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| TPC > SEC Filings for TPC > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
Overview
Tutor Perini Corporation, formerly known as Perini Corporation, is a leading construction services company, as ranked by Engineering News-Record based on revenues, offering diversified general contracting and design-build services to private clients and public agencies throughout the world. We have provided construction services since 1894 and have established a strong reputation within our markets for executing large, complex projects on time and within budget while adhering to strict quality control measures. We offer general contracting, pre-construction planning and comprehensive project management services, including the planning and scheduling of the manpower, equipment, materials and subcontractors required for a project. We also offer self-performed construction services including excavation, concrete forming and placement, steel erection, electrical and mechanical services, plumbing and HVAC.
Our business is conducted through three reportable segments: building, civil, and management services. Our building segment focuses on large, complex projects in the hospitality and gaming, municipal offices, sports and entertainment, educational, transportation, corrections, healthcare, biotech, pharmaceutical and high-tech markets, and electrical, mechanical, plumbing and HVAC services as a subcontractor to the Company and other general contractors. Our civil segment specializes in public works construction, primarily in the western, northeastern and mid-Atlantic United States, including the repair, replacement and reconstruction of the public infrastructure such as highways, bridges, mass transit systems and wastewater treatment facilities. Our management services segment, including the recently acquired Tutor-Saliba operation in Guam, provides diversified construction, design-build and maintenance services to the U.S. military and government agencies, as well as to surety companies and multi-national corporations in the United States and overseas.
Significant Accounting Policies
Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Our critical accounting policies are also identified and discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. We have made no significant changes to these policies during the nine months of 2009, except as noted below.
In December 2007, the FASB issued new guidance on business combinations. The new standard provides revised guidance on how an acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. This guidance also provides direction for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. It was effective for us beginning January 1, 2009 and we applied the provisions of this guidance to an acquisition completed in January 2009 (see Note 3(a) of the Consolidated Condensed Financial Statements).
In February 2008, the FASB issued a staff position which amends the fair value guidance by delaying its effective date by one year for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. We adopted the fair value guidance relating to our non-financial assets and non-financial liabilities on January 1, 2009. The adoption of this guidance did not have a material impact on our financial statements.
In December 2008, the FASB issued a staff position which requires employers to disclose information about fair value measurements of plan assets that are similar to the disclosures about fair value measurements required by the new fair value guidance. It will become effective for our 2009 annual financial statements. Since the staff position only requires enhanced disclosures, the implementation of this guidance will not have an impact on our financial statements.
In April 2009, the FASB issued a staff position providing additional guidance on factors to consider when the volume and level of market activity for an asset or liability have significantly decreased and determining whether a transaction was orderly. It was effective for us beginning April 1, 2009. The staff position affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. It applies to all fair value measurements when appropriate. The adoption of this guidance did not have a material impact on our financial statements.
In April 2009, the FASB issued a staff position amending existing guidance for determining whether an other-than-temporary impairment of debt securities has occurred. Among other changes, the FASB replaced the existing requirement that an entity's management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert (a) it does not have the intent to sell the security, and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. We adopted the provisions of the staff position beginning April 1, 2009. The adoption of this guidance did not have a material impact on our financial statements.
In April 2009, the FASB issued a staff position requiring fair value disclosures in both interim and annual financial statements. We adopted the provisions of the staff position beginning April 1, 2009. Other than the required disclosures, the adoption of this guidance did not have a material impact on our financial statements. See Note 5 for disclosure of fair value measurements.
In July 2009, the FASB Accounting Standards Codification ("ASC") was issued and became the single official source of authoritative, nongovernmental U.S. Generally Accepted Accounting Principles ("GAAP"). The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP. All other literature not included in the codification will be considered non-authoritative. ASC is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The implementation of the ASC did not have a material impact on our financial statements or disclosures.
Recent Developments
Company Name Change
On May 28, 2009, our shareholders voted to approve changing our Company name from Perini Corporation to Tutor Perini Corporation. We believe that the name change is in the best interests of the Company and our shareholders because the new name reflects the larger, more diversified merged company and allows us to maximize the benefit of the reputations and goodwill of both Tutor-Saliba and Perini. In conjunction with the name change, our common stock now trades on the New York Stock Exchange under its new stock symbol "TPC".
Acquisition of Keating Building Corporation
On January 15, 2009, we completed our acquisition of Daniel J. Keating Construction Company, d/b/a Keating Building Corporation ("Keating"), a Philadelphia-based privately held construction, construction management and design-build company. Under the terms of the transaction, we acquired 100% of Keating's common stock for total consideration of $51.1 million, which includes amounts paid at or subsequent to closing and additional consideration that may become payable under the terms of the agreement. Keating is licensed to provide construction services in a number of states, mostly in the mid-Atlantic and northeast regions of the United States. We believe that the acquisition of Keating is a strong strategic fit which will enable us to expand our building construction market presence in the eastern half of the United States, including the important northeast and mid-Atlantic regions, and to realize significant synergies from the acquisition by deploying Keating's resources in the regional private non-residential and public works building markets in the eastern United States. The results of operations for Keating are included in our financial statements for the first nine months of 2009.
Our backlog of uncompleted construction work at September 30, 2009 was approximately $4.9 billion, as compared to the $6.7 billion reported at December 31, 2008. Significant additions to new work during 2009 include a $272 million courthouse in Southern California, a $204 million runway reconstruction at JFK Airport in New York, a $240 million solar panel manufacturing plant in California, a $178 million civil infrastructure project at the World Trade Center site in New York, and a $124 million bridge replacement project in California. The overall decrease in our backlog during 2009 reflects the completion of large gaming and hospitality work under contract for the period and a reduced level of nonresidential building new work acquired.
Backlog at Backlog at
New Business Revenue September 30,
December 31, 2008 Awarded Recognized 2009
(in millions)
Building $ 5,732.0 $ 1,654.3 $ (3,576.7) $ 3,809.6
Civil 528.0 594.6 (259.2) 863.4
Management Services 415.9 17.4 (233.9) 199.4
Total $ 6,675.9 $ 2,266.3 $ (4,069.8) $ 4,872.4
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Results of Operations
Comparison of the Third Quarter of 2009 with the Third Quarter of 2008
Revenues decreased by $243.8 million to $1,168.8 million, gross profit decreased by $0.1 million, income from construction operations decreased by $9.8 million, and net income decreased by $7.4 million (or 21.8%) to $26.7 million. These revenue and profit decreases primarily reflect the completion of projects and a lower volume of new work. Basic earnings per common share were $0.55 for the third quarter of 2009, compared to $1.03 for the third quarter of 2008. Diluted earnings per common share were $0.54 for the third quarter of 2009, compared to $1.01 for the third quarter of 2008. The reductions in earnings per share reflect the decrease in net income and the increase in the number of common shares outstanding as a result of the merger with Tutor-Saliba.
Revenues for the
Three Months Ended September 30, Increase %
2009 2008 (Decrease) Change
(in millions)
Building $ 1,017.8 $ 1,294.3 $ (276.5) (21.4)%
Civil 72.6 74.1 (1.5) (2.0)%
Management Services 78.4 44.2 34.2 77.4 %
Total $ 1,168.8 $ 1,412.6 $ (243.8) (17.3)%
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Overall revenues decreased by $243.8 million (or 17.3%). The decrease in revenues was due primarily to a decline in building construction revenues that was partially offset by an increase in revenues in management services operations. The decrease in building construction revenues of $276.5 million (or 21.4%) was due primarily to the completion of large gaming and hospitality work under contract for the period and a reduced level of nonresidential building new work acquired. Partly offsetting this decrease in building construction revenues was an increase of $157.1 million in revenues as a result of the merger with Tutor-Saliba and the acquisition of Keating. Civil construction revenues decreased by $1.5 million (or 2.0%) primarily due to certain projects entering their final phase. This decrease was partially offset by the inclusion of revenues from Tutor-Saliba for a full quarter in 2009. Management services revenues increased by $34.2 million (or 77.4%) due to an increase in volume on projects in Iraq, which are nearing completion, and increased volume of work in Guam, from the addition of Tutor-Saliba. On a pro forma basis, including Tutor-Saliba, revenues were $1,650.3 million for the three months ended September 30, 2008.
Income from Construction
Operations for the Increase
Three Months Ended September 30, (Decrease) %
2009 2008 In Income Change
(in millions)
Building $ 38.8 $ 35.2 $ 3.6 10.2%
Civil 6.3 10.0 (3.7) (37.0)%
Management Services 8.5 12.1 (3.6) (29.8)%
Subtotal 53.6 57.3 (3.7) (6.5)%
Less: Corporate (11.1) (5.0) (6.1) 122.0%
Total $ 42.5 $ 52.3 $ (9.8) (18.7)%
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Income from construction operations decreased by $9.8 million (or 18.7%). Income from construction operations (excluding corporate) decreased by $3.7 million (or 6.5%). Building income from construction operations increased by $3.6 million (or 10.2%) due primarily to an improvement in gross margin in 2009 as a result of an increase in revenues from public works projects during the period. Civil construction income from operations decreased by $3.7 million (or 37.0%) due to favorable performance on a civil infrastructure job that occurred in the third quarter of 2008 that did not occur during the same period in 2009. Also contributing to the decrease was higher general and administrative expenses due to the inclusion of a partial quarter of Tutor-Saliba in 2008 as compared to a full quarter in 2009. Management services income from operations decreased by $3.6 million (or 29.8%) primarily due to favorable performance on a military base in Afghanistan that occurred in the third quarter of 2008 that did not occur during the same period in 2009. Corporate general and administrative expenses increased due to a partial quarter of Tutor-Saliba corporate general and administrative expenses in 2008 as well as acquisition costs and expenses related to the merger and integration of Tutor-Saliba, which reduced income from construction operations by $6.1 million. On a pro forma basis, including Tutor-Saliba, income from construction operations was $46.8 million for the three months ended September 30, 2008.
Other income decreased by $2.2 million, from $2.7 million in 2008 to $0.5 million in 2009, due primarily to a $2.1 million decrease in interest income from lower average interest rates and a lower average investment balance in 2009.
Interest expense increased by $0.9 million, from $1.1 million in 2008 to $2.0 million in 2009, due primarily to the increase in debt relating to the financing of transportation equipment and a temporary increase in borrowing under our revolving credit facility during 2009.
The provision for income taxes decreased by $5.5 million, from $19.8 million in 2008 to $14.3 million in 2009. The effective income tax rate for the third quarter of 2009 was 34.8%, as compared to 36.7% for the third quarter of 2008. The effective income tax rate reflects an adjustment between the tax provision and the tax return for the prior year.
Comparison of the Nine Months Ended September 30, 2009 with the Nine Months Ended September 30, 2008
Revenues increased by $ 12.4 million to $4,069.8 million, gross profit increased by $77.4 million, income from construction operations increased by $35.1 million, and net income increased by $16.8 million (or 19.1%) to $104.6 million in 2009. The performance in the first nine months of 2009 reflects improved profit contributions in all segments, due in part to the addition of projects from the merger of Tutor-Saliba and acquisition of Keating. Basic earnings per common share were $2.15 for the first nine months of 2009, compared to $3.01 for the first nine months of 2008. Diluted earnings per common share were $2.13 for the first nine months of 2009, compared to $2.96 in the first nine months of 2008. The reductions in earnings per share reflect the increase in the number of common shares outstanding as a result of the merger with Tutor-Saliba.
Revenues for the
Nine Months Ended September 30, Increase %
2009 2008 (Decrease) Change
(in millions)
Building $ 3,576.7 $ 3,757.0 $ (180.3) (4.8)%
Civil 259.2 192.8 66.4 34.4%
Management Services 233.9 107.6 126.3 117.4%
Total $ 4,069.8 $ 4,057.4 $ 12.4 0.3%
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Overall revenues increased by $12.4 million (or 0.3%) due to increased revenues in our civil and management services segments from the merger with Tutor-Saliba and acquisition of Keating, which more than offset the decrease in revenues from the building segment. Building construction revenues decreased by $180.3 million (or 4.8%) due to the completion of large gaming and hospitality work under contract for the period and a reduced level of nonresidential building new work acquired. Partly offsetting this decrease in building construction revenues was an increase of $743.3 million in revenues as a result of the merger with Tutor-Saliba and the acquisition of Keating. Civil construction revenues increased by $66.4 million (or 34.4%) due to an additional $83.0 million in revenues from the addition of Tutor-Saliba which was partially offset by a decrease in revenues on certain civil infrastructure projects that experienced favorable performance in 2008. Management services revenues increased by $126.3 million (or 117.4%) due to an increase in volume on projects in Iraq, which are nearing completion, and an increase in volume of work in Guam, from the addition of Tutor-Saliba. On a pro forma basis, including Tutor-Saliba, revenues were $5,092.9 million for the nine months ended September 30, 2008.
Income from Construction
Operations for the Increase
Nine Months Ended September 30, (Decrease) %
2009 2008 In Income Change
(in millions)
Building $ 120.2 $ 112.1 $ 8.1 7.2%
Civil 40.7 13.6 27.1 199.3%
Management Services 38.4 23.7 14.7 62.0%
Subtotal 199.3 149.4 49.9 33.4%
Less: Corporate (30.4) (15.6) (14.8) 94.9%
Total $ 168.9 $ 133.8 $ 35.1 26.2%
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Income from construction operations increased by $35.1 million (or 26.2%). Income from construction operations (excluding corporate) increased by $49.9 million (or 33.4%). Building income from construction operations increased by $8.1 million (or 7.2%) primarily due to an improvement in gross margin in 2009 as a result of an increase in revenues from public works projects during the period. Civil construction income from operations increased by $27.1 million (or 199.3%) due primarily to the increased revenues discussed above. Management services income from operations increased by $14.7 million (or 62.0%) due primarily to the increased revenues discussed above. Corporate general and administrative expenses increased due to a full nine months of Tutor-Saliba corporate general and administrative expenses in 2009 as well as acquisition costs and expenses related to the merger and integration of Tutor-Saliba, which reduced income from construction operations by $14.8 million. On a pro forma basis, including Tutor-Saliba, income from construction operations was $173.8 million for the nine months ended September 30, 2008.
Other income decreased by $4.3 million, from $6.7 million in 2008 to $2.4 million in 200. The decrease is due to a $6.7 million decrease in interest income as a result of lower average interest rates and a lower average investment balance, partially offset by a $2.7 million loss in 2008 due to the adjustment in fair value of our investments in auction rate securities.
Interest expense increased by $4.3 million, from $1.8 million in 2008 to $6.1 million in 2009, due primarily to debt assumed in the merger with Tutor-Saliba, an increase in transportation equipment financing, and a temporary increase in borrowing under our revolving credit facility during 2009.
The provision for income taxes increased by $9.7 million, from $50.9 million in 2008, to $60.6 million in 2009, due primarily to the increase in income before taxes in 2009. The effective income tax rate was 36.7% for the nine months ended 2008 and 2009.
Potential Impact of Current Economic Conditions
Current economic and financial market conditions in the United States and overseas, including severe disruptions in the credit markets, have had an adverse affect on our results of operations. If there is a prolonged economic recession or depression or if government efforts to stabilize and revitalize credit markets and financial institutions are not effective, current economic and financial market conditions could continue to adversely affect our results of operations in future periods. The current instability in the financial markets has made it difficult for certain of our customers, including state and local governments, to access the credit markets to obtain financing or refinancing, as the case may be, to fund new construction projects on satisfactory terms or at all. State and local governments also are facing significant budget shortfalls as a result of declining tax and other revenues, which may cause them to defer or cancel planned infrastructure projects. This situation has contributed to lower revenues in 2009. The $1.8 billion decrease in our backlog during 2009 is the result of lower volume of new work acquired as new projects have been deferred or delayed pending a turnaround in the economy, an improvement in the credit markets, and the release of funds for construction under the Federal economic stimulus package. We may encounter increased levels of deferrals and delays related to new construction projects in the future. Difficulty in obtaining adequate financing due to the unprecedented disruption in the credit markets may increase the rate at which our customers defer, delay or cancel proposed new construction projects. Such deferrals, delays or cancellations could have an adverse impact on our future operating results.
Liquidity and Capital Resources
Cash and Working Capital
At September 30, 2009 and December 31, 2008, cash held by us and available for general corporate purposes was $322.6 million and $342.3 million, respectively, and our proportionate share of cash held by joint ventures and available only for joint venture-related uses was $13.1 million and $43.9 million, respectively. Cash held by construction joint ventures is distributed from time to time to us and to the other joint venture participants in accordance with our respective percentage interest after the joint venture partners determine that a cash distribution is prudent. Cash distributions received by us from our construction joint ventures are then available for general corporate purposes.
A summary of cash flows for each of the nine month periods ended September 30, 2009 and 2008 is set forth below:
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