TUTOR PERINI CORP
10-Qs and 10-Ks
PROXIES
FORM
10-K
United
States Securities and Exchange
Commission Commission
File No. 1-6314
Washington,
DC 20549
[
X
] Annual
Report Pursuant to Section 13 or 15(d) of the Securities Act of
1934.
For the
fiscal year ended
December 31,
2009
.
[ ] Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
For the
transition period from
-to-
.
(Exact
name of registrant as specified in its charter)
|
Massachusetts
(State
of Incorporation)
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04-1717070
(IRS
Employer Identification No.)
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15901
Olden Street, Sylmar, California
(Address
of principal executive offices)
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91342
(Zip
Code)
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(818)
362-8391
(Registrant’s
telephone number, including area code)
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Title
of Each Class
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Name
of each exchange on which registered
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Common
Stock, $1.00 par value
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The
New York Stock Exchange
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Securities
registered pursuant to Section 12(g) of the
Act: None
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Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act. Yes [ ] No [X]
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 [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes [ ] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form
10-K. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer”, “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer [ ]
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Accelerated
filer [X]
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Non-accelerated
filer [ ]
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
[ ]
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act). Yes [ ] No [X]
The
aggregate market value of voting Common Stock held by nonaffiliates of the
registrant was $430,236,335 as of June 30,
2009, the
last business day of
the registrant’s most recently completed second fiscal quarter.
The
number of shares of Common Stock, $1.00 par value per share, outstanding at
February 17, 2010 was 49,023,044.
Portions
of the definitive proxy statement relating to the registrant’s annual meeting of
stockholders to be held on May 26, 2010 are incorporated by reference
into Part
III of this
report.
TUTOR
PERINI CORPORATION
INDEX
TO ANNUAL REPORT
ON
FORM 10-K
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PAGE
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PART I
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Item
1:
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Business
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3 –
13
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Item
1A:
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Risk
Factors
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14
– 23
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Item
1B:
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Unresolved
Staff Comments
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23
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Item
2:
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Properties
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24
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Item
3:
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Legal
Proceedings
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25
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| Item 4: | (Removed and Reserved) | 25 | |
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PART II
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Item
5:
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Market
for the Registrant’s Common Equity, Related Stockholder Matters and
Issuer
Purchases
of Equity Securities
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27
– 28
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Item
6:
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Selected
Financial Data
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29
– 30
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Item
7:
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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31
– 46
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Item
7A:
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Quantitative
and Qualitative Disclosures About Market Risk
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47
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Item
8:
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Financial
Statements and Supplementary Data
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48
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Item
9:
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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48
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Item
9A:
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Controls
and Procedures
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48
– 49
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Item
9B:
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Other
Information
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50
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PART III
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Item
10:
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Directors,
Executive Officers and Corporate Governance
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50
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Item
11:
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Executive
Compensation
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50
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Item
12:
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Security
Ownership of Certain Beneficial Owners and Management and
Related
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Stockholder
Matters
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50
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Item
13:
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Certain
Relationships and Related Transactions, and Director
Independence
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50
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Item
14:
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Principal
Accounting Fees and Services
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50
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PART IV
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Item
15:
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Exhibits
and Financial Statement Schedules
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51
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Signatures
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52
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2
PART I.
Forward-looking
Statements
The
statements contained in this Annual Report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including without limitation, statements regarding our
management’s expectations, hopes, beliefs, intentions or strategies regarding
the future. These forward-looking statements are based on our current
expectations and beliefs concerning future developments and their potential
effects on us. There can be no assurance that future developments
affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of
which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by
such forward-looking statements. These risks and uncertainties include, but are
not limited to, ongoing sluggishness in the economy and significant
deterioration in global economic conditions, which may cause or accelerate a
number of other factors listed below; our ability to convert backlog into
revenue; our ability to successfully and timely complete construction projects;
the potential delay, suspension, termination, or reduction in scope of a
construction project; the continuing validity of the underlying assumptions and
estimates of total forecasted project revenues, costs and profits and project
schedules; the outcomes of pending or future litigation, arbitration or other
dispute resolution proceedings; the availability of borrowed funds on
terms acceptable to us; the ability to retain certain members of management; the
ability to obtain surety bonds to secure our performance under certain
construction contracts; possible labor disputes or work stoppages within the
construction industry; changes in federal and state appropriations for
infrastructure projects; possible changes or developments in international or
domestic political, social, economic, business, industry, market and regulatory
conditions or circumstances; and actions taken or not taken by third parties,
including our customers, suppliers, business partners, and competitors and
legislative, regulatory, judicial and other governmental authorities and
officials. Also see “Item 1A. Risk Factors” on pages 14
through 23. We undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities
laws.
ITEM 1.
BUSINESS
General
Tutor
Perini Corporation and its subsidiaries (or “Tutor Perini,” “Company,” “we,”
“us,” and “our,” unless the context indicates otherwise) is a leading
construction services company, based on revenues, as ranked by
Engineering
News-Record
, or “ENR”, offering diversified general contracting,
construction management 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 site work, concrete
forming and placement, steel erection, electrical and mechanical, plumbing and
HVAC. During 2009, we performed work on approximately 280 construction projects
for over 140 federal, state and local government agencies or authorities and
private customers. Our headquarters are in Sylmar, California, and we have
forty-two other principal office locations throughout the United States and
certain U.S. territories. Our common stock is listed on the New York Stock
Exchange under the symbol “TPC”.
During
2009, the Company had a number of organizational changes primarily as a result
of the merger with Tutor-Saliba that occurred in September
2008. Shortly after the merger was completed the Company began a
process of integrating the Tutor-Saliba businesses and implemented a cost saving
initiative to reduce Company-wide general and administrative
expenses. In March 2009 the Company announced the appointment
of Group CEO’s who lead their respective business
segments. Organizationally, the Group CEO’s report to our
Chairman and CEO, who is designated as the Company’s chief operating decision
maker. In our May 2009 annual meeting, shareholders approved the name
change from Perini Corporation to Tutor Perini Corporation. On June
1, 2009, following the name change announcement, the Company began trading under
a new NYSE ticker symbol: TPC. In October 2009, the Company announced
the relocation of its corporate headquarters from Framingham, Massachusetts to
Sylmar, California.
3
Our
business is conducted through three basic segments: civil, building, and
management services. Our civil segment is comprised of Tutor Perini
Civil Construction, Tutor-Saliba Corporation (“Tutor-Saliba”), and Cherry Hill
Construction, Inc. (“Cherry Hill”) and focuses on public works construction,
including the new construction, repair, replacement and reconstruction of the
public infrastructure such as highways, bridges, mass transit systems and
wastewater treatment facilities. Our building segment, comprised of
Perini Building Company, James A. Cummings, Inc. (“Cummings”), Rudolph and
Sletten, Inc. (“Rudolph and Sletten”), Keating Building Company (“Keating”),
Desert Plumbing & Heating Company, Inc., and Powerco Electric Corporation,
focuses on large, complex projects in the hospitality and gaming,
transportation, healthcare, municipal offices, sports and entertainment,
education, correctional facilities, biotech, pharmaceutical, industrial, and
high-tech markets, and electrical and mechanical, plumbing and HVAC services as
a subcontractor to the Company and other general contractors. Our
management services segment, including Perini Management Services, Inc.
(“PMSI”), and Black Construction’s operation in Guam, provides diversified
construction and design-build services to the U.S. military and government
agencies as well as surety companies and multi-national corporations in the
United States and overseas.
Business
Segment Overview
Civil
Segment
Our civil
segment specializes in public works construction and the repair, replacement and
reconstruction of infrastructure, primarily in the western, northeastern and
mid-Atlantic United States. Our civil contracting services include
construction and rehabilitation of highways, bridges, mass transit systems, and
wastewater treatment facilities. Our customers primarily award contracts through
one of two methods: the traditional public "competitive bid" method, in which
price is the major determining factor, or through a request for proposals where
contracts are awarded based on a combination of technical capability and price.
Traditionally, our customers require each contractor to pre-qualify for
construction business by meeting criteria that include technical capabilities
and financial strength. Our financial strength and outstanding record of
performance on challenging civil works projects enables us to pre-qualify for
projects in situations where smaller, less diversified contractors are unable to
meet the qualification requirements. We believe this is a competitive advantage
that makes us an attractive partner on the largest infrastructure projects and
prestigious design-build, or DBOM (design-build-operate-maintain) contracts,
which combine the nation's top contractors with engineering firms, equipment
manufacturers and project development consultants in a competitive bid selection
process to execute highly sophisticated public works projects.
We
believe the civil segment provides significant opportunities for growth. The
multi-billion dollar economic stimulus package, approved by the U.S. government
in 2009, includes significant funding for civil construction, public healthcare
and public education projects over the next several years. We have
been active in civil construction since 1894 and believe we have a particular
expertise in large, complex civil construction projects. We have completed or
are currently working on some of the most significant civil construction
projects in the United States. We are currently working on
rehabilitation of the Tappan Zee Bridge in Westchester County, New York; the
John F. Kennedy International Airport runway widening in Queens, New York;
portions of the Port Authority of New York and New Jersey Greenwich Street
corridor project in New York, New York; the I-5 Bridge replacement in Shasta
County, California; the Caldecott Tunnel Project near Oakland, California; the
Route 9 Bridge replacement in Peekskill, New York; the Harold Structures mass
transit project in Queens, New York; and the construction of express toll lanes
along I-95 in Maryland. We have completed work on multiple portions
of the Boston Central Artery/Tunnel project; New Jersey Light Rail Transit; the
Richmond/San Rafael Bridge retrofit in California; the Alameda Corridor project
in California; rehabilitations of the Triborough, Williamsburg and Whitestone
Bridges in New York and the Passaic River Bridge in New Jersey; the Jamaica
Station Transportation Center in New York; and sections of both the
Brooklyn-Queens Expressway and the Long Island Expressway.
In
January 2005, we acquired Cherry Hill to expand our presence in the mid-Atlantic
and southeastern regions of the United States. Cherry Hill
specializes in excavation, foundations, paving and construction of civil
infrastructure. The Company’s merger with Tutor-Saliba in September
2008 significantly expanded our civil construction presence. Tutor-Saliba is an
established civil construction contractor specializing in mass transit, airport,
bridge, and waste water treatment projects in the western United
States.
4
Building
Segment
Our
building segment has significant experience providing services to a number of
specialized building markets, including the hospitality and gaming,
transportation, healthcare, municipal offices, sports and entertainment,
education, correctional facilities, biotech, pharmaceutical, industrial and
high-tech markets, electrical and mechanical, plumbing and HVAC services to both
governments and private non-residential customers. We believe our success within
the building segment results from our proven ability to manage and perform
large, complex projects with aggressive fast-track schedules, elaborate designs
and advanced mechanical, electrical and life safety systems while providing
accurate budgeting and strict quality control. Although price is a key
competitive factor, we believe our strong reputation, long-standing customer
relationships and significant level of repeat and referral business have enabled
us to achieve our leading position.
In its
2009 rankings based on revenue, ENR ranked us as the largest builder in the
hotel, motel and convention center market, the nation’s 2
rd
largest contractor in the United States general building market, the 2
nd
largest green building contractor in the United States, the 10
th
largest builder in the healthcare market, and one of the top 25 largest builders
in the commercial offices and entertainment markets. We are also a
recognized leader in the hospitality and gaming market, specializing in the
construction of high-end destination resorts and casinos and Native American
developments. We work with hotel operators, Native American tribal councils,
developers and architectural firms to provide diversified construction services
to meet the challenges of new construction and renovation of hotel and resort
properties. We believe that our reputation for completing projects on time is a
significant competitive advantage in this market, as any delay in project
completion may result in significant loss of revenues for the
customer.
As a
result of our reputation and track record, we have been awarded and have
recently completed or are currently working on contracts for several marquee
projects in the hospitality and gaming market in Las Vegas, including Project
CityCenter for MGM MIRAGE, The Cosmopolitan Resort and Casino, the Wynn Encore
Hotel and the Planet Hollywood Tower. Revenues for Project CityCenter
and other projects in Las Vegas, Nevada for MGM MIRAGE were 38% of total 2009
revenues. We have also completed work on several other marquee
projects in the hospitality and gaming market, including Paris Las Vegas;
Mohegan Sun and the MGM Grand at Foxwoods resort expansion, both in Connecticut;
the Morongo Casino Resort and Spa and the Pechanga Resort and Casino, both in
California; the Seminole Hard Rock Hotels and Casinos in Florida; the Red Rock
Casino Resort Spa, the Augustus Tower at Caesars Palace, the Trump International
Hotel and Tower, all in Las Vegas; and the Gaylord National Resort and
Convention Center in the Washington, DC area.
In other
end markets, we have been awarded and have recently completed or are currently
working on large public works building projects including McCarran International
Airport Terminal 3 in Las Vegas, NV, Philadelphia Convention Center in
Philadelphia, PA, San Bernardino Courthouse in San Bernardino, CA, and the Los
Angeles Police Headquarters in Los Angeles, CA. We have also
constructed large, complex projects such as the Airport Parking Garage and
Rental Car Facility in Ft. Lauderdale, FL; the Palm Beach International Airport
Parking Garage in West Palm Beach, FL; the San Francisco International Airport
reconstruction; the Florida International University Health and Life Sciences
Building in Miami, FL; the Glendale Arena in Glendale, AZ; the Stanford
University Cancer Center in Stanford, CA; the Johnson & Johnson
Pharmaceutical R&D Expansion in La Jolla, CA; and the Kaiser Hospital and
Medical Office Building in Santa Clara, CA.
In
January 2003, the acquisition of Cummings expanded our presence in the
southeastern region of the United States. Cummings specializes in the
construction of schools, municipal buildings and commercial
developments. In October 2005, we acquired Rudolph and Sletten, an
established building contractor and construction management company based in
Redwood City, California, to expand our presence on the west coast of the United
States. Rudolph and Sletten specializes in the construction of
corporate campuses and healthcare, gaming, biotech, pharmaceutical, industrial,
and high-tech projects. In September 2008, we merged with
Tutor-Saliba to further expand our presence in the western United States.
Tutor-Saliba is an established general contractor with expertise in both civil
and building projects, including highways, bridges, mass transit systems,
hospitality and gaming, transportation, healthcare, education and office
building projects, primarily in Nevada and California for both public and
private customers. In January 2009, we acquired Keating Building
Company, a Philadelphia-based construction, construction management and
design-build company with expertise in both private and public works building
projects. The acquisition of Keating has enabled us to expand our
building construction market presence in the eastern half of the United States,
including the northeast and mid-Atlantic regions.
5
Management
Services Segment
Our
management services segment provides diversified construction and design-build
services to the U.S. military and government agencies as well as surety
companies and multi-national corporations in the United States and overseas. Our
ability to plan and execute rapid response assignments and multi-year contracts
through our diversified construction and design-build abilities provides us with
a competitive edge. In addition, we believe 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 chosen by the federal government for
significant projects related to defense and reconstruction projects in Iraq and
Afghanistan. For example, we have recently completed or are currently working on
several overhead coverage protection projects throughout Iraq. In
addition, we completed work on the design and construction of four military
bases in Afghanistan for the Afghan National Army.
We
believe we are well positioned to capture additional management services
projects that involve long-term contracts and provide a recurring source of
revenues as the level of government expenditures for defense and homeland
security has increased in response to the global threat of terrorism. For
example, we have completed all work on a multi-year contract with the U.S.
Department of State, Office of Overseas Buildings Operations, to perform
design-build security upgrades at 27 U.S. embassies and consulates throughout
the world. In addition, our proven abilities with federal government
projects have enabled us to win contracts from private defense contractors who
are executing projects for the federal government. For example, we have
completed design and construction contracts with Raytheon Integrated Defense
Systems for upgrades to radar facilities at Beale Air Force Base in California,
the Cobra Dane Facility on Shemya Island, Alaska, and at a Royal Air Force
facility in Fylingdales, England, to meet the requirements of a new early radar
warning system. Black Construction, one of our subsidiaries and the
largest contractor on the island of Guam, is expected to generate a significant
portion of its future revenues from the construction of facilities during the
expansion of the United States military’s presence in Guam. The
United States military has announced plans to relocate approximately 8,000
marines and other military personnel from Okinawa, Japan to Guam.
We also
provide diversified management services to surety companies and multi-national
corporations. We are under agreement with a major North American surety company
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.
Markets and
Customers
Our
construction services are targeted toward end markets that are diversified
across project types, client characteristics and geographic locations. Revenues
by business segment for each of the three years in the period ended December 31,
2009 are set forth below:
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Revenues
by Segment
|
||||||||||||
|
Year
Ended December 31,
|
||||||||||||
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2009
|
2008
|
2007
|
||||||||||
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(in
thousands)
|
||||||||||||
|
Building
|
$ | 4,484,937 | $ | 5,146,563 | $ | 4,248,814 | ||||||
|
Civil
|
361,677 | 310,722 | 234,778 | |||||||||
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Management
Services
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305,352 | 203,001 | 144,766 | |||||||||
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Total
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$ | 5,151,966 | $ | 5,660,286 | $ | 4,628,358 | ||||||
6
Revenues
by end market for the building segment for each of the three years in the period
ended December 31, 2009 are set forth below:
|
Building
Segment Revenues by End Market
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
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(in
thousands)
|
||||||||||||
|
Hospitality
and Gaming
|
$ | 2,672,799 | $ | 3,714,822 | $ | 2,830,506 | ||||||
|
Transportation
Facilities
|
419,318 | 51,175 | 33,109 | |||||||||
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Healthcare
Facilities
|
409,216 | 619,959 | 574,175 | |||||||||
|
Municipal
& Government
|
273,455 | 33,688 | - | |||||||||
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Education
Facilities
|
218,943 | 215,472 | 291,491 | |||||||||
|
Condominiums
|
140,813 | 97,580 | 57,667 | |||||||||
|
Office
Buildings
|
127,758 | 298,914 | 250,949 | |||||||||
|
Industrial
Buildings
|
76,917 | 55,251 | 138,670 | |||||||||
|
Sports
and Entertainment
|
41,744 | 26,136 | 5,671 | |||||||||
|
Other
|
103,974 | 33,566 | 66,576 | |||||||||
|
Total
|
$ | 4,484,937 | $ | 5,146,563 | $ | 4,248,814 | ||||||
Revenues
by end market for the civil segment for each of the three years in the period
ended December 31, 2009 are set forth below:
|
Civil
Segment Revenues by End Market
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
(in
thousands)
|
||||||||||||
|
Bridges
|
$ | 103,354 | $ | 110,201 | $ | 67,687 | ||||||
|
Mass
Transit
|
93,053 | 30,812 | 6,171 | |||||||||
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Highways
|
77,952 | 103,968 | 116,129 | |||||||||
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Wastewater
Treatment and Other
|
87,308 | 57,263 | 29,983 | |||||||||
|
Sitework
|
10 | 8,478 | 14,808 | |||||||||
|
Total
|
$ | 361,677 | $ | 310,722 | $ | 234,778 | ||||||
Revenues
by end market for the management services segment for each of the three years in
the period ended December 31, 2009 are set forth below:
|
Management
Services Segment
|
||||||||||||
|
Revenues
by End Market
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
(in
thousands)
|
||||||||||||
|
U.S.
Government Services
|
$ | 276,833 | $ | 183,757 | $ | 131,369 | ||||||
|
Surety
and Other
|
28,519 | 19,244 | 13,397 | |||||||||
|
Total
|
$ | 305,352 | $ | 203,001 | $ | 144,766 | ||||||
We
provide our services to a broad range of private and public customers. The
allocation of our revenues by client source for each of the three years in the
period ended December 31, 2009 is set forth below:
|
Revenues
by Client Source
|
|||||
|
Year
Ended December 31,
|
|||||
|
2009
|
2008
|
2007
|
|||
|
Private
Owners
|
70%
|
85%
|
86%
|
||
|
State
and Local Governments
|
23%
|
12%
|
11%
|
||
|
Federal
Governmental Agencies
|
7%
|
3%
|
3%
|
||
|
100%
|
100%
|
100%
|
|||
7
Private Owners
. We derived
approximately 70% of our revenues from private customers during 2009. Our
private customers include major hospitality and gaming resort owners, Native
American sovereign nations, public corporations, private developers, healthcare
companies and private universities. We provide services to our
private customers primarily through negotiated contract arrangements, as opposed
to competitive bids.
State and Local Governments
.
We derived approximately 23% of our revenues from state and local government
customers during 2009. Our state and local government customers include state
transportation departments, metropolitan authorities, cities, municipal
agencies, school districts and public universities. We provide services to our
state and local customers primarily pursuant to contracts awarded through
competitive bidding processes. Our civil contracting services are concentrated
in the northeastern, mid-Atlantic and western United States. Our building
construction services for state and local government customers, which have
included schools and dormitories, healthcare facilities, convention centers,
parking structures and municipal buildings, are in locations throughout the
country.
Federal Governmental
Agencies
. We derived approximately 7% of our revenues from federal
governmental agencies during 2009. These agencies have included the U.S. State
Department, the U.S. Navy, the U.S. Army Corps of Engineers, and the U.S. Air
Force. We provide services to federal agencies primarily pursuant to contracts
for specific or multi-year assignments that involve new construction or
infrastructure improvements. A substantial portion of our revenues from federal
agencies is derived from projects in overseas locations. We expect this to
continue for the foreseeable future as a result of our expanding base of
experience and relationships with federal agencies, together with an anticipated
favorable expenditure trend for defense, security and reconstruction work due
primarily to the ongoing threats of terrorism and the relocation of
approximately 8,000 marines and other military personnel from Okinawa, Japan to
the island of Guam.
For
additional information on customers, markets, measures of profit or loss, and
total assets, both U.S and foreign, please see Note 13 of Notes to Consolidated
Financial Statements, entitled “Business Segments”.
Backlog
We
include a construction project in our backlog at such time as a contract is
awarded or a letter of commitment is obtained and adequate construction funding
is in place. As a result, we believe the backlog figures are firm, subject only
to the cancellation provisions contained in the various contracts. Historically,
these provisions have not had a material adverse effect on us.
As of
December 31, 2009, we had a construction backlog of $4.3 billion, compared to
$6.7 billion at December 31, 2008. Backlog is summarized below by business
segment as of December 31, 2009 and 2008:
|
Backlog
by Business Segment
|
||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
(dollars
in thousands)
|
||||||||||||||||
|
Building
|
$ | 3,125,780 | 73% | $ | 5,731,992 | 86% | ||||||||||
|
Civil
|
1,001,507 | 23% | 528,005 | 8% | ||||||||||||
|
Management
Services
|
182,904 | 4% | 415,906 | 6% | ||||||||||||
|
Total
|
$ | 4,310,191 | 100% | $ | 6,675,903 | 100% | ||||||||||
We
estimate that approximately $1.3 billion, or 31% of our backlog at December 31,
2009 will not be completed in 2010.
8
Backlog
by end market for the building segment as of December 31, 2009 and 2008 is set
forth below:
|
Building
Segment Backlog by End Market
|
||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
(dollars
in thousands)
|
||||||||||||||||
|
Hospitality
and Gaming
|
$ | 783,794 | 25% | $ | 2,788,336 | 49 | % | |||||||||
|
Transportation
Facilities
|
737,084 | 24% | 1,149,823 | 20 | % | |||||||||||
|
Healthcare
Facilities
|
713,296 | 23% | 1,057,319 | 18 | % | |||||||||||
|
Municipal
& Government
|
460,765 | 15% | 29,496 |
<1
|
% | |||||||||||
|
Industrial
Buildings
|
255,859 | 8% | 136,580 | 3 | % | |||||||||||
|
Education
Facilities
|
105,650 | 3% | 249,251 | 4 | % | |||||||||||
|
Condominiums
|
9,475 |
<1%
|
113,232 | 2 | % | |||||||||||
|
Sports
and Entertainment
|
8,641 |
<1%
|
51,150 | 1 | % | |||||||||||
|
Office
Buildings
|
7,114 |
<1%
|
106,942 | 2 | % | |||||||||||
|
Other
|
44,102 | 1% | 49,863 | 1 | % | |||||||||||
|
Total
|
$ | 3,125,780 | 100 | $ | 5,731,992 | 100 | % | |||||||||
Backlog
by end market for the civil segment as of December 31, 2009 and 2008 is set
forth below:
|
Civil
Segment Backlog by End Market
|
||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
(dollars
in thousands)
|
||||||||||||||||
|
Mass
Transit
|
$ | 457,786 | 46% | $ | 123,821 | 23% | ||||||||||
|
Highways
|
319,514 | 32% | 138,496 | 26% | ||||||||||||
|
Bridges
|
181,863 | 18% | 149,596 | 28% | ||||||||||||
|
Wastewater
Treatment and Other
|
42,131 | 4% | 115,842 | 22% | ||||||||||||
|
Sitework
|
213 |
<1%
|
250 |
<1%
|
||||||||||||
|
Total
|
$ | 1,001,507 | 100% | $ | 528,005 | 100% | ||||||||||
Backlog
by end market for the management services segment as of December 31, 2009 and
2008 is set forth below:
|
Management
Services Segment Backlog by End Market
|
||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
|||||||||||||||
|
(dollars
in thousands)
|
||||||||||||||||
|
U.S.
Government Services
|
$ | 147,192 | 80% | $ | 385,450 | 93% | ||||||||||
|
Surety
and Other
|
35,712 | 20% | 30,456 | 7% | ||||||||||||
|
Total
|
$ | 182,904 | 100% | $ | 415,906 | 100% | ||||||||||
Competition
The
construction industry is highly competitive and the markets in which we compete
include numerous competitors. In certain end markets of the building
segment, such as hospitality and gaming and healthcare, we are one of the
largest providers of construction services in the United States. In our building
segment, we compete with a variety of national and regional contractors. Our
primary competitors are Balfour Beatty Construction, Clark, DPR, Gilbane, Hensel
Phelps, JE Dunn, McCarthy, PCL, Skanska, Suffolk, and Turner. In our
civil segment, we compete principally with large civil construction firms that
operate in the west, northeast and mid-Atlantic regions, including Skanska,
Granite, Tully, Schiavone, Traylor Brothers, American Infrastructure, GAC Wagman
and Kiewit. In our management services segment, we compete
principally with national engineering and construction firms such as Fluor,
Washington Division of URS, Kellogg Brown & Root, Shaw, and CH2M
Hill. Major competitors to Black Construction’s operations in Guam
include DCK Construction, Coretech, Watts Constructors and Hensel Phelps. We
believe price, experience, reputation, responsiveness, customer relationships,
project completion track record and quality of work are key factors in customers
awarding contracts across our end markets.
9
Types of Contracts and The
Contract Process
Type
of Contracts
The
general contracting and management services we provide consist of planning and
scheduling the manpower, equipment, materials and subcontractors required for
the timely completion of a project in accordance with the terms, plans and
specifications contained in a construction contract. We provide these services
by entering into traditional general contracting arrangements, such as
guaranteed maximum price, cost plus fee and fixed price contracts and
construction management or design-build contracting arrangements. These contract
types and the risks generally inherent therein are discussed below:
|
|
•
|
Guaranteed
maximum price (GMP) contracts provide for a cost plus fee arrangement up
to a maximum agreed upon price. These contracts place risks on
the contractor for amounts in excess of the GMP, but may permit an
opportunity for greater profits than under Cost Plus contracts through
sharing agreements with the owner on any cost savings that may be
realized. Services provided by our building segment to various
private customers often are performed under GMP
contracts.
|
|
|
•
|
Cost plus fee (Cost Plus)
contracts provide for reimbursement of the costs required to complete a
project plus a stipulated fee arrangement. Cost Plus contracts
include cost plus fixed fee (CPFF) contracts and cost plus award fee
(CPAF) contracts. CPFF contracts provide for reimbursement of
the costs required to complete a project plus a fixed fee. CPAF
contracts provide for reimbursement of the costs required to complete a
project plus a base fee as well as an incentive fee based on cost and/or
schedule performance. Cost Plus contracts serve to minimize the
contractor’s financial risk, but may also limit
profits.
|
|
|
•
|
Fixed
price (FP) contracts, which include fixed unit price contracts, are
generally used in competitively bid public civil and building construction
projects and generally commit the contractor to provide all of the
resources required to complete a project for a fixed sum or at fixed unit
prices. Usually FP contracts transfer more risk to the
contractor but offer the opportunity, under favorable circumstances, for
greater profits. FP contracts represent a significant portion
of our publicly bid civil construction projects. We also
perform publicly bid building construction projects and certain task order
contracts for agencies of the U.S. government in our management services
segment under FP contracts.
|
|
•
|
Construction management (CM) contracts are those under which a
contractor agrees to manage a project for the owner for an agreed-upon
fee, which may be fixed or may vary based upon negotiated factors. CM
contracts
serve to minimize the contractor’s financial risk, but may also
limit profit relative to the overall scope of a
project.
|
|
•
|
Design-build
contracts are those under which a contractor provides both design and
construction services for a customer. These contracts may be
either GMP, fixed price contracts or cost plus fee contracts.
|
Historically,
a high percentage of our contracts have been of the GMP and fixed price type. As
a result of increasing opportunities in public work civil and building markets
combined with the increased resume and expertise as a result of the merger with
Tutor-Saliba, the fixed price type of contract is expected to grow as a
percentage of total revenues and backlog. A summary of revenues and
backlog by type of contract for each of the three years in the period ended
December 31, 2009 follows:
10
|
Revenues
for the
|
|||||
|
Year
Ended December 31,
|
|||||
|
2009
|
2008
|
2007
|
|||
|
Cost
Plus, GMP or CM
|
72%
|
89%
|
90%
|
||
|
FP
|
28%
|
11%
|
10%
|
||
|
100%
|
100%
|
100%
|
|||
|
Backlog
as of
|
|||||
|
December
31,
|
|||||
|
2009
|
2008
|
2007
|
|||
|
Cost
Plus, GMP or CM
|
53%
|
78%
|
92%
|
||
|
FP
|
47%
|
22%
|
8%
|
||
|
100%
|
100%
|
100%
|
|||
The
Contract Process
We
identify potential projects from a variety of sources, including advertisements
by federal, state and local governmental agencies, through the efforts of our
business development personnel and through meetings with other participants in
the construction industry such as architects and engineers. After determining
which projects are available, we make a decision on which projects to pursue
based on such factors as project size, duration, availability of personnel,
current backlog, competitive advantages and disadvantages, prior experience,
contracting agency or owner, source of project funding, geographic location and
type of contract.
After
deciding which contracts to pursue, we generally have to complete a
prequalification process with the applicable agency or customer. The
prequalification process generally limits bidders to those companies with the
operational experience and financial capability to effectively complete the
particular project(s) in accordance with the plans, specifications and
construction schedule.
Our
estimating process typically involves three phases. Initially, we perform a
detailed review of the plans and specifications, summarize the various types of
work involved and related estimated quantities, determine the project duration
or schedule and highlight the unique aspects of and risks associated with the
project. After the initial review, we decide whether to continue to pursue the
project. If we elect to pursue the project, we perform the second
phase of the estimating process which consists of estimating the cost and
availability of labor, material, equipment, subcontractors and the project team
required to complete the project on time and in accordance with the plans and
specifications. The final phase consists of a detailed review of the estimate by
management including, among other things, assumptions regarding cost, approach,
means and methods, productivity and risk. After the final review of the cost
estimate, management adds an amount for profit to arrive at the total bid
amount.
Public
bids to various governmental agencies are generally awarded to the lowest
bidder. Requests for proposals or negotiated contracts with public or private
customers are generally awarded based on a combination of technical capability
and price, taking into consideration factors such as project schedule and prior
experience.
During
the construction phase of a project, we monitor our progress by comparing actual
costs incurred and quantities completed to date with budgeted amounts and the
project schedule and periodically, at a minimum on a quarterly basis, prepare an
updated estimate of total forecasted revenue, cost and profit for the
project.
During
the ordinary course of most projects, the customer, and sometimes the
contractor, initiate modifications or changes to the original contract to
reflect, among other things, changes in specifications or design, construction
method or manner of performance, facilities, equipment, materials, site
conditions and period for completion of the work. Generally, the scope and price
of these modifications are documented in a "change order" to the original
contract and reviewed, approved and paid in accordance with the normal change
order provisions of the contract.
11
Often a
contract requires us to perform extra or change order work as directed by the
customer even if the customer has not agreed in advance on the scope or price of
the work to be performed. This process may result in disputes over whether the
work performed is beyond the scope of the work included in the original project
plans and specifications or, if the customer agrees that the work performed
qualifies as extra work, the price the customer is willing to pay for the extra
work. Even when the customer agrees to pay for the extra work, we may be
required to fund the cost of such work for a lengthy period of time until the
change order is approved and funded by the customer. Also, unapproved change
orders, contract disputes or claims result in costs being incurred by us that
cannot be billed currently and, therefore, are reflected as "costs and estimated
earnings in excess of billings" in our balance sheet. See Note 1(d) of Notes to
Consolidated Financial Statements, entitled “Method of Accounting for
Contracts.” In addition, any delay caused by the extra work may adversely impact
the timely scheduling of other project work and our ability to meet specified
contract milestone dates.
The
process for resolving claims varies from one contract to another but, in
general, we attempt to resolve claims at the project supervisory level through
the normal change order process or with higher levels of management within our
organization and the customer’s organization. Depending upon the terms of the
contract, claim resolution may involve a variety of other resolution methods,
including mediation, binding or non-binding arbitration or litigation.
Regardless of the process, when a potential claim arises on a project, we
typically have the contractual obligation to perform the work and incur the
related costs. We do not recoup the costs until the claim is resolved. It is not
uncommon for the claim resolution process to last months or years, especially if
it involves litigation.
Our
contracts generally involve work durations in excess of one
year. Revenue from our contracts in process is generally recorded
under the percentage of completion contract accounting method. For a
more detailed discussion of our policy in these areas, see Note 1(d) of Notes to
Consolidated Financial Statements.
Construction
Costs
While our
business may experience some adverse consequences if shortages develop or if
prices for materials, labor or equipment increase excessively, provisions in
certain types of contracts often shift all or a major portion of any adverse
impact to the customer. On our fixed price contracts, we attempt to
insulate ourselves from the unfavorable effects of inflation by incorporating
escalating wage and price assumptions, where appropriate, into our construction
cost estimates and by obtaining firm fixed price quotes from major
subcontractors and material suppliers at the time of the bid
period. Construction and other materials used in our construction
activities are generally available locally from multiple sources and have been
in adequate supply during recent years. Construction work in selected
overseas areas primarily employs expatriate and local labor which can usually be
obtained as required.
Environmental
Matters
Our
properties and operations are subject to federal, state and municipal laws and
regulations relating to the protection of the environment, including
requirements for water discharges, air emissions, the use, management and
disposal of solid or hazardous materials or wastes and the cleanup of
contamination. For example, we must apply water or chemicals to reduce dust on
road construction projects and to contain contaminants in storm run-off water at
construction sites. In certain circumstances, we may also be required to hire
subcontractors to dispose of hazardous materials encountered on a project in
accordance with a plan approved in advance by the owner. We believe that we are
in substantial compliance with all applicable laws and regulations; however,
future requirements or amendments to current laws or regulations imposing more
stringent requirements could require us to incur additional costs to maintain or
achieve compliance.
In
addition, some environmental laws, such as the U.S. federal "Superfund" law and
similar state statutes, can impose liability for the entire cost of cleanup of
contaminated sites upon any of the current or former owners or operators or upon
parties who sent wastes to these sites, regardless of who owned the site at the
time of the release or the lawfulness of the original disposal activity.
Contaminants have been detected at some of the sites that we own, or where we
worked as a contractor in the past, and we have incurred costs for investigation
or remediation of hazardous substances. We believe that our liability for these
sites will not be material, either individually or in the aggregate, and have
pollution liability insurance available for such matters. Perini Environmental
Services, Inc., or Perini Environmental, a wholly owned subsidiary of Tutor
Perini that was phased out during 1997, provided hazardous waste engineering and
construction
services to both private clients and public agencies nationwide. Perini
Environmental was responsible for compliance with applicable laws in connection
with its activities. We believe that we have minimal exposure to
environmental liability because Tutor Perini and Perini Environmental
generally
12
carry
insurance or received indemnification from customers to cover the risks
associated with the remediation business.
We own
real estate in seven states and in Guam and, as an owner, are subject to laws
governing environmental responsibility and liability based on ownership. We are
not aware of any significant environmental liability associated with our
ownership of real estate.
Insurance and
Bonding
All of
our properties and equipment, both directly owned and owned through joint
ventures with others, are covered by insurance and we believe that such
insurance is adequate. In addition, we maintain general liability,
excess liability and workers’ compensation insurance in amounts that we believe
are consistent with our risk of loss and industry practice.
As a
normal part of the construction business, we are often required to provide
various types of surety bonds as an additional level of security of our
performance. We have surety arrangements with several
sureties. We also require many of our higher risk subcontractors to
provide surety bonds as security for their performance. Since 2005,
we also have purchased contract default insurance on certain construction
projects to insure against the risk of subcontractor default as opposed to
having subcontractors provide traditional payment and performance
bonds.
Employees
The total
number of personnel employed by us is subject to seasonal fluctuations, the
volume of construction in progress and the relative amount of work performed by
subcontractors. Our average number of full time equivalent employees
during 2009 was 5,449.
We are
signatory to numerous local and regional collective bargaining agreements, both
directly and through trade associations, as a union contractor. These
agreements cover all necessary union crafts and are subject to various renewal
dates. Estimated amounts for wage escalation related to the
expiration of union contracts are included in our bids on various projects and,
as a result, the expiration of any union contract in the next fiscal year is not
expected to have any material impact on us. As of December 31, 2009,
approximately 2,000 of our total of 4,072 employees were union
employees. During the past several years, we have not experienced any
significant work stoppages caused by our union employees.
Available
Information
Our
website address is
http://
www.tutorperini.com
. The
information contained on our website is not included as a part of, or
incorporated by reference into, this Annual Report on Form 10-K. We
make available, free of charge on our Internet website, our annual reports on
Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K
and amendments to such reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as
reasonably practicable after we have electronically filed such materials with,
or furnished it to, the United States Securities and Exchange Commission. You
may read and copy any document we file at the SEC Headquarters, Public Reference
Room, 100 F Street, NE, Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at
http://www.sec.gov
that contains reports, proxy, information statements and other information
regarding issuers, such as the Company, that file electronically with the
SEC. Also available on our website are our Code of Business Conduct
and Ethics, Corporate Governance Guidelines, the charters of the Committees of
our Board of Directors and reports under Section 16 of the Exchange Act of
transactions in our stock by our directors and executive officers.
13
ITEM 1A. RISK
FACTORS
We are
subject to a number of risks, including those summarized below. Such risks could
have a material adverse effect on our financial condition, results of operations
and cash flows. See our disclosure under “Forward-looking Statements”
on page 3.
We
may not fully realize the revenue value reported in our backlog.
As of
December 31, 2009, our backlog of uncompleted construction work was
approximately $4.3 billion. We include a construction project in our
backlog at such time as a contract is awarded or a letter of commitment is
obtained and adequate construction funding is in place. The revenue
projected in our backlog may not be realized or, if realized, may not result in
profits. For example, if a project reflected in our backlog is
terminated, suspended or reduced in scope, it would result in a reduction to our
backlog which would reduce, potentially to a material extent, the revenues and
profits realized. If a customer cancels a project, we may be
reimbursed for certain costs and profit thereon but typically have no
contractual right to the total revenues reflected in our
backlog. Significant cancellations or delays of projects in our
backlog could have a material adverse effect on future revenues, profits, and
cash flows.
Current
economic conditions could adversely affect our operations.
The
deterioration of economic and financial market conditions in the United States
and overseas throughout 2009, including severe disruptions in the credit
markets, could continue to adversely affect our results of operations in future
periods. The continued instability in the financial markets has made it
difficult for certain of our customers, including private owners and 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 continue to face
potentially significant budget shortfalls as a result of declining tax and other
revenues, which may cause them to defer or cancel planned infrastructure
projects. Our backlog has decreased in 2009 as we have encountered
increased levels of deferrals and delays related to new construction projects.
Difficulty in obtaining adequate financing due to the unprecedented disruption
in the credit markets may significantly 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.
Instability
in the financial markets may also impact a customers’ ability to pay us on a
timely basis, or at all, for work on projects already under construction in
accordance with the contract terms. Customer financing may be subject
to periodic renewals and extensions of credit by the lender. As
credit markets remain tight and difficult economic conditions persist, lenders
may be unwilling to continue renewing or extending credit to a
customer. Such deferral, delay or cancellation of credit by the
lender could impact the customer’s ability to pay us, which could have an
adverse impact on our future operating results. A significant portion of our
operations are concentrated in California, New York and Nevada. As a result, we
are more susceptible to fluctuations caused by adverse economic or other
conditions in these regions as opposed to others.
Economic
downturns could reduce the level of consumer spending within the non-residential
building industry, which could adversely affect demand for our
services.
Consumer
spending in certain private non-residential building type projects, especially
hospitality and gaming, is discretionary and may decline during economic
downturns when consumers have less disposable income. Even an uncertain economic
outlook may adversely affect consumer and private industry spending in various
business operations, as consumers may spend less in anticipation of a potential
economic downturn. Decreased spending in the market could deter new projects
within the industry and the expansion or renovation of existing facilities,
which could negatively impact our revenues and earnings.
A
decrease in government funding of infrastructure and other public projects could
reduce the revenues of the company.
Approximately
23% (or $1.0 billion) of our backlog as of December 31, 2009, is derived from
construction projects involving civil construction contracts. Civil construction
markets are dependent on the amount of infrastructure work funded by various
governmental agencies which, in turn, depends on the condition of the existing
infrastructure, the need for new or expanded infrastructure and federal, state
or local government spending levels. A slowdown in economic activity in any of
the markets that we serve may result in less spending on public works projects.
In
14
addition,
a decrease or delay in government funding of infrastructure projects or delays
in the implementation of voter-approved bond measures could decrease the number
of civil construction projects available and limit our ability to obtain new
contracts, which could reduce revenues within our civil construction segment. In
addition, budget shortfalls and credit rating downgrades in California and other
states in which the Company is involved in significant infrastructure projects
and any long-term impairment in the ability of state and local governments to
finance construction projects by raising capital in the municipal bond market
could curtail or delay the funding of future projects.
Our
building segment also is involved in significant construction projects for
public works projects such as Terminal 3 at McCarran International Airport in
Las Vegas, public healthcare facilities, primarily in California, and public
education facilities, primarily in Florida and California. These projects also
are dependent upon funding by various federal, state and local governmental
agencies. A decrease in government funding of public healthcare and education
facilities, particularly in California and Florida, could decrease the number
and/or size of construction projects available and limit our ability to obtain
new contracts in these markets, which could further reduce our revenues and
earnings.
A
decrease in U.S. government funding or change in government plans, particularly
with respect to construction projects in Iraq, Afghanistan and Guam, as well as
the risks associated with undertaking projects in these countries, could
adversely affect the continuation of existing projects or the number of projects
available to us in the future.
We have
performed design-build security upgrades at United States embassies and
consulates throughout the world, and we are currently engaged in building
activities in Iraq. The United States federal government has approved various
spending bills for the reconstruction and defense of Iraq and Afghanistan and
has allocated significant funds to the defense of United States interests around
the world from the threat of terrorism. The United States federal government has
also approved funds for development in conjunction with the relocation of
military personnel into Guam. A decrease in government funding of
these projects or a decision by the United States federal government to reduce
or eliminate the use of outside contractors to perform this work would decrease
the number of projects available to us and limit our ability to obtain new
contracts in this area.
Our
projects in Iraq and Afghanistan and other areas of political and economic
instability carry with them specific security and operational risks. Intentional
or unintentional acts in those countries could result in damage to our
construction sites or harm to our employees and could result in our decision to
withdraw our operations from the area. Also, as a result of these acts, the
United States federal government could decide to cancel or suspend our
operations in these areas.
Economic,
political and other risks associated with our international operations involve
risks not faced by our domestic competitors, which could adversely affect our
revenues and earnings.
We
derived approximately 6% (or $298.5 million) of our revenues and approximately
$50.4 million of income from construction operations for the year ended December
31, 2009 from our work on projects located outside of the United States,
including projects in Iraq, Afghanistan and Guam. We expect non-U.S. projects to
continue to contribute to our revenues and earnings for the foreseeable future.
Our international operations expose us to risks inherent in doing business in
certain hostile regions outside the United States, including:
|
•
|
political
risks, including risks of loss due to civil disturbances, guerilla
activities and insurrection;
|
|
•
|
acts
of terrorism and acts of war;
|
|
•
|
unstable
economic, financial and market
conditions;
|
|
•
|
potential
incompatibility with foreign subcontractors and
vendors;
|
|
•
|
foreign
currency controls and fluctuations;
|
|
•
|
trade
restrictions;
|
|
•
|
variations
in taxes; and
|
|
•
|
changes
in labor conditions, labor strikes and difficulties in staffing and
managing international operations.
|
15
Any of
these factors could harm our international operations and, consequently, our
business and consolidated operating results. Specifically, failure to
successfully manage risks associated with our international operations could
result in higher operating costs than anticipated or could delay or limit our
ability to generate revenues and income from construction operations in key
international markets.
We
are subject to significant legal proceedings, which, if determined adversely to
us, could harm our reputation, preclude us from bidding on future projects
and/or have a material adverse effect on us.
We are
involved in various lawsuits, including the legal proceedings described under
Item 3 -- “Legal Proceedings.” Litigation is inherently uncertain and
it is not possible to predict what the final outcome will be of any legal
proceeding. A final judgment against us would require us to record the related
liability and fund the payment of the judgment and, if such adverse judgment is
significant, it could have a material adverse effect on us. Legal
proceedings resulting in judgments or findings against us may harm our
reputation and prospects for future contract awards.
Our
contracts require us to perform extra or change order work, which can result in
disputes and adversely affect our working capital, profits and cash
flows.
Our
contracts generally require us to perform extra or change order work as directed
by the customer even if the customer has not agreed in advance on the scope or
price of the work to be performed. This process can result in disputes over
whether the work performed is beyond the scope of the work included in the
original project plans and specifications or, if the customer agrees that the
work performed qualifies as extra work, the price the customer is willing to pay
for the extra work. Even when the customer agrees to pay for the extra work, we
may be required to fund the cost of such work for a lengthy period of time until
the change order is approved and funded by the customer.
Also,
unapproved change orders, contract disputes or claims cause us to incur costs
that cannot be billed currently and therefore may be reflected as "costs and
estimated earnings in excess of billings" in our balance sheet. See Note 1(d) of
Notes to Consolidated Financial Statements. To the extent our actual recoveries
with respect to unapproved change orders, contract disputes or claims are lower
than our estimates, the amount of any shortfall will reduce our revenues and the
amount of costs and estimated earnings in excess of billings recorded on our
balance sheet, and could have a material adverse effect on our working capital,
results of operations and cash flows. In addition, any delay caused by the extra
work may adversely impact the timely scheduling of other project work and our
ability to meet specified contract milestone dates.
Increased
regulation of the hospitality and gaming industry could reduce the number of
future hospitality and gaming projects available, which, in turn, could
adversely affect our future earnings.
The
hospitality and gaming industry is regulated extensively by federal and state
regulatory bodies, including state gaming commissions, the National Indian
Gaming Commission and federal and state taxing and law enforcement agencies.
From time to time, legislation is proposed in the legislatures of some of these
jurisdictions that, if enacted, could adversely affect the tax, regulatory,
operational or other aspects of the hospitality and gaming industry. Legislation
of this type may be enacted in the future. The United States federal government
has also previously considered a federal tax on casino revenues and may consider
such a tax in the future. In addition, companies that operate in the hospitality
and gaming industry are currently subject to significant state and local taxes
and fees in addition to normal federal and state corporate income taxes, and
such taxes and fees are subject to increase at any time. New
legislation or hospitality and gaming regulations could deter future hospitality
and gaming construction projects in jurisdictions in which we derive significant
revenues. As a result, the enactment of any such new legislation or regulations
could adversely affect our future earnings.
If
we are unable to accurately estimate the overall risks, revenues or costs on a
contract, we may achieve a lower than anticipated profit or incur a loss on that
contract.
We
generally enter into four principal types of contracts with our clients: fixed
price contracts, cost plus fee
16
contracts,
guaranteed maximum price contracts, and construction management. We derive a
significant portion of our civil construction segment and management services
segment revenues and backlog from fixed price contracts.
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Fixed
price and certain design-build contracts require us to perform the
contract for a fixed price irrespective of our actual costs. As a result,
we realize a profit on these contracts only if we successfully control our
costs and avoid cost overruns.
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Cost
plus fee contracts provide for reimbursement of the costs required to
complete a project, but generally have a lower base fee and an incentive
fee based on cost and/or schedule performance. If our costs exceed the
revenues available under such a contract or are not allowable under the
provisions of the contract, we may not receive reimbursement for these
costs.
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Guaranteed
maximum price contracts provide for a cost plus fee arrangement up to a
maximum agreed-upon price. These contracts also place the risk on us for
cost overruns that exceed the guaranteed maximum
price.
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Construction
management contracts are those under which we agree to manage a project
for a customer for an agreed upon fee, which may be fixed or may vary
based upon negotiated factors. Profitability on these types of contracts
is impacted by changes in the scope of work or design issues, which could
cause cost overruns beyond our control and limit profits on these
contracts.
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Cost
overruns, whether due to inefficiency, faulty estimates or other factors, result
in lower profit or a loss on a project. A significant number of our contracts
are based in part on cost estimates that are subject to a number of assumptions.
If our estimates of the overall risks, revenues or costs prove inaccurate or
circumstances change, we may incur a lower profit or a loss on that
contract.
The
percentage-of-completion method of accounting for contract revenues may result
in material adjustments, which could result in a charge against our
earnings.
We
recognize contract revenues using the percentage-of-completion method. Under
this method, estimated contract revenues are recognized by applying the
percentage of completion of the project for the period to the total estimated
revenues for the contract. Estimated contract losses are recognized in full when
determined. Total contract revenues and cost estimates are reviewed and revised
at a minimum on a quarterly basis as the work progresses and as change orders
are approved. Adjustments based upon the percentage of completion are
reflected in contract revenues in the period when these estimates are revised.
To the extent that these adjustments result in an increase, a reduction or an
elimination of previously reported contract profit, we recognize a credit or a
charge against current earnings, which could be material.
We
are subject to a number of risks as a U.S. government contractor, which could
either harm our reputation, result in fines or penalties against us and/or
adversely impact our financial condition.
We are a
provider of services to U.S. government agencies and therefore are exposed to
risks associated with government contracting. We must observe laws and
regulations relating to the formation, administration and performance of
government contracts which affect how we do business with our U.S. government
customers and may impose added costs on our business. For example,
the Federal Acquisition Regulations and the industrial security regulations of
the U.S. Department of Defense and related laws include provisions that allow
our U.S. government customers to terminate or not renew our contracts if we come
under foreign ownership, control or influence and require us to disclose and
certify cost and pricing data in connection with contract
negotiations.
Our
failure to comply with these or other laws and regulations could result in
contract terminations, suspension or debarment from contracting with the U.S.
government, civil fines and damages and criminal prosecution and penalties, any
of which could cause our actual results to differ materially from those
anticipated.
U.S.
government agencies generally can terminate or modify their contract with us at
their convenience and some government contracts must be renewed annually. If a
government agency terminates or fails to renew a contract, our backlog may be
reduced. If a government agency terminates a contract due to our unsatisfactory
performance, it could result in liability to us and harm our ability to compete
for future contracts.
17
U.S.
government agencies, including the Defense Contract Audit Agency, or DCAA,
routinely audit and investigate U.S. government contracts and U.S. government
contractors’ administrative processes and systems. These agencies
review our performance on contracts, pricing practices, cost structure and
compliance with applicable laws, regulations and standards. They also
review our compliance with regulations and policies and the adequacy of our
internal control systems and policies, including our purchasing, property,
estimating, compensation and management information systems. Any
costs found to be improperly allocated to a specific contract will not be
reimbursed, and any such costs already reimbursed must be
refunded. Moreover, if any of the administrative processes or systems
is found not to comply with requirements, we may be subjected to increased
government oversight and approval that could delay or otherwise adversely affect
our ability to compete for or perform contracts. Therefore, an
unfavorable outcome to an audit by the DCAA or another agency could cause our
results to differ materially from those anticipated. If an
investigation uncovers improper or illegal activities, we may be subject to
civil and criminal penalties and administrative sanctions, including termination
of contracts, forfeitures of profits, suspension of payments, fines and
suspension or debarment from doing business with the U.S.
government. In addition, we would suffer serious harm to our
reputation if allegations of impropriety were made against us. Each
of these results could cause actual results to differ materially from those
anticipated.
Our
participation in construction joint ventures exposes us to liability and/or harm
to our reputation for failures of our partners.
As part
of our business, we enter into joint venture arrangements typically to jointly
bid on and execute particular projects, thereby reducing our financial or
operational risk with respect to such projects. Success on these
joint projects depends in large part on whether our joint venture partners
satisfy their contractual obligations. We and our joint venture
partners are generally jointly and severally liable for all liabilities and
obligations of our joint ventures. If a joint venture partner fails to perform
or is financially unable to bear its portion of required capital contributions
or other obligations, including liabilities stemming from lawsuits, we could be
required to make additional investments, provide additional services or pay more
than our proportionate share of a liability to make up for our partner’s
shortfall. Further, if we are unable to adequately address our partner’s
performance issues, the customer may terminate the project, which could result
in legal liability to us, harm our reputation, and reduce our profit on a
project.
Our
pension plan is underfunded and we may be required to make significant future
contributions to the plan.
Our
defined benefit pension plan and our supplemental retirement plan are
non-contributory pension plans covering many of our employees. Benefits under
these plans were frozen as of June 1, 2004. As of December 31, 2009,
these plans were underfunded by approximately $22.9 million. We are required to
make cash contributions to our pension and supplemental retirement plans to the
extent necessary to comply with minimum funding requirements imposed by employee
benefit and tax laws. The amount of any such required contributions is
determined based on an annual actuarial valuation of the plan as performed by
the plan's actuaries. During 2009, we voluntarily contributed $6.9 million in
cash to our defined benefit pension plan and supplemental retirement plan. The
amount of our future contributions will depend upon asset returns, then-current
discount rates and a number of other factors, and, as a result, the amount we
may elect or be required to contribute to these plans in the future may vary
significantly. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Critical Accounting Policies--Defined Benefit
Retirement Plan."
The
construction services industry is highly schedule driven, and our failure to
meet schedule requirements of our contracts could adversely affect our
reputation and/or expose us to financial liability.
Many of
our contracts are subject to specific completion schedule requirements and
subject us to liquidated damages in the event the construction schedules are not
achieved. Our failure to meet schedule requirements could subject us not only to
liquidated damages, but could further subject us to liability for our customer’s
actual cost arising out of our delay and cause us to suffer damage to our
reputation within our industry and customer base.
Competition for new project awards is
intense and our failure to compete effectively could
reduce our market share and
profits.
New
project awards are often determined through either a competitive bid basis or on
a negotiated basis. Bid or negotiated contracts with public or private owners
are generally awarded based upon price, but many times other
18
factors,
such as shorter project schedules or prior experience with the customer,
influence the award of the contract. Within our industry, we compete with many
national, regional and local construction firms. Some of these competitors have
achieved greater market penetration than we have in the markets in which we
compete, and some have greater financial and other resources than we do. As a
result, we may need to accept lower contract margins or more fixed price or unit
price contracts in order for us to compete against competitors that have the
ability to accept awards at lower prices or have a pre-existing relationship
with the customer. If we are unable to compete successfully in such markets, our
relative market share and profits could be reduced.
We
will require substantial personnel and specialty subcontractor resources to
execute and perform on our contracts in backlog.
Our
ability to execute and perform on our contracts in backlog depends in large part
upon our ability to hire and retain highly skilled personnel, including
engineering, project management and senior management
professionals. In addition, our construction projects require a
significant amount of trade labor resources, such as carpenters, masons and
other skilled workers, as well as certain specialty subcontractor skills. In the
event we are unable to attract, hire and retain the requisite personnel and
subcontractors necessary to execute and perform on our contract backlog, we may
experience delays in completing projects in accordance with project schedules,
which may have an adverse effect on our financial results and harm our
reputation. Further, the increased demand for personnel and specialty
subcontractors may result in higher costs which could cause us to exceed the
budget on a project, which in turn may have an adverse effect on our results of
operations and harm our relationships with our customers. In
addition, if we lack the personnel and specialty subcontractors necessary to
perform on our current contract backlog, we may find it necessary to curtail our
pursuit of new projects.
An
inability to obtain bonding could limit the number of projects we are able to
pursue.
As is
customary in the construction business, we often are required to provide surety
bonds to secure our performance under construction contracts. Our ability to
obtain surety bonds primarily depends upon our capitalization, working capital,
past performance, management expertise and certain external factors, including
the overall capacity of the surety market. Surety companies consider such
factors in relation to the amount of our backlog and their underwriting
standards, which may change from time to time. Since 2001, the surety industry
has undergone significant changes with several companies withdrawing completely
from the industry or significantly reducing their bonding commitment. In
addition, certain reinsurers of surety risk have limited their participation in
this market. Therefore, we could be unable to obtain surety bonds, when
required, which could adversely affect our future results of operations and
revenues.
Conflicts
of interest may arise involving certain of our directors.
W
e have engaged in joint ventures, primarily in civil
construction, with O&G Industries, Inc., a Connecticut corporation, whose
Vice Chairman is Raymond R. Oneglia, one of our directors
. The
terms of our joint ventures with any affiliate have been and will be subject to
review and approval by our Audit Committee. As in any joint venture,
we could have disagreements with
our joint venture
partner
over the operation of a joint venture or a joint venture could be
involved in disputes with third parties, where we may or may not have an
identity of interest with
our joint venture
partner. These relationships also may create conflicts of interest with
respect to new business and other corporate opportunities.
Our
reputation may be harmed and our future earnings may be negatively impacted if
we are unable to retain key members of our management.
Our
business substantially depends on the continued service of key members of our
management, particularly Ronald N. Tutor, Robert Band, Mark A. Caspers, James
(“Jack”) Frost, Craig W. Shaw, Richard J. Rizzo, Claude K. Olsen, Martin B.
Sisemore, William R. Derrer, Daniel Keating, and Kenneth R. Burk, who,
collectively, have an average of more than 30 years in the construction
industry. Losing the services of any of these individuals could
adversely affect our business until a suitable replacement can be
found. We believe that they could not quickly be replaced with
executives of equal experience and capabilities. Generally these
executives are not bound by employment agreements with us and we do not maintain
key person life insurance policies on any of these executives.
19
Ronald
N. Tutor’s ownership interest in the Company, along with his management position
and his right to designate up to two nominees to serve as members of our Board
of Directors, provides him with significant
influence
over corporate matters and may make a third party’s acquisition of the Company
(or its stock or assets) more difficult.
As of
December 31, 2009, two trusts controlled by Mr. Tutor owned approximately
43% of the outstanding shares of our common stock. In addition, Mr. Tutor
is the chairman and chief executive officer of the Company and has the right to
designate up to two nominees for election as members of the Company’s Board of
Directors. As of the date of this Form 10-K, none of the current directors have
been appointed by Mr. Tutor. If Mr. Tutor fully exercises his
right to appoint two directors, he and his two designees would be 3 of 11
directors, as the size of the Board would increase by one
member. Although the Shareholders Agreement imposes significant
limits on Mr. Tutor’s right to vote the shares of our common stock held by
Mr. Tutor, two trusts controlled by him and any other affiliates of Mr. Tutor or
the trusts (the “Tutor Group”), or to take specified actions that may facilitate
an unsolicited acquisition of control of the Company by Mr. Tutor or his
affiliates, Mr. Tutor will nonetheless still be able to exert significant
influence over the outcome of a range of corporate matters, including
significant corporate transactions requiring a shareholder vote, such as a
merger or a sale of the Company or its assets. This concentration of ownership
and influence in management and Board decision-making also could harm the price
of our common stock by, among other things, discouraging a potential acquirer
from seeking to acquire shares of our common stock (whether by making a tender
offer or otherwise) or otherwise attempting to obtain control of the
Company.
Our
business, financial position, results of operations and cash flows could be
adversely affected by work stoppages and other labor problems.
We are a
signatory to numerous local and regional collective bargaining agreements, both
directly and through trade associations. Future agreements reached in collective
bargaining could increase our operating costs and reduce our profits as a result
of increased wages and benefits. If we or our trade associations are unable to
negotiate with any of our unions, we might experience strikes, work stoppages or
increased operating costs as a result of higher than anticipated wages or
benefits. If our unionized workers engage in a strike or other work stoppage, or
our non-unionized employees become unionized, we could experience a disruption
of our operations and higher ongoing labor costs, which could adversely affect
our business, financial position, results of operations and cash
flows.
We
are subject to restrictive covenants under our credit facility that could limit
our flexibility in managing the business.
Our
credit facility imposes operating and financial restrictions on us. These
restrictions include, among other things, limitations on our ability
to:
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create
liens or other encumbrances;
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enter
into certain types of transactions with our
affiliates;
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make
certain capital expenditures;
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make
investments, loans or other
guarantees;
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sell
or otherwise dispose of a portion of our assets;
or
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merge
or consolidate with another entity.
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In
addition, our credit facility prohibits us from incurring debt from other
sources without the consent of our lenders.
Our
credit facility contains financial covenants that require us to maintain minimum
net worth, fixed charge coverage and asset coverage levels as well as a maximum
leverage ratio. Our ability to borrow funds for any purpose is dependent upon
satisfying these tests.
If we are
unable to meet the terms of the financial covenants or fail to comply with any
of the other restrictions contained in our credit facility, an event of default
could occur. An event of default, if not waived by our lenders, could result in
the acceleration of any outstanding indebtedness, causing such debt to become
immediately due and payable. If such an acceleration occurs, we may not be able
to repay such indebtedness on a timely basis. Since our credit facility is
secured by substantially all of our assets, acceleration of this debt could
result in foreclosure of those
20
assets. In
the event of a foreclosure, we would be unable to conduct our business and may
be forced to discontinue ongoing operations.
Funds
associated with auction rate securities that we have traditionally held as
short-term investments may not be liquid or readily available.
As
discussed in Note 3 of Notes to Consolidated Financial Statements entitled “Fair
Value Measurements” included in this report, our investment securities consist
of auction rate securities which are not currently liquid or readily available
to convert to cash. If the global credit crisis persists or intensifies, it is
possible that we will be required to further adjust the fair value of our
auction rate securities. If we determine that the decline in the fair value of
our auction rate securities is other-than-temporary, it would result in
additional impairment charges being recognized in our Consolidated Statement of
Operations, which could be material and which could adversely affect our
financial results. In addition, the lack of liquidity associated with these
investments may require us to access our credit facility until some or all of
our auction rate securities are liquidated.
We
could face risks associated with environmental laws.
We are
subject to federal, state and local environmental laws and regulations,
governing activities and operations that may have environmental or health and
safety effects, such as the discharge of pollutants into the environment, the
handling, storage and disposal of solid or hazardous materials or wastes and the
investigation and remediation of contamination. We may be responsible
for the investigation and remediation of environmental conditions at currently
and formerly owned, leased, operated or used sites. We may be subject
to associated liabilities, including liabilities for natural resource damage,
third party property damage or personal injury resulting from lawsuits brought
by the government or private litigants, relating to our operations, the
operations of our facilities, or the land on which our facilities are
located. We may be subject to these liabilities regardless of whether
we lease or own the facility, and regardless of whether such environmental
conditions were created by us or by a prior owner or tenant, or by a third party
or a neighboring facility whose operations may have affected such facility or
land. This is because liability for contamination under certain
environmental laws can be imposed on the current or past owners or operators of
a site without regard to fault. Moreover, in the course of our
operations, hazardous wastes may be generated at third party owned or operated
sites, and hazardous wastes may be disposed of or treated at third party owned
or operated disposal sites. If those sites become contaminated, we
could also be held responsible for the cost of investigating and remediating
those sites, for any associated natural resource damage, and for civil or
criminal fines or penalties.
We
intend to continue to pursue acquisition opportunities, which may be difficult
to integrate into our business.
We intend
to continue to pursue acquisitions as part of our growth strategy. The process
of managing and integrating new acquisitions into our Company may result in
unforeseen operating difficulties and may require significant financial,
operational and managerial resources that would otherwise be available for the
operation, development and expansion of our existing business. To the extent
that we misjudge our ability to integrate and properly manage acquisitions, we
may have difficulty achieving our operating, strategic and financial
objectives.
Acquisitions
also may involve a number of special financial, business and operational risks,
such as:
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difficulties
in integrating diverse corporate cultures and management
styles;
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additional
or conflicting government
regulation;
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disparate
company policies and practices;
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client
relationship issues;
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diversion
of our management’s time, attention and
resources;
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decreased
utilization during the integration
process;
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loss
of key existing or acquired
personnel;
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increased
costs to improve or coordinate managerial, operational, financial and
administrative systems;
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dilutive
issuances of equity securities, including convertible debt securities to
finance acquisitions;
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the
assumption of legal liabilities;
and
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amortization
of acquired intangible assets.
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21
In
addition to the integration challenges mentioned above, acquisitions of non-U.S.
companies offer distinct integration challenges relating to non-U.S. GAAP
financial reporting, foreign laws and governmental regulations, including tax
and employee benefit laws, and other factors relating to operating in countries
other than the United States, which are discussed above in the discussion
regarding the difficulties we may face operating outside of the United
States.
In
connection with mergers and acquisitions, we have recorded goodwill and other
intangible assets that could become impaired and adversely affect our operating
results.
Under
accounting principles generally accepted in the United States, our mergers and
acquisitions have been accounted for under the purchase method of accounting.
Under the purchase method of accounting, the total purchase price we pay is
allocated to the acquired company’s tangible assets and liabilities and
identifiable intangible assets based on their estimated fair values as of the
date of completion of the merger or acquisition. The excess of the purchase
price over those estimated fair values is recorded as goodwill. We test goodwill
and intangible assets with indefinite lives for impairment annually, in the
fourth quarter of each year, and between tests if events occur or circumstances
change which suggest that the goodwill or intangible assets should be
evaluated. At December 31, 2009, the carrying value of the goodwill
and other indefinite-lived intangible assets recorded in mergers and
acquisitions totaled $736.8 million and represents 26% of our total assets of
$2.8 billion. To the extent the value of the goodwill or other intangible assets
becomes impaired in the future, we will be required to incur non-cash charges to
the Consolidated Statements of Operations relating to such
impairment.
If
Black Construction’s opportunity to win significant business from the expansion
of the United States military’s operations on the island of Guam does not
develop as anticipated, our growth prospects, revenues and earnings could be
adversely affected.
A
significant portion of the future revenues and growth prospects of Black
Construction, one of our subsidiaries, over the next several years is expected
to involve the construction of facilities for the expansion of the United States
military’s base on the island of Guam. This construction is dependent upon the
continued implementation of the United States military’s announced plan to
relocate 8,000 Marines and other military personnel from Okinawa, Japan to the
island of Guam by 2014. The continued implementation of the United States
military’s plan, and the amount of work that Black Construction wins and
performs in connection with the expansion of the United States military’s base
on the island of Guam, depends upon a number of factors, including:
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competition
from other construction companies operating on the island of Guam;
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the
political environment in the United States and
Japan;
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the
financial and other terms agreed upon between the United States and Japan
with respect to the relocation;
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the
United States military’s and the Japanese government’s availability of
funds for the continued funding of the expansion and relocation in light
of funding demands for other national priorities and
commitments;
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political,
military and terrorist activities that affect the United States foreign
policy;
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the
ability of the Company to invest sufficiently, and on favorable terms, in
expanding Black Construction’s capabilities on the island of Guam,
including hiring and relocating necessary personnel, acquiring land
(including warehousing and barracks) and acquiring and relocating
equipment; and
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economic,
political and other risks relating to business outside of the United
States (despite the fact that the island of Guam is a United States
territory).
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Any of
these factors could result in a delay or cancellation of some or all of the
anticipated work on the island of Guam, which would have an adverse effect on
our growth prospects, future revenues and future earnings of the combined
company.
The
public resale by former Tutor-Saliba shareholders of our common stock received
in the Tutor-Saliba merger could have a negative effect on the trading price of
our common stock.
In the
Tutor-Saliba merger, we issued a total of approximately 22.1 million shares
of our common stock to two trusts controlled by Mr. Tutor and approximately
900,000 shares to the other shareholders of Tutor-Saliba. On September 10, 2009,
the Company registered 8.6 million shares pursuant to the Securities Act of
1933. Included in that
22
registration
statement were 7.7 million shares held by Ronald N. Tutor, Ronald N. Tutor
Separate Property Trust, Ronald N. Tutor 2006 QuickGRAT and any affiliate of the
foregoing (collectively the “Tutor Group”). The registered shares
remain subject to certain contractual restrictions under the terms of the
Shareholders Agreement. Under those restrictions, prior to March 8, 2009, none
of those shares were permitted to be resold (except with the consent of the
Company’s board of directors or in a registered offering). After March 8, 2009,
the trusts were and are currently permitted to sell, in the aggregate, a maximum
of approximately 6.6 million shares of our common stock through the fifth
anniversary of the completion of the merger (September 8, 2013) (unless the
Company’s board of directors allows otherwise). Due to these
restrictions, the Tutor Group may only sell up to 6.6 million of those 7.7
million shares prior to September 8, 2013 (unless the Company’s board of
directors allows otherwise). Mr. Tutor’s trusts sold 1,000,000 shares
since the shares were registered for resale on September 10, 2009.
We
will have continuing contractual obligations with Mr. Tutor, which may
create conflicts of interest or may not be practical to enforce on our
behalf.
The
Company and the former Tutor-Saliba shareholders, including Mr. Tutor,
continue to have obligations following completion of the Tutor-Saliba merger.
These obligations include indemnification obligations, which may entitle the
Company to seek recovery from the former Tutor-Saliba shareholders for losses
related to pre-merger actions or omissions of Tutor-Saliba. In addition, the
Employment Agreement, the Shareholders Agreement and the notes issued by
Tutor-Saliba also include obligations that are in effect, including the
restrictions on competitive activities, several of which may be impacted by the
operating performance of the Company or Tutor-Saliba or the activities of
Mr. Tutor.
In light
of the important role Mr. Tutor serves for the Company, it may be more
difficult, impractical or inadvisable for the Company to enforce or assert
defenses with respect to these contractual obligations against Mr. Tutor
than against an unaffiliated third party, which may create a conflict of
interest for the Company or Mr. Tutor. Other former Tutor-Saliba
shareholders have continuing roles with the Company, and a similar conflict of
interest may arise, although their interests in the Company will be
significantly less than Mr. Tutor’s. If we determine that these
contractual obligations should not be enforced even if there is a valid claim
for enforcement or a valid defense to the enforcement of these obligations, we
may not get the entire benefit for which it negotiated in these agreements,
including recovery for certain losses related to Tutor-Saliba for which it
otherwise would be entitled to indemnification.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
23
ITEM
2. PROPERTIES
Properties
used in our construction operations are summarized below. We believe our
properties are well maintained, in good condition, adequate and suitable for our
purposes.
|
Owned
or Leased
|
Approximate
|
Approximate
Square
|
||||||
|
Principal
Offices
|
Business
Segment(s)
|
by
Tutor Perini
|
Acres
|
Feet
of Office Space
|
||||
|
Framingham,
MA
|
Management
Services
|
Owned
|
9
|
103,500
|
||||
|
Hendersen,
NV
|
Building
|
Owned
|
3
|
62,200
|
||||
|
Jessup,
MD
|
Civil
|
Owned
|
9
|
46,000
|
||||
|
Sylmar,
CA
|
Building,
Civil and Management Services
|
Leased
|
-
|
45,700
|
||||
|
Redwood
City, CA
|
Building
|
Leased
|
-
|
44,900
|
||||
|
Philadelphia,
PA
|
Building
|
Leased
|
-
|
35,800
|
||||
|
Phoenix,
AZ
|
Building
|
Leased
|
-
|
28,400
|
||||
|
Barrigada,
Guam
|
Management
Services
|
Owned
|
4
|
27,000
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
25,000
|
||||
|
Sylmar,
CA
|
Building
|
Owned
|
1
|
24,200
|
||||
|
Irvine,
CA
|
Building
|
Owned
|
2
|
24,000
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
22,800
|
||||
|
Folcroft,
PA
|
Building
|
Leased
|
-
|
21,600
|
||||
|
Peekskill,
NY
|
Civil
|
Owned
|
5
|
21,000
|
||||
|
Ft.
Lauderdale, FL
|
Building
|
Leased
|
-
|
17,500
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
13,500
|
||||
|
Roseville,
CA
|
Building
|
Leased
|
-
|
13,100
|
||||
|
San
Diego, CA
|
Building
|
Leased
|
-
|
13,000
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
12,500
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
8,900
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
6,500
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
5,400
|
||||
|
Orlando,
FL
|
Building
|
Leased
|
-
|
4,700
|
||||
|
Sylmar,
CA
|
Building
|
Owned
|
1
|
4,500
|
||||
|
Arlington,
VA
|
Building
|
Leased
|
-
|
2,900
|
||||
|
Metro
Manila, Philippines
|
Management
Services
|
Leased
|
-
|
2,500
|
||||
|
Agana
Heights, Guam
|
Management
Services
|
Owned
|
-
|
800
|
||||
|
34
|
637,900
|
|||||||
|
Principal
Permanent
|
||||||||
|
Storage
Yards
|
||||||||
|
Fontana,
CA
|
Building
and Civil
|
Leased
|
33
|
|||||
|
Barrigada,
Guam
|
Management
Services
|
Owned
|
13
|
|||||
|
Stockton,
CA
|
Building
|
Owned
|
7
|
|||||
|
Elkridge,
MD
|
Civil
|
Owned
|
7
|
|||||
|
Jessup,
MD
|
Civil
|
Owned
|
7
|
|||||
|
Henderson,
NV
|
Building
|
Leased
|
4
|
|||||
|
Jessup,
MD
|
Civil
|
Owned
|
3
|
|||||
|
Las
Vegas, NV
|
Building
|
Leased
|
2
|
|||||
|
Las
Vegas, NV
|
Building
|
Leased
|
1
|
|||||
|
Las
Vegas, NV
|
Building
|
Leased
|
1
|
|||||
|
Framingham,
MA
|
Building
and Civil
|
Owned
|
|
1
|
||||
|
Las
Vegas, NV
|
Building
|
Leased
|
-
|
|||||
|
Pasig,
Philippines
|
Management
Services
|
Leased
|
-
|
|||||
|
Pasig,
Philippines
|
Management
Services
|
Leased
|
-
|
|||||
|
Pasig,
Philippines
|
Management
Services
|
Leased
|
-
|
|||||
|
79
|
||||||||
24
ITEM 3. LEGAL
PROCEEDINGS
Legal
Proceedings are set forth in Item 15 in this report and are hereby incorporated
in this Item 3 by reference (see Note 9 of Notes to Consolidated Financial
Statements entitled “Contingencies and Commitments”).
ITEM
4. (REMOVED AND RESERVED)
25
EXECUTIVE OFFICERS OF THE
REGISTRANT
Listed
below are the names, offices held, ages and business experience of our executive
officers.
|
Name, Offices Held and Age
|
Year First Elected to Present Office and Business
Experience
|
|
Ronald
N. Tutor, Director, Chairman and Chief Executive Officer –
69
|
He
has served as a Director since January 1997 and has served as our Chief
Executive Officer since March 2000. He has also served as our
Chairman since July 1999, Vice Chairman from January 1998 to July 1999,
and Chief Operating Officer from January 1997 until March 2000 when he
became Chief Executive Officer. Prior to our merger with
Tutor-Saliba Corporation in September 2008, Mr. Tutor served as Chairman,
President and Chief Executive Officer of Tutor-Saliba Corporation since
prior to 1995 and actively managed that company since
1966.
|
|
Robert
Band, Director and President of Tutor Perini and Chief Executive Officer,
Management Services Group – 62
|
He
was appointed Chief Executive Officer of Management Services Group in
March 2009. He has served as a Director since May 1999. He has
also served as our President since May 1999 and as Chief Operating Officer
from March 2000 to March 2009. Previously, he served as Chief
Executive Officer from May 1999 until March 2000, Executive Vice President
and Chief Financial Officer from December 1997 until May 1999, and
President of Perini Management Services, Inc. since January
1996. Previously, he served in various operational and
financial capacities since 1973, including Treasurer from May 1988 to
January 1990.
|
|
James
(“Jack”) Frost, Executive Vice President and Chief Executive Officer,
Civil Group – 56
|
He
was appointed to his current position in March 2009. Previously
he was Executive Vice President and Chief Operating Officer of
Tutor-Saliba. He joined Tutor-Saliba in 1988.
|
|
Mark
Caspers, Executive Vice President and Chief Executive Officer, Building
Group – 48
|
He
was appointed to his current position in March 2009. Previously he was
President and Chief Operating Officer of Perini Building Company, where
he’s worked since 1982.
|
|
Kenneth
R. Burk, Executive Vice President and Chief Financial
Officer
– 50
|
He
was appointed to his current position in March 2009. Previously
he served as Senior Vice President and Chief Financial Officer from
September 2007 to March 2009. From February 2001 until July
2007, he served as President and Chief Executive Officer of Union Switch
and Signal, Inc., a provider of technology services, control systems and
specialty rail components for the rail transportation
industry. From 1999 until 2000, he served as Executive Vice
President and Chief Operating Officer of Railworks Corporation, a provider
of services and supplies to the rail transportation
industry. From 1994 to 1999, he served as Senior Vice President
and Chief Financial Officer of Dick Corporation, a Pittsburgh,
Pennsylvania-based engineering and construction firm.
|
|
William
Sparks, Executive Vice President, Treasurer and Corporate Secretary –
61
|
He
was appointed to his current position in March 2009. He joined
Tutor-Saliba in 1995 as Senior Vice President and Chief Financial
Officer.
|
Our
officers are elected on an annual basis at the Board of Directors’ Meeting
immediately following the Annual Meeting of Stockholders in May, to hold such
offices until the Board of Directors’ Meeting following the next Annual Meeting
of Stockholders and until their respective successors have been duly appointed
or until his earlier resignation or removal.
26
PART II.
ITEM 5. MARKET
FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market
Information
Our
common stock is traded on the New York Stock Exchange under the symbol
"TPC". In 2009, we changed our name to Tutor Perini Corporation from
Perini Corporation and accordingly changed our symbol from “PCR” to “TPC”. The
quarterly market high and low sales prices for our common stock in 2009 and 2008
are summarized below:
|
2009
|
2008
|
|||||||||||||||||||||||
|
High
|
Low
|
High
|
Low
|
|||||||||||||||||||||
|
Market Price Range per Common
Share:
|
||||||||||||||||||||||||
|
Quarter
Ended
|
||||||||||||||||||||||||
|
March
31
|
$ | 26.60 | - | $ | 10.21 | $ | 42.24 | - | $ | 25.08 | ||||||||||||||
|
June
30
|
23.77 | - | 11.73 | 44.80 | - | 32.08 | ||||||||||||||||||
|
September
30
|
21.98 | - | 13.83 | 32.85 | - | 21.42 | ||||||||||||||||||
|
December
31
|
22.35 | - | 16.26 | 26.20 | - | 11.50 | ||||||||||||||||||
Dividends
We have
not paid any cash dividends on our common stock since 1990. For the
foreseeable future, we intend to retain any earnings in our business and we do
not anticipate paying any cash dividends. Whether or not to declare
any dividends will be at the discretion of our Board of Directors, considering
then existing conditions, including our financial condition and results of
operations, capital requirements, bonding prospects, contractual restrictions,
acquisition prospects, business prospects and other factors that our Board of
Directors considers relevant.
Holders
At
February 17, 2010, there were 769 holders of record of our common stock,
including holders of record on behalf of an indeterminate number of beneficial
owners, based on the stockholders list maintained by our transfer
agent.
Performance
Graph
The
following graph compares the cumulative 5-year total return to shareholders on
the Company’s common stock relative to the cumulative total returns of the New
York Stock Exchange Market Value Index (“NYSE”), the Dow Jones Heavy
Construction Index (“DJ Heavy Construction”) and a Construction Peer
Group. We selected the DJ Heavy Construction because we believe the
index reflects the market conditions within the industry we primarily
operate. The thirteen companies included in the Construction Peer
Group were selected by the appropriate construction-related Standard Industrial
Classification Codes (or SIC Codes). The comparison of total return
on investment, defined as the change in year-end stock price plus reinvested
dividends, for each of the periods assumes that $100 was invested on January 1,
2004, in each of our common stock, the NYSE and the Construction Peer Group,
with investment weighted on the basis of market capitalization.
The
comparisons in the following graph are based on historical data and are not
intended to forecast the possible future performance of our common
stock.
27
COMPARISON
OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG
TUTOR PERINI CORPORATION,
NYSE
MARKET VALUE INDEX, DJ HEAVY CONSTRUCTION INDEX AND SELECTED CONSTRUCTION PEER
GROUP
|
Fiscal
Year Ending December 31,
|
|||||||||||
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
||||||
|
Tutor
Perini Corporation
|
100.00
|
144.70
|
184.42
|
248.17
|
140.08
|
108.33
|
|||||
|
NYSE
|
100.00
|
109.36
|
131.75
|
143.43
|
87.12
|
111.76
|
|||||
|
DJ
Heavy Construction
|
100.00
|
144.50
|
180.25
|
342.40
|
153.66
|
175.65
|
|||||
|
Construction
Peer Group
|
100.00
|
158.01
|
219.95
|
465.42
|
178.81
|
225.75
|
|||||
The
information included under the heading “Performance Graph” in Item 5 of this
Annual Report on Form 10-K is “furnished” and not “filed” and shall not be
deemed to be “soliciting material” or subject to Regulation 14A, shall not be
deemed “filed” for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities
of that section, nor shall it be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act.
28
ITEM 6. SELECTED
FINANCIAL DATA
Selected
Consolidated Financial Information
The
following selected financial data has been derived from our audited consolidated
financial statements and should be read in conjunction with the consolidated
financial statements, the related notes thereto and the independent auditors’
report thereon, and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” which are included elsewhere in this Form 10-K and
in previously filed annual reports on Form 10-K of Tutor Perini
Corporation. Backlog and new business awarded are not measures
defined in accounting principles generally accepted in the United States of
America and have not been derived from audited consolidated financial
statements.
|
Year
Ended December 31,
|
||||||||||||||||||||
|
2009
(1)
|
2008
(2)
|
2007
|
2006
|
2005
(3)
|
||||||||||||||||
|
(In
thousands, except per share data)
|
||||||||||||||||||||
|
OPERATING SUMMARY
|
||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Building
|
$ | 4,484,937 | $ | 5,146,563 | $ | 4,248,814 | $ | 2,515,051 | $ | 1,181,103 | ||||||||||
|
Civil
|
361,677 | 310,722 | 234,778 | 281,137 | 275,584 | |||||||||||||||
|
Management
Services
|
305,352 | 203,001 | 144,766 | 246,651 | 276,790 | |||||||||||||||
|
Total
|
5,151,966 | 5,660,286 | 4,628,358 | 3,042,839 | 1,733,477 | |||||||||||||||
|
Cost
of Operations
|
4,763,919 | 5,327,056 | 4,379,464 | 2,873,444 | 1,663,773 | |||||||||||||||
|
Gross
Profit
|
388,047 | 333,230 | 248,894 | 169,395 | 69,704 | |||||||||||||||
|
G&A
Expense
|
176,504 | 133,998 | 107,913 | 98,516 | 61,751 | |||||||||||||||
|
Goodwill
and Intangible Asset Impairment (4)
|
- | 224,478 | - | - | - | |||||||||||||||
|
Income
(Loss) From Construction Operations
|
211,543 | (25,246 | ) | 140,981 | 70,879 | 7,953 | ||||||||||||||
|
Other
Income (Expense), Net
|
1,098 | 9,559 | 15,361 | 2,581 | 971 | |||||||||||||||
|
Interest
Expense
|
(7,501 | ) | (4,163 | ) | (1,947 | ) | (3,771 | ) | (2,003 | ) | ||||||||||
|
Income
(Loss) Before Income Taxes
|
205,140 | (19,850 | ) | 154,395 | 69,689 | 6,921 | ||||||||||||||
|
Provision
for Income Taxes
|
(68,079 | ) | (55,290 | ) | (57,281 | ) | (28,153 | ) | (2,872 | ) | ||||||||||
|
Net
Income (Loss)
|
$ | 137,061 | $ | (75,140 | ) | $ | 97,114 | $ | 41,536 | $ | 4,049 | (6) | ||||||||
|
Income
(Loss) Available for Common
|
||||||||||||||||||||
|
Stockholders
(5)
|
$ | 137,061 | $ | (75,140 | ) | $ | 97,114 | $ | 41,117 | $ | 5,330 | |||||||||
|
Per
Share of Common Stock:
|
||||||||||||||||||||
|
Basic
Earnings (Loss)
|
$ | 2.82 | $ | (2.19 | ) | $ | 3.62 | $ | 1.56 | $ | 0.21 | |||||||||
|
Diluted
Earnings (Loss)
|
$ | 2.79 | $ | (2.19 | ) | $ | 3.54 | $ | 1.54 | $ | 0.20 | |||||||||
|
Cash
Dividend Declared
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
|
Book
Value
|
$ | 26.54 | $ | 23.56 | $ | 13.65 | $ | 9.18 | $ | 6.86 | ||||||||||
|
Weighted
Average Common
|
||||||||||||||||||||
|
Shares
Outstanding:
|
||||||||||||||||||||
|
Basic
|
48,525 | 34,272 | 26,819 | 26,308 | 25,518 | |||||||||||||||
|
Diluted
|
49,084 | 34,272 | 27,419 | 26,758 | 26,150 | |||||||||||||||
29
|
Year
Ended December 31,
|
||||||||||||||||||||
|
2009
(1)
|
2008
(2)
|
2007
|
2006
|
2005
(3)
|
||||||||||||||||
|
(In
thousands, except ratios)
|
||||||||||||||||||||
|
FINANCIAL POSITION SUMMARY
|
||||||||||||||||||||
|
Working
Capital
|
$ | 303,118 | $ | 225,049 | $ | 293,521 | $ | 193,952 | $ | 153,335 | ||||||||||
|
Current
Ratio
|
1.23x | 1.13x | 1.24x | 1.22x | 1.23x | |||||||||||||||
|
Long-term
Debt, less current maturities
|
84,771 | 61,580 | 13,358 | 34,135 | 39,969 | |||||||||||||||
|
Stockholders’
Equity
|
1,288,426 | 1,138,226 | 368,334 | 243,859 | 183,175 | |||||||||||||||
|
Ratio
of Long-term Debt to Equity
|
.07x | .05x | .04x | .14x | .22x | |||||||||||||||
|
Total
Assets
|
$ | 2,820,654 | $ | 3,073,078 | $ | 1,654,115 | $ | 1,195,992 | $ | 915,256 | ||||||||||
|
OTHER DATA
|
||||||||||||||||||||
|
Backlog
at Year End (7)
|
$ | 4,310,191 | $ | 6,675,903 | $ | 7,567,665 | $ | 8,451,381 | $ | 7,897,784 | ||||||||||
|
New
Business Awarded (8)
|
$ | 2,786,256 | $ | 4,768,524 | $ | 3,744,642 | $ | 3,596,436 | $ | 8,479,786 | ||||||||||
|
(1)
|
|
Includes
the results of Keating, acquired January 15, 2009. See Note 2
of Notes to Consolidated Financial Statements entitled “Merger &
Acquisition”.
|
|
(2)
|
|
Includes
the results of Tutor-Saliba, acquired September 8,
2008.
|
|
(3)
|
|
Includes
the results of Cherry Hill acquired January 1, 2005 and Rudolph and
Sletten acquired October 3, 2005.
|
|
(4)
|
Represents
$224.5 million impairment charge to adjust goodwill and certain intangible
assets to their fair values in the fourth quarter of 2008. See Note 4 of
Notes to Consolidated Financial Statements entitled “Goodwill and Other
Intangible Assets”.
|
|
(5)
|
Income
(Loss) available for common stockholders includes adjustments to net
income for (a) accrued dividends on our $21.25 Preferred Stock, or $2.125
Depositary Shares, (b) the reversal of previously accrued and unpaid
dividends in the amount of approximately $2.3 million applicable to
374,185 of the $2.125 Depositary Shares purchased and retired by us in
November 2005, and (c) the $0.3 million excess of fair value over carrying
value upon redemption of the remaining outstanding $2.125 Depositary
Shares in May 2006.
|
|
(6)
|
Includes
a $23.6 million after-tax charge related to an adverse judgment received
in the Washington Metropolitan Area Transit Authority (“WMATA”)
matter.
|
|
(7)
|
A
construction project is included in our backlog at such time as a contract
is awarded or a letter of commitment is obtained and adequate construction
funding is in place. Backlog is not a measure defined in
accounting principles generally accepted in the United States of America,
or GAAP, and our backlog may not be comparable to the backlog of other
companies. Management uses backlog to assist in forecasting
future results.
|
|
(8)
|
New
business awarded consists of the original contract price of projects added
to our backlog in accordance with Note (7) above plus or minus subsequent
changes to the estimated total contract price of existing
contracts. Management uses new business awarded to assist in
forecasting future results.
|
30
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF
OPERATIONS
Overview
We were
incorporated in 1918 as a successor to businesses that had been engaged in
providing construction services since 1894. We provide diversified
general contracting, construction management and design-build services to
private clients and public agencies throughout the world. Our
construction business is conducted through three basic segments or
operations: civil, building, and management services. Our
civil segment specializes in public works construction and the repair,
replacement and reconstruction of infrastructure, including highways, bridges,
mass transit systems and water and wastewater treatment facilities, primarily in
the western, northeastern and mid-Atlantic United States. Our
building segment has significant experience providing services to a number of
specialized building markets, including the hospitality and gaming,
transportation, healthcare, municipal offices, sports and
entertainment, educational, correctional facilities, biotech, pharmaceutical and
high-tech markets, and electrical and mechanical, plumbing and HVAC
services. Our management services segment provides diversified
construction and design-build services to the U. S. military and federal
government agencies, as well as surety companies and multi-national corporations
in the United States and overseas.
The
contracting and management services that we provide consist of general
contracting, pre-construction planning and comprehensive management services,
including planning and scheduling the manpower, equipment, materials and
subcontractors required for the timely completion of a project in accordance
with the terms and specifications contained in a construction
contract. We also offer self-performed construction services
including site work, concrete forming and placement, steel erection, electrical
and mechanical, plumbing and HVAC. We provide these services by using
traditional general contracting arrangements, such as fixed price, guaranteed
maximum price and cost plus fee contracts and, to a lesser extent, construction
management or design-build contracting arrangements. In the ordinary
course of our business, we enter into arrangements with other contractors,
referred to as “joint ventures,” for certain construction
projects. Each of the joint venture participants is usually committed
to supply a predetermined percentage of capital, as required, and to share in a
predetermined percentage of the income or loss of the
project. Generally, each joint venture participant is fully liable
for the obligations of the joint venture.
For the
year ended December 31, 2009, we achieved revenues of $5.2 billion, income from
construction operations of $211.5 million and net income of $137.1
million. We received significant new contract awards, as well as
additions to existing contracts, and ended the year with a contract backlog of
$4.3 billion. At December 31, 2009, we had working capital of $303.1
million, a ratio of current assets to current liabilities of 1.23 to 1.00, and a
ratio of long-term debt to equity of 0.07 to 1.00. Our stockholders’
equity increased to $1.3 billion as of December 31, 2009, reflecting the
operating results achieved in 2009, despite tough economic
conditions.
Recent
Developments
Amended
Credit Facility
On
January 13, 2010, we entered into a Second Amendment to the Third Amended and
Restated Credit Agreement (the “Credit Agreement”) with Bank of
America. The Credit Agreement allows us to borrow up to $205 million
on a revolving credit basis, with a $50 million sublimit for letters of credit,
and an additional $107.0 million as of December 31, 2009 under a supplementary
facility (the “Supplementary Facility”) to the extent that the $205 million base
facility has been fully drawn. Subject to certain conditions, we have
the option to increase the base facility by up to an additional $45
million. This amendment and Supplementary Facility provides us with
access to an additional source of liquidity. For a description of
additional material terms of the Credit Agreement, see Note 5 of Notes to
Consolidated Financial Statements entitled “Financial Commitments”.
Common
Stock Repurchase Program
On
November 24, 2009, our Board of Directors extended the common stock repurchase
program put into place on November 13, 2008. The program allows us to
repurchase up to $100 million of our common stock through March 31, 2010. Under
the terms of the program, we may repurchase shares in open market purchases or
through privately negotiated transactions. The timing and amount of any
repurchase will be based on our evaluation of market conditions, business
considerations and other factors. We expect to use cash on hand to
fund repurchases of our common stock. Stock repurchases will be conducted in
compliance with the safe harbor provisions of Rule 10b-18
31
under the
Securities Exchange Act of 1934, as amended. Repurchases also may be made under
Rule 10b5-1 plans, which would permit common stock to be purchased when we would
otherwise be prohibited from doing so under insider trading laws. The share
repurchase program does not obligate us to repurchase any dollar amount or
number of shares of our common stock, and the program may be extended, modified,
suspended or discontinued at any time, at our discretion. During
2008, we repurchased 2,003,398 shares for an aggregate purchase price of $31.8
million under the program. There were no repurchases made during
2009.
Tutor
Perini Ranked as the Second Largest General Building Contractor and Green
Contractor
Engineering
News Record (“ENR”) ranked Tutor Perini Corporation as the nation’s largest
general building contractor, second largest green building contractor, 10
th
largest U.S. general contractor, and the number one builder of hotels, motels
and convention centers, according to revenues.
Perini
Building Company Delivers CityCenter
In
December 2009, Perini Building Company, our wholly owned subsidiary, completed
CityCenter, the largest privately funded construction project in U.S. history.
The project required approximately 50 million man hours and is a 67-acre
development that includes ARIA Resort & Casino, Mandarin Oriental, Las
Vegas, Vdara Hotel & Spa, The Harmon Hotel, Crystals retail &
entertainment district, and Veer Towers. The project was completed on
schedule.
Backlog
Analysis for 2009
Our
backlog of uncompleted construction work at December 31, 2009 was approximately
$4.3 billion, as compared to the $6.7 billion at December 31,
2008. The decrease in backlog during the year is a result of the
anticipated substantial completion of large hospitality and gaming projects in
Las Vegas, Nevada, and the lack of new work acquired in the non-residential
building markets, partially offset by successful acquisition of new civil
projects in California and New York. The Company expects to replace a portion of
its high contract volume building projects with a growing share of new civil
projects at a higher profit margin than what was earned prior to the merger with
Tutor-Saliba. The following table provides an analysis of our backlog
by business segment for the year ended December 31, 2009.
| Backlog at | New Business | Revenue | Backlog at | |||||||||||||
| December 31, 2008 | Awarded (1) | Recognized | December 31, 2009 | |||||||||||||
| (in millions) | ||||||||||||||||
| Building | $ | 5,732.0 | $ | 1,878.7 | $ | (4,484.9) | $ | 3,125.8 | ||||||||
| Civil | 528.0 | 835.2 | (361.7) | 1,001.5 | ||||||||||||
|
Management
Services
|
415.9 | 72.4 | (305.4) | 182.9 | ||||||||||||
|
Total
|
$ | 6,675.9 | $ | 2,786.3 | $ | (5,152.0) | $ | 4,310.2 | ||||||||
|
(1)
|
New
business awarded consists of the original contract price of projects added
to our backlog plus or minus subsequent changes to the estimated total
contract price of existing
contracts.
|
Critical Accounting
Policies
Our
accounting and financial reporting policies are in conformity with accounting
principles generally accepted in the United States of America
(“GAAP”). The preparation of our consolidated financial statements in
conformity with GAAP requires us to make estimates and judgments that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the balance sheet date, and the reported amounts of revenues
and expenses during the reporting period. Although our significant
accounting policies are described in Note 1, “Summary of Significant Accounting
Policies,” of the Notes to Consolidated Financial Statements in Item 15 of this
Form 10-K, the following discussion is intended to describe those accounting
policies most critical to the preparation of our consolidated financial
statements.
Use of Estimates
- The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during
32
the
reporting period. Our construction business involves making
significant estimates and assumptions in the normal course of business relating
to our contracts and our joint venture contracts due to, among other things, the
one-of-a-kind nature of most of our projects, the long-term duration of our
contract cycle and the type of contract utilized. Therefore, management believes
that the “Method of Accounting for Contracts” is the most important and critical
accounting policy. The most significant estimates with regard to
these financial statements relate to the estimating of total forecasted
construction contract revenues, costs and profits in accordance with accounting
for long-term contracts (see Note 1(d) of Notes to Consolidated Financial
Statements) and estimating potential liabilities in conjunction with certain
contingencies, including the outcome of pending or future litigation,
arbitration or other dispute resolution proceedings relating to contract
claims (see Note 9 of Notes to Consolidated Financial
Statements). Actual results could differ from these estimates and
such differences could be material.
Our
estimates of contract revenue and cost are highly detailed. We
believe, based on our experience, that our current systems of management and
accounting controls allow us to produce materially reliable estimates of total
contract revenue and cost during any accounting period. However, many
factors can and do change during a contract performance period which can result
in a change to contract profitability from one financial reporting period to
another. Some of the factors that can change the estimate of total contract
revenue and cost include differing site conditions (to the extent that contract
remedies are unavailable), the availability of skilled contract labor, the
performance of major material suppliers to deliver on time, the performance of
major subcontractors, unusual weather conditions and the accuracy of the
original bid estimate. Because we have many contracts in process at
any given time, these changes in estimates can offset each other without
impacting overall profitability. However, large changes in cost
estimates on larger, more complex construction projects can have a material
impact on our financial statements and are reflected in our results of
operations when they become known.
When
recording revenue on contracts relating to unapproved change orders and claims,
we include in revenue an amount equal to the amount of costs incurred by us to
date for contract price adjustments that we seek to collect from customers for
delays, errors in specifications or designs, change orders in dispute or
unapproved as to scope or price, or other unanticipated additional costs, in
each case when recovery of the costs is considered probable. When
determining the likelihood of eventual recovery, we consider such factors as
evaluation of entitlement, settlements reached to date and our experience with
the customer. The settlement of these issues may take years depending
upon whether the item can be resolved directly with the customer or involves
litigation or arbitration. When new facts become known, an adjustment
to the estimated recovery is made and reflected in the current period
results.
The
amount of unapproved change order and claim revenue is included in our balance
sheet as part of costs and estimated earnings in excess of
billings. The amount of costs and estimated earnings in excess of
billings relating to unapproved change orders and claims included in our balance
sheet at December 31, 2009 and 2008 is summarized below:
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
(in
thousands)
|
||||||||
|
Unapproved
Change Orders
|
$ | 32,683 | $ | 16,401 | ||||
|
Claims
|
68,358 | 68,682 | ||||||
| $ | 101,041 | $ | 85,083 | |||||
Of the
balance of unapproved change orders and claims included in costs and estimated
earnings in excess of billings at December 31, 2009 and December 31, 2008,
approximately $62.7 million and $56.6 million respectively, are amounts subject
to pending litigation or dispute resolution proceedings as described in Item 3,
“Legal Proceedings” and Note 9, “Contingencies and Commitments” of Notes to
Consolidated Financial Statements for the respective periods. These
amounts are management’s estimate of the probable cost recovery from the
disputed claims considering such factors as evaluation of entitlement,
settlements reached to date and our experience with the customer. In
the event that future facts and circumstances, including the resolution of
disputed claims, cause us to reduce the aggregate amount of our estimated
probable cost recovery from the disputed claims, we will record the amount of
such reduction against earnings in the relevant future period.
Method of Accounting for
Contracts
– Revenues and profits from our contracts and construction
joint venture contracts are recognized by applying percentages of completion for
the period to the total estimated profits for the
33
respective
contracts. Percentage of completion is determined by relating the
actual cost of the work performed to date to the current estimated total cost of
the respective contracts. When the estimate on a contract indicates a
loss, the entire loss is recorded during the accounting period in which it is
estimated. In the ordinary course of business, at a minimum on a
quarterly basis, we prepare updated estimates of the total forecasted revenue,
cost and profit or loss for each contract. The cumulative effect of
revisions in estimates of the total forecasted revenue and costs, including
unapproved
change
orders and claims, during the course of the work is reflected in the accounting
period in which the facts that caused the revision become known. The
financial impact of these revisions to any one contract is a function of both
the amount of the revision and the percentage of completion of the
contract. An amount equal to the costs incurred that are attributable
to unapproved change orders and claims is included in the total estimated
revenue when realization is probable. For a further discussion of
unapproved change orders and claims, see Item 1, “Business – Types of Contracts
and The Contract Process” and Item 1A, “Risk Factors”. Profit from
unapproved change orders and claims is recorded in the accounting period such
amounts are resolved.
Billings
in excess of costs and estimated earnings represents the excess of contract
billings to date over the amount of contract costs and profits (or contract
revenue) recognized to date on the percentage of completion accounting
method. Costs and estimated earnings in excess of billings represents
the excess of contract costs and profits (or contract revenue) recognized to
date on the percentage of completion accounting method over contract billings to
date. Costs and estimated earnings in excess of billings results when
(1) the appropriate contract revenue amount has been recognized in accordance
with the percentage of completion accounting method, but a portion of the
revenue recorded cannot be billed currently due to the billing terms defined in
the contract and/or (2) costs, recorded at estimated realizable value, related
to unapproved change orders or claims are incurred. For unapproved
change orders or claims that cannot be resolved in accordance with the normal
change order process as defined in the contract, we may employ other dispute
resolution methods, including mediation, binding and non-binding arbitration, or
litigation. See Item 3 – “Legal Proceedings” and Note 9,
“Contingencies and Commitments” of Notes to Consolidated Financial
Statements. The prerequisite for billing unapproved change orders and
claims is the final resolution and agreement between the
parties. Costs and estimated earnings in excess of billings related
to our contracts and joint venture contracts at December 31, 2009 is discussed
above under “Use of Estimates” and in Note 1(d) of Notes to Consolidated
Financial Statements.
Impairment of Goodwill and Other
Intangible Assets -
We test goodwill and intangible assets with
indefinite lives, primarily trade names and contractor license, for impairment
by applying a fair value test in the fourth quarter of each year and between
annual tests if events occur or circumstances change which suggest that the
goodwill or indefinite-lived intangible assets should be evaluated. Intangible
assets with finite lives are tested for impairment whenever events or
circumstances indicate that the carrying value may not be
recoverable.
During
2009, the Company completed a reorganization enabling the Company to realize
greater operating efficiencies and take full advantage of the civil construction
expertise acquired through the merger with Tutor-Saliba. As a result of the
reorganization, the composition and number of reporting units has
changed. The Company reallocated goodwill between its reorganized
reporting units based on the relative fair value of pre-reorganization reporting
unit components distributed to post-reorganization reporting
units. The number of reportable segments has not changed (see Note 13
entitled “Business Segments” in the Notes to Consolidated Financial
Statements).
When
testing goodwill, we compare the fair value of the reporting unit to its
carrying value. If the carrying value exceeds the fair value, we determine the
fair value of the reporting unit’s individual assets and liabilities and
calculate the implied fair value of goodwill. The impairment charge equals the
excess of the carrying value of goodwill, if any, over the implied fair value of
goodwill. To determine the fair value of the reporting unit, we primarily use
the income approach which is based on the cash flows that the reporting unit
expects to generate in the future. This income valuation method requires
management to project revenues, operating expenses, working capital investment,
capital spending and cash flows for the reporting unit over a multi-year period,
as well as determine the weighted-average cost of capital to be used as a
discount rate. Impairment assessment inherently involves management judgments as
to assumptions about expected future cash flows and the impact of market
conditions on those assumptions. We also use the market valuation method to
estimate the fair value of our reporting units by utilizing industry multiples
of operating earnings. When calculating impairment for intangible assets with
indefinite lives, we compare the fair value of these assets, as determined based
on the income and market valuation methods, to the carrying value. The
impairment charge equals the excess of the carrying value of the asset, if any,
over its fair value. There were no impairment charges recorded in
2009.
34
Fair Value Measurements
– We
determined that we utilize unobservable (Level 3) inputs in determining the fair
value of our investments in auction rate securities, valued at $101.2 million as
of December 31, 2009. All of these instruments are classified as
available for sale securities as of December 31, 2009. We have
determined the estimated fair values of these securities utilizing a discounted
cash flow analysis. In addition, we obtained an independent valuation
of some of our auction rate security instruments and considered these valuations
in determining the estimated fair values of the auction rate securities in our
portfolio.
Our
analyses considered, among other items, the collateralization underlying the
security investments, the expected future cash flows, including the final
maturity, associated with the securities, and estimates of the next time the
security is expected to have a successful auction or return to full par
value.
In
conjunction with our estimates of fair value at December 31, 2009, we did not
deem our investment in auction rate securities to be impaired. See
Note 3 of Notes to Consolidated Financial Statements for more
information.
Share-based Compensation -
We
have granted restricted stock units and stock options to certain employees and
non-employee directors. We recognize share-based compensation expense
net of an estimated forfeiture rate and only recognize compensation expense for
those shares expected to vest on a straight-line basis over the requisite
service period of the award (which corresponds to the vesting
period). Determining the appropriate fair value model and calculating
the fair value of stock option awards requires the input of highly subjective
assumptions, including the expected life of the stock option awards and the
expected volatility of our stock price over the life of the
awards. We used the Black-Scholes-Merton option pricing model to
value our stock option awards, and utilized the historical volatility of our
common stock as a reasonable estimate of the future volatility of our common
stock over the expected life of the awards. The assumptions used in
calculating the fair value of share-based payment awards represent our best
estimates, but these estimates involve inherent uncertainties and the
application of management’s judgment. As a result, if factors change
which require the use of different assumptions, share-based compensation expense
could be materially different in the future. In addition, if the
actual forfeiture rate is materially different from our estimate, share-based
compensation expense could be significantly different from what has been
recorded through December 31, 2009.
Insurance Liabilities
– We
assume the risk for the amount of the self-insured deductible portion of the
losses and liabilities primarily associated with workers' compensation, general
liability and automobile liability coverage. Losses are accrued based
upon our estimates of the aggregate liability for claims incurred using
historical experience and certain actuarial assumptions followed in the
insurance industry. The estimate of our insurance liability within
our self-insured deductible limits includes an estimate of incurred but not
reported claims based on data compiled from historical
experience. Actual experience could differ significantly from these
estimates and could materially impact our consolidated financial position and
results of operations. We purchase varying levels of insurance from
third parties, including excess liability insurance, to cover losses in excess
of our self-insured deductible limits. Currently, our self-insured
deductible limit for workers' compensation, general liability and automobile
coverage is generally $1.0 million per occurrence. In addition, on
certain projects, we assume the risk for the amount of the self-insured
deductible portion of losses that arise from any subcontractor
defaults. Our self-insured deductible limit for subcontractor
default on projects covered under our program is $2.0 million per occurrence,
subject to a $3.5 million annual aggregate.
Accounting for Income Taxes
–
Information relating to our provision for income taxes and the status of our
deferred tax assets and liabilities is presented in Note 6, “Income Taxes” of
Notes to Consolidated Financial Statements. A key assumption in the
determination of our book tax provision is the amount of the valuation
allowance, if any, required to reduce the related deferred tax
assets. The net deferred tax assets reflect management’s estimate of
the amount which will, more likely than not, reduce future taxable
income.
We
identified and reviewed potential tax uncertainties for tax positions taken or
expected to be taken in a tax return and determined that the exposure to those
uncertainties did not have a material impact on our results of operations or
financial condition as of December 31, 2009.
Defined Benefit Retirement
Plan
– The status of our defined benefit pension plan obligations,
related plan assets and cost is presented in Note 8 of Notes to Consolidated
Financial Statements entitled “Employee Benefit Plans.” Plan obligations and
annual pension expense are determined by actuaries using a number of key
assumptions which include, among other things, the discount rate and the
estimated future return on plan assets. The discount rate of 6.29%
used for purposes of computing the 2009 annual pension expense was determined at
the beginning of the
35
calendar
year based upon an analysis performed by our actuaries which matches the cash
flows of our plan’s projected liabilities to bond investments of similar amounts
and durations. We plan to change the discount rate used for computing the 2010
annual pension expense to 5.84% based upon a similar analysis by our
actuaries.
The
estimated return on plan assets is primarily based on historical long-term
returns of equity and fixed income markets according to our targeted allocation
of plan assets (75% equity and 25% fixed income). We plan to continue
to use a return on asset rate of 7.5% in 2010 based on projected equity and bond
market performance compared to long-term historical averages.
The
plans’ benefit obligations exceeded the fair value of plan assets on December
31, 2009, 2008, and 2007. Accordingly, our unfunded projected benefit
obligation decreased $2.0 million in 2009, increased $24.0 million in 2008, and
decreased $6.2 million in 2007, with the offset to accumulated other
comprehensive income (loss), an increase (reduction) in stockholders’
equity.
Effective
June 1, 2004, all benefit accruals under our pension plan were frozen; however,
the vested benefit was preserved. Due to the expected increase in
amortization of prior years’ investment losses, we anticipate that pension
expense will increase from $1.6 million in 2009 to $2.0 million in
2010. Cash contributions to our defined benefit pension plan are
anticipated to be approximately $3.0 million in 2010. Cash
contributions may vary significantly in the future depending upon asset
performance and the interest rate environment.
Results
of Operations -
2009
Compared to 2008
In 2009,
revenues decreased by $508.3 million to $5,152.0 million and gross profit
increased by $54.8 million to $388.0 million. Income from construction
operations increased by $236.8 million, from a loss of $25.2 million to income
of $211.5 million. Net income increased by $212.2 million, from a
loss of $75.1 million to income of $137.1 million. Excluding the
recognition of a $224.5 million pretax ($202.8 million after tax) non-cash
impairment charge relating to goodwill and other intangible assets recorded in
2008, income from construction operations would have increased $12.3 million
from $199.2 million. The improvement of gross profit and income from
construction operations primarily reflects the increased contribution of our
civil segment and the addition of projects from the merger of Tutor-Saliba and
the acquisition of Keating. Basic and diluted earnings per common
share for 2009 were $2.82 and $2.79, respectively, as compared to basic and
diluted loss per common share of $2.19 in 2008. Excluding the
non-cash impairment charge basic and diluted earnings per share in 2008 would
have been $3.73 and $3.67, respectively.
Revenues
from Construction Operations
The
following table summarizes our revenues by segment.
|
Revenues
for the
|
|||||||||||||||||
|
Year
Ended December 31,
|
Increase
/
|
%
|
|||||||||||||||
|
2009
|
2008
|
(Decrease)
|
Change
|
||||||||||||||
|
(In
millions)
|
|||||||||||||||||
|
Building
|
$ | 4,484.9 | $ | 5,146.6 | $ | (661.7 | ) | (12.8)% | |||||||||
|
Civil
|
361.7 | 310.7 | 51.0 | 16.4% | |||||||||||||
|
Management
Services
|
305.4 | 203.0 | 102.4 | 50.4% | |||||||||||||
|
Total
|
$ | 5,152.0 | $ | 5,660.3 | $ | (508.3 | ) | (9.0)% | |||||||||
Overall
revenues decreased by $508.3 million (or 9.0%), from $5,660.3 million in 2008 to
$5,152.0 million in 2009. Revenue increases in both the civil and
management services segments were offset by a decrease in building construction
revenues of $661.7 million (or 12.8%). The decrease in building
construction revenues is due to the completion of several large building
projects in 2009 such as CityCenter, and was partially offset by the addition of
$715.6 million in revenues from a full year of projects acquired in the merger
of Tutor-Saliba and the acquisition of Keating. Civil
construction revenues increased by $51.0 million (or 16.4%), from $310.7 million
in 2008 to $361.7 million in 2009, due to the acquisition of new work during
2009, such as the I-5 Bridge replacement in Shasta County, California and the
Caldecott Tunnel Project near Oakland, California. Management
services revenues also improved due to an
increase
in volume from new work, from $203.0 million in 2008 to $305.4 million in 2009,
an
36
increase
of $102.4 million (or 50.4%).
Income
(Loss) from Construction Operations
The
following table summarizes by segment the income (loss) from construction
operations before and after the impairment charge.
|
Income
(Loss) from Construction
|
||||||||||||||||
|
Operations
for the
|
Increase
|
|||||||||||||||
|
Year
Ended December 31,
|
(Decrease)
|
%
|
||||||||||||||
|
2009
|
2008
|
In
Income
|
Change
|
|||||||||||||
|
(In
millions)
|
||||||||||||||||
|
Building
before impairment charge
|
$ | 155.5 | $ | 151.8 | $ | 3.7 | 2.4% | |||||||||
|
Impairment
charge
|
- | (197.6 | ) | 197.6 |
NM*
|
|||||||||||
|
Building,
net
|
155.5 | (45.8 | ) | 201.3 |
NM*
|
|||||||||||
|
Civil
before impairment charge
|
44.3 | 28.1 | 16.2 | 57.6% | ||||||||||||
|
Impairment
charge
|
- | (6.0 | ) | 6.0 |
NM*
|
|||||||||||
|
Civil,
net
|
44.3 | 22.1 | 22.2 |
NM*
|
||||||||||||
|
Management
Services before impairment charge
|
53.4 | 41.5 | 11.9 | 28.7% | ||||||||||||
|
Impairment
charge
|
- | (20.9 | ) | 20.9 |
NM*
|
|||||||||||
|
Management
Services, net
|
53.4 | 20.6 | 32.8 |
NM*
|
||||||||||||
|
Subtotal
before impairment charge
|
253.2 | 221.4 | 31.8 | 14.4% | ||||||||||||
|
Impairment
charge
|
- | (224.5 | ) | 224.5 |
NM*
|
|||||||||||
|
Subtotal,
net of impairment charge
|
253.2 | (3.1 | ) | 256.3 |
NM*
|
|||||||||||
|
Less: Corporate
|
(41.7 | ) | (22.1 | ) | (19.6 | ) | 88.7% | |||||||||
|
Total
before impairment charge
|
211.5 | 199.3 | 12.2 | 6.1% | ||||||||||||
|
Impairment
charge
|
- | (224.5 | ) | 224.5 |
NM*
|
|||||||||||
|
Total,
net of impairment charge
|
$ | 211.5 | $ | (25.2 | ) | $ | 236.7 |
NM*
|
||||||||
_____________________________
*NM
– Not meaningful.
The
following discussion of income from construction operations has been prepared on
a pre-impairment charge basis in order to enable users of this information to
better compare normal operating results of each segment between the two
periods. Since the impairment charge impacts 2008 only and does not
affect revenues, cost of revenues or general expenses we incur to conduct our
day-to-day construction operations, management believes the following
discussion, analysis and comparison of 2009 and 2008 operating results is more
meaningful to users when prepared on a pre-impairment charge basis.
Building
construction income from operations before the impairment charge remained fairly
consistent, increasing by $3.7 million (or 2.4%), from $151.8 million in 2008 to
$155.5 million in 2009. Building construction income from operations, net of the
impairment charge recorded in 2008, decreased slightly due to a decrease in
revenues discussed above, and was favorably impacted in 2009 by a higher margin
on certain large public works projects.
Civil
construction income from operations before the impairment charge increased by
$16.2 million, or 57.6%, from $28.1 million in 2008 to $44.3 million in
2009. Our civil operations have been favorably impacted by a full
year of Tutor-Saliba operations and by an increase in mass transit projects
acquired during 2009.
In
conjunction with the increase in revenues discussed above, management services
contributed to our income from operations in 2009. Management
services income from operations before the impairment charge increased by
$11.9
37
million
(or 28.7%), from $41.5 million in 2008 to $53.4 million in 2009, primarily
reflecting an increase in volume of work in Guam due to a full year of
Tutor-Saliba operations in 2009.
Overall
income from construction operations was unfavorably impacted by a $19.6 million
increase in corporate general and administrative expenses, from $22.1 million in
2008 to $41.7 million in 2009, due primarily to a full
year of
Tutor-Saliba general and administrative expenses, one time charges related to
the acquisition of Keating, and the integration of Tutor-Saliba, net of other
cost reduction activities in corporate services.
Other
income decreased by $8.5 million, from $9.6 million in 2008 to $1.1 million in
2009. This decrease was primarily due to less interest income, which decreased
by $8.2 million as a result of lower average interest rates and a lower average
investment balance during 2009.
Interest
expense increased by $3.3 million, from $4.2 million in 2008 to $7.5 million in
2009. This increase was attributable to a temporary increase in
borrowing under our revolving credit facility during 2009 and an increase in
transportation equipment financing.
The provision for income taxes increased by $12.8 million, from $55.3 million in 2008 to $68.1 million in 2009 primarily due to the increase in taxable income. The effective tax rate for 2009 was 33.2%. The decrease in the tax rate is a result of a favorable variance in permanent tax liability differences from current and prior years. In 2008, an effective tax rate of 37.6% was applied to pretax operating income, excluding the goodwill impairment charge of $166.9 million which is not tax deductible.
Results
of Operations -
2008
Compared to 2007
In 2008,
revenues increased by $1,031.9 million to a record $5,660.3 million and gross
profit increased by $84.3 million. Income from construction
operations decreased by $166.2 million, from a profit of $141.0 million to a
loss of $25.2 million, and net income decreased by $172.2 million, from a profit
of $97.1 million to a loss of $75.1 million, due to the recognition of a $224.5
million pretax non-cash impairment charge relating to goodwill and other
intangible assets. Had we not had to record the impairment charge in
2008, we would have achieved a record for income from construction operations
and net income for the third consecutive year. Excluding the non-cash
impairment charge, our strong performance in 2008 was led by our building and
management services segments. In addition, our civil segment returned
to profitability in 2008. The increase in revenues and profit (before
the impairment charge) primarily reflects the conversion of our substantial
building segment backlog into revenues and profit as expected and the impact of
the merger with Tutor-Saliba.
|
Revenues
for the
|
||||||||||||||||
|
Year
Ended December 31,
|
||||||||||||||||
|
2008
|
2007
|
Increase
|
%
Change
|
|||||||||||||
|
(In
millions)
|
||||||||||||||||
|
Building
|
$ | 5,146.6 | $ | 4,248.8 | $ | 897.8 | 21.1% | |||||||||
|
Civil
|
310.7 | 234.8 | 75.9 | 32.3% | ||||||||||||
|
Management
Services
|
203.0 | 144.8 | 58.2 | 40.2% | ||||||||||||
|
Total
|
$ | 5,660.3 | $ | 4,628.4 | $ | 1,031.9 | 22.3% | |||||||||
Overall
revenues increased by $1,031.9 million (or 22.3%), from $4,628.4 million in 2007
to $5,660.3 million in 2008. This increase was due primarily to an
increase in building construction revenues of $897.8 million (or 21.1%), from
$4,248.8 million in 2007 to $5,146.6 million in 2008, primarily as a result of
the conversion of our substantial building segment backlog into revenues as
expected, led by an increased volume of work in the hospitality and gaming,
healthcare and office building markets in Las Vegas and
California. The addition of Tutor-Saliba in September 2008 resulted
in an increase of $405.6 million in building construction revenues in
2008. Civil construction revenues increased by $75.9 million (or
32.3%), from $234.8 million to $310.7 million in 2008, due primarily to the
addition of Tutor-Saliba. Management services revenues
increased by $58.2 million (or 40.2%), from $144.8 million in 2007 to $203.0
million in 2008, due to the addition of Tutor-Saliba’s Black Construction
operation in Guam and a slightly higher volume of work in Iraq.
38
Impact
of Impairment Charge in 2008
Our 2008
income from construction operations was materially impacted by a $224.5 million
pretax impairment charge. This impairment charge reflects the
write-down to fair value of goodwill and certain other indefinite-lived
intangible assets initially recorded in connection with our merger with
Tutor-Saliba in September 2008. The pretax impairment charge related
to the indefinite-lived intangible assets, excluding goodwill, amounted to a
total of $57.6 million, of which $50.8 million related to the building segment,
$6.0 million related to the civil segment, and $0.8 million related to the
management services segment. These indefinite-lived intangible assets
consist of trade names and various contractors’ licenses. The pretax
impairment charge related to goodwill amounted to a total of $166.9 million, of
which $146.8 million related to the building segment and $20.1 million related
to the management services segment. We performed our annual
impairment test of goodwill and other indefinite-lived intangible assets in the
fourth quarter of 2008. In performing this test, we used the income
method to estimate the fair value of the reporting units. Due to the
global financial crisis and significant global economic conditions experienced
during the fourth quarter of 2008, we experienced delays, postponements and
reductions in scope of certain construction projects that we were anticipating
to enter backlog in 2008 or 2009. As a result of these delays,
postponements and reductions in scope, the projected cash flows of the
Tutor-Saliba reporting units decreased considerably from those initially
anticipated prior to the completion of the merger, thereby resulting in a lower
fair value of the Tutor-Saliba reporting units and a corresponding impairment in
the amount of goodwill and indefinite-lived intangible assets recorded in
connection with the merger. These impairment charges relating to
goodwill and indefinite-lived intangible assets are non-cash and therefore do
not affect our cash position, liquidity or have any impact on future operating
results.
The
following table summarizes by segment the income (loss) from construction
operations before and after the impairment charge.
39
|
Income
(Loss) from Construction
|
||||||||||||||||
|
Operations
for the
|
Increase
|
|||||||||||||||
|
Year
Ended December 31,
|
(Decrease)
|
%
|
||||||||||||||
|
2008
|
2007
|
In
Income
|
Change
|
|||||||||||||
|
(In
millions)
|
||||||||||||||||
|
Building
before impairment charge
|
$ | 151.8 | $ | 127.5 | $ | 24.3 | 19.1 | % | ||||||||
|
Impairment
charge
|
(197.6 | ) | - | (197.6 | ) | |||||||||||
|
Building,
net
|
(45.8 | ) | 127.5 | (173.3 | ) | (135.9 | )% | |||||||||
|
Civil
before impairment charge
|
28.1 | (13.0 | ) | 41.1 | ||||||||||||
|
Impairment
charge
|
(6.0 | ) | - | (6.0 | ) | |||||||||||
|
Civil,
net
|
22.1 | (13.0 | ) | 35.1 | ||||||||||||
|
Management
Services before impairment charge
|
41.5 | 49.4 | (7.9 | ) | (16.0 | )% | ||||||||||
|
Impairment
charge
|
(20.9 | ) | - | (20.9 | ) | |||||||||||
|
Management
Services, net
|
20.6 | 49.4 | (28.8 | ) | (58.3 | )% | ||||||||||
|
Subtotal
before impairment charge
|
221.4 | 163.9 | 57.5 | 35.1 | % | |||||||||||
|
Impairment
charge
|
(224.5 | ) | - | (224.5 | ) | |||||||||||
|
Subtotal,
net of impairment charge
|
(3.1 | ) | 163.9 | (167.0 | ) | (101.9 | )% | |||||||||
|
Less: Corporate
|
(22.1 | ) | (22.9 | ) | 0.8 | (3.5 | )% | |||||||||
|
Total
before impairment charge
|
199.3 | 141.0 | 58.3 | 41.3 | % | |||||||||||
|
Impairment
charge
|
(224.5 | ) | - | (224.5 | ) | |||||||||||
|
Total,
net of impairment charge
|
$ | (25.2 | ) | $ | 141.0 | $ | (166.2 | ) | (117.9 | )% | ||||||
Income
(Loss) from Construction Operations, before Impairment Charge
The
following discussion of income from construction operations in 2008 and 2007 has
been prepared on a pre-impairment charge basis in order to enable users of this
information to better compare normal operating results of each segment between
the two periods. Since the impairment charge impacts 2008 only and
does not affect revenues, cost of revenues or general expenses we incur to
conduct our day-to-day construction operations, management believes the
following discussion, analysis and comparison of 2008 and 2007 operating results
is more meaningful to users when prepared on a pre-impairment charge
basis.
Building
construction income from operations before the impairment charge increased by
$24.3 million (or 19.1%), from $127.5 million in 2007 to $151.8 million in 2008,
due primarily to the significant increase in revenues discussed above, including
the addition of Tutor-Saliba. Building construction income from
operations was reduced by a $21.0 million increase in building
construction-related general and administrative expenses, due primarily to
increases driven by changes in revenue volume and a $12.2 million increase
resulting from the addition of Tutor-Saliba. In addition, the
increase in building construction-related general and administrative expenses
included a $1.5 million increase due to marketing and preconstruction efforts
relating to potential projects in Dubai, and a $1.1 million increase in
amortization of stock-based compensation.
Civil
construction income from operations before the impairment charge increased by
$41.1 million, from a loss of $13.0 million in 2007 to a profit of $28.1 million
in 2008. The addition of Tutor-Saliba made a significant positive
impact on the 2008 civil construction income from operations along with improved
operating results from both our New York Civil and Cherry Hill
operations. The loss in 2007 was due primarily to recording a charge
with respect to the matter discussed in Note 9 of Notes to Consolidated
Financial Statements. Had that charge in 2007 not been recorded, the
civil construction segment would still have experienced a loss from operations
of approximately $3.0 million due primarily to (i) downward profit adjustments
recorded on a bridge rehabilitation project and on two mass transit projects in
metropolitan New York, and (ii) an increase in civil construction-related
general and
40
administrative
expenses, due primarily to a decrease in the number of active projects, as well
as an increase in legal fees relating to open legal matters.
In
conjunction with the increase in revenues discussed above, management services
contributed significantly to our income from operations in
2008. However, management services income from operations before the
impairment charge decreased by $7.9 million (or 16.0%), from $49.4 million in
2007 to $41.5 million in 2008, primarily reflecting the extraordinary operating
results recorded in 2007 due to favorable performance on work in
Iraq.
Overall
income from construction operations was favorably impacted by a $0.8 million
decrease in corporate general and administrative expenses, from $22.9 million in
2007 to $22.1 million in 2008, due primarily to a $4.2 million decrease in
corporate stock-based compensation expense resulting from certain restricted
stock units granted in 2006 through 2008. Largely offsetting this
decrease were increases in certain outside professional fees related to the
audit of our financial statements and an increase in legal fees related to the
matters discussed in Note 9 of Notes to Consolidated Financial
Statements.
Other
income decreased by $5.8 million, from $15.4 million in 2007 to $9.6 million in
2008, due primarily to the recognition of a $2.6 million loss due to the
adjustment of certain of our investments in auction rate securities to fair
value in 2008, and a net loss of $0.6 million in 2008, as compared to a $0.6
million net gain in 2007, from the sale of certain parcels of developed land
held for sale. In addition, interest income decreased by $0.9 million
as a result of lower interest rates available on short-term cash investments
during 2008.
Interest
expense increased by $2.2 million, from $2.0 million in 2007 to $4.2 million in
2008. A reduction in interest expense due to the February 2007
repayment of our term loan in full was more than offset by increases in interest
expense due to more extensive equipment financing in 2008 and to the $39.8
million of outstanding debt assumed in conjunction with the merger with
Tutor-Saliba.
The
provision for income taxes decreased by $2.0 million, from $57.3 million in 2007
to $55.3 million in 2008. For 2008, an effective tax rate of 37.6%
was applied to pretax operating income, excluding the goodwill impairment charge
of $166.9 million which is not tax deductible. The effective tax rate
in 2007 was 37.1%.
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 $2.4 billion decrease in our backlog during 2009 is the
result of a 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
On September
8, 2008, we entered into a Third Amended and Restated Credit Agreement (the
“Credit Agreement”) with Bank of America, as Agent, which was amended by a
Joinder Agreement dated February 13, 2009 and by a First Amendment dated as of
February 13, 2009 (collectively the “Amended Credit Agreement”). For
a description of the material terms of the Amended Credit Agreement, see Note 5
of Notes to Consolidated Financial Statements. The Amended Credit
Agreement amends and replaces in its entirety a previously existing credit
agreement dated February 22, 2007, as amended on May 7, 2008, and allows us to
borrow up to $155 million on a revolving credit
41
basis
(the “Revolving Facility”), with a $50 million sublimit for letters of credit,
and an additional $107.0 million under a supplementary facility (the
“Supplementary Facility”) to the extent that the $155 million base facility has
been fully drawn. This Supplementary Facility provides us with access
to a source of liquidity should the need arise. We have borrowed
under the revolving credit facilities for a brief period during 2009, and did
not fully utilize the facility during 2008, other than for letters of
credit. There are no borrowings outstanding at December 31, 2009 and,
accordingly we had $241.6 million available to borrow under the Amended Credit
Agreement, including outstanding letters of credit.
On
January 13, 2010, the Amended Credit Agreement was amended to increase the
Company’s borrowing capacity by $50 million, allowing the Company to borrow up
to $205 million, for additional working capital and potential acquisitions, on a
revolving credit basis and to favorably modify certain financial and other
covenants, including setting the net worth covenant at $1.1 billion as of
December 31, 2009. There has been no change to the Supplementary
Facility as a result of this amendment.
Cash and
cash equivalents consist of amounts held by us as well as our proportionate
share of amounts held by construction joint ventures. Cash held by us is
available for general corporate purposes while cash held by construction joint
ventures is available only for joint venture-related uses. Joint
venture cash and cash equivalents are not restricted to specific uses within
those entities; however, the terms of the joint venture agreements limit our
ability to distribute those funds and use them for corporate
purposes. Cash held by construction joint ventures is distributed
from time to time to us and to the other joint venture participants in
accordance with our respective percentage interest after the joint venture
partners determine that a cash distribution is prudent. Cash
distributions received by us from our construction joint ventures are then
available for general corporate purposes. At December 31, 2009 and
December 31, 2008, cash held by us and available for general corporate purposes
was $323.9 and $342.3 million, respectively, and our proportionate share of cash
held by joint ventures and available only for joint venture-related uses was
$24.4 million and $43.9 million, respectively.
Billing
procedures in the construction industry generally are based on the specific
billing terms of a contract. For example, billings may be based on
various measures of performance, such as cubic yards excavated, architect’s
estimates of completion, costs incurred on cost-plus type contracts or weighted
progress from a cost loaded construction time schedule. Billings are
generally on a monthly basis and are reviewed and approved by the customer prior
to submission. Therefore, once a bill is submitted, we are generally
able to collect amounts owed to us in accordance with the payment terms of the
contract. In addition, receivables of a contractor usually include
retentions, or amounts that are held back until contracts are completed or until
specified contract conditions or guarantees are met. Retentions are
governed by contract provisions and are typically a fixed percentage (for
example, 5% or 10%) of each billing. We generally follow the policy
of paying our vendors and subcontractors after we receive payment from our
customer.
A summary
of cash flows for each of the years ended December 31, 2009, 2008 and 2007 is
set forth below:
|
Year
Ended December 31,
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
(In
millions)
|
||||||||||||
|
Cash
flows provided (used) by:
|
||||||||||||
|
Operating
activities
|
$ | (26.1 | ) | $ | 126.1 | $ | 281.5 | |||||
|
Investing
activities
|
(40.9 | ) | (72.1 | ) | (25.6 | ) | ||||||
|
Financing
activities
|
29.1 | (127.0 | ) | (22.2 | ) | |||||||
|
Net
(decrease) increase in cash
|
(37.9 | ) | (73.0 | ) | 233.7 | |||||||
|
Cash
at beginning of year
|
386.2 | 459.2 | 225.5 | |||||||||
|
Cash
at end of year
|
$ | 348.3 | $ | 386.2 | $ | 459.2 | ||||||
42
During
2009, we used $26.1 million in cash flow from operating
activities. The negative cash flow from operating activities is
primarily due to the timing of receivables on certain large
projects. We used $40.9 million in cash to fund investing activities,
principally the purchase of property used in our building and management
services segments, equipment to be used in our civil segment, and to fund the
$44.8 million acquisition of Keating. We received $29.1 million in
cash from our financing activities, principally from a $35 million note
collateralized by transportation equipment owned by us and two notes totaling
$9.7 million to finance the property acquisitions in Guam. Our cash
balance decreased by $37.9 million during 2009 due to the use of cash in our
operating and investing activities, which was primarily driven by an uncollected
contract receivable from Fontainebleau and timing related billings due to the
start up of new projects and the cash disbursements associated with completing
projects during the year.
During
2008, we generated $126.1 million in cash flow from operating
activities. The positive cash flow from operating activities is
primarily due to the substantial increase in our building segment revenues as
well as favorable operating results in our civil and management services
segments. We used $72.1 million in cash to fund investing activities,
principally the purchase of auction rate securities, transportation and
construction equipment to be used primarily in our civil construction
operations, net of a $92.1 million cash balance recorded in connection with the
merger with Tutor-Saliba because the consideration paid in the merger was equity
and not cash. We used $127.0 million in cash to fund our financing
activities, principally $58.5 million for the repayment of shareholder notes
payable assumed in the merger with Tutor-Saliba, $38.7 million for the repayment
of debt, and $31.8 million for the purchase of common stock in connection with
our common stock repurchase program which was instituted in November
2008. The debt repayments include $28.8 million of debt assumed in
connection with the merger with Tutor-Saliba. Due to the use of cash
in our investing and financing activities, our cash balance decreased by $73.0
million during 2008.
During
2007, we generated $281.5 million in cash flow from operating
activities. The substantial increase in cash flow from operating
activities compared to 2006 is primarily due to the substantial increase in our
building segment revenues as well as favorable operating results in our
management services segment. Cash flow from operating activities was
partly used to fund $22.2 million in financing activities, primarily to pay in
full the remaining $22.5 million balance outstanding on our term loan in
conjunction with the closing of our new revolving credit facility in February
2007, and to pay down debt assumed in conjunction with the acquisition of Cherry
Hill; and to partly fund $25.6 million in investing activities, principally for
the purchase of construction equipment and property to be used in support of our
building construction operations, and to purchase a net $8.0 million of auction
rate securities for short-term investment purposes. As a result, we
increased our cash balance by $233.7 million during 2007.
Working
capital increased, from $293.5 million at the end of 2007 to $303.1 million at
December 31, 2009. The amount of working capital would have
been substantially higher at December 31, 2009; however, due to the current
overall liquidity concerns in capital markets and our likely inability to
liquidate our investments in auction rate securities in the near term, we
classified $101.2 million of these investments as long-term at December 31,
2009. For a description of our accounting for auction rate
securities, see Note 3 of Notes to Consolidated Financial
Statements. The current ratio increased from 1.13x at December 31,
2008 to 1.23x at December 31, 2009.
Long-term
Investments
At
December 31, 2009, we had investments in auction rate securities of $101.2
million, which are reflected at fair value. These investments are considered to
be “available for sale”, and are classified as long-term
investments. Our investment policy is to manage our assets to achieve
our goals of preserving principal, maintaining adequate liquidity at all times,
and maximizing returns subject to our investment guidelines. The
current overall liquidity concerns in capital markets have affected our ability
to liquidate many of our investments in auction rate
securities. Based on our ability to access our cash
equivalent investments, our anticipated operating cash flows, and our available
credit facilities, we do not expect the short-term lack of liquidity to affect
our overall liquidity position or our ability to execute our current business
plan.
We hold a
variety of highly rated (primarily AAA or AA) interest bearing auction rate
securities that generally represent interests in pools of either interest
bearing student loans or municipal bond issues. These auction rate
securities provide liquidity via an auction process that resets the applicable
interest rate at predetermined intervals, typically every 7 or
28 days. In the event that such auctions are
unsuccessful, the holder of the securities is not able to access these funds
until a future auction of these investments is successful. An
unsuccessful auction results in a lack of liquidity in the securities but does
not signify a default by the issuer. Upon an unsuccessful auction,
the
43
interest
rates do not reset at a market rate but instead reset based upon a formula
contained in the security, which rate is generally higher than the current
market rate. During the first quarter of 2008, we made substantial
additional investments in auction rate securities, with a total investment of
$181.9 million. Since mid-February 2008, regularly scheduled auctions for these
securities started to fail throughout the market at a significant
rate. We have been successful in liquidating at par value a
significant portion of our investment in auction rate securities and at December
31, 2009 we had investments in auction rate securities of $101.2
million. During 2009, we determined that the carrying value of our
auction rate securities reflected fair value and therefore did not recognize an
impairment charge. At December 31, 2008, we had investments in auction rate
securities of $104.8 million which are reflected at fair value after recognition
of a $5.8 million pretax impairment charge in 2008. Of this $5.8
million impairment charge, $2.6 million was deemed to be other-than-temporary,
thereby resulting in a charge to income. The $3.2 million balance of
the impairment charge was deemed to be temporary, thereby resulting in a charge
to stockholders’ equity.
Off-Balance
Sheet Arrangements
We do not
have any financial partnerships with unconsolidated entities, such as entities
often referred to as structured finance, special purpose entities or variable
interest entities which are often established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. Accordingly, we are not exposed to any financing, liquidity, market or
credit risk that could arise if we had such relationships.
Long-term
Debt
Long-term
debt, excluding current maturities of $31.3 million, was $84.8 million at
December 31, 2009, an increase of $23.2 million from December 31, 2008, due
primarily to new long-term debt agreements we entered into during 2009 for
transportation equipment owed by the Company of $35 million and to finance
building and land acquisitions for operations in Guam of $9.7
million. Our outstanding debt is secured by the underlying
assets. Approximately $85.0 million of the $116.1 million in
debt outstanding at December 31, 2009 carries interest at a fixed
rate. The long-term debt to equity ratio was .07x at December 31,
2009, compared to .05x at December 31, 2008.
Contractual
Obligations
Our
outstanding contractual obligations as of December 31, 2009 are summarized in
the following table:
|
Payments
Due by Period
|
|||||||||||||||||||
|
(In
thousands)
|
|||||||||||||||||||
|
Less
Than
|
More
Than
|
||||||||||||||||||
|
Total
|
1
Year
|
1-3
Years
|
3-5
Years
|
5
Years
|
|||||||||||||||
|
Total
debt, excluding interest
|
$ | 116,105 |
(a)
|
$ | 31,334 | $ | 24,151 | $ | 37,457 | $ | 23,163 | ||||||||
|
Interest
payments on debt
|
21,076 | 5,824 | 7,637 | 5,051 | 2,564 | ||||||||||||||
|
Operating
leases, net
|
48,300 | 10,128 | 14,487 | 11,988 | 11,697 | ||||||||||||||
|
Purchase
obligations
|
8,665 | 8,373 | 292 | - | - | ||||||||||||||
|
Unfunded
pension liability
|
22,882 | 2,983 | 7,755 | 7,755 | 4,389 | ||||||||||||||
|
Total
contractual obligations
|
$ | 217,028 | $ | 58,642 | $ | 54,322 | $ | 62,251 | $ | 41,813 | |||||||||
(a) Includes capital
leases in the amount of $137
Stockholders'
Equity
Our book
value per common share was $26.54 at December 31, 2009, compared to $23.56 at
December 31, 2008, and $13.65 at December 31, 2007. The major factors
impacting stockholders’ equity during the three year period were the 23.0
million shares issued in conjunction with the merger with Tutor-Saliba; the net
income (loss) recorded in all three years; the annual amortization of restricted
stock compensation expense; common stock options and stock purchase warrants
exercised; the income tax benefit attributable to stock-based
compensation. Also, we were required to adjust our accrued pension
liability by a decrease of $2.0 million in 2009, an increase of $24.0 million in
2008, and a decrease of $6.2 million in 2007, respectively, and a
cumulative increase of $23.7 million in prior years,
44
with the
offset to accumulated other comprehensive loss which resulted in an aggregate
$39.5 million pretax accumulated other comprehensive loss reduction in
stockholders’ equity at December 31, 2009 (see Note 8 of Notes to Consolidated
Financial Statements.) Adjustments to the amount of this accrued pension
liability will be recorded in future years based upon periodic re-evaluation of
the funded status of our pension plans.
Dividends
There
were no cash dividends declared or paid on our outstanding common stock during
the three years ended December 31, 2009.
Related
Party Transactions
We are
subject to certain related party transactions with our Chairman and Chief
Executive Officer, Ronald N. Tutor, and the Vice Chairman of O&G Industries,
Inc., one of our directors. For a more detailed description of these
transactions and their effect on our financial statements, see Note 14 of Notes
to Consolidated Financial Statements entitled “Related Party Transactions” in
Item 15 of this report.
New
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
guidance which clarifies the definition of fair value, describes methods used to
appropriately measure fair value, and expands fair value disclosure
requirements. This guidance applies under other accounting
pronouncements that currently require or permit fair value
measurements. We adopted this guidance on January 1, 2008, as
required. 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. Therefore, we adopted the application of the fair value
guidance relating to non-financial assets and non-financial liabilities on
January 1, 2009. See Note 3, “Fair Value Measurements” for additional
information.
In
December 2007, 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 the Company applied the
provisions of this guidance to an acquisition completed in January 2009 (see
Note 2 of the Consolidated Balance Sheets).
In March
2008, the FASB issued guidance regarding disclosures about derivative
instruments and hedging activities. This guidance was effective for us on
January 1, 2009 and applies only to financial statement disclosures. The
adoption of this guidance did not have a material impact on its consolidated
financial statements and related disclosures.
In
December 2008, the FASB issued a staff position which requires employers to
disclose information about fair value measurements of defined benefit plan
assets that are similar to the disclosures about fair value measurements
required by the new fair value guidance. It is effective for our 2009
annual financial statements. Since the staff position only requires
enhanced disclosures, the implementation of this guidance did not have an impact
on our financial statements.
In April
2009, the FASB issued a staff position providing additional guidance on factors
to consider in determining whether a transaction is orderly when the volume and
level of market activity for an asset or liability have significantly decreased.
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
45
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.
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.
46
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Our
exposure to market risk for changes in interest rates relates primarily to
borrowings under our credit agreement and our short-term and long-term
investment portfolios. Our revolving credit agreement is available
for us to borrow, when needed, for general corporate purposes, including working
capital requirements and capital expenditures. Borrowings under our
credit agreement bear interest at the applicable LIBOR or base rate, as defined,
and therefore we are subject to fluctuations in interest
rates. During 2009, we borrowed under our revolving credit facilities
for a brief period. Our outstanding debt at December 31, 2009 totaled
$116.1 million, of which approximately $85.0 million carries interest at a fixed
rate. Accordingly, we do not believe our liquidity or our operations
are subject to significant market risk for changes in interest
rates.
We hold a
variety of highly rated (primarily AAA or AA) interest bearing auction rate
securities that generally represent interests in pools of either interest
bearing student loans or municipal bond issues. These auction rate
securities provide liquidity via an auction process that resets the applicable
interest rate at predetermined intervals, typically every 7 or
28 days. In the event that such auctions are unsuccessful, the
holder of the securities is not able to access these funds until a future
auction of these investments is successful. An unsuccessful auction
results in a lack of liquidity in the securities but does not signify a default
by the issuer. Upon an unsuccessful auction, the interest rates do
not reset at a market rate but instead reset based upon a formula contained in
the security, which rate is generally higher than the current market
rate. Since mid-February 2008, regularly scheduled auctions for these
securities started to fail throughout the market at a significant
rate. At that time, we had $181.9 million invested in auction rate
securities. Since then, we have been successful in liquidating at par
value a significant portion of our investment in auction rate
securities. We recorded a $5.8 million pretax impairment charge in
2008. Of this $5.8 million impairment charge, $2.6 million was deemed
to be other-than-temporary, thereby resulting in a charge to
income. The $3.2 million balance of the impairment charge was deemed
to be temporary, thereby resulting in a charge to stockholders’
equity. At December 31, 2009, we had investments in auction rate
securities of $101.2 million which are reflected at fair value. These
investments are considered to be “available-for-sale” and are classified as
long-term investments. Our investment policy is to manage our assets
to achieve our goals of preserving principal, maintaining adequate liquidity at
all times, and maximizing returns subject to our investment
guidelines. The current overall liquidity concerns in capital markets
have affected our ability to liquidate many of our investments in auction rate
securities. Based on our ability to access our cash equivalent
investments, our anticipated operating cash flows, and our available Revolving
Facility and our Supplemental Facility discussed above, we do not expect that
the short-term lack of liquidity of our auction rate security investments will
materially affect our overall liquidity position or our ability to execute our
current business plan.
47
ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
The
Report of Independent Registered Public Accounting Firm, Consolidated Financial
Statements, and Supplementary Schedules are set forth in Item 15 in this report
and are hereby incorporated in this Item 8 by reference.
ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS
AND PROCEDURES
Evaluation of Disclosure Controls
and Procedures
– As required by Rule 13a-15(b) under the Securities
Exchange Act of 1934, as of December 31, 2009, we carried out an evaluation
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and
procedures. In designing and evaluating our disclosure controls and
procedures, we recognize that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management necessarily was required to apply
its judgment in evaluating and implementing possible controls and
procedures. The effectiveness of our disclosure controls and
procedures is necessarily limited by the staff and other resources available to
us and, although we have designed our disclosure controls and procedures to
address the geographic diversity of our operations, this diversity inherently
may limit the effectiveness of those controls and procedures. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that, as of December 31, 2009, our disclosure controls and procedures
were effective, in that they provide reasonable assurance that information
required to be disclosed by us in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms,
and include controls and procedures designed to ensure that information we are
required to disclose in such reports is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required
disclosures.
Changes in Internal Control Over
Financial Reporting
- There was no change in our internal control over
financial reporting that occurred during the period covered by this report that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
In
connection with Rule 13a-15(b) under the Securities Exchange Act of 1934, we
will continue to review and assess the adequacy of our disclosure controls and
procedures, including our internal control over financial reporting, and may
from time to time make changes aimed at enhancing their effectiveness and to
ensure that our systems evolve with our business.
Management’s Report On Internal
Control Over Financial Reporting -
Our management, under the supervision
of our Chief Executive Officer and Chief Financial Officer, is responsible for
establishing and maintaining an adequate system of internal control over
financial reporting as such term is defined in Exchange Act Rules 13a –
15(f). Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external reporting
purposes in accordance with accounting principles generally accepted in the
United States of America. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. In making this assessment,
management utilized the criteria set forth by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission in
Internal Control – Integrated
Framework.
Based on this assessment, management concluded
that, as of December 31, 2009, our internal control over financial reporting is
effective based on those criteria.
Deloitte
& Touche LLP, the independent registered public accounting firm that audited
our consolidated financial statements included in this Annual Report on Form
10-K, has issued an attestation report on the Company’s internal control over
financial reporting as of December 31, 2009. The report, which
expresses an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2009, is included below in
Item 9A under the heading “Report of Independent Registered Public Accounting
Firm.”
48
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of Tutor Perini Corporation
Sylmar,
CA
We have
audited the
internal
control
over
financial
reporting
of Tutor Perini Corporation and subsidiaries (the "Company") as of December 31,
2009, based on criteria established in
Internal Control — Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Management's Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal
control
over
financial
reporting was maintained in
all material respects. Our audit included obtaining an understanding of
internal
control
over
financial
reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of
internal
control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A
company's
internal
control
over
financial
reporting is a process designed by, or under the supervision of,
the company's principal executive and principal
financial
officers, or persons performing similar functions, and effected by the company's
board of directors, management, and other personnel to provide reasonable
assurance regarding the reliability of
financial
reporting and the preparation of
financial
statements for external purposes in accordance with generally accepted
accounting principles. A company's
internal
control
over
financial
reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the
financial
statements.
Because
of the inherent limitations of
internal
control
over
financial
reporting, including the
possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely
basis. Also, projections of any evaluation of the effectiveness of the
internal
control
over
financial
reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our
opinion, the Company maintained, in all material respects, effective
internal
control
over
financial
reporting as of December
31, 2009, based on the criteria established in
Internal
Control —
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of and
for the year ended December 31, 2009 of the Company and our report dated March
1, 2010 expressed an unqualified opinion on those financial
statements.
/s/ Deloitte & Touche,
LLP
Los
Angeles, California
March 1,
2010
49
ITEM 9B. OTHER
INFORMATION
None.
PART
III.
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Information
relating to our directors is set forth in the sections entitled "Election of
Directors " and “Corporate Governance” in the definitive proxy statement in
connection with our Annual Meeting of Stockholders to be held on May 26, 2010
(the "Proxy Statement"), which sections are incorporated herein by
reference. Information relating to our executive officers is set
forth in Part I of this report under the caption “Executive Officers of the
Registrant” and is hereby incorporated herein by reference.
We are
also required under Item 405 of Regulation S-K to provide information concerning
delinquent filers of reports under Section 16 of the Securities and Exchange Act
of 1934, as amended. This information is listed under the caption
“Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement
to be filed with the Securities and Exchange Commission no later than 120 days
after the end of our fiscal year. This information is incorporated
herein by reference.
ITEM
11. EXECUTIVE COMPENSATION
The
information appearing under the captions “Compensation Discussion and Analysis”
and “Compensation Committee Report” in the Proxy Statement is hereby
incorporated herein by reference.
ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER
MATTERS
The
information appearing under the caption “Ownership of Common Stock By Directors,
Executive Officers and Principal Stockholders” in the Proxy Statement is hereby
incorporated herein by reference.
The
information required by Item 201(d) of Regulation S-K is set forth under the
caption “Compensation Discussion and Analysis” in the Proxy Statement and is
incorporated herein by reference.
ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The
information appearing under the captions “Certain Relationships and Related
Party Transactions”, “Director Independence” and “Corporate Governance” in the
Proxy Statement is hereby incorporated herein by reference.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
information appearing under the caption “Fees Paid to Audit Firm” in the Proxy
Statement is hereby incorporated herein by reference.
50
PART IV.
ITEM 15. EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
TUTOR PERINI CORPORATION
AND SUBSIDIARIES
|
(a)1.
|
The
following consolidated financial statements and supplementary financial
information are filed as part of
|
||
|
this
report:
|
|||
|
Pages
|
|||
|
Consolidated
Financial Statements of the Registrant
|
|||
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
53
– 54
|
||
|
Consolidated
Statements of Operations for the years ended December 31, 2009, 2008 and
2007
|
55
|
||
|
Consolidated
Statements of Stockholders' Equity for the years ended December 31, 2009,
2008 and 2007
|
56
|
||
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007
|
57–
58
|
||
|
Notes
to Consolidated Financial Statements
|
59 –
96
|
||
|
Report
of Independent Registered Public Accounting Firm
|
97
|
||
|
(a)2.
|
All
consolidated financial statement schedules are omitted because of the
absence of the conditions under which they are required or because the
required information is included in the Consolidated Financial Statements
or in the Notes thereto.
|
||
|
(a)3.
|
Exhibits
|
||
|
The
exhibits which are filed with this report or which are incorporated herein
by reference are set forth in
|
|||
|
the
Exhibit Index which appears on pages 98 through
101.
|
|||
51
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
Tutor
Perini Corporation
|
|
|
(Registrant)
|
|
|
Dated: March
1, 2010
|
By
: /s/Robert
Band
|
|
Robert
Band
|
|
|
President
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
||
|
(i)
Principal
Executive Officer
|
||||
|
Ronald N. Tutor
|
Chairman
and Chief Executive Officer
|
March
1, 2010
|
||
|
By
: /s/Ronald N.
Tutor
|
||||
|
Ronald N. Tutor
|
||||
|
(ii)
Principal
Financial Officer
|
||||
|
Kenneth R. Burk
|
Executive
Vice President and Chief Financial Officer
|
March
1, 2010
|
||
|
By
: /s/Kenneth R.
Burk
|
||||
|
Kenneth R. Burk
|
||||
|
(iii)
Principal
Accounting Officer
|
||||
|
Steven M.
Meilicke
|
Vice
President and Controller
|
March
1, 2010
|
||
|
By
: /s/Steven M.
Meilicke
|
||||
|
Steven M.
Meilicke
|
||||
|
(iv)
Directors
|
||||
|
Ronald
N. Tutor
|
) |
|
||
|
Marilyn
A. Alexander
|
) |
|
||
|
Peter
Arkley
|
) |
|
||
|
Robert
Band
|
) |
|
||
|
Willard
W. Brittain, Jr
|
) |
|
||
|
Robert
A. Kennedy
|
) |
/
s/Robert
Band
|
||
|
Michael
R. Klein
|
) |
Robert
Band
|
||
|
Robert
L. Miller
|
) |
Attorney in Fact
|
||
|
Raymond
R. Oneglia
|
) |
|
||
|
Donald
D. Snyder
|
) |
Dated: March
1, 2010
|
52
Tutor
Perini Corporation and Subsidiaries
Consolidated
Balance Sheets
December
31, 2009 and 2008
(In
thousands, except share data)
|
Assets
|
||||||||
|
2009
|
2008
|
|||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash,
including cash equivalents of $294,807 and $333,869
|
$ | 348,309 | $ | 386,172 | ||||
|
Accounts
receivable, including retainage of $544,875 and $656,458
|
1,088,386 | 1,378,040 | ||||||
|
Costs
and estimated earnings in excess of billings
|
145,678 | 115,706 | ||||||
|
Deferred
tax asset
|
1,370 | 11,589 | ||||||
|
Other
current assets
|
30,811 | 18,793 | ||||||
|
Total
current assets
|
1,614,554 | 1,910,300 | ||||||
|
LONG-TERM
INVESTMENTS
|
101,201 | 104,779 | ||||||
|
PROPERTY
AND EQUIPMENT, at cost:
|
||||||||
|
Land
|
33,114 | 27,082 | ||||||
|
Buildings
and improvements
|
85,830 | 71,547 | ||||||
|
Construction
equipment
|
184,579 | 169,714 | ||||||
|
Other
equipment
|
112,554 | 107,253 | ||||||
| 416,077 | 375,596 | |||||||
|
Less
– Accumulated depreciation
|
67,256 | 47,116 | ||||||
|
Total
property and equipment, net
|
348,821 | 328,480 | ||||||
|
GOODWILL
|
602,471 | 588,112 | ||||||
|
INTANGIBLE
ASSETS, NET
|
134,327 | 125,026 | ||||||
|
OTHER
ASSETS
|
19,280 | 16,381 | ||||||
| $ | 2,820,654 | $ | 3,073,078 | |||||
The
accompanying notes are an integral part of these consolidated financial
statements.
53
Tutor
Perini Corporation and Subsidiaries
Consolidated
Balance Sheets (continued)
December
31, 2009 and 2008
(In
thousands, except share data)
|
Liabilities
and Stockholders’ Equity
|
||||||||||||
|
2009
|
2008 |
|
||||||||||
|
CURRENT
LIABILITIES:
|
||||||||||||
|
Current
maturities of long-term debt
|
$ | 31,334 | $ | 18,674 | ||||||||
|
Accounts
payable, including retainage of $396,928 and $486,561
|
990,551 | 1,352,041 | ||||||||||
|
Billings
in excess of costs and estimated earnings
|
187,714 | 192,442 | ||||||||||
|
Accrued
expenses
|
101,837 | 122,094 | ||||||||||
|
Total
current liabilities
|
1,311,436 | 1,685,251 | ||||||||||
|
LONG-TERM
DEBT, less current maturities included above
|
84,771 | 61,580 | ||||||||||
|
DEFERRED
INCOME TAXES
|
78,977 | 98,862 | ||||||||||
|
OTHER
LONG-TERM LIABILITIES
|
57,044 | 89,159 | ||||||||||
|
CONTINGENCIES
AND COMMITMENTS
|
||||||||||||
|
STOCKHOLDERS’
EQUITY:
|
||||||||||||
|
Common
stock, $1 par value:
|
||||||||||||
|
Authorized
– 75,000,000 shares
|
||||||||||||
|
Issued
and outstanding – 48,538,982 shares and 48,319,223 shares
|
48,539 | 48,319 | ||||||||||
|
Additional
paid-in capital
|
1,012,983 | 1,001,392 | ||||||||||
|
Retained
earnings
|
260,121 | 123,060 | ||||||||||
|
Accumulated
other comprehensive loss
|
(33,217 | ) | (34,545 | ) | ||||||||
|
Total
stockholders' equity
|
1,288,426 | 1,138,226 | ||||||||||
| $ | 2,820,654 | $ | 3,073,078 | |||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
54
Tutor
Perini Corporation and Subsidiaries
Consolidated
Statements of Operations
For the
Years Ended December 31, 2009, 2008 and 2007
(In
thousands, except per share data)
|
2009
|
2008
|
2007
|
||||||||||||||||||
|
Revenues
|
$ | 5,151,966 | $ | 5,660,286 | $ | 4,628,358 | ||||||||||||||
|
Cost
of Operations
|
4,763,919 | 5,327,056 | 4,379,464 | |||||||||||||||||
|
Gross
Profit
|
388,047 | 333,230 | 248,894 | |||||||||||||||||
|
General
and Administrative Expenses
|
176,504 | 133,998 | 107,913 | |||||||||||||||||
|
Goodwill
and Intangible Asset Impairment
|
- | 224,478 | - | |||||||||||||||||
|
INCOME
(LOSS) FROM CONSTRUCTION OPERATIONS
|
211,543 | (25,246 | ) | 140,981 | ||||||||||||||||
|
Other
Income, Net
|
1,098 | 9,559 | 15,361 | |||||||||||||||||
|
Interest
Expense
|
(7,501 | ) | (4,163 | ) | (1,947 | ) | ||||||||||||||
|
Income
(Loss) before Income Taxes
|
205,140 | (19,850 | ) | 154,395 | ||||||||||||||||
|
Provision
for Income Taxes
|
(68,079 | ) | (55,290 | ) | (57,281 | ) | ||||||||||||||
|
NET
INCOME (LOSS)
|
$ | 137,061 | $ | (75,140 | ) | $ | 97,114 | |||||||||||||
|
BASIC
EARNINGS (LOSS) PER COMMON SHARE
|
$ | 2.82 | $ | (2.19 | ) | $ | 3.62 | |||||||||||||
|
DILUTED
EARNINGS (LOSS) PER COMMON SHARE
|
$ | 2.79 | $ | (2.19 | ) | $ | 3.54 | |||||||||||||
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||||||||||||||
|
BASIC
|
48,525 | 34,272 | 26,819 | |||||||||||||||||
|
Effect
of Dilutive Stock Options, Warrants and Restricted Stock
|
||||||||||||||||||||
|
Units
|
559 | - | 600 | |||||||||||||||||
|
DILUTED
|
49,084 | 34,272 | 27,419 | |||||||||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
55
Tutor
Perini Corporation and Subsidiaries
Consolidated
Statements of Stockholders' Equity
For the
Years Ended December 31, 2009, 2008 and 2007
(In
thousands)
|
Accumulated
|
||||||||||||||||||||||||
|
Stock
|
Additional
|
Other
|
||||||||||||||||||||||
|
Purchase
|
Common
|
Paid-In
|
Retained
|
Comprehensive
|
||||||||||||||||||||
|
Warrants
|
Stock
|
Capital
|
Earnings
|
(Loss)
Income
|
Total
|
|||||||||||||||||||
|
Balance
- December 31, 2006
|
$ | 461 | $ | 26,554 | $ | 139,450 | $ | 101,086 | $ | (23,692 | ) | $ | 243,859 | |||||||||||
|
Net
Income
|
- | - | - | 97,114 | - | 97,114 | ||||||||||||||||||
|
Other
comprehensive income:
|
||||||||||||||||||||||||
|
Change
in pension benefit plans
|
- | - | - | - | 6,175 | 6,175 | ||||||||||||||||||
|
Total
comprehensive income
|
103,289 | |||||||||||||||||||||||
|
Common
Stock options and
|
||||||||||||||||||||||||
|
stock purchase warrants
exercised
|
(461 | ) | 267 | 1,095 | - | - | 901 | |||||||||||||||||
|
Excess
income tax benefit from stock-based compensation
|
- | - | 5,712 | - | - | 5,712 | ||||||||||||||||||
|
Restricted
stock compensation expense
|
- | - | 14,427 | - | - | 14,427 | ||||||||||||||||||
|
Issuance
of Common Stock, net
|
- | 166 | (20 | ) | - | - | 146 | |||||||||||||||||
|
Balance
- December 31, 2007
|
$ | - | $ | 26,987 | $ | 160,664 | $ | 198,200 | $ | (17,517 | ) | $ | 368,334 | |||||||||||
|
Net
Loss
|
- | - | - | (75,140 | ) | - | (75,140 | ) | ||||||||||||||||
|
Other
comprehensive loss:
|
||||||||||||||||||||||||
|
Change
in pension benefit plans
|
- | - | - | - | (14,922 | ) | (14,922 | ) | ||||||||||||||||
|
Change
in fair value of investments
|
- | - | - | - | (2,005 | ) | (2,005 | ) | ||||||||||||||||
|
Foreign
currency translation
|
- | - | - | - | (101 | ) | (101 | ) | ||||||||||||||||
|
Total
comprehensive loss
|
(92,168 | ) | ||||||||||||||||||||||
|
Common
Stock issued in acquisition of
|
||||||||||||||||||||||||
|
Tutor-Saliba
Corporation
|
- | 22,987 | 858,476 | - | - | 881,463 | ||||||||||||||||||
|
Common
Stock purchased under share repurchase program
|
- | (2,004 | ) | (29,793 | ) | - | - | (31,797 | ) | |||||||||||||||
|
Excess
income tax benefit from stock-based compensation
|
- | - | 533 | - | - | 533 | ||||||||||||||||||
|
Stock-based
compensation expense
|
- | - | 12,145 | - | - | 12,145 | ||||||||||||||||||
|
Issuance
of Common Stock, net
|
- | 349 | (633 | ) | - | - | (284 | ) | ||||||||||||||||
|
Balance
- December 31, 2008
|
$ | - | $ | 48,319 | $ | 1,001,392 | $ | 123,060 | $ | (34,545 | ) | $ | 1,138,226 | |||||||||||
|
Net
Income
|
- | - | - | 137,061 | - | 137,061 | ||||||||||||||||||
|
Other
comprehensive loss:
|
||||||||||||||||||||||||
|
Change
in pension benefit plans
|
- | 1,221 | 1,221 | |||||||||||||||||||||
|
Foreign
currency translation
|
- | 107 | 107 | |||||||||||||||||||||
|
Total
comprehensive income
|
138,389 | |||||||||||||||||||||||
|
Tax
effect of stock-based compensation
|
- | - | (824 | ) | - | - | (824 | ) | ||||||||||||||||
|
Stock-based
compensation expense
|
- | - | 12,462 | - | - | 12,462 | ||||||||||||||||||
|
Issuance
of Common Stock, net
|
- | 220 | (47 | ) | - | - | 173 | |||||||||||||||||
|
Balance
- December 31, 2009
|
$ | - | $ | 48,539 | $ | 1,012,983 | $ | 260,121 | $ | (33,217 | ) | $ | 1,288,426 | |||||||||||
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
56
Tutor
Perini Corporation and Subsidiaries
Consolidated
Statements of Cash Flows
For the
Years Ended December 31, 2009, 2008 and 2007
(In
thousands)
|
2009
|
2008
|
2007
|
||||||||||
|
Cash
Flows from Operating Activities:
|
||||||||||||
|
Net
income (loss)
|
$ | 137,061 | $ | (75,140 | ) | $ | 97,114 | |||||
|
Adjustments
to reconcile net income (loss) to net cash from operating
activities:
|
||||||||||||
|
Goodwill
and intangible asset impairment
|
- | 224,478 | - | |||||||||
|
Depreciation
|
21,292 | 12,345 | 9,225 | |||||||||
|
Amortization
of intangible assets and deferred expenses
|
17,215 | 15,251 | 1,718 | |||||||||
|
Stock-based
compensation expense
|
12,462 | 12,145 | 14,427 | |||||||||
|
Adjustment
of investments to fair value
|
(39 | ) | 2,721 | - | ||||||||
|
Excess
income tax benefit from stock-based compensation
|
(28 | ) | (533 | ) | (5,712 | ) | ||||||
|
Deferred
income taxes
|
(10,541 | ) | (7,984 | ) | (10,668 | ) | ||||||
|
Loss
(gain) on sale of land, net
|
340 | 638 | (566 | ) | ||||||||
|
Gain
on sale of property and equipment
|
624 | (1,706 | ) | (1,960 | ) | |||||||
|
Other
long-term liabilities
|
(36,284 | ) | 7,581 | 14,168 | ||||||||
|
Other
non-cash items, net
|
- | - | (10 | ) | ||||||||
|
Cash
from changes in other components of working capital:
|
||||||||||||
|
(Increase)
decrease in:
|
||||||||||||
|
Accounts
receivable
|
363,076 | (125,064 | ) | (224,088 | ) | |||||||
|
Costs
and estimated earnings in excess of billings
|
(29,798 | ) | (12,032 | ) | 21,944 | |||||||
|
Other
current assets
|
(11,017 | ) | (3,936 | ) | 3,881 | |||||||
|
Increase
(decrease) in:
|
||||||||||||
|
Accounts
payable
|
(449,370 | ) | 125,736 | 297,989 | ||||||||
|
Billings
in excess of costs and estimated earnings
|
(8,928 | ) | (36,844 | ) | 27,850 | |||||||
|
Accrued
expenses
|
(32,112 | ) | (11,602 | ) | 36,218 | |||||||
|
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES
|
(26,047 | ) | 126,054 | 281,530 | ||||||||
|
Cash
Flows from Investing Activities:
|
||||||||||||
|
Acquisition
of Keating Building Company,
|
(6,900 | ) | - | - | ||||||||
|
net
of cash balance acquired
|
||||||||||||
|
Cash
balance recorded in merger with Tutor-Saliba Corporation,
|
- | 92,081 | - | |||||||||
|
net
of transaction costs
|
||||||||||||
|
Acquisition
of property and equipment
|
(37,005 | ) | (66,767 | ) | (23,885 | ) | ||||||
|
Proceeds
from sale of property and equipment
|
1,873 | 6,697 | 4,994 | |||||||||
|
Land
held for sale, net
|
203 | (774 | ) | 1,133 | ||||||||
|
Investment
in available-for-sale securities
|
- | (218,325 | ) | (8,000 | ) | |||||||
|
Proceeds
from sale of available-for-sale securities
|
3,641 | 115,856 | 116 | |||||||||
|
Investment
in other activities
|
(2,698 | ) | (840 | ) | 27 | |||||||
|
NET
CASH USED BY INVESTING ACTIVITIES
|
(40,886 | ) | (72,072 | ) | (25,615 | ) | ||||||
57
Tutor
Perini Corporation and Subsidiaries
Consolidated
Statements of Cash Flows (continued)
For the
Years Ended December 31, 2009, 2008 and 2007
(In
thousands)
|
2009
|
2008
|
2007
|
||||||||||
|
Cash
Flows from Financing Activities:
|
||||||||||||
|
Proceeds
from long-term debt
|
$ | 180,182 | $ | 2,213 | $ | 5,971 | ||||||
|
Repayment
of long-term debt
|
(150,625 | ) | (38,696 | ) | (33,981 | ) | ||||||
|
Repayment
of shareholder notes payable
|
- | (58,485 | ) | - | ||||||||
|
Purchase
of common stock under share repurchase program
|
- | (31,797 | ) | - | ||||||||
|
Proceeds
from exercise of common stock options and stock purchase
warrants
|
34 | - | 901 | |||||||||
|
Excess
income tax benefit from stock-based compensation
|
28 | 533 | 5,712 | |||||||||
|
Issuance
of common stock and effect of cashless exercise
|
139 | (284 | ) | 146 | ||||||||
|
Deferred
debt costs
|
(688 | ) | (482 | ) | (980 | ) | ||||||
|
NET
CASH PROVIDED (USED) BY FINANCING ACTIVITIES
|
29,070 | (126,998 | ) | (22,231 | ) | |||||||
|
Net
(Decrease) Increase in Cash and Cash Equivalents
|
(37,863 | ) | (73,016 | ) | 233,684 | |||||||
|
Cash
and Cash Equivalents at Beginning of Year
|
386,172 | 459,188 | 225,504 | |||||||||
|
Cash
and Cash Equivalents at End of Year
|
$ | 348,309 | $ | 386,172 | $ | 459,188 | ||||||
|
Supplemental
Disclosure of Cash Paid During the Year For:
|
||||||||||||
|
Interest
|
$ | 7,804 | $ | 3,693 | $ | 1,872 | ||||||
|
Income
taxes
|
$ | 83,747 | $ | 79,270 | $ | 59,450 | ||||||
|
Supplemental
Disclosure of Non-Cash Transactions:
|
||||||||||||
|
Grant
date fair value of common stock issued for services
|
$ | 7,411 | $ | 12,651 | $ | 5,966 | ||||||
|
Property
and equipment acquired through financing arrangements
|
$ | 5,734 | $ | 27,441 | $ | - | ||||||
|
Common
stock issued in merger with Tutor-Saliba Corporation
|
$ | - | $ | 881,463 | $ | - | ||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
58
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For the
Years Ended December 31, 2009, 2008 and 2007
[1] Summary
of Significant Accounting Policies
(a) Nature
of Business
Tutor
Perini Corporation, formerly known as Perini Corporation, was incorporated in
1918 as a successor to businesses which had been engaged in providing
construction services since 1894. Tutor Perini Corporation and its
wholly owned subsidiaries (the “Company”) provide diversified general
contracting, construction management and design-build services to private
clients and public agencies throughout the world. The Company’s
construction business is conducted through three basic segments or operations:
civil, building and management services. The civil segment focuses on
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. The building segment focuses on
large, complex projects in the hospitality and gaming, transportation,
healthcare, municipal offices, sports and entertainment, education, correctional
facilities, biotech, pharmaceutical and high-tech markets, and electrical and
mechanical, plumbing and HVAC services to both government and private
non-residential customers. The management services segment provides diversified
construction, design-build and maintenance services to the U.S. military and
government agencies as well as surety companies and multi-national corporations
in the United States and overseas.
The
Company offers general contracting, pre-construction planning and comprehensive
project management services, including planning and scheduling of the manpower,
equipment, materials and subcontractors required for the timely completion of a
project in accordance with the terms and specifications contained in a
construction contract. The Company also offers self-performed
construction services, including site work, concrete forming and placement,
steel erection, electrical and mechanical, plumbing and HVAC. The
Company provides these services by using traditional general contracting
arrangements, such as fixed price, guaranteed maximum price and cost plus fee
contracts and construction management or design-build contracting
arrangements.
In an
effort to leverage the Company’s expertise and limit its financial and/or
operational risk on certain large or complex projects, the Company participates
in construction joint ventures, often as the sponsor or manager of the project,
for the purpose of bidding and, if awarded, providing the agreed upon
construction services. Each participant usually agrees in advance to
provide a predetermined percentage of capital, as required, and to share in the
same percentage of profit or loss of the project.
(b)
Principles of
Consolidation
The
consolidated financial statements include the accounts of Tutor Perini
Corporation and its wholly owned subsidiaries. The Company’s
interests in construction joint ventures are accounted for using the
proportionate consolidation method whereby the Company’s proportionate share of
each joint venture’s assets, liabilities, revenues and cost of operations are
included in the appropriate classifications in the consolidated financial
statements. All intercompany transactions and balances have been
eliminated in consolidation.
(c) Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company’s construction business involves making
significant estimates and assumptions in the normal course of business relating
to its contracts and joint venture contracts due to, among other things, the
one-of-a-kind nature of most of its projects, the long-term duration of a
contract cycle and the type of contract utilized. The most
significant estimates with regard to these financial statements relate to the
estimating of total forecasted construction contract revenues, costs and profits
in accordance
59
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[1] Summary
of Significant Accounting Policies (continued)
(c) Use of
Estimates
(continued)
with
accounting for long-term contracts (see Note 1(d) below) and estimating
potential liabilities in conjunction with certain contingencies, including the
outcome of pending or future litigation, arbitration or other dispute resolution
proceedings relating to contract claims (see Note 9 below). Actual
results could differ in the near term from these estimates and such differences
could be material.
(d) Method
of Accounting for Contracts
Revenues
and profits from the Company’s contracts and construction joint venture
contracts are generally recognized by applying percentages of completion for the
period to the total estimated profits for the respective
contracts. Percentage of completion is determined by relating the
actual cost of the work performed to date to the current estimated total cost of
the respective contracts. However, on construction management
contracts, profit is generally recognized in accordance with the contract terms,
usually on the as-billed method, which is generally consistent with the level of
effort incurred over the contract period. When the estimate on a
contract indicates a loss, the Company's policy is to record the entire loss
during the accounting period in which it is estimable. In the
ordinary course of business, at a minimum on a quarterly basis, the Company
prepares updated estimates of the total forecasted revenue, cost and profit or
loss for each contract. The cumulative effect of revisions in
estimates of the total forecasted revenue and costs, including unapproved change
orders and claims, during the course of the work is reflected in the accounting
period in which the facts that caused the
revision
become known. The financial impact of these revisions to any one
contract is a function of both the amount of the revision and the percentage of
completion of the contract. An amount equal to the costs incurred which are
attributable to unapproved change orders and claims is included in the total
estimated revenue when realization is probable. Profit from
unapproved change orders and claims is recorded in the period such amounts are
resolved.
In
accordance with normal practice in the construction industry, the Company
includes in current assets and current liabilities amounts related to
construction contracts realizable and payable over a period in excess of one
year. Billings in excess of costs and estimated earnings represents
the excess of contract billings to date over the amount of contract costs and
profits (or contract revenue) recognized to date on the percentage of completion
accounting method on certain contracts. Costs and estimated earnings
in excess of billings represents the excess of contract costs and profits (or
contract revenue) recognized to date on the percentage of completion accounting
method over the amount of contract billings to date on the remaining
contracts. Costs and estimated earnings in excess of billings results
when (1) the appropriate contract revenue amount has been recognized in
accordance with the percentage of completion accounting method, but a portion of
the revenue recorded cannot be billed currently due to the billing terms defined
in the contract and/or (2) costs, recorded at estimated realizable value,
related to unapproved change orders or claims are incurred. Costs and
estimated earnings in excess of billings related to the Company’s contracts and
joint venture contracts at December 31, 2009 and 2008, consisted of the
following (in thousands):
|
2009
|
2008
|
|||||||
|
Unbilled
costs and profits incurred to date*
|
$ | 44,637 | $ | 30,623 | ||||
|
Unapproved
change orders
|
32,683 | 16,401 | ||||||
|
Claims
|
68,358 | 68,682 | ||||||
| $ | 145,678 | $ | 115,706 | |||||
|
|
*
Represents the excess of contract costs and profits recognized to date on
the percentage of completion accounting method over the amount of contract
billings to date on certain
contracts.
|
60
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[1] Summary
of Significant Accounting Policies (continued)
(d) Method of Accounting
for Contracts
(continued)
Of the
balance of “Unapproved change orders” and “Claims” included above in costs and
estimated earnings in excess of billings at December 31, 2009 and December 31,
2008, approximately $62.7 million and $56.6 million, respectively, are amounts
subject to pending litigation or dispute resolution proceedings as described in
Note 9. These amounts are management’s estimate of the probable cost
recovery from the disputed claims considering such factors as evaluation of
entitlement, settlements reached to date and experience with the
customer. In the event that future facts and circumstances, including
the resolution of disputed claims, cause a reduction in the aggregate amount of
the estimated probable cost recovery from the disputed claims, the amount of
such reduction will be recorded against earnings in the relevant future
period.
The
prerequisite for billing “Unbilled costs and profits incurred to date” is
provided in the defined billing terms of each of the applicable
contracts. The prerequisite for billing “Unapproved change orders” or
“Claims” is the final resolution and agreement between the
parties. The amount of costs and estimated earnings in excess of
billings at December 31, 2009 estimated by management to be collected beyond one
year is approximately $30.0 million.
(e) Property
and Equipment
Land,
buildings and improvements, construction and computer-related equipment and
other equipment are recorded at cost. Major renewals and betterments
are capitalized and maintenance and repairs are charged to operations as
incurred. Depreciation is calculated primarily using the
straight-line method for all classifications of depreciable
property. Construction equipment is depreciated over estimated useful
lives ranging from five to twenty years after an allowance for
salvage. The remaining depreciable property is depreciated over
estimated useful lives ranging from three to forty years after an allowance for
salvage.
(f) Long-Lived
Assets
Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value may not be
recoverable. Recoverability is evaluated by comparing the carrying
value of the assets to the undiscounted associated cash flows. When
this comparison indicates that the carrying value of the asset is greater than
the undiscounted cash flows, a loss is recognized for the difference between the
carrying value and estimated fair value. Fair value is determined
based either on market quotes or appropriate valuation techniques.
(g) Goodwill
and Intangible Assets
Goodwill
and intangible assets with indefinite lives are not being
amortized. Intangible assets with finite lives are amortized over
their useful lives. The Company evaluates intangible assets that are
not being amortized at the end of each reporting period to determine whether
events and circumstances continue to support an indefinite useful
life.
The
Company tests goodwill and intangible assets with indefinite lives for
impairment by applying a fair value test in the fourth quarter of each year and
between annual tests if events occur or circumstances change which suggest that
the goodwill or intangible assets should be evaluated. Intangible
assets with finite lives are tested for impairment whenever events or
circumstances indicate that the carrying value may not be
recoverable. Based on impairment tests completed in 2009, 2008 and
2007, the Company concluded that goodwill and certain other intangible assets
were impaired in 2008 and were not impaired in 2009 and 2007. See
Note 4 for further information regarding the impairment loss recorded in
2008.
61
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[1] Summary
of Significant Accounting Policies (continued)
(h) Income
Taxes
Deferred
income tax assets and liabilities are recognized for the effects of temporary
differences between the financial statement carrying amounts and the income tax
basis of assets and liabilities using tax rates expected to be in effect when
such differences reverse. In addition, future tax benefits, such as
non-deductible accrued expenses, are recognized to the extent such benefits are
more likely than not to be realized as an economic benefit in the form of a
reduction of income taxes in future years. The Company recognizes
interest and penalties related to uncertain tax positions as a component of the
income tax provision.
(i)
Earnings (Loss) Per Common Share
Basic
earnings (loss) per common share was computed by dividing net income (loss) by
the weighted average number of common shares outstanding. Diluted
earnings (loss) per common share was similarly computed after giving
consideration to the dilutive effect of outstanding stock options, warrants and
restricted stock units.
The
computation of diluted income per common share excludes 610,000 stock options at
December 31, 2009 because the awards would have an antidilutive
effect. There were 841,500 antidilutive stock options and 1,797,501
antidilutive restricted stock units excluded from the computation of diluted
loss per common share at December 31, 2008. There were no
antidilutive stock options or restricted stock units at December 31,
2007.
(j) Cash
and Cash Equivalents
Cash
equivalents include short-term, highly liquid investments with original
maturities of three months or less when acquired.
Cash and
cash equivalents as reported in the accompanying Consolidated Balance Sheets
consist of amounts held by the Company that are available for general corporate
purposes and the Company’s proportionate share of amounts held by construction
joint ventures that are available only for joint venture-related
uses. Joint venture cash and cash equivalents are not restricted to
specific uses within those entities; however, the terms of the joint venture
agreements limit the ability to distribute those funds and use them for
corporate purposes. Cash held by construction joint ventures is
distributed from time to time to the Company and to the other joint venture
participants in accordance with their percentage interest after the joint
venture partners determine that a cash distribution is prudent. Cash
distributions received by the Company from its construction joint ventures are
then available for general corporate purposes.
62
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[1] Summary
of Significant Accounting Policies (continued)
(j) Cash and Cash
Equivalents
(continued)
At
December 31, 2009 and 2008, cash and cash equivalents consisted of the following
(in thousands):
|
2009
|
2008
|
|||||||
|
Corporate
cash and cash equivalents (available
|
||||||||
|
for
general corporate purposes)
|
$ | 323,867 | $ | 342,246 | ||||
|
Company's
share of joint venture cash and
|
||||||||
|
cash
equivalents (available only for joint venture
|
||||||||
|
purposes,
including future distributions)
|
24,442 | 43,926 | ||||||
| $ | 348,309 | $ | 386,172 | |||||
(k) Long-term
Investments
Investments,
consisting of auction rate securities, are classified as available-for-sale
securities based on the Company’s intentions. Investments are recorded at cost
with unrealized gains and temporary unrealized losses recorded in accumulated
other comprehensive income (loss), net of applicable taxes. Upon realization,
those amounts are reclassified from accumulated other comprehensive income
(loss) to other income, net. Unrealized losses that are other than
temporary and due to a decline in expected cash flows are charged against
income.
(l) Stock-Based
Compensation
Compensation
expense is measured based on the fair value of the award on the date of grant
and is recognized as expense on a straight-line basis (net of estimated
forfeitures) over the requisite service period. For awards which have a
performance component, compensation cost is recognized as achievement of the
performance objective appears probable.
(m)
Insurance Liabilities
The
Company typically utilizes third party insurance coverage subject to varying
deductible or self insurance levels with aggregate caps on losses
retained. The Company assumes the risk for the amount of the
self-insured deductible portion of the losses and liabilities primarily
associated with workers' compensation and general liability
coverage. In addition, on certain projects, the Company assumes the
risk for the amount of the self-insured deductible portion of losses that arise
from any subcontractor defaults. Losses are accrued based upon the
Company's estimates of the aggregate liability for claims incurred using
historical experience and certain actuarial assumptions followed in the
insurance industry. The estimate of insurance liability within the
self-insured deductible limits includes an estimate of incurred but not reported
claims based on data compiled from historical experience.
63
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[1] Summary
of Significant Accounting Policies (continued)
(n) Fair
Value of Financial Instruments
The
carrying amount of cash and cash equivalents approximates fair value due to the
short-term nature of these items. The carrying value of receivables,
payables and other amounts arising out of normal contract activities, including
retentions, which may be settled beyond one year, is estimated to approximate
fair value. See Note 3 for disclosure of the fair value of
investments and Note 5 for disclosure of the fair value of long-term
debt.
(o) Foreign
Currency Translation
The
functional currency for the Company’s foreign subsidiaries is the local
currency. Accordingly, the assets and liabilities of those operations are
translated into U.S. dollars using current exchange rates at the balance sheet
date and operating statement items are translated at average exchange rates
prevailing during the period. The resulting cumulative translation adjustment is
recorded in the foreign currency translation adjustment account as part of
accumulated other comprehensive income (loss) in shareholders’ equity. Foreign
currency transaction gains and losses, if any, are included in operations as
they occur.
(p) Reclassifications
Certain
prior year amounts have been reclassified to be consistent with the current year
classifications, including short term investments that were reclassified from
Short Term Investments to Other Current Assets in the Consolidated Balance
Sheets.
(q) New
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
guidance which clarifies the definition of fair value, describes methods used to
appropriately measure fair value, and expands fair value disclosure
requirements. This guidance applies under other accounting
pronouncements that currently require or permit fair value
measurements. The Company adopted this guidance on January 1, 2008,
as required. 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. Therefore, the application of the fair value guidance relating
to non-financial assets and non-financial liabilities of the Company was adopted
on January 1, 2009. See Note 3 for additional
information.
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 the Company beginning January 1,
2009 and the Company applied the provisions of this guidance to an acquisition
completed in January 2009 (see Note 2).
In March
2008, the FASB issued guidance regarding disclosures about derivative
instruments and hedging activities. This guidance was effective for the Company
on January 1, 2009 and applies only to financial statement disclosures. The
adoption of this guidance did not have a material impact on its consolidated
financial statements and related disclosures.
In
December 2008, the FASB issued a staff position which requires employers to
disclose information about fair value measurements of defined benefit plan
assets that are similar to the disclosures about fair value measurements
required by the new fair value guidance. It is effective for the
Company’s 2009 annual financial statements. Since
64
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[1] Summary
of Significant Accounting Policies (continued)
(q) New Accounting Pronouncements
(continued)
the staff
position only requires enhanced disclosures, the implementation of this guidance
did not have an impact on the Company’s financial statements.
In April
2009, the FASB issued a staff position providing additional guidance on factors
to consider in determining whether a transaction is orderly when the volume and
level of market activity for an asset or liability have significantly decreased.
It was effective for the Company 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 the Company’s 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. The Company adopted the provisions of the staff
position beginning April 1, 2009. The adoption of this guidance did
not have a material impact on the Company’s financial statements.
In April
2009, the FASB issued a staff position requiring fair value disclosures in both
interim and annual financial statements. The Company 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 the Company’s 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 the Company’s
financial statements or disclosures.
[2] Merger
& Acquisition
On
January 15, 2009 the Company completed its acquisition of all of the outstanding
capital stock of Daniel J. Keating Construction Company, d/b/a Keating Building
Company (“Keating”), for total consideration of $51.1 million. Keating provides
building construction general contracting services to both government agencies
and private non-residential customers. Keating primarily operates in
the northeast and mid-Atlantic regions of the United States and has a history of
successfully completed projects in the commercial office building, corporate
campus, gaming, hospitality, education, pharmaceutical and institutional
building construction markets. Goodwill of $14.3 million was recorded in
conjunction with this acquisition. The acquisition of Keating did not
have a material effect on the Company’s results of operations, financial
condition or cash flows.
65
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[3] Fair
Value Measurements
The fair
value guidance establishes a three-tier hierarchy for disclosure of investments
at fair value. This hierarchy prioritizes the inputs used to measure
fair value and expands disclosures about assets and liabilities measured at
fair
value. A
financial asset’s or liability’s classification within the hierarchy is
determined based on the lowest level input that is significant to the fair value
measurement. These hierarchical tiers are defined as
follows:
Level 1 –
inputs are unadjusted quoted prices in active markets for identical assets or
liabilities.
Level 2 –
inputs are other than quoted prices in active markets that are either directly
or indirectly observable through market corroboration.
Level 3 –
inputs are unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own assumptions based on the best
information available in the circumstances.
The
Company’s investments primarily consist of cash and cash equivalents and auction
rate securities (“ARS”). Cash and cash equivalents consist primarily
of money market funds with original maturity dates of three months or less, for
which fair value is determined through quoted market prices. Short-term
investments consist of an S&P 500 index mutual fund for which fair value is
determined through quoted market prices.
To
estimate the fair value of its ARS, the Company utilized an income approach
valuation model which considered, among other items, the following inputs: (i)
the underlying structure of each security; (ii) the present value of future
principal and interest payments discounted at rates considered to reflect
current market conditions; and (iii) consideration of the probabilities of
default or repurchase at par for each period.
At
December 31, 2009, the Company had $101.2 million invested in ARS which the
Company considers available for sale. The majority of the ARS held at
December 31, 2009, totaling $75.3 million, are securities collateralized by
student loan portfolios, which are guaranteed by the United States
government. Additional amounts totaling $17.9 million are invested in
securities collateralized by student loan portfolios, which are privately
insured. The remainder of the securities, totaling $8.0 million, are
invested in tax-exempt bonds. Most of the Company’s ARS are rated AAA
or AA. Due to the Company’s belief that the market for both government-backed
and privately insured student loans, as well as for tax-exempt municipal bonds,
may take in excess of twelve months to fully recover, the Company has classified
its $101.2 million investment in these securities as non-current and this amount
is included in Long-term Investments in the Consolidated Balance Sheets at
December 31, 2009.
As a
result of a fair valuation analysis, the Company recorded a pretax impairment
charge of $5.8 million during 2008. Of this $5.8 million impairment
charge, $2.6 million was deemed to be other-than-temporary and was recorded as a
charge against income. The $3.2 million balance of the impairment
charge was deemed to be temporary and was recorded as a charge to stockholders’
equity. The securities were not deemed to be impaired at December 31,
2009.
66
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2009, 2008 and 2007
(continued)
[3] Fair Value
Measurements (continued)
The following table provides the assets
and liabilities carried at fair value measured on a recurring basis as of
December 31, 2009 (in thousands):
|
Fair
Value Measurements at Dec. 31, 2009 Using
|
||||||||||||||||
|
Significant
other
|
Significant
|
|||||||||||||||
|
Total
Carrying
|
Quoted
prices in
|
observable
|
unobservable
|
|||||||||||||
|
Value
at
|
active
markets
|
inputs
|
inputs
|
|||||||||||||
|
Dec.
31, 2009
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
|
Cash
and cash equivalents
|
$ | 348,309 | $ | 348,309 | $ | - | $ | - | ||||||||
|
Short-term
investments
|
76 | 76 | - | - | ||||||||||||
|
Auction
rate securities
|
101,201 | - | 101,201 | |||||||||||||
|
TOTAL
|
$ | 449,586 | $ | 348,385 | $ | - | $ | 101,201 | ||||||||
Assets
measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) are as follows (in thousands):
|
Auction
Rate
|
||||
|
Securities
|
||||
|
Balance
at December 31, 2008
|
$ | 103,429 | ||
|
Settlements
|
(2,228 | ) | ||
|
Balance
at December 31, 2009
|
$ | 101,201 | ||
[4] Goodwill
and Other Intangible Assets
During
2009, the Company completed a reorganization enabling the Company to realize
greater operating efficiencies and take full advantage of the civil construction
expertise acquired through the merger with Tutor-Saliba. As a result of the
reorganization, the composition and number of reporting units has
changed. The Company reallocated goodwill between its reorganized
reporting units based on the relative fair value of pre-reorganization reporting
unit components distributed to post-reorganization reporting
units. The number of reportable segments has not changed (see Note
13). Changes in the carrying amount of goodwill during 2009 and 2008
are as follows (in thousands):
|
Management
|
||||||||||||||||
|
Building
|
Civil
|
Services
|
Total
|
|||||||||||||
|
Gross
goodwill, December 31, 2008
|
$ | 605,314 | $ | 83,163 | $ | 66,533 | 755,010 | |||||||||
|
Accumulated
impairment
|
(146,847 | ) | - | (20,051 | ) | (166,898 | ) | |||||||||
|
Balance
at December 31, 2008
|
458,467 | 83,163 | 46,482 | $ | 588,112 | |||||||||||
|
Goodwill
recorded in connection with
|
||||||||||||||||
|
the
acquisition of Keating
|
14,359 | - | - | 14,359 | ||||||||||||
|
Subtotal
|
472,826 | 83,163 | 46,482 | 602,471 | ||||||||||||
|
Reallocation
based on relative fair value
|
(217,929 | ) | 217,824 | 105 | - | |||||||||||
|
Balance
at December 31, 2009
|
$ | 254,897 | $ | 300,987 | $ | 46,587 | $ | 602,471 | ||||||||
67
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[4] Goodwill and Other
Intangible Assets (continued)
The
Company performs its annual impairment test of goodwill and other
indefinite-lived intangible assets in the fourth quarter of each year. The first
step in the two step process is to compare the fair value of the reporting unit
to its carrying value. If the carrying value of the reporting unit exceeds its
fair value, a second step must be followed to calculate the goodwill impairment.
The second step involves determining the fair value of the individual assets and
liabilities of the reporting unit and calculating the implied fair value of
goodwill. To determine the fair value of its reporting units, the Company uses
the income approach, which is based on the cash flows that the reporting unit
expects to generate in the future. This income valuation method requires
management to project revenues, operating expenses, working capital investment,
capital spending and cash flows for the reporting unit over a multi-year period,
as well as determine the weighted-average cost of capital to be used as a
discount rate. The Company also uses the market valuation method to
estimate the fair value of its reporting units by utilizing industry multiples
of operating earnings. Impairment assessment inherently involves
management judgments as to assumptions used to project these amounts and the
impact of market conditions on those assumptions.
In the
fourth quarter of 2009, the Company performed its impairment evaluation of
goodwill and other intangible assets. There was no change in the
carrying amount of goodwill and other intangible assets as a result of this
evaluation.
In 2008,
the Company recorded an impairment to goodwill of approximately $166.9
million. The Company also recorded impairment charges of $57.6
million ($35.9 million after taxes) related to the trade names and contractor
license. The impairment charges were due to degradation in the timing of cash
flows caused by delays, postponements and reduction in scope of certain projects
that were anticipated to enter into backlog in 2008 or 2009, exacerbated by the
global economic conditions experienced in the fourth quarter of
2008. These non-cash impairment charges relating to goodwill and the
other indefinite-lived intangible assets do not affect the Company’s cash
position, liquidity or have any impact on future operating
results. The Company also evaluated its finite-lived intangible
assets for impairment in 2008, and determined that an impairment of the
finite-lived intangible assets did not exist.
68
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For the years Ended December 31, 2009, 2008 and 2007
(continued)
[4] Goodwill
and Other Intangible Assets (continued)
Other
intangible assets consist of the following (in thousands):
|
|
December 31, 2009 | Weighted | |||||||||||||||||||
| Accumulated | Average | ||||||||||||||||||||
| Accumulated | Impairment | Carrying | Amortization | ||||||||||||||||||
| Cost | Amortization | Charge | Value | Period | |||||||||||||||||
| Trade names | $ | 153,050 | $ | - | $ | (56,900 | ) | $ 96,150 | Indefinite | ||||||||||||
|
Contractor
license
|
6,000 | - | (680 | ) | 5,320 | Indefinite | |||||||||||||||
|
Customer
relationships
|
31,700 | (4,243 | ) | - | 27,457 | 11.8 years | |||||||||||||||
|
Construction
contract backlog
|
33,340 | (28,300 | ) | - | 5,040 | 2.5 years | |||||||||||||||
|
Non-compete
agreements
|
2,400 | (2,040 | ) | - | 360 | 5 years | |||||||||||||||
|
Total
|
$ | 226,490 | $ | (34,583 | ) | $ | (57,580 | ) | $ 134,327 | ||||||||||||
| December 31, 2008 | Weighted | ||||||||||||||||||||
| Accumulated | Average | ||||||||||||||||||||
| Accumulated | Impairment | Carrying | Amortization | ||||||||||||||||||
| Cost | Amortization | Charge | Value | Period | |||||||||||||||||
| Trade names | $ | 140,350 | $ | - | 56,900) | $ | 83,450 | Indefinite | |||||||||||||
|
Contractor
license
|
6,000 | - | (680) | 5,320 | Indefinite | ||||||||||||||||
|
Customer
relationships
|
26,700 | (1,373 | ) | - | 25,327 | 12.7 years | |||||||||||||||
|
Construction
contract backlog
|
25,040 | (14,951 | ) | - | 10,089 | 2.3 years | |||||||||||||||
|
Non-compete
agreements
|
2,400 | (1,560 | ) | - | 840 | 5 years | |||||||||||||||
|
Total
|
$ | 200,490 | $ | (17,884 | ) | $ | (57,580) | $ | 125,026 | ||||||||||||
Amortization
expense for the years ended December 31, 2009 and 2008 totaled $16.7 million and
$14.6 million, respectively. At December 31, 2009, amortization
expense is estimated to be $7.8 million in 2010, $3.3 million in 2011, and $2.9
million in 2012, 2013 and 2014.
[5] Financial
Commitments
Long-term
Debt
Long-term
debt at December 31, 2009 and 2008 consists of the following (in
thousands):
69
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[5] Financial
Commitments (continued)
|
2009
|
2008
|
|||||||
|
Equipment
financing at rates ranging from 2.33% to 7.95%
|
$ | 37,486 | $ | 49,021 | ||||
|
Loan
on transportation equipment at a rate of 6.44% payable in equal monthly
installments over a five year period, with a balloon payment of $29.3
million in 2014
|
34,398 | - | ||||||
|
Loan
on transportation equipment at a variable LIBOR-based rate plus 2.4%
payable in equal monthly installments over a seven year period, with a
balloon payment of $12.0 million in 2015
|
16,044 | 16,661 | ||||||
|
Mortgage
on land and office building, both at a variable LIBOR-based interest rate
plus 2.0% with principal amortized at a fixed rate of 5.25% payable in
equal monthly installments over seven and fifteen year periods,
respectively. The seven year mortgage includes a balloon payment of $3.0
million in 2016
|
9,383 | - | ||||||
|
Mortgage
on office building at a rate of 8.96% payable in equal monthly
installments over a ten year period, with a balloon payment of
approximately $5.3 million in 2010
|
5,560 | 5,855 | ||||||
|
Mortgage
on office building at a variable rate of lender's prime rate less 1.0%
(1.25% in 2009) payable in equal monthly installments over a ten year
period, with a balloon payment of $2.6 million in
2018
|
4,646 | 4,843 | ||||||
|
Mortgage
on office building at a rate of 7.16% payable in equal monthly
installments over a five year period, with a balloon payment of $1.5
million in 2011
|
1,614 | 1,665 | ||||||
|
Mortgage
on office building at a rate of 5.62% payable in equal monthly
installments over a five year period, with a balloon payment of $1.1
million in 2013
|
1,331 | 1,397 | ||||||
|
Other
Indebtedness
|
5,643 | 812 | ||||||
|
Total
|
116,105 | 80,254 | ||||||
|
Less
– current maturities
|
31,334 | 18,674 | ||||||
|
Net
long-term debt
|
$ | 84,771 | $ | 61,580 | ||||
Payments
required under these obligations amount to approximately $31.3 million in 2010,
$15.5 million in 2011, $8.6 million in 2012, $5.5 million in 2013, $32.0 million
in 2014 and $23.2 million in 2015 and beyond.
On
September 8, 2008, the Company entered into a Third Amended and Restated Credit
Agreement (the “Credit Agreement”) with Bank of America, N. A.. The Credit
Agreement has been amended by a Joinder Agreement dated February 13, 2009
executed by Daniel J. Keating Construction Company and by a First Amendment
dated as of February 23, 2009 (collectively, the “Amended Credit Agreement”).
The Amended Credit Agreement replaces the Company’s previously existing credit
agreement dated February 22, 2007, as amended on May 7, 2008 (the “Prior
Agreement”) and allows the Company to borrow up to $155 million on a revolving
credit basis, with a $50 million sublimit for letters of credit, and an
additional $107.0 million at December 31, 2009 under a supplementary facility to
the extent that the $155 million base facility has been fully drawn
“Supplementary Facility”.
70
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[5] Financial
Commitments
(continued)
Subject
to certain conditions, the Company has the option to increase the base facility
by up to an additional $45 million. Similar to the Prior Agreement, subsidiaries
of the Company unconditionally guarantee the obligations of the Company under
the Amended Credit Agreement. Certain companies not party to the
Prior Agreement, have become subsidiaries of the Company as a result of the
acquisition of Tutor-Saliba on September 8, 2008 and Daniel J. Keating
Construction Company on January 15, 2009, and also became guarantors under the
Amended Credit Agreement. The obligations under the Amended
Credit Agreement are secured by a lien on all personal property and certain real
property of the Company and its subsidiaries party thereto. Amounts outstanding
under the Amended Credit Agreement bear interest at a rate equal to, at the
Company's option, (a) the adjusted British Bankers Association LIBOR rate, as
defined, plus 100 to 350 basis points (with a floor of 250 basis points for the
$155 million base facility) based on the ratio of consolidated funded
indebtedness of the Company and its subsidiaries to consolidated EBITDA or (b)
the higher of the Federal Funds Rate plus 50 basis points, or the prime rate
announced by Bank of America, N.A., plus up to 250 basis points based on the
ratio of consolidated funded indebtedness of the Company and its subsidiaries to
consolidated EBITDA. In addition, the Company has agreed to pay quarterly
facility fees of 0.50% per annum of the unused portion of the base credit
facility and ranging from 0.20% to 0.35% per annum of the unused portion of the
supplementary facility. Any outstanding loans under the revolving credit
facility and supplementary facility mature on February 22, 2012 and December 31,
2010, respectively, unless extended pursuant to the terms of the Amended Credit
Agreement.
The
Amended Credit Agreement requires the Company to comply with certain financial
and other covenants including minimum net worth, minimum asset coverage, minimum
fixed charge coverage and maximum leverage ratios. The Amended Credit
Agreement also includes certain customary provisions for this type of facility,
including operational covenants restricting liens, investments, indebtedness,
fundamental changes in corporate organization, and dispositions of property, and
events of default, certain of which include corresponding grace periods and
notice requirements. In addition, the Amended Credit Agreement
provides that the Supplementary Facility shall be reduced by the amount of any
reduction in the principal amount of certain auction rate securities presently
held by the Company.
On
January 13, 2010, the Amended Credit Agreement was amended to increase the
Company’s borrowing capacity by $50 million, allowing the Company to borrow up
to $205 million on a revolving credit basis and to favorably modify certain
financial and other covenants, including setting the net worth covenant at $1.1
billion as of December 31, 2009. There has been no change to the
Supplementary Facility as a result of this amendment.
The
Company borrowed under its available revolving credit facilities during a brief
period in 2009 and did not utilize the facility during 2008, other than for
letters of credit. There are no borrowings outstanding at December 31,
2009. Accordingly, at December 31, 2009, the Company has $241.6
million available to borrow under the Amended Credit Agreement.
In July
2009, the Company obtained a loan for $35 million from U.S. Bancorp Equipment
Finance, Inc., which is collateralized by transportation equipment owned by the
Company. The terms of the loan include equal monthly installments at
an interest rate of 6.44% payable over a five-year period beginning in July
2009, with a balloon payment of $29.3 million in 2014.
In
addition, the Company obtained two loans during 2009 totaling $9.7 million from
First Hawaiian Bank to finance building and land acquisition for operations in
Guam. Both notes carry interest at a LIBOR-based rate and mature on
February 12, 2016.
71
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[5] Financial
Commitments
(continued)
The fair
value of the $31.1 million and $4.8 million of variable rate debt approximated
its carrying value at December 31, 2009 and December 31, 2008,
respectively. For fixed rate debt, fair value is determined based on
discounted cash flows for the debt at the Company’s current incremental
borrowing rate for similar types of debt. The estimated fair value of
fixed rate debt at December 31, 2009 and 2008 is $87.0 million and $76.8
million, respectively, compared to the carrying amount of $85.0 million and
$75.5 million, respectively.
Leases
The
Company leases certain construction equipment, vehicles and office space under
non-cancelable operating leases. Future minimum rent payments under
non-cancelable operating leases as of December 31, 2009 are as follows (in
thousands):
|
Amount
|
||||
|
2010
|
$ | 10,277 | ||
|
2011
|
7,951 | |||
|
2012
|
6,536 | |||
|
2013
|
6,092 | |||
|
2014
|
5,896 | |||
|
Thereafter
|
11,697 | |||
|
Subtotal
|
48,449 | |||
|
Less
- Sublease rental agreements
|
(149 | ) | ||
|
Total
|
$ | 48,300 | ||
Rental
expense under operating leases of construction equipment, vehicles and office
space was $13,199 in 2009, $10,498 in 2008 and $7,492 in 2007.
[6] Income
Taxes
For the
years ended December 31, 2009, 2008 and 2007, the income (loss) before taxes,
consists of the following (in thousands):
|
U.S.
|
Foreign
|
|||||||||||
|
Operations
|
Operations
|
Total
|
||||||||||
|
2009
|
$ | 196,088 | $ | 9,052 | $ | 205,140 | ||||||
|
2008
|
(3,734 | ) | (16,116 | ) | (19,850 | ) | ||||||
|
2007
|
154,395 | - | 154,395 | |||||||||
72
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[6] Income
Taxes (continued)
The
provision for income taxes consists of the following (in
thousands):
|
Federal
|
State
|
Foreign
|
Total
|
|||||||||||||
|
2009
|
||||||||||||||||
|
Current
|
$ | 65,822 | $ | 9,737 | $ | 3,061 | $ | 78,620 | ||||||||
|
Deferred
|
(11,139 | ) | 506 | 92 | (10,541 | ) | ||||||||||
| $ | 54,683 | $ | 10, 243 | $ | 3,153 | $ | 68,079 | |||||||||
|
2008
|
||||||||||||||||
|
Current
|
$ | 54,811 | $ | 7,174 | $ | 1,289 | $ | 63,274 | ||||||||
|
Deferred
|
(7,732 | ) | (479 | ) | 227 | (7,984 | ) | |||||||||
| $ | 47,079 | $ | 6,695 | $ | 1,516 | $ | 55,290 | |||||||||
|
2007
|
||||||||||||||||
|
Current
|
$ | 61,198 | $ | 6,751 | $ | - | $ | 67,949 | ||||||||
|
Deferred
|
(9,593 | ) | (1,075 | ) | - | (10,668 | ) | |||||||||
| $ | 51,605 | $ | 5,676 | $ | - | $ | 57,281 | |||||||||
The table
below reconciles the difference between the statutory federal income tax rate
and the effective rate provided for income (loss) before income taxes in the
Consolidated Statements of Operations.
|
|
|||||
|
|
|||||
|
2009
|
2008
|
2007
|
|||
|
Statutory
federal income tax rate
|
35.0
|
% |
35.0
|
% |
35.0%
|
| State income taxes, net of federal tax benefit | 3.2 | (24.0 | ) | 2.6 | |
| Officer's Compensation | 0.3 | (6.6 | ) | - | |
| Impairment of goodwill and other intangible assets | - | (294.3 | ) | - | |
|
Other
|
(5.3
|
) |
11.4
|
(0.5)
|
|
| Effective tax rate |
33.2
|
% |
(278.5
|
) |
37.1%
|
73
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[6] Income
Taxes (continued)
The
following is a summary of the significant components of the deferred tax assets
and liabilities as of December 31, 2009 and 2008 (in thousands):
|
2009
|
2008
|
|||||||
|
Deferred Tax Assets
|
||||||||
|
Timing
of expense recognition
|
$ | 43,312 | $ | 34,898 | ||||
|
Construction
contract accounting
|
- | 1,002 | ||||||
|
Other,
net
|
(35 | ) | 2,384 | |||||
|
Deferred
tax assets
|
43,277 | 38,284 | ||||||
|
Deferred Tax Liabilities
|
||||||||
|
Intangible
assets, due primarily to purchase accounting
|
(55,231 | ) | (57,894 | ) | ||||
|
Fixed
assets, due primarily to purchase accounting
|
(51,125 | ) | (38,906 | ) | ||||
|
Construction
contract accounting
|
(13,707 | ) | (22,169 | ) | ||||
|
Joint
ventures - construction
|
(360 | ) | (3,987 | ) | ||||
|
Other
|
(461 | ) | (2,601 | ) | ||||
|
Deferred
tax liabilities
|
(120,884 | ) | (125,557 | ) | ||||
|
Net
deferred tax liability
|
$ | (77,607 | ) | $ | (87,273 | ) | ||
The net
deferred tax liability as of December 31, 2009 and 2008 is classified in the
Consolidated Balance Sheets based on when the future benefit (expense) is
expected to be realized as follows (in thousands):
|
2009
|
2008
|
|||||||
|
Current
deferred tax asset
|
$ | 1,370 | $ | 11,589 | ||||
| Long-term deferred tax liability | (78,997 | ) | (98,862 | ) | ||||
| $ | (77,607 | ) | $ | (87,273 | ) | |||
No
valuation allowance for deferred tax assets was recorded at December 31, 2009
since the Company believes it is more likely than not that all of the deferred
tax assets will be realized because they would be recoverable from taxes paid in
prior years.
In
general, it is the practice and intention of the Company to reinvest the
earnings of its non-U.S. subsidiaries in those operations. Generally,
such amounts become subject to U.S. taxation upon the remittance of dividends
and under certain other circumstances. As of December 31, 2009,
unremitted earnings of foreign subsidiaries, which have been or are intended to
be permanently invested, aggregated approximately $16.0
million. It is not practicable to estimate the amount of
deferred tax liability related to investments in these foreign
subsidiaries.
The
Company identified and reviewed potential tax uncertainties and determined that
the exposure to those uncertainties did not have a material impact on the
Company’s results of operations or financial condition as of December 31, 2009
and 2008.
74
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[7] Other
Assets, Other Long-term Liabilities and Other Income, Net
Other
Assets, Other Long-term Liabilities and Other Income, Net consist of the
following (in thousands):
Other
Assets
| 2009 | 2008 |
|
||||||||||
|
Mineral
reserves
|
$ |
|
12,814
|
$ |
|
12,850
|
|
|
||||
|
Deposits
|
3,090
|
|
-
|
|
|
|
||||||
|
Deferred expenses
|
1,903
|
1,432
|
|
|||||||||
|
Other
long term sale
|
|
1,473
|
|
1,556
|
|
|
||||||
| Land held for sale | - | 543 | ||||||||||
| $ | 19,280 | $ | 16,381 | |||||||||
|
|
||||||||||||
| Other Long-term Liabilities | ||||||||||||
| 2009 | 2008 | |||||||||||
| Pension liability | $ | 20,590 | $ | 27,829 | ||||||||
| Mineral royalties payable | 11,325 | 11,360 | ||||||||||
| Deferred purchase price | 11,200 | 8,000 | ||||||||||
| Subcontractor insurance program | 7,787 | 36,558 | ||||||||||
| Employee benefit related liabilities | 2,053 | 2,211 | ||||||||||
| Deferred lease incentive | 1,697 | 1,726 | ||||||||||
| Other | 2,392 | 1,475 | ||||||||||
| $ | 57,044 | $ | 89,159 | |||||||||
|
|
||||||||||||
| Other (Expense) Income, Net | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| Interest income | $ | 4,666 | $ | 12,898 | $ | 13,811 | ||||||
| Gain (loss) from land sales, net | (340 | ) | (638 | ) | 566 | |||||||
| Adjustment of investments to fair value | 39 | (2,721 | ) | - | ||||||||
| Gain on sale of property used in operations | 157 | 1,617 | 1,585 | |||||||||
| Bank fees | (1,494 | ) | (1,093 | ) | (683 | ) | ||||||
| Miscellaneous income (expense), net | (1,930 | ) | (504 | ) | 82 | |||||||
| $ | 1,098 | $ | 9,559 | $ | 15,361 | |||||||
[8] Employee
Benefit Plans
The
Company has a defined benefit pension plan that covers certain of its executive,
professional, administrative and clerical employees, subject to certain
specified service requirements. The plan is noncontributory and
benefits are based on an employee's years of service and "final average
earnings", as defined. The plan provides reduced benefits for early
retirement and takes into account offsets for social security
benefits. The Company also has an unfunded supplemental retirement
plan (“Benefit Equalization Plan”) for certain employees whose benefits under
the defined
75
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[8] Employee Benefit Plans
(continued)
benefit
pension plan were reduced because of compensation limitations under federal tax
laws. Effective June 1, 2004, all benefit accruals under the
Company’s pension plan and Benefit Equalization Plan were frozen; however, the
current vested benefit was preserved. Pension disclosure as presented
below includes aggregated amounts for both of the Company’s plans, except where
otherwise indicated.
The
Company historically has used the date of its fiscal year-end as its measurement
date to determine the funded status of the plan.
Net
periodic benefit cost for 2009, 2008 and 2007 is as follows (in
thousands):
|
2009
|
2008
|
2007
|
||||||||||
|
Interest
cost on projected benefit obligation
|
$ | 4,676 | $ | 4,658 | $ | 4,490 | ||||||
|
Expected
return on plan assets
|
(4,871 | ) | (4,799 | ) | (4,536 | ) | ||||||
|
Amortization
of net loss
|
1,776 | 1,468 | 2,261 | |||||||||
|
Net
periodic benefit cost
|
$ | 1,581 | $ | 1,327 | $ | 2,215 | ||||||
|
Actuarial
assumptions used to determine net cost:
|
||||||||||||
|
Discount
rate
|
6.29 | % | 6.41 | % | 5.86 | % | ||||||
|
Expected
return on assets
|
7.50 | % | 7.50 | % | 7.50 | % | ||||||
|
Rate
of increase in compensation
|
n.a.
|
n.a.
|
n.a.
|
|||||||||
The
expected long-term rate of return on assets assumption will remain at 7.50% for
2010. The expected long-term rate of return on assets assumption was
developed considering forward looking capital market assumptions and historical
return expectations for each asset class assuming the Company’s target asset
allocation and full availability of invested assets.
The
target asset allocation for the Company’s pension plan by asset category for
2010 and the actual asset allocation at December 31, 2009 and 2008 by asset
category are as follows:
|
Percentage
of Plan Assets at December 31,
|
||||||
|
Target
|
||||||
|
Allocation
|
||||||
|
Asset
Category
|
2010
|
2009
|
2008
|
|||
|
Equity
securities:
|
||||||
|
Domestic
|
60.0%
|
58.6%
|
65.8%
|
|||
|
International
|
15.0
|
14.2
|
14.7
|
|||
|
Fixed
income securities
|
25.0
|
27.2
|
19.5
|
|||
|
Total
|
100.0%
|
100.0%
|
100.0%
|
|||
76
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[8] Employee
Benefit Plans (continued)
The
target asset allocation was established to attempt to maximize returns with
consideration of the long-term nature of the obligations and to reduce the level
of overall market volatility through the allocation to fixed income
investments. During the year, the asset allocation is reviewed for
adherence to the target asset allocation and the portfolio of investments is
rebalanced periodically.
International
investments consist primarily of large capitalization equities for which fair
value is determined using quoted market prices. During 2007, the
domestic equity portfolio was transferred to funds of hedge funds, with the goal
of generating returns in excess of traditional equity funds. As of
December 31, 2009 and 2008, plan assets included approximately $33.8 million and
$30.3 million, respectively, of investments in funds of hedge funds which do not
have readily determinable fair values. The underlying holdings of the funds are
comprised of a combination of assets for which the estimate of fair value is
determined using information provided by fund managers. The fixed income
allocation comprises a high yield mutual fund which invests primarily in
corporate bonds with an average rating of B for which fair value is determined
using quoted market prices.
The
Company expects to contribute approximately $3.0 million to its defined benefit
pension plan in 2010.
Future
benefit payments under the plans are estimated as follows (in
thousands):
|
Amount
|
||||
|
2010
|
$ | 5,123 | ||
|
2011
|
5,203 | |||
|
2012
|
5,295 | |||
|
2013
|
5,478 | |||
|
2014
|
5,632 | |||
|
2015
- 2019
|
29,672 | |||
The
following tables provide a reconciliation of the changes in the fair value of
plan assets and plan benefit obligations during the two-year period ended
December 31, 2009, and a summary of the funded status as of December 31, 2009
and 2008 (in thousands):
77
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[8] Employee
Benefit Plans (continued)
|
|
|
|||||||||
|
Change
in Fair Value of Plan Assets
|
2009 | 2008 | ||||||||
|
Balance
at beginning of year
|
$ | 46,082 | $ | 66,343 | ||||||
|
Actual
return on plan assets
|
9,247 | (19,265 | ) | |||||||
|
Company
contribution
|
6,949 | 3,344 | ||||||||
|
Benefit
payments
|
(4,563 | ) | (4,340 | ) | ||||||
|
Balance
at end of year
|
$ | 57,715 | $ | 46,082 | ||||||
|
Change
in Benefit Obligations
|
||||||||||
|
Balance
at beginning of year
|
$ | 76,350 | $ | 74,638 | ||||||
|
Interest
cost
|
4,676 | 4,658 | ||||||||
|
Actuarial
loss (gain)
|
4,134 | 1,394 | ||||||||
|
Benefit
payments
|
(4,563 | ) | (4,340 | ) | ||||||
|
Balance
at end of year
|
$ | 80,597 | $ | 76,350 | ||||||
|
Funded
Status
|
||||||||||
|
Funded
status at December 31,
|
$ | (22,882 | ) | $ | (30,268 | ) | ||||
|
Amounts
recognized in Consolidated Balance Sheets consist of:
|
||||||||||
|
Current
liabilities
|
$ | (239 | ) | $ | (228 | ) | ||||
|
Long-term
liabilities
|
(22,643 | ) | (30,040 | ) | ||||||
|
Net
amount recognized in Consolidated Balance Sheets
|
$ | (22,882 | ) | $ | (30,268 | ) | ||||
|
Amounts
not yet reflected in net periodic benefit cost and
|
||||||||||
|
included
in accumulated other comprehensive loss:
|
||||||||||
|
Net
Actuarial loss
|
$ | (39,488 | ) | $ | (41,506 | ) | ||||
|
Accumulated
other comprehensive loss
|
(39,488 | ) | (41,506 | ) | ||||||
|
Cumulative
Company contributions in excess of net periodic benefit
cost
|
16,606 | 11,238 | ||||||||
|
Net
amount recognized in Consolidated Balance Sheets
|
$ | (22,882 | ) | $ | (30,268 | ) | ||||
The
estimated amount of the net accumulated loss that will be amortized from
accumulated other comprehensive loss into net period benefit cost in 2010 is
$2.5 million.
|
2009
|
2008
|
||
|
Actuarial
assumptions used to determine benefit obligation:
|
|||
|
Discount
rate
|
5.84%
|
6.29%
|
|
|
Rate
of increase in compensation
|
n.a.
|
n.a.
|
|
|
Measurement
date
|
December
31
|
December
31
|
78
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[8] Employee
Benefit Plans (continued)
The
following table sets forth the plan assets at fair value as of December 31, 2009
(in thousands) in accordance with the fair value hierarchy described in Note
3:
|
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Observable Inputs
|
Significant
Unobservable Inputs
|
Total
Value
|
|||||||||||||
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
||||||||||||||
|
Cash
and cash equivalents
|
$ | 402 | $ | - | $ | - | $ | 402 | ||||||||
|
Fixed
Income
|
15,269 | - | - | 15,269 | ||||||||||||
|
International
Mutual Funds
|
8,219 | - | - | 8,219 | ||||||||||||
|
Hedge
Fund Investments
|
||||||||||||||||
|
Cash
|
2,469 | - | - | 2,469 | ||||||||||||
|
Long-Short
Equity Fund
|
- | - | 14,574 | 14,574 | ||||||||||||
|
Event
Driven Fund
|
- | - | 4,488 | 4,488 | ||||||||||||
|
Distressed
Credit
|
- | - | 8,651 | 8,651 | ||||||||||||
|
Multi-Strategy
Fund
|
- | - | 3,643 | 3,643 | ||||||||||||
|
Total
|
$ | 26,359 | $ | - | $ | 31,356 | $ | 57,715 | ||||||||
Fund
strategies seek to capitalize on inefficiencies identified across different
asset classes or markets.
Hedge fund strategy types include long-short, event driven,
multi-strategy and distressed credit.
The table
below sets forth a summary of changes in the fair value of the Level 3 assets
for the year ended December 31, 2009 (in thousands):
|
Hedge
Fund Investments
|
||||
|
Balance,
December 31, 2008
|
$ | 25,026 | ||
|
Realized
losses
|
(1,174 | ) | ||
|
Unrealized
gains
|
4,685 | |||
|
Purchases,
sales, issuances, and settlements (net)
|
2,819 | |||
|
Balance,
December 31, 2009
|
$ | 31,356 | ||
The net
actuarial gain arising during the period, netted against the amortization of the
previously existing actuarial loss during the period, resulted in net other
comprehensive income of $2.0 million in 2009, a net other comprehensive loss of
$24.0 million in 2008 and net other comprehensive income of $6.2 million in
2007. Other comprehensive loss attributable to a change in the
unfunded projected benefit obligation amounted to a net increase of $23.7
million recognized in prior years. The cumulative net amount of $39.5
million represents the excess of the projected benefit obligations of the
Company’s pension plans over the fair value of the plans’ assets as of December
31, 2009, compared to a $16.6 million pension asset previously
recognized. The net amount of $22.9 million is
79
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[8] Employee
Benefit Plans (continued)
reflected
as a liability as of December 31, 2009 (see above) with the offset being a
reduction in stockholders’ equity. Adjustments to the amount of this
pension liability will be recorded in future years, as required, based upon
periodic re-evaluation of the funded status of the Company’s pension
plans.
The
Company’s plans have benefit obligations in excess of the fair value of the
plans’ assets. The following table provides information relating to
each of the plans’ benefit obligations compared to the fair value of its assets
as of December 31, 2009 and 2008 (in thousands):
|
2009
|
2008
|
|||||||||||||||||||||||
|
Benefit
|
Benefit
|
|||||||||||||||||||||||
|
Pension
|
Equalization
|
Pension
|
Equalization
|
|||||||||||||||||||||
|
Plan
|
Plan
|
Total
|
Plan
|
Plan
|
Total
|
|||||||||||||||||||
|
Projected
benefit obligation
|
$ | 77,449 | $ | 3,148 | $ | 80,597 | $ | 73,315 | $ | 3,035 | $ | 76,350 | ||||||||||||
|
Accumulated
benefit obligation
|
77,449 | 3,148 | 80,597 | 73,315 | 3,035 | 76,350 | ||||||||||||||||||
|
Fair
value of plan assets
|
57,715 | - | 57,715 | 46,082 | - | 46,082 | ||||||||||||||||||
|
Projected
benefit obligation
|
||||||||||||||||||||||||
|
greater
than fair value of
|
||||||||||||||||||||||||
|
plan
assets
|
19,734 | 3,148 | 22,882 | 27,233 | 3,035 | 30,268 | ||||||||||||||||||
|
Accumulated
benefit obligation
|
||||||||||||||||||||||||
|
greater
than fair value of
|
||||||||||||||||||||||||
|
plan
assets
|
$ | 19,734 | $ | 3,148 | $ | 22,882 | $ | 27,233 | $ | 3,035 | $ | 30,268 | ||||||||||||
The
Company has a contributory Section 401(k) plan which covers its executive,
professional, administrative and clerical employees, subject to certain
specified service requirements. The 401(k) expense provision
approximated $4.3 million in 2009, $4.8 million in 2008 and $3.7 million in
2007. The Company’s contribution is based on a non-discretionary
match of employees’ contributions, as defined.
The
Company has an incentive compensation plan for key employees which is generally
based on the Company’s achievement of a certain level of profit.
The
Company also contributes to various multi-employer union retirement plans under
collective bargaining agreements which provide retirement benefits for
substantially all of its union employees. The aggregate amounts
provided in accordance with the requirements of these plans were approximately
$26.0 million in 2009, $30.6 million in 2008, and $25.9 million in 2007. The
Multi-employer Pension Plan Amendments Act of 1980 defines certain employer
obligations under multi-employer plans. Information regarding union
retirement plans is not available from plan administrators to enable the Company
to determine its share of any unfunded vested liabilities.
Under the
Employee Retirement Income Security Act, a contributor to a multi-employer plan
is liable, upon termination or withdrawal from a plan, for its proportionate
share of a plan’s unfunded vested liability. The Company currently
has no intention of withdrawing from any of the multi-employer pension plans in
which it participates.
80
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments
The
Company and certain of its subsidiaries are involved in litigation and are
contingently liable for commitments and performance guarantees arising in the
ordinary course of business. The Company and certain of its clients have made
claims arising from the performance under its contracts. The Company recognizes
certain significant claims for recovery of incurred cost when it is probable
that the claim will result in additional contract revenue and when the amount of
the claim can be reliably estimated. As of December 31, 2009, several matters
were in the litigation and dispute resolution process. The following discussion
provides a background and current status of these matters.
Tutor-Saliba-Perini
Joint Venture vs. Los Angeles MTA Matter
During
1995, a joint venture, Tutor-Saliba-Perini, (“Joint Venture”), in which the
Company and Tutor-Saliba were partners, filed a complaint in the Superior Court
of the State of California for the County of Los Angeles against the Los Angeles
County Metropolitan Transportation Authority (“LAMTA”), seeking to recover costs
for extra work required by LAMTA in connection with the construction of certain
tunnel and station projects. In 1999, LAMTA countered with civil claims under
the California False Claims Act (“CFCA”) against the Joint Venture, Tutor-Saliba
and the Company jointly and severally (together, “TSP”). In September, 2008,
Tutor-Saliba merged with the Company.
Claims
concerning the construction of LAMTA projects were tried in 2001. During the
trial, based on the Joint Venture’s alleged failure to comply with the court’s
discovery orders, the judge issued terminating sanctions that resulted in a
substantial judgment against TSP.
TSP
appealed and, in January 2005, the State of California Court of Appeal reversed
the trial court’s entire judgment and found that the trial court judge had
abused his discretion, had violated TSP’s due process rights, and had imposed
impermissibly overbroad terminating sanctions. The Court of Appeal also directed
the trial court to dismiss LAMTA’s claims that TSP had violated the Unfair
Competition Law (“UCL”) because LAMTA lacked standing to bring such a claim, and
remanded the Joint Venture’s claims against LAMTA for extra work required by
LAMTA and LAMTA’s counterclaim under the CFCA against TSP to the trial court for
further proceedings, including a new trial.
In 2006,
upon remand, the trial court allowed LAMTA to amend its cross-complaint to add
the District Attorney as a party in order to have a plaintiff with standing to
assert a UCL claim, and allowed a UCL claim to be added. The court also ordered
that individual issues of the case be tried separately.
In
December 2006, in the trial of the first issue, which arose out of a 1994 change
order involving a Disadvantaged Business Enterprise (“DBE”) subcontractor
pass-through claim, the jury found that the Joint Venture had submitted two
false claims for payment and had breached its contract with LAMTA and awarded
LAMTA $111,651 in direct damages. The court has awarded penalties of $10,000 for
each of the two claims and will treble the damages awarded by the
Jury. A final judgment with respect to these claims will not be
entered until the entire case has been resolved and is subject to appeal. In
addition, the court will determine whether there were any violations of the UCL,
but has deferred its decision on those claims until the case is completed. Each
such violation may bear a penalty of up to $2,500.
In
February 2007, the court granted a Joint Venture motion and precluded LAMTA in
future proceedings from presenting its claims that the Joint Venture breached
its contract and violated the CFCA by allegedly “frontloading” the so-called “B
Series” contracts. The court ordered further briefing on LAMTA’s UCL claim on
this issue.
81
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
In March
2009, the court ruled that LAMTA could not proceed with its breach of contract
claims unless it can prove the contracts are constitutional under a “strict
scrutiny” standard. LAMTA has informed the court it will drop the contract
claims. The court also ruled that LAMTA may proceed with a trial on
its DBE false claims.
In a
series of hearings commencing on November 23, 2009, the court ruled on a number
of TSP’s and LAMTA’s Motions in limine. Subsequently, LAMTA has
agreed to concede to TSP’s entitlement to be paid on five of TSP’s
claims
and to the amount requested by TSP with respect to four of the
five. LAMTA will contest the amount of the fifth
claim. LAMTA also abandoned its alleged false claim related to
delay.
Trial is
expected to start in March 2010.
The
ultimate financial impact of the lawsuit is not yet
determinable. Therefore, no provision for loss, if any, has been
recorded in the financial statements.
Perini/Kiewit/Cashman
Joint Venture-Central Artery/Tunnel Project Matter
Perini/Kiewit/Cashman
Joint Venture (“PKC”) a joint venture in which the Company holds a 56% interest
and is the managing partner, is currently pursuing a series of claims,
instituted at different times over the course of the past ten years, for
additional contract time and/or compensation against the Massachusetts Highway
Department (“MHD”) for work performed by PKC on a portion of the Central
Artery/Tunnel project in Boston, Massachusetts. During construction, MHD ordered
PKC to perform changes to the work and issued related direct cost changes with
an estimated value, excluding time delay and inefficiency costs, in excess of
$100 million. In addition, PKC encountered a number of unforeseen conditions
during construction that greatly increased PKC’s cost of performance. MHD has
asserted counterclaims for liquidated damages.
Certain
of PKC’s claims have been presented to a Disputes Review Board, or DRB, which
consists of three construction experts chosen by the parties. To date, the
various DRB panels have issued eight awards and several interim decisions on
PKC’s claims. The second panel (the “Second DRB”) ruled on a binding basis that
PKC is entitled to five compensation awards, less credits, totaling $57.2
million for delays, impacts and inefficiencies caused by MHD to certain of PKC’s
work. The first three such awards, totaling $34.5 million, have been confirmed
by the Superior Court and were not appealed. The other two awards, totaling
$22.7 million, were confirmed by the Superior Court in January 2009 and have
been appealed by MHD. The January 2009 Superior Court decision also held that
PKC was entitled to post-award, pre-judgment interest on those two awards,
albeit at a lower rate than awarded by the Second DRB.
The third
panel (the “Third DRB”) made three awards. The first is an award to PKC in the
amount of $50.7 million for further delays, impacts and inefficiencies. Of that
total award, $41.1 million was issued as a binding arbitration award, and the
remaining $9.6 million was issued as a non-binding recommendation. The second
award is in the amount of $5.8 million for delay damages. Of that amount, $3.3
million was issued as a binding arbitration award, and $2.5 million was issued
as a non-binding recommendation. MHD has appealed both of these
awards. The third award is a binding arbitration award, denying PKC’s
$3.7 million claim for further compensable delays. That award was not
appealed by PKC.
The Third
DRB also issued three interim decisions. The first interim decision held that
PKC’s claim for delays, on which it later issued an award, is not barred or
limited by the 10% markups for overhead and profit on change
orders.
82
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
The
second interim decision held that the date of the project’s substantial
completion, for purposes of calculating any liquidated damages, is August 23,
2003. The third interim decision was issued in which the Third DRB decided which
portions of PKC’s claims are subject to binding arbitration. MHD has
appealed that decision.
It is
PKC’s position that the remaining claims to be decided by the DRB on a binding
basis have an anticipated value of approximately $28 million, plus
interest. PKC also claims it is due interest on the amounts awarded
by the Third DRB. MHD disputes that the remaining claims before the
DRB may be decided on a binding basis, and further disputes that any interest is
due. Hearings before the DRB occurred throughout 2009 and are scheduled to
continue during 2010.
Management
has made an estimate of the total anticipated cost recovery on this project and
it is included in revenue recorded to date. To the extent new facts
become known or the final cost recovery included in the claim settlement varies
from the estimate, the impact of the change will be reflected in the financial
statements at that time.
Investigation
by U.S. Attorney for Eastern District of New York
In 2001,
the Company received a grand jury subpoena for documents in connection with an
investigation by the U.S. Attorney’s Office for the Eastern District of New
York. The investigation concerns contracting between the Company’s civil
division and disadvantaged, minority, and women-owned businesses in the New York
City area construction industry. The Company has cooperated with the
U.S. Attorney’s Office in the investigation and produced documents pursuant to
the subpoena in 2001 and 2002. In August 2006 and May 2007, the
Company received additional grand jury subpoenas for documents in connection
with the same investigation. The Company subsequently produced
documents pursuant to those subpoenas, and continues to cooperate in the
investigation. In December 2008, the Company was informed by
the U.S. Attorney’s Office that a determination had been made not to bring any
criminal charges against the Company in connection with the investigation, and
that the matter would be best resolved by a purely civil
settlement.
On
January 13, 2009, an indictment stemming from the investigation was unsealed in
the Eastern District of New York. The indictment alleges fraud
charges against two former employees of the Company – a former president of the
civil division and a former procurement manager in the civil
division. Both of these employees left the Company nearly three years
ago, and neither is currently associated with Tutor Perini.
The
Company and the U.S. Attorney’s Office entered a civil settlement agreement on
October 30, 2009, that resolves all outstanding allegations relating to the
Company and its civil division. Under the agreement, the Company paid
$9.75 million to the U.S. Justice Department. This amount was fully
provided for in prior years and therefore did not have a significant impact on
the Company’s 2009 results of operations.
By letter
dated December 22, 2009, the Federal Highway Administration indicated that the
Company is presently responsible; that the initiation of suspension and
debarment action is not required to protect the public interest; and that the
Company is eligible to participate in federally funded projects and
programs.
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 (the “Project”) included the complete
83
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
reconstruction
and/or new construction of fourteen bridges and numerous retaining and barrier
walls; reconfiguration of the existing interchange with the addition of three
flyover bridges; widening and resurfacing of three miles of highway; and a
substantial amount of related work. The Company substantially completed the
Project in January 2004, and its work on the Project was accepted by the NYSDOT
as finally complete in February 2006.
Because
of numerous design errors, undisclosed utility conflicts, lack of coordination
with local agencies and other interferences for which the Company believes that
the NYSDOT is responsible, the Company suffered impacts
involving
every structure. As a result, the Company incurred significant additional costs
in completing its work and suffered a significantly extended Project
schedule.
The
initial Project schedule contemplated substantial completion in 28 months from
the Project commencement in September 2000. Ultimately, the time for substantial
completion was extended by the NYSDOT by 460 days. While the Project was under
construction, the NYSDOT made $8.5 million of payments to the Company as
additional compensation for its extended overhead costs.
The
Company sought approximately $33 million of additional relief from the NYSDOT
for the delay and extra work it experienced. The NYSDOT, however, declined to
grant the Company any further relief. Moreover, the NYSDOT stated it will take
an adjustment of approximately $2.5 million of the $8.5 million it previously
paid to the Company for its extended overhead costs. Since the NYSDOT has
accepted the Company’s work as complete, it must close out the Project contract.
The Company is actively pursuing the closeout of this contract with
NYSDOT.
After the
closeout of the Project contract by the NYSDOT, the Company had intended to file
a formal claim with the NYSDOT for the delay and extra work it experienced, as
well as for appropriate portions of the adjustment taken by the NYSDOT to the
amounts previously paid to the Company for its extended overhead costs, as a
condition precedent to filing an action in the New York Court of Claims.
However, as a result of a meeting with the NYSDOT on January 26, 2009, the
NYSDOT has indicated a willingness to engage in settlement negotiations to
resolve all claims. On April 20, 2009, the Company made a
presentation of its position to the NYSDOT regarding the additional relief it
seeks from the NYSDOT. To date the parties have been unable to reach
a settlement agreement.
Management
has made an estimate of the total anticipated cost recovery on this project and
it is included in revenue recorded to date. To the extent new facts
become known or the final cost recovery included in the claim settlement varies
from the estimate, the impact of the change will be reflected in the financial
statements at that time.
Queensridge
Matter
Perini
Building Company, Inc. (“PBC”) was the general contractor for the construction
of One Queensridge Place, a condominium project in Las Vegas, Nevada. The
developer of the project, Queensridge Towers, LLC / Executive Home Builders,
Inc. (“Queensridge”), has failed to pay PBC for work which PBC and its
subcontractors performed on the project.
The
subcontractors have brought claims against PBC and have filed liens on the
property in the amount of approximately $25 million. PBC has also filed a lien
on the property in the amount of $24 million, representing unpaid contract
balances and additional work. PBC’s lien has been reduced to
approximately $19.2 million, such reduction based on duplication with
independent subcontractor liens, matters that have been settled, and other
matters subject to executed liquidating agreements. The subordination
of PBC’s lien to a pre-existing security
84
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
interest
of the lender as to amounts over $11.2 million is a disputed issue.
Queensridge
has alleged that PBC and the subcontractors are not due the amounts which were
sought and that it has backcharges from incomplete and defective
work.
Through
an action in the Clark County District Court in Nevada, PBC has asked the court
to consolidate all of the claims into one proceeding and to compel Queensridge
and the subcontractors to participate in binding arbitration of
all of
those claims per the requirements of the contract. The court advised that it
would not act on the Motion to Compel Arbitration until it ruled on several
other pending motions, including cross motions for spoliation.
Evidentiary
hearings on spoliation were held and have been concluded. The court
denied Queensridge’s request for terminating sanctions and granted PBC’s motion
to compel arbitration with Queensridge and those subcontractors whose cases are
consolidated with the subject case. The court found no evidence of
intentional spoliation by PBC, no evidence that anything relevant or prejudicial
was lost, and no malice or mal-intent by PBC or its
counsel. Queensridge brought a motion for
reconsideration. PBC anticipates that motion will be
denied.
Accordingly,
PBC should now proceed with the merits of the dispute through arbitration. To
date, efforts by the parties to settle the matter have not been
successful.
Management
has made an estimate of the total anticipated cost recovery on this project and
it is included in revenue recorded to date. To the extent new facts
become known or the final cost recovery included in the claim settlement varies
from the estimate, the impact of the change will be reflected in the financial
statements at that time.
Gaylord
Hotel and Convention Center Matter
In 2005,
Gaylord National, LLC (“Gaylord”), as Owner, and Perini Building Company, Inc.
/Tompkins Builders, Joint Venture (“PTJV”), as Construction Manager, entered
into a contract to construct the Gaylord National Resort and Convention Center
(the “Project”) in Maryland. PBC is the managing partner of the joint venture.
The
Project is complete, and as part of its settlement with Gaylord reached in
November 2008, PTJV agreed to perform additional punchlist and related work
valued at $3 million. PTJV also agreed to pay all subcontractors and defend all
claims and lien actions by them relating to the Project.
PTJV
closed out most major subcontracts in 2009, including those with Pierce
Associates, Inc., Banker Steel Company, Inc., and MTR Electrical Construction,
LLC. Resolution of the issues with the remaining subcontractors may require
mediation, arbitration and/or trial. PTJV is pursuing an insurance claim related
to Banker Steel’s work. In November 2009, PTJV filed suit against Factory Mutual
Insurance Co. (“FM”) in the Maryland federal district court alleging FM breached
the insurance contracts and for declaratory judgment with respect to the
insurance coverage. Pursuant to a separate agreement with Banker Steel,
PTJV will share in any net recovery resulting from Banker Steel’s lawsuit
against its supplier which was filed in February 2010 and is pending in the
Virginia federal court.
Management
has made an estimate of the total anticipated cost recovery on this project and
it is included in revenue recorded to date. To the extent new facts become
known or the final cost recovery included in the claim settlement varies from
the estimate, the impact of the change will be reflected in the financial
statements at that time.
85
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
UCLA
Westwood Replacement Hospital Matter
This
project, which was undertaken by the joint venture of Tutor-Saliba Corporation
and Perini Corporation (“TSP”), involved the construction of a new hospital on
the University of California, Los Angeles campus. The project Owner is the
University of California at Los Angeles (the “Owner”). The project has been
completed.
The
project experienced significant delays, impacts and inefficiencies which TSP
maintains were the result of Owner
caused
delays and design deficiencies. TSP has submitted a claim to the Owner that
includes a delay claim which, under the contract between TSP and the Owner, is
compensable at the rate of $25,000 per day, and a labor and material escalation
claim in the amount of $800,000.
TSP has
filed a lawsuit, in Los Angeles Superior Court, against the Owner on behalf of
TSP and its subcontractors. TSP is seeking $36 million on behalf of itself and
$171 million on behalf of its subcontractors. The Owner has filed a Cross
Complaint against TSP, the Company, Tutor-Saliba Corporation, Helix Electric
Inc., and others (together “Tutor Perini Defendants”) alleging
contract breach and violation of the California False Claims Act. Helix
Electric, Inc. (“Helix”) was a subcontractor to TSP. The Owner is
seeking $62.2 million for contract breach from the Tutor Perini Defendants; $4.3
million, trebled, for false claims from the Tutor Perini Defendants and Helix;
and other relief. The subcontractors have filed lawsuits against TSP seeking the
aforementioned $171 million in what are essentially pass through claims to the
Owner. Pursuant to the provisions of TSP’s agreements with its
subcontractors, TSP is not responsible to pay subcontractors for Owner-caused
damages.
The Owner
has audited the books and records of TSP and its
subcontractors. Global negotiations, originally scheduled for May
2009, did not take place. The court has ordered limited informal
discovery under “Mediation Privilege”; ordered the Owner to produce its records;
granted TSP’s motion to lift the discovery stay with respect to third parties
(e.g., Owner’s Architect, Construction Manager and Inspectors); and will allow
limited depositions prior to mediation.
All cases
have been deemed related and consolidated. The consolidated cases
will be referred to as “In Re UCLA Westwood Replacement Hospital
Cases.” TSP is designated lead plaintiff.
This
matter is currently in the discovery phase limited to prepare for
mediation. Mediation is scheduled to start on April 26,
2010.
Management
has made an estimate of the total anticipated cost recovery on this project and
it is included in revenue recorded to date. To the extent new facts
become known or the final cost recovery included in the claim settlement varies
from the estimate, the impact of the change will be reflected in the financial
statements at that time.
Palomar
Pomerado Health Matter
Rudolph
and Sletten (“R&S”) was construction manager for Palomar Pomerado Health
(“PPH”) regarding its capital expansion program commencing in 2003 through the
end of 2009. Portions of the work were terminated for convenience by
PPH in 2008. PPH audited R&S’ books and records and made an
unsubstantiated claim for approximately $5 million in alleged inappropriate
billings. R&S reviewed its billings, corrected certain miscoded billings and
submitted revised billings. The adjustment by R&S was less than
$70,000. R&S is evaluating whether or not PPH wrongfully
terminated R&S’s contract for convenience and wrongfully awarded the balance
of the
86
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
contract
to another construction manager/contractor.
To date,
attempts by the parties to achieve a negotiated resolution have been
unsuccessful. On December 10, 2009, PPH filed a lawsuit, in Superior
Court of the State of California for the County of San Diego, against
R&S. The complaint includes claims for breach of contract, civil
fraud and negligent misrepresentation. R&S intends to file a cross-complaint
against PPH. The ultimate financial impact of the lawsuit is not yet
determinable. Therefore, no provision for loss, if any, has been
recorded in the financial statements.
Fontainebleau
Matter
Desert
Plumbing & Heating Co. (“DPH”), a wholly owned subsidiary of the Company,
was the plumbing and mechanical subcontractor on the Fontainebleau Project in
Las Vegas (the “Project”). The Project is a hotel/casino complex with
approximately 3,800 rooms.
The
Project owner is Fontainebleau Las Vegas, LLC (“Fontainebleau”) and an
owner-controlled contracting company, Turnberry West Construction, Inc.
(“Turnberry”), is the general contractor. DPH has four contracts on the
Project: one with the Fontainebleau, one with Turnberry and two with other
Turnberry subcontractors (collectively the “Contracts”).
In April
2009, Turnberry and Fontainebleau failed to honor DPH’s March payment
application. DPH stopped work on May 13, 2009, pursuant to an earlier statutory
stop work notice. Other subcontractors stopped work and, by June 2009, the
Project was shut down. The overall Project is approximately 70%
complete.
In June
2009, Fontainebleau filed for bankruptcy protection, under Chapter 11 of the U.
S. Bankruptcy Code, in the Southern District of
Florida. Fontainebleau is headquartered in Miami,
Florida.
DPH has
filed liens in Nevada for approximately $42 million, representing its
unreimbursed costs to date and lost profits, including anticipated profits;
other unaffiliated subcontractors have filed liens. On June 17, 2009, DPH filed
suit against Turnberry, in the 8
th
Judicial District Court, Clark County, Nevada, seeking damages based on contract
theories.
The
bankruptcy court has ruled that the subcontractors cannot make a combined credit
bid to purchase the property. A lender group initiated an action
against the mechanics lien holders, including DPH, seeking, among other things,
a ruling that the lenders have priority over the mechanics lien
holders. A property auction took place on January 21,
2010. As a result of the court ordered auction, Icahn Nevada Gaming
Acquisition LLC (“Icahn Nevada”) acquired clear and free title to the Project in
exchange for approximately $156.2 million. The first $51 million of that amount
will go to satisfy the Debtor in Possession (“DIP”) financing. DPH and
other lien holders have filed appeals with respect to portions of the DIP
financing. The remainder of Ichan Nevada’s purchase price will be set
aside for the other creditors of the bankruptcy estate in order of
seniority. The Icahn Nevada acquisition is scheduled to close in
February 2010.
Management
has made an estimate of the total anticipated recovery on this project and it is
included in revenue recorded to date. To the extent new facts become
known or the final recovery included in the claim varies from the estimate, the
impact of the change will be reflected in the financial statements at that
time.
87
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
Shareholder
Litigation
Isham
and Rollman Securities Litigation Matters
Two
putative class actions were filed in the U.S. District Court for the District of
Massachusetts on behalf of
individuals
who purchased the Company’s stock between November 2, 2006 and January 17, 2008,
alleging securities fraud violations against the Company and its executives
Ronald N. Tutor, Robert Band, Michael E. Ciskey and Kenneth R. Burk
(collectively, the “Isham/Rollman Individual Defendants”). The first lawsuit was
filed on August 18, 2008, by an individual named William B. Isham. On September
11, 2008, an individual named Marion Rollman filed the second
lawsuit.
In both
cases, the plaintiffs claimed that the Company and the Isham/Rollman Individual
Defendants violated sections 10(b) and 20(a) of the 1934 Exchange Act, as well
as the SEC’s Rule 10b-5. The complaints allege generally that the defendants
purportedly made material misrepresentations or omissions in press releases and
SEC filings regarding the future prospects for Las Vegas construction projects.
The plaintiffs claim that the alleged misrepresentations or omissions had the
effect of artificially inflating the value of the Company’s stock. Plaintiffs
further alleged that stock sales by the Isham/Rollman Individual Defendants
prior to disclosures related to the developer of one of the Las Vegas projects
support the claims that the defendants misrepresented or omitted material facts
regarding the future prospects of these projects. Plaintiffs sought
certification of the matter as a class action, and damages allegedly incurred by
the Company’s shareholders who had purchased stock during the putative class
period. On October 20, 2008, two pension funds, the Iron Workers District
Council, Southern Ohio & Vicinity Pension Trust and the Operating Engineers
Construction Industry and Miscellaneous Pension Fund, moved to consolidate the
two cases and to be appointed lead plaintiff under the Private Securities
Litigation Reform Act (“PSLRA”). The court granted that motion on December 10,
2008. The parties agreed to a stipulated scheduling order, which provided that
plaintiffs were to file a consolidated amended complaint by February 9, 2009 and
Defendants were to file any motions to dismiss by March 26, 2009. The
consolidated amended complaint repeated the allegations and counts from the
initial complaints, while adding additional factual allegations regarding
financial difficulties with The Cosmopolitan Resort and Casino project in Las
Vegas.
Defendants
filed motions to dismiss on April 17, 2009, which were granted by the court on
October 7, 2009. Thereafter, following the parties’ execution of a
Notice Not to Replead and Stipulation of Dismissal, the court filed its Order of
Dismissal with Prejudice on November 30, 2009.
Adams
Derivative Lawsuit
On
January 28, 2009, an individual named Kathy Adams, who is allegedly a holder of
the Company’s common stock, sent the Company’s Board of Directors a letter
demanding that the Board commence an investigation of potential claims against
certain current or former officers and directors of the Company for alleged
breaches of their fiduciary duties owed to the Company, resulting from alleged
failures to disclose purported problems with the Company’s Las Vegas
construction projects. The Company’s Board of Directors voted to form
a Special Litigation Committee (“SLC”) to investigate Adams’
allegations. That action was communicated to Adams’ counsel on April
27, 2009. The SLC retained independent counsel to conduct the
investigation.
The SLC’s
independent counsel has concluded its investigation, deciding that it is not in
the Company’s interest to
88
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[9] Contingencies
and Commitments (continued)
pursue a
claim based on Adams’ demand. Further activity in this matter will
depend on whether Adams re-files her complaint.
[10] Capital
Stock
(a) Common
Stock
On
September 8, 2008, the Company’s shareholders approved an increase in the number
of authorized shares of common stock from 40 million shares to 75 million
shares. On the same day, the Company acquired all of the outstanding
shares of Tutor-Saliba, a privately-held California-based construction company,
in exchange for 22,987,293 shares of the Company’s common
stock. These shares are subject to certain liquidation restrictions
contained in a shareholders agreement between Mr. Tutor, the Company and other
former Tutor-Saliba shareholders.
(b) Common
Stock Repurchase Program
On
November 13, 2008, the Company’s Board of Directors authorized a program to
repurchase up to $100 million of the Company’s common stock over the then
following 12 months. On November 24, 2009, the Company’s Board of
Directors extended the program through March 31, 2010. Under the
terms of the program, the Company may repurchase shares in open market purchases
or through privately negotiated transactions. The Company expects to use cash on
hand to fund repurchases of its common stock. Stock repurchases will
be conducted in compliance with the safe harbor provisions of Rule 10b-18 under
the Securities Exchange Act of 1934, as amended. The timing and
amount of any repurchase will be based on management’s evaluation of market
conditions, business considerations and other factors. Repurchases
also may be made under 10b5-1 plans, which would permit common stock to be
purchased when the Company would otherwise be prohibited from doing so under
insider trading laws.
The share
repurchase program does not obligate the Company to repurchase any dollar amount
or number of shares of its common stock, and the program may be extended,
modified, suspended or discontinued at any time, at the Company’s
discretion. During 2008, the Company repurchased 2,003,398 shares
under the program for an aggregate purchase price of $31.8 million. There were
no repurchases made during 2009.
(c) Preferred
Stock
The
Company is authorized to issue 1,000,000 shares of preferred
stock. At December 31, 2009 and 2008, there were no preferred shares
issued and outstanding.
[11] Stock-Based
Compensation
(a) 2004
Stock Option and Incentive Plan
The
Company is authorized to grant up to 5,500,000 stock-based compensation awards
to key executives, employees and directors of the Company under the 2004 Stock
Option and Incentive Plan (the “Plan”). The Plan allows stock-based
compensation awards to be granted in a variety of forms, including stock
options, stock appreciation rights, restricted stock awards, unrestricted stock
awards, deferred stock awards and dividend equivalent rights. The
terms and conditions of the awards granted are established by the Compensation
Committee of the Company’s Board of Directors who also administers the
Plan.
The
Company recognized total compensation expense of $12.5 million, $12.1 million
and $14.4 million in 2009, 2008 and 2007, respectively, related to stock-based
compensation awards which is included in “General and Administrative Expenses”
in the Consolidated Statements of Operations. Income tax benefits of
$4.2 million, $4.6
89
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[11] Stock-Based
Compensation (continued)
(a) 2004
Stock Option and Incentive Plan (continued)
million
and $5.4 million in 2009, 2008 and 2007, respectively, have been recognized
relating to these awards. A total of 364,278 shares of common stock
are available for future grant under the Plan at December 31, 2009.
Restricted
Stock Awards
Restricted
stock awards generally vest subject to the satisfaction of service requirements
or the satisfaction of both service requirements and achievement of certain
pre-established pre-tax income performance targets. Upon vesting, each award is
exchanged for one share of the Company’s common stock. As of December
31, 2009, the Compensation Committee has approved the grant of an aggregate of
3,742,500 restricted stock awards to eligible
participants. During 2009, the Company granted 975,000
restricted stock units, including 750,000 restricted stock units for which a
grant date fair value cannot be determined currently because the related
performance targets for future years have not yet been established by the
Compensation Committee. During 2008 and 2007, the Company granted
1,122,500 and 50,000 restricted stock awards, respectively. The
awards granted in 2009, 2008 and 2007 had a weighted-average grant date fair
value of $20.71, $22.79 and $53.22, respectively. The grant date fair
value is determined based on the closing price of the Company’s common stock on
the date of grant.
The
Company recognized compensation expense of $9.8 million, $11.6 million and $14.4
million in 2009, 2008 and 2007, respectively, related to the restricted stock
awards which is included in “General and Administrative Expenses”. As
of December 31, 2009, there was $18.9 million of unrecognized compensation cost
related to the unvested awards which, absent significant forfeitures in the
future, is expected to be recognized over a weighted-average period of
approximately 3.5 years.
A summary
of restricted stock awards activity during the year ended December 31, 2009 is
as follows:
90
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[11] Stock-Based
Compensation (continued)
(a) 2004 Stock Option and Incentive
Plan
(continued)
|
Weighted-Average
|
Aggregate
|
|||||||||||
|
Number
|
Grant
Date
|
Intrinsic
|
||||||||||
|
of
Shares
|
Fair
Value
|
Value
|
||||||||||
|
Unvested,
January 1, 2009
|
1,797,501 | 26.26 | $ | 42,025,573 | ||||||||
|
Vested
|
(265,000 | ) | 33.86 | 8,972,900 | ||||||||
|
Granted
|
275,000 | 20.71 | 4,972,000 | |||||||||
|
Forfeited
|
(90,000 | ) | 29.17 | |||||||||
| 1,717,501 | 24.05 | 31,052,418 | ||||||||||
|
Approved
for grant
|
700,000 | (a) | 12,656,000 | |||||||||
|
Unvested,
December 31, 2009
|
2,417,501 |
n.a.
|
43,708,418 | |||||||||
|
(a)
|
Grant
date fair value cannot be determined currently because the related
performance targets for future years have not yet been established by the
Compensation Committee.
|
The
outstanding unvested awards at December 31, 2009 are scheduled to vest as
follows, subject where applicable to the achievement of performance
targets. As described above, certain performance targets are not yet
established.
|
|
|
||||||
|
Vesting
Date
|
Number
of Awards
|
|
|||||
| 2010 | 685,001 | ||||||
| 2011 | 225,000 | ||||||
| 2012 | 200,000 | ||||||
| 2013 | 1,157,500 | ||||||
| 2014 | 150,000 | ||||||
| Total | 2,417,501 | ||||||
Approximately
451,667 of the unvested awards will vest based on the satisfaction of service
requirements and 1,965,834 will vest based on the satisfaction of both service
requirements and the achievement of pre-tax income performance
targets. The aggregate fair value of restricted stock awards vested
in 2008 and 2007 was $11.8 million and $5.2 million, respectively.
Stock
Options
During
2009, the Company granted 750,000 stock options under the Plan to eligible
participants, including 600,000 options for which a grant date fair value cannot
be determined currently because the related performance targets for future years
have not yet been established by the Compensation Committee. The
exercise price of the options is equal to the closing price of the Company’s
common stock on the date the awards were made by the Compensation
Committee. The options vest in five equal annual installments from
2010 through 2014 upon the achievement of
91
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[11] Stock-Based
Compensation (continued)
(a) 2004 Stock Option and Incentive
Plan
(continued)
pre-tax
income performance targets as established by the Compensation
Committee. The options expire on May 28, 2019.
The
Company recognized compensation expense of $2.7 million in 2009 and $0.5 million
in 2008 related to stock option grants. No compensation expense
related to stock option grants was recognized in 2007. As of December
31, 2009, there was $7.5 million of unrecognized compensation cost related to
the outstanding options which, absent significant forfeitures in the future, is
expected to be recognized over a weighted-average period of approximately 3.6
years.
A summary
of stock option activity under the Plan during the year ended December 31, 2009
is as follows:
|
Weighted
Average
|
||||||||||||
|
Number
|
Grant
Date
|
Exercise
|
||||||||||
|
of
Shares
|
Fair
Value
|
Price
|
||||||||||
|
Outstanding
- January 1, 2009
|
805,000 | $ | 11.78 | $ | 20.68 | |||||||
|
Granted
|
150,000 | 9.98 | 20.33 | |||||||||
|
Forfeited
|
(20,000 | ) | 14.84 | 26.19 | ||||||||
|
Subtotal
|
935,000 | 11.42 | 20.51 | |||||||||
|
Approved
for grant
|
600,000 |
(a)
|
20.33 | |||||||||
|
Outstanding
- December 31, 2009
|
1,535,000 |
n.a.
|
20.44 | |||||||||
|
(a)
|
Grant
date fair value cannot be determined currently because the related
performance targets for future years have not yet been established by the
Compensation Committee.
|
Approximately
785,000 of the outstanding options will vest based on the satisfaction of
service requirements and 750,000 will vest based on the satisfaction of both
service requirements and the achievement of pre-tax income performance
targets.
The
outstanding options had an intrinsic value of approximately $1.8 million and a
weighted-average remaining contractual life of 9.1 years at December 31,
2009. None of the outstanding options were exercisable at December
31, 2009.
The fair
value of the initial tranche of the 2009 awards was determined using the
Black-Scholes-Merton option pricing model using the following key
assumptions:
| 2.65% | ||||
|
Expected
life of options
|
5.5 years
|
|||
|
Expected
volatility of underlying stock
|
51.11% | |||
|
Expected
quarterly dividends (per share)
|
$ | 0.00 | ||
92
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[11] Stock-Based
Compensation (continued)
(b) Special
Equity Incentive Plan
The
Company is authorized to grant up to 3,000,000 non-qualified stock options to
key executives, employees and directors of the Company under the Special Equity
Incentive Plan (the “Incentive Plan”). Options are granted at not
less than the fair market value on the date of grant, as defined, and generally
expire 10 years from the date of grant. No options were granted under the
Incentive Plan in 2009, 2008 or 2007. As of December 31, 2009, 29,000
options were outstanding and exercisable at a weighted-average exercise price of
$3.84. The outstanding options had an intrinsic value of
approximately $0.4 million and a weighted-average remaining contractual life of
0.6 years at December 31, 2009. In 2009, 7,500 stock options were
exercised with an intrinsic value of $0.1 million and a weighted average
exercise price of $4.50. There were no options exercised in
2008. The intrinsic value of options exercised in 2007 was $9.3
million. A total of 195,634 shares of common stock are available for
future grant under the Incentive Plan at December 31, 2009.
[12] Unaudited
Quarterly Financial Data
The
following table sets forth unaudited quarterly financial data for the years
ended December 31, 2009 and 2008
(in
thousands, except per share amounts):
| 2009 by Quarter | ||||||||||||||||
|
1st
|
2nd
|
3rd
|
4th
|
|||||||||||||
|
Revenues
|
$ |
|
1,518,282
|
$
|
1,382,748
|
$
|
1,168,769
|
$
|
1,082,167
|
|||||||
|
Gross
Profit
|
106,910
|
|
108,213
|
85,366
|
87,558
|
|
||||||||||
| Net Income |
|
38,981
|
|
38,897
|
$
|
26,684
|
$
|
32,499
|
||||||||
|
|
||||||||||||||||
|
Basic
earnings per common share
|
$ |
|
0.80
|
$
|
0.80
|
$
|
0.55
|
$
|
0.67
|
|||||||
| Diluted earnings per common share | $ | 0.80 | $ | 0.79 | $ | 0.54 | $ | 0.66 | ||||||||
| 2008 by Quarter | ||||||||||||||||
| 1st | 2nd | 3rd | 4th (a) | |||||||||||||
| Revenues | $ | 1,256,336 | $ | 1,388,387 | $ | 1,412,635 | $ | 1,602,928 | ||||||||
| Gross profit | 66,562 | 70,998 | 85,507 | 110,163 | ||||||||||||
| Net Income (loss) | 25,153 | 28,557 | 34,106 | (162,956 | ) | |||||||||||
| $ | 0.93 | $ | 1.05 | $ | 1.03 | $ | (3.29 | ) | ||||||||
| Basic earnings (loss) per common share | ||||||||||||||||
| $ | 0.91 | $ | 1.03 | $ | 1.01 | $ | (3.29 | ) | ||||||||
| Diluted earnings (loss) per common share | ||||||||||||||||
(a) The
net loss in the fourth quarter of 2008 includes an after-tax impairment charge
of $202.8 million, or $4.08 per diluted share, relating to goodwill and certain
intangible assets.
93
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[13] Business
Segments
During
2009, the Company’s chief operating decision maker was the Chairman and Chief
Executive Officer who decides how to allocate resources and assess performance
of the business segments. Generally, the Company evaluates
performance of its operating segments on the basis of income from operations and
cash flow.
During
2009 the Company completed a reorganization which resulted in the reallocation
of goodwill between reportable segments. Asset balances by reportable
segment have been restated for 2008 to reflect this reallocation. The
reorganization had no impact on comparability of assets in 2007 or the
comparability of operating results between reportable segments. The
following tables set forth certain business and geographic segment information
relating to the Company’s operations for each of the three years in the period
ended December 31, 2009 (in thousands).
|
Reportable
Segments
|
|||||||||||||||||||||||||
|
Management
|
Consolidated
|
||||||||||||||||||||||||
|
Building
|
Civil
|
Services
|
Totals
|
Corporate
|
Total
|
||||||||||||||||||||
|
2009
|
|||||||||||||||||||||||||
|
Revenues
|
$ | 4,484,937 | $ | 361,677 | $ | 305,352 | $ | 5,151,966 | $ | - | $ | 5,151,966 | |||||||||||||
|
Income
from Construction Operations
|
155,500 | 44,268 | 53,447 | 253,215 | (41,672 | ) |
(a)
|
211,543 | |||||||||||||||||
|
Assets
|
1,580,735 | 562,728 | 293,177 | 2,436,640 | 384,014 |
(b)
|
2,820,654 | ||||||||||||||||||
|
Capital
Expenditures
|
19,671 | 13,624 | 5 | 33,300 | 9,439 | 42,739 | |||||||||||||||||||
|
2008
|
|||||||||||||||||||||||||
|
Revenues
|
$ | 5,146,563 | $ | 310,722 | $ | 203,001 | $ | 5,660,286 | $ | - | $ | 5,660,286 | |||||||||||||
|
Income
(loss) from
|
|||||||||||||||||||||||||
|
Construction
Operations:
|
|||||||||||||||||||||||||
|
Before
Impairment Charge
|
151,797 | 28,115 | 41,459 | 221,371 | (22,139 | ) |
(a)
|
199,232 | |||||||||||||||||
|
Impairment
Charge
|
(197,627 | ) | (6,000 | ) | (20,851 | ) | (224,478 | ) | - | (224,478 | ) | ||||||||||||||
|
After
Impairment Charge
|
(45,830 | ) | 22,115 | 20,608 | (3,107 | ) | (22,139 | ) | (25,246 | ) | |||||||||||||||
|
Assets (c)
|
1,743,547 | 602,436 | 178,201 | 2,524,184 | 548,894 |
(b)
|
3,073,078 | ||||||||||||||||||
|
Capital
Expenditures
|
20,490 | 18,359 | 2,309 | 41,158 | 53,050 | 94,208 | |||||||||||||||||||
|
2007
|
|||||||||||||||||||||||||
|
Revenues
|
$ | 4,248,814 | $ | 234,778 | $ | 144,766 | $ | 4,628,358 | $ | - | $ | 4,628,358 | |||||||||||||
|
Income
(Loss) from
|
|||||||||||||||||||||||||
|
Construction
Operations
|
127,426 | 12,991 | ) | 49,402 | 163,837 | (22,856 | ) |
(a)
|
140,981 | ||||||||||||||||
|
Assets
|
995,303 | 181,798 | 23,697 | 1,200,798 | 453,317 |
(b)
|
1,654,115 | ||||||||||||||||||
|
Capital
Expenditures
|
19,111 | 4,504 | 270 | 23,885 | - | 23,885 | |||||||||||||||||||
(a)
Consists of corporate general and
administrative expenses.
(b)
Consists principally of cash and cash
equivalents, corporate transportation equipment, net deferred tax asset, and
other investments available for general corporate purposes.
(c)
Restated to reflect the reallocation of
goodwill out of the building segment, in the amount of $217.9 million, and
into the civil and the management services segments, in the amount of $217.8
million and $0.1 million respectively.
94
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[13] Business
Segments (continued)
|
|
|
Revenues
from Project CityCenter and other projects in Las Vegas, Nevada for MGM MIRAGE
in the building segment totaled approximately $1,968 million (or 38% of total
revenues in 2009), $2,263 million (or 40% of total revenues in 2008), and $1,495
million (or 32% of total revenues) in 2007.
Information
concerning principal geographic areas is as follows (in thousands):
| Revenues | |||||||||
| 2009 | 2008 | 2007 | |||||||
| United States | $ | 4,853,477 | $ | 5,464,944 | $ | 4,494,976 | |||
| Foreign and U.S. Territories | 298,489 | 195,342 | 133,382 | ||||||
| Total | $ | 5,151,966 | $ | 5,660,286 | $ | 4,628,358 | |||
| Income (Loss) from Construction Operations | |||||||||
| 2009 | 2008 | 2007 | |||||||
| United States | $ | 202,852 | $ | 181,739 | $ | 114,986 | |||
| Foreign and U.S. Territories | 50,363 | 39,632 | 48,851 | ||||||
| Corporate | (41,672 | ) | (22,139 | ) | (22,856 | ) | |||
| Goodwill and intangible asset impairment | - | (224,478 | ) | ||||||
| Total | $ | 211,543 | $ | (25,246 | ) | $ | 140,981 | ||
| Assets | |||||||||
| 2009 | 2008 | 2007 | |||||||
| United States | $ | 2,665,513 | $ | 2,934,381 | $ | 1,654,115 | |||
| Foreign and U.S. Territories | 155,141 | 138,697 | - | ||||||
| Total | $ | 2,820,654 | 3,073,078 | $ | 1,654,115 | ||||
Income
from construction operations has been allocated geographically based on the
location of the job site.
95
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2009, 2008 and 2007
(continued)
[14] Related
Party Transactions
The
Company leases certain facilities from Ronald N. Tutor, the Company’s chairman
and chief executive officer, and an affiliate owned by Mr. Tutor under
non-cancelable operating lease agreements with monthly payments of $180,000,
which increase at 3% per annum beginning August 1, 2010 and expire in July 31,
2016. Lease expense for these leases, recorded on a straight-line
basis, was $2.3 million for the year ended December 31, 2009 and $0.7 million
for the four months ended December 31, 2008.
In the
fourth quarter of 2008, the Company repaid in full $58.5 million of notes
payable due to the former Tutor-Saliba shareholders which was assumed in the
merger. Approximately $55.9 million of the total was paid to two
trusts controlled by Mr. Tutor.
An
affiliate of Mr. Tutor had an outstanding note payable to a Company joint
venture, of which the Company’s proportionate share was $0.2 million as of
December 31, 2008. This amount was paid off entirely during
2009.
The
Vice Chairman of
O&G Industries, Inc.
(“O&G”)
is a director of the
Company
. O&G participates in joint ventures with the
Company, the Company’s share of which contributed $1.2 million (or less than
1%), $6.1 million (or less than 1%) and $3.1 million (or less than 1%) to the
Company’s consolidated revenues in 2009, 2008 and 2007,
respectively. The cumulative holdings of O&G as of December 31,
2009, 2008 and 2007 was 600,000 shares, or 1.24% of total common shares
outstanding at December 31, 2009.
On May
28, 2009, the Board of Directors of the Company approved a one-time cash payment
of $3 million to Mr. Tutor, for his agreement to personally guarantee certain
surety bond obligations related to a significant construction project awarded to
the Company in July 2008. The Company made the payment in June 2009. Mr. Tutor
was required by the surety companies to enter into this guaranty for the benefit
of the Company in connection with the award of the project. Mr. Tutor has agreed
to remain as guarantor until the project is completed. In determining the
appropriate fee to pay Mr. Tutor for this guaranty, the Board of Directors
considered information about market rates for third-party guaranty
fees.
96
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of Tutor Perini Corporation
Sylmar,
CA
We have
audited the accompanying consolidated balance sheets of Tutor Perini Corporation
and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2009. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Tutor Perini Corporation as of December 31,
2009 and 2008, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2009, in conformity with
accounting principles generally accepted in the United States of
America.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company's internal control over financial
reporting as of December 31, 2009, based on the criteria established in
Internal Control—Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 1, 2010 expressed an unqualified
opinion on the Company's internal control over financial reporting.
/s/ Deloitte & Touche,
LLP
Los
Angeles, California
March 1,
2010
97
Exhibit
Index
The
following designated exhibits are, as indicated below, either filed herewith or
have heretofore been filed with the Securities and Exchange Commission under the
Securities Act of 1933 or the Securities Act of 1934 and are referred to and
incorporated herein by reference to such filings.
|
Exhibit
2.
|
Plan
of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
|
|
|
2.1
|
Agreement
and Plan of Merger, dated as of April 2, 2008, by and among Tutor Perini
Corporation, Trifecta Acquisition LLC, Tutor-Saliba Corporation, Ronald N.
Tutor and shareholders of Tutor-Saliba Corporation signatory thereto
(incorporated by reference to Exhibit 2.1 to Form 8-K filed on April 7,
2008).
|
|
|
2.2
|
Amendment
No. 1 to the Agreement and Plan of Merger, dated as of May 28, 2008, by
and among Tutor Perini Corporation, Trifecta Acquisition LLC, Tutor-Saliba
Corporation, Ronald N. Tutor and shareholders of Tutor-Saliba Corporation
signatory thereto (incorporated by reference to Exhibit 2.2 to Form 10-Q
filed on August 8, 2008).
|
|
|
Exhibit
3.
|
Articles
of Incorporation and By-laws
|
|
|
3.1
|
Restated
Articles of Organization (incorporated by reference to Exhibit 4 to
Form
S-2
(File No. 33-28401) filed on April 28, 1989).
|
|
|
3.2
|
Articles
of Amendment to the Restated Articles of Organization of the Tutor Perini
Corporation (incorporated by reference to Exhibit 3.2 to Form S-1 (File
No. 333-111338) filed on December 19, 2003).
|
|
|
3.3
|
Articles
of Amendment to the Restated Articles of Organization of Tutor Perini
Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on
April 12, 2000).
|
|
|
3.4
|
Articles
of Amendment to the Restated Articles of Organization of Tutor Perini
Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on
September 11, 2008.)
|
|
|
3.5
|
Articles
of Amendment to the Restated Articles of Organization of Tutor Perini
Corporation (incorporated by reference to Exhibit 3.5 to Form 10-Q filed
on August 10, 2009).
|
|
|
3.6
|
Second
Amended and Restated By-laws of Tutor Perini Corporation (incorporated by
reference to Exhibit 3.1 to Form 8-K filed on November 24,
2009).
|
|
98
Exhibit
Index
(Continued)
|
Exhibit
4.
|
Instruments
Defining the Rights of Security Holders, Including
Indentures
|
|
|
4.1
|
Registration
Rights Agreement by and among Tutor Perini Corporation, Tutor-Saliba
Corporation, Ronald N. Tutor, O&G Industries, Inc. and National Union
Fire Insurance Company of Pittsburgh, Pa., BLUM Capital Partners, L.P., PB
Capital Partners, L.P., The Common Fund for Non-Profit Organizations, and
The Union Labor Life Insurance Company, acting on behalf of its Separate
Account P, dated as of March 29, 2000 (incorporated by reference to
Exhibit 4.1 to Form 8-K filed on April 12,
2000).
|
|
|
4.2
|
Shareholders
Agreement, dated April 2, 2008, by and among Tutor Perini Corporation,
Ronald N. Tutor and the shareholders of Tutor-Saliba Corporation signatory
thereto (incorporated by reference to Exhibit 4.1 to Form 8-K filed on
April 7, 2008).
|
|
|
Exhibit
10.
|
Material
Contracts
|
|
|
10.1*
|
Amendment
No. 1 dated March 20, 2009 to the Amended and Restated Employment
Agreement dated December 23, 2008, by and between Perini Corporation and
Ronald N. Tutor (incorporated by reference to Exhibit 10.1 to Form 10-Q
filed on May 8, 2009).
|
|
|
10.2*
|
Tutor
Perini Corporation Amended and Restated (2004) Construction Business Unit
Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 to
Amendment No. 2 to Form S-1 (File No. 333-111338) filed on March 8,
2004).
|
|
|
10.3*
|
Special
Equity Incentive Plan (incorporated by reference to Exhibit A to Tutor
Perini Corporation’s Proxy Statement for the Annual Meeting of
Stockholders dated April 19, 2000).
|
|
|
10.4*
|
Tutor
Perini Corporation 2004 Stock Option and Incentive Plan (incorporated by
reference to Annex A to the Company’s Definitive Proxy Statement on Form
DEF 14A filed on April 17, 2009).
|
|
|
10.5
|
Promissory
Note dated as of September 6, 2000 by and among Mt. Wayte Realty, LLC (a
wholly owned subsidiary of Tutor Perini Corporation) and The Manufacturers
Life Insurance Company (U.S.A.) (incorporated by reference to Exhibit
10.34 to Tutor Perini Corporation’s Quarterly Report on Form 10-Q for the
period ended September 30, 2000 filed on November 6,
2000).
|
|
|
10.6*
|
Form
of Director and Officer Indemnification Agreement (incorporated by
reference to Exhibit 10.19 to Amendment No. 1 to Form S-1 (File No.
333-111338) filed on February 10, 2004).
|
|
|
10.7*
|
Form
of Restricted Stock Unit Award Agreement under the Tutor Perini
Corporation 2004 Stock Option and Incentive Plan (incorporated by
reference to Exhibit 10.24 to Tutor Perini Corporation’s Annual Report on
Form 10-K for the year ended December 31, 2004 filed on March 4,
2005).
|
|
99
Exhibit
Index
(Continued)
|
10.8
|
Letter
Agreement by and among Tutor Perini Corporation, BLUM Capital Partners,
L.P., PB Capital Partners, L.P., National Union Fire Insurance Company of
Pittsburgh, Pa., The Union Labor Life Insurance Company, O&G
Industries, Inc. and Tutor-Saliba Corporation, dated as of December 14,
2005 (incorporated by reference to Exhibit 10.28 to Post-Effective
Amendment No. 4 to Form S-1 (File No. 333-117344) filed on December 14,
2005).
|
||
|
10.9*
|
Restricted
Stock Unit Award Agreement under the Tutor Perini Corporation 2004 Stock
Option and Incentive Plan dated as of September 26, 2007 between the
Company and Kenneth R. Burk (incorporated by reference to Exhibit 10.1 to
Form 10-Q filed on November 9, 2007).
|
||
|
10.10*
|
Employment
Agreement, dated April 2, 2008, by and between Tutor Perini Corporation
and Ronald N. Tutor (incorporated by reference to Exhibit 10.1 to Form 8-K
filed on April 7, 2008).
|
||
|
10.11*
|
Amended
and Restated Employment Agreement dated December 23, 2008, by and between
Tutor Perini Corporation and Ronald N. Tutor (incorporated by reference to
Exhibit 10.1 to Form 8-K filed on December 23, 2008).
|
||
|
10.12
|
Third
Amended and Restated Credit Agreement dated as of September 8, 2008 among
Tutor Perini Corporation, the subsidiaries of Tutor Perini identified
therein, and Bank of America, N.A. and the other lenders that are parties
thereto (incorporated by reference to Exhibit 10.1 to Form 8-K filed on
September 12, 2008).
|
||
|
10.13
|
First
Amendment dated February 23, 2009 to the Third Amended and Restated Credit
Agreement among Tutor Perini Corporation, the subsidiaries of Tutor Perini
identified therein, and Bank of America, N.A. and the other lenders that
are parties thereto (incorporated by reference to Exhibit 10.13 to Form
10-K filed on February 27, 2009).
|
||
|
10.14
|
Second
Amendment dated January 13, 2010 to the Third Amended and Restated Credit
Agreement among Tutor Perini Corporation, the subsidiaries of Tutor Perini
identified therein, and Bank of America, N.A., and the other lenders that
are parties thereto (incorporated by reference to Exhibit 10.1 to Form 8-K
filed on January 21, 2010).
|
||
|
10.15
|
2004
Stock Option and Incentive Plan (incorporated by reference to Annex A to
the Company’s Definitive Proxy Statement on Form DEF 14A filed on April
17, 2009
|
||
|
10.16
|
2009
General Incentive Compensation Plan (incorporated by reference to Annex B
to the Company’s Definitive Proxy Statement on Form DEF 14A filed on April
17, 2009
|
||
|
Exhibit
21
|
Subsidiaries
of Tutor Perini Corporation - filed herewith.
|
||
|
Exhibit
23
|
Consent
of Independent Registered Public Accounting Firm - filed
herewith.
|
||
|
Exhibit
24
|
ower
of Attorney - filed herewith.
|
||
|
Exhibit
31.1
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 – filed herewith.
|
||
100
Exhibit
Index
(Continued)
|
Exhibit
31.2
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 – filed herewith.
|
|
Exhibit
32.1
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – filed
herewith.
|
|
Exhibit
32.2
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – filed
herewith.
|
*
Management contract or compensatory arrangement required to be filed as an
exhibit pursuant to Item 15(a)(3) of Form 10-K.
101
TABLE OF CONTENTS
Part IprintItem 1. BusinessprintItem 1A. Risk FactorsprintItem 1B. Unresolved Staff CommentsprintItem 2. PropertiesprintItem 3. Legal ProceedingsprintItem 4. (removed and Reserved)printPart IIprintItem 5. Market For The Registrant's Common Equity and Related Stockholder MattersprintItem 6. Selected Financial DataprintItem 7. Management S Discussion and Analysis Of Financial ConditionprintItem 7A. Quantitative and Qualitative Disclosures About Market RiskprintItem 8. Financial Statements and Supplementary DataprintItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureprintItem 9A. Controls and ProceduresprintItem 9B. Other InformationprintPart IIIprintItem 10. Directors, Executive Officers and Corporate GovernanceprintItem 11. Executive CompensationprintItem 12. Security Ownership Of Certain Beneficial Owners and ManagementprintItem 13. Certain Relationships and Related Transactions, and DirectorprintItem 14. Principal Accountant Fees and ServicesprintPart IVprintItem 15. Exhibits and Financial Statement Schedulesprint