13) Employee Pension Plans
The Company has a defined benefit pension plan and an unfunded supplemental retirement plan. Effective
SeptemberJune 1, 2004, all benefit accruals under these plans were frozen; however, the current vested benefit was preserved. The pension disclosure presented below includes aggregated amounts for both of the Company’s plans.
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The following table sets forth
a summary of the net periodic benefit cost for the three and
ninesix months ended
SeptemberJune 30,
20172021 and
2016:2020: | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 | (in thousands) | 2021 | 2020 | | 2021 | 2020 |
Interest cost | $ | 975 | | $ | 1,053 | | $ | 2,925 | | $ | 3,159 | Interest cost | $ | 582 | | $ | 758 | | | $ | 1,164 | | $ | 1,516 | |
| Service cost | | Service cost | 237 | | 231 | | | 473 | | 462 | |
Expected return on plan assets | | (1,088) | | (1,203) | | (3,264) | | (3,609) | Expected return on plan assets | (1,015) | | (1,006) | | | (2,030) | | (2,012) | |
Amortization of net loss | | 456 | | 427 | | 1,368 | | 1,281 | |
Other | | 213 | | 150 | | | 639 | | 450 | |
| Recognized net actuarial losses | | Recognized net actuarial losses | 683 | | 592 | | | 1,366 | | 1,184 | |
Net periodic benefit cost | $ | 556 | | $ | 427 | | $ | 1,668 | | $ | 1,281 | Net periodic benefit cost | $ | 487 | | $ | 575 | | | $ | 973 | | $ | 1,150 | |
The Company contributed
$2.0$1.0 million and
$1.3$2.2 million to its defined benefit pension plan during the
ninesix months ended
SeptemberJune 30,
20172021 and
2016, respectively, and expects2020, respectively. Due to the election of certain options provided under the American Rescue Plan Act of 2021, enacted on March 11, 2021, the Company is not required to contribute
an additional
$0.6 million later in 2017.(11) amounts to the defined benefit pension plan for the remainder of 2021.
(14)Fair Value Measurements The fair value hierarchy established by ASC 820, Fair Value Measurement, prioritizes the use of inputs used in valuation techniques into the following three levels: | ·
| | Level 1 inputs are observable quoted prices in active markets for identical assets or liabilities
|
| ·
| | Level 2 inputs are observable, either directly or indirectly, but are not Level 1 inputs
|
•Level 1 inputs are observable quoted prices in active markets for identical assets or liabilities | ·
| | Level 3 inputs are unobservable
|
•Level 2 inputs are observable, either directly or indirectly, but are not Level 1 inputs•Level 3 inputs are unobservable
The following fair value hierarchy table presents the Company’s assets that are measured at fair value on a recurring basis as of SeptemberJune 30, 20172021 and December 31, 2016:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2021 | | As of December 31, 2020 |
| Fair Value Hierarchy | | | | Fair Value Hierarchy | | |
| (in thousands) | Level 1 | Level 2 | Level 3 | | Total | | Level 1 | Level 2 | Level 3 | | Total |
Cash and cash equivalents(a) | $ | 231,129 | | $ | 0 | | $ | 0 | | | $ | 231,129 | | | $ | 374,289 | | $ | 0 | | $ | 0 | | | $ | 374,289 | |
Restricted cash(a) | 2,884 | | 0 | | 0 | | | 2,884 | | | 77,563 | | 0 | | 0 | | | 77,563 | |
Restricted investments(b) | 0 | | 85,545 | | 0 | | | 85,545 | | | 0 | | 78,912 | | 0 | | | 78,912 | |
Investments in lieu of retainage(c) | 45,803 | | 55,174 | | 0 | | | 100,977 | | | 92,609 | | 1,300 | | 0 | | | 93,909 | |
| Total | $ | 279,816 | | $ | 140,719 | | $ | 0 | | | $ | 420,535 | | | $ | 544,461 | | $ | 80,212 | | $ | 0 | | | $ | 624,673 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2017 | | As of December 31, 2016 |
| | Fair Value Hierarchy | | | | | Fair Value Hierarchy | | | |
(in thousands) | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Cash and cash equivalents (a) | | $ | 221,878 | | $ | — | | $ | — | | $ | 221,878 | | $ | 146,103 | | $ | — | | $ | — | | $ | 146,103 |
Restricted cash (a) | | | 17,424 | | | — | | | — | | | 17,424 | | | 50,504 | | | — | | | — | | | 50,504 |
Investments in lieu of retainage (b) | | | 56,102 | | | 3,059 | | | — | | | 59,161 | | | 46,855 | | | 4,411 | | | — | | | 51,266 |
Total | | $ | 295,404 | | $ | 3,059 | | $ | — | | $ | 298,463 | | $ | 243,462 | | $ | 4,411 | | $ | — | | $ | 247,873 |
(a)
Includes money market funds and short-term investments with original maturity dates of three months or less.less when acquired.
(b)Restricted investments, as of June 30, 2021, consist of investments in corporate debt securities of $43.9 million, U.S. government agency securities of $40.7 million and corporate certificates of deposits of $0.9 million with maturities of up to five years, and are valued based on pricing models, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets and are therefore classified as Level 2 assets. As of December 31, 2020, restricted investments consisted of investments in U.S. government agency securities of $40.5 million, corporate debt securities of $37.5 million, and corporate certificates of deposits of $0.9 million with maturities of up to five years. The amortized cost of these available-for-sale securities at June 30, 2021 and December 31, 2020 was not materially different from the fair value.
(c)Investments in lieu of customer retainage are included in accountsretainage receivable and as of June 30, 2021 are comprised of money market funds of $45.8 million, corporate debt securities of $53.9 million and municipal bonds the majority of which are rated A3 or better.$1.3 million. The fair values of the money market funds are measured using quoted market prices; therefore, they are classified as Level 1 assets. The fair values of corporate and municipal bonds have maturity periods up to five years, and are measured using readily available pricing sources for comparable instruments;determined from a compilation of primarily observable market information, third-party quoted market prices, broker quotes in non-active markets or similar assets; therefore, they are classified as Level 2 assets. AllAs of December 31, 2020, investments in lieu of
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
retainage consisted of money market funds of $92.6 million and municipal bonds of $1.3 million. The amortized cost of these available-for-sale securities at June 30, 2021 and December 31, 2020 was not materially different from the
above investments are available-for-sale securities.The Company did not have material transfers between Levels 1 and 2 during the nine months ended September 30, 2017 or 2016.
fair value.
The carrying values of receivables, payables and other amounts arising out of normal contract activities, including retainage, which may be settled beyond one year, are estimated to approximate fair value.
The Company has restricted investments with an aggregate fair value of $48.7 million as of September 30, 2017, determined using Level 2 inputs. Restricted investments are held as collateral to secure insurance related contingent obligations. They are comprised of various corporate bonds and bank notes that are rated A3 or better and have maturities within the Company’s operating cycle. These restricted investments are held-to-maturity securities carried at amortized cost of $48.8 million as of September 30, 2017. Of the Company’s long-term debt, the fair value of the 2017 Senior Notes
was $517.2 million and $495.0 million as of
SeptemberJune 30,
2017 was $537.5 million.2021 and December 31, 2020, respectively. The fair value of the
2010 SeniorConvertible Notes
was $69.1 million as of December 31,
2016 was $302.6 million;2020 and the
2010 Senior Notes were redeemed inCompany repaid the
second quarterremaining principal balance of
2017, as discussed in Note 6. The fair value of the
Table of Contents
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Convertible Notes was $231.9 million and $228.4 million as of September 30, 2017 and December 31, 2016, respectively. notes at maturity on June 15, 2021. The fair values of the 2017 Senior Notes, 2010 Senior Notes and Convertible Notes were determined using Level 1 inputs, specifically current observable market prices. The fair value of the Term Loan B was $427.1 million and $425.0 million as of June 30, 2021 and December 31, 2020, respectively. The fair value of the Term Loan B was determined using Level 2 inputs, specifically third-party quoted market prices. The reported value of the Company’s remaining long-term debt at Septemberborrowings approximates fair value as of June 30, 20172021 and December 31, 2016 approximates fair value.
(12) 2020.
(15)Variable Interest Entities (“VIE”)From time to time the(VIEs)
The Company may form joint ventures or partnerships with third parties for the execution of single contracts or projects. In accordance with ASC 810, Consolidation (“ASC 810”), the Company assesses its partnerships and joint ventures at inception to determine if any meet the qualifications of a VIE. The Company considers a joint venture a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, the Company reassesses its initial determination of whether a joint venture is a VIE.
ASC 810 also requires the Company to determine whether it is the primary beneficiary of the VIE. The Company concludes that it is the primary beneficiary and consolidates the VIE if the Company has both (a) the power to direct the economically significant activities of the VIE and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The Company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if the Company is the primary beneficiary. The Company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. In accordance with ASC 810, management’s assessment of whether the Company is the primary beneficiary of a VIE is performed continuously.
As of
SeptemberJune 30,
2017,2021, the Company had
consolidatedunconsolidated VIE-related
current assets
of $115.4 million and liabilities of
$96.9$2.0 million
all of which are classified as current and
are$1.9 million, respectively, included in the Company’s Condensed Consolidated Balance Sheet.
One large As of December 31, 2020, the Company had unconsolidated VIE-related current assets and liabilities of $0.6 million and $0.5 million, respectively, included in the Company’s Condensed Consolidated Balance Sheet. The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments. There were no future funding requirements for the unconsolidated VIEs as of June 30, 2021.
As of June 30, 2021, the Company’s Condensed Consolidated Balance Sheet included current and noncurrent assets of $457.3 million and $5.6 million, respectively, as well as current liabilities of $468.3 million related to the operations of its consolidated VIEs. As of December 31, 2020, the Company’s Condensed Consolidated Balance Sheet included current and noncurrent assets of $405.7 million and $14.2 million, respectively, as well as current liabilities of $514.9 million related to the operations of its consolidated VIEs.
Below is a discussion of some of the Company’s more significant or unique VIEs.
The Company established a joint venture
that the Company is consolidating was established to construct the Purple Line
SegmentExtension Section 2
Extension project, a $1.4 billion(Tunnels and Stations) and Section 3 (Stations) mass-transit
projectprojects in Los Angeles,
California.California with an original combined value of approximately $2.8 billion. The Company has a 75% interest in the joint venture with the remaining 25% held by O&G Industries, Inc.
The joint venture was initially financed with contributions from the partners and, per the terms of the joint venture agreement, the partners may be required to provide additional capital contributions in the future.(13) The Company has determined that this joint venture is a VIE for which the Company is the primary beneficiary.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The Company also established a joint venture with Parsons Corporation (“Parsons”) to construct the Newark Liberty International Airport Terminal One project, a transportation infrastructure project in Newark, New Jersey with an original value of approximately $1.4 billion. The Company has an 80% interest in the joint venture with the remaining 20% held by Parsons. The joint venture was initially financed with contributions from the partners and, per the terms of the joint venture agreement, the partners may be required to provide additional capital contributions in the future. The Company has determined that this joint venture is a VIE for which the Company is the primary beneficiary.
(16)Changes in Equity
A reconciliation of the changes in equity for the three and six months ended June 30, 2021 and 2020 is provided below:
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 |
| (in thousands) | Common
Stock | Additional
Paid-in
Capital | Retained
Earnings | Accumulated
Other
Comprehensive
Loss | Noncontrolling
Interests | Total
Equity |
| Balance - March 31, 2021 | $ | 50,938 | | $ | 1,127,624 | | $ | 438,419 | | $ | (47,356) | | $ | 2,456 | | $ | 1,572,081 | |
| Net income | — | | — | | 31,165 | | — | | 10,446 | | 41,611 | |
| Other comprehensive income | — | | — | | — | | 830 | | 280 | | 1,110 | |
| Share-based compensation | — | | 3,171 | | — | | — | | — | | 3,171 | |
| Issuance of common stock, net | 134 | | (427) | | — | | — | | — | | (293) | |
| | | | | | |
| Distributions to noncontrolling interests | — | | — | | — | | — | | (7,250) | | (7,250) | |
| Balance - June 30, 2021 | $ | 51,072 | | $ | 1,130,368 | | $ | 469,584 | | $ | (46,526) | | $ | 5,932 | | $ | 1,610,430 | |
| | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2021 |
| (in thousands) | Common
Stock | Additional
Paid-in
Capital | Retained
Earnings | Accumulated
Other
Comprehensive
Loss | Noncontrolling
Interests | Total
Equity |
| Balance - December 31, 2020 | $ | 50,827 | | $ | 1,127,385 | | $ | 422,385 | | $ | (46,741) | | $ | (10,911) | | $ | 1,542,945 | |
| Net income | — | | — | | 47,199 | | — | | 19,517 | | 66,716 | |
| Other comprehensive income | — | | — | | — | | 215 | | 576 | | 791 | |
| Share-based compensation | — | | 4,757 | | — | | — | | — | | 4,757 | |
| Issuance of common stock, net | 245 | | (1,774) | | — | | — | | — | | (1,529) | |
| Contributions from noncontrolling interests | — | | — | | — | | — | | 4,000 | | 4,000 | |
| Distributions to noncontrolling interests | — | | — | | — | | — | | (7,250) | | (7,250) | |
| Balance - June 30, 2021 | $ | 51,072 | | $ | 1,130,368 | | $ | 469,584 | | $ | (46,526) | | $ | 5,932 | | $ | 1,610,430 | |
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 |
| (in thousands) | Common
Stock | Additional
Paid-in
Capital | Retained
Earnings | Accumulated
Other
Comprehensive
Loss | Noncontrolling
Interests | Total
Equity |
| Balance - March 31, 2020 | $ | 50,577 | | $ | 1,120,487 | | $ | 331,362 | | $ | (43,128) | | $ | (16,370) | | $ | 1,442,928 | |
| Net income | — | | — | | 18,709 | | — | | 12,150 | | 30,859 | |
| Other comprehensive income | — | | — | | — | | 2,531 | | 854 | | 3,385 | |
| Share-based compensation | — | | 4,185 | | — | | — | | — | | 4,185 | |
| Issuance of common stock, net | 194 | | — | | — | | — | | — | | 194 | |
| Distributions to noncontrolling interests | — | | — | | — | | — | | (17,410) | | (17,410) | |
| Balance - June 30, 2020 | $ | 50,771 | | $ | 1,124,672 | | $ | 350,071 | | $ | (40,597) | | $ | (20,776) | | $ | 1,464,141 | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
| | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2020 |
| (in thousands) | Common
Stock | Additional
Paid-in
Capital | Retained
Earnings | Accumulated
Other
Comprehensive
Loss | Noncontrolling
Interests | Total
Equity |
| Balance - December 31, 2019 | $ | 50,279 | | $ | 1,117,972 | | $ | 313,991 | | $ | (42,100) | | $ | (9,617) | | $ | 1,430,525 | |
| Net income | — | | — | | 36,080 | | — | | 20,917 | | 56,997 | |
| Other comprehensive income (loss) | — | | — | | — | | 1,503 | | (1,166) | | 337 | |
| Share-based compensation | — | | 7,692 | | — | | —�� | | — | | 7,692 | |
| Issuance of common stock, net | 492 | | (992) | | — | | — | | — | | (500) | |
| Distributions to noncontrolling interests | — | | — | | — | | — | | (30,910) | | (30,910) | |
| Balance - June 30, 2020 | $ | 50,771 | | $ | 1,124,672 | | $ | 350,071 | | $ | (40,597) | | $ | (20,776) | | $ | 1,464,141 | |
(17)Other Comprehensive Income (Loss) ASC 220, Comprehensive Income, establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. The Company reports the change in pension benefit plan assets/liabilities, cumulative foreign currency translation and change in fair value of investments and change in fair value of an interest rate swap as components of accumulated other comprehensive lossincome (loss) (“AOCI”). The
tax effects of the components of other comprehensive income (loss)
and the related tax effects for the three
and six months ended
SeptemberJune 30,
20172021 and
2016 are2020 were as follows:
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | September 30, 2016 | | Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2020 |
(in thousands) | Before-Tax Amount | | Tax Expense | | Net-of-Tax Amount | | Before-Tax Amount | | Tax (Expense) Benefit | | Net-of-Tax Amount | (in thousands) | Before-Tax Amount | Tax Expense | Net-of-Tax Amount | | Before-Tax Amount | Tax Expense | Net-of-Tax Amount |
Other comprehensive income (loss): | | | | | | | | | | | | | | Other comprehensive income (loss): | | | |
Defined benefit pension plan adjustments | $ | 456 | | $ | (187) | | $ | 269 | | $ | 427 | | $ | (179) | | $ | 248 | Defined benefit pension plan adjustments | $ | 683 | | $ | (192) | | $ | 491 | | | $ | 592 | | $ | (168) | | $ | 424 | |
Foreign currency translation adjustments | | 1,232 | | (506) | | 726 | | (708) | | 297 | | (411) | Foreign currency translation adjustments | 446 | | (46) | | 400 | | | 1,973 | | (318) | | 1,655 | |
Unrealized gain (loss) in fair value of investments | | 21 | | (9) | | 12 | | | (145) | | 66 | | (79) | |
Total other comprehensive income (loss) | | 1,709 | | (702) | | 1,007 | | | (426) | | 184 | | (242) | |
Other comprehensive income (loss) attributable to Tutor Perini Corporation | $ | 1,709 | | $ | (702) | | $ | 1,007 | | $ | (426) | | $ | 184 | | $ | (242) | |
| Unrealized gain in fair value of investments | | Unrealized gain in fair value of investments | 303 | | (84) | | 219 | | | 1,602 | | (296) | | 1,306 | |
| Total other comprehensive income | | Total other comprehensive income | 1,432 | | (322) | | 1,110 | | | 4,167 | | (782) | | 3,385 | |
Less: Other comprehensive income attributable to noncontrolling interests(a) | | Less: Other comprehensive income attributable to noncontrolling interests(a) | 280 | | 0 | | 280 | | | 854 | | 0 | | 854 | |
| Total other comprehensive income attributable to Tutor Perini Corporation | | Total other comprehensive income attributable to Tutor Perini Corporation | $ | 1,152 | | $ | (322) | | $ | 830 | | | $ | 3,313 | | $ | (782) | | $ | 2,531 | |
18
(a)The only component of other comprehensive income (loss) attributable to noncontrolling interests is foreign currency translation.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2021 | | Six Months Ended June 30, 2020 |
| (in thousands) | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount |
| Other comprehensive income (loss): | | | | | | | |
| Defined benefit pension plan adjustments | $ | 1,366 | | $ | (383) | | $ | 983 | | | $ | 1,183 | | $ | (336) | | $ | 847 | |
| Foreign currency translation adjustments | 848 | | (76) | | 772 | | | (2,954) | | 596 | | (2,358) | |
| Unrealized gain (loss) in fair value of investments | (1,247) | | 283 | | (964) | | | 2,359 | | (511) | | 1,848 | |
| Total other comprehensive income | 967 | | (176) | | 791 | | | 588 | | (251) | | 337 | |
Less: Other comprehensive income (loss) attributable to noncontrolling interests(a) | 576 | | 0 | | 576 | | | (1,166) | | 0 | | (1,166) | |
| Total other comprehensive income attributable to Tutor Perini Corporation | $ | 391 | | $ | (176) | | $ | 215 | | | $ | 1,754 | | $ | (251) | | $ | 1,503 | |
(a)The tax effects of the componentsonly component of other comprehensive income (loss) for the nine months ended September 30, 2017 and 2016 are as follows:attributable to noncontrolling interests is foreign currency translation. | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended | | Nine Months Ended |
| September 30, 2017 | | September 30, 2016 |
(in thousands) | Before-Tax Amount | | Tax (Expense) Benefit | | Net-of-Tax Amount | | Before-Tax Amount | | Tax (Expense) Benefit | | Net-of-Tax Amount |
Other comprehensive income: | | | | | | | | | | | | | | | | | |
Defined benefit pension plan adjustments | $ | 1,368 | | $ | (562) | | $ | 806 | | $ | 1,280 | | $ | (461) | | $ | 819 |
Foreign currency translation adjustment | | 2,242 | | | (921) | | | 1,321 | | | 500 | | | (239) | | | 261 |
Unrealized loss in fair value of investments | | (20) | | | 8 | | | (12) | | | (403) | | | 179 | | | (224) |
Unrealized loss in fair value of interest rate swap | | — | | | — | | | — | | | (45) | | | 21 | | | (24) |
Total other comprehensive income | | 3,590 | | | (1,475) | | | 2,115 | | | 1,332 | | | (500) | | | 832 |
Other comprehensive income attributable to Tutor Perini Corporation | $ | 3,590 | | $ | (1,475) | | $ | 2,115 | | $ | 1,332 | | $ | (500) | | $ | 832 |
The changes in AOCI balances by component (after tax) attributable to Tutor Perini Corporation during the three and ninesix months ended SeptemberJune 30, 2017 are2021 were as follows:
| | | | | | | | | |
| | | | | | | | | |
| Three Months Ended September 30, 2017 | |
| Defined | | | | Unrealized | | Accumulated | |
| Benefit | | Foreign | | Gain in | | Other | | | | | | | | | | | | | | |
| Pension | | Currency | | Fair Value of | | Comprehensive | | Three Months Ended June 30, 2021 |
(in thousands) | Plan | | Translation | | Investments, Net | | Loss | (in thousands) | Defined
Benefit
Pension
Plan | Foreign
Currency
Translation | Unrealized Gain (Loss) in Fair Value of Investments, Net | Accumulated
Other
Comprehensive
Income (Loss) |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | | Attributable to Tutor Perini Corporation: | |
Balance as of June 30, 2017 | $ | (40,328) | | $ | (4,269) | | $ | 292 | | $ | (44,305) | |
Other comprehensive gain before reclassifications | | — | | 726 | | 12 | | 738 | |
| Balance as of March 31, 2021 | | Balance as of March 31, 2021 | $ | (43,595) | | $ | (5,246) | | $ | 1,485 | | $ | (47,356) | |
| Other comprehensive income before reclassifications | | Other comprehensive income before reclassifications | 0 | | 120 | | 233 | | 353 | |
Amounts reclassified from AOCI | | 269 | | — | | — | | 269 | Amounts reclassified from AOCI | 491 | | 0 | | (14) | | 477 | |
Total other comprehensive income | | 269 | | 726 | | 12 | | 1,007 | Total other comprehensive income | 491 | | 120 | | 219 | | 830 | |
Balance as of September 30, 2017 | $ | (40,059) | | $ | (3,543) | | $ | 304 | | $ | (43,298) | |
| Balance as of June 30, 2021 | | Balance as of June 30, 2021 | $ | (43,104) | | $ | (5,126) | | $ | 1,704 | | $ | (46,526) | |
| | | | | | | | | |
| | | | | | | | | |
| Nine Months Ended September 30, 2017 | |
| Defined | | | | Unrealized | | Accumulated | |
| Benefit | | Foreign | | Gain (Loss) in | | Other | | | | | | | | | | | | | | |
| Pension | | Currency | | Fair Value of | | Comprehensive | | Six Months Ended June 30, 2021 |
(in thousands) | Plan | | Translation | | Investments, Net | | Loss | (in thousands) | Defined
Benefit
Pension
Plan | Foreign
Currency
Translation | Unrealized Gain (Loss) in Fair Value of Investments, Net | Accumulated
Other
Comprehensive
Income (Loss) |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | | Attributable to Tutor Perini Corporation: | |
Balance as of December 31, 2016 | $ | (40,865) | | $ | (4,864) | | $ | 316 | | $ | (45,413) | |
Other comprehensive gain (loss) before reclassifications | | — | | 1,321 | | (12) | | 1,309 | |
| Balance as of December 31, 2020 | | Balance as of December 31, 2020 | $ | (44,087) | | $ | (5,322) | | $ | 2,668 | | $ | (46,741) | |
| Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | 0 | | 196 | | (827) | | (631) | |
Amounts reclassified from AOCI | | 806 | | — | | — | | 806 | Amounts reclassified from AOCI | 983 | | 0 | | (137) | | 846 | |
Total other comprehensive income (loss) | | 806 | | 1,321 | | (12) | | 2,115 | Total other comprehensive income (loss) | 983 | | 196 | | (964) | | 215 | |
Balance as of September 30, 2017 | $ | (40,059) | | $ | (3,543) | | $ | 304 | | $ | (43,298) | |
| Balance as of June 30, 2021 | | Balance as of June 30, 2021 | $ | (43,104) | | $ | (5,126) | | $ | 1,704 | | $ | (46,526) | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The changes in AOCI
balancebalances by component (after tax)
forattributable to Tutor Perini Corporation during the three and
ninesix months ended
SeptemberJune 30,
2016 are2020 were as follows:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Three Months Ended September 30, 2016 |
| | | | | | | Unrealized | | |
| Defined | | | | Unrealized | | Gain (Loss) in | | Accumulated |
| Benefit | | Foreign | | Gain (Loss) in | | Fair Value of | | Other |
| Pension | | Currency | | Fair Value of | | Interest Rate | | Comprehensive |
(in thousands) | Plan | | Translation | | Investments, Net | | Swap, Net | | Loss |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | | | | |
Balance as of June 30, 2016 | $ | (37,671) | | $ | (3,931) | | $ | 511 | | $ | — | | $ | (41,091) |
Other comprehensive loss before reclassifications | | — | | | (411) | | | (79) | | | — | | | (490) |
Amounts reclassified from AOCI | | 248 | | | — | | | — | | | — | | | 248 |
Total other comprehensive income (loss) | | 248 | | | (411) | | | (79) | | | — | | | (242) |
Balance as of September 30, 2016 | $ | (37,423) | | $ | (4,342) | | $ | 432 | | $ | — | | $ | (41,333) |
| | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 |
| (in thousands) | Defined
Benefit
Pension
Plan | Foreign
Currency
Translation | Unrealized Gain (Loss) in Fair Value of Investments, Net | Accumulated
Other
Comprehensive
Income (Loss) |
| Attributable to Tutor Perini Corporation: | | | | |
| Balance as of March 31, 2020 | $ | (37,403) | | $ | (7,364) | | $ | 1,639 | | $ | (43,128) | |
| Other comprehensive income before reclassifications | 0 | | 801 | | 1,335 | | 2,136 | |
| Amounts reclassified from AOCI | 424 | | 0 | | (29) | | 395 | |
| Total other comprehensive income | 424 | | 801 | | 1,306 | | 2,531 | |
| Balance as of June 30, 2020 | $ | (36,979) | | $ | (6,563) | | $ | 2,945 | | $ | (40,597) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2016 | |
| | | | | | | Unrealized | | | |
| Defined | | | | Unrealized | | Gain (Loss) in | | Accumulated | |
| Benefit | | Foreign | | Gain (Loss) in | | Fair Value of | | Other | | | | | | | | | | | | | | |
| Pension | | Currency | | Value of | | Interest Rate | | Comprehensive | | Six Months Ended June 30, 2020 |
(in thousands) | Plan | | Translation | | Investments, Net | | Swap, Net | | Loss | (in thousands) | Defined
Benefit
Pension
Plan | Foreign
Currency
Translation | Unrealized Gain (Loss) in Fair Value of Investments, Net | Accumulated
Other
Comprehensive
Income (Loss) |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | | | | | Attributable to Tutor Perini Corporation: | |
Balance as of December 31, 2015 | $ | (38,242) | | $ | (4,603) | | $ | 656 | | $ | 24 | | $ | (42,165) | |
Other comprehensive gain (loss) before reclassifications | | — | | | 261 | | | (224) | | | (24) | | | 13 | |
| Balance as of December 31, 2019 | | Balance as of December 31, 2019 | $ | (37,826) | | $ | (5,371) | | $ | 1,097 | | $ | (42,100) | |
| Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | 0 | | (1,192) | | 1,881 | | 689 | |
Amounts reclassified from AOCI | | 819 | | | — | | | — | | | — | | | 819 | Amounts reclassified from AOCI | 847 | | 0 | | (33) | | 814 | |
Total other comprehensive income (loss) | | 819 | | | 261 | | | (224) | | | (24) | | | 832 | Total other comprehensive income (loss) | 847 | | (1,192) | | 1,848 | | 1,503 | |
Balance as of September 30, 2016 | $ | (37,423) | | $ | (4,342) | | $ | 432 | | $ | — | | $ | (41,333) | |
| Balance as of June 30, 2020 | | Balance as of June 30, 2020 | $ | (36,979) | | $ | (6,563) | | $ | 2,945 | | $ | (40,597) | |
The significant items reclassified out of AOCI and the corresponding location and impact on the
Condensed Consolidated
StatementStatements of
Operations areIncome during the three and six months ended June 30, 2021 and 2020 were as follows:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Location in | | Three Months Ended | | Nine Months Ended |
| | Condensed Consolidated | | September 30, | | September 30, |
(in thousands) | | Statements of Operations | | 2017 | | 2016 | | 2017 | | 2016 |
Defined benefit pension plan adjustments | | Various accounts(a) | | $ | 456 | | $ | 427 | | $ | 1,368 | | $ | 1,280 |
Income tax benefit | | Provision for income taxes | | | (187) | | | (179) | | | (562) | | | (461) |
Net of tax | | | | $ | 269 | | $ | 248 | | $ | 806 | | $ | 819 |
(a)Defined benefit pension plan adjustments were reclassified to cost of operations and general and administrative expenses.
20
| | | | | | | | | | | | | | | | | | | | |
| Location in Consolidated | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in thousands) | Statements of Income | 2021 | 2020 | | 2021 | 2020 |
| Component of AOCI: | | | | | | |
| Defined benefit pension plan adjustments | Other income, net | $ | 683 | | $ | 592 | | | $ | 1,366 | | $ | 1,183 | |
| Income tax benefit | Income tax expense | (192) | | (168) | | | (383) | | (336) | |
| Net of tax | | $ | 491 | | $ | 424 | | | $ | 983 | | $ | 847 | |
| | | | | | |
| Unrealized gain in fair value of investment adjustments | Other income, net | $ | (17) | | $ | (37) | | | $ | (173) | | $ | (42) | |
| Income tax expense | Income tax expense | 3 | | 8 | | | 36 | | 9 | |
| Net of tax | | $ | (14) | | $ | (29) | | | $ | (137) | | $ | (33) | |
Table of Contents
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(14) The Company offers general contracting, pre-construction planning and comprehensive project management services, including planning and scheduling of manpower, equipment, materials and subcontractors required for the timely completion of a project in accordance with the terms and specifications contained in a construction contract. The Company also offers self-performed construction services: site work;work, concrete forming and placement;placement, steel erection; electrical; mechanical; plumbing;erection, electrical, mechanical, plumbing, and heating,HVAC (heating, ventilation and air conditioning (HVAC)conditioning). As described below, ourthe Company’s business is conducted through three3 segments:
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Civil, Building and Specialty Contractors. These segments are determined based on how the Company’s Chairman and Chief Executive Officer (chief operating decision maker) aggregates business units when evaluating performance and allocating resources.
The Civil segment specializes in public works construction and the replacement and reconstruction of infrastructure. The
civil contracting services
provided by the Civil segment include construction and rehabilitation of highways, bridges, tunnels, mass-transit systems,
military defense facilities, and water management and wastewater treatment facilities.
The Building segment has significant experience providing services for private and public works customers in a number of specialized building markets, including:
high-rise residential, hospitality and gaming, transportation, health care, commercial
andoffices, government
offices,facilities, sports and entertainment, education, correctional facilities, biotech, pharmaceutical, industrial and
high-tech.technology.
The Specialty Contractors segment specializes in electrical, mechanical, plumbing, HVAC, fire protection systems and pneumatically placed concrete for a full range of civil and building construction projects in the industrial, commercial, hospitality and gaming, and mass-transit end markets. This segment provides the Company with unique strengths and capabilities that allow the Company to position itself as a full-service contractor with greater control over scheduled work, project delivery, and
cost and risk management.
To the extent that a contract is co-managed and co-executed among segments, the Company allocates the share of revenues and costs of the contract to each segment to reflect the shared responsibilities in the management and execution of the project.
The following tables set forth certain reportable segment information relating to the Company’s operations for the three and
ninesix months ended
SeptemberJune 30,
20172021 and
2016:2020: | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Reportable Segments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Specialty | | | | | | | | Consolidated | | Reportable Segments | |
(in thousands) | Civil | | | Building | | Contractors | | Total | | Corporate | | Total | (in thousands) | Civil | Building | Specialty
Contractors | Total | | Corporate | | Consolidated
Total |
Three Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2021 | |
Total revenue | $ | 458,487 | | $ | 500,420 | | $ | 310,137 | | $ | 1,269,044 | | $ | — | | $ | 1,269,044 | Total revenue | $ | 643,055 | | $ | 415,801 | | $ | 281,370 | | $ | 1,340,226 | | | $ | — | | | $ | 1,340,226 | |
Elimination of intersegment revenue | | (62,667) | | | (6,872) | | | — | | | (69,539) | | | — | | | (69,539) | Elimination of intersegment revenue | (87,703) | | (33,141) | | (139) | | (120,983) | | | — | | | (120,983) | |
Revenue from external customers | $ | 395,820 | | $ | 493,548 | | $ | 310,137 | | $ | 1,199,505 | | $ | — | | $ | 1,199,505 | Revenue from external customers | $ | 555,352 | | $ | 382,660 | | $ | 281,231 | | $ | 1,219,243 | | | $ | — | | | $ | 1,219,243 | |
Income from construction operations | $ | 38,144 | | $ | 14,058 | | $ | 14,575 | | $ | 66,777 | | $ | (17,705) | (a) | $ | 49,072 | |
| Income (loss) from construction operations | | Income (loss) from construction operations | $ | 75,073 | | $ | (2,488) | | $ | 9,960 | | $ | 82,545 | | (a) | $ | (13,792) | | (b) | $ | 68,753 | |
Capital expenditures | $ | 1,248 | | $ | 36 | | $ | 81 | | $ | 1,365 | | $ | 164 | | $ | 1,529 | Capital expenditures | $ | 8,616 | | $ | 51 | | $ | 19 | | $ | 8,686 | | | $ | 339 | | | $ | 9,025 | |
Depreciation and amortization (b) | $ | 5,213 | | $ | 502 | | $ | 1,166 | | $ | 6,881 | | $ | 2,824 | | $ | 9,705 | |
Depreciation and amortization(c) | | Depreciation and amortization(c) | $ | 31,178 | | $ | 424 | | $ | 892 | | $ | 32,494 | | | $ | 2,767 | | | $ | 35,261 | |
| | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 | | Three Months Ended June 30, 2020 | |
Total revenue | $ | 506,100 | | $ | 560,795 | | $ | 331,613 | | $ | 1,398,508 | | $ | — | | $ | 1,398,508 | Total revenue | $ | 644,685 | | $ | 490,317 | | $ | 234,497 | | $ | 1,369,499 | | | $ | — | | | $ | 1,369,499 | |
Elimination of intersegment revenue | | (47,277) | | | (18,253) | | | — | | | (65,530) | | | — | | | (65,530) | Elimination of intersegment revenue | (75,709) | | (17,296) | | (67) | | (93,072) | | | — | | | (93,072) | |
Revenue from external customers | $ | 458,823 | | $ | 542,542 | | $ | 331,613 | | $ | 1,332,978 | | $ | — | | $ | 1,332,978 | Revenue from external customers | $ | 568,976 | | $ | 473,021 | | $ | 234,430 | | $ | 1,276,427 | | | $ | — | | | $ | 1,276,427 | |
Income from construction operations | $ | 50,307 | | $ | 13,296 | | $ | 11,084 | | $ | 74,687 | | $ | (13,768) | (a) | $ | 60,919 | |
| Income (loss) from construction operations | | Income (loss) from construction operations | $ | 65,398 | | $ | 17,789 | | $ | (11,388) | | $ | 71,799 | | (d) | $ | (14,103) | | (b) | $ | 57,696 | |
Capital expenditures | $ | 1,342 | | $ | 79 | | $ | 54 | | $ | 1,475 | | $ | 117 | | $ | 1,592 | Capital expenditures | $ | 18,951 | | $ | 186 | | $ | 255 | | $ | 19,392 | | | $ | 301 | | | $ | 19,693 | |
Depreciation and amortization (b) | $ | 12,669 | | $ | 541 | | $ | 1,243 | | $ | 14,453 | | $ | 2,886 | | $ | 17,339 | |
Depreciation and amortization(c) | | Depreciation and amortization(c) | $ | 21,775 | | $ | 428 | | $ | 995 | | $ | 23,198 | | | $ | 2,767 | | | $ | 25,965 | |
(a)Consists primarily of corporate general and administrative expenses.
| (b)
| | Depreciation and amortization is included in income from construction operations.
|
Table of Contents
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Reportable Segments | | | | | | |
| | | | | | | Specialty | | | | | | | | Consolidated |
(in thousands) | Civil | | | Building | | Contractors | | Total | | Corporate | | Total |
Nine Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | |
Total revenue | $ | 1,363,850 | | $ | 1,520,356 | | $ | 907,690 | | $ | 3,791,896 | | $ | — | | $ | 3,791,896 |
Elimination of intersegment revenue | | (190,873) | | | (36,883) | | | — | | | (227,756) | | | — | | | (227,756) |
Revenue from external customers | $ | 1,172,977 | | $ | 1,483,473 | | $ | 907,690 | | $ | 3,564,140 | | $ | — | | $ | 3,564,140 |
Income from construction operations | $ | 128,176 | | $ | 25,035 | | $ | 15,330 | | $ | 168,541 | | $ | (48,407) | (a) | $ | 120,134 |
Capital expenditures | $ | 8,665 | | $ | 184 | | $ | 374 | | $ | 9,223 | | $ | 489 | | $ | 9,712 |
Depreciation and amortization (b) | $ | 26,767 | | $ | 1,533 | | $ | 3,551 | | $ | 31,851 | | $ | 8,612 | | $ | 40,463 |
| | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | |
Total revenue | $ | 1,378,531 | | $ | 1,594,946 | | $ | 932,288 | | $ | 3,905,765 | | $ | — | | $ | 3,905,765 |
Elimination of intersegment revenue | | (118,143) | | | (61,145) | | | — | | | (179,288) | | | — | | | (179,288) |
Revenue from external customers | $ | 1,260,388 | | $ | 1,533,801 | | $ | 932,288 | | $ | 3,726,477 | | $ | — | | $ | 3,726,477 |
Income from construction operations | $ | 129,028 | | $ | 38,969 | | $ | 25,910 | | $ | 193,907 | | $ | (44,037) | (a) | $ | 149,870 |
Capital expenditures | $ | 8,499 | | $ | 381 | | $ | 798 | | $ | 9,678 | | $ | 595 | | $ | 10,273 |
Depreciation and amortization (b) | $ | 33,200 | | $ | 1,647 | | $ | 3,811 | | $ | 38,658 | | $ | 8,637 | | $ | 47,295 |
(a)Consists primarily of corporate general and administrative expenses.
(b)Depreciation and amortization is included in income from construction operations.
During the ninethree months ended SeptemberJune 30, 2016,2021, the Company recorded net favorable adjustments totaling $3.0a reduction of $20.1 million in income from constructioncost of operations ($0.04(an after-tax impact of $14.6 million, or $0.28 per diluted share) for various Five Star Electric projectsdue to a favorable legal judgment on a completed electrical project in New York in the Specialty Contractors segment. The netjudgment awarded the Company the recovery of certain costs previously incurred.
(b)Consists primarily of corporate general and administrative expenses.
(c)Depreciation and amortization is included in income (loss) from construction operations.
(d)During the three months ended June 30, 2020, the Company recorded a charge of $13.2 million in income (loss) from construction operations (an after-tax impact included material adjustments related to two electrical subcontract projects: a favorable adjustment of $14.0$9.5 million, for a completed project ($0.17or $0.19 per diluted share) anddue to an unfavorable adjustmentadverse arbitration ruling pertaining to an electrical project in New York in the Specialty Contractors segment.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reportable Segments | | | | |
| (in thousands) | Civil | Building | Specialty
Contractors | Total | | Corporate | | Consolidated
Total |
| Six Months Ended June 30, 2021 | | | | | | | | |
| Total revenue | $ | 1,226,199 | | $ | 872,971 | | $ | 606,318 | | $ | 2,705,488 | | | $ | — | | | $ | 2,705,488 | |
| Elimination of intersegment revenue | (195,272) | | (83,078) | | (300) | | (278,650) | | | — | | | (278,650) | |
| Revenue from external customers | $ | 1,030,927 | | $ | 789,893 | | $ | 606,018 | | $ | 2,426,838 | | | $ | — | | | $ | 2,426,838 | |
| Income (loss) from construction operations | $ | 125,178 | | $ | 8,728 | | $ | 11,284 | | $ | 145,190 | | (a) | $ | (26,733) | | (b) | $ | 118,457 | |
| Capital expenditures | $ | 18,180 | | $ | 124 | | $ | 164 | | $ | 18,468 | | | $ | 392 | | | $ | 18,860 | |
Depreciation and amortization(c) | $ | 53,891 | | $ | 856 | | $ | 1,851 | | $ | 56,598 | | | $ | 5,537 | | | $ | 62,135 | |
| | | | | | | | |
| Six Months Ended June 30, 2020 | | | | | | | | |
| Total revenue | $ | 1,224,771 | | $ | 995,400 | | $ | 516,949 | | $ | 2,737,120 | | | $ | — | | | $ | 2,737,120 | |
| Elimination of intersegment revenue | (169,166) | | (40,615) | | (183) | | (209,964) | | | — | | | (209,964) | |
| Revenue from external customers | $ | 1,055,605 | | $ | 954,785 | | $ | 516,766 | | $ | 2,527,156 | | | $ | — | | | $ | 2,527,156 | |
| Income (loss) from construction operations | $ | 111,519 | | $ | 21,305 | | $ | (3,109) | | $ | 129,715 | | (d) | $ | (24,792) | | (b) | $ | 104,923 | |
| Capital expenditures | $ | 30,143 | | $ | 198 | | $ | 728 | | $ | 31,069 | | | $ | 317 | | | $ | 31,386 | |
Depreciation and amortization(c) | $ | 40,391 | | $ | 855 | | $ | 1,988 | | $ | 43,234 | | | $ | 5,542 | | | $ | 48,776 | |
(a)During the six months ended June 30, 2021, the Company recorded a reduction of $20.1 million for a project that was nearly complete ($0.17in cost of operations (an after-tax impact of $14.6 million, or $0.28 per diluted share). These were due to a favorable legal judgment on a completed electrical project in New York in the only changesSpecialty Contractors segment. The judgment awarded the Company the recovery of certain costs previously incurred.
(b)Consists primarily of corporate general and administrative expenses.
(c)Depreciation and amortization is included in estimates considered materialincome (loss) from construction operations.
(d)During the six months ended June 30, 2020, the Company recorded a charge of $13.2 million in income (loss) from construction operations (an after-tax impact of $9.5 million, or $0.19 per diluted share) due to an adverse arbitration ruling pertaining to an electrical project in New York in the Company’s results of operations during the periods presented herein.Specialty Contractors segment.
A reconciliation of segment results to the consolidated income before income taxes is as follows:
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 | (in thousands) | 2021 | 2020 | | 2021 | 2020 |
Income from construction operations | $ | 49,072 | | $ | 60,919 | | $ | 120,134 | | $ | 149,870 | Income from construction operations | $ | 68,753 | | $ | 57,696 | | | $ | 118,457 | | $ | 104,923 | |
Other income, net | | 967 | | 2,048 | | 42,373 | | | 5,214 | |
| Other income (expense) | | Other income (expense) | 1,431 | | (797) | | | 1,606 | | (316) | |
Interest expense | | (15,643) | | (15,041) | | | (53,726) | | | (44,655) | Interest expense | (17,938) | | (16,464) | | | (35,748) | | (32,900) | |
Income before income taxes | $ | 34,396 | | $ | 47,926 | | $ | 108,781 | | $ | 110,429 | Income before income taxes | $ | 52,246 | | $ | 40,435 | | | $ | 84,315 | | $ | 71,707 | |
Total assets by segment
arewere as follows:
| | | | | |
| | | | | |
(in thousands) | September 30, 2017 | | December 31, 2016 |
Civil | $ | 2,273,486 | | $ | 2,152,123 |
Building | | 889,136 | | | 917,317 |
Specialty Contractors | | 757,103 | | | 813,851 |
Corporate and other (a) | | 363,060 | | | 155,329 |
Total assets | $ | 4,282,785 | | $ | 4,038,620 |
| (a)
| | Consists principally of cash, equipment, tax-related assets and insurance-related assets, offset by the elimination of assets related to intersegment revenue.
|
| | | | | | | | |
| (in thousands) | As of June 30,
2021 | As of December 31,
2020 |
| Civil | $ | 3,253,753 | | $ | 3,141,991 | |
| Building | 1,052,374 | | 1,147,649 | |
| Specialty Contractors | 659,633 | | 673,891 | |
Corporate and other(a) | (73,660) | | 82,086 | |
| Total assets | $ | 4,892,100 | | $ | 5,045,617 | |
22
(a)Consists principally of cash, equipment, tax-related assets and insurance-related assets, offset by the elimination of assets related to intersegment revenue.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(15) Related Party Transactions
Raymond R. Oneglia, Vice Chairman of O&G Industries, Inc. (“O&G”), is a director of the Company. The Company occasionally forms construction project joint ventures with O&G. Currently, the Company has two joint ventures with O&G for infrastructure projects in the northeastern United States that are both complete. In addition, the Company has a 75% interest in a newly formed joint venture with O&G (as the 25% interest holder) for a project in Los Angeles, California. O&G may provide equipment and services to these joint ventures on customary trade terms; related payments made by the joint ventures to O&G during the three and nine months ended September 30, 2017 and 2016 were immaterial.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discusses our financial position as of
SeptemberJune 30,
20172021 and the results of our operations for the three and
ninesix months ended
SeptemberJune 30,
20172021 and should be read in conjunction with
other information, including the unaudited Condensed Consolidated Financial Statements and notes
contained herein as well asincluded in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10‑Q, the audited consolidated financial statements and accompanying notes to our Annual Report on Form
10-K10‑K for the year ended December 31,
2016.2020, and the information contained under the heading “Risk Factors” in our Annual Report on Form 10‑K for the year ended December 31, 2020 and in Part II, Item 1A below.
Forward-Looking Statements
This Quarterly Report on Form
10-Q,10‑Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results, which are intended to be covered by the safe harbor provision for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. Words such as “achieve,” “anticipate,” “assumes,” “believes,” “continue,” “could,” “estimate,” “expects,” “forecast,” “hope,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “would,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Although such statements are based on currently available financial and economic data, as well as management’s estimates and expectations, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors potentially contributing to such differences include, among others:
| ·
| | Inaccurate estimates of contract risks, revenue or costs; the timing of new awards; or the pace of project execution may result in losses or lower than anticipated profits;
|
| ·
| | The requirement to perform extra, or change order, work resulting in disputes or claims or adversely affecting our working capital, profits and cash flows;
|
•The impact of the COVID-19 pandemic and related events that are beyond our control, including possible effects on our business and operations, customers and suppliers, and employees, contractors and subcontractors, which could affect adversely our projects and the geographic regions in which we conduct business; | ·
| | Unfavorable outcomes of legal proceedings and failure to promptly recover significant working capital invested in projects subject to unresolved legal claims;
|
•Revisions of estimates of contract risks, revenue or costs; the timing of new awards; the pace of project execution; or economic factors, including inflation, may result in losses or lower than anticipated profit; | ·
| | Increased competition and failure to secure new contracts;
|
•Unfavorable outcomes of existing or future litigation or dispute resolution proceedings against customers (project owners, developers, general contractors, etc.), subcontractors or suppliers, as well as failure to promptly recover significant working capital invested in projects subject to such matters; | ·
| | Client cancellations of, or reductions in scope under, contracts reported in our backlog;
|
•The requirement to perform extra, or change order, work resulting in disputes or claims or adversely affecting our working capital, profits and cash flows; | ·
| | A significant slowdown or decline in economic conditions;
|
•Increased competition and failure to secure new contracts; | ·
| | Actual results could differ from the assumptions and estimates used to prepare financial statements;
|
•A significant slowdown or decline in economic conditions; | ·
| | Decreases in the level of government spending for infrastructure and other public projects;
|
•Risks and other uncertainties associated with assumptions and estimates used to prepare financial statements; | ·
| | Failure to meet contractual schedule requirements, which could result in higher costs and reduced profits or, in some cases, exposure to financial liability for liquidated damages and/or damages to customers;
|
•Inability to retain key members of our management, to hire and retain personnel required to complete projects or implement succession plans for key officers; | ·
| | Inability to retain key members of our management, to hire and retain personnel required to complete projects or implement succession plans for key officers;
|
•Failure to meet contractual schedule requirements, which could result in higher costs and reduced profits or, in some cases, exposure to financial liability for liquidated damages and/or damages to customers; | ·
| | Possible systems and information technology interruptions;
|
•Client cancellations of, or reductions in scope under, contracts reported in our backlog; | ·
| | Failure of our joint venture partners to perform their venture obligations, which could impose additional financial and performance obligations on us, resulting in reduced profits or losses;
|
•Possible systems and information technology interruptions, including due to cyberattack, systems failures or other similar events; | ·
| | The impact of inclement weather conditions on projects;
|
•Decreases in the level of government spending for infrastructure and other public projects; | ·
| | Failure to meet our obligations under our debt agreements;
|
•Failure of our joint venture partners to perform their venture obligations, which could impose additional financial and performance obligations on us, resulting in reduced profits or losses and/or reputational harm; | ·
| | Failure to comply with laws and regulations related to government contracts;
|
•Economic, political, regulatory and other risks, including civil unrest, security issues, labor conditions, corruption and other unforeseeable events in countries where we do business, resulting in unanticipated losses; | ·
| | Conversion of our outstanding Convertible Notes that could dilute ownership interests of existing stockholders and could adversely affect the market price of our common stock;
|
•The impact of inclement weather conditions on projects; | ·
| | Potential dilutive impact of our Convertible Notes in our diluted earnings per share calculation;
|
•Risks related to government contracts and related procurement regulations; | ·
| | Economic, political and other risks, including civil unrest, security issues, labor conditions, corruption and other unforeseeable events in countries where we do business, resulting in unanticipated losses; and
|
•Violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws; | ·
| | Impairment of our goodwill or other indefinite-lived intangible assets.
|
•Adverse health events, such as an epidemic or a pandemic;•Failure to meet our obligations under our debt agreements;
•Downgrades in our credit ratings;
•Impairment of our goodwill or other indefinite-lived intangible assets; and
•Uncertainty from the expected discontinuance of the London Interbank Offered Rate (“LIBOR”) and transition to any other interest rate benchmark.
COVID-19 Update
Since the onset of the COVID-19 pandemic in early 2020, the pandemic has caused occasional shortages in available manpower, reductions in field labor productivity, other inefficiencies, delays to project schedules and deferrals of project execution. As a result, we continue to incur incremental costs, much of which we are seeking to recover from our customers as allowed by contractual terms. The relief sought from customers, some of which has already been received, together with certain incremental project opportunities that resulted from the pandemic, has helped to mitigate the pandemic's negative impact on our financial results. In addition, we continue to experience delays in certain legal proceedings, as well as delays in certain settlement discussions where we have claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price. These delays in resolving and recovering on such claims continue to adversely affect our liquidity and financial results.
The vast majority of our projects, especially in the Civil segment, have been and continue to be considered essential business activities, which has allowed projects to continue while implementing new health and safety requirements. However, the COVID-19 pandemic has had an adverse effect on the volume and timing of our new awards and, correspondingly, our backlog. Many of our state and local government customers’ revenue sources were negatively impacted by the pandemic due to severely curtailed ridership on mass-transit systems (buses, subways, trains, etc.), travel on commercial airlines, and driving by the general public, which resulted in reduced fare and toll collections, lower fuel tax receipts and reduced airport and other facility usage fees. Sales and other tax revenues were also negatively affected by reduced spending, as the retail, travel, hospitality and entertainment industries, among others, suffered through periodic government-imposed shut-downs or occupancy restrictions. Such restrictions have gradually been easing over the past several months, but are being reinstated in some locations due to increasing COVID-19 case rates largely driven by the newer Delta variant. The tax revenue shortfalls led to, and could continue to result in, funding uncertainties that have caused customers to delay bid solicitations and contract awards for many of their planned infrastructure projects. Our reduced backlog combined with the possibility of continued pandemic-related delays in project bids and awards could result in lower-than-expected revenue and earnings until such time as the federal government provides supplemental funding support to our customers (should that occur) or when customers’ funding uncertainties are otherwise resolved. The Biden Administration is currently working to secure congressional passage of a large-scale infrastructure funding bill, which, if passed, is expected to provide substantial incremental funding for various infrastructure projects nationwide over a multi-year period.
COVID-19 vaccination coverage has broadened considerably across the United States since the vaccines were first approved and became available in late 2020, but progress in vaccination rates has slowed. While the vaccines generally have been reported to be highly effective against the original COVID-19 virus strain, their effectiveness against variants, including the Delta variant, is the subject of evolving and sometimes conflicting information.The duration of effectiveness of the vaccines, as well as their effectiveness against future variants is uncertain. As such, due to the fluidity of the COVID-19 pandemic, uncertainties as to its scope and duration, and ongoing changes in the way that governments, businesses and individuals react and respond to the pandemic, the Company is unable at this time to accurately predict the pandemic’s future impact on the Company’s business, results of operations, financial condition or liquidity.
Operating Results
Consolidated revenue for the three and
ninesix months ended
SeptemberJune 30,
20172021 was
$1.2$1.22 billion and
$3.6$2.43 billion,
respectively, compared to
$1.3 $1.28 billion and $3.7$2.53 billion respectively, for the same periods in 2016.2020. The slight decrease for both periods was principallyprimarily due to reduced project execution activities onin the Building segment, partially offset by increased volume in the Specialty Contractors segment. Revenue for both periods of 2020 and 2021 was negatively impacted by the COVID-19 pandemic, which has resulted in delays in new awards and the execution of certain projects.
Despite the modest revenue decline for both periods, income from construction operations increased to $68.8 million and $118.5 million for the three and six months ended June 30, 2021, respectively, compared to $57.7 million and $104.9 million for the same periods in 2020. The increase for both periods was primarily driven by improved overall results in the Specialty Contractors segment mostly due to the resolution of various
contract disputes that had a net favorable impact in 2021 and the absence of the impact of an unfavorable arbitration ruling in 2020, as well as increased profitability in the Civil segment
projects in New York, Washington and the Midwest, and certain Building segment projects in California and Florida, all of which are completed or nearing completion.due to a continued shift towards higher-margin projects. The
decreaseincrease was partially offset by
increased activity on certain mass-transit projects in New York and California, as well as certain hospitality and gaming projects in California and Maryland. Revenue for the third quarter of 2017 was lower than expected, mainly due to certain delaysunfavorable results in the
timing ofBuilding segment.
new awardsThe effective tax rate was 20.4% and project execution activities for previously awarded projects, which are expected to shift the timing of those revenue contributions to 2018.
Income from construction operations20.9% for the three and ninesix months ended SeptemberJune 30, 20172021, respectively, compared to 23.7% and 20.5% for the comparable periods in 2020. See Corporate, Tax and Other Matters below for a discussion of the change in the effective tax rate.
Net income attributable to the Company for the three and six months ended June 30, 2021 was
$49.1$31.2 million and
$120.1$47.2 million,
a decreaserespectively, compared to $18.7 million and $36.1 million for the same periods in 2020. Diluted earnings per common share for the three and six months ended June 30, 2021 was $0.61 and $0.92, respectively, compared to diluted earnings per common share of
$11.8 million, or 19%,$0.37 and
$29.7 million, or 20%, respectively,$0.71 for the same periods in 2020. The increase in net income attributable to the Company, and correspondingly EPS, for both periods was primarily due to the factors discussed above that drove the increase in income from construction operations and lower net income attributable to noncontrolling interests for the current-year periods compared to the same periods in
2016. The decrease for2020. For the three months ended
SeptemberJune 30,
2017 was principally due to reduced project execution activities on various projects2021, the increase in
the Midwest and Washington, which are completed or nearing completion. For the nine months ended September 30, 2017, the decrease was primarily driven by the impact of unfavorable project adjustments recorded in the second quarter of 2017 on certain mechanical projects in New York in the Specialty Contractors segment, none of which were individually material, as well as higher general and administrative expenses primarily due to higher compensation-related expenses in anticipation of a substantially higher volume of new work.The effective tax rate for the three and nine months ended September 30, 2017 was 26.4% and 34.1% respectively, compared to 39.9% and 40.6% for the three and nine months ended September 30, 2016. See Corporate, Tax and Other Matters below for a detailed discussion of the changes in the effective tax rate.
Earnings per diluted share for the three and nine months ended September 30, 2017 was $0.47 and $1.33, respectively, compared to $0.57 and $1.32 for three and nine months ended September 30, 2016. The decrease for the third quarter of 2017 was primarily duenet income attributable to the factors mentioned above that drove changes in revenue and income from construction operations, partially offset byCompany was also due to a lower effective income tax rate. The increase for the 2017 nine-month period was primarily due to a gain on a $37.0 million ($0.44 per diluted share) legal settlement in the second quarter of 2017 (see Note 8 of the Notesrate as compared to the Condensed Consolidated Financial Statements) and a lower effective tax rate for the nine-month period, mostly offset by the projects that resulted in the decreases in revenue and income from construction operations discussed above.
2020 period.
Consolidated new awards for the three and
ninesix months ended
SeptemberJune 30,
2017 were $1.12021 totaled $0.6 billion and
$4.8$1.6 billion, respectively, compared to
$0.8$0.7 billion and
$3.0$1.3 billion for the
three and nine months ended September 30, 2016.same periods in 2020. The
CivilBuilding segment was the
majorprimary contributor to the new award activity in
both periods, with civil awards comprising more than halfthe second quarter of
all2021. The most significant new awards
in the second quarter of 2021 included a $152 million courthouse project in California and $88 million for
various civil projects in the
first nine monthsMidwest. The Company anticipates booking several significant new awards into backlog in the third quarter of
2017. 2021, including the $471 million LAX Airport Metro Connector project, the $220 million I-70 Missouri River Bridge project and a significant new health care facility project in California.
Consolidated backlog as of
SeptemberJune 30,
20172021 was $7.5 billion,
down 10% compared to
$6.2$8.3 billion at December 31,
2016. The significant backlog growth since the end of 2016 has been attributable to a large volume of new awards booked during the first nine months of 2017, particularly as a result of continued strong demand for civil construction services.2020. As of
SeptemberJune 30,
2017,2021, the mix of backlog by segment was approximately 58% for Civil,
21%22% for Building and
21%20% for Specialty Contractors.
The decline in backlog as of June 30, 2021 was a result of revenue that solidly outpaced the volume of new awards. The COVID-19 pandemic has negatively impacted the volume and timing of new awards in recent quarters.
The following table presents the Company’s backlog by business segment, reflecting changes from December 31, 20162020 to SeptemberJune 30, 2017:2021:
| | | | | | | | | | | | | | |
| (in millions) | Backlog at December 31, 2020 | New Awards(a) | Revenue
Recognized | Backlog at June 30, 2021(b) |
| Civil | $ | 4,783.6 | | $ | 576.3 | | $ | (1,030.9) | | $ | 4,329.0 | |
| Building | 1,702.3 | | 730.3 | | (789.9) | | 1,642.7 | |
| Specialty Contractors | 1,859.8 | | 294.9 | | (606.0) | | 1,548.7 | |
| Total | $ | 8,345.7 | | $ | 1,601.5 | | $ | (2,426.8) | | $ | 7,520.4 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Backlog at | | New | | Revenue | | Backlog at |
(in millions) | December 31, 2016 | | Awards(a) | | Recognized | | September 30, 2017 |
Civil | $ | 2,672.1 | | $ | 2,808.3 | | $ | (1,173.0) | | $ | 4,307.4 |
Building | | 1,981.2 | | | 1,101.0 | | | (1,483.5) | | | 1,598.7 |
Specialty Contractors | | 1,573.8 | | | 929.4 | | | (907.6) | | | 1,595.6 |
Total | $ | 6,227.1 | | $ | 4,838.7 | | $ | (3,564.1) | | $ | 7,501.7 |
| (a)
| | New awards consist of the original contract price of projects added to our backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.
|
(b)Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 3 of the Notes to Condensed Consolidated Financial Statements. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog sometimes may include awards for which a contract has not yet been executed or a notice to proceed has not been issued, but for which there are no remaining major uncertainties that the project will proceed (e.g., adequate funding is in place).The growthCompany is unable to predict the future impacts of the COVID-19 pandemic, due to, among other things, the uncertainty of vaccination coverage, infection rates, the duration of effectiveness of vaccinations, their effectiveness against current and future variants and how government entities and our customers respond to these factors. The outlook for the CompanyCompany’s growth over the next several years remains very favorable, particularly forin the Civil segment.and Specialty Contractors segments, but the impact of the COVID-19 pandemic could continue to adversely affect future performance and operations, and the amount and timing of new work awarded. In addition, the Company’s growth could continue to be impacted by future project delays or the large current backlog,timing of project commencements, ramp-up activities and completions. We anticipate that we expectwill continue to win our share of significant new awards based onresulting from long-term capital spending plans by various state, local and federal customers, and typically bipartisan supportas well as limited competition for infrastructure investments.some of the largest project opportunities. In November 2016,elections over the past several years, voters in numerous states approved dozens of long-term transportation funding measures totaling approximately $200 billion which have yet to have a significant impact on the Company’s bidding activities.in long-term funding. The largest of these werewas in Los Angeles County, where Measure M, a half-cent sales tax increase, was approved and is expected to generate $120 billion of funding over the next 40 years, and inyears. In Seattle, Washington, where Sound Transit 3 was passed and is expected to generate $54 billion of funding over 25 years. Interest rates have remained at historically low levels, which may be conducive to continued, and potentially increased, spending on infrastructure projects.
There has long been strong, bipartisan support for infrastructure investments in the next 25 years for regional transportation projects. In addition, in April 2017 California enacted into lawUnited States. Given the lack of substantial federal infrastructure spending over the past few decades and the negative economic impacts of the COVID-19 pandemic, there is currently a $52 billion, 10-year transportation bill. This new long-term funding measure should leadstrong focus by the Biden Administration and congressional leaders to various new civil project opportunities in California beginning in 2018. Furthermore, the Trump administration continues to plansecure passage of a significant infrastructure investment programbill. Should an infrastructure bill be approved, any substantial incremental federal funding, such as what is
currently being contemplated, could directly and favorably impact the Company’s current work and prospective opportunities. The timing and content of such legislation, if any is preparing to present its plan for approvaladopted, and funding.the amount of spending funded by it remain uncertain.
While we anticipate overall steady revenue in 2021 supported by our existing backlog of large civil projects on the West Coast and in Guam, certain large civil projects in the Northeast are completing or will be nearing completion in 2021. The
$305 billion Fixing America’s Surface Transportation Act (FAST Act)Company is
alsopursuing several large prospective projects on the West Coast, in the Northeast and in Guam that are expected to
provide statebe bid and
local agenciesawarded later this year and in 2022. However, revenue could decline in 2021 because the timing and magnitude of revenue contributions from these prospective projects may not be sufficient to offset revenue reductions associated with
federal funding for numerous highway, bridgethe projects that will be completed or progressing toward completion in 2021. In addition, as discussed earlier, the COVID-19 pandemic has resulted in, and
mass-transitcould continue to result in, delays in the bidding and awarding of certain projects
through 2020. Finally, a continued low interest rate environment should sustain high demand and continued spending by private and public customers on infrastructure projects.the Company is pursuing, which could further delay large new revenue streams.
For a more detailed discussion of operating performance of each business segment, corporate general and administrative expenseexpenses and other items, see Results of Segment Operations, Corporate, Tax and Other Matters and Liquidity and Financial Condition Capital Resourcesbelow.
Results of Segment Operations
The results of our Civil, Building and Specialty Contractors segments are discussed below.
Revenue and income from construction operations for the Civil segment are summarized as follows:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Revenue | | $ | 395.8 | | $ | 458.8 | | $ | 1,173.0 | | $ | 1,260.4 |
Income from construction operations | | | 38.1 | | | 50.3 | | | 128.2 | | | 129.0 |
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2021 | 2020 | | 2021 | 2020 |
| Revenue | $ | 555.4 | | $ | 569.0 | | | $ | 1,030.9 | | $ | 1,055.6 | |
| Income from construction operations | 75.1 | | 65.4 | | | 125.2 | | 111.5 | |
Revenue for both the three and six months ended June 30, 2021 decreased 2% compared to the same periods in 2020.
Despite the slight revenue decline for both periods of 2021, income from construction operations for the three and ninesix months ended SeptemberJune 30, 2017 decreased 14%2021 increased 15% and 7%12%, respectively, compared to the same periods in 2016.2020. The decreaseincrease for both periods was primarily due to reduced project execution activities oncontributions from certain mass-transit projects in New York and a tunnel project in Washington,higher-margin projects. For the six-month period of 2021, the increase was partially offset by increasednet volume on another mass-transit project in New York. For the nine-month period, revenue on a new mass-transit project in Californiareductions mostly related to certain projects that have completed or are nearing completion.
Operating margin was
offset by decreased activity on various bridge projects in the Midwest.Income from construction operations13.5% and 12.1% for the three and ninesix months ended SeptemberJune 30, 2017 decreased 24% and 1%,2021, respectively, compared to the same periods last year. The decrease for the third quarter of 2017 was principally due to the volume changes discussed above.
Operating margin was 9.6%11.5% and 10.9%, respectively, for the three and nine months ended September 30, 2017 compared to 11.0% and 10.2%10.6% for the same periods in 2016.2020. The margin decreaseincreases for both periods of 2021 reflect the third quarter of 2017 was primarily due to reduced profitability on various bridge projects in the Midwest. The margin increase for the nine months ended September 30, 2017 was principally due to certain mass-transit projects in California and New York that had higher volume and profit margins in the current year nine-month period.
segment’s continued shift towards higher-margin projects.
New awards in the Civil segment totaled
$463$119 million and
$2.8 billion$576 million for the three and
ninesix months ended
SeptemberJune 30,
20172021, respectively, compared to
$284$377 million and
$1.3 billion, respectively,$555 million for the
threesame periods in 2020. The volume of new awards in the second quarter of 2021 declined due to the timing of new project bids and
nine months ended September 30, 2016. New awardsawards. However, the Company anticipates booking the $220 million I-70 Missouri River Bridge project into backlog in the third quarter of
2017 included a joint-venture tunnel project2021 and also has several large Civil segment opportunities that are expected to bid and/or potentially be awarded to the Company later this year and in 2022. The COVID-19 pandemic has resulted in significant revenue shortfalls for
a hydroelectric generating station in British Columbia, Canada, valued at $274 million, a joint-venture bridge project in Minnesota, for whichmany state and local government agencies since 2020, and may continue to cause the
Company’s portion is valued at $90 million,deferrals or cancellations of certain new projects, depending on the allocation and
a military training range project in Guam worth $78 million.prioritization of state and local funding, as well as the availability, timing and magnitude of anticipated funding from the federal government.
Backlog for the Civil segment was $4.3 billion as of
SeptemberJune 30,
2017, up $1.5 billion, or 54%,2021 compared to
the backlog$5.5 billion as of
SeptemberJune 30,
2016. Civil segment backlog may continue2020. The decrease has been the result of relatively fewer and smaller new awards over the past six months primarily due to
grow based on the
volume and anticipated timing of
other prospects expected to be awarded later this year or in early 2018.upcoming bids for large prospective projects and impacts from the COVID-19 pandemic on new awards. The segment continues to experience
elevatedstrong demand reflected in a large,
multi-year pipeline of prospective projects,
which are supported by substantial anticipated funding from various voter-approved transportation
measures; California’s recently enacted $52 billion, 10-year transportation bill; the considerable infrastructure investment program expected from the Trump administration; the $305 billion FAST Act;measures and public agencies’ long-term spending plans. The Civil segment is
well positionedwell-positioned to
capturecontinue capturing its share of these prospective projects.
The segment, however, faces continued strong competition from both foreign and domestic competitors.
Revenue and income
(loss) from construction operations for the Building segment are
summarized as follows:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Revenue | | $ | 493.5 | | $ | 542.5 | | $ | 1,483.5 | | $ | 1,533.8 |
Income from construction operations | | | 14.1 | | | 13.3 | | | 25.0 | | | 39.0 |
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2021 | 2020 | | 2021 | 2020 |
| Revenue | $ | 382.7 | | $ | 473.0 | | | $ | 789.9 | | $ | 954.8 | |
| Income (loss) from construction operations | (2.5) | | 17.8 | | | 8.7 | | 21.3 | |
Revenue for the three
and six months ended
SeptemberJune 30,
20172021 decreased
9%19% and 17%, respectively, compared to the same
periodperiods in
2016. The decrease was2020, primarily
driven bydue to reduced project execution activities on
a biotechnology project and a courthouse project in California, both of whichcertain projects that are
substantially complete. The decrease wascompleted or nearing completion, partially offset by increased activity
on a hospitality and gaming project in
California. Revenue for the
nine months ended September 30, 2017 decreased a modest 3% comparedcurrent year related to
revenue forwork that had been deferred by the
same period last year.
Income from construction operations for the three months ended September 30, 2017 increased 6% compared to the third quarter of 2016. The increase was primarily due to favorable adjustments as a result of progress towards completionCOVID-19 pandemic on a technology project in California partially offset by reduced activity onin the above-mentioned biotechnology project in California. Incomeprior year.
Loss from construction operations for the
ninesecond quarter of 2021 was $2.5 million and income from construction operations for the six months ended
SeptemberJune 30,
2017 decreased 36%2021 was $8.7 million, compared to
income from construction operations of $17.8 million and $21.3 million for the
same period in 2016.three and six months ended June 30, 2020, respectively. The
decreasechange for both periods was principally due to
favorable closeout activitiesunfavorable adjustments on certain projects, which were immaterial individually and in the
first quarter of 2016 on two projects in New York and reduced activity onaggregate, as well as the
above-mentioned biotechnology project in California, partially offset by the improved performance on the technology project, also in California.volume reductions mentioned above.
Operating margin was
2.8%(0.7)% and
1.7%1.1% for the three and
ninesix months ended
SeptemberJune 30,
2017,2021, respectively, compared to
2.5%3.8% and 2.2% for
both the
three and nine months ended September 30, 2016.same periods in 2020. The
margin changes for both periodsdecreases were
primarily due to the
reasons discussed aboveabove-mentioned factors that drove the
decreasechanges in revenue and
variances in income
(loss) from construction operations.
New awards in the Building segment totaled $284$386 million and $1.1 billion$730 million for the three and ninesix months ended SeptemberJune 30, 20172021, respectively, compared to $270$260 million and $982$443 million respectively, for the threesame periods in 2020. The most significant new awards in the second quarter of 2021 were a $152 million courthouse project in California and nine months ended September 30, 2016. New awardsa $43 million government facility project in Mississippi. As mentioned above in Executive Overview, the Company anticipates booking the $471 million LAX Airport Metro Connector project, as well as a significant new health care facility project in California, into backlog in the third quarter of 2017 included a U.S. embassy renovation project in Uruguay valued at $87 million and $49 million of early scope tasks for a new technology office building in California, which is eventually anticipated to be worth approximately $500 million once the remaining funding is released.2021.
Backlog for the Building segment was $1.6 billion as of
SeptemberJune 30,
20172021 compared to
$2.2$2.3 billion as of
SeptemberJune 30,
2016. 2020. The backlog declinedecrease was due todriven by revenue recognition that outpacedexceeded the volume of new awards sinceover the end ofpast six months, as the third quarter of 2016.COVID-19 pandemic delayed certain new awards for prospective projects. The Building segment continues to have a large pipelinevolume of prospective projects some ofacross various end markets and geographic locations. We expect demand to grow as economic conditions improve and customer spending increases, which are expectedcontinue to be selected and awarded by customers later in this year or in early 2018. Sustained demand is expected due to ongoing customer spendingsupported by a historically low interest rate environment. The Building segment is well positionedHowever, the COVID-19 pandemic has resulted in, and could continue to capture its share of prospective projects based on its customer relationships and long-term reputationresult in, reduced demand for excellence in delivering high-quality projects on time and within budget.our building construction services.
Specialty Contractors Segment
Revenue and income
(loss) from construction operations for the Specialty Contractors segment are
summarized as follows:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Revenue | | $ | 310.1 | | $ | 331.6 | | $ | 907.7 | | $ | 932.3 |
Income from construction operations | | | 14.6 | | | 11.1 | | | 15.3 | | | 25.9 |
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2021 | 2020 | | 2021 | 2020 |
| Revenue | $ | 281.2 | | $ | 234.4 | | | $ | 606.0 | | $ | 516.8 | |
| Income (loss) from construction operations | 10.0 | | (11.4) | | | 11.3 | | (3.1) | |
Revenue for the three and six months ended SeptemberJune 30, 2017 decreased 6%2021 increased 20% and 17%, respectively, compared to the same periodperiods in 2016.2020. The decreasegrowth for both periods was principally driven by increased project execution activities on certain projects in the Northeast.
Income from construction operations for the
third quarterthree and six months ended June 30, 2021 was $10.0 million and $11.3 million, respectively, compared to a loss from construction operations of
2017$11.4 million and $3.1 million for the comparable periods in 2020. The increase for both periods of 2021 was primarily due to
reduceda $20.1 million favorable adjustment related to a legal judgment on a completed electrical project
execution activitiesin New York, partially offset by unfavorable adjustments in the second quarter of 2021 related to the resolution of disputes on
variouscertain electrical and mechanical projects in New York,
as certain projects have completed or are nearing completionwhich were immaterial individually and
newer projects have yet to fully ramp up. The decrease was partially offset by increased activity on various electrical projects in the
southern United States and in California. Revenue for the nine months ended September 30, 2017 decreased slightly by 3% compared to revenue for the same period last year.Income from construction operations increased 32% for the three months ended September 30, 2017 compared to the same period in 2016.aggregate. The increase was due in partalso driven by the absence of a $13.2 million prior-year second-quarter impact from an adverse arbitration ruling related to improvedanother electrical project profitability on various newer electrical projects in New York, as well as the increased activity mentioned above on various electrical projects in the southern United States and in California. Income from construction operations for the nine months ended September 30, 2017 decreased 41% compared to the same period last year. The decrease was primarily due to the impactYork.
Operating margin was
4.7%3.5% and
1.7%1.9% and for the three and
ninesix months ended
SeptemberJune 30,
2017,2021, respectively, compared to
3.3%(4.9)% and
2.8%(0.6)% for the
three and nine months ended September 30, 2016, respectively.same periods in 2020. The
increases in operating margin
changes for both periods were
primarilyprincipally due to the
above-mentionedaforementioned factors that
impacteddrove the changes in revenue and income
(loss) from construction operations.
New awards in the Specialty Contractors segment totaled
$394$137 million and
$929$295 million for the three and
ninesix months ended
SeptemberJune 30,
20172021, respectively, compared to
$206$81 million and
$660$306 million
respectively, for the
threesame periods in 2020. The COVID-19 pandemic has resulted in, and
nine months ended September 30, 2016. New awardscould continue to result in,
the third quarter of 2017 included a $154 million electrical subcontract for a mass-transit project in California, approximately $65 million for various smaller electrical projects in the southern United Statesreduced demand from certain commercial and
$52 million for three new mechanical projects in New York.government customers that have been experiencing funding constraints.
Backlog for the Specialty Contractors segment was
$1.6$1.5 billion as of
SeptemberJune 30,
20172021 compared to
$1.7$2.2 billion as of
SeptemberJune 30,
2016.2020. The decrease was driven by revenue that exceeded the volume of new awards over the past six months, as new awards have continued to be negatively impacted by the COVID-19 pandemic. The Specialty Contractors segment continues to
have a significant pipelinebe increasingly focused on servicing the Company’s backlog of
prospectivelarge Civil and Building segment projects,
with demand forbut also remains well-positioned to capture its
services supported by continued spending on civil and building projects. The Specialty Contractors segment should capture its
share of prospectivenew projects based onfor external customers, leveraging the size and scale of itsour business units that operate in New York, Texas, Florida and California and the strong reputation held by these business units for high-quality work on large, complex projects.
Corporate, Tax and Other Matters
Corporate General and Administrative Expenses
Corporate general and administrative expenses were
$17.7$13.8 million and
$48.4$26.7 million during the three and
ninesix months ended
SeptemberJune 30,
20172021, respectively, compared to
$13.8$14.1 million and
$44.0$24.8 million during the three and
ninesix months ended
SeptemberJune 30,
2016. The increases were primarily due to higher compensation-related expenses.2020, respectively.
Other Income
Net,(Expense), Interest Expense and
Provision for Income
TaxesTax Expense | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Other income, net | | $ | 1.0 | | $ | 2.0 | | $ | 42.4 | | $ | 5.2 |
Interest expense | | | (15.6) | | | (15.0) | | | (53.7) | | | (44.7) |
Provision for income taxes | | | (9.1) | | | (19.1) | | | (37.1) | | | (44.9) |
Other income, net increased $37.2 million
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in millions) | 2021 | 2020 | | 2021 | 2020 |
| Other income (expense) | $ | 1.4 | | $ | (0.8) | | | $ | 1.6 | | $ | (0.3) | |
| Interest expense | (17.9) | | (16.5) | | | (35.7) | | (32.9) | |
| Income tax expense | (10.6) | | (9.6) | | | (17.6) | | (14.7) | |
The effective tax rate was 20.4% and 20.9% for the
ninethree and six months ended
SeptemberJune 30,
20172021, respectively, compared to
23.7% and 20.5% for the same
periodperiods in
2016.2020, respectively. The
increase was primarily due to a $37.0 million legal settlement received during the second quarter of 2017, as discussed in Note 8 of the Notes to the Condensed Consolidated Financial Statements. Interest expense increased $9.0 million for the nine months ended September 30, 2017 compared to the same period in 2016. The increase was principally due to non-cash extinguishment costs related to our debt restructuring transactions in April 2017, as well as increased non-cash interest charges from the amortization of debt discount and issuance costs.
The Company’shigher effective income tax rate for the three and ninesix months ended SeptemberJune 30, 20172021 is primarily due to the absence of the favorable rate impact recognized in the 2020 period from the net operating loss carryback as a result of the Coronavirus Aid, Relief, and Economic Security Act, which was 26.4% and 34.1%, respectively, compared to 39.9% and 40.6%partially offset by unfavorable share-based compensation expense adjustments. The effective income tax rates for the three and ninesix months ended SeptemberJune 30, 2016, respectively. The favorable effective tax rate for both of the 2017 periods was primarily due to the release of tax liabilities as a result of a statute expiration and earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company. The effective tax rate for the nine months ended September 30, 2017 was also2021 were favorably impacted by lower state income taxes compared to the tax benefits associated with share-based compensation. During the first quartersame periods in 2020. For a further discussion of 2017, the Company recognized tax benefits associated with share-based compensation under the provisions of ASU 2016-09, as discussed inincome taxes, refer to Note 97 of the Notes to the Condensed Consolidated Financial Statements.The effective tax rate for the third quarter of 2016 was favorably impacted by various return-to-provision adjustments.
Liquidity and Capital Resources
Liquidity is provided by available cash and cash equivalents, cash generated from operations, credit facilities and access to capital markets. On April 20, 2017, we issued $500We have a committed line of credit totaling $175 million, which may be used for revolving loans, letters of senior notes and entered into a new credit facility with a $350 million revolver. We used the net proceeds to repurchase and/or redeem our 2010 Senior Notes in full and repay all borrowings under our 2014 Credit Facility.general purposes. We believe that the increased liquidity that resultedcash generated from this refinancingoperations, along with our unused credit capacity of $175 million and available cash balances as of June 30, 2021, will helpbe sufficient to fund any working capital needs and debt maturities for the significant number of project opportunitiesnext 12 months, provided that we see overare not adversely impacted by unanticipated future events, including further impacts related to the next several years, especiallyCOVID-19 pandemic as discussed above in our Civil segment.COVID-19 Update.
Cash and cash equivalents were
$221.9$231.1 million as of
SeptemberJune 30,
20172021 compared to
$146.1$374.3 million as of December 31,
2016.2020. Cash
immediately available for general corporate purposes was
$84.2$103.5 million and
$49.5$210.8 million as of
SeptemberJune 30,
20172021 and December 31,
2016,2020, respectively, with the remainder being
amounts held by our consolidated joint ventures and also our proportionate share of cash
related toheld by our unconsolidated joint ventures. Cash held by our joint ventures
which was available
only for joint venture-related uses, including distributions to joint venture partners. In addition, our restricted cash and restricted investments
held primarily to secure insurance-related contingent obligations, totaled
$66.2$88.4 million as of
SeptemberJune 30,
20172021 compared to
$50.5$156.5 million as of December 31,
2016.2020. Restricted cash and restricted investments at June 30, 2021 were primarily held to secure insurance-related contingent obligations. Restricted cash as of December 31, 2020 also included cash held to repay the $69.9 million outstanding principal balance of the Convertible Notes, which were repaid at maturity on June 15, 2021 (see Note 9 of the Notes to Condensed Consolidated Financial Statements).
During the
ninesix months ended
SeptemberJune 30,
2017,2021, net cash
provided byused in operating activities was
$1.9$131.3 million,
($36.5 million for the third quarter of 2017) due primarily to
investments in project working capital partially offset by cash generated from earnings
sources, mostly offset by increased investmentsources. The increase in
project working capital. The change in project working capital
for the first six months of 2021 primarily reflects
increases in accounts receivable and costs and estimated earnings in excess of billings, partially offset by an increase
in billings in excess of costs and estimated earnings. Other changes included reductions in accounts payable due to the timing of payments to vendors and subcontractors. In the first nine months of 2016, $94.2 million in cash was provided from operating activities, due primarily to favorable operating results offset by changes in net investment in project working capital.
The $92.3 million reduction in cash flow from operations for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 reflects the unfavorable timing of payments of payables and changes in costs and estimated earnings in excess of billings offset by changes(“CIE”), a decrease in accounts receivablepayable due to timing of payments to suppliers and subcontractors and a decrease in billings in excess of costs and estimated earnings.
earnings (“BIE”). The increase in CIE was primarily due to the follow-on impacts of the COVID-19 pandemic, which has caused delays in the negotiation and resolution of certain claims and unapproved change orders (due to the postponement or deferrals of certain legal and arbitration proceedings and settlement discussions), and constrained customers’ revenue and funding sources, thereby limiting their budgetary discretion to pay the Company for changes approved in scope but for which pricing is pending. During the first ninesix months of 2017, ourended June 30, 2020, net cash used for investingprovided by operating activities of $23.8was $58.2 million was due primarily to $48.7 millioncash generated from earnings sources, partially offset by investment in working capital. The increase in working capital for the first six months of 2020 primarily reflected an increase in accounts receivable due to timing of collections, partially offset by increases in BIE and accounts payable due to timing of payments to suppliers and subcontractors.
Cash flow from operating activities decreased $189.5 million when comparing the first six months of 2021 with the same period of 2020. The decrease in cash from operating activities in the first six months of 2021 compared to 2020 substantially reflects an increase in investment in working capital primarily as a result of restricted fundsa current-year decrease in accounts payable compared to obtainan increase in the prior year due to timing of payments to vendors and subcontractors, a higher returncurrent-year decrease in BIE compared to an increase in the prior year and a larger current-year increase in CIE compared to the use of $9.7 million for the acquisition of property and equipment,prior year, partially offset by a $33.1 millioncurrent-year decrease in restricted cash. Net cashaccounts receivable compared to an increase in the prior year.
Cash used
byin investing activities
forduring the
comparable period in 2016first six months of 2021 was
$12.0$22.8 million primarily due to the acquisition of property and
equipment.Forequipment for projects totaling $18.9 million, as well as net cash used in investment transactions of $7.6 million. Cash used in investing activities during the first ninesix months of 2017, net2020 was $32.6 million, primarily due to the acquisition of property and equipment for projects.
Net cash provided byused in financing activities was $97.7$63.7 million for the first six months of 2021, which was primarily duedriven by a $58.8 million net repayment of borrowings, including the repayment of the remaining principal balance of the Convertible Notes, and $3.2 million of net distributions to increased net borrowings of $125.4 million, partially offset by the use of $15.3 million for debt issuance and extinguishment costs related to the debt restructuring transactions in April 2017 and $11.1 million for tax payments related to the net settlement of share-based compensation.noncontrolling interests. Net cash provided byused in financing activities for the comparable period of 2016in 2020 was $13.1$36.2 million, which was principally due to increased net borrowings of $28.4 million, partially offsetprimarily driven by $14.9 million in debt issuance costs associated with amendments to our 2014 Credit Facility and the issuance of $200.0$30.9 million of Convertible Notes incash distributions to noncontrolling interests and a $4.3 million net repayment of borrowings.
At June
2016.At September 30, 2017,2021, we had working capital of $1.6$2.0 billion, a ratio of current assets to current liabilities of 2.071.96 and a ratio of debt to equity of 0.54,0.60, compared to working capital of $1.3$1.8 billion, a ratio of current assets to current liabilities of 1.871.80 and a ratio of debt to equity of 0.490.66 at December 31, 2016.
2020.
2020 Credit
FacilityAgreement
On
April 20, 2017, weAugust 18, 2020, the Company entered into a credit agreement (the
“2017“2020 Credit
Facility”Agreement”) with
SunTrustBMO Harris Bank
N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and
a syndicate of other lenders. The
20172020 Credit
FacilityAgreement provides for a
$350$425.0 million term loan B facility (the “Term Loan B”) and a $175.0 million revolving credit facility (the
“2017“2020 Revolver”)
and a sublimit, with sublimits for the issuance of letters of credit and
swinglineswing line loans up to the aggregate
amountamounts of
$150$75.0 million and
$10$10.0 million,
respectively, both maturingrespectively. The Term Loan B will mature on
April 20, 2022August 18, 2027 and the 2020 Revolver will mature on August 18, 2025, in each case, unless any of the
Convertible2017 Senior Notes are outstanding on
December 17, 2020,January 30, 2025 (which is 91 days prior to the maturity of the 2017 Senior Notes), in which case,
all such borrowingsboth the Term Loan B and the 2020 Revolver will mature on
December 17, 2020January 30, 2025 (subject to certain further exceptions).
In addition, the 2017 Credit Facility permits additional borrowings in an aggregate amount of $150 million, which can be in the form of increased capacity on the 2017 Revolver or the establishment of one orFor more
term loans. For additional information regarding the terms of our
20172020 Credit
Facility,Agreement, refer to Note
69 of the Notes to Condensed Consolidated Financial Statements.
The table below presents our actual and required consolidated
fixed charge coverage ratio and consolidatedfirst lien net leverage ratio under the
20172020 Credit
FacilityAgreement for the period, which
areis calculated on a rolling four-quarter basis:
| | | | | | | | |
| | | | Trailing Four Fiscal Quarters Ended |
| | Twelve Months Ended SeptemberJune 30, 2017
2021 |
| Actual | Actual
| | Required |
Fixed charge coverageFirst lien net leverage ratio
| 0.94 to 1.00 | 2.16≤ 2.75 : 1.00
| | > or = 1.25 : 1.00
|
Leverage ratio
| | 2.99 : 1.00
| | < or = 4.00 : 1.00
|
As of
the filing date of this Form 10-Q,June 30, 2021, we
arewere in compliance and expect to continue to be in compliance with the covenants under the
20172020 Credit
Facility. 2017Agreement.
Repurchase and Repayment of Convertible Notes
On June 15, 2016, the Company issued $200 million of 2.875% Convertible Senior Notes
due June 15, 2021 (the “Convertible Notes”) in a private placement offering. On April 20, 2017, we issued $500August 19, 2020, the Company used proceeds from the Term Loan B to repurchase $130.1 million in aggregate principal amount of 6.875% Seniorthe Convertible Notes due 2025 (the “2017 Senior Notes”) in a private placement. Interest onfor an aggregate purchase price of $132.4 million (including accrued and unpaid interest to the 2017 Senior Notes is payable in arrears semi-annually on May 1 and November 1 of each year, beginning on November 1, 2017. For additional information regardingrepurchase date). The Company repaid the terms of our 2017 Senior Notes, refer to Note 6remaining principal balance of the Convertible Notes to Condensed Consolidated Financial Statements.
Repurchase and Redemption of 2010 Senior Notes and Termination of 2014 Credit Facility
We usedat maturity on June 15, 2021 using proceeds from the 2017 Senior Notes and 2017 Revolver to repurchase or redeem our 2010 Senior Notes, to pay off our Term Loan and 2014 Revolver, and to pay accrued but unpaid interest and fees. In addition, we satisfied and dischargedB which were held in a restricted cash account for this purpose. None of the indenture governing the 2010 SeniorConvertible Notes and terminated the 2014 Credit Facility.
remained outstanding as of June 30, 2021.
Contractual Obligations
Aside from theDebt discussion above, there have been no significantmaterial changes in our contractual obligations from thatthose described in our Annual Report on Form 10-K10‑K for the year ended December 31, 2016.2020.
Off-Balance Sheet Arrangements
None
None.
Critical Accounting Policies
Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form
10-K10‑K for the year ended December 31,
2016.2020. Our critical accounting policies are also identified and discussed in Item 7 of our Annual Report on Form
10-K10‑K for the year ended December 31,
2016.2020.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Consolidated Financial Statements.
Item 3.Quantitative and Qualitative Disclosures About Market Risk There has been no material change in our exposure to market risk from that described in Item 7A of our Annual Report on Form 10-K10‑K for the year ended December 31, 2016.2020.
Item 4.Controls and Procedures Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this Quarterly Report on Form
10-Q10‑Q was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (a) were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. –OTHER INFORMATION In the ordinary course of our business, we are involved in various legal proceedings. We discloseddisclose information about certain of ourpending legal proceedings inpursuant to SEC rules and as we otherwise determine to be appropriate. For information on such pending matters, see Part I, Item 3 of our Annual Report on Form 10-K10‑K for the year ended December 31, 2016. For an update to those disclosures, see Notes 7 and 82020, updated by Note 11 of the Notes to the Condensed Consolidated Financial Statements.Statements included in this Quarterly Report on Form 10‑Q.
Item 1A.Risk FactorsThere have been no material changes to our
The following risk factors asfactor updates and replaces the risk factor under the same heading previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016. 2020.
If we are unable to accurately estimate contract risks, revenue or costs, the timing of new awards, or the pace of project execution, we may incur a loss or achieve lower than anticipated profit.
Accounting for contract-related revenue and costs requires management to make significant estimates and assumptions that may change substantially throughout the project lifecycle, which has previously resulted, and in the future could result, in a material impact to our consolidated financial statements. In addition, cost overruns, including unanticipated cost increases on fixed price and guaranteed maximum price contracts, have previously resulted, and in the future may result, in lower profits or losses. Economic factors, including inflation, could also subject us to higher costs, which we may not be able to fully recover in future projects that we are bidding, and may also decrease profit on our existing contracts, in particular with respect to our fixed price, unit price and guaranteed maximum price contracts. Changes in laws, policies or regulations, including tariffs and taxes, have previously impacted, and in the future could impact, the prices for materials or equipment. Further, our results of operations have historically fluctuated, and may continue to fluctuate, quarterly and annually depending on when new awards occur and the commencement and progress of work on projects already awarded.
Item 4.Mine Safety Disclosures Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires domestic mine operators to disclose violations and orders issued under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) by the federal Mine Safety and Health Administration. We do not act as the owner of any mines but we may act as a mining operator as defined under the Mine Act where we may be an independent contractor performing services or construction of such mine.
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104
of Regulation S-K is included in Exhibit 95.
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| Tutor Perini Corporation |
| |
| Dated: August 4, 2021 | |
Dated: November 9, 2017
By: | By:
| /s/Gary G. Smalley |
| Gary G. Smalley |
| Executive Vice President and Chief Financial Officer |