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Dive brief:
- Tutor Perini’s layoff extended into the third quarter with revenue similar to a year ago as the large civil contractor received several write-downs from its numerous legal disputes.
- The Los Angeles-based company lost $36.9 million in the third quarter, compared with $32.5 million in the same period in 2022, on revenue of $1.06 billion. That top number was basically flat from the $1.07 billion the company reported in the third quarter last year. On a positive note, its $10.6 billion money portfolio represented a 28% increase over the past 12 months.
- In a conference call with Wall Street analysts after the results, CEO Ron Tutor urged investors to stand by the company. He said the company was moving forward to refinance its debt and resolve its pending litigation, a process he said would be largely completed by 2024. “Thank you all for coming along and be patient,” he told the end of call . “We’re getting there.”
Diving knowledge:
“We had mixed results for the third quarter of 2023, with very strong cash generation and year-over-year execution backlog growth, but with earnings challenged due to a number of write-downs that resulted from the resolution of various matters in dispute,” Tutor. said
Gary Smalley, the company’s chief financial officer, broke down the impacts of ongoing disputes and settlements the company has been involved in over the past few quarters.
For example, he highlighted the $13 million loss in the company’s construction operations segment, which he said was “primarily due to changes in estimates resulting from negotiations, settlements and legal judgments on certain claims in dispute and unapproved change orders”.
Separately, the company reached a settlement on various components of a different public transportation project in California, resulting in a negative adjustment of $23 million. That was at least partially offset by a $9 million positive adjustment in another project component, Smalley said.
A healthy offer channel
Tutor Perini’s ongoing disputes, charges and settlements illustrate the risk involved in large multi-year infrastructure projects. A recent study found construction had the third most legal requests — which resulted in the third highest costs — among all US business sectors. Besides, the cost of construction disputes has soared, 42% more in the last year.
In fact, some companies, such as competitor Granite Construction, have done this on purpose he avoided multimillion megaprojects due to the uncertainty of costs involved in tendering work with completion dates that are several years in the future.
For Tutor Perini, however, continuing to bid on these projects, while riskier, has also resulted in him often being one of two or three bidders on a job. That puts it in a sweet spot, Tutor stated on the call.
“As the competition, as I’ve said time and time again, has diminished, we’re confident that we’ll win our share of these projects and that we’ll be able to continue to grow our portfolio substantially over the next 12 to 18 months,” Tutor said .
Up to this point, Tutor Perini previously announced in the second quarter that he won a $2.95 billion contract to build the Brooklyn facility for the New York City prison system. On the call, the company highlighted several successful deals from its third quarter, including:
- $115 million in additional funding for a health care project in California.
- $95 million and $81 million in additional funding for two public transit projects in California.
- The $47 million New Everglades National Park Visitor Center project in Florida.
- A $42 million mining project in Virginia.
- The $40 million Central District of Florida wastewater treatment plant, awarded to its subsidiary Fisk Electric.
Tutor also outlined several opportunities in the contractor’s bid portfolio that it expects to make decisions on by the end of the year or early 2024, including:
- The $3 billion Queens prison in New York.
- The $1 billion Frederick Douglass Tunnel project in Maryland.
- The $800 million Amtrak East River Tunnel Rehab project in New York.
- The $500 million RFK Bridge Rehabilitation and Rehabilitation Project in New York.
- The $225 million MD 4 at Suitland Parkway Interchange in Maryland.
- The $200 million long slip channel railroad improvement project in New Jersey.
Additional short and long term bidding opportunities include:
- The Transbay Transit Center’s $2.6 billion downtown rail extension in San Francisco.
- The $2 billion Honolulu Rail Transit Project in Hawaii.
- The $1.6 billion Amtrak Sawtooth Bridge Replacement Project in New Jersey.
- The $1.5 billion Inglewood Automated People Mover project in Southern California.
- The $1.5 billion Newark AirTrain project in New Jersey.
- The $750 million Manhattan Tunnel project in New York.
- Its subsidiary Frontier Kemper’s $500 million Great Lakes Tunnel project.
- The $500 million Amtrak Connecticut River Bridge Replacement Project.
- The $500 million Palisades Tunnel in New Jersey.
Refinancing in works
In addition to moving forward with its legal disputes, the firm also said it is looking for ways to refinance its debt. The company had $3.2 billion in liabilities on its balance sheet at the end of the quarter, compared to $4.5 billion in assets.
While the result is a net positive, as the federal funds rate has risen from near zero to over 5% since early 2022, the cost of refinancing has also increased. On the call, Smalley said the company was working to find ways to refinance and noted that it had set aside more than $70 million of its positive cash flow in the fourth quarter toward that end.
“We are focused on our debt maturities and have been taking a holistic approach that considers a wide range of alternatives, drawing on the experience of both our management and the board of directors to evaluate our refinancing options,” he said Smalley. “We will soon begin the actual refinancing process.”
