FORM 10-K



United States Securities and Exchange Commission

Washington, DC 20549



(Mark One)





 

Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934.



For the fiscal year ended December 31, 2014.2016.





 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.



For the transition period from-to-.



Commission File No. 1-6314



Tutor Perini Corporation

(Exact name of registrant as specified in its charter)





 

 

Massachusetts

 

04-1717070

(State of Incorporation)

 

(IRS Employer Identification No.)







 

 

15901 Olden Street, Sylmar, California

 

91342

(Address of principal executive offices)

 

(Zip Code)







(818) 362-8391

(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:





 

 

Title of Each Class

 

Name of each exchange on which registered

Common Stock, $1.00 par value

 

The New York Stock Exchange



Securities registered pursuant to Section 12(g) of the Act: None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No  ☒ 



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   No  



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒  No 



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”,filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





 

 

 

 

 

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company



 

 

 

(Do not check if a smaller reporting company)

 

 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No



The aggregate market value of voting Common Stock held by non-affiliates of the registrant was $1,211,384,936$900,681,219 as of June 28, 2014,30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter.



The number of shares of Common Stock, $1.00 par value per share, outstanding at February 20, 201517, 2017 was 48,671,492.49,222,934.



Documents Incorporated by Reference



Portions of the definitive proxy statement relating to the registrant’s annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K10-K.

 

 


 











TUTOR PERINI CORPORATION



20142016 ANNUAL REPORT ON FORM 10-K



TABLE OF CONTENTS





 

 



 

PAGE

PART II.

 

 

Item 11.

Business

314

Item 1A1A.

Risk Factors

1419

11 

Item 1B1B.

Unresolved Staff Comments

1915 

Item 22.

Properties

2016 

Item 33.

Legal Proceedings

2116 

Item 44.

Mine Safety Disclosures

2116 



 

 

PART IIII.

 

 

Item 55.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

2217 

Item 66.

Selected Financial Data

2324

19 

Item 77.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2442

21 

Item 7A7A.

Quantitative and Qualitative Disclosures About Market Risk

4230 

Item 88.

Financial Statements and Supplementary Data

4230 

Item 99.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

4230 

Item 9A9A.

Controls and Procedures

4243

30 

Item 9B9B.

Other Information

4532 



 

 

PART IIIIII.

 

 

Item 1010.

Directors, Executive Officers and Corporate Governance

4532 

Item 1111.

Executive Compensation

4532 

Item 1212.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

4532 

Item 1313.

Certain Relationships and Related Transactions, and Director Independence

4532 

Item 1414.

Principal Accountant Fees and Services

4532 



 

 

PART IVIV.

 

 

Item 1515.

Exhibits and Financial Statement Schedules

4633 



Signatures

4735 





 

2

 


 

Table of Contents

 

PART I.



Forward-lookingForward-Looking Statements



The statements contained in this Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including without limitation, statements regarding our management’s expectations, hopes, beliefs, intentions or strategies regarding the future and statements regarding future guidance or estimates and non-historical performance. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on us. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties are listed and discussed in Item 1A. Risk Factors, below. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.



ITEM 1. BUSINESS



General



Tutor Perini Corporation, formerly known as Perini Corporation, was incorporated in 1918 as a successor to businesses which had been engaged in providing construction services since 1894. Tutor Perini Corporation and(together with its consolidated subsidiaries (“Tutor“Tutor Perini,” the “Company,” “we,” “us,” and “our,” unless the context indicates otherwise) is a leading construction company, based on revenues,revenue, as ranked by Engineering News-Record (“ENR”), offering diversified general contracting, construction management and design-build services to private customers and public agencies throughout the world. Our corporate headquarters are in Los Angeles (Sylmar), California, and we have various other principal office locations throughout the United States and certain U.S. territories (see Item 2. Properties for a listing of our major facilities). Our common stock is listed on the New York Stock Exchange under the symbol “TPC.” We are incorporated under the laws of the Commonwealth of Massachusetts.



We and our predecessors have provided construction services since 1894 and have established a strong reputation within our markets by executing large, complex projects on time and within budget while adhering to strict quality control measures. We offer general contracting, pre-construction planning and comprehensive project management services, including the planning and scheduling of the manpower, equipment, materials and subcontractors required for a project. We also offer self-performed construction services including site work,work; concrete forming and placement,placement; steel erection, electrical, mechanical, plumbing,erection; electrical; mechanical; plumbing; and heating, ventilation and air conditioning (HVAC).

During 2014,2016, we performed work on more than 1,500 construction projects. Our corporate headquarters are in Sylmar, California, and we have various other principal office locations throughout the United States and certain U.S. territories (see Item 2. Properties for a listing of our major facilities). Our common stock is listed on the New York Stock Exchange under the symbol “TPC”. We are incorporated under the laws of the Commonwealth of Massachusetts.



Our business is conducted through three  basic segments: Civil, Building and Specialty Contractors, as described below in the “Business Segment Overview”.Overview.”



Historically, we have beenWe are recognized as one of the leading civil contractors in the United States, as evidenced by our past and current performance on several of the country’s largest mass-transit and transportation projects, such as the McCarran International Airport Terminal 3 in Las Vegas, the East Side Access project in New York City, the San Francisco Central Subway extension to Chinatown and major portions of the Red Line Subway project in Los Angeles. We are also recognized as one of the leading building contractors in the United States, as evidenced by our performance on several of the largest hospitality and gaming projects, including Project CityCenter and the Cosmopolitan Casino and Resort and large transportation projects such as the McCarran International Airport Terminal 3 in Las Vegas, Nevada. Vegas.

In 2008, we embarked upon a strategy to better align our business to pursue markets with higher profit margins and the best long-term growth potential, while maintaining our presence as a leading contractor in the general building market. In September 2008, weour predecessors, Perini Corporation and Tutor-Saliba Corporation (“Tutor-Saliba”), completed a merger with Tutor-Saliba Corporation (“Tutor-Saliba”) to providewhich provided us with enhanced opportunities for growth not available to us on a stand-alone basis through increased size, scale, andbonding capacity, immediate access to multiple geographic regions, management capabilities, complementary assets and expertise particularly Tutor-Saliba’s expertise in large civil projects, immediate access to multiple geographic regions, and increased ability to compete for a large number of projects, particularly in the civil construction segment due to an increased bonding capacity. The success of the Tutor-Saliba merger and the execution of the Company’s strategy to focus on acquiring higher-margin civil projects are best illustrated by the dramatic growth we have experienced in our Civil segment. Despite the economic challenges associated with state and local funding over the past several years, our Civil segment’s backlog, revenue, and income from construction operations have more than quadrupled since 2008.projects. 



In late 2010 and 2011, we sawtook advantage of opportunities to continue to buildexpand our Company vertically and geographically through the strategic acquisitions of seven companies which havewith demonstrated success in their respective markets. By the third quarter of 2011, we had completed the acquisition of seven companies with a combined backlog of $2.6 billion at their respective acquisition dates. These acquisitions strengthened our geographic presence in our Building and Civil segments and also significantly increased our specialty contracting capabilities. In the third quarter of 2011, we completed an internal reorganization of our reporting segments with the creation of the Specialty Contractors segment, which we describe below.  Furthermore, during the first quarter of 2014, we completed a

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reorganization which resulted in the elimination of the Management Services reporting unit and reportable segment. The Management Services reporting unit formerly consisted of two subsidiary companies, Black Construction and Perini Management Services, which have since been included in the Civil and Building segments, respectively.  This reorganization was completed due to the Management Services unit no longer meeting the criteria set forth in FASB ASC Topic 280, “Segment Reporting”.



We believe that the successful completion of our acquisition strategy hasacquisitions have enabled us to realize cross-selling opportunities across an expanded geographic footprint, while continuing to focus on vertical integration through increased self-performedself-perform work capabilities, thus further improving profitability and providing greater stability during economic cycles.

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Business Segment Overview



Civil Segment



Our Civil segment specializes in public works construction and the repair, replacement and reconstruction of infrastructure across most of the major geographic regions of the United States. Our civil contracting services include construction and rehabilitation of highways, bridges, mass transittunnels, mass-transit systems, and water management and wastewater treatment facilities.



The Civil segment is comprised of the Company’s legacy heavy civil construction operations (civil operations of the formerour predecessors, Perini Corporation, Tutor-Saliba and Tutor-Saliba, includingits subsidiary, Black Construction) and the following three companies described hereafter, whichacquired by the Company acquired in 2011.2011: Frontier-Kemper, Lunda Construction, and Becho. Frontier-Kemper is a heavy civil contractor which buildsengaged in the construction of tunnels for highways, railroads, subways and rapid transit systems, as well assystems; the construction of shafts and other facilities for water supply, wastewater transport and hydroelectric projects. It also developsprojects; and equipsthe development and equipping of mines with innovative hoisting, elevator and vertical conveyance systems for the mining industry.systems. Lunda Construction is a heavy civil contractor engaged in the construction, rehabilitation and maintenance of bridges, railroads and other civil structures in the Midwest and throughout the United States. Becho specializesis engaged in drilling, foundation and excavation support for shoring, bridges, piers, roads and highway projects, primarily in the southwestern U.S.United States. We believe that the Company has benefitted through these acquisitions by allowing us to expand ouran expanded geographic presence, enhance ourenhanced civil construction capabilities and addthe addition of experienced management with a proven, successful track record.records.



Our Civil segment’s customers primarily award contracts through one of two methods: the traditional public “competitive bid” method, in which price is the major determining factor, or through a request for proposals where contracts are awarded based on a combination of technical capability and price.



Traditionally, our Civil segmentsegment’s customers require each contractor to pre-qualify for construction business by meeting criteria that include technical capabilities and financial strength. Our financial strength and outstanding record of performance on challenging civil works projects often enablesenable us to pre-qualify for projects in situations where smaller, less diversified contractors are unable to meet the qualification requirements. We believe this is a competitive advantage that makes us an attractive partner on the largest, most complex infrastructure projects and prestigious design-build, or DBOM (design-build-operate-maintain) contracts, which combine the nation’s top contractors with engineering firms, equipment manufacturers and project development consultants in a competitive bid selection process to execute highly sophisticated public works projects.



In its 20142016 rankings, ENR ranked us as the nation’s fifthfourth largest domestic heavy contractor, fourth largest contractor in the bridge market and the mass transit and rail market, sixth largest domestic contractor in heavy construction, eighth largest in the transportation market ninth largest in airports, and tenth largest in highways and mining.contractor overall.



We believe the Civil segment provides significant opportunities for growth due to the age and condition of existing infrastructure coupled with large government funding sources aimed at the replacement and repairreconstruction of aging U.S. infrastructure and popular, often bipartisan, support from votersthe public and elected officials for infrastructure improvement programs. Funding for major civil infrastructure projects is typically provided through a combination of one or more of the following: local, regional, state and/orand federal loans, grants, andloans; grants; other direct allocations sourced through tax revenues, bonds, and/orrevenue; bonds; and user fees.  For example, the California High-Speed Rail project, with an estimated total cost of approximately $67.5 billion, is being funded in its initial stages through more than $3 billion of federal stimulus funds and $9 billion of voter-approved bond funds. Additional funding will come from California’s Cap and Trade proceeds and the private sector. The Federal Highway Trust Fund also provides funding for certain transportation projects. Some large civil projects also benefit from funding provided through alternative sources, such as public-private partnerships.



We have been active in civil construction since 1894 and believe we have a particular expertise in large, complex civil construction projects. We have completed or are currently working on some of the most significant civil construction projects in the United States. For example, we are currently working on various segments of the East Side Access project in New York City; the first segmentphase of the California High-Speed Rail project; the Alaskan Way Viaduct Replacement (SR-99 bored tunnel) project in Seattle, Washington; the Third Street Light Rail — CentralRail-Central Subway project in San Francisco, California; the platform over the eastern rail yard and the Amtrak Tunnel at Hudson Yards in New York City; the Queens Plaza substation project in Queens, New York;and the rehabilitation of the Verrazano-Narrows Bridge in New York; the I-5 Antlers Bridge replacement in Shasta County, California; the New Irvington Tunnel in Fremont, California; the Harold Structures mass transit

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project in Queens, New York; and the construction of express toll lanes along I-95 in Maryland.York. We have also performed runway widening and reconstruction projects at the John F. Kennedy International Airport in Queens, New York;York, and completed the runway paving project at Andrews AFBNew Irvington Tunnel in Maryland;Fremont, California,  the Caldecott Tunnel Fourth Bore project near Oakland, California;California, and various segmentsexpress toll lanes along I-95 in Maryland. In January of 2017, a joint-venture team we are leading was awarded a $1.4 billion contract for the East Side AccessPurple Line Segment 2 expansion project in New York.Los Angeles, California.



Building Segment



Our Building segment has significant experience providing services to a number of specialized building markets for private and public works customers, including the hospitality and gaming, transportation, healthcare,health care, corporate and municipal offices, sports and entertainment, education, correctional facilities, biotech, pharmaceutical, industrial and high-tech markets. We believe ourthe success withinof the Building segment results from our proven ability to manage and perform large, complex projects with aggressive fast-track schedules,schedules; elaborate designsdesigns; and advanced mechanical, electrical and life safety systems, while providing accurate budgeting and strict quality control. Although price is a key competitive factor, we believe our strong reputation, long-standing customer relationships and significant level of repeat and referral business have enabled us to achieve our leading position.

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The Building segment is comprised of the Company’s legacy buildingseveral operating units that provide general contracting, design-build, preconstruction and construction operations (building operationsservices in various regions of the former Perini Corporation and Tutor-Saliba, includingUnited States. Tutor Perini Building Corp., focuses on large, complex building projects nationwide, including significant projects in the hospitality and gaming, commercial office, education, government facilities, and multi-unit residential markets. Rudolph and Sletten and James A. Cummings, as well as Perini Management Services) and two companies described hereafter, which the Company acquired subsequent to the Tutor-Saliba merger in 2008. Keating Building Company is a construction management and design-build company with expertise in both private and public works buildingfocuses on large, complex projects in California in the northeastern U.S.commercial office, technology, industrial, education, and Mid-Atlantic regions.government facilities markets. Roy Anderson Corp. (formerly known as Anderson Companies) provides general contracting, design-build, preconstruction, construction management, andits services, including disaster rapid response services, to public and private customers primarily throughout the southeastern United States. Perini Management Services provides diversified construction and design-build services to U.S. military and has expertise in hospitalitygovernment agencies, as well as to surety companies and gaming, commercial, government, healthcare, industrial and educational facilities. We believe that the Company has benefitted through these acquisitions by strengthening our positionsmulti-national corporations in the eastern and southeastern United States and welocations overseas. We believe that our national resources and strong resumerésumé of notable projects will enable future growth potential for these companies on large, complex building projects.



In its 20142016 rankings, ENR ranked us as the tenthsixth largest generaldomestic building contractor in the United States. Within the general building category, we were ranked as the third largest builder in the entertainment and casinos market, seventh largest in the multi-unit residential market, and eighth largest in the government offices market.contractor. We are a recognized leader in the hospitality and gaming market, specializing in the construction of high-end destination resorts and casinos and Native American developments.casinos. We work with hotel operators, Native American tribal councils, developers and architectural firms to provide diversified construction services to meet the challenges of new construction and renovation of hotel and resort properties. We believe that our reputation for completing projects on time is a significant competitive advantage in this market, as any delay in project completion could result in significant loss of revenuesrevenue for the customer.



We have been awarded and have recently completed, or are currently working on, large public worksprivate and privatepublic building projects across a wide array of building end markets, including commercial offices, multi-unit residential, healthcare,health care, hospitality and gaming, transportation, education, and entertainment, among others, includingentertainment. Specific projects include a large technology research and development office building in northern California for a confidential technology customer; the Panorama Tower in Miami, Florida; the South Tower (“C and Tower C”)D at Hudson Yards and the George Washington Bridge Bus Station redevelopment, both in New York City; the Washington Hospital expansion in Fremont, California; the Graton Rancheria Resort and Casino in Rohnert Park, California; the Chumash Casino Resort expansion in Santa Ynez, California; the Scarlet Pearl Casino Resort in D’Iberville, Mississippi; the Broadway Plaza retail development in Walnut Creek, California; the McCarran International Airport Terminal 3 in Las Vegas, Nevada; Kaiser Hospital Buildings in San Leandro and Redwood City, California; and courthouses in San Bernardino and San Diego, California and Broward County, Florida. As a result of our reputation and track record, we were previously awarded and have completed contracts for several marquee projects in the hospitality and gaming market, including the Resorts World New York Casino in Jamaica, New York, and Project CityCenter, Thethe Cosmopolitan Resort and Casino, the Wynn Encore Hotel and the Planet Hollywood, Tower, all in Las Vegas, Nevada. These projects span a wide array of building end markets and they illustrate our Building segment’s resumerésumé of performance onsuccessfully completed large-scale public and private projects.



Specialty Contractors Segment



Our 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 transitmass-transit end markets, among others.markets. This segment provides the Company with unique strengthensstrengths and capabilities whichthat position us as a full-service contractor with greater control over scheduled work, project delivery and risk management.



The Specialty Contractors segment is comprised of the followingseveral operating units whichthat provide unique services in various regions of the United States:States. Five Star Electric is the largest electrical contractor in New York City, providing construction services in the electrical sector, including power, lighting, fire alarm, security, telecommunications, low voltage and wireless systems. Five Star Electric has established itself as an industry leader performing work in both the public and private sectors, including high-end residential, hotel and commercial towers, transportation, water treatment plants, schools and universities, health care, retail, sports and government facilities. Fisk Electric covers many of the major commercial, transportation and industrial electrical construction markets in the southwestern and southeastern United States, with the ability to cover other attractive markets nationwide. Fisk’s expertise is in technology design and the development of electrical and technology systems for major projects spanning a broad variety of project types, including commercial office buildings, sports arenas, hospitals, research laboratories, hotels and casinos, convention centers, manufacturing plants, refineries and water and wastewater treatment facilities. WDF, Nagelbush and Desert Mechanical each provide mechanical, plumbing, HVAC and fire protection services to a range of customers in a wide variety of markets, including transportation, commercial/industrial, schools and universities and residential. WDF is one of the largest mechanical contractors servicing the New York City metropolitan region, Nagelbush operates primarily in Florida, and Desert Mechanical operates primarily in the western United States. Superior Gunite specializes in pneumatically placed structural concrete utilized in infrastructure projects nationwide, such as bridges, dams, tunnels and retaining walls.



In its 2016 rankings, ENR ranked us as the fifth largest electrical contractor1, eleventh largest mechanical contractor and tenth largest specialty contractor1 in the United States. Through Five Star Electric and WDF, collectively, we are also the largest specialty contractor in the New York City metropolitan area.

1This ranking represents the collective revenue of the Company’s specialty contracting subsidiaries as reported to ENR.

·

Five Star Electric provides electrical light, power, and low-voltage systems installation to a range of public and private sector customers in the New York City metropolitan area, including high-end residential, hotel and commercial towers, transportation, water treatment plants, schools and universities, and government facilities.

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·

Fisk Electric covers many of the major commercial, transportation, and industrial electrical construction markets in the southwestern and southeastern U.S. with the ability to cover other attractive markets nationwide. Fisk’s expertise is in the design and development of electrical and technology systems for major projects spanning a broad variety of project types, including commercial office buildings, sports arenas, hospitals, research laboratories, hospitality and casinos, convention centers, and industrial facilities.

·

WDF,Nagelbush, and Desert Mechanical provide mechanical, plumbing, HVAC, and fire protection services to a range of customers in a wide variety of markets, including transportation, infrastructure, commercial, schools and universities, residential, and specialty construction. WDF services the New York City metropolitan region, Nagelbush operates primarily in the southeastern U.S., and Desert Mechanical operates primarily in the western U.S.

·

Superior Gunite specializes in pneumatically placed structural concrete utilized in infrastructure projects such as bridges, dams, tunnels, and retaining walls throughout the U.S.



In its 2014 rankings, ENR ranked us as the fifth largest electrical contractor in the U.S. and the eighth largest specialty contractor nationwide. We are also the largest specialty contractor in the New York region.

Our Specialty Contractors segment has been awarded, hashave recently completed, work on, or isare currently working on, severalvarious electrical and mechanical projects at the World Trade Center and at Hudson Yards in New York City;City, two signal system modernization projects in New York City;City and electrical work for the new hospital at the University of Texas Southwestern Medical Center.Center in Dallas, Texas. This segment has also supported, or is currently supporting, several large public works projects in our Building and Civil segments, including the Alaskan Way Viaduct Replacement (SR-99 bored tunnel) project in Seattle, Washington; the McCarran International Airport Terminal 3 in Las Vegas, Nevada; the Resorts World New York Casino in Jamaica, New York; various segments of the Greenwich Street Corridor and East Side Access projects in New York City; the Caldecott Tunnel Fourth Bore project near Oakland, California; the New Irvington Tunnel in Fremont, California; and several marquee projects in the hospitality and gaming market, including Project CityCenter, Thethe Cosmopolitan Resort and Casino and the Planet Hollywood, Tower, all in Las Vegas, Nevada.



The majority of the work performed by our Specialty Contractors units is contracted directly with project owners, including state and local municipal agencies, school districts, real estate developers, general contractors, commercial and general contractors. Aindustrial customers and school districts; additionally, a smaller, but growing, component of its work is performed as a subcontractor to the Company’sour Building and Civil groups.

6segments.




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Markets and Customers



OurWe provide diversified construction services are targeted towardto a variety of end markets that are diversified across project types, customer characteristics and geographic locations. During the first quarter of 2014, the Company completed a reorganization which resulted in the elimination of the Management Services reporting unit and reportable segment. The Management Services reporting unit formerly consisted of the following subsidiary companies: Black Construction and Perini Management Services. The reorganization was completed due to changes in volume of business resulting in a change in organizational structure as the unit no longer met the criteria set forth in FASB ASC Topic 280, “Segment Reporting”.

customers. The following tables set forth certain reportable segment information relating to the Company’s operationoperations for the years ended December 31, 2014, 20132016, 2015 and 2012. In accordance with the accounting guidance on segment reporting, the Company has restated the comparative prior period information for the reorganized reportable segments:2014.



Revenues by business segment for fiscal years 2014,  2013 and 2012 are set forth below:









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues by Business Segment

 

Year Ended December 31,

 

2014

 

2013

 

2012

 

(in thousands)

Revenue by Business Segment

Year Ended December 31,

(in thousands)

2016

 

2015

 

2014

Civil

 

$

1,687,144 

 

$

1,441,416 

 

$

1,335,993 

$

1,668,963 

 

$

1,889,907 

 

$

1,687,144 

Building

 

 

1,503,837 

 

 

1,551,979 

 

 

1,592,441 

 

2,069,841 

 

 

1,802,535 

 

 

1,503,837 

Specialty Contractors

 

 

1,301,328 

 

 

1,182,277 

 

 

1,183,037 

 

1,234,272 

 

 

1,228,030 

 

 

1,301,328 

Total

 

$

4,492,309 

 

$

4,175,672 

 

$

4,111,471 

$

4,973,076 

 

$

4,920,472 

 

$

4,492,309 





Revenues by end market for the Civil segment for fiscal years 2014,  2013 and 2012 are set forth below:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Civil Segment Revenue by End Market

Year Ended December 31,

(in thousands)

2016

 

2015

 

2014

Mass Transit

$

547,913 

 

$

450,436 

 

$

534,110 

Bridges

 

533,762 

 

 

662,553 

 

 

535,733 

Highways

 

290,745 

 

 

388,963 

 

 

156,443 

Other

 

296,543 

 

 

387,955 

 

 

460,858 

Total

$

1,668,963 

 

$

1,889,907 

 

$

1,687,144 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Civil Segment Revenues by End Market

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

 

 

(in thousands)

Bridges

 

$

535,733 

 

$

501,867 

 

$

548,641 

Mass Transit

 

 

534,110 

 

 

364,148 

 

 

217,292 

Highways

 

 

156,443 

 

 

211,316 

 

 

228,652 

Other

 

 

460,858 

 

 

364,085 

 

 

341,408 

Total

 

$

1,687,144 

 

$

1,441,416 

 

$

1,335,993 

Revenues by end market for the Building segment for fiscal years 2014,  2013 and 2012 are set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building Segment Revenues by End Market

 

Year Ended December 31,

 

2014

 

2013

 

2012

 

(in thousands)

Building Segment Revenue by End Market

Year Ended December 31,

(in thousands)

2016

 

2015

 

2014

Office

$

441,591 

 

$

226,928 

 

$

2,722 

Industrial and Commercial

 

271,480 

 

 

266,921 

 

 

90,194 

Municipal and Government

 

262,022 

 

 

335,762 

 

 

300,274 

Health Care Facilities

 

235,005 

 

 

164,963 

 

 

127,963 

Hospitality and Gaming

 

216,224 

 

 

250,757 

 

 

101,819 

Condominiums

 

193,755 

 

 

125,949 

 

 

115,251 

Mixed Use

 

163,454 

 

 

112,737 

 

 

159,083 

Education Facilities

 

$

337,062 

 

$

280,685 

 

$

190,968 

 

157,808 

 

 

186,944 

 

 

337,062 

Municipal and Government

 

 

300,274 

 

 

325,258 

 

 

224,483 

Healthcare Facilities

 

 

127,963 

 

 

296,294 

 

 

346,379 

Hospitality and Gaming

 

 

101,819 

 

 

376,620 

 

 

238,915 

Industrial Buildings

 

 

90,194 

 

 

34,802 

 

 

286,677 

Mass Transit

 

 

40,676 

 

 

10,755 

 

 

10,909 

Other

 

 

505,849 

 

 

227,565 

 

 

294,110 

 

128,502 

 

 

131,574 

 

 

269,469 

Total

 

$

1,503,837 

 

$

1,551,979 

 

$

1,592,441 

$

2,069,841 

 

$

1,802,535 

 

$

1,503,837 



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Revenues by end market for the Specialty Contractors segment for fiscal years 2014, 2013 and 2012 are set forth below:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Contractors Segment

 

Revenues by End Market

 

Year Ended December 31,

 

2014

 

2013

 

2012

 

(in thousands)

Industrial Buildings

 

$

276,008 

 

$

212,438 

 

$

201,987 

Specialty Contractors Segment Revenue by End Market

Year Ended December 31,

(in thousands)

2016

 

2015

 

2014

Condominiums

$

239,937 

 

$

266,648 

 

$

105,670 

Mass Transit

 

204,398 

 

 

107,120 

 

 

217,318 

Industrial and Commercial

 

186,769 

 

 

164,480 

 

 

276,008 

Transportation

 

164,468 

 

 

149,971 

 

 

61,288 

Mixed Use

 

159,286 

 

 

96,072 

 

 

36,008 

Education Facilities

 

 

230,645 

 

 

123,910 

 

 

94,463 

 

80,476 

 

 

195,647 

 

 

230,645 

Mass Transit

 

 

217,318 

 

 

174,778 

 

 

203,242 

Office Buildings

 

 

129,350 

 

 

137,189 

 

 

189,447 

Condominiums

 

 

105,670 

 

 

133,916 

 

 

91,151 

Hospitality and Gaming

 

 

46,901 

 

 

69,327 

 

 

22,104 

Municipal and Government

 

 

23,034 

 

 

39,621 

 

 

103,193 

Health Care Facilities

 

60,233 

 

 

40,228 

 

 

30,591 

Wastewater Treatment

 

58,479 

 

 

73,094 

 

 

69,000 

Other

 

 

272,402 

 

 

291,098 

 

 

277,450 

 

80,226 

 

 

134,770 

 

 

274,800 

Total

 

$

1,301,328 

 

$

1,182,277 

 

$

1,183,037 

$

1,234,272 

 

$

1,228,030 

 

$

1,301,328 

We provide our services to a broad range of private and public customers. The allocation of our revenues by customer source for fiscal years 2014, 2013 and 2012 is set forth below:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues by Customer Source

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

State and Local Governments

 

56 

%

 

60 

%

 

53 

%

Private Owners

 

40 

%

 

35 

%

 

41 

%

Federal Government Agencies

 

%

 

%

 

%

 

 

100 

%

 

100 

%

 

100 

%



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Revenue by Customer Type

Year Ended December 31,



2016

 

2015

 

2014

State and Local Agencies

49 

%

 

55 

%

 

56 

%

Private Owners

45 

%

 

40 

%

 

40 

%

Federal Agencies

%

 

%

 

%

Total

100 

%

 

100 

%

 

100 

%



State and Local GovernmentsAgencies. We derived approximately 56% of our revenues from state and local government customers during 2014. Our state and local government customers include state transportation departments, metropolitan authorities, cities, municipal agencies, school districts and public universities. We provide services to our state and local customers primarily pursuant to contracts awarded through competitive bidding processes. Our building construction services for state and local government customers have included judicial and correctional facilities, schools and dormitories, healthcarehealth care facilities, convention centers, parking structures and other municipal buildings. OurThe vast majority of our civil contracting and building construction services are provided in locations throughout the country.United States and its territories.



Private Owners. We derived approximately 40% of our revenues from private customers during 2014. Our private customers include private real estate developers, healthcarehealth care companies, technology companies, major hospitality and gaming resort owners, Native American sovereign nations, public corporations and private universities. We provide services to our private customers through negotiated contract arrangements, as well as through competitive bids.



Federal Government Agencies. We derived approximately 4% of our revenues fromOur federal government agencies during 2014. These agencies have includedcustomers include the U.S. State Department, the U.S. Navy, the U.S. Army Corps of Engineers, and the U.S. Air Force.Force and the National Park Service. We provide services to federal agencies primarily pursuant to contracts for specific or multi-year assignments that involve new construction or infrastructure repairs or improvements. A substantial portion of our revenuesrevenue from federal agencies is derived from projects in overseas locations. Welocations, which we expect this to continue for the foreseeable future as a result of our expanding base of experience and strong relationships with federal agencies, together with anticipated stable expenditures for defense, diplomatic and security-related construction work primarily associated with the ongoing threats of terrorism.work.



Most federal, state and local government contracts contain provisions whichthat permit the termination of contracts, in whole or in part, for the convenience of the government, among other reasons.



For additional information on customers, markets, measures of profit or loss,revenue and total assets both U.S and foreign,by geographic location, see Note 12 — 10Business Segments of the Notes to Consolidated Financial Statements in Item 15. Statements.Exhibits and Financial Statement Schedules.

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Backlog



Backlog

in our industry is a measure of the total value of work that is remaining to be performed on contracts awarded. We include a construction project in our backlog at such time aswhen a contract is awarded or a letter of commitment is obtained and we believe adequate construction funding is in place. As a result, we believe theour backlog figures areis firm, subject only to the cancellation provisions containedand although cancellations or scope adjustments may occur, historically they have not been material. Our backlog by segment, end market and customer type is presented in the various contracts. Historically, these provisions have not had a material effect on us.

Backlog is summarized below by business segment as of December 31, 2014 and 2013. In accordance with the accounting guidance on segment reporting, the Company has restated the comparative prior period information for the reorganized reportable segments:following tables:









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog by Business Segment

 

December 31,

 

2014

 

2013

 

(dollars in thousands)

Backlog by Business Segment

As of December 31,

(in thousands)

2016

 

2015

Civil

 

$

3,563,239 

 

45 

%

 

$

3,538,094 

 

51 

%

$

2,672,126 

 

43 

%

 

$

2,743,708 

 

37 

%

Building

 

 

2,187,767 

 

28 

%

 

 

1,755,049 

 

25 

%

 

1,981,193 

 

32 

%

 

2,780,440 

 

37 

%

Specialty Contractors

 

 

2,080,719 

 

27 

%

 

 

1,661,144 

 

24 

%

 

1,573,818 

 

25 

%

 

 

1,940,981 

 

26 

%

Total

 

$

7,831,725 

 

100 

%

 

$

6,954,287 

 

100 

%

$

6,227,137 

 

100 

%

 

$

7,465,129 

 

100 

%



We estimate that approximately $3.7$3.4 billion, or 47.8%54%, of our backlog atas of December 31, 20142016 will be recognized as revenue in 2015.2017.





Backlog by end market for the Civil segment as of December 31, 2014 and 2013 is set forth below:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Civil Segment Backlog by End Market

 

December 31,

 

2014

 

2013

 

(dollars in thousands)

Civil Segment Backlog by End Market

As of December 31,

(in thousands)

2016

 

2015

Mass Transit

 

$

1,934,028 

 

54 

%

 

$

1,623,728 

 

47 

%

$

1,853,117 

 

69 

%

 

$

1,455,194 

 

53 

%

Highways

 

379,630 

 

14 

%

 

505,998 

 

18 

%

Bridges

 

 

894,975 

 

25 

%

 

 

1,041,856 

 

29 

%

 

297,810 

 

11 

%

 

497,702 

 

18 

%

Highways

 

 

349,399 

 

10 

%

 

 

252,918 

 

%

Mixed Use

 

 

205,881 

 

%

 

 

425,717 

 

12 

%

Other

 

 

178,956 

 

%

 

 

193,875 

 

%

 

141,569 

 

%

 

 

284,814 

 

11 

%

Total

 

$

3,563,239 

 

100 

%

 

$

3,538,094 

 

100 

%

$

2,672,126 

 

100 

%

 

$

2,743,708 

 

100 

%







Backlog by end market for the Building segment as of December 31, 2014 and 2013 is set forth below:



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Building Segment Backlog by End Market

As of December 31,

(in thousands)

2016

 

2015

Hospitality and Gaming

$

517,017 

 

26 

%

 

$

67,530 

 

%

Office

 

342,034 

 

17 

%

 

 

722,582 

 

26 

%

Mixed Use

 

249,088 

 

13 

%

 

 

340,086 

 

12 

%

Municipal and Government

 

206,164 

 

10 

%

 

 

337,273 

 

12 

%

Health Care Facilities

 

192,280 

 

10 

%

 

 

333,759 

 

12 

%

Condominiums

 

169,366 

 

%

 

 

352,251 

 

13 

%

Education Facilities

 

168,634 

 

%

 

 

233,414 

 

%

Industrial and Commercial

 

74,787 

 

%

 

 

250,511 

 

%

Other

 

61,823 

 

%

 

 

143,034 

 

%

Total

$

1,981,193 

 

100 

%

 

$

2,780,440 

 

100 

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Building Segment Backlog by End Market

 

December 31,

 

2014

 

2013

 

(dollars in thousands)

Municipal and Government

 

$

555,990 

 

25 

%

 

$

709,064 

 

41 

%

Education Facilities

 

 

318,380 

 

15 

%

 

 

444,110 

 

25 

%

Healthcare Facilities

 

 

276,123 

 

13 

%

 

 

74,980 

 

%

Hospitality and Gaming

 

 

265,565 

 

12 

%

 

 

40,621 

 

%

Specialty Contractors Segment Backlog by End Market

As of December 31,

(in thousands)

2016

 

2015

Mass Transit

 

 

97,261 

 

%

 

 

127,390 

 

%

$

612,688 

 

39 

%

 

$

596,455 

 

31 

%

Mixed Use

 

 

78,751 

 

%

 

 

238,576 

 

14 

%

 

239,763 

 

15 

%

 

262,941 

 

14 

%

Condominiums

 

153,354 

 

10 

%

 

272,061 

 

14 

%

Industrial and Commercial

 

130,028 

 

%

 

180,957 

 

%

Transportation

 

105,990 

 

%

 

228,536 

 

12 

%

Health Care Facilities

 

101,494 

 

%

 

47,862 

 

%

Education Facilities

 

83,897 

 

%

 

93,752 

 

%

Other

 

 

595,697 

 

27 

%

 

 

120,308 

 

%

 

146,604 

 

10 

%

 

 

258,417 

 

13 

%

Total

 

$

2,187,767 

 

100 

%

 

$

1,755,049 

 

100 

%

$

1,573,818 

 

100 

%

 

$

1,940,981 

 

100 

%





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Table of Contents

 

Backlog by end market for the Specialty Contractors segment as of December 31, 2014 and 2013 is set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Contractors Segment Backlog by End Market

 

 

December 31,

 

 

2014

 

2013

 

 

(dollars in thousands)

Mass Transit

 

$

805,253 

 

38 

%

 

$

469,099 

 

28 

%

Education Facilities

 

 

239,487 

 

12 

%

 

 

290,517 

 

17 

%

Condominiums

 

 

220,466 

 

11 

%

 

 

110,823 

 

%

Industrial Buildings

 

 

144,076 

 

%

 

 

204,126 

 

12 

%

Wastewater Treatment

 

 

98,669 

 

%

 

 

65,475 

 

%

Office Buildings

 

 

85,891 

 

%

 

 

101,799 

 

%

Healthcare Facilities

 

 

24,664 

 

%

 

 

49,008 

 

%

Hospitality and Gaming

 

 

11,991 

 

%

 

 

34,829 

 

%

Other

 

 

450,222 

 

21 

%

 

 

335,468 

 

21 

%

Total

 

$

2,080,719 

 

100 

%

 

$

1,661,144 

 

100 

%



 

 

 

 

 



 

 

 

 

 

Backlog by Customer Type

As of December 31,



2016

 

2015

State and Local Agencies

57 

%

 

55 

%

Private Owners

36 

%

 

38 

%

Federal Agencies

%

 

%

Total

100 

%

 

100 

%



We have seen over the past several years a significant shift in the mix of our customers from private to state and local government agencies, which has corresponded with an increased share of our Civil segment’s contributions to revenues and operating profits over the period. We intend to continue our focus on increasing our share of higher-margin public works and specialty contracting projects  to further enhance our consolidated operating margins, as well as continuing to capture our share of large private building work on an opportunistic basis.

Competition

The construction industry is highly competitive and the markets in which we compete include numerous competitors. In the small to mid-size work that we have targeted, we have continued to experience strong pricing competition from our competitors. However, the majority of the work that we target is for larger, more complex projects where the number of active market participants is smaller because of the capabilities and resources required to perform the work. As a result, on these larger projects we face fewer competitors, as smaller contractors are unable to effectively compete or are unable to secure bonding to support large projects.

In our Civil segment, we compete principally with large civil construction firms, including Dragados USA, Flatiron Construction Corp., Fluor Corp., Granite Construction, Kiewit Corp., Skanska USA, Traylor Bros., Inc., and The Walsh Group. In certain end markets of the Building segment, such as hospitality and gaming and multi-unit residential, we are one of the largest providers of construction services in the United States. In our Building segment, we compete with a variety of national and regional contractors. Our primary competitors are AECOM (through its acquisitions of Tishman Construction and Hunt Construction Group), Balfour Beatty Construction, Clark Construction Group, DPR Construction, Gilbane, Inc., Hensel Phelps Construction Co., McCarthy Building Companies, Inc., Skanska USA, Turner Construction Co., The Walsh Group, and The Whiting-Turner Contracting Co. In our Specialty Contractors segment, we compete principally with various regional electrical, mechanical, and plumbing subcontractors. We believe price, experience, reputation, responsiveness, customer relationships, project completion track record, schedule control and delivery, risk management, and quality of work are key factors in customers awarding contracts across our end markets.

Types of Contracts and The Contract Process

Types of Contracts



The general contracting and management services we provide consist of planning and scheduling the manpower, equipment, materials and subcontractors required for the timely completion of a project in accordance with the terms, plans and specifications contained in a construction contract. We provide these services by entering into traditional general contracting arrangements such as fixed price, guaranteed maximum price, and cost plus fee contracts. These contract types and the risks generally inherent therein are discussed below:follows:

·

Fixed price (FP) contracts, which include fixed unit priceor lump-sum contracts are generallymost commonly used for projects in competitively bid public civil, building,the Civil and specialty construction projectsSpecialty Contractors segments and generally commit the contractorCompany to provide all of the resources required to complete a project for a fixed sum or atsum. Usually, fixed unit prices. Usually FPprice contracts transfer more risk to the contractorCompany, but offer the opportunity under favorable circumstances, for greater profits. FP contracts represent a significant portion of our publicly bid civil construction projects. We also perform publicly bid building and specialty construction projects and certain task order contracts for U.S. government agencies in our Building segment under FP contracts.

10


Table of Contents

·

Guaranteed maximum price (GMP)(“GMP”) contracts provide for a cost plus fee arrangement up to a maximum agreed upon price. These contracts place risks on the contractorCompany for amounts in excess of the GMP, but may permit an opportunity for greater profits than under Cost Pluscost plus fee contracts through sharing agreements with the owner on any cost savings that may be realized. Services provided by our Building segment to various private customers are often are performed under GMP contracts.

·

Unit price contracts are most prevalent for projects in the Civil and Specialty Contractors segments and generally commit the Company to provide an undetermined number of units or components that comprise a project at a fixed price per unit. This approach shifts the risk of estimating the quantity of units required to the project owner, but the risk of increased cost per unit is borne by the Company, unless otherwise allowed for in the contract.

·

Cost plus fee (Cost Plus)contracts are used for many projects in the Building and Specialty Contractors segments. Cost plus fee contracts include cost plus fixed fee contracts and cost plus award fee contracts. Cost plus fixed fee contracts provide for reimbursement of approved project costs plus a fixed fee. Cost plus award fee contracts provide for reimbursement of the costs required to complete a project plus a stipulated fee arrangement. Cost Plus contracts include cost plus fixed fee (CPFF) contracts and cost plus award fee (CPAF) contracts. CPFF contracts provide for reimbursement of the costs required to complete a project plus a fixed fee. CPAF contracts provide for reimbursement of the costs required to complete a project plus a base fee, as well as an incentive fee based on cost and/or schedule performance. Cost Plusplus fee contracts serve to minimize the contractor’sCompany’s financial risk, but may also limit profits.



Historically,Fixed price contracts account for a high percentage of our contracts have been of the GMP and FP type. As a result of increasing opportunities in public works civil and building markets, combined with our increased resume of notable projects and expertise and the execution of our acquisition strategy, FP contracts have accounted for an increasingsubstantial portion of our revenues since 2008revenue and are expected to continue to represent a sizeable percentage of both total revenuesrevenue and backlog. The composition of revenuesrevenue and backlog by type of contract for fiscal years2016, 2015 and 2014 2013 and 2012 is as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues for the

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

Cost Plus, GMP

 

40 

%

 

37 

%

 

39 

%

FP

 

60 

%

 

63 

%

 

61 

%

 

 

100 

%

 

100 

%

 

100 

%



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

Revenue

2016

 

2015

 

2014

Fixed price

47 

%

 

44 

%

 

60 

%

Guaranteed maximum price

28 

%

 

32 

%

 

24 

%

Unit price

11 

%

 

12 

%

 

%

Cost plus fee and other

14 

%

 

12 

%

 

%



100 

%

 

100 

%

 

100 

%







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog as of

 

 

December 31,

 

 

2014

 

2013

Cost Plus, GMP

 

33 

%

 

24 

%

FP

 

67 

%

 

76 

%

 

 

100 

%

 

100 

%



 

 

 

 

 



 

 

 

 

 



As of December 31,

Backlog

2016

 

2015

Fixed price

63 

%

 

55 

%

Guaranteed maximum price

21 

%

 

22 

%

Unit price

%

 

%

Cost plus fee and other

10 

%

 

16 

%



100 

%

 

100 

%



The Contract Process

We identify potential projects from a variety of sources, including from advertisements by federal, state and local government agencies, through the efforts of our business development personnel and through meetings with other participants in the construction industry, such as architects and engineers. After determining which projects are available, we make a decision on which projects to pursue based on factors such as project size, duration, availability of personnel, current backlog, competitive advantages and disadvantages, profitability expectations, prior experience, contracting agency or owner, source of project funding, geographic location and type of contract.

After deciding which contracts to pursue, we generally have to complete a prequalification process with the applicable agency or customer. The prequalification process generally limits bidders to those companies that the agencies or customer concludes have the operational experience and financial capability to effectively complete the particular project(s) in accordance with the plans, specifications and construction schedule.

Our estimating process typically involves three phases. Initially, we perform a detailed review of the plans and specifications, summarize the various types of work involved and related estimated quantities, determine the project duration or schedule, and highlight the unique aspects of and risks associated with the project. After the initial review, we decide whether to continue to pursue the project. If we elect to pursue the project, we perform the second phase of the estimating process, which consists of estimating the cost and availability of labor, material, equipment, subcontractors and the project team required to complete the project on time and in accordance with the plans and specifications. The final phase consists of a detailed review of the estimate by management including, among other things, assumptions regarding cost, approach, means and methods, productivity and risk. After the final review of the cost estimate, management adds an amount for profit to arrive at the total bid amount.

Public bids to various government agencies are generally awarded to the lowest bidder. Requests for proposals or negotiated contracts with public or private customers are generally awarded based on a combination of technical capability and price, taking into consideration factors such as project schedule and prior experience.



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During the construction phase of a project, we monitor our progress by comparing actual costs incurred and quantities completed to date with budgeted amounts and the project schedule and periodically, at a minimum on a quarterly basis, prepare an updated estimate of total forecasted revenue, cost and profit for the project.Competition



DuringThe markets in which we compete include numerous competitors. In the ordinary course of most projects, the customer, and sometimes the contractor, initiate modifications or changessmall to the original contractmid-sized work that we have targeted, we have continued to reflect, among other things, changes in specifications or design, construction method or manner of performance, facilities, equipment, materials, site conditions and period for completion of the work. Generally, the scope and price of these modifications are documented in a “change order” to the original contract and are reviewed, approved and paid in accordance with the normal change order provisions of the contract.

Often a contract requires us to perform extra, or change order, work as directed by the customer even if the customer has not agreed in advance on the scope or priceexperience strong pricing competition from our competitors. Much of the work to be performed. This process may result in disputes over whether the work performedthat we target, however, is beyond the scopefor larger, more complex projects where there are fewer active market participants because of the work includedenhanced capabilities and resources required to perform the work. As a result, on these larger projects we typically face fewer competitors. Despite this, over the past two years we have seen increased competition especially from foreign competitors that have been pursuing major projects in the original project plansUnited States due to the relatively larger size and specifications or, if the customer agreessignificant number of U.S. opportunities. We anticipate that the work performed qualifies as extra work, the price the customer is willing to payincreased level of foreign competition will persist for the extra work. Even when the customer agrees to pay for the extra work, we may be required to fund the cost of such work for a lengthy period of time until the change order is approved and funded by the customer. Also, unapproved change orders, contract disputes or claims result in costs being incurred by us that cannot be billed currently and, therefore, are reflected as “costs and estimated earnings in excess of billings” in our Consolidated Balance Sheets. See Note 1 — Description of Business and Summary of Significant Accounting Policies, under the section entitled Method of Accounting for Contracts, of Notes to Consolidated Financial Statements in Item 15. Exhibits and Financial Statement Schedules. In addition, any delay caused by the extra work may adversely impact the timely scheduling of other project work and our ability to meet specified contract milestone dates.foreseeable future.



In our Civil segment, we compete principally with large civil construction firms, including (alphabetically) Dragados USA; Fluor Corporation; Granite Construction; Kiewit Corporation; Skanska USA; Traylor Bros., Inc.; and The process for resolving claims varies from one contract to another, but, in general,Walsh Group. In our Building segment, we attempt to resolve claims at the project supervisory level through the normal change order process orcompete with higher levels of management within our organization and the customer’s organization. Depending upon the terms of the contract, claim resolution may involve a variety of other resolution methods, including mediation, binding or non-binding arbitration or litigation. Regardlessnational and regional contractors. Our primary competitors are (alphabetically) AECOM (through its acquisitions of the process,Tishman Construction and Hunt Construction Group); Balfour Beatty Construction; Clark Construction Group; DPR Construction; Gilbane, Inc.; Hensel Phelps Construction Co.; McCarthy Building Companies, Inc.; Skanska USA; Suffolk Construction; and Turner Construction Company. In our Specialty Contractors segment, we compete principally with various regional and local electrical, mechanical and plumbing subcontractors. We believe price, experience, reputation, responsiveness, customer relationships, project completion track record, schedule control, risk management and quality of work are key factors customers consider when a potential claim arises on a project, we typically have the contractual obligation to perform the work and incur the related costs. It is not uncommon for the claim resolution process to last months or years, especially if it involves litigation.awarding contracts.



There are a number of factors that can create variability in contract performance and results as compared to a project’s original bid. These include costs associated with added scope changes, extended overhead due to owner, weather, and other delays, subcontractor performance issues, changes in site conditions that differ from those assumed in the original bid, the availability and skill level of workers in the geographic location of the project, and a change in the availability and proximity of equipment or materials. In addition, certain efficiencies and cost savings may at times be realized during the course of a project compared to the originally anticipated costs and levels of productivity. Furthermore, our original bids for most contracts are based on the customer’s estimates of quantities needed to complete the contract. All of these factors can cause changes in estimates to a project’s at-completion costs, resulting in favorable or unfavorable impacts to profitability in current and future periods. Because of the rigor of our estimating process, we have often encountered opportunities to improve project performance cost estimates through realized project execution efficiencies and cost savings.

Our project contracts often involve work durations in excess of one year. Revenue from our contracts in process is generally recorded under the percentage of completion contract accounting method. For a more detailed discussion of our policy in these areas, see Note 1 — Description of Business and Summary of Significant Accounting Policies, under the section entitled Method of Accounting for Contracts, of Notes to Consolidated Financial Statements in Item 15. Exhibits and Financial Statement Schedules.

Construction Costs



While our business may experience some adverse consequences if shortages develop or ifIf prices for materials, labor or equipment increase excessively, provisions in certain types of contracts often shift all or a major portion of any adverse impact to the customer. OnIn our fixed price contracts, we attempt to insulate ourselves from the unfavorable effects of inflation, when possible, by incorporating escalating wage and price assumptions where appropriate, into our construction cost estimates, and by obtaining firm fixed price quotes from major subcontractors and material suppliers, at the time of the bid period, and when possible, by purchasing required materials early in the project schedule. Construction and other materials used in our construction activities are generally available locally from multiple sources and have been in adequate supply during recent years. Construction workLabor resources for our domestic projects are largely obtained through various labor unions with which we are associated. We have not experienced significant labor shortages in selected overseas areas primarily employsrecent years, nor do we expect to in the future. We employ expatriate and local labor which can usually be obtained as required.in selected overseas areas.



Environmental Matters



Our properties and operations are subject to federal, state and municipal laws and regulations relating to the protection of the environment, including requirements for water discharges,discharges; air emissions,emissions; the use, management and disposal of solid or hazardous materials or wasteswastes; and the cleanup of contamination. For example, we must apply water or chemicals to reduce dust on road

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construction projects and to contain contaminants in stormwater runoff at construction sites. In certain circumstances, we may also be required to hire subcontractors to dispose of hazardous materials encountered on a project in accordance with a plan approved in advance by the owner. We believe that we are in substantial compliance with all applicable environmental laws and regulations, and we continually evaluate whether we must take additional steps to ensure compliance with environmental laws; however,those laws and regulations. However, future requirements or amendments to current laws or regulations imposing more stringent requirements could require us to incur additional costs to maintain or achieve compliance.



In addition, some environmental laws, such as the U.S. federal “Superfund” law and similar state statutes, can impose liability for the entire cost of cleanup of contaminated sites upon any of the current or former owners or operators or upon parties who generated waste at, or sent waste to, these sites, regardless of who owned the site at the time of the release or the lawfulness of the original disposal activity. Contaminants have been detected at some of the sites that we own orand where we have worked as a contractor in the past, and we have incurred costs for the investigation orand remediation of hazardous substances. We believe that our liabilityliabilities for these sites willare not be material, either individually or in the aggregate, andaggregate. We have pollution liability insurance availablecoverage for such matters. We believe thatmatters, and we have minimal exposure to environmental liability because we generally carry insurance or receive indemnification from customers to cover the risks associated with the remediation business.

We own real estate in several states and in Guam (see Item 2. Properties for a description of our major properties) and, as an owner, are subject to laws governing environmental responsibility and liability based on ownership. We are not aware of any significant environmental liability associated with our ownership of real estate.remediation.



Insurance and Bonding



All of our properties and equipment, both directly owned and owned throughas well as those of our joint ventures, with others, are covered by insurance and we believe that the amount and scope of such insurance is adequate for the risks we face. In addition, we maintain general liability, excess liability and workers’ compensation insurance in amounts that we believe are consistent with our risk of loss and industry practice. Our wholly owned subsidiary, PCR Insurance Company, issues deductible reimbursement policies for subcontractor default insurance, auto liability, general liability and workers’ compensation insurance, allowing us to centralize our claims and risk management functions to reduce our insurance-related costs.



As a normal part of the construction business, we are often required to provide various types of surety bonds as an additional level of security of our performance. We have surety arrangements with several sureties. We also require many of our higher-risk subcontractors to provide surety bonds as security for payment of subcontractors and suppliers and to guarantee their performance. Historically,As an alternative to traditional surety bonds, we also have purchased contractsubcontractor default insurance onfor certain construction projects to insure against the risk of subcontractor default as opposed to having subcontractors provide traditional payment and performance bonds. In 2008, we formed PCR Insurance Company, a wholly owned subsidiary, to consolidate the risk under our various insurance policies utilizing deductible reimbursement policies issued by PCR Insurance Company, for each of our subsidiaries’ contractor default insurance, auto liability, general liability and workers’ compensation insurance exposure. The formation of PCR Insurance Company has allowed us to take advantage of favorable tax opportunities, and to centralize our claims and risk management functions, thus reducing claims and insurance-related costs.default.



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Employees



The total number of personnel employed by us is subject to seasonal fluctuations,our employees varies based on the volume of construction in progress and the relative amount of work performed by subcontractors. Our average number of full-time equivalent employees during 2014 was 10,532,active projects, the type and magnitude of those projects, as well as our position within the lifecycle of those projects. Our total number of employees atas of December 31, 20142016 was 10,939.  The increase in the average from 9,679 in 2013 to 10,532 in 2014 is primarily due to business growth and normal fluctuation in job timing.11,603.  



We are signatory to numerous local and regional collective bargaining agreements, both directly and through trade associations, as a union contractor. These agreements cover all necessary union crafts and are subject to various renewal dates. Estimated amounts for wage escalation related to the expiration of union contracts are included in our bids on various projects and, as a result,projects; accordingly, the expiration of any union contract in the next fiscal year is not expected to have any material impact on us. As of December 31, 2014,  approximately 7,145 of our total of 10,939 employees were union employees. During the past several years, we have not experienced any significant work stoppages caused by our union employees.



Financial information about geographic areas is discussed in Note 10 to the Consolidated Financial Statements under the heading “Geographic Information.”

Available Information



Our website address is http://www.tutorperini.com. The information contained onIn the ‘‘Investor Relations’’ portion of our website, is not included as a partunder “Financial Reports,” subsection “SEC Filings,” you may obtain free electronic copies of or incorporated by reference into, this Annual Report on Form 10-K. We make available, free of charge on our website, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our10‑Q, current reports on Form 8-K and all amendments to suchthose reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soonwell as reasonably practicable after we have electronically filed such materials with, or furnished them to, the United States Securities and Exchange Commission (the “SEC”). You may read and copy any document we file at the SEC Headquarters, Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at http://www.sec.gov that contains reports, proxy, information

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statements and other information regarding issuers, such as the Company, that file electronically with the SEC. Also available on our website are our Code of Business Conduct and Ethics, Corporate Governance Guidelines, the charters of the Committees of our Board of Directors and reports under Section 16 of the Exchange Act of transactions in our stock by our directors and executiveexecutive officers. These reports are made available on our website as soon as reasonably practicable after we electronically file them with the Securities and Exchange Commission (“SEC”). These reports, and any amendments to them, are also available at the Internet website of the SEC, www.sec.gov. The public may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. In order to obtain information about the operation of the Public Reference Room, you may call 1-800-732-0330. We also maintain various documents, including our Code of Business Conduct and Ethics, Corporate Governance Guidelines and the charters of the Committees of our Board of Directors in the “Corporate Governance” portion of our website.

  

ITEM 1A. RISK FACTORS



We are subject to a number of known and unknown risks and uncertainties that could materially adversely affecthave a material adverse effect on our operations. Set forth below, and elsewhere in this report, and in other documents we file with the SEC are descriptions of the risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. Additional risks we do not yet know of or that we currently think are immaterial may also affect our business operations. These risksreport and could have a material adverse effect on our financial condition, results of operations and cash flows.



A significant slowdown or decline in economic conditions could adversely affect our operations.

Any significant decline in economic conditions in any of the markets we serve or uncertainty regarding the economic outlook, could result in a decline in demand for infrastructure projects and commercial building developments. In addition, any instability in the financial and credit markets could negatively impact our customers’ ability to pay us on a timely basis, or at all, for work on projects already under construction, could cause our customers to delay or cancel construction projects in our backlog or could create difficulties for customers to obtain adequate financing to fund new construction projects. Such consequences could have an adverse impact on our future operating results. Lastly, we are more susceptible to adverse economic conditions in New York and California, as a significant portion of our operations are concentrated in those states.

If we are unable to accurately estimate the overall risks, revenue or costs on a contract, we may achieve a lower than anticipated profit or incur a loss on that contract.

Accounting for contract related revenue and costs requires management to make significant estimates and assumptions that may change significantly throughout the project lifecycle, resulting in a material impact to our consolidated financial statements. In addition, cost overruns on fixed price and GMP contracts may result in lower profits or losses.

Our contracts require us to perform extra, or change order, work, which can result in disputes or claims and adversely affect our working capital, profits and cash flows.

Our contracts generally require us to perform extra, or change order, work as directed by the customer even if the customer has not agreed in advance on the scope or price of the work to be performed. This process may result in disputes or claims over whether the work performed is beyond the scope of work directed by the customer and/or exceeds the price the customer is willing to pay for the work performed. To the extent we do not recover our costs for this work or there are delays in the recovery of these costs, our cash flows and working capital could be adversely impacted.

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We are subject to significant legal proceedings which, if determined adversely to us, could harm our reputation, preclude us from bidding on future projects and/or have a material effect on us. We also may invest significant working capital on projects while legal proceedings are being settled.

We are involved in various lawsuits, including the legal proceedings described under Note 7 of the Notes to Consolidated Financial Statements. Litigation is inherently uncertain, and it is not possible to accurately predict what the final outcome will be of any legal proceeding. We must make certain assumptions and rely on estimates, which are inherently subject to risks and uncertainties, regarding potential outcomes of legal proceedings in order to determine an appropriate contingent liability and charge to income. Any result that is materially different than our estimates could have a material adverse effect on our financial condition, results of operations and cash flows. In addition, any adverse judgments could harm our reputation and preclude us from bidding on future projects.

We occasionally bring claims against project owners for additional cost exceeding the contract price or for amounts not included in the original contract price. When these types of events occur and unresolved claims are pending, we may invest significant working capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to promptly recover on these types of claims could have a material effect on our liquidity and financial results.

Competition for new project awards is intense, and our failure to compete effectively could reduce our market share and profits.

New project awards are determined through either a competitive bid basis or on a negotiated basis. Projects are generally awarded based upon price but often take into account other factors, such as technical approach and qualifications, duration of project execution and past performance on similar projects completed. Within our industry, we compete with many international, regional and local construction firms. Some of these competitors have achieved greater market penetration than we have in the markets in which we compete, and some have greater resources than we do. If we are unable to compete successfully in such markets, our relative market share and profits could be reduced.

We may not fully realize the revenue value reported in our backlog.backlog due to cancellations or reductions in scope.



As of December 31, 2014,2016, our backlog of uncompleted construction work was approximately $7.8$6.2 billion. We include a construction project in our backlog at such time as a contract is awarded, or a letter of commitment is obtained and adequate construction funding is in place. The revenue projected in our backlog may not be realized or, if realized, may not result in profits. For example, if a project reflected in our backlog is terminated, suspendedthe cancellation or reducedreduction in scope it would result in a reduction to our backlog which could reduce, potentially to a material extent, the revenues and profits realized. If a customer cancels aof any project we may be reimbursed for certain costs and profit thereon but typically have no contractual right to the total revenues reflected in our backlog. Significant cancellations or delays of projects in our backlog could have a material adverse effect on future revenues, profits,our financial condition, results of operations and cash flows.



A significant slowdown or decline in economic conditionsWe have a substantial amount of indebtedness which could adversely affect our operations.financial position and prevent us from fulfilling our obligations under our debt agreements.



Although economic conditionsWe currently have, and expect to continue to have, a substantial amount of indebtedness. As of December 31, 2016, we had total debt of $759.5 million. If we are unable to meet the terms of the financial covenants or fail to comply with any of the other restrictions contained in the agreements governing our indebtedness, an event of default could occur, causing the debt related to such agreement to become immediately due. If such acceleration occurs, we may not be able to repay such indebtedness as required. Since indebtedness under our Credit Agreement is secured by substantially all of our assets, acceleration of this debt could result in foreclosure of those assets and a negative impact on our operations. In addition, a failure to meet the terms of our Credit Agreement could result in a reduction of future borrowing capacity under the Credit Agreement, causing a loss of liquidity. A loss of liquidity could adversely impact our ability to execute projects in our backlog, obtain new projects, engage subcontractors, and attract and retain key employees.

Our actual results could differ from the assumptions and estimates used to prepare our financial statements.

In preparing our financial statements, we are required under accounting principles generally accepted in the United States have gradually improved over the past two years following several challenging years during the aftermath(“GAAP”) to make estimates and assumptions as of the global economic downturn in 2008, any significant slowdown or decline in economic conditions could result in renewed demand uncertainty across various partsdate of the country, particularlyfinancial statements. These estimates and assumptions affect the reported values of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Areas requiring significant estimates by our management include, but are not limited to:

• recognition of contract revenue, costs, profits or losses in applying the principles of percentage-of-completion accounting;

• recognition of revenue related to project incentives or awards we expect to receive;

• recognition of recoveries under contract change orders or claims;

• estimated amounts for new commercial building developmentsexpected project losses, warranty costs, contract close-out or renovations to existing infrastructure. In addition, any renewed tightness in theother costs;

• collectability of billed and unbilled accounts receivable;

• asset valuations;

• income tax provisions and related valuation allowances;

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• determination of expense and potential liabilities under pension and other post-retirement benefit programs; and

• accruals for other estimated liabilities, including litigation and insurance revenue/reserves.

Our actual business and financial and credit marketsresults could create difficulties for some customers, including certain private owners and state and local governments, to obtain adequate financing to fund new construction projects on satisfactory terms or at all. These financing difficulties may significantly increase the rate atdiffer from our estimates of such results, which our customers defer, delay, or cancel proposed new construction projects. Such deferrals, delays or cancellations could have an adversea material negative impact on our future operating results.financial condition and reported results of operations.



Any renewed instability or worsening conditions in the financial and credit markets could also impact a customer’s ability to pay us on a timely basis, or at all, for work on projects already under construction in accordance with the contract terms. Customer financing may be subject to periodic renewals and extensions of credit by the lender. If credit markets tighten and challenging economic conditions return, lenders may become unwilling to continue renewing or extending credit to a customer. Such deferral, delay or cancellation of credit by the lender could impact the customer’s ability to pay us, which could have an adverse impact on our future operating results. A significant portion of our operations are concentrated in California and New York. As a result, we are more susceptible to fluctuations caused by adverse economic or other conditions in these states compared to others.

Reductions in the level of consumer spending within the non-residential building industry and theThe level of federal, state and local government spending for infrastructure and other public projects could adversely affect the number of projects available to us in the future.



With regard to the non-residential building industry, consumer spending is discretionary and may decline during economic downturns when consumers have less disposable income. Even an uncertain economic outlook may adversely affect consumer and private industry spending in various business operations, as consumers may spend less in anticipation of a potential economic downturn. Decreased spending in the non-residential building markets could deter new projects within the industry and the expansion or renovation of existing facilities.

With regard to infrastructure and other public works spending,The civil construction and public-works building markets are dependent on the amount of infrastructure work funded by various government agencies, which in turn, depends on many factors, including the condition of the existing infrastructure and buildings; the need for new or expanded infrastructure and buildings; and federal, state orand local government spending levels. A slowdownAs a result, our future operating results could be negatively impacted by any decrease in economic activity in any of the markets that we serve may result in less spending ondemand for public works projects. In addition, aprojects or decrease or delay in government funding, which could result from a variety of infrastructure projects orfactors, including delays in the sale of voter-approved bonds, could decrease the number of civil construction projects available and limit our ability to obtain new contracts, which could reduce revenues within our Civil segment. In addition, budget shortfalls, and credit rating downgrades in states in which the Company is involved in significant infrastructure projects and anyor long-term impairment in the ability of state and local governments to finance construction projects by raisingraise capital in the municipal bond marketmarket.

The construction services industry is highly schedule driven, and our failure to meet the schedule requirements of our contracts could curtail adversely affect our reputation and/or expose us to financial liability.

Many of our contracts are subject to specific completion schedule requirements. Any failure to meet contractual schedule requirements could subject us to liquidated damages, liability for our customer’s actual cost arising out of our delay the fundingand damage to our reputation.

We require substantial personnel, including construction and project managers and specialty subcontractor resources to execute and perform our contracts in backlog. The successful execution of future projects. Our Building segmentour business strategies is also involveddependent upon our ability to attract, retain and implement succession plans for key officers.

Our ability to execute and perform on our contracts in significant public worksbacklog depends in large part upon our ability to hire and retain highly skilled personnel, including project and construction management and trade labor resources, such as carpenters, masons and other skilled workers. In the event we are unable to attract, hire and retain the requisite personnel and subcontractors necessary to execute and perform our backlog, we may experience delays in completing projects in accordance with project schedules or an increase in expected costs, both of which could have a material adverse effect on our financial results, our reputation and our relationships. In addition, if we lack the personnel and specialty subcontractors necessary to perform on our current contract backlog, we may find it necessary to curtail our pursuit of new projects.

The execution of our business strategies also substantially depends on our ability to retain several key members of our management. Losing any of these individuals could adversely affect our business. The majority of these key officers are not bound by employment agreements. Volatility or lack of positive performance in our stock price may adversely affect our ability to retain key staff to whom we have provided share-based compensation. Additionally, because a substantial portion of our key executives' compensation is placed "at risk" and linked to the performance of our business, when our operating results are negatively impacted, we are at greater risk of employee turnover. If we lose our existing key executives and are unable to execute a succession plan our operating results would likely be harmed.

Systems and information technology interruption and breaches in data security could adversely impact our ability to operate and negatively impact our operating results.

We are reliant on computer and other information technology that could be interrupted or damaged by a variety of factors including, healthcare facilities, educational facilities,but not limited to, cyber-attacks, natural disasters, power loss, telecommunications failures, acts of war, computer viruses and municipalphysical damage. The resulting consequences could include a loss of critical data, a delay in operations or an unintentional disclosure of confidential information, any of which could have a material impact to our Company and government facilitiesits consolidated financial statements.

Our participation in construction joint ventures exposes us to liability and/or harm to our reputation for failures by our partners.

As part of our business, we enter into joint venture arrangements typically to jointly bid on and execute particular projects, thereby reducing our risk profile while enhancing the execution capability and financial reward of project teams. Success on these joint projects depends in large part on whether our joint-venture partners satisfy their contractual obligations. We and our joint-venture partners are generally jointly and severally liable for all liabilities and obligations of our joint ventures. If a joint venture partner fails to perform or is financially unable to bear its portion of required capital contributions or other obligations, including liabilities stemming from lawsuits, we could be required to make additional investments, provide additional services or pay more than our proportionate share of a liability to make up for our partner’s shortfall. Further, if we are unable to adequately address our partner’s

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primarilyperformance issues, the customer may terminate the project, which could result in Californialegal liability to us, harm our reputation, reduce our profit on a project or, in some cases, result in a loss.

We are subject to a number of risks as a U.S. government contractor, which could harm our reputation, result in fines or penalties against us and/or adversely impact our financial condition.

Failure to comply with laws and regulations related to government contracts could result in contract termination, suspension or debarment from contracting with the southeastern United States. These projects also are dependentU.S. government, civil fines and criminal prosecution, any of which could have a material impact on our consolidated financial statements and future financial condition and performance.

Conversion of our outstanding Convertible Notes could dilute ownership interests of existing stockholders and could adversely affect the market price of our common stock.

Based on the terms of the indenture for the Convertible Notes, we may redeem the Convertible Notes in cash, shares of our common stock or a combination of the two. As a result, a conversion of some or all of the Convertible Notes may dilute the ownership interests of existing stockholders. Any sales in the public market of our common stock issuable upon fundingsuch conversion of the Convertible Notes could cause the price of our common stock to decline. In addition, the existence of the Convertible Notes may encourage short selling by various federal, state and local government agencies. Amarket participants because a conversion of the Convertible Notes could depress the price of our common stock.

We may need to include the potential dilutive impact of our Convertible Notes in our diluted earnings per share calculation.

We currently intend to pay the principal amount of our Convertible Notes in cash; therefore, we have not included the potential dilutive effect of our Convertible Notes in our diluted earnings per share calculations. If, however, there is a change in future circumstances as a result of a decline in our projected cash flow or for other reasons, we may conclude at such time that it will be preferable to use shares to satisfy the Convertible Notes. Such a change in our intentions would result in the inclusion of the potential dilutive impact of the Convertible Notes in our diluted earnings per share calculation, which would result in a decrease in government funding of public healthcareour diluted earnings per share. 

Weather can significantly affect our revenue and education facilities, particularly in those regions, could decrease the number and/or size of construction projects availableprofitability.

Inclement weather conditions, such as significant storms and limitunusual temperatures, can impact our ability to obtain new contractsperform work. Adverse weather conditions can cause delays and increases in these markets, which could reduceproject costs, resulting in variability in our revenuesrevenue and earnings.profitability.



Economic,Our international operations expose us to economic, political and other risks, and the level ofas well as uncertainty related to U.S. Government funding, associated with our international operationswhich could adversely affect our revenuesrevenue and earnings. In addition, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.



We derived approximately 4% or $168.8 million of revenues and approximately $27.7 million of income from construction operations forFor the year ended December 31, 20142016, we derived approximately $170.7 million of revenue from our work on projects located outside of the United States, including projects in Afghanistan, Guam, and the Philippine Islands.States. Our international operations expose us to risks inherent in doing business in certain hostile regions outside the United States, including:including political risks,risks; risks of loss due to civil disturbances, guerilla activities and insurrection; acts of terrorism and acts of war; unstable economic, financial and market conditions; potential incompatibility with foreign subcontractors and vendors; foreign currency controls and fluctuations; trade restrictions; logistical challenges; variations in taxes; and changes in labor conditions, labor strikes and difficulties in staffing and managing international operations. Failure to successfully manage risks associated with our international operations could result in higher operating costs than anticipated or could delay or limit our ability to generate revenuesrevenue and income from construction operations in key international markets.



The U.S. federal government has approved various spending bills for the construction of defense- and diplomacy-related projects and has allocated significant funds to the defense of U.S. interests around the world from the threat of terrorism. The federal government has also approved funds for development in conjunction with the relocation of military personnel into Guam. However, federal government funding levels for construction projects in the Middle East have decreased significantly over the past fewseveral years as the U.S. government has reduced the number of military troops and support personnel in the region. As a result, we have seen a decrease in the number and size of federal government projects available to us in this region. Any decrease in U.S. federal government funding for projects in Guam or in other U.S. Territories or countries in which we are pursuing work may result in project delays or cancellations, which could reduce our revenuesrevenue and earnings.



CompetitionFinally, the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act of 2010, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for new project awardsthe purpose of obtaining or retaining business. While our policies mandate compliance with these anti-bribery laws, there is intenseno assurance that our internal control policies and our failure to compete effectivelyprocedures will protect us from circumstances or actions that could reduce our market shareresult in possible criminal penalties or other sanctions, including contract cancellations or debarment and profits.

New project awards are often determined through either a competitive bid basis or on a negotiated basis. Bid or negotiated contracts with public or private owners are generally awarded based upon price, but oftentimes take into account other factors, such as technical approach and/or qualifications, shorter project schedules, or our recordloss of past performance on similar projects completed. Within our industry, we compete with many national, regional and local construction firms. Somereputation, any of these competitors have achieved greater market penetration than we have in the markets in which we compete, and some have greater financial and other resources than we do. As a result, we may need to accept lower contract margins or more fixed price or unit price contracts in order for us to compete against competitors that have the ability to accept awards at lower prices or have a pre-existing relationship with the customer. If we are unable to compete successfully in such markets, our relative market share and profits could be reduced.

The construction services industry is highly schedule driven, and our failure to meet schedule requirements of our contracts could adversely affect our reputation and/or expose us to financial liability.

Many of our contracts are subject to specific completion schedule requirements and subject us to liquidated damages in the event the construction schedules are not achieved. Our failure to meet schedule requirements could subject us not only to liquidated damages, but could further subject us to liability for our customer’s actual cost arising out of our delay and cause us to suffer damage to our reputation within our industry and customer base.

We will require substantial personnel, including construction and project managers and specialty subcontractor resources to execute and perform on our contracts in backlog. The successful execution of our business strategies is also dependent upon our ability to attract, retain, and implement succession plans for key officers.

Our ability to execute and perform on our contracts in backlog depends in large part upon our ability to hire and retain highly skilled personnel, including project and construction management. In addition, our construction projects require significant trade labor resources, such as carpenters, masons and other skilled workers, as well as certain specialty subcontractor skills. In the event we are unable to attract, hire and retain the requisite personnel and subcontractors necessary to execute and perform on our contract backlog, we may experience delays in completing projects in accordance with project schedules, which may have a material effectadverse impact on our business, financial resultscondition, and harm our reputation. Further, the increased demand for personnel and specialty subcontractors may result in higher than expected costs, which could cause us to exceed the budget on a project. This, in turn, may have a material effect on our results of operations and harm our relationships with our customers. In addition, if we lack the personnel and specialty subcontractors necessary to perform on our current contract backlog, we may find it necessary to curtail our pursuit of new projects. Although thisoperations.

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risk has been somewhat mitigated through the specialty contracting capabilities which we acquired in 2011, we still rely significantly on external specialty subcontractors to perform our projects.

The execution of our business strategies also substantially depends on our ability to retain the continued service of several key members of our management. Losing the services of these key officers could adversely affect our business until a suitable replacement can be found. The majority of these key officers are not bound by employment agreements with us nor do we maintain key person life insurance policies for them.

Volatility or lack of positive performance in our stock price and the overall markets may adversely affect our ability to retain key staff who have received equity compensation. Additionally, because a substantial portion of our key executives' compensation is placed "at risk" and linked to the performance of our business, when our operating results are negatively impacted, we are at a competitive disadvantage for retaining and hiring key executives and managers compared to other companies that may pay a relatively higher fixed salary. If we lose our existing key executives or managers or are unable to hire and integrate new key executives or managers, or if we fail to implement succession plans for our key executives, our operating results would likely be harmed.

Weather can significantly affect our revenues and profitability.

Our ability to perform work is significantly affected by weather conditions such as precipitation and temperature. Changes in weather conditions can cause delays and otherwise significantly affect our project costs. The impact of weather conditions can result in variability in our revenues and profitability.

Our participation in construction joint ventures exposes us to liability and/or harm to our reputation for failures by our partners.

As part of our business, we enter into joint venture arrangements typically to jointly bid on and execute particular projects, thereby reducing our financial or operational risk with respect to such projects. Success on these joint projects depends in large part on whether our joint venture partners satisfy their contractual obligations. We and our joint venture partners are generally jointly and severally liable for all liabilities and obligations of our joint ventures. If a joint venture partner fails to perform or is financially unable to bear its portion of required capital contributions or other obligations, including liabilities stemming from lawsuits, we could be required to make additional investments, provide additional services or pay more than our proportionate share of a liability to make up for our partner’s shortfall. Further, if we are unable to adequately address our partner’s performance issues, the customer may terminate the project, which could result in legal liability to us, harm our reputation, reduce our profit on a project or, in some cases, result in a loss.

We are subject to significant legal proceedings which, if determined adversely to us, could harm our reputation, preclude us from bidding on future projects and/or have a material effect on us. We also may invest significant working capital on projects while legal proceedings are being settled.

We are involved in various lawsuits, including the legal proceedings described under Item 3. Legal Proceedings. Litigation is inherently uncertain and it is not possible to accurately predict what the final outcome will be of any legal proceeding. We must make certain assumptions and rely on estimates regarding potential outcomes of legal proceedings in order to determine an appropriate charge to income and contingent liabilities. Estimating and recording future outcomes of litigation proceedings requires us to make significant judgments and assumptions about the future, which are inherently subject to risks and uncertainties. If the final recovery turns out to be materially less favorable than our estimates, we would have to record the related liability, which may include losses from money owed pursuant to an unfavorable judgment as well as losses based on the failure to receive an anticipated judgment for sums in our favor, and fund the payment of the judgment and, if such adverse judgment is significant, it could have a material adverse effect on us. Legal proceedings resulting in judgments or findings against us may harm our reputation and prospects for future contract awards. We occasionally bring claims against project owners for additional cost exceeding the contract price or for amounts not included in the original contract price. When these types of events occur and unresolved claims are pending, we may invest significant working capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to promptly recover on these types of claims could have a material effect on our liquidity and financial results.

Our contracts require us to perform extra, or change order, work, which can result in disputes and adversely affect our working capital, profits and cash flows.

Our contracts generally require us to perform extra, or change order, work as directed by the customer even if the customer has not agreed in advance on the scope or price of the work to be performed. This process can result in disputes over whether the work performed is beyond the scope of the work included in the original project plans and specifications or, if the customer agrees that the work performed qualifies as extra work, over the price the customer is willing to pay for the extra work. Even when the customer agrees to pay for the extra work, we may be required to fund the cost of such work for a lengthy period of time until the change order is approved and funded by the customer.

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Also, unapproved change orders, contract disputes or claims cause us to incur costs that cannot be billed currently and therefore may be reflected as “costs and estimated earnings in excess of billings” in our balance sheet. See Note1 — Description of Business and Summary of Significant Accounting Policies, under the section entitled Method of Accounting for Contracts of Notes to Consolidated Financial Statements in Item 15. Exhibits and Financial Statement Schedules. To the extent our actual recoveries with respect to unapproved change orders, contract disputes or claims are lower than our estimates, the amount of any shortfall will reduce our revenues and the amount of costs and estimated earnings in excess of billings recorded on our balance sheet, and could have a material effect on our working capital, results of operations and cash flows. Additionally, as we include unapproved change orders in our estimates of revenues and costs to complete a project, our profitability may be diluted via the percentage-of- completion method of accounting for contract revenues. Any delay caused by the extra work may also adversely impact the timely scheduling of other project work and our ability to meet specified contract milestone dates.

The percentage-of-completion method of accounting for contract revenues involved significant estimates which may result in material adjustments, which could result in a charge against our earnings.

We recognize contract revenues using the percentage-of-completion method. Under this method, estimated contract revenues are recognized by applying the percentage of completion of the project for the period to the total estimated revenues for the contract. Estimated contract losses are recognized in full when determined. Total contract revenues and cost estimates are reviewed and revised at a minimum on a quarterly basis as the work progresses and as change orders are approved. Adjustments based upon the percentage of completion are reflected in contract revenues in the period when these estimates are revised. To the extent that these adjustments result in an increase or a reduction in or an elimination of previously reported contract profit, we recognize a credit or a charge against current earnings, as applicable. Such credits or charges could be material and could cause our results to fluctuate materially from period to period.

Accounting for our contract related revenues and costs, as well as other expenses, require management to make a variety of significant estimates and assumptions. Although we believe we have the experience and processes to enable us to formulate appropriate assumptions and produce reasonably dependable estimates, these assumptions and estimates may change significantly in the future and could result in the reversal of previously recognized revenue and profit. Such changes could have a material adverse effect on our financial position and results of operations.

If we are unable to accurately estimate the overall risks, revenues or costs on a contract, we may achieve a lower than anticipated profit or incur a loss on that contract.

We generally enter into three principal types of contracts with our customers: fixed price contracts, guaranteed maximum price contracts and cost plus fee contracts. We derive a significant portion of our Civil and Specialty Contractors segment revenues and backlog from fixed price contracts.

Cost overruns, whether due to inefficiency, faulty estimates or other factors, result in lower profit or even a loss on a project. If our estimates of the overall risks, revenues or costs prove inaccurate or circumstances change, we may incur a lower profit or a loss on that contract.

We are subject to a number of risks as a U.S. government contractor, which could harm our reputation, result in fines or penalties against us and/or adversely impact our financial condition.

We are a provider of services to U.S. government agencies and therefore are exposed to risks associated with government contracting. We must observe laws and regulations relating to the formation, administration and performance of government contracts which affect how we do business with our U.S. government customers and may impose added costs on our business. For example, the Federal Acquisition Regulations allow our U.S. government customers to terminate our contracts for the failure to comply with regulatory requirements not directly related to performance and in certain cases, require us to disclose and certify cost and pricing data in connection with contract negotiations.

Our failure to comply with these or other laws and regulations could result in contract terminations, suspension or debarment from contracting with the U.S. government, civil fines and damages and criminal prosecution and penalties, any of which could cause our actual results to differ materially from those anticipated.

Our pension plan is underfunded and we may be required to make significant future contributions to the plan.

Our defined benefit pension plan and our supplemental retirement plan are non-contributory pension plans covering many of our employees. Benefits under these plans were frozen as of June 1, 2004. As of December 31, 2014, these plans were underfunded by approximately $35.0 million. We are required to make cash contributions to our pension and supplemental retirement plans to the extent necessary to comply with minimum funding requirements imposed by employee benefit and tax laws. The amount of any such

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required contributions is determined based on an annual actuarial valuation of the plan as performed by the plans’ actuaries. During 2014, we contributed $5.2 million in cash to our defined benefit pension plan and supplemental retirement plan. The amount of our future contributions will depend upon asset returns, then-current discount rates and a number of other factors, and, as a result, the amount we may elect or be required to contribute to these plans in the future may vary significantly. See Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations- in the section entitled Critical Accounting Policies.



In connection with mergers and acquisitions, we have recorded goodwill and other intangible assets that could become impaired and adversely affect our operating results. Assessing whether impairment has occurred requires us to make significant judgments and assumptions about the future, which are inherently subject to risks and uncertainties, and if actual events turn out to be materially less favorable than the judgments we make and the assumptions we use, we may be required to record additional impairmentsimpairment charges in the future.



We had approximately $685.3$635.4 million of goodwill and indefinite-lived intangible assets recorded on our Consolidated Balance Sheet atas of December 31, 2014. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations reduced by any impairments recorded subsequent to the date of acquisition.2016. We test goodwill and intangibleassess these assets for impairment by applyingannually, or more often if required. Our assessments involve a fair value test in the fourth quarternumber of each yearestimates and between annual tests if events or circumstances change which suggestassumptions that the goodwill or intangible assets should be evaluated. For example, if our market capitalization drops significantly below the amountare inherently subjective, require significant judgment and regard highly uncertain matters that are subject to change. The use of net equity recorded on our balance sheet, it might indicate a decline in the fair value of our goodwill and intangible assets and would require us to further evaluate whether impairment has occurred. If we determine that there has been an impairment (meaning that carrying value exceeds fair value), we would be required to write down the carrying value by the amount of the excess (which would represent the impaired portion of these assets).

Impairment assessment inherently involves management judgments as to the assumptions used to project amounts included in the valuation process and as to anticipated future market conditions and their potential effect on future performance. Changes indifferent assumptions or estimates cancould materially affect the determination of fair value. If we determine, based on our assumptions, judgments, estimates and projections, that noas to whether or not an impairment exists as of a specific date, andhas occurred. In addition, if future events turn out to be materiallyare less favorable than what we assumed or estimated in assessing fair value when we tested forour impairment analysis, we may be required atto record impairment charge, which could have a future date (either as part of a subsequent annual evaluation or on an interim basis) to re-evaluate fair value and to recognize an impairment at that time and write down the carrying value of our goodwill and/or intangible assets. If we were required to write down all or a significant part of our goodwill and intangible assets in future periods, our net earnings and equity could be materially and adversely affected.

The forecasts utilized in the discounted cash flow analysis as part of our impairment test assume future revenue and profitability growth in each of our segments. If our operating segments cannot obtain, or we determine at a later date that we no longer expect them to obtain, the projected levels of profitability, future goodwill impairment tests may also result in an impairment charge. There can be no assurances that our operating segments will be able to achieve our estimated levels of profitability. A number of factors, many of which we have no ability to control, could affect our financial condition, operating results and business prospects and could cause our actual results to differ from the estimates and assumptions we employed in our goodwill impairment testing. These factors include, but are not limited to; (i) renewed deterioration in the overall economy; (ii) a significant decline in our stock price and resulting market capitalization; (iii) changes in the discount rate; (iv) successful efforts by our competitors to gain market share in our markets; (v) adverse changes as a result of regulatory actions; (vi) a significant adverse change in legal factors or in the overall business climate; (vii) recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of our reporting units; and (viii) the resolution of legal proceedings resulting in judgments less favorable than our estimates. Given these and other factors, we cannot be certain that goodwill impairment will not be required during future periods.

Basedmaterial impact on our annual review of our goodwill and intangible assets, which we performed in the fourth quarter of 2014, we concluded that no impairment had occurred. To the extent that the value of the goodwill or other intangible assets becomes impaired in the future, we will be required to incur non-cash charges relating to the impairment and recognized them in our Consolidated Statement of Operations.consolidated financial statements.



Conflicts of interest may arise involving certain of our directors.



We have engaged in joint ventures, primarily in civil construction, with O&G Industries, Inc., a Connecticut corporation, whose Vice Chairman is Raymond R. Oneglia, one of our directors. In accordance with the Company’s policy, the terms of this joint venture and any of our joint ventures with any affiliate have been and will continue to be subject to review and approval by our Audit Committee. As in any joint venture, we could have disagreements with our joint venture partner over the operation of a joint venture, or a joint venture could be involved in disputes with third parties, where we may or may not have a conflict of interest with our joint venture partner. These relationships also may create conflicts of interest with respect to new business and other corporate opportunities.

As of December 31, 2014,2016, our chairman and chief executive officer, Ronald N. Tutor, and twothree trusts controlled by Mr. Tutor (the “Tutor Group”) owned approximately 17.3%18% of the outstanding shares of our common stock. Under the terms of Mr. Tutor’s employment agreement, he has the right to designate one nominee for election as a member of the Company’s Board of Directors so

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long as the Tutor Group owns at least 11.25% of the outstanding shares of the Company’s common stock. As of the date of this Form 10-K, there are eleven10 current directors, one of whom was appointed by Mr. Tutor in November 2013. Mr. Tutor will be able to exert significant influence over the outcome of a range of corporate matters, including significant corporate transactions requiring a shareholder vote, such as a merger or a sale of the Company or its assets. This concentration of ownership and influence in management and Board decision-making also could harm the price of our common stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our common stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of the Company.

We have a substantial amount of indebtedness which could adversely affect our financial position and prevent us from fulfilling our obligations under our debt agreements, in particular under our $300 million senior unsecured notes and our $250 million term loan under our revolving credit facility.

We currently have and expect to continue to have a substantial amount of indebtedness. As of December 31, 2014, we had a total debt of $865.4 million, consisting of $298.8 million of senior unsecured notes (net of unamortized debt discount of $1.2 million) (the “Senior Notes”), $130.0 million of outstanding borrowings on a revolving credit basis (the “Revolving Facility”), a $250 million term loan (the “Term Loan”) which has been paid down to $242.5 million at December 31, 2014, and $194.1 million of other debt. We may also incur significant additional indebtedness in the future.

Our Senior Notes and revolving credit facility impose operating and financial restrictions on us and limit our ability to incur indebtedness from other sources without consent. Our revolving credit facility contains financial covenants that require us to maintain minimum fixed charge coverage and maximum consolidated leverage ratios. Our ability to borrow funds for any purpose is dependent upon satisfying these tests.

If we are unable to meet the terms of the financial covenants or fail to comply with any of the other restrictions contained in these agreements, an event of default could occur. An event of default, if not waived by our lenders, could result in an acceleration of any outstanding indebtedness, causing such debt to become immediately due and payable. If such acceleration occurs, we may not be able to repay such indebtedness on a timely basis. Since indebtedness under our revolving credit facility and Senior Notes is secured by substantially all of our assets, acceleration of this debt could result in foreclosure of those assets. In the event of a foreclosure, we would be unable to conduct our business and may be forced to discontinue ongoing operations.

Systems and information technology interruption and breaches in data security could adversely impact our ability to operate and our operating results.

We are reliant on computer and information technology and systems to properly operate. From time to time, we experience system interruptions and delays. If we are unable to add required software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of and protect our systems, systems operation could be interrupted or delayed, or data security could be breached. If any of our key software vendors discontinue further development, integration, or long-term software maintenance support for our systems, or there is any significant system interruption, delay, breach of security, loss of data, or loss of a vendor, we may need to migrate our data to other systems. In addition, our systems and operations could be damaged or interrupted by natural disasters, power loss, telecommunications failures, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins, and similar events or disruptions, including breaches by computer hackers and cyber-terrorists. Any of these or other events could cause loss of critical data, delay or prevent operations, or result in the unintentional disclosure of information. While management has taken steps to address these concerns by implementing state-of-the-art network and end-point security, internal control measures, and redundant backups of key data, a system failure or loss or data security breach could materially adversely affect our financial condition and operating results.

  

ITEM 1B. UNRESOLVED STAFF COMMENTS



None.

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ITEM 2. PROPERTIES



Properties used in our construction operations primarily consist ofWe have office space within general, commercial office buildings in major cities as well as storagefacilities and equipment yards for our construction equipment. We believe our properties are well maintained, in good condition, adequate and suitable for our purposes.

Our major facilities are in the following locations:locations, which we believe are suitable and adequate for our current needs:













 

 

 

 



 

 

 

 

Offices

Business Segment(s)

 

Owned or Leased by Tutor Perini

 

Business Segment(s)

Framingham, MALos Angeles (Sylmar), CA

 

BuildingLeased

Corporate, Civil & Specialty Contractors

Barricada, Guam

 

Owned

 

Henderson, NV

Building

Owned

Houston, TX

Specialty Contractors

Owned

Sylmar, CA

Corporate

Leased

Redwood City, CA

Building

Leased

Ozone Park, NY

Specialty Contractors

Leased

Bronx, NY

Specialty Contractors

Leased

Gulfport , MS

Building

Owned

Mt. Vernon, NY

Specialty Contractors

Leased

Sylmar, CA

Civil

Owned

New Rochelle, NY

Civil

Owned

Peekskill, NY

Civil

Owned

Evansville, IN

Civil

Owned

Barrigada, Guam

Civil

Owned

Sylmar, CA

Specialty Contractors

Owned

Black River Falls, WI

 

Owned

Civil

Evansville, IN

 

Owned

 

Civil

Fort Lauderdale, FL

 

BuildingLeased

 

LeasedBuilding & Specialty Contractors

Framingham, MA

 

Owned

Building

Orlando, FLGulfport, MS

Owned

Building

Henderson, NV

Owned

Building & Specialty Contractors

Houston, TX

Owned

 

Specialty Contractors

Jessup, MD

 

LeasedOwned

 

Civil

Lakeview Terrace, CA

 

Leased

Specialty Contractors

Mount Vernon, NY

 

Leased

 

Specialty Contractors

Jessup, MD

CivilNew Rochelle, NY

 

Owned

 

Civil

Ozone Park, NY

Leased

Specialty Contractors

Philadelphia, PA

 

Leased

Building

Redwood City, CA

 

Leased

 

Irvine, CA

Building

Owned

Las Vegas, NV

Specialty Contractors

Leased

Jamaica, NY

Specialty Contractors

Leased

Rosemount, MN

Civil

Owned



 

 

 

 



 

 

 

 

Equipment Yards

Business Segment(s)

 

Owned or Leased by Tutor Perini

 

Business Segment(s)

Black River Falls, WI

Owned

Civil

Fontana, CA

 

Leased

Civil

Jessup, MD

Owned

Civil

Lakeview Terrace, CA

 

Leased

 

Specialty Contractors

Peekskill, NY

Owned

Civil

Stockton, CA

 

Building

Owned

Folcroft, PA

 

Building

Leased

Hilbert, WI

Civil

Leased

Long Island, NY

Specialty Contractors

Leased

Fort Lauderdale, FL

Specialty Contractors

Leased

  



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ITEM 3. LEGAL PROCEEDINGS



Legal Proceedings are set forth in our financial statement schedules in Part IV, Item 15Note 7 of this Annual Reportthe Notes to Consolidated Financial Statements and are incorporated herein by reference. See Note 8 — Contingencies and Commitments of Notes to Consolidated Financial Statements of Part IV, Item 15. Exhibits and Financial Statement Schedules.

  

ITEM 4. MINE SAFETY DISCLOSURES



Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires domesticWe do not own or operate any mines; however, we may be considered a  mine operators to disclose violations and orders issuedoperator 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. However, we may be treated as acting as a mining operator as defined under the Mine Act because we are an independent contractor performingprovide construction-related services or construction of such mine. Informationfor customers in the mining industry.  Accordingly, we provide information concerning mine safety violations orand other regulatorymining regulation matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 Regulation S-K is included in Exhibit 95.95 to this Form 10-K. For 2014, revenuesthe year ended December 31, 2016, revenue from mine construction services were less than $100was $18.8  million.

  

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PART II.



ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



Market Information



Our common stock is traded on the New York Stock Exchange under the symbol “TPC”. In 2009, we changed our name to Tutor Perini Corporation from Perini Corporation and accordingly changed our symbol from “PCR” to “TPC”.“TPC.”  The quarterly market high and low sales prices for our common stock in 20142016 and 2013 are summarized below:2015 were as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

High

 

Low

 

High

 

Low

2016

 

2015

Market Price Range per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

High

 

Low

 

High

 

Low

Quarter Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31

 

$

30.04 

 

$

21.06 

 

$

19.38 

 

$

13.70 

$

16.64 

 

$

10.16 

 

$

26.71 

 

$

20.24 

June 30

 

$

32.11 

 

$

26.83 

 

$

19.28 

 

$

15.47 

$

24.17 

 

$

14.35 

 

$

24.74 

 

$

20.50 

September 30

 

$

32.51 

 

$

26.25 

 

$

21.53 

 

$

18.02 

$

25.98 

 

$

19.80 

 

$

21.86 

 

$

14.95 

December 31

 

$

29.25 

 

$

20.07 

 

$

26.44 

 

$

20.08 

$

30.20 

 

$

18.05 

 

$

19.57 

 

$

15.20 



Holders



At February 20, 2015,17, 2017, there were 562427 holders of record of our common stock, including holders of record on behalf of an indeterminate number of beneficial owners, based on the stockholders list maintained by our transfer agent.owners.



Dividends

We currently have no future plans to pay cash dividends. Our revolving facility and senior unsecured notes also restrict us from making dividend payments. See Note 4 — Financial Commitments of Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statements Schedules.

Securities Authorized for Issuance Under Equity Compensation Plans

For a description of our equity compensation plan, see Note 10 — Stock-Based Compensation of Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules.

Issuer Purchases of Equity Securities



There were no repurchases by the Company of its equity securitiesWe did not pay dividends or repurchase stock during the three monthsyear ended December 31, 2014.2016;  we do not have any immediate plans to do so. Furthermore, our current debt agreements restrict us from paying dividends or repurchasing stock.



Issuance of Unregistered Securities



None.



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Performance Graph



The performancefollowing graph required by this Item 5 is hereby incorporated by reference fromcompares the cumulative 5-year total return to shareholders on our definitive proxy statementCommon Stock relative to be filed within 120 days after the endcumulative total returns of the fiscal year 2014.NYSE Composite Index and the Dow Jones Heavy Construction Index (“DJ Heavy Construction Index”). We selected the DJ Heavy Construction Index because we believe the index reflects the market conditions within the industry in which we primarily operate. The comparison of total return on investment, defined as the change in year-end stock price plus reinvested dividends, for each of the periods assumes that $100 was invested on December 31, 2011 in each of our Common Stock, the NYSE Composite Index and the DJ Heavy Construction Index, with investment weighted on the basis of market capitalization.

The comparisons in the following graph are based on historical data and are not intended to forecast the possible future performance of our Common Stock.



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ITEM 6. SELECTED FINANCIAL DATA



Selected Consolidated Financial Information



The following selected financial data has been derived from our audited consolidatedshould be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 15. Exhibits andFinancial Statement Schedules inthis Annual Report. The following tables present selected financial statements anddata for the last five years. This selected financial data should be read in conjunction with the consolidated financial statements theand related notes theretoincluded in Item 15. Exhibits and the independent auditors’ report thereon, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this Form 10-K and in previously filed annual reports on Form 10-K of Tutor Perini Corporation. Backlog and new business awarded are not measures defined in accounting principles generally accepted in the United States (“U.S. GAAP”) and have not been derived from audited consolidated financial statements. In conjunction with our 2011 and 2014 reorganizations, we have restated comparative prior period information for the reorganized reportable segments in each of the revenue and backlog tabular disclosures below. We have also restated comparative prior period results to allocate intersegment eliminations of revenues into the applicable Civil or Building segments to which the Specialty Contractors segment has provided services.Statement Schedules.











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

 

2011(1)

 

2010(2)

 

 

(In thousands, except per share data)

OPERATING SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Civil

 

$

1,687,144 

 

$

1,441,416 

 

$

1,335,993 

 

$

985,245 

 

$

714,478 

Building

 

 

1,503,837 

 

 

1,551,979 

 

 

1,592,441 

 

 

1,928,612 

 

 

2,371,872 

Specialty Contractors

 

 

1,301,328 

 

 

1,182,277 

 

 

1,183,037 

 

 

802,460 

 

 

112,860 

Total

 

 

4,492,309 

 

 

4,175,672 

 

 

4,111,471 

 

 

3,716,317 

 

 

3,199,210 

Cost of Operations

 

 

3,986,867 

 

 

3,708,768 

 

 

3,696,339 

 

 

3,320,976 

 

 

2,861,362 

Gross Profit

 

 

505,442 

 

 

466,904 

 

 

415,132 

 

 

395,341 

 

 

337,848 

General and Administrative Expenses

 

 

263,752 

 

 

263,082 

 

 

260,369 

 

 

226,965 

 

 

165,536 

Goodwill and Intangible Asset Impairment (3)

 

 

 —

 

 

 —

 

 

376,574 

 

 

 —

 

 

 —

Income (Loss) From Construction Operations

 

 

241,690 

 

 

203,822 

 

 

(221,811)

 

 

168,376 

 

 

172,312 

Other (Expense) Income, Net

 

 

(9,536)

 

 

(18,575)

 

 

(1,857)

 

 

4,421 

 

 

(2,280)

Interest Expense

 

 

(44,716)

 

 

(45,632)

 

 

(44,174)

 

 

(35,750)

 

 

(10,564)

Income (Loss) Before Income Taxes

 

 

187,438 

 

 

139,615 

 

 

(267,842)

 

 

137,047 

 

 

159,468 

(Provision) Benefit for Income Taxes

 

 

(79,502)

 

 

(52,319)

 

 

2,442 

 

 

(50,899)

 

 

(55,968)

Net Income (Loss)

 

$

107,936 

 

$

87,296 

 

$

(265,400)

 

$

86,148 

 

$

103,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Available to Common Stockholders

 

$

107,936 

 

$

87,296 

 

$

(265,400)

 

$

86,148 

 

$

103,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) Per Share of Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.22 

 

$

1.82 

 

$

(5.59)

 

$

1.82 

 

$

2.15 

Diluted

 

$

2.20 

 

$

1.80 

 

$

(5.59)

 

$

1.80 

 

$

2.13 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Dividend Paid Per Common Share

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

1.00 

Book Value Per Common Share

 

$

28.06 

 

$

25.76 

 

$

24.05 

 

$

29.58 

 

$

27.88 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

48,562 

 

 

47,851 

 

 

47,470 

 

 

47,226 

 

 

48,111 

Diluted

 

 

49,114 

 

 

48,589 

 

 

47,470 

 

 

47,890 

 

 

48,649 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,

(In thousands, except per share data)

2016

 

2015

 

2014

 

2013

 

2012

CONSOLIDATED OPERATING RESULTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Civil

$

1,668,963 

 

$

1,889,907 

 

$

1,687,144 

 

$

1,441,416 

 

$

1,335,993 

Building

 

2,069,841 

 

 

1,802,535 

 

 

1,503,837 

 

 

1,551,979 

 

 

1,592,441 

Specialty Contractors

 

1,234,272 

 

 

1,228,030 

 

 

1,301,328 

 

 

1,182,277 

 

 

1,183,037 

Total

 

4,973,076 

 

 

4,920,472 

 

 

4,492,309 

 

 

4,175,672 

 

 

4,111,471 

Cost of operations

 

(4,515,886)

 

 

(4,564,219)

 

 

(3,986,867)

 

 

(3,708,768)

 

 

(3,696,339)

Gross profit

 

457,190 

 

 

356,253 

 

 

505,442 

 

 

466,904 

 

 

415,132 

General and administrative expenses

 

(255,270)

 

 

(250,840)

 

 

(263,752)

 

 

(263,082)

 

 

(260,369)

Goodwill and intangible asset impairment

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(376,574)

Income (Loss) from construction operations

 

201,920 

 

 

105,413 

 

 

241,690 

 

 

203,822 

 

 

(221,811)

Other income (expense), net

 

6,977 

 

 

13,569 

 

 

(8,217)

 

 

(16,692)

 

 

(234)

Interest expense

 

(59,782)

 

 

(45,143)

 

 

(46,035)

 

 

(47,515)

 

 

(45,797)

Income (Loss) before income taxes

 

149,115 

 

 

73,839 

 

 

187,438 

 

 

139,615 

 

 

(267,842)

(Provision) Benefit for income taxes

 

(53,293)

 

 

(28,547)

 

 

(79,502)

 

 

(52,319)

 

 

2,442 

Net income (loss)

$

95,822 

 

$

45,292 

 

$

107,936 

 

$

87,296 

 

$

(265,400)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.95 

 

$

0.92 

 

$

2.22 

 

$

1.82 

 

$

(5.59)

Diluted (a)

$

1.92 

 

$

0.91 

 

$

2.20 

 

$

1.80 

 

$

(5.59)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

49,150 

 

 

48,981 

 

 

48,562 

 

 

47,851 

 

 

47,470 

Diluted

 

49,864 

 

 

49,666 

 

 

49,114 

 

 

48,589 

 

 

47,470 

(a)

During the year ended December 31, 2015, the Company had a decrease of $0.53 per diluted share due to unfavorable adjustments on various Five Star Electric projects in the Specialty Contractors segment. In addition, there was a decrease of $0.28 per diluted share due to unfavorable adjustments to the estimated cost to complete a Building segment project in New York. The Company’s 2015 results were also impacted by an unfavorable adjustment for an adverse legal decision related to a long-standing litigation matter in the Civil segment, which resulted in a decrease of $0.28 per diluted share. Furthermore, the Company recorded favorable adjustments for a Civil segment runway reconstruction project, which resulted in an increase of $0.16 per diluted share in 2015.

The Company's results for the year ended December 31, 2014 included a positive impact related to changes in the estimated recoveries for two Civil segment projects and a Building segment hospitality and gaming project, resulting in a $0.33 increase per diluted share.

The Company's diluted EPS during the years ended December 31, 2013 and 2012 were positively impacted by $0.18 and $0.16, respectively, because of changes in the estimated recovery for the same hospitality and gaming project.



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Table of Contents

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

 

2011 (1)

 

2010(2)

 

 

(In thousands, except ratios)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL POSITION SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Capital

 

$

1,113,980 

 

$

787,434 

 

$

747,577 

 

$

556,800 

 

$

592,928 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Ratio

 

 

1.82x

 

 

1.61x

 

 

1.61x

 

 

1.40x

 

 

1.61x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

 

 

865,359 

 

 

733,884 

 

 

737,090 

 

 

672,507 

 

 

395,684 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity (3)

 

 

1,365,505 

 

 

1,247,535 

 

 

1,143,864 

 

 

1,399,827 

 

 

1,312,994 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of  Debt to Equity

 

 

0.63x

 

 

.59x

 

 

.64x

 

 

.48x

 

 

.30x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

3,773,315 

 

$

3,397,438 

 

$

3,296,410 

 

$

3,613,127 

 

$

2,779,220 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog at Year End (4)

 

$

7,831,725 

 

$

6,954,287 

 

$

5,603,624 

 

$

6,108,277 

 

$

4,284,290 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Business Awarded (5)

 

$

5,369,747 

 

$

5,526,335 

 

$

3,606,818 

 

$

5,540,304 

 

$

3,173,309 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of and For the Year Ended December 31,

 

(In thousands, except ratios and percentages)

2016

 

2015

 

2014

 

2013

 

2012

 

CONSOLIDATED FINANCIAL POSITION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

$

2,837,756 

 

$

2,608,939 

 

$

2,454,594 

 

$

2,077,680 

 

$

1,971,776 

 

Current liabilities

 

1,518,943 

 

 

1,448,819 

 

 

1,344,447 

 

 

1,288,235 

 

 

1,228,266 

 

Working capital

$

1,318,813 

 

$

1,160,120 

 

$

1,110,147 

 

$

789,445 

 

$

743,510 

 

Current ratio

 

1.87 

 

 

1.80 

 

 

1.83 

 

 

1.61 

 

 

1.61 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

$

477,626 

 

$

523,525 

 

$

527,602 

 

$

498,125 

 

$

485,095 

 

Total assets

 

4,038,620 

 

 

3,861,300 

 

 

3,711,450 

 

 

3,358,663 

 

 

3,246,216 

 

Capitalization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

759,519 

 

 

817,684 

 

 

857,791 

 

 

726,171 

 

 

726,807 

 

Stockholders’ equity

 

1,553,023 

 

 

1,420,227 

 

 

1,365,505 

 

 

1,247,535 

 

 

1,143,864 

 

Total capitalization

$

2,312,542 

 

$

2,237,911 

 

$

2,223,296 

 

$

1,973,706 

 

$

1,870,671 

 

Total debt as a percentage of total capitalization

 

33 

%

 

37 

%

 

39 

%

 

37 

%

 

39 

%

Ratio of debt to equity

 

0.49 

 

 

0.58 

 

 

0.63 

 

 

0.58 

 

 

0.64 

 

Shareholders' equity per common share

$

31.56 

 

$

28.94 

 

$

28.06 

 

$

25.76 

 

$

24.05 

 

OTHER DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog at year end

$

6,227,137 

 

$

7,465,129 

 

$

7,831,725 

 

$

6,954,287 

 

$

5,603,624 

 

New awards

 

3,735,084 

 

 

4,553,877 

 

 

5,369,747 

 

 

5,526,335 

 

 

3,606,818 

 

Capital expenditures

 

15,743 

 

 

35,912 

 

 

75,829 

 

 

59,049 

 

 

43,402 

 

Net cash provided by (used in) operating activities

 

113,336 

 

 

14,072 

 

 

(56,678)

 

 

50,728 

 

 

(67,863)

 

Net cash used in investing activities

 

(18,495)

 

 

(32,415)

 

 

(26,957)

 

 

(43,574)

 

 

(16,855)

 

Net cash (used in) provided by financing activities

 

(24,190)

 

 

(41,788)

 

 

99,295 

 

 

(55,287)

 

 

48,534 

 



We have changed the presentation of certain items in our consolidated financial statements as of and for the year ended December 31, 2015, 2014, 2013 and 2012 for the following items: (1) Subsequent to the issuance of our 2015 consolidated financial statements we identified that certain immaterial classification adjustments, related to the offsetting of deferred assets and liabilities by tax jurisdiction, were necessary to correct the error in the classification of deferred tax assets and liabilities. See Note 6 of the Notes to Consolidated Financial Statements for additional details. (2) We early adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes (Subtopic 740-10), which requires companies to retrospectively present all deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. (3) During 2016, we retrospectively adopted Accounting Standards Update (“ASU”) 2015-03, Interest – Imputation of Interest (Subtopic 835-30), which requires companies to present in the balance sheet debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts. In addition, the amortization of debt discounts is required to be presented as a component of interest expense.



______________The aggregate impact of the changes discussed above is as follows:

(1)

Includes the results of Fisk, Anderson, Frontier-Kemper, Lunda, WDF, Five Star Electric, Nagelbush and Becho as each was acquired during 2011.



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



As of and For the Year Ended December 31,

(In thousands, except ratios)

2015

 

2014

 

2013

 

2012

Other income (expense), net, as previously reported

$

12,453 

 

$

(9,536)

 

$

(18,575)

 

$

(1,857)

Reclass amortization of deferred debt cost to interest expense

 

1,116 

 

 

1,319 

 

 

1,883 

 

 

1,623 

Other income (expense), net, as restated

$

13,569 

 

$

(8,217)

 

$

(16,692)

 

$

(234)



 

 

 

 

 

 

 

 

 

 

 

Interest expense, as previously reported

$

(44,027)

 

$

(44,716)

 

$

(45,632)

 

$

(44,174)

Reclass amortization of deferred debt cost to interest expense

 

(1,116)

 

 

(1,319)

 

 

(1,883)

 

 

(1,623)

Interest expense, as restated

$

(45,143)

 

$

(46,035)

 

$

(47,515)

 

$

(45,797)



 

 

 

 

 

 

 

 

 

 

 

Current asset, as previously reported

$

2,635,245 

 

$

2,472,556 

 

$

2,085,920 

 

$

1,981,847 

Classification adjustments

 

(24,889)

 

 

(14,129)

 

 

(8,184)

 

 

(6,004)

Reclass current deferred tax assets to non-current deferred tax assets

 

(1,417)

 

 

(3,833)

 

 

(56)

 

 

(4,067)

Current asset, as restated

$

2,608,939 

 

$

2,454,594 

 

$

2,077,680 

 

$

1,971,776 



 

 

 

 

 

 

 

 

 

 

 

Current liabilities, as previously reported

$

1,473,708 

 

$

1,358,576 

 

$

1,298,486 

 

$

1,234,270 

Classification adjustments

 

(24,889)

 

 

(14,129)

 

 

(8,184)

 

 

(6,004)

Reclass current deferred tax liabilities to non-current deferred tax liabilities

 

 —

 

 

 —

 

 

(2,067)

 

 

 —

Current liabilities, as restated

$

1,448,819 

 

$

1,344,447 

 

$

1,288,235 

 

$

1,228,266 



 

 

 

 

 

 

 

 

 

 

 

Total assets, as previously reported

$

4,042,441 

 

$

3,773,315 

 

$

3,397,438 

 

$

3,296,410 

Classification adjustments

 

(173,960)

 

 

(50,754)

 

 

(31,061)

 

 

(35,844)

Reclass non-current deferred tax assets to non-current deferred tax liabilities

 

(1,417)

 

 

(3,543)

 

 

(1)

 

 

(4,067)

Reclass deferred debt cost to long-term debt

 

(5,764)

 

 

(7,568)

 

 

(7,713)

 

 

(10,283)

Total assets, as restated

$

3,861,300 

 

$

3,711,450 

 

$

3,358,663 

 

$

3,246,216 

(2)

Includes the results of Superior Gunite, acquired November 1, 2010.

(3)

Represents goodwill and intangible assets impairment charge of $376.6 million in 2012. See Note 3 Goodwill and other Intangible Assets of Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules.

20

(4)

A construction project is included in our backlog at such time as a contract is awarded, or a letter of commitment is obtained and adequate construction funding is in place. Backlog is not a measure defined in U.S. GAAP, and our backlog may not be comparable to the backlog of other companies. Management uses backlog to assist in forecasting future results.

(5)

New business awarded consists of the original contract price of projects added to our backlog in accordance with Note (4) above plus or minus subsequent changes to the estimated total contract price of existing contracts. For 2011 and 2010, this category also includes approximately $2.6 billion of backlog obtained through acquisitions. Management uses new business awarded to assist in forecasting future results.

 


Table of Contents

  

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included in Item 15. Exhibits and Financial Statement Schedules in this Annual Report. This discussion contains forward-looking statements, which involve risks and uncertainties. For cautions about relying on such forward-looking statements, please refer to the section entitled “Forward-Looking Statements” at the beginning of this Annual Report immediately prior to Item 1. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those discussed in Item 1A. Risk Factors and elsewhere in this Annual Report.

Executive Overview



WeConsolidated revenue for 2016 was $5.0 billion compared to $4.9 billion for 2015. The modest improvement was attributable to higher volume in our Building segment, driven by various building projects primarily in California.

Consolidated revenue for 2015 was $4.9 billion compared to $4.5 billion for 2014. The growth was driven by increased volume in our Building and Civil segments, with various building projects in California and two large mass-transit projects in New York being the largest contributors.

Income from construction operations for 2016 was $201.9 million compared to $105.4 million for 2015. The strong increase was primarily due to significantly improved operating performance in all segments. The prior year included various unfavorable adjustments, as discussed in the next paragraph.

Income from construction operations for 2015 was $105.4 million compared to $241.7 million for 2014. The decrease was primarily due to significant project charges recorded for various Five Star Electric projects in New York in the Specialty Contractors segment, decreased activity on certain higher-margin civil projects, unfavorable adjustments related to the estimate of costs to complete an office building project in New York and the adverse Brightwater litigation-related charge for a legacy civil project.

The effective tax rate was 35.7%,  38.7% and 42.4% for 2016,  2015 and 2014, respectively. The 2016 rate was favorably impacted by rate changes associated with a shift in revenue mix between states affecting state apportionment, as well as various return-to-provision and deferred tax adjustments related to depreciation. The 2015 rate was favorably impacted by the resolution of certain state tax matters. The 2014 rate was unfavorably impacted by increased activity in higher state tax jurisdictions and higher non-deductible compensation expense.

Earnings per diluted share was $1.92,  $0.91 and $2.20 in 2016,  2015 and 2014, respectively. The strong earnings growth in 2016 was due to significantly improved operating performance in all segments, as discussed above. The primary reasons for the earnings decline in 2015 were incorporatedthe various above-mentioned unfavorable adjustments that impacted income from construction operations during that year.

Cash flow from operations was $113.3 million in 19182016 compared to $14.1 million in 2015, and compared to a use of cash from operations of $56.7 million in 2014. The strong improvement in operating cash generation in 2016 was due to significant progress achieved on the Company’s initiative to focus on cash flow and the reduction of unbilled costs through more timely project billings and collections, and resolution and subsequent invoicing of unapproved change orders and claims. In 2016, for the first time in eight years, the Company’s cash flow from operations exceeded its net income for the year.

Consolidated new awards in 2016 were $3.7 billion compared to $4.6 billion in 2015 and $5.4 billion in 2014. The Civil and Building segments were the major contributors of new awards during 2016. The Building segment was the major contributor of new awards during 2015. New awards in 2014 were generally balanced across all three segments, with the Building segment contributing a modestly higher volume.

Consolidated backlog was $6.2 billion, $7.5 billion and $7.8 billion as a successor to businessesof December 31, 2016,  2015 and 2014, respectively. The backlog at the end of 2016 was the result of revenue burn during the year that had been engagedoutpaced new awards in providing construction services since 1894. We provide diversified general contracting, construction managementthe Building and design-build services to private customersSpecialty Contractors segments, and public agencies throughoutclosely tracked new awards in the world. Our construction business is conducted through three basic segments or operations:Civil segment. As of December 31, 2016, the mix of backlog by segment was approximately 43%,  32% and 25% for the Civil, Building and Specialty Contractors. Our Civil segment specializesContractors segments, respectively. The Company was awarded a $1.4 billion joint-venture mass-transit project in public works construction andJanuary 2017 that the repair, replacement and reconstruction of infrastructure, including highways, bridges, mass transit systems, and water management and wastewater treatment facilities, primarilyCompany will consolidate in its financial results starting in the western, midwestern, northeastern and mid-Atlantic United States. Ourfirst quarter of 2017. The backlog at the end of 2015 was primarily due to significant new awards in the Building segment, has significant experience providing services to a number of specialized building markets, includingpartially offset by revenue burn that outpaced new awards in the hospitalityCivil and gaming, transportation, healthcare, municipal offices, sports and entertainment, educational, correctional facilities, biotech, pharmaceutical and high-tech markets. Our Specialty Contractors segment specializes in electrical, mechanical, plumbing, HVAC, fire protection systems, and pneumaticallysegments.

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Table of Contents

 

placed concrete for a full range of civil and building construction projectsProjects in the industrial, commercial, hospitality and gaming, and transportation end markets, among others.

The contracting and management services that we provide consistCivil segment’s backlog typically convert to revenue over a period of general contracting, pre-construction planning and comprehensive management services, including planning and scheduling the manpower, equipment, materials and subcontractors requiredthree to five years, whereas projects for the timely completionBuilding and Specialty Contractors segments typically convert to revenue over a period of a project in accordance with the terms and specifications contained in a construction contract.one to three years. We also offer self-performed construction services including site work, concrete forming and placement, steel erection, electrical and mechanical, plumbing, and HVAC. We provide these services by using traditional general contracting arrangements, such as fixed price, guaranteed maximum price and cost plus fee contracts. In our ordinary course of business, we enter into arrangements with other contractors, referred to as “joint ventures,” for certain construction projects. Each of the joint venture participants is usually committed to supply a predetermined percentage of capital, as required, and to share in a predetermined percentage of the incomeestimate that approximately $3.4 billion, or loss of the project. Generally, each joint venture participant is fully liable for the obligations of the joint venture.

We believe our leadership position as the contractor of choice for large, complex civil and building projects will support our long-term backlog growth. We have continued to experience increased contributions from our Civil segment consistent with our focus on obtaining higher-margin public works projects. We expect to continue to leverage our increased self-performance and schedule control capabilities to obtain additional large-scale Civil and Building awards. Our strong self-performance capabilities represent a unique competitive advantage. By self-performing certain specialized components54%,  of our projects when possible, we are able to capture profits that would otherwise be recognized by other contractors. We continue to capitalize on our leadership position as evidenced by our December 31, 2014 contract backlog of $7.8 billion, an increase of $0.8 billion from $7.0 billion as of December 31, 2013. In 2014, we received several significant new awards (discussed below, under Backlog Analysis for 2014) and we continue to have a large volume of pending awards, including several additional phases of the Hudson Yards development project in New York and several mixed-use, hospitality and gaming, educational, and retail building development projects primarily on the East Coast and in the southern U.S.

During 2014, we experienced a high level of bidding activity, which subsequently translated into several large Civil and Building contracts, including two major mass transit projects in New York awarded in the first quarter, a large multi-unit residential tower project in Florida awarded in the second quarter, and a runway reconstruction project in New York and a healthcare facility project in California, both awarded in the third quarter. In addition, our work on the Hudson Yards project increased significantly in 2014, including continued activity on construction of the South Tower (Tower C), as well as substantial work on the Amtrak Tunnel and the platform over the eastern rail yard which will serve as the foundation for future towers at the site. Additional phases of the Hudson Yards project are expected to be awarded over the next one to two years. Several of our recently awarded large Civil projects have contract durations of approximately four to five years, and our larger recently awarded Building projects have contract durations of two to three years. Accordingly, we expect to realize the benefits of these projects over the next several years. Typically, in later stages of our projects, productivity increases are realized and claims and unapproved change orders, if any, are resolved. When projects are in later stages of completion, these changes may result in more significant impacts to profitability.

The following table sets forth our consolidated results of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Results of Operations

 

% Change

 

 

 

Year ended December 31,

 

Favorable (Unfavorable)

 

 

 

2014

 

2013

 

2012

 

2014 vs. 2013

 

 

2013 vs. 2012

 

 

 

(In thousands)

 

 

 

 

 

 

Revenues

 

$

4,492,309 

 

$

4,175,672 

 

$

4,111,471 

 

7.6 

%

 

1.6 

%

Cost of operations

 

 

3,986,867 

 

 

3,708,768 

 

 

3,696,339 

 

(7.5)

%

 

(0.3)

%

Gross profit

 

 

505,442 

 

 

466,904 

 

 

415,132 

 

8.3 

%

 

12.5 

%

General and administrative expenses

 

 

263,752 

 

 

263,082 

 

 

260,369 

 

(0.3)

%

 

(1.0)

%

Goodwill and intangible asset impairment

 

 

 —

 

 

 —

 

 

376,574 

 

 —

 

 

100.0 

%

Income (loss) from construction operations

 

 

241,690 

 

 

203,822 

 

 

(221,811)

 

18.6 

%

 

191.9 

%

Other (expense) income, net

 

 

(9,536)

 

 

(18,575)

 

 

(1,857)

 

48.7 

%

 

(900.3)

%

Interest expense

 

 

(44,716)

 

 

(45,632)

 

 

(44,174)

 

2.0 

%

 

(3.3)

%

Income (loss) before income taxes

 

 

187,438 

 

 

139,615 

 

 

(267,842)

 

34.3 

%

 

152.1 

%

(Provision) benefit for income taxes

 

 

(79,502)

 

 

(52,319)

 

 

2,442 

 

52.0 

%

 

(2,242.5)

%

Net income (loss)

 

$

107,936 

 

$

87,296 

 

$

(265,400)

 

23.6 

%

 

132.9 

%

25


Table of Contents

 

 

Consolidated Results of Operations

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

 

 

(As a percentage of Revenues)

Revenues

 

100.0 

%

 

100.0 

%

 

100.0 

%

Cost of operations

 

88.7 

%

 

88.8 

%

 

89.9 

%

Gross profit

 

11.3 

%

 

11.2 

%

 

10.1 

%

General and administrative expenses

 

5.9 

%

 

6.3 

%

 

6.3 

%

Goodwill and intangible asset impairment

 

0.0 

%

 

0.0 

%

 

9.2 

%

Income (loss) from construction operations

 

5.4 

%

 

4.9 

%

 

(5.4)

%

Other (expense) income, net

 

(0.2)

%

 

(0.4)

%

 

0.0 

%

Interest expense

 

(1.0)

%

 

(1.1)

%

 

(1.1)

%

Income (loss) before income taxes

 

4.2 

%

 

3.4 

%

 

(6.5)

%

(Provision) benefit for income taxes

 

(1.8)

%

 

(1.3)

%

 

0.0 

%

Net income (loss)

 

2.4 

%

 

2.1 

%

 

(6.5)

%

Revenues were $4.5 billion in 2014, compared to $4.2 billion in 2013 and $4.1 billion in 2012. Income from construction operations was $241.7 million in 2014, compared to $203.8 million in 2013 and a loss from construction operations of $221.8 million in 2012. In 2012, our loss from construction operations of $221.8 million was materially impacted by a $376.6 million goodwill and intangible asset impairment charge ($326.4 million after-tax), due primarily to a deterioration in broader market conditions, degradation in the timing of projected cash flows used to derive the fair value, and a sustained decrease in the Company’s stock price, causing its market capitalization to be substantially less than its carrying value. See additional discussion under Critical Accounting Policies below. Net income was $107.9 million in 2014,  compared to a net income of $87.3 million in 2013 and net loss of $265.4 million in 2012. Basic and diluted earnings per share were $2.22 and $2.20, respectively, in 2014, compared to basic and diluted earnings per share of $1.82 and $1.80, respectively, in 2013, and basic and diluted loss per share of $5.59 and $5.59, respectively, in 2012. On an adjusted basis, net income and diluted earnings per share in 2012 were $70.3 million and $1.46, respectively, excluding the $326.4 million after-tax goodwill and intangible asset impairment charge, a $3.0 million after-tax litigation provision relating to an adverse court decision, $3.6 million in discrete tax expense adjustments, and a $2.7 million pre-tax loss on the sale of certain Auction Rate Securities (“ARS”). Net income and diluted earnings per share excluding these adjustments are non-U.S. GAAP financial measures, which are discussed below and are reconciled to the most directly comparable U.S. GAAP measures.

Revenues increased by $316.6 million, or 7.6%,  during 2014.  This increase was due primarily to increased activity on projects at Hudson Yards in New York, certain electrical and mechanical projects on the East Coast, certain mass transit projects in California and New York, and certain bridge projects in the Midwest and New York. The increase was partially offset by decreased activity on hospitality and gaming projects in various states, healthcare projects in California, and tunnel projects on the West Coast.

Income from construction operations increased by $37.9 million,  or 18.6%,  during 2014.  This increase was due primarily to the revenue increase discussed above and net favorable adjustments to anticipated recoveries associated with two legal rulings issued in the second quarter of 2014.

Other expense (income), net, was an expense of $9.5 million in 2014, a decrease of $9.1 million compared to an expense of $18.6 million in 2013. This decrease was primarily driven by decreases in contingent consideration retated to past business acquisition expenses.

Interest expense decreased by $0.9 million during 2014. This decrease was primarily driven by lower interest rates, offset by an increased level of borrowings.

The provision for income taxes increased by $27.2 million during 2014. This increase was primarily driven by increased net income and increased activity in certain higher-tax jurisdictions.

At December 31, 2014, we had working capital of $1.1 billion, a ratio of current assets to current liabilities of 1.82, and a ratio of debt to equity of 0.63  compared to working capital of $0.8 billion, a ratio of current assets to current liabilities of 1.61, and a ratio of debt to equity of 0.59 at December 31, 2013. Our stockholders’ equity increased to $1.4 billion as of December 31, 2014 from $1.2 billion as of December 31, 2013.

Non-U.S. GAAP Measures

Our consolidated financial statements are presented based on U.S. GAAP. We sometimes use non-U.S. GAAP measures of income from operations, net income, earnings per share and other measures that we believe are appropriate to enhance an overall understanding of our historical financial performance and future prospects. We are providing these non-U.S. GAAP measures to

26


Table of Contents

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. For these reasons, management believes these non-U.S. GAAP measures can be useful operating performance measures to be considered by investors, prospective investors and others. These non-U.S. GAAP measures are not intended to replace the presentation of our financial results in accordance with U.S. GAAP, and they may not be comparable to other similarly titled measures of other companies.

The following table is a reconciliation of reported income (loss) from construction operations, net income (loss), and diluted earnings (loss) per share under U.S. GAAP to income from operations, net income and diluted earnings per share for the years ended December 31, 2014, 2013, and 2012, excluding discrete items. For the year ended December 31, 2012, included in discrete items is the impact of the following one-time expenses (benefits): (i) a $326.4 million after-tax impairment charge, (ii) a $3.0 million after-tax litigation provision relating to an adverse court decision, (iii) $3.6 million of discrete tax expense items related to an increase in unrecognized tax benefits and an adjustment, both associated with certain stock-based compensation items identified during the first quarter of 2012, and (iv) a $2.7 million realized loss on the sale of ARS in the first quarter of 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

(in thousands, except per share data)

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

Reported net income (loss)

 

$

107,936 

 

$

87,296 

 

$

(265,400)

Plus: Impairment charge

 

 

 —

 

 

 —

 

 

376,574 

Less: Tax benefit provided on impairment charge

 

 

 —

 

 

 —

 

 

(50,158)

Plus: Litigation provision less tax benefit

 

 

 —

 

 

 —

 

 

2,980 

Plus: Realized loss on sale of investments

 

 

 —

 

 

 —

 

 

2,699 

Plus: Discrete tax adjustments

 

 

 —

 

 

 —

 

 

3,649 

Net income, excluding discrete items

 

$

107,936 

 

$

87,296 

 

$

70,344 

 

 

 

 

 

 

 

 

 

 

Reported diluted income (loss) per common share

 

$

2.20 

 

$

1.80 

 

$

(5.59)

Plus: Impairment charge, net of tax benefit

 

 

 —

 

 

 —

 

 

6.85 

Plus: Litigation provision less tax benefit

 

 

 —

 

 

 —

 

 

0.06 

Plus: Realized loss on sale of investments

 

 

 —

 

 

 —

 

 

0.06 

Plus: Discrete tax adjustments

 

 

 —

 

 

 —

 

 

0.08 

Diluted earnings per common share,

 

 

 

 

 

 

 

 

 

excluding discrete items

 

$

2.20 

 

$

1.80 

 

$

1.46 

Backlog Analysis for 2014

Our backlog of uncompleted construction work at December 31, 2014 was approximately $7.8 billion compared to $7.0 billion at December 31, 2013. During 2014,  we booked a number of pending awards into backlog across each of our business segments and had significant net favorable adjustments to existing contracts. Significant new award bookings during 2014 included two mass transit projects in New York collectively valued at $844 million; a $255 million multi-unit residential tower project in Florida; a $243 million runway reconstruction project in New York; two hospitality and gaming projects in Mississippi and California collectively valued at $225 million; a $211 million healthcare facility project in California; three bridge projects in Wisconsin and Minnesota collectively valued at $181 million; a $120 million retail development project in California; and a $113 million technology building project in California. As a result of these and other new awards and adjustments to existing contracts, we experienced strong backlog growth in our Building and Specialty Contractors segments. Our Civil segment’s backlog was flat for the year despite several large new awards, as a result of the segment’s strong revenue performance in 2014. We estimate that approximately $3.7 billion, or 47.8% of our backlog at December 31, 20142016 will be recognized as revenue in 2015.2017.



In addition to our existing backlog, we continue to have a significant volume of pending contract awards, including up to $2.3 billion in the total construction value of various future phases of the Hudson Yards project, and various other contracts. We anticipate booking many of our pending awards into backlog over the next several quarters, and future phases of the Hudson Yards project over the next several years, as the contracts for these various projects are executed. We continue tracking several large-scale civil and building prospects for both public and private sector customers as we further leverage our self-performance and schedule control capabilities.

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Table of Contents

The following table provides an analysis of ourpresents the changes in backlog by business segment for the year ended December 31, 2014.in 2016:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Backlog at

 

New Business

 

Revenues

 

Backlog at

 

Backlog at

 

 

 

Revenue

 

Backlog at

 

December 31, 2013

 

Awarded (1)

 

Recognized

 

December 31, 2014

 

December 31,

 

New Awards

 

Recognized

 

December 31,

 

 

(in millions)

 

(in millions)

2015

 

in 2016 (a)

 

in 2016

 

2016

Civil

 

$

3,538.1 

 

$

1,712.2 

 

$

(1,687.1)

 

$

3,563.2 

 

$

2,743.7 

 

$

1,597.4 

 

$

(1,669.0)

 

$

2,672.1 

Building

 

1,755.1 

 

 

1,936.6 

 

 

(1,503.9)

 

2,187.8 

 

 

2,780.4 

 

 

1,270.6 

 

 

(2,069.8)

 

1,981.2 

Specialty Contractors

 

 

1,661.1 

 

 

1,720.9 

 

 

(1,301.3)

 

 

2,080.7 

 

 

1,941.0 

 

 

867.1 

 

 

(1,234.3)

 

 

1,573.8 

Total

 

$

6,954.3 

 

$

5,369.7 

 

$

(4,492.3)

 

$

7,831.7 

 

$

7,465.1 

 

$

3,735.1 

 

$

(4,973.1)

 

$

6,227.1 

 

 

 

 

 

 

 

 

 

 

 

 

 

______________


(1)(a)

New business awarded consistsawards  consist of the original contract price of projects added to our backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.



Critical Accounting Policies

Our accounting and financial reporting policies are in conformity with U.S. GAAP. The preparation ofoutlook for our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affectCompany’s growth over the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. Although our significant accounting policies are described in Note 1 — Description of Business and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules, the following discussion is intended to describe those accounting policies most critical to the preparation of our consolidated financial statements.

Use of and Changes in Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our construction business involves making significant estimates and assumptions in the normal course of business relating to our contracts and our joint venture contracts due to, among other things, the one-of-a-kind nature of most of our projects, the long-term duration of our contract cycle and the type of contract utilized. Therefore, management believes that the “Method of Accounting for Contracts”next several years is the most importantfavorable it has been in many years, particularly in the Civil segment. In addition to our large volume of backlog, we expect significant new award activity based on long-term capital spending plans by various state, local and critical accounting policy.federal customers, and typically bipartisan support for infrastructure investments. In the November 2016 U.S. election, voters in numerous states approved dozens of transportation funding measures totaling approximately $200 billion in long-term funding. The mostlargest 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 the next 40 years, and in Seattle, Washington, where Sound Transit 3 was passed and is expected to generate $54 billion of funding over the next 25 years for regional transportation projects. In addition, the Trump administration envisions a significant estimatesinfrastructure investment program, has identified a priority list containing dozens of “emergency and national security” projects and is preparing to present its infrastructure plan for approval and funding. Furthermore, the $305-billion Fixing America’s Surface Transportation (FAST) Act, which was approved in late 2015, is expected to provide state and local agencies with regardfederal funding for numerous highway, bridge and mass-transit projects through 2020. Several large, long-duration civil infrastructure programs with which we are already involved are also progressing, such as California’s High-Speed Rail system and the New York Metropolitan Transportation Authority’s East Side Access project. Planning and permitting are also underway related to Amtrak’s Northeast Corridor Improvements, including the Gateway Program, which will eventually bring new rail tunnels beneath the Hudson River to connect service between New Jersey and New York’s Penn Station. Finally, sustained low interest rates and capital costs are expected to drive high demand and continued spending by private and public customers on building infrastructure projects.

For a more detailed discussion of operating performance of each business segment, corporate general and administrative expense and other items, see “Results of Segment Operations,” “Corporate, Tax and Other Matters” and “Liquidity and Financial Condition” below.

Results of Segment Operations

The Company provides professional services consisting of construction management, including specialty construction services involving electrical, mechanical, HVAC, plumbing and pneumatically placed concrete, to private and public customers primarily in the United States and its territories and in certain other international locations. The Company’s three principal business segments are as follows: Civil, Building and Specialty Contractors. For more information on these financial statements relatebusiness segments, see “Item 1. – Business” above.

Civil Segment

Revenue and income from construction operations for the Civil segment are summarized as follows:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in millions)

2016

 

2015

 

2014

Revenue

$

1,669.0 

 

$

1,889.9 

 

$

1,687.1 

Income from construction operations

 

172.7 

 

 

145.2 

 

 

220.6 

Revenue for 2016 decreased 12% compared to 2015, principally due to the estimatingprior-year completion of total forecasted construction contract revenues, costsa large runway reconstruction project in New York and profitsreduced activity in accordance with accounting for long-term contracts (see Note 1 — Description of Business and Summary of Significant Accounting Policies, under the section entitled (d) Use of and Changes in Estimates of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules) and estimating potential liabilities in conjunction with certain contingencies, including the outcome of pending or future litigation, arbitration or other dispute resolution proceedings relating to contract claims (see Note 8  —  Contingencies and Commitments of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules). Actual results could differ from these estimates and such differences could be material.

Our estimates of contract revenue and cost are highly detailed. We believe that, based on our experience, our current systems of management and accounting controls allow us to produce materially reliable estimates of total contract revenue and cost during any accounting period. However, many factors can and do change during a contract performance period which can result in a change to contract profitability from one financial reporting period to another. Some of the factors that can change the estimate of total contract revenue and cost include differing site conditions (to the extent that contract remedies are unavailable), the availability of skilled contract labor, the performance of major material suppliers to deliver on time, the performance of major subcontractors, unusual weather conditions and the accuracy of the original bid estimate. Because we have many contracts in process at any given time, these changes in estimates can offset each other minimizing the impact on overall profitability. However, large changes in cost estimates on larger, more complex construction projects can have a material impact on our financial statements and are reflected in our results of operations when they become known.

Management focuses on evaluating the performance of contracts individually. In the ordinary course of business, and at a minimum2016 on a quarterly basis, we update projected total contract revenue, costplatform project at Hudson Yards in New York, which is nearing completion. The decrease was partially offset by increased activity on various projects, including a large tunnel project in Seattle, Washington and profit or lossa large mass-transit project in California. Revenue for each of our contracts based2015 increased 12% compared to 2014, principally due to progress on changes in facts, such as an approved scope change, and changes in estimates. Normal, recurring changes in estimates include, but are not limited to: (i) changes in estimated scope as a result of unapproved or unpriced customer change orders; (ii) changes in estimated productivity assumptions based on experience to date; (iii) changes in estimated materials costs based on experience to date; (iv) changes in estimated subcontractor costs based on subcontractor buyout experience; (v) changes in the timing of scheduled work that may impact future costs; (vi) achievement of incentive income; and (vii) changes in estimated recoveries through the settlement of litigation.

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During the year ended December 31, 2014, our results of operations were impacted by $27.9 million because of changesprojects in the estimated recoveries on two Civil segment projects driven by changes in cost recovery assumptions based on certain legal rulings issued during the second quarter of 2014, as well as a final settlement agreement regarding a Building segment project reached with our customer during the fourth quarter of 2014, which resulted in a $11.4 million increase in the estimated recovery projected for that project. With respect to the two Civil segment projects, during 2014 there was a $25.9 million favorable increase and a $9.4 million unfavorable decrease. These changes in estimates altogether resulted in an increase of $27.9 million in income from construction operations, $16.0 million in net income, and $0.33 in diluted earnings per common share during 2014.

During the year ended December 31, 2013, our results of operations were impacted by a $13.8 million increase in the estimated recovery projected for a Building segment project due to changes in facts and circumstances that occurred during 2013. This change in estimate resulted in an increase of $13.8 million in income from construction operations, $8.6 million in net income, and $0.18 in diluted earnings per common share during 2013.

These changes were the only changes in estimates considered material to the Company's results of operations during the periods presented herein.

Contracts vary in lengths and larger contracts can span over two to six years. At various stages of a contract’s life cycle, different types of changes in estimates are more typical. Generally during the early ramp up stage, cost estimates relating to purchases of materials and subcontractors are frequently subject to revisions. As a contract moves into the most productive phase of execution, change orders, project cost estimate revisions and claims are frequently the sources for changes in estimates. During the contract’s final phase, remaining estimated costs to complete or provisions for claims will be closed out and adjusted based on actual costs incurred. The impact on operating margin in a reporting period and future periods from a change in estimate will depend on the stage of contract completion. Generally, if the contract is at an early stage of completion, the current period impact is smaller than if the same change in estimate is made to the contract at a later stage of completion. Likewise, if the company’s overall project portfolio was to be at a later stage of completion during the reporting period, the overall gross margin could be subject to greater variability from changes in estimates.

When recording revenue on contracts relating to unapproved change orders and claims, we include in revenue an amount less than or equal to the amount of costs incurred by us to date for contract price adjustments that we seek to collect from customers for delays, errors in specifications or designs, change orders in dispute or unapproved as to scope or price, or other unanticipated additional costs, in each case when recovery of the costs is considered probable. The amount of unapproved change orders and claim revenues is included in our Consolidated Balance Sheets as part of costs and estimated earnings in excess of billings. When determining the likelihood of eventual recovery, we consider such factors as evaluation of entitlement, settlements reached to date and our experience with the customer. The settlement of these issues may take years depending upon whether the item can be resolved directly with the customer or involves litigation or arbitration. When new facts become known, an adjustment to the estimated recovery is made and reflected in the current period results.

Method of Accounting for Contracts — Revenues and profits from our contracts and construction joint venture contracts are recognized by applying percentages of completion for the period to the total estimated revenues for the respective contracts. Percentage of completion is determined by relating the actual cost of the work performed to date to the current estimated total cost of the respective contracts. When the estimate on a contract indicates a loss, the entire loss is recorded during the accounting period in which it is estimated. In the ordinary course of business, at a minimum on a quarterly basis, we prepare updated estimates of the total forecasted revenue, cost and profit or loss for each contract. The cumulative effect of revisions in estimates of the total forecasted revenue and costs, including unapproved change orders and claims, during the course of the work is reflected in the accounting period in which the facts that caused the revision become known. The financial impact of these revisions to any one contract is a function of both the amount of the revision and the percentage of completion of the contract. An amount up to the costs incurred that are attributable to unapproved change orders and claims is included in the total estimated revenue when realization is probable. For a further discussion of unapproved change orders and claims, see Item 1. Business under the section entitled Types of Contracts and The Contract Process and Item 1A. Risk Factors. Profit from unapproved change orders and claims is recorded in the accounting period in which such amounts are resolved.

Billings in excess of costs and estimated earnings represents the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date on the percentage of completion accounting method. Costs and estimated earnings in excess of billings represents the excess of contract costs and profits (or contract revenue) recognized to date on the percentage of completion accounting method over contract billings to date. Costs and estimated earnings in excess of billings results when (1) the appropriate contract revenue amount has been recognized in accordance with the percentage of completion accounting method, but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract and/or (2) costs, recorded at estimated realizable value, related to unapproved change orders or claims are incurred. For unapproved change orders or claims that cannot be resolved in accordance with the normal change order process as defined in the contract, we may employ other dispute resolution methods, including mediation, binding and non-binding arbitration, or litigation. See Item 3. Legal Proceedings and Note 8 - Contingencies and Commitments of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial

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Statement Schedules. The prerequisite for billing unapproved change orders and claims is the final resolution and agreement between the parties. Costs and estimated earnings in excess of billings related to our contracts and joint venture contracts at December 31, 2014 is discussed above under “Use of and Changes in Estimates” and in Note 1 — Description of Business and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules.

Impairment of Goodwill and Other Intangible Assets - Intangible assets with finite lives are amortized over their useful lives. Construction contract backlog is amortized on a weighted-average basis over the corresponding contract period. Customer relationships and certain trade names are amortized on a straight-line basis over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized. We evaluate intangible assets that are not being amortized at the end of each reporting period to determine whether events and circumstances continue to support an indefinite useful life.

We test goodwill and intangible assets with indefinite lives for impairment by applying a fair value test in the fourth quarter of each year and between annual tests if events occur or circumstances change which suggest that the goodwill or intangible assets should be evaluated. Intangible assets with finite lives are tested for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. The first step in the two-step process of the impairment analysis is to determine the fair value of the Company and each of its reporting units and compare the fair value of each reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value, a second step must be followed to calculate the goodwill impairment. The second step involves determining the fair value of the individual assets and liabilities of the reporting unit that failed the first step and calculating the implied fair value of goodwill. To determine the fair value of the Company and each of its reporting units, we utilize both an income-based valuation approach as well as a market-based valuation approach. The income-based valuation approach is based on the cash flows that the reporting unit expects to generate in the future and it requires us to project revenues, operating expenses, working capital investment, capital spending and cash flows for the reporting unit in a discrete period, as well as determine the weighted-average cost of capital to be used as a discount rate and a terminal value growth rate for the non-discrete period. The market-based valuation approach to estimate the fair value of our reporting units utilizes industry multiples of revenues and operating earnings. We conclude on the fair value of the reporting units by assuming a 67% weighting on the income-based approach and a 33% weighing on the market-based valuation approach.

As part of the valuation process, the aggregate fair value of the Company is compared to its market capitalization at the valuation date in order to determine an implied control premium. In evaluating whether our implied control premium is reasonable, we consider a number of factorsNew York area, including the following factors of greatest significance.

·

Market control premium: We compare our implied control premium to the average control premium paid in transactions of companies in the construction industry during the year of evaluation.

·

Sensitivity analysis: We perform a sensitivity analysis to determine the minimum control premium required to recover the book value of the Company at the testing date. The minimum control premium required is then compared to the average control premium paid in transactions of companies in the construction industry during the year of evaluation.

·

Impact of low public floatCM006 and CS179 mass-transit projects, and limited trading activity:  A significant portion of our common stock is owned by our Chairman and CEO. As a result, the public float of our common stock, calculated as the percentage of shares of common stock freely traded by public investors divided by our total shares outstanding, is significantly lower than that of its publicly traded peers. This circumstance does not impact the fair value of the Company, however based on its evaluation of third party market data, we believe it does lead to an inherent marketability discount impacting its stock price.

Impairment assessment inherently involves management judgments as to the assumptions used for projections and to evaluate the impact of market conditions on those assumptions. The key assumptions that we use to estimate the fair value of our reporting units under the income-based approach are as follows:

·

Weighted-average cost of capital used to discount the projected cash flows;

·

Cash flows generated from existing and new work awards; and

·

Projected operating margins.

Weighted-average cost of capital rates used to discount the projected cash flows are developed via the capital asset pricing model which is primarily based upon market inputs. We use discount rates that management feels are an accurate reflection of the risks associated with the forecasted cash flows of our respective reporting units.

To develop the cash flows generated from new work awards and future operating margins, we primarily track prospective work for each of our reporting units on a project-by-project basis as well as the estimated timing of when the work would be bid or prequalified, started and completed. We also give consideration to our relationships with the prospective owners, the pool of competitors that are capable of performing large, complex work, changes in business strategy and the Company’s history of success in winning new work

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in each reporting unit. With regard to operating margins, we give consideration to our historical reporting unit operating margins in the end markets that the prospective work opportunities are most significant, current market trends in recent new work procurement, and changes in business strategy.

We also estimate the fair value of our reporting units under a market-based approach by applying industry-comparable multiples of revenues and operating earnings to our reporting units’ projected performance. The conditions and prospects of companies in the construction industry depend on common factors such as overall demand for services.

Changes in our assumptions or estimates could materially affect the determination of the fair value of a reporting unit. Such changes in assumptions could be caused by:

·

Terminations, suspensions, reductions in scope or delays in the start-up of the revenues and cash flows from backlog as well as the prospective work we track;

·

Reductions in available government, state and local agencies and non-residential private industry funding and spending;

·

Our ability to effectively compete for new work and maintain and grow market penetration in the regions that the Company operates in;

·

Our ability to successfully control costs, work schedule, and project delivery; or

·

Broader market conditions, including stock market volatility in the construction industry and its impact on the weighted- average cost of capital assumption.

On a quarterly basis we consider whether events or changes in circumstances indicate that assets, including goodwill and intangible assets not subject to amortization might be impaired. In conjunction with this analysis, we evaluate whether our current market capitalization is less than our stockholders’ equity and specifically consider (1) changes in macroeconomic conditions, (2) changes in general economic conditions in the construction industry including any declines in market-dependent multiples, (3) cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows analyses, (4) a reconciliation of the implied control premium to a current market control premium, (5) target price assessments by third party analysts and (6) the impact of current market conditions on its forecast of future cash flows including consideration of specific projects in backlog, pending awards, or large prospect opportunities. We also evaluate our most recent assessment of the fair value for each of our reporting units, considering whether our current forecast of future cash flows is in line with those used in our annual impairment assessment and whether there are any significant changes in trends or any other material assumptions used.

As of December 31, 2014, we have concluded that we do not have an impairment of our goodwill or our indefinite-lived intangible assets and that the estimated fair value of each reporting unit exceeds its carrying value. See Note 3 — Goodwill and Other Intangible Assets of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedule for additional goodwill disclosure.

At December 31, 2013, the carrying value of our investment in auction rate securities (“ARS”) approximated fair value.

On April 30, 2014, the Company sold its ARS for $44.5 million.  At December 31, 2013 the Company had $46.3 million invested in these ARS which the Company considered as available-for-sale long-term investments. The long-term investments in ARS held by the Company at December 31, 2013 were in securities collateralized by student loan portfolios. At both March 31, 2014 and December 31, 2013, most of the Company’s ARS were rated AA+ and approximated fair value.

The contingent consideration involved in the purchases of several of our recently acquired entities is also measured at fair value utilizing unobservable (Level 3) inputs. We estimate these fair values utilizing an income approach which is based on the cash flows that the acquired entity is expected to generate in the future. This approach requires management to project revenues, operating expenses, working capital investment, capital spending and cash flows for the reporting unit over a multi-year period, as well as determine the weighted-average cost of capital to be used as a discount rate. See Note 2 — Fair Value Measurements of Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules for more information on our investment in ARS and contingent consideration.

Share-based Compensation - We have granted restricted stock units and stock options to certain employees and non- employee directors. We recognize share-based compensation expense net of an estimated forfeiture rate and only recognize compensation expense for those shares expected to vest on a straight-line basis over the requisite service period of the award (which corresponds to the vesting period). Determining the appropriate fair value model and calculating the fair value of stock option awards requires the input of highly subjective assumptions, including the expected life of the stock option awards and the expected volatility of our stock price over the life of the awards. We used the Black-Scholes-Merton option pricing model to value our stock option awards, and utilized the historical volatility of our common stock as a reasonable estimate of the future volatility of our common stock over the

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expected life of the awards. The assumptions used in calculating the fair value of share-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change which require the use of different assumptions, share-based compensation expense could be materially different in the future. In addition, if the actual forfeiture rate is materially different from our estimate, share-based compensation expense could be significantly different from what has been recorded through December 31, 2014.

Insurance Liabilities — We assume the risk for the amount of the deductible portion of the losses and liabilities primarily associated with workers’ compensation, general liability and automobile liability coverage. Losses are accrued based upon our estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions followed in the insurance industry. The estimate of our insurance liability within our deductible limits includes an estimate of incurred but not reported claims based on data compiled from historical experience. Actual experience could differ significantly from these estimates and could materially impact our consolidated financial position and results of operations. We purchase varying levels of insurance from third parties, including excess liability insurance, to cover losses in excess of our deductible limits. Currently, our deductible limit for workers’ compensation, general liability and automobile coverage is generally $1.0 million per occurrence, subject to a policy aggregate loss limitation based upon policy exposures. In addition, on certain projects, we assume the risk for the amount of the deductible portion of losses and a co-payment amount that arise from any subcontractor defaults. Our deductible limit for subcontractor default on projects covered under our program ranges from $0.5 million to $2.0 million per occurrence, with a co- payment of 20% of the next $5.0 million, subject to an annual aggregate ranging from $3.5 million to $4.0 million.

Accounting for Income Taxes — Information relating to our provision for income taxes and the status of our deferred tax assets and liabilities is presented in Note 5 - Income Taxes of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules. A key assumption in the determination of our book tax provision is the amount of the valuation allowance, if any, required to reduce the related deferred tax assets. The net deferred tax assets reflect management’s estimate of the amount which will, more likely than not, reduce future taxable income.

Our accounting policy requires us to identify and review potential tax uncertainties for tax positions taken or expected to be taken in a tax return and determine whether the exposure to those uncertainties have a material impact on our results of operations or financial condition as of December 31, 2014.

Defined Benefit Retirement Plan — The status of our defined benefit pension plan obligations, related plan assets and cost is presented in Note 7 - Employee Benefit Plans of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules. Plan obligations and annual pension expense are determined by actuaries using a number of key assumptions which include, among other things, the discount rate and the estimated future return on plan assets. The discount rate of 4.47% used for purposes of computing the 2014 annual pension expense was determined at the beginning of the calendar year based upon an analysis performed by our actuaries which matches the cash flows of our plan’s projected liabilities to bond investments of similar amounts and durations. We plan to change the discount rate used for computing the 2015 annual pension expense to 3.75% based upon a similar analysis by our actuaries.

The estimated return on plan assets is primarily based on historical long-term returns of equity and fixed income markets according to our targeted allocation of plan assets 90% equity, 5% fixed income and 5% cash. We plan to use a return on asset rate of 6.75% in 2015 based on projected equity performance compared to long-term historical averages.

The plans’ benefit obligations exceeded the fair value of plan assets on December 31, 2014 and 2013 by $35 million and $22.6 million, respectively. Accordingly, we recorded adjustments to our pension liability with an offset to accumulated other comprehensive income (loss), a component of stockholders’ equity.

Effective June 1, 2004, all benefit accruals under our pension plan were frozen; however, the vested benefit was preserved. We anticipate that pension expense will increase from $3.7 million in 2014 to $4.9 million in 2015. Cash contributions to our defined benefit pension plan are anticipated to be approximately $2.3 million in 2015. Cash contributions may vary significantly in the future depending upon asset performance and the interest rate environment.

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Table of Contents

Results of Operations -

2014 Compared to 2013

Revenues

The following table summarizes our revenues by business segment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues for the

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

 

 

 

 

(dollars in millions)

 

2014

 

2013

 

$ Change

 

% Change

Civil

 

$

1,687.1 

 

$

1,441.4 

 

$

245.7 

 

17.0 

%

Building

 

 

1,503.8 

 

 

1,552.0 

 

 

(48.2)

 

(3.1)

%

Specialty Contractors

 

 

1,301.4 

 

 

1,182.3 

 

 

119.1 

 

10.1 

%

Total Revenues

 

$

4,492.3 

 

$

4,175.7 

 

$

316.6 

 

7.6 

%

Civil Segment

Civil segment revenues were $1,687.1 million in 2014,  increase of $245.7 million, or 17%, compared to $1,441.4 million in 2013. The increase in revenues was due primarily to increased activity on civil projects at Hudson Yards in New York, certain mass transit projects in California and New York, certainvarious bridge projects in the Midwest and New York, and a runway reconstruction project in New York. TheMidwest. This increase was partially offset by decreased activity on certain tunnel projects on the West Coast,Coast.

Income from construction operations increased 19% in 2016 compared to 2015, due to improved operating performance and because the prior-year results included the Brightwater litigation-related charge of $23.9 million. The increase was partially offset by the impact of the reduced volume discussed above. Income from construction operations declined 34% in 2015 compared to 2014 primarily due to reduced activity on certain highwayhigher-margin projects, the aforementioned Brightwater litigation-related charge, decreased activity on certain tunnel projects on the EastWest Coast and an airport parking apronnet favorable adjustments in 2014 of $16.5 million due to anticipated recoveries associated with two legal rulings. The decline was partially offset by increased activity, as well as favorable adjustments in 2015 totaling $13.7 million on the runway reconstruction project in New York.

Operating margin was 10.3% in 2016, compared to 7.7% in 2015 and 13.1% in 2014. The increase in operating margin in 2016 was primarily due to the reasons discussed above that impacted revenue and income from construction operations. The margin decline in 2015 was also due to the reasons discussed above regarding changes in revenue and income from construction operations. Excluding the Brightwater litigation-related charge and favorable adjustments for the runway project in New York, operating margin in 2015 was 8.2%. Our 2014 performance benefitted from significant work performed on certain higher-margin projects.

New awards in the Civil segment totaled $1.6 billion in 2016, $1.1 billion in 2015 and $1.7 billion in 2014. New awards in 2016 included a $663 million mass-transit project in New York, approximately $277 million of new bridge projects in the Midwest, the Company’s share of $244 million of additional contract scope for a mass-transit project in California, a $107 million highway project in Virginia and a $97 million airport terminal expansion project in Guam. New awards in 2015 included a mass-transit project in New York valued at $80 million, highway projects in Delaware, Maryland and Pennsylvania valued at $70 million, $60 million and $58 million, respectively, and a tunnel extension project in New York worth $56 million. New awards in 2014 included two mass-transit projects in New York collectively valued at $844 million, a runway reconstruction project in New York valued at $243 million and three bridge projects in Wisconsin and Minnesota collectively valued at $181 million.

Backlog for the Civil segment was $2.7 billion as of December 31, 2016, consistent with $2.7 billion as of December 31, 2015 and compared to $3.6 billion as of December 31, 2014. Civil segment backlog is expected to grow in early 2017, primarily the result of a new award in January 2017 for a $1.4 billion joint-venture mass-transit project in Los Angeles that the Company will consolidate in its financial results starting in the first quarter of 2017. The segment continues to experience strong demand reflected in a large pipeline of prospective projects and substantial anticipated funding associated with various transportation measures that were voter-approved during the November 2016 election; the Trump administration’s considerable, expected infrastructure investment program; public agencies’ long-term spending plans; and the $305-billion FAST Act. The Civil segment is well-positioned to capture its share of these prospective projects. The segment, however, faces continued strong competition, including occasional aggressive bids from foreign competitors.



Building Segment



Revenue and income from construction operations for the Building segment revenues were $1,503.8 million in 2014, a decrease of $48.2 million, or 3.1%, compared to $1,552.0 million in 2013. The decrease was due primarily to decreased activity on hospitality and gaming projects in California, Arizona, Nevada, Louisiana, and Pennsylvania, healthcare projects in California, and a containerized housing project in Iraq. The decrease was partially offset by increased activity on certain mixed-use facility projects in New York (including Hudson Yards), California, and Louisiana, and an industrial project in California.are summarized as follows:



Specialty Contractors Segment



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in millions)

2016

 

2015

 

2014

Revenue

$

2,069.8 

 

$

1,802.5 

 

$

1,503.8 

(Loss) Income from construction operations

 

51.6 

 

 

(1.2)

 

 

24.7 



Specialty Contractors segment revenues were $1,301.4 million in 2014, an increase of $119.1 million, or 10.1%,Revenue for 2016 increased  15% compared to $1,182.3 million in 2013. The increase was2015, principally due primarily to increased activity on various mechanical projects on the East Coast, two signal system modernizationcommercial office, technology, health care, hospitality and gaming, and retail building projects in New York, and various electrical projects in the southern U.S. TheCalifornia. This increase was partially offset by Hurricane Sandy-relatedthe completion in 2015 of a hospitality and gaming project in Mississippi. Revenue for 2015 increased 20% compared to 2014, primarily driven by increased activity on various commercial office, technology, government, education and retail building projects performed in 2013.California.



Income from Construction Operations

construction operations increased considerably in 2016 compared to 2015, when the segment experienced a slight loss. The following table summarizes our income (loss)strong increase was due to improved operating performance and prior-year unfavorable adjustments, totaling $24.3 million, to the estimated cost to complete an office building project in New York. Income from construction operations by business segment:declined in 2015 compared to 2014, primarily due to the above-mentioned unfavorable adjustments and favorable adjustments in 2014 totaling $11.4 million for a large hospitality and gaming project.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from Construction Operations

 

 

 

 

 

 

 

 

 

 

 

and Operating Margins for the

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

Change in

 

 

2014

 

2013

 

Amount

 

Margin

(dollars in millions)

 

Amount

 

Margin

 

Amount

 

Margin

 

$

 

%

 

%

Civil

 

$

220.6 

 

13.1 

%

 

$

177.7 

 

12.3 

%

 

$

42.9 

 

24.1 

%

 

0.8 

%

Building

 

 

24.7 

 

1.6 

%

 

 

24.5 

 

1.6 

%

 

 

0.2 

 

0.8 

%

 

 —

%

Specialty Contractors

 

 

51.0 

 

3.9 

%

 

 

49.0 

 

4.1 

%

 

 

2.0 

 

4.1 

%

 

(0.2)

%

 

 

 

296.3 

 

6.6 

%

 

 

251.2 

 

6.0 

%

 

 

45.1 

 

18.0 

%

 

0.6 

%

Corporate

 

 

(54.6)

 

(1.1)

%

 

 

(47.4)

 

(1.1)

%

 

 

(7.2)

 

15.2 

%

 

 —

%

Income from construction operations

 

 

241.7 

 

5.4 

%

 

 

203.8 

 

4.9 

%

 

 

37.9 

 

18.6 

%

 

0.5 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin was 2.5% in 2016, compared to (0.1)% in 2015 and 1.6% in 2014. The following discussion ofnotable margin improvement in 2016 was due to the above-mentioned factors that drove the changes in revenue and income (loss) from construction operations foroperations. The margin decline in 2015 was principally due to the years ended December 31, 2014 and 2013 has been prepared to compare operating results of each segment betweenfactors discussed above that caused the two fiscal years.significant decline in income from construction operations.

 

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Table of Contents

 

Civil SegmentNew awards in the Building segment totaled $1.3 billion in 2016, $2.4 billion in 2015 and $1.9 billion in 2014. New awards in 2016 included a hospitality and gaming project in California and another in Maryland, collectively valued at $372 million; a hospitality project in California valued at $120 million; and a multi-unit residential project in Florida valued at $72 million. New awards in 2015 included a technology research and development office project valued at $800 million and $230 million of incremental funding for a biotechnology project, both in California, and a hospitality project in Pennsylvania worth $239 million. New awards in 2014 included a multi-unit residential project in Florida worth $255 million, two hospitality and gaming projects in Mississippi and California collectively valued at $225 million and a health care project in California valued at $211 million.



CivilBacklog for the Building segment income from construction operations was $220.6 million in 2014,  an increase$2.0 billion as of $42.9 million, or 24.1%,December 31, 2016, compared to $177.7 million$2.8 billion as of December 31, 2015 and $2.2 billion as of December 31, 2014. The backlog decline in 2013. The increase2016 was due primarily to strong revenue burn that outpaced new awards during the volume changes discussed above under Revenues and net favorable adjustments to anticipated recoveries associated with two legal rulings issued in the second quarter of 2014.year. The increase was partially offset by reduced activity on certain higher-margin projects.

Civil segment operating margin increased from 12.3% in 2013 to 13.1% in 2014 due primarily to the reasons discussed above.

Building Segment

Building segment income from construction operations was $24.7 million in 2014,  an increasecontinues to have a large pipeline of $0.2 million, or 0.8%, comparedprospective projects, some of which have already been bid and are expected to $24.5 million in 2013.be selected and awarded by customers during the first half of 2017. Strong demand is expected to continue due to ongoing customer spending, supported by a low interest rate environment. The increase  was due primarily to the volume changes discussed above under Revenues and a decrease in general and administrative expenses in 2014 due primarily to increased staff utilization.

Building segment operating margins remained stable: 1.6%is well-positioned to capture its share of prospective projects based on its strong customer relationships and long-term reputation for excellence in 2013delivering high-quality projects on time and 1.6% in 2014.within budget.



Specialty Contractors Segment



Specialty Contractors segmentRevenue and income from construction operations was $51.0 million in 2014,  an increase of $2.0 million, or 4.1%,for the Specialty Contractors segment are summarized as follows:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in millions)

2016

 

2015

 

2014

Revenue

$

1,234.3 

 

$

1,228.0 

 

$

1,301.4 

Income from construction operations

 

37.9 

 

 

15.7 

 

 

51.0 

Revenue for 2016 increased slightly compared to $49.0 million2015. Increased activity on two electrical projects in 2013. The increasethe western United States and electrical projects in New York was mostly offset by decreased activity on various mechanical projects in New York. Revenue for 2015 decreased 6% compared to 2014, primarily due primarily to decreased activity on various smaller electrical projects in the volume changes discussed above under Revenuessouthern United States that were impacted in 2015 by the low price of oil, electrical projects at the World Trade Center and improved financial performancemechanical projects at the United Nations in two of our Specialty Contractors business units. The increaseNew York. This decrease was partially offset by a settlement related to a large hospitality and gaming electrical subcontract recorded in the second quarter of 2013.

Specialty Contractors segment operating margin declined from 4.1% in 2013 to 3.9% in 2014 due primarily to lower-than-expected profitability from our mechanical business unit in New York.

Corporate

Corporate general and administrative expenses were $54.6 million in 2014,  an increase of $7.2 million, or 15.2%, compared to $47.4 million in 2013. The increase was due primarily to increased performance-based incentive compensation expense.

Other Income (Expense), Interest Expense and Provision (Benefit) for Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

 

 

 

(dollars in millions)

 

2014

 

2013

 

$ Change

 

% Change

Other Income (Expense), net

 

$

(9.5)

 

$

(18.6)

 

$

9.1 

 

(48.9)

%

Interest Expense

 

 

44.7 

 

 

45.6 

 

 

(0.9)

 

(2.0)

%

Provision for Income Taxes

 

 

79.5 

 

 

52.3 

 

 

27.2 

 

52.0 

%

Other income (expense), net, decreased by $9.1 million, or 48.9%,  during 2014 compared to 2013 due primarily to decreases in contingent consideration retated to past business acquisitions.  

Interest expense decreased by $0.9 million, or 2.0%,  during 2014 compared to 2013 due primarily to lower interest rates, offset by an increased level of borrowings.

The provision for income taxes was $79.5 million during 2014 compared to $52.3 million during 2013. The increase was due primarily to increased net income and increased activity in certain higher-tax jurisdictions. 

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Table of Contents

Results of Operations -

2013 Compared to 2012

During the first quarter of 2014, we completed a reorganization which resulted in the elimination of the Management Services reporting unit and reportable segment. The Management Services reporting unit formerly consisted of the following subsidiary companies: Black Construction and Perini Management Services. The reorganization was completed due to changes in volume of business resulting in a change in organizational structure as the unit no longer met the criteria set forth in FASB ASC Topic 280, “Segment Reporting”. The following information has been restated as required by U.S. GAAP  to include the affected subsidiary companies in the Civil and Building segments and remove the Management Services segment accordingly .

Revenues

The following table summarizes our revenues by segment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues for the

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

 

 

 

 

(dollars in millions)

 

2013

 

2012

 

$ Change

 

% Change

Civil

 

$

1,441.4 

 

$

1,336.0 

 

$

105.4 

 

7.9 

%

Building

 

 

1,552.0 

 

 

1,592.5 

 

 

(40.5)

 

(2.5)

%

Specialty Contractors

 

 

1,182.3 

 

 

1,183.0 

 

 

(0.7)

 

(0.1)

%

Total Revenues

 

$

4,175.7 

 

$

4,111.5 

 

$

64.2 

 

1.6 

%

Civil Segment

Civil segment revenues were $1,441.4 million in 2013, an increase of $105.4 million, or 7.9%, compared to $1,336.0 million in 2012. The increase was due primarily to the start-up of civil projects at Hudson Yards in New York and certain rail transportation projects in California, as well as increased activity on pipeline projects in the Midwest, a large tunnel project in Washington, an airport runway expansion project in Florida, and an aircraft parking apron project in Guam. The increase was partially offset by the substantial completion of a bridge rehabilitation project in New York, reduced activity on a large tunnel project in California, and several smaller civil and mining projects in the Midwest and on the East Coast.

Building Segment

Building segment revenues were $1,552.0 million in 2013, consistent with $1,592.5 million in 2012. The Building segment experienced increased activity on hospitality and gaming projects in California, Arizona and Nevada, courthouse projects in California and Florida, the Hudson Yards project in New York, and a containerized housing project in Iraq. These increases were offset by reduced activity on several building projects in the southern U.S. in 2013 and reduced activity on several large healthcare projects in California.

Specialty Contractors Segment

Specialty Contractors segment revenues were $1,182.3 million in 2013, consistent with $1,183.0 million in 2012. The Specialty Contractors segment experienced increased activity on various electrical projects on the West Coastat Hudson Yards, two large mass-transit projects and various other electrical, mechanical and concrete placement projects, all in the southern U.S., and on work performedNew York.

Income from construction operations increased 141% in 2016 compared to 2015 because 2015 included unfavorable adjustments totaling $45.6 million for various Five Star Electric projects in New York, none of which were individually material. Income from construction operations declined 69% in connection with damage caused by Hurricane Sandy. These increases were offset by reduced activity2015 compared to 2014, primarily due to the aforementioned unfavorable adjustments related to Five Star Electric.

Operating margin was 3.1% in 2016,  compared to 1.3% in 2015 and 3.9% in 2014. The margin improvement in 2016 was due to the factors mentioned above that impacted income from construction operations. In addition, throughout 2016, management focused on several electricalimproving operational performance at its Five Star Electric and WDF business units in New York and, as a result, considered it a transitional year for the Specialty Contractors segment. The operational improvement is reflected in the segment’s increased income from construction operations and operating margin. Further operating margin improvement is anticipated for the segment in 2017. The margin decline in 2015 was principally due to the aforementioned unfavorable adjustments at Five Star Electric.

New awards in the Specialty Contractors segment totaled $867 million in 2016, $1.1 billion in 2015 and $1.7 billion in 2014. New awards in 2016 included various mechanical projects in New York collectively valued at approximately $146 million, several electrical projects in the southern United States totaling approximately $93 million and on various smaller concrete placement projects on the east and west coasts.

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Table of Contents

Income (Loss) from Construction Operations

The following table summarizes our income (loss) from construction operations by business segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from Construction Operations

 

 

 

 

 

 

 

 

 

 

 

and Operating Margins before

 

 

 

 

 

 

 

 

 

 

 

Impairment Charges

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

Change in

 

 

2013

 

2012

 

Amount

 

Margin

(dollars in millions)

 

Amount

 

Margin

 

Amount

 

Margin

 

$

 

%

 

%

Civil

 

$

177.7 

 

12.3 

%

 

$

118.7 

 

8.9 

%

 

$

59.0 

 

49.7 

%

 

3.4 

%

Building

 

 

24.5 

 

1.6 

%

 

 

2.1 

 

0.1 

%

 

 

22.4 

 

1,066.7 

%

 

1.5 

%

Specialty Contractors

 

 

49.0 

 

4.1 

%

 

 

79.1 

 

6.7 

%

 

 

(30.1)

 

(38.1)

%

 

(2.6)

%

 

 

 

251.2 

 

6.0 

%

 

 

199.9 

 

4.9 

%

 

 

51.3 

 

25.7 

%

 

1.1 

%

Corporate

 

 

(47.4)

 

(1.1)

%

 

 

(45.1)

 

(1.1)

%

 

 

(2.3)

 

5.1 

%

 

 —

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from construction operations before impairment charges

 

 

203.8 

 

4.9 

%

 

 

154.8 

 

3.8 

%

 

 

49.0 

 

31.6 

%

 

1.1 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and intangible asset impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Civil

 

 

 —

 

 

 

 

 

82.5 

 

 

 

 

 

 

 

 

 

 

 

 

Building

 

 

 —

 

 

 

 

 

282.6 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Contractors

 

 

 —

 

 

 

 

 

11.5 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

 

 

 

 

376.6 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from construction operations

 

$

203.8 

 

 

 

 

$

(221.8)

 

 

 

 

 

 

 

 

 

 

 

 

Civil Segment

Civil segment income from construction operations was $177.7 million in 2013, an increase of $59.0 million, or 49.7%,  compared to $118.7 million in 2012. The increase was due primarily to the increase in volume discussed above under Revenues and favorable productivity on an aircraft parking apronelectrical subcontract for a mass-transit project in Guam.

Civil segment operating margin increased from 8.9%New York valued at $86 million. New awards in 2012 to 12.3% in 2013 due primarily to2015 included an increased mix of higher-margin civil projects in certain parts of the U.S.

Building Segment

Building segment income from construction operations was $24.5electrical subcontract valued at $90 million in 2013, an increase of $22.4 million, or 1066.7%,  compared to an income of $2.1 million in 2012. The increase was due primarily to the volume changes discussed above under Revenues, an increase in estimated recoveries onfor a certain large hospitality and gamingmass-transit project in Nevada, certain unrecoverable costs incurredNew York and an electrical subcontract valued at $73 million for a Hudson Yards office tower in 2012 related to an educational facilityNew York. New awards in Alabama,2014 included a $321 million electrical subcontract for a mass-transit project in New York and a decrease in general and administrative expenses in 2013 due primarily to staffing reductions and increased staff utilization. Building segment operating margin increased from 0.1% in 2012 to 1.6% in 2013 due primarily to the reasons discussed above.

Specialty Contractors Segment

Specialty Contractors segment income from construction operations was $49.0two contracts totaling $175 million in 2013, a decrease of $30.1 million, or 38.1%, as compared to $79.1 million in 2012. The decrease in income from construction operations during 2013 was primarily driven by the changes in Revenues discussed above, favorable productivity in 2012for electrical work on several electrical and mechanicalother mass-transit projects in New York and California.

Backlog for the Specialty Contractors segment was $1.6 billion as wellof December 31, 2016, compared to $1.9 billion as changes to certain project cost estimates associatedof December 31, 2015 and $2.1 billion as of December 31, 2014. The Specialty Contractors segment has a significant pipeline of prospective projects, with unfavorable execution issuesdemand for its services supported by strong continued spending on various smaller concrete placementcivil and building projects. The decrease was partially offset by work performedSpecialty Contractors segment is well-positioned to capture its share of prospective projects based on the size and scale of our business units that operate in New York, in connection with damage causedTexas, Florida and California and the strong reputation held by Hurricane Sandy and a favorable settlement related to a large hospitality and gaming electrical subcontract.

Specialty Contractors segment operating margin decreased from 6.7% in 2012 to 4.1% in 2013 due primarily to the above-mentioned reasons.these business units for high-quality work on larger, complex projects.



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Corporate, Tax and Other Matters

Corporate General and Administrative Expense



Corporate general and administrative expenses were $47.4$60.2 million in 2013, an increase2016, $54.2 million in 2015 and $54.6 million in 2014. The higher corporate general and administrative expenses in 2016 were predominantly due to increased compensation expense attributable to improved financial results and the hiring of $2.3 million, or 5.1%,several key executives. In 2015, there was lower performance-based compensation expense compared to $45.1 million in 2012. The increase was due primarily to increased performance-based incentive compensation expense.2014.



Other Income (Expense), Interest Expense and Provision (Benefit) for Income Taxes



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

 

 

 

(dollars in millions)

 

2013

 

2012

 

$ Change

 

% Change

Other Income (Expense), net

 

$

(18.6)

 

$

(1.9)

 

$

(16.7)

 

(878.9)

%

Interest Expense

 

 

45.6 

 

 

44.2 

 

 

1.4 

 

3.2 

%

Provision (Benefit) for Income Taxes

 

 

52.3 

 

 

(2.4)

 

 

54.7 

 

2,279.2 

%





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in millions)

2016

 

2015

 

2014

Other income (expense), net

$

7.0 

 

$

13.6 

 

$

(8.2)

Interest expense

 

(59.8)

 

 

(45.1)

 

 

(46.0)

Provision for income taxes

 

(53.3)

 

 

(28.5)

 

 

(79.5)



Other income, (expense), net, increaseddecreased by $16.7$6.6 million or 878.9%, during 2013in 2016 compared to 2012 due primarily2015, and improved $21.8 million in 2015 compared to a net increase2014. Other income in certain2015 included adjustments to decrease contingent earn-out liabilities related to prior business acquisition-related expensesacquisitions. Other expense in 2013.2014 included earn-out expense related to past business acquisitions.



Interest expense increased by $1.4$14.7 million or 3.2%, during 2013for the year ended December 31, 2016 compared to 2012the prior year. Interest expense for the year ended December 31, 2015 was comparable to 2014. The increase for the year ended December 31, 2016 was primarily due primarily to additional borrowings on our revolving line of credit.cash and non-cash interest expense related to the Convertible Notes issued in June 2016, as well as an increase in non-cash interest expense associated with fees related to two amendments to the Company’s 2014 Credit Facility. The year ended December 31, 2016 was also impacted by higher net borrowing rates, which were 78 basis points higher compared to the same period in 2015, partially offset by a $21.4 million reduction in the Company’s average year-over-year borrowings. 



The provisioneffective income tax rate was 35.7% for income taxes was $52.3 million during 20132016, 38.7% for 2015 and 42.4% for 2014.  The effective tax rate for 2016 compared to 2015 was favorably impacted by rate changes associated with a benefit of $2.4 million during 2012.shift in revenue mix between states affecting state apportionment, as well as various return-to-provision and depreciation adjustments. The effective income rate increased from 0.9% in 2012 to 37.5% in 2013 was due primarilylargest contributor to the $376.6 million impairment chargedecreased tax rate in the second quarter of 2012 and discrete items. The income tax expense for 2013 include discrete items of $(1.1) million related mainly to favorable federal and state audit settlements, and $0.9 million related to 2012 return true-up adjustments,2015 compared to $3.6 million for 2012 related mainly to stock-based compensation items.2014 was the resolution of certain state tax matters.

  

Liquidity and Capital ResourcesFinancial Condition



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 $300 million, which may be used for revolving loans, letters of credit and/or general purposes. We believe that for at least the next 12 months, cash generated from operations, along with our unused credit capacity of $147.3 million and cash position, is sufficient to support operating requirements. Additionally, over the long-term we may from time to time use excess cash to repurchase our debt.

Cash and Working Capital



Cash and cash equivalents consistwere $146.1 million as of amounts held by us as well as our proportionate share of amounts held by construction joint ventures. Cash held by us is available for general corporate purposes, while cash held by construction joint ventures is available only for joint venture-related uses. Joint venture cash and cash equivalents are not restricted to specific uses within those entities; however, the terms of the joint venture agreements limit our ability to distribute those funds and use them for corporate purposes. Cash held by construction joint ventures is distributed from time to time to us and to the other joint venture participants in accordance with our respective percentage interest after the joint venture partners determine that a cash distribution is prudent. Cash distributions received by us from our construction joint ventures are then available for general corporate purposes.

At December 31, 2014 and 2013,2016 compared to $75.5 million as of December 31, 2015. These were comprised of cash held by us and available for general corporate purposes was $40.8of $49.5 million and $36.6$18.5 million, respectively. Ourrespectively, and our proportionate share of cash held by joint ventures, and available only for joint venture-relatedjoint-venture-related uses including distributions to joint joint‑venture partners was $94.7of $96.6 million and $83.3$57.0 million, at December 31, 2014 and 2013, respectively, andrespectively. In addition, our restricted cash, held primarily to secure insurance-related contingent obligations, was $44.4$50.5 million and $42.6 million, atas of December 31, 2014 and 2013, respectively.2016, compared to $45.9 million as of December 31, 2015.



We do not believe that it is likely that we will be called upon to contribute significant additional capitalDuring the year ended December 31, 2016, net cash provided by operating activities was $113.3 million ($108.8 million of which was generated in the eventthird and fourth quarters), due primarily to favorable operating results, somewhat offset by changes in net investment in working capital. The change in working capital primarily reflects increases in accounts receivable (both trade accounts receivable and retention) related to billing activity, offset by a reduction of defaultcosts and estimated earnings in excess of billings, which management is continuing to resolve and collect. In 2016, for the first time in eight years, the Company’s cash flow from operations exceeded its net income for the year. During the year ended December 31, 2015, $14.1 million in cash was provided from operating activities, primarily due to cash generated from earnings sources being mostly offset by any of our joint venture partners. We require each partnerincreased net investment in the joint ventures in which we participate to accept joint and several responsibility for all obligations of the joint venture. Prior to forming a joint venture, we conduct a thorough analysis of the prospective partner to determine its capabilities, specifically relating to construction expertise, track record for delivering a quality product on time, reputation in the industry, as well as financial strength and available liquidity. We utilize a number of resources to verify a potential joint venture partner’s financial condition, including credit rating reports and financial information contained in its audited financial statements. We specifically review a potential partner’s available liquidity and bonding capacity. In the event we are concerned with the financial viability of a potential partner, we will require substantial cash contributions upon inception of the joint venture to mitigate the risk that we would be required to cover a disproportionate share of the joint venture’s future cash needs.working capital.



The majority$99.3 million improvement in cash flow from operations for the year ended December 31, 2016 compared to the year ended December 31, 2015 is reflective of our joint venture contracts are for various government agencies that typically require the joint venture and/or our partners to complete a thorough pre-qualification process. This pre-qualification process typically includes the verification of each partner’s financial conditionimproved year-over-year profitability and capacity to perform the work, as well as the issuance of performance bonds by surety companies who also independently verify each partner’s financial condition.

Billing procedureslower net investment in the construction industry are based on the specific billing terms of a contract. For example, billings may be based on various measures of performance, such as cubic yards excavated, architect’s estimates of completion, costs incurred on cost-plus type contracts or weighted progressworking capital resulting from a cost loaded construction time schedule. Billings are generally on a monthly basissignificant reduction in costs and are reviewed and approved by the customer priorestimated earnings in excess of billings. The improvement in cash generation in 2016 compared to submission. Therefore, once a bill is submitted, we are generally able to collect

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amounts owed2015 is even more pronounced when considering there were significant collections by the Company in the first quarter of 2015 related to usthe settlements of past disputes over the CityCenter project in accordance with the payment terms of the contract. In addition, receivables ofLas Vegas, Nevada and a contractor usually include retentions, or amounts that are held back until contracts are completed or until specified contract conditions or guarantees are met. Retentions are governed by contract provisions and are typically a fixed percentage (for example, 5% or 10%) of each billing. We generally follow the policy of paying our vendors and subcontractors after we receive payment from our customer.hospital project in Santa Monica, California.



A summary of cash flows for each of fiscal years 2014,  2013, and 2012 is set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

 

 

(In millions)

Cash flows provided (used) by:

 

 

 

 

 

 

 

 

 

Operating activities

 

$

(56.7)

 

$

50.7 

 

$

(67.9)

Investing activities

 

 

(27.0)

 

 

(43.6)

 

 

(16.8)

Financing activities

 

 

99.3 

 

 

(55.2)

 

 

48.5 

Net increase (decrease) in cash

 

 

15.6 

 

 

(48.1)

 

 

(36.2)

Cash at beginning of year

 

 

119.9 

 

 

168.0 

 

 

204.2 

Cash at end of year

 

$

135.5 

 

$

119.9 

 

$

168.0 

During 2014,2016, we used $56.7$18.5 million in cash from operating activities due primarily to the timing of collections in the Specialty and Building segments and cash payments for interest on our outstanding debt and income taxes. We used $27.0 million in cash from investing activities, due primarily to the purchaseacquisition of constructionproperty and equipment, compared to the use of cash of $32.4 million for investing activities during 2015, which was primarily related to the acquisition of property and equipment of $75.0$35.9 million, offset by the$5.0 million in proceeds from the sale of our ARSproperty and equipment.

During 2016, we utilized $24.2 million of $44.5 million, and proceeds from the sale of construction equipment of $5.3 million. We received $99.3 million in cash from financing activities, primarily due primarily to the net paydown of debt and the payment of $15.1 million in debt issuance costs associated with two amendments to the 2014 Credit Facility and the issuance of $200.0 million of Convertible Notes. The net proceeds from the Convertible Notes were used to prepay $125.0 million of the borrowings outstanding under our revolving facility offset by cash used for scheduled debt repaymentsTerm Loan, pay down $69.0 million of borrowings outstanding under our 2014 Revolver and business acquisition related payments.

During 2013, we generated $50.7pay $6.0 million in cash from operating activities, due primarily to net income earned and payments receivedof fees related to the CityCenter matter, offset byoffering. Net cash paidused in financing activities for interest and taxes and payments related2015 was $41.8 million, which was primarily due to the Brightwater matter. See Note 8 — Contingencies and Commitmentspay down of Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules for more information on Brightwater and CityCenter. We used $43.6 million in cash from investing activities, due primarily todebt under the purchase of construction equipment of $42.4 million. We used $55.2 million in cash from financing activities, due primarily to net debt repayments of $23.5 million and business acquisition related payments of $31.0 million.2014 Credit Facility. 



During 2012, we used $67.9 million in cash to fund operating activities, due primarily to the timingAs of collections in the Building segment and cash payments for interest on our outstanding debt and income taxes. We used $16.8 million in cash from investing activities, due primarily to purchase construction equipment, offset by the proceeds from the sales of several of our ARS and construction equipment. We received $48.5 million in cash from financing activities, due primarily to borrowings under our revolving facility offset by cash used for scheduled debt repayments and business acquisition related payments.

At December 31, 2014,2016, we had working capital of $1.1$1.3 billion, a ratio of current assets to current liabilities of 1.82,1.87 and a ratio of debt to equity of 0.630.49 compared to working capital of $0.8$1.2 billion, a ratio of current assets to current liabilities of 1.611.80 and a ratio of debt to equity of 0.590.58 at December 31, 2013. Our stockholders’ equity increased to $1.4 billion2015.

Debt

2014 Credit Facility

Under our 2014 Revolver, we had outstanding borrowings of $152.5 million as of December 31, 2014, compared to $1.2 billion2016 and $158.0 million as of December 31, 2013. At2015. The 2014 Revolver balances reported on the Consolidated Balance Sheets as of December 31, 2016 and 2015 include unamortized debt issuance cost of $4.5 million and $2.2 million, respectively. We utilized the 2014 Revolver for letters of credit in the amount of $0.2 million as of December 31, 2016 and 2015, respectively.

On June 5, 2014, the Company entered into a Sixth Amended and Restated Credit Agreement (the “Original Facility,” with subsequent amendments discussed herein, the “2014 Credit Facility”), with Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2014 Credit Facility provides for a $300 million revolving credit facility (the “2014 Revolver”), a $250 million term loan (the “Term Loan”) and a sublimit for the issuance of letters of credit up to the aggregate amount of $150 million, all maturing on May 1, 2018. Borrowings under both the 2014 Revolver and the Term Loan bear interest based either on Bank of America’s prime lending rate or the London Interbank Offered Rate (“LIBOR”), each plus an applicable margin ranging from 1.25% to 3.00% contingent upon the latest Consolidated Leverage Ratio.

During the first half of 2016, the Company entered into two amendments to the Original Facility (the “Amendments”): Waiver and Amendment No. 1, entered into on February 26, 2016 (“Amendment No. 1”), and Consent and Amendment No. 2, entered into on June 8, 2016 (“Amendment No. 2”). In Amendment No. 1, the lenders waived the Company’s violation of its consolidated leverage ratio covenant and consolidated fixed charge coverage ratio covenant. These violations were the result of the Company’s financial results for the year ended December 31, 2015, which included the previously reported $23.9 million non-cash, pre-tax charge related to an adverse ruling on the Brightwater litigation matter in the third quarter of 2015, as well as $45.6 million of pre-tax charges in the third and fourth quarters of 2015 for various Five Star Electric projects. In Amendment No. 2, the lenders consented to the issuance of the Convertible Notes subject to certain conditions, including the prepayment of $125 million on the Term Loan and the paydown of $69 million on the 2014 Revolver, and consented to a potential sale transaction of one of the Company’s business units in its Building segment, which the Company later decided not to sell.

In addition to the Amendments’ provisions discussed above, the Amendments also modified other provisions and added new provisions to the Original Facility, and Amendment No. 2 superseded and modified some of the provisions of Amendment No. 1. The following reflects the more significant changes to the Original Facility and the results of the Amendments that are now reflected in the 2014 Credit Facility. Unless otherwise noted, the changes below were primarily the result of Amendment No. 1: (1) The Company may utilize LIBOR-based borrowings. (Amendment No. 1 precluded the use of LIBOR-based borrowings until the Company filed its compliance certificate for the fourth quarter of 2016; however, Amendment No. 2 negated this preclusion.) (2) The Company is subject to an increased rate on borrowings, with such rate being 100 basis points higher than the highest rate under the Original Facility if the Company’s consolidated leverage ratio is greater than 3.50:1.00 but not more than 4.00:1.00, and an additional 100 basis points higher if the Company’s consolidated leverage ratio is greater than 4.00:1.00. (3) The Company will be subject to increased commitment fees if the Company’s consolidated leverage ratio is greater than 3.50:1.00. (4) The impact of the Brightwater litigation matter in the third quarter of 2015 is to be excluded from the calculation of the Company’s consolidated leverage ratio and consolidated fixed charge coverage ratio covenants. (5) Interest payments are due on a monthly basis; however, if the Company is in compliance with its consolidated leverage ratio and consolidated fixed charge coverage ratio covenants provided in the Original Facility as of December 31, 2016, the timing of interest payments will revert to the terms of the Original Facility. As of December 31,

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Table of Contents

2016, the Company is in compliance with its consolidated leverage ratio and consolidated fixed charge coverage ratio covenants provided in the Original Facility and the timing of our interest payments reverted back to the terms of the Original Facility, quarterly for the Term Loan and base rate borrowings and upon maturity for Eurodollar borrowings. (6) The accordion feature of the Original Facility, which would have allowed either an increase of $300 million in the 2014 Revolver or the establishment of one or more new term loan commitments, is no longer available. (7) The Company’s maximum allowable consolidated leverage ratio was increased to 4.25:1.00 for the first, second and third quarters of 2016 after which it returns to the Original Facility’s range of 3.25:1.00 to 3.00:1.00. (Amendment No. 1 increased the Company’s maximum allowable consolidated leverage ratio covenant requirements to 4.25:1.00 for the first quarter of 2016 and 4.0:1.0 for the second and third quarters of 2016. Amendment No. 2 increased the maximum allowable consolidated leverage ratio covenant requirements to 4.25:1.00 for the second and third quarters of 2016.) (8) The Company is subject to additional covenants regarding its liquidity, including a cap on the cash balance in the Company’s bank account and a weekly minimum liquidity requirement (based on specified available cash balances and availability under the 2014 Revolver). (9) The Company is required to achieve certain cumulative quarterly cash collection milestones, which were eased somewhat in Amendment No. 2. (10) The Company is required to make additional quarterly principal payments, which will be applied to the Term Loan balloon payment, with some of the payments based on a percentage of certain forecasted cash collections for the prior quarter. This change was effective in the fourth quarter of 2016. (11) The lenders’ collateral package was increased by pledging to the lenders (i) the equity interests of each direct domestic subsidiary of the Company and (ii) 65% of the stock of each material first-tier foreign restricted subsidiary of the Company. (12) The 2014 Credit Facility will now mature on May 1, 2018, as opposed to June 5, 2019, the maturity date of the Original Facility.

The table below presents our actual and required consolidated fixed charge coverage ratio and consolidated leverage ratio under the 2014 Credit Facility for the period, which are calculated on a four-quarter rolling basis:

Twelve Months Ended December 31, 2016

Actual

Required

Fixed charge coverage ratio

2.08 : 1.00

> or = 1.25 : 1.00

Leverage ratio

2.79 : 1.00

< or = 3.25 : 1.00

As of the filing date of this Form 10-K we wereare in compliance and expect to continue to be in compliance with the financial covenants under our credit agreement.the 2014 Credit Facility.



2010 Senior Notes

In October 2010, the Company issued $300 million of 7.625% Senior Notes due November 1, 2018, (the “2010 Notes”) in a private placement offering. Interest on the 2010 Notes is payable semi-annually on May 1 and November 1 of each year. The Company may redeem the 2010 Notes at par beginning on November 1, 2016, which was not exercised as of December 31, 2016. At the date of any redemption, any accrued and unpaid interest would also be due.

Convertible Notes

On June 15, 2016, we completed an offering of $200 million of 2.875% Convertible Senior Notes due June 15, 2021 (the “Convertible Notes”). The Convertible Notes are senior unsecured obligations of the Company. Interest on the Convertible Notes is payable on June 15 and December 15 of each year, commencing on December 15, 2016, until the maturity date. We used the proceeds to prepay $125.0 million of our Term Loan, pay down $69.0 million of our 2014 Revolver, and pay $6.0 million of fees related to the offering. For additional information regarding the terms of our Convertible Notes, refer to Note 5 of the Notes to Consolidated Financial Statements. As of December 31, 2016, none of the conversion provisions of our Convertible Notes have been triggered.

Equipment financing and mortgages

The Company has certain loans entered into for the purchase of specific property, plant and equipment and secured by the assets purchased. The aggregate balance of equipment financing loans was approximately $84.9 million and $115.6 million at December 31, 2016 and 2015, respectively, with interest rates ranging from 1.90% to 5.93% with equal monthly installment payments over periods up to ten years with additional balloon payments of $12.4 million in 2021 and $6.3 million in 2022 on the remaining loans outstanding at December 31, 2016. The aggregate balance of mortgage loans was approximately $16.7 million and $17.7 million at December 31, 2016 and 2015, respectively, with interest rates ranging from a fixed 2.50% to LIBOR plus 3% and equal monthly installment payments over periods up to seven years with additional balloon payments of $2.6 million in 2018, $2.9 million in 2021 and $6.7 million in 2023.

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Off-Balance Sheet Arrangements



Except for one immaterial variable interest entity, we do not have financial partnerships with unconsolidated entities, such as entities often referred to as structured finance or special purpose entities which are often established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. The one variable interest entity in which we participate does not pose off-balance sheet arrangements or increased risk due to our participation. Accordingly, we are not exposed to any financing, liquidity, market or credit risk that could arise from such relationships.None



Debt

Debt was $865.4 million at December 31, 2014, an increase of $131.5 million from $733.9 million at December 31, 2013,  due primarily to the net increase of $127.5 million in borrowings on our term loan partially offset by a $5.0 million decrease in our revolving credit facility. We utilized the revolving facility for outstanding letters of credit in the amount of $1.0 million. Accordingly, at December 31, 2014, we had $169.0 million available to borrow under our credit agreement.

Excluding the outstanding borrowings of $130.0 million on our revolving line of credit, unsecured senior notes of $298.8 million and our $250 million term loan (which had been paid down to $242.5 million as of December 31, 2014), the remaining balance of $194.1 

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million of our outstanding debt is generally secured by the underlying assets. Our debt to equity ratio was 0.63 to 1.00 as of December 31, 2014 compared to 0.59 to 1.00 as of December 31, 2013.

Amended Credit Agreement

On August 2, 2012, we entered into a First Amendment (the “First Amendment”) to our Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) entered into on August 3, 2011 as Borrower, with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer. The First Amendment modified the financial covenants under the Credit Agreement to allow for more favorable minimum net worth, minimum fixed charge and maximum leverage ratios for us and also to add several new financial covenants including minimum liquidity and a consolidated senior leverage ratio. The First Amendment also modified the applicable interest rates for amounts outstanding under the credit facility as well as the quarterly fees per annum for the unused portion of the credit facility.

On June 5, 2014, we entered into a Sixth Amended and Restated Credit Agreement, (the “Credit Facility”) restructuring our former $300 million revolving credit facility and $200 million Term Loan. All outstanding amounts under the Fifth Amended and Restated Credit Agreement were repaid in full using proceeds of the Credit Facility. The new agreement provides for a $300 million revolving credit facility (the “Revolving Credit Facility") and a $250 million term loan (the “Term Loan”) with Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The Term Loan principal is to be repaid on a quarterly basis, with 6.0% of the original total outstanding principal repaid in year 1, 9.0% in year 2, 12.0% in year 3, 15.0% in year 4 and 13.5% in year 5 along with a balloon payment of the remaining 44.5% due at maturity. Borrowings under the Revolving Credit Facility bear interest based either on Bank of America’s prime lending rate or the London Interbank Offered Rate (“LIBOR”) plus an applicable margin. Borrowings under the Term Loan bear interest based on LIBOR plus an applicable margin. Included in the Credit Facility is a special provision allowing an additional accordion provision, which we may opt to utilize at a future date to increase either the Revolving Credit Facility or establish one or more new term loan commitments, up to an aggregate amount not to exceed $300 million. The Credit Facility provides a sublimit for the issuance of letters of credit up to the aggregate amount of $150 million. Both the Revolving Credit Facility and the Term Loan mature on June 5, 2019.

The Revolving Credit Facility and Term Loan include usual and customary covenants for credit facilities of this type, including covenants providing maximum allowable ranges of consolidated leverage ratios from 3.75:1.00 to 2.75:1.00 over a range of five years and maintaining a minimum consolidated fixed charge coverage ratio of 1.25:1.00. The Credit Facility eliminated the other covenant requirements that were formerly held under the Fifth Amended and Restated Credit Agreement.

Substantially all of our subsidiaries unconditionally guarantee our obligations under the Credit Facility. The obligations under the Credit Facility are secured by a lien on all personal property of the Company and our subsidiaries party thereto. Any outstanding loans under the Revolving Facility and the Term Loan mature on June 5, 2019. The Term Loan balance was $242.5 million at December 31, 2014. The first quarterly term loan payment under the Credit Facility was due and paid on September 30, 2014. We were in compliance with the modified financial covenants under the Credit Facility for the period ended December 31, 2014.

We had $130.0 million of outstanding borrowings under our Revolving Facility as of December 31, 2014 and $135.0 million of outstanding borrowings under the former Revolving Facility as of December 31, 2013. The net change in borrowings under the Revolving Facility comprises all “Proceeds from debt” and a significant portion of all “Repayment of debt” as presented in the Consolidated Condensed Statements of Cash Flows. We utilized the Revolving Facility for letters of credit in the amount of $1.0 million as of December 31, 2014 and $0.2 million under the former Revolving Facility as of December 31, 2013. Accordingly, at December 31, 2014, we had $169.0 million available to borrow under the Revolving Facility.

On August 26, 2011, we entered into a swap agreement (“Swap Agreement”) with Bank of America, N.A. to establish a long-term interest rate for the Term Loan discussed above. The Swap Agreement pertains to the Term Loan principal balance outstanding at January 31, 2012 and will remain effective through the maturity date in June 2016.. Amounts outstanding under the Swap Agreement will bear interest at a rate equal to, the Applicable Rate, as defined in the Amended Credit Agreement (based upon our consolidated leverage ratio) plus 97.5 basis points. The Swap Agreement includes quarterly installments of principal and monthly installments of interest payable through the maturity date.

7.625% Senior Notes due 2018

On October 20, 2010, we completed a private placement offering of $300 million in aggregate principal amount of our 7.625% senior unsecured notes due November 1, 2018 (the “Senior Notes”). The Senior Notes were priced at 99.258%, resulting in a yield to maturity of 7.75%. The Senior Notes were made available in a private offering that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The private placement of the Senior Notes resulted in proceeds to us of approximately $293.2 million after a debt discount of $2.2 million and initial debt issuance costs of $4.6 million. The Senior Notes were issued pursuant to an indenture (the “Indenture”), dated as of October 20, 2010 by and among us, our subsidiary guarantors and Wilmington Trust FSB, as trustee (the “Trustee”).

The Senior Notes mature on November 1, 2018, and bear interest at a rate of 7.625% per annum, payable semi-annually in cash in arrears on May 1 and November 1 of each year, beginning on May 1, 2011. The Senior Notes are our senior unsecured obligations and

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are guaranteed by substantially all of our existing and future subsidiaries that guarantee obligations under our Amended Credit Agreement.

The terms of the Indenture, among other things, limit our ability and our restricted subsidiaries to (i) incur additional indebtedness or issue certain preferred stock; (ii) pay dividends on, or make distributions in respect of, our capital stock or repurchase our capital stock; (iii) make certain investments or other restricted payments; (iv) sell certain assets; (v) create liens or use assets as security in other transactions; (vi) merge, consolidate or transfer or dispose of substantially all of our assets; and (vii) engage in certain transactions with affiliates.

The Senior Notes became redeemable, in whole or in part, on and at any time after November 1, 2014, at the redemption prices specified in the Indenture, together with accrued and unpaid interest, if any, to the redemption date.

Upon the occurrence of a change of control triggering event specified in the Indenture, we must offer to purchase the Senior Notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.

The Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing, the Trustee or holders of at least 25% in principal amount of the outstanding Senior Notes may declare the principal, accrued and unpaid interest, if any, on all the Senior Notes to be due and payable.

Debt Agreements from Acquisitions

In connection with the acquisition of Lunda, we issued to the former Lunda shareholders promissory notes in an aggregate amount of approximately $21.7 million (the “Lunda Seller Notes”). Interest under the Lunda Seller Notes accrues at the rate of 5% per annum with all accrued but unpaid interest payable annually. The Lunda Seller Notes mature on July 1, 2016. We may prepay all or any portion of the Lunda Seller Notes at any time without premium or penalty. To the extent that the Company prepays all or any portion of its outstanding Senior Notes, it is also required to repay a pro rata portion (based upon the amount being prepaid under the Senior Notes and the total amount outstanding under the Senior Notes) of the Lunda Seller Notes. The Lunda Seller Notes are guaranteed by Lunda, which, as a result of the acquisition, is a wholly owned subsidiary of the Company.

Collateralized Loans

During 2014 and 2013,  we entered into several equipment financing arrangements for our existing and recently acquired equipment fleets as discussed in more detail below. We attempted to take advantage of the opportunity to fix low interest rates for these fleets which have provided additional cash flows available for general corporate purposes.

During 2014, we obtained equipment financing totaling $46.5 million at fixed rates ranging from 2.12% to 2.69%, payable in equal monthly installments for forty-eight to sixty months.

During 2013, we obtained equipment financing totaling $25.8 million at fixed rates ranging from 2.28% to 3.09%, payable in equal monthly installments for sixty months. We obtained a mortgage loan of $9.6 million collateralized by land and improvements located in Houston, Texas, with equal monthly installments over a 30-year period at LIBOR plus 3.00% with a balloon payment of $6.7 million due in 2023.

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Contractual Obligations



Our outstanding contractual obligations as of December 31, 20142016 are summarized in the following table:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments Due by Period

 

 

(In thousands)

 

 

 

 

 

Less Than

 

 

 

 

 

 

 

More Than

 

 

Total

 

1 Year

 

1-3 Years

 

3-5 Years

 

5 Years

Total debt, excluding interest

 

$

865,359 

 

$

73,184 

 

$

145,680 

 

$

486,245 

 

$

160,250 

Interest payments on debt

 

 

223,436 

 

 

44,357 

 

 

78,083 

 

 

40,701 

 

 

60,295 

Operating leases, net

 

 

98,930 

 

 

22,286 

 

 

31,213 

 

 

15,781 

 

 

29,650 

Purchase obligations (a)

 

 

4,767 

 

 

1,094 

 

 

874 

 

 

896 

 

 

1,903 

Acquisition-related liabilities

 

 

32,814 

 

 

11,244 

 

 

21,570 

 

 

 —

 

 

 —

Unfunded pension liability

 

 

34,879 

 

 

6,288 

 

 

12,752 

 

 

13,201 

 

 

2,638 

Insurance claim payable (b)

 

 

36,897 

 

 

7,378 

 

 

7,378 

 

 

7,379 

 

 

14,762 

Other

 

 

10,205 

 

 

1,727 

 

 

1,502 

 

 

6,976 

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total contractual obligations

 

$

1,307,287 

 

$

167,558 

 

$

299,052 

 

$

571,179 

 

$

269,498 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

Payments Due

Contractual Obligations

Total

 

1 year or less

 

2-3 years

 

4-5 years

 

Over 5 years

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt(a)

$

815,591 

 

$

85,890 

 

$

490,877 

 

$

224,301 

 

$

14,523 

Interest on debt(a)

 

144,383 

 

 

55,677 

 

 

60,080 

 

 

28,328 

 

 

298 

Operating leases

 

78,677 

 

 

22,950 

 

 

23,594 

 

 

12,873 

 

 

19,260 

Pension benefit payments(b)

 

2,883 

 

 

2,883 

 

 

 —

 

 

 —

 

 

 —

Other

 

7,883 

 

 

3,011 

 

 

4,872 

 

 

 —

 

 

 —

Total

$

1,049,417 

 

$

170,411 

 

$

579,423 

 

$

265,502 

 

$

34,081 

______________


(a)

Purchase obligations consists primarilyDebt and interest on debt payments reflect the terms of software licensingthe Amendments and maintenance contracts.excludes unamortized debt discount and deferred issuance costs. Amounts for interest on debt are based on interest rates in effect as of December 31, 2016.

(b)

The insurance claim payable representsCompany utilizes current actuarial assumptions in determining the expected insurance loss2017 contributions to fund our defined benefit pension and other post-retirement plans. Contributions beyond one year have not been included because, in management’s judgment, amounts tobeyond one year cannot be received from the insurance carriers and to be paid in claims respectively.reliably estimated.



Stockholders’ Equity

Our book value per common share was $28.06 at December 31, 2014, compared to $25.76 at December 31, 2013, and $24.05 at December 31, 2012. The major factors impacting stockholders’ equity during the three year period were the net income (loss) recorded in all three years; the annual amortization of stock compensation expense; common stock options exercised; and the excess income tax benefit attributable to stock-based compensation. Also, we were  required to adjust our accrued pension liability by a increase of  $13.9 million in 2014, an decrease of $18.7 million in 2013, an increase of  $1.7 million in 2012,  and a cumulative increase of  $59.3 million in prior years, with the offset to accumulated other comprehensive income (loss) which resulted in an aggregate $56.2 million  pretax accumulated other comprehensive loss reduction in stockholders’ equity at December 31, 2014 (see Note 7 — Employee Benefit Plans of the Notes to Consolidated Financial Statements in Part IV, Item 15. Exhibits and Financial Statement Schedules). Adjustments to the amount of this accrued pension liability will be recorded in future years based upon periodic re-evaluation of the funded status of our pension plans.

Related Party Transactions

We are subject to certain related party transactions with our Chairman and Chief Executive Officer, Ronald N. Tutor, and Raymond R. Oneglia, the Vice Chairman of O&G Industries, Inc., one of our directors. A more detailed description of these transactions will be set forth in the sections entitled “Certain Relationships and Related Party Transactions” in the definitive proxy statement in connection with our 2015 Annual Meeting of Stockholders (the “Proxy Statement”), which section is incorporated herein by reference.

New Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-04 Liabilities (Topic 405), which provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This ASU is an update to FASB ASC Topic 405, “Liabilities”. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the Emerging Issues Task Force). This ASU addresses when unrecognized tax benefits should be presented as reductions to deferred tax assets for net operating loss carryforwards in the financial statements. This ASU is effective prospectively for fiscal years, and interim periods within those

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years, beginning after December 15, 2013.Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements. The adoptionpreparation of this guidance did not have a material impactthe Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on information available through the Company’sdate of the issuance of the financial statements.statements; accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of the Consolidated Financial Statements apply to the following critical accounting policies:



Method of Accounting for Contracts — Contract revenue is recognized on the percentage-of-completion method based on contract cost incurred to date compared to total estimated contract cost. The estimates used in the percentage-of-completion method during the contract performance period require judgment and assumptions regarding both future events and the evaluation of contingencies such as the impact of change orders, liability claims, other contract disputes, the achievement of contractual performance standards, and potential variances in project schedule and costs. Changes to the total estimated contract cost, either due to unexpected events or revisions to management’s initial estimates, for a given project are recognized in the period in which they are determined.

In May 2014,certain instances, we provide guaranteed completion dates and/or achievement of other performance criteria. Failure to meet schedule or performance guarantees could result in unrealized incentive fees and/or liquidated damages. In addition, depending on the FASB issued FASB ASU No. 2014-09,type of contract, unexpected increases in contract cost may be unrecoverable, resulting in total cost exceeding revenue realized from the projects. The Company generally provides limited warranties for work performed, with warranty periods typically extending for a limited duration following substantial completion of the Company’s work on a project. Historically, warranty claims have not resulted in material costs incurred.

Claims arising from construction contracts have been made against the Company by customers, and the Company has made claims against customers for cost incurred in excess of current contract provisions. The Company recognizes revenue, but not profit, for certain significant claims when it is determined that recovery of incurred cost is probable and the amounts can be reliably estimated. These requirements are satisfied under GAAP’s Accounting Standards Codification (“ASC”) 605-35-25 when the contract or other evidence provides a legal basis for the claim, additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the Company’s performance, claim-related costs are identifiable and considered reasonable in view of the work performed, and evidence supporting the claim is objective and verifiable. 

Recoverability of Goodwill  Revenue— Goodwill represents the excess of amounts paid over the fair value of net assets acquired from Contracts with Customers (Topic 606), an acquisition. In order to determine the amount of goodwill resulting from an acquisition, we perform an assessment to determine the value of the acquired company's tangible and identifiable intangible assets and liabilities. In our assessment, we determine whether identifiable intangible assets exist, which supersedestypically include backlog, customer relationships and trade name.

We test goodwill for impairment annually for each reporting unit in the revenue recognition requirementsfourth quarter of the fiscal year, and between annual tests if events occur or circumstances change which suggest that goodwill should be evaluated. Such events or circumstances include significant changes in ASC 605, Revenue Recognition. This ASU addresses whenlegal factors and business climate, recent losses at a reporting unit, and industry trends, among other factors. A reporting unit is defined as an entity should recognize revenueoperating segment or one level below an operating segment. Our impairment tests are performed at the operating segment level as they represent our reporting units.

The impairment test is a two-step process. During the first step, we estimate the fair value of the reporting unit using income and market approaches, and compare that amount to depict the transfercarrying value of promised goods or services to customers in an amount that reflectsreporting unit. In the consideration to whichevent the entity expectsfair value of the reporting unit is determined to be entitled in exchangeless than the carrying value, a second step is required. The second step requires us to perform a hypothetical purchase allocation for those goods or services. This ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, using oneunit and to compare the resulting current implied fair value of two retrospective application methods. Early application is not permitted. The Company is currently evaluating the effectgoodwill to the current carrying value of the goodwill for that reporting unit. In the event that the adoptioncurrent implied fair value of this ASU willthe goodwill is less than the carrying value, an impairment charge is recognized.

During the fourth quarter, we conducted our annual goodwill impairment test. The impairment evaluation process includes, among other things, making assumptions about variables such as revenue growth rates, profitability, discount rates, and industry market multiples, which are subject to a high degree of judgment.

Material assumptions used in the impairment analysis included the weighted average cost of capital (WACC). As of October1, 2016, changes of 0.5% in the WACC rate would have on its financial statements.resulted in changes in the fair value of reporting units ranging from $(30) million to $35 million, which would not have changed the conclusions reached in our annual goodwill impairment test.



In June 2014,New Accounting Pronouncements — For discussion of recently adopted accounting standards and updates, see Note 1 of the FASB issued ASU No. 2014-12, Compensation — Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, clarifying the recognition timing of expense associated with certain performance based stock awards when the performance target that affects vesting could be achieved after the requisite service period. This ASU is an updateNotes to FASB ASC Topic 718 and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 with earlier adoption permitted.  The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.Consolidated Financial Statements.

  

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Our exposure toInterest rate risk is our primary market risk for changes inexposure. Borrowing under our Credit Agreement and certain other debt obligations have variable interest rates primarily relates to borrowings under our Amended Credit Agreement, our Term Loan, and our short-term and long-term investment portfolios. Our Revolving Facility is available for us to borrow, when needed, for general corporate purposes, including working capital requirements and capital expenditures. Borrowings under our Revolving Facility and outstanding principal on our Term Loan bear interest at the applicable LIBOR or base rate, as defined, andare therefore we are subject to fluctuations ininterest rate risk. As of December 31, 2016, we had approximately $211.3 million of net borrowings with variable interest rates. We borrowedIf short-term floating interest rates were to increase by 0.50%, interest on the revolving line of credit in 2014, 2013 and 2012.

Accordingly, we do not believe our liquidity or our operations are subject to significant market risk for changes in interest rates.

these borrowings would increase by approximately $1.1 million.

  

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



The Report of Independent Registered Public Accounting Firm, Consolidated Financial Statements and Supplementary Schedules are set forth in Item 15 in this Annual Report on Form 10-K and are incorporated herein by reference.

  

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None.

  

ITEM 9A. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, the Company, with the participation of our Chief Executive Officer and Chief Financial Officer, has carried out anAn 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 December 31, 2014.2016 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, as of December 31, 2014,2016, our disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.



Management’s Report on Internal Control over Financial Reporting - Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining an adequate system of internal control over financial reporting as such term is defined in Exchange Act Rules 13a—15(f). In designing and evaluating our system of internal control over financial reporting, we recognize that inherent limitations exist in any control system no matter how well designed and operated, and we can only provide reasonable, not absolute, assurance of achieving the desired control objectives. In making this assessment, management utilized the criteria issued in Internal Control — Integrated Framework (2013) issuedby the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2013 Framework).  Based on this assessment, management concluded that, as of December 31, 2014,2016, our internal control over financial reporting was effective based on those criteria.



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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.



Deloitte & Touche LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2014.2016. This report appears on page 31 of this Form 10-K.



Changes in Internal Control over Financial Reporting - There were no changes in our internal control over financial reporting for the fiscal quarter ended December 31, 20142016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of

Tutor Perini Corporation

Sylmar, California



We have audited the internal control over financial reporting of Tutor Perini Corporation and subsidiaries (the "Company") as of December 31, 2014,2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.



Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.



We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 20142016 of the Company and our report dated February 26, 201523, 2017 expressed an unqualified opinion on those financial statements.



/s/ Deloitte & Touche LLP



Los Angeles, California



February 26, 201523, 2017



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ITEM 9B. OTHER INFORMATION



None.

  

PART III.



ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



The information required by this Item 10 is hereby incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of the fiscal year 2014.2016.

  

ITEM 11. EXECUTIVE COMPENSATION



The information required by this Item 11 is hereby incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of the fiscal year 2014.2016.

  

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The information required by this Item 12 is hereby incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of the fiscal year 2014.2016.

  

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE



The information required by this Item 13 is hereby incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of the fiscal year 2014.2016.

  

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The information required by this Item 14 is hereby incorporated by reference from our definitive proxy statement to be filed within 120 days after the end of the fiscal year 2014.2016.  

  

4532

 


 

Table of Contents

 

PART IV.



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



TUTOR PERINI CORPORATION AND SUBSIDIARIES



(a)1.The following            Financial Statements:

Our consolidated financial statements as of December 31, 2016 and supplementary2015 and for each of the three years in the period ended December 31, 2016 and the notes thereto, together with the report of the independent registered public accounting firm on those consolidated financial informationstatements are hereby filed as part of this Annual Report:

Pages

Consolidated Financial Statements of the Registrant

Consolidated Balance Sheets as of December 31, 2014 and 2013

4849

Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012

50 

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2014, 2013, and 2012

51 

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013, and 2012

52 

Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012

53  –  54

Notes to Consolidated Financial Statements

55 – 104

Report of Independent Registered Public Accounting Firm

101 

Report on Form 10-K, beginning on page F-1.



(a)2.           Financial Statement Schedules:

All consolidated financial statement schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in theConsolidated Financial Statements orand in the Notes thereto.



(a)3.Exhibits           Exhibits:

EXHIBIT INDEX



The following designated exhibits which are, as indicated below, either filed herewith or have heretofore been filed with this Annual Report on Form 10-Kthe SEC under the Securities Act of 1933 or whichthe Securities Act of 1934 and are referred to and incorporated herein by reference are set forth in the Exhibit Index which appears on pages 102 through 103.to such filings.



Exhibit��3.

Articles of Incorporation and By-laws

3.1

Restated Articles of Organization (incorporated by reference to Exhibit 3.1 to Form 10-K (File No. 001-06314) filed on March 31, 1997).

3.2

Articles of Amendment to the Restated Articles of Organization of Tutor Perini Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on April 12, 2000.)

3.3

Articles of Amendment to the Restated Articles of Organization of Tutor Perini Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on September 11, 2008.)

3.4

Articles of Amendment to the Restated Articles of Organization of Tutor Perini Corporation (incorporated by reference to Exhibit 3.5 to Form 8-K filed on August 10, 2009).

3.5

Third Amended and Restated By-laws of Tutor Perini Corporation (incorporated by reference to Exhibit 3.5 to Form 10-Q filed on August 2, 2016).

Exhibit 4.

Instruments Defining the Rights of Security Holders, Including Indentures

4.1

Shareholders Agreement, dated April 2, 2008, by and among Tutor Perini Corporation, Ronald N. Tutor and the shareholders of Tutor-Saliba Corporation signatory thereto (incorporated by reference to Exhibit 4.1 to Form 8-K filed on April 7, 2008).

4.2

Amendment No. 1 to the Shareholders Agreement, dated as of September 17, 2010, by and between Tutor Perini Corporation and Ronald N. Tutor, as shareholder representative (incorporated by reference to Exhibit 4.1 to Form 8-K filed on September 20, 2010).

4.3

Amendment No. 2 to the Shareholders Agreement, dated as of June 2, 2011, by and between Tutor Perini Corporation and Ronald N. Tutor, as shareholder representative (incorporated by reference to Exhibit 4.1 to Form 8-K filed on June 6, 2011).

4.4

Amendment No. 3 to the Shareholders Agreement, dated as of September 13, 2011, by and between Tutor Perini Corporation and Ronald N. Tutor, as shareholder representative (incorporated by reference to Exhibit 4.1 to Form 8-K filed on September 16, 2011).

4.5

Indenture, dated October 20, 2010, by and among Tutor Perini Corporation, certain subsidiary guarantors named therein and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed on October 21, 2010).

4.6

Registration Rights Agreement dated October 20, 2010, by and among Tutor Perini Corporation, certain subsidiary guarantors named therein and the initial purchasers named therein (incorporated by reference to Exhibit 4.2 to Form 8-K filed on October 21, 2010).

4.7

Indenture, dated June 15, 2016, by and between Tutor Perini Corporation and Wilmington Trust, National Association (incorporated by reference to Exhibit 4.1 to Form 8-K filed on June 16, 2016). 

Exhibit 10.

Material Contracts

10.1*

2009 General Incentive Compensation Plan (incorporated by reference to Annex B to the Company’s Definitive Proxy Statement on Form DEF 14A filed on April 17, 2009).

10.2*

Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (as amended on October 2, 2014 and included as Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on October 2, 2014 and incorporated herein by reference.

33


Table of Contents

10.3*

Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to Form S-1 (File No. 333-111338) filed on February 10, 2004).

10.4

Sixth Amended and Restated Credit Facility, dated as of June 5, 2014, with Bank of America, N.A., in its capacity as administrative agent, Swing Line lender and L/C Issuer (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 9, 2014).

10.5

Waiver and Amendment No. 1 to the Sixth Amended and Restated Credit Agreement, dated as of February 26, 2016, with Bank of America, N.A., as Administrative Agent and L/C Issuer and a syndicate of other lenders (incorporated by reference to Exhibit 10.14 to Form 10-K on February 29, 2016).

10.6

Consent and Amendment No. 2 to the Sixth Amended and Restated Credit Agreement, dated June 8, 2016, with the guarantors and lenders party thereto and Bank of America, N.A., as administrative agent and L/C Issuer (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 8, 2016). 

10.7*

Employment Agreement dated as of December 22, 2014, by and between Tutor Perini Corporation and Ronald N. Tutor (incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 22, 2014).

10.8*

Amended and Restated Employment Agreement, dated November 1, 2016 by and between James A. Frost and Tutor Perini Corporation (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on November 2, 2016).

10.9*

Letter Agreement, dated November 9, 2015, by and between Gary Smalley and Tutor Perini Corporation (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on November 16, 2015).

10.10

Commercial Lease Agreement, dated April 18, 2014 by and among Tutor-Perini Corporation and Ronald N. Tutor (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on May 7, 2014).

10.11

Industrial Lease Agreement, dated April 18, 2014 by and among Tutor-Perini Corporation and Krista Investments, Ltd (incorporated by reference to Exhibit 10.2 to Form 10-Q filed on May 7, 2014).

Exhibit 21

Subsidiaries of Tutor Perini Corporation.

Exhibit 23

Consent of Independent Registered Public Accounting Firm.

Exhibit 24

Power of Attorney executed by members of the Company’s Board of Directors allowing Management to sign the Company’s Form 10-K on their behalf.

Exhibit 31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 95

Mine Safety Disclosure.

Exhibit 101.INS

XBRL Instance Document.

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.


*Management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K

4634

 


 

Table of Contents

 

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



5

 

 



Tutor Perini Corporation



(Registrant)



 

Dated: February 26, 201523, 2017

By:

/s/James A. FrostGary G. Smalley



James A. FrostGary G. Smalley



Executive Vice President and Chief OperatingFinancial Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.





��

 

 

 

Signature

 

Title

 

Date



 

 

 

 

Principal Executive Officer and Director

/s/Ronald N. Tutor

Ronald N. Tutor

 

Chairman and Chief Executive Officer

February 26, 201523, 2017

Principal Financial Officer

/s/Gary G. Smalley

Gary G. Smalley

Executive Vice President and Chief Financial Officer

February 23, 2017

Principal Accounting Officer

/s/Ronald P. Marano II

Ronald P. Marano II

Vice President and Chief Accounting Officer

February 23, 2017



 

 

 

By:

/s/Ronald N. Tutor

Ronald N. Tutor

Principal Financial OfficerOther Directors

Michael J. Kershaw

Executive Vice President and Chief Financial Officer

February 26, 2015

By:

/s/Michael J. Kershaw

Michael J. Kershaw

 

 

 



 

 

 

Principal Accounting Officer
Ronald P. Marano II

 

Vice President and Chief Accounting Officer

February 26, 2015

By:

/s/Ronald P. Marano II

Ronald P. Marano II

Directors

Ronald N. Tutor

)

Marilyn A. Alexander

)

 

 

Peter Arkley

)

 

 

James A. Frost

)

 

 

Sidney J. Feltenstein

)

 

/s/James A. FrostGary G. Smalley

Michael R. Klein

)

 

James A. FrostGary G. Smalley

Robert C. Lieber

)

 

Attorney in Fact

Dale A. ReissRaymond R. Oneglia

)

 

 

Raymond R. OnegliaDale A. Reiss

)

 

 

Donald D. Snyder

)

 

 

Dickran M. Tevrizian, Jr.

)

 

Dated: February 26, 201523, 2017

  

  



 

35


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

Pages

Consolidated Financial Statements of the Registrant

Report of Independent Registered Public Accounting Firm

F-2 

Consolidated Statements of Operations

F-3

Consolidated Statements of Comprehensive Income

F-4

Consolidated Balance Sheets

F-5

Consolidated Statements of Cash Flows

F-6

Consolidated Statements of Stockholders’ Equity

F-7

Notes to Consolidated Financial Statements

F-8

  

47F-1


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Tutor Perini Corporation

Sylmar, California

We have audited the accompanying consolidated balance sheets of Tutor Perini Corporation and subsidiaries (the "Company") as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Tutor Perini Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2017 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Los Angeles, California

February 23, 2017

F-2


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,



2016

 

2015

 

2014

REVENUE

$

4,973,076 

 

$

4,920,472 

 

$

4,492,309 

COST OF OPERATIONS

 

(4,515,886)

 

 

(4,564,219)

 

 

(3,986,867)

GROSS PROFIT

 

457,190 

 

 

356,253 

 

 

505,442 

General and administrative expenses

 

(255,270)

 

 

(250,840)

 

 

(263,752)

INCOME FROM CONSTRUCTION OPERATIONS

 

201,920 

 

 

105,413 

 

 

241,690 

Other income (expense), net

 

6,977 

 

 

13,569 

 

 

(8,217)

Interest expense

 

(59,782)

 

 

(45,143)

 

 

(46,035)

INCOME BEFORE INCOME TAXES

 

149,115 

 

 

73,839 

 

 

187,438 

Provision for income taxes

 

(53,293)

 

 

(28,547)

 

 

(79,502)

NET INCOME

$

95,822 

 

$

45,292 

 

$

107,936 



 

 

 

 

 

 

 

 

BASIC EARNINGS PER COMMON SHARE

$

1.95 

 

$

0.92 

 

$

2.22 

DILUTED EARNINGS PER COMMON SHARE

$

1.92 

 

$

0.91 

 

$

2.20 



 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

BASIC

 

49,150 

 

 

48,981 

 

 

48,562 

DILUTED

 

49,864 

 

 

49,666 

 

 

49,114 

The accompanying notes are an integral part of these consolidated financial statements.

F-3


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,



2016

 

2015

 

2014

NET INCOME

$

95,822 

 

$

45,292 

 

$

107,936 



 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE LOSS, NET OF TAX:

 

 

 

 

 

 

 

 

Defined benefit pension plan adjustments

 

(2,623)

 

 

2,026 

 

 

(8,155)

Foreign currency translation adjustment

 

(261)

 

 

(3,214)

 

 

(638)

Unrealized (loss) gain in fair value of investments

 

(340)

 

 

766 

 

 

205 

Unrealized (loss) gain in fair value of interest rate swap

 

(24)

 

 

(125)

 

 

349 

Total other comprehensive loss, net of tax

 

(3,248)

 

 

(547)

 

 

(8,239)



 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE INCOME

$

92,574 

 

$

44,745 

 

$

99,697 

The accompanying notes are an integral part of these consolidated financial statements.

F-4

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31,

As of December 31,

 

2014

 

2013

2016

 

2015

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

Cash, including cash equivalents of $12,044 and $6,437

 

$

135,583 

 

 

119,923 

Cash, including cash equivalents of $15,302 and $1,696

$

146,103 

 

$

75,452 

Restricted cash

 

 

44,370 

 

 

42,594 

 

50,504 

 

45,853 

Accounts receivable, including retainage of $382,891 and $364,239

 

 

1,479,504 

 

 

1,291,246 

Accounts receivable, including retainage of $569,391 and $484,255

 

1,743,300 

 

1,473,615 

Costs and estimated earnings in excess of billings

 

 

726,402 

 

 

573,248 

 

831,826 

 

905,175 

Deferred income taxes

 

 

17,962 

 

 

8,240 

Other current assets

 

 

68,735 

 

 

50,669 

 

66,023 

 

 

108,844 

Total current assets

 

 

2,472,556 

 

 

2,085,920 

 

2,837,756 

 

 

2,608,939 

 

 

 

 

 

 

 

 

 

 

 

LONG-TERM INVESTMENTS

 

 

 —

 

 

46,283 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, at cost:

 

 

 

 

 

 

PROPERTY AND EQUIPMENT:

 

 

 

 

Land

 

 

41,307 

 

 

41,307 

 

41,382 

 

41,382 

Buildings and improvements

 

 

120,796 

 

 

118,312 

Building and improvements

 

124,157 

 

123,600 

Construction equipment

 

 

426,379 

 

 

370,452 

 

444,153 

 

431,080 

Other equipment

 

 

159,148 

 

 

151,847 

 

181,717 

 

 

181,940 

 

 

747,630 

 

 

681,918 

 

791,409 

 

 

778,002 

Less – Accumulated depreciation

 

 

220,028 

 

 

183,793 

Less accumulated depreciation

 

(313,783)

 

 

(254,477)

Total property and equipment, net

 

477,626 

 

 

523,525 

GOODWILL

 

585,006 

 

 

585,006 

INTANGIBLE ASSETS, NET

 

92,997 

 

96,540 

OTHER ASSETS

 

45,235 

 

 

47,290 

TOTAL ASSETS

$

4,038,620 

 

$

3,861,300 

 

 

 

 

 

 

 

 

 

 

 

Total property and equipment, net

 

 

527,602 

 

 

498,125 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Current maturities of long-term debt

$

85,890 

 

$

88,917 

Accounts payable, including retainage of $258,294 and $204,767

 

994,016 

 

937,464 

Billings in excess of costs and estimated earnings

 

331,112 

 

288,311 

Accrued expenses and other current liabilities

 

107,925 

 

 

134,127 

Total current liabilities

 

1,518,943 

 

 

1,448,819 

 

 

 

 

 

 

 

 

 

 

GOODWILL

 

 

585,006 

 

 

577,756 

LONG-TERM DEBT, less current maturities, net of unamortized discount and debt issuance cost of $56,072 and $6,697

 

673,629 

 

728,767 

DEFERRED INCOME TAXES

 

131,007 

 

122,822 

OTHER LONG-TERM LIABILITIES

 

162,018 

 

 

140,665 

TOTAL LIABILITIES

 

2,485,597 

 

 

2,441,073 

 

 

 

 

 

 

 

 

 

 

 

INTANGIBLE ASSETS, NET

 

 

100,254 

 

 

113,740 

CONTINGENCIES AND COMMITMENTS (Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

87,897 

 

 

75,614 

 

 

 

 

 

 

Total assets

 

$

3,773,315 

 

 

3,397,438 

STOCKHOLDERS' EQUITY:

 

 

 

 

Preferred stock – authorized 1,000,000 shares ($1 par value), none issued

 

 —

 

 —

Common stock – authorized 75,000,000 shares ($1 par value), issued and outstanding 49,211,353 and 49,072,710 shares

 

49,211 

 

49,073 

Additional paid-in capital

 

1,075,600 

 

1,035,516 

Retained earnings

 

473,625 

 

377,803 

Accumulated other comprehensive loss

 

(45,413)

 

 

(42,165)

TOTAL STOCKHOLDERS' EQUITY

 

1,553,023 

 

 

1,420,227 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

4,038,620 

 

$

3,861,300 





The accompanying notes are an integral part of these consolidated financial statements.

48


Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31,

 

 

2014

 

2013

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Current maturities of long-term debt

 

$

81,292 

 

$

114,658 

Accounts payable, including retainage of $142,586 and $137,944

 

 

798,174 

 

 

758,225 

Billings in excess of costs and estimated earnings

 

 

319,296 

 

 

267,586 

Accrued expenses and other current liabilities

 

 

159,814 

 

 

158,017 

Total current liabilities

 

 

1,358,576 

 

 

1,298,486 

 

 

 

 

 

 

 

LONG-TERM DEBT, less current maturities

 

 

784,067 

 

 

619,226 

 

 

 

 

 

 

 

DEFERRED INCOME TAXES

 

 

150,371 

 

 

114,333 

 

 

 

 

 

 

 

OTHER LONG-TERM LIABILITIES

 

 

114,796 

 

 

117,858 

 

 

 

 

 

 

 

Total liabilities

 

 

2,407,810 

 

 

2,149,903 

 

 

 

 

 

 

 

CONTINGENCIES AND COMMITMENTS (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock, $1 par value:

 

 

 

 

 

 

Authorized – 1,000,000 shares

 

 

 

 

 

 

Issued and outstanding – none

 

 

 —

 

 

 —

Common stock, $1 par value:

 

 

 

 

 

 

Authorized – 75,000,000 shares

 

 

 

 

 

 

Issued and outstanding – 48,671,492 shares and 48,421,467 shares

 

 

48,671 

 

 

48,421 

Additional paid-in capital

 

 

1,025,941 

 

 

1,007,918 

Retained earnings

 

 

332,511 

 

 

224,575 

Accumulated other comprehensive loss

 

 

(41,618)

 

 

(33,379)

Total stockholders' equity

 

 

1,365,505 

 

 

1,247,535 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

3,773,315 

 

$

3,397,438 

The accompanying notes are an integral part of these consolidated financial statements.

49


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

Revenues

 

$

4,492,309 

 

$

4,175,672 

 

$

4,111,471 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

 

3,986,867 

 

 

3,708,768 

 

 

3,696,339 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

505,442 

 

 

466,904 

 

 

415,132 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

263,752 

 

 

263,082 

 

 

260,369 

 

 

 

 

 

 

 

 

 

 

Goodwill and intangible asset impairment

 

 

 —

 

 

 —

 

 

376,574 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM CONSTRUCTION OPERATIONS

 

 

241,690 

 

 

203,822 

 

 

(221,811)

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

 

(9,536)

 

 

(18,575)

 

 

(1,857)

Interest expense

 

 

(44,716)

 

 

(45,632)

 

 

(44,174)

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income taxes

 

 

187,438 

 

 

139,615 

 

 

(267,842)

 

 

 

 

 

 

 

 

 

 

(Provision) benefit for income taxes

 

 

(79,502)

 

 

(52,319)

 

 

2,442 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

107,936 

 

$

87,296 

 

$

(265,400)

 

 

 

 

 

 

 

 

 

 

BASIC EARNINGS (LOSS) PER COMMON SHARE

 

$

2.22 

 

$

1.82 

 

$

(5.59)

 

 

 

 

 

 

 

 

 

 

DILUTED EARNINGS (LOSS) PER COMMON SHARE

 

$

2.20 

 

$

1.80 

 

$

(5.59)

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

BASIC

 

 

48,562 

 

 

47,851 

 

 

47,470 

Effect of dilutive stock options and restricted stock units

 

 

552 

 

 

738 

 

 

 —

DILUTED

 

 

49,114 

 

 

48,589 

 

 

47,470 

The accompanying notes are an integral part of these consolidated financial statements.

50


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TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousandsF-)5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

NET INCOME (LOSS)

 

$

107,936 

 

$

87,296 

 

$

(265,400)

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE (LOSS) INCOME :

 

 

 

 

 

 

 

 

 

Change in pension benefit plans assets/liabilities *

 

 

(13,887)

 

 

18,675 

 

 

(1,697)

Foreign currency translation

 

 

(1,086)

 

 

(1,212)

 

 

608 

Change in fair value of investments

 

 

345 

 

 

(744)

 

 

396 

Change in fair value of interest rate swap

 

 

594 

 

 

948 

 

 

(1,659)

Realized loss on sale of investments recorded in  net income (loss)

 

 

 —

 

 

 —

 

 

3,224 

Other comprehensive (loss) income before taxes

 

 

(14,034)

 

 

17,667 

 

 

872 

INCOME TAX EXPENSE (BENEFIT):

 

 

 

 

 

 

 

 

 

Tax adjustment on minimum pension liability *

 

 

(5,732)

 

 

7,765 

 

 

(87)

Foreign currency translation

 

 

(448)

 

 

(474)

 

 

226 

Change in fair value of investments

 

 

141 

 

 

(189)

 

 

158 

Change in fair value of interest rate swap

 

 

245 

 

 

370 

 

 

(685)

Realized loss on sale of investments recorded in net income (loss)

 

 

 —

 

 

 —

 

 

1,219 

Income tax expense

 

 

(5,794)

 

 

7,472 

 

 

831 

NET OTHER COMPREHENSIVE (LOSS) INCOME

 

 

(8,240)

 

 

10,195 

 

 

41 

 

 

 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS)

 

$

99,696 

 

$

97,491 

 

$

(265,359)

*See discussion under Defined Benefit Pension Plan in Note 7  — Employee Benefit Plans

The accompanying notes are an integral part of these consolidated financial statements.

51


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

Common

 

Paid-In

 

Retained

 

Comprehensive

 

 

 

 

 

Stock

 

Capital

 

Earnings

 

Loss

 

Total

Balance - December 31, 2011

 

$

47,329 

 

$

993,434 

 

$

402,679 

 

$

(43,615)

 

$

1,399,827 

Net income

 

 

 —

 

 

 —

 

 

(265,400)

 

 

 —

 

 

(265,400)

Other comprehensive loss

 

 

 —

 

 

 —

 

 

 —

 

 

41 

 

 

41 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(265,359)

Tax effect of stock-based compensation

 

 

 —

 

 

(195)

 

 

 —

 

 

 —

 

 

(195)

Stock-based compensation expense

 

 

 —

 

 

9,470 

 

 

 —

 

 

 —

 

 

9,470 

Issuance of common stock, net

 

 

227 

 

 

(106)

 

 

 —

 

 

 —

 

 

121 

Balance - December 31, 2012

 

$

47,556 

 

$

1,002,603 

 

$

137,279 

 

$

(43,574)

 

$

1,143,864 

Net loss

 

 

 —

 

 

 —

 

 

87,296 

 

 

 —

 

 

87,296 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

10,195 

 

 

10,195 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97,491 

Tax effect of stock-based compensation

 

 

 —

 

 

(7)

 

 

 —

 

 

 —

 

 

(7)

Stock-based compensation expense

 

 

 —

 

 

6,623 

 

 

 —

 

 

 —

 

 

6,623 

Issuance of common stock, net

 

 

865 

 

 

(1,301)

 

 

 —

 

 

 —

 

 

(436)

Balance - December 31, 2013

 

$

48,421 

 

$

1,007,918 

 

$

224,575 

 

$

(33,379)

 

$

1,247,535 

Net income

 

 

 —

 

 

 —

 

 

107,936 

 

 

 —

 

 

107,936 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

(8,240)

 

 

(8,240)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99,696 

Tax effect of stock-based compensation

 

 

 —

 

 

786 

 

 

 —

 

 

 —

 

 

786 

Stock-based compensation expense

 

 

 —

 

 

18,616 

 

 

 —

 

 

 —

 

 

18,616 

Issuance of common stock, net

 

 

250 

 

 

(1,378)

 

 

 —

 

 

 —

 

 

(1,128)

Balance - December 31, 2014

 

$

48,671 

 

$

1,025,942 

 

$

332,511 

 

$

(41,619)

 

$

1,365,505 

The accompanying notes are an integral part of these consolidated financial statements.

52

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve months ended December 31,

 

 

2014

 

2013 

 

2012 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

107,936 

 

$

87,296 

 

$

(265,400)

Adjustments to reconcile net (loss) income to net cash from operating activities:

 

 

 

 

 

 

 

 

 

Goodwill and intangible asset impairment

 

 

 —

 

 

 —

 

 

376,574 

Depreciation

 

 

40,216 

 

 

43,383 

 

 

40,583 

Amortization of intangible assets and debt issuance costs

 

 

15,756 

 

 

16,027 

 

 

20,874 

Stock-based compensation expense

 

 

18,615 

 

 

6,623 

 

 

9,470 

Excess income tax benefit from stock-based compensation

 

 

(787)

 

 

(1,148)

 

 

 —

Deferred income taxes

 

 

21,460 

 

 

9,009 

 

 

(25,606)

Adjustment interest rate swap to fair value

 

 

 —

 

 

 —

 

 

264 

Loss on sale of investments

 

 

1,786 

 

 

 —

 

 

2,699 

Loss on sale of property and equipment

 

 

801 

 

 

49 

 

 

316 

Other long-term liabilities

 

 

3,074 

 

 

23,107 

 

 

(5,104)

Other non-cash items

 

 

3,273 

 

 

(3,719)

 

 

148 

Cash from changes in other components of working capital:

 

 

 

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(186,384)

 

 

(62,991)

 

 

50,655 

Costs and estimated earnings in excess of billings

 

 

(153,153)

 

 

(107,983)

 

 

(106,604)

Other current assets

 

 

(17,450)

 

 

25,250 

 

 

2,237 

Increase (decrease) in:

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

33,667 

 

 

59,169 

 

 

(89,252)

Billings in excess of costs and estimated earnings

 

 

51,711 

 

 

(36,835)

 

 

(82,521)

Accrued expenses

 

 

2,801 

 

 

(6,509)

 

 

2,804 

NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES

 

 

(56,678)

 

 

50,728 

 

 

(67,863)

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

Acquisition of property and equipment excluding financed purchases

 

 

(75,013)

 

 

(42,360)

 

 

(41,352)

Proceeds from sale of property and equipment

 

 

5,335 

 

 

2,663 

 

 

11,759 

Investment in available-for-sale securities

 

 

 —

 

 

 —

 

 

(535)

Proceeds from sale of available-for-sale securities

 

 

44,497 

 

 

 —

 

 

16,553 

Change in restricted cash

 

 

(1,776)

 

 

(3,877)

 

 

(3,280)

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

 

 

(26,957)

 

 

(43,574)

 

 

(16,855)



The accompanying notes are an integral part of these consolidated financial statements.

53


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve months ended December 31,

 

 

2014

 

2013

 

2012

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

1,156,739 

 

 

653,280 

 

 

688,425 

Repayment of debt

 

 

(1,026,349)

 

 

(676,795)

 

 

(626,122)

Business acquisition related payments

 

 

(26,430)

 

 

(31,038)

 

 

(11,462)

Excess income tax benefit from stock-based compensation

 

 

787 

 

 

1,148 

 

 

 —

Issuance of Common stock and effect of cashless exercise

 

 

(1,771)

 

 

(1,882)

 

 

(308)

Debt issuance costs

 

 

(3,681)

 

 

 —

 

 

(1,999)

NET CASH  PROVIDED (USED) BY FINANCING ACTIVITIES

 

 

99,295 

 

 

(55,287)

 

 

48,534 

 

 

 

 

 

 

 

 

 

 

Net Increase/(Decrease) in Cash and Cash Equivalents

 

 

15,660 

 

 

(48,133)

 

 

(36,184)

Cash and Cash Equivalents at Beginning of Year

 

 

119,923 

 

 

168,056 

 

 

204,240 

Cash and Cash Equivalents at End of Year

 

$

135,583 

 

$

119,923 

 

$

168,056 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Paid For:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

$

45,236 

 

$

41,207 

 

$

40,183 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

75,494 

 

$

28,898 

 

$

16,309 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Non-Cash Transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant date fair value of common stock issued for services

 

$

6,261 

 

$

18,290 

 

$

5,075 

 

 

 

 

 

 

 

 

 

 

Property and equipment acquired through financing arrangements not included above

 

$

816 

 

$

16,689 

 

$

2,050 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,



2016

 

2015

 

2014

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net income

$

95,822 

 

$

45,292 

 

$

107,936 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

63,759 

 

 

37,919 

 

 

40,216 

Amortization of intangible assets

 

3,543 

 

 

3,715 

 

 

13,486 

Share-based compensation expense

 

13,423 

 

 

9,477 

 

 

18,615 

Excess income tax benefit from share-based compensation

 

(269)

 

 

(186)

 

 

(787)

Change in debt discount and deferred debt issuance costs

 

10,968 

 

 

2,095 

 

 

2,270 

Deferred income taxes

 

(10,169)

 

 

22,214 

 

 

21,460 

Loss on sale of investments

 

 —

 

 

 —

 

 

1,786 

(Gain) loss on sale of property and equipment

 

453 

 

 

(2,909)

 

 

801 

Other long-term liabilities

 

28,210 

 

 

28,912 

 

 

3,074 

Other non-cash items

 

(1,874)

 

 

(3,680)

 

 

3,273 

Changes in other components of working capital 

 

(90,530)

 

 

(128,777)

 

 

(268,808)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

113,336 

 

 

14,072 

 

 

(56,678)



 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment excluding financed purchases

 

(15,743)

 

 

(35,912)

 

 

(75,013)

Proceeds from sale of property and equipment

 

1,899 

 

 

4,980 

 

 

5,335 

Proceeds from sale of investments

 

 —

 

 

 —

 

 

44,497 

Change in restricted cash

 

(4,651)

 

 

(1,483)

 

 

(1,776)

NET CASH USED IN INVESTING ACTIVITIES

 

(18,495)

 

 

(32,415)

 

 

(26,957)



 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Issuance of convertible notes

 

200,000 

 

 

 —

 

 

 —

Proceeds from debt

 

1,353,895 

 

 

1,013,205 

 

 

1,156,739 

Repayment of debt

 

(1,562,684)

 

 

(1,054,371)

 

 

(1,026,349)

Payments related to business acquisitions

 

 —

 

 

 —

 

 

(26,430)

Excess income tax benefit from share-based compensation

 

269 

 

 

186 

 

 

787 

Issuance of common stock and effect of cashless exercise

 

(584)

 

 

(808)

 

 

(1,771)

Debt issuance costs

 

(15,086)

 

 

 —

 

 

(3,681)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

 

(24,190)

 

 

(41,788)

 

 

99,295 



 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

70,651 

 

 

(60,131)

 

 

15,660 

Cash and cash equivalents at beginning of year

 

75,452 

 

 

135,583 

 

 

119,923 

Cash and cash equivalents at end of year

$

146,103 

 

$

75,452 

 

$

135,583 



The accompanying notes are an integral part of these consolidated financial statements.

  

  

54F-6

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

[1] Description of BusinCONSOLIDATED STATEMEess and NTS OF STOCKHOLDERS’ EQUITY

(in thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

Accumulated

 

 

 



 

 

 

Additional

 

 

 

 

Other

 

 

 



Common

 

Paid-in

 

Retained

 

Comprehensive

 

 

 



Stock

 

Capital

 

Earnings

 

Loss

 

Total

Balance - December 31, 2013

$

48,421 

 

$

1,007,918 

 

$

224,575 

 

$

(33,379)

 

$

1,247,535 

Net income

 

 —

 

 

 —

 

 

107,936 

 

 

 —

 

 

107,936 

Other comprehensive loss

 

 —

 

 

 —

 

 

 —

 

 

(8,239)

 

 

(8,239)

Tax effect of share-based compensation

 

 —

 

 

786 

 

 

 —

 

 

 —

 

 

786 

Share-based compensation expense

 

 —

 

 

18,616 

 

 

 —

 

 

 —

 

 

18,616 

Issuance of common stock, net

 

250 

 

 

(1,379)

 

 

 —

 

 

 —

 

 

(1,129)

Balance - December 31, 2014

$

48,671 

 

$

1,025,941 

 

$

332,511 

 

$

(41,618)

 

$

1,365,505 

Net income

 

 —

 

 

 —

 

 

45,292 

 

 

 —

 

 

45,292 

Other comprehensive loss

 

 —

 

 

 —

 

 

 —

 

 

(547)

 

 

(547)

Tax effect of share-based compensation

 

 —

 

 

(186)

 

 

 —

 

 

 —

 

 

(186)

Share-based compensation expense

 

 —

 

 

9,477 

 

 

 —

 

 

 —

 

 

9,477 

Issuance of common stock, net

 

402 

 

 

284 

 

 

 —

 

 

 —

 

 

686 

Balance - December 31, 2015

$

49,073 

 

$

1,035,516 

 

$

377,803 

 

$

(42,165)

 

$

1,420,227 

Net income

 

 —

 

 

 —

 

 

95,822 

 

 

 —

 

 

95,822 

Other comprehensive loss

 

 —

 

 

 —

 

 

 —

 

 

(3,248)

 

 

(3,248)

Tax effect of share-based compensation

 

 —

 

 

(457)

 

 

 —

 

 

 —

 

 

(457)

Share-based compensation expense

 

 —

 

 

13,423 

 

 

 —

 

 

 —

 

 

13,423 

Issuance of common stock, net

 

138 

 

 

676 

 

 

 —

 

 

 —

 

 

814 

Convertible note proceeds allocated to conversion option, net

 

 —

 

 

26,442 

 

 

 —

 

 

 —

 

 

26,442 

Balance - December 31, 2016

$

49,211 

 

$

1,075,600 

 

$

473,625 

 

$

(45,413)

 

$

1,553,023 

The accompanying notes are an integral part of these consolidated financial statements.

F-7


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      Summary of Significant Accounting Policies



(a) Nature of Business

Tutor Perini Corporation, formerly known as Perini Corporation, was incorporated in 1918 as a successor to businesses which had been engaged in providing construction services since 1894. Tutor Perini Corporation and its wholly owned subsidiaries (the “Company”) provide diversified general contracting, construction management and design-build services to private customers and public agencies throughout the world. The Company’s construction business is conducted through three basic segments or operations: Civil, Building, and Specialty Contractors. The Civil segment specializes in public works construction and the repair, replacement and reconstruction of infrastructure, including highways, bridges, mass transit systems, and water management and wastewater treatment facilities. The Building segment has significant experience providing services to a number of specialized building markets, including the hospitality and gaming, transportation, healthcare, municipal offices, sports and entertainment, educational, correctional facilities, biotech, pharmaceutical and high-tech markets. 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, among others.

The Company offers general contracting, pre-construction planning and comprehensive project management services, including planning and scheduling of the 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, including site work, concrete forming and placement, steel erection, electrical, mechanical, plumbing and HVAC. The Company provides these services by using traditional general contracting arrangements, such as fixed price, guaranteed maximum price and cost plus fee contracts.

In an effort to leverage the Company’s expertise and limit its financial and/or operational risk on certain large or complex projects, the Company participates in construction joint ventures, often as the sponsor or manager of the project, for the purpose of bidding and, if awarded, providing the agreed upon construction services. Each participant usually agrees in advance to provide a predetermined percentage of capital, as required, and to share in the same percentage of profit or loss of the project.

(b) Basis of Presentation



The accompanying consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as codified in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification.Codification (“ASC”).



(c)(b) Principles of Consolidation



The consolidated financial statements include the accounts of Tutor Perini Corporation and its wholly owned subsidiaries.subsidiaries (the “Company”). The Company’s interestsCompany frequently forms joint ventures or partnerships with unrelated third parties for the execution of single contracts or projects. The Company assesses its joint ventures or partnerships at inception to determine if they meet the qualifications of a variable interest entity ("VIE") in accordance with ASC 810, Consolidation. If a joint venture or partnership is a VIE and the Company is the primary beneficiary, the joint venture or partnership is fully consolidated. For construction joint ventures are accountedthat do not need to be consolidated, the Company accounts for its interest in the joint ventures using the proportionate consolidation method, whereby the Company’s proportionate share of eachthe joint venture’sventures’ assets, liabilities, revenuesrevenue and cost of operations are included in the appropriate classifications in the Company’s consolidated financial statements. All intercompany transactions and balances have been eliminated in consolidation.



(d)(c) Use of and Changes in Estimates



The preparation of financial statements in conformityaccordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atamounts. These estimates are based on information available through the date of the issuance of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s construction business involves making significant estimates and assumptions in the normal course of business relating to its contracts and its joint venture contracts due to, among other things, the one-of-a-kind nature of most of its projects, the long-term duration of its contract cycle and the type of contract utilized. The most significant estimates with regard to these financial statements relate to the estimating of total forecasted construction contract revenues, costs and profits in accordance with accounting for long-term contracts and estimating potential liabilities in conjunction with certain contingencies, including the outcome of pending or future litigation, arbitration or other dispute resolution proceedings relating to contract claims. Actualstatements; therefore, actual results could differ from those estimates.

(d) Construction Contracts

The Company and its affiliated entities recognize construction contract revenue using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated contract cost. Cost of revenue includes an allocation of depreciation and amortization. Pre-contract costs are expensed as incurred. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined.

The Company generally provides limited warranties for work performed under its construction contracts with periods typically extending for a limited duration following substantial completion of the Company’s work on a project. Historically, warranty claims have not resulted in material costs incurred.

The Company classifies construction-related receivables and payables that may be settled in periods exceeding one year from the balance sheet date as current, consistent with the length of time of its project operating cycle. For example:

·

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.

·

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 and are classified as a current liability.

Costs and estimated earnings in excess of billings result when either: 1) the appropriate contract revenue amount has been recognized in accordance with the percentage-of-completion accounting method, but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract, or 2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. For both claims and unapproved change orders, the Company recognizes revenue, but not profit, when it is determined that recovery of incurred cost is probable and the amounts can be reliably estimated. For claims, these estimatesrequirements are satisfied under ASC 605-35-25 when the contract or other evidence provides a legal basis for the claim, additional costs were caused by circumstances that were unforeseen at the contract date and such differences couldnot the result of deficiencies in the Company’s performance, claim-related costs are identifiable and considered reasonable in view of the work performed, and evidence supporting the claim or change order is objective and verifiable.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reported costs and estimated earnings in excess of billings consists of the following:



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Claims

$

477,425 

 

$

407,164 

Unapproved change orders

 

207,475 

 

 

270,019 

Other unbilled costs and profits

 

146,926 

 

 

227,992 

Total costs and estimated earnings in excess of billings

$

831,826 

 

$

905,175 

The prerequisite for billing claims and unapproved change orders is the final resolution and agreement between the parties. The prerequisite for billing other unbilled costs and profits is provided in the defined billing terms of each of the applicable contracts. The amount of costs and estimated earnings in excess of billings as of December 31, 2016 estimated by management to be material.collected beyond one year is approximately $414.7 million.

(e) Changes in Estimates



The Company’s estimates of contract revenue and cost are highly detailed. The Company believes that, based on its experience, its current systems of managementdetailed and accounting controls allow it to produce materially reliable estimates of total contract revenue and cost during any accounting period. However, many factors can and do change during a contract performance period which canthat result in a change to contract profitability from one financial reporting periodprofitability. These factors include, but are not limited to, another. Some of the factors that can change the estimate of total contract revenue and cost include differing site conditions (to the extent that contract remedies are unavailable), theconditions; availability of skilled contract labor, thelabor; performance of major material suppliers to deliver on time, the performance of major subcontractors,

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and subcontractors; on-going subcontractor negotiations and buyout provisions; unusual weather conditions andconditions; changes in the timing of scheduled work; change orders; accuracy of the original bid estimate. Because the Company has many contracts in process at any given time, theseestimate; changes in estimates can offset each other minimizing the impact on overall profitability. However, large changes in cost estimates on larger, more complex construction projects can have a material impact on the Company’s financial statementsestimated labor productivity and are reflected in results of operations when they become known.

Management focuses on evaluating the performance of contracts individually. These estimates and assumptions can vary in the normal course of business as projects progress, when estimated productivity assumptions changecosts based on experience to datedate; achievement of incentive-based income targets; and uncertainties are resolved. Changethe expected, or actual, resolution terms for claims. The factors that cause changes in estimates vary depending on the maturation of the project within its lifecycle. For example, in the ramp-up phase, these factors typically consist of revisions in anticipated project costs and during the peak and close-out phases, these factors include the impact of change orders and claims as well as changes in related estimates of costs to complete, are consideredadditional revisions in estimates. The Company uses the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates. In the ordinary course of business, and at a minimum on a quarterly basis, the Company updates projected total contract revenue, cost and profit or loss for each of its contracts based on changes in facts, such as an approved scope change, and changes in estimates. Normal, recurring changes in estimates include, but are not limited to: (i) changes in estimated scope as a result of unapproved or unpriced customer change orders; (ii) changes in estimated productivity assumptions based on experience to date; (iii) changes in estimated materials costs based on experience to date; (iv) changes in estimated subcontractor costs based on subcontractor buyout experience; (v) changes in the timing of scheduled work that may impact future costs; (vi) achievement of incentive income; and (vii) changes in estimated recoveries through the settlement of litigation.

During the year ended December 31, 2014, our results of operations were impacted by $27.9 million because of changes in the estimated recoveries on two Civil segment projects driven by changes in cost recovery assumptions based on certain legal rulings issued during the second quarter of 2014, as well as a final settlement agreement regarding a Building segmentremaining anticipated project reached with our customer during the fourth quarter of 2014, which resulted in a $11.4 million increase in the estimated recovery projected for that project. With respect to the two Civil segment projects, during 2014 there was a $25.9 million favorable increase and a $9.4 million unfavorable decrease. These changes in estimates altogether resulted in an increase of $27.9 million in income from construction operations, $16.0 million in net income, and $0.33 in diluted earnings per common share during 2014.

During the year ended December 31, 2013, our results of operations were impacted by a $13.8 million increase in the estimated recovery projected for a Building segment project due to changes in facts and circumstances that occurred during 2013. This change in estimate resulted in an increase of $13.8 million in income from construction operations, $8.6 million in net income, and $0.18 in diluted earnings per common share during 2013.

Contracts vary in lengths and larger contracts can span over two to six years. At various stages of a contract’s lifecycle, different types of changes in estimates are more typical. Generally during the early ramp up stage, cost estimates relating to purchases of materials and subcontractors are frequently subject to revisions. As a contract moves into the most productive phase of execution, change orders, project cost estimate revisions and claims are frequently the sources for changes in estimates. During the contract’s final phase, remaining estimated costs to complete or provisions for claims will be closed out and adjusted based on actual costs incurred. The impact on operating margin in a reporting period and future periods from a change in estimate will depend on the stage of contract completion.costs. Generally, if the contract is at an early stage of completion, the current period impact is smaller than if the same change in estimate is made to the contract at a later stage of completion. Likewise,Management evaluates changes in estimates on a contract by contract basis and discloses significant changes, if material, in the company’s overall project portfolio wasnotes to be at a later stage of completion during the reporting period, the overall gross margin could be subjectconsolidated financial statements. The cumulative catch-up method is used to greater variability from changesaccount for revisions in estimates.



When recording revenue on contracts relating to unapproved change orders(f) Depreciation of Property and claims, the Company includes in revenue an amount less than or equal to the amountEquipment and Amortization of costs incurred by it to date for contract price adjustments that it seeks to collect from customers for delays, errors in specifications or designs, change orders in dispute or unapproved as to scope or price, or other unanticipated additional costs, in each case when recovery of the costs is considered probable. The amount of unapproved change orders and claim revenues is included in Consolidated Balance Sheets as part of costs and estimated earnings in excess of billings. When determining the likelihood of eventual recovery, the Company considers such factors as evaluation of entitlement, settlements reached to date and our experience with the customer. The settlement of these issues may take years depending upon whether the item can be resolved directly with the customer or involves litigation or arbitration. When new facts become known, an adjustment to the estimated recovery is made and reflected in the current period results.Long-Lived Intangible Assets



(e) Method of Accounting for Contracts

RevenuesProperty and profits from the Company’s contractsequipment and construction joint venture contractslong-lived intangible assets are recognized by applying percentages of completion for the period to the total estimated revenues for the respective contracts. Percentage of completion is determined by relating the actual cost of the work performed to date to the current estimated total cost of the respective contracts. However, on contracts under which we provide construction management services, profit is generally recognized in accordance with the contract terms, usually on the as-billed method, which is generally consistent with the level of effort incurred over the contract period. When the estimatedepreciated or amortized on a contract indicates a loss, the Company’s policy is to record the entire loss during the accounting period in which it is estimable. In the ordinary course of business, at a minimum on a quarterlystraight-line basis the Company updates estimates projected total contract revenue, cost and profit or loss for each contract based on changes in facts, such as an approved scope change, and changes in

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estimates. The cumulative effect of revisions in estimates of the total forecasted revenue and costs, including unapproved change orders and claims, during the course of the work is reflected in the accounting period in which the facts that caused the revision become known. The financial impact of these revisions to any one contract is a function of both the amount of the revision and the percentage of completion of the contract. Amounts up to the costs incurred which are attributable to unapproved change orders and claims are included in the total estimated revenue when realization is probable. Profit from unapproved change orders and claims is recorded in the period such amounts are resolved.

In accordance with normal practice in the construction industry, the Company includes in current assets and current liabilities amounts related to construction contracts realizable and payable over a period in excess of one year. Billings in excess of costs and estimated earnings represents the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date on the percentage of completion accounting method on certain contracts. Costs and estimated earnings in excess of billings represents the excess of contract costs and profits (or contract revenue) recognized to date on the percentage of completion accounting method over the amount of contract billings to date on the remaining contracts. Costs and estimated earnings in excess of billings results when (1) the appropriate contract revenue amount has been recognized in accordance with the percentage of completion accounting method, but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract and/or (2) costs, recorded at estimated realizable value, related to unapproved change orders or claims are incurred.

For unapproved change orders or claims that cannot be resolved in accordance with the normal change order process as defined in the contract, the Company employs other dispute resolution methods, including mediation, binding and non-binding arbitration, or litigation.

Costs and estimated earnings in excess of billings related to the Company’s contracts and joint venture contracts consisted of the following:

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2014

 

2013

 

 

(in thousands)

Unbilled costs and profits incurred to date*

 

$

253,078 

 

$

204,276 

Unapproved change orders

 

 

161,375 

 

 

146,787 

Claims

 

 

311,949 

 

 

222,185 

 

 

$

726,402 

 

$

573,248 

______________

*    Represents the excess of contract costs and profits recognized to date on the percentage of completion accounting method over the amount of contract billings to date on certain contracts.

Of the balance of “Unapproved change orders” and “Claims” included above in costs and estimated earnings in excess of billings at December 31, 2014 and December 31, 2013, approximately $38.4 million and $58.8 million, respectively, are amounts subject to pending litigation or dispute resolution proceedings as described in Note 8 — Contingencies and Commitments. These amounts are management’s estimate of the probable cost recovery from the disputed claims considering such factors as evaluation of entitlement, settlements reached to date and experience with the customer. In the event that future facts and circumstances, including the resolution of disputed claims, cause a reduction in the aggregate amount of the estimated probable cost recovery from the disputed claims, the amount of such reduction will be recorded against earnings in the relevant future period.

The prerequisite for billing “Unbilled costs and profits incurred to date” is provided in the defined billing terms of each of the applicable contracts. The prerequisite for billing “Unapproved change orders” or “Claims” is the final resolution and agreement between the parties. The amount of costs and estimated earnings in excess of billings at December 31, 2014 estimated by management to be collected beyond one year is approximately $251.3 million.

(f) Property and Equipment

Land, buildings and improvements, construction and computer-related equipment and other equipment are recorded at cost. Major renewals and betterments are capitalized and maintenance and repairs are charged to operations as incurred. Depreciation is primarily calculated using the straight-line method for all classifications of depreciable property. Construction equipment is depreciated over estimated useful lives ranging from five to twenty years after an allowance for salvage. The remaining depreciable property is depreciated overtheir estimated useful lives ranging from three to forty years after an allowance for salvage.years.



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Table(g) Recoverability of Contents

(g) Long-Lived Assets



Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the future cash flows generated by the assets might be less than the assets’ net carrying value. In such circumstances, an impairment loss will be recognized by the amount the assets’ net carrying value may not be recoverable. Recoverability is evaluated by comparing the carrying value of the assets to the undiscounted associated cash flows. When this comparison indicates that the carrying value of the asset is greater than the undiscounted cash flows, a loss is recognized for the difference between the carrying value and estimatedexceeds their fair value. Fair value is determined based either on market quotes or appropriate valuation techniques.



(h) Goodwill and Intangible Assets

Intangible assets with finite lives are amortized over their useful lives. Construction contract backlog is amortized on a weighted- average basis over the corresponding contract period. Customer relationships and certain trade names are amortized on a straight-line basis over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized. The Company evaluates intangible assets that are not being amortized at the endRecoverability of each reporting period to determine whether events and circumstances continue to support an indefinite useful life.Goodwill



The Company tests goodwill and intangible assets with indefinite lives for impairment by applying a fair value testannually for each reporting unit in the fourth quarter of eachthe fiscal year, and between annual tests if events occur or circumstances change which suggest that the goodwill or intangible assets should be evaluated. Intangible assets with finite lives are tested for impairment wheneverreevaluated. Such events or circumstances indicate thatinclude significant changes in legal factors and business climate, recent losses at a reporting unit, and industry trends, among other factors. The Civil, Building and Specialty Contractors segments each represent a reporting unit. We perform our annual quantitative impairment assessment during the carrying value may not be recoverable. The first step in the two-step process of the impairment analysis is to determine the fair value of the Company and each of its reporting units and compare the fair valuefourth quarter of each reporting unit to its carrying value. If the carrying valueyear using a weighted average of the reporting unit exceeds its fair value,an income and a second step must be followed to calculate the goodwill impairment. The second step involves determining the fair value of the individual assets and liabilities of the reporting unit that failed the first step and calculating the implied fair value of goodwill. To determine the fair value of the Company and each of its reporting units, the Company utilizes both an income-based valuation approach as well as a market-based valuationmarket approach. The income-based valuationincome approach is based on the cash flows that the reporting unit expects to generate in theestimated present value of future and it requires the Company to project revenues, operating expenses, working capital investment, capital spending and cash flows for each reporting unit. The market approach is based on assumptions about how market data relates to the Company. The weighting of these two approaches is based on their individual correlation to the economics of each reporting unitunit. The quantitative assessment performed in a discrete period, as well as determine the weighted-average cost of capital to be used as a discount rate and a terminal value growth rate for the non-discrete period. The market-based valuation approach to estimate the2016 resulted in an estimated fair value for each of the Company’sour reporting units utilizes industry multiples of revenues and operating earnings. The Company concludes on the fair value of the reporting units by assuming a 67% weighting on the income-based approach and a 33% weighing on the market-based valuation approach.that exceeded their respective net book values; therefore, no impairment charge was necessary for 2016.



As part(i) Recoverability of the valuation process, the aggregate fair value of the Company is compared to its market capitalization at the valuation date in order to determine an implied control premium. In evaluating whether the Company’s implied control premium is reasonable, the Company considers a number of factors including the following factors of greatest significance.Non-Amortizable Trade Names

·

Market control premium: The Company compares its implied control premium to the average control premium paid in transactions of companies in the construction industry during the year of evaluation.

·

Sensitivity analysis: The Company performs a sensitivity analysis to determine the minimum control premium required to recover the book value of the Company at the testing date. The minimum control premium required is then compared to the average control premium paid in transactions of companies in the construction industry during the year of evaluation.

·

Impact of low public float and limited trading activity:  A significant portion of the Company’s common stock is owned by the Company’s Chairman and CEO. As a result, the public float of the Company’s common stock, calculated as the percentage of shares of common stock freely traded by public investors divided by the Company’s total shares outstanding, is significantly lower than that of its publicly traded peers. This circumstance does not impact the fair value of the Company, however based on its evaluation of third party market data, the Company believes it does lead to an inherent marketability discount impacting its stock price.



Impairment assessment inherently involves management judgments asCertain trade names have an estimated indefinite life and are not amortized to the assumptions usedearnings, but instead are reviewed for projections and to evaluate the impact of market conditions on those assumptions. The key assumptionsimpairment annually, or more often if events occur or circumstances change which suggest that the Company uses to estimatenon-amortizable trade names should be reevaluated. We perform our annual quantitative impairment assessment during the fair valuefourth quarter of its reporting units under the income-based approach are as follows:

·

Weighted-average cost of capital used to discount the projected cash flows;

·

Cash flows generated from existing and new work awards; and

·

Projected operating margins.

each year using an income

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Weighted-average cost of capital rates used to discount the projected cash flows are developed via the capital asset pricing model which is primarily based upon market inputs. The Company uses discount rates that management feels are an accurate reflection of the risks associated with the forecasted cash flows of its respective reporting units.TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

To develop the cash flows generatedapproach (relief from new work awards and future operating margins, the Company primarily tracks prospective work for each of its reporting units on a project-by-project basis as well as theroyalty method). The quantitative assessment performed in 2016 resulted in an estimated timing of when the work would be bid or prequalified, 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, changes in 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, current market trends in recent new work procurement, and changes in business strategy.

The Company also estimates 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’ projected performance. The conditions and prospects of companies in the construction industry depend on common factors such as overall demand for services.

Changes in the Company’s assumptions or estimates could materially affect the determination of the fair value of a reporting unit. Such changes in assumptions could be caused by:

·

Terminations, suspensions, reductions in scope or delays in the start-up of the revenues and cash flows from backlog as well as the prospective work the Company tracks;

·

Reductions in available government, state and local agencies and non-residential private industry funding and spending;

·

The Company’s ability to effectively compete for new work and maintain and grow market penetration in the regions that the Company operates in;

·

The Company’s ability to successfully control costs, work schedule, and project delivery; or

·

Broader market conditions, including stock market volatility in the construction industry and its impact on the weighted- average cost of capital assumption.

On a quarterly basis the Company considers whether events or changes in circumstances indicate that assets, including goodwill and intangible assets not subject to amortization might be impaired. In conjunction with this analysis, the Company evaluates whether its current market capitalization is less than its stockholders’ equity and specifically considers (1) changes in macroeconomic conditions, (2) changes in general economic conditions in the construction industry including any declines in market-dependent multiples, (3) cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows analyses, (4) a reconciliation of the implied control premium to a current market control premium, (5) target price assessments by third party analysts and (6) the impact of current market conditions on its forecast of future cash flows including consideration of specific projects in backlog, pending awards, or large prospect opportunities. The Company also evaluates its most recent assessment of the fair value for each of its reporting units, considering whether its current forecast of future cash flows is in line with those used in its annualthe non-amortizable trade names that exceeded their respective net book values; therefore, no impairment assessment and whether there are any significant changes in trends or any other material assumptions used.charge was necessary for 2016.



As of December 31, 2014 the Company has concluded that it does not have an impairment of its goodwill or its indefinite-lived intangible assets and that the estimated fair value of each reporting unit exceeds its carrying value. See Note 3 — Goodwill and Other Intangible Assets for additional goodwill disclosure.

(i)(j) Income Taxes



Deferred income tax assets and liabilities are recognized for the effects of temporary differences between the financial statement carrying amounts and the income tax basis of assets and liabilities using tax rates expected to be in effect when such differences reverse. In addition, futureIncome tax benefits, such as non-deductible accrued expenses, are recognized to the extent such benefits are more likely than notpositions must meet a more-likely-than-not threshold to be realized as an economic benefit in the form of a reduction of income taxes in future years.recognized. The Company recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision.



(j)(k) Earnings (Loss) Per Common Share



Basic earnings (loss) per common share were computedEPS is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted earnings (loss) per common share were similarly computed after giving consideration tooutstanding during the period. Potentially dilutive effect of stock options and restricted stock unit awards outstanding on the weighted-average number of common shares outstanding.

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The computation of diluted earnings (loss) per common share excludes 9,000 stock option shares during 2014, 860,000 stock option shares during 2013, and 1,315,465 stock option shares and 1,291,665securities include restricted stock units and stock options. Diluted EPS reflects the assumed exercise or conversion of all dilutive securities using the treasury stock method. The calculations of the basic and diluted EPS for the years ended December 31, 2016, 2015 and 2014 are presented below:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in thousands, except per share data)

2016

 

2015

 

2014

Net income

$

95,822 

 

$

45,292 

 

$

107,936 



 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — basic

 

49,150 

 

 

48,981 

 

 

48,562 

Effect of diluted stock options and unvested restricted stock

 

714 

 

 

685 

 

 

552 

Weighted-average common shares outstanding — diluted

 

49,864 

 

 

49,666 

 

 

49,114 



 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

$

1.95 

 

$

0.92 

 

$

2.22 

Diluted

$

1.92 

 

$

0.91 

 

$

2.20 

Anti-dilutive securities not included above

 

1,132 

 

 

1,372 

 

 

With regard to diluted EPS and the impact of the Convertible Notes (as discussed in Note 5) on the diluted EPS calculation, because the Company has the intent and ability to settle the principal amount of the Convertible Notes in cash, per ASC 260, Earnings Per Share, the settlement of the principal amount has no impact on diluted EPS. ASC 260 also requires any potential conversion premium associated with the Convertible Notes’ conversion option to be considered in the calculation of diluted EPS when the Company's average stock price, as defined in the indenture governing the Convertible Notes, is higher than 130% of the Convertible Notes’ conversion rate of 33.0579 (or $39.32); however, this was not the case during 2012 because these shares would have an antidilutive effect.the year ended December 31, 2016.



(k)(l) Cash and Cash Equivalents and Restricted Cash



Cash equivalents include short-term, highly liquid investments with original maturities of three months or less when acquired.

Cash and cash equivalents, as reported in the accompanying Consolidated Balance Sheets, consist of amounts held by the Company that are available for general corporate purposes and the Company’s proportionate share of amounts held by construction joint ventures that are available only for joint venture-relatedjoint-venture-related uses, including future distributions to joint venturejoint-venture partners. Restricted cash is primarily held to secure insurance-related contingent obligations, such as insurance claim deductibles, in lieu of letters of credit.



Cash and cash equivalents and restricted cash consisted of the following:





 

 

 

 

 

 

 

 

 

 

At December 31,

 

 

 

2014

 

2013

 

 

 

(in thousands)

 

Corporate cash and cash equivalents (available for general  corporate purposes)

 

$

40,846 

 

$

36,579 

 

Company's share of joint venture cash and cash equivalents (available only for joint venture purposes, including future distributions)

 

 

94,737 

 

 

83,344 

 

Total Cash and Cash Equivalents

 

$

135,583 

 

$

119,923 

 

 

 

 

 

 

 

 

 

Restricted Cash

 

$

44,370 

 

$

42,594 

 



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Cash and cash equivalents

$

49,539 

 

$

18,409 

Company's share of joint-venture cash and cash equivalents

 

96,564 

 

 

57,043 

Total cash and cash equivalents

$

146,103 

 

$

75,452 



 

 

 

 

 

Restricted cash

$

50,504 

 

$

45,853 



(l) Long-term Investments

At December 31, 2013, the Company had $46.3 million invested in Auction Rate Securities (“ARS”) classified as available-for-sale. On April 30, 2014, the Company sold all of its ARS for approximately $44.5 million, limiting the Company’s loss on investment to $1.8 million which properly reflected the Company’s investment policy of maintaining adequate liquidity and maximizing returns.

The Company had classified its ARS investment as long-term investments due to the uncertainty in the timing of future ARS calls and the absence of an active market for government-backed student loans. At the date of the balance sheet prior to the sale, the Company expected that it would take in excess of twelve months before the ARS could be refinanced or sold.

Prior to the sale of the ARS, the Company performed a fair market value assessment of its ARS on a quarterly basis. To estimate fair value, the Company utilized an income approach valuation model, with consideration given to market-based valuation inputs. The model considered, among other items, the following inputs: (i) the underlying structure of each security; (ii) the present value of future principal and interest payments discounted at rates considered to reflect current market conditions (discount rates range from 3% to 7% for investment grade securities); (iii) consideration of the probabilities of default or repurchase at par for each period (term periods range from 6 to 8 years); (iv) prices from recent comparable transactions; and (v) other third party pricing information.

The inputs and the Company’s analysis considered: (i) contractual terms of the ARS instruments; (ii) government- backed guarantees, if any; (iii) credit ratings on the ARS; (iv) current interest rates on the ARS and other market interest rate data; (v) trade data available, including trade data from secondary markets, for the Company’s ARS or similar ARS; (vi) recovery rates for any non-government guaranteed assets; (vii) historical transactions of the Company’s ARS being called at par; (viii) refunding initiatives of ARS; and (ix) risk of downgrade and default. Current market conditions, including repayment status of student loans, credit market risk, market liquidity and macro-economic influences were reflected in these inputs.

On a quarterly basis, the Company also assessed the recoverability of the ARS balance by reviewing: (i) the regularity and timely payment of interest on the securities; (ii) the probabilities of default or repurchase at par; (iii) the risk of loss of principal from government-backed versus non-government-backed securities; and (iv) the prioritization of the Company’s tranche of securities within the investment in case of default. The potential impact of any principal loss was included in the valuation model.

When the Company’s analysis indicated an impairment of a security, several factors were considered to determine the proper classification of the charge including: (i) any requirement or intent to sell the security; (ii) failure of the issuer to pay interest or principal; (iii) volatility of fair value; (iv) changes to the ratings of the security; (v) adverse conditions specific to the security or market; (vi) expected defaults; and (vii) length of time and extent that fair value has been less than the cost basis. The accumulation of

60F-10

 


 

Table of Contents

 

this data was used to conclude if a credit loss existed for the specific security, and then to determine the classification of the impairment charge as temporary or other-than- temporary.TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

(m) Stock-BasedShare-Based Compensation



The Company’s long-term incentive plan allows itthe Company to grant stock-basedshare-based compensation awards in a variety of forms, including restricted and unrestricted stock units and stock options. The terms and conditions of the awards granted are established by the Compensation Committee of the Company’s Board of Directors.

Restricted stock unit awardsunits and stock option awardsoptions generally vest subject to the satisfaction of service and/or performance requirements, or the satisfaction of both service requirements and achievement of certain performance targets. For restricted stock unit awards that vest subject to the satisfaction of service requirements,with related compensation expense is measured based onequal to the fair value of the award on the date of grant and is recognized as expense on a straight-line basis (net of estimated forfeitures) over the requisite service period. For restrictedUnrestricted stock unit awards which haveunits are issued to the directors as part of their annual service fee, vest immediately and are expensed over a performance component, compensation cost is measured based on the fair value on the grant date (the date performance targets are established) and is recognized on a straight-line basis (net of estimated forfeitures) over the applicable requisite12-month service period as achievement of the performance objective becomes probable.period.



(n) Insurance Liabilities



The Company typically utilizes third party insurance coverage subject to varying deductible levels with aggregate caps on losses retained. The Company assumes the risk for the amount of the deductible portion of the losses and liabilities primarily associated with workers’ compensation and general liability coverage. In addition, on certain projects, the Company assumes the risk for the amount of the deductible portion of losses that arise from any subcontractor defaults. Losses are accrued based upon the Company’s estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions followed in the insurance industry. The estimate of insurance liability within the deductible limits includes an estimate of incurred but not reported claims based on data compiled from historical experience.



(o) Fair Value of Financial InstrumentsOther Comprehensive Income (Loss)



ASC 220, Comprehensive Income, establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. The carrying amount of cash and cash equivalents approximates fair value due toCompany reports the short-term nature of these items. The carrying values of receivables, payables and other amounts arising out of normal contract activities, including retentions, which may be settled beyond one year, are estimated to approximate fair values. The fair value of receivables subject to pending litigation or dispute resolution proceedings is determined based upon the length of time that these matters take to be resolved and, as a result, the fair value can be greater than or less than the recorded book value depending on the facts and circumstances of each matter. See Note 2 — Fair Value Measurements for disclosure of thechange in pension benefit plans assets/liabilities, cumulative foreign currency translation, change in fair value of investments long-term debt and contingent consideration associated with our acquisitionschange in 2011.

(p) Foreign Currency Translation

The functional currency for the Company’s foreign subsidiaries is the local currency. Accordingly, the assets and liabilitiesfair value of those operations are translated into U.S. dollars using current exchange rates at the balance sheet date and operating statement items are translated at average exchange rates prevailing during the period. The resulting cumulative translation adjustment is recorded in the foreign currency translation adjustment accountinterest rate swap as partcomponents of accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction gains and losses, if any, are included in operations as they occur.

(q) New Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-04 Liabilities (Topic 405), which provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This ASU is an update to FASB ASC Topic 405, “Liabilities”loss (“AOCI”). The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance did not have a material impact on the Company’s financial statements.



In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensusThe tax effects of the Emerging Issues Task Force). This ASU addresses when unrecognized tax benefits should be presentedcomponents of other comprehensive income (loss) are as reductions to deferred tax assetsfollows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,



2016

 

2015

 

2014

(in thousands)

Before-Tax Amount

 

Tax 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):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined benefit pension plan adjustments

$

(4,452)

 

$

1,829 

 

$

(2,623)

 

$

31 

 

$

1,995 

 

$

2,026 

 

$

(13,887)

 

$

5,732 

 

$

(8,155)

Foreign currency translation adjustment

 

(439)

 

 

178 

 

 

(261)

 

 

(5,897)

 

 

2,683 

 

 

(3,214)

 

 

(1,086)

 

 

448 

 

 

(638)

Unrealized gain (loss) in fair value of investments

 

(576)

 

 

236 

 

 

(340)

 

 

1,123 

 

 

(357)

 

 

766 

 

 

346 

 

 

(141)

 

 

205 

Unrealized gain (loss) in fair value of interest rate swap

 

(45)

 

 

21 

 

 

(24)

 

 

(37)

 

 

(88)

 

 

(125)

 

 

594 

 

 

(245)

 

 

349 

Total other comprehensive income (loss)

$

(5,512)

 

$

2,264 

 

$

(3,248)

 

$

(4,780)

 

$

4,233 

 

$

(547)

 

$

(14,033)

 

$

5,794 

 

$

(8,239)

The changes in AOCI balances by component (after-tax) for net operating loss carryforwards ineach of the financial statements. This ASU is effective prospectively for fiscalthree years and interim periods within those years, beginning afterended December 15, 2013. The adoption of this guidance did not have a material impact on the Company’s financial statements.31, 2016 are as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Defined Benefit Pension Plan

 

Foreign Currency Translation

 

Unrealized Gain (Loss) in Fair Value of Investments

 

Unrealized Gain (Loss) in Fair Value of Interest Rate Swap

 

Accumulated Other Comprehensive Loss

Balance as of December 31, 2013

$

(32,113)

 

$

(751)

 

$

(315)

 

$

(200)

 

$

(33,379)

Other comprehensive income (loss)

 

(8,155)

 

 

(638)

 

 

205 

 

 

349 

 

 

(8,239)

Balance as of December 31, 2014

$

(40,268)

 

$

(1,389)

 

$

(110)

 

$

149 

 

$

(41,618)

Other comprehensive income (loss)

 

2,026 

 

 

(3,214)

 

 

766 

 

 

(125)

 

 

(547)

Balance as of December 31, 2015

$

(38,242)

 

$

(4,603)

 

$

656 

 

$

24 

 

$

(42,165)

Other comprehensive loss before reclassifications

 

(3,722)

 

 

(261)

 

 

(340)

 

 

(24)

 

 

(4,347)

Amounts reclassified from AOCI

 

1,099 

 

 

 —

 

 

 —

 

 

 —

 

 

1,099 

Balance as of December 31, 2016

$

(40,865)

 

$

(4,864)

 

$

316 

 

$

 —

 

$

(45,413)



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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The significant items reclassified out of AOCI and the corresponding location and impact on the Consolidated Statement of Earnings are as follows:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



Location in Consolidated

 

Year Ended December 31,

(in thousands)

Statements of Earnings

 

2016

 

2015

 

2014

Component of AOCI:

 

 

 

 

 

 

 

 

 

 

Defined benefit pension plan adjustments

Various accounts

 

$

1,745 

 

$

 —

 

$

 —

Income tax benefit

Provision for income taxes

 

 

(646)

 

 

 —

 

 

 —

Net of tax

 

 

$

1,099 

 

$

 —

 

$

 —

(p) New Accounting Pronouncements

In May 2014, the FASB issued FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), new accounting guidance which supersedesamended the existing accounting standards for revenue recognition requirements in ASC 605, Revenue Recognition. This ASU addresses when an entity should recognizerecognition. The new accounting guidance establishes principles for recognizing revenue to depictupon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration to which the entity expects to be entitledreceived in exchange for those goods or services. The guidance will be effective for the Company as of January 1, 2018. The amendments may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application (modified retrospective method). The Company is currently reviewing contracts within types of projects in order to determine the impact, if any, the adoption of this ASU will have on its consolidated financial statements. A number of industry-specific implementation issues are still unresolved and the final resolution of certain of these issues could impact the Company’s current accounting policies and/or revenue recognition patterns. The Company currently expects to adopt this new standard using the modified retrospective method.

In January 2017, The FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. This ASU simplifies the calculation of goodwill impairment by eliminating Step 2 of the impairment test prescribed by ASC 350. Step 2 requires companies to calculate the implied fair value of their goodwill by estimating the fair value of their assets, other than goodwill, and liabilities, including unrecognized assets and liabilities, following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. The calculated net fair value of the assets would then be compared to the fair value of the reporting unit to determine the implied fair value of goodwill, and to the extent that the carrying value of goodwill was less than the implied fair value, a loss would be recognized. Under ASU 2017-04, however, goodwill is impaired when the calculated fair value of a reporting unit is less than its carrying value, and the impairment charge will equal that difference; i.e., impairment will be calculated at the reporting unit level and there will be no need to estimate the fair value of individual assets and liabilities. This guidance will be effective for annual reporting periodsthe Company for any goodwill impairment tests performed in fiscal years beginning after December 15, 2019, however, early adoption is permitted for tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In the first quarter of 2016, including interimthe Company adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30). This ASUrequires companies to present, in the balance sheet, debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts. In addition, the amortization of debt discounts is required to be presented as a component of interest expense. The Company applied the guidance retrospectively; accordingly, the Company reclassified unamortized debt issuance costs of $5.8 million from Other Assets to Long-Term Debt,  less current maturities in its December 31, 2015 Consolidated Balance Sheet and reclassified amortization of deferred debt issuance costs of $1.1 million and $1.4 million, respectively, from Other income (expense), net to Interest Expense in its Consolidated Statements of Operations for the years ended December 31, 2015 and 2014.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic-842), which amends the existing guidance in ASC 840 Leases. This amendment requires the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases. Other significant provisions of the amendment include (i) defining the “lease term” to include the non-cancellable period together with periods withinfor which there is a significant economic incentive for the lessee to extend or not terminate the lease; (ii) defining the initial lease liability to be recorded on the balance sheet to contemplate only those variable lease payments that reporting period,depend on an index or that are in substance “fixed”; and (iii) a dual approach for determining whether lease expense is recognized on a straight-line or accelerated basis, depending on whether the lessee is expected to consume more than an insignificant portion of the leased asset’s economic benefits. This guidance will be effective for the Company as of January 1, 2019 and will be applied using one of twothe modified retrospective application methods. Early application is not permitted.transition method for existing leases. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.



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Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In June 2014, the FASB issuedfourth quarter of 2016, the Company elected to early adopt ASU 2015-17, ASU No. 2014-12, Compensation — Stock Compensation (Topic 718): Accounting for Share-Based Payments When the TermsBalance Sheet Classification of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service PeriodDeferred Taxes (Subtopic 740-10), clarifyingas allowed for by the recognition timing of expense associated with certain performance based stock awards when the performance target that affects vesting could be achieved after the requisite service period. guidance.  This ASU is an updaterequires entities to FASB ASC Topic 718present all deferred tax assets and is effectiveall deferred tax liabilities as noncurrent in a classified balance sheet. The Company applied the guidance retrospectively as discussed in Note 6.

2.     Consolidated Statement of Cash Flows

Below are the changes in other components of working capital, as shown in the Consolidated Statement of Cash Flows, and the supplemental disclosure of cash paid for fiscal years,interest and interim periods within those years, beginning after December 15, 2015 with earlier adoption permitted.  The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.income taxes, as well as non-cash transactions:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

 

2014

Decrease (Increase) in:

 

 

 

 

 

 

 

 

Accounts receivable

$

(269,900)

 

$

4,734 

 

$

(186,384)

Costs and estimated earnings in excess of billings

 

73,349 

 

 

(178,774)

 

 

(153,153)

Other current assets

 

39,480 

 

 

(38,616)

 

 

(17,450)

Increase (Decrease) in:

 

 

 

 

 

 

 

 

Accounts payable

 

56,552 

 

 

139,290 

 

 

33,667 

Billings in excess of costs and estimated earnings

 

42,926 

 

 

(30,985)

 

 

51,711 

Accrued expenses

 

(32,937)

 

 

(24,426)

 

 

2,801 

Changes in other components of working capital

$

(90,530)

 

$

(128,777)

 

$

(268,808)



 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

$

47,403 

 

$

45,055 

 

$

45,236 

Income taxes

$

26,908 

 

$

35,299 

 

$

75,494 



 

 

 

 

 

 

 

 

Non-cash transactions during the year for:

 

 

 

 

 

 

 

 

Property and equipment acquired through financing arrangements not included in cash flows from financing activities

$

 —

 

$

 —

 

$

816 







[2]

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Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Fair Value Measurements



The Company measures certain financial instruments, including cash and cash equivalents, such as money market funds, at their fair values. The fair values were determined based on a three-tiervalue hierarchy established by ASC 820, Fair Value Measurement, prioritizes the use of inputs used in valuation hierarchy for disclosure of significant inputs. These hierarchical tiers are defined as follows:techniques into the following three levels:



Level 1 — inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

and liabilities

Level 2 — inputs are other than quoted prices in active marketsLevel 1 inputs that are observable, either directly or indirectly observable through market corroboration.

Level 3 — inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions based on the best information available in the circumstances.



The carrying amountfollowing table presents, for each of cash and cash equivalents approximatesthe fair value due tohierarchy levels required under ASC 820, the short-term natureCompany’s assets and liabilities that are measured at fair value on a recurring basis as of these items. December 31, 2016 and 2015:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2016

 

As of December 31, 2015



 

Fair Value Hierarchy

 

Fair Value Hierarchy

(in thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Level 1

 

Level 2

 

Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (a)

 

$

146,103 

 

$

146,103 

 

$

 —

 

$

 —

 

$

75,452 

 

$

75,452 

 

$

 —

 

$

 —

Restricted cash (a)

 

 

50,504 

 

 

50,504 

 

 

 —

 

 

 —

 

 

45,853 

 

 

45,853 

 

 

 —

 

 

 —

Investments in lieu of customer retainage (b)

 

 

51,266 

 

 

46,855 

 

 

4,411 

 

 

 —

 

 

41,566 

 

 

35,350 

 

 

6,216 

 

 

 —

Total

 

$

247,873 

 

$

243,462 

 

$

4,411 

 

$

 —

 

$

162,871 

 

$

156,655 

 

$

6,216 

 

$

 —



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap contract (c)

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

45 

 

$

 —

 

$

45 

 

$

 —

Total

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

45 

 

$

 —

 

$

45 

 

$

 —


(a)

Cash, cash equivalents and restricted cash consists primarily of money market funds with original maturity dates of three months or less measured using quoted market prices.

(b)

Investments in lieu of customer retainage are classified as accounts receivable and are comprised of money market funds, U.S. Treasury Notes and other municipal bonds, the majority of which are rated Aa3 or better. The fair value of money market funds is measured using quoted market prices; therefore they are classified as Level 1 assets. The fair values of the U.S. Treasury Notes and municipal bonds are measured using readily available pricing sources for comparable instruments; therefore, they are classified as Level 2 assets.

(c)

The Company valued the interest rate swap liability utilizing a discounted cash flow model that took into consideration forward interest rates observable in the market and the counterparty’s credit risk.

The following is a summary of changes in Level 3 liabilities during 2015:

Contingent

(in thousands)

Consideration

Balance as of December 31, 2014

$

24,814 

Fair value adjustments included in other income (expense), net

(3,739)

Amount no longer subject to contingency

(21,075)

Balance as of December 31, 2015

$

 —

The Company did not have material transfers between Levels 1 and 2 for either financial assets or liabilities during the years ended December 31, 2016 and 2015.  

The carrying values of receivables, payables, other amounts arising out of normal contract activities, including retainage, which may be settled beyond one year, are estimated to approximate fair value. The fair value of receivables subject to pending litigation or dispute resolution proceedings is determined based upon the length of time that these matters take to be resolved and, as a result, the fair value can be greater than or less than the recorded book value depending on the facts and circumstances of each matter. Of the Company’s long-term debt, the fair values of the fixed rate senior unsecured notes2010 Notes as of December 31, 20142016 and 20132015 were $310.3$302.6 million and $321.0$305.6 million, respectively, compared toand the carryingfair value of the Convertible Notes was  $228.4 million as of December 31, 2016; the fair values were determined using Level 1 inputs, specifically current observable market prices. The reported value of $298.8 millionthe Company’s remaining long-term debt at December 31, 2016 and $298.5 million, respectively. 2015 approximates fair value.  

The fair value of the senior unsecured notesliability component of the Convertible Notes as of the issuance date of June 15, 2016 was estimated$153.2 million, which was determined using Level 1 inputsa binomial lattice approach based on market quotations including broker quotes or interest ratesLevel 2 inputs, specifically quoted prices in active markets for the same or similar financialdebt instruments at December 31, 2014 and 2013. For other fixed rate debt, fair value is determined using Level 3 inputs based on discounted cash flowsthat do not have a conversion feature. See Note 5 for the debt atadditional information related to the Company’s current incremental borrowing rate for similar types of debt. The estimated fair values of other fixed rate debt at December 31, 2014 and 2013 were $164.3 million and $150.0 million, respectively, compared to the carrying amounts of $162.3 million and $151.4 million, respectively. The fair value of variable rate debt, which includes the Term Loan, approximated its carrying value of $404.3 million and $283.9 million at December 31, 2014 and 2013, respectively. See Note 4 — Financial Commitments for a discussion of the Term Loan.Convertible Notes.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

The following is a summary of financial statement items carried at estimated fair value measured on a recurring basis as of the dates presented:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

 

 

Quoted prices

 

 

other

 

 

Significant

 

 

 

Total

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

Carrying

 

 

markets

 

 

inputs

 

 

inputs

At December 31, 2014

 

 

Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(in thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 Cash and cash equivalents (1)

 

$

135,583 

 

$

135,583 

 

$

 —

 

$

 —

 Restricted cash (1)

 

 

44,370 

 

 

44,370 

 

 

 —

 

 

 —

 Short-term investments (2)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 Investments in lieu of retainage (3)

 

 

33,224 

 

 

25,761 

 

 

7,463 

 

 

 —

Total

 

$

213,177 

 

$

205,714 

 

$

7,463 

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 Interest rate swap contract (5)

 

$

381 

 

$

 —

 

$

381 

 

$

 —

 Contingent consideration (6)

 

 

24,814 

 

 

 —

 

 

 —

 

 

24,814 

 

 

$

25,195 

 

$

 —

 

$

381 

 

$

24,814 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

 

 

Quoted prices

 

 

other

 

 

Significant

 

 

 

Total

 

 

in active

 

 

observable

 

 

unobservable

 

 

 

Carrying

 

 

markets

 

 

inputs

 

 

inputs

At December 31, 2013

 

 

Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

(in thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 Cash and cash equivalents (1)

 

$

119,923 

 

$

119,923 

 

$

 —

 

$

 —

 Restricted cash (1)

 

 

42,594 

 

 

42,594 

 

 

 —

 

 

 —

 Short-term investments (2)

 

 

2,336 

 

 

 —

 

 

2,336 

 

 

 —

 Investments in lieu of retainage (3)

 

 

21,913 

 

 

12,184 

 

 

9,729 

 

 

 —

Long-term investments - auction rate securities (4)

 

 

46,283 

 

 

 —

 

 

 —

 

 

46,283 

Total

 

$

233,049 

 

$

174,701 

 

$

12,065 

 

$

46,283 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 Interest rate swap contract (5)

 

$

974 

 

$

 —

 

$

974 

 

$

 —

 Contingent consideration (6)

 

 

46,022 

 

 

 —

 

 

 —

 

 

46,022 

 

 

$

46,996 

 

$

 —

 

$

974 

 

$

46,022 

______________

(1)

Cash, cash equivalents and restricted cash primarily consist of money market funds with original maturity dates of three months or less, for which fair value is determined through quoted market prices.

(2)

Short-term investments are classified as other current assets and are comprised of U.S. Treasury Notes and municipal bonds. The majority of the municipal bonds are rated Aa2 or better. The fair values of the municipal bonds are obtained from readily- available pricing sources for comparable instruments, and as such, the Company has classified these assets as Level 2.

(3)

Investments in lieu of retainage are classified as accounts receivable, including retainage and are comprised of money market funds, U.S. Treasury Notes and other municipal bonds, the majority of which are rated Aa3 or better. The fair values of the U.S. Treasury Notes and municipal bonds are obtained from readily-available pricing sources for comparable instruments, and as such, the Company has classified these assets as Level 2.

(4)

At 2013 the Company had $46.3 million invested in ARS which the Company considered as available-for-sale long-term investments. The long-term investments ARS held by the Company at 2013 were in securities collateralized by student loan portfolios. At 2013, most of the Company’s ARS were rated AA+ and AA+, respectively. The Company estimated the fair value

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of its ARS utilizing an income approach valuation model which considered, among other items, the following inputs: (i) the underlying structure of each security; (ii) the present value of future principal and interest payments discounted at rates considered to reflect current market conditions (discount rates range from 3% to 7%); (iii) consideration of the probabilities of default or repurchase at par for each period (term periods range from 6 to 8 years); (iv) prices from recent comparable transactions; and (v) other third party pricing information without adjustment.

(5)

As discussed in Note 4 — Financial Commitments, the Company entered into a swap agreement with Bank of America, N.A. to establish a long-term interest rate for its $200 million five-year term loan which extends to its replacement $250 million five-year term loan. The swap agreement became effective for the term loan principal balance outstanding at January 31, 2012 and will remain effective through June, 2016. The Company values the interest rate swap liability utilizing a discounted cash flow model that takes into consideration forward interest rates observable in the market and the counterparty’s credit risk. This liability is classified as a component of other long-term liabilities.

(6)

The liabilities listed as of December 31, 2014 and 2013 above represent the contingent consideration for the Company’s acquisitions in 2011 for which the measurement periods for purchase price analyses for the acquisitions have concluded.

The Company did not have any transfers between Levels 1 and 2 of financial assets or liabilities that are fair valued on a recurring basis during the years ended December 31, 2014 and 2013.

The following is a summary of changes in Level 3 assets measured at fair value on a recurring basis during 2014 and 2013:

Auction Rate

Securities

(in thousands)

Balance at December 31, 2013

$

46,283 

Purchases

 —

Settlements

(44,497)

Realized loss included in other income (expense), net

(1,786)

Balance at December 31, 2014

$

 —

Auction Rate

Securities

(in thousands)

Balance at December 31, 2012

$

46,283 

Purchases

 —

Settlements

 —

Balance at December 31, 2013

$

46,283 

At December 31, 2013, the Company had $46.3 million invested in ARS classified as available-for-sale. All of the ARS were securities collateralized by student loan portfolios guaranteed by the United States government. At December 31, 2013, most of the Company’s ARS were rated AA+. On April 30, 2014, the Company sold all of its ARS for approximately $44.5 million, limiting our loss on investment to $1.8 million which properly reflected the Company’s investment policy of maintaining adequate liquidity and maximizing returns.

The Company had classified its ARS investment as long-term investments due to the uncertainty in the timing of future ARS calls and the absence of an active market for government-backed student loans. At the date of the balance sheet prior to the sale, the Company expected that it would take in excess of twelve months before the ARS could be refinanced or sold.

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Table of ContentsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

The following is a summary of changes in Level 3 liabilities measured at fair value on a recurring basis during 2014 and 2013:

Contingent

Consideration

(in thousands)

Balance at December 31, 2013

$

46,022 

Fair value adjustments included in other income (expense), net

5,592 

Contingent consideration settled

(26,800)

Balance at December 31, 2014

$

24,814 

Contingent

Consideration

(in thousands)

Balance at December 31, 2012

$

42,624 

Fair value adjustments included in other income (expense), net

26,374 

Contingent consideration settled

(22,976)

Balance at December 31, 2013

$

46,022 

The liabilities listed above represent the contingent consideration for former acquisitionsfor which the measurement periods for purchase price analyses for all the acquisitions have concluded.

The fair values of the contingent consideration were estimated based on an income approach which is based on the cash flows that the acquired entity is expected to generate in the future. This approach requires management to project revenues, operating expenses, working capital investment, capital spending and cash flows for the reporting unit over a multi-year period, as well as determine the weighted-average cost of capital to be used as a discount rate (weighted-average cost of capital inputs have ranged from 14% - 18%).

[3]4.     Goodwill and Other Intangible Assets



The following table presentsAs of December 31, 2016, 2015 and 2014, the changes in the carrying amountCompany had $585.0 million of goodwill allocated to the Company’sits reporting units as follows: Civil, $415.3 million; Building, $13.5 million; and Specialty Contractors, $156.2 million. The balances presented include historical accumulated impairment of $76.7 million for the periods presented:Civil segment and $411.3 million for the Building segment.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty

 

Management

 

 

 

 

 

Civil

 

Building

 

Contractors

 

Services

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Gross Goodwill Balance

 

 

429,893 

 

 

420,267 

 

 

141,833 

 

 

66,638 

 

 

1,058,631 

Accumulated Impairment

 

 

(55,740)

 

 

(409,765)

 

 

 —

 

 

(22,480)

 

 

(487,985)

Balance at December 31, 2012

 

$

374,153 

 

 

10,502 

 

$

141,833 

 

$

44,158 

 

$

570,646 

Goodwill recorded in connection with an acquisition (2)

 

 

 —

 

 

 —

 

 

7,110 

 

 

 —

 

 

7,110 

Balance at December 31, 2013

 

$

374,153 

 

$

10,502 

 

$

148,943 

 

$

44,158 

 

$

577,756 

Reallocation based on relative fair value (1)

 

 

41,205 

 

 

2,953 

 

 

 —

 

 

(44,158)

 

 

 —

Acquisition related adjustments (2)

 

 

 —

 

 

 —

 

 

7,250 

 

 

 —

 

 

7,250 

Balance at December 31, 2014

 

$

415,358 

 

$

13,455 

 

$

156,193 

 

$

 —

 

$

585,006 

______________

(1)

During the first quarterIn addition, as of 2014, the Company completed a reorganization which resulted in the elimination of the Management Services reporting unit and reportable segment. The Management Services reporting unit formerly consisted of the following subsidiary companies: Black Construction and Perini Management Services. The reorganization was completed due to the unit no longer meeting the criteria set forth in FASB ASC Topic 280,  “Segment Reporting”.  The Company reallocated goodwill between its reorganized reporting units based on a relative fair value assessment in accordance with the guidance on segment reporting.

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Table of Contents

(2)

During the quarter ended September 30, 2013, the Company acquired a small fire protection systems contractor.  During the quarter ended June 30, 2014, an adjustment was made to goodwill for this acquisition in the amount of $7.3 million. As this acquisition is immaterial, including adjustments, no pro forma disclosures are presented herein.

The Company tests goodwill and intangible assets with indefinite lives for impairment by applying a fair value test in the fourth quarter of each year and between annual tests if events occur or circumstances change that suggest a material adverse change to the most recently concluded valuation. Intangible assets with finite lives are also tested for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. The Company did not observe any changes in facts or circumstances during the twelve months ended December 31, 2014 that would suggest2016 and 2015, the Company had the following: (1) non-amortizable trade names with a material decline in the value of goodwill and intangible assets as concluded in the fourth quarter of the year ended December 31, 2013.

The net change in the carrying amount of goodwill for the year ended December 31, 2012 was due primarily to a goodwill impairment charge of $321.1 million recorded in the second quarter of 2012. See “Goodwill Impairment” below.

Goodwill Impairment

The Company performs its annual impairment test of goodwill and other indefinite-lived intangible assets in the fourth quarter of each year. The first step in the two step process is to compare the fair value of the reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value,$50.4 million; (2) amortizable trade names with a second step must be followed to calculate the goodwill impairment. The second step involves determining the fair value of the individual assets and liabilities of the reporting unit and calculating the implied fair value of goodwill. To determine the fair value of its reporting units, the Company uses the income approach, which is based on the cash flows that the reporting unit expects to generate in the future. This income valuation method requires management to project revenues, operating expenses, working capital investment, capital spending and cash flows for the reporting unit over a multi-year period, as well as determine the weighted-average cost of capital to be used as a discount rate. The Company also uses the market valuation method to estimate the fair value of its reporting units by utilizing industry multiples of operating earnings. Impairment assessment inherently involves management judgments as to assumptions used to project these amounts and the impact of market conditions on those assumptions.

As part of the valuation process, the aggregate fair value of the Company was compared to its market capitalization at the valuation date in order to determine the implied control premium. The implied control premium was then compared to the control premiums paid in recent transactions within the industry. The Company’s implied market control premium of 29.3% and 35.6%, as of the fourth quarter of 2014 and fourth quarter of 2013 valuation, respectively, were determined to be in an acceptable range of market transactions observed in the construction and engineering industry in the past several years.

As part of the review process for the reporting unit valuations, the Company created multiple income-based and market-based valuation models to understand the sensitivity of the variables used in determining the fair value. These models were reviewed with the Company’s external fair value specialists who assisted in the process by providing insight into acceptable ranges on various valuation assumptions as well as preferred valuation techniques.

Weighted-average cost of capital rates used to discount the projected cash flows were developed via the capital asset pricing model which is primarily based upon market inputs. The Company used discount rates that management felt were an accurate reflection of the risks associated with the forecasted cash flows of its respective reporting units. Weighted- average cost of capital inputs ranged from 14.0%-  15.5% for the Company’s reporting units. Since the Company’s 2012 annual impairment analysis, the weighted-average cost of capital rates were positively impacted by broader market conditions including the recent rise in comparable companies within the construction industry.

Similar to previous valuations, the Company noted that small changes to valuation assumptions could have a significant impact on the concluded value; however, the Company gained comfort over the assumptions selected for valuation through comparison to historical transaction benchmarks, third party industry expectations, and the Company’s previous models.

During the second quarter of 2012, the Company experienced a sustained decrease in its stock price, causing its market capitalization to be substantially less than its carrying value and its implied control premium to increase beyond the implied control premium that was reconciled in its 2011 annual impairment analysis, and beyond the observable market comparable level. Additionally, deterioration in broader market conditions including stock market volatility, particularly in the construction industry, impacted the weighted-average cost of capital rate assumptions used in deriving the fair values of the Company’s reporting units, which are primarily based on market inputs. Finally, several of the Company’s reporting units experienced degradation in the timing of projected cash flows used in deriving the fair values of those reporting units in its 2011 annual impairment analysis caused by delays in the timing of awards and start of new work that the Company anticipated would enter into backlog in the first half of 2012, and a general decrease in profit margins on new work awards that were factored into the Company’s forecast assumptions.

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With regard to the Company’s reporting units, the carrying values of the Company’s Civil and Building reporting units were greater than their fair values, and as such, the Company performed the second step of the goodwill impairment test for these reporting units which resulted in goodwill impairments as discussed above. In this second step, the Company determined the fair value of the individual assets and liabilities of the reporting units that failed Step 1 and calculated the implied fair value of goodwill for those reporting units. The Company included in this calculation the valuation of assets and liabilities that would occur in a theoretical purchase price allocation of the reporting unit in accordance with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 805 — Business Combinations, as well as the value of backlog, trade name, and customer relationships and the impact of deferred tax liabilities and assets arising from the fair valuation of these assets and liabilities.

The fair value of the Specialty Contractors reporting unit substantially exceeded its carrying value, and as such, it was not necessary to perform the second step of the goodwill impairment test for this reporting unit.

In conducting the initial step of its goodwill evaluation, the Company also evaluated its finite lived tangible and intangible assets due to the degradation in the timing of projected cash flows since the Company’s 2011 impairment analysis and changes in the planned use of certain intangible assets. The Company compared the fair value of the finite lived tangible and intangible assets to their carrying value and determined that thegross carrying value of a portion of these assets exceeded their fair value as determined by the income-based valuation approach$51.1 million and by benchmarking against observable market prices. This income-based valuation approach involved key assumptions similar to those used in the goodwill impairment analysis for the Company’s reporting units as discussed above, (e.g. projections of future cash flows associated with the Company’s trade name, contractor license, customer relationship and contract backlog intangible assets that were recorded in previous acquisitions).

Based on these circumstances and events, the Company performed an interim goodwill and indefinite lived intangible asset impairment testaccumulated amortization as of June 30, 2012December 31, 2016 and as a result, the Company recorded a goodwill impairment charge2015 of $321.1$13.8 million and an indefinite lived intangible assets impairment charge$11.3 million, respectively; and (3) amortizable customer relationships with a gross carrying value of $16.4$23.2 million in the second quarterand accumulated amortization as of 2012. The Company also evaluated its finite lived tangibleDecember 31, 2016 and intangible assets due to the degradation in the timing2015 of projected cash flows since the Company’s 2011 impairment analysis$17.9 million and changes in the planned use of certain intangible assets, and this analysis resulted in a $39.1$16.8 million, impairment charge on the Company’s finite lived intangible assets in the second quarter of 2012.

Intangible assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

Weighted

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

Average

 

 

 

 

 

Accumulated

 

Impairment

 

Carrying

 

Amortization

 

 

Cost

 

Amortization

 

Charge

 

Value

 

Period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names (non-amortizable)

 

$

117,600 

 

$

 —

 

$

(67,190)

 

$

50,410 

 

Indefinite

Trade names (amortizable)

 

 

74,350 

 

 

(8,829)

 

 

(23,232)

 

 

42,289 

 

20 years

Contractor license

 

 

6,000 

 

 

 —

 

 

(6,000)

 

 

 —

 

Indefinite

Customer relationships

 

 

39,800 

 

 

(15,600)

 

 

(16,645)

 

 

7,555 

 

11.4 years

Construction contract backlog

 

 

73,706 

 

 

(73,706)

 

 

 —

 

 

 —

 

3.6 years

Total

 

$

311,456 

 

$

(98,135)

 

$

(113,067)

 

$

100,254 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2013

Weighted

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

Average

 

 

 

 

 

Accumulated

 

Impairment

 

Carrying

 

Amortization

 

 

 

Cost

 

Amortization

 

Charge

 

Value

 

Period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names (non-amortizable)

 

$

117,600 

 

$

 —

 

$

(67,190)

 

$

50,410 

 

Indefinite

Trade names (amortizable)

 

 

74,350 

 

 

(6,341)

 

 

(23,232)

 

 

44,777 

 

20 years

Contractor license

 

 

6,000 

 

 

 —

 

 

(6,000)

 

 

 —

 

Indefinite

Customer relationships

 

 

39,800 

 

 

(14,315)

 

 

(16,645)

 

 

8,840 

 

11.4 years

Construction contract backlog

 

 

73,706 

 

 

(63,993)

 

 

 —

 

 

9,713 

 

3.6 years

Total

 

$

311,456 

 

$

(84,649)

 

$

(113,067)

 

$

113,740 

 

 

 

respectively.



Amortization expense related to amortizable intangible assets for the years ended December 31, 2016,  2015 and 2014 2013,totaled  $3.5 million, $3.7 million and 2012 totaled $13.5 million, $13.1 million and $18.3 million, respectively. AtThe amortization expense for the years ended December 31, 2014 includes amortization of construction contract backlog, which was fully amortized in early 2015. Future amortization expense related to amortizable intangible assets is estimated towill be

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$3.7 million in 2015, approximately $3.5 million in 2016,  $3.5 million inper year for the years 2017 $3.5 million in 2018,  $3.6 million in 2019 and $32.0 million thereafter.through 2021.



The weighted-average amortization period for amortizable trade names and customer relationships is 20 years and 12 years, respectively.

[4]

5.     Financial Commitments



Long-termLong-Term Debt



Long-term debt consists of the following:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

 

 

(in thousands)

Senior unsecured notes due November 1, 2018 with interest rate of 7.625% payable in equal semi-annual installments beginning May 1, 2011 through November 1, 2018

 

$

300,000 

 

$

300,000 

Less unamortized debt discount based on imputed interest rate of 7.75%

 

 

(1,223)

 

 

(1,493)

Total amount, net of unamortized discount

 

 

298,777 

 

 

298,507 

 

 

 

 

 

 

 

$300.0 million revolving line of credit at lender's prime rate (3.25%) or Euro rate, plus applicable spread rates, maturing in 2019

 

 

130,000 

 

 

135,000 

 

 

 

 

 

 

 

$250.0 million term loan in 2014 and a $200.0 million term loan in 2013 including quarterly installments of principal and interest payable over a five-year period at rates as defined in the Sixth Amended and Restated Credit Facility, the Fifth Amended Credit Agreement, and the Swap Agreement

 

 

242,500 

 

 

115,000 

 

 

 

 

 

 

 

Equipment financing at rates ranging from 2.12% to 4.82% payable in equal monthly installments over a five-year period, with balloon payments totaling $8.3 million in 2016

 

 

102,009 

 

 

78,055 

 

 

 

 

 

 

 

Loan on transportation equipment with interest rate of 6.44% payable in equal monthly installments over a five-year period, with a balloon payment of $29.2 million in 2014

 

 

 —

 

 

29,582 

 

 

 

 

 

 

 

Loan on transportation equipment with interest rate of 3.35% payable in equal monthly installments over a ten-year period, with a balloon payment of $12.4 million in 2021

 

 

27,954 

 

 

 —

 

 

 

 

 

 

 

Lunda seller notes payable at a rate of 5% with interest payable annually and principal payable in 2016

 

 

21,750 

 

 

21,750 

 

 

 

 

 

 

 

Loan on transportation equipment at a variable LIBOR-based rate plus 2.4% payable in equal monthly installments over a seven-year period, with a balloon payment of $12.0 million in 2015

 

 

12,611 

 

 

13,363 

 

 

 

 

 

 

 

Mortgage on land and improvements at a variable LIBOR-based interest rate plus 3.00% payable in equal monthly installments over a 10-year period, with a balloon payment of $6.7 million in 2023.

 

 

9,144 

 

 

9,404 

 

 

 

 

 

 

 

Mortgages on land and office building, both at a variable LIBOR-based interest rate plus 2.0% with principal on both payable in equal monthly installments over seven years. The seven-year mortgages include balloon payments in 2016 of $3.0 million and $2.6 million, respectively

 

 

6,306 

 

 

6,952 

 

 

 

 

 

 

 

Mortgage on office building at a variable rate of lender's prime rate (3.25%) less 1.0% payable in equal monthly installments over a ten-year period, with a balloon payment of $2.6 million in 2018

 

 

3,428 

 

 

3,671 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other indebtedness

 

 

10,880 

 

 

22,600 

Total

 

 

865,359 

 

 

733,884 

Less – current maturities

 

 

(81,292)

 

 

(114,658)

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Table of Contents



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Term Loan

$

54,650 

 

$

222,120 

2014 Revolver

 

147,990 

 

 

155,815 

2010 Notes

 

298,120 

 

 

297,118 

Convertible Notes

 

152,668 

 

 

 —

Equipment financing and mortgages

 

101,558 

 

 

133,288 

Other indebtedness

 

4,533 

 

 

9,343 

Total debt

 

759,519 

 

 

817,684 

Less – current maturities

 

(85,890)

 

 

(88,917)

Long-term debt, net

$

673,629 

 

$

728,767 

Long-term debt, net

$

784,067 

$

619,226 

Principal payments required under these obligations amount to approximately $81.3 million in 2015, $95.1 million in 2016, $51.0 million in 2017, $359.7 million in 2018, $126.5 million in 2019 and $151.8 million in 2020 and beyond.

7.625% Senior Notes due 2018

On October 20, 2010, the Company completed a private placement offering of $300 million in aggregate principal amount of its 7.625% senior unsecured notes due November 1, 2018 (the “Senior Notes”). The Senior Notes were priced at 99.258%, resulting in a yield to maturity of 7.75%. The Senior Notes were made available in a private offering that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The private placement of the Senior Notes resulted in proceeds to the Company of approximately $293.2 million after a debt discount of $2.2 million and initial debt issuance costs of $4.6 million. The Senior Notes were issued pursuant to an indenture (the “Indenture”), dated as of October 20, 2010 by and among the Company, its subsidiary guarantors and Wilmington Trust FSB, as trustee (the “Trustee”).



The Senior Notes mature on November 1, 2018,following table reconciles the outstanding debt balance to the reported debt balances as of December 31, 2016 and bear interest at a rate of 7.625% per annum, payable semi-annually in cash in arrears on May 1 and November 1 of each year, beginning on May 1, 2011. The Senior Notes are senior unsecured obligations of the Company and are guaranteed by substantially all of the Company’s existing and future subsidiaries that guarantee obligations under the Company’s Amended Credit Agreement.2015:



The terms of the Indenture, among other things, limit the ability of the Company and its restricted subsidiaries to (i) incur additional indebtedness or issue certain preferred stock; (ii) pay dividends on, or make distributions in respect of, the Company’s capital stock or repurchase the Company’s capital stock; (iii) make certain investments or other restricted payments; (iv) sell certain assets; (v) create liens or use assets as security in other transactions; (vi) merge, consolidate or transfer or dispose of substantially all of the Company’s assets; and (vii) engage in certain transactions with affiliates.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2016

 

As of December 31, 2015

(in thousands)

Outstanding Long-Term Debt

 

Unamortized Discount and Issuance Cost

 

Long-Term

Debt,

as reported

 

Outstanding Long-Term Debt

 

Unamortized Discount and Issuance Cost

 

Long-Term Debt,
as reported

Term Loan

$

57,000 

 

$

(2,350)

 

$

54,650 

 

$

223,750 

 

$

(1,630)

 

$

222,120 

2014 Revolver

 

152,500 

 

 

(4,510)

 

 

147,990 

 

 

158,000 

 

 

(2,185)

 

 

155,815 

2010 Notes

 

300,000 

 

 

(1,880)

 

 

298,120 

 

 

300,000 

 

 

(2,882)

 

 

297,118 

Convertible Notes

 

200,000 

 

 

(47,332)

 

 

152,668 

 

 

 —

 

 

 —

 

 

 —



The Senior Notes became redeemable, in whole or in part, any time on or after November 1, 2014 at the redemption prices specified in the Indenture, together with accrued and unpaid interest, if any, to the redemption date.

Upon the occurrence of a change of control triggering event specified in the Indenture, the Company must offer to purchase the Senior Notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.

The Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing, the Trustee or holders of at least 25% in principal amount of the outstanding Senior Notes may declare the principal, accrued and unpaid interest, if any, on all the Senior Notes to be due and payable.

Amended Credit Agreement

On August 3, 2011 the Company entered into a Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., and was amended by a Joinder Agreement dated October 21, 2011 executed by Becho, Inc. The Credit Agreement allowed the Company to borrow up to $300 million on a revolving credit basis (the “Revolving Facility”), with a $50 million sublimit for letters of credit, and an additional $200 million term loan (the “Term Loan”).

On August 2, 2012, the Company entered into a First Amendment (the “First Amendment”) to its Fifth Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (the “Lender”). The First Amendment modified the financial covenants under the Amended Credit Agreement beginning with the period ended September 30, 2012 to allow for more favorable minimum net worth, minimum fixed charge and maximum leverage ratios for the Company and also to add new financial covenants including minimum liquidity and consolidated senior leverage ratio covenants. The First Amendment also increased the sublimit for letters of credit from $50 million to $150 million.Facility



On June 5 2014, the Company entered into a Sixth Amended and Restated Credit Agreement (the “Credit“Original Facility,” with subsequent amendments discussed herein, the “2014 Credit Facility”) restructuring its former $300 million revolving credit facility and $200 million Term Loan. All outstanding amounts under the Fifth Amended and Restated Credit Agreement were repaid in full using proceeds of the Credit Facility. The new agreement provides for a $300 million revolving credit facility (the “Revolving Credit Facility") and a $250 million term loan (the “Term Loan”) with Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The Term Loan principal is to be repaid on a quarterly basis, with 6.0% of the original total outstanding principal repaid in year 1, 9.0% in year 2, 12.0% in year 3, 15.0% in year 4 and 13.5% in year 5 along with a balloon payment of the remaining 44.5% due at maturity. Borrowings under the Revolving Credit Facility bear interest based either on Bank of America’s prime lending rate or the London Interbank Offered Rate

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(“LIBOR”) plus an applicable margin. Borrowings under the Term Loan bear interest based on LIBOR plus an applicable margin. Included in the Credit Facility is a special provision allowing an additional accordion provision, which the Company may opt to utilize at a future date to increase either the Revolving Credit Facility or establish one or more new term loan commitments, up to an aggregate amount not to exceed $300 million. The2014 Credit Facility provides for a $300 million revolving credit facility (the “2014 Revolver”), a $250 million Term Loan (the “Term Loan”) and a sublimit for the issuance of letters of credit up to the aggregate amount of $150 million. Bothmillion, all maturing on May 1, 2018. Borrowings under both the Revolving Credit Facility2014 Revolver and the Term Loan mature on June 5, 2019.

The Revolving Credit Facility and Term Loan include usual and customary covenants for credit facilities of this type, including covenants providing maximum allowable ranges of consolidated leverage ratios from 3.75:1.00 to 2.75:1.00 over a range of five years and maintaining a minimum consolidated fixed charge coverage ratio of 1.25:1.00. The Credit Facility eliminated the other covenant requirements that were formerly held under the Fifth Amended and Restated Credit Agreement.

Substantially all of the Company’s subsidiaries unconditionally guarantee the obligations of the Company under the Credit Facility. The obligations under the Credit Facility are secured by a lien on all personal property of the Company and its subsidiaries party thereto. Any outstanding loans under the Revolving Facility and the Term Loan mature on June 5, 2019. The Term Loan balance was $242.5 million at December 31, 2014. The first quarterly term loan payment under the Credit Facility was due and paid on September 30, 2014. The Company was in compliance with the modified financial covenants under the Credit Facility for the period ended December 31, 2014.

The Company had $130.0 million of outstanding borrowings under its Revolving Facility as of December 31, 2014 and $135.0 million of outstanding borrowings under its former Revolving Facility as of December 31, 2013. The net change in borrowings under the Revolving Facility comprises all “Proceeds from debt” and a significant portion of all “Repayment of debt” as presented in the Consolidated Condensed Statements of Cash Flows. The Company utilized the Revolving Facility for letters of credit in the amount of $1.0 million as of December 31, 2014 and $0.2 million under the former Revolving Facility as of December 31, 2013. Accordingly, at December 31, 2014, the Company had $169.0 million available to borrow under the Revolving Facility.

On August 26, 2011, we entered into a swap agreement (“Swap Agreement”) with Bank of America, N.A. to establish a long-term interest rate for the Term Loan discussed above. The Swap Agreement pertains to the Term Loan principal balance outstanding at January 31, 2012 and will remain effective through the maturity date in June 2016.. Amounts outstanding under the Swap Agreement will bear interest at a rate equal to, the Applicable Rate, as defined in the Amended Credit Agreement (based upon our consolidated leverage ratio) plus 97.5 basis points. The Swap Agreement includes quarterly installments of principal and monthly installments of interest payable through the maturity date.

Debt Agreements from Acquisitions

In connection with the acquisition of Lunda, the Company issued to the former Lunda shareholders promissory notes in an aggregate amount of approximately $21.7 million (the “Lunda Seller Notes”). Interest under the Lunda Seller Notes accrues at the rate of 5% per annum with all accrued but unpaid interest payable annually. The Lunda Seller Notes mature on July 1, 2016. The Company may prepay all or any portion of the Lunda Seller Notes at any time without premium or penalty. To the extent that the Company prepays all or any portion of its outstanding Senior Notes, it is also required to repay a pro rata portion (based upon the amount being prepaid under the Senior Notes and the total amount outstanding under the Senior Notes) of the Lunda Seller Notes. The Lunda Seller Notes are guaranteed by Lunda, which, as a result of the acquisition, is a wholly owned subsidiary of the Company.

Collateralized Loans

During 2014 and 2013, the Company entered into several equipment financing arrangements for its existing and its recently acquired equipment fleets as discussed in more detail below. The Company attempted to take advantage of the opportunity to fix low interest rates for these fleets which has provided additional cash flows available for general corporate purposes.

During 2014, the Company obtained equipment financing totaling $46.5 million at fixed rates ranging from 2.12% to 2.69%, payable in equal monthly installments for forty eight to sixty months.

During 2013, the Company obtained equipment financing totaling $25.8 million at fixed rates ranging from 2.28% to 3.09%, payable in equal monthly installments for sixty months. We obtained a mortgage loan of $9.6 million collateralized by land and improvements located in Houston, Texas, with equal monthly installments over a 10-year period at LIBOR plus 3.00% with a balloon payment of $6.7 million due in 2023.

In January of 2012, the Company obtained a mortgage loan of $2.1 million collateralized by land at a rate of 0.20% with 24 equal monthly installments of principal and interest and a balloon payment of $1.5 million that was paid in November of 2013.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

based on either on Bank of America’s prime lending rate or the London Interbank Offered Rate (“LIBOR”), each plus an applicable margin ranging from 1.25% to 3.00% contingent upon the latest Consolidated Leverage Ratio.

During the first half of 2016, the Company entered into two amendments to the Original Facility (the “Amendments”): Waiver and Amendment No. 1, entered into on February 26, 2016 (“Amendment No. 1”), and Consent and Amendment No. 2, entered into on June 8, 2016 (“Amendment No. 2”). In Amendment No. 1, the lenders waived the Company’s violation of its consolidated leverage ratio covenant and consolidated fixed charge coverage ratio covenant. These violations were the result of the Company’s financial results for the year ended December 31, 2015, which included the previously reported $23.9 million non-cash, pre-tax charge related to an adverse ruling on the Brightwater litigation matter in the third quarter of 2015, as well as $45.6 million of pre-tax charges in the third and fourth quarters of 2015 for various Five Star Electric projects. In Amendment No. 2, the lenders consented to the issuance of the Convertible Notes subject to certain conditions, including the prepayment of $125 million on the Term Loan and the paydown of $69 million on the 2014 Revolver, and consented to a potential sale transaction of one of the Company’s business units in its Building segment, which the Company later decided not to sell.

In addition to the Amendments’ provisions discussed above, the Amendments also modified other provisions and added new provisions to the Original Facility, and Amendment No. 2 superseded and modified some of the provisions of Amendment No. 1. The following reflects the more significant changes to the Original Facility and the results of the Amendments that are now reflected in the 2014 Credit Facility. Unless otherwise noted, the changes below were primarily the result of Amendment No. 1: (1) The Company may utilize LIBOR-based borrowings. (Amendment No. 1 precluded the use of LIBOR-based borrowings until the Company filed its compliance certificate for the fourth quarter of 2016; however, Amendment No. 2 negated this preclusion.) (2) The Company is subject to an increased rate on borrowings, with such rate being 100 basis points higher than the highest rate under the Original Facility if the Company’s consolidated leverage ratio is greater than 3.50:1.00 but not more than 4.00:1.00, and an additional 100 basis points higher if the Company’s consolidated leverage ratio is greater than 4.00:1.00. (3) The Company will be subject to increased commitment fees if the Company’s consolidated leverage ratio is greater than 3.50:1.00. (4) The impact of the Brightwater litigation matter in the third quarter of 2015 is to be excluded from the calculation of the Company’s consolidated leverage ratio and consolidated fixed charge coverage ratio covenants. (5) Interest payments are due on a monthly basis; however, if the Company is in compliance with its consolidated leverage ratio and consolidated fixed charge coverage ratio covenants provided in the Original Facility as of December 31, 2016, the timing of interest payments will revert to the terms of the Original Facility. As of December 31, 2016, the Company is in compliance with its consolidated leverage ratio and consolidated fixed charge coverage ratio covenants provided in the Original Facility and the timing of our interest payments reverted back to the terms of the Original Facility, quarterly for the Term Loan and base rate borrowings and upon maturity for Eurodollar borrowings. (6) The accordion feature of the Original Facility, which would have allowed either an increase of $300 million in the 2014 Revolver or the establishment of one or more new term loan commitments, is no longer available. (7) The Company’s maximum allowable consolidated leverage ratio was increased to 4.25:1.00 for the first, second and third quarters of 2016 after which it returns to the Original Facility’s range of 3.25:1.00 to 3.00:1.00. (Amendment No. 1 increased the Company’s maximum allowable consolidated leverage ratio covenant requirements to 4.25:1.00 for the first quarter of 2016 and 4.0:1.0 for the second and third quarters of 2016. Amendment No. 2 increased the maximum allowable consolidated leverage ratio covenant requirements to 4.25:1.00 for the second and third quarters of 2016.) (8) The Company is subject to additional covenants regarding its liquidity, including a cap on the cash balance in the Company’s bank account and a weekly minimum liquidity requirement (based on specified available cash balances and availability under the 2014 Revolver). (9) The Company is required to achieve certain cumulative quarterly cash collection milestones, which were eased somewhat in Amendment No. 2. (10) The Company is required to make additional quarterly principal payments, which will be applied to the Term Loan balloon payment, with some of the payments based on a percentage of certain forecasted cash collections for the prior quarter. This change was effective in the fourth quarter of 2016. (11) The lenders’ collateral package was increased by pledging to the lenders (i) the equity interests of each direct domestic subsidiary of the Company and (ii) 65% of the stock of each material first-tier foreign restricted subsidiary of the Company. (12) The 2014 Credit Facility will now mature on May 1, 2018, as opposed to June 5, 2019, the maturity date of the Original Facility.

As of December 31, 2016, there was $147.3 million available under the 2014 Revolver and the Company had utilized the 2014 Credit Facility for letters of credit in the amount of $0.2  million. The Company was in compliance with the financial covenants under the 2014 Credit Facility for the period ended December 31, 2016. As of December 31, 2016, the effective interest rate on the Term Loan and the 2014 Revolver was 4.68% and 5.05%, respectively.

2010 Senior Notes

In October 2010, the Company issued $300 million of 7.625% Senior Notes due November 1, 2018 (the “2010 Notes”) in a private placement offering. Interest on the 2010 Notes is payable semi-annually on May 1 and November 1 of each year. The Company may

F-16


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

redeem the 2010 Notes at par beginning on November 1, 2016, which was not exercised as of December 31, 2016. At the date of any redemption, any accrued and unpaid interest would also be due.

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.

To account for the Convertible Notes, the Company applied the provisions of ASC 470-20, Debt with Conversion and Other Options. ASC 470-20 requires issuers of certain convertible debt instruments that may be settled in cash upon conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. This is done by allocating the proceeds from issuance to the liability component based on the fair value of the debt instrument excluding the conversion feature, with the residual allocated to the equity component and classified in additional paid in capital. The $46.8 million difference between the principal amount of the Convertible Notes ($200.0 million) and the proceeds allocated to the liability component ($153.2 million) is treated as a discount on the Convertible Notes. This difference is being amortized as non-cash interest expense using the interest method, as discussed below under Interest Expense. The equity component, however, is not subject to amortization nor subsequent remeasurement.

In addition, ASC 470-20 requires that the debt issuance costs associated with a convertible debt instrument be allocated between the liability and equity components in proportion to the allocation of the debt proceeds between these two components. The debt issuance costs attributable to the liability component of the Convertible Notes ($5.1 million) are also treated as a discount on the Convertible Notes and amortized as non-cash interest expense. The debt issuance costs attributable to the equity component ($1.5 million) were netted with the equity component and will not be amortized.

The following table presents information related to the liability and equity components of the Convertible Notes:

(in thousands)

As of
December 31,
2016

Liability component:

Principal

$

200,000 

Conversion feature

(46,800)

Allocated debt issuance costs

(5,051)

Amortization of discount and debt issuance costs (non-cash interest expense)

4,519 

Net carrying amount

$

152,668 

Equity component:

Conversion feature

$

46,800 

Allocated debt issuance costs

(1,543)

Net deferred tax liability

(18,815)

Net carrying amount

$

26,442 

The Convertible Notes, governed by the terms of an indenture between the Company and Wilmington Trust, National Association, as trustee, are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company. The Convertible Notes bear interest at a rate of 2.875% per year, payable in cash semiannually in June and December.

Prior to January 15, 2021, the Convertible Notes will be convertible only under the following circumstances: (1) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for such trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (2) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016, 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.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Convertible Notes will be convertible at an initial conversion rate of 33.0579 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $30.25. The conversion rate will be subject to adjustment for some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company is required to increase, in certain circumstances, the conversion rate for a holder who elects to convert their Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” described in the indenture. Upon conversion, and at the Company’s election, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock. As of December 31, 2016, none of the conversion provisions of the Convertible Notes have been triggered.

Equipment Financing and Mortgages

The Company has certain loans entered into for the purchase of specific property, plant and equipment and secured by the assets purchased. The aggregate balance of equipment financing loans was approximately $84.9 million and $115.6 million at December 31, 2016 and 2015, respectively, with interest rates ranging from 1.90% to 5.93% with equal monthly installment payments over periods up to ten years with additional balloon payments of $12.4 million in 2021 and $6.3 million in 2022 on the remaining loans outstanding at December 31, 2016. The aggregate balance of mortgage loans was approximately $16.7 million and $17.7 million at December 31, 2016 and 2015, respectively, with interest rates ranging from a fixed 2.50% to LIBOR plus 3% and equal monthly installment payments over periods up to seven years with additional balloon payments of $2.6 million in 2018, $2.9 million in 2021 and $6.7 million in 2023.

The following table presents the future principal payments required under all of the Company’s debt obligations, discussed above, including the terms of the Amendments.



 

 

 



 

 

 

Year (in thousands)

 

 

2017

 

$

85,890 

2018

 

 

478,583 

2019

 

 

12,294 

2020

 

 

5,378 

2021

 

 

218,923 

Thereafter

 

 

14,523 



 

 

815,591 

Less: Unamortized Discount and Issuance Cost

 

 

(56,072)

Total

 

$

759,519 

Interest Expense

Interest Expense as reported in the Consolidated Statements of Operations consists of the following:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



For the year ended December 31,

(in thousands)

2016

 

2015

 

2014

Cash interest expense:

 

 

 

 

 

 

 

 

Interest on 2014 Credit Facility

$

19,201 

 

$

14,368 

 

$

12,980 

Interest on 2010 Senior Notes

 

22,875 

 

 

22,875 

 

 

22,875 

Interest on Convertible Notes

 

3,115 

 

 

 —

 

 

 —

Other interest

 

3,623 

 

 

5,805 

 

 

7,910 

Total cash interest expense

 

48,814 

 

 

43,048 

 

 

43,765 

Non-cash interest expense:(a)

 

 

 

 

 

 

 

 

Amortization of debt issuance costs on 2014 Credit Facility

 

5,447 

 

 

1,116 

 

 

1,319 

Amortization of discount and debt issuance costs on 2010 Senior Notes

 

1,002 

 

 

979 

 

 

951 

Amortization of discount and debt issuance costs on Convertible Notes

 

4,519 

 

 

 —

 

 

 —

Total non-cash interest expense

 

10,968 

 

 

2,095 

 

 

2,270 

Total cash and non-cash interest expense

$

59,782 

 

$

45,143 

 

$

46,035 

(a)  Non-cash interest expense produces effective interest rates that are higher than contractual rates; accordingly, the effective interest rates for the 2014 Credit Facility, the 2010 Senior Notes and the Convertible Notes are 9.86%,  7.99% and 9.39%, respectively.

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Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Leases



The Company leases certain construction equipment, vehicles and office space under non-cancelablenon-cancellable operating leases. Futureleases, with future minimum rent payments under non-cancelable operating leases as of December 31, 2014 are2016 as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

(in thousands)

2015

 

$

22,394 

2016

 

 

17,699 

Year (in thousands)

 

 

2017

 

 

13,659 

 

$

22,950 

2018

 

 

8,762 

 

 

13,612 

2019

 

 

7,175 

 

 

9,983 

2020

 

 

7,417 

2021

 

 

5,455 

Thereafter

 

 

29,733 

 

 

19,260 

Subtotal

 

$

99,422 

 

 

78,677 

Less - Sublease rental agreements

 

 

(491)

 

 

(3,150)

 

$

98,931 

Total

 

$

75,527 



Rental expense under operating leases of construction equipment, vehicles and office space was $28.2 million in 2016, $17.4 million in 2015 and $24.4 million in 2014,  $18.5 million in  2013 and  $17.7 million in  2012.2014.

  

[5]6.     Income Taxes



Income (Loss) before taxes is summarized as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

Foreign

 

 

 

Year ended December 31, 2014

 

Operations

 

Operations

 

Total

 

 

(in thousands)

2014

 

$

170,517 

 

 

16,921 

 

 

187,438 

2013

 

$

127,682 

 

$

11,933 

 

$

139,615 

2012

 

$

(271,683)

 

$

3,841 

 

$

(267,842)



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Year Ended December 31,

(in thousands)

 

2016

 

2015

 

2014

United States Operations

 

$

128,072 

 

$

69,822 

 

$

170,517 

Foreign Operations

 

 

21,043 

 

 

4,017 

 

 

16,921 

Total

 

$

149,115 

 

$

73,839 

 

$

187,438 



The (benefit) provision for income taxes is as follows:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Year Ended December 31,

(in thousands)

 

2016

 

2015

 

2014

Current expense:

 

 

 

 

 

 

 

 

 

Federal

 

$

43,850 

 

$

5,465 

 

$

45,074 

State

 

 

13,039 

 

 

(362)

 

 

11,174 

Foreign

 

 

6,573 

 

 

1,126 

 

 

3,203 

Total current

 

 

63,462 

 

 

6,229 

 

 

59,451 



 

 

 

 

 

 

 

 

 

Deferred (benefit) expense:

 

 

 

 

 

 

 

 

 

Federal

 

 

(3,054)

 

 

19,583 

 

 

9,992 

State

 

 

(5,302)

 

 

2,735 

 

 

10,059 

Foreign

 

 

(1,813)

 

 

 —

 

 

 —

Total deferred

 

 

(10,169)

 

 

22,318 

 

 

20,051 

Total provision

 

$

53,293 

 

$

28,547 

 

$

79,502 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

 

 

(in thousands)

Current expense:

 

 

 

 

 

 

 

 

 

Federal

 

$

45,074 

 

$

29,034 

 

$

19,573 

State

 

 

11,174 

 

 

9,018 

 

 

3,508 

Foreign

 

 

3,203 

 

 

4,256 

 

 

1,542 

Total current

 

 

59,451 

 

 

42,308 

 

 

24,623 

 

 

 

 

 

 

 

 

 

 

Deferred (benefit) expense:

 

 

 

 

 

 

 

 

 

Federal

 

 

9,992 

 

 

9,547 

 

 

(28,157)

State

 

 

10,059 

 

 

577 

 

 

1,104 

Foreign

 

 

 —

 

 

(113)

 

 

(12)

Total deferred

 

 

20,051 

 

 

10,011 

 

 

(27,065)

Total (benefit) provision

 

$

79,502 

 

$

52,319 

 

$

(2,442)

71F-19

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table is a reconciliation of the Company’s provision (benefit) for income taxes at the statutory rates to the provision (benefit) for income taxes at the Company’s effective rate.





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Year Ended December 31,



 

2016

 

2015

 

2014

(dollars in thousands)

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

Federal income expense at statutory tax rate

 

$

52,190 

 

35.0 

%

 

$

25,844 

 

35.0 

%

 

$

65,603 

 

35.0 

%

State income taxes, net of federal tax benefit

 

 

5,972 

 

4.0 

 

 

 

1,250 

 

1.7 

 

 

 

10,367 

 

5.5 

 

Officers' compensation

 

 

3,807 

 

2.6 

 

 

 

2,900 

 

3.9 

 

 

 

3,657 

 

2.0 

 

Domestic Production Activities Deduction

 

 

(4,018)

 

(2.7)

 

 

 

(1,499)

 

(2.0)

 

 

 

(5,170)

 

(2.8)

 

Impact of state tax rate changes on deferred taxes

 

 

(1,358)

 

(0.9)

 

 

 

2,435 

 

3.3 

 

 

 

3,245 

 

1.7 

 

Other

 

 

(3,300)

 

(2.3)

 

 

 

(2,383)

 

(3.2)

 

 

 

1,800 

 

1.0 

 

Provision for income taxes

 

$

53,293 

 

35.7 

%

 

$

28,547 

 

38.7 

%

 

$

79,502 

 

42.4 

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

 

 

(dollars in thousands)

Federal income expense (benefit) at statutory tax rate

 

$

65,603 

 

35.0 

%

 

$

48,865 

 

35.0 

%

 

$

(93,745)

 

35.0 

%

State income taxes, net of federal tax benefit

 

 

10,367 

 

5.5 

 

 

 

6,236 

 

4.5 

 

 

 

3,214 

 

(1.2)

 

Officers' compensation

 

 

3,657 

 

2.0 

 

 

 

1,732 

 

1.2 

 

 

 

1,473 

 

(0.6)

 

Domestic Production Activities Deduction

 

 

(5,170)

 

(2.8)

 

 

 

(3,641)

 

(2.6)

 

 

 

(2,246)

 

(2.4)

 

Goodwill Impairment

 

 

 —

 

 —

 

 

 

 —

 

 —

 

 

 

89,191 

 

(33.3)

 

Impact of state tax rate changes on deferreds

 

 

3,245 

 

1.7 

 

 

 

 —

 

 —

 

 

 

 —

 

 —

 

Other

 

 

1,800 

 

1.0 

 

 

 

(873)

 

(0.6)

 

 

 

(329)

 

3.4 

 

(Benefit) provision for income taxes

 

$

79,502 

 

42.4 

%

 

$

52,319 

 

37.5 

%

 

$

(2,442)

 

0.9 

%



The Company’s provision for income taxes and effective tax rate for the year ended December 31, 20142016 were significantly impacted by a shift inrate changes associated with shifts of revenue from projects in higher-tax jurisdictions causing a riseaffecting state apportionment as well as various return-to-provision and depreciation adjustments. The decrease in the state tax rate.  The higher state tax rate was applied to deferred tax balances, which further increaseddecreased the effective rate.

The Company’s provision for income taxes and effective tax rate for the year ended December 31, 2012 were significantly impacted by the goodwill and intangible asset impairment charge discussed in Note 3 — Goodwill and Other Intangible Assets. Of the total goodwill and intangible asset impairment charge of $376.6 million, approximately $255.0 million pertained to goodwill that had no corresponding tax basis. The tax effect of the impairment charge resulted in a reduction in the Company’s provision for income taxes of approximately $50.2 million in 2012.



The following is a summary of the significant components of the deferred tax assets and liabilities:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

As of December 31,

 

2014

 

2013

 

(in thousands)

(in thousands)

 

2016

 

2015

Deferred Tax Assets

 

 

 

 

 

 

 

 

 

 

 

 

Timing of expense recognition

 

$

47,017 

 

$

24,170 

 

$

36,055 

 

$

23,580 

Net operating losses

 

 

2,188 

 

 

4,123 

 

10,140 

 

5,478 

Other, net

 

 

6,980 

 

 

5,641 

 

 

33,507 

 

 

29,342 

Deferred tax assets

 

 

56,185 

 

 

33,934 

 

 

79,702 

 

 

58,400 

Valuation Allowance

 

 

(1,369)

 

 

(2,817)

Valuation allowance

 

 

(460)

 

 

(460)

Net deferred tax assets

 

 

54,816 

 

 

31,117 

 

 

79,242 

 

 

57,940 

 

 

 

 

 

 

Deferred Tax Liabilities

 

 

 

 

 

 

 

 

 

 

Intangible assets, due primarily to purchase accounting

 

 

(26,094)

 

 

(18,260)

 

(34,679)

 

(37,157)

Fixed assets, due primarily to purchase accounting

 

 

(90,886)

 

 

(79,243)

 

(107,081)

 

(100,516)

Construction contract accounting

 

 

(6,854)

 

 

(6,432)

 

(12,564)

 

(9,197)

Joint ventures - construction

 

 

(30,654)

 

 

(5,229)

 

(29,609)

 

(29,949)

Contested Legal Settlement

 

 

 —

 

 

(12,012)

Other

 

 

(10,012)

 

 

(3,408)

 

 

(24,970)

 

 

(3,943)

Deferred tax liabilities

 

 

(164,500)

 

 

(124,584)

 

 

(208,903)

 

 

(180,762)

 

 

 

 

 

 

 

 

 

 

 

Net deferred tax liability

 

$

(109,684)

 

$

(93,467)

 

$

(129,661)

 

$

(122,822)



The net deferred tax liability is presented in the Consolidated Balance Sheets as  follows:



 

 

 

 

 

 



 

 

 

 

 

 



 

As of December 31,

(in thousands)

 

2016

 

2015

Deferred tax asset

 

$

1,346 

 

$

 —

Deferred tax liability

 

 

(131,007)

 

 

(122,822)

Net deferred tax liability

 

$

(129,661)

 

$

(122,822)

Subsequent to the issuance of our 2015 consolidated financial statements, the Company identified that certain immaterial classification adjustments, related to the offsetting of deferred assets and liabilities by tax jurisdiction, were necessary to properly present deferred tax assets and liabilities on its Consolidated Balance Sheet as of December 31, 2015. The accompanying Consolidated Balance Sheet as of December 31, 2015, the corresponding balance sheet amounts within the business segments footnote (Note 10) and the guarantor footnote (Note 13), have been corrected for the effect of this classification error. The Company has evaluated the effects of the

72F-20

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

classification adjustments as of December 31, 2015 based on the SEC’s guidance in Staff Accounting Bulletin No. 99, Materiality, and after consideration of both quantitative and qualitative factors, has concluded that the following adjustments are immaterial:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

As of December 31, 2015

(in thousands)

 

As Previously Reported

 

Adjustments

 

As Restated (a)

Total current assets

 

$

2,635,245 

 

$

(24,889)

 

$

2,610,356 

Other assets

 

 

202,125 

 

 

(149,071)

 

 

53,054 

Total assets

 

 

4,042,441 

 

 

(173,960)

 

 

3,868,481 

Accrued expenses and other current liabilities

 

 

(159,016)

 

 

24,889 

 

 

(134,127)

Total current liabilities

 

 

(1,473,708)

 

 

24,889 

 

 

(1,448,819)

Total liabilities

 

 

(2,622,214)

 

 

173,960 

 

 

(2,448,254)

Total liabilities and stockholders' equity

 

 

(4,042,441)

 

 

173,960 

 

 

(3,868,481)



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

As of December 31, 2015

(in thousands)

 

As Previously Reported

 

Adjustments

 

As Restated (a)

Current deferred tax asset

 

$

26,306 

 

$

(24,889)

 

$

1,417 

Long-term deferred tax asset

 

 

149,071 

 

 

(149,071)

 

 

 —

Current deferred tax liability

 

 

(24,889)

 

 

24,889 

 

 

 —

Long-term deferred tax liability

 

 

(273,310)

 

 

149,071 

 

 

(124,239)

Net deferred tax liability

 

$

(122,822)

 

$

 —

 

$

(122,822)

(a)

The amounts reflected are prior to the Company's adoption of ASU 2015-03 (see discussion in Note 1) and ASU 2015-17, discussed below.

In addition to the immaterial classification adjustments reflected above, the Company identified certain immaterial classification errors within the disclosure of the significant components of deferred tax assets and liabilities as of December 31, 2015. The following is a revised summary of the significant components of deferred tax assets and liabilities to reflect adjustments for the immaterial classification errors as of December 31, 2015:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

As of December 31, 2015

(in thousands)

 

As Previously Reported

 

Adjustments

 

As Restated

Deferred Tax Assets

 

 

 

 

 

 

 

 

 

Timing of expense recognition

 

$

58,048 

 

$

(34,468)

 

$

23,580 

Net operating losses

 

 

3,564 

 

 

1,914 

 

 

5,478 

Other, net

 

 

114,225 

 

 

(84,883)

 

 

29,342 

Deferred tax assets

 

 

175,837 

 

 

(117,437)

 

 

58,400 

Valuation allowance

 

 

(460)

 

 

 —

 

 

(460)

Net deferred tax assets

 

 

175,377 

 

 

(117,437)

 

 

57,940 

Deferred Tax Liabilities

 

 

 

 

 

 

 

 

 

Intangible assets, due primarily to purchase accounting

 

 

(99,549)

 

 

62,392 

 

 

(37,157)

Fixed assets, due primarily to purchase accounting

 

 

(101,022)

 

 

506 

 

 

(100,516)

Construction contract accounting

 

 

(7,530)

 

 

(1,667)

 

 

(9,197)

Joint ventures - construction

 

 

(27,604)

 

 

(2,345)

 

 

(29,949)

Other

 

 

(62,494)

 

 

58,551 

 

 

(3,943)

Deferred tax liabilities

 

 

(298,199)

 

 

117,437 

 

 

(180,762)

Net deferred tax liability

 

$

(122,822)

 

$

 —

 

$

(122,822)

The Company has also elected to early adopt ASU 2015-17, effective as of the beginning of the fourth quarter of 2016. As a result of the adoption of ASU 2015-17, the Company has retrospectively adjusted the Consolidated Balance Sheet as of December 31, 2015 to

F-21


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

reflect the provisions of the ASU. The adoption of ASU 2015-17 resulted in a reclassification of $1.4 million of deferred tax assets classified as current to long-term as of December 31, 2015. Upon adoption of ASU 2015-17, the resulting long-term deferred asset of $1.4 million was offset against the Company’s net deferred tax liability is classified inliabilities within the Consolidated Balance Sheets based on  when the  future benefit (expense) is expected to be realized as  follows:same jurisdiction.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

 

(in thousands)

Current deferred tax asset

 

$

17,962 

 

$

8,240 

Long-term deferred tax asset

 

 

36,854 

 

 

22,877 

Current deferred tax liability

 

 

(14,129)

 

 

(10,251)

Long-term deferred tax liability

 

 

(150,371)

 

 

(114,333)

Net deferred tax liability

 

$

(109,684)

 

$

(93,467)

At December 31, 2013 theThe Company had a valuation allowance of $2.8$0.5 million and atas of December 31, 2014, the Company had a valuation allowance of $1.4 million2016 and 2015 for federal and state capital loss-carry-forwardsloss carryforwards as the ultimate utilization of this item was less than “more likely than not.” 

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. As of the years ended December 31, 2014 and December 31, 2013, unremitted earnings of foreign subsidiaries, which have been or are intended to be permanently invested, aggregated approximately $15.1 million and $4.3 million, respectively. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.likely.



The Company adoptedhas not provided for deferred income taxes or foreign withholding tax on basis differences in its non-U.S. subsidiaries that result from undistributed earnings aggregating $19.7 million which the provisionsCompany has the intent and the ability to reinvest in its foreign operations. Generally, the U.S. income taxes imposed upon repatriation of FASB ASC 740-10, Income Taxes, Accounting for Uncertainty in Income Taxes, inundistributed earnings would be reduced by foreign tax credits from foreign income taxes paid on the first quarterearnings. Determination of 2007. Itthe deferred income tax liability on these basis differences is thenot reasonably estimable because such liability, if any, is dependent on circumstances existing if and when remittance occurs.

The Company’s policy is to record any accrued interest and penalties on unrecognized tax benefits as partan element of the income tax provision.expense. The cumulative amounts related to interest and penalties are added to the total unrecognized tax liabilities on the balance sheet. The total amount of gross unrecognized tax benefits as of December 31, 2016 that, if recognized, would affect the effective tax rate is $7.6 million. During 2013,2016, the Company recognized a net increase of $1.4$4.0 million in liabilities. The amount of gross unrecognized tax benefits as of December 31, 2013 is $5.52015 was $3.6 million. Included in this liability is $0.5 million of related interest. During 2014,2015, the Company recognized a net increasedecrease of $2.2$4 million in liabilities. The amount of gross unrecognized tax benefits as of December 31, 2014 iswas $7.6 million. Includedmillion in this liability is $0.8liabilities. During 2014, the Company recognized a net increase of $2.2 million of related interest.in liabilities. The Company does not expect any significant release of unrecognized tax benefits within the next twelve months.



The Company accounts for its uncertain tax positions in accordance with GAAP. A reconciliation of the beginning and ending amountamounts of these tax benefits for the gross unrecognized tax benefitthree years ended December 31, 2016 is as follows (in thousands):follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

As of December 31,

(in thousands)

 

2016

 

2015

 

2014

Beginning balance

 

$

3,612 

 

$

7,636 

 

$

5,459 

Change in tax positions of prior years

 

 

3,543 

 

 

(3,073)

 

 

426 

Change in tax positions of current year

 

 

419 

 

 

169 

 

 

2,929 

Reduction in tax positions for statute expirations

 

 

 —

 

 

(1,120)

 

 

(1,178)

Ending Balance

 

$

7,574 

 

$

3,612 

 

$

7,636 



We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to examination by taxing authorities principally throughout the United States, Guam and Canada. We are no longer under examination by the taxing authority regarding any U.S. federal income tax returns for years before 2011 while the years open for examination under various state and local jurisdictions vary.

7.     Contingencies and Commitments

Gross unrecognized tax benefit balance at January 1, 2012

$

2,043 

Add:

Additions based on tax positions related to current year

1,281 

Additions/reductions for tax positions of prior years

1,857 

Less:

Reductions for tax positions of prior years (expiration of statute of limitations)   

(1,158)

Gross unrecognized tax benefit balance at December 31, 2012

$

4,023 

Gross unrecognized tax benefit balance at January 1, 2013

$

4,023 

Add:

Additions based on tax positions related to current year

1,254 

Additions/reductions for tax positions of prior years

182 

Less:

Reductions for tax positions of prior years (expiration of statute of limitations)   

 —

Gross unrecognized tax benefit balance at December 31, 2013

$

5,459 

Gross unrecognized tax benefit balance at January 1, 2014

$

5,459 

Add:

Additions based on tax positions related to current year

2,929 

Additions/reductions for tax positions of prior years

426 

Less:

Reductions for tax positions of prior years (expiration of statute of limitations)   

(1,178)

Gross unrecognized tax benefit balance at December 31, 2014

$

7,636 



The company records interestCompany and penalties relatedcertain of its subsidiaries are involved in litigation and are contingently liable for commitments and performance guarantees arising in the ordinary course of business. The Company and certain of its customers have made claims arising from the performance under their contracts. The Company recognizes certain significant claims for recovery of incurred cost when it is probable that the claim will result in additional contract revenue and when the amount of the claim can be reliably estimated. These assessments require judgments concerning matters such as litigation developments and outcomes, the anticipated outcome of negotiations, the number of future claims and the cost of both pending and future claims. In addition, because most contingencies are resolved over long periods of time, assets and liabilities may change in the future due to an unrecognized tax benefitvarious factors. Management believes that, based on current information and discussions with the Company’s legal counsel, the ultimate resolution of these matters is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Several matters are in income tax expenses. Interest expensethe litigation and dispute resolution process. The following discussion provides a background and current status of $0.4 million was recorded during 2014.the more significant matters.

73F-22

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

[6] Other Assets, Other Long-term Liabilities and Other Income (Expense), Net

Long Island Expressway/Cross Island Parkway Matter



Other Assets, Other Long-term LiabilitiesThe Company reconstructed the Long Island Expressway/Cross Island Parkway Interchange project for the New York State Department of Transportation (the “NYSDOT”). The $130 million project was substantially completed in January 2004 and Other Income (Expense), Net consistwas accepted by the NYSDOT as complete in February 2006. The Company incurred significant added costs in completing its work and suffered extended schedule costs due to numerous design errors, undisclosed utility conflicts, lack of coordination with local agencies and other interferences for which the Company believes the NYSDOT is responsible.

In March 2011, the Company filed its claim and complaint with the New York State Court of Claims and served to the New York State Attorney General’s Office, seeking damages in the amount of $53.8 million. In May 2011, the NYSDOT filed a motion to dismiss the Company’s claim on the grounds that the Company had not provided required documentation for project closeout and filing of a claim. In September 2011, the Company reached agreement on final payment with the Comptroller’s Office on behalf of the following:NYSDOT which resulted in an amount of $0.5 million payable to the Company and formally closed out the project allowing the Company to re-file its claim. The Company re-filed its claim in the amount of $53.8 million with the NYSDOT in February 2012 and with the Court of Claims in March 2012. In May 2012, the NYSDOT served its answer and counterclaims in the amount of $151 million alleging fraud in the inducement and punitive damages related to disadvantaged business enterprise (“DBE”) requirements for the project. The Court subsequently ruled that NYSDOT’s counterclaims may only be asserted as a defense and offset to the Company’s claims and not as affirmative claims. In November 2014, the Appellate Division First Department affirmed the dismissal of the City’s affirmative defenses and affirmative counterclaims based on DBE fraud. The Company does not expect the counterclaims to have any material effect on its consolidated financial statements.



Management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.

Fontainebleau Matter

Desert Mechanical Inc. (“DMI”) and Fisk Electric Company (“Fisk”), wholly owned subsidiaries of the Company, were subcontractors on the Fontainebleau Project in Las Vegas (“Fontainebleau”), a hotel/casino complex with approximately 3,800 rooms. In June 2009, Fontainebleau filed for bankruptcy protection, under Chapter 11 of the U.S. Bankruptcy Code, in the Southern District of Florida. Fontainebleau is headquartered in Miami, Florida.

DMI and Fisk filed liens in Nevada for approximately $44 million, representing unreimbursed costs to date and lost profits, including anticipated profits. Other unaffiliated subcontractors have also filed liens. In June 2009, DMI filed suit against Turnberry West Construction, Inc., the general contractor, in the 8th Judicial District Court, Clark County, Nevada (the “District Court”), and in May 2010, the court entered an order in favor of DMI for approximately $45 million.

In January 2010, the Bankruptcy Court approved the sale of the property to Icahn Nevada Gaming Acquisition, LLC, and this transaction closed in February 2010. As a result of a July 2010 ruling relating to certain priming liens, there was approximately $125 million set aside from this sale, which is available for distribution to satisfy the creditor claims based on seniority. At that time, the total estimated sustainable lien amount was approximately $350 million. The project lender filed suit against the mechanic’s lien claimants, including DMI and Fisk, alleging that certain mechanic’s liens are invalid and that all mechanic’s liens are subordinate to the lender’s claims against the property. The Nevada Supreme Court ruled in October 2012 in an advisory opinion at the request of the Bankruptcy Court that lien priorities would be determined in favor of the mechanic lien holders under Nevada law.

In October 2013, a settlement was reached by and among the Statutory Lienholders and the other interested parties. The Bankruptcy Court appointed a mediator to facilitate the execution of that settlement agreement. Settlement discussions are ongoing.

Management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.

Honeywell Street/Queens Boulevard Bridges Matter

In 1999, the Company was awarded a contract for reconstruction of the Honeywell Street/Queens Boulevard Bridges project for the City of New York (the “City”). In June 2003, after substantial completion of the project, the Company initiated an action to recover $8.8 million in claims against the City on behalf of itself and its subcontractors. In March 2010, the City filed counterclaims for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

 

(in thousands)

Other Assets

 

 

 

 

 

 

Insurance claim receivable (1)

 

$

36,945 

 

$

34,839 

Deferred income taxes

 

 

36,854 

 

 

22,877 

Deferred costs

 

 

 —

 

 

7,711 

Mineral reserves

 

 

3,199 

 

 

3,199 

Deposits

 

 

671 

 

 

677 

Other long-term assets

 

 

10,228 

 

 

6,311 

 

 

$

87,897 

 

$

75,614 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Long-term Liabilities

 

 

 

 

 

 

Acquisition related liabilities

 

$

32,814 

 

$

51,102 

Insurance claim payable (1)

 

 

36,897 

 

 

34,774 

Pension liability

 

 

32,403 

 

 

19,831 

Employee benefit related liabilities

 

 

2,476 

 

 

2,536 

Mineral royalties payable

 

 

1,727 

 

 

1,727 

Deferred lease incentive

 

 

462 

 

 

1,143 

Other

 

 

8,017 

 

 

6,745 

 

 

$

114,796 

 

$

117,858 

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$74.6 million and other relief, alleging fraud in connection with the DBE requirements for the project. In May 2010, the Company served the City with its response to the City’s counterclaims and affirmative defenses. In August 2013, the Court granted the Company’s motion to dismiss the City’s affirmative defenses and counterclaims relating to fraud.

In January 2017, the Court granted the City’s motion for summary judgment and dismissed the Company’s claim against the City of New York. The Company has filed a notice of appeal. The Court also granted the Company’s motion for summary judgment for release of retention plus interest from 2010 for an aggregate amount of approximately $1.1 million.

The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements.

Westgate Planet Hollywood Matter

Tutor-Saliba Corporation (“TSC”), a wholly owned subsidiary of the Company, contracted to construct a timeshare development project in Las Vegas which was substantially completed in December 2009. The Company’s claims against the owner, Westgate Planet Hollywood Las Vegas, LLC (“WPH”), relate to unresolved owner change orders and other claims. The Company filed a lien on the project in the amount of $23.2 million, and filed its complaint with the District Court, Clark County, Nevada. Several subcontractors have also recorded liens, some of which have been released by bonds and some of which have been released as a result of subsequent payment. WPH has posted a mechanic’s lien release bond for $22.3 million.

WPH filed a cross-complaint alleging non-conforming and defective work for approximately $51 million, primarily related to alleged defects, misallocated costs, and liquidated damages. WPH revised the amount of their counterclaims to approximately $45 million.

Following multiple post-trial motions, final judgment was entered in this matter on March 20, 2014. TSC was awarded total judgment in the amount of $19.7 million on its breach of contract claim, which includes an award of interest up through the date of judgment, plus attorney’s fees and costs. WPH has paid $0.6 million of that judgment. WPH was awarded total judgment in the amount of $3.1 million on its construction defect claims, which includes interest up through the date of judgment. The awards are not offsetting. WPH and its Sureties have filed a notice of appeal. TSC has filed a notice of appeal on the defect award. In July 2014, the Court ordered WPH to post an additional supersedeas bond on appeal, in the amount of $1.7 million, in addition to the lien release bond of $22.3 million, which increases the security up to $24.0 million. The Nevada Supreme Court has not yet ruled on this matter.

The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements. Management has made an estimate of the total anticipated recovery on this project and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.

U.S. Department of Commerce, National Oceanic and Atmospheric Administration Matter

Rudolph and Sletten, Inc. (“R&S”), a wholly owned subsidiary of the Company, entered into a contract with the United States Department of Commerce, National Oceanic and Atmospheric Administration (“NOAA”) for the construction of a 287,000 square-foot facility for NOAA’s Southwest Fisheries Science Center Replacement Headquarters and Laboratory in La Jolla, California. The contract work began on May 24, 2010, and was substantially completed in September 2012. R&S incurred significant additional costs as a result of a design that contained errors and omissions, NOAA’s unwillingness to correct design flaws in a timely fashion and a refusal to negotiate the time and pricing associated with change order work.

R&S has filed three certified claims against NOAA for contract adjustments related to the unresolved Owner change orders, delays, design deficiencies and other claims. The First Certified Claim was submitted on August 20, 2013, in the amount of $26.8 million ("First Certified Claim") and the Second Certified Claim was submitted on October 30, 2013, in the amount of $2.6 million ("Second Certified Claim") and the Third Certified Claim was submitted on October 1, 2014 in the amount of $0.7 million (“Third Certified Claim”).

NOAA requested an extension to issue a decision on the First Certified Claim and on the Third Certified Claim, but did not request an extension of time to review the Second Certified Claim. On January 6, 2014, R&S filed suit in the United States Federal Court of Claims on the Second Certified Claim plus interest and attorney's fees and costs. This was followed by a submission of a lawsuit on the First Certified Claim on July 31, 2014. In February 2015, the Court denied NOAA’s motion to dismiss the Second Certified Claim. In March 2015, the Contracting Officer issued decisions on all Claims accepting a total of approximately $1.0 million of claims and denying approximately $29.5 million of claims. On April 14, 2015, the Court consolidated the cases. Trial is scheduled to commence in December 2017.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Five Star Electric Matter

In the third quarter of 2015, Five Star Electric Corp. ("Five Star"), a subsidiary of the Company that was acquired in 2011, entered into a tolling agreement related to an ongoing investigation being conducted by the United States Attorney for the Eastern District of New York (“USAO EDNY”). The tolling agreement extended the statute of limitations to avoid the expiration of any unexpired statute of limitations while the investigation is pending. Five Star has been cooperating with the USAO EDNY since late June 2014, when it was first made aware of the investigation, and has been providing information related to its use of certain minority-owned, women-owned, small and disadvantaged business enterprises and, in addition, most recently, information regarding certain of Five Star’s employee compensation, benefit and tax practices. The investigation covers the period of 2005-2014.

The Company cannot predict the ultimate outcome of the investigation and cannot accurately estimate any potential liability 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 diameter bored tunnel in downtown Seattle, King County, Washington to replace the Alaskan Way Viaduct, also known as State Route 99.

The construction of the large diameter bored tunnel requires 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 damaged and was required to be shut down for repair. 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 differing site condition. WSDOT has not accepted that finding.

The TBM is 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 insurer and requested interim payments under the Policy. The Insurers refused to pay and denied coverage. In June 2015, STP filed a lawsuit in the King County Superior Court, State of Washington (“Washington Superior Court”) seeking declaratory relief concerning contract interpretation as well as damages as a result of the Insurers’ breach of its obligations under the terms of the Policy. WSDOT is deemed a plaintiff since WSDOT is an insured under the Policy and had filed its own claim for damages. Hitachi, the manufacturer of the TBM, has also joined the case as a plaintiff for costs incurred to repair the damages to the TBM. Trial is scheduled for June 2018.  

In March 2016, WSDOT filed a complaint against STP in Thurston County Superior Court for breach of contract alleging STP’s delays and failure to perform and declaratory relief concerning contract interpretation. STP filed its answer to WSDOT’s complaint and filed a counterclaim against WSDOT and against the manufacturer of the TBM. Trial is set for June 2018.

As of December 31, 2016, the Company has concluded that the potential for a material adverse financial impact due to the Insurer’s and WSDOT’s respective legal actions is neither probable nor remote. With respect to STP’s counterclaim, management has included an estimate of the total anticipated recovery, concluded to be both probable and reliably estimable, 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 financial statements at that time.

8.     Share-Based Compensation

The Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (the “Plan”) provides for various types of share-based grants, including restricted and unrestricted stock units and stock options. Restricted and unrestricted stock units give the holder the right to exchange their stock units for shares of the Company’s common stock on a one-for-one basis. Stock options give the holder the right to purchase shares of the Company’s common stock at an exercise price equal to the fair value of the Company’s common stock on the date of the stock option’s award. Restricted stock units and stock options are usually subject to certain service and performance conditions and may not be sold or otherwise transferred until those restrictions have been satisfied; however, unrestricted stock units have no such restrictions. The term for stock options is limited to 10 years from the date of grant. As of December 31, 2016, there were 327,584 shares available to be granted under the Company’s share-based compensation plan.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Many of the awards issued under the Plan contain separate tranches, each for a separate performance period and each with a performance target to be established subsequent to the award date; accordingly, the tranches are accounted for under ASC 718 Stock Compensation (“ASC 718”) as separate grants, with the grant date being the date the performance targets for a given tranche are established and communicated to the grantee. Similarly, for these awards, compliance with the requirements of the Plan is also based on the number of units granted in a given year, as determined by ASC 718, rather than the number of units awarded in a given year. As a result, as of December 31, 2016, the Company had outstanding awards with 448,000 restricted stock units and 448,000 stock options that had not been granted yet. These units will be granted in 2017, 2018 and 2019 when the performance targets for those respective years are established.

The following table summarizes restricted stock unit and stock option activity:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



Restricted Stock Units

 

Stock Options



 

 

Weighted-

 

 

 

Weighted-



 

 

Average

 

 

 

Average



 

 

Grant Date

 

 

 

Exercise/



 

 

Fair Value

 

 

 

(Strike) Price



Number

 

Per Share

 

Number

 

Per Share

Outstanding as of December 31, 2013

361,668 

 

$

17.30 

 

1,295,000 

 

$

20.20 

Granted

996,597 

 

 

27.10 

 

714,000 

 

 

18.40 

Expired or forfeited

(20,000)

 

 

24.77 

 

 —

 

 

 —

Vested/exercised

(281,668)

 

 

16.76 

 

(20,000)

 

 

12.54 

Outstanding as of December 31, 2014

1,056,597 

 

$

26.54 

 

1,989,000 

 

$

19.63 

Granted

321,500 

 

 

23.07 

 

259,000 

 

 

16.07 

Expired or forfeited

(281,560)

 

 

23.89 

 

(250,000)

 

 

15.97 

Vested/exercised

(370,940)

 

 

27.07 

 

 —

 

 

 —

Outstanding as of December 31, 2015

725,597 

 

$

25.28 

 

1,998,000 

 

$

19.62 

Granted

483,387 

 

 

19.14 

 

274,000 

 

 

16.20 

Vested/exercised

(52,500)

 

 

18.74 

 

(97,500)

 

 

12.72 

Outstanding as of December 31, 2016

1,156,484 

 

$

22.64 

 

2,174,500 

 

$

19.50 

The following table summarizes unrestricted stock units issued to the members of the Company’s Board of Directors as part of their annual retainers:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

 

 

(in thousands)

Other Income (Expense), Net

 

 

 

 

 

 

 

 

 

Interest  income

 

$

4,793 

 

$

8,745 

 

$

2,842 

Gain on sale of property used in operations

 

 

 —

 

 

 —

 

 

456 

Adjustment of acquisition related liabilities

 

 

(5,972)

 

 

(26,374)

 

 

(256)

Amortization of deferred costs

 

 

(1,397)

 

 

(1,844)

 

 

(1,585)

Bank fees

 

 

(1,236)

 

 

(1,559)

 

 

(2,090)

Realized loss on sale of investments, net

 

 

(1,851)

 

 

72 

 

 

(2,699)

Miscellaneous income (expense), net

 

 

(3,873)

 

 

2,385 

 

 

1,475 

 

 

$

(9,536)

 

$

(18,575)

 

$

(1,857)



 

 

 

 

 

 



 

 

 

 

 

 



 

Unrestricted Stock Units



 

 

 

 

Weighted-



 

 

 

 

Average



 

 

 

 

Grant Date



 

 

 

 

Fair Value

Year

 

Number

 

Per Share

2014

 

$

47,873 

 

$

30.81 

2015

 

 

68,160 

 

 

21.93 

2016

 

 

64,603 

 

 

21.67 

______________

The fair value of unrestricted stock units issued during 2016, 2015 and 2014 was approximately $1.4 million, $1.5 million and $1.5 million, respectively.

The fair value of restricted stock units that vested during 2016,  2015 and 2014 was approximately $1.0 million,  $8.0 million and $8.0 million, respectively. The aggregate intrinsic value, representing the difference between the market value on the date of exercise and the option price of the stock options exercised during 2016 and 2014 was $1.1 million and $0.3 million, respectively. As of December 31, 2016, the balance of unamortized restricted stock and stock option expense was $6.5 million and $0.7 million, respectively, which will be recognized over weighted-average periods of 1.3 years for restricted stock units and 0.5 years for stock options. 

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2,174,500 outstanding stock options as of December 31, 2016 had an intrinsic value of $18.5 million and a weighted-average remaining contractual life of 4.3 years. Of those outstanding options:  1)  1,402,500 were exercisable with an intrinsic value of $11.3 million, a weighted-average exercise price of $19.95 per share and a weighted-average remaining contractual life of 3.1 years; and 2) 772,000 have been granted but have not vested, of which 756,876 are expected to vest and have an intrinsic value of $7.2 million, a weighted-average exercise price of $18.49 and a weighted-average remaining contractual life of 6.5 years.

The fair value on the grant date and the significant assumptions used in the Black-Scholes option-pricing model are as follows:



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,



2016

 

2015

 

2014

Total stock options granted

 

274,000 

 

 

 

259,000 

 

 

 

714,000 

 

Weighted-average grant date fair value

$

5.31 

 

 

$

12.48 

 

 

$

17.69 

 

Weighted-average assumptions:

 

 

 

 

 

 

 

 

 

 

 

Risk-Free Rate

 

1.2 

%

 

 

1.3 

%

 

 

1.8 

%

Expected life of options(a)

 

4.2 

 

 

 

4.7 

 

 

 

5.7 

 

Expected volatility(b)

 

40.6 

%

 

 

45.5 

%

 

 

50.6 

%

Expected quarterly dividends

$

 —

 

 

$

 —

 

 

$

 —

 


(1)(a)

Insurance claims receivableCalculated using the simplified method due to the terms of the stock options and the corresponding insurance claims payable representlimited pool of grantees.

(b)

Calculated using historical volatility of the Company’s common stock over periods commensurate with the expected insurable loss amounts to be received fromlife of the insurance carriers and to be paid in claims respectively.option.



For the respective years ended December 31, 2016, 2015 and 2014, the Company recognized, as part of general and administrative expense, costs for stock-based payment arrangements for both employees of $13.4 million,  $9.5 million and $18.6  million and non-employee directors of $1.4 million, $1.5 million and $1.4 million, with related aggregate tax benefits of $6.1 million, $4.6  million and $8.1  million, respectively.

[7]

9.     Employee Benefit Plans



Defined Benefit Pension Plan



The Company has a defined benefit pension plan that covers certain of its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The plan is noncontributory and benefits are based on an employee’s years of service and “final average earnings”,earnings,” as defined.defined by the plan. The plan provides reduced benefits for early retirement and takes into account offsets for social security benefits. The Company also has an unfunded supplemental retirement plan (“Benefit Equalization Plan”) for certain employees whose benefits under the defined benefit pension plan were reduced because of compensation limitations under federal tax laws. Effective June 1, 2004, all benefitsbenefit accruals under the Company’s pension plan and Benefit Equalization Plan

74


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were frozen; however, the current vested benefit was preserved. Pension disclosure as presented below includes aggregated amounts for both of the Company’s plans, except where otherwise indicated.



The Company historically has used the date of its fiscal year-end as its measurement date to determine the funded status of the plan.



The long-term investment goals of our plan are to manage the assets in accordance with the legal requirements of all applicable laws; produce investment returns which maximize return within reasonable and prudent levels of risks; and achieve a fully funded status with regard to current pension liabilities. Some risk must be assumed in order to achieve the investment goals. Investments with the ability to withstand short and intermediate term variability are considered and some interim fluctuations in market value and rates of return are tolerated in order to achieve the plan’s longer-term objectives.

The pension plan’s assets are managed by a third-party investment manager. The Company monitors investment performance and risk on an ongoing basis.

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Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of net periodic benefit cost is as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

 

 

(dollars in thousands)

Interest cost on projected benefit obligation

 

$

4,144 

 

 

$

3,710 

 

 

$

4,011 

 

  Return on plan assets

 

 

(4,797)

 

 

 

(4,509)

 

 

 

(4,783)

 

  Recognized net actuarial losses

 

 

4,385 

 

 

 

6,330 

 

 

 

5,487 

 

  Net periodic benefit cost

 

$

3,732 

 

 

$

5,531 

 

 

$

4,715 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial assumptions used to determine net cost:

 

 

 

 

 

 

 

 

 

 

 

 

  Discount rate

 

 

4.47% 

%

 

 

3.58% 

%

 

 

4.10% 

%

  Expected return on assets

 

 

6.75% 

%

 

 

6.75% 

%

 

 

7.00% 

%

  Rate of increase in compensation

 

 

n.a.

 

 

 

n.a.

 

 

 

n.a.

 





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,

 

(in thousands)

2016

 

 

2015

 

 

2014

 

Interest cost

$

4,153 

 

 

$

4,055 

 

 

$

4,144 

 

Service cost

 

600 

 

 

 

 —

 

 

 

 —

 

Expected return on plan assets

 

(4,803)

 

 

 

(5,021)

 

 

 

(4,797)

 

Recognized net actuarial losses

 

1,745 

 

 

 

1,869 

 

 

 

4,385 

 

Net periodic benefit cost

$

1,695 

 

 

$

903 

 

 

$

3,732 

 

Actuarial assumptions used to determine net cost:

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

4.10 

%

 

 

3.75 

%

 

 

4.47 

%

Expected return on assets

 

6.00 

%

 

 

6.50 

%

 

 

6.75 

%

Rate of increase in compensation

 

N/A

 

 

 

N/A

 

 

 

N/A

 



The target asset allocation for the Company’s pension plan by asset category for 20142017 and the actual asset allocation atas of December 31, 20142016 and 20132015 by asset category are as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of Plan Assets at December 31,

 

Percentage of Plan Assets as of December 31,

 

Target

 

 

 

 

 

 

 

Target

 

 

 

 

Allocation

 

 

 

 

 

 

 

Allocation

 

 

Actual Allocation

Asset Category

 

2015

 

2014

 

2013

 

2017

 

 

2016

 

 

2015

Cash

 

5.0 

%

 

6.2 

%

 

5.2 

%

 

%

 

 

%

 

 

%

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

65.0 

 

 

62.9 

 

 

63.4 

 

 

50 

 

 

 

47 

 

 

 

61 

 

International

 

25.0 

 

 

25.9 

 

 

25.9 

 

 

25 

 

 

 

28 

 

 

 

30 

 

Fixed income securities

 

5.0 

 

 

5.0 

 

 

5.5 

 

 

20 

 

 

 

21 

 

 

 

 

Total

 

100 

%

 

100 

%

 

100 

%

 

100 

%

 

 

100 

%

 

 

100 

%

The Company’s target allocation for 2014 will include 65.0% domestic equity securities, 25.0% international equity securities, and 5.0% fixed income securities.



As of December 31, 20142016 and 2013,2015, plan assets included approximately $45.5$39.1 million and $44.7$52.1 million, respectively, of investments in hedge funds and equity partnerships which do not have readily determinable fair values. The underlying holdings of the funds arewere comprised of a combination of assets for which the estimate of fair value is determined using information provided by fund managers.



The Company expects to contribute approximately $2.3$2.6 million to its defined benefit pension plan in 2015. 2017.  

Future benefit payments under the plans are estimated as follows:





 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

(in thousands)

 

2015

 

$

6,288 

2016

 

 

6,359 

(in thousands)

 

 

2017

 

 

6,392 

$

6,488 

2018

 

 

6,557 

 

6,632 

2019

 

 

6,644 

 

6,691 

2020

 

6,717 

2021

 

6,732 

Thereafter

 

 

33,459 

 

32,722 

 

$

65,699 

Total

$

65,982 



75F-28

 


 

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables provide a reconciliation of the changes in the fair value of plan assets and plan benefit obligations during 20142016 and 2013,2015, and a summary of the funded status as of December 31, 20142016 and 2013:

2015





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

Year Ended December 31,

 

2014

 

2013

 

(in thousands)

(in thousands)

2016

 

2015

Change in Fair Value of Plan Assets

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

 

$

72,617 

 

$

66,137 

$

72,296 

 

$

75,956 

Actual return on plan assets

 

 

3,711 

 

 

8,545 

 

(1,909)

 

 

(984)

Company contribution

 

 

5,213 

 

 

3,478 

 

2,025 

 

 

2,900 

Benefit payments

 

 

(5,585)

 

 

(5,543)

 

(6,355)

 

 

(5,576)

Balance at end of year

 

$

75,956 

 

$

72,617 

$

66,057 

 

$

72,296 







 

 

 

 

 



 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

Change in Benefit Obligations

 

 

 

 

 

Balance at beginning of year

$

105,942 

 

$

110,923 

Interest cost

 

4,153 

 

 

4,055 

Service cost

 

600 

 

 

 —

Assumption change (gain) loss

 

308 

 

 

(3,838)

Actuarial (gain) loss

 

(967)

 

 

378 

Benefit payments

 

(6,355)

 

 

(5,576)

Balance at end of year

$

103,681 

 

$

105,942 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

 

(in thousands)

Change in Benefit Obligations

 

 

 

 

 

 

Balance at beginning of year

 

$

95,178 

 

$

105,320 

Interest cost

 

 

4,144 

 

 

3,710 

Assumption change loss (gain)

 

 

17,054 

 

 

(9,627)

Actuarial loss

 

 

132 

 

 

1,318 

Benefit payments

 

 

(5,585)

 

 

(5,543)

Balance at end of year

 

$

110,923 

 

$

95,178 



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Funded status

$

(37,624)

 

$

(33,646)

Amounts recognized in Consolidated Balance Sheets consist of:

 

 

 

 

 

Current liabilities

$

(271)

 

$

(218)

Long-term liabilities

 

(37,353)

 

 

(33,428)

Net amount recognized in Consolidated Balance Sheets

$

(37,624)

 

$

(33,646)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31,

 

 

2014

 

2013

 

 

(in thousands)

Funded Status

 

 

 

 

 

 

Funded status at December 31,

 

$

(34,967)

 

$

(22,561)

 

 

 

 

 

 

 

Amounts recognized in Consolidated Balance Sheets consist of:

 

 

 

 

 

 

Current liabilities

 

$

(218)

 

$

(194)

Long-term liabilities

 

 

(34,749)

 

 

(22,367)

 

 

 

 

 

 

 

Net amount recognized in Consolidated Balance Sheets

 

$

(34,967)

 

$

(22,561)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

Year Ended December 31,

 

2014

 

2013

 

(in thousands)

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss:

 

 

 

 

 

 

(in thousands)

2016

 

2015

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss

 

 

 

 

 

Net actuarial loss

 

$

(56,147)

 

$

(42,261)

$

(61,132)

 

$

(56,824)

Accumulated other comprehensive loss

 

 

(56,147)

 

 

(42,261)

Cumulative Company contributions in excess of net periodic benefit cost

 

 

21,180 

 

 

19,700 

 

23,508 

 

 

23,178 

Net amount recognized in Consolidated Balance Sheets

 

$

(34,967)

 

$

(22,561)

$

(37,624)

 

$

(33,646)



The netchange in actuarial gain arisingloss during the period netted against the amortization of the previously existing actuarial loss resultedresulting from changed assumptions was $4.3 million in a net other comprehensive loss of2016,  $0.7 million in 2015 and $13.9 million in 2014, and a net comprehensive gain of $18.7 million in 2013 and  $1.7 million in 2012. Other comprehensive loss attributable to a change in the unfunded projected benefit obligation amounted to a net increase of $59.3 million recognized in prior years. The cumulative net amount of $56.2 million represents the excess of the projected benefit obligations of the Company’s pension plans over the fair value of the plans’ assets as of December 31, 2014, compared to $42.3 million of contributions in excess of the net periodic benefit cost previously recognized. The net amount of $34.9 million is reflected as a liability as of December 31, 2014 with the offset being a reduction in stockholders’ equity. Adjustments to the amount of this

76


Table of Contents

pension liability will be recorded in future years, as required, based upon periodic re-evaluation of the funded status of the Company’s pension plans.2014.



The estimated amount of the net accumulated loss that will be amortized from accumulated other comprehensive loss into net period benefit cost in 20142017 is $5.8$1.8 million.



The discount rate used in determining the accumulated post-retirement benefit obligation was 3.9% as of December 31, 2016 and 4.1% as of December 31, 2015. The discount rate used for the accumulated post-retirement obligation was derived using a blend of U.S. Treasury and high-quality corporate bond discount rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

Actuarial assumptions used to determine benefit obligation:

 

 

 

 

 

 

Discount rate

 

3.75 

%

 

4.47 

%

Rate of increase in compensation

 

n.a.

 

 

n.a.

 

Measurement date

 

December 31

 

 

December 31

 



The expected long-term rate of return on assets assumption remained at 6.75%was 6.0% for 20132016 and 2014.6.5% for 2015. The expected long-term rate of return on assets assumption was developed considering forward looking capital market assumptions and historical return expectations for each asset class assuming the Company’splans’ target asset allocation and full availability of invested assets.



F-29


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fund strategies seek to capitalize on inefficiencies identified across different asset classes or markets. Hedge fund strategy types include long-short, event-driven, multi-strategy, equity partnerships and distressed credit.

Plan assets were measured at fair value. The following provides a description of the valuation techniques employed for each major asset class: Corporate equities were valued at the closing price reported on the active market on which the individual securities were purchased.

Registered investment companies are public investment vehicles valued using the Net Asset Value (NAV) of shares held by the plan at year-end. Closely held funds held by the plan, which are only available through private offerings, do not have readily determinable fair values. Estimates of fair value of these funds were determined using the information provided by the fund managers and it is generally based on the net asset value per share or its equivalent. Corporate bonds were valued based on market values quoted by dealers who are market makers in these securities, and by independent pricing services which use multiple valuation techniques that incorporate available market information and proprietary valuation models using market characteristics, such as benchmark yield curve, coupon rates, credit spreads, estimated default rates and other features.

The following table sets forth the plan assets at fair value in accordance with the fair value hierarchy described in Note 2 — Fair Value Measurements:3:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

in Active

 

 

 

 

 

 

 

 

 

 

 

Markets for

 

Significant

 

Significant

 

 

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

 

 

Assets

 

Inputs

 

Inputs

 

 

 

At December 31, 2014

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total Value

 

 

(in thousands)

Cash and cash equivalents

 

$

4,693 

 

$

 —

 

$

 —

 

$

4,693 

Fixed Income

 

 

3,824 

 

 

 —

 

 

 —

 

 

3,824 

Equities

 

 

7,676 

 

 

 —

 

 

 —

 

 

7,676 

Mutual Funds

 

 

6,550 

 

 

 —

 

 

 —

 

 

6,550 

Equity Partnerships

 

 

 —

 

 

7,723 

 

 

 —

 

 

7,723 

Hedge Fund Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 

1,010 

 

 

 —

 

 

 —

 

 

1,010 

Long-Short Equity Fund

 

 

 —

 

 

15,878 

 

 

12,755 

 

 

28,633 

Event Driven Fund

 

 

 —

 

 

3,471 

 

 

9,562 

 

 

13,033 

Distressed Credit

 

 

 —

 

 

 —

 

 

1,320 

 

 

1,320 

Multi-Strategy Fund

 

 

 —

 

 

 —

 

 

1,494 

 

 

1,494 

Total

 

$

23,753 

 

$

27,072 

 

$

25,131 

 

$

75,956 

77



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2016

 

As of December 31, 2015



Fair Value Hierarchy

 

Fair Value Hierarchy

(in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Level 1

 

Level 2

 

Level 3

Cash and cash equivalents

$

2,437 

 

$

2,437 

 

$

 —

 

$

 —

 

$

2,654 

 

$

2,654 

 

$

 —

 

$

 —

Fixed Income

 

14,023 

 

 

14,023 

 

 

 —

 

 

 —

 

 

4,029 

 

 

4,029 

 

 

 —

 

 

 —

Equities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

6,566 

 

 

6,566 

 

 

 —

 

 

 —

Mutual Funds

 

10,489 

 

 

10,489 

 

 

 —

 

 

 —

 

 

6,994 

 

 

6,994 

 

 

 —

 

 

 —



$

26,949 

 

$

26,949 

 

$

 —

 

$

 —

 

$

20,243 

 

$

20,243 

 

$

 —

 

$

 —

Closely held funds(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Partnerships

 

6,931 

 

 

 

 

 

 

 

 

 

 

 

7,920 

 

 

 

 

 

 

 

 

 

Hedge Fund Investments

 

32,177 

 

 

 

 

 

 

 

 

 

 

 

44,133 

 

 

 

 

 

 

 

 

 

Total closely held funds(a)

 

39,108 

 

 

 

 

 

 

 

 

 

 

 

52,053 

 

 

 

 

 

 

 

 

 

Total

$

66,057 

 

$

26,949 

 

$

 —

 

$

 —

 

$

72,296 

 

$

20,243 

 

$

 —

 

$

 —




Table of Contents



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

in Active

 

 

 

 

 

 

 

 

 

 

 

Markets for

 

Significant

 

Significant

 

 

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

 

 

Assets

 

Inputs

 

Inputs

 

 

 

At December 31, 2013

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total Value

 

 

(in thousands)

Cash and cash equivalents

 

$

3,762 

 

$

 —

 

$

 —

 

$

3,762 

Fixed Income

 

 

4,000 

 

 

 —

 

 

 —

 

 

4,000 

Mutual Funds

 

 

13,234 

 

 

 —

 

 

 —

 

 

13,234 

Equity Partnerships

 

 

 —

 

 

6,876 

 

 

 —

 

 

6,876 

Hedge Fund Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 

527 

 

 

 —

 

 

 —

 

 

527 

Long-Short Equity Fund

 

 

 —

 

 

14,566 

 

 

11,655 

 

 

26,221 

Event Driven Fund

 

 

 —

 

 

5,928 

 

 

8,752 

 

 

14,680 

Distressed Credit

 

 

 —

 

 

 —

 

 

1,429 

 

 

1,429 

Multi-Strategy Fund

 

 

 —

 

 

 —

 

 

1,888 

 

 

1,888 

Total

 

$

21,523 

 

$

27,370 

 

$

23,724 

 

$

72,617 

Fund strategies seek to capitalize on inefficiencies identified across different asset classes or markets. Hedge fund strategy types include long-short, event driven, multi-strategy and distressed credit. Generally the redemption of the Company’s hedge fund investments is subject to certain notice-period requirements and as such the Company has classified these assets as Level 3 assets.

The table below sets forth a summary of changes in the fair value of the Level 3 assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in Fair Value of Level 3 Assets

 

 

Long-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short

 

Event

 

 

 

 

Multi-

 

 

 

 

 

Equity

 

Driven

 

Distressed

 

Strategy

 

 

 

 

 

Fund

 

 

Fund

 

Credit

 

Fund

 

Total

 

 

(in thousands)

Balance, December 31, 2013

 

$

10,863 

 

$

8,863 

 

$

2,199 

 

$

1,799 

 

$

23,724 

Realized gains

 

 

 —

 

 

 —

 

 

13 

 

 

 

 

16 

Unrealized gains

 

 

843 

 

 

505 

 

 

57 

 

 

59 

 

 

1,464 

Purchases

 

 

1,049 

 

 

16 

 

 

 

 

 

 

1,076 

Sales

 

 

 —

 

 

(2,512)

 

 

(954)

 

 

(373)

 

 

(3,839)

Transfer to Level 2 (1)

 

 

 —

 

 

2,690 

 

 

 —

 

 

 —

 

 

2,690 

Balance, December 31, 2014

 

$

12,755 

 

$

9,562 

 

$

1,320 

 

$

1,494 

 

$

25,131 

______________

(1)(a)

The transferClosely held funds in private investment were measured at fair value using NAV and were not categorized in the fair value hierarchy. Although the investments were not categorized within the fair value hierarchy, the holdings of $2.7 million from Level 3 to Level 2 wasthese private investment funds were comprised of certain hedge funds thata combination of Level 1, 2 and 3 investments, but were moved duenot categorized in the fair value hierarchy because they were measured at NAV using the practical expedient. This is a change from prior years’ presentation as there is no longer a requirement to liquidity classifications.  

78


Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in Fair Value of Level 3 Assets

 

 

Long-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short

 

Event

 

 

 

 

Multi-

 

 

 

 

 

Equity

 

Driven

 

Distressed

 

Strategy

 

 

 

 

 

Fund

 

 

Fund

 

Credit

 

Fund

 

Total

 

 

(in thousands)

Balance, December 31, 2012

 

$

9,992 

 

$

7,152 

 

$

2,559 

 

$

1,950 

 

$

21,653 

Realized gains

 

 

 —

 

 

 —

 

 

(7)

 

 

(5)

 

 

(12)

Unrealized gains

 

 

2,971 

 

 

1,252 

 

 

158 

 

 

223 

 

 

4,604 

Purchases

 

 

1,343 

 

 

459 

 

 

 

 

 

 

1,817 

Sales

 

 

 —

 

 

 —

 

 

(517)

 

 

(378)

 

 

(895)

Transfer to Level 2 (2)

 

 

(3,443)

 

 

 —

 

 

 —

 

 

 —

 

 

(3,443)

Balance, December 31, 2013

 

$

10,863 

 

$

8,863 

 

$

2,199 

 

$

1,799 

 

$

23,724 

______________

(2)

The transfer of $3.4 million from Level 3 to Level 2 was comprised of certain hedge funds that became redeemablecategorize within 90 days from December 31, 2014.the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient. 

 

The Company’s plans have benefit obligations in excess of the fair value of the plans’ assets. The following table provides information relating to each of the plans’ benefit obligations compared to the fair value of its assets:plan’s assets detailed as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014

 

At December 31, 2013

 

 

 

 

 

Benefit

 

 

 

 

 

 

 

Benefit

 

 

 

 

 

Pension

 

Equalization

 

 

 

 

Pension

 

Equalization

 

 

 

 

 

Plan

 

Plan

 

Total

 

Plan

 

Plan

 

Total

 

 

(in thousands)

Projected benefit obligation

 

$

107,570 

 

$

3,353 

 

$

110,923 

 

$

91,946 

 

$

3,232 

 

$

95,178 

Accumulated benefit obligation

 

$

107,570 

 

$

3,353 

 

$

110,923 

 

$

91,946 

 

$

3,232 

 

$

95,178 

Fair value of plan assets

 

$

75,956 

 

$

 —

 

$

75,956 

 

$

72,617 

 

$

 —

 

$

72,617 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation greater than fair value of plan assets

 

$

31,614 

 

$

3,353 

 

$

34,967 

 

$

19,329 

 

$

3,232 

 

$

22,561 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated benefit obligation greater than fair value of plan assets

 

$

31,614 

 

$

3,353 

 

$

34,967 

 

$

19,329 

 

$

3,232 

 

$

22,561 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2016

 

As of December 31, 2015



 

 

 

Benefit

 

 

 

 

 

 

 

Benefit

 

 

 



Pension

 

Equalization

 

 

 

 

Pension

 

Equalization

 

 

 

(in thousands)

Plan

 

Plan

 

Total

 

Plan

 

Plan

 

Total

Projected benefit obligation

$

100,336 

 

$

3,345 

 

$

103,681 

 

$

102,495 

 

$

3,447 

 

$

105,942 

Accumulated benefit obligation

 

100,336 

 

 

3,345 

 

 

103,681 

 

 

102,495 

 

 

3,447 

 

 

105,942 

Fair value of plans' assets

 

66,057 

 

 

 —

 

 

66,057 

 

 

72,296 

 

 

 —

 

 

72,296 

Projected benefit obligation greater than fair value of plans' assets

$

34,279 

 

$

3,345 

 

$

37,624 

 

$

30,199 

 

$

3,447 

 

$

33,646 

Accumulated benefit obligation greater than fair value of plans' assets

$

34,279 

 

$

3,345 

 

$

37,624 

 

$

30,199 

 

$

3,447 

 

$

33,646 



Section 401(k) Plans



The Company has several contributory Section 401(k) plans which cover its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The 401(k) expense provision approximatedwas $4.0 million in both 2016 and 2015 and $3.6 million in 2014,  $3.8 million in 2013 and $3.8 million in 2012.2014. The Company’s contribution is based on a non-discretionary match of employees’ contributions, as defined.defined by each plan.

F-30

 


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash-Based Compensation Plans

The Company has multiple cash-based compensation plans and a stock-based incentive compensation plan for key employees which are generally based on the Company’s achievement of a certain level of profit. For information on the Company’s stock-based incentive compensation plan, see Note 10 — Stock-Based Compensation.

Multiemployer Plans

The Company also contributes to various multi-employer union retirement plans under collective bargaining agreements which provide retirement benefits for substantially all of its union employees. The Company’s participation in the plans that it considers to be significant for the years ended December 31, 2014 and 2013, is outlined in the tables below. The “EIN/Pension Plan Number” column provides the Employer Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2014 and 2013 is for the plan’s year-end at December 31, 2013, and December 31, 2012, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are

79


Table of Contents

less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. Under the Employee Retirement Income Security Act, a contributor to a multi-employer plan is liable, only upon termination or withdrawal from a plan, for its proportionate share of a plan’s unfunded vested liability. The Company currently has no intention of withdrawing from any of the multiemployer pension plans in which it participates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expiration

 

 

 

 

 

 

 

 

FIP/RP 

 

 

 

 

 

 

 

 

 

 

 

 

Date of

 

 

 

 

Pension Protections Act

 

Status

 

Company Contributions

 

 

 

Collective

 

 

EIN/Pension

 

Zone Status

 

Pending Or

 

(amounts in millions)

 

Surcharge

 

Bargaining

Pension Fund

 

Plan Number

 

2014

 

2013

 

Implemented

 

2014

 

2013

 

2012

 

Imposed

 

Agreement

Pension, Hospitalization and Benefit Plan of the Electrical Industry - Pension Trust Account

 

13-6123601 / 001

 

Green

 

Green

 

No

 

11.8 (b)

(a)

 

13.4 (b)

(a)

 

12.9 (b)

 

 

No

 

5/8/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steamfitters Industry Pension Fund

 

13-6149680 / 001

 

Yellow

 

Yellow

 

Implemented

 

5.1 (b)

(a)

 

4.3 (b)

(a)

 

3.5 (b)

 

 

No

 

6/30/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excavators Union Local 731 Pension Fund

 

13-1809825 / 002

 

Green

 

Green

 

No

 

5.3 

 

 

3.2 

 

 

3.3 

 

 

No

 

6/30/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carpenters Pension Trust Fund for Northern California

 

94-6050970 / 001

 

Red

 

Red

 

Implemented

 

1.8 

 

 

2.1 

 

 

2.3 

 

 

No

 

6/30/2015

______________

(a)

These amounts exceeded 5% of the respective total plan contributions.

In addition to the individually significant plans described above, the Company also contributed approximately $35.5 million in 2014,  $31.6 million in 2013 and $29.9 million in 2012 to other multiemployer pension plans.

[8] Contingencies and Commitments

The Company and certain of its subsidiaries are involved in litigation and are contingently liable for commitments and performance guarantees arising in the ordinary course of business. The Company and certain of its clients have made claims arising from the performance under their contracts. The Company recognizes certain significant claims for recovery of incurred cost when it is probable that the claim will result in additional contract revenue and when the amount of the claim can be reliably estimated. These assessments require judgments concerning matters such as litigation developments and outcomes, the anticipated outcome of negotiations, the number of future claims and the cost of both pending and future claims. In addition, because most contingencies are resolved over long periods of time, liabilities may change in the future due to various factors.

Several matters are in the litigation and dispute resolution process. The following discussion provides a background and current status of these matters.

Tutor-Saliba-Perini Joint Venture vs. Los Angeles MTAFontainebleau Matter



During 1995 Tutor-Saliba-PeriniDesert Mechanical Inc. (“Joint Venture”DMI”) and Fisk Electric Company (“Fisk”), wholly owned subsidiaries of the Company, were subcontractors on the Fontainebleau Project in Las Vegas (“Fontainebleau”), a hotel/casino complex with approximately 3,800 rooms. In June 2009, Fontainebleau filed a complaintfor bankruptcy protection, under Chapter 11 of the U.S. Bankruptcy Code, in the SuperiorSouthern District of Florida. Fontainebleau is headquartered in Miami, Florida.

DMI and Fisk filed liens in Nevada for approximately $44 million, representing unreimbursed costs to date and lost profits, including anticipated profits. Other unaffiliated subcontractors have also filed liens. In June 2009, DMI filed suit against Turnberry West Construction, Inc., the general contractor, in the 8th Judicial District Court, of the State of California for theClark County, of Los Angeles against the Los Angeles County Metropolitan Transportation Authority (“LAMTA”), seeking to recover costs for extra work required by LAMTA in connection with the construction of certain tunnel and station projects, all of which were completed by 1996. In 1999, LAMTA countered with civil claims under the California False Claims Act against the Joint Venture, Tutor-Saliba and the Company jointly and severally (together, “TSP”Nevada (the “District Court”), and obtained a judgment that was reversed on appeal and remanded for retrial before a different judge.

Between 2005 andin May 2010, the court granted certain Joint Venture motions and LAMTA capitulated on others, which reduced the number of false claims LAMTA may seek and limited LAMTA’s claims for damages and penalties. In September 2010, LAMTA dismissed its remaining claims and agreed to pay the entire amount of the Joint Venture’s remaining claims plus interest. In the remanded proceedings, the Court subsequently entered judgmentan order in favor of TSP and against LAMTA in the amount of $3.0 million after deducting $0.5 million, representing the tunnel handrail verdict plus accrued interest against TSP. The parties filed post-trial motionsDMI for costs and fees. The Court ruled that TSP’s sureties could recover costs, LAMTA could recover costs for the tunnel handrail trial, and no party could recover attorneys’ fees. TSP is appealing the false claims jury verdict on the tunnel handrail claim and other issues, including the denial of TSP’s and its sureties’ request for attorneys’ fees. LAMTA subsequently filed its cross-appeal. In June 2014, the Court of Appeal issued its decision reversing judgment on the People’s Unfair Competition claim and the denial of TSP’s Sureties’ request for attorney’s fees and affirming the remainder of the judgment. LAMTA subsequently filed a

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request for hearing before the California Supreme Court, challenging the Court of Appeal’s decision that TSP’s Sureties are entitled to attorney’s fees. In September 2014, the Supreme Court denied the MTA’s petition for Review. In September 2014, the Court of Appeal remitted the case back to the trial court to make further rulings consistent with the decision of the Court of Appeal. In November 2014, the court set the hearing on the motion for TSP’s Surety’s attorney’s fees for March 2015. In January 2015, payment was made by LAMTA in the amount of $3.8approximately $45 million.

The Company does not expect this matter to have any material effect on its consolidated financial statements.

Perini/Kiewit/Cashman Joint Venture-Central Artery/Tunnel Project Matter

Perini/Kiewit/Cashman Joint Venture (“PKC”), a joint venture in which the Company holds a 56% interest and is the managing partner, is currently pursuing a series of claims, instituted at different times since 2000, for additional contract time and/or compensation against the Massachusetts Highway Department (“MHD”) for work performed by PKC on a portion of the Central Artery/Tunnel (“CA/T”) project in Boston, Massachusetts. During construction, MHD ordered PKC to perform changes to the work and issued related direct cost changes with an estimated value, excluding time delay and inefficiency costs, in excess of $100 million. In addition, PKC encountered a number of unforeseen conditions during construction that greatly increased PKC’s cost of performance. MHD has asserted counterclaims for liquidated damages and back charges.

Certain of PKC’s claims have been presented to a Disputes Review Board (“DRB”), which consists of three construction experts chosen by the parties. To date, five DRB panels issued several awards and interim decisions in favor of PKC’s claims, amounting to total awards to PKC in excess of $128 million plus interest, of which $110 million were binding awards.



In DecemberJanuary 2010, the Suffolk County SuperiorBankruptcy Court granted MHD’s motion for summary judgment to vacateapproved the Third DRB Panel’s awards to PKC for approximately $56.5 million on the grounds that the arbitrators do not have authority to decide whether particular claims are subject to the arbitration provisionsale of the contract. MHD subsequently movedproperty to vacate approximately $13.7 million of the Fourth DRB Panel’s total awards to PKC on the same arbitrability basis that the Third DRB’s awards were vacated. In October 2011, the Suffolk County Superior Court followed its earlier arbitrability rulings holding that the Fourth DRB exceeded its authorityIcahn Nevada Gaming Acquisition, LLC, and this transaction closed in deciding arbitrability with respect to certain of the Fourth DRB Panel’s awards (approximately $8 million of the $13.7 million discussed above). PKC appealed the Superior Court decisions and in January 2013, the Superior Court decisions were affirmed in MHD’s favor. The Appeals Court remanded the case back to the lower court to determine how and by whom the claims must be decided. PKC filed an application for further appellate review by the Massachusetts Supreme Judicial Court and a motion for reconsideration in the Appeals Court. The Appeals Court rejected PKC’s petition for rehearing. The Massachusetts Supreme Judicial Court denied the application in June 2013.

In February 2012, PKC received a $22 million payment for an interest award associated with the Second DRB panel’s awards to PKC. In January 2013, PKC received a $14.8 million payment for back charges and interest associated with the Fourth DRB panel’s awards to PKC that were confirmed.

In June 2014, the Superior Court issued a decision granting PKC's motion in its entirety. The Court concluded that the Engineer's Decisions concerning the arbitrability of PKC's claims were based on error of law and were unsupported by substantial evidence. The Court vacated the Engineer's Decisions on the arbitrability of PKC's claims. The Court also concluded that PKC's claims are subject to arbitration. The Court reinstated the DRB's arbitration awards on those claims, and made clear that its decision pertains to the awards of DRB3 as well as awards of the DRB4. DRB5 will convene to award interest on DRB3 and DRB4 awards, and the Court will then enter judgment in PKC’s favor on the total amount.2010. As a result of a July 2010 ruling relating to certain priming liens, there was approximately $125 million set aside from this sale, which is available for distribution to satisfy the Judge’s Order, PKC has increased its anticipated recovery to $88.7 million which includes interest. In October 2014, PKC reached agreement with MHDcreditor claims based on seniority. At that time, the total estimated sustainable lien amount owed,was approximately $350 million. The project lender filed suit against the mechanic’s lien claimants, including interest. Management bookedDMI and Fisk, alleging that certain mechanic’s liens are invalid and that all mechanic’s liens are subordinate to the impactlender’s claims against the property. The Nevada Supreme Court ruled in October 2012 in an advisory opinion at the request of this settlement during the third quarterBankruptcy Court that lien priorities would be determined in favor of 2014. In December 2014, payment was made by MHD in the amount of $88.7 million. This matter is now closed.

Long Island Expressway/Cross Island Parkway Matter

The Company reconstructed the Long Island Expressway/Cross Island Parkway Interchange project for the New York State Department of Transportation (the “NYSDOT”). The $130 million project was substantially completed in January 2004 and was accepted by the NYSDOT as finally 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 and other interferences for which the Company believes that the NYSDOT is responsible.mechanic lien holders under Nevada law.



In March 2011,October 2013, a settlement was reached by and among the Company filed its claimStatutory Lienholders and complaint with the New York Stateother interested parties. The Bankruptcy Court appointed a mediator to facilitate the execution of Claims and served to the New York State Attorney General’s Office, seeking damages in the amount of $53.8 million. In May 2011, the NYSDOT filed a motion to dismiss the Company’s claim on the grounds that the Company had not provided required documentation for project closeout and filing of a claim. In September 2011, the Company reached agreement on final payment with the Comptroller’s Office on behalf of the NYSDOT which resulted in an amount of $0.5 million payable to the Company and formally closed out the project, which allowed the

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Company’s claim to be re-filed. The Company re-filed its claim in the amount of $53.8 million with the NYSDOT in February 2012 and with the Court of Claims in March 2012. In May 2012, the NYSDOT served its answer and counterclaims in the amount of $151 million alleging fraud in the inducement and punitive damages related to disadvantaged business enterprise (“DBE”) requirements for the project. The Court subsequently ruled that NYSDOT’s counterclaims may only be asserted as a defense and offset to the Company’s claims and not as affirmative claims. The Company does not expect the counterclaim to have any material effect on its consolidated financial statements.settlement agreement. Settlement discussions are ongoing.



Management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.



Honeywell Street/Queens Boulevard Bridges Matter

In 1999, the Company was awarded a contract for reconstruction of the Honeywell Street/Queens Boulevard Bridges project for the City of New York (the “City”). In June 2003, after substantial completion of the project, the Company initiated an action to recover $8.8 million in claims against the City on behalf of itself and its subcontractors. In March 2010, the City filed counterclaims for

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$74.6 million and other relief, alleging fraud in connection with the DBE requirements for the project. In May 2010, the Company served the City with its response to the City’s counterclaims and affirmative defenses. In August 2013, the Court granted the Company’s motion to dismiss the City’s affirmative defenses and counterclaims relating to fraud.

In January 2017, the Court granted the City’s motion for summary judgment and dismissed the Company’s claim against the City of New York. The Company has filed a notice of appeal. The Court also granted the Company’s motion for summary judgment for release of retention plus interest from 2010 for an aggregate amount of approximately $1.1 million.

The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements.

Westgate Planet Hollywood Matter

Tutor-Saliba Corporation (“TSC”), a wholly owned subsidiary of the Company, contracted to construct a timeshare development project in Las Vegas which was substantially completed in December 2009. The Company’s claims against the owner, Westgate Planet Hollywood Las Vegas, LLC (“WPH”), relate to unresolved owner change orders and other claims. The Company filed a lien on the project in the amount of $23.2 million, and filed its complaint with the District Court, Clark County, Nevada. Several subcontractors have also recorded liens, some of which have been released by bonds and some of which have been released as a result of subsequent payment. WPH has posted a mechanic’s lien release bond for $22.3 million.

WPH filed a cross-complaint alleging non-conforming and defective work for approximately $51 million, primarily related to alleged defects, misallocated costs, and liquidated damages. WPH revised the amount of their counterclaims to approximately $45 million.

Following multiple post-trial motions, final judgment was entered in this matter on March 20, 2014. TSC was awarded total judgment in the amount of $19.7 million on its breach of contract claim, which includes an award of interest up through the date of judgment, plus attorney’s fees and costs. WPH has paid $0.6 million of that judgment. WPH was awarded total judgment in the amount of $3.1 million on its construction defect claims, which includes interest up through the date of judgment. The awards are not offsetting. WPH and its Sureties have filed a notice of appeal. TSC has filed a notice of appeal on the defect award. In July 2014, the Court ordered WPH to post an additional supersedeas bond on appeal, in the amount of $1.7 million, in addition to the lien release bond of $22.3 million, which increases the security up to $24.0 million. The Nevada Supreme Court has not yet ruled on this matter.

The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements. Management has made an estimate of the total anticipated recovery on this project and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.

U.S. Department of Commerce, National Oceanic and Atmospheric Administration Matter

Rudolph and Sletten, Inc. (“R&S”), a wholly owned subsidiary of the Company, entered into a contract with the United States Department of Commerce, National Oceanic and Atmospheric Administration (“NOAA”) for the construction of a 287,000 square-foot facility for NOAA’s Southwest Fisheries Science Center Replacement Headquarters and Laboratory in La Jolla, California. The contract work began on May 24, 2010, and was substantially completed in September 2012. R&S incurred significant additional costs as a result of a design that contained errors and omissions, NOAA’s unwillingness to correct design flaws in a timely fashion and a refusal to negotiate the time and pricing associated with change order work.

R&S has filed three certified claims against NOAA for contract adjustments related to the unresolved Owner change orders, delays, design deficiencies and other claims. The First Certified Claim was submitted on August 20, 2013, in the amount of $26.8 million ("First Certified Claim") and the Second Certified Claim was submitted on October 30, 2013, in the amount of $2.6 million ("Second Certified Claim") and the Third Certified Claim was submitted on October 1, 2014 in the amount of $0.7 million (“Third Certified Claim”).

NOAA requested an extension to issue a decision on the First Certified Claim and on the Third Certified Claim, but did not request an extension of time to review the Second Certified Claim. On January 6, 2014, R&S filed suit in the United States Federal Court of Claims on the Second Certified Claim plus interest and attorney's fees and costs. This was followed by a submission of a lawsuit on the First Certified Claim on July 31, 2014. In February 2015, the Court denied NOAA’s motion to dismiss the Second Certified Claim. In March 2015, the Contracting Officer issued decisions on all Claims accepting a total of approximately $1.0 million of claims and denying approximately $29.5 million of claims. On April 14, 2015, the Court consolidated the cases. Trial is scheduled to commence in December 2017.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Five Star Electric Matter

In the third quarter of 2015, Five Star Electric Corp. ("Five Star"), a subsidiary of the Company that was acquired in 2011, entered into a tolling agreement related to an ongoing investigation being conducted by the United States Attorney for the Eastern District of New York (“USAO EDNY”). The tolling agreement extended the statute of limitations to avoid the expiration of any unexpired statute of limitations while the investigation is pending. Five Star has been cooperating with the USAO EDNY since late June 2014, when it was first made aware of the investigation, and has been providing information related to its use of certain minority-owned, women-owned, small and disadvantaged business enterprises and, in addition, most recently, information regarding certain of Five Star’s employee compensation, benefit and tax practices. The investigation covers the period of 2005-2014.

The Company cannot predict the ultimate outcome of the investigation and cannot accurately estimate any potential liability 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 diameter bored tunnel in downtown Seattle, King County, Washington to replace the Alaskan Way Viaduct, also known as State Route 99.

The construction of the large diameter bored tunnel requires 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 damaged and was required to be shut down for repair. 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 differing site condition. WSDOT has not accepted that finding.

The TBM is 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 insurer and requested interim payments under the Policy. The Insurers refused to pay and denied coverage. In June 2015, STP filed a lawsuit in the King County Superior Court, State of Washington (“Washington Superior Court”) seeking declaratory relief concerning contract interpretation as well as damages as a result of the Insurers’ breach of its obligations under the terms of the Policy. WSDOT is deemed a plaintiff since WSDOT is an insured under the Policy and had filed its own claim for damages. Hitachi, the manufacturer of the TBM, has also joined the case as a plaintiff for costs incurred to repair the damages to the TBM. Trial is scheduled for June 2018.  

In March 2016, WSDOT filed a complaint against STP in Thurston County Superior Court for breach of contract alleging STP’s delays and failure to perform and declaratory relief concerning contract interpretation. STP filed its answer to WSDOT’s complaint and filed a counterclaim against WSDOT and against the manufacturer of the TBM. Trial is set for June 2018.

As of December 31, 2016, the Company has concluded that the potential for a material adverse financial impact due to the Insurer’s and WSDOT’s respective legal actions is neither probable nor remote. With respect to STP’s counterclaim, management has included an estimate of the total anticipated recovery, concluded to be both probable and reliably estimable, 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 financial statements at that time.

8.     Share-Based Compensation

The Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (the “Plan”) provides for various types of share-based grants, including restricted and unrestricted stock units and stock options. Restricted and unrestricted stock units give the holder the right to exchange their stock units for shares of the Company’s common stock on a one-for-one basis. Stock options give the holder the right to purchase shares of the Company’s common stock at an exercise price equal to the fair value of the Company’s common stock on the date of the stock option’s award. Restricted stock units and stock options are usually subject to certain service and performance conditions and may not be sold or otherwise transferred until those restrictions have been satisfied; however, unrestricted stock units have no such restrictions. The term for stock options is limited to 10 years from the date of grant. As of December 31, 2016, there were 327,584 shares available to be granted under the Company’s share-based compensation plan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Many of the awards issued under the Plan contain separate tranches, each for a separate performance period and each with a performance target to be established subsequent to the award date; accordingly, the tranches are accounted for under ASC 718 Stock Compensation (“ASC 718”) as separate grants, with the grant date being the date the performance targets for a given tranche are established and communicated to the grantee. Similarly, for these awards, compliance with the requirements of the Plan is also based on the number of units granted in a given year, as determined by ASC 718, rather than the number of units awarded in a given year. As a result, as of December 31, 2016, the Company had outstanding awards with 448,000 restricted stock units and 448,000 stock options that had not been granted yet. These units will be granted in 2017, 2018 and 2019 when the performance targets for those respective years are established.

The following table summarizes restricted stock unit and stock option activity:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



Restricted Stock Units

 

Stock Options



 

 

Weighted-

 

 

 

Weighted-



 

 

Average

 

 

 

Average



 

 

Grant Date

 

 

 

Exercise/



 

 

Fair Value

 

 

 

(Strike) Price



Number

 

Per Share

 

Number

 

Per Share

Outstanding as of December 31, 2013

361,668 

 

$

17.30 

 

1,295,000 

 

$

20.20 

Granted

996,597 

 

 

27.10 

 

714,000 

 

 

18.40 

Expired or forfeited

(20,000)

 

 

24.77 

 

 —

 

 

 —

Vested/exercised

(281,668)

 

 

16.76 

 

(20,000)

 

 

12.54 

Outstanding as of December 31, 2014

1,056,597 

 

$

26.54 

 

1,989,000 

 

$

19.63 

Granted

321,500 

 

 

23.07 

 

259,000 

 

 

16.07 

Expired or forfeited

(281,560)

 

 

23.89 

 

(250,000)

 

 

15.97 

Vested/exercised

(370,940)

 

 

27.07 

 

 —

 

 

 —

Outstanding as of December 31, 2015

725,597 

 

$

25.28 

 

1,998,000 

 

$

19.62 

Granted

483,387 

 

 

19.14 

 

274,000 

 

 

16.20 

Vested/exercised

(52,500)

 

 

18.74 

 

(97,500)

 

 

12.72 

Outstanding as of December 31, 2016

1,156,484 

 

$

22.64 

 

2,174,500 

 

$

19.50 

The following table summarizes unrestricted stock units issued to the members of the Company’s Board of Directors as part of their annual retainers:



 

 

 

 

 

 



 

 

 

 

 

 



 

Unrestricted Stock Units



 

 

 

 

Weighted-



 

 

 

 

Average



 

 

 

 

Grant Date



 

 

 

 

Fair Value

Year

 

Number

 

Per Share

2014

 

$

47,873 

 

$

30.81 

2015

 

 

68,160 

 

 

21.93 

2016

 

 

64,603 

 

 

21.67 

The fair value of unrestricted stock units issued during 2016, 2015 and 2014 was approximately $1.4 million, $1.5 million and $1.5 million, respectively.

The fair value of restricted stock units that vested during 2016,  2015 and 2014 was approximately $1.0 million,  $8.0 million and $8.0 million, respectively. The aggregate intrinsic value, representing the difference between the market value on the date of exercise and the option price of the stock options exercised during 2016 and 2014 was $1.1 million and $0.3 million, respectively. As of December 31, 2016, the balance of unamortized restricted stock and stock option expense was $6.5 million and $0.7 million, respectively, which will be recognized over weighted-average periods of 1.3 years for restricted stock units and 0.5 years for stock options. 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2,174,500 outstanding stock options as of December 31, 2016 had an intrinsic value of $18.5 million and a weighted-average remaining contractual life of 4.3 years. Of those outstanding options:  1)  1,402,500 were exercisable with an intrinsic value of $11.3 million, a weighted-average exercise price of $19.95 per share and a weighted-average remaining contractual life of 3.1 years; and 2) 772,000 have been granted but have not vested, of which 756,876 are expected to vest and have an intrinsic value of $7.2 million, a weighted-average exercise price of $18.49 and a weighted-average remaining contractual life of 6.5 years.

The fair value on the grant date and the significant assumptions used in the Black-Scholes option-pricing model are as follows:



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,



2016

 

2015

 

2014

Total stock options granted

 

274,000 

 

 

 

259,000 

 

 

 

714,000 

 

Weighted-average grant date fair value

$

5.31 

 

 

$

12.48 

 

 

$

17.69 

 

Weighted-average assumptions:

 

 

 

 

 

 

 

 

 

 

 

Risk-Free Rate

 

1.2 

%

 

 

1.3 

%

 

 

1.8 

%

Expected life of options(a)

 

4.2 

 

 

 

4.7 

 

 

 

5.7 

 

Expected volatility(b)

 

40.6 

%

 

 

45.5 

%

 

 

50.6 

%

Expected quarterly dividends

$

 —

 

 

$

 —

 

 

$

 —

 


(a)

Calculated using the simplified method due to the terms of the stock options and the limited pool of grantees.

(b)

Calculated using historical volatility of the Company’s common stock over periods commensurate with the expected life of the option.

For the respective years ended December 31, 2016, 2015 and 2014, the Company recognized, as part of general and administrative expense, costs for stock-based payment arrangements for both employees of $13.4 million,  $9.5 million and $18.6  million and non-employee directors of $1.4 million, $1.5 million and $1.4 million, with related aggregate tax benefits of $6.1 million, $4.6  million and $8.1  million, respectively.

9.     Employee Benefit Plans

Defined Benefit Pension Plan

The Company has a defined benefit pension plan that covers certain of its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The plan is noncontributory and benefits are based on an employee’s years of service and “final average earnings,” as defined by the plan. The plan provides reduced benefits for early retirement and takes into account offsets for social security benefits. The Company also has an unfunded supplemental retirement plan (“Benefit Equalization Plan”) for certain employees whose benefits under the defined benefit pension plan were reduced because of compensation limitations under federal tax laws. Effective June 1, 2004, all benefit accruals under the Company’s pension plan and Benefit Equalization Plan were frozen; however, the current vested benefit was preserved. Pension disclosure as presented below includes aggregated amounts for both of the Company’s plans, except where otherwise indicated.

The Company historically has used the date of its year-end as its measurement date to determine the funded status of the plan.

The long-term investment goals of our plan are to manage the assets in accordance with the legal requirements of all applicable laws; produce investment returns which maximize return within reasonable and prudent levels of risks; and achieve a fully funded status with regard to current pension liabilities. Some risk must be assumed in order to achieve the investment goals. Investments with the ability to withstand short and intermediate term variability are considered and some interim fluctuations in market value and rates of return are tolerated in order to achieve the plan’s longer-term objectives.

The pension plan’s assets are managed by a third-party investment manager. The Company monitors investment performance and risk on an ongoing basis.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of net periodic benefit cost is as follows:



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,

 

(in thousands)

2016

 

 

2015

 

 

2014

 

Interest cost

$

4,153 

 

 

$

4,055 

 

 

$

4,144 

 

Service cost

 

600 

 

 

 

 —

 

 

 

 —

 

Expected return on plan assets

 

(4,803)

 

 

 

(5,021)

 

 

 

(4,797)

 

Recognized net actuarial losses

 

1,745 

 

 

 

1,869 

 

 

 

4,385 

 

Net periodic benefit cost

$

1,695 

 

 

$

903 

 

 

$

3,732 

 

Actuarial assumptions used to determine net cost:

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

4.10 

%

 

 

3.75 

%

 

 

4.47 

%

Expected return on assets

 

6.00 

%

 

 

6.50 

%

 

 

6.75 

%

Rate of increase in compensation

 

N/A

 

 

 

N/A

 

 

 

N/A

 

The target asset allocation for the Company’s pension plan by asset category for 2017 and the actual asset allocation as of December 31, 2016 and 2015 by asset category are as follows:



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

Percentage of Plan Assets as of December 31,



 

Target

 

 

 



 

Allocation

 

 

Actual Allocation

Asset Category

 

2017

 

 

2016

 

 

2015

Cash

 

%

 

 

%

 

 

%

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

50 

 

 

 

47 

 

 

 

61 

 

International

 

25 

 

 

 

28 

 

 

 

30 

 

Fixed income securities

 

20 

 

 

 

21 

 

 

 

 

Total

 

100 

%

 

 

100 

%

 

 

100 

%

As of December 31, 2016 and 2015, plan assets included approximately $39.1 million and $52.1 million, respectively, of investments in hedge funds and equity partnerships which do not have readily determinable fair values. The underlying holdings of the funds were comprised of a combination of assets for which the estimate of fair value is determined using information provided by fund managers.

The Company expects to contribute approximately $2.6 million to its defined benefit pension plan in 2017.  

Future benefit payments under the plans are estimated as follows:



 

 



 

 

Year ended December 31,

 

(in thousands)

 

 

2017

$

6,488 

2018

 

6,632 

2019

 

6,691 

2020

 

6,717 

2021

 

6,732 

Thereafter

 

32,722 

Total

$

65,982 

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables provide a reconciliation of the changes in the fair value of plan assets and plan benefit obligations during 2016 and 2015, and a summary of the funded status as of December 31, 2016 and 2015



 

 

 

 

 



 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

Change in Fair Value of Plan Assets

 

 

 

 

 

Balance at beginning of year

$

72,296 

 

$

75,956 

Actual return on plan assets

 

(1,909)

 

 

(984)

Company contribution

 

2,025 

 

 

2,900 

Benefit payments

 

(6,355)

 

 

(5,576)

Balance at end of year

$

66,057 

 

$

72,296 



 

 

 

 

 



 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

Change in Benefit Obligations

 

 

 

 

 

Balance at beginning of year

$

105,942 

 

$

110,923 

Interest cost

 

4,153 

 

 

4,055 

Service cost

 

600 

 

 

 —

Assumption change (gain) loss

 

308 

 

 

(3,838)

Actuarial (gain) loss

 

(967)

 

 

378 

Benefit payments

 

(6,355)

 

 

(5,576)

Balance at end of year

$

103,681 

 

$

105,942 



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Funded status

$

(37,624)

 

$

(33,646)

Amounts recognized in Consolidated Balance Sheets consist of:

 

 

 

 

 

Current liabilities

$

(271)

 

$

(218)

Long-term liabilities

 

(37,353)

 

 

(33,428)

Net amount recognized in Consolidated Balance Sheets

$

(37,624)

 

$

(33,646)



 

 

 

 

 



 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss

 

 

 

 

 

Net actuarial loss

$

(61,132)

 

$

(56,824)

Cumulative Company contributions in excess of net periodic benefit cost

 

23,508 

 

 

23,178 

Net amount recognized in Consolidated Balance Sheets

$

(37,624)

 

$

(33,646)

The change in actuarial loss during the period resulting from changed assumptions was $4.3 million in 2016,  $0.7 million in 2015 and $13.9 million in 2014.

The estimated amount of the net accumulated loss that will be amortized from accumulated other comprehensive loss into net period benefit cost in 2017 is $1.8 million.

The discount rate used in determining the accumulated post-retirement benefit obligation was 3.9% as of December 31, 2016 and 4.1% as of December 31, 2015. The discount rate used for the accumulated post-retirement obligation was derived using a blend of U.S. Treasury and high-quality corporate bond discount rates.

The expected long-term rate of return on assets assumption was 6.0% for 2016 and 6.5% for 2015. The expected long-term rate of return on assets assumption was developed considering forward looking capital market assumptions and historical return expectations for each asset class assuming the plans’ target asset allocation and full availability of invested assets.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fund strategies seek to capitalize on inefficiencies identified across different asset classes or markets. Hedge fund strategy types include long-short, event-driven, multi-strategy, equity partnerships and distressed credit.

Plan assets were measured at fair value. The following provides a description of the valuation techniques employed for each major asset class: Corporate equities were valued at the closing price reported on the active market on which the individual securities were purchased.

Registered investment companies are public investment vehicles valued using the Net Asset Value (NAV) of shares held by the plan at year-end. Closely held funds held by the plan, which are only available through private offerings, do not have readily determinable fair values. Estimates of fair value of these funds were determined using the information provided by the fund managers and it is generally based on the net asset value per share or its equivalent. Corporate bonds were valued based on market values quoted by dealers who are market makers in these securities, and by independent pricing services which use multiple valuation techniques that incorporate available market information and proprietary valuation models using market characteristics, such as benchmark yield curve, coupon rates, credit spreads, estimated default rates and other features.

The following table sets forth the plan assets at fair value in accordance with the fair value hierarchy described in Note 3:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2016

 

As of December 31, 2015



Fair Value Hierarchy

 

Fair Value Hierarchy

(in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Level 1

 

Level 2

 

Level 3

Cash and cash equivalents

$

2,437 

 

$

2,437 

 

$

 —

 

$

 —

 

$

2,654 

 

$

2,654 

 

$

 —

 

$

 —

Fixed Income

 

14,023 

 

 

14,023 

 

 

 —

 

 

 —

 

 

4,029 

 

 

4,029 

 

 

 —

 

 

 —

Equities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

6,566 

 

 

6,566 

 

 

 —

 

 

 —

Mutual Funds

 

10,489 

 

 

10,489 

 

 

 —

 

 

 —

 

 

6,994 

 

 

6,994 

 

 

 —

 

 

 —



$

26,949 

 

$

26,949 

 

$

 —

 

$

 —

 

$

20,243 

 

$

20,243 

 

$

 —

 

$

 —

Closely held funds(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Partnerships

 

6,931 

 

 

 

 

 

 

 

 

 

 

 

7,920 

 

 

 

 

 

 

 

 

 

Hedge Fund Investments

 

32,177 

 

 

 

 

 

 

 

 

 

 

 

44,133 

 

 

 

 

 

 

 

 

 

Total closely held funds(a)

 

39,108 

 

 

 

 

 

 

 

 

 

 

 

52,053 

 

 

 

 

 

 

 

 

 

Total

$

66,057 

 

$

26,949 

 

$

 —

 

$

 —

 

$

72,296 

 

$

20,243 

 

$

 —

 

$

 —


(a)

Closely held funds in private investment were measured at fair value using NAV and were not categorized in the fair value hierarchy. Although the investments were not categorized within the fair value hierarchy, the holdings of these private investment funds were comprised of a combination of Level 1, 2 and 3 investments, but were not categorized in the fair value hierarchy because they were measured at NAV using the practical expedient. This is a change from prior years’ presentation as there is no longer a requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient. 

The plans have benefit obligations in excess of the fair value of each plan’s assets detailed as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2016

 

As of December 31, 2015



 

 

 

Benefit

 

 

 

 

 

 

 

Benefit

 

 

 



Pension

 

Equalization

 

 

 

 

Pension

 

Equalization

 

 

 

(in thousands)

Plan

 

Plan

 

Total

 

Plan

 

Plan

 

Total

Projected benefit obligation

$

100,336 

 

$

3,345 

 

$

103,681 

 

$

102,495 

 

$

3,447 

 

$

105,942 

Accumulated benefit obligation

 

100,336 

 

 

3,345 

 

 

103,681 

 

 

102,495 

 

 

3,447 

 

 

105,942 

Fair value of plans' assets

 

66,057 

 

 

 —

 

 

66,057 

 

 

72,296 

 

 

 —

 

 

72,296 

Projected benefit obligation greater than fair value of plans' assets

$

34,279 

 

$

3,345 

 

$

37,624 

 

$

30,199 

 

$

3,447 

 

$

33,646 

Accumulated benefit obligation greater than fair value of plans' assets

$

34,279 

 

$

3,345 

 

$

37,624 

 

$

30,199 

 

$

3,447 

 

$

33,646 

Section 401(k) Plans

The Company has several contributory Section 401(k) plans which cover its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The 401(k) expense provision was $4.0 million in both 2016 and 2015 and $3.6 million in 2014. The Company’s contribution is based on a non-discretionary match of employees’ contributions, as defined by each plan.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fontainebleau Matter



Desert Mechanical Inc. (“DMI”) and Fisk Electric Company (“Fisk”), wholly owned subsidiaries of the Company, were subcontractors on the Fontainebleau Project in Las Vegas (“Fontainebleau”), a hotel/casino complex with approximately 3,800 rooms. In June 2009, Fontainebleau filed for bankruptcy protection, under Chapter 11 of the U.S. Bankruptcy Code, in the Southern District of Florida. Fontainebleau is headquartered in Miami, Florida.



DMI and Fisk filed liens in Nevada for approximately $44 million, representing unreimbursed costs to date and lost profits, including anticipated profits. Other unaffiliated subcontractors have also filed liens. In June 2009, DMI filed suit against Turnberry West Construction, Inc. (“Turnberry”), the general contractor, in the 8th Judicial District Court, Clark County, Nevada (the “District Court”), and in May 2010, the court entered an order in favor of DMI for approximately $45 million.



In January 2010, the Bankruptcy Court approved the sale of the property to Icahn Nevada Gaming Acquisition, LLC, and this transaction closed in February 2010. As a result of a July 2010 ruling relating to certain priming liens, there was approximately $125 million set aside from this sale, which is available for distribution to satisfy the creditor claims based on seniority. At that time, the total estimated sustainable lien amount was approximately $350 million. The project lender filed suit against the mechanic’s lien claimants, including DMI and Fisk, alleging that certain mechanic’s liens are invalid and that all mechanic’s liens are subordinate to the lender’s claims against the property. The Nevada Supreme Court ruled in October 2012 in an advisory opinion at the request of the Bankruptcy Court that lien priorities would be determined in favor of the mechanic lien holders under Nevada law.



In October 2013, a settlement was reached by and among the Statutory Lienholders and the other interested parties. The agreed upon settlement has not had an impact onBankruptcy Court appointed a mediator to facilitate the Company’s recorded accounting position as of the period and periods ended December 31, 2014. The execution of that settlement agreement continues under the supervision of a mediator appointed by the Bankruptcy Court. agreement. Settlement discussions are ongoing.

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.

MGM CityCenter Matter

Tutor Perini Building Corp. (“TPBC”) (formerly Perini Building Company, Inc.), a wholly owned subsidiary of the Company, contracted with MGM MIRAGE Design Group (“MGM”) in March 2005 to construct the CityCenter project in Las Vegas, Nevada. The project, which encompasses nineteen separate contracts, is a 66-acre urban mixed use development consisting of hotels, condominiums, retail space and a casino.

The Company achieved substantial completion of the project in December 2009, and MGM opened the project to the public on the same date. In March 2010, the Company filed suit against MGM and certain other property owners in the Clark County District Court alleging several claims including breach of contract, among other items.

In a Current Report on Form 8-K filed by MGM in March 2010, and in subsequent communications issued, MGM asserted that it believes it owes substantially less than the claimed amount and that it has claims for losses in connection with the construction of the Harmon Tower and is entitled to unspecified offsets for other work on the project. According to MGM, the total of the offsets and the Harmon Tower claims exceed the amount claimed by the Company.

In May 2010, MGM filed a counterclaim and third party complaint against the Company and its subsidiary TPBC. The court granted the Company and MGM’s joint motion to consolidate all subcontractor initiated actions into the main CityCenter lawsuit. In July 2012, the Court granted MGM’s motion to demolish the Harmon Tower, one of the CityCenter buildings, as a “business decision.”

Evidence had been presented at the Harmon related hearings that the Harmon Tower could be repaired for approximately $21 million, more than $15 million of which is due to design defects that are MGM’s responsibility. In mid-September 2012, MGM filed a request

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for additional destructive testing of the Harmon Tower. In October 2012, the Court ruled it would allow additional testing but with certain conditions including but not limited to the Court’s withdrawing MGM’s right to demolish the Harmon Tower and severing the Harmon Tower defects issue from the rest of the case. In February 2013, MGM filed third-party complaints against the project designers, which were resolved through third party settlements including $33.0 million attributable to MGM’s alleged damages on the Harmon, effective October 2013. In early April 2013, MGM started additional destructive testing of the Harmon Tower.

With respect to alleged losses at the Harmon Tower, the Company has contractual indemnities from the responsible subcontractor, as well as insurance coverage. The Company’s insurance carrier initiated legal proceedings seeking declaratory relief that their insurance policies do not provide for defense or coverage for matters pertaining to the Harmon Towers. Those proceedings are stayed pending the outcome of the underlying dispute in Nevada District Court. The Company is not aware of a basis for other claims that would amount to material offsets against what MGM owes to the Company. The Company does not expect this matter to have any material effect on its consolidated financial statements.

During July 2013, a settlement was reached for $39.8 million related to outstanding receivables for various subcontractors, which included consideration for, and brought resolution to, disputes between the Company’s subsidiaries Fisk and DMI and MGM. Payment was received in August 2013.

As of December 2014, MGM has reached agreements with subcontractors to settle $348 million of amounts previously billed to MGM. The Company has reduced and will continue to reduce amounts included in revenues, cost of construction operations, accounts receivable and accounts payable for the reduction in subcontractor pass-through billings, which the Company would not expect to have an impact on recorded profit. As of December 2014, the Company had approximately $145.3 million recorded as contract receivables for amounts due and owed to the Company.

In January 2014, the Parties reached a confidential settlement on most of the non-Harmon Tower related issues, including the majority of the Company’s affirmative claims. On or about October 27, 2014, a second agreement was reached for previously disputed items as the Court ordered mediation remained in progress for unresolved claims. The trial began on October 28, 2014.

On December 12, 2014, and December 31, 2014,  Tutor Perini Corporation and Tutor Perini Building Corp. (collectively “Tutor Perini”) reached multiple settlements with MGM Mirage Resorts International and CityCenter Holdings, LLC (collectively “CityCenter”) regarding the CityCenter Project and the litigation which commenced in 2010. The settlement was entered into under confidential terms which fully resolve all material disputes between Tutor Perini, CityCenter, and the related subcontractors, except for Show Canada. Management booked the impact of this settlement, which did not differ materially from balances recorded as of September 2014, during the fourth quarter of 2014. During February 2015, payment was received in full. This matter is now closed.



Honeywell Street/Queens Boulevard Bridges Matter



In 1999, the Company was awarded a contract for reconstruction of the Honeywell Street/Queens Boulevard Bridges project for the City of New York (the “City”). In June 2003, after substantial completion of the project, the Company initiated an action to recover $8.8 million in claims against the City on behalf of itself and its subcontractors. In March 2010, the City filed counterclaims for $74.6

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$74.6 million and other relief, alleging fraud in connection with the DBE requirements for the project. In May 2010, the Company served the City with its response to the City’s counterclaims and affirmative defenses. In November 2014,August 2013, the Appellate Division First Department affirmedCourt granted the dismissal ofCompany’s motion to dismiss the City’s affirmitiveaffirmative defenses and counterclaims based on DBErelating to fraud.

In January 2017, the Court granted the City’s motion for summary judgment and dismissed the Company’s claim against the City of New York. The Company has filed a notice of appeal. The Court also granted the Company’s motion for summary judgment for release of retention plus interest from 2010 for an aggregate amount of approximately $1.1 million.



The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements.



Westgate Planet Hollywood Matter



Tutor-Saliba Corporation (“TSC”), a wholly owned subsidiary of the Company, contracted to construct a time sharetimeshare development project in Las Vegas which was substantially completed in December 2009. The Company’s claims against the owner, Westgate Planet Hollywood Las Vegas, LLC (“WPH”), relate to unresolved owner change orders and other claims. The Company filed a lien on the project in the amount of $23.2 million, and filed its complaint with the District Court, Clark County, Nevada. Several subcontractors have also recorded liens, some of which have been released by bonds and some of which have been released as a result of subsequent payment. WPH has posted a mechanic’s lien release bond for $22.3 million.



WPH filed a cross-complaint alleging non-conforming and defective work for approximately $51 million, primarily related to alleged defects, misallocated costs, and liquidated damages. Some or all of the allegations will be defended by counsel appointed by TSC’s insurance carrier. WPH has since revised the amount of their counterclaims to approximately $45 million.



Following multiple post-trial motions, final judgment was entered in this matter on March 20, 2014. TSC was awarded total judgment in the amount of $19.7 million on its breach of contract claim, which includes an award of interest up through the date of judgment, plus attorney’s fees and costs. WPH has paid $0.6 million of that judgment. WPH was awarded total judgment in the amount of $3.1 

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million on its construction defect claims, which includes interest up through the date of judgment. The awards are not offsetting. WPH and its Sureties have filed a notice of appeal. TSC has filed a notice of appeal on the defect award. In July 2014, the Court ordered WPH to post an additional supersedeas bond on appeal, in the amount of $1.7 million, in addition to the lien release bond of $22.3 million, which increases the security up to $24.0 million. The Nevada Supreme Court has not yet ruled on this matter.



The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements. Management has made an estimate of the total anticipated recovery on this project and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.

100th Street Bus Depot Matter

The Company constructed the 100th Street Bus Depot for the New York City Transit Authority (“NYCTA”) in New York. Prior to receiving notice of final acceptance from the NYCTA, this project experienced a failure of the brick facade on the building due to faulty subcontractor work. The Company has not yet received notice of final acceptance of this project from the NYCTA. The Company contends defective structural installation by the Company’s steel subcontractor caused or was a causal factor of the brick facade failure.

The Company tendered its claim to the NYCTA OCIP and to Chartis Claims, Inc. (“Chartis”), its insurance carrier. Coverage was denied in January 2011. The OCIP and general liability carriers filed a declaratory relief action in the United States District Court, Southern District of New York against the Company seeking court determination that no coverage is afforded under their policies. In mid-February 2012, the Company filed a third-party action against certain underwriters (“Lloyd’s”). In mid-November 2012, the Court granted Chartis’ and Lloyd’s respective motions for summary judgment without oral argument. In 2013, parties filed appellate briefs and the matter at the time was under submission in the Court of Appeal. On May 6, 2014, the 2nd Circuit Court issued a summary order affirming the trial court’s decision on the grounds of late notice. Management booked the impact of this judgment during the second quarter of 2014, resulting in a charge against the company’s earnings. This matter is now closed.

Brightwater Matter

In 2006, the Department of Natural Resources and Parks Wastewater Treatment Division of King County (“King County”), as Owner, and Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, Joint Venture (“VPFK”), as Contractor, entered into a contract to construct the Brightwater Conveyance System and tunnel sections in Washington State. Frontier-Kemper, a wholly owned subsidiary of the Company, is a 20% minority partner in the joint venture.

In April 2010, King County filed a lawsuit alleging damages in the amount of $74 million, plus costs, for VPFK’s failure to complete specified components of the project in the King County Superior Court, State of Washington. Shortly thereafter, VPFK filed a counterclaim in the amount of approximately $75 million, seeking reimbursement for additional costs incurred as a result of differing site conditions, King County’s defective specifications, for damages sustained on VPFK’s tunnel boring machines (“TBM”), and increased costs as a result of hyperbaric interventions. VPFK’s claims related to differing site conditions, defective design specifications, and damages to the TBM were presented to a Dispute Resolution Board (“DRB”). King County amended the amount sought in its lawsuit to approximately $132 million. In August 2011, the DRB generally found that King County was liable to VPFK for VPFK’s claims for encountering differing site conditions, including damages to the TBM, but not on VPFK’s alternative theory of defective specifications. From June through August 2012, each party filed several motions for summary judgment on certain claims and requests in preparation for trial, which were heard and ruled upon by the Court. The Court granted and denied various requests of each party related to evidence and damages.

In December 2012, a jury verdict was received in favor of King County in the amount of $155.8 million and a verdict in favor of VPFK in the amount of $26.3 million. In late April 2013, the Court ruled on post-trial motions and ordered VPFK’s sureties to pay King County’s attorneys’ fees and costs in the amount of $14.7 million. All other motions were denied. On May 7, 2013, VPFK paid the full verdict amount and the associated fees, thus terminating any interest on the judgment. VPFK’s notice of appeal was filed on May 31, 2013. Oral argument is scheduled for March 9, 2015.

The ultimate financial impact of King County’s lawsuit is not yet specifically determinable. In the fourth quarter of 2012, management developed a range of possible outcomes and has recorded a charge to income and a contingent liability of $5.0 million in accrued expenses. In developing a range of possible outcomes, management considered the jury verdict, continued litigation and potential settlement strategies. Management determined that there was no estimate within the range of possible outcomes that was more probable than the other and recorded a liability at the low end of the range. As of December 31, 2014, there were no changes in facts or circumstances that led management to believe that there were any changes to the probability of outcomes. The amount of payments in excess of the established contingent liability is recorded in Accounts Receivable on the Company’s Consolidated Condensed Balance Sheet as of December 31, 2014. Estimating and recording future outcomes of litigation proceedings require significant judgment and assumptions about the future, which are inherently subject to risks and uncertainties. If a final recovery turns out to be

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materially less favorable than our estimates, this may have a significant impact on the Company’s financial results. 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 financial statements at that time.

156 Stations Matter

In December 2003, Five Star Electric Corporation (“FSE”), a wholly owned subsidiary of the Company, entered into an agreement with the Prime Contractor Transit Technologies, L.L.C (“Transit”), a Consortium member of Siemens Transportation Transit Technologies, L.L.C (“Siemens”), to assist in the installation of new public address and customer information screens system for each of the 156 stations for the New York City Transit Authority (“NYCTA”) as the owner. Work on the project commenced in early 2004 and was substantially completed.

In June 2007, FSE submitted a Demand for Arbitration against Transit to terminate FSE’s subcontract due to: the execution of a Cure Agreement between the NYCTA, Siemens and Transit, which amended FSE’s rights under the Prime Contract; Transit’s failure to provide information and equipment to allow work to progress according to the approved schedule, and Transit’s failure to tender payment in excess of a year. In June 2012, the arbitration panel awarded FSE a total of approximately $11.9 million to be paid within 45 days, and Transit’s claims were denied. FSE filed a motion to confirm arbitration award in District Court in July 2012. In late August 2012, Transit Technologies filed a cross petition to vacate the award. In November 2012, the Court granted FSE’s petition to confirm the arbitration award and denied Transit Technologies’ cross-petition to vacate the award. In February 2013, the Court affirmed FSE’s award and entered judgment in the amount of $12.3 million including award, costs and interest.  The deadline for Transit to file an appeal regarding the judgment passed on April 4, 2013, rendering the judgment final for all purposes

In a related matter, in May 2014, the court decided that only $8.5 million of the total arbitration award of $11.9 million can be recovered aganst the payment bond. In December 2014, FSE filed its reply for the motion for re-argument with regard to the reduction in recoverable costs against the payment bond.

Settlement discussions have taken place with Siemens to avoid further litigation. The eventual resolution of this matter is not expected to have a material effect on the Company’s consolidated financial statements.



U.S. Department of Commerce, National Oceanic and Atmospheric Administration Matter

Rudolph and Sletten, Inc. (“R&S”), a wholly owned subsidiary of the Company, entered into a contract with the United States Department of Commerce, National Oceanic and Atmospheric Administration (“NOAA” or “Owner”) for the construction of a 287,000 square-foot facility for NOAA’s Southwest Fisheries Science Center Replacement Headquarters and Laboratory in La Jolla, California. The contract work began on May 24, 2010, and was substantially completed in September 2012. R&S incurred significant additional costs as a result of a design that contained errors and omissions, NOAA’s unwillingness to correct design flaws in a timely fashion and a refusal to negotiate the time and pricing associated with change order work.



R&S has filed twothree certified claims against NOAA for contract adjustments related to the unresolved Owner change orders, delays, design deficiencies and other claims. The First Certified Claim was submitted on August 20, 2013, in the amount of $26.8 million ("First Certified Claim") and the second certified claimSecond Certified Claim was submitted on October 30, 2013, in the amount of $2.6 million ("Second Certified Claim") and the Third Certified Claim was submitted on October 1, 2014 in the amount of $0.7 million (“Third Certified Claim”).



NOAA requested an extension of nine months to issue a decision on the First Certified Claim and on the Third Certified Claim, but did not request an extension of time related to review of the Second Certified Claim. On January 6, 2014, R&S filed suit in the United States Federal Court of Claims on the Second Certified Claim plus interest and attorney's fees and costs. This was followed by a submission of a law suitlawsuit on the First Certified Claim on July 31, 2014. In October 2014,February 2015, the court ordered thatCourt denied NOAA’s motion to dismiss the two lawsuits beSecond Certified Claim. In March 2015, the Contracting Officer issued decisions on all Claims accepting a total of approximately $1.0 million of claims and denying approximately $29.5 million of claims. On April 14, 2015, the Court consolidated for purposes of oral argument on the respective Motionscases. Trial is scheduled to Dismiss.commence in December 2017.



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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.



Five Star Electric Matter

In the third quarter of 2015, Five Star Electric Corp. ("Five Star"), a subsidiary of the Company that was acquired in 2011, entered into a tolling agreement related to an ongoing investigation being conducted by the United States Attorney for the Eastern District of New York (“USAO EDNY”). The tolling agreement extended the statute of limitations to avoid the expiration of any unexpired statute of limitations while the investigation is pending. Five Star has been cooperating with the USAO EDNY since late June 2014, when it was first made aware of the investigation, and has been providing information related to its use of certain minority-owned, women-owned, small and disadvantaged business enterprises and, in addition, most recently, information regarding certain of Five Star’s employee compensation, benefit and tax practices. The investigation covers the period of 2005-2014.

The Company cannot predict the ultimate outcome of the investigation and cannot accurately estimate any potential liability 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 diameter bored tunnel in downtown Seattle, King County, Washington to replace the Alaskan Way Viaduct, also known as State Route 99.

The construction of the large diameter bored tunnel requires 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 damaged and was required to be shut down for repair. 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 differing site condition. WSDOT has not accepted that finding.

The TBM is 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 insurer and requested interim payments under the Policy. The Insurers refused to pay and denied coverage. In June 2015, STP filed a lawsuit in the King County Superior Court, State of Washington (“Washington Superior Court”) seeking declaratory relief concerning contract interpretation as well as damages as a result of the Insurers’ breach of its obligations under the terms of the Policy. WSDOT is deemed a plaintiff since WSDOT is an insured under the Policy and had filed its own claim for damages. Hitachi, the manufacturer of the TBM, has also joined the case as a plaintiff for costs incurred to repair the damages to the TBM. Trial is scheduled for June 2018.  

In March 2016, WSDOT filed a complaint against STP in Thurston County Superior Court for breach of contract alleging STP’s delays and failure to perform and declaratory relief concerning contract interpretation. STP filed its answer to WSDOT’s complaint and filed a counterclaim against WSDOT and against the manufacturer of the TBM. Trial is set for June 2018.

As of December 31, 2016, the Company has concluded that the potential for a material adverse financial impact due to the Insurer’s and WSDOT’s respective legal actions is neither probable nor remote. With respect to STP’s counterclaim, management has included an estimate of the total anticipated recovery, concluded to be both probable and reliably estimable, 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 financial statements at that time.

8.     Share-Based Compensation

The Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (the “Plan”) provides for various types of share-based grants, including restricted and unrestricted stock units and stock options. Restricted and unrestricted stock units give the holder the right to exchange their stock units for shares of the Company’s common stock on a one-for-one basis. Stock options give the holder the right to purchase shares of the Company’s common stock at an exercise price equal to the fair value of the Company’s common stock on the date of the stock option’s award. Restricted stock units and stock options are usually subject to certain service and performance conditions and may not be sold or otherwise transferred until those restrictions have been satisfied; however, unrestricted stock units have no such restrictions. The term for stock options is limited to 10 years from the date of grant. As of December 31, 2016, there were 327,584 shares available to be granted under the Company’s share-based compensation plan.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

[9] Capital Stock



(a) Common Stock

On September 8, 2008,Many of the Company’s shareholders approved an increase inawards issued under the Plan contain separate tranches, each for a separate performance period and each with a performance target to be established subsequent to the award date; accordingly, the tranches are accounted for under ASC 718 Stock Compensation (“ASC 718”) as separate grants, with the grant date being the date the performance targets for a given tranche are established and communicated to the grantee. Similarly, for these awards, compliance with the requirements of the Plan is also based on the number of authorized shares of common stock from 40 million shares to 75 million shares. On the same day, the Company acquired all of the outstanding shares of Tutor-Saliba in exchange for 22,987,293 shares of the Company’s common stock. These shares are subject to certain liquidation restrictions containedunits granted in a shareholders agreement between Mr. Tutor,given year, as determined by ASC 718, rather than the Company and other former Tutor-Saliba shareholders.number of units awarded in a given year. As a result, as of December 31, 2014, Mr. Tutor had beneficial ownership of approximately 8,406,375 shares of the Company’s common stock.

(b) Common Stock Repurchase Program

On March 19, 2010, the Company’s Board of Directors extended the common stock repurchase program put into place on November 13, 2008. The program allowed2016, the Company to repurchase up to $100 million of its commonhad outstanding awards with 448,000 restricted stock through March 31, 2011, at which timeunits and 448,000 stock options that had not been granted yet. These units will be granted in 2017, 2018 and 2019 when the program expired.

There were no repurchases made during 2011. During 2010, the Company repurchased and cancelled 2,164,840 shares under the programperformance targets for an aggregate purchase price of $39.4 million. On a cumulative basis during 2008 through 2010, the Company repurchased and cancelled 4,168,238 shares under the program for an aggregate purchase price of $71.2 million, or an average purchase price per share of $17.08.

(c) Preferred Stockthose respective years are established.



The Company is authorized to issue 1,000,000 shares of preferred stock.  At December 31, 2014following table summarizes restricted stock unit and 2013, there were no preferred shares issued and outstanding.stock option activity:



[10] Stock-Based Compensation

Tutor Perini Corporation Long-Term Incentive Plan



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



Restricted Stock Units

 

Stock Options



 

 

Weighted-

 

 

 

Weighted-



 

 

Average

 

 

 

Average



 

 

Grant Date

 

 

 

Exercise/



 

 

Fair Value

 

 

 

(Strike) Price



Number

 

Per Share

 

Number

 

Per Share

Outstanding as of December 31, 2013

361,668 

 

$

17.30 

 

1,295,000 

 

$

20.20 

Granted

996,597 

 

 

27.10 

 

714,000 

 

 

18.40 

Expired or forfeited

(20,000)

 

 

24.77 

 

 —

 

 

 —

Vested/exercised

(281,668)

 

 

16.76 

 

(20,000)

 

 

12.54 

Outstanding as of December 31, 2014

1,056,597 

 

$

26.54 

 

1,989,000 

 

$

19.63 

Granted

321,500 

 

 

23.07 

 

259,000 

 

 

16.07 

Expired or forfeited

(281,560)

 

 

23.89 

 

(250,000)

 

 

15.97 

Vested/exercised

(370,940)

 

 

27.07 

 

 —

 

 

 —

Outstanding as of December 31, 2015

725,597 

 

$

25.28 

 

1,998,000 

 

$

19.62 

Granted

483,387 

 

 

19.14 

 

274,000 

 

 

16.20 

Vested/exercised

(52,500)

 

 

18.74 

 

(97,500)

 

 

12.72 

Outstanding as of December 31, 2016

1,156,484 

 

$

22.64 

 

2,174,500 

 

$

19.50 



The Company is authorized to grant up to 8,500,000 stock-based compensation awards to key executives, employees and directors of the Company under the Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (the “Plan”). The Plan allows stock-based compensation awards to be granted in a variety of forms, including stock options, stock appreciation rights, restricted stock unit awards,following table summarizes unrestricted stock awards, deferred stock awards and dividend equivalent rights. The terms and conditions ofunits issued to the awards granted are established by the Compensation Committeemembers of the Company’s Board of Directors who also administers the Plan.as part of their annual retainers:



A total



 

 

 

 

 

 



 

 

 

 

 

 



 

Unrestricted Stock Units



 

 

 

 

Weighted-



 

 

 

 

Average



 

 

 

 

Grant Date



 

 

 

 

Fair Value

Year

 

Number

 

Per Share

2014

 

$

47,873 

 

$

30.81 

2015

 

 

68,160 

 

 

21.93 

2016

 

 

64,603 

 

 

21.67 

The fair value of 659,740 shares of commonunrestricted stock are available for future grant under the Plan at December 31, 2014.units issued during 2016, 2015 and 2014 was approximately $1.4 million, $1.5 million and $1.5 million, respectively.



Restricted Stock Unit Awards

RestrictedThe fair value of restricted stock unit awards generally vest subject tounits that vested during 2016,  2015 and 2014 was approximately $1.0 million,  $8.0 million and $8.0 million, respectively. The aggregate intrinsic value, representing the satisfaction of service requirements ordifference between the satisfaction of both service requirements and achievement of certain performance targets. Upon vesting, each award is exchanged for one share of the Company’s common stock. The grant date fair values of these awards are determined basedmarket value on the closingdate of exercise and the option price of the Company’s common stock on either the award date (if subject only to service conditions), or the date that the Compensation Committee establishes the applicable performance target (if subject to performance conditions). The related compensation expense is amortized over the applicable requisite service period.options exercised during 2016 and 2014 was $1.1 million and $0.3 million, respectively. As of December 31, 2014,2016, the Compensation Committee has approved the grantbalance of an aggregate of 5,976,430unamortized restricted stock unit awards to eligible participants.

Theand stock option expense was $6.5 million and $0.7 million, respectively, which will be recognized over weighted-average periods of 1.3 years for restricted stock unit awards granted in 2014,  2013units and 2012 had weighted-average grant date fair values of $27.10,  $19.87 and $14.39, respectively. The grant date fair value is determined based on the closing price of the Company’s common0.5 years for stock on the date of grant.options. 

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

The following table presents the compensation expense recognized related to the restricted stock unit awards which is included in general and administrative expenses in the Consolidated Statements of Operations:NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

 

 

(in millions)

Restricted Stock Compensation Expense

 

$

13.4 

 

$

4.9 

 

$

7.1 

Related Income Tax Benefit

 

$

5.4 

 

$

1.9 

 

$

1.5 



AsThe 2,174,500 outstanding stock options as of December 31, 2014, there was $15.52016 had an intrinsic value of $18.5 million and a weighted-average remaining contractual life of unrecognized compensation expense related to the unvested restricted stock unit awards4.3 years. Of those outstanding options:  1)  1,402,500 were exercisable with an intrinsic value of $11.3 million, a weighted-average exercise price of $19.95 per share and a weighted-average remaining contractual life of 3.1 years; and 2) 772,000 have been granted but have not vested, of which absent significant forfeitures in the future, is756,876 are expected to be recognized overvest and have an intrinsic value of $7.2 million, a weighted-average periodexercise price of approximately 2.8$18.49 and a weighted-average remaining contractual life of 6.5 years.



During 2014,The fair value on the Compensation Committee established the 2014 performance targets for 866,500 restricted stock units awarded in 2014,  2013, and 2012grant date and the 2015 performance target for 120,097 restricted stock units awardedsignificant assumptions used in 2014. During 2014, the Compensation Committee approved the award of 788,097 new restricted stock units.

A summary of restricted stock unit awards activity during the year ended December 31, 2014 isBlack-Scholes option-pricing model are as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate

 

 

 

 

 

Weighted-Average

 

Intrinsic

 

 

 

Number

 

Grant Date

 

Value

 

 

 

of Shares

 

Fair Value

 

(in thousands)

Granted and Unvested - January 1, 2014

 

 

361,668 

 

$

17.30 

 

$

9,512 

Vested

 

 

(281,668)

 

$

16.76 

 

$

8,049 

Granted

 

 

996,597 

 

$

27.10 

 

$

23,988 

Forfeited

 

 

(20,000)

 

$

24.77 

 

$

 —

Total Granted and Unvested

 

 

1,056,597 

 

$

26.54 

 

$

25,432 

Approved for grant

 

 

749,000 

 

 

(a)

 

$

18,028 

Total Awarded and Unvested - December 31, 2014

 

 

1,805,597 

 

 

n.a.

 

$

43,461 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,



2016

 

2015

 

2014

Total stock options granted

 

274,000 

 

 

 

259,000 

 

 

 

714,000 

 

Weighted-average grant date fair value

$

5.31 

 

 

$

12.48 

 

 

$

17.69 

 

Weighted-average assumptions:

 

 

 

 

 

 

 

 

 

 

 

Risk-Free Rate

 

1.2 

%

 

 

1.3 

%

 

 

1.8 

%

Expected life of options(a)

 

4.2 

 

 

 

4.7 

 

 

 

5.7 

 

Expected volatility(b)

 

40.6 

%

 

 

45.5 

%

 

 

50.6 

%

Expected quarterly dividends

$

 —

 

 

$

 —

 

 

$

 —

 

______________


(a)

Grant date fair value cannot be determined currently becauseCalculated using the related performance targets for future years have not yet been established bysimplified method due to the Compensation Committee.terms of the stock options and the limited pool of grantees.

(b)

Calculated using historical volatility of the Company’s common stock over periods commensurate with the expected life of the option.



The outstanding unvested restricted stock unit awards atFor the respective years ended December 31, 2016, 2015 and 2014, are scheduled to vestthe Company recognized, as follows, subject where applicable to the achievementpart of performance targets. As described above, certain performance targets have not yet been established.general and administrative expense, costs for stock-based payment arrangements for both employees of $13.4 million,  $9.5 million and $18.6  million and non-employee directors of $1.4 million, $1.5 million and $1.4 million, with related aggregate tax benefits of $6.1 million, $4.6  million and $8.1  million, respectively.



  

 

 

 

 

 

 

 

 

Number

Vesting Date

 

of Awards

2015

 

390,500 

2016

 

202,500 

2017

 

857,597 

2018

 

196,000 

2019

 

159,000 

 

 

1,805,597 

Approximately 53,000 of the unvested restricted stock unit awards will vest based on the satisfaction of service requirements and 1,752,597 will vest based on the satisfaction of both service requirements and the achievement of pre-tax income performance targets.9.     Employee Benefit Plans



Stock OptionsDefined Benefit Pension Plan



Stock option awards generally vestThe Company has a defined benefit pension plan that covers certain of its executive, professional, administrative and clerical employees, subject to the satisfactioncertain specified service requirements. The plan is noncontributory and benefits are based on an employee’s years of service requirements orand “final average earnings,” as defined by the satisfactionplan. The plan provides reduced benefits for early retirement and takes into account offsets for social security benefits. The Company also has an unfunded supplemental retirement plan (“Benefit Equalization Plan”) for certain employees whose benefits under the defined benefit pension plan were reduced because of compensation limitations under federal tax laws. Effective June 1, 2004, all benefit accruals under the Company’s pension plan and Benefit Equalization Plan were frozen; however, the current vested benefit was preserved. Pension disclosure as presented below includes aggregated amounts for both service requirements and achievement of certain performance targets. the Company’s plans, except where otherwise indicated.

The grant date fair values of these awards are determined based on the Black-Scholes option price model on either the award date (if subject only to service conditions), orCompany historically has used the date thatof its year-end as its measurement date to determine the Compensation Committeefunded status of the plan.

The long-term investment goals of our plan are to manage the assets in accordance with the legal requirements of all applicable laws; produce investment returns which maximize return within reasonable and prudent levels of risks; and achieve a fully funded status with regard to current pension liabilities. Some risk must be assumed in order to achieve the investment goals. Investments with the ability to withstand short and intermediate term variability are considered and some interim fluctuations in market value and rates of return are tolerated in order to achieve the plan’s longer-term objectives.

The pension plan’s assets are managed by a third-party investment manager. The Company monitors investment performance and risk on an ongoing basis.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

establishes the applicable performanceA summary of net periodic benefit cost is as follows:



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Year Ended December 31,

 

(in thousands)

2016

 

 

2015

 

 

2014

 

Interest cost

$

4,153 

 

 

$

4,055 

 

 

$

4,144 

 

Service cost

 

600 

 

 

 

 —

 

 

 

 —

 

Expected return on plan assets

 

(4,803)

 

 

 

(5,021)

 

 

 

(4,797)

 

Recognized net actuarial losses

 

1,745 

 

 

 

1,869 

 

 

 

4,385 

 

Net periodic benefit cost

$

1,695 

 

 

$

903 

 

 

$

3,732 

 

Actuarial assumptions used to determine net cost:

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

4.10 

%

 

 

3.75 

%

 

 

4.47 

%

Expected return on assets

 

6.00 

%

 

 

6.50 

%

 

 

6.75 

%

Rate of increase in compensation

 

N/A

 

 

 

N/A

 

 

 

N/A

 

The target (if subject to performance conditions). The related compensation expense is amortized over the applicable requisite service period. The exercise price of the options is equal to the closing price ofasset allocation for the Company’s common stock on the date the awards were approvedpension plan by the Compensation Committee,asset category for 2017 and the awards expire ten years from the award date. Asactual asset allocation as of December 31, 2014, the Compensation Committee has approved an aggregate of 3,085,465 stock option awards to eligible participants.2016 and 2015 by asset category are as follows:



The stock option awards granted in 2014,  2013 and 2012 had weighted-average grant date fair values of $17.69,  $7.90 and $5.65, respectively. The grant date fair value is determined based on the Black-Scholes option pricing model as discussed below.

The following table presents the compensation expense recognized related to stock option grants which is included in general and administrative expenses in the Consolidated Statements of Operations:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

 

 

(in millions)

Stock Option Compensation Expense

 

$

5.2 

 

$

1.7 

 

$

2.4 

Related Income Tax Benefit

 

$

2.1 

 

$

0.7 

 

$

1.0 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

Percentage of Plan Assets as of December 31,



 

Target

 

 

 



 

Allocation

 

 

Actual Allocation

Asset Category

 

2017

 

 

2016

 

 

2015

Cash

 

%

 

 

%

 

 

%

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

50 

 

 

 

47 

 

 

 

61 

 

International

 

25 

 

 

 

28 

 

 

 

30 

 

Fixed income securities

 

20 

 

 

 

21 

 

 

 

 

Total

 

100 

%

 

 

100 

%

 

 

100 

%



As of December 31, 2014, there was $7.92016 and 2015, plan assets included approximately $39.1 million and $52.1 million, respectively, of unrecognized compensation expense related toinvestments in hedge funds and equity partnerships which do not have readily determinable fair values. The underlying holdings of the outstanding stock option grantsfunds were comprised of a combination of assets for which absent significant forfeitures in the future,estimate of fair value is expected to be recognized over a weighted- average period of approximately 2.7 years.determined using information provided by fund managers.



During 2014, the Compensation Committee established the 2014 performance targets for 380,000 stock options awardedThe Company expects to contribute approximately $2.6 million to its defined benefit pension plan in 2012 and 84,000 stock options awarded in 2013. During 2014, the Compensation Committee approved the award of, and set performance targets for, 250,000 new stock options.2017.  



A summary of stock option activity duringFuture benefit payments under the year ended December 31, 2014 isplans are estimated as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

Number

 

Grant Date

 

Exercise

 

 

 

of Shares

 

Fair Value

 

Price

Total Granted and Outstanding - January 1, 2014

 

 

1,295,000 

 

$

9.94 

 

$

20.20 

Granted

 

 

714,000 

 

$

17.69 

 

$

18.40 

Exercised

 

 

(20,000)

 

$

7.25 

 

$

12.54 

Forfeited

 

 

 —

 

 

 —

 

 

 —

Total Granted and Outstanding

 

 

1,989,000 

 

$

12.75 

 

$

19.63 

Approved for grant

 

 

636,000 

 

 

(a)

 

 

17.62 

Total Awarded and Outstanding - December 31, 2014

 

 

2,625,000 

 

 

n.a.

 

 

19.14 

______________

(a)

Grant date fair value cannot be determined currently because the related performance targets for future years have not yet been established by the Compensation Committee.



 

 



 

 

Year ended December 31,

 

(in thousands)

 

 

2017

$

6,488 

2018

 

6,632 

2019

 

6,691 

2020

 

6,717 

2021

 

6,732 

Thereafter

 

32,722 

Total

$

65,982 



There were 1,210,000 options that have vested and were exercisable at December 31, 2014 at a weighted-average exercise price of $20.35 per share.

Of the remaining options outstanding, approximately 475,000 will vest based on the satisfaction of service requirements and 2,150,000 will vest based on the satisfaction of both service requirements and the achievement of performance targets.

At December 31, 2014, the outstanding options of 1,989,000 had an intrinsic value of $10.4 million and a weighted-average remaining contractual life of 5.9 years.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table detailstables provide a reconciliation of the key assumptions usedchanges in estimating the grant date fair valuesvalue of stock option awards grantedplan assets and plan benefit obligations during 2014, 20132016 and 2012 based on2015, and a summary of the Black-Scholes option pricing model:funded status as of December 31, 2016 and 2015





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant dates established during

 

 

2014

 

2013

 

2012

Awarded during

 

2014

 

2013

 

2013

 

2012

 

2012

 

2013

2009 (1)

2012

2009 (1)

Number of options

 

250,000 

 

 

75,000 

 

 

9,000 

 

 

150,000 

 

 

230,000 

 

 

50,000 

 

150,000 

 

 

15,000 

 

 

150,000 

 

Risk-free interest rate

 

2.08 

%

 

1.72 

%

 

2.25 

 

 

1.46 

%

 

1.82 

 

 

1.64 

%

0.48 

%

 

1.12 

%

 

0.88 

%

Expected life of options (years)

 

6.5 

 

 

5.3 

 

 

7.0 

 

 

4.6 

 

 

5.6 

 

 

5.7 

 

3.6 

 

 

7.3 

 

 

4.4 

 

Expected volatility of underlying stock

 

50.97 

%

 

51.72 

%

 

50.68 

 

 

47.69 

%

 

51.86 

 

 

51.81 

%

51.00 

%

 

50.59 

%

 

53.89 

%

Expected quarterly dividends (per share)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 —

 

 —

 —

 

 

 —

 

______________

(1)

During 2009, the Compensation Committee approved the award of 750,000 stock options that vest in five equal annual installments from 2010 to 2014 subject to the achievement of pre-tax income performance targets established by the Compensation Committee for fiscal years 2009 to 2013. The Compensation Committee has established the performance targets for fiscal years 2011, 2012 and 2013, and these tranches were deemed granted for accounting purposes.



 

 

 

 

 



 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

Change in Fair Value of Plan Assets

 

 

 

 

 

Balance at beginning of year

$

72,296 

 

$

75,956 

Actual return on plan assets

 

(1,909)

 

 

(984)

Company contribution

 

2,025 

 

 

2,900 

Benefit payments

 

(6,355)

 

 

(5,576)

Balance at end of year

$

66,057 

 

$

72,296 







 

 

 

 

 



 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

Change in Benefit Obligations

 

 

 

 

 

Balance at beginning of year

$

105,942 

 

$

110,923 

Interest cost

 

4,153 

 

 

4,055 

Service cost

 

600 

 

 

 —

Assumption change (gain) loss

 

308 

 

 

(3,838)

Actuarial (gain) loss

 

(967)

 

 

378 

Benefit payments

 

(6,355)

 

 

(5,576)

Balance at end of year

$

103,681 

 

$

105,942 

[11] Unaudited Quarterly Financial Data



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Funded status

$

(37,624)

 

$

(33,646)

Amounts recognized in Consolidated Balance Sheets consist of:

 

 

 

 

 

Current liabilities

$

(271)

 

$

(218)

Long-term liabilities

 

(37,353)

 

 

(33,428)

Net amount recognized in Consolidated Balance Sheets

$

(37,624)

 

$

(33,646)



 

 

 

 

 



 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss

 

 

 

 

 

Net actuarial loss

$

(61,132)

 

$

(56,824)

Cumulative Company contributions in excess of net periodic benefit cost

 

23,508 

 

 

23,178 

Net amount recognized in Consolidated Balance Sheets

$

(37,624)

 

$

(33,646)

The change in actuarial loss during the period resulting from changed assumptions was $4.3 million in 2016,  $0.7 million in 2015 and $13.9 million in 2014.



The following table presents selected unaudited quarterly financial data for each full quarterlyestimated amount of the net accumulated loss that will be amortized from accumulated other comprehensive loss into net period of 2014 and 2013:benefit cost in 2017 is $1.8 million.



(The discount rate used in thousands, except per share amounts)determining the accumulated post-retirement benefit obligation was 3.9% as of December 31, 2016 and 4.1% as of December 31, 2015. The discount rate used for the accumulated post-retirement obligation was derived using a blend of U.S. Treasury and high-quality corporate bond discount rates.





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First

 

Second

 

Third

 

Fourth

Year ended December 31, 2014

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Revenues

 

$

955,233 

 

$

1,084,510 

 

 

$

1,250,689 

 

$

1,201,877 

Gross profit

 

$

105,347 

 

$

129,531 

 

 

$

140,841 

 

$

129,723 

Income from construction operations

 

$

41,497 

 

$

65,443 

 

 

$

70,354 

 

$

64,396 

Income before income taxes

 

$

27,293 

 

$

47,612 

 

 

$

58,616 

 

$

53,917 

Net income

 

$

15,939 

 

$

28,545 

 

 

$

35,730 

 

$

27,722 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.33 

 

$

0.59 

 

 

$

0.74 

 

$

0.57 

Diluted

 

$

0.33 

 

$

0.58 

 

 

$

0.73 

 

$

0.56 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First

 

Second

 

Third

 

Fourth

Year ended December 31, 2013

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Revenues

 

$

992,928 

 

$

1,053,065 

 

 

$

1,030,388 

 

$

1,099,291 

Gross profit

 

$

100,357 

 

$

105,955 

 

 

$

120,857 

 

$

139,735 

Income from construction operations

 

$

36,079 

 

$

39,474 

(a)

 

$

58,094 

 

$

70,175 

Income before income taxes

 

$

23,916 

 

$

25,157 

 

 

$

37,035 

 

$

53,507 

Net income

 

$

14,800 

 

$

15,478 

 

 

$

23,759 

 

$

33,259 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31 

 

$

0.32 

 

 

$

0.50 

 

$

0.69 

Diluted

 

$

0.31 

 

$

0.32 

 

 

$

0.49 

 

$

0.68 

The expected long-term rate of return on assets assumption was 6.0% for 2016 and 6.5% for 2015. The expected long-term rate of return on assets assumption was developed considering forward looking capital market assumptions and historical return expectations for each asset class assuming the plans’ target asset allocation and full availability of invested assets.



89F-29

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

[12]Fund strategies seek to capitalize on inefficiencies identified across different asset classes or markets. Hedge fund strategy types include long-short, event-driven, multi-strategy, equity partnerships and distressed credit.

Plan assets were measured at fair value. The following provides a description of the valuation techniques employed for each major asset class: Corporate equities were valued at the closing price reported on the active market on which the individual securities were purchased.

Registered investment companies are public investment vehicles valued using the Net Asset Value (NAV) of shares held by the plan at year-end. Closely held funds held by the plan, which are only available through private offerings, do not have readily determinable fair values. Estimates of fair value of these funds were determined using the information provided by the fund managers and it is generally based on the net asset value per share or its equivalent. Corporate bonds were valued based on market values quoted by dealers who are market makers in these securities, and by independent pricing services which use multiple valuation techniques that incorporate available market information and proprietary valuation models using market characteristics, such as benchmark yield curve, coupon rates, credit spreads, estimated default rates and other features.

The following table sets forth the plan assets at fair value in accordance with the fair value hierarchy described in Note 3:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2016

 

As of December 31, 2015



Fair Value Hierarchy

 

Fair Value Hierarchy

(in thousands)

Total

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Level 1

 

Level 2

 

Level 3

Cash and cash equivalents

$

2,437 

 

$

2,437 

 

$

 —

 

$

 —

 

$

2,654 

 

$

2,654 

 

$

 —

 

$

 —

Fixed Income

 

14,023 

 

 

14,023 

 

 

 —

 

 

 —

 

 

4,029 

 

 

4,029 

 

 

 —

 

 

 —

Equities

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

6,566 

 

 

6,566 

 

 

 —

 

 

 —

Mutual Funds

 

10,489 

 

 

10,489 

 

 

 —

 

 

 —

 

 

6,994 

 

 

6,994 

 

 

 —

 

 

 —



$

26,949 

 

$

26,949 

 

$

 —

 

$

 —

 

$

20,243 

 

$

20,243 

 

$

 —

 

$

 —

Closely held funds(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Partnerships

 

6,931 

 

 

 

 

 

 

 

 

 

 

 

7,920 

 

 

 

 

 

 

 

 

 

Hedge Fund Investments

 

32,177 

 

 

 

 

 

 

 

 

 

 

 

44,133 

 

 

 

 

 

 

 

 

 

Total closely held funds(a)

 

39,108 

 

 

 

 

 

 

 

 

 

 

 

52,053 

 

 

 

 

 

 

 

 

 

Total

$

66,057 

 

$

26,949 

 

$

 —

 

$

 —

 

$

72,296 

 

$

20,243 

 

$

 —

 

$

 —


(a)

Closely held funds in private investment were measured at fair value using NAV and were not categorized in the fair value hierarchy. Although the investments were not categorized within the fair value hierarchy, the holdings of these private investment funds were comprised of a combination of Level 1, 2 and 3 investments, but were not categorized in the fair value hierarchy because they were measured at NAV using the practical expedient. This is a change from prior years’ presentation as there is no longer a requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient. 

The plans have benefit obligations in excess of the fair value of each plan’s assets detailed as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2016

 

As of December 31, 2015



 

 

 

Benefit

 

 

 

 

 

 

 

Benefit

 

 

 



Pension

 

Equalization

 

 

 

 

Pension

 

Equalization

 

 

 

(in thousands)

Plan

 

Plan

 

Total

 

Plan

 

Plan

 

Total

Projected benefit obligation

$

100,336 

 

$

3,345 

 

$

103,681 

 

$

102,495 

 

$

3,447 

 

$

105,942 

Accumulated benefit obligation

 

100,336 

 

 

3,345 

 

 

103,681 

 

 

102,495 

 

 

3,447 

 

 

105,942 

Fair value of plans' assets

 

66,057 

 

 

 —

 

 

66,057 

 

 

72,296 

 

 

 —

 

 

72,296 

Projected benefit obligation greater than fair value of plans' assets

$

34,279 

 

$

3,345 

 

$

37,624 

 

$

30,199 

 

$

3,447 

 

$

33,646 

Accumulated benefit obligation greater than fair value of plans' assets

$

34,279 

 

$

3,345 

 

$

37,624 

 

$

30,199 

 

$

3,447 

 

$

33,646 

Section 401(k) Plans

The Company has several contributory Section 401(k) plans which cover its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The 401(k) expense provision was $4.0 million in both 2016 and 2015 and $3.6 million in 2014. The Company’s contribution is based on a non-discretionary match of employees’ contributions, as defined by each plan.

F-30


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash-Based Compensation Plans

The Company has multiple cash-based compensation plans and a share-based incentive compensation plan for key employees, which are generally based on the Company’s achievement of a certain level of profit. For information on the Company’s share-based incentive compensation plan, see Note 8.

Multiemployer Plans

In addition to the Company’s defined benefit pension and contribution plans discussed above, the Company participates in multiemployer pension plans for its union construction employees. Contributions are based on the hours worked by employees covered under various collective bargaining agreements. Under the Employee Retirement Income Security Act, a contributor to a multiemployer plan is only liable for its proportionate share of a plan’s unfunded vested liability upon termination, or withdrawal from, a plan. The Company currently has no intention of withdrawing from any of the multiemployer pension plans in which it participates and, therefore, has not recognized a liability for its proportionate share of any unfunded vested liabilities associated with these plans. 

The following tables summarize key information for the plans that the Company had significant involvement with during the years ended December 31, 2016, 2015 and 2014.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expiration



 

 

 

 

 

 

 

FIP/RP 

 

 

 

 

 

 

 

 

 

 

 

 

Date of



 

 

 

Pension Protections Act

 

Status

 

Company Contributions

 

 

 

Collective



 

EIN/Pension

 

Zone Status

 

Pending Or

 

(amounts in millions)

 

Surcharge

 

Bargaining

Pension Fund

 

Plan Number

 

2016

 

2015

 

Implemented

 

2016 (b)

 

2015

 

2014

 

Imposed

 

Agreement

The Pension, Hospitalization and Benefit Plan of the Electrical Industry - Pension Trust Fund

 

13-6123601/001

 

Green

 

Green

 

N/A

 

$     15.8 

 

 

$     13.6 

(a)

 

$     11.8 

(a)

 

No

 

5/31/2019

Laborers Pension Trust Fund for Northern California

 

94-6277608

 

Yellow

 

Yellow

 

Implemented

 

5.6 

 

 

2.8 

 

 

1.9 

 

 

No

 

6/30/2019

Carpenters Pension Trust Fund for Northern California

 

94-6050970

 

Red

 

Red

 

Implemented

 

4.4 

 

 

2.7 

 

 

1.9 

 

 

No

 

6/30/2019

Excavators Union Local 731 Pension Fund

 

13-1809825/002

 

Green

 

Green

 

N/A

 

4.2 

 

 

7.1 

 

 

5.3 

 

 

No

 

4/30/2022

Steamfitters Industry Pension Fund

 

13-6149680/001

 

Green

 

Green

 

N/A

 

3.9 

 

 

6.2 

(a)

 

5.1 

(a)

 

No

 

6/30/2017

Iron Workers Locals 40,361 & 417 Pension Fund

 

51-6102576/001

 

Green

 

Yellow

 

Implemented

 

3.8 

 

 

5.2 

(a)

 

0.7 

 

 

No

 

6/30/2020

Local 147 Construction Workers Retirement Fund

 

13-6528181

 

Green

 

Green

 

N/A

 

3.7 

 

 

5.6 

(a)

 

1.3 

 

 

No

 

6/30/2018

Southern California Gunite Workers Pension Fund

 

95-4354179

 

Green

 

Green

 

N/A

 

3.5 

 

 

0.7 

 

 

0.7 

 

 

No

 

6/30/2019


(a)

These amounts exceeded 5% of the respective total plan contributions.

(b)

The Company's contributions as a percentage of total plan contributions were not available for any of our plans.

In addition to the individually significant plans described above, the Company also contributed approximately $38.8 million in 2016,  $37.5 million in 2015 and $30.8 million in 2014 to other multiemployer pension plans.

10.     Business Segments



The Company’s chief operating decision makerCompany 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 heating, ventilation and air conditioning (HVAC). As described below, our business is conducted through three segments: Civil, Building and Specialty Contractors. These segments are determined based on how the Company’s Chairman and Chief Executive Officer who decides how(chief operating decision maker) aggregates business units when evaluating performance and allocating resources.

The Civil segment specializes in public works construction and the replacement and reconstruction of infrastructure. The civil contracting services 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 to allocate resourcesa number of specialized building markets for private and assess performancepublic works customers, including the high-rise residential, hospitality and gaming, transportation, health care, commercial and government offices, sports and entertainment, education, correctional facilities, biotech, pharmaceutical, industrial and high-tech markets.

F-31


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 business segments. Generally,industrial, commercial, hospitality and gaming, and mass-transit end markets. This segment provides the Company evaluates performance of its operating segments on the basis of income from operationswith unique strengths and cash flow.

During the first quarter of 2014,capabilities that allow the Company completedto position itself as a reorganization which resulted in the elimination of the Management Services reporting unitfull-service contractor with greater control over scheduled work, project delivery and reportable segment. The Management Services reporting unit formerly consisted of the following subsidiary companies: Black Construction and Perini Management Services. The reorganization was completed due to the unit no longer meeting the criteria set forth in FASB ASC Topic 280,  “Segment Reporting”risk management.



The following tables set forth certain reportable segment information relating to the Company’s operations for the years ended December 31, 2014, 20132016,  2015 and 2012. In accordance with the accounting guidance on segment reporting, the Company has restated comparative prior period information for the reorganized reportable segments in the tables below.

2014.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reportable Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

Specialty

 

 

 

 

 

 

 

 

Consolidated

(in thousands)

 

Civil

 

Building

 

Contractors

 

Totals

 

Corporate

 

Total

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

$

1,730,468 

 

$

1,558,431 

 

$

1,301,328 

 

$

4,590,227 

 

$

 —

 

 

$

4,590,227 

Elimination of intersegment revenues

 

 

(43,324)

 

 

(54,594)

 

 

 —

 

 

(97,918)

 

 

 —

 

 

 

(97,918)

Revenues from external customers

 

$

1,687,144 

 

$

1,503,837 

 

$

1,301,328 

 

$

4,492,309 

 

$

 —

 

 

$

4,492,309 

Income from construction operations

 

$

220,554 

 

$

24,697 

 

$

50,998 

 

$

296,249 

 

$

(54,559)

 

 

$

241,690 

Assets

 

$

1,814,170 

 

$

680,933 

 

$

775,162 

 

$

3,270,265 

 

$

503,050 

(b)

 

$

3,773,315 

Capital Expenditures

 

$

65,377 

 

$

735 

 

$

6,974 

 

$

73,086 

 

$

1,927 

 

 

$

75,013 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

$

1,519,370 

 

$

1,622,705 

 

$

1,182,844 

 

$

4,324,919 

 

$

 —

 

 

$

4,324,919 

Elimination of intersegment revenues

 

 

(77,954)

 

 

(70,726)

 

 

(567)

 

 

(149,247)

 

 

 —

 

 

 

(149,247)

Revenues from external customers

 

$

1,441,416 

 

$

1,551,979 

 

$

1,182,277 

 

$

4,175,672 

 

$

 —

 

 

$

4,175,672 

Income from construction operations

 

 

177,667 

 

$

24,579 

 

$

49,008 

 

$

251,254 

 

$

(47,432)

 

 

$

203,822 

Assets

 

$

1,427,633 

 

$

666,375 

 

$

727,303 

 

$

2,821,311 

 

$

576,127 

(b)

 

$

3,397,438 

Capital Expenditures

 

 

32,489 

 

$

1,666 

 

$

4,137 

 

$

38,292 

 

$

6,999 

 

 

$

45,291 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

$

1,378,322 

 

$

1,632,279 

 

$

1,183,518 

 

$

4,194,119 

 

$

 —

 

 

$

4,194,119 

Elimination of intersegment revenues

 

 

(42,329)

 

 

(39,838)

 

 

(481)

 

 

(82,648)

 

 

 —

 

 

 

(82,648)

Revenues from external customers

 

$

1,335,993 

 

$

1,592,441 

 

$

1,183,037 

 

$

4,111,471 

 

$

 —

 

 

$

4,111,471 

(Loss) Income from construction operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Before impairment charge

 

$

118,637 

 

$

2,140 

 

$

79,080 

 

$

199,857 

 

$

(45,094)

(a)

 

$

154,763 

Impairment charge

 

 

(81,341)

 

 

(283,744)

 

 

(11,489)

 

 

(376,574)

 

 

 —

 

 

 

(376,574)

Total

 

$

37,296 

 

$

(281,604)

 

$

67,591 

 

$

(176,717)

 

$

(45,094)

 

 

$

(221,811)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

$

1,214,805 

 

$

681,832 

 

$

672,074 

 

$

2,568,711 

 

$

727,699 

(b)

 

$

3,296,410 

Capital Expenditures

 

$

28,828 

 

$

1,682 

 

$

10,201 

 

$

40,711 

 

$

2,691 

 

 

$

43,402 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Reportable Segments

 

 

 

 

 

 



 

 

 

 

Specialty

 

Segment

 

 

 

Consolidated

(in thousands)

Civil

 

Building

 

Contractors

 

Total

 

Corporate

 

Total

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

$

1,830,857 

 

$

2,146,747 

 

$

1,234,272 

 

$

5,211,876 

 

$

 —

 

$

5,211,876 

Elimination of intersegment revenue

 

(161,894)

 

 

(76,906)

 

 

 —

 

 

(238,800)

 

 

 —

 

 

(238,800)

Revenue from external customers

$

1,668,963 

 

$

2,069,841 

 

$

1,234,272 

 

$

4,973,076 

 

$

 —

 

$

4,973,076 

Income from construction operations

$

172,668 

 

$

51,564 

 

$

37,908 

 

$

262,140 

 

$

(60,220)

(a)

$

201,920 

Capital expenditures

$

13,541 

 

$

516 

 

$

1,005 

 

$

15,062 

 

$

681 

 

$

15,743 

Depreciation and amortization (b)

$

48,561 

 

$

2,186 

 

$

5,035 

 

$

55,782 

 

$

11,520 

 

$

67,302 

Year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$

2,005,193 

 

$

1,900,492 

 

$

1,228,030 

 

$

5,133,715 

 

$

 —

 

$

5,133,715 

Elimination of intersegment revenue

 

(115,286)

 

 

(97,957)

 

 

 —

 

 

(213,243)

 

 

 —

 

 

(213,243)

Revenue from external customers

$

1,889,907 

 

$

1,802,535 

 

$

1,228,030 

 

$

4,920,472 

 

$

 —

 

$

4,920,472 

Income from construction operations

$

145,213 

 

$

(1,240)

 

$

15,682 

 

$

159,655 

 

$

(54,242)

(a)

$

105,413 

Capital expenditures

$

8,383 

 

$

2,877 

 

$

1,193 

 

$

12,453 

 

$

23,459 

 

$

35,912 

Depreciation and amortization (b)

$

22,601 

 

$

2,728 

 

$

5,507 

 

$

30,836 

 

$

10,798 

 

$

41,634 

Year ended December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$

1,730,468 

 

$

1,558,431 

 

$

1,301,328 

 

$

4,590,227 

 

$

 —

 

$

4,590,227 

Elimination of intersegment revenue

 

(43,324)

 

 

(54,594)

 

 

 —

 

 

(97,918)

 

 

 —

 

 

(97,918)

Revenue from external customers

$

1,687,144 

 

$

1,503,837 

 

$

1,301,328 

 

$

4,492,309 

 

$

 —

 

$

4,492,309 

Income from construction operations

$

220,554 

 

$

24,697 

 

$

50,998 

 

$

296,249 

 

$

(54,559)

(a)

$

241,690 

Capital expenditures

$

65,377 

 

$

735 

 

$

6,974 

 

$

73,086 

 

$

1,927 

 

$

75,013 

Depreciation and amortization (b)

$

31,674 

 

$

3,466 

 

$

12,018 

 

$

47,158 

 

$

6,544 

 

$

53,702 

______________


(a)

Primarily consistConsists primarily of corporate general and administrative expenses.

(b)

Principally consist of cashDepreciation and cash equivalents, corporate transportation equipment,amortization is included in income from construction equipment, and other investments available for general corporate purposes.operations.

During the year ended December 31, 2016, the Company recorded the following offsetting adjustments in the Specialty Contractors segment: a favorable adjustment of $14.0 million for a completed project ($0.17 per diluted share) and an unfavorable adjustment of $13.8 million for a project that is substantially complete ($0.16 per diluted share). 

During the year ended December 31, 2015, the Company recorded unfavorable adjustments in the Specialty Contractors segment totaling $45.6 million in income from construction operations ($0.53 per diluted share) related to various Five Star Electric projects in New York, none of which were individually material. Most of these projects are complete or nearing completion. In addition, there were unfavorable adjustments to the estimated cost to complete a Building segment project, which has been completed and resulted in a decrease of $24.3 million in income from construction operations ($0.28 per diluted share). Furthermore, the Company recorded an unfavorable adjustment totaling $23.9 million ($0.28 per diluted share) in the Civil segment for an adverse legal decision related to a long-standing litigation matter, for which the Company assumed liability as part of an acquisition in 2011. Finally, the Company recorded favorable adjustments for a Civil segment runway reconstruction project, which resulted in an increase of $13.7 million in income from construction operations ($0.16 per diluted share).

During the year ended December 31, 2014, the Company’s income from construction operations was positively impacted by changes in the estimated recoveries on two Civil segment projects and a Building segment hospitality and gaming project. The changes in estimates were driven by changes in cost recovery assumptions based on legal rulings pertaining to the Civil segment projects, as well as agreements reached with a customer regarding the Building segment hospitality and gaming project. The Building project change in

90F-32

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

estimate resulted in an $11.4 million increase in income from construction operations ($0.14 per diluted share). With respect to the two Civil segment projects, there was an increase of $25.9 million in income from construction operations ($0.30 per diluted share) and a $9.4 million decrease in income from construction operations ($0.11 per diluted share).

The above were the only changes in estimates considered material to the Company’s results of operations during the periods presented herein.

The following table sets forth the total assets for the reportable segments as of December 31, 2016 and 2015.



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Civil

$

2,152,123 

 

$

1,957,991 

Building

 

917,317 

 

 

711,201 

Specialty Contractors

 

813,851 

 

 

808,598 

Corporate and other (a)

 

155,329 

 

 

383,510 

Total Assets

$

4,038,620 

 

$

3,861,300 

(a)

Consists principally of cash, equipment, tax-related assets and insurance-related assets, offset by the elimination of assets related to intersegment revenue.

Geographic Information

Information concerning principal geographic areas is as follows:





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

 

2014

Revenue:

 

 

 

 

 

 

 

 

United States

$

4,802,393 

 

$

4,694,165 

 

$

4,323,471 

Foreign and U.S. territories

 

170,683 

 

 

226,307 

 

 

168,838 

Total

$

4,973,076 

 

$

4,920,472 

 

$

4,492,309 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2014

 

2013

 

2012

 

 

(in thousands)

Revenues

 

 

 

 

 

 

 

 

 

United States

 

$

4,323,471 

 

$

4,000,380 

 

$

3,925,733 

Foreign and U.S. Territories

 

 

168,838 

 

 

175,292 

 

 

185,738 

Total

 

$

4,492,309 

 

$

4,175,672 

 

$

4,111,471 

 

 

 

 

 

 

 

 

 

 

Income (loss) from construction operations

 

 

 

 

 

 

 

 

 

United States

 

$

268,566 

 

$

238,989 

 

$

(195,457)

Foreign and U.S. Territories

 

 

27,683 

 

 

12,265 

 

 

18,740 

Corporate

 

 

(54,559)

 

 

(47,432)

 

 

(45,094)

Total

 

$

241,690 

 

$

203,822 

 

$

(221,811)



 

 

 

 

 



 

 

 

 

 



As of December 31,

(in thousands)

2016

 

2015

Assets:

 

 

 

 

 

United States

$

3,911,865 

 

$

3,687,973 

Foreign and U.S. territories

 

126,755 

 

 

173,327 

Total Assets

$

4,038,620 

 

$

3,861,300 



Reconciliation of Segment Information to Consolidated Amounts



The following table reconciles segment results to the consolidated income before income taxes for the years ended December 31, 2016, 2015 and 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31,

 

 

2014

 

2013

 

2012

 

 

(in thousands)

Assets

 

 

 

 

 

 

 

 

 

United States

 

$

3,612,997 

 

$

3,182,706 

 

$

3,107,808 

Foreign and U.S. Territories

 

 

160,318 

 

 

214,732 

 

 

188,602 

Total

 

$

3,773,315 

 

$

3,397,438 

 

$

3,296,410 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Year Ended December 31,

(in thousands)

2016

 

2015

 

2014

Income from construction operations

$

201,920 

 

$

105,413 

 

$

241,690 

Other income (expense), net

 

6,977 

 

 

13,569 

 

 

(8,217)

Interest expense

 

(59,782)

 

 

(45,143)

 

 

(46,035)

Income before income taxes

$

149,115 

 

$

73,839 

 

$

187,438 

  

Income from construction operations has been allocated geographically based on the location of the job site.

[13]11.     Related Party Transactions



The Company leases certain facilities from an entity owned by Ronald N. Tutor, the Company’s Chairman and Chief Executive Officer, and an affiliate owned by Mr. Tutor under non-cancelable operatingat market lease agreements. On April 18, 2014,rates. Under these leases the Company and Ronald N. Tutor entered into two separate lease agreements, replacing the former leases which terminated on May 31, 2014. Each of the new leases is effective June 1, 2014 with new monthly payments of an aggregate of $0.2paid $2.8 million,  $2.7 million and an increase at the rate of the greater of 3% per annum or the Consumer Price Index (“CPI”) for the Los Angeles metropolitan area beginning on June 1, 2015. Both new leases provide for purchase/sell options beginning on June 1, 2021 and June 1, 2025, respectively. Also under both leases, the fair market value shall be agreed upon by both parties, or shall be determined by a consensus of independent qualified appraisers. Lease expense for these new leases and the former leases until date of termination, recorded on a straight-line basis, was $2.5$2.4 million for both the years ended December 31, 2016,  2015 and 2014, respectively, and 2013recognized expense of $3.2 million for each year ended December 31, 2016 and $2.32015 and $2.5 million for the year ended 2012.2014.  



Raymond R. Oneglia, who is the Vice Chairman of O&G Industries, Inc. (“O&G”), is a director of the Company. The Company occasionally forms construction project joint ventures with O&G, and O&G often provides equipment and services for the projects on customary

F-33


Table of Contents

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

trade terms. Currently, the Company has a 30% interest in a joint venture with O&G as the sponsor involvingfor a highway construction project for the State of Connecticut, with an estimated total contract value of approximately $362 million, scheduled for completion in 2016. Under this arrangement, O&G provides project-related equipment and services directly to the customer (on customary trade terms). In accordance withproject.  The payments made by the joint venture agreement, payments to O&G for equipment and services for each ofduring the years ended December 31, 2016, 2015 and 2014, were immaterial.

Peter Arkley, Senior Managing Director, Construction Services Group, of Alliant Insurance Services, Inc. (“Alliant”), is a director of the Company. The Company uses Alliant for various insurance related services. The associated expenses for services provided for the years ended December 31, 20132016, 2015 and December 31, 20122014 were $7.0$8.9 million,  $6.9$9.8 million and $6.3$14.2 million, respectively. O&G’s cumulative holdings of the Company’s stockThe Company owed Alliant $5.2 million and $7.5 million as of December 31, 2014 were 500,000 shares2016 and December 31, 2013 were 600,000 shares, or 1.03% and 1.24%,2015, respectively, of total common shares outstanding at December 31, 2014 and 2013.for services rendered. 

12.     Unaudited Quarterly Financial Data



The Company had periodically utilized flight services from JF Aviation, LLC. James A. Frost is the Ownerfollowing table presents selected unaudited quarterly financial data for each full quarterly period of JF Aviation, LLC2016 and serves as President, Chief Operating Officer, and Chief Executive Officer of the Company’s Civil segment. During the year ended December 31, 2012, the transaction amounted to approximately $0.4 million. The Company did not utilize the services of JF Aviation 2015:

(in 2013 or 2014.thousands, except per share amounts)



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

First

 

Second

 

Third

 

Fourth

Year Ended December 31, 2016

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Revenues

 

$

1,085,369 

 

$

1,308,130 

 

$

1,332,978 

 

$

1,246,599 

Gross profit

 

 

105,092 

 

 

109,770 

 

 

124,668 

 

 

117,660 

Income from construction operations

 

 

40,122 

 

 

48,829 

 

 

60,919 

 

 

52,050 

Income before income taxes

 

 

26,724 

 

 

35,780 

 

 

47,926 

 

 

38,685 

Net income

 

 

15,400 

 

 

21,361 

 

 

28,801 

 

 

30,260 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31 

 

$

0.43 

 

$

0.59 

 

$

0.62 

Diluted

 

 

0.31 

 

 

0.43 

 

 

0.57 

 

 

0.60 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

First

 

Second

 

Third

 

Fourth

Year Ended December 31, 2015

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Revenues

 

$

1,066,465 

 

$

1,312,438 

 

$

1,340,739 

 

$

1,200,830 

Gross profit

 

 

90,759 

 

 

98,620 

 

 

100,201 

 

 

66,673 

Income from construction operations

 

 

20,084 

 

 

30,881 

 

 

38,974 

 

 

15,474 

Income before income taxes

 

 

8,205 

 

 

19,992 

 

 

33,955 

 

 

11,687 

Net income

 

 

5,126 

 

 

11,777 

 

 

19,677 

 

 

8,712 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.11 

 

$

0.24 

 

$

0.40 

 

$

0.18 

Diluted

 

 

0.10 

 

 

0.24 

 

 

0.40 

 

 

0.18 





  

91F-34

 


 

Table of Contents

 

TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

[14]13.     Separate Financial Information of Subsidiary Guarantors of Indebtedness



As discussed in Note 4 — Financial Commitments, theThe Company’s obligation to pay principal and interestobligations on its 7.625% senior unsecured notes due November 1, 2018, is2010 Notes are guaranteed on a joint and several basis by substantially all of the Company’s existing and future subsidiaries that guarantee obligations under the Company’s Amended2014 Credit AgreementFacility (the “Guarantors”). The guarantees are full and unconditional as well as joint and theseveral. The Guarantors are 100%-owned bywholly owned subsidiaries of the Company.



The following supplemental condensed consolidating financial information reflects the summarized financial information of the Company as the issuer of the senior unsecured notes, the Guarantors and the Company’s non- guarantornon-guarantor subsidiaries on a combined basis.

92F-35


Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2016

(in thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Non-

 

 

 

 

 

 



Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total



Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Revenue

$

977,298 

 

$

4,316,658 

 

$

16,547 

 

$

(337,427)

 

$

4,973,076 

Cost of operations

 

(861,695)

 

 

(3,991,618)

 

 

 —

 

 

337,427 

 

 

(4,515,886)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

115,603 

 

$

325,040 

 

$

16,547 

 

$

 —

 

$

457,190 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

(85,014)

 

 

(168,394)

 

 

(1,862)

 

 

 —

 

 

(255,270)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONSTRUCTION OPERATIONS

$

30,589 

 

$

156,646 

 

$

14,685 

 

$

 —

 

$

201,920 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

113,369 

 

 

 —

 

 

 —

 

 

(113,369)

 

 

 —

Other income, net

 

892 

 

 

6,294 

 

 

1,002 

 

 

(1,211)

 

 

6,977 

Interest expense

 

(58,787)

 

 

(2,206)

 

 

 —

 

 

1,211 

 

 

(59,782)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income taxes

 

86,063 

 

 

160,734 

 

 

15,687 

 

 

(113,369)

 

 

149,115 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

9,759 

 

 

(57,446)

 

 

(5,606)

 

 

 —

 

 

(53,293)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

$

95,822 

 

$

103,288 

 

$

10,081 

 

$

(113,369)

 

$

95,822 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other comprehensive income of subsidiaries

 

(601)

 

 

 —

 

 

 —

 

 

601 

 

 

 —

 Change in pension benefit plans assets/liabilities

 

(2,623)

 

 

 —

 

 

 —

 

 

 —

 

 

(2,623)

 Foreign currency translation

 

 —

 

 

(261)

 

 

 —

 

 

 —

 

 

(261)

 Change in fair value of investments

 

 —

 

 

(340)

 

 

 —

 

 

 —

 

 

(340)

 Change in fair value of interest rate swap

 

(24)

 

 

 —

 

 

 —

 

 

 —

 

 

(24)

 Total other comprehensive (loss) income

 

(3,248)

 

 

(601)

 

 

 —

 

 

601 

 

 

(3,248)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

$

92,574 

 

$

102,687 

 

$

10,081 

 

$

(112,768)

 

$

92,574 

F-36

 


 

Table of Contents

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2015

(in thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Non-

 

 

 

 

 

 



Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total



Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Revenue

$

1,064,723 

 

$

4,104,871 

 

$

13,405 

 

$

(262,527)

 

$

4,920,472 

Cost of operations

 

(918,322)

 

 

(3,908,424)

 

 

 —

 

 

262,527 

 

 

(4,564,219)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

146,401 

 

$

196,447 

 

$

13,405 

 

$

 —

 

$

356,253 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

(77,806)

 

 

(171,153)

 

 

(1,881)

 

 

 —

 

 

(250,840)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONSTRUCTION OPERATIONS

$

68,595 

 

$

25,294 

 

$

11,524 

 

$

 —

 

$

105,413 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

23,367 

 

 

 —

 

 

 —

 

 

(23,367)

 

 

 —

Other (expense) income, net

 

9,271 

 

 

3,745 

 

 

553 

 

 

 —

 

 

13,569 

Interest expense

 

(42,123)

 

 

(3,020)

 

 

 —

 

 

 —

 

 

(45,143)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income taxes

 

59,110 

 

 

26,019 

 

 

12,077 

 

 

(23,367)

 

 

73,839 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(13,818)

 

 

(10,060)

 

 

(4,669)

 

 

 —

 

 

(28,547)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME  (LOSS)

$

45,292 

 

$

15,959 

 

$

7,408 

 

$

(23,367)

 

$

45,292 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income of subsidiaries

 

(2,448)

 

 

 —

 

 

 —

 

 

2,448 

 

 

 —

Change in pension benefit plans assets/liabilities

 

2,026 

 

 

 —

 

 

 —

 

 

 —

 

 

2,026 

Foreign currency translation

 

 —

 

 

(3,214)

 

 

 —

 

 

 —

 

 

(3,214)

Change in fair value of investments

 

 —

 

 

766 

 

 

 —

 

 

 —

 

 

766 

Change in fair value of interest rate swap

 

(125)

 

 

 —

 

 

 —

 

 

 —

 

 

(125)

Total other comprehensive income (loss)

 

(547)

 

 

(2,448)

 

 

 —

 

 

2,448 

 

 

(547)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

$

44,745 

 

$

13,511 

 

$

7,408 

 

$

(20,919)

 

$

44,745 

F-37


Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEET -STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2014

(in thousands)





 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Non-

 

 

 

 

 

 



Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total



Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Revenue

$

959,010 

 

$

3,690,075 

 

$

 —

 

$

(156,776)

 

$

4,492,309 

Cost of Operations

 

(808,285)

 

 

(3,353,098)

 

 

17,740 

 

 

156,776 

 

 

(3,986,867)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

$

150,725 

 

$

336,977 

 

$

17,740 

 

$

 —

 

$

505,442 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and Administrative Expenses

 

(80,151)

 

 

(181,714)

 

 

(1,887)

 

 

 —

 

 

(263,752)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONSTRUCTION OPERATIONS

$

70,574 

 

$

155,263 

 

$

15,853 

 

$

 —

 

$

241,690 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

95,501 

 

 

 —

 

 

 —

 

 

(95,501)

 

 

 —

Other (expense) income, net

 

(7,003)

 

 

(1,705)

 

 

491 

 

 

 —

 

 

(8,217)

Interest expense

 

(41,977)

 

 

(4,058)

 

 

 —

 

 

 —

 

 

(46,035)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income taxes

 

117,095 

 

 

149,500 

 

 

16,344 

 

 

(95,501)

 

 

187,438 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(9,159)

 

 

(63,411)

 

 

(6,932)

 

 

 —

 

 

(79,502)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME  (LOSS)

$

107,936 

 

$

86,089 

 

$

9,412 

 

$

(95,501)

 

$

107,936 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income of subsidiaries

 

(433)

 

 

 —

 

 

 —

 

 

433 

 

 

 —

Change in pension benefit plans assets/liabilities

 

(8,155)

 

 

 —

 

 

 —

 

 

 —

 

 

(8,155)

Foreign currency translation

 

 —

 

 

(638)

 

 

 —

 

 

 —

 

 

(638)

Change in fair value of investments

 

 —

 

 

205 

 

 

 —

 

 

 —

 

 

205 

Change in fair value of interest rate swap

 

349 

 

 

 —

 

 

 —

 

 

 —

 

 

349 

Total other comprehensive (loss) income

 

(8,239)

 

 

(433)

 

 

 —

 

 

433 

 

 

(8,239)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

$

99,697 

 

$

85,656 

 

$

9,412 

 

$

(95,068)

 

$

99,697 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

 

 

Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

75,087 

 

$

36,764 

 

$

23,732 

 

$

 —

 

$

135,583 

 

Restricted Cash

 

 

3,369 

 

 

5,274 

 

 

35,727 

 

 

 —

 

 

44,370 

 

Accounts Receivable

 

 

299,427 

 

 

1,246,635 

 

 

37,064 

 

 

(103,622)

 

 

1,479,504 

 

Costs and Estimated Earnings in Excess of Billings

 

 

70,344 

 

 

700,362 

 

 

152 

 

 

(44,456)

 

 

726,402 

 

Deferred Income Taxes

 

 

 —

 

 

15,639 

 

 

 —

 

 

2,323 

 

 

17,962 

 

Other Current Assets

 

 

39,196 

 

 

42,750 

 

 

24,397 

 

 

(37,608)

 

 

68,735 

 

Total Current Assets

 

 

487,423 

 

 

2,047,424 

 

 

121,072 

 

 

(183,363)

 

 

2,472,556 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

Property and Equipment, net

 

 

92,413 

 

 

430,876 

 

 

4,313 

 

 

 —

 

 

527,602 

 

Intercompany Notes and Receivables

 

 

 —

 

 

122,401 

 

 

 —

 

 

(122,401)

 

 

 —

 

Other Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Goodwill

 

 

 —

 

 

585,006 

 

 

 —

 

 

 —

 

 

585,006 

 

   Intangible Assets, net

 

 

 —

 

 

100,254 

 

 

 —

 

 

 —

 

 

100,254 

 

   Investment in Subsidiaries

 

 

2,154,562 

 

 

19,519 

 

 

50 

 

 

(2,174,131)

 

 

 —

 

   Other

 

 

83,503 

 

 

9,847 

 

 

 —

 

 

(5,453)

 

 

87,897 

 

 

 

$

2,817,901 

 

$

3,315,327 

 

$

125,435 

 

$

(2,485,348)

 

$

3,773,315 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Maturities of Long-term Debt

 

$

34,776 

 

$

46,516 

 

$

 —

 

$

 —

 

$

81,292 

 

Accounts Payable

 

 

186,958 

 

 

716,851 

 

 

3,749 

 

 

(109,384)

 

 

798,174 

 

Billings in Excess of Costs and Estimated Earnings

 

 

139,020 

 

 

185,807 

 

 

2,672 

 

 

(8,203)

 

 

319,296 

 

Accrued Expenses and Other Current Liabilities

 

 

33,018 

 

 

95,177 

 

 

58,571 

 

 

(26,952)

 

 

159,814 

 

Total Current Liabilities

 

 

393,772 

 

 

1,044,351 

 

 

64,992 

 

 

(144,539)

 

 

1,358,576 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term Debt, less current maturities

 

 

712,460 

 

 

112,060 

 

 

 —

 

 

(40,453)

 

 

784,067 

 

Deferred Income Taxes

 

 

142,457 

 

 

7,914 

 

 

 —

 

 

 —

 

 

150,371 

 

Other Long-term Liabilities

 

 

112,899 

 

 

1,897 

 

 

 —

 

 

 —

 

 

114,796 

 

Intercompany Notes and Advances Payable

 

 

90,373 

 

 

 —

 

 

35,619 

 

 

(125,992)

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

 

 —

 

Contingencies and Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

1,365,939 

 

 

2,149,105 

 

 

24,824 

 

 

(2,174,363)

 

 

1,365,505 

 

 

 

$

2,817,900 

 

$

3,315,327 

 

$

125,435 

 

$

(2,485,347)

 

$

3,773,315 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



93F-38

 


 

Table of Contents

 

CONDENSED CONSOLIDATING BALANCE SHEET - DECEMBER 31, 20132016

(in thousands)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

 

 

Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

88,995 

 

$

18,031 

 

$

12,897 

 

$

 —

 

$

119,923 

 

Restricted Cash

 

 

18,833 

 

 

8,040 

 

 

15,721 

 

 

 —

 

 

42,594 

 

Accounts Receivable

 

 

208,227 

 

 

1,126,012 

 

 

47,958 

 

 

(90,951)

 

 

1,291,246 

 

Costs and Estimated Earnings in Excess of Billings

 

 

99,779 

 

 

505,979 

 

 

152 

 

 

(32,662)

 

 

573,248 

 

Deferred Income Taxes

 

 

 —

 

 

15,866 

 

 

 —

 

 

(7,626)

 

 

8,240 

 

Other Current Assets

 

 

37,605 

 

 

26,234 

 

 

24,462 

 

 

(37,632)

 

 

50,669 

 

Total Current Assets

 

 

453,439 

 

 

1,700,162 

 

 

101,190 

 

 

(168,871)

 

 

2,085,920 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term Investments

 

 

46,283 

 

 

 —

 

 

 —

 

 

 —

 

 

46,283 

 

Property and Equipment, net

 

 

77,562 

 

 

415,993 

 

 

4,570 

 

 

 —

 

 

498,125 

 

Intercompany Notes and Receivables

 

 

 —

 

 

428,190 

 

 

 —

 

 

(428,190)

 

 

 —

 

Other Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Goodwill

 

 

 —

 

 

577,756 

 

 

 —

 

 

 —

 

 

577,756 

 

   Intangible Assets, net

 

 

 —

 

 

113,740 

 

 

 —

 

 

 —

 

 

113,740 

 

   Investment in Subsidiaries

 

 

2,181,280 

 

 

29 

 

 

50 

 

 

(2,181,359)

 

 

 —

 

   Other

 

 

70,269 

 

 

10,528 

 

 

 —

 

 

(5,183)

 

 

75,614 

 

 

 

$

2,828,833 

 

$

3,246,398 

 

$

105,810 

 

$

(2,783,603)

 

$

3,397,438 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Maturities of Long-term Debt

 

 

50,578 

 

 

64,080 

 

 

 —

 

 

 —

 

 

114,658 

 

Accounts Payable

 

 

162,292 

 

 

677,997 

 

 

6,039 

 

 

(88,103)

 

 

758,225 

 

Billings in Excess of Costs and Estimated Earnings

 

 

90,267 

 

 

177,285 

 

 

34 

 

 

 —

 

 

267,586 

 

Accrued Expenses and Other Current Liabilities

 

 

58,232 

 

 

99,257 

 

 

48,369 

 

 

(47,841)

 

 

158,017 

 

Total Current Liabilities

 

 

361,369 

 

 

1,018,619 

 

 

54,442 

 

 

(135,944)

 

 

1,298,486 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term Debt, less current maturities

 

 

575,356 

 

 

84,053 

 

 

 —

 

 

(40,183)

 

 

619,226 

 

Deferred Income Taxes

 

 

107,448 

 

 

6,885 

 

 

 —

 

 

 —

 

 

114,333 

 

Other Long-term Liabilities

 

 

114,677 

 

 

3,181 

 

 

 —

 

 

 —

 

 

117,858 

 

Intercompany Notes and Advances Payable

 

 

422,448 

 

 

 —

 

 

23,462 

 

 

(445,910)

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingencies and Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

1,247,535 

 

 

2,133,660 

 

 

27,906 

 

 

(2,161,566)

 

 

1,247,535 

 

 

 

$

2,828,833 

 

$

3,246,398 

 

$

105,810 

 

$

(2,783,603)

 

$

3,397,438 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Non-

 

 

 

 

 

 



Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total



Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

80,829 

 

$

65,079 

 

$

195 

 

$

 —

 

$

146,103 

Restricted cash

 

2,016 

 

 

2,211 

 

 

46,277 

 

 

 —

 

 

50,504 

Accounts receivable

 

426,176 

 

 

1,441,263 

 

 

107,380 

 

 

(231,519)

 

 

1,743,300 

Costs and estimated earnings in excess of billings

 

140,901 

 

 

758,158 

 

 

152 

 

 

(67,385)

 

 

831,826 

Other current assets

 

76,453 

 

 

38,889 

 

 

7,498 

 

 

(56,817)

 

 

66,023 

Total current assets

$

726,375 

 

$

2,305,600 

 

$

161,502 

 

$

(355,721)

 

$

2,837,756 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

$

74,739 

 

$

399,091 

 

$

3,796 

 

$

 —

 

$

477,626 

Intercompany notes and receivables

 

 —

 

 

242,382 

 

 

 —

 

 

(242,382)

 

 

 —

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Goodwill

 

 —

 

 

585,006 

 

 

 —

 

 

 —

 

 

585,006 

   Intangible assets, net

 

 —

 

 

92,997 

 

 

 —

 

 

 —

 

 

92,997 

   Investment in subsidiaries

 

2,223,971 

 

 

 —

 

 

 —

 

 

(2,223,971)

 

 

 —

   Other

 

42,324 

 

 

8,905 

 

 

2,407 

 

 

(8,401)

 

 

45,235 



$

3,067,409 

 

$

3,633,981 

 

$

167,705 

 

$

(2,830,475)

 

$

4,038,620 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

$

122,166 

 

$

23,724 

 

$

 —

 

$

(60,000)

 

$

85,890 

Accounts payable

 

280,342 

 

 

937,428 

 

 

2,495 

 

 

(226,249)

 

 

994,016 

Billings in excess of costs and estimated earnings

 

102,373 

 

 

229,746 

 

 

19,564 

 

 

(20,571)

 

 

331,112 

Accrued expenses and other current liabilities

 

60,227 

 

 

76,002 

 

 

20,597 

 

 

(48,901)

 

 

107,925 

Total Current Liabilities

$

565,108 

 

$

1,266,900 

 

$

42,656 

 

$

(355,721)

 

$

1,518,943 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

$

614,608 

 

$

65,015 

 

$

 —

 

$

(5,994)

 

$

673,629 

Deferred income taxes

 

16,475 

 

 

116,939 

 

 

 —

 

 

(2,407)

 

 

131,007 

Other long-term liabilities

 

111,108 

 

 

2,415 

 

 

48,495 

 

 

 —

 

 

162,018 

Intercompany notes and advances payable

 

207,087 

 

 

 —

 

 

35,295 

 

 

(242,382)

 

 

 —



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingencies and commitments

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

1,553,023 

 

 

2,182,712 

 

 

41,259 

 

 

(2,223,971)

 

 

1,553,023 



$

3,067,409 

 

$

3,633,981 

 

$

167,705 

 

$

(2,830,475)

 

$

4,038,620 

  

94F-39

 


 

Table of Contents

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDEDBALANCE SHEET - DECEMBER 31, 20142015

(in thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tutor

 

 

 

 

Non-

 

 

 

 

 

 

 

 

Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

959,010 

 

$

3,690,075 

 

$

 —

 

$

(156,776)

 

$

4,492,309 

Cost of operations

 

 

808,285 

 

 

3,353,098 

 

 

(17,740)

 

 

(156,776)

 

 

3,986,867 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

150,725 

 

 

336,977 

 -

 

17,740 

 -

 

 —

 -

 

505,442 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

80,151 

 

 

181,714 

 

 

1,887 

 

 

 —

 

 

263,752 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONSTRUCTION OPERATIONS

 

 

70,574 

 

 

155,263 

 

 

15,853 

 

 

 —

 

 

241,690 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

 

95,501 

 

 

 —

 

 

 —

 

 

(95,501)

 

 

 —

Other income (expense), net

 

 

(8,322)

 

 

(1,705)

 

 

491 

 

 

 —

 

 

(9,536)

Interest expense

 

 

(40,658)

 

 

(4,058)

 

 

 —

 

 

 —

 

 

(44,716)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

117,095 

 

 

149,500 

 -

 

16,344 

 -

 

(95,501)

 -

 

187,438 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

(9,159)

 

 

(63,411)

 

 

(6,932)

 

 

 —

 

 

(79,502)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

107,936 

 

$

86,089 

 -

$

9,412 

 -

$

(95,501)

 -

$

107,936 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income of Subsidiaries

 

 

(433)

 

 

 —

 -

 

 —

 

 

433 

 

 

 —

Change in pension benefit plans assets/liabilities

 

 

(8,155)

 

 

 —

 -

 

 —

 

 

 —

 

 

(8,155)

Foreign currency translation

 

 

 —

 

 

(637)

 

 

 —

 

 

 —

 

 

(637)

Change in fair value of investments

 

 

 —

 

 

204 

 

 

 —

 

 

 —

 

 

204 

Change in fair value of interest rate swap

 

 

348 

 

 

 —

 

 

 —

 

 

 —

 

 

348 

Total other comprehensive income (loss)

 

 

(8,240)

 

 

(433)

 

 

 —

 

 

433 

 

 

(8,240)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Comprehensive Income (Loss)

 

$

99,696 

 

$

85,656 

 

$

9,412 

 

$

(95,068)

 

$

99,696 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Non-

 

 

 

 

 

 



Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total



Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

47,196 

 

$

26,892 

 

$

1,364 

 

$

 —

 

$

75,452 

Restricted cash

 

3,369 

 

 

3,283 

 

 

39,201 

 

 

 —

 

 

45,853 

Accounts receivable

 

358,437 

 

 

1,179,919 

 

 

82,004 

 

 

(146,745)

 

 

1,473,615 

Costs and estimated earnings in excess of billings

 

114,580 

 

 

868,026 

 

 

152 

 

 

(77,583)

 

 

905,175 

Other current assets

 

60,119 

 

 

48,482 

 

 

11,662 

 

 

(11,419)

 

 

108,844 

Total current assets

$

583,701 

 

$

2,126,602 

 

$

134,383 

 

$

(235,747)

 

$

2,608,939 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

$

105,306 

 

$

414,143 

 

$

4,076 

 

$

 —

 

$

523,525 

Intercompany notes and receivables

 

 —

 

 

148,637 

 

 

 —

 

 

(148,637)

 

 

 —

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

   Goodwill

 

 —

 

 

585,006 

 

 

 —

 

 

 —

 

 

585,006 

   Intangible assets, net

 

 —

 

 

96,540 

 

 

 —

 

 

 —

 

 

96,540 

   Investment in subsidiaries

 

1,962,983 

 

 

 —

 

 

 —

 

 

(1,962,983)

 

 

 —

   Other

 

60,978 

 

 

7,067 

 

 

3,392 

 

 

(24,147)

 

 

47,290 



$

2,712,968 

 

$

3,377,995 

 

$

141,851 

 

$

(2,371,514)

 

$

3,861,300 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

$

107,283 

 

$

41,634 

 

$

 —

 

$

(60,000)

 

$

88,917 

Accounts payable

 

211,679 

 

 

890,268 

 

 

3,222 

 

 

(167,705)

 

 

937,464 

Billings in excess of costs and estimated earnings

 

89,303 

 

 

203,003 

 

 

1,716 

 

 

(5,711)

 

 

288,311 

Accrued expenses and other current liabilities

 

6,146 

 

 

123,497 

 

 

25,239 

 

 

(20,755)

 

 

134,127 

Total Current Liabilities

$

414,411 

 

$

1,258,402 

 

$

30,177 

 

$

(254,171)

 

$

1,448,819 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

$

653,669 

 

$

80,821 

 

$

 —

 

$

(5,723)

 

$

728,767 

Deferred income taxes

 

 —

 

 

122,822 

 

 

 —

 

 

 —

 

 

122,822 

Other long-term liabilities

 

106,588 

 

 

3,278 

 

 

30,799 

 

 

 —

 

 

140,665 

Intercompany notes and advances payable

 

118,073 

 

 

 —

 

 

30,564 

 

 

(148,637)

 

 

 —



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingencies and commitments

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

1,420,227 

 

 

1,912,672 

 

 

50,311 

 

 

(1,962,983)

 

 

1,420,227 



$

2,712,968 

 

$

3,377,995 

 

$

141,851 

 

$

(2,371,514)

 

$

3,861,300 



  

  

95F-40

 


 

Table of Contents

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSCASH FLOWS

YEAR ENDED DECEMBER 31, 20132016

(in thousands)





 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Non-

 

 

 

 

 

 



Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total



Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

95,822 

 

$

103,288 

 

$

10,081 

 

$

(113,369)

 

$

95,822 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

31,660 

 

 

35,362 

 

 

280 

 

 

 —

 

 

67,302 

Equity in earnings of subsidiaries

 

(113,369)

 

 

 —

 

 

 —

 

 

113,369 

 

 

 —

Share-based compensation expense

 

13,423 

 

 

 —

 

 

 —

 

 

 —

 

 

13,423 

Excess income tax benefit from share-based compensation

 

(269)

 

 

 —

 

 

 —

 

 

 —

 

 

(269)

Change in debt discount and deferred debt issuance costs

 

10,968 

 

 

 —

 

 

 —

 

 

 —

 

 

10,968 

Deferred income taxes

 

2,256 

 

 

(12,425)

 

 

 —

 

 

 —

 

 

(10,169)

(Gain) loss on sale of investments

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

(Gain) loss on sale of property and equipment

 

148 

 

 

305 

 

 

 —

 

 

 —

 

 

453 

Other long-term liabilities

 

4,168 

 

 

6,346 

 

 

17,696 

 

 

 —

 

 

28,210 

Other non-cash items

 

(1,125)

 

 

(749)

 

 

 —

 

 

 —

 

 

(1,874)

Changes in other components of working capital 

 

(108,973)

 

 

46,309 

 

 

(27,866)

 

 

 —

 

 

(90,530)

NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES

$

(65,291)

 

$

178,436 

 

$

191 

 

$

 —

 

$

113,336 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of property and equipment excluding financed purchases

 

(1,405)

 

 

(14,338)

 

 

 —

 

 

 —

 

 

(15,743)

Proceeds from sale of property and equipment

 

164 

 

 

1,735 

 

 

 —

 

 

 —

 

 

1,899 

(Increase) decrease in intercompany advances

 

 —

 

 

(94,732)

 

 

 —

 

 

94,732 

 

 

 —

Change in restricted cash

 

1,353 

 

 

1,072 

 

 

(7,076)

 

 

 —

 

 

(4,651)

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

$

112 

 

$

(106,263)

 

$

(7,076)

 

$

94,732 

 

$

(18,495)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Convertible Notes

 

200,000 

 

 

 —

 

 

 —

 

 

 —

 

 

200,000 

Proceeds from debt

 

1,348,800 

 

 

5,095 

 

 

 —

 

 

 —

 

 

1,353,895 

Repayment of debt

 

(1,523,603)

 

 

(39,081)

 

 

 —

 

 

 —

 

 

(1,562,684)

Excess income tax benefit from share-based compensation

 

269 

 

 

 —

 

 

 —

 

 

 —

 

 

269 

Issuance of common stock and effect of cashless exercise

 

(584)

 

 

 —

 

 

 —

 

 

 —

 

 

(584)

Debt issuance costs

 

(15,086)

 

 

 —

 

 

 —

 

 

 —

 

 

(15,086)

Increase (decrease) in intercompany advances

 

89,016 

 

 

 —

 

 

5,716 

 

 

(94,732)

 

 

 —

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES

$

98,812 

 

$

(33,986)

 

$

5,716 

 

$

(94,732)

 

$

(24,190)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

33,633 

 

 

38,187 

 

 

(1,169)

 

 

 —

 

 

70,651 

Cash and Cash Equivalents at Beginning of Year

 

47,196 

 

 

26,892 

 

 

1,364 

 

 

 —

 

 

75,452 

Cash and Cash Equivalents at End of Year

$

80,829 

 

$

65,079 

 

$

195 

 

$

 —

 

$

146,103 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tutor

 

 

 

 

Non-

 

 

 

 

 

 

 

 

Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

680,440 

 

$

3,315,608 

 

$

 —

 

$

179,624 

 

$

4,175,672 

Cost of operations

 

 

590,675 

 

 

2,960,569 

 

 

(22,100)

 

 

179,624 

 

 

3,708,768 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

89,765 

 

 

355,039 

 -

 

22,100 

 -

 

 —

 -

 

466,904 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

77,507 

 

 

183,723 

 

 

1,852 

 

 

 —

 

 

263,082 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONSTRUCTION OPERATIONS

 

 

12,258 

 

 

171,316 

 

 

20,248 

 

 

 —

 

 

203,822 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

 

122,875 

 

 

 —

 

 

 —

 

 

(122,875)

 

 

 —

Other income (expense), net

 

 

(27,162)

 

 

8,075 

 

 

512 

 

 

 —

 

 

(18,575)

Interest expense

 

 

(41,987)

 

 

(3,645)

 

 

 —

 

 

 —

 

 

(45,632)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

65,984 

 

 

175,746 

 -

 

20,760 

 -

 

(122,875)

 -

 

139,615 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

21,312 

 

 

(65,852)

 

 

(7,779)

 

 

 —

 

 

(52,319)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

87,296 

 

$

109,894 

 -

$

12,981 

 -

$

(122,875)

 -

$

87,296 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income of subsidiaries

 

 

(1,293)

 

 

 —

 -

 

 —

 

 

1,293 

 

 

 —

 Change in pension benefit plans assets/liabilities

 

 

10,910 

 

 

 —

 

 

 —

 

 

 —

 

 

10,910 

Foreign currency translation

 

 

 —

 

 

(738)

 

 

 —

 

 

 —

 

 

(738)

Change in fair value of investments

 

 

 —

 

 

(555)

 

 

 —

 

 

 —

 

 

(555)

Change in fair value of interest rate swap

 

 

578 

 

 

 —

 

 

 —

 

 

 —

 

 

578 

Total other comprehensive income (loss)

 

 

10,195 

 

 

(1,293)

 

 

 —

 

 

1,293 

 

 

10,195 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Comprehensive Income (Loss)

 

$

97,491 

 

$

108,601 

 

$

12,981 

 

$

(121,582)

 

$

97,491 

96F-41

 


 

Table of Contents

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSCASH FLOWS

YEAR ENDED DECEMBER 31, 20122015

(in thousands)





 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Non-

 

 

 

 

 

 



Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total



Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

45,292 

 

$

15,959 

 

$

7,408 

 

$

(23,367)

 

$

45,292 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

8,612 

 

 

32,746 

 

 

276 

 

 

 —

 

 

41,634 

Equity in earnings of subsidiaries

 

(23,367)

 

 

 —

 

 

 —

 

 

23,367 

 

 

 —

Share-based compensation expense

 

9,477 

 

 

 —

 

 

 —

 

 

 —

 

 

9,477 

Excess income tax benefit from share-based compensation

 

(186)

 

 

 —

 

 

 —

 

 

 —

 

 

(186)

Change in debt discount and deferred debt issuance costs

 

2,095 

 

 

 —

 

 

 —

 

 

 —

 

 

2,095 

Adjustment interest rate swap to fair value

 

(224)

 

 

224 

 

 

 —

 

 

 —

 

 

 —

Deferred income taxes

 

1,399 

 

 

36,083 

 

 

(15,268)

 

 

 —

 

 

22,214 

(Gain) loss on sale of property and equipment

 

82 

 

 

(2,991)

 

 

 —

 

 

 —

 

 

(2,909)

Other long-term liabilities

 

(3,157)

 

 

32,069 

 

 

 —

 

 

 —

 

 

28,912 

Other non-cash items

 

(248)

 

 

(3,432)

 

 

 —

 

 

 —

 

 

(3,680)

Changes in other components of working capital 

 

(154,300)

 

 

49,868 

 

 

(24,345)

 

 

 —

 

 

(128,777)

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

$

(114,525)

 

$

160,526 

 

$

(31,929)

 

$

 —

 

$

14,072 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of property and equipment excluding financed purchases

 

(21,587)

 

 

(14,286)

 

 

(39)

 

 

 —

 

 

(35,912)

Proceeds from sale of property and equipment

 

 —

 

 

4,980 

 

 

 —

 

 

 —

 

 

4,980 

(Increase) decrease in intercompany advances

 

 —

 

 

(102,763)

 

 

 —

 

 

102,763 

 

 

 —

Change in restricted cash

 

 —

 

 

1,991 

 

 

(3,474)

 

 

 —

 

 

(1,483)

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

$

(21,587)

 

$

(110,078)

 

$

(3,513)

 

$

102,763 

 

$

(32,415)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from debt

 

981,855 

 

 

31,350 

 

 

 —

 

 

 —

 

 

1,013,205 

Repayment of debt

 

(962,701)

 

 

(91,670)

 

 

 —

 

 

 —

 

 

(1,054,371)

Excess income tax benefit from share-based compensation

 

186 

 

 

 —

 

 

 —

 

 

 —

 

 

186 

Issuance of common stock and effect of cashless exercise

 

(808)

 

 

 —

 

 

 —

 

 

 —

 

 

(808)

Increase (decrease) in intercompany advances

 

89,689 

 

 

 —

 

 

13,074 

 

 

(102,763)

 

 

 —

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES

$

108,221 

 

$

(60,320)

 

$

13,074 

 

$

(102,763)

 

$

(41,788)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

(27,891)

 

 

(9,872)

 

 

(22,368)

 

 

 —

 

 

(60,131)

Cash and Cash Equivalents at Beginning of Year

 

75,087 

 

 

36,764 

 

 

23,732 

 

 

 —

 

 

135,583 

Cash and Cash Equivalents at End of Year

$

47,196 

 

$

26,892 

 

$

1,364 

 

$

 —

 

$

75,452 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tutor

 

 

 

 

Non-

 

 

 

 

 

 

 

 

Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

429,926 

 

$

3,769,814 

 

$

 —

 

$

(88,269)

 

$

4,111,471 

Cost of operations

 

 

375,914 

 

 

3,421,877 

 

 

(13,183)

 

 

(88,269)

 

 

3,696,339 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

54,012 

 

 

347,937 

 -

 

13,183 

 -

 

 —

 -

 

415,132 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and Administrative Expenses

 

 

71,983 

 

 

186,831 

 

 

1,555 

 

 

 —

 

 

260,369 

Goodwill and intangible assets impairment

 

 

 —

 

 

376,574 

 

 

 —

 

 

 —

 

 

376,574 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONSTRUCTION OPERATIONS

 

 

(17,971)

 

 

(215,468)

 -

 

11,628 

 -

 

 —

 -

 

(221,811)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

 

(225,100)

 

 

 —

 

 

 —

 

 

225,100 

 

 

 —

Other income (expense), net

 

 

(2,603)

 

 

382 

 

 

364 

 

 

 —

 

 

(1,857)

Interest expense

 

 

(40,067)

 

 

(4,107)

 

 

 —

 

 

 —

 

 

(44,174)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

(285,741)

 

 

(219,193)

 -

 

11,992 

 -

 

225,100 

 -

 

(267,842)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

20,341 

 

 

(13,155)

 

 

(4,744)

 

 

 —

 

 

2,442 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(265,400)

 

$

(232,348)

 -

$

7,248 

 -

$

225,100 

 -

$

(265,400)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income of subsidiaries

 

 

620 

 

 

 —

 

 

 —

 

 

(620)

 

 

 —

Tax adjustment on minimum pension liability

 

 

(1,610)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,610)

Foreign currency translation

 

 

 —

 

 

382 

 

 

 —

 

 

 —

 

 

382 

Change in fair value of investments

 

 

 —

 

 

238 

 

 

 —

 

 

 —

 

 

238 

 Change in fair value of interest rate swap

 

 

(974)

 

 

 —

 

 

 —

 

 

 —

 

 

(974)

 Realized loss on sale of investments recorded in net income (loss)

 

 

2,005 

 

 

 —

 

 

 —

 

 

 —

 

 

2,005 

Total other comprehensive income (loss)

 

 

41 

 

 

620 

 

 

 —

 

 

(620)

 

 

41 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Comprehensive Income (Loss)

 

$

(265,359)

 

$

(231,728)

 

$

7,248 

 

$

224,480 

 

$

(265,359)

97F-42

 


 

Table of Contents

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2014

(in thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

Total

 

Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

Total

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

107,936 

 

$

86,089 

 

$

9,412 

 

$

(95,501)

 

$

107,936 

 

$

107,936 

 

$

86,089 

 

$

9,412 

 

$

(95,501)

 

$

107,936 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,592 

 

 

51,109 

 

 

271 

 

 —

 

55,972 

 

 

2,322 

 

 

51,109 

 

 

271 

 

 

 —

 

53,702 

Equity in earnings of subsidiaries

 

 

(95,501)

 

 

 —

 

 

 —

 

 

95,501 

 

 —

 

 

(95,501)

 

 

 —

 

 

 —

 

 

95,501 

 

 —

Stock-based compensation expense

 

 

19,256 

 

 

(641)

 

 

 —

 

 

 —

 

18,615 

 

Excess income tax benefit from stock-based compensation

 

 

(787)

 

 

 —

 

 

 —

 

 

 —

 

(787)

 

Share-based compensation expense

 

19,256 

 

 

(641)

 

 

 —

 

 

 —

 

18,615 

Excess income tax benefit from share-based compensation

 

(787)

 

 

 —

 

 

 —

 

 

 

 

(787)

Change in debt discount and deferred debt issuance costs

 

2,270 

 

 

 —

 

 

 —

 

 

 

 

2,270 

Deferred income taxes

 

 

39,186 

 

 

(17,726)

 

 

 —

 

 

 —

 

21,460 

 

 

39,186 

 

 

(17,726)

 

 

 —

 

 

 —

 

21,460 

(Gain) loss on sale of investments

 

 

1,786 

 

 

 —

 

 

 —

 

 

 —

 

1,786 

 

 

1,786 

 

 

 —

 

 

 —

 

 

 —

 

1,786 

(Gain) loss on sale of property and equipment

 

 

833 

 

 

(32)

 

 

 —

 

 

 —

 

801 

 

 

833 

 

 

(32)

 

 

 —

 

 

 —

 

801 

Other long-term liabilities

 

 

20,221 

 

 

(17,147)

 

 

 —

 

 

 —

 

3,074 

 

 

20,221 

 

 

(17,147)

 

 

 —

 

 

 —

 

3,074 

Other non-cash items

 

 

(7,029)

 

 

10,302 

 

 

 —

 

 

 —

 

3,273 

 

 

(7,029)

 

 

10,302 

 

 

 —

 

 

 —

 

3,273 

Changes in other components of working capital

 

 

(26,100)

 

 

(264,203)

 

 

21,495 

 

 

 —

 

 

(268,808)

 

 

(26,100)

 

 

(264,203)

 

 

21,495 

 

 

 —

 

 

(268,808)

NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES

 

$

64,393 

 

$

(152,249)

 

$

31,178 

 

$

 —

 

$

(56,678)

 

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

$

64,393 

 

$

(152,249)

 

$

31,178 

 

$

 —

 

$

(56,678)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of property and equipment excluding financed purchases

 

 

(17,626)

 

(57,387)

 

 —

 

 —

 

(75,013)

 

Acquisition of property and equipment

 

(17,626)

 

 

(57,387)

 

 

 —

 

 

 —

 

(75,013)

Proceeds from sale of property and equipment

 

 

(784)

 

6,119 

 

 —

 

 —

 

5,335 

 

 

(784)

 

 

6,119 

 

 

 —

 

 

 —

 

5,335 

Proceeds from sale of available-for-sale securities

 

 

44,497 

 

(0)

 

 —

 

 —

 

44,497 

 

Proceeds from sale of investments

 

44,497 

 

 

 —

 

 

 —

 

 

 —

 

44,497 

Change in restricted cash

 

 

15,464 

 

 

2,766 

 

 

(20,006)

 

 

 —

 

 

(1,776)

 

 

15,464 

 

 

2,766 

 

 

(20,006)

 

 

 —

 

 

(1,776)

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

 

$

41,551 

 

$

(48,502)

 

$

(20,006)

 

$

 —

 

$

(26,957)

 

$

41,551 

 

$

(48,502)

 

$

(20,006)

 

$

 —

 

$

(26,957)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

1,078,932 

 

77,807 

 

 —

 

 —

 

1,156,739 

 

 

1,078,932 

 

 

77,807 

 

 

 —

 

 

 —

 

1,156,739 

Repayment of debt

 

 

(957,830)

 

(68,519)

 

 —

 

 —

 

(1,026,349)

 

 

(957,830)

 

 

(68,519)

 

 

 —

 

 

 —

 

(1,026,349)

Business acquisition-related payments

 

 

(26,430)

 

 

 —

 

 —

 

(26,430)

 

Excess income tax benefit from stock-based compensation

 

 

787 

 

 —

 

 —

 

 —

 

787 

 

Payments related to business acquisitions

 

(26,430)

 

 

 —

 

 

 —

 

 

 —

 

(26,430)

Excess income tax benefit from share-based compensation

 

787 

 

 

 —

 

 

 —

 

 

 —

 

787 

Issuance of common stock and effect of cashless exercise

 

 

(1,772)

 

 

 —

 

 —

 

(1,771)

 

 

(1,772)

 

 

 

 

 —

 

 

 —

 

(1,771)

Debt Issuance Costs

 

 

(3,681)

 

 

 —

 

 —

 

(3,681)

 

Debt issuance costs

 

(3,681)

 

 

 —

 

 

 —

 

 

 —

 

(3,681)

Increase (decrease) in intercompany advances

 

 

(209,858)

 

 

210,195 

 

 

(337)

 

 

 —

 

 

 —

 

 

(209,858)

 

 

210,195 

 

 

(337)

 

 

 —

 

 

 —

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES

 

$

(119,852)

 

$

219,484 

 

$

(337)

 

$

 —

 

$

99,295 

 

$

(119,852)

 

$

219,484 

 

$

(337)

 

$

 —

 

$

99,295 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

(13,908)

 

18,733 

 

10,835 

 

 —

 

15,660 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

(13,908)

 

 

18,733 

 

 

10,835 

 

 

 —

 

15,660 

Cash and Cash Equivalents at Beginning of Year

 

 

88,995 

 

 

18,031 

 

 

12,897 

 

 

 —

 

 

119,923 

 

 

88,995 

 

 

18,031 

 

 

12,897 

 

 

 —

 

 

119,923 

Cash and Cash Equivalents at End of Period

 

$

75,087 

 

$

36,764 

 

$

23,732 

 

$

 —

 

$

135,583 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents at End of Year

$

75,087 

 

$

36,764 

 

$

23,732 

 

$

 —

 

$

135,583 

  

  



98


Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2013

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

 

 

Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

87,296 

 

$

109,894 

 

$

12,981 

 

$

(122,875)

 

$

87,296 

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

10,893 

 

 

48,246 

 

 

271 

 

 

 —

 

 

59,410 

 

Equity in earnings of subsidiaries

 

 

(122,875)

 

 

 —

 

 

 —

 

 

122,875 

 

 

 —

 

Stock-based compensation expense

 

 

6,623 

 

 

 —

 

 

 —

 

 

 —

 

 

6,623 

 

Excess income tax benefit from stock-based compensation

 

 

(1,148)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,148)

 

Deferred income taxes

 

 

921 

 

 

8,088 

 

 

 —

 

 

 —

 

 

9,009 

 

(Gain) loss on sale of property and equipment

 

 

 —

 

 

49 

 

 

 —

 

 

 —

 

 

49 

 

Other long-term liabilities

 

 

24,359 

 

 

(1,252)

 

 

 —

 

 

 —

 

 

23,107 

 

Other non-cash items

 

 

(4,341)

 

 

622 

 

 

 —

 

 

 —

 

 

(3,719)

 

Changes in other components of working capital 

 

 

72,359 

 

 

(184,543)

 

 

(17,715)

 

 

 —

 

 

(129,899)

 

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

 

$

74,087 

 

$

(18,896)

 

$

(4,463)

 

$

 —

 

$

50,728 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of property and equipment excluding financed purchases

 

 

(21,267)

 

 

(21,093)

 

 

 —

 

 

 —

 

 

(42,360)

 

Proceeds from sale of property and equipment

 

 

 

 

2,657 

 

 

 —

 

 

 —

 

 

2,663 

 

Change in restricted cash

 

 

11,403 

 

 

441 

 

 

(15,721)

 

 

 —

 

 

(3,877)

 

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

 

$

(9,858)

 

$

(17,995)

 

$

(15,721)

 

$

 —

 

$

(43,574)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

627,520 

 

 

25,760 

 

 

 —

 

 

 —

 

 

653,280 

 

Repayment of debt

 

 

(647,795)

 

 

(29,000)

 

 

 —

 

 

 —

 

 

(676,795)

 

Business acquisition related payments

 

 

(31,038)

 

 

 —

 

 

 —

 

 

 —

 

 

(31,038)

 

Excess income tax benefit from stock-based compensation

 

 

1,148 

 

 

 —

 

 

 —

 

 

 —

 

 

1,148 

 

Issuance of common stock and effect of cashless exercise

 

 

(1,882)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,882)

 

Increase (decrease) in intercompany advances

 

 

12,150 

 

 

(16,223)

 

 

4,073 

 

 

 —

 

 

 —

 

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES

 

$

(39,897)

 

$

(19,463)

 

$

4,073 

 

$

 —

 

$

(55,287)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

24,332 

 

 

(56,354)

 

 

(16,111)

 

 

 —

 

 

(48,133)

 

Cash and Cash Equivalents at Beginning of Year

 

 

64,663 

 

 

74,385 

 

 

29,008 

 

 

 —

 

 

168,056 

 

Cash and Cash Equivalents at End of Period

 

$

88,995 

 

$

18,031 

 

$

12,897 

 

$

 —

 

$

119,923 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2012

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

 

 

Tutor Perini

 

Guarantor

 

Guarantor

 

 

 

 

Total

 

 

 

Corporation

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(265,400)

 

$

(232,348)

 

$

7,248 

 

$

225,100 

 

$

(265,400)

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill and intangible assets impairment

 

 

 —

 

 

376,574 

 

 

 —

 

 

 —

 

 

376,574 

 

Depreciation and amortization

 

 

5,373 

 

 

55,812 

 

 

272 

 

 

 —

 

 

61,457 

 

Equity in earnings of subsidiaries

 

 

225,100 

 

 

 —

 

 

 —

 

 

(225,100)

 

 

 —

 

Stock-based compensation expense

 

 

9,470 

 

 

 —

 

 

 —

 

 

 —

 

 

9,470 

 

Adjustment of interest rate swap to fair value

 

 

264 

 

 

 —

 

 

 —

 

 

 —

 

 

264 

 

Deferred income taxes

 

 

(20,220)

 

 

(5,386)

 

 

 —

 

 

 —

 

 

(25,606)

 

Loss on sale of investments

 

 

2,699 

 

 

 —

 

 

 

 

 

 

 

 

2,699 

 

(Gain) loss on sale of property and equipment

 

 

 —

 

 

316 

 

 

 —

 

 

 —

 

 

316 

 

Other long-term liabilities

 

 

(2,518)

 

 

(2,586)

 

 

 —

 

 

 —

 

 

(5,104)

 

Other non-cash items

 

 

(228)

 

 

376 

 

 

 —

 

 

 —

 

 

148 

 

Changes in other components of working capital 

 

 

25,251 

 

 

(268,525)

 

 

20,593 

 

 

 —

 

 

(222,681)

 

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

 

$

(20,209)

 

$

(75,767)

 

$

28,113 

 

$

 —

 

$

(67,863)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of property and equipment excluding financed purchases

 

 

(15,041)

 

 

(26,311)

 

 

 —

 

 

 —

 

 

(41,352)

 

Proceeds from sale of property and equipment

 

 

364 

 

 

11,395 

 

 

 —

 

 

 —

 

 

11,759 

 

Investments in available-for-sale securities

 

 

 —

 

 

(535)

 

 

 —

 

 

 —

 

 

(535)

 

Proceeds from sale of available-for-sale securities

 

 

16,553 

 

 

 —

 

 

 —

 

 

 —

 

 

16,553 

 

Change in restricted cash

 

 

(3,251)

 

 

(29)

 

 

 —

 

 

 —

 

 

(3,280)

 

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

 

$

(1,375)

 

$

(15,480)

 

$

 —

 

$

 —

 

$

(16,855)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

688,425 

 

 

 —

 

 

 —

 

 

 —

 

 

688,425 

 

Repayment of debt

 

 

(601,282)

 

 

(24,840)

 

 

 —

 

 

 —

 

 

(626,122)

 

Business acquisition related payments

 

 

(11,462)

 

 

 —

 

 

 —

 

 

 —

 

 

(11,462)

 

Issuance of common stock and effect of cashless exercise

 

 

(308)

 

 

 —

 

 

 —

 

 

 —

 

 

(308)

 

Debt issuance costs

 

 

(1,999)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,999)

 

Increase (decrease) in intercompany advances

 

 

(122,063)

 

 

137,980 

 

 

(15,917)

 

 

 —

 

 

 —

 

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES

 

$

(48,689)

 

$

113,140 

 

$

(15,917)

 

$

 —

 

$

48,534 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

(70,273)

 

 

21,893 

 

 

12,196 

 

 

 —

 

 

(36,184)

 

Cash and Cash Equivalents at Beginning of Year

 

 

134,936 

 

 

52,492 

 

 

16,812 

 

 

 —

 

 

204,240 

 

Cash and Cash Equivalents at End of Period

 

$

64,663 

 

$

74,385 

 

$

29,008 

 

$

 —

 

$

168,056 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Tutor Perini Corporation

Sylmar, California

We have audited the accompanying consolidated balance sheets of Tutor Perini Corporation and subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Tutor Perini Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2014, based on the criteria established in F-Internal Control — Integrated Framework (2013)43 issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2015 expressed an unqualified opinion on the Company's internal control over financial reporting.

5

/s/ Deloitte & Touche LLP

Los Angeles, California

February 26, 2015

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Exhibit Index

The following designated exhibits are, as indicated below, either filed herewith or have heretofore been filed with the Securities and Exchange Commission under the Securities Act of 1933 or the Securities Act of 1934 and are referred to and incorporated herein by reference to such filings.

Exhibit 2.

Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession

2.1

Agreement and Plan of Merger, dated as of April 2, 2008, by and among Tutor Perini Corporation, Trifecta Acquisition LLC, Tutor-Saliba Corporation, Ronald N. Tutor and shareholders of Tutor-Saliba Corporation signatory thereto (incorporated by reference to Exhibit 2.1 to Form 8-K filed on April 7, 2008).

2.2

Amendment No. 1 to the Agreement and Plan of Merger, dated as of May 28, 2008, by and among Tutor Perini Corporation, Trifecta Acquisition LLC, Tutor-Saliba Corporation, Ronald N. Tutor and shareholders of Tutor-Saliba Corporation signatory thereto (incorporated by reference to Exhibit 2.2 to Form 10-Q filed on August 8, 2008).

2.3

Stock Purchase Agreement dated July 1, 2011 by and among Tutor Perini Corporation, Lunda Construction Company, and each of the Shareholders of Lunda Construction Company (incorporated by reference to Exhibit  2.1 to Form  8-K filed on July  6, 2011). Exhibits, schedules (or similar attachments) to the Stock Purchase Agreement are not filed. The Company will furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

2.4

Agreement and Plan of Merger dated July 1, 2011 by and among Tutor Perini Corporation, GreenStar Services Corporation, Galaxy Merger, Inc., and GreenStar IH Rep LLC (incorporated by reference to Exhibit 2.2 to Form 8-K filed on July 6, 2011). Exhibits, schedules (or similar attachments) to the Agreement and Plan of Merger are not filed. The Company will furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

Exhibit 3.

Articles of Incorporation and By-laws

3.1

Restated Articles of Organization (incorporated by reference to Exhibit 4 to Form S-2 (File No. 33-28401) filed on April 28, 1989).

3.2

Articles of Amendment to the Restated Articles of Organization of Tutor Perini Corporation (incorporated by reference to Exhibit 3.2 to Form S-1 (File No. 333-111338) filed on December 19, 2003).

3.3

Articles of Amendment to the Restated Articles of Organization of Tutor Perini Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on April 12, 2000.)

3.4

Articles of Amendment to the Restated Articles of Organization of Tutor Perini Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on September 11, 2008.)

3.5

Articles of Amendment to the Restated Articles of Organization of Tutor Perini Corporation (incorporated by reference to Exhibit 3.5 to Form 10-Q filed on August 10, 2009).

3.6

Second Amended and Restated By-laws of Tutor Perini Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on November 24, 2009).

Exhibit 4.

Instruments Defining the Rights of Security Holders, Including Indentures

4.1

Shareholders Agreement, dated April 2, 2008, by and among Tutor Perini Corporation, Ronald N. Tutor and the shareholders of Tutor-Saliba Corporation signatory thereto (incorporated by reference to Exhibit 4.1 to Form 8-K filed on April 7, 2008).

4.2

Amendment No. 1 to the Shareholders Agreement, dated as of September 17, 2010, by and between Tutor Perini Corporation and Ronald N. Tutor, as shareholder representative (incorporated by reference to Exhibit 4.1 to Form 8-K filed on September 20, 2010).

4.3

Amendment No. 2 to the Shareholders Agreement, dated as of June 2, 2011, by and between Tutor Perini Corporation and Ronald N. Tutor, as shareholder representative (incorporated by reference to Exhibit 4.1 to Form 8-K filed on June 6, 2011).

4.4

Amendment No. 3 to the Shareholders Agreement, dated as of September 13, 2011, by and between Tutor Perini Corporation and Ronald N. Tutor, as shareholder representative (incorporated by reference to Exhibit 4.1 to Form 8-K filed on September 16, 2011).

4.5

Indenture, dated October  20, 2010, by and among Tutor Perini Corporation, certain subsidiary guarantors named therein and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed on October 21, 2010).

4.6

Registration Rights Agreement dated October 20, 2010, by and among Tutor Perini Corporation, certain subsidiary guarantors named therein and the initial purchasers named therein (incorporated by reference to Exhibit 4.2 to Form 8-K filed on October 21, 2010).

Exhibit 10.

Material Contracts

10.1*

Amendment No. 1 dated March 20, 2009 to the Amended and Restated Employment Agreement dated December 23, 2008, by and between Perini Corporation and Ronald N. Tutor (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on May 8, 2009).

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Table of Contents

10.2*

Tutor Perini Corporation Amended and Restated (2004) Construction Business Unit Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 to Amendment No. 2 to Form S-1 (File No. 333-111338) filed on March 8, 2004).

10.3*

Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (as amended on October 2, 2014 and included as Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on October 2, 2014 and incorporated herein by reference.

10.33*

Tutor Perini Corporation 2004 Stock Option and Incentive Plan (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement on Form DEF 14A filed on April 17, 2009).

10.4*

Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to Form S-1 (File No. 333-111338) filed on February 10, 2004).

   10.5*

Form of Restricted Stock Unit Award Agreement under the Tutor Perini Corporation 2004 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.24 to Tutor Perini Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 filed on March 4, 2005).

   10.6

Sixth Amended and Restated Credit Facility dated as of June 5, 2014, with Bank of America, N.A., in its capacity as administrative agent, Swing Line lender and L/C Issuer (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 9, 2014).

10.66

Fifth Amended and Restated Credit Agreement, dated as of August 3, 2011, among Tutor Perini Corporation, the subsidiaries of Tutor Perini named therein, and Bank of America, N.A., and the other lenders that are parties thereto (incorporated by reference to Exhibit 10.3 to Form 10-Q filed on August 4, 2011).

10.7

First Amendment to Fifth Amended and Restated Credit Agreement dated as of August 2, 2012, among Tutor Perini Corporation, the subsidiaries of Tutor Perini named therein, and Bank of America, N.A., and the other lenders that are parties thereto — (incorporated by reference to Exhibit 10.3 to Form 10-Q filed on August 7, 2012).

10.8

Promissory Note, dated July 1, 2011, issued by Tutor Perini Corporation to GreenStar IH Rep LLC, in its capacity as the Interest Holder Representative on behalf of certain equity holders of GreenStar (incorporated by reference to Exhibit 10.1 to Form 8-K filed on July 6, 2011).

10.9*

Employment Agreement dated as of March  21, 2011, by and between Tutor Perini Corporation and James A. Frost (incorporated by reference to Exhibit 10.1 to Form 8−K filed on March 24, 2011).

10.1

Employment Agreement dated as of December 22.2014, by and between Tutor Perini Corporation and Ronald N. Tutor (incorporated by reference to Exhibit 10.1 to Form 8-K filed on December 22, 2014).

10.11*

2009 General Incentive Compensation Plan (incorporated by reference to Annex B to the Company’s Definitive Proxy Statement on Form DEF 14A filed on April 17, 2009).

  10.12

Commercial Lease Agreement, dated April 18, 2014 by and among Tutor-Perini Corporation and Ronald N. Tutor (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on May 7, 2014).

      10.13

Industrial Lease Agreement, dated April 18, 2014 by and among Tutor-Perini Corporation and Kristra Investments, Ltd (incorporated by reference to Exhibit 10.2 to Form 10-Q filed on May 7, 2014).

Exhibit 21

Subsidiaries of Tutor Perini Corporation - filed herewith.

Exhibit 23

Consent of Independent Registered Public Accounting Firm - filed herewith.

Exhibit 24

Power of Attorney - filed herewith.

Exhibit 31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—filed herewith.

Exhibit 31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — filed herewith.

Exhibit 32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — filed herewith.

Exhibit 32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — filed herewith.

Exhibit 95

Mine Safety Disclosure — filed herewith.

Exhibit 101.INS

XBRL Instance Document.

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

______________

*    Management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form 10-K

103