Sets Us Apart
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Tutor Perini Corporation
Tutor Perini Corporation (the "Company") is a leading civil and building construction company 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 by executing large complex projects on time and within budget while adhering to strict quality control measures.
We offer general contracting, pre-construction planning and comprehensive project management services, including the planning and scheduling of the manpower, equipment, materials, and subcontractors required for a project. We also offer self-performed construction services including excavation, concrete forming and placement, steel erection, electrical and mechanical services, plumbing, and HVAC. We are known for our major complex building project commitments as well as our capacity to perform large and complex transportation and heavy civil construction for government agencies and private clients throughout the world.
Third-Quarter and Nine-Month Results
Revenues were $1,030.4 million and $3,076.4 million for the third quarter and nine months ended September 30, 2013, respectively, compared to $1,099.4 million and $2,997.3 million for the same periods last year. Income from construction operations was $58.1 million and $133.6 million for the third quarter and nine months ended September 30, 2013, respectively, compared to $54.7 million and a loss from construction operations of $282.5 million for the same periods last year. Net income was $23.8 million and $54.0 million for the third quarter and nine months ended September 30, 2013, respectively, compared to $42.6 million and a net loss of $307.0 million for the same periods last year. Diluted earnings per share (EPS) were $0.49 and $1.11 for the third quarter and nine months ended September 30, 2013, respectively, compared to $0.88 and a diluted loss per share of $6.47 for the same periods last year.
Excluding a $16.8 million tax benefit recognized in the third quarter of 2012, associated with the $376.6 million goodwill and intangible assets impairment charge recorded in the second quarter of 2012, net income for the third quarter of 2012 was $25.8 million, or $0.54 per diluted share. Excluding the impairment charge and related $37.4 million tax benefit, together with a $2.7 million realized loss on the sale of certain auction rate securities and $3.6 million in discrete tax adjustments recorded in the first quarter of 2012, net income for the nine months ended September 30, 2012 was $37.4 million, or $0.78 per diluted share. Net income and diluted EPS excluding these adjustments are non-GAAP financial measures, which are discussed below and are reconciled to the most directly comparable GAAP measures in the financial tables attached hereto.
Revenues decreased 6.3% in the third quarter and increased 2.6% in the nine months ended September 30, 2013, respectively, compared to the same periods last year. The decrease in third quarter revenue was primarily driven by reduced activity on certain large healthcare and office facility projects in the Building segment in California. The increase in revenue for the nine months ended September 30, 2013 was primarily driven by increased activity on certain hospitality and gaming projects in California, Arizona and Nevada. The decrease in net income for the three months ended September 30, 2013 was primarily driven by the aforementioned $16.8 million tax benefit. The increase in net income for the nine months ended September 30, 2013 was primarily driven by the aforementioned impairment charge.
Excluding the impairment charge and other discrete items discussed above, the decrease in net income for the three months ended September 30, 2013 was primarily driven by reduced activity on certain large healthcare and office facility projects in the Building segment in California, and the increase in net income for the nine months ended September 30, 2013 was primarily driven by strong operating performance in the Civil segment and Hurricane Sandy-related projects performed in the first quarter in New York.
The Company generated $27.5 million of cash from operating activities in the third quarter of 2013 compared to $4.0 million in the same quarter last year. At September 30, 2013, working capital was $820.8 million, an increase of $73.2 million from $747.6 million at December 31, 2012. The Company believes its financial position and available borrowing under existing credit arrangements are sufficient to support the Company’s current backlog and anticipated new work.
Backlog Increased to $6.9 Billion on Continued Strong Volume of New Awards
The backlog of uncompleted construction work at September 30, 2013 was $6.9 billion, an increase of $1.3 billion from $5.6 billion reported at December 31, 2012 and at September 30, 2012. Revenue earned during the third quarter partially offset a continued strong volume of new awards and adjustments to contracts in process, which together added approximately $1.3 billion. Significant additions to backlog included the Company’s $511 million share of the $1.022 billion joint venture California High-Speed Rail design-build project, two Wisconsin highway construction contracts collectively valued at $191 million, a $47 million transit station electrical subcontract, and a $24 million military housing renovation project in Guam. As mentioned last quarter, the $6.9 billion backlog excludes more than $400 million of work related to construction of the South Tower at Hudson Yards, for which the Company will earn a profit despite not recognizing revenue due to the customer’s direct contracts
for certain externally subcontracted services. The Company continues to target a number of attractive civil infrastructure and building projects which could be awarded in the balance of this year or first half of next year.
Outlook and Guidance
Ronald Tutor, Chairman and Chief Executive Officer, said, “I am pleased with the continued growth in our backlog and our strongest quarterly operating margin in three years, which reflect solid growth and execution in our Civil segment. Our backlog remains at the highest level in five years and it should continue to grow, as we expect to book the $600 million Hudson Yards platform in the fourth quarter. We expect to deliver strong fourth-quarter results driven by the continued ramp-up of several large Civil projects.”
Based on performance to date and the outlook for the remainder of this year, the Company is re-affirming its fiscal 2013 guidance for revenue in the range of $4.5 billion to $5.0 billion and diluted EPS in the range of $1.65 to $1.90.
The following are key estimated assumptions for FY13 which factor into the above EPS guidance:
- $56 million ($0.71 per share) in depreciation and amortization expense
- $45 million ($0.57 per share) in interest expense
- 37% to 38% effective tax rate
- 49 million diluted shares outstanding
Non-GAAP Financial Measures
To supplement our consolidated financial statements presented based on accounting principles generally accepted in the United States of America (“GAAP”), we sometimes use non-GAAP measures of income from operations, net income, EPS and other measures that we believe are appropriate to enhance an overall understanding of our historical financial performance and future prospects. The Company is providing these measures to provide additional information to facilitate the comparison of past and present operations, and they are among the indicators management uses as a basis for evaluating its financial performance as well as for forecasting future periods. For these reasons, management believes these non-GAAP measures can be useful operating performance measures to be considered by investors, potential investors, and others. These measures are not intended to replace the presentation of our financial results in accordance with GAAP, and they should be considered in addition to, and not in
lieu of, our GAAP results. The non-GAAP financial measures that we provide may not be comparable to other similarly titled measures of other companies. A table reconciling reported income/loss from construction operations, net income/loss, and diluted earnings/loss per share under GAAP to adjusted income from operations, net income and diluted EPS in 2012 is attached. Included in the adjustments to GAAP are the impacts of: (i) the $376.6 million goodwill and intangible assets impairment charge recorded in the second quarter of 2012 and the related $37.4 million tax benefit, (ii) $3.6 million of discrete tax expense items related to an increase in unrecognized tax benefits and an adjustment, both associated with certain stock-based compensation items identified during the first quarter of 2012, and (iii) the $2.7 million realized loss on the sale of auction rate securities in the first quarter of 2012.
Our Civil Group is comprised of the operations of Tutor-Saliba Corporation, Tutor Perini Corporation, Cherry Hill Construction, Inc., Lunda Construction Company, Frontier-Kemper Constructors and Becho, Inc. and is engaged in public works construction throughout the U.S., including the repair, replacement, and reconstruction of public infrastructure such as highways, bridges, and mass transit systems. We have been active in civil construction since 1894 and believe we are expert at managing large, complex civil construction projects. Our corporate integrity, financial strength, and outstanding record of performance on challenging civil works projects pre-qualifies us for projects in situations where smaller, less diversified contractors are unable to do so. This is a competitive advantage that makes us an attractive partner on the largest infrastructure projects and prestigious DBOM (design-build-operate-maintain) contracts, which combine the nation's top contractors with engineering
firms, equipment manufacturers, and project development consultants in a competitive bid selection process to execute highly sophisticated public works projects.
Our Building Group is comprised of Tutor Perini Building Corp., Tutor-Saliba Corporation, James A. Cummings, Inc., Rudolph and Sletten, Inc., Keating Building Corporation, and Roy Anderson Corp. and focuses on large, complex projects in the hospitality and gaming, sports and entertainment, educational, transportation, and healthcare markets. We believe our success results from our proven philosophy, "Building Relationships on Trust," and our ability to manage large, complex projects with aggressive fast-track schedules, elaborate designs, and advanced systems while providing accurate budgeting and strict quality control. Although price is a key competitive factor, our strong reputation, long-standing customer relationships and significant level of repeat and referral business have enabled us to achieve our leading position. Our reputation for completing projects on time is a significant competitive advantage in the building market, as any delay in project completion may result in
significant loss of revenues for the owner.
Specialty Contractors Group
Our Specialty Contractors Group is comprised of Five Star Electric, Fisk Electric, WDF, Desert Mechanical, Nagelbush Mechanical, Superior Gunite, and Federated Fire Protection and serves to complement and enhance our mechanical and electrical capabilities. The Specialty Contractors group has a sizable presence in New York, Texas, and California and partners with other Tutor Perini companies on projects throughout the United States.
Management Services Group
Comprised of Perini Management Services Inc. (PMSI) and Black Construction, our Management Services Group provides diversified construction and design-build services to the U.S. military and government agencies, surety companies, and multi-national corporations. PMSI and Black are well known for their ability to plan and execute rapid response assignments and multi-year contracts through diversified construction and design-build capabilities. We have consistently demonstrated superior performance on competitively bid or negotiated multi-year, multi-trade, task order and ID/IQ (Indefinite Delivery/Indefinite Quantity) construction programs.
We have been selected by the federal government for significant projects related to defense, reconstruction, and international development projects in Iraq, Afghanistan, and Haiti. Black Construction Corporation of Guam is one of the most successful contractors in Guam and the Western Pacific.
The Management Services Group is also under agreement with major North American surety companies to provide rapid response, contract completion services. Upon notification from the surety of a contractor bond default, we provide management or general contracting services to fulfill the contractual and financial obligations of the surety.
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Ronald N. Tutor, Chairman & CEO of Tutor Perini Corporation
With over 15 years at the Company and over 49 years in the industry, Mr. Tutor brings in-depth knowledge of our Company and the construction industry. Mr. Tutor has served as our Chief Executive Officer since March 2000 and as Chairman since July 1999. Mr. Tutor also served as Chairman, President and Chief Executive Officer of Tutor-Saliba Corporation ("Tutor-Saliba"), a privately held California corporation engaged in the construction industry, until Tutor-Saliba merged with the Company in September 2008.
Robert Band, President, Tutor Perini Corporation and CEO, Tutor Perini Management Services Group
Mr. Band joined Perini in 1973 and has held several operating and financial positions during his career with the Company, including President of the Company since May 1999. All of Tutor Perini's management services operations report to Mr. Band including Perini Management Services Inc. (PMSI) and Black Construction.
James ("Jack") A. Frost, Executive Vice President and CEO, Tutor Perini Civil Group
Mr. Frost was appointed to his current position in March 2009, and all of Tutor Perini's civil operations report to him, including Tutor-Saliba, Tutor Perini Civil, Cherry Hill Construction, Lunda Construction Company, and Frontier-Kemper Constructors. Mr. Frost previously served at Tutor-Saliba since 1988, where he was the Executive Vice President and Chief Operating Officer of Tutor-Saliba prior to the merger in September 2008.
Craig W. Shaw, Executive Vice President and CEO, Tutor Perini Building Group
Mr. Shaw brings over 35 years of experience in the building construction industry. He joined Tutor Perini in May 1978 and is responsible for overseeing all of Tutor Perini's building operations, including Tutor Perini Building Corp., Rudolph and Sletten, Roy Anderson Corp., Keating Building Corp., and James A. Cummings.
Michael J. Kershaw, Executive Vice President, Chief Financial Officer
Mr. Kershaw joined Tutor Perini in September 2011 as Executive Vice President, Chief Financial Officer. Previously, Mr. Kershaw was Senior Vice President and Chief Accounting Officer for The Shaw Group Inc. Mr. Kershaw has also held financial executive positions with KBR and McDermott earlier in his career. He is also responsible for Human Resources, Information Systems and Investor Relations.
William B. Sparks, Executive Vice President, Treasurer and Corporate Secretary, Tutor Perini Corporation
Mr. Sparks was appointed to his current position in March 2009. Mr. Sparks joined Tutor-Saliba Corporation in 1995 as Senior Vice President and Chief Financial Officer. Mr. Sparks also oversees Risk Management for Tutor Perini.