Tutor Perini(TPC) - 2024 Q2 - Quarterly Report

Part I. Financial Information This section presents the unaudited condensed consolidated financial statements, management's discussion, market risk, and controls for the reporting period Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and detailed notes for the periods presented Condensed Consolidated Statements of Operations This section provides the unaudited condensed consolidated statements of operations, detailing revenue, gross profit, and net income Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $1,127,470 | $1,021,751 | $2,176,457 | $1,798,051 | | Gross Profit | $117,078 | $64,961 | $232,328 | $40,792 | | Income (Loss) from Construction Operations | $40,493 | $2,388 | $89,299 | $(79,557) | | Net Income (Loss) Attributable to Tutor Perini Corporation | $812 | $(37,534) | $16,572 | $(86,730) | | Basic Earnings (Loss) Per Common Share | $0.02 | $(0.72) | $0.32 | $(1.68) | | Diluted Earnings (Loss) Per Common Share | $0.02 | $(0.72) | $0.31 | $(1.68) | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the unaudited condensed consolidated statements of comprehensive income (loss), including net income and other comprehensive income Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) | $15,969 | $(16,764) | $43,471 | $(65,693) | | Total Other Comprehensive Income (Loss), Net of Tax | $(257) | $232 | $(1,099) | $2,112 | | Comprehensive Income (Loss) | $15,712 | $(16,532) | $42,372 | $(63,581) | | Comprehensive Income (Loss) Attributable to Tutor Perini Corporation | $748 | $(37,703) | $16,133 | $(85,172) | Condensed Consolidated Balance Sheets This section provides the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | As of June 30, 2024 | As of December 31, 2023 | | :------------------------------------------------------------------------------------------------------------------------------------------- | :------------------ | :---------------------- | | ASSETS: | | | | Total current assets | $3,396,240 | $3,521,354 | | Total assets | $4,293,748 | $4,429,856 | | LIABILITIES AND EQUITY: | | | | Total current liabilities | $2,060,664 | $2,124,953 | | Total liabilities | $2,977,631 | $3,145,945 | | Total equity | $1,316,117 | $1,283,911 | | Total liabilities and equity | $4,293,748 | $4,429,856 | Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows, outlining operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided By Operating Activities | $151,413 | $77,650 | | Net Cash Used In Investing Activities | $(24,012) | $(29,159) | | Net Cash Used In Financing Activities | $(242,592) | $(47,863) | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $(115,191) | $628 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $279,489 | $274,459 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanatory notes supporting the condensed consolidated financial statements (1) Basis of Presentation The unaudited condensed consolidated financial statements are presented with the 2023 Form 10-K, and management confirms fair presentation - The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended December 31, 2023[19] - Management confirms that the accompanying unaudited Condensed Consolidated Financial Statements reflect all necessary adjustments for fair presentation[20] (2) Recent Accounting Pronouncements The company is evaluating the impact of new FASB ASUs on Segment Reporting and Income Tax Disclosures, effective in future fiscal years - ASU 2023-07, Segment Reporting, requires incremental segment information disclosure on an interim and annual basis, effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with retrospective application[21] - ASU 2023-09, Income Taxes, requires public entities to disclose specific categories in their annual effective tax rate reconciliation and disaggregated income tax payment information, effective for fiscal years beginning after December 15, 2024, with prospective application[22] - The Company is currently evaluating the impact of both ASU 2023-07 and ASU 2023-09 on its consolidated financial statements and disclosures[21][22] (3) Revenue Revenue is disaggregated by segment, customer, and contract type, with remaining performance obligations totaling $7.7 billion as of June 30, 2024 Revenue by Segment and End Market (in thousands) | Segment | End Market | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------- | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Civil | Mass transit | $289,587 | $361,082 | $542,103 | $549,542 | | | Military facilities | $117,779 | $83,811 | $222,923 | $169,378 | | | Bridges | $62,308 | $51,326 | $89,980 | $81,971 | | | Commercial and industrial sites | $36,630 | $29,192 | $76,120 | $51,918 | | | Power and energy | $35,728 | $15,159 | $61,926 | $25,335 | | | Other | $4,456 | $13,553 | $25,601 | $25,849 | | Total Civil segment revenue | | $546,488 | $554,123 | $1,018,653 | $903,993 | | Building | Healthcare facilities | $135,954 | $55,839 | $247,941 | $106,256 | | | Government | $114,118 | $97,814 | $244,729 | $187,434 | | | Education facilities | $84,190 | $54,420 | $152,349 | $102,497 | | | Mass transit | $57,323 | $62,871 | $118,498 | $96,191 | | | Sports and entertainment | $10,621 | $13,364 | $26,260 | $26,830 | | | Commercial and industrial facilities | $4,073 | $16,026 | $15,442 | $54,297 | | | Hospitality and gaming | $3,636 | $16,979 | $6,388 | $36,585 | | | Other | $7,951 | $14,029 | $18,201 | $(49,095) | | Total Building segment revenue | | $417,866 | $331,342 | $829,808 | $560,995 | | Specialty Contractors | Mass transit | $48,826 | $4,973 | $96,952 | $52,518 | | | Commercial and industrial facilities | $30,213 | $53,583 | $58,423 | $107,810 | | | Multi-unit residential | $20,298 | $29,207 | $45,024 | $62,003 | | | Government | $18,491 | $20,763 | $41,444 | $41,832 | | | Healthcare facilities | $14,718 | $14,048 | $31,428 | $23,579 | | | Water | $14,702 | $20,147 | $28,918 | $48,481 | | | Other | $15,868 | $(6,435) | $25,807 | $(3,160) | | Total Specialty Contractors segment revenue | | $163,116 | $136,286 | $327,996 | $333,063 | Revenue by Customer Type (in thousands) | Customer Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | State and local agencies | $676,863 | $635,139 | $1,284,330 | $1,070,849 | | Federal agencies | $165,736 | $140,387 | $325,681 | $279,999 | | Private owners | $284,871 | $246,225 | $566,446 | $447,203 | | Total revenue | $1,127,470 | $1,021,751 | $2,176,457 | $1,798,051 | Revenue by Contract Type (in thousands) | Contract Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fixed price | $775,218 | $734,948 | $1,507,587 | $1,308,592 | | Guaranteed maximum price | $191,668 | $123,229 | $379,637 | $194,825 | | Unit price | $95,593 | $79,730 | $149,992 | $136,806 | | Cost plus fee and other | $64,991 | $83,844 | $139,241 | $157,828 | | Total revenue | $1,127,470 | $1,021,751 | $2,176,457 | $1,798,051 | - Revenue was negatively impacted by changes in contract estimates related to performance obligations satisfied in prior periods by $9.0 million for the three months ended June 30, 2024, and $15.6 million for the six months ended June 30, 2024[34] - As of June 30, 2024, remaining performance obligations were $4.4 billion for Civil, $2.2 billion for Building, and $1.1 billion for Specialty Contractors segments[35] (4) Contract Assets and Liabilities Contract assets totaled $1.80 billion and liabilities $1.21 billion as of June 30, 2024, with $31.9 million amortized capitalized contract costs for six months Contract Assets (in thousands) | Metric | As of June 30, 2024 | As of December 31, 2023 | | :------------------------------------------------- | :------------------ | :---------------------- | | Retention receivable | $546,668 | $580,926 | | Costs and estimated earnings in excess of billings | $1,160,710 | $1,143,846 | | Capitalized contract costs | $95,732 | $117,913 | | Total contract assets | $1,803,110 | $1,842,685 | Contract Liabilities (in thousands) | Metric | As of June 30, 2024 | As of December 31, 2023 | | :----------------------------------------------- | :------------------ | :---------------------- | | Retention payable | $223,962 | $223,138 | | Billings in excess of costs and estimated earnings | $987,447 | $1,103,530 | | Total contract liabilities | $1,211,409 | $1,326,668 | - During the three and six months ended June 30, 2024, $15.6 million and $31.9 million, respectively, of previously capitalized contract costs were amortized and recognized as expense[39] (5) Cash, Cash Equivalents and Restricted Cash Total cash, cash equivalents, and restricted cash decreased to $279.5 million as of June 30, 2024, with a portion restricted for insurance obligations Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric | As of June 30, 2024 | As of December 31, 2023 | | :---------------------------------------------------------- | :------------------ | :---------------------- | | Cash and cash equivalents available for general corporate purposes | $84,118 | $145,055 | | Joint venture cash and cash equivalents | $182,954 | $235,509 | | Cash and cash equivalents | $267,072 | $380,564 | | Restricted cash | $12,417 | $14,116 | | Total cash, cash equivalents and restricted cash | $279,489 | $394,680 | - Restricted cash is primarily held as collateral for insurance-related contingent obligations[44] (6) Earnings Per Common Share Diluted EPS for Tutor Perini Corporation was $0.02 for three months and $0.31 for six months ended June 30, 2024, showing significant improvement Earnings Per Common Share (in thousands, except per common share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Tutor Perini Corporation | $812 | $(37,534) | $16,572 | $(86,730) | | Weighted-average common shares outstanding, basic | 52,327 | 51,803 | 52,210 | 51,678 | | Effect of dilutive RSUs and stock options | 521 | — | 472 | — | | Weighted-average common shares outstanding, diluted | 52,848 | 51,803 | 52,682 | 51,678 | | Basic EPS | $0.02 | $(0.72) | $0.32 | $(1.68) | | Diluted EPS | $0.02 | $(0.72) | $0.31 | $(1.68) | - For the three and six months ended June 30, 2023, all outstanding RSUs and stock options were excluded from diluted EPS calculation due to their anti-dilutive effect from net losses[46] (7) Income Taxes Income tax expense was $7.3 million for three months and $14.6 million for six months ended June 30, 2024, with effective rates of 31.3% and 25.1% Income Tax Expense and Effective Tax Rate | Period | Income Tax Expense (in millions) | Effective Income Tax Rate | | :------------------------------- | :----------------------------- | :------------------------ | | Three Months Ended June 30, 2024 | $7.3 | 31.3% | | Six Months Ended June 30, 2024 | $14.6 | 25.1% | | Three Months Ended June 30, 2023 | $0.2 | (1.2)% | | Six Months Ended June 30, 2023 | $(47.9) (benefit) | 42.2% | - The effective income tax rate for both periods in 2024 was higher than the 21.0% federal statutory rate primarily due to non-deductible expenses and state income taxes, partially offset by earnings attributable to noncontrolling interests[47] - The effective income tax rate for the three months ended June 30, 2023, was lower than the federal statutory rate due to a cumulative catch-up adjustment from a revised forecast, while the six-month period benefited from tax benefits against a pre-tax loss[48] (8) Goodwill and Intangible Assets Goodwill remained at $205.1 million with no impairment, while net intangible assets decreased slightly to $67.2 million due to amortization Goodwill Carrying Amount (in thousands) | Segment | As of December 31, 2023 | As of June 30, 2024 | | :---------------------- | :---------------------- | :------------------ | | Civil | $205,143 | $205,143 | | Building | — | — | | Specialty Contractors | — | — | | Total Goodwill | $205,143 | $205,143 | - The Company performed its annual impairment test in Q4 2023 and concluded goodwill was not impaired. No triggering events occurred since then that would reduce the fair value of the Civil reporting unit below its carrying amount[50][51] Intangible Assets, Net (in thousands) | Intangible Asset | Cost | Accumulated Amortization | Accumulated Impairment Charge | Carrying Value (June 30, 2024) | Carrying Value (December 31, 2023) | | :-------------------------------- | :------- | :----------------------- | :---------------------------- | :----------------------------- | :--------------------------------- | | Trade names (non-amortizable) | $117,600 | — | $(67,190) | $50,410 | $50,410 | | Trade names (amortizable) | $69,250 | $(29,241) | $(23,232) | $16,777 | $17,895 | | Contractor license | $6,000 | — | $(6,000) | — | — | | Customer relationships | $39,800 | $(23,155) | $(16,645) | — | — | | Construction contract backlog | $149,290 | $(149,290) | — | — | — | | Total | $381,940 | $(201,686) | $(113,067) | $67,187 | $68,305 | - Amortization expense for intangible assets was $0.6 million for the three months and $1.1 million for the six months ended June 30, 2024[53] (9) Financial Commitments Total debt decreased to $676.4 million as of June 30, 2024, following new senior notes issuance and redemption, with interest expense increasing for the quarter Long-Term Debt (in thousands) | Debt Type | As of June 30, 2024 | As of December 31, 2023 | | :------------------------------ | :------------------ | :---------------------- | | 2024 Senior Notes | $376,232 | — | | 2017 Senior Notes | — | $498,410 | | Term Loan B | $266,369 | $357,744 | | Equipment financing and mortgages | $31,724 | $34,807 | | Other indebtedness | $2,112 | $8,784 | | Total debt | $676,437 | $899,745 | | Less: Current maturities | $(18,602) | $(117,431) | | Long-term debt, net | $657,835 | $782,314 | - On April 22, 2024, the Company issued $400.0 million in 11.875% Senior Notes due April 30, 2029, and used the proceeds, along with cash on hand, to redeem the 2017 Senior Notes in full on May 2, 2024[57][59] - The 2020 Credit Agreement was amended on April 15, 2024, extending the Revolver maturity date and permanently reducing aggregate commitments by $5.0 million to $170.0 million[61] Interest Expense (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cash interest expense | $20,524 | $21,015 | $38,025 | $41,524 | | Non-cash interest expense | $2,560 | $1,001 | $4,366 | $2,005 | | Total interest expense | $23,084 | $22,016 | $42,391 | $43,529 | (10) Leases Total lease expense was $16.5 million for three months and $32.0 million for six months ended June 30, 2024, with operating lease liabilities at $56.9 million Lease Expense (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease expense | $3,202 | $3,387 | $6,522 | $6,861 | | Short-term lease expense | $13,545 | $12,692 | $25,868 | $26,611 | | Less: Sublease income | $(203) | $(198) | $(402) | $(392) | | Total lease expense | $16,544 | $15,881 | $31,988 | $33,080 | Operating Lease Liabilities (in thousands) | Metric | As of June 30, 2024 | As of December 31, 2023 | | :------------------------------------ | :------------------ | :---------------------- | | Current lease liabilities | $6,817 | $6,275 | | Long-term lease liabilities | $50,107 | $47,781 | | Total lease liabilities | $56,924 | $54,056 | | Weighted-average remaining lease term | 9.7 years | 10.3 years | | Weighted-average discount rate | 11.97% | 12.13% | Maturities of Operating Lease Liabilities (undiscounted, in thousands) | Year | Operating Leases | | :---------------------------------------------------- | :--------------- | | 2024 (excluding the six months ended June 30, 2024) | $6,481 | | 2025 | $12,044 | | 2026 | $10,166 | | 2027 | $8,750 | | 2028 | $8,671 | | Thereafter | $52,663 | | Total lease payments | $98,775 | | Less: Imputed interest | $(41,851) | | Total | $56,924 | (11) Commitments and Contingencies The company faces various legal proceedings, including the Alaskan Way Viaduct Matter with trials scheduled against insurers and a design firm - The Company is involved in litigation and dispute resolution in the ordinary course of business, including contract payment and performance-related issues[74] - In the Alaskan Way Viaduct Matter, Seattle Tunnel Partners (STP), in which the Company has a 45% interest, has pending lawsuits against insurers (trial scheduled for September 23, 2024) and HNTB Corporation, its design firm (trial scheduled for April 27, 2025), seeking significant damages[76][79][80] - A lawsuit between STP and WSDOT related to the Alaskan Way Viaduct Matter concluded in October 2022, with STP paying $34.6 million (Company's proportionate share) following a jury verdict in favor of WSDOT[81][82] (12) Share-Based Compensation Share-based compensation expense significantly increased to $16.9 million for three months and $22.4 million for six months due to stock price impact - For the three and six months ended June 30, 2024, share-based compensation expense was $16.9 million and $22.4 million, respectively, a significant increase from the prior year[84] - The increase in share-based compensation expense was primarily due to a substantial increase in the Company's stock price during the period, which impacted the fair value of liability-classified awards[84] - As of June 30, 2024, the balance of unamortized share-based compensation expense was $56.1 million, expected to be recognized over a weighted-average period of 2.1 years[84] (13) Employee Pension Plans Net periodic benefit cost was $0.6 million for three months and $1.3 million for six months ended June 30, 2024, with $1.3 million contributed to pension plans Net Periodic Benefit Cost (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest cost | $910 | $969 | $1,821 | $1,938 | | Service cost | $232 | $255 | $463 | $510 | | Expected return on plan assets | $(944) | $(979) | $(1,888) | $(1,957) | | Recognized net actuarial losses | $438 | $413 | $875 | $826 | | Net periodic benefit cost | $636 | $658 | $1,271 | $1,317 | - The Company contributed $1.3 million to its defined benefit pension plan during the six months ended June 30, 2024, and expects to contribute an additional $1.2 million by the end of 2024[85] (14) Fair Value Measurements Assets measured at fair value totaled $538.6 million as of June 30, 2024, with AFS debt securities showing $5.5 million in unrealized losses Assets Measured at Fair Value on a Recurring Basis (in thousands) | Metric | Level 1 (June 30, 2024) | Level 2 (June 30, 2024) | Total (June 30, 2024) | Level 1 (December 31, 2023) | Level 2 (December 31, 2023) | Total (December 31, 2023) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $267,072 | — | $267,072 | $380,564 | — | $380,564 | | Restricted cash | $12,417 | — | $12,417 | $14,116 | — | $14,116 | | Restricted investments | — | $134,182 | $134,182 | — | $130,287 | $130,287 | | Investments in lieu of retention | $31,590 | $93,306 | $124,896 | $19,988 | $86,961 | $106,949 | | Total | $311,079 | $227,488 | $538,567 | $414,668 | $217,248 | $631,916 | Available-for-Sale (AFS) Debt Securities (in thousands) | Metric | Amortized Cost (June 30, 2024) | Unrealized Gains (June 30, 2024) | Unrealized Losses (June 30, 2024) | Fair Value (June 30, 2024) | | :----------------------------------- | :----------------------------- | :------------------------------- | :-------------------------------- | :------------------------- | | Restricted investments | $138,035 | $254 | $(4,107) | $134,182 | | Investments in lieu of retention | $94,487 | $244 | $(1,425) | $93,306 | | Total AFS debt securities | $232,522 | $498 | $(5,532) | $227,488 | - Unrealized losses in AFS debt securities are primarily due to market interest rate increases, not deterioration in credit quality. No impairment losses were recognized in earnings during the six months ended June 30, 2024[91][92] (15) Variable Interest Entities (VIEs) Consolidated VIEs contributed $481.2 million in current assets and $452.9 million in current liabilities, primarily from mass-transit and airport projects - As of June 30, 2024, the Company's Condensed Consolidated Balance Sheets included current and noncurrent assets of $481.2 million and $29.4 million, respectively, and current liabilities of $452.9 million related to consolidated VIEs[99] - The Company is the primary beneficiary of a joint venture for the $2.8 billion Purple Line Extension Section 2 and 3 mass-transit projects in Los Angeles (75% interest)[100] - The Company is also the primary beneficiary of a joint venture for the $1.4 billion Newark Liberty International Airport Terminal One project (80% interest)[101] (16) Changes in Equity Total equity increased to $1.32 billion as of June 30, 2024, driven by net income and share-based compensation, partially offset by distributions Changes in Equity (in thousands) - Six Months Ended June 30, 2024 | Metric | 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 | — | — | $16,572 | — | $26,899 | $43,471 | | Other comprehensive loss | — | — | — | $(439) | $(660) | $(1,099) | | Share-based compensation | — | $4,355 | — | — | — | $4,355 | | Issuance of common stock, net | $364 | $(2,485) | — | — | — | $(2,121) | | Distributions to noncontrolling interests | — | — | — | — | $(12,400) | $(12,400) | | Balance - June 30, 2024 | $52,389 | $1,148,074 | $149,718 | $(40,226) | $6,162 | $1,316,117 | Changes in Equity (in thousands) - Three Months Ended June 30, 2024 | Metric | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total Equity | | :------------------------------------ | :----------- | :------------------------- | :---------------- | :----------------------------------- | :----------------------- | :----------- | | Balance - March 31, 2024 | $52,284 | $1,146,008 | $148,906 | $(40,162) | $(3,802) | $1,303,234 | | Net income | — | — | $812 | — | $15,157 | $15,969 | | Other comprehensive loss | — | — | — | $(64) | $(193) | $(257) | | Share-based compensation | — | $2,852 | — | — | — | $2,852 | | Issuance of common stock, net | $105 | $(786) | — | — | — | $(681) | | Distributions to noncontrolling interests | — | — | — | — | $(5,000) | $(5,000) | | Balance - June 30, 2024 | $52,389 | $1,148,074 | $149,718 | $(40,226) | $6,162 | $1,316,117 | (17) Other Comprehensive Income (Loss) Total other comprehensive loss attributable to Tutor Perini Corporation was $(64) thousand for three months and $(439) thousand for six months, influenced by foreign currency Components of Other Comprehensive Income (Loss) (in thousands) - Three Months Ended June 30, 2024 | Component | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | | :---------------------------------------------------- | :---------------- | :-------------------- | :---------------- | | Defined benefit pension plan adjustments | $438 | $(117) | $321 | | Foreign currency translation adjustments | $(869) | $166 | $(703) | | Unrealized gain (loss) in fair value of investments | $153 | $(28) | $125 | | Total other comprehensive income (loss) | $(278) | $21 | $(257) | | Less: Attributable to noncontrolling interests | $(193) | — | $(193) | | Total attributable to Tutor Perini Corporation | $(85) | $21 | $(64) | Components of Other Comprehensive Income (Loss) (in thousands) - Six Months Ended June 30, 2024 | Component | Before-Tax Amount | Tax (Expense) Benefit | Net-of-Tax Amount | | :---------------------------------------------------- | :---------------- | :-------------------- | :---------------- | | Defined benefit pension plan adjustments | $875 | $(233) | $642 | | Foreign currency translation adjustments | $(1,951) | $321 | $(1,630) | | Unrealized gain (loss) in fair value of investments | $(148) | $37 | $(111) | | Total other comprehensive income (loss) | $(1,224) | $125 | $(1,099) | | Less: Attributable to noncontrolling interests | $(660) | — | $(660) | | Total attributable to Tutor Perini Corporation | $(564) | $125 | $(439) | - The changes in Accumulated Other Comprehensive Income (AOCI) balances for Tutor Perini Corporation show a shift from $(40,162) thousand at March 31, 2024, to $(40,226) thousand at June 30, 2024, primarily influenced by foreign currency translation adjustments[109] (18) Business Segments The company operates through Civil, Building, and Specialty Contractors segments, with Civil generating $546.5 million revenue and a major customer contributing 19.0% of consolidated revenue - The Civil segment specializes in public works construction and infrastructure, including highways, bridges, tunnels, mass-transit systems, military facilities, and water management[116] - The Building segment provides services for private and public works customers in specialized markets such as hospitality, healthcare, commercial offices, government facilities, and education[116] - The Specialty Contractors segment focuses on electrical, mechanical, plumbing, HVAC, and fire protection systems for civil and building projects, enhancing control over scheduled work and risk management[117] Segment Performance (in thousands) - Three Months Ended June 30, 2024 | Segment | Revenue from External Customers | Income (Loss) from Construction Operations | | :---------------------- | :------------------------------ | :----------------------------------------- | | Civil | $546,488 | $75,587 | | Building | $417,866 | $5,047 | | Specialty Contractors | $163,116 | $(7,846) | | Consolidated Total | $1,127,470 | $40,493 | Segment Performance (in thousands) - Six Months Ended June 30, 2024 | Segment | Revenue from External Customers | Income (Loss) from Construction Operations | | :---------------------- | :------------------------------ | :----------------------------------------- | | Civil | $1,018,653 | $146,330 | | Building | $829,808 | $21,167 | | Specialty Contractors | $327,996 | $(26,158) | | Consolidated Total | $2,176,457 | $89,299 | - Revenue from a single major customer represented 19.0% and 18.9% of the Company's consolidated revenue for the three and six months ended June 30, 2024, respectively[124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, liquidity, capital resources, and outlook for the periods presented Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements covered by the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties that could cause actual results to differ materially[127] - Key risk factors include unfavorable outcomes of litigation, revisions of contract estimates, contract requirements for extra work, failure to meet schedule requirements, inability to attract and retain key personnel, systems interruptions, inability to obtain bonding, inclement weather, international operation risks, increased competition, economic slowdowns, decreased government spending, client cancellations, government contract risks, joint venture partner failures, stock price fluctuations, debt agreement non-compliance, credit rating downgrades, anti-bribery law violations, public health crises, climate change risks, and goodwill impairment[127][128] Executive Overview This section provides a high-level summary of consolidated operating results, new awards, and backlog, highlighting revenue growth and improved income Consolidated Operating Results (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $1,100 | $1,000 | $2,200 | $1,800 | | Income (Loss) from Construction Operations | $40.5 | $2.4 | $89.3 | $(79.6) | | Diluted Earnings (Loss) Per Common Share | $0.02 | $(0.72) | $0.31 | $(1.68) | - Revenue growth was primarily driven by increased project execution activities in the Building segment (healthcare, educational, detention facilities) and Civil segment (mass-transit, airport, energy projects), and the absence of prior-year net unfavorable adjustments[129] - Income from construction operations improved significantly due to increased project execution, absence of prior-year unfavorable adjustments, and a favorable adjustment on a Civil segment mass-transit project, partially offset by an unfavorable settlement on Civil segment highway projects and increased share-based compensation expense[130] Consolidated New Awards and Backlog (in billions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | New Awards | $1.6 | $4.0 | $2.4 | $4.7 | | Backlog (as of period end) | $10.4 | $10.2 (Dec 31, 2023) | | | - The 2023 new awards included the $2.95 billion Brooklyn Jail project. Significant new awards in Q2 2024 included a $1.3 billion bridge replacement project in Connecticut and a $216 million airport terminal connectors project in Florida[132] - Consolidated backlog as of June 30, 2024, was $10.4 billion, with a mix of approximately 42% Civil, 40% Building, and 18% Specialty Contractors[133] - The outlook for revenue growth is favorable, supported by long-term, well-funded capital spending plans from state, local, and federal customers, including the $1.2 trillion Bipartisan Infrastructure Law[134][136] Results of Segment Operations This section details the financial performance and key operational highlights for the Civil, Building, and Specialty Contractors segments Civil Segment Civil segment revenue increased 13% for six months, with income from construction operations improving due to project execution and dispute resolutions, and backlog at $4.4 billion Civil Segment Performance (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $546.5 | $554.1 | $1,018.7 | $904.0 | | Income from construction operations | $75.6 | $105.4 | $146.3 | $123.4 | | Operating margin | 13.8% | 19.0% | 14.4% | 13.7% | - Three-month revenue decreased slightly due to the absence of prior-year favorable adjustments, largely offset by increased project execution activities on mass-transit projects in California, airport projects in the Northern Mariana Islands, and an energy project in British Columbia[140] - Six-month income from construction operations increased due to contributions from increased project execution and a $10.2 million favorable adjustment on a California mass-transit project related to dispute resolution and cost savings[141] - New awards in the Civil segment totaled $814.5 million for the three months and $1.1 billion for the six months ended June 30, 2024, including a $1.3 billion bridge replacement project in Connecticut[142] Building Segment Building segment revenue increased 48% for six months, moving to income from construction operations due to increased project execution and absence of prior-year unfavorable rulings Building Segment Performance (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $417.9 | $331.3 | $829.8 | $561.0 | | Income (loss) from construction operations | $5.0 | $(13.8) | $21.2 | $(84.0) | | Operating margin | 1.2% | (4.2)% | 2.6% | (15.0)% | - Revenue growth was primarily due to increased project execution activities on healthcare and educational facility projects in California and a detention facility project in New York[145] - Income from construction operations improved significantly due to increased project execution and the absence of a prior-year unfavorable adjustment related to an adverse legal ruling on a completed mixed-use project in New York[146] - New awards in the Building segment totaled $436.7 million for the three months and $841.0 million for the six months ended June 30, 2024, including a $216 million airport terminal connectors project[148] Specialty Contractors Segment Specialty Contractors segment significantly reduced losses from construction operations due to the absence of prior-year unfavorable adjustments, with backlog at $1.9 billion Specialty Contractors Segment Performance (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $163.1 | $136.3 | $328.0 | $333.1 | | Loss from construction operations | $(7.8) | $(69.8) | $(26.2) | $(82.3) | | Operating margin | (4.8)% | (51.2)% | (8.0)% | (24.7)% | - The improvement in loss from construction operations was primarily due to the absence of prior-year unfavorable adjustments related to changes in estimates on a transportation project and an adverse legal ruling on an educational facilities project[152] - New awards in the Specialty Contractors segment totaled $313.0 million for the three months and $453.3 million for the six months ended June 30, 2024, including a $127 million electrical project in New York[153] - The segment's backlog was $1.9 billion as of June 30, 2024, up 2.1% compared to June 30, 2023, with a focus on servicing large Civil and Building segment projects[154] Corporate, Tax and Other Matters This section discusses corporate general and administrative expenses, other income, interest expense, and income tax impacts - Corporate general and administrative expenses increased to $31.5 million for the three months and $51.3 million for the six months ended June 30, 2024, primarily due to higher compensation-related expenses, mainly share-based compensation, driven by a substantial increase in the Company's stock price[155] Other Income, Net, Interest Expense and Income Tax (Expense) Benefit (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Other income, net | $5.8 | $3.1 | $11.1 | $9.5 | | Interest expense | $(23.1) | $(22.0) | $(42.4) | $(43.5) | | Income tax (expense) benefit | $(7.3) | $(0.2) | $(14.6) | $47.9 | - The effective income tax rate for both the three and six months ended June 30, 2024, was higher than the 21.0% federal statutory rate primarily due to non-deductible expenses and state income taxes, partially offset by earnings attributable to noncontrolling interests[156][157] Liquidity and Capital Resources This section details the company's liquidity sources, cash flow from operations, debt management, and compliance with financial covenants - The Company's liquidity is provided by available cash, cash generated from operations, credit facilities, and access to capital markets. Management expects sufficient liquidity to fund working capital needs and debt maturities for the next 12 months and beyond[159] - Net cash provided by operating activities was $151.4 million for the six months ended June 30, 2024, primarily due to earnings and a reduction in net project working capital[161] - Net cash used in financing activities was $242.6 million for the first six months of 2024, driven by a $202.9 million net repayment of debt (including the 2024 Senior Notes issuance and 2017 Senior Notes redemption) and $25.1 million in debt issuance costs[164] Working Capital and Debt Ratios | Metric | As of June 30, 2024 | As of December 31, 2023 | | :------------------------------------ | :------------------ | :---------------------- | | Working capital | $1.3 billion | $1.4 billion | | Ratio of current assets to current liabilities | 1.65 | 1.66 | | Ratio of debt to equity | 0.51 | 0.70 | - The Company issued $400.0 million in 11.875% Senior Notes due 2029 and redeemed the 2017 Senior Notes. The 2020 Credit Agreement was amended to extend the Revolver maturity and reduce commitments to $170.0 million[166][168][169][170] - As of June 30, 2024, the Revolver had $170.0 million unused capacity, and the Company was in compliance with the First Lien Net Leverage Ratio covenant (actual 1.15:1.00 vs. required ≤ 2.25:1.00)[167][172][174][176] Critical Accounting Policies and Estimates This section refers to the company's significant accounting policies and critical estimates detailed in its Annual Report on Form 10-K - The Company's significant accounting policies and critical accounting estimates are described in Note 1 and Part II, Item 7 of its Annual Report on Form 10-K for the year ended December 31, 2023[177] Recently Issued Accounting Pronouncements This section directs to Note 2 for information on recently issued accounting pronouncements - Information on recently issued accounting pronouncements is provided in Note 2 of the Notes to Condensed Consolidated Financial Statements[178] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk exposure have occurred since the prior annual report - No material change in market risk exposure from that described in the Annual Report on Form 10-K for the year ended December 31, 2023[179] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024[180] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2024[181] Part II. Other Information This section provides additional information not covered in Part I, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Information on pending legal proceedings is updated in Note 11 of the Condensed Consolidated Financial Statements - Information on pending legal proceedings is provided in Note 11 of the Notes to Condensed Consolidated Financial Statements, updating the Annual Report on Form 10-K[184] Item 1A. Risk Factors No material changes to the company's risk factors have been reported since the prior annual report - No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2023[185] Item 4. Mine Safety Disclosures The company, as a mine operator, provides mine safety violation information in Exhibit 95 of this report - The Company provides construction services to the mining industry and is considered a mine operator under the Federal Mine Safety and Health Act of 1977[186] - Mine safety violations and other mining regulation matters are disclosed in Exhibit 95 to this Quarterly Report on Form 10-Q[186] Item 5. Other Information No director or Section 16 officer adopted or terminated trading arrangements during the quarter ended June 30, 2024 - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2024[187] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, agreements, and certifications - Exhibits include Restated Articles of Organization, Fifth Amended and Restated By-Laws, Amendment to Restricted Stock Unit Award Agreement, Separation Agreement, Certifications of Principal Executive and Financial Officers (Sarbanes-Oxley Act), Mine Safety Disclosure, and XBRL documents[188] Signature The report was duly signed on August 1, 2024, by Ryan J. Soroka, Senior Vice President and Chief Financial Officer - The report was signed by Ryan J. Soroka, Senior Vice President and Chief Financial Officer, on August 1, 2024[189]