TUTOR PERINI CORP [TPC] Filings

10-Q 1 tpc-20220331.htm 10-Q tpc-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	March 31, 2022
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ___________

Commission File Number: 1-6314

Tutor Perini Corporation

(Exact Name of Registrant as Specified in its Charter)

MASSACHUSETTS


(State or Other Jurisdiction of Incorporation or Organization)

15901 OLDEN STREET, SYLMAR, CALIFORNIA


(Address of Principal Executive Offices)

04-1717070


(I.R.S. Employer Identification No.)

91342-1093


(Zip Code)

(818) 362-8391

(Registrant’s Telephone Number, Including Area Code)

None

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	TPC	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock, $1.00 par value per share, of the registrant outstanding at April 28, 2022 was 51,200,161.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS


			Page Numbers
Part I.	Financial Information:
	Item 1.	Financial Statements:
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31 , 202 2 and 202 1 (Unaudited)	3
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 202 1 (Unaudited)	4
		Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 202 1 (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 202 1 (Unaudited)	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
	Item 4.	Controls and Procedures	34
Part II.	Other Information:
	Item 1.	Legal Proceedings	35
	Item 1A.	Risk Factors	35
	Item 4.	Mine Safety Disclosures	35
	Item 6.	Exhibits	35
	Signature		36

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PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED


	Three Months Ended March 31,
(in thousands, except per common share amounts)	2022		2021
REVENUE	$	952,154	$	1,207,595
COST OF OPERATIONS	(901,809)		(1,097,140)
GROSS PROFIT	50,345		110,455
General and administrative expenses	(60,252)		(60,751)
INCOME (LOSS) FROM CONSTRUCTION OPERATIONS	(9,907)		49,704
Other income, net	3,697		175
Interest expense	(16,492)		(17,810)
INCOME (LOSS) BEFORE INCOME TAXES	(22,702)		32,069
Income tax (expense) benefit	3,889		(6,964)
NET INCOME (LOSS)	(18,813)		25,105
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	2,821		9,071
NET INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION	$	(21,634)	$	16,034
BASIC EARNINGS (LOSS) PER COMMON SHARE	$	(0.42)	$	0.31
DILUTED EARNINGS (LOSS) PER COMMON SHARE	$	(0.42)	$	0.31
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:
BASIC	51,107		50,913
DILUTED	51,107		51,348

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED


	Three Months Ended March 31,
(in thousands)	2022		2021
NET INCOME (LOSS)	$	(18,813)	$	25,105

OTHER COMPREHENSIVE LOSS, NET OF TAX:
Defined benefit pension plan adjustments	458		492
Foreign currency translation adjustments	257		372
Unrealized loss in fair value of investments	(4,204)		(1,183)
TOTAL OTHER COMPREHENSIVE LOSS, NET OF TAX	(3,489)		(319)

COMPREHENSIVE INCOME (LOSS)	(22,302)		24,786
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	2,442		9,367
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TUTOR PERINI CORPORATION	$	(24,744)	$	15,419

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED


(in thousands, except share and per share amounts)	As of March 31, 2022		As of December 31, 2021

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($167,391 and $102,679 related to variable interest entities (“VIEs”))	$	316,499	$	202,197
Restricted cash	4,870		9,199
Restricted investments	85,075		84,355
Accounts receivable ($102,702 and $116,415 related to VIEs)	1,413,246		1,454,319
Retention receivable ($169,106 and $162,259 related to VIEs)	542,301		568,881
Costs and estimated earnings in excess of billings ($121,545 and $143,105 related to VIEs)	1,356,607		1,356,768
Other current assets ($42,356 and $43,718 related to VIEs)	216,400		186,773
Total current assets	3,934,998		3,862,492
PROPERTY AND EQUIPMENT (“P&E”), net of accumulated depreciation of $496,617 and $483,417 (net P&E of $4,595 and $2,203 related to VIEs)	425,966		429,645
GOODWILL	205,143		205,143
INTANGIBLE ASSETS, NET	79,563		85,068
OTHER ASSETS	146,488		142,550
TOTAL ASSETS	$	4,792,158	$	4,724,898

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	23,285	$	24,406
Accounts payable ($73,743 and $96,097 related to VIEs)	559,152		512,056
Retention payable ($38,461 and $37,007 related to VIEs)	228,690		268,945
Billings in excess of costs and estimated earnings ($390,885 and $355,270 related to VIEs)	844,618		761,689
Accrued expenses and other current liabilities ($10,088 and $8,566 related to VIEs)	199,412		210,017
Total current liabilities	1,855,157		1,777,113
LONG-TERM DEBT, less current maturities, net of unamortized discount and debt issuance costs totaling $16,350 and $17,109	979,769		969,248
DEFERRED INCOME TAXES	69,890		70,989
OTHER LONG-TERM LIABILITIES	240,821		233,828
TOTAL LIABILITIES	3,145,637		3,051,178
COMMITMENTS AND CONTINGENCIES (NOTE 10)
EQUITY
Stockholders' equity:
Preferred stock - authorized 1,000,000 shares ($1 par value), none issued	—		—
Common stock - authorized 112,500,000 shares ($1 par value), issued and outstanding 51,200,161 and 51,095,706 shares	51,200		51,096
Additional paid-in capital	1,134,688		1,133,150
Retained earnings	492,676		514,310
Accumulated other comprehensive loss	(46,745)		(43,635)
Total stockholders' equity	1,631,819		1,654,921
Noncontrolling interests	14,702		18,799
TOTAL EQUITY	1,646,521		1,673,720
TOTAL LIABILITIES AND EQUITY	$	4,792,158	$	4,724,898

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED


	Three Months Ended March 31,
(in thousands)	2022		2021
Cash Flows from Operating Activities:
Net income (loss)	$	(18,813)	$	25,105
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	14,733		20,231
Amortization of intangible assets	5,505		6,643
Share-based compensation expense	3,417		2,448
Change in debt discounts and deferred debt issuance costs	901		2,017
Deferred income taxes	(52)		95
(Gain) loss on sale of property and equipment	(132)		20
Changes in other components of working capital	112,448		(108,385)
Other long-term liabilities	2,489		5,027
Other, net	251		95
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	120,747		(46,704)

Cash Flows from Investing Activities:
Acquisition of property and equipment	(12,028)		(9,835)
Proceeds from sale of property and equipment	1,434		457
Investments in securities	(4,657)		(2,910)
Proceeds from maturities and sales of investments in securities	383		6,870
NET CASH USED IN INVESTING ACTIVITIES	(14,868)		(5,418)

Cash Flows from Financing Activities:
Proceeds from debt	284,552		74,251
Repayment of debt	(275,910)		(75,939)
Cash payments related to share-based compensation	(1,009)		(1,236)
Distributions paid to noncontrolling interests	(7,500)		—
Contributions from noncontrolling interests	3,961		4,000

NET CASH PROVIDED BY FINANCING ACTIVITIES	4,094		1,076

Net increase (decrease) in cash, cash equivalents and restricted cash	109,973		(51,046)
Cash, cash equivalents and restricted cash at beginning of period	211,396		451,852
Cash, cash equivalents and restricted cash at end of period	$	321,369	$	400,806

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

(1)Basis of Presentation

The Condensed Consolidated Financial Statements do not include footnotes and certain financial information normally presented annually under generally accepted accounting principles in the United States (“GAAP”). Therefore, they should be read in conjunction with the audited consolidated financial statements and the related notes included in Tutor Perini Corporation’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the three months ended March 31, 2022 may not be indicative of the results that will be achieved for the full year ending December 31, 2022.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the Company’s consolidated financial position as of March 31, 2022 and its consolidated statements of operations and cash flows for the interim periods presented. Intercompany balances and transactions have been eliminated. Certain amounts in the notes to the condensed consolidated financial statements of prior years have been reclassified to conform to the current year presentation.

(2)Revenue

Disaggregation of Revenue

The following tables disaggregate revenue by end market, customer type and contract type, which the Company believes best depict how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors for the three months ended March 31, 2022 and 2021.


	Three Months Ended March 31,
(in thousands)	2022		2021
Civil segment revenue by end market:
Mass transit (includes certain transportation and tunneling projects)	$	257,138	$	308,875
Military defense facilities	49,794		49,536
Bridges	41,247		46,167
Water	20,652		26,810

Other	21,964		44,187
Total Civil segment revenue	$	390,795	$	475,575


	Three Months Ended March 31,
(in thousands)	2022		2021
Building segment revenue by end market:
Hospitality and gaming	$	76,918	$	100,567
Municipal and government	75,955		71,909
Mass transit (includes transportation projects)	60,201		26,535
Commercial and industrial facilities	39,086		130,052
Health care facilities	35,560		10,409
Education facilities	29,860		38,317

Other	13,068		29,444
Total Building segment revenue	$	330,648	$	407,233

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

UNAUDITED


	Three Months Ended March 31,
(in thousands)	2022		2021
Specialty Contractors segment revenue by end market:
Mass transit (includes certain transportation and tunneling projects)	$	119,027	$	181,163
Commercial and industrial facilities	29,857		38,749
Multi-unit residential	24,938		42,795
Water	21,447		21,154
Education facilities	12,276		13,356

Other	23,166		27,570
Total Specialty Contractors segment revenue	$	230,711	$	324,787


	Three Months Ended March 31, 2022								Three Months Ended March 31, 2021
(in thousands)	Civil		Building		Specialty Contractors		Total		Civil		Building		Specialty Contractors		Total
Revenue by customer type:
State and local agencies	$	313,842	$	123,690	$	92,231	$	529,763	$	390,502	$	76,581	$	142,924	$	610,007
Federal agencies	50,694		46,098		11,334		108,126		51,633		50,361		21,237		123,231
Private owners	26,259		160,860		127,146		314,265		33,440		280,291		160,626		474,357
Total revenue	$	390,795	$	330,648	$	230,711	$	952,154	$	475,575	$	407,233	$	324,787	$	1,207,595


	Three Months Ended March 31, 2022								Three Months Ended March 31, 2021
(in thousands)	Civil		Building		Specialty Contractors		Total		Civil		Building		Specialty Contractors		Total
Revenue by contract type:
Fixed price	$	336,993	$	102,518	$	199,063	$	638,574	$	419,156	$	84,449	$	293,468	$	797,073
Guaranteed maximum price	293		171,509		5,333		177,135		1,270		270,454		1,130		272,854
Unit price	50,510		33		14,822		65,365		52,733		111		28,297		81,141
Cost plus fee and other	2,999		56,588		11,493		71,080		2,416		52,219		1,892		56,527
Total revenue	$	390,795	$	330,648	$	230,711	$	952,154	$	475,575	$	407,233	$	324,787	$	1,207,595

Changes in Contract Estimates that Impact Revenue

Changes to the total estimated contract revenue or cost for a given project, either due to unexpected events or revisions to management’s initial estimates, are recognized in the period in which they are determined. Revenue was negatively impacted during the three months ended March 31, 2022 related to performance obligations satisfied (or partially satisfied) in prior periods by $48.5 million. Likewise, revenue was negatively impacted during the three months ended March 31, 2021 related to performance obligations satisfied (or partially satisfied) in prior periods by $19.3 million.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and exclude unexercised contract options. As of March 31, 2022, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $4.6 billion, $2.2 billion and $1.3 billion for the Civil, Building and Specialty Contractors segments, respectively. As of March 31, 2021, the aggregate amounts of the transaction prices allocated to the remaining performance obligations of the Company’s construction contracts were $4.8 billion, $1.5 billion and $1.7 billion for the Civil, Building and Specialty Contractors segments, respectively. The Company typically recognizes revenue on Civil segment projects over a period of three to five years, whereas for projects in the Building and Specialty Contractors segments, the Company typically recognizes revenue over a period of one to three years.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

UNAUDITED

(3)Contract Assets and Liabilities

The Company classifies contract assets and liabilities that may be settled beyond one year from the balance sheet date as current, consistent with the length of time of the Company’s project operating cycle.

Contract assets include amounts due under retention provisions, costs and estimated earnings in excess of billings and capitalized contract costs. The amounts as included on the Condensed Consolidated Balance Sheets consisted of the following:


(in thousands)	As of March 31, 2022		As of December 31, 2021
Retention receivable	$	542,301	$	568,881
Costs and estimated earnings in excess of billings:
Claims	788,876		833,352
Unapproved change orders	482,945		418,054
Other unbilled costs and profits	84,786		105,362
Total costs and estimated earnings in excess of billings	1,356,607		1,356,768
Capitalized contract costs	75,278		69,027
Total contract assets	$	1,974,186	$	1,994,676

Retention receivable represents amounts invoiced to customers where payments have been partially withheld pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project. Retention agreements vary from project to project, and balances could be outstanding for several months or years depending on a number of circumstances such as contract-specific terms, project performance and other variables that may arise as the Company makes progress toward completion. As of March 31, 2022, the amount of retention receivable estimated by management to be collected beyond one year is approximately 43% of the balance.

Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. Costs and estimated earnings in excess of billings result when either: (1) the appropriate contract revenue amount has been recognized over time in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract, or (2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. The Company routinely estimates recovery related to claims and unapproved change orders as a form of variable consideration at the most likely amount it expects to receive and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Claims and unapproved change orders are billable upon the agreement and resolution between the contractual parties and after the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions; decreases normally result from resolutions and subsequent billings. As discussed in Note 10, the resolution of these claims and unapproved change orders may require litigation or other forms of dispute resolution proceedings. Other unbilled costs and profits are billable in accordance with the billing terms of each of the existing contractual arrangements and, as such, the timing of contract billing cycles can cause fluctuations in the balance of unbilled costs and profits. Ultimate resolution of other unbilled costs and profits typically involves incremental progress toward contractual requirements or milestones.

Capitalized contract costs are included in other current assets and primarily represent costs to fulfill a contract that (1) directly relate to an existing or anticipated contract, (2) generate or enhance resources that will be used in satisfying performance obligations in the future and (3) are expected to be recovered through the contract. Capitalized contract costs are generally expensed to the associated contract over the period of anticipated use on the project. During the three months ended March 31, 2022 and 2021, $12.6 million and $11.8 million, respectively, of previously capitalized contract costs were amortized and recognized as expense on the related contracts.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

UNAUDITED

Contract liabilities include amounts owed under retention provisions and billings in excess of costs and estimated earnings. The amount as reported on the Condensed Consolidated Balance Sheets consisted of the following:


(in thousands)	As of March 31, 2022		As of December 31, 2021
Retention payable	$	228,690	$	268,945
Billings in excess of costs and estimated earnings	844,618		761,689
Total contract liabilities	$	1,073,308	$	1,030,634

Retention payable represents amounts invoiced to the Company by subcontractors where payments have been partially withheld pending the completion of certain milestones, other contractual conditions or upon the completion of the project. Generally, retention payable is not remitted to subcontractors until the associated retention receivable from customers is collected. As of March 31, 2022, the amount of retention payable estimated by management to be remitted beyond one year is approximately 37% of the balance.

Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date. The balance may fluctuate depending on the timing of contract billings and the recognition of contract revenue. Revenue recognized during the three months ended March 31, 2022 and 2021 and included in the opening billings in excess of costs and estimated earnings balances for each period totaled $317.8 million and $306.9 million, respectively.

(4)Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows:


(in thousands)	As of March 31, 2022		As of December 31, 2021
Cash and cash equivalents available for general corporate purposes	$	75,789	$	60,192
Joint venture cash and cash equivalents	240,710		142,005
Cash and cash equivalents	316,499		202,197
Restricted cash	4,870		9,199
Total cash, cash equivalents and restricted cash	$	321,369	$	211,396

Cash equivalents include short-term, highly liquid investments with maturities of three months or less when acquired. Cash and cash equivalents consist of amounts available for the Company’s general purposes, the Company’s proportionate share of cash held by the Company’s unconsolidated joint ventures and 100% of amounts held by the Company’s consolidated joint ventures. In both cases, cash held by joint ventures is available only for joint venture-related uses, including future distributions to joint venture partners.

Restricted cash includes amounts held as collateral to secure insurance-related contingent obligations, such as insurance claim deductibles, in lieu of letters of credit.

(5)Earnings Per Common Share

Basic earnings per common share (“EPS”) and diluted EPS are calculated by dividing net income (loss) attributable to Tutor Perini Corporation by the following: for basic EPS, the weighted-average number of common shares outstanding during the period; and for diluted EPS, the sum of the weighted-average number of both outstanding common shares and potentially dilutive securities, which for the Company can include restricted stock units and unexercised stock options. Potentially dilutive securities also included the Convertible Notes (as defined in Note 8) prior to their repayment on June 15, 2021; however, the Convertible Notes had no impact on diluted EPS. The Company calculates the effect of the potentially dilutive restricted stock units and stock options using the treasury stock method.

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

UNAUDITED


	Three Months Ended March 31,
(in thousands, except per common share data)	2022		2021
Net income (loss) attributable to Tutor Perini Corporation	$	(21,634)	$	16,034

Weighted-average common shares outstanding, basic	51,107		50,913
Effect of dilutive restricted stock units and stock options	—		435
Weighted-average common shares outstanding, diluted	51,107		51,348

Net income (loss) attributable to Tutor Perini Corporation per common share:
Basic	$	(0.42)	$	0.31
Diluted	$	(0.42)	$	0.31

Anti-dilutive securities not included above	3,431		1,640

For the three months ended March 31, 2022, all outstanding restricted stock units and stock options were excluded from the calculation of weighted-average diluted shares outstanding, as the shares have an anti-dilutive effect due to the net loss for the period.

(6)Income Taxes

The Company’s effective income tax rate was 17.1% for the three months ended March 31, 2022. The effective income tax rate for the period was lower than the 21% federal statutory rate primarily due to earnings attributable to noncontrolling interests, for which income taxes are not the responsibility of the Company, partially offset by state income taxes (net of the federal tax benefit).

The Company’s effective income tax rate for the three months ended March 31, 2021 was 21.7%. The effective income tax rate for the 2021 period was higher than the 21% federal statutory rate primarily due to state income taxes (net of the federal tax benefit) and nondeductible expenses, partially offset by earnings attributable to noncontrolling interests, for which income taxes are not the responsibility of the Company.

(7)Goodwill and Intangible Assets

Goodwill

The following table presents the changes in the carrying amount of goodwill since its inception through March 31, 2022:


(in thousands)	Civil		Building		Specialty Contractors		Total
Gross goodwill as of December 31, 2021	$	492,074	$	424,724	$	156,193	$	1,072,991
Accumulated impairment as of December 31, 2021	(286,931)		(424,724)		(156,193)		(867,848)
Goodwill as of December 31, 2021	205,143		—		—		205,143
Current year activity	—		—		—		—
Goodwill as of March 31, 2022	$	205,143	$	—	$	—	$	205,143

The Company performed its annual impairment test in the fourth quarter of 2021 and concluded goodwill was not impaired. In addition, the Company determined that no triggering events occurred and no circumstances changed since the date of our annual impairment test that would more likely than not reduce the fair value of the Civil reporting unit below its carrying amount.

The Company will continue to monitor events and circumstances for changes that indicate the Civil reporting unit goodwill would need to be reevaluated for impairment during future interim periods prior to the annual impairment test. These future

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TUTOR PERINI CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

UNAUDITED

events and circumstances include, but are not limited to, changes in the overall financial performance of the Civil reporting unit, impacts to our business as a result of the COVID-19 pandemic, as well as other quantitative and qualitative factors which could indicate potential triggering events for possible impairment.

Intangible Assets

Intangible assets consist of the following:


	As of March 31, 2022								Weighted-Average Amortization Period
(in thousands)	Cost		Accumulated Amortization		Accumulated Impairment Charge		Carrying Value
Trade names (non-amortizable)	$	117,600	$	—	$	(67,190)	$	50,410	Indefinite
Trade names (amortizable)	69,250		(24,209)		(23,232)		21,809		20 years
Contractor license	6,000		—		(6,000)		—		N/A
Customer relationships	39,800		(23,114)		(16,645)		41		12 years
Construction contract backlog	149,290		(141,987)		—		7,303		3 years
Total	$	381,940	$	(189,310)	$	(113,067)	$	79,563


	As of December 31, 2021								Weighted-Average Amortization Period
(in thousands)	Cost		Accumulated Amortization		Accumulated Impairment Charge		Carrying Value
Trade names (non-amortizable)	$	117,600	$	—	$	(67,190)	$	50,410	Indefinite
Trade names (amortizable)	69,250		(23,650)		(23,232)		22,368		20 years
Contractor license	6,000		—		(6,000)		—		N/A
Customer relationships	39,800		(23,053)		(16,645)		102		12 years
Construction contract backlog	149,290		(137,102)		—		12,188		3 years
Total	$	381,940	$	(183,805)	$	(113,067)	$	85,068

Amortization expense for the three months ended March 31, 2022 and 2021 was $5.5 million and $6.6 million, respectively. As of March 31, 2022, future amortization expense is estimated to be $9.0 million for the remainder of 2022, $2.2 million per year for the years 2023 through 2027 and $9.2 million thereafter.

The Company performed its annual impairment test for non-amortizable trade names during the fourth quarter of 2021. Based on this assessment, the Company concluded that its non-amortizable trade names were not impaired. In addition, the Company determined that no triggering events occurred and no circumstances changed since the date of our annual impairment test that would indicate impairment of its non-amortizable trade names.

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(8)Financial Commitments

Long-Term Debt

Long-term debt as reported on the Condensed Consolidated Balance Sheets consisted of the following:


(in thousands)	As of March 31, 2022		As of December 31, 2021
2017 Senior Notes	$	496,498	$	496,244
Term Loan B	405,777		406,335
2020 Revolver	41,000		27,000
Equipment financing and mortgages	55,700		56,246
Other indebtedness	4,079		7,829
Total debt	1,003,054		993,654
Less: Current maturities	23,285		24,406
Long-term debt, net	$	979,769	$	969,248

The following table reconciles the outstanding debt balances to the reported debt balances as of March 31, 2022 and December 31, 2021:


	As of March 31, 2022						As of December 31, 2021
(in thousands)	Outstanding Debt		Unamortized Discounts and Issuance Costs		Debt, as reported		Outstanding Debt		Unamortized Discounts and Issuance Costs		Debt, as reported
2017 Senior Notes	$	500,000	$	(3,502)	$	496,498	$	500,000	$	(3,756)	$	496,244
Term Loan B	418,625		(12,848)		405,777		419,688		(13,353)		406,335

The unamortized issuance costs related to the 2020 Revolver were $1.9 million and $2.1 million as of March 31, 2022 and December 31, 2021, respectively, and are included in other assets on the Condensed Consolidated Balance Sheets.

2020 Credit Agreement

On August 18, 2020, the Company entered into a credit agreement (the “2020 Credit Agreement”) with BMO Harris Bank N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders. The 2020 Credit Agreement provides for a $425.0 million term loan B facility (the “Term Loan B”) and a $175.0 million revolving credit facility (the “2020 Revolver”), with sublimits for the issuance of letters of credit and swing line loans up to the aggregate amounts of $75.0 million and $10.0 million, respectively. The Term Loan B will mature on August 18, 2027 and the 2020 Revolver will mature on August 18, 2025, in each case, unless any of the 2017 Senior Notes are outstanding on January 30, 2025 (which is 91 days prior to the maturity of the 2017 Senior Notes), in which case, both the Term Loan B and the 2020 Revolver will mature on January 30, 2025 (subject to certain further exceptions).

The 2020 Credit Agreement permits the Company to repay any or all borrowings outstanding under the 2020 Credit Agreement at any time prior to maturity without penalty. The 2020 Credit Agreement requires the Company to make regularly scheduled payments of principal on the Term Loan B in quarterly installments equal to 0.25% of the initial principal amount of the Term Loan B. The 2020 Credit Agreement also requires the Company to make prepayments on the Term Loan B in connection with certain asset sales, receipts of insurance proceeds, incurrences of unpermitted indebtedness and annual excess cash flow (subject to certain exceptions).

Subject to certain exceptions, at any time prior to maturity, the 2020 Credit Agreement provides the Company with the right to increase the commitments under the 2020 Revolver and/or to establish one or more term loan facilities in an aggregate amount up to (i) the greater of $173.5 million and 50% LTM EBITDA (as defined in the 2020 Credit Agreement) plus (ii) additional amounts if (A) in the case of pari passu first lien secured indebtedness, the First Lien Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 1.35:1.00, (B) in the case of junior lien secured indebtedness, the Total Net Leverage Ratio (as defined in the 2020 Credit Agreement) does not exceed 3.50:1.00 and (C) in the case of unsecured indebtedness,

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(x) the Total Net Leverage Ratio does not exceed 3.50:1.00 or (y) the Fixed Charge Coverage Ratio (as defined in the 2020 Credit Agreement) is no less than 2.00:1.00.

Borrowings under the 2020 Credit Agreement bear interest, at the Company’s option, at a rate equal to (i) (a) LIBOR or (b) a base rate (determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 50 basis points and (3) the LIBOR rate for a one-month interest period plus 100 basis points) plus, (ii) an applicable margin. The margin applicable to the Term Loan B is between 4.50% and 4.75% for LIBOR and between 3.50% and 3.75% for base rate (which was initially 4.75% for LIBOR and 3.75% for base rate), and, in each case, is based on the Total Net Leverage Ratio. The margin applicable to the 2020 Revolver is between 4.25% and 4.75% for LIBOR and 3.25% and 3.75% for base rate (which was initially 4.75% for LIBOR and 3.75% for base rate), and, in each case, is based on the First Lien Net Leverage Ratio. In addition to paying interest on outstanding principal under the 2020 Credit Agreement, the Company will pay a commitment fee to the lenders under the 2020 Revolver in respect of the unutilized commitments thereunder. The Company will pay customary letter of credit fees. If a payment or bankruptcy event of default occurs and is continuing, the otherwise applicable margin on overdue amounts will be increased by 2% per annum. The agreement includes provisions for the replacement of LIBOR with an alternative benchmark rate upon LIBOR being discontinued. The weighted-average annual interest rate on borrowings under the 2020 Revolver was 6.55% during the three months ended March 31, 2022.

The 2020 Credit Agreement requires, with respect to the 2020 Revolver only, the Company and its restricted subsidiaries to maintain a maximum First Lien Net Leverage Ratio of 2.75:1:00, stepping down to 2.25:1.00 beginning the quarter ending March 31, 2022. The 2020 Credit Agreement also includes certain customary representations and warranties, affirmative covenants and events of default. Subject to certain exceptions, substantially all of the Company’s existing and future material wholly-owned subsidiaries unconditionally guarantee the obligations of the Company under the 2020 Credit Agreement; additionally, subject to certain exceptions, the obligations are secured by a lien on substantially all of the assets of the Company and its subsidiaries guaranteeing these obligations.

As of March 31, 2022, $41 million was outstanding and $134 million was available under the 2020 Revolver. The Company had not utilized the 2020 Revolver for letters of credit. The Company was in compliance with the financial covenants under the 2020 Credit Agreement for the period ended March 31, 2022.

Repurchase and Repayment of Convertible Notes

On June 15, 2021, the Company repaid the $69.9 million outstanding principal balance of the 2.875% Convertible Senior Notes (the “Convertible Notes”).

2017 Senior Notes

On April 20, 2017, the Company issued $500 million in aggregate principal amount of 6.875% Senior Notes due May 1, 2025 (the “2017 Senior Notes”) in a private placement offering. Interest on the 2017 Senior Notes is payable in arrears semi-annually in May and November of each year, beginning in November 2017.

The Company may redeem the 2017 Senior Notes at specified redemption prices described in the indenture. Upon a change of control, holders of the 2017 Senior Notes may require the Company to repurchase all or part of the 2017 Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.

The 2017 Senior Notes are senior unsecured obligations of the Company and are guaranteed by substantially all of the Company’s existing and future subsidiaries that also guarantee obligations under the Company’s 2020 Credit Agreement, as defined above. In addition, the indenture for the 2017 Senior Notes provides for customary covenants, including events of default and restrictions on the payment of dividends and share repurchases.

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Interest Expense

Interest expense as reported in the Condensed Consolidated Statements of Operations consisted of the following:


	Three Months Ended March 31,
(in thousands)	2022		2021
Cash interest expense:
Interest on 2017 Senior Notes	$	8,594	$	8,594
Interest on Term Loan B	6,033		6,094
Interest on 2020 Revolver	503		121
Interest on Convertible Notes	—		503
Other interest	461		481
Total cash interest expense	15,591		15,793

Non-cash interest expense:(a)
Amortization of discount and debt issuance costs on Convertible Notes	—		1,099
Amortization of discount and debt issuance costs on Term Loan B	505		539
Amortization of debt issuance costs on 2020 Revolver	142		142
Amortization of debt issuance costs on 2017 Senior Notes	254		237
Total non-cash interest expense	901		2,017

Total interest expense	$	16,492	$	17,810

____________________________________________________________________________________________________

(a)The combination of cash and non-cash interest expense produces effective interest rates that are higher than contractual rates. Accordingly, the effective interest rates for the 2017 Senior Notes and Term Loan B were 7.13% and 6.43%, respectively, for the three months ended March 31, 2022.

(9)Leases

The Company leases certain office space, construction and office equipment, vehicles and temporary housing generally under non-cancelable operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet, and the Company generally recognizes lease expense for these leases on a straight-line basis over the lease term. As of March 31, 2022, the Company’s operating leases have remaining lease terms ranging from less than one year to 16 years, some of which include options to renew the leases. The exercise of lease renewal options is generally at the Company’s sole discretion. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.

The following table presents components of lease expense for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(in thousands)	2022		2021
Operating lease expense	$	4,157	$	3,718
Short-term lease expense(a)	14,444		21,125
	18,601		24,843
Less: Sublease income	190		170
Total lease expense	$	18,411	$	24,673

____________________________________________________________________________________________________

(a)Short-term lease expense includes all leases with lease terms ranging from less than one month to one year. Short-term leases include, among other things, construction equipment rented on an as-needed basis as well as temporary housing.

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The following table presents supplemental balance sheet information related to operating leases:


(dollars in thousands)	Balance Sheet Line Item	As of March 31, 2022			As of December 31, 2021
Assets
Right-of-use assets	Other assets	$	57,453		$	53,462
Total lease assets		$	57,453		$	53,462
Liabilities
Current lease liabilities	Accrued expenses and other current liabilities	$	7,832		$	7,481
Long-term lease liabilities	Other long-term liabilities	53,925			50,057
Total lease liabilities		$	61,757		$	57,538
Weighted-average remaining lease term		11.8 years			12.0 years
Weighted-average discount rate		9.34		%	9.44		%

The following table presents supplemental cash flow information and non-cash activity related to operating leases:


	Three Months Ended March 31,
(in thousands)	2022		2021
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	(3,927)	$	(3,345)
Non-cash activity:
Right-of-use assets obtained in exchange for lease liabilities	$	6,757	$	2,338

The following table presents maturities of operating lease liabilities on an undiscounted basis as of March 31, 2022:


Year (in thousands)	Operating Leases
2022 (excluding the three months ended March 31, 2022)	$	9,955
2023	10,936
2024	8,462
2025	7,570
2026	6,405
Thereafter	65,120
Total lease payments	108,448
Less: Imputed interest	46,691
Total	$	61,757

(10)Commitments and Contingencies

The Company and certain of its subsidiaries are involved in litigation and other legal proceedings and forms of dispute resolution in the ordinary course of business, including but not limited to disputes over contract payment and/or performance-related issues (such as disagreements regarding delay or a change in the scope of work of a project and/or the price associated with that change) and other matters incidental to the Company’s business. In accordance with ASC 606, the Company makes assessments of these types of matters on a routine basis and, to the extent permitted by ASC 606, estimates and records recovery related to these matters as a form of variable consideration at the most likely amount the Company expects to receive, as discussed further in Note 3. In addition, the Company is contingently liable for litigation, performance guarantees and other commitments arising in the ordinary course of business, which are accounted for in accordance with ASC 450, Contingencies. Management reviews these matters regularly and updates or revises its estimates as warranted by subsequent information and developments. These assessments require judgments concerning matters that are inherently uncertain, such as litigation developments and outcomes, the anticipated outcome of negotiations and the estimated cost of resolving disputes.

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Consequently, these assessments are estimates, and actual amounts may vary from such estimates. In addition, because such matters are typically resolved over long periods of time, the Company’s assets and liabilities may change over time should the circumstances dictate. The description of the legal proceedings listed below include management’s assessment of those proceedings. Management believes that, based on current information and discussions with the Company’s legal counsel, the ultimate resolution of other matters is not expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

A description of the material pending legal proceedings, other than ordinary routine litigation incidental to the business is as follows:

Five Star Electric Matter

In the third quarter of 2015, Five Star Electric Corp. (“Five Star”), a wholly owned subsidiary of the Company that was acquired in 2011, entered into a tolling agreement (which has since expired) related to an ongoing investigation being conducted by the United States Attorney’s Office for the Eastern District of New York (“USAO EDNY”). Five Star has been cooperating with the USAO EDNY since late June 2014, when it was first made aware of the investigation, and has provided information requested by the government related to its use of certain minority-owned, women-owned, small and disadvantaged business enterprises and certain of Five Star’s employee compensation, benefit and tax practices.

As of March 31, 2022, the Company has concluded that the potential for a material adverse financial impact on Five Star or the Company as a result of the investigation is remote.

Alaskan Way Viaduct Matter

In January 2011, Seattle Tunnel Partners (“STP”), a joint venture between Dragados USA, Inc. and the Company, entered into a design-build contract with the Washington State Department of Transportation (“WSDOT”) for the construction of a large-diameter bored tunnel in downtown Seattle, King County, Washington to replace the Alaskan Way Viaduct, also known as State Route 99. The Company has a 45% interest in STP.

The construction of the large-diameter bored tunnel required the use of a tunnel boring machine (“TBM”). In December 2013, the TBM struck a steel pipe, installed by WSDOT as a well casing for an exploratory well. The TBM was significantly damaged and was required to be repaired. STP has asserted that the steel pipe casing was a differing site condition that WSDOT failed to properly disclose. The Disputes Review Board mandated by the contract to hear disputes issued a decision finding the steel casing was a Type I (material) differing site condition. WSDOT did not accept that finding.

The TBM was insured under a Builder’s Risk Insurance Policy (the “Policy”) with Great Lakes Reinsurance (UK) PLC and a consortium of other insurers (the “Insurers”). STP submitted the claims to the Insurers and requested interim payments under the Policy. The Insurers refused to pay and denied coverage. In June 2015, STP filed a lawsuit in the King County Superior Court, State of Washington seeking declaratory relief concerning contract interpretation, as well as damages as a result of the Insurers’ breach of their obligations under the terms of the Policy. STP is also asserting extra-contractual and statutory claims against the Insurers. STP submitted damages to the Insurers in the King County lawsuit in the amount of $532 million. WSDOT is deemed a plaintiff since WSDOT is an insured under the Policy and had filed its own claim for damages. Hitachi Zosen (“Hitachi”), the manufacturer of the TBM, joined the case as a plaintiff for costs incurred to repair the damages to the TBM.

In April and September 2018, rulings received on pre-trial motions limited some of the potential recoveries under the Policy for STP, WSDOT and Hitachi. On August 2, 2021, the Court of Appeals reversed in part certain of those limitations but affirmed other parts of those rulings. On January 5, 2022, the Washington Supreme Court issued an order granting STP, WSDOT and Hitachi’s requests for discretionary review of the portions of the Court of Appeals’ decision that affirmed the April and September 2018 decisions. STP also asserted $532 million of damages from WSDOT related to the pipe-strike by the TBM in a related lawsuit in Thurston County (see following paragraph).

In March 2016, WSDOT filed a complaint against STP in Thurston County Superior Court alleging breach of contract, seeking $57.2 million in delay-related damages and seeking declaratory relief concerning contract interpretation. STP filed its answer to WSDOT’s complaint and filed a counterclaim against WSDOT and Hitachi, as the TBM designer, seeking damages of $667 million. On October 3, 2019, STP and Hitachi entered into a settlement agreement which released and dismissed the claims that STP and Hitachi had against each other. The jury trial between STP and WSDOT commenced on October 7, 2019 and concluded on December 13, 2019, with a jury verdict in favor of WSDOT awarding them $57.2 million in damages.

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Judgment was entered on January 10, 2020, and STP appealed the decision. The appeal was argued on December 10, 2021 and STP is awaiting a decision from the Court of Appeals of the State of Washington, which is expected in the second half of 2022. If STP is successful in its appeal, the case will be remanded to the trial court for a new trial.

The Company recorded the impact of the jury verdict during the fourth quarter of 2019, resulting in a pre-tax charge of $166.8 million, which included $25.7 million for the Company’s 45% proportionate share of the $57.2 million in damages awarded by the jury to WSDOT. Payment of damages will only be made if the adverse verdict is upheld on appeal, as the payment is secured by a bond for the course of the appeal. Other than the possible future cash payment of $25.7 million for damages, the charge was for non-cash write-downs primarily related to the costs and estimated earnings in excess of billings and receivables that the Company previously recorded to reflect its expected recovery in this case.

With respect to STP’s direct and indirect claims against the Insurers, management has included in receivables an estimate of the total anticipated recovery concluded to be probable.

George Washington Bridge Bus Station Matter

In August 2013, Tutor Perini Building Corp. (“TPBC”) entered into a contract with the George Washington Bridge Bus Station Development Venture, LLC (the “Developer”) to renovate the George Washington Bridge Bus Station, a mixed-use facility owned by the Port Authority of New York and New Jersey (the “Port Authority”) that serves as a transit facility and retail space. The $100 million project experienced significant design errors and associated delays, resulting in damages to TPBC and its subcontractors, including WDF and Five Star, wholly owned subsidiaries of the Company. The project reached substantial completion on May 16, 2017.

On February 26, 2015, the Developer filed a demand for arbitration, subsequently amended, seeking $30 million in alleged damages and declaratory relief that TPBC’s requests for additional compensation are invalid due to lack of notice. TPBC denied the Developer’s claims and filed a counterclaim in March 2018. TPBC seeks in excess of $113 million in the arbitration, which includes unpaid contract balance claims, the return of $29 million retained by the Developer in alleged damages, as well as extra work claims, pass-through claims and delay claims.

Hearings on the merits commenced on September 24, 2018 before the arbitration panel. On June 4, 2019, the arbitration panel, as confirmed by the U.S. District Court in the Southern District of New York, issued a writ of attachment for $23 million of the $29 million discussed above. On October 7, 2019, the Developer filed for bankruptcy protection in the Southern District of New York under Chapter 11 of the Bankruptcy Code. The filing for bankruptcy stayed the pending arbitration proceedings. TPBC appeared in the bankruptcy proceedings on October 8, 2019 and filed a Proof of Claim in the amount of $113 million on December 13, 2019.

On June 5, 2020, the Developer, secured lenders and the Port Authority announced that they had reached a settlement of their disputes. As part of the settlement, the Port Authority waived the enforcement of its right to seek a “cure” pursuant to its lease agreement with the Developer which requires construction costs be paid prior to any sale of the leasehold, the sole asset in the Developer’s bankruptcy estate to be distributed in this bankruptcy. On July 14, 2020, the bankruptcy court conducted a hearing to determine (1) whether to approve the settlement agreement between the Developer, secured lenders and the Port Authority; and (2) whether TPBC can assert third-party beneficiary rights to the lease agreement and require that prior to the sale of the leasehold, any outstanding costs owed to contractors for the cost of building the project must be paid pursuant to the lease agreement’s “cure” provisions. On August 12, 2020, the bankruptcy court approved the settlement and denied TPBC’s third-party beneficiary rights under the lease agreement. On August 20, 2020, TPBC filed an appeal with the U.S. District Court for the Southern District of New York seeking to challenge the denial of its third-party beneficiary rights under the lease agreement’s “cure” provisions to avoid being subordinate to the claims of the secured lenders in the bankruptcy proceedings, which was denied by the U.S. District Court on August 4, 2021 and is now before the Second Circuit Court of Appeals. On August 25, 2021, the bankruptcy court approved the sale of the leasehold, which was completed on August 31, 2021. On October 1, 2021, the bankruptcy court converted the case from a Chapter 11 to a Chapter 7 bankruptcy proceeding.

Separately, on July 2, 2018, TPBC filed a lawsuit against the Port Authority, as owner of the project, seeking the same $113 million in damages pursuant to the lease agreement between the Port Authority and the Developer. On August 20, 2018, the Port Authority filed a motion to dismiss all causes of action, which was denied by the court on July 1, 2019. The Port Authority appealed this decision on July 15, 2019. On February 18, 2021, the Appellate Division affirmed in part and reversed in part the trial court's denial of the Port Authority's motion to dismiss TPBC’s causes of action. On April 11, 2022, the court granted the Port Authority’s motion to dismiss on statutory notice grounds. The Company intends to appeal this decision. In

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addition, on August 11, 2021, TPBC filed a second lawsuit in state court against the Port Authority alleging unjust enrichment and tortious interference with TPBC’s right to recover under the lease agreement’s “cure” provision in the bankruptcy proceeding. The case was removed to the federal bankruptcy court on September 21, 2021. The Port Authority filed a motion to dismiss on March 4, 2022, which remains pending before the bankruptcy court.

On January 27, 2020, TPBC filed separate litigation in the U.S. District Court for the Southern District of New York in which TPBC asserted related claims against individual owners of the Developer for their wrongful conversion of project funds and against lenders that received interest payments from project funds and other amounts earmarked to pay the contractors. On December 29, 2020, the court granted in part and denied in part the defendants’ motions to dismiss, resulting in the lender defendants being dismissed from the lawsuit and the lawsuit against the individual owners of the Developer continuing. The lawsuit was refil