UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20192020
or
☐TRANSITION REPORT 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
Tutor Perini Corporation
(Exact Name of Registrant as Specified in its Charter)
MASSACHUSETTS | 04-1717070 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
15901 OLDEN STREET, SYLMAR, CALIFORNIA | 91342-1093 | |
(Address of Principal Executive Offices) | (Zip Code) |
(818) 362-8391
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if 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 every Interactive Data File required to be submitted 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 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.
Large accelerated filer ☒ | Accelerated filer ☐ |
Non-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. ☐
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 October 31, 2019July 22, 2020 was 50,278,816.50,771,288.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
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Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I. – FINANCIAL INFORMATION
Item 1. – Financial Statements
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||
September 30, | September 30, | June 30, | June 30, | |||||||||||||||||||
(in thousands, except per common share amounts) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
REVENUE | $ | 1,189,345 | $ | 1,123,137 | $ | 3,273,107 | $ | 3,271,378 | $ | 1,276,427 | $ | 1,125,275 | $ | 2,527,156 | $ | 2,083,762 | ||||||
COST OF OPERATIONS | (1,074,282) | (1,012,013) | (2,968,631) | (2,974,546) | (1,158,673) | (1,024,332) | (2,298,322) | (1,894,349) | ||||||||||||||
GROSS PROFIT | 115,063 | 111,124 | 304,476 | 296,832 | 117,754 | 100,943 | 228,834 | 189,413 | ||||||||||||||
General and administrative expenses | (67,120) | (63,818) | (195,474) | (195,636) | (60,058) | (62,797) | (123,911) | (128,354) | ||||||||||||||
Goodwill impairment | — | — | (379,863) | — | — | (379,863) | — | (379,863) | ||||||||||||||
INCOME (LOSS) FROM CONSTRUCTION OPERATIONS | 47,943 | 47,306 | (270,861) | 101,196 | 57,696 | (341,717) | 104,923 | (318,804) | ||||||||||||||
Other income, net | 1,674 | 1,909 | 2,996 | 3,739 | ||||||||||||||||||
Other income (expense) | (797) | 900 | (316) | 1,322 | ||||||||||||||||||
Interest expense | (17,305) | (16,411) | (51,252) | (47,474) | (16,464) | (17,522) | (32,900) | (33,947) | ||||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 32,312 | 32,804 | (319,117) | 57,461 | 40,435 | (358,339) | 71,707 | (351,429) | ||||||||||||||
Income tax (expense) benefit | (5,591) | (7,368) | 35,121 | (15,071) | (9,576) | 42,900 | (14,710) | 40,712 | ||||||||||||||
NET INCOME (LOSS) | 26,721 | 25,436 | (283,996) | 42,390 | 30,859 | (315,439) | 56,997 | (310,717) | ||||||||||||||
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 7,408 | 4,164 | 17,577 | 8,359 | 12,150 | 5,091 | 20,917 | 10,169 | ||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 19,313 | $ | 21,272 | $ | (301,573) | $ | 34,031 | $ | 18,709 | $ | (320,530) | $ | 36,080 | $ | (320,886) | ||||||
BASIC EARNINGS (LOSS) PER COMMON SHARE | $ | 0.38 | $ | 0.43 | $ | (6.01) | $ | 0.68 | $ | 0.37 | $ | (6.38) | $ | 0.71 | $ | (6.40) | ||||||
DILUTED EARNINGS (LOSS) PER COMMON SHARE | $ | 0.38 | $ | 0.42 | $ | (6.01) | $ | 0.68 | $ | 0.37 | $ | (6.38) | $ | 0.71 | $ | (6.40) | ||||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||||||||
BASIC | 50,279 | 50,018 | 50,201 | 49,927 | 50,667 | 50,224 | 50,502 | 50,161 | ||||||||||||||
DILUTED | 50,582 | 50,375 | 50,201 | 50,210 | 50,935 | 50,224 | 50,885 | 50,161 | ||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
UNAUDITED
Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||
September 30, | September 30, | June 30, | June 30, | |||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
NET INCOME (LOSS) | $ | 26,721 | $ | 25,436 | $ | (283,996) | $ | 42,390 | $ | 30,859 | $ | (315,439) | $ | 56,997 | $ | (310,717) | ||||||
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | ||||||||||||||||||||||
Defined benefit pension plan adjustments | 331 | 365 | 992 | 1,100 | 424 | 331 | 847 | 661 | ||||||||||||||
Foreign currency translation adjustments | (450) | 376 | 708 | (1,432) | 1,655 | 810 | (2,358) | 1,158 | ||||||||||||||
Unrealized gain (loss) in fair value of investments | 256 | (129) | 1,615 | (1,143) | ||||||||||||||||||
Unrealized gain in fair value of investments | 1,306 | 686 | 1,848 | 1,359 | ||||||||||||||||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | 137 | 612 | 3,315 | (1,475) | 3,385 | 1,827 | 337 | 3,178 | ||||||||||||||
COMPREHENSIVE INCOME (LOSS) | 26,858 | 26,048 | (280,681) | 40,915 | 34,244 | (313,612) | 57,334 | (307,539) | ||||||||||||||
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 7,309 | 4,164 | 17,737 | 8,359 | 13,004 | 5,248 | 19,751 | 10,428 | ||||||||||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 19,549 | $ | 21,884 | $ | (298,418) | $ | 32,556 | $ | 21,240 | $ | (318,860) | $ | 37,583 | $ | (317,967) | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
As of September 30, | As of December 31, | As of June 30, | As of December 31, | |||||||
(in thousands, except share and per share amounts) | 2019 | 2018 | 2020 | 2019 | ||||||
ASSETS | ASSETS | ASSETS | ||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents ($110,447 and $43,131 related to variable interest entities ("VIEs")) | $ | 207,130 | $ | 116,075 | ||||||
Cash and cash equivalents ($92,056 and $103,850 related to variable interest entities ("VIEs")) | $ | 182,599 | $ | 193,685 | ||||||
Restricted cash | 6,261 | 3,788 | 8,892 | 8,416 | ||||||
Restricted investments | 67,728 | 58,142 | 75,382 | 70,974 | ||||||
Accounts receivable ($142,749 and $62,482 related to VIEs) | 1,460,450 | 1,261,072 | ||||||||
Retainage receivable ($73,424 and $36,724 related to VIEs) | 542,274 | 478,744 | ||||||||
Costs and estimated earnings in excess of billings | 1,159,333 | 1,142,295 | ||||||||
Other current assets ($36,859 and $30,185 related to VIEs) | 162,406 | 115,527 | ||||||||
Accounts receivable ($129,081 and $91,090 related to VIEs) | 1,586,560 | 1,354,519 | ||||||||
Retainage receivable ($98,304 and $89,132 related to VIEs) | 581,495 | 562,375 | ||||||||
Costs and estimated earnings in excess of billings ($26,392 and $22,764 related to VIEs) | 1,149,103 | 1,123,544 | ||||||||
Other current assets ($55,286 and $58,128 related to VIEs) | 222,392 | 197,473 | ||||||||
Total current assets | 3,605,582 | 3,175,643 | 3,806,423 | 3,510,986 | ||||||
PROPERTY AND EQUIPMENT ("P&E"), net of accumulated depreciation of $375,717 and $343,735 (net P&E of $54,729 and $51,508 related to VIEs) | 509,986 | 490,669 | ||||||||
PROPERTY AND EQUIPMENT ("P&E"), net of accumulated depreciation of $417,575 and $388,147 (net P&E of $34,669 and $49,919 related to VIEs) | 504,722 | 509,685 | ||||||||
GOODWILL | 205,143 | 585,006 | 205,143 | 205,143 | ||||||
INTANGIBLE ASSETS, NET | 83,254 | 85,911 | 140,674 | 155,270 | ||||||
OTHER ASSETS | 90,943 | 50,523 | 106,641 | 104,693 | ||||||
TOTAL ASSETS | $ | 4,494,908 | $ | 4,387,752 | $ | 4,763,603 | $ | 4,485,777 | ||
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||||
Current maturities of long-term debt | $ | 10,862 | $ | 16,767 | ||||||
Accounts payable ($74,183 and $18,070 related to VIEs) | 670,458 | 621,728 | ||||||||
Retainage payable ($10,294 and $0 related to VIEs) | 232,209 | 211,956 | ||||||||
Billings in excess of costs and estimated earnings ($404,357 and $263,764 related to VIEs) | 818,806 | 573,190 | ||||||||
Accrued expenses and other current liabilities ($37,935 and $34,828 related to VIEs) | 188,373 | 174,325 | ||||||||
Current maturities of long-term debt, net of unamortized discount and debt issuance costs totaling $11,911 and $0 | $ | 320,790 | $ | 124,054 | ||||||
Accounts payable ($110,676 and $93,848 related to VIEs) | 770,515 | 682,699 | ||||||||
Retainage payable ($19,589 and $13,967 related to VIEs) | 278,045 | 252,181 | ||||||||
Billings in excess of costs and estimated earnings ($434,608 and $422,847 related to VIEs) | 962,446 | 844,389 | ||||||||
Accrued expenses and other current liabilities ($16,212 and $25,402 related to VIEs) | 209,576 | 206,533 | ||||||||
Total current liabilities | 1,920,708 | 1,597,966 | 2,541,372 | 2,109,856 | ||||||
LONG-TERM DEBT, less current maturities, net of unamortized discounts and debt issuance costs totaling $26,358 and $34,998 | 825,382 | 744,737 | ||||||||
LONG-TERM DEBT, less current maturities, net of unamortized discount and debt issuance costs totaling $5,190 and $23,343 | 515,629 | 710,422 | ||||||||
DEFERRED INCOME TAXES | 58,305 | 105,521 | 41,329 | 35,686 | ||||||
OTHER LONG-TERM LIABILITIES | 186,965 | 151,639 | 201,132 | 199,288 | ||||||
TOTAL LIABILITIES | 2,991,360 | 2,599,863 | 3,299,462 | 3,055,252 | ||||||
COMMITMENTS AND CONTINGENCIES (NOTE 11) |
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EQUITY | ||||||||||
Stockholders' equity: | ||||||||||
Preferred stock - authorized 1,000,000 shares ($1 par value), NaN issued | — | — | — | — | ||||||
Common stock - authorized 75,000,000 shares ($1 par value), issued and outstanding 50,278,816 and 50,025,996 shares | 50,279 | 50,026 | ||||||||
Common stock - authorized 75,000,000 shares ($1 par value), issued and outstanding 50,771,288 and 50,278,816 shares | 50,771 | 50,279 | ||||||||
Additional paid-in capital | 1,113,987 | 1,102,919 | 1,124,672 | 1,117,972 | ||||||
Retained earnings | 400,108 | 701,681 | 350,071 | 313,991 | ||||||
Accumulated other comprehensive loss | (42,294) | (45,449) | (40,597) | (42,100) | ||||||
Total stockholders' equity | 1,522,080 | 1,809,177 | 1,484,917 | 1,440,142 | ||||||
Noncontrolling interests | (18,532) | (21,288) | (20,776) | (9,617) | ||||||
TOTAL EQUITY | 1,503,548 | 1,787,889 | 1,464,141 | 1,430,525 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 4,494,908 | $ | 4,387,752 | $ | 4,763,603 | $ | 4,485,777 | ||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Nine Months Ended September 30, | Six Months Ended June 30, | |||||||||
(in thousands) | 2019 | 2018 | 2020 | 2019 | ||||||
Cash Flows from Operating Activities: | ||||||||||
Net income (loss) | $ | (283,996) | $ | 42,390 | $ | 56,997 | $ | (310,717) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used) in operating activities: | ||||||||||
Goodwill impairment | 379,863 | — | — | 379,863 | ||||||
Depreciation | 41,884 | 30,924 | 34,180 | 26,543 | ||||||
Amortization of intangible assets | 2,657 | 2,657 | 14,596 | 1,771 | ||||||
Share-based compensation expense | 14,331 | 17,779 | 8,264 | 10,078 | ||||||
Change in debt discounts and deferred debt issuance costs | 9,790 | 8,962 | ||||||||
Change in debt discount and deferred debt issuance costs | 7,046 | 6,442 | ||||||||
Deferred income taxes | (48,318) | 233 | 5,423 | (50,321) | ||||||
(Gain) loss on sale of property and equipment | (1,799) | 823 | ||||||||
Loss (gain) on sale of property and equipment | 31 | (1,479) | ||||||||
Changes in other components of working capital | (7,148) | (136,113) | (68,471) | (177,471) | ||||||
Other long-term liabilities | 3,979 | (2,606) | 1,295 | 3,209 | ||||||
Other, net | 122 | 190 | (1,131) | 596 | ||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 111,365 | (34,761) | 58,230 | (111,486) | ||||||
Cash Flows from Investing Activities: | ||||||||||
Acquisition of property and equipment | (62,677) | (64,411) | (31,386) | (39,346) | ||||||
Proceeds from sale of property and equipment | 4,300 | 5,462 | 1,082 | 3,629 | ||||||
Investment in securities | (18,790) | (13,841) | (13,319) | (13,660) | ||||||
Proceeds from maturities and sales of investments in securities | 11,078 | 14,302 | 10,985 | 8,131 | ||||||
NET CASH USED IN INVESTING ACTIVITIES | (66,089) | (58,488) | (32,638) | (41,246) | ||||||
Cash Flows from Financing Activities: | ||||||||||
Proceeds from debt | 649,139 | 1,502,177 | 752,843 | 716,139 | ||||||
Repayment of debt | (583,039) | (1,444,760) | (757,141) | (527,159) | ||||||
Business acquisition related payment | — | (15,951) | ||||||||
Cash payments related to share-based compensation | (2,363) | (2,671) | (994) | (2,363) | ||||||
Distributions paid to noncontrolling interests | (21,500) | (22,500) | (30,910) | (4,000) | ||||||
Contributions from noncontrolling interests | 6,519 | 1,000 | — | 5,379 | ||||||
Debt modification costs | (504) | — | — | (504) | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 48,252 | 17,295 | ||||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (36,202) | 187,492 | ||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 93,528 | (75,954) | (10,610) | 34,760 | ||||||
Cash, cash equivalents and restricted cash at beginning of period | 119,863 | 197,648 | 202,101 | 119,863 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 213,391 | $ | 121,694 | $ | 191,491 | $ | 154,623 | ||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(1) Basis of Presentation
The Condensed Consolidated Financial Statements do not include footnotes and certain financial information normally presented annually under generally accepted accounting principles in the United States (“GAAP”). Therefore, they should be read in conjunction with the audited consolidated financial statements and the related notes included in Tutor Perini Corporation’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2018.2019. The results of operations for the three and ninesix months ended SeptemberJune 30, 20192020 may not be indicative of the results that will be achieved for the full year ending December 31, 20192020.
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, 20192020 and its consolidated statements of operations and cash flows for the interim periods presented. Intercompany balances and transactions have been eliminated.
(2) Recent Accounting Pronouncements
New accounting pronouncements adopted by the Company during the nine months ended September 30, 2019 are discussed below.
In August 2018, the Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” adopting amendments to certain disclosure rules that were redundant, duplicative, overlapping, outdated, or superseded, in light of other SEC disclosure requirements, GAAP or changes in the information environment. This release was subsequently codified in July 2019 as part of Accounting Standards Update (“ASU”) 2019-07, Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, “Disclosure Update and Simplification,” and Nos. 33-10231 and 33-10442, “Investment Company Reporting Modernization,” and Miscellaneous Updates. The amendments expanded the disclosure requirements relating to the analysis of equity for interim financial statements. Under the amendments, an analysis of the changes in each caption of stockholders’ equity and noncontrolling interests presented in the balance sheet must be provided in a note or separate statement. The analysis must present a reconciliation of the beginning balance to the ending balance of each period for which a statement of earnings is required to be filed. The final rule was effective on November 5, 2018. The Company adopted the final rule effective for the first quarter of 2019. The adoption of the final rule did not have an impact on the Company’s consolidated financial position or results of operations. See Note 16, Changes in Equity, for the new required disclosures.
In FebruaryJune 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, and issued subsequent amendments to the initial guidance within ASU 2019-04 and ASU 2019-05 (collectively, “ASU 2016-13”). The amendments in ASU 2016-13 replace the incurred loss impairment methodology with the current expected credit loss model, which requires consideration of a broader range of reasonable and supportable information to estimate credit losses. The Company adopted this ASU effective January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position, results of operations or cash flows.
In March 2020, the FASB issued ASU 2016-02,2020-04, LeasesReference Rate Reform (Topic 842),848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting as amended and supplemented by subsequent ASUs (collectively, “ASC 842”(“ASU 2020-04”). ASC 842 amendsThe amendments in ASU 2020-04 provide temporary optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions to ease the existing guidance in Accounting Standards Codificationpotential accounting and financial reporting burden associated with transitioning away from reference rates that are expected to be discontinued, including the London Interbank Offered Rate (“ASC”LIBOR”) 840, Leases. This ASU requires, among other things, the recognition2020-04 is effective as of lease right-of-use (“ROU”) assets and lease liabilities by lessees for those leases currently classified as operating leases. ASC 842 allowed companies to adoptMarch 12, 2020 through December 31, 2022. The adoption of the new standard by applying eitherhas not had and is not expected to have a modified retrospective method to the beginning of the earliest period presented in the financial statements or an optional transition method to initially apply the standard on January 1, 2019 and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the standard using the optional transition method. Under this method, financial results reported in periods prior to 2019 are unchanged. The Company elected the package of practical expedients which provides relief from having to reassess (1) whether any expired or existing contracts contain leases, (2) lease classification (as operating or financing) for any expired or existing leases, and (3) initial direct costs for any existing leases. The Company also elected to separate non-lease components from lease components. Basedmaterial impact on the Company’s evaluation of ASC 842, the adoption on January 1, 2019 resulted in an increase of $43.3 million to its assets and liabilities on the Condensed Consolidated Balance Sheets with no impact to itsfinancial position, results of operations or cash flows.
The following new accounting pronouncement requires implementation in future periods.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), modifying Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). The amendments in ASU 2019-12, among other things, remove certain exceptions to the general principles in ASC 740 and seek more consistent application by clarifying and amending the existing guidance. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020. The Company is currently evaluating the new standard, which is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The effects of the changes made to the Company’s January 1, 2019 consolidated balance sheet for the adoption of ASC 842 were as follows:
BALANCE SHEET | Balance as of | Adjustments due to | Balance as of | |||||
(in thousands) | December 31, 2018(a) | ASC 842 | January 1, 2019 | |||||
ASSETS | ||||||||
Other assets(b) | $ | 50,523 | $ | 43,273 | $ | 93,796 | ||
LIABILITIES | ||||||||
Accrued expenses and other current liabilities(b) | $ | 174,325 | $ | 11,569 | $ | 185,894 | ||
Other long-term liabilities(b) | 151,639 | 31,704 | 183,343 | |||||
____________________________________________________________________________________________________
(a)Balance as previously reported on the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
(b)Prior to the adoption of ASC 842, operating lease ROU assets and current and long-term operating lease liabilities were not recorded on the Condensed Consolidated Balance Sheets.
The following table presents the impacts of adoption of the new leases standard on the Condensed Consolidated Balance Sheet:
As of September 30, 2019 | |||||||||
Balance Without | |||||||||
BALANCE SHEET | Adoption of | Effect of | |||||||
(in thousands) | As Reported | ASC 842 | Change | ||||||
ASSETS | |||||||||
Other assets(a) | $ | 90,943 | $ | 49,823 | $ | 41,120 | |||
LIABILITIES | |||||||||
Accrued expenses and other current liabilities(a) | $ | 188,373 | $ | 177,298 | $ | 11,075 | |||
Other long-term liabilities(a) | 186,965 | 156,920 | 30,045 | ||||||
____________________________________________________________________________________________________
(a)Prior to the adoption of ASC 842, operating lease ROU assets and current and long-term operating lease liabilities were not recorded on the Condensed Consolidated Balance Sheets.
For the three and nine months ended September 30, 2019, the new requirements of ASC 842 did not have an impact on the Company’s 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 Company believes best depict how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018.2019.
Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||
September 30, | September 30, | June 30, | June 30, | |||||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Civil segment revenue by end market: | ||||||||||||||||||||||||
Mass transit | $ | 265,671 | $ | 177,619 | $ | 655,541 | $ | 485,841 | ||||||||||||||||
Mass transit (includes transportation and tunneling projects) | $ | 354,809 | $ | 243,620 | $ | 651,952 | $ | 389,870 | ||||||||||||||||
Bridges | 113,743 | 128,240 | 269,517 | 311,979 | 89,100 | 86,467 | 141,284 | 155,774 | ||||||||||||||||
Highways | 44,630 | 46,553 | 145,917 | 129,619 | 35,591 | 60,244 | 68,173 | 101,287 | ||||||||||||||||
Tunneling | 32,076 | 33,377 | 96,602 | 66,009 | ||||||||||||||||||||
Military defense facilities | 35,042 | 13,140 | 58,652 | 23,421 | ||||||||||||||||||||
Water | 29,548 | 4,658 | 53,292 | 14,326 | ||||||||||||||||||||
Other | 68,426 | 45,699 | 164,121 | 103,627 | 24,886 | 65,529 | 82,252 | 122,474 | ||||||||||||||||
Total Civil segment revenue | $ | 524,546 | $ | 431,488 | $ | 1,331,698 | $ | 1,097,075 | $ | 568,976 | $ | 473,658 | $ | 1,055,605 | $ | 807,152 | ||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
Building segment revenue by end market: | ||||||||||||
Commercial and industrial facilities | $ | 106,899 | $ | 115,193 | $ | 239,948 | $ | 224,546 | ||||
Hospitality and gaming | 107,942 | 53,576 | 226,929 | 122,885 | ||||||||
Municipal and government | 79,223 | 68,580 | 148,725 | 130,542 | ||||||||
Mass transit (includes transportation projects) | 66,552 | 41,211 | 124,399 | 70,388 | ||||||||
Education facilities | 47,038 | 47,062 | 78,660 | 89,590 | ||||||||
Health care facilities | 32,418 | 60,796 | 68,307 | 141,023 | ||||||||
Mixed use | 13,101 | 9,316 | 23,073 | 24,591 | ||||||||
Other | 19,848 | 32,584 | 44,744 | 58,219 | ||||||||
Total Building segment revenue | $ | 473,021 | $ | 428,318 | $ | 954,785 | $ | 861,784 | ||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
Specialty Contractors segment revenue by end market: | ||||||||||||
Mass transit (includes transportation and tunneling projects) | $ | 118,634 | $ | 100,016 | $ | 267,305 | $ | 181,411 | ||||
Commercial and industrial facilities | 20,499 | 43,618 | 74,004 | 87,641 | ||||||||
Multi-unit residential | 37,611 | 19,225 | 64,104 | 30,614 | ||||||||
Education facilities | 10,338 | 14,036 | 26,895 | 25,616 | ||||||||
Mixed use | 10,536 | 18,036 | 24,338 | 28,705 | ||||||||
Health care facilities | 4,283 | 9,248 | 6,805 | 20,899 | ||||||||
Other | 32,529 | 19,120 | 53,315 | 39,940 | ||||||||
Total Specialty Contractors segment revenue | $ | 234,430 | $ | 223,299 | $ | 516,766 | $ | 414,826 | ||||
Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | ||||||||||||||||||||||
Specialty | Specialty | ||||||||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | |||||||||||||||
Revenue by customer type: | |||||||||||||||||||||||
State and local agencies | $ | 503,828 | $ | 157,748 | $ | 113,623 | $ | 775,199 | $ | 381,438 | $ | 133,798 | $ | 114,255 | $ | 629,491 | |||||||
Federal agencies | 42,590 | 34,648 | 11,292 | 88,530 | 26,979 | 44,396 | 2,761 | 74,136 | |||||||||||||||
Private owners | 22,558 | 280,625 | 109,515 | 412,698 | 65,241 | 250,124 | 106,283 | 421,648 | |||||||||||||||
Total revenue | $ | 568,976 | $ | 473,021 | $ | 234,430 | $ | 1,276,427 | $ | 473,658 | $ | 428,318 | $ | 223,299 | $ | 1,125,275 | |||||||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||
Building segment revenue by end market: | ||||||||||||
Commercial and industrial facilities | $ | 121,206 | $ | 57,505 | $ | 345,752 | $ | 290,571 | ||||
Health care facilities | 58,323 | 127,219 | 199,347 | 320,416 | ||||||||
Municipal and government | 62,444 | 67,003 | 192,986 | 187,984 | ||||||||
Hospitality and gaming | 57,672 | 65,744 | 180,556 | 226,999 | ||||||||
Mass transit | 53,384 | — | 123,772 | — | ||||||||
Education facilities | 33,469 | 43,405 | 123,059 | 108,763 | ||||||||
Mixed use | 2,183 | 40,758 | 26,774 | 121,348 | ||||||||
Other | 26,665 | 53,858 | 84,884 | 136,631 | ||||||||
Total Building segment revenue | $ | 415,346 | $ | 455,492 | $ | 1,277,130 | $ | 1,392,712 | ||||
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||
Specialty Contractors segment revenue by end market: | ||||||||||||
Mass transit | $ | 103,710 | $ | 63,457 | $ | 285,121 | $ | 216,808 | ||||
Commercial and industrial facilities | 51,471 | 48,601 | 139,112 | 136,892 | ||||||||
Multi-unit residential | 25,860 | 18,254 | 56,474 | 64,104 | ||||||||
Education facilities | 21,610 | 26,024 | 47,226 | 77,626 | ||||||||
Mixed use | 18,465 | 37,587 | 47,170 | 137,420 | ||||||||
Health care facilities | 5,217 | 12,873 | 26,116 | 43,861 | ||||||||
Transportation | 5,931 | 17,150 | 16,092 | 73,154 | ||||||||
Other | 17,189 | 12,211 | 46,968 | 31,726 | ||||||||
Total Specialty Contractors segment revenue | $ | 249,453 | $ | 236,157 | $ | 664,279 | $ | 781,591 | ||||
Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | ||||||||||||||||||||||
Specialty | Specialty | ||||||||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | |||||||||||||||
Revenue by customer type: | |||||||||||||||||||||||
State and local agencies | $ | 420,839 | $ | 144,106 | $ | 136,191 | $ | 701,136 | $ | 341,067 | $ | 177,377 | $ | 99,913 | $ | 618,357 | |||||||
Private owners | 70,855 | 234,350 | 108,476 | 413,681 | 63,477 | 225,225 | 124,186 | 412,888 | |||||||||||||||
Federal agencies | 32,852 | 36,890 | 4,786 | 74,528 | 26,944 | 52,890 | 12,058 | 91,892 | |||||||||||||||
Total revenue | $ | 524,546 | $ | 415,346 | $ | 249,453 | $ | 1,189,345 | $ | 431,488 | $ | 455,492 | $ | 236,157 | $ | 1,123,137 | |||||||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||
Specialty | Specialty | Specialty | Specialty | |||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | ||||||||||||||||||||||||||||||
Revenue by customer type: | ||||||||||||||||||||||||||||||||||||||||||||||
State and local agencies | $ | 1,059,384 | $ | 422,590 | $ | 347,517 | $ | 1,829,491 | $ | 894,613 | $ | 452,918 | $ | 312,541 | $ | 1,660,072 | $ | 899,873 | $ | 303,764 | $ | 246,496 | $ | 1,450,133 | $ | 638,545 | $ | 278,484 | $ | 211,326 | $ | 1,128,355 | ||||||||||||||
Federal agencies | 79,251 | 66,621 | 21,048 | 166,920 | 50,137 | 84,547 | 10,530 | 145,214 | ||||||||||||||||||||||||||||||||||||||
Private owners | 189,325 | 733,103 | 301,446 | 1,223,874 | 134,891 | 790,330 | 423,280 | 1,348,501 | 76,481 | 584,400 | 249,222 | 910,103 | 118,470 | 498,753 | 192,970 | 810,193 | ||||||||||||||||||||||||||||||
Federal agencies | 82,989 | 121,437 | 15,316 | 219,742 | 67,571 | 149,464 | 45,770 | 262,805 | ||||||||||||||||||||||||||||||||||||||
Total revenue | $ | 1,331,698 | $ | 1,277,130 | $ | 664,279 | $ | 3,273,107 | $ | 1,097,075 | $ | 1,392,712 | $ | 781,591 | $ | 3,271,378 | $ | 1,055,605 | $ | 954,785 | $ | 516,766 | $ | 2,527,156 | $ | 807,152 | $ | 861,784 | $ | 414,826 | $ | 2,083,762 | ||||||||||||||
Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||
Specialty | Specialty | Specialty | Specialty | |||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | ||||||||||||||||||||||||||||||
Revenue by contract type: | ||||||||||||||||||||||||||||||||||||||||||||||
Fixed price | $ | 376,230 | $ | 144,514 | $ | 208,689 | $ | 729,433 | $ | 272,996 | $ | 91,972 | $ | 193,607 | $ | 558,575 | $ | 455,928 | $ | 114,229 | $ | 205,531 | $ | 775,688 | $ | 349,945 | $ | 136,250 | $ | 187,826 | $ | 674,021 | ||||||||||||||
Guaranteed maximum price | 639 | 159,217 | 4,405 | 164,261 | 3,025 | 269,069 | 18,720 | 290,814 | 281 | 248,738 | 4,038 | 253,057 | 1,644 | 185,050 | 7,315 | 194,009 | ||||||||||||||||||||||||||||||
Unit price | 142,253 | 2,922 | 25,193 | 170,368 | 141,917 | 9,938 | 7,939 | 159,794 | 111,790 | 629 | 18,442 | 130,861 | 116,285 | 2,800 | 20,183 | 139,268 | ||||||||||||||||||||||||||||||
Cost plus fee and other | 5,424 | 108,693 | 11,166 | 125,283 | 13,550 | 84,513 | 15,891 | 113,954 | 977 | 109,425 | 6,419 | 116,821 | 5,784 | 104,218 | 7,975 | 117,977 | ||||||||||||||||||||||||||||||
Total revenue | $ | 524,546 | $ | 415,346 | $ | 249,453 | $ | 1,189,345 | $ | 431,488 | $ | 455,492 | $ | 236,157 | $ | 1,123,137 | $ | 568,976 | $ | 473,021 | $ | 234,430 | $ | 1,276,427 | $ | 473,658 | $ | 428,318 | $ | 223,299 | $ | 1,125,275 | ||||||||||||||
Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||
Specialty | Specialty | Specialty | Specialty | |||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | ||||||||||||||||||||||||||||||
Revenue by contract type: | ||||||||||||||||||||||||||||||||||||||||||||||
Fixed price | $ | 969,041 | $ | 395,123 | $ | 551,779 | $ | 1,915,943 | $ | 716,826 | $ | 267,630 | $ | 675,526 | $ | 1,659,982 | $ | 864,899 | $ | 219,827 | $ | 454,047 | $ | 1,538,773 | $ | 592,811 | $ | 250,609 | $ | 343,090 | $ | 1,186,510 | ||||||||||||||
Guaranteed maximum price | 4,517 | 551,399 | 15,326 | 571,242 | 11,200 | 801,537 | 51,762 | 864,499 | 589 | 486,511 | 6,587 | 493,687 | 3,878 | 392,182 | 10,921 | 406,981 | ||||||||||||||||||||||||||||||
Unit price | 343,416 | 10,950 | 64,379 | 418,745 | 332,118 | 29,526 | 21,829 | 383,473 | 183,148 | 1,163 | 39,593 | 223,904 | 201,163 | 8,028 | 39,186 | 248,377 | ||||||||||||||||||||||||||||||
Cost plus fee and other | 14,724 | 319,658 | 32,795 | 367,177 | 36,931 | 294,019 | 32,474 | 363,424 | 6,969 | 247,284 | 16,539 | 270,792 | 9,300 | 210,965 | 21,629 | 241,894 | ||||||||||||||||||||||||||||||
Total revenue | $ | 1,331,698 | $ | 1,277,130 | $ | 664,279 | $ | 3,273,107 | $ | 1,097,075 | $ | 1,392,712 | $ | 781,591 | $ | 3,271,378 | $ | 1,055,605 | $ | 954,785 | $ | 516,766 | $ | 2,527,156 | $ | 807,152 | $ | 861,784 | $ | 414,826 | $ | 2,083,762 | ||||||||||||||
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. NetRevenue 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.Likewise, revenue was negatively impacted during the three- and nine-monthsix-month periods ended SeptemberJune 30, 2019 related to performance obligations satisfied (or partially satisfied) in prior periods by $13.8$14.6 million and $46.3$27.7 million, respectively. Net revenue recognized during the three and nine months ended September 30, 2018 related to performance obligations satisfied (or partially satisfied) in prior periods was immaterial.
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 SeptemberJune 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. As of June 30, 2019, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $5.3$5.5 billion, $1.6$1.7 billion and $2.2 billion for the Civil, Building and Specialty Contractors segments, respectively. As of September 30, 2018, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $4.2 billion, $2.1 billion and $1.7 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:
As of September 30, | As of December 31, | As of June 30, | As of December 31, | |||||||||
(in thousands) | 2019 | 2018 | 2020 | 2019 | ||||||||
Retainage receivable | $ | 542,274 | $ | 478,744 | $ | 581,495 | $ | 562,375 | ||||
Costs and estimated earnings in excess of billings: | ||||||||||||
Claims | 756,760 | 698,274 | 729,170 | 705,993 | ||||||||
Unapproved change orders | 334,125 | 354,000 | 348,043 | 362,264 | ||||||||
Other unbilled costs and profits | 68,448 | 90,021 | 71,890 | 55,287 | ||||||||
Total costs and estimated earnings in excess of billings | 1,159,333 | 1,142,295 | 1,149,103 | 1,123,544 | ||||||||
Capitalized contract costs | 60,290 | 37,404 | 88,185 | 80,294 | ||||||||
Total contract assets | $ | 1,761,897 | $ | 1,658,443 | $ | 1,818,783 | $ | 1,766,213 | ||||
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 towardstoward completion.As of September 30, 2019, the amount of retainage receivables estimated by management to be collected beyond one year is approximately 39% of the balance.
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)(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)(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, Commitments and Contingencies, 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 ninesix months ended SeptemberJune 30, 2019, $8.52020, $12.5 million and $22.8 million, respectively, of previously capitalized contract costs were amortized and recognized as expense on the related contracts. During the three and ninesix months ended SeptemberJune 30, 2018, $4.02019, $8.6 million and $12.2$14.3 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:
As of September 30, | As of December 31, | As of June 30, | As of December 31, | |||||||||
(in thousands) | 2019 | 2018 | 2020 | 2019 | ||||||||
Retainage payable | $ | 232,209 | $ | 211,956 | $ | 278,045 | $ | 252,181 | ||||
Billings in excess of costs and estimated earnings | 818,806 | 573,190 | 962,446 | 844,389 | ||||||||
Total contract liabilities | $ | 1,051,015 | $ | 785,146 | $ | 1,240,491 | $ | 1,096,570 | ||||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
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.As of September 30, 2019, the amount of retainage payable estimated by management to be remitted beyond one year is approximately 30% of the balance.
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 ninesix months ended SeptemberJune 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. Revenue recognized during the three and six months ended June 30, 2019 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $322.8$289.4 million and $437.1 million, respectively. Revenue recognized during the three and nine months ended September 30, 2018 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $251.4 million and $341.2$391.9 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:
As of September 30, | As of December 31, | As of June 30, | As of December 31, | |||||||||
(in thousands) | 2019 | 2018 | 2020 | 2019 | ||||||||
Cash and cash equivalents available for general corporate purposes | $ | 49,166 | $ | 51,749 | $ | 57,651 | $ | 43,760 | ||||
Joint venture cash and cash equivalents | 157,964 | 64,326 | 124,948 | 149,925 | ||||||||
Cash and cash equivalents | 207,130 | 116,075 | 182,599 | 193,685 | ||||||||
Restricted cash | 6,261 | 3,788 | 8,892 | 8,416 | ||||||||
Total cash, cash equivalents and restricted cash | $ | 213,391 | $ | 119,863 | $ | 191,491 | $ | 202,101 | ||||
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.
Amounts included in restricted cash are primarily held as collateral to secure insurance-related contingent obligations, such as insurance claim deductibles, in lieu of letters of credit.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(6) Earnings Per Common Share (EPS)
Basic 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 9, Financial Commitments.9. In accordance with ASC 260, Earnings Per Share(“ASC 260”), the settlement of the principal amount of the Convertible Notes has no impact on diluted EPS because the Company has the intent and ability to settle the principal amount in cash.cash. See Note 9 for further discussion of the 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 September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
(in thousands, except per common share data) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net income (loss) attributable to Tutor Perini Corporation | $ | 19,313 | $ | 21,272 | $ | (301,573) | $ | 34,031 | $ | 18,709 | $ | (320,530) | $ | 36,080 | $ | (320,886) | ||||||
Weighted-average common shares outstanding, basic | 50,279 | 50,018 | 50,201 | 49,927 | 50,667 | 50,224 | 50,502 | 50,161 | ||||||||||||||
Effect of dilutive restricted stock units and stock options | 303 | 357 | — | 283 | 268 | — | 383 | — | ||||||||||||||
Weighted-average common shares outstanding, diluted | 50,582 | 50,375 | 50,201 | 50,210 | 50,935 | 50,224 | 50,885 | 50,161 | ||||||||||||||
Net income (loss) attributable to Tutor Perini Corporation per common share: | ||||||||||||||||||||||
Basic | $ | 0.38 | $ | 0.43 | $ | (6.01) | $ | 0.68 | $ | 0.37 | $ | (6.38) | $ | 0.71 | $ | (6.40) | ||||||
Diluted | $ | 0.38 | $ | 0.42 | $ | (6.01) | $ | 0.68 | $ | 0.37 | $ | (6.38) | $ | 0.71 | $ | (6.40) | ||||||
Anti-dilutive securities not included above | 1,665 | 2,107 | 3,458 | 2,765 | 2,209 | 4,191 | 2,209 | 4,354 | ||||||||||||||
The net loss attributable to Tutor Perini Corporation per common share for the nine months ended September 30, 2019 in the table above reflects the impact of the $379.9 million goodwill impairment charge discussed in Note 8, Goodwill and Intangible Assets, withan after-tax impact of $329.5 million, or $6.56 per diluted share.
For the ninethree and six months ended SeptemberJune 30, 2019, all outstanding restricted stock units and stock options were excluded from the calculation of weighted-average diluted shares outstanding due to the net loss for the period.
(7) Income Taxes
The Company’s effective income tax rate was 17.3%23.7% and 11.0%20.5% for the three and ninesix months ended SeptemberJune 30, 2019 and 22.5% and 26.2% for the three and nine months ended September 30, 2018,2020, respectively. The Company’s provision for income taxes and effective tax rate for the nine months ended September 30, 2019 were significantly impacted by the goodwill impairment charge discussed in Note 8, Goodwill and Intangible Assets. Of the total goodwill impairment charge of $379.9 million, approximately $209.5 million pertained to goodwill that is not tax deductible and yielded permanent differences between book income and taxable income. For the nine months ended September 30, 2019, the Company recognized a tax benefit totaling $50.4 million as a result of the impairment charge. Additionally, approximately $50.3 million was recorded as a deferred tax asset or a reduction of a previously recorded deferred tax liability due to the impairment charge.
The effective tax rate for the three months ended September 30, 2019 of 17.3% and the adjusted effective income tax rate for the ninesix months ended SeptemberJune 30, 2020 primarily reflects the favorable impact of the 2019 of 25.1%net operating loss (“NOL”), which excludesis allowed to be carried back up to five years as a result of the goodwill impairment chargeCoronavirus Aid, Relief, and associatedEconomic Security Act (“CARES Act”), enacted on March 27, 2020. Under the CARES Act, the Company’s NOL generated in 2019 may be carried back to tax years when the federal statutory tax rate was 35% rather than the current rate of 21%, consequently generating a larger tax benefit were favorably impactedfrom the NOL due to the enactment of the CARES Act. The favorable impact resulting from the enactment of the CARES Act was partially offset by the unfavorable impact of the vesting of restricted stock units for which a large portion of the share-based compensation expense recognized in prior periods will not be deductible for income tax purposes. For the three and six months ended June 30, 2020, the effective income tax rates differed from the federal statutory rate also as a result of state income taxes, with the increases partially offset by earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the CompanyCompany.
For the three and tax return-to-provision adjustments. The nine-month periodsix months ended SeptemberJune 30, 2019, also includedthe Company recognized income tax benefits of $42.9 million and $40.7 million, with effective income tax rates of 12.0% and 11.6%, respectively. The Company’s provisions for income taxes and effective tax rates for the three and six months ended June 30, 2019 were significantly impacted by the goodwill impairment charge of $379.9 million. Of the total goodwill impairment charge, approximately $209.5 million pertained to goodwill that was not tax deductible and yielded permanent differences between book income and taxable income. The Company recognized a tax benefit totaling $50.4 million as a result of the impairment charge. The adjusted effective income tax rates, which exclude the tax benefit resulting from the goodwill impairment charge, were 34.7% and 34.0% for the three and six months ended June 30, 2019, respectively, and primarily reflected the unfavorable impact of expired stock options for which the share-based compensation expense recognized in prior periods will not be deductible for income taxes. TheFor the three and six months ended June 30, 2019, the adjusted effective income tax rates for the 2018 periods were favorably impacted by the release of tax liabilities as a result of expirations of statutes of limitations and earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company, partially offset by unfavorable rate impacts of share-based compensation-related changes. The effective tax rates for all periods also include provisions for state income taxes, net of the federal benefit.
higher
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than the federal statutory rate also as a result of state income taxes, with the increases partially offset by earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company.
(8) Goodwill and Intangible Assets
Goodwill
The following table presents the changes in the carrying amount of goodwill since its inception through SeptemberJune 30, 2019:2020:
Specialty | Specialty | |||||||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Civil | Building | Contractors | Total | ||||||||||||||
Gross goodwill | $ | 492,074 | $ | 424,724 | $ | 156,193 | $ | 1,072,991 | $ | 492,074 | $ | 424,724 | $ | 156,193 | $ | 1,072,991 | ||||||
Accumulated impairment | (76,716) | (411,269) | — | (487,985) | (286,931) | (424,724) | (156,193) | (867,848) | ||||||||||||||
Balance as of December 31, 2018 | 415,358 | 13,455 | 156,193 | 585,006 | ||||||||||||||||||
Second quarter 2019 impairment | (210,215) | (13,455) | (156,193) | (379,863) | ||||||||||||||||||
Balance as of September 30, 2019(a) | $ | 205,143 | $ | — | $ | — | $ | 205,143 | ||||||||||||||
Balance as of December 31, 2019 | 205,143 | — | — | 205,143 | ||||||||||||||||||
Current year activity | — | — | — | — | ||||||||||||||||||
Balance as of June 30, 2020 | $ | 205,143 | $ | — | $ | — | $ | 205,143 | ||||||||||||||
____________________________________________________________________________________________________
(a)As of September 30, 2019, accumulated impairment was $867.8 million.
The aggregate carrying amount of goodwill allocated to the Company’s 3 reporting units as of December 31, 2018 was $585.0 million. The Company tests the goodwill allocated to its reporting units 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 a reporting unit is less than its carrying amount. The Company performed its 2018 annual impairment test asin the fourth quarter of October 1, 20182019 using a weighted averageweighted-average of (1) an income approach and (2) a market approachapproach. These approaches utilize various valuation assumptions, and small changes to determine the assumptions could have a significant impact on the concluded fair value of each reporting unit andvalue. Based on this assessment, the Company concluded that the goodwill was not0t impaired since the estimated fair value of eachthe Civil reporting unit exceeded its respective net bookcarrying value. In addition, the Company determined that no triggering events occurred and no circumstances changed since the implied control premium (the excessdate of our annual impairment test that would more likely than not reduce the fair value of the aggregated fair values ofCivil reporting unit below its reporting units over its market capitalization) was consistent with and within a reasonable range of actual premiums paid in industry-specific merger and acquisition (“M&A”) transactions over a sustained period of time.carrying amount.
During the interim periods sincefirst half of 2020, the datenovel coronavirus (“COVID-19”) pandemic, as well as the actions taken to contain and mitigate its public health effects, caused disruptions in domestic and global economies and financial markets. The vast majority of the last annual test, and prior to the second quarter of 2019, the Company concluded that no triggering events had occurred. In the second quarter of 2019,Company’s projects, especially in connection with the preparation of its quarterly financial statements, the Company assessed the changes in circumstances that occurred during the quarter to determine whether it was more likely than not that the fair values of any of itsCivil reporting units were below their carrying amounts. While there was no single determinative event or factor, potential triggering events identified in the accounting guidance (ASC 350, Intangibles – Goodwill and Other) developed during the second quarter of 2019,unit, have been designated as essential business, which ledallows the Company to concludecontinue its work on those projects. As such, the Civil reporting unit’s operations were not materially impacted during the three and six months ended June 30, 2020. However, due to the fluidity of the pandemic, uncertainties as to its scope and duration, and ongoing changes in the way that when consideringgovernments, businesses and individuals react and respond to the eventsCOVID-19 pandemic, the Company is unable at this time to accurately predict the pandemic’s future impact on the Company’s business, financial condition or performance. Among other things, governments could prohibit the continuation of certain projects that to date have been designated as “essential” or could impose health, safety and factorsother operational requirements on such projects that could result in totality, it was more likely than not thatdelays to or suspensions of such projects. In addition, employees and contractors working on such projects could be unable or unwilling to continue working on them, perhaps for extended periods. The COVID-19 pandemic also could negatively affect the fair valuesability of each of its reporting units were below their carrying amounts. The triggering factors included:counterparties or joint venture partners to make required payments on a timely basis or at all.
The Company faced a declining stock pricewill continue to monitor events and observed a sustained decrease subsequentcircumstances for changes that indicate the Civil reporting unit goodwill would need to be reevaluated for impairment during future interim periods prior to the filingannual impairment test. These future events and circumstances include, but are not limited to, changes in the overall financial performance of the Company’s first quarter Form 10-Q on May 8, 2019, in both absolute termsCivil reporting unit, impacts to our business as a result of the COVID-19 pandemic, as well as other quantitative and relative to its peers. Consistent with the average stock prices of companies in its peer group, the Company’s stock price had been trending lower over several prior periods; however, during the second quarter of 2019, the Company’s stock price dropped to a 52-week low while the average stock price of companies in its peer group increased. The Company believes that delays experienced in resolving certain claims and unapproved change orders,qualitative factors which when combined with the increased working capital needs and significant negative operating cash flows in the first quarter of 2019, has contributed significantly to the sustained decrease in the Company’s stock price;could indicate potential triggering events for possible impairment.
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Intangible Assets
Intangible assets consist of the following:
As of June 30, 2020 | Weighted | |||||||||||||
Accumulated | Average | |||||||||||||
Accumulated | Impairment | Carrying | Amortization | |||||||||||
(in thousands) | Cost | Amortization | Charge | Value | Period | |||||||||
Trade names (non-amortizable) | $ | 117,600 | $ | — | $ | (67,190) | $ | 50,410 | Indefinite | |||||
Trade names (amortizable) | 74,350 | (22,511) | (23,232) | 28,607 | 20 years | |||||||||
Contractor license | 6,000 | — | (6,000) | — | N/A | |||||||||
Customer relationships | 39,800 | (21,575) | (16,645) | 1,580 | 12 years | |||||||||
Construction contract backlog | 149,290 | (89,213) | — | 60,077 | 3 years | |||||||||
Total | $ | 387,040 | $ | (133,299) | $ | (113,067) | $ | 140,674 | ||||||
As of December 31, 2019 | Weighted | |||||||||||||
Accumulated | Average | |||||||||||||
Accumulated | Impairment | Carrying | Amortization | |||||||||||
(in thousands) | Cost | Amortization | Charge | Value | Period | |||||||||
Trade names (non-amortizable) | $ | 117,600 | $ | — | $ | (67,190) | $ | 50,410 | Indefinite | |||||
Trade names (amortizable) | 74,350 | (21,267) | (23,232) | 29,851 | 20 years | |||||||||
Contractor license | 6,000 | — | (6,000) | — | N/A | |||||||||
Customer relationships | 39,800 | (21,048) | (16,645) | 2,107 | 12 years | |||||||||
Construction contract backlog | 149,290 | (76,388) | — | 72,902 | 3 years | |||||||||
Total | $ | 387,040 | $ | (118,703) | $ | (113,067) | $ | 155,270 | ||||||
Amortization expense for the three and six months ended June 30, 2020 was $8.8 million and $14.6 million, respectively. Amortization expense for the three and six months ended June 30, 2019 was $0.9 million and $1.8 million, respectively. As of June 30, 2020, amortization expense is estimated to be $19.5 million for the remainder of 2020, $26.4 million in 2021, $22.0 million in 2022 and $2.5 million per year for the years 2023 through 2025.
The Company determinedperformed an annual impairment assessment of its non-amortizable trade names in the fourth quarter of 2019 using a qualitative approach to determine whether conditions existed to indicate that it was more likely than not that the fair valuesvalue of its reporting units were belownon-amortizable trade names is less than their carrying amounts,values. Based on this assessment, the Company performed an interimconcluded that it was more likely than not that the fair value of the non-amortizable trade names was greater than their carrying values, and therefore a quantitative analysis was not required. In addition, no triggering events occurred and no circumstances changed since the date of our annual impairment test asthat would indicate impairment of June 1, 2019 (the “Interim Test”) and, as described below, recognized a non-cash impairment loss totaling $379.9 million.the Company’s non-amortizable trade names.
The decrease in the Company’s stock price reduced its total market capitalization and increased the implied control premium to a level beyond observable market-comparable data. As a result, when performing the Interim Test, the Company increased the discount rates and the projected investments in working capital compared to the assumptions used in the previous October 1 test, which extended the timing of certain expected future cash flows in the calculation of fair value under the income-based approach. The Company believes these are changes reflective of market participant inputs and the recent decrease in the Company’s market valuation.
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Consistent with the previous October 1, 2018 test, the Company utilized a weighted average of (1) an income approach and (2) a market approach to determine the fair value of the Company and each of its reporting units for the Interim Test. The income approach is based on estimated present value of future cash flows for each reporting unit. The market approach is based on assumptions about how market data relates to each reporting unit. The weighting of these two approaches is based on their individual correlation to the economics of each reporting unit and is impacted by factors such as the availability of comparable market data for each reporting unit.
Assessing impairment inherently involves management judgments as to the assumptions used to calculate fair value of the reporting units and the impact of market conditions on those assumptions. The key inputs that the Company uses in its assumptions to estimate the fair value of its reporting units under the income-based approach are as follows:
Weighted average cost of capital (“WACC”), the risk-adjusted rate used to discount the projected cash flows;
Cash flows generated from existing work and new awards; and
Projected operating margins.
Expected future after-tax operating cash flows of each reporting unit are discounted to a present value using a risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning future operating performance including cash flows generated from existing work and new awards, projected operating margins, variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows, as well as future economic conditions, which may differ from actual future cash flows. The discount rate, which is intended to reflect the risks inherent in future cash flow projections, used in estimating the present value of future cash flows, is based on estimates of the WACC of market participants relative to the reporting units. Financial and credit market volatility can directly impact certain inputs and assumptions used to develop the WACC.
To develop the cash flows generated from new awards and future operating margins, the Company tracks known prospects of significance for each of its reporting units and considers the estimated timing of when the work is expected to be bid, started and completed. The Company also gives consideration to its relationships with the prospective owners; the pool of competitors that are capable of performing large, complex work; business strategy; and the Company’s history of success in winning new work in each reporting unit. With regard to operating margins, the Company gives consideration to its historical reporting unit operating margins in the end markets that the prospective work opportunities are most significant, expected margins from existing work, current market trends in recent new work procurement, and business strategy.
The Company also estimated the fair value of its reporting units under a market-based approach by applying industry-comparable multiples of revenues and operating earnings to its reporting units’ revenues and operating earnings. The conditions and prospects of companies in the engineering and construction industry depend on common factors such as overall demand for services.
The Company believes that the discount rates, timing of cash flows and other inputs and assumptions used in the Interim Test were consistent with those that a market participant would use based on the events described above which occurred during the second quarter of 2019 and were reflective of the market assessment of the fair value of its reporting units at that time. In addition, the Company believes that its estimates and assumptions about future revenues and margin projections in the Interim Test were reasonable and consistent with the estimates and assumptions used in the annual goodwill impairment test as of October 1, 2018. As an additional step to corroborate the Interim Test results, the Company compared its implied control premium with those of recent comparable market transactions and concluded that the implied control premium was within the range of control premiums observed in prior industry-specific M&A transactions.
Similar to previous valuations, the Company noted that small changes to valuation assumptions could have a significant impact on the concluded value. The assumption changes described above were relatively larger in the Specialty Contractors reporting unit than in the Civil or Building reporting units, as Specialty Contractors had not met recent market expectations at the time of the Interim Test.
As of September 30, 2019, the Company determined that no triggering events occurred or circumstances changed since the date of our Interim Test that would more likely than not reduce the fair value of the Civil reporting unit below its carrying amount. However, since the Interim Test reduced the carrying value of the Civil reporting unit to approximate its fair value, there is a risk of additional goodwill impairment if future events related to the Civil reporting unit are less favorable than what the Company assumed or estimated in its Interim Test. The Company will continue to monitor events occurring or circumstances changing which may suggest that goodwill should be reevaluated during interim periods prior to the annual impairment test. These events and circumstances include, but are not limited to, a sustained decline in our stock price and market capitalization, as well as quantitative and qualitative factors specific to the Civil reporting unit which indicate potential triggering events that would more likely than not reduce the fair value of the Civil reporting unit below its carrying amount.
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Intangible Assets
Intangible assets consist of the following:
As of September 30, 2019 | Weighted | |||||||||||||
Accumulated | Average | |||||||||||||
Accumulated | Impairment | Carrying | Amortization | |||||||||||
(in thousands) | Cost | Amortization | Charge | Value | Period | |||||||||
Trade names (non-amortizable) | $ | 117,600 | $ | — | $ | (67,190) | $ | 50,410 | Indefinite | |||||
Trade names (amortizable) | 74,350 | (20,645) | (23,232) | 30,473 | 20 years | |||||||||
Contractor license | 6,000 | — | (6,000) | — | N/A | |||||||||
Customer relationships | 39,800 | (20,784) | (16,645) | 2,371 | 12 years | |||||||||
Construction contract backlog | 73,706 | (73,706) | — | — | N/A | |||||||||
Total | $ | 311,456 | $ | (115,135) | $ | (113,067) | $ | 83,254 | ||||||
As of December 31, 2018 | Weighted | |||||||||||||
Accumulated | Average | |||||||||||||
Accumulated | Impairment | Carrying | Amortization | |||||||||||
(in thousands) | Cost | Amortization | Charge | Value | Period | |||||||||
Trade names (non-amortizable) | $ | 117,600 | $ | — | $ | (67,190) | $ | 50,410 | Indefinite | |||||
Trade names (amortizable) | 74,350 | (18,780) | (23,232) | 32,338 | 20 years | |||||||||
Contractor license | 6,000 | — | (6,000) | — | N/A | |||||||||
Customer relationships | 39,800 | (19,992) | (16,645) | 3,163 | 12 years | |||||||||
Construction contract backlog | 73,706 | (73,706) | — | — | N/A | |||||||||
Total | $ | 311,456 | $ | (112,478) | $ | (113,067) | $ | 85,911 | ||||||
Amortization expense for the three and nine months ended September 30, 2019 was $0.9 million and $2.7 million, respectively. Amortization expense for the three and nine months ended September 30, 2018 was $0.9 million and $2.7 million, respectively. As of September 30, 2019, amortization expense is estimated to be $0.9 million for the remainder of 2019, $3.5 million in 2020, $3.4 million in 2021, $2.6 million in 2022 and $2.5 million in both 2023 and 2024.
Certain trade names have an estimated indefinite life and are not amortized to earnings, but instead are reviewed for impairment annually, or more often if events occur or circumstances change which suggest that the non-amortizable trade names should be reevaluated. The Company has also monitored events and circumstances as well as any entity-specific quantitative or qualitative factors, which occurred during interim periods since the annual test, that suggest intangible assets should be reevaluated for impairment. During the interim periods since the date of the last annual test, and prior to the second quarter of 2019, management concluded that there have been no triggering events that would more likely than not reduce the fair value of the Company’s intangible assets below their carrying amounts.
In conjunction with its interim goodwill test during the second quarter of 2019, the Company also evaluated its non-amortizable trade names for potential impairment due to the second quarter triggering factors related to goodwill mentioned above. The Company performed its interim impairment test by comparing the carrying value of its indefinite-lived intangible assets to their calculated fair value, which is determined by the income approach (relief from royalty method). This income-based valuation approach involves similar key assumptions to the goodwill impairment analysis discussed above. The interim impairment test performed in the second quarter of 2019 resulted in an estimated fair value for the non-amortizable trade names that substantially exceeded their respective net book values; therefore, no impairment charge was necessary for the second quarter. While the key assumptions used in the impairment test of the non-amortizable trade names are similar to those used in the evaluation of goodwill, historically, the headroom (the excess of calculated fair value over carrying value) has been relatively higher for non-amortizable trade names than for goodwill. Unlike goodwill, trade names possess inherent value based on market perception which is valued considering the cost savings available through ownership and the avoidance of paying royalties associated with revenue generation. The discounted value is not impacted by cash flow related assumptions such as working capital investment. Consequently, goodwill was impaired while the non-amortizable trade name intangible assets were not.
As of September 30, 2019, management concluded that no triggering events occurred or circumstances changed since the date of the interim impairment test that would more likely than not reduce the fair value of the Company’s intangible assets below their carrying amounts.
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The Company also performed a qualitative assessment to evaluate its long-lived tangible and intangible assets with finite lives due to the changes in circumstances since the Company’s 2018 annual impairment analysis. Based on this assessment in which there were no identified changes to market prices, the manner of use or the planned purchase or sale of assets/asset groups, the Company concluded that no triggering events occurred since the date of its last annual test that would more likely than not reduce the fair value of its long-lived tangible and intangible assets with finite lives below their carrying amounts.
(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, | As of June 30, | As of December 31, | |||||||
(in thousands) | 2019 | 2018 | 2020 | 2019 | ||||||
2017 Senior Notes | $ | 494,148 | $ | 493,521 | $ | 494,810 | $ | 494,365 | ||
2017 Credit Facility | 117,000 | 41,000 | 100,000 | 114,000 | ||||||
Convertible Notes | 179,494 | 171,481 | 188,089 | 182,292 | ||||||
Equipment financing and mortgages | 40,475 | 50,904 | 44,917 | 39,159 | ||||||
Other indebtedness | 5,127 | 4,598 | 8,603 | 4,660 | ||||||
Total debt | 836,244 | 761,504 | 836,419 | 834,476 | ||||||
Less: Current maturities | 10,862 | 16,767 | 320,790 | 124,054 | ||||||
Long-term debt, net | $ | 825,382 | $ | 744,737 | $ | 515,629 | $ | 710,422 | ||
The following table reconciles the outstanding debt balance to the reported debt balances as of SeptemberJune 30, 20192020 and December 31, 2018:2019:
As of September 30, 2019 | As of December 31, 2018 | As of June 30, 2020 | As of December 31, 2019 | |||||||||||||||||||||||||||||||
(in thousands) | Outstanding Long-Term Debt | Unamortized Discount and Issuance Costs | Long-Term Debt, as reported | Outstanding Long-Term Debt | Unamortized Discount and Issuance Costs | Long-Term Debt, as reported | Outstanding Debt | Unamortized Discount and Issuance Costs | Debt, as reported | Outstanding Debt | Unamortized Discount and Issuance Costs | Debt, as reported | ||||||||||||||||||||||
2017 Senior Notes | $ | 500,000 | $ | (5,852) | $ | 494,148 | $ | 500,000 | $ | (6,479) | $ | 493,521 | $ | 500,000 | $ | (5,190) | $ | 494,810 | $ | 500,000 | $ | (5,635) | $ | 494,365 | ||||||||||
Convertible Notes | 200,000 | (20,506) | 179,494 | 200,000 | (28,519) | 171,481 | 200,000 | (11,911) | 188,089 | 200,000 | (17,708) | 182,292 | ||||||||||||||||||||||
The unamortized issuance costs related to the 2017 Credit Facility were $4.1$2.9 million and $4.8$3.7 million as of SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively, and are included in other assets in the Condensed Consolidated Balance Sheets.
2017 Senior Notes
On April 20, 2017, the Company issued $500 million in aggregate principal amount of 6.875% Senior Notes due 2025 (the “2017 Senior Notes”) in a private 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 redeemcould have redeemed the 2017 Senior Notes at a redemption price equal to 100% of their principal amount plus a “make-whole” premium described in the indenture. In addition, prior to May 1, 2020, the Company may redeemalso could have redeemed up to 40% of the original aggregate principal amount of the notes at a redemption price of 106.875% of their principal amount with the proceeds received by the Company from any offering of the Company’s equity. AfterSince May 1, 2020, 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.
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 2017 Credit Facility, as defined below. 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.
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2017 Credit Facility
On April 20, 2017, the Company entered into a 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. 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
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December 17, 2020 (subject to certain further exceptions). In addition,(the “spring-forward provision”), provided however (i) if the Convertible Notes are refinanced in full with the proceeds of permitted refinancing indebtedness in accordance with the terms of the 2017 Credit Facility, the maturity date for the 2017 Credit Facility will remain April 20, 2022 and (ii) if the Company issues “New Convertible Notes” (as defined in the 2017 Credit Facility) and retires the Convertible Notes in full, the maturity date for the 2017 Credit Facility will be the earlier of (x) April 20, 2022 or (y) 90 days prior to the maturity date for such New Convertible Notes. The 2017 Credit Facility also 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) the London Interbank Offered Rate (“LIBOR”)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 Facility, the Company will pay a commitment fee to the lenders under the 2017 Revolver in respect of the unutilized commitments thereunder. The Company will 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 5.03%3.66% during the ninesix months ended SeptemberJune 30, 2019.2020.
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. On May 7, 2019, certain provisions of the 2017 Credit Facility were amended, including setting the maximum leverage ratio at 3.50:1.00 for the remainder of its term, thus eliminating the step down from 3.50:1:00 to 3.25:1.00. 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 SeptemberJune 30, 2019,2020, there was $233$250 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 SeptemberJune 30, 2019 (the goodwill impairment charge,2020.
As a result of the spring-forward provision mentioned above, the facility will mature on December 17, 2020 if the Convertible Notes remain outstanding at that time. The Company does not have call rights that allow it to unilaterally redeem the Convertible Notes. Due to the spring-forward provision in the 2017 Credit Facility, all borrowings under the facility are included in “Current maturities of long-term debt” on the Condensed Consolidated Balance Sheet as discussed in Note 8, Goodwillof June 30, 2020. The Company continues to evaluate options to address the spring-forward provision and Intangible Assets, did not impactrefinancing or retirement of the financial covenant calculations).outstanding Convertible Notes.
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 of the Company 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.December, and are included in “Current maturities of long-term debt” on the Condensed Consolidated Balance Sheet as of June 30, 2020.
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 10 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 the Company’s 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
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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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
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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conversion, and at the Company’s election, the Company may satisfy its conversion obligation with cash, shares of its common stock or a combination thereof. As of SeptemberJune 30, 2019,2020, the conversion provisions of the Convertible Notes have not been triggered.
Interest Expense
Interest expense as reported in the Condensed Consolidated Statements of Operations consisted of the following:
Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||
September 30, | September 30, | June 30, | June 30, | |||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Cash interest expense: | ||||||||||||||||||||||
Interest on 2017 Senior Notes | $ | 8,594 | $ | 8,594 | $ | 25,781 | $ | 25,781 | $ | 8,593 | $ | 8,594 | $ | 17,187 | $ | 17,187 | ||||||
Interest on 2017 Credit Facility | 3,385 | 2,596 | 9,712 | 6,300 | 2,338 | 3,682 | 4,753 | 6,327 | ||||||||||||||
Interest on Convertible Notes | 1,438 | 1,437 | 4,313 | 4,312 | 1,438 | 1,438 | 2,875 | 2,875 | ||||||||||||||
Other interest | 540 | 736 | 1,656 | 2,119 | 535 | 541 | 1,039 | 1,116 | ||||||||||||||
Total cash interest expense | 13,957 | 13,363 | 41,462 | 38,512 | 12,904 | 14,255 | 25,854 | 27,505 | ||||||||||||||
Non-cash interest expense:(a) | ||||||||||||||||||||||
Amortization of discount and debt issuance costs on Convertible Notes | 2,734 | 2,490 | 8,013 | 7,298 | 2,933 | 2,671 | 5,797 | 5,279 | ||||||||||||||
Amortization of debt issuance costs on 2017 Credit Facility | 401 | 360 | 1,150 | 1,080 | 402 | 387 | 804 | 749 | ||||||||||||||
Amortization of debt issuance costs on 2017 Senior Notes | 213 | 198 | 627 | 584 | 225 | 209 | 445 | 414 | ||||||||||||||
Total non-cash interest expense | 3,348 | 3,048 | 9,790 | 8,962 | 3,560 | 3,267 | 7,046 | 6,442 | ||||||||||||||
Total interest expense | $ | 17,305 | $ | 16,411 | $ | 51,252 | $ | 47,474 | $ | 16,464 | $ | 17,522 | $ | 32,900 | $ | 33,947 | ||||||
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(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 and the Convertible Notes were 7.13% and 9.39%, respectively, for the ninesix months ended SeptemberJune 30, 2019.2020.
(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 SeptemberJune 30, 2019,2020, the Company’s operating leases have remaining lease terms ranging from less than one year to 10 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.
The Company determines if an arrangement is a lease at inception. Operating lease ROU assets are included in other assets, while current and long-term operating lease liabilities are included in accrued expenses and other current liabilities, and other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheet as of September 30, 2019. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The present value of future lease payments are discounted using either the implicit rate in the lease, if known, or the Company’s incremental borrowing rate for the specific lease as of the lease commencement date. The ROU asset is also adjusted for any prepayments made or incentives received. The lease terms include options to extend or terminate the lease only to the extent it is reasonably certain any of those options will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company accounts for lease components (e.g., fixed payments) separate from the non-lease components (e.g., common-area maintenance costs).The Company does not have any material financing leases.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The following table presents components of lease expense for the three and ninesix months ended SeptemberJune 30, 2020 and 2019:
Three Months Ended | Six Months Ended | ||||||||||||||||
Three Months Ended | Nine Months Ended | June 30, | June 30, | ||||||||||||||
(in thousands) | September 30, 2019 | September 30, 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||
Operating lease expense | $ | 4,047 | $ | 11,749 | $ | 3,661 | $ | 3,921 | $ | 7,428 | $ | 7,702 | |||||
Short-term lease expense(a) | 17,786 | 50,843 | 23,056 | 16,486 | 40,321 | 33,057 | |||||||||||
21,833 | 62,592 | 26,717 | 20,407 | 47,749 | 40,759 | ||||||||||||
Less: Sublease income | 263 | 784 | 329 | 262 | 658 | 521 | |||||||||||
Total lease expense | $ | 21,570 | $ | 61,808 | $ | 26,388 | $ | 20,145 | $ | 47,091 | $ | 40,238 | |||||
____________________________________________________________________________________________________
(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 as of September 30, 2019:leases:
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(dollars in thousands) | Balance Sheet Line Item | 2020 | 2019 | |||
Assets | ||||||
ROU assets | Other assets | $ | 38,909 | $ | 40,156 | |
Total lease assets | $ | 38,909 | $ | 40,156 | ||
Liabilities | ||||||
Current lease liabilities | Accrued expenses and other current liabilities | $ | 10,255 | $ | 11,392 | |
Long-term lease liabilities | Other long-term liabilities | 31,869 | 31,900 | |||
Total lease liabilities | $ | 42,124 | $ | 43,292 | ||
Weighted-average remaining lease term (in years) | 5.0 | 5.0 | ||||
Weighted-average discount rate | 6.77% | 5.96% | ||||
The following table presents supplemental cash flow information and non-cash activity related to operating leases for the nine months ended September 30, 2019:leases:
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(in thousands) | 2020 | 2019 | ||||
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Cash paid for amounts included in the measurement of lease liabilities | $ | (7,386) | $ | (7,622) | ||
Non-cash activity: | ||||||
ROU assets obtained in exchange for lease liabilities | $ | 4,923 | $ | 6,040 | ||
The following table presents maturities of operating lease liabilities on an undiscounted basis as of SeptemberJune 30, 2019:2020:
Year (in thousands) | Operating Leases | Operating Leases | ||||||
2019 (excluding the nine months ended September 30, 2019) | $ | 3,781 | ||||||
2020 | 12,339 | |||||||
2020 (excluding the six months ended June 30, 2020) | $ | 7,039 | ||||||
2021 | 8,997 | 10,588 | ||||||
2022 | 7,695 | 9,294 | ||||||
2023 | 6,489 | 7,582 | ||||||
2024 | 5,701 | |||||||
Thereafter | 12,461 | 10,053 | ||||||
Total lease payments | 51,762 | 50,257 | ||||||
Less: Imputed interest | 7,468 | 8,133 | ||||||
Total | $ | 44,294 | $ | 42,124 | ||||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
As of December 31, 2018, future minimum lease payments under long-term non-cancelable operating leases as classified under ASC 840 were as follows:
Year (in thousands) | Operating Leases | ||||
2019 | $ | 14,039 | |||
2020 | 10,706 | ||||
2021 | 7,464 | ||||
2022 | 6,567 | ||||
2023 | 5,587 | ||||
Thereafter | 11,662 | ||||
56,025 | |||||
Less: Sublease rental agreements | 1,398 | ||||
Total | $ | 54,627 | |||
(11) Commitments and Contingencies
The Company and certain of its subsidiaries are involved in litigation and other 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 4Contract Assets and Liabilities.. In addition, the Company is contingently liable for litigation, performance guarantees and other commitments arising in the ordinary course of business, which are accounted for in accordance with ASC 450, Contingencies. Management reviews these matters regularly and updates or revises its estimates from time to time as warranted by subsequent information and developments. These assessments require judgments concerning matters that are inherently uncertain, such as litigation developments and outcomes, the anticipated outcome of negotiations and the estimated cost of resolving disputes. Consequently, these assessments are estimates, and actual amounts may vary from such estimates. In addition, because such matters are typically resolved over long periods of time, the Company’s assets and liabilities may change over time should the 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 effect on the Company’s consolidated financial position.position, results of operations or cash flows.
Long Island Expressway/Cross Island Parkway Matter
The Company reconstructedA description of the Long Island Expressway/Cross Island Parkway Interchange (“LIE Project”) for the New York State Department of Transportation (“NYSDOT”). The $130 million project was substantially completed in January 2004 and was accepted by 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 NYSDOT is responsible.
In March 2011, the Company opened a case with the New York State Court of Claims against NYSDOT relatedthan ordinary routine litigation incidental to the LIE Project. In May 2011, 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 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. In March 2012, the Company filed its formal Verified Claim seeking $50.7 million in damages. In May 2012, NYSDOT served its answer and asserted counterclaims in the amount of $151 million alleging fraud in the inducement and punitive damages related to alleged violations of the 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 NYSDOT’s affirmative counterclaims. In June 2018, following additional summary judgment motions, the Court granted the Company’s motion to dismiss NYSDOT’s affirmative defenses, which eliminated the use of NYSDOT’s counterclaims of $151 million as a defense to the claims of the Company. In October 2018, NYSDOT filed a notice of appeal. A trial date for the underlying case will not be set until after the appeal is resolved.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
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. As of September 30, 2019, the Company has concluded that the potential for a material adverse financial impact due to NYSDOT’s counterclaims is remote.follows:
Five Star Electric Matter
In the third quarter of 2015, Five Star Electric Corp. (“Five 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.
As of SeptemberJune 30, 2019,2020, the Company cannot predict the ultimate outcome of the investigation and cannot reasonably estimate the potential loss or range of loss that Five Star or the Company may incur or the impact of the results of the investigation on Five Star or the Company.
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 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 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. 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.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
In September 2018, rulings received on pre-trial motions effectively limited potential recovery under the Policy for STP, WSDOT and Hitachi. However, on December 19, 2018, the Court of Appeal granted the Company’s request for a discretionary appeal of those rulings. The appeal is expected to be heard in the first half oflate 2020. STP submitted damages to the Insurers in the King County lawsuit in the amount of $532 million. STP is also seekingsought these 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 delays and failure to perform, seeking $57.2 million in delay-related damages and seeking declaratory relief concerning contract interpretation. STP filed its answer to WSDOT’s complaint and filed a counterclaim against WSDOT and Hitachi, as the TBM designer, seeking damages of $667 million. On October 3, 2019, STP and Hitachi entered into a settlement agreement which causedreleased and dismissed the release and dismissal of claims that STP and Hitachi had against each other. The jury trial between STP and WSDOT commenced on October 7, 2019.2019 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 appeal is expected to be heard in 2021.
AsThe Company recorded the impact of September 30,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 the 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 is for non-cash write-downs primarily related to the costs and estimated earnings in excess of billings and receivables that the Company has concluded that the potential for a material adverse financial impact duepreviously recorded to the Insurers’ denial of coverage and WSDOT’s legal actions is neither probable nor remote, and the potential loss or range of loss is not reasonably estimable. reflect its expected recovery in this case.
With respect to STP’s direct and indirect claims against the Insurers, WSDOT and Hitachi, management has included in receivables an estimate of the total anticipated recovery concluded to be both probable and reliably estimable, in receivables or costs and estimated earnings in excess of billings recorded to date. To the extent new facts become known or the final recoveries vary from the estimate, the impact of the change will be reflected in the financial statements at that time.probable.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
George Washington Bridge Bus Station Matter
In August 2013, Tutor Perini Building Corporation (“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 liquidated 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 liquidated 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, and were expected to continue over various weeks through March 2020. On April 15, 2019, the counsel for the Developer withdrew from the case, which resulted in further delays to the proceedings.panel. On June 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. At this hearing, the bankruptcy court indicated that it will issue a formal order approving the settlement and denying TPBC’s third-party beneficiary rights under the lease agreement. TPBC plans to appeal the decision, once it is formally issued, to challenge the denial of its third-party beneficiary rights under the lease agreement’s “cure” provisions and to avoid being subordinate to the claims of the secured lenders in the bankruptcy proceedings.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Separately, on July 2, 2018, TPBC filed a lawsuit against the Port Authority, of New York and New Jersey, as owner of the project, and STV Incorporated, as designer, seeking the same $113 million in damages. Thatdamages pursuant to the lease agreement between the Port Authority and the Developer. On August 20, 2018, the Port Authority filed a motion to dismiss, which was denied by the court on July 1, 2019. The Port Authority appealed this decision on July 15, 2019, and the appeal is expected to be decided in 2021. On December 2, 2019, the Court of Appeal denied the Port Authority’s request to stay the trial court action pending the appeal. As a result, the lawsuit is proceeding against the Port Authority before the trial court. On January 13, 2020, the court dismissed STV Incorporated from the case.
On January 27, 2020, TPBC filed separate litigation in the discovery phase,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 is not stayed byagainst certain lenders that received interest payments from project funds and other amounts earmarked to pay the Developer’s bankruptcy filing.contractors. On June 1, 2020, the defendants filed motions to dismiss, and a decision remains pending from the court.
As of SeptemberJune 30, 2019,2020, the Company has concluded that the potential for a material adverse financial impact due to the Developer’s claims is remote. With respect to TPBC’s claims against the Developer, its owners and the Port Authority, of New York and New Jersey, and STV Incorporated, 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.
(12) Share-Based Compensation
As of SeptemberJune 30, 2019,2020, there were 1,368,2431,185,089 shares of common stock available for grant under the Tutor Perini Corporation Omnibus Incentive Plan. During the first ninesix months of 20192020 and 2018,2019, the Company issuedgranted the following share-based instruments: (1) restricted stock units totaling 400,00075,000 and 614,000175,000 with weighted-average fair values per share of $20.90$13.93 and $25.19,$20.41, respectively; (2) stock options totaling 135,00075,000 and 579,00085,000 with weighted-average fair values per share of $6.84$3.94 and $11.45,$7.57, respectively, and weighted-average per share exercise prices of $20.94$25.70 and $23.99,$25.62, respectively; and (3) unrestricted stock units totaling 98,591194,177 and 115,42098,591 with weighted-average fair values per share of $15.72$8.60 and $21.26,$15.72, respectively. During the ninesix months ended SeptemberJune 30, 2019, 839,711750,000 stock options with a weighted-average per share exercise price of $20.78 expired or were forfeited.$20.33 expired.
The fair value of restricted and unrestricted stock units 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 ninesix months of 20192020 was determined using the Black-Scholes model based on the following weighted-average assumptions: (i) expected life of 5.86.0 years, (ii) expected volatility of 38.17%44.91%, (iii) risk-free rate of 2.31%1.56%, and (iv) 0 quarterly dividends. For certainCertain performance-based awards containingcontain market condition components the fair valueand are valued on the grant date is determinedof grant using a Monte Carlo simulation model.
For the three and ninesix months ended SeptemberJune 30, 2019,2020, the Company recognized, as part of general and administrative expenses, costs for share-based payment arrangements totaling $4.3$3.8 million and $14.3$8.3 million, respectively, and $5.7$4.6 million and $17.8$10.1 million for the three and ninesix months ended SeptemberJune 30, 2018,2019, respectively. As of SeptemberJune 30, 2019,2020, the balance of unamortized share-based compensation expense was $22.8$14.8 million, which is expected to be recognized over a weighted-average period of 2.11.7 years.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(13) Employee Pension Plans
The Company has a defined benefit pension plan and an unfunded supplemental retirement plan. Effective June 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.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The following table sets forth a summary of the net periodic benefit cost for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018:2019:
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Interest cost | $ | 948 | $ | 883 | $ | 2,844 | $ | 2,649 | $ | 758 | $ | 948 | $ | 1,516 | $ | 1,896 | ||||||
Expected return on plan assets | (1,043) | (1,077) | (3,129) | (3,231) | (1,006) | (1,043) | (2,012) | (2,086) | ||||||||||||||
Amortization of net loss | 463 | 513 | 1,389 | 1,539 | 592 | 463 | 1,184 | 926 | ||||||||||||||
Other | 225 | 213 | 675 | 639 | 231 | 225 | 462 | 450 | ||||||||||||||
Net periodic benefit cost | $ | 593 | $ | 532 | $ | 1,779 | $ | 1,596 | $ | 575 | $ | 593 | $ | 1,150 | $ | 1,186 | ||||||
The Company contributed $3.3$2.2 million and $2.1$2.0 million to its defined benefit pension plan during each of the nine-monthsix-month periods ended SeptemberJune 30, 20192020 and 2018,2019, respectively, and expects to contribute an additional $1.3$1.9 million by the end of 2019.2020.
(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 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, 20192020 and December 31, 2018:2019:
As of September 30, 2019 | As of December 31, 2018 | As of June 30, 2020 | As of December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||
Fair Value Hierarchy | Fair Value Hierarchy | Fair Value Hierarchy | Fair Value Hierarchy | |||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||
Cash and cash equivalents(a) | $ | 207,130 | $ | — | $ | — | $ | 207,130 | $ | 116,075 | $ | — | $ | — | $ | 116,075 | $ | 182,599 | $ | — | $ | — | $ | 182,599 | $ | 193,685 | $ | — | $ | — | $ | 193,685 | ||||||||||||||||
Restricted cash(a) | 6,261 | — | — | 6,261 | 3,788 | — | — | 3,788 | 8,892 | — | — | 8,892 | 8,416 | — | — | 8,416 | ||||||||||||||||||||||||||||||||
Restricted investments(b) | — | 67,728 | — | 67,728 | — | 58,142 | — | 58,142 | — | 75,382 | — | 75,382 | — | 70,974 | — | 70,974 | ||||||||||||||||||||||||||||||||
Investments in lieu of retainage(c) | 78,492 | 1,229 | — | 79,721 | 62,858 | 1,190 | — | 64,048 | 98,837 | 1,208 | — | 100,045 | 89,572 | 1,219 | — | 90,791 | ||||||||||||||||||||||||||||||||
Total | $ | 291,883 | $ | 68,957 | $ | — | $ | 360,840 | $ | 182,721 | $ | 59,332 | $ | — | $ | 242,053 | $ | 290,328 | $ | 76,590 | $ | — | $ | 366,918 | $ | 291,673 | $ | 72,193 | $ | — | $ | 363,866 | ||||||||||||||||
____________________________________________________________________________________________________
(a)Includes money market funds and short-term investments with maturity dates of three months or less when acquired.
(b)Restricted investments, as of SeptemberJune 30, 2019,2020, consist of investments in corporate debt securities of $37.0 million and U.S. government agency securities of $30.7$37.5 million, corporate debt securities of $36.8 million and corporate certificates of deposits of $1.1 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, 2018,2019, restricted investments consisted of investments in corporate debt securities of $30.4$35.8 million, and U.S. government agency securities of $27.7 million.$33.8 million and corporate certificates of deposits of $1.4 million with maturities of up to five years. The amortized cost of these available-for-sale securities at SeptemberJune 30, 20192020 and December 31, 20182019 was not materially different from the fair value.
(c)Investments in lieu of retainage are included in retainage receivable and as of SeptemberJune 30, 20192020 are comprised of money market funds of $78.5$98.8 million and municipal bonds of $1.2 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 municipal bonds are measured using readily available pricing sources for comparable instruments; therefore, they are classified as Level 2 assets. As of December 31, 2018,2019, investments in lieu of retainage consisted of money market funds of $62.9$89.6 million and municipal bonds of $1.2 million. The amortized cost of these available-for-sale securities at SeptemberJune 30, 20192020 and December 31, 20182019 was not materially different from the fair value.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
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. Of the Company’s long-term debt, the fair value of the 2017 Senior Notes was $486.0$484.4 million and $466.8$485.0 million as of SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively. The fair value of the
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Convertible Notes was $190.3$190.7 million and $184.4$193.4 million as of SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively. The fair values of the 2017 Senior Notes and Convertible Notes were determined using Level 1 inputs, specifically current observable market prices. The reported value of the Company’s remaining borrowings approximates fair value as of SeptemberJune 30, 20192020 and December 31, 2018.2019.
(15) Variable Interest Entities (VIEs)
The Company may form joint ventures or partnerships with third parties for the execution of 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 thea 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, 2019,2020, the Company had unconsolidated VIE-related current assets and liabilities of $0.5$3.4 million and $0.4$3.3 million, respectively, included in the Company’s Condensed Consolidated Balance Sheet. As of December 31, 2018,2019, the Company had unconsolidated VIE-related current assets and liabilities of $4.0$1.5 million and $3.8$1.4 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 SeptemberJune 30, 2019.2020.
As of SeptemberJune 30, 2020, the Company’s Condensed Consolidated Balance Sheet included current and noncurrent assets of $401.1 million and $36.4 million, respectively, as well as current liabilities of $581.1 million related to the operations of its consolidated VIEs. As of December 31, 2019, the Company’s Condensed Consolidated Balance Sheet included current and noncurrent assets of $372.6$365.0 million and $56.8$52.0 million, respectively, as well as current liabilities of $526.8 million related to the operations of its consolidated VIEs. As of December 31, 2018, the Company’s Condensed Consolidated Balance Sheet included current and noncurrent assets of $173.9 million and $51.5 million, respectively, as well as current liabilities of $319.9$556.1 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 to construct the Purple Line Extension Section 2 (Tunnels and Stations) and Section 3 (Stations) mass-transit projects in Los Angeles, California with a 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. The Company has determined that this joint venture is a VIE for which the Company is the primary beneficiary.
The Company also established a joint venture with Parsons Corporation (“Parsons”) to construct the Newark Liberty International Airport Terminal One project, a $1.4 billion transportation infrastructure project in Newark, New Jersey. 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.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(16) Changes in Equity
A reconciliation of the changes in equity for the three and ninesix months ended SeptemberJune 30, 20192020 and 20182019 is provided below:
Three Months Ended September 30, 2019 | Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||
Additional | Other | Additional | Other | |||||||||||||||||||||||||||||||
Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | |||||||||||||||||||||||
(in thousands) | Stock | Capital | Earnings | Loss | Interests | Equity | Stock | Capital | Earnings | Loss | Interests | Equity | ||||||||||||||||||||||
Balance - June 30, 2019 | $ | 50,279 | $ | 1,110,496 | $ | 380,795 | $ | (42,530) | $ | (9,481) | $ | 1,489,559 | ||||||||||||||||||||||
Balance - March 31, 2020 | $ | 50,577 | $ | 1,120,487 | $ | 331,362 | $ | (43,128) | $ | (16,370) | $ | 1,442,928 | ||||||||||||||||||||||
Net income | — | — | 19,313 | — | 7,408 | 26,721 | — | — | 18,709 | — | 12,150 | 30,859 | ||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 236 | (99) | 137 | ||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 2,531 | 854 | 3,385 | ||||||||||||||||||||||||||||
Share-based compensation | — | 3,491 | — | — | — | 3,491 | — | 4,185 | — | — | — | 4,185 | ||||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | 1,140 | 1,140 | ||||||||||||||||||||||||||||
Issuance of common stock, net | 194 | — | — | — | — | 194 | ||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | (17,500) | (17,500) | — | — | — | — | (17,410) | (17,410) | ||||||||||||||||||||||
Balance - September 30, 2019 | $ | 50,279 | $ | 1,113,987 | $ | 400,108 | $ | (42,294) | $ | (18,532) | $ | 1,503,548 | ||||||||||||||||||||||
Balance - June 30, 2020 | $ | 50,771 | $ | 1,124,672 | $ | 350,071 | $ | (40,597) | $ | (20,776) | $ | 1,464,141 | ||||||||||||||||||||||
Nine Months Ended September 30, 2019 | |||||||||||||||||
Accumulated | |||||||||||||||||
Additional | Other | ||||||||||||||||
Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | ||||||||||||
(in thousands) | Stock | Capital | Earnings | Loss | Interests | Equity | |||||||||||
Balance - December 31, 2018 | $ | 50,026 | $ | 1,102,919 | $ | 701,681 | $ | (45,449) | $ | (21,288) | $ | 1,787,889 | |||||
Net income (loss) | — | — | (301,573) | — | 17,577 | (283,996) | |||||||||||
Other comprehensive income | — | — | — | 3,155 | 160 | 3,315 | |||||||||||
Share-based compensation | — | 13,586 | — | — | — | 13,586 | |||||||||||
Issuance of common stock, net | 253 | (2,518) | — | — | — | (2,265) | |||||||||||
Contributions from noncontrolling interests | — | — | — | — | 6,519 | 6,519 | |||||||||||
Distributions to noncontrolling interests | — | — | — | — | (21,500) | (21,500) | |||||||||||
Balance - September 30, 2019 | $ | 50,279 | $ | 1,113,987 | $ | 400,108 | $ | (42,294) | $ | (18,532) | $ | 1,503,548 | |||||
Six Months Ended June 30, 2020 | |||||||||||||||||
Accumulated | |||||||||||||||||
Additional | Other | ||||||||||||||||
Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | ||||||||||||
(in thousands) | Stock | Capital | Earnings | Loss | Interests | 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 | |||||
Three Months Ended September 30, 2018 | Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||
Additional | Other | Additional | Other | |||||||||||||||||||||||||||||||
Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | |||||||||||||||||||||||
(in thousands) | Stock | Capital | Earnings | Loss | Interests | Equity | Stock | Capital | Earnings | Loss | Interests | Equity | ||||||||||||||||||||||
Balance - June 30, 2018 | $ | 50,011 | $ | 1,093,874 | $ | 631,004 | $ | (44,805) | $ | (17,540) | $ | 1,712,544 | ||||||||||||||||||||||
Net income | — | — | 21,272 | — | 4,164 | 25,436 | ||||||||||||||||||||||||||||
Balance - March 31, 2019 | $ | 50,180 | $ | 1,105,184 | $ | 701,325 | $ | (44,200) | $ | (17,310) | $ | 1,795,179 | ||||||||||||||||||||||
Net income (loss) | — | — | (320,530) | — | 5,091 | (315,439) | ||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 612 | — | 612 | — | — | — | 1,670 | 157 | 1,827 | ||||||||||||||||||||||
Share-based compensation | — | 4,993 | — | — | — | 4,993 | — | 5,312 | — | — | — | 5,312 | ||||||||||||||||||||||
Issuance of common stock, net | 15 | (228) | — | — | — | (213) | 99 | — | — | — | — | 99 | ||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | (10,000) | (10,000) | ||||||||||||||||||||||||||||
Balance - September 30, 2018 | $ | 50,026 | $ | 1,098,639 | $ | 652,276 | $ | (44,193) | $ | (23,376) | $ | 1,733,372 | ||||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | 2,581 | 2,581 | ||||||||||||||||||||||||||||
Balance - June 30, 2019 | $ | 50,279 | $ | 1,110,496 | $ | 380,795 | $ | (42,530) | $ | (9,481) | $ | 1,489,559 | ||||||||||||||||||||||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Nine Months Ended September 30, 2018 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||
Additional | Other | Additional | Other | |||||||||||||||||||||||||||||||
Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | Common | Paid-in | Retained | Comprehensive | Noncontrolling | Total | |||||||||||||||||||||||
(in thousands) | Stock | Capital | Earnings | Loss | Interests | Equity | Stock | Capital | Earnings | Loss | Interests | Equity | ||||||||||||||||||||||
Balance - December 31, 2017 | $ | 49,781 | $ | 1,084,205 | $ | 622,007 | $ | (42,718) | $ | (8,495) | $ | 1,704,780 | ||||||||||||||||||||||
Cumulative effect of accounting change | — | — | (3,762) | — | (1,740) | (5,502) | ||||||||||||||||||||||||||||
Net income | — | — | 34,031 | — | 8,359 | 42,390 | ||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (1,475) | — | (1,475) | ||||||||||||||||||||||||||||
Balance - December 31, 2018 | $ | 50,026 | $ | 1,102,919 | $ | 701,681 | $ | (45,449) | $ | (21,288) | $ | 1,787,889 | ||||||||||||||||||||||
Net income (loss) | — | — | (320,886) | — | 10,169 | (310,717) | ||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 2,919 | 259 | 3,178 | ||||||||||||||||||||||||||||
Share-based compensation | — | 17,264 | — | — | — | 17,264 | — | 10,095 | — | — | — | 10,095 | ||||||||||||||||||||||
Issuance of common stock, net | 245 | (2,830) | — | — | — | (2,585) | 253 | (2,518) | — | — | — | (2,265) | ||||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | 1,000 | 1,000 | — | — | — | — | 5,379 | 5,379 | ||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | (22,500) | (22,500) | — | — | — | — | (4,000) | (4,000) | ||||||||||||||||||||||
Balance - September 30, 2018 | $ | 50,026 | $ | 1,098,639 | $ | 652,276 | $ | (44,193) | $ | (23,376) | $ | 1,733,372 | ||||||||||||||||||||||
Balance - June 30, 2019 | $ | 50,279 | $ | 1,110,496 | $ | 380,795 | $ | (42,530) | $ | (9,481) | $ | 1,489,559 | ||||||||||||||||||||||
(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 as components of accumulated other comprehensive income (loss) (“AOCI”).
The tax effects of the components of other comprehensive income (loss) and the related tax effects for the three and ninesix months ended SeptemberJune 30, 20192020 and 20182019 were as follows:
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | June 30, 2020 | June 30, 2019 | |||||||||||||||||||||||||||||||
(in thousands) | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | ||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||
Defined benefit pension plan adjustments | $ | 464 | $ | (133) | $ | 331 | $ | 513 | $ | (148) | $ | 365 | $ | 592 | $ | (168) | $ | 424 | $ | 464 | $ | (133) | $ | 331 | ||||||||||
Foreign currency translation adjustments | (590) | 140 | (450) | 519 | (143) | 376 | 1,973 | (318) | 1,655 | 1,072 | (262) | 810 | ||||||||||||||||||||||
Unrealized gain (loss) in fair value of investments | 328 | (72) | 256 | (173) | 44 | (129) | ||||||||||||||||||||||||||||
Total other comprehensive income (loss) | 202 | (65) | 137 | 859 | (247) | 612 | ||||||||||||||||||||||||||||
Unrealized gain in fair value of investments | 1,602 | (296) | 1,306 | 867 | (181) | 686 | ||||||||||||||||||||||||||||
Total other comprehensive income | 4,167 | (782) | 3,385 | 2,403 | (576) | 1,827 | ||||||||||||||||||||||||||||
Less: Other comprehensive income attributable to noncontrolling interests(a) | (99) | — | (99) | — | — | — | 854 | — | 854 | 157 | — | 157 | ||||||||||||||||||||||
Total other comprehensive income (loss) attributable to Tutor Perini Corporation | $ | 301 | $ | (65) | $ | 236 | $ | 859 | $ | (247) | $ | 612 | ||||||||||||||||||||||
Total other comprehensive income attributable to Tutor Perini Corporation | $ | 3,313 | $ | (782) | $ | 2,531 | $ | 2,246 | $ | (576) | $ | 1,670 | ||||||||||||||||||||||
____________________________________________________________________________________________________
(a)The only component of other comprehensive income (loss) attributable to noncontrolling interests is foreign currency translation.
Six Months Ended | Six Months Ended | ||||||||||||||||
June 30, 2020 | June 30, 2019 | ||||||||||||||||
(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 | $ | 1,183 | $ | (336) | $ | 847 | $ | 926 | $ | (265) | $ | 661 | |||||
Foreign currency translation adjustment | (2,954) | 596 | (2,358) | 1,551 | (393) | 1,158 | |||||||||||
Unrealized gain in fair value of investments | 2,359 | (511) | 1,848 | 1,725 | (366) | 1,359 | |||||||||||
Total other comprehensive income | 588 | (251) | 337 | 4,202 | (1,024) | 3,178 | |||||||||||
Less: Other comprehensive income (loss) attributable to noncontrolling interests(a) | (1,166) | — | (1,166) | 259 | — | 259 | |||||||||||
Total other comprehensive income attributable to Tutor Perini Corporation | $ | 1,754 | $ | (251) | $ | 1,503 | $ | 3,943 | $ | (1,024) | $ | 2,919 | |||||
(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)
UNAUDITED
Nine Months Ended | Nine Months Ended | ||||||||||||||||
September 30, 2019 | September 30, 2018 | ||||||||||||||||
(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 | $ | 1,390 | $ | (398) | $ | 992 | $ | 1,539 | $ | (439) | $ | 1,100 | |||||
Foreign currency translation adjustment | 961 | (253) | 708 | (2,034) | 602 | (1,432) | |||||||||||
Unrealized gain (loss) in fair value of investments | 2,053 | (438) | 1,615 | (1,468) | 325 | (1,143) | |||||||||||
Total other comprehensive income (loss) | 4,404 | (1,089) | 3,315 | (1,963) | 488 | (1,475) | |||||||||||
Less: Other comprehensive income (loss) attributable to noncontrolling interests(a) | 160 | — | 160 | — | — | — | |||||||||||
Total other comprehensive income (loss) attributable to Tutor Perini Corporation | $ | 4,244 | $ | (1,089) | $ | 3,155 | $ | (1,963) | $ | 488 | $ | (1,475) | |||||
____________________________________________________________________________________________________
(a)The only component of other comprehensive income attributable to noncontrolling interests is foreign currency translation.
The changes in AOCI balances by component (after tax) attributable to Tutor Perini Corporation during the three and nine months ended September 30, 2019 were as follows:
Three Months Ended September 30, 2019 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain in | Other | ||||||||
Pension | Currency | Fair Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | Income (Loss) | |||||||
Attributable to Tutor Perini Corporation: | |||||||||||
Balance as of June 30, 2019 | $ | (38,009) | $ | (5,416) | $ | 895 | $ | (42,530) | |||
Other comprehensive income (loss) before reclassifications | — | (351) | 254 | (97) | |||||||
Amounts reclassified from AOCI | 331 | — | 2 | 333 | |||||||
Total other comprehensive income | 331 | (351) | 256 | 236 | |||||||
Balance as of September 30, 2019 | $ | (37,678) | $ | (5,767) | $ | 1,151 | $ | (42,294) | |||
Nine Months Ended September 30, 2019 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain (Loss) in | Other | ||||||||
Pension | Currency | Fair Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | Income (Loss) | |||||||
Attributable to Tutor Perini Corporation: | |||||||||||
Balance as of December 31, 2018 | $ | (38,670) | $ | (6,315) | $ | (464) | $ | (45,449) | |||
Other comprehensive income before reclassifications | — | 548 | 1,633 | 2,181 | |||||||
Amounts reclassified from AOCI | 992 | — | (18) | 974 | |||||||
Total other comprehensive income | 992 | 548 | 1,615 | 3,155 | |||||||
Balance as of September 30, 2019 | $ | (37,678) | $ | (5,767) | $ | 1,151 | $ | (42,294) | |||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The changes in AOCI balances by component (after tax) attributable to Tutor Perini Corporation during the three and six months ended June 30, 2020 were as follows:
Three Months Ended June 30, 2020 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain (Loss) in | Other | ||||||||
Pension | Currency | Fair Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | 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 | — | 801 | 1,335 | 2,136 | |||||||
Amounts reclassified from AOCI | 424 | — | (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) | |||
Six Months Ended June 30, 2020 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain (Loss) in | Other | ||||||||
Pension | Currency | Fair Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | Income (Loss) | |||||||
Attributable to Tutor Perini Corporation: | |||||||||||
Balance as of December 31, 2019 | $ | (37,826) | $ | (5,371) | $ | 1,097 | $ | (42,100) | |||
Other comprehensive income (loss) before reclassifications | — | (1,192) | 1,881 | 689 | |||||||
Amounts reclassified from AOCI | 847 | — | (33) | 814 | |||||||
Total other comprehensive income (loss) | 847 | (1,192) | 1,848 | 1,503 | |||||||
Balance as of June 30, 2020 | $ | (36,979) | $ | (6,563) | $ | 2,945 | $ | (40,597) | |||
The changes in AOCI balances by component (after tax) attributable to Tutor Perini Corporation during the three and ninesix months ended SeptemberJune 30, 20182019 were as follows:
Three Months Ended September 30, 2018 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain (Loss) in | Other | ||||||||
Pension | Currency | Fair Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | Income (Loss) | |||||||
Attributable to Tutor Perini Corporation: | |||||||||||
Balance as of June 30, 2018 | $ | (38,706) | $ | (5,399) | $ | (700) | $ | (44,805) | |||
Other comprehensive income (loss) before reclassifications | — | 376 | (145) | 231 | |||||||
Amounts reclassified from AOCI | 365 | — | 16 | 381 | |||||||
Total other comprehensive income (loss) | 365 | 376 | (129) | 612 | |||||||
Balance as of September 30, 2018 | $ | (38,341) | $ | (5,023) | $ | (829) | $ | (44,193) | |||
Three Months Ended June 30, 2019 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain (Loss) in | Other | ||||||||
Pension | Currency | Fair Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | Income (Loss) | |||||||
Attributable to Tutor Perini Corporation: | |||||||||||
Balance as of March 31, 2019 | $ | (38,340) | $ | (6,069) | $ | 209 | $ | (44,200) | |||
Other comprehensive income before reclassifications | — | 653 | 714 | 1,367 | |||||||
Amounts reclassified from AOCI | 331 | — | (28) | 303 | |||||||
Total other comprehensive income | 331 | 653 | 686 | 1,670 | |||||||
Balance as of June 30, 2019 | $ | (38,009) | $ | (5,416) | $ | 895 | $ | (42,530) | |||
Nine Months Ended September 30, 2018 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain (Loss) in | Other | ||||||||
Pension | Currency | Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | Income (Loss) | |||||||
Attributable to Tutor Perini Corporation: | |||||||||||
Balance as of December 31, 2017 | $ | (39,441) | $ | (3,591) | $ | 314 | $ | (42,718) | |||
Other comprehensive loss before reclassifications | — | (1,432) | (1,159) | (2,591) | |||||||
Amounts reclassified from AOCI | 1,100 | — | 16 | 1,116 | |||||||
Total other comprehensive income (loss) | 1,100 | (1,432) | (1,143) | (1,475) | |||||||
Balance as of September 30, 2018 | $ | (38,341) | $ | (5,023) | $ | (829) | $ | (44,193) | |||
Six Months Ended June 30, 2019 | |||||||||||
Defined | Unrealized | Accumulated | |||||||||
Benefit | Foreign | Gain (Loss) in | Other | ||||||||
Pension | Currency | Fair Value of | Comprehensive | ||||||||
(in thousands) | Plan | Translation | Investments, Net | Income (Loss) | |||||||
Attributable to Tutor Perini Corporation: | |||||||||||
Balance as of December 31, 2018 | $ | (38,670) | $ | (6,315) | $ | (464) | $ | (45,449) | |||
Other comprehensive income before reclassifications | — | 899 | 1,379 | 2,278 | |||||||
Amounts reclassified from AOCI | 661 | — | (20) | 641 | |||||||
Total other comprehensive income | 661 | 899 | 1,359 | 2,919 | |||||||
Balance as of June 30, 2019 | $ | (38,009) | $ | (5,416) | $ | 895 | $ | (42,530) | |||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(18) Business Segments
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, concrete forming and placement, steel erection, electrical, mechanical, plumbing, and HVAC (heating, ventilation and air conditioning). As described below, the Company’s business is conducted through 3 segments: 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 contracting services provided by the Civil segment include construction and rehabilitation of highways, bridges, tunnels, mass-transit systems, 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 and government offices, sports and entertainment, education, correctional facilities, biotech, pharmaceutical, industrial and 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.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The following tables set forth certain reportable segment information relating to the Company’s operations for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018:2019:
Reportable Segments | Reportable Segments | |||||||||||||||||||||||||||||||||
Specialty | Consolidated | Specialty | Consolidated | |||||||||||||||||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Corporate | Total | Civil | Building | Contractors | Total | Corporate | Total | ||||||||||||||||||||||
Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||
Total revenue | $ | 591,884 | $ | 421,241 | $ | 249,453 | $ | 1,262,578 | $ | — | $ | 1,262,578 | $ | 644,685 | $ | 490,317 | $ | 234,497 | $ | 1,369,499 | $ | — | $ | 1,369,499 | ||||||||||
Elimination of intersegment revenue | (67,338) | (5,895) | — | (73,233) | — | (73,233) | (75,709) | (17,296) | (67) | (93,072) | — | (93,072) | ||||||||||||||||||||||
Revenue from external customers | $ | 524,546 | $ | 415,346 | $ | 249,453 | $ | 1,189,345 | $ | — | $ | 1,189,345 | $ | 568,976 | $ | 473,021 | $ | 234,430 | $ | 1,276,427 | $ | — | $ | 1,276,427 | ||||||||||
Income (loss) from construction operations | $ | 50,695 | $ | 7,580 | $ | 7,247 | $ | 65,522 | $ | (17,579) | (a) | $ | 47,943 | $ | 65,398 | $ | 17,789 | $ | (11,388) | $ | 71,799 | (a) | $ | (14,103) | (b) | $ | 57,696 | |||||||
Capital expenditures | $ | 22,497 | $ | 144 | $ | 325 | $ | 22,966 | $ | 365 | $ | 23,331 | $ | 18,951 | $ | 186 | $ | 255 | $ | 19,392 | $ | 301 | $ | 19,693 | ||||||||||
Depreciation and amortization(b) | $ | 11,953 | $ | 495 | $ | 1,018 | $ | 13,466 | $ | 2,761 | $ | 16,227 | ||||||||||||||||||||||
Depreciation and amortization(c) | $ | 21,775 | $ | 428 | $ | 995 | $ | 23,198 | $ | 2,767 | $ | 25,965 | ||||||||||||||||||||||
Three Months Ended September 30, 2018 | ||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||
Total revenue | $ | 479,581 | $ | 457,304 | $ | 236,157 | $ | 1,173,042 | $ | — | $ | 1,173,042 | $ | 541,117 | $ | 433,559 | $ | 223,299 | $ | 1,197,975 | $ | — | $ | 1,197,975 | ||||||||||
Elimination of intersegment revenue | (48,093) | (1,812) | — | (49,905) | — | (49,905) | (67,459) | (5,241) | — | (72,700) | — | (72,700) | ||||||||||||||||||||||
Revenue from external customers | $ | 431,488 | $ | 455,492 | $ | 236,157 | $ | 1,123,137 | $ | — | $ | 1,123,137 | $ | 473,658 | $ | 428,318 | $ | 223,299 | $ | 1,125,275 | $ | — | $ | 1,125,275 | ||||||||||
Income (loss) from construction operations | $ | 41,282 | $ | 8,853 | $ | 11,561 | $ | 61,696 | $ | (14,390) | (a) | $ | 47,306 | $ | (164,472) | $ | (3,810) | $ | (159,795) | $ | (328,077) | (d) | $ | (13,640) | (b) | $ | (341,717) | |||||||
Capital expenditures | $ | 15,364 | $ | 277 | $ | 70 | $ | 15,711 | $ | 397 | $ | 16,108 | $ | 24,439 | $ | 150 | $ | 110 | $ | 24,699 | $ | 235 | $ | 24,934 | ||||||||||
Depreciation and amortization(b) | $ | 8,031 | $ | 488 | $ | 1,081 | $ | 9,600 | $ | 2,817 | $ | 12,417 | ||||||||||||||||||||||
Depreciation and amortization(c) | $ | 10,285 | $ | 497 | $ | 1,061 | $ | 11,843 | $ | 2,754 | $ | 14,597 | ||||||||||||||||||||||
____________________________________________________________________________________________________
(a)Consists primarily of corporate general and administrative expenses.
(b)Depreciation and amortization is included inDuring the three months ended June 30, 2020, income (loss) from construction operations.
Reportable Segments | |||||||||||||||||
Specialty | Consolidated | ||||||||||||||||
(in thousands) | Civil | Building | Contractors | Total | Corporate | Total | |||||||||||
Nine Months Ended September 30, 2019 | |||||||||||||||||
Total revenue | $ | 1,516,623 | $ | 1,291,043 | $ | 664,279 | $ | 3,471,945 | $ | — | $ | 3,471,945 | |||||
Elimination of intersegment revenue | (184,925) | (13,913) | — | (198,838) | — | (198,838) | |||||||||||
Revenue from external customers | $ | 1,331,698 | $ | 1,277,130 | $ | 664,279 | $ | 3,273,107 | $ | — | $ | 3,273,107 | |||||
Income (loss) from construction operations | $ | (72,032) | $ | 6,903 | $ | (160,036) | $ | (225,165) | (a) | $ | (45,696) | (b) | $ | (270,861) | |||
Capital expenditures | $ | 60,948 | $ | 349 | $ | 558 | $ | 61,855 | $ | 822 | $ | 62,677 | |||||
Depreciation and amortization(c) | $ | 31,608 | $ | 1,495 | $ | 3,143 | $ | 36,246 | $ | 8,295 | $ | 44,541 | |||||
Nine Months Ended September 30, 2018 | |||||||||||||||||
Total revenue | $ | 1,266,595 | $ | 1,395,896 | $ | 781,591 | $ | 3,444,082 | $ | — | $ | 3,444,082 | |||||
Elimination of intersegment revenue | (169,520) | (3,184) | — | (172,704) | — | (172,704) | |||||||||||
Revenue from external customers | $ | 1,097,075 | $ | 1,392,712 | $ | 781,591 | $ | 3,271,378 | $ | — | $ | 3,271,378 | |||||
Income (loss) from construction operations(d) | $ | 93,560 | $ | 27,814 | $ | 26,250 | $ | 147,624 | $ | (46,428) | (b) | $ | 101,196 | ||||
Capital expenditures | $ | 61,912 | $ | 1,147 | $ | 704 | $ | 63,763 | $ | 648 | $ | 64,411 | |||||
Depreciation and amortization(c) | $ | 20,356 | $ | 1,458 | $ | 3,299 | $ | 25,113 | $ | 8,468 | $ | 33,581 | |||||
____________________________________________________________________________________________________
(a)During the nine months ended September 30, 2019, the Company recorded a non-cash goodwill impairment charge of $379.9operations was impacted by $13.2 million in income (loss) from continuing operations (an unfavorable after-tax impact of $329.5$9.5 million, or $6.56$0.19 per diluted share) resulting fromdue to an interim impairment testadverse arbitration ruling pertaining to an electrical project in New York in the Company performed as of June 1, 2019. (For further information and breakdown of the goodwill impairment charge by segment, see Note 8, Goodwill and Intangible Assets).Specialty Contractors segment.
(b)Consists primarily of corporate general and administrative expenses.
(c)Depreciation and amortization is included in income (loss) from construction operations.
(d)During the ninethree months ended SeptemberJune 30, 2018,2019, the Company recorded a non-cash goodwill impairment charge of $17.8$379.9 million in income (loss) from construction operations (an unfavorable after-tax impact of $12.8$329.5 million, or $0.25$6.56 per diluted share), which was primarily non-cash, resulting from an interim impairment test the Company performed as a result of the unexpected outcome of an arbitration decision related to a subcontract back charge dispute on a Civil segment project in New York that was completed in 2013.June 1, 2019.
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 | |||||||||||
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 | (a) | $ | (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 | |||||
Six Months Ended June 30, 2019 | |||||||||||||||||
Total revenue | $ | 924,739 | $ | 869,802 | $ | 414,826 | $ | 2,209,367 | $ | — | $ | 2,209,367 | |||||
Elimination of intersegment revenue | (117,587) | (8,018) | — | (125,605) | — | (125,605) | |||||||||||
Revenue from external customers | $ | 807,152 | $ | 861,784 | $ | 414,826 | $ | 2,083,762 | $ | — | $ | 2,083,762 | |||||
Income (loss) from construction operations | $ | (122,727) | $ | (677) | $ | (167,283) | $ | (290,687) | (d) | $ | (28,117) | (b) | $ | (318,804) | |||
Capital expenditures | $ | 38,451 | $ | 205 | $ | 233 | $ | 38,889 | $ | 457 | $ | 39,346 | |||||
Depreciation and amortization(c) | $ | 19,655 | $ | 1,000 | $ | 2,125 | $ | 22,780 | $ | 5,534 | $ | 28,314 | |||||
____________________________________________________________________________________________________
(a)During the six months ended June 30, 2020, income (loss) from construction operations was impacted by $13.2 million (an unfavorable 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 Specialty Contractors segment.
(b)Consists primarily of corporate general and administrative expenses.
(c)Depreciation and amortization is included in income (loss) from construction operations.
(d)During the six months ended June 30, 2019, the Company recorded a non-cash goodwill impairment charge of $379.9 million in income (loss) from construction operations (an unfavorable after-tax impact of $329.5 million, or $6.57 per diluted share) resulting from an interim impairment test the Company performed as of June 1, 2019.
A reconciliation of segment results to the consolidated income (loss) before income taxes is as follows:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||
Income (loss) from construction operations | $ | 57,696 | $ | (341,717) | $ | 104,923 | $ | (318,804) | |||
Other income (expense) | (797) | 900 | (316) | 1,322 | |||||||
Interest expense | (16,464) | (17,522) | (32,900) | (33,947) | |||||||
Income (loss) before income taxes | $ | 40,435 | $ | (358,339) | $ | 71,707 | $ | (351,429) | |||
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
A reconciliation of segment results to the consolidated income (loss) before income taxes is as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||
Income (loss) from construction operations | $ | 47,943 | $ | 47,306 | $ | (270,861) | $ | 101,196 | |||
Other income, net | 1,674 | 1,909 | 2,996 | 3,739 | |||||||
Interest expense | (17,305) | (16,411) | (51,252) | (47,474) | |||||||
Income (loss) before income taxes | $ | 32,312 | $ | 32,804 | $ | (319,117) | $ | 57,461 | |||
Total assets by segment were as follows:
As of | As of | As of | As of | |||||||
(in thousands) | September 30, 2019 | December 31, 2018 | June 30, 2020 | December 31, 2019 | ||||||
Civil | $ | 2,791,537 | $ | 2,574,326 | $ | 3,084,528 | $ | 2,791,402 | ||
Building | 965,917 | 913,746 | 1,083,421 | 995,298 | ||||||
Specialty Contractors | 644,016 | 745,313 | 664,161 | 635,180 | ||||||
Corporate and other(a) | 93,438 | 154,367 | (68,507) | 63,897 | ||||||
Total assets | $ | 4,494,908 | $ | 4,387,752 | $ | 4,763,603 | $ | 4,485,777 | ||
____________________________________________________________________________________________________
(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
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discusses our financial position as of SeptemberJune 30, 20192020 and the results of our operations for the three and ninesix months ended SeptemberJune 30, 20192020 and should be read in conjunction with other information, including the unaudited Condensed Consolidated Financial Statements and notes included in Part 1,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-K for the year ended December 31, 2018,2019, and the information contained under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20182019 and in our Quarterly Reports.Part II, Item 1A below.
Forward-Looking Statements
This Quarterly Report on Form 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:
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;
A significant slowdown or decline in economic conditions;
Revisions of 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 profit;
Unfavorable outcomes of existing or future litigation or dispute resolution proceedings against clientscustomers (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;
The requirement to perform extra, or change order, work resulting in disputes or claims or adversely affecting our working capital, profits and cash flows;
Risks and other uncertainties associated with assumptions and estimates used to prepare financial statements;
Inability to retain key members of our management, to hire and retain personnel required to complete projects or implement succession plans for key officers;
Client cancellations of, or reductions in scope under, contracts reported in our backlog;
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;
A significant slowdown or decline in economic conditions;
Failure to meet our obligations under our debt agreements;
The impactDecreases in the level of inclement weather conditions ongovernment spending for infrastructure and other public projects;
Downgrades in our credit ratings;
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;
Increased competition and failure to secure new contracts;
Client cancellations of, or reductions in scope under, contracts reported in our backlog;
Decreases in the level of government spending for infrastructure and other public projects;
Impairment of our goodwill or other indefinite-lived intangible assets;
Possible systems and information technology interruptions, including due to cyberattack, systems failures or other similar events;
Failure to comply with laws and regulations related to government contracts;
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;
Potential dilutive impact of our Convertible Notes in our diluted earnings per share calculation;
Uncertainty from the expected discontinuance of London Interbank Offered Rate and transition to any other interest rate benchmark; and
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.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;
Failure to comply with laws and regulations related to government contracts;
Potential dilutive impact of our Convertible Notes in our diluted earnings per share calculation;
Uncertainty from the expected discontinuance of the London Interbank Offered Rate and transition to any other interest rate benchmark; and
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.
Executive Overview
COVID-19 Update
In the first quarter of 2020, the outbreak of a novel strain of coronavirus, COVID-19, was declared a pandemic. Efforts in the United States to prevent the spread of COVID-19 and mitigate its impacts intensified in March 2020. All 50 states in the United States declared states of emergency, and various countries around the world, including the United States, took steps to restrict travel. Many states and cities within the United States also enacted temporary closures of businesses, issued stay-at-home orders and implemented other restrictive measures in response to the pandemic. The COVID-19 pandemic did not have an impact on our business until mid-March 2020. The pandemic continued to impact certain projects through the middle to latter part of the second quarter, when certain states and cities began easing some restrictions to allow for the gradual re-opening and expansion of business activities and most of our affected projects of significance resumed more normalized operations. The pace of easing and the continued level of restrictions have varied across regions based on the rates of new COVID-19 cases and hospitalizations, and this variability is expected to continue until rates decrease to levels that are more acceptable to public health officials.
For the three and six months ended June 30, 2020, the Company estimates that the COVID-19 pandemic reduced revenue by $130 million and $190 million, respectively, income from construction operations by $9 million and $12 million, respectively, and diluted earnings per common share by $0.13 and $0.17, respectively. These estimated impacts primarily affected the results of the lower-margin Building and Specialty Contractors segments, as certain projects in the Specialty Contractors segment in New York and certain projects in the Building segment in California and Arkansas experienced reduced project execution activities and productivity primarily due to temporary project suspensions and restarts. The higher-margin Civil segment was not significantly impacted by the COVID-19 pandemic during the first half of 2020. The vast majority of our projects have been considered essential business activities, which has allowed projects to continue while implementing new health and safety requirements.
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. Among other things, governments could prohibit the continuation of certain projects that to date have been designated as “essential” or could impose health, safety and other operational requirements on such projects that could result in delays to or suspensions of such projects. In addition, employees and contractors working on such projects could be unable or unwilling to continue working on them, perhaps for extended periods. The COVID-19 pandemic also could negatively affect the ability of counterparties or joint venture partners to make required payments on a timely basis or at all.
Operating Results
Despite the impacts from the COVID-19 pandemic described above, consolidated revenue for the three and six months ended June 30, 2020 was $1.3 billion and $2.5 billion, an increase of 13% and 21%, respectively, compared to $1.1 billion and $2.1 billion for the same periods in 2019. The growth was primarily attributable to increased activities on several infrastructure projects in California, Minnesota, and the Northeast, and certain building projects in California and Oklahoma. The increases were partially offset by the COVID-19 impacts mentioned above.
Income from construction operations for the three and six months ended June 30, 2020 was $57.7 million and $104.9 million, respectively, compared to a loss from construction operations of $341.7 million and $318.8 million for the same periods in 2019. Adjusted income from construction operations for the three and six months ended June 30, 2019, which is a non-GAAP financial measure and excludes the $379.9 million non-cash goodwill impairment charge, was $38.2 million and $61.1 million, respectively. (For a discussion of non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most nearly comparable GAAP financial measures, see the section below titled Non-GAAP Financial Measures.) The increase for both periods was primarily driven by contributions from the above-mentioned infrastructure projects. For the six-month period of 2020, the increase was also partially driven by the absence of prior year unfavorable adjustments that totaled $20.0million on certain electrical and mechanical projects in New York, none of which were individually material. The increases for both the second quarter and year-to-date 2020 periods were partially offset by the $13.2million impact of an unfavorable arbitration ruling related to an electrical project in New York, incremental non-cash amortization expense of $7.9 million and $12.8 million for the three and six months ended June 30, 2020, respectively, related to the increased equity interest in a joint venture that the Company acquired in the fourth quarter of 2019, and the COVID-19 impacts mentioned above.
Executive Overview
Consolidated revenueThe provision for income taxes was $9.6 million and $14.7 million for the three and ninesix months ended SeptemberJune 30, 2019 was $1.2 billion and $3.3 billion,2020, respectively, compared to $1.1 billionan income tax benefit of $42.9 million and $3.3 billion$40.7 million for the same periods in 2018.2019. The revenue growth for the third quarter of 2019 effective tax rate was primarily driven by increased project execution activities on certain mass-transit projects in California23.7% and Minnesota.20.5%
Income from construction operations for the third quarter of 2019 was $47.9 million and loss from construction operations for the nine months ended September 30, 2019 was $270.9 million. Income from construction operations was $47.3 million and $101.2 million, respectively, for the three and ninesix months ended SeptemberJune 30, 2018. The loss for the nine-month period in 2019 was driven by the $379.9 million pre-tax non-cash goodwill impairment charge recorded in the second quarter of 2019 (see Note 8 of the Notes to Condensed Consolidated Financial Statements). This non-cash charge does not impact the Company’s overall business operations, including the pursuit of new work. Adjusted income from construction operations for the nine months ended September 30, 2019, which is a non-GAAP financial measure and excludes the non-cash goodwill impairment charge (and the associated tax benefit), was $109.0 million. For a discussion of non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most nearly comparable GAAP financial measures, see Non-GAAP Financial Measures below. The increase for the nine-month period was primarily due to current-year contributions from the Newark Airport Terminal One project and the absence of a prior-year pre-tax charge totaling $17.8 million, which was attributable to the unexpected outcome of an arbitration decision on a completed Civil segment project in New York. The increase was partially offset by net unfavorable adjustments on certain electrical and mechanical projects in New York totaling $26.7 million, none of which were individually material. In addition, during both current-year periods, the Company’s results were impacted by lower than anticipated contributions from certain projects that have experienced temporary progress delays, but which are expected to advance more meaningfully in the fourth quarter of 2019 and in 2020.
Income tax expense was $5.6 million for the three months ended September 30, 2019 and the Company recognized an income tax benefit of $35.1 million for the nine months then ended. The effective tax rates were 17.3% and 11.0% for the three and nine months ended September 30, 2019,2020, respectively, compared to effective tax rates of 22.5%12.0% and 26.2%, respectively,11.6% for the comparable periods in 2018. A2019. The income tax benefits in the 2019 periods include the $50.4 million tax benefit totaling $50.4 million was recognized during the nine months ended September 30, 2019 related toas a result of the goodwill impairment charge. The adjusted effective income tax rate for the nine months ended September 30, 2019, which excludes the tax benefit from the goodwill impairment charge and which is a non-GAAP financial measure, was 25.1%. See Corporate, Tax and Other Matters below for a discussion of the changes in the effective tax rates.rate.
Diluted earnings per common share for the three and six months ended SeptemberJune 30, 20192020 was $0.38$0.37 and $0.71, respectively, compared to a loss per share for the nine months ended September 30, 2019 was $6.01, compared to diluted earnings per share of $0.42$6.38 and $0.68, respectively,$6.40 for the same periods in 2018.2019. The COVID-19 pandemic had an estimated negative impact on diluted earnings per common share of $0.13 and $0.17 for the three and six months ended June 30, 2020. Adjusted diluted earnings per common share, which is a non-GAAP financial measure and excludes the goodwill impairment charge (and the associated tax benefit) for the ninethree and six months ended SeptemberJune 30, 2019, was $0.55.$0.18 and $0.17, respectively. The reductionincrease in adjusted diluted earnings per common share for both periods in 2019 was primarilyprincipally due to higherthe factors discussed above that drove the increase in income attributable to noncontrolling interests compared to the same periods in 2018.from construction operations.
Consolidated new awards for the three and ninesix months ended SeptemberJune 30, 20192020 totaled $0.7 billion and $4.9$1.3 billion, respectively, compared to $0.9 billion and $4.5$4.2 billion for the same periods in 2018. 2019. The lower volume of new awards in both current year periods was due to the timing of bidding for and awards of prospective project opportunities, which the Company expects will occur later in 2020 or in 2021. The Civil segment wasand Building segments were the largest contributorprimary contributors to the new award activity in the thirdsecond quarter of 2019, whereas the2020. The most significant new awards included more than $300 million of additional funding for various mass-transit projects, over $235 million for various building projects in California, the largest of which was a $69 million education building, and $67 million for various civil infrastructure projects in the CivilMidwest. The COVID-19 pandemic has resulted in and Building segments were most prominent duringcould potentially continue to result in delays in the nine months ended September 30, 2019.bidding and awarding of certain projects the Company is pursuing due to customer funding constraints and administrative challenges.
Consolidated backlog as of SeptemberJune 30, 20192020 was $10.9$10.0 billion an increase of 17% compared to $9.3$11.2 billion at December 31, 2018 and up 28% compared to $8.5 billion2019. Backlog declined as a result of the higher current year revenue generated from near-record backlog at September 30, 2018. The backlog growth was attributable to a large volumethe end of 2019 outpacing current year new awards across all segments, including the $1.4 billion Purple Line Section 3 Stations project in California (which includes $216 million of electrical and mechanical work to be performed by the Specialty Contractors segment), the Choctaw Casino and Resort project in Oklahoma, the Table Mountain Hotel and Casino project in California, valued at approximately $350 million, the $253 million Culver Line Communications-Based Train Control project in New York, a technology campus tenant improvement project worth over $200 million in California and the $200 million Southland Gaming Casino and Hotel project in Arkansas.. As of SeptemberJune 30, 2019,2020, the mix of backlog by segment was approximately 55% for Civil, 24%23% for Building and 21%22% for Specialty Contractors.
The following table presents the Company’s backlog by business segment, reflecting changes from December 31, 20182019 to SeptemberJune 30, 2019:2020:
Backlog at | New | Revenue | Backlog at | Backlog at | New | Revenue | Backlog at | |||||||||||||||
(in millions) | December 31, 2018 | Awards(a) | Recognized | September 30, 2019(b) | December 31, 2019 | Awards(a) | Recognized | June 30, 2020(b) | ||||||||||||||
Civil | $ | 5,141.9 | $ | 2,139.4 | $ | (1,331.7) | $ | 5,949.6 | $ | 6,037.2 | $ | 555.3 | $ | (1,055.6) | $ | 5,536.9 | ||||||
Building | 2,333.1 | 1,596.4 | (1,277.1) | 2,652.4 | 2,790.3 | 443.0 | (954.8) | 2,278.5 | ||||||||||||||
Specialty Contractors | 1,821.7 | 1,116.5 | (664.3) | 2,273.9 | 2,393.6 | 306.4 | (516.8) | 2,183.2 | ||||||||||||||
Total | $ | 9,296.7 | $ | 4,852.3 | $ | (3,273.1) | $ | 10,875.9 | $ | 11,221.1 | $ | 1,304.7 | $ | (2,527.2) | $ | 9,998.6 | ||||||
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(a)New awards consist of the original contract price of projects added to 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).
Because the COVID-19 pandemic remains fluid and uncertain, the Company cannot assess the degree to which it might experience future adverse impacts. The general outlook for the Company’s growth over the next several years remains favorable, particularly in the Civil and Specialty Contractors segments, althoughbut the paceimpact of the COVID-19 pandemic could adversely affect future performance and operations. In addition, the Company’s growth could continue to be impacted by project delays or the timing of project commencements, ramp-up activities and completions. We anticipate that we will continue to win our share of significant new awards resulting from long-term capital spending plans by state, local and federal customers, as well as bipartisan support for infrastructure investments and limited competition for some of the largest project opportunities. In recent years,elections, voters in numerous states approved dozens of long-term transportation funding measures totaling approximately $200 billion in long-term funding. The largest of these were 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 40 years, and in Seattle, Washington, where Sound Transit 3 was passed and is expected to generate $54 billion of funding over 25 years. In addition,As state and local governments respond to the Trump Administrationeconomic burdens of the COVID-19 pandemic, they may delay or cancel planned infrastructure investments due to reduced revenues from income and various congressional leaders continuesales taxes, fuel taxes and tolls. The extent of such effects, their duration, and how state and local governments will respond remains uncertain, just as the scope and duration of the COVID-19 pandemic remains uncertain. The possibility of additional federal financial assistance or stimulus programs directed
toward assisting state and local governments or specifically targeting significant investments in infrastructure have been discussed as possible additional pieces of the federal government’s ongoing response to propose a significantthe COVID-19 pandemic. Such additional federal infrastructure investment program, which most recently has been estimated at approximately $2 trillion. Furthermore,financial assistance or stimulus programs could favorably impact the Company’s current work and prospective opportunities, though the timing and magnitude of such additional federal government actions, if any, remain uncertain.Meanwhile, several large, long-duration civil infrastructure programs with which we are already involved are progressing, such ascontinue to progress. Finally, the Purple Line Extension projects in Los Angeles. Finally, whileCOVID-19 pandemic’s dramatic impact on the U.S. economy has led to interest rates are up modestly from their historicallythat remain at record low levels they remainand may be conducive to continued, customer spending.and potentially increased, spending on infrastructure projects.
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 Capital Resources below.
Non-GAAP Financial Measures
To supplement our unaudited condensed consolidated financial statements presented under generally accepted accounting principles in the United States (“GAAP”), we are presenting certain non-GAAP financial measures.measures. We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations, and they are among the indicators management uses as a basis for evaluating the Company’s financial performance as well as for forecasting future periods. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results, including underlying trends.
These non-GAAP financial measures, which exclude the non-cash goodwill impairment charge incurred in the second quarter of 2019 (and(as well as the tax benefit associated with that charge), include adjusted income (loss) from construction operations, adjusted net income attributable to Tutor Perini Corporation, adjusted diluted earnings per common share and adjusted effective income tax rate. We also reference adjusted operating margin for each segment, which is a non-GAAP financial measure that we define as adjusted income (loss) from construction operations as a percentage of consolidated revenue. These non-GAAP financial measures are not intended to replace the presentation of our financial results in accordance with GAAP, and they may not be comparable to other similarly titled non-GAAP financial measures presented by other companies. Reconciliations of these non-GAAP financial measures to the most nearly comparable GAAP financial measures are presented below. For the three months ended September 30, 2019 andThere were no adjustments for the three and ninesix months ended SeptemberJune 30, 2018, there are no non-GAAP financial measures presented or included in the reconciliation tables below because2020; therefore, the non-GAAP financial measures as defined by the Company, do not differ from GAAP results in those periods, as the only adjustment item occurred in the second quarter of 2019.periods.
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||
Specialty | Consolidated | |||||||||||||
(in millions) | Civil | Building | Contractors | Corporate | Total | |||||||||
Three Months Ended June 30, 2019 | ||||||||||||||
Income (loss) from construction operations, as reported | $ | (164.5) | $ | (3.8) | $ | (159.8) | $ | (13.6) | $ | (341.7) | ||||
Plus: Goodwill impairment charge | 210.2 | 13.5 | 156.2 | — | 379.9 | |||||||||
Adjusted income (loss) from construction operations | $ | 45.7 | $ | 9.7 | $ | (3.6) | $ | (13.6) | $ | 38.2 | ||||
Six Months Ended June 30, 2019 | ||||||||||||||
Income (loss) from construction operations, as reported | $ | (122.7) | $ | (0.7) | $ | (167.3) | $ | (28.1) | $ | (318.8) | ||||
Plus: Goodwill impairment charge | 210.2 | 13.5 | 156.2 | — | 379.9 | |||||||||
Adjusted income (loss) from construction operations | $ | 87.5 | $ | 12.8 | $ | (11.1) | $ | (28.1) | $ | 61.1 | ||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||
Specialty | Consolidated | |||||||||||||
(in millions) | Civil | Building | Contractors | Corporate | Total | |||||||||
Nine Months Ended September 30, 2019 | ||||||||||||||
Income (loss) from construction operations, as reported | $ | (72.0) | $ | 6.9 | $ | (160.0) | $ | (45.8) | $ | (270.9) | ||||
Plus: Goodwill impairment charge | 210.2 | 13.5 | 156.2 | — | 379.9 | |||||||||
Adjusted income (loss) from construction operations | $ | 138.2 | $ | 20.4 | $ | (3.8) | $ | (45.8) | $ | 109.0 | ||||
Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||
September 30, | June 30, | June 30, | |||||||||||||||||
(in millions, except per common share amounts and percentages) | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income (loss) attributable to Tutor Perini Corporation, as reported | $ | (301.6) | $ | 34.0 | $ | 18.7 | $ | (320.5) | $ | 36.1 | $ | (320.9) | |||||||
Plus: Goodwill impairment charge | 379.9 | — | — | 379.9 | — | 379.9 | |||||||||||||
Less: Tax benefit provided on goodwill impairment charge | (50.4) | — | — | (50.4) | — | (50.4) | |||||||||||||
Adjusted net income attributable to Tutor Perini Corporation | $ | 27.9 | $ | 34.0 | $ | 18.7 | $ | 9.0 | $ | 36.1 | $ | 8.6 | |||||||
Diluted earnings (loss) per common share, as reported | $ | (6.01) | $ | 0.68 | $ | 0.37 | $ | (6.38) | $ | 0.71 | $ | (6.40) | |||||||
Plus: Goodwill impairment charge | 7.56 | — | — | 7.56 | — | 7.57 | |||||||||||||
Less: Tax benefit provided on goodwill impairment charge | (1.00) | — | — | (1.00) | — | (1.00) | |||||||||||||
Adjusted diluted earnings per common share | $ | 0.55 | $ | 0.68 | $ | 0.37 | $ | 0.18 | $ | 0.71 | $ | 0.17 | |||||||
Effective income tax rate, as reported | (11.0) | % | 26.2 | % | 23.7 | % | (12.0) | % | 20.5 | % | (11.6) | % | |||||||
Tax effect of goodwill impairment charge | 36.1 | % | — | % | — | % | 46.7 | % | — | % | 45.6 | % | |||||||
Adjusted effective income tax rate | 25.1 | % | 26.2 | % | 23.7 | % | 34.7 | % | 20.5 | % | 34.0 | % | |||||||
Results of Segment Operations
The results of our Civil, Building and Specialty Contractors segments are discussed below.
Civil Segment
Revenue, income (loss) from construction operations and adjusted income from construction operations for the Civil segment are summarized as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
(in millions) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Revenue | $ | 524.5 | $ | 431.5 | $ | 1,331.7 | $ | 1,097.1 | $ | 569.0 | $ | 473.7 | $ | 1,055.6 | $ | 807.2 | ||||||
Income (loss) from construction operations, as reported | 50.7 | 41.3 | (72.0) | 93.6 | 65.4 | (164.5) | 111.5 | (122.7) | ||||||||||||||
Plus: Goodwill impairment charge | — | — | 210.2 | — | — | 210.2 | — | 210.2 | ||||||||||||||
Adjusted income from construction operations | $ | 50.7 | $ | 41.3 | $ | 138.2 | $ | 93.6 | $ | 65.4 | $ | 45.7 | $ | 111.5 | $ | 87.5 | ||||||
Revenue for the three and ninesix months ended SeptemberJune 30, 20192020 increased 22%20% and 21%31%, respectively, compared to the same periods in 2018. 2019. The revenue growth for both periods was principally driven byprimarily due to overall increased project execution activities on certainvarious mass-transit projects in California and Minnesota that are earlyMinnesota. The COVID-19 pandemic had an insignificant impact on revenue in their project life cycles. For the nine-month period, the increase was also due to increased activity on the Newark Airport Terminal One project, a highway project in Marylandboth periods (an estimated $15 million and a tunnel project in British Columbia.$25 million, respectively).
IncomeExcluding the goodwill impairment charge in the second quarter of 2019, adjusted income from construction operations for the three and ninesix months ended SeptemberJune 30, 20192020 increased 23%43% and decreased 177%27%, respectively, compared to the same periods in 2018.2019. The decreaseincrease was primarily driven by the volume growth mentioned above and improved performance on certain projects, partially offset by the impact of incremental non-cash amortization expense of $7.9 million and $12.8 million for the nine-month period was attributablethree and six months ended June 30, 2020, respectively, related to the goodwill impairment charge recordedincreased equity interest in a joint venture that the Company acquired in the secondfourth quarter of 2019. AdjustedThe COVID-19 pandemic resulted in insignificant impacts on income from construction operations for the three and nine months ended September 30, 2019 increased 23% and 48%, respectively, compared to the samein both current year periods (an estimated $2 million in 2018. For the three-month period, the increase was primarily due to increased volume. The increase for the nine-month period of 2019 was due to higher volume and the absence of the $17.8 million charge in the prior year mentioned above in the Executive Overview and an immaterial favorable adjustment on a highway project in New York, also in the prior year.each period).
Operating margin was 9.7%11.5% and (5.4)10.6% for the three and six months ended June 30, 2020, respectively, compared to operating margin of (34.7)% and (15.2)% and adjusted operating margin was 9.7% and 10.4% for the three and nine months ended September 30, 2019, respectively, compared toof 9.6% and 8.5%10.8% for the same periods in 2018. 2019, which excludes the impact of the goodwill impairment charge. The reductiondifference in adjusted operating margin for the nine-month periodsecond quarter of 2020 was primarily driven by improved performance on several ongoing projects, partially offset by the aforementioned incremental amortization expense. For the first half of 2020, the difference in adjusted operating margin was principally driven by the goodwill impairment charge recordedsame incremental amortization expense.
New awards in the Civil segment totaled $377 million and $555 million for the three and six months ended June 30, 2020, respectively, compared to $149 million and $1.8 billion for the same periods in 2019. The increased level of new awards in the second quarter of 2019. The changes to adjusted2020 was primarily driven by more than $300 million of additional funding for various mass-transit projects, as well as
operating margin$67 million for both periods were primarily driven by the factors mentioned above that drove the changes in revenue and adjusted income from construction operations.
New awardsvarious projects in the Civil segment totaled $293 million and $2.1 billion for the three and nine months ended September 30, 2019 compared to $346 million and $1.6 billion, respectively, for the same periods in 2018.Midwest. The Civil segment’ssubstantially lower volume of new awards in the third quarterfirst half of 2019 included a $178 million military facilities project in Guam and various other smaller projects.
Backlog for the Civil segment was $5.9 billion as of September 30, 2019, up 28%2020 compared to $4.7 billion asthe same period in 2019 was due to the timing of September 30, 2018. The increase was driven primarily bybidding for and awards of prospective project opportunities, which the awardCompany expects will occur later in 2020 or 2021, whereas the first quarter of 2019 ofprior year first-half period included the $1.4 billion Purple Line Section 3 Stations project in California. Several large Civil segment opportunities are expected to bid and potentially be awarded to the Company later this year and in 2021. However, the COVID-19 pandemic is resulting in revenue shortfalls for many state and local government agencies that could result in the deferral or cancellation of certain new projects, depending on the allocation and prioritization of state and local funding, as well as the availability, timing and magnitude of anticipated supplemental funding from the federal government.
Backlog for the Civil segment was $5.5 billion as of June 30, 2020 compared to $6.2 billion as of June 30, 2019. The higher backlog in the prior year period was primarily driven by the Purple Line Section 3 Stations project awarded in the first quarter of 2019. The segment continues to experience strong demand reflected in a large, multi-year pipeline of prospective projects, that are supported by substantial anticipated funding from various voter-approved transportation measures and public agencies’ long-term spending plans. The Civil segment is well-positioned to continue capturing its share of these prospective projects.
Building Segment
Revenue, income (loss) from construction operations and adjusted income from construction operations for the Building segment are summarized as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
(in millions) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Revenue | $ | 415.3 | $ | 455.5 | $ | 1,277.1 | $ | 1,392.7 | $ | 473.0 | $ | 428.3 | $ | 954.8 | $ | 861.8 | ||||||
Income from construction operations, as reported | 7.6 | 8.9 | 6.9 | 27.8 | ||||||||||||||||||
Income (loss) from construction operations, as reported | 17.8 | (3.8) | 21.3 | (0.7) | ||||||||||||||||||
Plus: Goodwill impairment charge | — | — | 13.5 | — | — | 13.5 | — | 13.5 | ||||||||||||||
Adjusted income from construction operations | $ | 7.6 | $ | 8.9 | $ | 20.4 | $ | 27.8 | $ | 17.8 | $ | 9.7 | $ | 21.3 | $ | 12.8 | ||||||
Revenue for the three and ninesix months ended SeptemberJune 30, 2019 decreased 9%2020 increased 10% and 8%11%, respectively, compared to the same periods in 2018. The decrease for both periods was 2019 primarily due to a reduction inincreased project execution activities on health carevarious projects in California, Oklahoma and hospitality and gaming projects in various states. For the third quarter of 2019, the decrease wasNortheast. The increases were partially offset by increasedreduced activity on technologycertain projects in California.California that are completed or nearing completion. Revenue grew in both periods of 2020 despite the negative impact of the COVID-19 pandemic, which resulted in delays on certain projects that impacted revenue by approximately $80 million and $115 million for the three and six months ended June 30, 2020, respectively.
IncomeExcluding the goodwill impairment charge in the second quarter of 2019, adjusted income from construction operations for the three and ninesix months ended SeptemberJune 30, 2019 decreased 15%2020 increased 84% and 75%66%, respectively, compared to the same periods in 2018.2019. The decrease for the nine-month period was primarily due to the goodwill impairment charge recorded in the second quarter of 2019. Adjusted income from construction operations for the three and nine months ended September 30, 2019 decreased 15% and 27%, respectively, compared to the same periods in 2018. For both periods, the decrease was due to the absence of prior-year immaterial favorable project closeout adjustments, offset by increased project contributions from other projects, including Newark Airport Terminal One, in the current year.
Operating margin was 1.8% and 0.5% and adjusted operating margin was 1.8% and 1.6% for the three and nine months ended September 30, 2019, respectively, compared to 1.9% and 2.0% for the same periods in 2018. The reduction in operating margin for the nine-month period in 2019 was driven by the goodwill impairment charge recorded in the second quarter. The changes to adjusted operating marginincrease for both periods were primarilywas principally driven by the factors mentioned above that drove the changesincreases in revenue. The COVID-19 pandemic resulted in insignificant impacts on income from construction operations in both current year periods (an estimated $2 million and $3 million, respectively).
Operating margin was 3.8% and 2.2% for the three and six months ended June 30, 2020, respectively, compared to operating margin of (0.9)% and (0.1)% and adjusted operating margin of 2.3% and 1.5% for the same periods in 2019, which excludes the impact of the goodwill impairment charge. The increase in adjusted operating margin for both periods was driven by the factors mentioned above that drove the increases in revenue and adjusted income from construction operations.
New awards in the Building segment totaled $199$260 million and $1.6 billion$443 million for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared to $493$328 million and $1.8$1.4 billion for the same periods in 2018. New2019. The lower volume of new awards in both periods of 2020 was due to the timing of prospective project opportunities, which are expected to be awarded later this year or in 2021, whereas the first half of 2019 included several sizeable new awards, such as the Choctaw Casino and Resort project in Oklahoma, a large hospitality and gaming project in California and the Southland Gaming Casino and Hotel project in Arkansas. Significant new awards in the thirdsecond quarter of 2019 included $592020 included over $235 million of incremental funding for an educationvarious building projects in California, the largest of which was a $69 million education building. The COVID-19 pandemic is impacting demand in certain end markets, such as hospitality and a cultural arts facility, alsogaming, which has resulted in California, valued at $51 million.and could continue to result in reduced project opportunities in those markets.
Backlog for the Building segment was $2.7$2.3 billion as of SeptemberJune 30, 2019, up 25%2020 compared to $2.1$2.9 billion as of SeptemberJune 30, 2018. 2019. The increasedecrease was driven by revenue growth for the segment that exceeded new awards, which were impacted by the timing of bidding and award activities, including in some instances delays as a result of the Choctaw Casino and Resort project in Oklahoma, the Table Mountain Hotel and Casino project in California, valued at approximately $350 million, the $200 million Southland Gaming Casino and Hotel project in Arkansas and a technology campus tenant improvement project in California valued at more than $200 million.COVID-19 pandemic. The Building segment continues to have a large volume of prospective projects some of which have already been bidacross various end markets and are expected to be selected and awarded by customers in 2019. Strong demand is expected to continue due to ongoing customer spending supported by a favorable economic environment and low interest rates.
geographic locations. Barring any further adverse impacts from the
COVID-19 pandemic, demand for our building construction services is expected to continue due to ongoing customer spending supported by a favorable interest rate environment.
Specialty Contractors Segment
Revenue, income (loss)loss from construction operations and adjusted income (loss)loss from construction operations for the Specialty Contractors segment are summarized as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
(in millions) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Revenue | $ | 249.5 | $ | 236.2 | $ | 664.3 | $ | 781.6 | $ | 234.4 | $ | 223.3 | $ | 516.8 | $ | 414.8 | ||||||
Income (loss) from construction operations, as reported | 7.2 | 11.6 | (160.0) | 26.3 | ||||||||||||||||||
Loss from construction operations, as reported | (11.4) | (159.8) | (3.1) | (167.3) | ||||||||||||||||||
Plus: Goodwill impairment charge | — | — | 156.2 | — | — | 156.2 | — | 156.2 | ||||||||||||||
Adjusted income (loss) from construction operations | $ | 7.2 | $ | 11.6 | $ | (3.8) | $ | 26.3 | ||||||||||||||
Adjusted loss from construction operations | $ | (11.4) | $ | (3.6) | $ | (3.1) | $ | (11.1) | ||||||||||||||
Revenue for the third quarter of 2019 increased 6% compared to the third quarter of 2018. Revenue for the ninethree and six months ended SeptemberJune 30, 2019 decreased 15%2020 increased 5% and 25%, respectively, compared to the same periods in 2019. The increase for the year-to-date period was principally driven by an overall increase in 2018 primarily due to reduced project execution activities on certainvarious electrical and mechanical projects in California, New Yorkthe Northeast. Revenue grew in both periods of 2020 despite the impact of the COVID-19 pandemic, which resulted in delays on certain projects that negatively impacted revenue by approximately $35 million and Washington that are complete or nearing completion. The decrease was partially offset by increased activity on a large mechanical project in New York.$50 million for the three and six months ended June 30, 2020, respectively.
IncomeLoss from construction operations for the third quarter of 2019three and six months ended June 30, 2020 was $7.2$11.4 million and $3.1 million, respectively, compared to a loss from construction operations for the nine months ended September 30, 2019 was $160.0 million compared to income from construction operations of $11.6$159.8 million and $26.3$167.3 million for the three and nine months ended September 30, 2018, respectively. For the nine-month period, the decrease was primarily due to the goodwill impairment charge recordedsame periods in the second quarter of 2019. Excluding the impact of the goodwill impairment charge in the second quarter of 2019, adjusted loss from construction operations was $3.8$3.6 million and $11.1 million for the ninethree and six months ended SeptemberJune 30, 2019. 2019, respectively. The decreaseincrease in adjusted loss from construction operations for the thirdsecond quarter of 2020 was principallyprimarily due to the net impact of various immaterial adjustments on certain$13.2million unfavorable arbitration ruling pertaining to an electrical projects in New York. The decrease for the nine-month period was due to net unfavorable adjustments totaling $26.7 million on certain electrical and mechanical projectsproject in New York noneand the negative impact of which were individually material.the COVID-19 pandemic (an estimated $5 million), partially offset by increased activity on various projects in the Northeast. For the first half of 2020, the decreased loss from construction operations was primarily due to the absence of the prior year unfavorable adjustments described in the Executive Overview and net increased activity on various projects in the Northeast, partially offset by the $13.2million unfavorable arbitration ruling and the negative impact of the COVID-19 pandemic (an estimated $7 million).
Operating margin was 2.9% and (24.1)(4.9)% and adjusted operating margin was 2.9% and (0.6)% for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared to 4.9%operating margin of (71.6)% and 3.4%(40.3)% and adjusted operating margin of (1.6)% and (2.7)% for the same periods in 2018. For2019, which excludes the nine-month period, the reduction in operating margin was driven byimpact of the goodwill impairment charge recorded in the second quarter of 2019. charge. The changes toin adjusted operating marginmargins for both periods were primarily driven bymainly attributable to the aforementioned factors mentioned above that drove the changes in revenue and adjusted income (loss) from construction operations.operations.
New awards in the Specialty Contractors segment totaled $199$81 million and $1.1 billion$306 million for the three and ninesix months ended SeptemberJune 30, 20192020, respectively, compared to $110$439 million and $1.1 billion, respectively,$918 million for the same periods in 2018. New awards2019. The COVID-19 pandemic has resulted in the third quarter of 2019 included three electrical projectsand could continue to result in Texas collectively valued at $99 million, as well as $32 million of incrementalreduced demand from certain commercial and government customers that are experiencing funding for another electrical project, also in Texas.constraints.
Backlog for the Specialty Contractors segment was $2.2 billion as of June 30, 2020 compared to $2.3 billion as of SeptemberJune 30, 2019, up 31% compared to $1.7 billion as of September 30, 2018, driven by significant new awards received earlier in 2019. Many of the segment’s new awards over the last year have notably higher margins than in the past due, in some cases, to limited competition. The segment continues to have a substantial volume of prospective projects with demand increasing because of strong public and private sector spending on civil and building projects. The Specialty Contractors segment iscontinues to be increasingly focused on servicing the Company’s growing backlog of large Civil and Building segment projects, but it also remains well-positioned to capture its share of new projects for external customers, leveraging the size and scale of our 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 $17.6$14.1 million and $46.0$24.8 million during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared to $15.0$13.6 million and $46.9$28.4 million during the three and ninesix months ended SeptemberJune 30, 2018,2019, respectively. The increasedecrease in the threesix months ended SeptemberJune 30, 2020 compared to the same period in 2019 was primarily due to higher professional fees.lower compensation-related expenses.
Other Income Net,(Expense), Interest Expense and Income Tax (Expense) Benefit
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
(in millions) | 2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Other income, net | $ | 1.7 | $ | 1.9 | $ | 3.0 | $ | 3.7 | ||||||||||||||||
Other income (expense) | $ | (0.8) | $ | 0.9 | $ | (0.3) | $ | 1.3 | ||||||||||||||||
Interest expense | (17.3) | (16.4) | (51.3) | (47.5) | (16.5) | (17.5) | (32.9) | (33.9) | ||||||||||||||||
Income tax (expense) benefit | (5.6) | (7.4) | 35.1 | (15.1) | (9.6) | 42.9 | (14.7) | 40.7 | ||||||||||||||||
Interest expense increased $0.9decreased $1.0 million and $3.8 million for both the three and ninesix months ended SeptemberJune 30, 2019, respectively,2020 compared to the same periods in 2018.2019. The increasesdecreases in the 20192020 periods were primarily due to higherlower average balancesinterest rates on our line of credit, while higher interest rates also impacted the nine month period.credit.
Income tax expense was $5.6 million for the three months ended September 30, 2019 and the Company recognized an income tax benefit of $35.1 million for the first nine months of 2019. The effective income tax rate for the three and ninesix months ended SeptemberJune 30, 20192020 was 17.3%23.7% and 11.0%20.5%, respectively, compared to 22.5%12.0% and 26.2%11.6%, respectively, for the same periods in 2018.2019. The lowereffective income tax rate for the ninesix months ended SeptemberJune 30, 2020 primarily reflects the favorable impact of the 2019 net operating loss (“NOL”), which is allowed to be carried back up to five years as a result of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted on March 27, 2020. Under the CARES Act, the Company’s NOL generated in 2019 may be carried back to tax years when the federal statutory tax rate was 35% rather than the current rate of 21%, consequently generating a larger tax benefit from the NOL due to the enactment of the CARES Act. The favorable impact resulting from the enactment of the CARES Act was partially offset by the unfavorable impact of the vesting of restricted stock units for which a large portion of the share-based compensation expense recognized in prior periods will not be deductible for income tax purposes. The Company’s provisions for income taxes and effective tax rates for the 2019 periods were significantly impacted by the goodwill impairment charge. For the three months ended June 30, 2019, the Company recognized a tax benefit of $42.9 million on a loss before income taxes of $358.3 million. The lower effective tax rates in the 2019 periods primarily resulted from the $379.9 million goodwill impairment charge discussed above of which approximately $209.5 million iswas not deductible for income tax purposes. The Company recognized a tax benefit totaling $50.4 million as a result of the impairment charge.The adjusted effective income tax rate forrates, which exclude the nine months ended September 30, 2019, which excludestax benefit resulting from the goodwill impairment charge, were 34.7% and associated tax benefit,34.0%, respectively, for the three and which is a non-GAAP financial measure, was 25.1%. The lower effective rate insix months ended June 30, 2019 and primarily reflected the third quarter of 2019 compared to the prior year is primarily due to the favorable impact of tax return-to-provision adjustments, a smaller unfavorable impact of expired stock options for which the share-based compensation related changes and higher earnings attributable to noncontrolling interestsexpense recognized in prior periods will not be deductible for which income taxes are not the responsibility of the Company. The lower adjusted effective rate in the nine month period of 2019 compared to the prior year is primarily due to the favorable impact of higher earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company and tax return-to-provision adjustments, partially offset by a higher unfavorable impact of share-based compensation related changes. taxes. For a further discussion of income taxes, refer to Note 7 of the Notes to Condensed Consolidated Financial Statements.
Liquidity and Capital Resources
Liquidity is provided by available cash and cash equivalents, cash generated from operations, credit facilities and access to capital markets. We have a committed line of credit totaling $350 million, which may be used for revolving loans, letters of credit and/or general purposes. We believe that cash generated from operations, along with our unused credit capacity of $233$250 million and available cash balances as of June 30, 2020, will be sufficient to fund any working capital needs and debt maturities for the next 12 months.months, provided that we are not adversely impacted by unanticipated future events, including material increases in the negative impact of the COVID-19 pandemic as discussed in COVID-19 Update above. In addition, we expect that liquidity will continue to be positively impacted in 2020 by improved cash flow generation from project execution activities, settlements of disputed matters and certain provisions of the CARES Act, which enable the Company to accelerate the collection of tax refunds associated with the 2019 NOL carryback and allow the deferral of certain 2020 Social Security payroll tax liabilities until the end of 2021 and 2022. For a discussion of our 2017 Credit Facility and our Convertible Notes, see the section entitled Debt below.
Cash and Working Capital
Cash and cash equivalents were $207.1$182.6 million as of SeptemberJune 30, 20192020 compared to $116.1$193.7 million as of December 31, 2018.2019. Cash immediately available for general corporate purposes was $49.2$57.7 million and $51.7$43.8 million as of SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively, with the remainder being amounts held by our consolidated joint ventures and also our proportionate share of cash held by our unconsolidated joint ventures and also amounts held by our consolidated joint ventures. Cash held by our joint ventures 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 $74.0$84.3 million as of SeptemberJune 30, 20192020 compared to $61.9$79.4 million as of December 31, 2018.2019.
During the ninesix months ended SeptemberJune 30, 2019,2020, net cash provided by operating activities was $111.4$58.2 million (with $222.9$92.2 million provided in the thirdsecond quarter) due primarily to cash generated from earnings sources, whilepartially offset by investment in working capital was relatively flat duringcapital. In the period. The $222.9second quarter of 2020, strong cash contributions associated with increased project execution activities on certain, higher-margin projects with favorable billing terms, driven by the Company’s near-record backlog at the end of 2019, were enhanced by the resolution and collection of approximately $40 million of disputed balances and a modest decrease in working capital. For the first half of 2020, the $58.2 million cash provided by operating activities inresulted from the third quarterstrong cash contributions associated with the increased project execution activities mentioned above and the resolution and collection of 2019 was primarily driven byapproximately $40 million of disputed balances noted above, which more than offset an increase of $68.5 million in investment in working capital. The increase in working
capital for the first six months of 2020 primarily reflects an increase in accounts receivable due to timing of collections, partially offset by increases in billings in excess of costs and estimated earnings (“BIE”), along with modest declines in and accounts receivablepayable due to timing of payments to suppliers and costs and estimated earnings in excess of billings (“CIE”) corresponding to settlement and collection activities.subcontractors. During the ninesix months ended SeptemberJune 30, 2018,2019, net cash used in operating activities was $34.8$111.5 million due primarily to investments in project working capital that exceeded cash generated from earnings sources. The change in working capital primarily reflected increases in CIE and accounts receivable, as well as decreases in accounts payable due to the timing of payments to vendors and subcontractors, partially offset byresulted from an increase in BIE.accounts receivable due to timing of collections.
The change resultingCash flow from the comparison of cash provided by operating activities forincreased $169.7 million when comparing the ninefirst six months ended September 30, 2019of 2020 with the cash flow for the comparablesame period in 2018 is anof 2019. The substantial increase in cash provided of $146.1 millionfrom operating activities in the first half of 2020 compared to 2019 period. The improvementreflects the significant increase in the 2019 period primarily reflectscash from earnings sources as well as a current year increaseconsiderable reduction in investment in working capital as a result of improved collections associated with substantial growth in project billings and, to a lesser degree, increases in accounts payable compared to a decrease in the prior yearand accrual balances due to favorable timing of payments to vendors and subcontractors, along with a smaller increase in CIE and a larger increase in BIE. These current year improvements were partially offset by larger increases for accounts receivable and retainage receivable in 2019.the increased project activity.
The cashCash used for investing activities during the first ninesix months of 2020 and 2019 and 2018 was $66.1$32.6 million and $58.5$41.2 million, respectively, primarily due primarily to the acquisition of property and equipment for projects.
For the first ninesix months of 2019,2020, net cash provided byused in financing activities was $48.3$36.2 million, which was primarily due to increased net borrowings of $66.1 million, partially offsetdriven by $21.5$30.9 million of cash distributions to noncontrolling interests.interests and a $4.3 million net repayment of borrowings. Net cash provided by financing activities for the comparable period in 2018 2019 was $17.3$187.5 million, which was primarily due todriven by increased net borrowings of $57.4 million, partially offset by $22.5 million of cash distributions to noncontrolling interests and a $16.0 million earn-out payment related to an acquisition in a prior year.$189.0 million.
At SeptemberJune 30, 2019,2020, we had working capital of $1.7$1.3 billion, a ratio of current assets to current liabilities of 1.881.50 and a ratio of debt to equity of 0.56,0.57, compared to working capital of $1.6$1.4 billion, a ratio of current assets to current liabilities of 1.991.66 and a ratio of debt to equity of 0.430.58 at December 31, 2018.2019.
Debt
Summarized below are the key terms of the 2017 Credit Facility as of SeptemberJune 30, 2019.2020. For additional information regarding our outstanding debt, refer to Note 9 of the Notes to Condensed Consolidated Financial Statements.Statements, as applicable.
2017 Credit Facility
On April 20, 2017, we entered into a 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. 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 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 “spring-forward provision”), provided however (i) if the Convertible Notes are refinanced in full with the proceeds of permitted refinancing indebtedness in accordance with the terms of the 2017 Credit Facility, the maturity date for the 2017 Credit Facility will remain April 20, 2022 and (ii) if the Company issues “New Convertible Notes” (as defined in the 2017 Credit Facility) and retires the Convertible Notes in full, the maturity date for the 2017 Credit Facility will be the earlier of (x) April 20, 2022 or (y) 90 days prior to the maturity date for such New Convertible Notes. The 2017 Credit Facility also 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. On May 7, 2019, certain provisions of the 2017 Credit Facility were amended, including among other things, setting the maximum leverage ratio at 3.50:1.00 for the remainder of its term, thus eliminating the step down from 3.50:1.00 to 3.25:1.00. For additional information regarding the terms of our 2017 Credit Facility, refer to Note 9 of the Notes to Condensed Consolidated Financial Statements.
As a result of the spring-forward provision mentioned above, the facility will mature on December 17, 2020 if the Convertible Notes remain outstanding at that time. The Company does not have call rights that allow it to unilaterally redeem the Convertible Notes. Due to the spring-forward provision in the 2017 Credit Facility, all borrowings under the facility, as well as the outstanding balance for the Convertible Notes due June 15, 2021, are included in “Current maturities of long-term debt” on the Condensed Consolidated Balance Sheet as of June 30, 2020. The Company continues to evaluate options to address the spring-forward provision and refinancing or retirement of the outstanding Convertible Notes. New credit arrangements are expected to be finalized in the third quarter of 2020.
The table below presents our actual and required consolidated fixed charge coverage ratio and consolidated leverage ratio under the 2017 Credit Facility for the period, which are calculated on a rolling four-quarter basis:
Twelve Months Ended | ||||
Actual | Required | |||
Fixed charge coverage ratio |
| > or = 1.25 : 1.00 | ||
Leverage ratio |
| < or = 3.50 : 1.00 | ||
As of SeptemberJune 30, 2019,2020, we were in compliance and expect to continue to be in compliance with the covenants under the 2017 Credit Facility.
Contractual Obligations
There have been no material changes in our contractual obligations from those described in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Off-Balance Sheet Arrangements
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-K for the year ended December 31, 2018.2019. Our critical accounting policies are also identified and discussed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018.2019. See Note 8 of the Notes to Condensed Consolidated Financial Statements for a detailed discussion of our accounting policies related to goodwill.
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-K for the year ended December 31, 2018.2019.
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-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
Item 1. Legal Proceedings
In the ordinary course of our business, we are involved in various legal proceedings. We disclose information about certain pending legal proceedings pursuant 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-K for the year ended December 31, 2018,2019, updated by Note 11 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
There have been no material changesThe risk factor discussed below is intended to oursupplement the risk factors aspreviously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. It updates and replaces the risk factor previously disclosed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business, financial condition and results of operations.
The World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. Government declared a national emergency in March 2020. The COVID-19 pandemic has created volatility, uncertainty and economic disruption for the Company, our customers, subcontractors and suppliers, and the markets in which we do business. The scope and impact of the COVID-19 pandemic continues to evolve. Extraordinary and wide-ranging actions have been taken by international, federal, state and local public health and governmental authorities to contain and combat the spread of COVID-19, including stay-at-home or shelter-in-place orders, social distancing measures and travel restrictions for individuals and orders for many businesses to cease or curtail normal operations unless their work is deemed essential or critical.
While we have not experienced project cancellations as a result of the COVID-19 pandemic, we have experienced disruptions to our business operations as the pandemic has spread through the geographies where we do business. For example, beginning in mid-March of 2020, work on some non-essential construction projects was suspended or curtailed by certain customers, primarily in our Building and Specialty Contractors segments, though the vast majority of our projects in the Civil segment have been designated as essential business, allowing us to continue our work on those projects. In addition, we have modified certain business and workforce practices and implemented new protocols to promote social distancing and enhance health and safety measures on our projects and in our offices to conform to regulatory requirements and best practices encouraged by governmental and regulatory authorities, all of which has negatively affected our operations and resulted in increases in operating expenses. We have also experienced absenteeism due to illness, quarantine or fear by our employees or those of our subcontractors on certain projects, which has resulted in some disruption of our work. The COVID-19 impacts to date have been primarily productivity inefficiencies due to project suspensions or absenteeism on certain projects, as well as additional costs associated with the new health and safety measures implemented in response to the pandemic. Any ongoing project suspensions, personnel absenteeism, or reduced work schedules or shifts required to comply with quarantines or other social distancing measures could continue to adversely affect our operations. In addition, as a result of COVID-19 containment efforts, we have experienced delays in certain bidding activities and also in legal proceedings and 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. Consequently, our ability to resolve and recover on these types of claims may be delayed, which may adversely affect our liquidity and financial results.
It remains too early to assess the full impact that the COVID-19 pandemic, and the actions taken in response to it, will have on our employees, our operating segments and practices, our customers, subcontractors and suppliers, and the regions that we serve, or on our financial condition and results of operations as a whole. The full impact depends on many factors that remain uncertain and subject to ongoing volatility, or that are not yet identifiable, and in many cases are out of our control. These factors could include, among other things: (1) the duration of the COVID-19 pandemic and the types and magnitude of adverse impacts on the U.S. and global economies; (2) the health and welfare of our employees, and those of our customers, subcontractors and suppliers; (3) evolving business and government actions in response to the pandemic, including stay-at-home measures, changes to what are considered “essential” businesses, social distancing measures, travel bans and additional health and safety requirements that we may be required to observe in order to continue working on our projects; (4) the varying impact that the pandemic may have on industries we serve and on government spending for infrastructure projects, including reduced government spending on infrastructure as a result of lower revenues from taxes, tolls and fares; (5) the response of our customers or prospective customers to the pandemic, including further delays, stoppages or terminations of existing projects or potential new awards; (6) increases in our receivables if our customers fail to pay, delay making payments, request financial concessions or if we experience delays in resolving claims and disputes (e.g., further delays in court proceedings or settlement discussions); (7) limitations and higher costs associated with obtaining financing; (8) potential challenges with suppliers that could limit the availability or cost of materials; (9) potential interruptions to our information systems and technology or breaches in our data security due to increasing use of remote communications and access; and (10) the timing of finding effective treatments, a vaccine or a cure for COVID-19. Such events may result in fewer or delayed project bidding opportunities or additional or further delays on existing projects.
Any of these events or impacts we have experienced or identified could cause or contribute to the risks and uncertainties facing the Company and our customers and could materially and adversely affect our business or portions thereof, and our financial condition and results of operations. The COVID-19 pandemic, and the volatile economic conditions stemming from the pandemic, as well as reactions to future pandemics or resurgences of COVID-19, could also aggravate or heighten the risks posed by other risk factors that we identify in our Annual Report on Form 10-K for the year ended December 31, 2019, which in turn could materially and adversely affect our business, financial condition and results of operations. There may be other adverse consequences to our business, financial condition and results of operations from the spread of COVID-19 that are not presently known or that have not yet become apparent.
As a result, we cannot assure you that if COVID-19 continues to spread, it would not have a further adverse impact on our business, financial condition and results of operations.
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.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits | Description |
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31.1 | |
31.2 | |
32.1 | |
32.2 | |
95 | |
101.INS | XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
SIGNATURE
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: | By: | /s/ Gary G. Smalley |
Gary G. Smalley | ||
Executive Vice President and Chief Financial Officer | ||