SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
FORM10-Q☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
(Mark One)
| | | | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | March 31, 2024 |
| or |
| ☐ | TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ___________ to ___________ |
Commission File Number: 1-6314
(Exact
nameName of
registrantRegistrant as
specifiedSpecified in its
charter)Charter)MASSACHUSETTS
| | |
MASSACHUSETTS
| | 04-1717070
|
(State or other jurisdictionOther Jurisdiction of
incorporationIncorporation or organization) | | (I.R.S. Employer
Identification No.)
Organization) |
15901 OLDEN STREET,SYLMAR,CALIFORNIA
| | |
| (Address of Principal Executive Offices) |
04-1717070
| | |
(I.R.S. Employer Identification No.)
|
91342-1093
(Address of principal executive offices)
(Zip code)
(Registrant’s
telephone number, including area code)Telephone Number, Including Area Code)
None
(Former
name, former addressName, Former Address and
former fiscal year,Former Fiscal Year, if
changed since last report)Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $1.00 par value | TPC | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Large accelerated filer☒ | ☐ | | Accelerated filer☐ | ☒ | | |
| | Non-accelerated filer | ☐ | |
Non-Accelerated filer ☐
| | Smaller reporting company | ☐ | | |
| | |
Emerging growth company☐ | ☐ | | | | | |
| | | | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of common stock, $1.00 par value per share, of the registrant outstandingoutstanding at November 3, 2017April 18, 2024 was 49,781,010.52,284,162.
TUTORPERINI CORPORATION AND SUBSIDIARIES | | | | | | | | | | | |
| | | Page Numbers |
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| | | 7-23 |
| | | 24-30 |
| | | 30 |
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PART I. –FINANCIAL INFORMATION Item 1.
– Financial Statements
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS | | | | | | | | |
| | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| Three Months Ended
March 31, | |
| Three Months Ended
March 31, | |
| Three Months Ended
March 31, | |
| (in thousands, except per common share amounts) | |
| (in thousands, except per common share amounts) | |
(in thousands, except per common share amounts) | 2017 | | 2016 | | 2017 | | 2016 |
REVENUE | $ | 1,199,505 | | $ | 1,332,978 | | $ | 3,564,140 | | $ | 3,726,477 |
| REVENUE | |
| REVENUE | |
COST OF OPERATIONS | | (1,081,254) | | | (1,208,310) | | | (3,240,332) | | (3,386,947) |
GROSS PROFIT | | 118,251 | | | 124,668 | | | 323,808 | | 339,530 |
| COST OF OPERATIONS | |
| COST OF OPERATIONS | |
| GROSS PROFIT (LOSS) | |
| GROSS PROFIT (LOSS) | |
| GROSS PROFIT (LOSS) | |
General and administrative expenses | | (69,179) | | | (63,749) | | | (203,674) | | (189,660) |
INCOME FROM CONSTRUCTION OPERATIONS | | 49,072 | | | 60,919 | | | 120,134 | | 149,870 |
| General and administrative expenses | |
| General and administrative expenses | |
| INCOME (LOSS) FROM CONSTRUCTION OPERATIONS | |
| INCOME (LOSS) FROM CONSTRUCTION OPERATIONS | |
| INCOME (LOSS) FROM CONSTRUCTION OPERATIONS | |
| Other income, net | |
| Other income, net | |
Other income, net | | 967 | | | 2,048 | | 42,373 | | 5,214 |
Interest expense | | (15,643) | | | (15,041) | | | (53,726) | | (44,655) |
INCOME BEFORE INCOME TAXES | | 34,396 | | | 47,926 | | | 108,781 | | 110,429 |
Provision for income taxes | | (9,096) | | | (19,125) | | | (37,084) | | (44,868) |
NET INCOME | | 25,300 | | | 28,801 | | | 71,697 | | 65,561 |
| Interest expense | |
| Interest expense | |
| INCOME (LOSS) BEFORE INCOME TAXES | |
| INCOME (LOSS) BEFORE INCOME TAXES | |
| INCOME (LOSS) BEFORE INCOME TAXES | |
| Income tax (expense) benefit | |
| Income tax (expense) benefit | |
| Income tax (expense) benefit | |
| NET INCOME (LOSS) | |
| NET INCOME (LOSS) | |
| NET INCOME (LOSS) | |
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | | (1,716) | | | ��— | | | (4,253) | | — |
NET INCOME ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 23,584 | | $ | 28,801 | | $ | 67,444 | | $ | 65,561 |
BASIC EARNINGS PER COMMON SHARE | $ | 0.47 | | $ | 0.59 | | $ | 1.36 | | $ | 1.33 |
DILUTED EARNINGS PER COMMON SHARE | $ | 0.47 | | $ | 0.57 | | $ | 1.33 | | $ | 1.32 |
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | |
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | |
| NET INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | |
| NET INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | |
| NET INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | |
| BASIC EARNINGS (LOSS) PER COMMON SHARE | |
| BASIC EARNINGS (LOSS) PER COMMON SHARE | |
| BASIC EARNINGS (LOSS) PER COMMON SHARE | |
| DILUTED EARNINGS (LOSS) PER COMMON SHARE | |
| DILUTED EARNINGS (LOSS) PER COMMON SHARE | |
| DILUTED EARNINGS (LOSS) PER COMMON SHARE | |
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: | |
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: | |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: | | | | | | | | | | |
BASIC | | 49,775 | | 49,185 | | | 49,602 | | 49,132 |
| BASIC | |
| BASIC | |
DILUTED | | 50,587 | | 50,100 | | | 50,768 | | 49,649 |
| DILUTED | |
| DILUTED | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATEDSTATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| | | | | | | | | | | |
| Three Months Ended
March 31, | |
| Three Months Ended
March 31, | |
| Three Months Ended
March 31, | |
| (in thousands) | |
| (in thousands) | |
| (in thousands) | |
| NET INCOME (LOSS) | |
| NET INCOME (LOSS) | |
| NET INCOME (LOSS) | |
| | | | | | | | | | | |
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
NET INCOME | $ | 25,300 | | $ | 28,801 | | $ | 71,697 | | $ | 65,561 |
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | |
| | | | | | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | | | | | | | | | | | |
Defined benefit pension plan adjustments | | 269 | | | 248 | | | 806 | | | 819 |
| Defined benefit pension plan adjustments | |
| Defined benefit pension plan adjustments | |
| Foreign currency translation adjustments | |
| Foreign currency translation adjustments | |
Foreign currency translation adjustments | | 726 | | | (411) | | | 1,321 | | | 261 |
Unrealized gain (loss) in fair value of investments | | 12 | | | (79) | | | (12) | | | (224) |
Unrealized loss in fair value of interest rate swap | | — | | | — | | | — | | | (24) |
| Unrealized gain (loss) in fair value of investments | |
| Unrealized gain (loss) in fair value of investments | |
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | |
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | |
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | | 1,007 | | | (242) | | | 2,115 | | | 832 |
| | | | | | | | | | | |
COMPREHENSIVE INCOME | | 26,307 | | | 28,559 | | | 73,812 | | | 66,393 |
| COMPREHENSIVE INCOME (LOSS) | |
| | COMPREHENSIVE INCOME (LOSS) | |
| | COMPREHENSIVE INCOME (LOSS) | |
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | | (1,716) | | | — | | | (4,253) | | | — |
COMPREHENSIVE INCOME ATTRIBUTABLE TO TUTOR PERINI CORPORATION | $ | 24,591 | | $ | 28,559 | | $ | 69,559 | | $ | 66,393 |
| LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | |
| LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | |
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | |
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | |
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATEDBALANCE SHEETS | | | | |
| | | | |
| As of September 30, | | As of December 31, |
(in thousands, except share and per share amounts) | 2017 | | 2016 | (in thousands, except share and per share amounts) | As of March 31,
2024 | | As of December 31,
2023 |
| | ASSETS | |
| ASSETS | |
ASSETS | | | | | |
CURRENT ASSETS: | | | | |
Cash and cash equivalents ($79,111 and $0 related to variable interest entities ("VIEs")) | $ | 221,878 | | $ | 146,103 |
| Cash and cash equivalents ($171,727 and $173,118 related to variable interest entities (“VIEs”)) | |
| Cash and cash equivalents ($171,727 and $173,118 related to variable interest entities (“VIEs”)) | |
| Cash and cash equivalents ($171,727 and $173,118 related to variable interest entities (“VIEs”)) | |
Restricted cash | | 17,424 | | 50,504 |
Restricted investments | | 48,775 | | — |
Accounts receivable ("AR") including retainage of $574,710 and $569,391 (AR of $36,317 and $0 related to VIEs) | | 1,857,870 | | 1,743,300 |
Costs and estimated earnings in excess of billings | | 902,312 | | 831,826 |
Other current assets | | 70,781 | | | 66,023 |
| Accounts receivable ($51,822 and $84,014 related to VIEs) | |
| Retention receivable ($154,951 and $161,187 related to VIEs) | |
| Costs and estimated earnings in excess of billings ($72,566 and $58,089 related to VIEs) | |
| Other current assets ($22,155 and $26,725 related to VIEs) | |
Total current assets | | 3,119,040 | | | 2,837,756 |
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $345,546 and $313,783 | | 447,588 | | | 477,626 |
PROPERTY AND EQUIPMENT (“P&E”), net of accumulated depreciation of $546,716 and $534,171 (net P&E of $33,813 and $35,135 related to VIEs) | |
GOODWILL | | 585,006 | | 585,006 |
INTANGIBLE ASSETS, NET | | 90,340 | | 92,997 |
| DEFERRED INCOME TAXES | |
OTHER ASSETS | | 40,811 | | | 45,235 |
TOTAL ASSETS | $ | 4,282,785 | | $ | 4,038,620 |
| | | | | |
LIABILITIES AND EQUITY | | | | |
| LIABILITIES AND EQUITY | |
| LIABILITIES AND EQUITY | |
CURRENT LIABILITIES: | | | | |
Current maturities of long-term debt | $ | 30,951 | | $ | 85,890 |
Accounts payable ("AP") including retainage of $267,110 and $258,294 (AP of $4,826 and $0 related to VIEs) | | 949,675 | | 994,016 |
Billings in excess of costs and estimated earnings ($91,750 and $0 related to VIEs) | | 403,635 | | 331,112 |
Accrued expenses and other current liabilities | | 124,385 | | | 107,925 |
| Current maturities of long-term debt | |
| Current maturities of long-term debt | |
| Accounts payable ($23,199 and $24,160 related to VIEs) | |
| Retention payable ($22,011 and $22,841 related to VIEs) | |
| Billings in excess of costs and estimated earnings ($425,410 and $439,759 related to VIEs) | |
| Accrued expenses and other current liabilities ($10,572 and $18,206 related to VIEs) | |
Total current liabilities | | 1,508,646 | | | 1,518,943 |
LONG-TERM DEBT, less current maturities, net of unamortized
discounts and debt issuance costs totaling $54,699 and $56,072 | | 855,325 | | | 673,629 |
DEFERRED INCOME TAXES | | 132,335 | | 131,007 |
LONG-TERM DEBT, less current maturities, net of unamortized discount and debt issuance costs totaling $9,389 and $11,000 | |
| | OTHER LONG-TERM LIABILITIES | |
| OTHER LONG-TERM LIABILITIES | |
OTHER LONG-TERM LIABILITIES | | 155,553 | | | 162,018 |
TOTAL LIABILITIES | | 2,651,859 | | | 2,485,597 |
| | | | | |
CONTINGENCIES AND COMMITMENTS (NOTE 7) | | | | |
| | | | |
| COMMITMENTS AND CONTINGENCIES (NOTE 11) | | COMMITMENTS AND CONTINGENCIES (NOTE 11) | | | |
EQUITY | | | | |
Stockholders' Equity: | | | | |
| Stockholders' equity: | |
| Stockholders' equity: | |
| Stockholders' equity: | |
Preferred stock - authorized 1,000,000 shares ($1 par value), none issued | | — | | — |
Common stock - authorized 75,000,000 shares ($1 par value),
issued and outstanding 49,781,010 and 49,211,353 shares | | 49,781 | | 49,211 |
| Preferred stock - authorized 1,000,000 shares ($1 par value), none issued | |
| Preferred stock - authorized 1,000,000 shares ($1 par value), none issued | |
| Common stock - authorized 112,500,000 shares ($1 par value), issued and outstanding 52,284,162 and 52,025,497 shares | |
Additional paid-in capital | | 1,080,371 | | 1,075,600 |
Retained earnings | | 541,069 | | 473,625 |
Accumulated other comprehensive loss | | (43,298) | | | (45,413) |
Total Stockholders' Equity | | 1,627,923 | | | 1,553,023 |
| Total stockholders' equity | |
Noncontrolling interests | | 3,003 | | | — |
TOTAL EQUITY | | 1,630,926 | | | 1,553,023 |
| | | | | |
TOTAL LIABILITIES AND EQUITY | $ | 4,282,785 | | $ | 4,038,620 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS | | | | |
| | | | |
| Nine Months Ended September 30, |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
(in thousands) | 2017 | | 2016 | (in thousands) | 2024 | | 2023 |
Cash Flows from Operating Activities: | | | | | |
Net income | $ | 71,697 | | $ | 65,561 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Net income (loss) | |
| Net income (loss) | |
| Net income (loss) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |
| Depreciation | |
| Depreciation | |
Depreciation | | 37,806 | | 44,638 |
Amortization of intangible assets | | 2,657 | | 2,657 |
Share-based compensation expense | | 16,057 | | 10,109 |
Excess income tax benefit from share-based compensation | | — | | (10) |
Change in debt discounts and deferred debt issuance costs | | 14,725 | | 7,124 |
Deferred income taxes | | 642 | | (8,636) |
(Gain) loss on sale of property and equipment | | (376) | | 300 |
| Gain on sale of property and equipment | |
| Changes in other components of working capital | |
Other long-term liabilities | | (2,876) | | (8,555) |
Other | | 4,785 | | (353) |
Changes in other components of working capital | | (143,213) | | | (18,669) |
| Other, net | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | 1,904 | | | 94,166 |
| | | | | |
Cash Flows from Investing Activities: | | | | |
Acquisition of property and equipment excluding financed purchases | | (9,712) | | (10,273) |
| Cash Flows from Investing Activities: | |
| Cash Flows from Investing Activities: | |
| Acquisition of property and equipment | |
| Acquisition of property and equipment | |
| Acquisition of property and equipment | |
Proceeds from sale of property and equipment | | 1,440 | | 1,139 |
Investments in securities restricted in use | | (48,657) | | — |
Change in restricted cash | | 33,080 | | | (2,872) |
| Investments in securities | |
| Proceeds from maturities and sales of investments in securities | |
NET CASH USED IN INVESTING ACTIVITIES | | (23,849) | | | (12,006) |
| | | | | |
Cash Flows from Financing Activities: | | | | |
Proceeds from issuance of convertible notes | | — | | 200,000 |
| Cash Flows from Financing Activities: | |
| Cash Flows from Financing Activities: | |
| Proceeds from debt | |
| Proceeds from debt | |
Proceeds from debt | | 1,991,457 | | 1,003,092 |
Repayment of debt | | (1,866,072) | | (1,174,679) |
Excess income tax benefit from share-based compensation | | — | | 10 |
Issuance of common stock and effect of cashless exercise | | (11,147) | | (423) |
| Cash payments related to share-based compensation | |
Distributions paid to noncontrolling interests | | (2,500) | | — |
Contributions from noncontrolling interests | | 1,250 | | — |
Debt issuance and extinguishment costs | | (15,268) | | | (14,868) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | | 97,720 | | | 13,132 |
| Debt issuance, extinguishment and modification costs | |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | |
| | | | | |
Net increase in cash and cash equivalents | | 75,775 | | 95,292 |
Cash and cash equivalents at beginning of period | | 146,103 | | | 75,452 |
Cash and cash equivalents at end of period | $ | 221,878 | | $ | 170,744 |
| Net increase (decrease) in cash, cash equivalents and restricted cash | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | |
| Cash, cash equivalents and restricted cash at beginning of period | |
| Cash, cash equivalents and restricted cash at end of period | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Condensed Consolidated Financial Statements do not include footnotes and certain financial information normally presented annually under
generally accepted accounting principles
generally accepted in the United States (“GAAP”). Therefore, they should be read in conjunction with the audited consolidated financial statements and the related notes included in
the Company’sTutor Perini Corporation’s (the “Company”) Annual Report on Form 10-K for the year ended December 31,
2016.2023. The results of operations for the three
and nine months ended
September 30, 2017March 31, 2024 may not be indicative of the results that will be achieved for the full year ending December 31,
2017.2024.
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the Company’s consolidated financial position as of
September 30, 2017March 31, 2024 and its consolidated
resultsstatements of operations and cash flows for the interim periods presented.
All significant intercompanyIntercompany balances and transactions
of consolidated subsidiaries have been eliminated.
There were no material events that occurred subsequentCertain amounts in the condensed consolidated financial statements and notes thereto of prior years have been reclassified to conform to the
date of the financial statements up to the filing of this Form 10-Q. current year presentation.
(2)Recent Accounting Pronouncements In May 2014,November 2023, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606)2023-07, Segment Reporting (“Topic 280”): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), as amended by subsequent ASUs (collectively, “ASU 2014-09”).which requires disclosure of incremental segment information on an interim and annual basis. ASU 2014-09 amends the existing accounting standards for revenue recognition and establishes principles for recognizing revenue upon the transfer of promised goods or services to customers based on the expected consideration to be received in exchange for those goods or services. The guidance will be2023-07 is effective for the Company as of January 1, 2018. The amendments may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application (modified retrospective method). The Company expects to adopt this new standard using the modified retrospective method. The Company is currently reviewing contracts in order to determine the impact, if any, that the adoption of ASU 2014-09 will have on its consolidated financial statements. Based on the Company’s evaluation of ASU 2014-09, the Company currently does not expect it to have a material impact on its results of operations. The Company is identifying and implementing changes to the Company’s business processes, systems and internal controls to support the adoption of this new standard and the related disclosure requirements. The adoption of the standard is also expected to impact the presentation of the consolidated balance sheet. The impact primarily relates to reclassifications among financial statement accounts to align with the new standard. The Company will continue its evaluation of ASU 2014-09 (including how it may impact future contracts, as well as any new or emerging interpretations of the standard) through the date of adoption.In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, seeking to eliminate diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in ASU 2016-15 address eight specific cash flow issues including the classification of debt prepayment and extinguishment costs in the cash flow statement. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017,2023, and interim periods within those fiscal years.periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (“Topic 740”): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public entities to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. ASU 2023-09 also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. This guidance is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is permitted, including adoption in an interim period provided any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. permitted. The Company adoptedis currently evaluating the impact of this accounting standard duringguidance on the consolidated financial statements and disclosures.
(3)Revenue
Disaggregation of Revenue
The following tables disaggregate revenue by end market, customer type and contract type, which the Company believes best depict how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors for the three months ended
September 30, 2017March 31, 2024 and
has applied the provisions retrospectively to the beginning of the fiscal years presented in the Condensed Consolidated Financial Statements. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies the scope of modification accounting under Topic 718 with respect to changes to the terms or conditions of a share-based payments award. Under this new guidance, modification accounting would not apply if a change to an award does not affect the total current fair value, vesting conditions or the classification of the award. This guidance will be effective for the Company as of January 1, 2018, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
2023. | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| (in thousands) | | 2024 | | 2023 | | | |
| Civil segment revenue by end market: | | | | | | | |
| Mass transit (includes certain transportation and tunneling projects) | | $ | 252,516 | | | $ | 188,460 | | | | |
| Military facilities | | 105,144 | | | 85,567 | | | | |
| Commercial and industrial sites | | 39,490 | | | 22,726 | | | | |
| Bridges | | 27,672 | | | 30,645 | | | | |
| Power and energy | | 26,198 | | | 10,176 | | | | |
| Other | | 21,145 | | | 12,296 | | | | |
| Total Civil segment revenue | | $ | 472,165 | | | $ | 349,870 | | | | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| (in thousands) | | 2024 | | 2023 | | | |
| Building segment revenue by end market: | | | | | | | |
| Government | | $ | 130,611 | | | $ | 89,620 | | | | |
| Health care facilities | | 111,987 | | | 50,417 | | | | |
| Education facilities | | 68,159 | | | 48,077 | | | | |
| Mass transit (includes transportation projects) | | 61,175 | | | 33,320 | | | | |
| Sports and entertainment | | 15,639 | | | 13,466 | | | | |
| Commercial and industrial facilities | | 11,369 | | | 38,271 | | | | |
| Hospitality and gaming | | 2,752 | | | 19,606 | | | | |
Other(a) | | 10,250 | | | (63,124) | | | | |
| Total Building segment revenue | | $ | 411,942 | | | $ | 229,653 | | | | |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| (in thousands) | | 2024 | | 2023 | | | |
| Specialty Contractors segment revenue by end market: | | | | | | | |
| Mass transit (includes certain transportation and tunneling projects) | | $ | 48,126 | | | $ | 47,545 | | | | |
| Commercial and industrial facilities | | 28,210 | | | 54,227 | | | | |
| Multi-unit residential | | 24,726 | | | 32,796 | | | | |
| Government | | 22,953 | | | 21,069 | | | | |
| Health care facilities | | 16,710 | | | 9,531 | | | | |
| Water | | 14,216 | | | 28,334 | | | | |
| | | | | | | |
| | | | | | | |
Other(a) | | 9,939 | | | 3,275 | | | | |
| Total Specialty Contractors segment revenue | | $ | 164,880 | | | $ | 196,777 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, 2024 | | Three Months Ended
March 31, 2023 |
| (in thousands) | Civil | Building | Specialty
Contractors | Total | | Civil | Building | Specialty
Contractors | Total |
| Revenue by customer type: | | | | | |
| State and local agencies | $ | 283,995 | | $ | 246,519 | | $ | 76,953 | | $ | 607,467 | | | $ | 213,427 | | $ | 136,601 | | $ | 85,682 | | $ | 435,710 | |
| Federal agencies | 113,454 | | 46,052 | | 439 | | 159,945 | | | 95,984 | | 41,735 | | 1,893 | | 139,612 | |
Private owners(a) | 74,716 | | 119,371 | | 87,488 | | 281,575 | | | 40,459 | | 51,317 | | 109,202 | | 200,978 | |
| Total revenue | $ | 472,165 | | $ | 411,942 | | $ | 164,880 | | $ | 1,048,987 | | | $ | 349,870 | | $ | 229,653 | | $ | 196,777 | | $ | 776,300 | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
March 31, 2024 | | Three Months Ended
March 31, 2023 |
| (in thousands) | Civil | Building | Specialty
Contractors | Total | | Civil | Building | Specialty
Contractors | Total |
| Revenue by contract type: | | | | | |
| Fixed price | $ | 422,720 | | $ | 170,146 | | $ | 139,503 | | $ | 732,369 | | | $ | 311,373 | | $ | 96,116 | | $ | 166,155 | | $ | 573,644 | |
Guaranteed maximum price(a) | 46 | | 187,300 | | 623 | | 187,969 | | | 62 | | 69,778 | | 1,756 | | 71,596 | |
| Unit price | 33,854 | | — | | 20,545 | | 54,399 | | | 33,012 | | — | | 24,064 | | 57,076 | |
| Cost plus fee and other | 15,545 | | 54,496 | | 4,209 | | 74,250 | | | 5,423 | | 63,759 | | 4,802 | | 73,984 | |
| Total revenue | $ | 472,165 | | $ | 411,942 | | $ | 164,880 | | $ | 1,048,987 | | | $ | 349,870 | | $ | 229,653 | | $ | 196,777 | | $ | 776,300 | |
(3) Earnings Per Common Share (EPS)
Basic EPS
(a)The three-month period ended March 31, 2023 includes the negative impact of a non-cash charge of $83.6 million that resulted from an adverse legal ruling (of which $72.2 million impacted the Building segment and diluted EPS$11.4 million impacted the Specialty Contractors segment). Refer to Note 18, Business Segments, for additional details.
Changes in Contract Estimates that Impact Revenue
Changes to the total estimated contract revenue or cost for a given project, either due to unexpected events or revisions to management’s initial estimates, are calculated by dividing net income attributable to Tutor Perini Corporation byrecognized in the following: for basic EPS, the weighted-average number of common shares outstandingperiod in which they are determined. Net revenue recognized during the period;three months ended March 31, 2024 related to performance obligations satisfied (or partially satisfied) in prior periods was immaterial. Revenue was negatively impacted during the three months ended March 31, 2023 related to performance obligations satisfied (or partially satisfied) in prior periods by $108.0 million. Refer to Note 18, Business Segments, for additional details on significant adjustments.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and for diluted EPS,exclude unexercised contract options. As of March 31, 2024, the sumaggregate amounts of the weighted-average numbertransaction prices allocated to the remaining performance obligations of both outstanding common sharesthe Company’s construction contracts were $4.1 billion, $1.8 billion and potentially dilutive securities, which$1.1 billion for the Civil, Building and Specialty Contractors segments, respectively. As of March 31, 2023, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $4.4 billion, $2.2 billion and $1.2 billion for the Company can include restricted stock units, unexercised stock optionsCivil, Building and the Convertible Notes, as defined in Note 6.Specialty Contractors segments, respectively. The Company calculatestypically recognizes revenue on Civil segment projects over a period of three to five years, whereas for projects in the effectBuilding and Specialty Contractors segments, the Company typically recognizes revenue over a period of these potentially dilutive securities usingone to three years.
(4)Contract Assets and Liabilities
The Company classifies contract assets and liabilities that may be settled beyond one year from the
treasury stock method. | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands, except per common share amounts) | 2017 | | 2016 | | 2017 | | 2016 |
Net income attributable to Tutor Perini Corporation | $ | 23,584 | | $ | 28,801 | | $ | 67,444 | | $ | 65,561 |
| | | | | | | | | | | |
Weighted-average common shares outstanding, basic | | 49,775 | | | 49,185 | | | 49,602 | | | 49,132 |
Effect of dilutive restricted stock units and stock options | | 812 | | | 915 | | | 1,166 | | | 517 |
Weighted-average common shares outstanding, diluted | | 50,587 | | | 50,100 | | | 50,768 | | | 49,649 |
| | | | | | | | | | | |
Earnings per common share: | | | | | | | | | | | |
Basic earnings per common share | $ | 0.47 | | $ | 0.59 | | $ | 1.36 | | $ | 1.33 |
Diluted earnings per common share | $ | 0.47 | | $ | 0.57 | | $ | 1.33 | | $ | 1.32 |
| | | | | | | | | | | |
Anti-dilutive shares not included above | | 912 | | | 610 | | | 752 | | | 1,339 |
With regard to diluted EPS andbalance sheet date as current, consistent with the impactlength of time of the Convertible Notes 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 Accounting Standards Codification (“ASC”) 260, Earnings Per Share, the settlement of the principal amount has no impact on diluted EPS.
(4) Income Taxes
The Company’s effective income tax rate for the three and nine months ended September 30, 2017 was 26.4% and 34.1%, respectively, compared to 39.9% and 40.6% for the three and nine months ended September 30, 2016, respectively. The effective tax rate for both of the 2017 periods was favorably impacted by the release of tax liabilities as a result of a statute expiration and earnings attributable to noncontrolling interests for which income taxes are not the responsibility of the Company. The effective tax rate for the nine months ended September 30, 2017 was also favorably impacted by the tax benefits associated with share-based compensation. During the first quarter of 2017, the Company recognized tax benefits associated with share-based compensationproject operating cycle.
Contract assets include amounts due under
theretention provisions,
of ASU 2016-09, Improvement to Employee Share-Based Payment Accounting, as discussed in Note 9. This tax benefit is the result of a greater tax deduction for share-based compensation expense for awards that vested or were exercised in the first quarter of 2017 relative to the share-based compensation expense recognized under GAAP for these same awards. The effective tax rate for the third quarter of 2016 was favorably impacted by return-to-provision adjustments.(5) Costs and Estimated Earnings in Excess of Billings
Costscosts and estimated earnings in excess of billings and capitalized contract costs. The amounts as reportedincluded on the Condensed Consolidated Balance Sheets consisted of the following:
| | | | | |
| | | | | |
| As of September 30, | | As of December 31, |
(in thousands) | 2017 | | 2016 | (in thousands) | | As of March 31,
2024 | | As of December 31,
2023 |
| Retention receivable | |
| Costs and estimated earnings in excess of billings: | |
| Claims | |
| Claims | |
Claims | $ | 505,069 | | $ | 477,425 |
Unapproved change orders | | 295,204 | | | 207,475 |
Other unbilled costs and profits | | 102,039 | | | 146,926 |
Total costs and estimated earnings in excess of billings | $ | 902,312 | | $ | 831,826 |
| Capitalized contract costs | |
| Total contract assets | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Retention receivable represents amounts invoiced to customers where payments have been partially withheld pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project. Retention agreements vary from project to project, and balances could be outstanding for several months or years depending on a number of circumstances such as contract-specific terms, project performance and other variables that may arise as the Company makes progress toward completion.
Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. Costs and estimated earnings in excess of billings result when either: (1) the appropriate contract revenue amount has been recognized over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract, or (2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. The Company routinely estimates recovery related to claims and unapproved change orders as a form of variable consideration at the most likely amount it expects to receive and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Claims and unapproved change orders are billable upon the agreement and resolution of any disputed or open items between the contractual parties and after the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions where recovery is concluded to be both probable and reliably estimable;positions; decreases normally result from resolutions and subsequent billings. For bothAs discussed in Note 11, Commitments and Contingencies, the resolution of these claims and unapproved change orders the Company recognizes revenue, but
not profit.dispute resolution proceedings. Other unbilled costs and profits are billable in accordance with the billing terms of each of the existing contractual arrangements and, as such, the timing of contract billing cycles can cause fluctuations in the balance of unbilled costs and profits. Ultimate resolution of other unbilled costs and profits typically involves the passage of time and, often, incremental progress toward contractual requirements or milestones.
(6) Financial Commitments
Long-Term Debt
Long-term debt consisted
Capitalized contract costs are included in other current assets and primarily represent costs to fulfill a contract that (1) directly relate to an existing or anticipated contract, (2) generate or enhance resources that will be used in satisfying performance obligations in the future and (3) are expected to be recovered through the contract. Capitalized contract costs are generally expensed to the associated contract over the period of anticipated use on the followingproject. During the three months ended March 31, 2024, $16.3 million of previously capitalized contract costs were amortized and recognized as expense on the related contracts. During the three months ended March 31, 2023, $10.8 million of previously capitalized contract costs were amortized and recognized as expense on the datesrelated contracts.
Contract liabilities include amounts owed under retention provisions and billings in excess of
costs and estimated earnings. The amount as reported on the Condensed Consolidated Balance Sheets
presented:consisted of the following: | | | | | |
| | | | | |
| As of September 30, | | As of December 31, |
(in thousands) | 2017 | | 2016 |
2017 Senior Notes | $ | 492,545 | | $ | — |
2017 Credit Facility | | 146,942 | | | — |
2010 Senior Notes | | — | | | 298,120 |
2014 Revolver | | — | | | 147,990 |
Term Loan | | — | | | 54,650 |
Convertible Notes | | 159,314 | | | 152,668 |
Equipment financing, mortgages and acquisition-related notes | | 83,156 | | | 101,558 |
Other indebtedness | | 4,319 | | | 4,533 |
Total debt | | 886,276 | | | 759,519 |
Less – current maturities | | (30,951) | | | (85,890) |
Long-term debt, net | $ | 855,325 | | $ | 673,629 |
| | | | | | | | | | | | | | |
| (in thousands) | | As of March 31,
2024 | | As of December 31,
2023 |
| Retention payable | | $ | 227,731 | | | $ | 223,138 | |
| Billings in excess of costs and estimated earnings | | 1,002,268 | | | 1,103,530 | |
| Total contract liabilities | | $ | 1,229,999 | | | $ | 1,326,668 | |
Retention payable represents amounts invoiced to the Company by subcontractors where payments have been partially withheld pending the completion of certain milestones, other contractual conditions or upon the completion of the project. Generally, retention payable is not remitted to subcontractors until the associated retention receivable from customers is collected.
Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date. The balance may fluctuate depending on the timing of contract billings and the recognition of contract revenue. Revenue recognized during the three months ended March 31, 2024 and 2023 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $482.0 million and $365.1 million, respectively.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(5)Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows:
| | | | | | | | | | | | | | |
| (in thousands) | | As of March 31,
2024 | | As of December 31,
2023 |
| Cash and cash equivalents available for general corporate purposes | | $ | 128,942 | | | $ | 145,055 | |
| Joint venture cash and cash equivalents | | 229,362 | | | 235,509 | |
| Cash and cash equivalents | | 358,304 | | | 380,564 | |
| Restricted cash | | 14,749 | | | 14,116 | |
| Total cash, cash equivalents and restricted cash | | $ | 373,053 | | | $ | 394,680 | |
Cash equivalents include short-term, highly liquid investments with maturities of three months or less when acquired. Cash and cash equivalents consist of amounts available for the Company’s general purposes, the Company’s proportionate share of cash held by the Company’s unconsolidated joint ventures and 100% of amounts held by the Company’s consolidated joint ventures. In both cases, cash held by joint ventures is available only for joint venture-related uses, including future distributions to joint venture partners.
Restricted cash includes amounts primarily held as collateral to secure insurance-related contingent obligations, such as insurance claim deductibles, in lieu of letters of credit.
(6)Earnings Per Common Share
Basic earnings per common share (“EPS”) and diluted EPS are calculated by dividing net income (loss) attributable to Tutor Perini Corporation by the following: for basic EPS, the weighted-average number of common shares outstanding during the period; and for diluted EPS, the sum of the weighted-average number of both outstanding common shares and potentially dilutive securities, which for the Company can include restricted stock units (“RSUs”) and unexercised stock options. The Company calculates the effect of the potentially dilutive RSUs and stock options using the treasury stock method.
| | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| (in thousands, except per common share data) | | 2024 | | 2023 | | | |
| Net income (loss) attributable to Tutor Perini Corporation | | $ | 15,760 | | | $ | (49,196) | | | | |
| | | | | | | |
| Weighted-average common shares outstanding, basic | | 52,092 | | | 51,551 | | | | |
| Effect of dilutive RSUs and stock options | | 423 | | | — | | | | |
| Weighted-average common shares outstanding, diluted | | 52,515 | | | 51,551 | | | | |
| | | | | | | |
| Net income (loss) attributable to Tutor Perini Corporation per common share: | | | | | | | |
| Basic | | $ | 0.30 | | | $ | (0.95) | | | | |
| Diluted | | $ | 0.30 | | | $ | (0.95) | | | | |
| | | | | | | |
| Anti-dilutive securities not included above | | 1,421 | | | 2,857 | | | | |
For the three months ended March 31, 2023, all outstanding RSUs and stock options were excluded from the calculation of weighted-average diluted shares outstanding, as the shares have an anti-dilutive effect due to the net loss for the period.
(7)Income Taxes
The Company recognized an income tax expense for the three months ended March 31, 2024 of $7.3 million resulting in an effective income tax rate of 21.0%. The effective income tax rate for the three months ended March 31, 2024 was consistent with the 21.0% federal statutory rate as the impacts of rate reductions from earnings attributable to noncontrolling interests (for
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
which income taxes are not the responsibility of the Company) and federal income tax credits were offset by non-deductible expenses, share-based compensation adjustments and state income taxes (net of federal tax benefit).
The Company recognized an income tax benefit for the three months ended March 31, 2023 of $48.1 million resulting in an effective income tax rate of 49.6%. The effective income tax rate was higher than the 21.0% federal statutory rate primarily due to the pre-tax loss for the period and projected for the year. In periods reporting pre-tax losses, a tax benefit increases the effective income tax rate because it increases the tax benefit generated from the pre-tax loss. The tax benefits that caused a higher effective tax rate were primarily the earnings attributable to noncontrolling interests (for which income taxes are not the responsibility of the Company) and state income taxes (net of the federal tax benefit), partially offset by non-deductible expenses.
(8)Goodwill and Intangible Assets
Goodwill
The following table presents the changes in the carrying amount of goodwill since its inception through March 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | Civil | | Building | | Specialty
Contractors | | Total |
| Gross goodwill as of December 31, 2023 | | $ | 492,074 | | | $ | 424,724 | | | $ | 156,193 | | | $ | 1,072,991 | |
| Accumulated impairment as of December 31, 2023 | | (286,931) | | | (424,724) | | | (156,193) | | | (867,848) | |
| Goodwill as of December 31, 2023 | | 205,143 | | | — | | | — | | | 205,143 | |
| Current year activity | | — | | | — | | | — | | | — | |
| Goodwill as of March 31, 2024 | | $ | 205,143 | | | $ | — | | | $ | — | | | $ | 205,143 | |
The Company performed its annual impairment test in the fourth quarter of 2023 and concluded goodwill was not impaired. In addition, the Company determined that no triggering events occurred and no circumstances changed since the date of our annual impairment test that would more likely than not reduce the fair value of the Civil reporting unit below its carrying amount.
The Company will continue to monitor events and circumstances for changes that indicate the Civil reporting unit goodwill would need to be reevaluated for impairment during future interim periods prior to the annual impairment test. These future events and circumstances include, but are not limited to, changes in the overall financial performance of the Civil reporting unit, as well as other quantitative and qualitative factors which could indicate potential triggering events for possible impairment.
Intangible Assets
Intangible assets consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 | | Weighted-Average Amortization Period |
| (in thousands) | | Cost | | Accumulated
Amortization | | Accumulated Impairment Charge | | Carrying Value | |
| Trade names (non-amortizable) | | $ | 117,600 | | | $ | — | | | $ | (67,190) | | | $ | 50,410 | | | Indefinite |
| Trade names (amortizable) | | 69,250 | | | (28,682) | | | (23,232) | | | 17,336 | | | 20 years |
| Contractor license | | 6,000 | | | — | | | (6,000) | | | — | | | N/A |
| Customer relationships | | 39,800 | | | (23,155) | | | (16,645) | | | — | | | N/A |
| Construction contract backlog | | 149,290 | | | (149,290) | | | — | | | — | | | N/A |
| Total | | $ | 381,940 | | | $ | (201,127) | | | $ | (113,067) | | | $ | 67,746 | | | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2023 | | Weighted-Average Amortization Period |
| (in thousands) | | Cost | | Accumulated
Amortization | | Accumulated Impairment Charge | | Carrying Value | |
| Trade names (non-amortizable) | | $ | 117,600 | | | $ | — | | | $ | (67,190) | | | $ | 50,410 | | | Indefinite |
| Trade names (amortizable) | | 69,250 | | | (28,123) | | | (23,232) | | | 17,895 | | | 20 years |
| Contractor license | | 6,000 | | | — | | | (6,000) | | | — | | | N/A |
| Customer relationships | | 39,800 | | | (23,155) | | | (16,645) | | | — | | | N/A |
| Construction contract backlog | | 149,290 | | | (149,290) | | | — | | | — | | | N/A |
| Total | | $ | 381,940 | | | $ | (200,568) | | | $ | (113,067) | | | $ | 68,305 | | | |
Amortization expense related to amortizable intangible assets for both the three months ended March 31, 2024 and 2023 was $0.6 million. As of March 31, 2024, future amortization expense related to amortizable intangible assets will be approximately $1.7 million for the remainder of 2024, $2.2 million per year for the years 2025 through 2029 and $4.6 million thereafter.
The Company performed its annual impairment test for non-amortizable trade names during the fourth quarter of 2023. Based on this assessment, the Company concluded that its non-amortizable trade names were not impaired. In addition, the Company determined that no triggering events occurred and no circumstances changed since the date of our annual impairment test that would indicate impairment of its non-amortizable trade names. Other amortizable intangible assets are reviewed for impairment whenever circumstances indicate that the future cash flows generated by the assets might be less than the assets’ net carrying value. The Company had no impairment of intangible assets during the three months ended March 31, 2024 or 2023.
(9)Financial Commitments
Long-Term Debt
Long-term debt as reported on the Condensed Consolidated Balance Sheets consisted of the following:
| | | | | | | | | | | | | | |
| (in thousands) | | As of March 31,
2024 | | As of December 31,
2023 |
| 2017 Senior Notes | | $ | 498,703 | | | $ | 498,410 | |
| Term Loan B | | 266,959 | | | 357,744 | |
| Revolver | | — | | | — | |
| Equipment financing and mortgages | | 31,238 | | | 34,807 | |
| Other indebtedness | | 4,267 | | | 8,784 | |
| Total debt | | 801,167 | | | 899,745 | |
Less: Current maturities(a) | | 21,109 | | | 117,431 | |
| Long-term debt, net | | $ | 780,058 | | | $ | 782,314 | |
____________________________________________________________________________________________________(a)Current maturities at December 31, 2023 included the $91.0 million principal prepayment on the Term Loan B that was made in February 2024.
The following table reconciles the outstanding debt
balancebalances to the reported debt balances as of
September 30, 2017March 31, 2024 and December 31,
2016:2023: | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| As of September 30, 2017 | | As of December 31, 2016 |
(in thousands) | Outstanding Long-Term Debt | | Unamortized Discounts and Issuance Costs | | Long-Term Debt, as reported | | Outstanding Long-Term Debt | | Unamortized Discounts and Issuance Costs | | Long-Term Debt, as reported |
2017 Senior Notes | $ | 500,000 | | $ | (7,455) | | $ | 492,545 | | $ | — | | $ | — | | $ | — |
2017 Credit Facility | | 153,500 | | | (6,558) | | | 146,942 | | | — | | | — | | | — |
2010 Senior Notes | | — | | | — | | | — | | | 300,000 | | | (1,880) | | | 298,120 |
2014 Revolver | | — | | | — | | | — | | | 152,500 | | | (4,510) | | | 147,990 |
Term Loan | | — | | | — | | | — | | | 57,000 | | | (2,350) | | | 54,650 |
Convertible Notes | | 200,000 | | | (40,686) | | | 159,314 | | | 200,000 | | | (47,332) | | | 152,668 |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (in thousands) | Outstanding Debt | Unamortized Discounts and Issuance Costs | Debt,
as reported | | Outstanding Debt | Unamortized Discounts and Issuance Costs | Debt,
as reported |
| 2017 Senior Notes | $ | 500,000 | | $ | (1,297) | | $ | 498,703 | | | $ | 500,000 | | $ | (1,590) | | $ | 498,410 | |
| Term Loan B | 275,051 | | (8,092) | | 266,959 | | | 367,154 | | (9,410) | | 357,744 | |
Debt Transactions
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The unamortized issuance costs related to the Revolver were $1.2 million and $1.4 million as of March 31, 2024 and December 31, 2023, respectively, and are included in other assets on the Condensed Consolidated Balance Sheets.
2020 Credit Agreement
On August 18, 2020, the Company entered into a credit agreement (as amended, the “2020 Credit Agreement”) with BMO Bank N.A. (f/k/a BMO Harris Bank N.A.), as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders. The 2020 Credit Agreement provided for a $425.0 million term loan B facility (the “Term Loan B”) and a $175.0 million (which will be reduced to $170.0 million following the effectiveness of the amendment to the 2020 Credit Agreement entered into on April 15, 2024, as described in further detail in Note 19, Subsequent Events) revolving credit facility (the “Revolver”), with sub-limits for the issuance of letters of credit and swing line loans up to the aggregate amounts of $75.0 million and $10.0 million, respectively. The Term Loan B will mature on August 18, 2027, except that if any of the 2017 Senior Notes (defined below) remain outstanding beyond future dates specified below, the maturity of certain amounts of the Term Loan B will be accelerated (“spring-forward maturity”). The spring-forward maturity provisions are as follows: (i) if on January 30, 2025, any of the 2017 Senior Notes remain outstanding, the maturity date for one tranche of the Term Loan B (representing 10.2% of the principal balance) shall be January 30, 2025 (which is 91 days prior to the maturity of the 2017 Senior Notes) and (ii) if on April 21, 2025, any of the 2017 Senior Notes remain outstanding, the maturity date for another tranche of the Term Loan B (representing 89.8% of the principal balance) shall be April 21, 2025 (which is 10 days prior to the maturity of the 2017 Senior Notes), subject to certain further exceptions. However, following the redemption of the 2017 Senior Notes, which will occur on May 2, 2024 (as described in further detail in Note 19,
Subsequent Events), the spring-forward maturity in respect of both tranches of the Term Loan B will no longer be in effect. The Revolver will mature on August 18, 2025, unless any of the 2017 Senior Notes are outstanding on January 30, 2025, in which case any extensions of credit under the Revolver will mature and the commitments under the Revolver will be reduced to zero, in each case, on January 30, 2025, subject to certain further exceptions. However, following the effectiveness of the April 15, 2024 amendment described in further detail in Note 19, the Revolver will mature (a) if any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof) remains outstanding, the earlier of (i) May 20, 2027 and (ii) the date that is ninety (90) days prior to the final maturity of any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof), as applicable and (b) if no obligations are outstanding with respect to any tranche of the Term Loan B, any incremental term loan or any refinancing term loan, August 18, 2027. On April 15, 2024, as described in further detail in Note 19, Subsequent Events, the Company entered into an amendment in respect of the 2020 Credit Agreement to, among other things, extend the maturity of the Revolver and permanently reduce the aggregate commitments in respect of the Revolver by $5.0 million from $175.0 million to $170.0 million. The effectiveness of the amendment is subject to the satisfaction or waiver of certain conditions precedent more fully described in Note 19, Subsequent Events.
The 2020 Credit Agreement permits the Company to repay any or all borrowings outstanding under the 2020 Credit Agreement at any time prior to maturity without penalty. The 2020 Credit Agreement requires the Company to make regularly scheduled payments of principal on the Term Loan B in quarterly installments equal to 0.25% of the initial principal amount of the Term Loan B. The 2020 Credit Agreement also requires the Company to make prepayments on the Term Loan B in connection with certain asset sales, receipts of insurance proceeds, incurrences of certain indebtedness and annual excess cash flow (in each case, subject to certain customary exceptions). At December 31, 2023, current maturities of long-term debt in the accompanying Condensed Consolidated Balance Sheet included $91.0 million prepayment of principal on the Term Loan B, relating to the mandatory prepayment provision of the 2020 Credit Agreement in respect of annual excess cash flow. The $91.0 million prepayment included in current maturities at December 31, 2023, which was due by the first week of April 2024, was paid in February 2024.
Subject to certain exceptions, at any time prior to maturity, the 2020 Credit Agreement provides the Company with the right to increase the commitments under the Revolver and/or to establish one or more term loan facilities in an aggregate amount up to (i) the greater of $173.5 million and 50% LTM EBITDA (as defined in the 2020 Credit Agreement) plus (ii) additional amounts if (A) in the case of pari passu first lien secured indebtedness, the First Lien Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 1.35:1.00, (B) in the case of junior lien secured indebtedness, the Total Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 3.50:1.00 and (C) in the case of unsecured indebtedness, (x) the Total Net Leverage Ratio does not exceed 3.50:1.00 or (y) the Fixed Charge Coverage Ratio (as defined in the 2020 Credit Agreement) is no less than 2.00:1.00.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Borrowings under the 2020 Credit Agreement bear interest, at the Company’s option, at a rate equal to (i) (A) in the case of the Term Loan B, following the amendment to the 2020 Credit Agreement on May 2, 2023 (as discussed below), (x) the Adjusted Term Secured Overnight Financing Rate (“Adjusted Term SOFR”) (calculated with a 11.448 basis point, 26.161 basis point and 42.826 basis point credit spread adjustment for a 1, 3 and 6 month interest period, respectively) or (y) a base rate (determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 50 basis points and (3) the Adjusted Term SOFR rate for a one-month interest period plus 100 basis points) and (B) in case of the Revolver, following the amendment to the 2020 Credit Agreement on October 31, 2022 (as discussed below), (x) the Adjusted Term SOFR rate (calculated with a 10 basis point credit spread adjustment for all interest periods) or (y) a base rate (determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 50 basis points and (3) the Adjusted Term SOFR rate for a one-month interest period plus 100 basis points) plus, in each case, (ii) an applicable margin. The margin applicable to the Term Loan B is between 4.50% and 4.75% for Adjusted Term SOFR and between 3.50% and 3.75% for base rate, and, in each case, is based on the Total Net Leverage Ratio. The margin applicable to the Revolver is between 4.25% and 4.75% for Adjusted Term SOFR and 3.25% and 3.75% for base rate, and, in each case, is based on the First Lien Net Leverage Ratio. Effective following the amendment to the 2020 Credit Agreement on October 31, 2022, the Company’s original London Interbank Offered Rate (“LIBOR”) option in respect of the Revolver was transitioned to Adjusted Term SOFR. Effective May 2, 2023, the 2020 Credit Agreement was further amended to transition the Company’s original LIBOR option in respect of the Term Loan B to Adjusted Term SOFR. In addition to paying interest on outstanding principal under the 2020 Credit Agreement, the Company will pay a commitment fee to the lenders under the Revolver in respect of the unutilized commitments thereunder. The Company will pay customary letter of credit fees. If a payment or bankruptcy event of default occurs and is continuing, the otherwise applicable margin on overdue amounts will be increased by 2% per annum. The 2020 Credit Agreement includes customary provisions for the replacement of Adjusted Term SOFR with an alternative benchmark rate upon Adjusted Term SOFR being discontinued. There were no borrowings under the Revolver during the three months ended March 31, 2024. At March 31, 2024, the borrowing rate on the Revolver was 12.3%.
As amended, the 2020 Credit Agreement requires, solely with respect to the Revolver, the Company and its restricted subsidiaries to maintain a maximum First Lien Net Leverage Ratio of 3.50:1.00, effective the fiscal quarter ended December 31, 2022 and increasing to 3.75:1.00 for the fiscal quarter ending March 31, 2023 and subsequently stepping down to 3.00:1.00 for the fiscal quarter ending June 30, 2023, 2.50:1.00 for the fiscal quarter ending September 30, 2023 and 2.25:1.00 for the fiscal quarter ending December 31, 2023 and each fiscal quarter thereafter. The 2020 Credit Agreement also includes certain customary representations and warranties, affirmative covenants and events of default. Subject to certain exceptions, substantially all of the Company’s existing and future material wholly-owned subsidiaries unconditionally guarantee the obligations of the Company under the 2020 Credit Agreement; additionally, subject to certain exceptions, the obligations are secured by a lien on substantially all of the assets of the Company and its subsidiaries guaranteeing these obligations.
As of March 31, 2024, the entire $175.0 million was available under the Revolver. The Company had not utilized the Revolver for letters of credit. The Company was in compliance with the financial covenant under the 2020 Credit Agreement for the period ended March 31, 2024.
2024 Senior Notes
On April 22, 2024, as described in further detail in Note 19, Subsequent Events, the Company issued $400.0 million in aggregate principal amount of 11.875% Senior Notes due April 30, 2029 (the “2024 Senior Notes”) in a private placement offering.
2017 Senior Notes
On April 20, 2017, the Company issued
$500$500.0 million in aggregate principal amount of 6.875% Senior Notes due
May 1, 2025 (the “2017 Senior Notes”) in a private
placement.placement offering. Interest on the 2017 Senior Notes is payable in arrears semi-annually in May and November of each year, beginning in November 2017.
Prior to May 1, 2020, the Company may redeem the 2017 Senior Notes at a redemption price equal to 100% of their principal amount plus a “make-whole” premium described in the indenture. In addition, prior to May 1, 2020, the Company may redeem up to 40% of the original aggregate principal amount of the notes at a redemption price of 106.875% of their principal amount with the proceeds received by the Company from any offering of the Company’s equity. After May 1, 2020, the
The Company may redeem the 2017 Senior Notes at specified redemption prices described in the indenture. Upon a change of control, holders of the 2017 Senior Notes may require the Company to repurchase all or part of the 2017 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The 2017 Senior Notes are senior unsecured obligations of the Company and are guaranteed by substantially all of the Company’s existing and future subsidiaries that also guarantee obligations under the Company’s 20172020 Credit Facility,Agreement, as
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
defined
below.above. In addition, the indenture for the 2017 Senior Notes provides for customary covenants, including events of default and restrictions on the payment of dividends and share repurchases.
2017 Credit Facility
On April 20, 2017,
As described in further detail in Note 19, Subsequent Events, the Company entered into a credit agreement (the “2017 Credit Facility”) with SunTrust Bank as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2017 Credit Facility provides for a $350 million revolving credit facility (the “2017 Revolver”) and a sublimit for the issuance of letters of credit and swingline loans up to the aggregate amount of $150 million and $10 million, respectively, both maturing on April 20, 2022, unless anyproceeds of the Convertible2024 Senior Notes, as defined below, aretogether with cash on hand, will be used to redeem in full, all of the outstanding on December 17, 2020, in which case all such borrowings will mature on December 17, 2020 (subject to certain further exceptions). In addition, the 2017 Credit Facility permits additional borrowings in an aggregate amount of $150 million, which can be in the form of increased capacity on the 2017 Revolver or the establishment of one or more term loans.Borrowings under the 2017 Revolver bear interest, at the Company’s option, at a rate equal to a margin over (a) the London Interbank Offered Rate (“LIBOR”) plus a margin of between 1.50% and 3.00% or (b) a base rate (determined by reference to the highest of (i) the administrative agent’s prime lending rate, (ii) the federal funds effective rate plus 50 basis points, (iii) the LIBOR rate for a one-month interest period plus 100 basis points and (iv) 0%), plus a margin of between 0.50% and 2.00%, in each case based on the Consolidated Leverage Ratio (as defined in the 2017 Credit Facility). In addition to paying interest on outstanding principal under the 2017 Credit Agreement, the Company will pay a commitment fee to the lenders under the 2017 Revolverobligations in respect of the unutilized commitments thereunder. The Companywill pay customary letter2017 Senior Notes. A Notice of credit fees. If an eventConditional Full Redemption was delivered to holders of default occurs and is continuing, the otherwise applicable margin and letter of credit fees will be increased by 2% per annum. The weighted-average annual interest rate on borrowings under the 2017 Revolver was approximately 3.86% during the first nine months of 2017.
The 2017 Credit Facility contains customary covenants for credit facilities of this type, including maximum consolidated leverage ratios ranging from 4.00:1.00 to 3.25:1.00 over the life of the facility and a minimum consolidated fixed charge coverage ratio of 1.25:1.00. Substantially all of the Company’s subsidiaries unconditionally guarantee the obligations of the Company under the 2017 Credit Facility; additionally, the obligations are secured by a lien on all personal property of the Company and its subsidiaries guaranteeing these obligations.
As of September 30, 2017, there was $197 million available under the 2017 Revolver, and the Company had not utilized the 2017 Credit Facility for letters of credit. The Company was in compliance with the financial covenants under the 2017 Credit Facility as of September 30, 2017.
Repurchase and Redemption of 2010 Senior Notes and Termination of 2014 Credit Facility
On April 20, 2017, the Company used proceeds from the 2017 Senior Notes on April 17, 2024, and the redemption of the 2017 Revolver to repurchase or redeem its 2010 Senior Notes to pay off its Term Loan and 2014 Revolver, and to pay accrued but unpaid interest and fees. In addition, the indenture governing the 2010 Senior Notes was satisfied and discharged, and the Company terminated the 2014 Credit Facility.
2010 Senior Notes
On October 20, 2010, the Company issued $300 million of 7.625% Senior Notes due November 1, 2018 (the “2010 Senior Notes”) in a private placement offering. As discussed above, on April 20, 2017, the Company repurchased or redeemed the 2010 Senior Notes in full and the related indenture was satisfied and discharged.
2014 Credit Facility
On June 5, 2014, the Company entered into a Sixth Amended and Restated Credit Agreement, as amended (the “2014 Credit Facility”), with Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 2014 Credit Facility provided for a $300 million revolving credit facility (the “2014 Revolver”), a $250 million term loan (the “Term Loan”) and a sublimit for the issuance of letters of credit up to the aggregate amount of $150 million, all maturingwill occur on May 1, 2018. Borrowings under both the 2014 Revolver and the Term Loan bore interest based either on Bank of America’s prime lending rate or the London Interbank Offered Rate (“LIBOR”), each plus an applicable margin ranging from 1.25% to 3.00%, contingent upon the latest Consolidated Leverage Ratio.
2, 2024.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
As discussed above, on April 20, 2017, the Company repaid all borrowings under the 2014 Credit Facility and concurrently terminated the facility.
Convertible Notes
On June 15, 2016, the Company issued $200 million of 2.875% Convertible Senior Notes due June 15, 2021 (the “Convertible Notes”) in a private placement offering. The Convertible Notes are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company. The Convertible Notes bear interest at a rate of 2.875% per year, payable in cash semi-annually in June and December.
Prior to January 15, 2021, the Convertible Notes will be convertible only under the following circumstances: (1) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for such trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (2) if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion rate of 33.0579 (or $39.32) on each applicable trading day; or (3) upon the occurrence of specified corporate events. On or after January 15, 2021 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
The Convertible Notes will be convertible at an initial conversion rate of 33.0579 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $30.25. The conversion rate will be subject to adjustment for some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company is required to increase, in certain circumstances, the conversion rate for a holder who elects to convert their Convertible Notes in connection with such a corporate event including customary conversion rate adjustments in connection with a “make-whole fundamental change” described in the indenture. Upon conversion, and at the Company’s election, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock. As of September 30, 2017, the conversion provisions of the Convertible Notes have not been triggered.
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TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Interest Expense
Interest expense as reported in the Condensed Consolidated Statements of Operations consistsconsisted of the following:
| | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in thousands) | 2024 | 2023 | | | |
| Cash interest expense: | | | | | |
| Interest on Term Loan B | $ | 8,488 | | $ | 9,749 | | | | |
| Interest on 2017 Senior Notes | 8,594 | | 8,594 | | | | |
| Interest on Revolver | — | | 1,745 | | | | |
| | | | | |
| Other interest | 419 | | 421 | | | | |
| Total cash interest expense | 17,501 | | 20,509 | | | | |
| | | | | |
Non-cash interest expense:(a) | | | | | |
| | | | | |
| Amortization of discount and debt issuance costs on Term Loan B | 1,318 | | 571 | | | | |
| Amortization of debt issuance costs on 2017 Senior Notes | 293 | | 273 | | | | |
| Amortization of debt issuance costs on Revolver | 195 | | 160 | | | | |
| Total non-cash interest expense | 1,806 | | 1,004 | | | | |
| | | | | |
| Total interest expense | $ | 19,307 | | $ | 21,513 | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
Cash interest expense: | | | | | | | | | | | |
Interest on 2017 Senior Notes | $ | 8,593 | | $ | — | | $ | 15,373 | | $ | — |
Interest on 2017 Credit Facility | | 2,035 | | | — | | | 3,526 | | | — |
Interest on 2010 Senior Notes | | — | | | 5,719 | | | 6,926 | | | 17,156 |
Interest on 2014 Credit Facility | | — | | | 3,553 | | | 4,455 | | | 15,943 |
Interest on Convertible Notes | | 1,438 | | | 1,438 | | | 4,313 | | | 1,677 |
Other interest | | 802 | | | 556 | | | 2,495 | | | 2,755 |
Cash portion of loss on extinguishment | | — | | | — | | | 1,913 | | | — |
Total cash interest expense | | 12,868 | | | 11,266 | | | 39,001 | | | 37,531 |
| | | | | | | | | | | |
Non-cash interest expense:(a) | | | | | | | | | | | |
Amortization of debt issuance costs on 2017 Senior Notes | | 185 | | | — | | | 326 | | | — |
Amortization of debt issuance costs on 2017 Credit Facility | | 322 | | | — | | | 603 | | | — |
Amortization of discount and debt issuance costs on 2010 Senior Notes | | — | | | 251 | | | 308 | | | 750 |
Amortization of debt issuance costs on 2014 Credit Facility | | — | | | 1,458 | | | 1,703 | | | 3,969 |
Amortization of discount and debt issuance costs on Convertible Notes | | 2,268 | | | 2,066 | | | 6,646 | | | 2,405 |
Non-cash portion of loss on extinguishment | | — | | | — | | | 5,139 | | | — |
Total non-cash interest expense | | 2,775 | | | 3,775 | | | 14,725 | | | 7,124 |
| | | | | | | | | | | |
Total interest expense | $ | 15,643 | | $ | 15,041 | | $ | 53,726 | | $ | 44,655 |
(a)The combination of cash and non-cash interest expense produces effective interest rates that are higher than contractual rates. Accordingly, the effective interest rates for the 2017 Senior Notes and the Convertible NotesTerm Loan B were 7.13% and 9.39%13.13%, respectively, for the ninethree months ended September 30, 2017.
(7) ContingenciesMarch 31, 2024.(10)Leases
The Company leases certain office space, construction and office equipment, vehicles and temporary housing generally under non-cancelable operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet, and the Company generally recognizes lease expense for these leases on a straight-line basis over the lease term. As of March 31, 2024, the Company’s operating leases have remaining lease terms ranging from less than one year to 14 years, some of which include options to renew the leases. The exercise of lease renewal options is generally at the Company’s sole discretion. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The following table presents components of lease expense for the three months ended March 31, 2024 and 2023:
| | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| (in thousands) | 2024 | 2023 | | | |
| Operating lease expense | $ | 3,320 | | $ | 3,474 | | | | |
Short-term lease expense(a) | 12,323 | | 13,919 | | | | |
| 15,643 | | 17,393 | | | | |
| Less: Sublease income | 199 | | 194 | | | | |
| Total lease expense | $ | 15,444 | | $ | 17,199 | | | | |
(a)Short-term lease expense includes all leases with lease terms of up to one year. Short-term leases include, among other things, construction equipment rented on an as-needed basis as well as temporary housing.
The following table presents supplemental balance sheet information related to operating leases:
| | | | | | | | | | | |
| (dollars in thousands) | Balance Sheet Line Item | As of March 31,
2024 | As of December 31,
2023 |
| Assets | | | |
| Right-of-use assets | Other assets | $ | 51,254 | | $ | 48,878 | |
| Total lease assets | | $ | 51,254 | | $ | 48,878 | |
| Liabilities | | | |
| Current lease liabilities | Accrued expenses and other current liabilities | $ | 6,605 | | $ | 6,275 | |
| Long-term lease liabilities | Other long-term liabilities | 49,981 | | 47,781 | |
| Total lease liabilities | | $ | 56,586 | | $ | 54,056 | |
| Weighted-average remaining lease term | | 9.9 years | 10.3 years |
| Weighted-average discount rate | | 12.01 | % | 12.13 | % |
The following table presents supplemental cash flow information and non-cash activity related to operating leases:
| | | | | | | | |
| Three Months Ended
March 31, |
| (in thousands) | 2024 | 2023 |
| Operating cash flow information: | | |
| Cash paid for amounts included in the measurement of lease liabilities | $ | (3,168) | | $ | (3,446) | |
| Non-cash activity: | | |
| Right-of-use assets obtained in exchange for lease liabilities | $ | 4,154 | | $ | 318 | |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The following table presents maturities of operating lease liabilities on an undiscounted basis as of March 31, 2024:
| | | | | |
Year (in thousands) | Operating Leases |
| 2024 (excluding the three months ended March 31, 2024) | $ | 9,428 | |
| 2025 | 11,580 | |
| 2026 | 9,704 | |
| 2027 | 8,281 | |
| 2028 | 8,183 | |
| Thereafter | 52,269 | |
| Total lease payments | 99,445 | |
| Less: Imputed interest | 42,859 | |
| Total | $ | 56,586 | |
(11)Commitments and Contingencies
The Company and certain of its subsidiaries are involved in litigation and areother legal proceedings and forms of dispute resolution in the ordinary course of business, including but not limited to disputes over contract payment and/or performance-related issues (such as disagreements regarding delay or a change in the scope of work of a project and/or the price associated with that change) and other matters incidental to the Company’s business. In accordance with ASC 606, the Company makes assessments of these types of matters on a routine basis and, to the extent permitted by ASC 606, estimates and records recovery related to these matters as a form of variable consideration at the most likely amount the Company expects to receive, as discussed further in Note 4, Contract Assets and Liabilities. In addition, the Company is contingently liable for commitmentslitigation, performance guarantees and performance guaranteesother commitments arising in the ordinary course of business. The Companybusiness, which are accounted for in accordance with ASC 450, Contingencies. Management reviews these matters regularly and certain ofupdates or revises its customers have made claims arising from the performance under their contracts. The Company recognizes certain significant claims for recovery of incurred cost when it is probable that the claim will result in additional contract revenueestimates as warranted by subsequent information and when the amount of the claim can be reliably estimated.developments. These assessments require judgments concerning matters that are inherently uncertain, such as litigation developments and outcomes, the anticipated outcome of negotiations the number of future claims, and the estimated cost of both pendingresolving disputes. Consequently, these assessments are estimates, and future claims.actual amounts may vary from such estimates. In addition, because most contingenciessuch matters are typically resolved over long periods of time, the Company’s assets and liabilities may change inover time should the future due to various factors.circumstances dictate. The description of the legal proceedings listed below include management’s assessment of those proceedings. Management believes that, based on current information and discussions with the Company’s legal counsel, the ultimate resolution of theseother matters is not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.Several matters are in the litigation and dispute resolution process. The following discussion provides a background and current status
A description of the
more significant matters.Long Island Expressway/Cross Island Parkway Matter
The Company reconstructed the Long Island Expressway/Cross Island Parkway Interchange for the New York State Department of Transportation (the “NYSDOT”). The $130 million project was substantially completed in January 2004 and was accepted by the NYSDOT as complete in February 2006. The Company incurred significant added costs in completing its work and suffered extended schedule costs due to numerous design errors, undisclosed utility conflicts, lack of coordination with local agencies andmaterial pending legal proceedings, other interferences for which the Company believes the NYSDOT is responsible.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
In March 2011, the Company filed its claim and complaint with the New York State Court of Claims and servedthan ordinary routine litigation incidental to the New York State Attorney General’s Office, seeking damages in the amount of $53.8 million. In May 2011, the NYSDOT filed a motion to dismiss the Company’s claim on the grounds that the Company had not provided required documentation for project closeout and filing of a claim. In September 2011, the Company reached agreement on final payment with the Comptroller’s Office on behalf of the NYSDOT, which resulted in an amount of $0.5 million payable to the Company and formally closed out the project allowing the Company to re-file its claim. The Company re-filed its claim in the amount of $53.8 million with the NYSDOT in February 2012 and with the Court of Claims in March 2012. In May 2012, the NYSDOT served its answer and counterclaims in the amount of $151 million alleging fraud in the inducement and punitive damages related to disadvantaged business enterprise (“DBE”) requirements for the project. The Court subsequently ruled that NYSDOT’s counterclaims may only be assertedis as a defense and offset to the Company’s claims and not as affirmative claims. In November 2014, the Appellate Division First Department affirmed the dismissal of the City’s affirmative defenses and affirmative counterclaims based on DBE fraud. The Company does not expect the counterclaims to have any material effect on its consolidated financial statements.
Management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.
Fontainebleau Matter
Desert Mechanical, Inc. (“DMI”) and Fisk Electric Company (“Fisk”), wholly owned subsidiaries of the Company, were subcontractors on the Fontainebleau Project in Las Vegas (“Fontainebleau”), a hotel/casino complex with approximately 3,800 rooms. In June 2009, Fontainebleau filed for bankruptcy protection, under Chapter 11 of the U.S. Bankruptcy Code, in the Southern District of Florida.
DMI and Fisk filed liens in Nevada for approximately $44 million, representing unreimbursed costs to date and lost profits, including anticipated profits. Other unaffiliated subcontractors have also filed liens. In June 2009, DMI filed suit against Turnberry West Construction, Inc., the general contractor, in the 8th Judicial District Court, Clark County, Nevada (the “District Court”), and in May 2010, the court entered an order in favor of DMI for approximately $45 million.
In January 2010, the Bankruptcy Court approved the sale of the property to Icahn Nevada Gaming Acquisition, LLC, and this transaction closed in February 2010. As a result of a July 2010 ruling relating to certain priming liens, there was approximately $125 million set aside from this sale that is available for distribution to satisfy the creditor claims based on seniority. At that time, the total estimated sustainable lien amount was approximately $350 million. The project lender filed suit against the mechanic’s lien claimants, including DMI and Fisk, alleging that certain mechanic’s liens are invalid and that all mechanic’s liens are subordinate to the lender’s claims against the property. The Nevada Supreme Court ruled in October 2012 in an advisory opinion at the request of the Bankruptcy Court that lien priorities would be determined in favor of the mechanic lien holders under Nevada law.
In October 2013, a settlement was reached by and among the Statutory Lienholders and the other interested parties. The Bankruptcy Court appointed a mediator to facilitate the execution of that settlement agreement, but the parties were unable to settle. During the third quarter of 2017, DMI filed a motion seeking permission to file an action in Nevada; the motion was granted by the Bankruptcy Court.
Management has made an estimate of the total anticipated recovery on this project, and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.
Honeywell Street/Queens Boulevard Bridges Matter
In 1999, the Company was awarded a contract for reconstruction of the Honeywell Street/Queens Boulevard Bridges project for the City of New York (the “City”). In June 2003, after substantial completion of the project, the Company initiated an action to recover $8.8 million in claims against the City on behalf of itself and its subcontractors. In March 2010, the City filed counterclaims for $74.6 million and other relief, alleging fraud in connection with the DBE requirements for the project. In May 2010, the Company served the City with its response to the City’s counterclaims and affirmative defenses. In August 2013, the Court granted the Company’s motion to dismiss the City’s affirmative defenses and counterclaims relating to fraud.
follows:
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In January 2017, the Court granted the City’s motion for summary judgment and dismissed the Company’s claim against the City. The Company has filed a notice of appeal. The Court also granted the Company’s motion for summary judgment for release of retention plus interest from 2010 for an aggregate amount of approximately $1.2 million.
The Company does not expect ultimate resolution of this matter to have a material effect on its consolidated financial statements.
Westgate Planet Hollywood Matter
Tutor-Saliba Corporation (“TSC”), a wholly owned subsidiary of the Company, was contracted to construct a timeshare development project in Las Vegas, which was substantially completed in December 2009. The Company’s claims against the owner, Westgate Planet Hollywood Las Vegas, LLC (“WPH”), relate to unresolved owner change orders and other claims. The Company filed a lien on the project in the amount of $23.2 million and filed its complaint with the District Court, Clark County, Nevada. Several subcontractors have also recorded liens, some of which have been released by bonds and some of which have been released as a result of subsequent payment. WPH has posted a mechanic’s lien release bond for $22.3 million.
WPH filed a cross-complaint alleging non-conforming and defective work for approximately $51 million, primarily related to alleged defects, misallocated costs and liquidated damages. WPH revised the amount of their counterclaims to approximately $45 million.
Following multiple post-trial motions, final judgment was entered in this matter on March 20, 2014. TSC was awarded total judgment in the amount of $19.7 million on its breach of contract claim, which includes an award of interest up through the date of judgment, plus attorney’s fees and costs. WPH was awarded total judgment in the amount of $3.1 million on its construction defect claims, which includes interest up through the date of judgment. WPH and its Sureties have filed a notice of appeal. TSC has filed a notice of appeal on the defect award. In July 2014, the Court ordered WPH to post an additional supersedeas bond on appeal, in the amount of $1.7 million, in addition to the lien release bond of $22.3 million, which increases the security up to $24.0 million. In May 2017, the Nevada Supreme Court issued its ruling on the appeal by WPH and its Sureties. With only minor adjustments, the Nevada Supreme Court affirmed the lower district court’s judgment, and following further proceedings in the lower district court, the anticipated final recovery to the Company is estimated to exceed $20 million, including interest and recovery of certain attorneys’ fees and costs.
The Company does not expect ultimate resolution of this matter to have any material effect on its consolidated financial statements. Management has made an estimate of the total anticipated recovery on this project and such estimate is included in revenue recorded to date. To the extent new facts become known or the final recovery included in the claim settlement varies from the estimate, the impact of the change will be reflected in the consolidated financial statements at that time.
U.S. Department of Commerce, National Oceanic and Atmospheric Administration Matter
Rudolph and Sletten, Inc. (“R&S”), a wholly owned subsidiary of the Company, entered into a contract with the United States Department of Commerce, National Oceanic and Atmospheric Administration (“NOAA”) for the construction of a 287,000 square-foot facility for NOAA’s Southwest Fisheries Science Center Replacement Headquarters and Laboratory in La Jolla, California. The contract work began on May 24, 2010 and was substantially completed in September 2012. R&S incurred significant additional costs as a result of design errors and omissions, NOAA’s unwillingness to correct design flaws in a timely fashion and a refusal to negotiate the time and pricing associated with change order work. R&S filed claims against NOAA for contract adjustments related to the unresolved owner change orders, delays, design deficiencies and other claims.
In March 2017, the parties agreed to a proposed settlement, which was subsequently approved and paid by the government in the third quarter of 2017. The settlement did not have a material impact on the Company’s financial results for the three and nine months ended September 30, 2017.
Five Star Electric Matter
In the third quarter of 2015, Five Star Electric Corp. ("Five Star"), a wholly owned subsidiary of the Company that was acquired in 2011, entered into a tolling agreement (which has since expired) related to an ongoing investigation being conducted by the United States Attorney’s Office for the Eastern District of New York (“USAO EDNY”). Five Star has been cooperating with the USAO EDNY since late June 2014, when it was first made aware of the investigation, and has provided information requested by the government related to its use of certain minority-owned, women-owned, small and disadvantaged business enterprises and certain of Five Star’s employee compensation, benefit and tax practices.
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As of September 30, 2017, the Company cannot predict the ultimate outcome of the investigation and cannot reasonably estimate the potential loss or range of loss that Five Star or the Company may incur or the impact of the results of the investigation on Five Star or the Company.
Alaskan Way Viaduct Matter
In January 2011, Seattle Tunnel Partners (“STP”), a joint venture between Dragados USA, Inc. and the Company, entered into a design-build contract with the Washington State Department of Transportation (“WSDOT”) for the construction of a
large diameterlarge-diameter bored tunnel in downtown Seattle, King County, Washington to replace the Alaskan Way Viaduct, also known as State Route 99.
The Company has a 45% interest in STP.
The construction of the
large diameterlarge-diameter bored tunnel required the use of a tunnel boring machine (“TBM”). In December 2013, the TBM struck a steel pipe, installed by WSDOT as a well casing for an exploratory well. The TBM was
significantly damaged and was required to be
shut down for repair.repaired. STP has asserted that the steel pipe casing was a differing site condition that WSDOT failed to properly disclose. The Disputes Review Board mandated by the contract to hear disputes issued a decision finding the steel casing was a Type I
(material) differing site condition. WSDOT
hasdid not
acceptedaccept that finding.
The TBM was insured under a Builder’s Risk Insurance Policy (the “Policy”) with Great Lakes Reinsurance (UK) PLC and a consortium of other insurers (the “Insurers”). STP submitted the claims to the Insurers and requested interim payments under the Policy. The Insurers refused to pay and denied coverage. In June 2015, STP filed a lawsuit in the King County Superior Court, State of Washington (“Washington Superior Court”) seeking declaratory relief concerning contract interpretation, as well as damages as a result of the Insurers’ breach of their obligations under the terms of the Policy. STP is also asserting extra-contractual and statutory claims
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
against the Insurers. STP submitted damages to the Insurers in the King County lawsuit in the amount of $532 million. WSDOT is deemed a plaintiff since WSDOT is an insured under the Policy and had filed its own claim for damages. Hitachi Zosen (“Hitachi”), the manufacturer of the TBM, has also joined the case as a plaintiff for costs incurred to repair the damages to the TBM. Trial
In April and September 2018, rulings received on pre-trial motions limited some of the potential recoveries under the Policy for STP, WSDOT and Hitachi. On August 2, 2021, the Court of Appeals reversed in part certain of those limitations but affirmed other parts of those rulings. On September 15, 2022, the Washington Supreme Court affirmed the decision of the Court of Appeals, which limits recovery of certain damages under the Policy. Based on the rulings of the Court of Appeals, the case will continue for adjudication on the remaining facts and legal issues, including the number of covered occurrences which could increase the amount of available coverage under the Policy and the amount of investigative costs that are subject to the Policy limits. STP also has claims for costs, fees, pre-judgment interest and extra-contractual and statutory claims, which are not subject to the Policy limits. The case has been scheduled for trial commencing September 23, 2024.
In addition, STP has a pending case in the Washington Superior Court against HNTB Corporation (“HNTB”), its design firm on the project, wherein STP alleges that HNTB is liable for providing design services that resulted in the TBM striking the steel pipe described above and for additional steel quantity costs associated with the project. STP’s complaint seeks in excess of $640 million. The case is scheduled for
October 2018. Discovery is ongoing.trial to commence on April 27, 2025.
With respect to STP’s direct and indirect claims against the Insurers and HNTB, management has included in receivables an estimate of the total anticipated recovery concluded to be probable.
In March 2016, WSDOT filed a complaint against STP in Thurston County Superior Court
foralleging breach of contract,
alleging STP’s delaysseeking $57.2 million in delay-related damages and
failure to perform andseeking declaratory relief concerning contract interpretation. STP
filed its answer to WSDOT’s complaint andsubsequently filed a counterclaim against WSDOT
seeking the same damages in excess of $640 million. The jury trial between STP and
Hitachi. Trial is setWSDOT commenced on October 7, 2019 and concluded on December 13, 2019, with a jury verdict in favor of WSDOT awarding them $57.2 million in damages. The Company recorded the impact of the jury verdict during the fourth quarter of 2019, resulting in a pre-tax charge of $166.8 million, which included $25.7 million for
June 2018. Discovery is ongoing.Asthe Company’s 45% proportionate share of September 30, 2017, the Company has concluded that$57.2 million in damages awarded by the potentialjury to WSDOT. The charge was for a material adverse financial impact duenon-cash write-downs primarily related to the Insurers’ denial of coverage and WSDOT’s legal actions is neither probable nor remote, and the potential loss or range of loss is not reasonably estimable. With respect to STP’s claims against the Insurers, WSDOT and Hitachi, management has included an estimate of the total anticipated recovery, concluded to be both probable and reliably estimable, in receivables or costs and estimated earnings in excess of billings and receivables that the Company previously recorded to date. Toreflect its expected recovery in this case.
STP filed a petition for discretionary review by the extent new facts become known orWashington Supreme Court on July 12, 2022, which was denied by the final recoveries varySupreme Court on October 10, 2022. On October 18, 2022, STP paid the damages and associated interest from the estimate,judgment, which included the impactCompany’s proportionate share of $34.6 million. As a result, the lawsuit between STP and WSDOT has concluded.
(12)Share-Based Compensation
As of March 31, 2024, there were 1,457,658 shares of common stock available for grant under the Tutor Perini Corporation Omnibus Incentive Plan. During the three months ended March 31, 2024 and 2023, the Company granted the following share-based instruments: (1) RSUs totaling 30,000 and 590,188, respectively, with weighted-average grant date fair values per unit of $12.68 and $8.66, respectively; (2) cash-settled performance stock units (“CPSUs”) totaling 645,180 and 901,541, respectively, with weighted-average grant date fair values per unit of $19.17 and $13.78, respectively; and (3) deferred cash awards (“DCAs”), including cash-settled stock units, with service-based vesting conditions and payouts indexed to shares of the change will be reflected in the financial statements at that time.(8) Other Income, Net
On MayCompany’s common stock totaling 673,855 and 90,000, respectively, with weighted-average grant date fair values per unit of $12.75 and $8.98, respectively.
As of March 31, 2017,2024 and December 31, 2023, the Company entered into a settlement agreementrecognized liabilities for CPSUs, RSUs with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”)guaranteed minimum payouts and DCAs on the Condensed Consolidated Balance Sheets totaling approximately $7.5 million and $4.9 million, as successor in interest to Banc of America Securities LLC and Bank of America, N.A. (collectively “BofA”), to resolverespectively. During the pending litigation betweenthree months ended March 31, 2024, the Company paid approximately $1.0 million, respectively, to settle certain awards.
For the three months ended March 31, 2024 and Merrill Lynch. The litigation, which was filed by2023, the Company in 2011, relatedrecognized, as part of general and administrative expenses, costs for share-based payment arrangements totaling $5.5 million and $3.1 million, respectively. As of March 31, 2024, the balance of unamortized share-based compensation expense was $37.5 million, which is expected to the purchase by the Companybe recognized over a weighted-average period of certain auction-rate securities from BofA.On June 6, 2017, the Company received the $37.0 million cash settlement payment agreed to in the settlement agreement, and the pending litigation was dismissed with prejudice. Neither party made any admission of liability or wrongdoing, and the settlement agreement includes mutual releases of all claims and liabilities related to the subject matter of the pending litigation.
The Company recognized the settlement as a gain during the second quarter of 2017 and reported it as a component of other income, net in its Condensed Consolidated Statement of Operations for the nine months ended September 30, 2017.
2.4 years.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Share-Based Compensation
On April 3, 2017, the Company adopted the Tutor Perini Corporation Incentive Compensation Plan (“Compensation Plan”), which was approved by the Company’s shareholders on May 24, 2017. The Compensation Plan provides for various types of share-based grants, including restricted and unrestricted stock units and stock options. Restricted and unrestricted stock units give the holder the right to exchange their stock units for shares of the Company’s common stock on a one-for-one basis. Stock options give the holder the right to purchase shares of the Company’s common stock at an exercise price equal to the fair value of the Company’s common stock on the date of the stock option’s award. Restricted stock units and stock options are usually subject to certain service and performance conditions and may not be sold or otherwise transferred until those restrictions have been satisfied; however, unrestricted stock units have no such restrictions. The term for stock options is limited to 10 years from the date of grant. The Compensation Plan allows for 2,335,000 shares of the Company’s common stock to be issued. As of September 30, 2017, there were 1,839,364 shares available to be granted under this plan.
The Company’s Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (“Incentive Plan”) is still active. The Incentive Plan is described, and informational disclosures are provided, in the Notes to Consolidated Financial Statements included in the Form 10-K for the year ended December 31, 2016. As of September 30, 2017, there were 405,529 shares authorized to be issued under the Incentive Plan; however, as discussed in the Company’s Definitive Proxy Statement (Schedule 14A) filed on April 13, 2017, the Company will not issue these shares. As of September 30, 2017, the Incentive Plan had an aggregate of 4,360,018 of restricted stock units and stock options from outstanding, historical awards that either have not vested or have vested but have not been exercised.
During the first nine months of 2017 and 2016, the Company issued, in total from both the Compensation Plan and the Incentive Plan, the following share-based instruments: (1) restricted stock units of 1,055,000 and 483,387 at weighted-average per share prices of $30.03 and $19.14, respectively; (2) stock options of 530,000 and 274,000 at weighted-average per share exercise prices of $24.64 and $16.20, respectively; (3) unrestricted stock units of 99,155 and 64,603 at weighted-average per share prices of $26.26 and $21.67, respectively.
Effective January 1, 2017, the Company prospectively adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for the income tax effect of share-based transactions and the forfeiture of share-based instruments. Upon this adoption, the Company elected an accounting policy requiring forfeitures of share-based instruments to be accounted for upon occurrence. As a result, the Company will recognize the full grant-date fair value of share-based awards throughout the requisite service period, with any adjustments for forfeitures recognized only if and when a forfeiture occurs. This policy notwithstanding, the Company will continue to assess the probability that performance targets will be achieved, and will adjust share-based compensation expense accordingly. During the nine months ended September 30, 2017, a total of 20,985 performance-based restricted stock units, with a weighted-average per share price of $23.91, and 19,466 performance-based stock options, with a weighted-average per share exercise price of $26.56, were forfeited; however, the impact of these forfeitures was not recognized during this period because it was previously recognized in the fourth quarter of 2016 in accordance with the provisions of ASC 718, Compensation-Stock Compensation.
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UNAUDITED
(10) (13)Employee Pension Plans
The Company has a defined benefit pension plan and an unfunded supplemental retirement plan. Effective
SeptemberJune 1, 2004, all benefit accruals under these plans were frozen; however, the current vested benefit was preserved. The pension disclosure presented below includes aggregated amounts for both of the Company’s plans.
The following table sets forth
a summary of the net periodic benefit cost for the three
and nine months ended
September 30, 2017March 31, 2024 and
2016:2023: | | | | | | | | |
| | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| (in thousands) | |
| (in thousands) | |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
Interest cost | $ | 975 | | $ | 1,053 | | $ | 2,925 | | $ | 3,159 |
| Interest cost | |
| Interest cost | |
| Service cost | |
| Service cost | |
| Service cost | |
Expected return on plan assets | | (1,088) | | (1,203) | | (3,264) | | (3,609) |
Amortization of net loss | | 456 | | 427 | | 1,368 | | 1,281 |
Other | | 213 | | 150 | | | 639 | | 450 |
| Expected return on plan assets | |
| Expected return on plan assets | |
| Recognized net actuarial losses | |
| Recognized net actuarial losses | |
| Recognized net actuarial losses | |
Net periodic benefit cost | $ | 556 | | $ | 427 | | $ | 1,668 | | $ | 1,281 |
| Net periodic benefit cost | |
| Net periodic benefit cost | |
The Company contributed $2.0$0.7 million and $1.3 million to its defined benefit pension plan during the ninethree months ended September 30, 2017 and 2016, respectively, andMarch 31, 2024. The Company expects to contribute an additional $0.6$1.8 million later in 2017.(11) cash by the end of 2024. Due to availability of our prefunded pension balance related to the defined benefit pension plan, the Company was not required to make any cash payments during the three months ended March 31, 2023.
(14)Fair Value Measurements The fair value hierarchy established by ASC 820, Fair Value Measurement, prioritizes the use of inputs used in valuation techniques into the following three levels: | ·
| | Level 1 inputs are observable quoted prices in active markets for identical assets or liabilities
|
| ·
| | Level 2 inputs are observable, either directly or indirectly, but are not Level 1 inputs
|
•Level 1 inputs are observable quoted prices in active markets for identical assets or liabilities | ·
| | Level 3 inputs are unobservable
|
•Level 2 inputs are observable, either directly or indirectly, but are not Level 1 inputs•Level 3 inputs are unobservable
The following fair value hierarchy table presents the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2017March 31, 2024 and December 31, 2016:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| Fair Value Hierarchy | | | | Fair Value Hierarchy | | |
| (in thousands) | Level 1 | Level 2 | Level 3 | | Total | | Level 1 | Level 2 | Level 3 | | Total |
Cash and cash equivalents(a) | $ | 358,304 | | $ | — | | $ | — | | | $ | 358,304 | | | $ | 380,564 | | $ | — | | $ | — | | | $ | 380,564 | |
Restricted cash(a) | 14,749 | | — | | — | | | 14,749 | | | 14,116 | | — | | — | | | 14,116 | |
Restricted investments(b) | — | | 130,499 | | — | | | 130,499 | | | — | | 130,287 | | — | | | 130,287 | |
Investments in lieu of retention(c) | 28,342 | | 87,614 | | — | | | 115,956 | | | 19,988 | | 86,961 | | — | | | 106,949 | |
| Total | $ | 401,395 | | $ | 218,113 | | $ | — | | | $ | 619,508 | | | $ | 414,668 | | $ | 217,248 | | $ | — | | | $ | 631,916 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2017 | | As of December 31, 2016 |
| | Fair Value Hierarchy | | | | | Fair Value Hierarchy | | | |
(in thousands) | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Cash and cash equivalents (a) | | $ | 221,878 | | $ | — | | $ | — | | $ | 221,878 | | $ | 146,103 | | $ | — | | $ | — | | $ | 146,103 |
Restricted cash (a) | | | 17,424 | | | — | | | — | | | 17,424 | | | 50,504 | | | — | | | — | | | 50,504 |
Investments in lieu of retainage (b) | | | 56,102 | | | 3,059 | | | — | | | 59,161 | | | 46,855 | | | 4,411 | | | — | | | 51,266 |
Total | | $ | 295,404 | | $ | 3,059 | | $ | — | | $ | 298,463 | | $ | 243,462 | | $ | 4,411 | | $ | — | | $ | 247,873 |
(a)
Includes money market funds and short-term investments with original maturity dates of three months or less.less when acquired.
(b)Restricted investments, as of March 31, 2024 and December 31, 2023, consist of available-for-sale (“AFS”) debt securities, which are valued based on pricing models determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets; therefore, they are classified as Level 2 assets.
(c)Investments in lieu of customer retainageretention are included in accountsretention receivable as of March 31, 2024 and December 31, 2023, and are comprisedcomposed of money market funds of $28.3 million and municipal bonds, the majority$20.0 million, respectively, and AFS debt securities of which are rated A3 or better.$87.6 million and $87.0 million, respectively. The fair values of the money market funds are measured using quoted market prices; therefore, they are classified as Level 1 assets. The fair values of municipal bondsAFS debt securities are measured using readily available pricing sources for comparable instruments;determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets; therefore, they are classified as Level 2 assets. All
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Investments in AFS debt securities consisted of the above investmentsfollowing as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (in thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value |
| Restricted investments: | | | | | | | | | |
| Corporate debt securities | $ | 101,568 | | $ | 395 | | $ | (2,257) | | $ | 99,706 | | | $ | 95,903 | | $ | 762 | | $ | (2,202) | | $ | 94,463 | |
| U.S. government agency securities | 24,380 | | 4 | | (1,050) | | 23,334 | | | 29,082 | | 18 | | (1,054) | | 28,046 | |
| Municipal bonds | 7,899 | | 4 | | (908) | | 6,995 | | | 8,227 | | 5 | | (914) | | 7,318 | |
| Corporate certificates of deposit | 495 | | — | | (31) | | 464 | | | 498 | | — | | (38) | | 460 | |
| Total restricted investments | 134,342 | | 403 | | (4,246) | | 130,499 | | | 133,710 | | 785 | | (4,208) | | 130,287 | |
| | | | | | | | | |
| Investments in lieu of retention: | | | | | | | | | |
| Corporate debt securities | 88,134 | | 105 | | (1,682) | | 86,557 | | | 87,601 | | 246 | | (1,950) | | 85,897 | |
| Municipal bonds | 824 | | 233 | | — | | 1,057 | | | 823 | | 241 | | — | | 1,064 | |
| Total investments in lieu of retention | 88,958 | | 338 | | (1,682) | | 87,614 | | | 88,424 | | 487 | | (1,950) | | 86,961 | |
| | | | | | | | | |
| Total AFS debt securities | $ | 223,300 | | $ | 741 | | $ | (5,928) | | $ | 218,113 | | | $ | 222,134 | | $ | 1,272 | | $ | (6,158) | | $ | 217,248 | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The following table summarizes the fair value and gross unrealized losses aggregated by category and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 |
| Less than 12 Months | | 12 Months or Greater | | Total |
| (in thousands) | Fair Value | Unrealized Losses | | Fair Value | Unrealized Losses | | Fair Value | Unrealized Losses |
| Restricted investments: | | | | | | | | |
| Corporate debt securities | $ | 22,242 | | $ | (123) | | | $ | 37,507 | | $ | (2,134) | | | $ | 59,749 | | $ | (2,257) | |
| U.S. government agency securities | 3,333 | | (24) | | | 14,869 | | (1,026) | | | 18,202 | | (1,050) | |
| Municipal bonds | — | | — | | | 6,814 | | (908) | | | 6,814 | | (908) | |
| Corporate certificates of deposit | — | | — | | | 465 | | (31) | | | 465 | | (31) | |
| Total restricted investments | 25,575 | | (147) | | | 59,655 | | (4,099) | | | 85,230 | | (4,246) | |
| | | | | | | | |
| Investments in lieu of retention: | | | | | | | | |
| Corporate debt securities | 24,714 | | (125) | | | 45,925 | | (1,557) | | | 70,639 | | (1,682) | |
| Total investments in lieu of retention | 24,714 | | (125) | | | 45,925 | | (1,557) | | | 70,639 | | (1,682) | |
| | | | | | | | |
| Total AFS debt securities | $ | 50,289 | | $ | (272) | | | $ | 105,580 | | $ | (5,656) | | | $ | 155,869 | | $ | (5,928) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| Less than 12 Months | | 12 Months or Greater | | Total |
| (in thousands) | Fair Value | Unrealized Losses | | Fair Value | Unrealized Losses | | Fair Value | Unrealized Losses |
| Restricted investments: | | | | | | | | |
| Corporate debt securities | $ | 4,971 | | $ | (3) | | | $ | 40,649 | | $ | (2,199) | | | $ | 45,620 | | $ | (2,202) | |
| U.S. government agency securities | 1,280 | | (4) | | | 22,858 | | (1,050) | | | 24,138 | | (1,054) | |
| Municipal bonds | 99 | | (2) | | | 7,038 | | (912) | | | 7,137 | | (914) | |
| Corporate certificates of deposit | — | | — | | | 460 | | (38) | | | 460 | | (38) | |
| Total restricted investments | 6,350 | | (9) | | | 71,005 | | (4,199) | | | 77,355 | | (4,208) | |
| | | | | | | | |
| Investments in lieu of retention: | | | | | | | | |
| Corporate debt securities | 11,398 | | (55) | | | 49,726 | | (1,895) | | | 61,124 | | (1,950) | |
| Total investments in lieu of retention | 11,398 | | (55) | | | 49,726 | | (1,895) | | | 61,124 | | (1,950) | |
| | | | | | | | |
| Total AFS debt securities | $ | 17,748 | | $ | (64) | | | $ | 120,731 | | $ | (6,094) | | | $ | 138,479 | | $ | (6,158) | |
| | | | | | | | |
The unrealized losses in AFS debt securities as of March 31, 2024 and December 31, 2023 are available-for-sale securities.The Companyprimarily attributable to market interest rate increases and not a deterioration in credit quality of the issuers. Management evaluated the unrealized losses in AFS debt securities considering factors including credit ratings and other relevant information, which may indicate that contractual cash flows are not expected to occur.
Based on the analysis, management determined that credit losses did not have material transfers between Levels 1exist for AFS debt securities in an unrealized loss position as of March 31, 2024 and 2December 31, 2023. It is not considered likely that the Company will be required to sell the investments before full recovery of the amortized cost basis of the AFS debt securities, which may be at maturity. As a result, consistent with the same period in 2023, the Company has not recognized any impairment losses in earnings during the ninethree months ended September 30, 2017March 31, 2024.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The amortized cost and fair value of AFS debt securities by contractual maturity as of March 31, 2024 are summarized in the table below. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or
2016.prepay certain obligations.
| | | | | | | | |
| |
| (in thousands) | Amortized Cost | Fair Value |
| | |
| Due within one year | $ | 38,792 | | $ | 38,009 | |
| Due after one year through five years | 174,478 | | 171,095 | |
| Due after five years | 10,030 | | 9,009 | |
| Total | $ | 223,300 | | $ | 218,113 | |
The carrying values of receivables, payables and other amounts arising out of normal contract activities, including
retainage,retention, which may be settled beyond one year, are estimated to approximate fair value.
The Company has restricted investments with an aggregate fair value of $48.7 million as of September 30, 2017, determined using Level 2 inputs. Restricted investments are held as collateral to secure insurance related contingent obligations. They are comprised of various corporate bonds and bank notes that are rated A3 or better and have maturities within the Company’s operating cycle. These restricted investments are held-to-maturity securities carried at amortized cost of $48.8 million as of September 30, 2017. Of the Company’s long-term debt, the fair value of the 2017 Senior Notes
as of September 30, 2017 was
$537.5 million. The fair value of the 2010 Senior Notes as of December 31, 2016 was $302.6 million; the 2010 Senior Notes were redeemed in the second quarter of 2017, as discussed in Note 6. The fair value of the
Table of Contents
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Convertible Notes was $231.9$495.4 million and $228.4$490.9 million as of September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The fair values of the 2017 Senior Notes, 2010 Senior Notes and Convertible Notes were determined using Level 1 inputs, specifically current observable market prices. The fair value of the Term Loan B was $274.4 million and $358.9 million as of March 31, 2024 and December 31, 2023, respectively. The fair values of the Term Loan B were determined using Level 2 inputs, specifically third-party quoted market prices. The reported value of the Company’s remaining long-term debt at September 30, 2017borrowings approximates fair value as of March 31, 2024 and December 31, 2016 approximates fair value.
(12) 2023.
(15)Variable Interest Entities (“VIE”)From time to time the(VIEs)
The Company may form joint ventures or partnerships with third parties for the execution of single contracts or projects. In accordance with ASC 810, Consolidation (“ASC 810”), the Company assesses its partnerships and joint ventures at inception to determine if any meet the qualifications of a VIE. The Company considers a joint venture a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, the Company reassesses its initial determination of whether a joint venture is a VIE.
ASC 810 also requires the Company to determine whether it is the primary beneficiary of the VIE. The Company concludes that it is the primary beneficiary and consolidates the VIE if the Company has both (a) the power to direct the economically significant activities of the VIE and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The Company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if the Company is the primary beneficiary. The Company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. In accordance with ASC 810, management’s assessment of whether the Company is the primary beneficiary of a VIE is performed continuously.
As of
September 30, 2017,March 31, 2024, the Company had
consolidatedunconsolidated VIE-related
current assets
of $115.4 million and liabilities of
$96.9$0.5 million
all of which are classified as current and
are$0.1 million, respectively, included in the Company’s Condensed Consolidated Balance
Sheet.One largeSheets. As of December 31, 2023, the Company had unconsolidated VIE-related current assets and liabilities of $0.5 million and $0.1 million, respectively, included in the Company’s Condensed Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments. There were no future funding requirements for the unconsolidated VIEs as of March 31, 2024.
As of March 31, 2024, the Company’s Condensed Consolidated Balance Sheets included current and noncurrent assets of $473.2 million and $33.8 million, respectively, as well as current liabilities of $481.2 million related to the operations of its consolidated VIEs. As of December 31, 2023, the Company’s Condensed Consolidated Balance Sheets included current and noncurrent assets of $503.1 million and $35.1 million, respectively, as well as current liabilities of $505.0 million related to the operations of its consolidated VIEs.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
Below is a discussion of some of the Company’s more significant or unique VIEs.
The Company established a joint venture
that the Company is consolidating was established to construct the Purple Line
SegmentExtension Section 2
Extension project, a $1.4 billion(Tunnels and Stations) and Section 3 (Stations) mass-transit
projectprojects in Los Angeles,
California.California with an original combined value of approximately $2.8 billion. The Company has a 75% interest in the joint venture with the remaining 25% held by O&G Industries, Inc.
The joint venture was initially financed with contributions from the partners and, per the terms of the joint venture agreement, the partners may be required to provide additional capital contributions in the future.(13) The Company has determined that this joint venture is a VIE for which the Company is the primary beneficiary.
The Company also established a joint venture with Parsons Corporation (“Parsons”) to construct the Newark Liberty International Airport Terminal One project, a transportation infrastructure project in Newark, New Jersey with an original value of approximately $1.4 billion. The Company has an 80% interest in the joint venture with the remaining 20% held by Parsons. The joint venture was initially financed with contributions from the partners and, per the terms of the joint venture agreement, the partners may be required to provide additional capital contributions in the future. The Company has determined that this joint venture is a VIE for which the Company is the primary beneficiary.
(16)Changes in Equity
A reconciliation of the changes in equity for the three months ended March 31, 2024 and 2023 is provided below:
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2024 |
| (in thousands) | Common
Stock | Additional
Paid-in
Capital | Retained
Earnings | Accumulated
Other
Comprehensive
Loss | Noncontrolling
Interests | Total
Equity |
| Balance - December 31, 2023 | $ | 52,025 | | $ | 1,146,204 | | $ | 133,146 | | $ | (39,787) | | $ | (7,677) | | $ | 1,283,911 | |
| Net income | — | | — | | 15,760 | | — | | 11,742 | | 27,502 | |
| Other comprehensive loss | — | | — | | — | | (375) | | (467) | | (842) | |
| Share-based compensation | — | | 1,503 | | — | | — | | — | | 1,503 | |
| Issuance of common stock, net | 259 | | (1,699) | | — | | — | | — | | (1,440) | |
| | | | | | |
| Distributions to noncontrolling interests | — | | — | | — | | — | | (7,400) | | (7,400) | |
| Balance - March 31, 2024 | $ | 52,284 | | $ | 1,146,008 | | $ | 148,906 | | $ | (40,162) | | $ | (3,802) | | $ | 1,303,234 | |
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| (in thousands) | Common
Stock | Additional
Paid-in
Capital | Retained
Earnings | Accumulated
Other
Comprehensive
Loss | Noncontrolling
Interests | Total
Equity |
| Balance - December 31, 2022 | $ | 51,521 | | $ | 1,140,933 | | $ | 304,301 | | $ | (47,037) | | $ | (7,734) | | $ | 1,441,984 | |
| Net income (loss) | — | | — | | (49,196) | | — | | 267 | | (48,929) | |
| Other comprehensive income | — | | — | | — | | 1,727 | | 153 | | 1,880 | |
| Share-based compensation | — | | 1,395 | | — | | — | | — | | 1,395 | |
| Issuance of common stock, net | 124 | | (247) | | — | | — | | — | | (123) | |
| Contributions from noncontrolling interests | — | | — | | — | | — | | 2,000 | | 2,000 | |
| Distributions to noncontrolling interests | — | | — | | — | | — | | (8,500) | | (8,500) | |
| Balance - March 31, 2023 | $ | 51,645 | | $ | 1,142,081 | | $ | 255,105 | | $ | (45,310) | | $ | (13,814) | | $ | 1,389,707 | |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
(17)Other Comprehensive Income (Loss) ASC 220, Comprehensive Income, establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. The Company reports the change in pension benefit plan assets/liabilities, cumulative foreign currency translation change in fair valueand the unrealized gain (loss) of investments and change in fair value of an interest rate swap as components of accumulated other comprehensive lossincome (loss) (“AOCI”). The
tax effects of the components of other comprehensive income (loss)
and the related tax effects for the three months ended
September 30, 2017March 31, 2024 and
2016 are2023 were as follows:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended |
| September 30, 2017 | | September 30, 2016 |
| Three Months Ended March 31, 2024 | | | Three Months Ended March 31, 2024 | | Three Months Ended March 31, 2023 |
(in thousands) | Before-Tax Amount | | Tax Expense | | Net-of-Tax Amount | | Before-Tax Amount | | Tax (Expense) Benefit | | Net-of-Tax Amount | (in thousands) | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | | Before-Tax Amount | Tax Expense | Net-of-Tax Amount |
Other comprehensive income (loss): | | | | | | | | | | | | | |
| Defined benefit pension plan adjustments | |
| Defined benefit pension plan adjustments | |
Defined benefit pension plan adjustments | $ | 456 | | $ | (187) | | $ | 269 | | $ | 427 | | $ | (179) | | $ | 248 |
Foreign currency translation adjustments | | 1,232 | | (506) | | 726 | | (708) | | 297 | | (411) |
Unrealized gain (loss) in fair value of investments | | 21 | | (9) | | 12 | | | (145) | | 66 | | (79) |
Total other comprehensive income (loss) | | 1,709 | | (702) | | 1,007 | | | (426) | | 184 | | (242) |
Other comprehensive income (loss) attributable to Tutor Perini Corporation | $ | 1,709 | | $ | (702) | | $ | 1,007 | | $ | (426) | | $ | 184 | | $ | (242) |
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | |
| Total other comprehensive income (loss) attributable to Tutor Perini Corporation | |
Table of Contents
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
The tax effects of the components of other comprehensive income (loss) for the nine months ended September 30, 2017 and 2016 are as follows:
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended | | Nine Months Ended |
| September 30, 2017 | | September 30, 2016 |
(in thousands) | Before-Tax Amount | | Tax (Expense) Benefit | | Net-of-Tax Amount | | Before-Tax Amount | | Tax (Expense) Benefit | | Net-of-Tax Amount |
Other comprehensive income: | | | | | | | | | | | | | | | | | |
Defined benefit pension plan adjustments | $ | 1,368 | | $ | (562) | | $ | 806 | | $ | 1,280 | | $ | (461) | | $ | 819 |
Foreign currency translation adjustment | | 2,242 | | | (921) | | | 1,321 | | | 500 | | | (239) | | | 261 |
Unrealized loss in fair value of investments | | (20) | | | 8 | | | (12) | | | (403) | | | 179 | | | (224) |
Unrealized loss in fair value of interest rate swap | | — | | | — | | | — | | | (45) | | | 21 | | | (24) |
Total other comprehensive income | | 3,590 | | | (1,475) | | | 2,115 | | | 1,332 | | | (500) | | | 832 |
Other comprehensive income attributable to Tutor Perini Corporation | $ | 3,590 | | $ | (1,475) | | $ | 2,115 | | $ | 1,332 | | $ | (500) | | $ | 832 |
The changes in AOCI balances by component (after tax) attributable to Tutor Perini Corporation and attributable to noncontrolling interests during the three and nine months ended September 30, 2017 areMarch 31, 2024 and 2023 were as follows:
| | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, 2017 |
| Defined | | | | Unrealized | | Accumulated |
| Benefit | | Foreign | | Gain in | | Other |
| Pension | | Currency | | Fair Value of | | Comprehensive |
(in thousands) | Plan | | Translation | | Investments, Net | | Loss |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | |
Balance as of June 30, 2017 | $ | (40,328) | | $ | (4,269) | | $ | 292 | | $ | (44,305) |
Other comprehensive gain before reclassifications | | — | | | 726 | | | 12 | | | 738 |
Amounts reclassified from AOCI | | 269 | | | — | | | — | | | 269 |
Total other comprehensive income | | 269 | | | 726 | | | 12 | | | 1,007 |
Balance as of September 30, 2017 | $ | (40,059) | | $ | (3,543) | | $ | 304 | | $ | (43,298) |
| | | | | | | | | | | | | | |
| Three Months Ended March 31, 2024 |
| (in thousands) | Defined
Benefit
Pension
Plan | Foreign
Currency
Translation | Unrealized Gain (Loss) in Fair Value of Investments, Net | Accumulated
Other
Comprehensive
Income (Loss) |
| Attributable to Tutor Perini Corporation: | | | | |
| Balance as of December 31, 2023 | $ | (29,354) | | $ | (6,893) | | $ | (3,540) | | $ | (39,787) | |
| Other comprehensive loss before reclassifications | — | | (428) | | (313) | | (741) | |
| Amounts reclassified from AOCI | 321 | | — | | 45 | | 366 | |
| Total other comprehensive income (loss) | 321 | | (428) | | (268) | | (375) | |
| Balance as of March 31, 2024 | $ | (29,033) | | $ | (7,321) | | $ | (3,808) | | $ | (40,162) | |
| Attributable to Noncontrolling Interests: | | | | |
| Balance as of December 31, 2023 | $ | — | | $ | (312) | | $ | (419) | | $ | (731) | |
| Other comprehensive income (loss) | — | | (499) | | 32 | | (467) | |
| Balance as of March 31, 2024 | $ | — | | $ | (811) | | $ | (387) | | $ | (1,198) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2017 |
| Defined | | | | Unrealized | | Accumulated |
| Benefit | | Foreign | | Gain (Loss) in | | Other |
| Pension | | Currency | | Fair Value of | | Comprehensive |
(in thousands) | Plan | | Translation | | Investments, Net | | Loss |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | |
Balance as of December 31, 2016 | $ | (40,865) | | $ | (4,864) | | $ | 316 | | $ | (45,413) |
Other comprehensive gain (loss) before reclassifications | | — | | | 1,321 | | | (12) | | | 1,309 |
Amounts reclassified from AOCI | | 806 | | | — | | | — | | | 806 |
Total other comprehensive income (loss) | | 806 | | | 1,321 | | | (12) | | | 2,115 |
Balance as of September 30, 2017 | $ | (40,059) | | $ | (3,543) | | $ | 304 | | $ | (43,298) |
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The changes in AOCI balance by component (after tax) for the three and nine months ended September 30, 2016 are as follows:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Three Months Ended September 30, 2016 |
| | | | | | | Unrealized | | |
| Defined | | | | Unrealized | | Gain (Loss) in | | Accumulated |
| Benefit | | Foreign | | Gain (Loss) in | | Fair Value of | | Other |
| Pension | | Currency | | Fair Value of | | Interest Rate | | Comprehensive |
(in thousands) | Plan | | Translation | | Investments, Net | | Swap, Net | | Loss |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | | | | |
Balance as of June 30, 2016 | $ | (37,671) | | $ | (3,931) | | $ | 511 | | $ | — | | $ | (41,091) |
Other comprehensive loss before reclassifications | | — | | | (411) | | | (79) | | | — | | | (490) |
Amounts reclassified from AOCI | | 248 | | | — | | | — | | | — | | | 248 |
Total other comprehensive income (loss) | | 248 | | | (411) | | | (79) | | | — | | | (242) |
Balance as of September 30, 2016 | $ | (37,423) | | $ | (4,342) | | $ | 432 | | $ | — | | $ | (41,333) |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2016 |
| | | | | | | Unrealized | | |
| Defined | | | | Unrealized | | Gain (Loss) in | | Accumulated |
| Benefit | | Foreign | | Gain (Loss) in | | Fair Value of | | Other |
| Pension | | Currency | | Value of | | Interest Rate | | Comprehensive |
(in thousands) | Plan | | Translation | | Investments, Net | | Swap, Net | | Loss |
Attributable to Tutor Perini Corporation: | | | | | | | | | | | | | | |
Balance as of December 31, 2015 | $ | (38,242) | | $ | (4,603) | | $ | 656 | | $ | 24 | | $ | (42,165) |
Other comprehensive gain (loss) before reclassifications | | — | | | 261 | | | (224) | | | (24) | | | 13 |
Amounts reclassified from AOCI | | 819 | | | — | | | — | | | — | | | 819 |
Total other comprehensive income (loss) | | 819 | | | 261 | | | (224) | | | (24) | | | 832 |
Balance as of September 30, 2016 | $ | (37,423) | | $ | (4,342) | | $ | 432 | | $ | — | | $ | (41,333) |
| | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| (in thousands) | Defined
Benefit
Pension
Plan | Foreign
Currency
Translation | Unrealized Gain (Loss) in Fair Value of Investments, Net | Accumulated
Other
Comprehensive
Income (Loss) |
| Attributable to Tutor Perini Corporation: | | | | |
| Balance as of December 31, 2022 | $ | (32,637) | | $ | (7,241) | | $ | (7,159) | | $ | (47,037) | |
| Other comprehensive income before reclassifications | — | | 231 | | 1,171 | | 1,402 | |
| Amounts reclassified from AOCI | 301 | | — | | 24 | | 325 | |
| Total other comprehensive income | 301 | | 231 | | 1,195 | | 1,727 | |
| Balance as of March 31, 2023 | $ | (32,336) | | $ | (7,010) | | $ | (5,964) | | $ | (45,310) | |
| Attributable to Noncontrolling Interests: | | | | |
| Balance as of December 31, 2022 | $ | — | | $ | (799) | | $ | (931) | | $ | (1,730) | |
| Other comprehensive income | — | | 19 | | 134 | | 153 | |
| Balance as of March 31, 2023 | $ | — | | $ | (780) | | $ | (797) | | $ | (1,577) | |
The significant items reclassified out of AOCI and the corresponding location and impact on the Condensed Consolidated
StatementStatements of Operations
areduring the three months ended March 31, 2024 and 2023 were as follows:
| | | | | | | | | | |
| Three Months Ended
March 31, | |
| Three Months Ended
March 31, | |
| Three Months Ended
March 31, | |
| (in thousands) | |
| (in thousands) | |
| (in thousands) | |
| Component of AOCI: | |
| Component of AOCI: | |
| Component of AOCI: | |
Defined benefit pension plan adjustments(a) | |
Defined benefit pension plan adjustments(a) | |
Defined benefit pension plan adjustments(a) | |
Income tax benefit(b) | |
Income tax benefit(b) | |
Income tax benefit(b) | |
| Net of tax | |
| Net of tax | |
| Net of tax | |
| | | | | | | | | | |
Unrealized loss in fair value of investment adjustments(a) | |
| | Location in | | Three Months Ended | | Nine Months Ended |
Unrealized loss in fair value of investment adjustments(a) | |
| | Condensed Consolidated | | September 30, | | September 30, |
(in thousands) | | Statements of Operations | | 2017 | | 2016 | | 2017 | | 2016 |
Defined benefit pension plan adjustments | | Various accounts(a) | | $ | 456 | | $ | 427 | | $ | 1,368 | | $ | 1,280 |
Income tax benefit | | Provision for income taxes | | (187) | | (179) | | | (562) | | (461) |
Unrealized loss in fair value of investment adjustments(a) | |
Income tax benefit(b) | |
Income tax benefit(b) | |
Income tax benefit(b) | |
Net of tax | | | | $ | 269 | | $ | 248 | | $ | 806 | | $ | 819 |
| Net of tax | |
| Net of tax | |
(a)Defined benefit pension plan adjustments were reclassified to cost of operations and general and administrative expenses.
(14) (b)Amounts included in income tax (expense) benefit on the Condensed Consolidated Statements of Operations.
The Company offers general contracting, pre-construction planning and comprehensive project management services, including planning and scheduling of manpower, equipment, materials and subcontractors required for the timely completion of a project in accordance with the terms and specifications contained in a construction contract. The Company also offers self-performed construction services: site
work;work, concrete forming and
placement;placement, steel
erection; electrical; mechanical; plumbing;erection, electrical, mechanical, plumbing, and
heating,HVAC (heating, ventilation and air
conditioning (HVAC)conditioning). As described below,
ourthe Company’s business is conducted through three segments: Civil, Building and Specialty Contractors. These segments are determined based on how the Company’s Chairman and Chief Executive Officer (chief operating decision maker) aggregates business units when evaluating performance and allocating resources.
The Civil segment specializes in public works construction and the replacement and reconstruction of infrastructure. The
civil contracting services
provided by the Civil segment include construction and rehabilitation of highways, bridges, tunnels, mass-transit systems,
military facilities, and water management and wastewater treatment facilities.
The Building segment has significant experience providing services for private and public works customers in a number of specialized building markets, including: high-rise residential, hospitality and gaming, transportation, health care, commercial andoffices, government offices,
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
facilities, sports and entertainment, education, correctional
and detention facilities, biotech, pharmaceutical, industrial and
high-tech.technology.
The Specialty Contractors segment specializes in electrical, mechanical, plumbing, HVAC
and fire protection systems
and pneumatically placed concrete for a full range of civil and building construction projects in the industrial, commercial, hospitality and gaming, and mass-transit end markets. This segment provides the Company with unique strengths and capabilities that allow the Company to position itself as a full-service contractor with greater control over scheduled work, project delivery, and
cost and risk management.
To the extent that a contract is co-managed and co-executed among segments, the Company allocates the share of revenues and costs of the contract to each segment to reflect the shared responsibilities in the management and execution of the project.
The following tables set forth certain reportable segment information relating to the Company’s operations for the three
and nine months ended
September 30, 2017March 31, 2024 and
2016:2023: | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Reportable Segments | | | | | | |
| | | | | | | Specialty | | | | | | | | Consolidated |
| Reportable Segments | |
(in thousands) | Civil | | | Building | | Contractors | | Total | | Corporate | | Total |
Three Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | |
| (in thousands) | |
| (in thousands) | | Civil | Building | Specialty
Contractors | Total | | Corporate | | Consolidated
Total |
| Three Months Ended March 31, 2024 | |
| Total revenue | |
| Total revenue | |
Total revenue | $ | 458,487 | | $ | 500,420 | | $ | 310,137 | | $ | 1,269,044 | | $ | — | | $ | 1,269,044 |
Elimination of intersegment revenue | | (62,667) | | | (6,872) | | | — | | | (69,539) | | | — | | | (69,539) |
Revenue from external customers | $ | 395,820 | | $ | 493,548 | | $ | 310,137 | | $ | 1,199,505 | | $ | — | | $ | 1,199,505 |
Income from construction operations | $ | 38,144 | | $ | 14,058 | | $ | 14,575 | | $ | 66,777 | | $ | (17,705) | (a) | $ | 49,072 |
| Income (loss) from construction operations | |
Capital expenditures | $ | 1,248 | | $ | 36 | | $ | 81 | | $ | 1,365 | | $ | 164 | | $ | 1,529 |
Depreciation and amortization (b) | $ | 5,213 | | $ | 502 | | $ | 1,166 | | $ | 6,881 | | $ | 2,824 | | $ | 9,705 |
Depreciation and amortization(c) | |
| | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | |
| Three Months Ended March 31, 2023 | |
| Three Months Ended March 31, 2023 | |
| Total revenue | |
| Total revenue | |
Total revenue | $ | 506,100 | | $ | 560,795 | | $ | 331,613 | | $ | 1,398,508 | | $ | — | | $ | 1,398,508 |
Elimination of intersegment revenue | | (47,277) | | | (18,253) | | | — | | | (65,530) | | | — | | | (65,530) |
Revenue from external customers | $ | 458,823 | | $ | 542,542 | | $ | 331,613 | | $ | 1,332,978 | | $ | — | | $ | 1,332,978 |
Income from construction operations | $ | 50,307 | | $ | 13,296 | | $ | 11,084 | | $ | 74,687 | | $ | (13,768) | (a) | $ | 60,919 |
| Income (loss) from construction operations | |
Capital expenditures | $ | 1,342 | | $ | 79 | | $ | 54 | | $ | 1,475 | | $ | 117 | | $ | 1,592 |
Depreciation and amortization (b) | $ | 12,669 | | $ | 541 | | $ | 1,243 | | $ | 14,453 | | $ | 2,886 | | $ | 17,339 |
Depreciation and amortization(c) | |
(a)During the three months ended March 31, 2024, the Company’s income (loss) from construction operations was impacted by an unfavorable adjustment of $12.0 million ($8.8 million, or $0.17 per diluted share, after tax) due to an arbitration ruling that only provided a partial award to the Company pertaining to a completed Specialty Contractors segment electrical project in New York, as well as by a favorable adjustment of $10.2 million ($7.5 million, or $0.14 per diluted share, after tax) on a Civil segment mass-transit project in California related to a dispute resolution and associated expected cost savings.
(b)Consists primarily of corporate general and administrative expenses.
| (b)
| | Depreciation and amortization is included in income from construction operations.
|
Table of Contents
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Reportable Segments | | | | | | |
| | | | | | | Specialty | | | | | | | | Consolidated |
(in thousands) | Civil | | | Building | | Contractors | | Total | | Corporate | | Total |
Nine Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | |
Total revenue | $ | 1,363,850 | | $ | 1,520,356 | | $ | 907,690 | | $ | 3,791,896 | | $ | — | | $ | 3,791,896 |
Elimination of intersegment revenue | | (190,873) | | | (36,883) | | | — | | | (227,756) | | | — | | | (227,756) |
Revenue from external customers | $ | 1,172,977 | | $ | 1,483,473 | | $ | 907,690 | | $ | 3,564,140 | | $ | — | | $ | 3,564,140 |
Income from construction operations | $ | 128,176 | | $ | 25,035 | | $ | 15,330 | | $ | 168,541 | | $ | (48,407) | (a) | $ | 120,134 |
Capital expenditures | $ | 8,665 | | $ | 184 | | $ | 374 | | $ | 9,223 | | $ | 489 | | $ | 9,712 |
Depreciation and amortization (b) | $ | 26,767 | | $ | 1,533 | | $ | 3,551 | | $ | 31,851 | | $ | 8,612 | | $ | 40,463 |
| | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | |
Total revenue | $ | 1,378,531 | | $ | 1,594,946 | | $ | 932,288 | | $ | 3,905,765 | | $ | — | | $ | 3,905,765 |
Elimination of intersegment revenue | | (118,143) | | | (61,145) | | | — | | | (179,288) | | | — | | | (179,288) |
Revenue from external customers | $ | 1,260,388 | | $ | 1,533,801 | | $ | 932,288 | | $ | 3,726,477 | | $ | — | | $ | 3,726,477 |
Income from construction operations | $ | 129,028 | | $ | 38,969 | | $ | 25,910 | | $ | 193,907 | | $ | (44,037) | (a) | $ | 149,870 |
Capital expenditures | $ | 8,499 | | $ | 381 | | $ | 798 | | $ | 9,678 | | $ | 595 | | $ | 10,273 |
Depreciation and amortization (b) | $ | 33,200 | | $ | 1,647 | | $ | 3,811 | | $ | 38,658 | | $ | 8,637 | | $ | 47,295 |
(a)Consists primarily of corporate general and administrative expenses.
(b)(c)Depreciation and amortization is included in income (loss) from construction operations.
(d)During the ninethree months ended September 30, 2016,March 31, 2023, the Company recorded net favorable adjustments totaling $3.0 million inCompany’s income (loss) from construction operations ($0.04 per diluted share) for various Five Star Electric projectswas unfavorably impacted by an adverse legal ruling on a completed mixed-use project in New York, which resulted in a non-cash, pre-tax charge of $83.6 million ($60.1 million, or $1.17 per diluted share, after-tax), of which $72.2 million impacted the Building segment and $11.4 million impacted the Specialty Contractors segment. The net impact included material adjustments related to two electrical subcontract projects: a favorable adjustment of $14.0 million for a completed project ($0.17 per diluted share) andsegment, as well as an unfavorable adjustment of $13.8$28.0 million ($22.2 million, or $0.43 per diluted share, after tax) for a Civil segment mass-transit project that was nearly complete ($0.17 per diluted share). These werein California, resulting from the only changes in estimates considered material tosuccessful negotiation of significant lower margin (and lower risk) change orders which increased the Company’s resultsproject’s overall estimated profit but reduced the project’s percentage of operations during the periods presented herein.completion and overall margin percentage as of March 31, 2023.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED
A reconciliation of segment results to the consolidated income
(loss) before income taxes is as follows:
| | | | | | | | | |
| | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
Income from construction operations | $ | 49,072 | | $ | 60,919 | | $ | 120,134 | | $ | 149,870 |
| (in thousands) | |
| (in thousands) | |
| Income (loss) from construction operations | |
| Income (loss) from construction operations | |
| Income (loss) from construction operations | |
| Other income, net | |
| Other income, net | |
Other income, net | | 967 | | 2,048 | | 42,373 | | | 5,214 |
Interest expense | | (15,643) | | (15,041) | | | (53,726) | | | (44,655) |
Income before income taxes | $ | 34,396 | | $ | 47,926 | | $ | 108,781 | | $ | 110,429 |
| Interest expense | |
| Interest expense | |
| Income (loss) before income taxes | |
| Income (loss) before income taxes | |
| Income (loss) before income taxes | |
Total assets by segment
arewere as follows:
| | | | | |
| | | | | |
(in thousands) | September 30, 2017 | | December 31, 2016 |
Civil | $ | 2,273,486 | | $ | 2,152,123 |
Building | | 889,136 | | | 917,317 |
Specialty Contractors | | 757,103 | | | 813,851 |
Corporate and other (a) | | 363,060 | | | 155,329 |
Total assets | $ | 4,282,785 | | $ | 4,038,620 |
| (a)
| | Consists principally of cash, equipment, tax-related assets and insurance-related assets, offset by the elimination of assets related to intersegment revenue.
|
| | | | | | | | |
| (in thousands) | As of March 31,
2024 | As of December 31,
2023 |
| Civil | $ | 3,426,013 | | $ | 3,539,608 | |
| Building | 957,202 | | 898,902 | |
| Specialty Contractors | 270,005 | | 307,171 | |
Corporate and other(a) | (282,813) | | (315,825) | |
| Total assets | $ | 4,370,407 | | $ | 4,429,856 | |
(a)Consists principally of cash, equipment, tax-related assets and insurance-related assets, offset by the elimination of assets related to intersegment revenue.
Major Customer
Revenue from a single customer with multiple projects, impacting the Civil, Building and Specialty Contractors segments, represented 18.7% and 19.5% of the Company’s consolidated revenue for the three months ended March 31, 2024 and March 31, 2023, respectively.
(19)Subsequent Events
2024 Senior Notes Issuance and 2017 Senior Notes Redemption
On April 22, 2024, the Company issued $400.0 million in aggregate principal amount of 11.875% Senior Notes due April 30, 2029 (the “2024 Senior Notes”) in a private placement offering. Interest on the 2024 Senior Notes is payable in arrears semi-annually in April and October of each year, beginning in October 2024.
Prior to April 30, 2026, the Company may redeem the 2024 Senior Notes at a redemption price equal to 100% of the principal amount plus a “make-whole” premium described in the indenture. In addition, prior to April 30, 2026, the Company may redeem up to 40% of the original aggregate principal amount of the notes at a redemption price of 111.875% of their principal amount with the proceeds received by the Company from any offering of the Company’s equity. On or after April 30, 2026, the Company may redeem the 2024 Senior Notes at specified redemption prices described in the indenture. Upon a change of control, holders of the 2024 Senior Notes may require the Company to repurchase all or part of the 2024 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.
The 2024 Senior Notes are senior unsecured obligations of the Company and are guaranteed by the Company’s existing and future subsidiaries that also guarantee obligations under the Company’s 2020 Credit Agreement. In addition, the indenture for the 2024 Senior Notes provides for customary covenants on restricting certain payments and includes customary events of default.
The proceeds of the 2024 Senior Notes, together with cash on hand, will be used to redeem in full, all of the outstanding obligations in respect of the 2017 Senior Notes, resulting in a total net reduction to the Company’s outstanding principal debt balance of $100.0 million. A Notice of Conditional Full Redemption was delivered to holders of the 2017 Senior Notes on April 17, 2024, and the redemption of the 2017 Senior Notes will occur on May 2, 2024.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) Related Party Transactions
Raymond R. Oneglia, Vice Chairman of O&G Industries, Inc. (“O&G”), is a director
Amendment to 2020 Credit Agreement
On April 15, 2024, the Company entered into an amendment in respect of the Company. 2020 Credit Agreement (the “Amendment”), which, among other changes (1) extends the existing Revolver maturity date from August 18, 2025 to (a) if any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof) remains outstanding, the earlier of (i) May 20, 2027 and (ii) the date that is ninety (90) days prior to the final maturity of any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof), as applicable, and (b) if no obligations are outstanding with respect to any tranche of the Term Loan B, any incremental term loan or any refinancing term loan, August 18, 2027 and (2) permanently reduces the aggregate commitments in respect of the Revolver by $5.0 million from $175.0 million to $170.0 million.
The
Company occasionally forms construction project joint venturesAmendment is expected to become effective on or around the redemption date of the 2017 Senior Notes, subject to satisfaction or waiver of conditions to effectiveness thereunder (including, without limitation, the consummation of the refinancing of $500.0 million of the 2017 Senior Notes with
O&G. Currently, the
Company has two joint ventures with O&G for infrastructure projects inproceeds of the
northeastern United States that are both complete. In addition,2024 Senior Notes and cash on hand). If the
Company has a 75% interest in a newly formed joint venture with O&G (asAmendment does not become effective prior to May 15, 2024, the
25% interest holder) for a project in Los Angeles, California. O&G may provide equipmentAmendment will become null and
servicesvoid and the contemplated amendments to
these joint ventures on customary trade terms; related payments made by the
joint ventures to O&G during the three and nine months ended September 30, 2017 and 2016 were immaterial.
2020 Credit Agreement will not be effective.
TUTOR PERINI CORPORATION AND SUBSIDIARIES
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations The following
discussesdiscussion and analysis of our financial position as of
September 30, 2017March 31, 2024 and the results of our operations for the three
and nine months ended
September 30, 2017 andMarch 31, 2024 should be read in conjunction with
other information, including the unaudited Condensed Consolidated Financial Statements and notes
contained herein as well asincluded in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10‑Q, the audited consolidated financial statements and accompanying notes to our Annual Report on Form
10-K10‑K for the year ended December 31,
2016.2023, and the information contained under the heading “Risk Factors” in our Annual Report on Form 10‑K for the year ended December 31, 2023 and in Part II, Item 1A below.
Forward-Looking Statements
This Quarterly Report on Form
10-Q,10‑Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results, which are intended to be covered by the safe harbor provision for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. Words such as “achieve,” “anticipate,” “assumes,” “believes,” “continue,” “could,” “estimate,” “expects,” “forecast,” “hope,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “would,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Although such statements are based on currently available financial and economic data, as well as management’s estimates and expectations, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors potentially contributing to such differences include, among others:
| ·
| | Inaccurate estimates of contract risks, revenue or costs; the timing of new awards; or the pace of project execution may result in losses or lower than anticipated profits;
|
| ·
| | The requirement to perform extra, or change order, work resulting in disputes or claims or adversely affecting our working capital, profits and cash flows;
|
•Unfavorable outcomes of existing or future litigation or dispute resolution proceedings against us or customers (project owners, developers, general contractors, etc.), subcontractors or suppliers, as well as failure to promptly recover significant working capital invested in projects subject to such matters; | ·
| | Unfavorable outcomes of legal proceedings and failure to promptly recover significant working capital invested in projects subject to unresolved legal claims;
|
•Revisions of estimates of contract risks, revenue or costs; economic factors such as inflation; the timing of new awards; or the pace of project execution, which has resulted and may continue to result in losses or lower than anticipated profit; | ·
| | Increased competition and failure to secure new contracts;
|
•Increased competition and failure to secure new contracts; | ·
| | Client cancellations of, or reductions in scope under, contracts reported in our backlog;
|
•Contract requirements to perform extra work beyond the initial project scope, which has and in the future could result in disputes or claims and adversely affect our working capital, profits and cash flows; | ·
| | A significant slowdown or decline in economic conditions;
|
•Risks and other uncertainties associated with estimates and assumptions used to prepare our financial statements; | ·
| | Actual results could differ from the assumptions and estimates used to prepare financial statements;
|
•A significant slowdown or decline in economic conditions, such as those presented during a recession; | ·
| | Decreases in the level of government spending for infrastructure and other public projects;
|
•Failure to meet contractual schedule requirements, which could result in higher costs and reduced profits or, in some cases, exposure to financial liability for liquidated damages and/or damages to customers, as well as damage to our reputation; | ·
| | Failure to meet contractual schedule requirements, which could result in higher costs and reduced profits or, in some cases, exposure to financial liability for liquidated damages and/or damages to customers;
|
•Failure to meet our obligations under our debt agreements (especially in a high interest rate environment); | ·
| | Inability to retain key members of our management, to hire and retain personnel required to complete projects or implement succession plans for key officers;
|
•Inability to attract and retain our key officers, and to adequately plan for their succession, and hire and retain personnel required to execute and perform on our contracts; | ·
| | Possible systems and information technology interruptions;
|
•Possible systems and information technology interruptions and breaches in data security and/or privacy; | ·
| | Failure of our joint venture partners to perform their venture obligations, which could impose additional financial and performance obligations on us, resulting in reduced profits or losses;
|
•An inability to obtain bonding could have a negative impact on our operations and results; | ·
| | The impact of inclement weather conditions on projects;
|
•The impact of inclement weather conditions and other events outside of our control on projects; | ·
| | Failure to meet our obligations under our debt agreements;
|
•Risks related to our international operations, such as uncertainty of U.S. government funding, as well as economic, political, regulatory and other risks, including risks of loss due to acts of war, labor conditions and other unforeseeable events in countries where we do business, which could adversely affect our revenue and earnings; | ·
| | Failure to comply with laws and regulations related to government contracts;
|
•Decreases in the level of government spending for infrastructure and other public projects; | ·
| | Conversion of our outstanding Convertible Notes that could dilute ownership interests of existing stockholders and could adversely affect the market price of our common stock;
|
•Downgrades in our credit ratings; | ·
| | Potential dilutive impact of our Convertible Notes in our diluted earnings per share calculation;
|
•Client cancellations of, or reductions in scope under, contracts reported in our backlog; | ·
| | Economic, political and other risks, including civil unrest, security issues, labor conditions, corruption and other unforeseeable events in countries where we do business, resulting in unanticipated losses; and
|
•Risks related to government contracts and related procurement regulations; | ·
| | Impairment of our goodwill or other indefinite-lived intangible assets.
|
•Failure of our joint venture partners to perform their venture obligations, which could impose additional financial and performance obligations on us, resulting in reduced profits or losses and/or reputational harm;•Violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws;
•Significant fluctuations in the market price of our common stock, which could result in substantial losses for stockholders and potentially subject us to securities litigation;
•Public health crises, such as COVID-19, have adversely impacted, and could in the future adversely impact, our business, financial condition and results of operations by, among other things, delaying the timing of project bids and/or awards and the timing of dispute resolutions and associated collections;
•Physical and regulatory risks related to climate change;
•Impairment of our goodwill or other indefinite-lived intangible assets; and
•The exertion of influence over the Company by our chairman and chief executive officer due to his position and significant ownership interest.
Operating Results
Consolidated revenue for the three and nine months ended September 30, 2017March 31, 2024 was $1.2 billion and $3.6$1.05 billion compared to$1.3 billion and $3.7 billion, respectively, $776.3 million for the same periodsperiod in 2016.2023. The decrease for both periodschange was principally due to reducedprimarily driven by increased project execution activities on variousa Civil segment projectsmass-transit project in New York, Washington and the Midwest, and certainCalifornia, a Building segment projects in California and Florida, all of which are completed or nearing completion. The decrease was partially offset by increased activity on certain mass-transit projectsdetention facility project in New York and a Building segment mass-transit project in California, as well as by the absence of certain hospitality and gaming projectsprior-year unfavorable adjustments, as discussed in California and Maryland. Revenue for the third quartermore detail below in
Results of 2017 was lower than expected, mainly due to certain delays in the timing ofSegment Operations.
new awards and project execution activities for previously awarded projects, which are expected to shift the timing of those revenue contributions to 2018.
Income from construction operations for the three and nine months ended September 30, 2017March 31, 2024 was $49.1$48.8 million, and $120.1an improvement of $130.7 million a decrease of $11.8 million, or 19%, and $29.7 million, or 20%, respectively, compared to loss from construction operations of $81.9 million for the same periodsperiod in 2016.2023. The decreasesignificant improvement was principally due to the absence of certain prior-year unfavorable adjustments, as discussed further below in Results of Segment Operations, as well as contributions related to the increased project execution activities discussed above. The improvement was also due to a favorable adjustment in the first quarter of 2024 of $10.2 million on a Civil segment mass-transit project in California related to a dispute resolution and associated expected cost savings. The results for the first quarter of 2024 were negatively impacted by an unfavorable adjustment of $12.0 million due to an arbitration ruling that only provided a partial award to the Company pertaining to a completed Specialty Contractors segment electrical project in New York.
The effective tax rate was 21.0% for the three months ended September 30, 2017 was principally dueMarch 31, 2024 compared to reduced project execution activities on various projects in the Midwest and Washington, which are completed or nearing completion. For the nine months ended September 30, 2017, the decrease was primarily driven by the impact of unfavorable project adjustments recorded in the second quarter of 2017 on certain mechanical projects in New York in the Specialty Contractors segment, none of which were individually material, as well as higher general and administrative expenses primarily due to higher compensation-related expenses in anticipation of a substantially higher volume of new work.The effective tax rate49.6% for the three and nine months ended September 30, 2017 was 26.4% and 34.1% respectively, compared to 39.9% and 40.6% for the three and nine months ended September 30, 2016.comparable period in 2023. See
Corporate, Tax and Other Matters below for a detailed discussion of the changeschange in the effective tax rate.Earnings
Diluted earnings per
dilutedcommon share for the three
and nine months ended
September 30, 2017March 31, 2024 was
$0.47 and $1.33, respectively,$0.30, compared to
$0.57 and $1.32 for three and nine months ended September 30, 2016. The decreasediluted loss per common share of $0.95 for the
thirdsame period in 2023. The improvement for the first quarter of
20172024, as compared to the same quarter last year, was primarily due to the factors
mentioneddiscussed above
that drove changes in revenue and income from construction operations, partially offset by a lower effective tax rate. The increase for the 2017 nine-month period was primarily due to a gain on a $37.0 million ($0.44 per diluted share) legal settlement in the second quarter of 2017 (see Note 8 of the Notes to the Condensed Consolidated Financial Statements) and a lower effective tax rate for the nine-month period, mostly offset by the projects that resulted in the
decreaseschange in
revenue and income
(loss) from construction
operations discussed above. operations.
Consolidated new awards for the three
and nine months ended
September 30, 2017 were $1.1 billion and $4.8 billion, respectively,March 31, 2024 totaled $872.8 million compared to
$0.8 billion and $3.0 billion$766.7 million for the
threesame period in 2023. The Building and
nine months ended September 30, 2016. The Civil
segment wassegments were the
major contributorprimary contributors to the new award activity in
both periods, with civil awards comprising more than halfthe first quarter of
all2024. The most significant new awards
forand contract adjustments in the first
nine monthsquarter of
2017. 2024 included a $243 million health care facility project in California; a $73 million airport hangar project in Florida; $66 million of additional funding for several other health care projects in California; $55 million for three U.S. Navy projects in Diego Garcia; and $52 million of additional funding for three mass-transit projects in California.
Consolidated backlog as of
September 30, 2017March 31, 2024 was
$7.5$10.0 billion,
down slightly compared to
$6.2$10.2 billion
atas of December 31,
2016. The significant backlog growth since the end of 2016 has been attributable to a large volume of new awards booked during the first nine months of 2017, particularly as a result of continued strong demand for civil construction services.2023. As of
September 30, 2017,March 31, 2024, the mix of backlog by segment was approximately
58%41% for Civil,
21%42% for Building and
21%17% for Specialty Contractors.
The following table presents the Company’s backlog by business segment, reflecting changes from December 31, 20162023 to September 30, 2017:March 31, 2024:
| | | | | | | | | | | | | | |
| (in millions) | Backlog at December 31, 2023 | New Awards(a) | Revenue
Recognized | Backlog at March 31, 2024(b) |
| Civil | $ | 4,240.6 | | $ | 328.2 | | $ | (472.2) | | $ | 4,096.6 | |
| Building | 4,177.5 | | 404.3 | | (411.9) | | 4,169.9 | |
| Specialty Contractors | 1,740.3 | | 140.3 | | (164.9) | | 1,715.7 | |
| Total | $ | 10,158.4 | | $ | 872.8 | | $ | (1,049.0) | | $ | 9,982.2 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Backlog at | | New | | Revenue | | Backlog at |
(in millions) | December 31, 2016 | | Awards(a) | | Recognized | | September 30, 2017 |
Civil | $ | 2,672.1 | | $ | 2,808.3 | | $ | (1,173.0) | | $ | 4,307.4 |
Building | | 1,981.2 | | | 1,101.0 | | | (1,483.5) | | | 1,598.7 |
Specialty Contractors | | 1,573.8 | | | 929.4 | | | (907.6) | | | 1,595.6 |
Total | $ | 6,227.1 | | $ | 4,838.7 | | $ | (3,564.1) | | $ | 7,501.7 |
| (a)
| | New awards consist of the original contract price of projects added to our backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.
|
(b)Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 3 of the Notes to Condensed Consolidated Financial Statements. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog may include awards for which a contract has not yet been executed or a notice to proceed has not been issued, but for which there are no remaining major uncertainties that we will proceed with our work on the project (e.g., adequate funding is in place, we have received a notice of intent to award a contract, etc.).
The growth outlook for the CompanyCompany’s revenue growth over the next several years remains very favorable, particularly forfavorable. However, revenue growth could be hampered by unanticipated project delays or the Civil segment. In additiontiming of project bids, awards, commencements, ramp-up activities and completions. We anticipate that we will continue to the large current backlog, we expectwin our share of significant new project awards based onresulting from long-term, well-funded capital spending plans by various state, local and federal customers, as well as limited competition for some of the largest project opportunities.
In elections over the past decade, voters have approved thousands of state and typically bipartisan supportlocal ballot measures, raising an estimated $342 billion in new and renewed revenue funding for infrastructuretransportation investments. In November 2016, voters in numerous states approved dozens of long-term transportation funding measures totaling approximately $200 billion, which have yet to have a significant impact on the Company’s bidding activities. The largest of these werewas in Los Angeles County, where Measure M, a half-cent sales tax increase, was approved in 2016 and is expected to generate $120 billion of funding over the next 40 years, and in Seattle, Washington, where Sound Transit 3 was passedyears. Funding from this measure is supporting, and is expected to generate $54continue to support, several of the Company’s current and prospective projects. Despite numerous interest rate increases since March 2022, rates are still at levels that we believe are conducive to continued spending on certain types of projects that have strong end-market demand with adequate available funding, such as mass transit, transportation, bridges, and health care, educational, and correctional and detention facilities, among others. Many economists believe that interest rates will begin falling sometime during 2024, although the timing and extent of any reductions remains uncertain as a result of continued inflation volatility. Lower interest rates would likely support additional demand for continued infrastructure spending. In contrast, should interest rates rise further, they could reach levels that may negatively impact demand, especially for certain types of Building segment projects, such as commercial offices and tenant improvement projects, which tend to be more economically sensitive than projects handled by our Civil segment.
The Bipartisan Infrastructure Law was enacted into law in November 2021, and provides for $1.2 trillion of federal infrastructure funding, including $550 billion
in new spending for improvements to the country’s surface-transportation network and enhancements to core infrastructure. The law initiated the largest federal investment in public transit ever, the single largest dedicated bridge investment since the construction of
the interstate highway system and the largest federal investment in passenger rail since the creation of Amtrak, all in addition to providing for regular annual spending for numerous infrastructure projects. This significant incremental funding
is anticipated to be spent over the next
2510 years
from its enactment through 2031, and much of it is allocated for
regional transportation projects. In addition,investment in
April 2017 California enacted into law a $52 billion, 10-year transportation bill. This new long-termend markets that are directly aligned with the Company’s market focus. Accordingly, the Company believes that this significant level of sustained, incremental funding
measure should leadhas benefited, and will continue to
various new civil projectfavorably impact, the Company’s current work and prospective opportunities
in California beginning in 2018. Furthermore,over the
Trump administration continues to plan a significant infrastructure investment program and is preparing to present its plan for approval and funding. The $305 billion Fixing America’s Surface Transportation Act (FAST Act) is also expected to provide state and local agencies with federal funding for numerous highway, bridge and mass-transit projects through 2020. Finally, a continued low interest rate environment should sustain high demand and continued spending by private and public customers on infrastructure projects.next decade.
For a more detailed discussion of the operating performance of each business segment, corporate general and administrative expenseexpenses and other items, see Results of Segment Operations, Corporate, Tax and Other Matters and Liquidity and Financial Condition Capital Resourcesbelow.
Results of Segment Operations
The results of our Civil, Building and Specialty Contractors segments are discussed below.
Revenue and income from construction operations for the Civil segment are summarized as follows:
| | | | | | | | |
| | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| (in millions) | |
| (in millions) | |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Revenue | | $ | 395.8 | | $ | 458.8 | | $ | 1,173.0 | | $ | 1,260.4 |
| Revenue | |
| Revenue | |
Income from construction operations | | 38.1 | | 50.3 | | 128.2 | | | 129.0 |
| Income from construction operations | |
| Income from construction operations | |
Revenue for the three
and nine months ended
September 30, 2017 decreased 14% and 7%, respectively,March 31, 2024 increased 35% compared to the same
periodsperiod in
2016.2023. The
decrease for both periodsgrowth was
primarilylargely due to
reducedincreased project execution activities on
certain mass-transit projects in New York and a
tunnel project in Washington, partially offset by increased volume on another mass-transit project in New York. For the nine-month period, revenue on a new mass-transit project in California
and the tunneling component of an energy project in British Columbia. The change was
offsetalso favorably impacted by
decreased activity on various bridge projectsthe absence of a prior-year unfavorable adjustment, as further discussed in the
Midwest.paragraph below.
Income from construction operations for the three and nine months ended September 30, 2017 decreased 24% and 1%, respectively,March 31, 2024 was $70.7 million, up 293% compared to $18.0 million for the same periods last year.period in 2023. The decreaseincrease was primarily due to the absence of a prior-year temporary unfavorable impact of $28.0 million from the successful negotiation of significant lower margin (and lower risk) change orders on a mass-transit project in California, as well as contributions related to the increased project execution activities discussed above. The increase was also due to a $10.2 million favorable adjustment in the first quarter of 2024 on a mass-transit project in California related to a dispute resolution and associated expected cost savings.
Operating margin was 15.0% for the
third quarter of 2017three months ended March 31, 2024 compared to 5.1% for the same period in 2023. The increase in operating margin was principally due to the
volumeabove-mentioned factors that drove the changes
discussed above.Operating margin was 9.6%in revenue and 10.9%, respectively, for the three and nine months ended September 30, 2017 compared to 11.0% and 10.2% for the same periods in 2016. The margin decrease for the third quarter of 2017 was primarily due to reduced profitability on various bridge projects in the Midwest. The margin increase for the nine months ended September 30, 2017 was principally due to certain mass-transit projects in California and New York that had higher volume and profit margins in the current year nine-month period.
income from construction operations.
New awards in the Civil segment totaled
$463$328.2 million
and $2.8 billion for the three
and nine months ended
September 30, 2017March 31, 2024 compared to
$284$379.1 million
and $1.3 billion, respectively, for the
threesame period in 2023. The most significant new awards and
nine months ended September 30, 2016. New awardscontract adjustments in the
thirdfirst quarter of
20172024 included
a joint-venture tunnel project$55 million for
a hydroelectric generating stationthree U.S. Navy projects in
British Columbia, Canada, valued at $274Diego Garcia and $52 million
a joint-venture bridge projectof additional funding for three mass-transit projects in
Minnesota, for which the Company’s portion is valued at $90 million, and a military training range project in Guam worth $78 million.California.
Backlog for the Civil segment was
$4.3$4.1 billion as of
September 30, 2017, up $1.5 billion, or 54%,March 31, 2024 compared to
the backlog$4.4 billion as of
September 30, 2016. Civil segment backlog may continue to grow based on the volume and anticipated timing of other prospects expected to be awarded later this year or in early 2018.March 31, 2023. The segment continues to experience
elevatedstrong demand reflected in a large,
multi-year pipeline of prospective projects,
which are supported by substantial anticipated funding from various voter-approved transportation
measures; California’s recently enacted $52 billion, 10-year transportation bill;measures and the
considerable infrastructure investment program expected from the Trump administration; the $305 billion FAST Act;BIL, and
by public agencies’ long-term spending plans. The Civil segment is
well positionedwell-positioned to capture its share of these prospective projects.
The segment, however, faces continued strong competition from both foreign and domestic competitors.Revenue and income from(loss) from construction operations for the Building segment are summarized as follows: | | | | | | | | |
| | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| (in millions) | |
| (in millions) | |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Revenue | | $ | 493.5 | | $ | 542.5 | | $ | 1,483.5 | | $ | 1,533.8 |
Income from construction operations | | 14.1 | | 13.3 | | 25.0 | | 39.0 |
| Revenue | |
| Revenue | |
| Income (loss) from construction operations | |
| Income (loss) from construction operations | |
| Income (loss) from construction operations | |
Revenue for the three months ended
September 30, 2017 decreased 9%March 31, 2024 increased 79% compared to the same period in
2016. The decrease was2023 primarily
driven by reduceddue to increased project execution activities on a
biotechnologydetention facility project
andin New York, a
courthousemass-transit project in California
bothand a health care facility project in California, as well as the absence of
which are substantially complete. The decrease was partially offset by increased activitya prior-year unfavorable adjustment related to an adverse legal ruling on a
hospitality and gamingcompleted mixed-use project in
California. Revenue for the nine months ended September 30, 2017 decreased a modest 3% compared to revenue for the same period last year.New York.
Income from construction operations for the three months ended September 30, 2017 increased 6%March 31, 2024 was $16.1 million compared to the third quarter of 2016. The increase was primarily due to favorable adjustments as a result of progress towards completion on a technology project in California, partially offset by reduced activity on the above-mentioned biotechnology project in California. Incomeloss from construction operations of $70.2 million for the nine months ended September 30, 2017 decreased 36% compared to the same period in 2016.2023. The decreasesignificant improvement was principally due to favorable closeout activities in the first quarterabsence of 2016the aforementioned unfavorable adjustment related to the adverse legal ruling on two projectsa completed mixed-use project in New York that resulted in a non-cash charge of $83.6 million, of which $72.2 million impacted the Building segment. The improvement was also driven by contributions related to increased project execution activities in revenue discussed above, as well as an immaterial favorable adjustment in the 2024 period resulting from a legal ruling related to a completed hospitality and reduced activity on the above-mentioned biotechnology project in California, partially offset by the improved performance on the technology project, also in California.
gaming project.
Operating margin was
2.8% and 1.7%3.9% for the three
and nine months ended
September 30, 2017, respectively,March 31, 2024 compared to
2.5%(30.6)% for
both the
three and nine months ended September 30, 2016.same period in 2023. The
change in operating margin
changes for both periods were primarilywas principally due to the
reasons discussed aboveaforementioned factors that drove the
decreasechanges in revenue and
variances in income
(loss) from construction operations.
New awards in the Building segment totaled
$284$404.3 million
and $1.1 billion for the three
and nine months ended
September 30, 2017March 31, 2024 compared to
$270$233.5 million
and $982 million, respectively, for the
threesame period in 2023. The most significant new awards and
nine months ended September 30, 2016. New awardscontract adjustments in the
thirdfirst quarter of
20172024 included a
U.S. embassy renovation$243 million health care facility project in
Uruguay valued at $87California; a $73 million
airport hangar project in Florida; and
$49$66 million of
early scope tasksadditional funding for
aseveral other health care projects in California. The lingering effects of COVID-19, including the proliferation of remote and hybrid work for many businesses, as well as slowed economic conditions caused by inflation and higher interest rates, could continue to result in certain delayed or even canceled Building segment project opportunities, particularly in the corporate office end market. However, other Building segment end markets, such as correctional and detention facilities, health care, education, industrial/manufacturing, and hospitality and gaming, continue to show strong demand for new
technology office building in California, which is eventually anticipated to be worth approximately $500 million once the remaining funding is released.and renovated facilities.
Backlog for the Building segment was
$1.6$4.2 billion as of
September 30, 2017March 31, 2024, up 87% compared to $2.2 billion as of
September 30, 2016. The backlog decline was due to revenue recognition that outpaced new awards since the end of the third quarter of 2016.March 31, 2023. The Building segment continues to haveexperience strong customer demand as reflected by a large pipelinevolume of prospective projects some of which are expected to be selectedacross various end markets and awarded by customers later in this year or in early 2018. Sustained demand is expected due to ongoing customer spendingsupported by a low interest rate environment. The Building segment is well positioned to capture its share of prospective projects based on its customer relationships and long-term reputation for excellence in delivering high-quality projects on time and within budget.geographic locations.
Specialty Contractors Segment
Revenue and income loss from construction operations for the Specialty Contractors segment are summarized as follows: | | | | | | | | |
| | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| (in millions) | |
| (in millions) | |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Revenue | | $ | 310.1 | | $ | 331.6 | | $ | 907.7 | | $ | 932.3 |
Income from construction operations | | 14.6 | | 11.1 | | 15.3 | | 25.9 |
| Revenue | |
| Revenue | |
| Loss from construction operations | |
| Loss from construction operations | |
| Loss from construction operations | |
Revenue for the three months ended
September 30, 2017March 31, 2024 decreased
6%16% compared to the same period in
2016.2023. The decrease
for the third quarter of 2017 was
primarilyprincipally due to reduced project execution activities on
variousan industrial facility project in Arizona and the electrical and mechanical
projectscomponents of a completed transportation project in the Northeast. The decrease was also the result of an unfavorable adjustment in the first quarter of 2024 due to an arbitration ruling that only provided a partial award to the Company pertaining to a completed electrical project in New
York, as certain projects have completed or are nearing completion and newer projects have yet to fully ramp up.York. The
decreaserevenue decline was partially offset by
increased activitythe absence of a prior-year unfavorable adjustment related to the adverse legal ruling on
various electrical projectsa completed mixed-use project in
the southern United States and in California. Revenue for the nine months ended September 30, 2017 decreased slightly by 3% compared to revenue for the same period last year.IncomeNew York.
Loss from construction operations increased 32% for the three months ended September 30, 2017March 31, 2024 was $18.3 million compared to $12.4 million for the same period in 2016.2023. The increasechange was primarily the result of an unfavorable adjustment in the first quarter of 2024 of $12.0 million due in part to improvedthe above-mentioned arbitration ruling on a completed electrical project profitability on various newer electrical projects in New York, as well as the increased activity mentioned abovean immaterial unfavorable adjustment due to a settlement on various electrical projects in the southern United States anda completed mass-transit project in California. Income from construction operationsThe impact of these unfavorable adjustments was largely offset by the absence of a prior-year unfavorable adjustment related to the adverse legal ruling on a completed mixed-use project in New York that resulted in a non-cash charge of $83.6 million, of which $11.4 million impacted the Specialty Contractors segment.
Operating margin was (11.1)% for the
ninethree months ended
September 30, 2017 decreased 41%March 31, 2024 compared to
(6.3)% for the same period
last year.in 2023. The
decreasechange in operating margin was
primarilyprincipally due to the
impact of unfavorable project adjustments recorded in the second quarter of 2017 on certain mechanical projects in New York, none of which were individually material.Operating margin was 4.7% and 1.7% for the three and nine months ended September 30, 2017, respectively, compared to 3.3% and 2.8% for the three and nine months ended September 30, 2016, respectively. The margin changes for both periods were primarily due to the above-mentionedaforementioned factors that impacteddrove the changes in revenue and incomeloss from construction operations.
New awards in the Specialty Contractors segment totaled
$394 million and $929$140.3 million for the three
and nine months ended
September 30, 2017March 31, 2024, slightly down compared to
$206$154.1 million
and $660 million, respectively, for the
three and nine months ended September 30, 2016. New awardssame period in
the third quarter of 2017 included a $154 million electrical subcontract for a mass-transit project in California, approximately $65 million for various smaller electrical projects in the southern United States and $52 million for three new mechanical projects in New York.2023.
Backlog for the Specialty Contractors segment was
$1.6 billion as of September 30, 2017 compared to $1.7 billion as of
September 30, 2016.March 31, 2024, up 37.6% compared to $1.2 billion as of March 31, 2023. The Specialty Contractors segment continues to
have a significant pipeline ofbe primarily focused on servicing the Company’s current and prospective
large Civil and Building segment projects,
with demand for its services supported by continued spending on civilparticularly in the Northeast and
building projects.California. The
Specialty Contractors segment
shouldremains well-positioned to capture its
share of prospectivenew projects, based onleveraging the size and scale of itsour business units that operate in New York, Texas, Florida and California and the strong reputation held by these business units for high-quality work on large, complex projects.
Corporate, Tax and Other Matters
Corporate General and Administrative Expenses
Corporate general and administrative expenses were
$17.7$19.7 million and
$48.4$16.4 million during the three
and nine months ended
September 30, 2017 compared to $13.8 millionMarch 31, 2024 and
$44.0 million during2023, respectively. The increase in the three
and nine months ended
September 30, 2016. The increases wereMarch 31, 2024 was primarily due to higher compensation-related
expenses.expenses, mainly attributable to higher share-based compensation expense on liability-classified awards resulting from the impact of the increase in the Company’s stock price during the 2024 period.
Other Income, Net, Interest Expense and
Provision for Income
TaxesTax (Expense) Benefit | | | | | | | | |
| | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| Three Months Ended March 31, | |
| (in millions) | |
| (in millions) | |
(in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
Other income, net | | $ | 1.0 | | $ | 2.0 | | $ | 42.4 | | $ | 5.2 |
| Other income, net | |
| Other income, net | |
Interest expense | | | (15.6) | | (15.0) | | (53.7) | | (44.7) |
Provision for income taxes | | | (9.1) | | (19.1) | | (37.1) | | (44.9) |
| Interest expense | |
| Interest expense | |
| Income tax (expense) benefit | |
| Income tax (expense) benefit | |
| Income tax (expense) benefit | |
Other income, net
increased $37.2 million for the
ninethree months ended
September 30, 2017March 31, 2024 decreased by $1.1 million compared to the same period in
2016. The increase was primarily due to a $37.0 million legal settlement received during the second quarter of 2017, as discussed in Note 8 of the Notes to the Condensed Consolidated Financial Statements. 2023.
Interest expense increased $9.0 million for the ninethree months ended September 30, 2017March 31, 2024 decreased by $2.2 million compared to the same period in 2016.2023. The increasedecrease in the 2024 period was principallysubstantially due to non-cash extinguishment costs related to our debt restructuring transactions in April 2017,absence of Revolver borrowings, as well as increased non-cash interest chargesa lower balance of outstanding Term Loan B borrowings, primarily resulting from the amortization$91.0 million prepayment of debt discountTerm Loan B principal in February 2024, as discussed below in Liquidity and issuance costs.Capital Resources
. The Company’sCompany recognized an income tax expense for the three months ended March 31, 2024 of $7.3 million resulting in an effective income tax rate of 21.0%. The effective income tax rate for the three and nine months ended September 30, 2017March 31, 2024 was 26.4% and 34.1%, respectively, compared to 39.9% and 40.6% forconsistent with the three and nine months ended September 30, 2016, respectively. The favorable effective tax21.0% federal statutory rate for bothas the impacts of the 2017 periods was primarily due to the release of tax liabilities as a result of a statute expiration andrate reductions from earnings attributable to noncontrolling interests for(for which income taxes are not the responsibility of the Company. Company) and federal income tax credits were offset by non-deductible expenses, share-based compensation adjustments and state income taxes (net of federal tax benefit).
The effective
income tax rate was 49.6% for the three months ended March 31, 2023. The effective income tax rate for the
nine months ended September 30, 20172023 period was
also favorably impacted byhigher than the 21.0% federal statutory rate primarily due to the pre-tax loss for the period and projected for the year. In periods reporting pre-tax losses, a tax benefit increases the effective income tax rate because it increases the tax
benefits associated with share-based compensation. Duringbenefit generated from the
first quarter of 2017, the Company recognizedpre-tax loss. The tax benefits
associated with share-based compensation under the provisions of ASU 2016-09, as discussed in Note 9 of the Notes to the Condensed Consolidated Financial Statements. Thethat caused a higher effective tax rate forwere primarily the third quarterearnings attributable to noncontrolling interests (for which income taxes are not the responsibility of 2016 was favorably impactedthe Company) and state income taxes (net of the federal tax benefit), partially offset by various return-to-provision adjustments.non-deductible expenses.
Liquidity and Capital Resources
Liquidity is provided by available cash and cash equivalents, cash generated from operations, credit facilities and access to capital markets. On April 20, 2017, we issued $500We have a committed line of credit totaling $175.0 million (to be reduced to $170.0 million as discussed further in Debt and in Note 19 of senior notes and entered into a newthe Notes to Condensed Consolidated Financial Statements), which may be used for revolving loans, letters of credit facility with a $350 million revolver. We used the net proceeds to repurchase and/or redeem our 2010 Senior Notes in full and repay all borrowings under our 2014 Credit Facility.general purposes. We believe that the increased liquidity that resultedcash generated from this refinancingoperations, along with our unused credit capacity and available cash balances as of March 31, 2024, will helpbe sufficient to fund any working capital needs and debt maturities for the next 12 months and beyond, as discussed further in Debt below. We generated significant numberoperating cash flow in the first quarter of 2024 as discussed below in Cash and Working Capital. We expect strong operating cash flow to continue for the remainder of 2024, based on projected cash collections, both from project opportunities thatexecution activities and the resolution of additional outstanding claims and unapproved change orders, including COVID-19-related cost recoveries from certain customers. In addition, we see overexpect to benefit from the next several years, especially inutilization of available net operating loss carryforwards to reduce our Civil segment.cash outflows for income taxes.
Cash and cash equivalents were
$221.9$358.3 million as of
September 30, 2017March 31, 2024 compared to
$146.1$380.6 million as of December 31,
2016.2023. Cash
immediately available for general corporate purposes was
$84.2$128.9 million and
$49.5$145.1 million as of
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively, with the remainder being
amounts held by our consolidated joint ventures and also our proportionate share of cash
related toheld by our unconsolidated joint ventures. Cash held by our joint ventures
which wasis available
only for joint venture-related uses, including distributions to joint venture partners. In addition, our restricted cash and restricted investments
totaled $145.2 million as of March 31, 2024 compared to $144.4 million as of December 31, 2023. Restricted cash and restricted investments at March 31, 2024 were primarily held
primarily to secure insurance-related contingent obligations
totaled $66.2 million as of September 30, 2017 compared to $50.5 million as of December 31, 2016.and deposits.
During the
ninethree months ended
September 30, 2017,March 31, 2024, net cash provided by operating activities was
$1.9$98.3 million,
($36.5 millionthe second-largest result for the
third quarterfirst three months of
2017)any year since the merger between Tutor-Saliba Corporation and Perini Corporation in 2008. The net cash provided by operating activities for the 2024 period was primarily due
primarily to cash generated
fromby earnings sources
mostly offset by increasedand a decrease in investment in project working capital. The
changedecrease in investment in project working capital
was primarily
reflects increasesdue to an increase in accounts
receivablepayable, as a result of the timing of payments to subcontractors and
costs and estimated earnings in excess of billings,vendors, partially offset by
an increasea decrease in billings in excess of costs and estimated
earnings. Other changes included reductions in accounts payableearnings (“BIE”). During the three months ended March 31, 2023, net cash provided by operating activities was $21.3 million. The net cash provided by operating activities for the 2023 period was primarily due to
the timing of payments to vendors and subcontractors. In the first nine months of 2016, $94.2 milliona decrease in
cash was provided from operating activities, due primarily to favorable operating results offset by changes in net investmentinvestments in project working
capital.
capital, partially offset by cash utilized by earnings sources. The $92.3 million reductiondecrease in cash flow from operations for the nine months ended September 30, 2017 comparedinvestments in project working capital was primarily due to the nine months ended September 30, 2016 reflects the unfavorable timing of payments of payables and changesa decrease in costs and estimated earnings in excess of billings offset by changes(“CIE”) and decreases in accounts receivable and billings in excess of costs and estimated earnings.
Duringretention receivable that resulted from improved collection activity.
Cash flow from operating activities increased $76.9 million when comparing the first ninethree months of 2017, our net2024 with the same period in 2023. The increase in cash flow from operating activities for the first three months of 2024 compared to 2023 primarily reflects cash generated by earning sources in the current period compared to cash used for investing activities of $23.8 million was due primarily to $48.7 million forby earnings sources in the investment of restricted funds to obtain a higher return and the use of $9.7 million for the acquisition of property and equipment,same period last year, partially offset by a $33.1 millionsmaller decrease in restricted cash. investment in working capital in the current period compared to the prior-year period. The smaller decrease in investment in working capital in the 2024 period was primarily due to a current-
year decrease in BIE compared to an increase last year, a current-year increase in CIE compared to a decrease last year and a current-year increase in accounts receivable compared to a decrease last year, partially offset by a current-year increase in accounts payable compared to a decrease last year. Both periods were positively impacted by collections associated with previously disputed matters.
Net cash used
byin investing activities
forduring the
comparable period in 2016first three months of 2024 was
$12.0$10.3 million primarily due to the acquisition of property and
equipment.Forequipment for projects (i.e., capital expenditures) totaling $10.4 million. Net cash used in investing activities during the first ninethree months of 2017,2023 was $6.9 million primarily due to the acquisition of property and equipment for projects totaling $17.8 million, partially offset by proceeds from the sale of property and equipment of $6.5 million and net proceeds from investment transactions of $4.4 million.
Net cash used in financing activities was $109.6 million for the first three months of 2024, which was primarily driven by $100.2 million of repayments of debt (including the $91.0 million principal repayment on the Term Loan B as discussed below in Debt) and $7.4 million of distributions to noncontrolling interests. Net cash provided by financing activities was $97.7$14.4 million for the first three months of 2023, which was primarily due to increaseddriven by $21.4 million of net proceeds from borrowings, of $125.4 million, partially offset by the use of $15.3 million for debt issuance and extinguishment costs related to the debt restructuring transactions in April 2017 and $11.1 million for tax payments related to the net settlement of share-based compensation. Net cash provided by financing activities for the comparable period of 2016 was $13.1 million, which was principally due to increased net borrowings of $28.4 million, partially offset by $14.9 million in debt issuance costs associated with amendments to our 2014 Credit Facility and the issuance of $200.0$6.5 million of Convertible Notes in June 2016.net distributions to noncontrolling interests.
At
September 30, 2017,March 31, 2024, we had working capital of
$1.6$1.4 billion, a ratio of current assets to current liabilities of
2.071.70 and a ratio of debt to equity of
0.54,0.61, compared to working capital of
$1.3$1.4 billion, a ratio of current assets to current liabilities of
1.871.66 and a ratio of debt to equity of
0.490.70 at December 31,
2016.2023.
2020 Credit
FacilityAgreement
On April 20, 2017, weAugust 18, 2020, the Company entered into a credit agreement (the “2017(as amended, the “2020 Credit Facility”Agreement”) with SunTrustBMO Bank N.A. (f/k/a BMO Harris Bank N.A.), as Administrative Agent, Swing Line Lender and L/C Issuer and a syndicate of other lenders. The 20172020 Credit FacilityAgreement provides for a $350$425.0 million term loan B facility (the “Term Loan B”) and a $175.0 million revolving credit facility (the “2017 Revolver”“Revolver”), which will be reduced to $170.0 million following the effectiveness of the amendment to the 2020 Credit Agreement entered into on April 15, 2024, as described further detail below and a sublimitin Note 19 of the Notes to Condensed Consolidated Financial Statements, with sub-limits for the issuance of letters of credit and swinglineswing line loans up to the aggregate amountamounts of $150$75.0 million and $10$10.0 million, respectively, both maturingrespectively.
Subject to certain exceptions, at any time prior to maturity, the 2020 Credit Agreement provides the Company with the right to increase the commitments under the Revolver and/or to establish one or more term loan facilities in an aggregate amount up to (i) the greater of $173.5 million and 50% LTM EBITDA (as defined in the 2020 Credit Agreement) plus (ii) additional amounts if (A) in the case of pari passu first lien secured indebtedness, the First Lien Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 1.35:1.00, (B) in the case of junior lien secured indebtedness, the Total Net Leverage Ratio, as defined in the 2020 Credit Agreement, does not exceed 3.50:1.00, and (C) in the case of unsecured indebtedness, (x) the Total Net Leverage Ratio does not exceed 3.50:1.00 or (y) the Fixed Charge Coverage Ratio (as defined in the 2020 Credit Agreement) is no less than 2.00:1.00. The balances of indebtedness used in the calculations of the First Lien Net Leverage Ratio and the Total Net Leverage Ratio include offsets for cash and cash equivalents available for general corporate purposes.
The Term Loan B will mature on August 18, 2027, except that if any of the 2017 Senior Notes (defined below) remain outstanding beyond future dates specified below, the maturity of certain amounts of the Term Loan B will be accelerated (“spring-forward maturity”). The spring-forward maturity provisions are as follows: (i) if, on January 30, 2025, any of the 2017 Senior Notes remain outstanding, the maturity date for one tranche of the Term Loan B (representing 10.2% of the principal balance) shall be January 30, 2025 (which is 91 days prior to the maturity of the 2017 Senior Notes) and (ii) if on April 20, 202221, 2025, any of the 2017 Senior Notes remain outstanding, the maturity date for another tranche of the Term Loan B (representing 89.8% of the principal balance) shall be April 21, 2025 (which is 10 days prior to the maturity of the 2017 Senior Notes), subject to certain further exceptions. However, following the redemption of the 2017 Senior Notes, which will occur on May 2, 2024 (as described in further detail below), the spring-forward maturity in respect of both tranches of the Term Loan B will no longer be in effect.
The Revolver will mature on August 18, 2025, unless any of the Convertible2017 Senior Notes are outstanding on December 17, 2020,January 30, 2025, in which case all such borrowingsany extensions of credit under the Revolver will mature and the commitments available under the Revolver will be reduced to zero, in each case, on December 17, 2020 (subjectJanuary 30, 2025, subject to certain further exceptions). In addition,exceptions. However, following the 2017effectiveness of the April 15, 2024 amendment discussed below, the Revolver will mature (a) if any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof) remains outstanding, the earlier of (i) May 20, 2027 and (ii) the date that is ninety (90) days prior to the final maturity of any tranche of the Term Loan B, any incremental term loan or any refinancing term loan (or any refinancing or replacement thereof), as applicable and (b) if no obligations are outstanding with respect to any tranche of the Term Loan B, any incremental term loan or any refinancing term loan, August 18, 2027.
On April 15, 2024, as described in further detail in Note 19 of the Notes to the Condensed Consolidated Financial Statements, the Company entered into an amendment in respect of the 2020 Credit
Facility permits additional borrowingsAgreement to, among other things, extend the maturity of the Revolver (as described above) and permanently reduce the aggregate commitments in
an aggregate amountrespect of
$150the Revolver by $5.0 million
which can befrom $175.0 million to $170.0 million. The effectiveness of the amendment is subject to the satisfaction or waiver of certain conditions precedent more fully described in
the form of increased capacity on the 2017 Revolver or the establishment of one or more term loans. For additional information regarding the terms of our 2017 Credit Facility, refer to Note
619 of the Notes to Condensed Consolidated Financial Statements.
As of March 31, 2024, the Revolver had unused available borrowing capacity of $175.0 million, and the outstanding balance of the Term Loan B and the 2017 Senior Notes were $275.1 million and $500.0 million, respectively.
The 2020 Credit Agreement requires the Company to make prepayments on the Term Loan B in connection with certain asset sales, receipts of insurance proceeds, incurrences of certain indebtedness and annual excess cash flow (in each case, subject to certain customary exceptions). At December 31, 2023, current maturities of long-term debt in the accompanying Condensed Consolidated Balance Sheets included $91.0 million of principal on the Term Loan B, relating to the mandatory prepayment provision of the 2020 Credit Agreement in respect of annual excess cash flow. The $91.0 million principal prepayment, which was due by the first week of April 2024, was paid in February 2024.
Borrowings under the 2020 Credit Agreement bear interest at variable rates, which have increased since the latter part of 2022 due to changes in market conditions that resulted in increases in the Secured Overnight Financing Rate (“SOFR”) (and the London Interbank Offered Rate (“LIBOR”) prior to the transition to SOFR), in the case of the Term Loan B, and the administrative agent’s prime lending rate, in the case of the Revolver. Effective May 2, 2023, the 2020 Credit Agreement was amended to transition the Company’s original LIBOR option in respect of the Term Loan B to Adjusted Term SOFR. The average borrowing rates on the Term Loan B for the three months ended March 31, 2024 was approximately 9.2%. There were no borrowings under the Revolver during the three months ended March 31, 2024. At March 31, 2024, the borrowing rates on the Term Loan B and the Revolver were 10.2% and 12.3%, respectively. For more information regarding the terms of our 2020 Credit Agreement, refer to Note 9 of the Notes to Condensed Consolidated Financial Statements.
The table below presents our actual and required
consolidated fixed charge coverage ratio and consolidated leverageFirst Lien Net Leverage ratio under the
20172020 Credit
FacilityAgreement for the period, which
areis calculated on a rolling four-quarter basis:
| | | | | | | | |
| Trailing Four Fiscal Quarters Ended |
| | | | March 31, 2024 |
| Actual | | Twelve Months Ended September 30, 2017
Required |
| First lien net leverage ratio | 1.12 to 1.00 | Actual
| | Required
|
Fixed charge coverage ratio
| | 2.16≤ 2.25 : 1.00
| | > or = 1.25 : 1.00
|
Leverage ratio
| | 2.99 : 1.00
| | < or = 4.00 : 1.00
|
On October 31, 2022, the 2020 Credit Agreement was amended to increase the maximum First Lien Net Leverage Ratio covenant level for certain fiscal quarters. On March 10, 2023, the 2020 Credit Agreement was further amended to set the maximum First Lien Net Leverage Ratio covenant level to 3.50:1.00, effective the fiscal quarter ended December 31, 2022, and increasing to 3.75:1.00 for the fiscal quarter ending March 31, 2023 and subsequently stepping down to 3.00:1.00 for the fiscal quarter ending June 30, 2023, 2.50:1.00 for the fiscal quarter ending September 30, 2023 and 2.25:1.00 for the fiscal quarter ending December 31, 2023 and each fiscal quarter thereafter. As of
the filing date of this Form 10-Q,March 31, 2024, we
arewere in compliance and expect to continue to be in compliance with the covenants under the
20172020 Credit
Facility. Agreement.
2024 Senior Notes Issuance and 2017 Senior Notes
Redemption
On April 20, 2017, we22, 2024, the Company issued $500$400.0 million in aggregate principal amount of 6.875%11.875% Senior Notes due 2025April 30, 2029 (the “2017“2024 Senior Notes”) in a private placement.placement offering. Interest on the 20172024 Senior Notes is payable in arrears semi-annually on May 1in April and November 1October of each year, beginning in October 2024.
Prior to April 30, 2026, the Company may redeem the 2024 Senior Notes at a redemption price equal to 100% of the principal amount plus a “make-whole” premium described in the indenture. In addition, prior to April 30, 2026, the Company may
redeem up to 40% of the original aggregate principal amount of the notes at a redemption price of 111.875% of their principal amount with the proceeds received by the Company from any offering of the Company’s equity. On or after April 30, 2026, the Company may redeem the 2024 Senior Notes at specified redemption prices described in the indenture. Upon a change of control, holders of the 2024 Senior Notes may require the Company to repurchase all or part of the 2024 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.
The 2024 Senior Notes are senior unsecured obligations of the Company and are guaranteed by the Company’s existing and future subsidiaries that also guarantee obligations under the Company’s 2020 Credit Agreement. In addition, the indenture for the 2024 Senior Notes provides for customary covenants on November 1, 2017. For additional information regardingcertain payments and includes customary events of default.
The proceeds of the terms2024 Senior Notes, together with cash on hand, will be used to redeem in full, all of the outstanding obligations in respect of the 2017 Senior Notes, resulting in a total net reduction to the Company’s outstanding principal debt balance of $100.0 million. A Notice of Conditional Full Redemption was delivered to holders of the 2017 Senior Notes on April 17, 2024, and the redemption of the 2017 Senior Notes will occur on May 2, 2024.
Contractual Obligations
Other than the issuance of the 2024 Senior Notes and redemption of our 2017 Senior Notes, refer toas discussed above in Debt and in Note 619 of the Notes to Condensed Consolidated Financial Statements.Repurchase and Redemption of 2010 Senior Notes and Termination of 2014 Credit Facility
We used proceeds from the 2017 Senior Notes and 2017 Revolver to repurchase or redeem our 2010 Senior Notes, to pay off our Term Loan and 2014 Revolver, and to pay accrued but unpaid interest and fees. In addition, we satisfied and discharged the indenture governing the 2010 Senior Notes and terminated the 2014 Credit Facility.
Aside from the discussion above,Statements, there have been no significantmaterial changes in our contractual obligations from thatthose described in our Annual Report on Form 10-K10‑K for the year ended December 31, 2016.
2023.
Off-Balance Sheet Arrangements
None
Critical Accounting Policies
and Estimates
Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form
10-K10‑K for the year ended December 31,
2016.2023. Our critical accounting
policiesestimates are also identified and discussed in
Part II, Item 7 of our Annual Report on Form
10-K10‑K for the year ended December 31,
2016.2023.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Consolidated Financial Statements.
Item 3.Quantitative and Qualitative Disclosures About Market Risk There has been no material change in our exposure to market risk from that described in Part II, Item 7A of our Annual Report on Form 10-K10‑K for the year ended December 31, 2016.2023.
Item 4.Controls and Procedures Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this Quarterly Report on Form
10-Q10‑Q was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (a) were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. –OTHER INFORMATION In the ordinary course of our business, we are involved in various legal proceedings. We discloseddisclose information about certain of ourpending legal proceedings inpursuant to SEC rules and as we otherwise determine to be appropriate. For information on such pending matters, see Part I, Item 3 of our Annual Report on Form 10-K10‑K for the year ended December 31, 2016. For an update to those disclosures, see Notes 7 and 82023, updated by Note 11 of the Notes to the Condensed Consolidated Financial Statements.Statements included in this Quarterly Report on Form 10‑Q.
There have been no material changes to our risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016. 2023.
Item 4.Mine Safety Disclosures Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Dodd-Frank Act”) requires domestic mine operators to disclose violations and orders issued under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) by the federal Mine Safety and Health Administration. We do not
act as the owner ofown or operate any
mines butmines; however, we may
act asbe considered a
miningmine operator as defined under the Mine Act
wherebecause we
may be an independent contractor performingprovide construction services
or construction of such mine.Information concerningto customers in the mining industry. Accordingly, we provide information regarding 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-Q.
Item 5.Other InformationNone.
(c) Trading Plans
During the quarter ended March 31, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
| | | | | |
| Exhibits | Description |
Exhibits
4.1 | Description
|
| Employment Agreement,Indenture, dated September 6, 2017, by and betweenApril 22, 2024, among Tutor Perini Corporation, the guarantors named therein and Gary G. SmalleyWilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 10.14.1 to Form 8-K filed on September 8, 2017)April 23, 2024).
|
31.1
10.1* | |
| 10.2 | |
| 31.1 | |
31.2 | |
32.1 | |
32.2 | |
95 | |
101.INS | XBRL Instance Document. Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL (included as Exhibit 101). |
31
* Management contract or compensatory plan or arrangement
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| Tutor Perini Corporation |
| |
| Dated: April 25, 2024 | By: | /s/ Ryan J. Soroka |
| Ryan J. Soroka |
| Dated: November 9, 2017
By:
| /s/Gary G. Smalley
|
| Gary G. Smalley
|
| ExecutiveSenior Vice President and Chief Financial Officer
|