TUTOR PERINI CORP

Previous wording

The following discussion and analysis of our financial position as of June 30, 2024 and the results of our operations for the three and six months ended June 30, 2024 should be read in conjunction with other information, including the unaudited Condensed Consolidated Financial Statements and notes included in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10‑Q, the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10‑K for the year ended December 31, 2023, and the information contained under the heading “Risk Factors” in our Annual Report on Form 10‑K for the year ended December 31, 2023 and in Part II, Item 1A below.

Current wording

The following discussion and analysis of our financial position as of September 30, 2024 and the results of our operations for the three and nine months ended September 30, 2024 should be read in conjunction with other information, including the unaudited Condensed Consolidated Financial Statements and notes included in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10‑Q, the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10‑K for the year ended December 31, 2023, and the information contained under the heading “Risk Factors” in our Annual Report on Form 10‑K for the year ended December 31, 2023 and in Part II, Item 1A below.

Previous wording

•The impact of inclement weather conditions and other events outside of our control on projects;

Current wording

•The impact of inclement weather conditions, disasters and other catastrophic events outside of our control on projects;

Previous wording

•Decreases in the level of government spending for infrastructure and other public projects;

Current wording

•Decreases in the level of federal, state and local government spending for infrastructure and other public projects;

Previous wording

Consolidated revenue for the three and six months ended June 30, 2024 was $1.1 billion and $2.2 billion, respectively, compared to $1.0 billion and $1.8 billion for the same periods in 2023. The growth for both periods was primarily driven by increased project execution activities on certain Building segment projects, including various healthcare and educational facility projects in California and a detention facility project in New York. The growth for both periods was also due to increased project execution activities on various Civil segment projects, including certain mass-transit projects in California, two airport projects in the Northern Mariana Islands and the tunneling component of an energy project in British Columbia, as well as the absence of certain prior-year net unfavorable adjustments, as discussed in more detail below in Results of Segment Operations. The growth for both periods was partially offset by reduced project execution activities on a completed transportation project in the Northeast.

Current wording

Consolidated revenue for the three months ended September 30, 2024 was $1.1 billion, up slightly compared to the same period in 2023. Consolidated revenue for the nine months ended September 30, 2024 was $3.3 billion, up 14% compared to the same period in 2023. For the nine-month period of 2024, the growth was primarily driven by increased project execution activities on certain Building segment projects, including various healthcare and educational facility projects in California and a detention facility project in New York. The growth was also due to increased project execution activities on various Civil segment projects, including certain mass-transit projects in California, two airport projects in the Northern Mariana Islands and the tunneling component of an energy project in British Columbia, as well as the absence of certain prior-year net unfavorable adjustments, as discussed in more detail below in Results of Segment Operations. The improvement for the nine-month period of 2024 was partially offset by reduced project execution activities on a Civil segment mass-transit project in the Midwest that is nearing completion, as well as certain net unfavorable adjustments in the current-year period, also discussed in more detail below.

Previous wording

Income from construction operations for the three and six months ended June 30, 2024 was $40.5 million and $89.3 million, respectively, compared to income from construction operations of $2.4 million and loss from construction operations of $79.6 million for the same periods in 2023. For the second quarter of 2024, the increase was principally due to contributions related to the increased project execution activities discussed above and the absence of certain prior-year net unfavorable adjustments, as discussed further below in Results of Segment Operations. The increase was partially offset by an unfavorable adjustment in the second quarter of 2024 of $12.4 million due to the impact of a settlement on two completed Civil segment highway projects in the Northeast. For the first six months of 2024, the improvement was due to the same factors mentioned above for the second quarter, as well as a favorable adjustment in the first quarter of 2024 of $10.2 million on a Civil segment mass-transit project in California related to a dispute resolution and associated expected cost savings, partially offset by an unfavorable adjustment of $12.0 million due to an arbitration ruling that only provided a partial award to the Company pertaining to a completed Specialty Contractors segment electrical project in New York. Furthermore, income from construction operations for the three and six months ended June 30, 2024 was negatively impacted by an increase in share-based compensation expense of $14.3 million and $16.8 million, respectively, as compared to the same periods in 2023. The increase in share-based compensation expense in both 2024 periods was primarily due to a substantial increase in the Company’s stock price during the first and second quarters of 2024, which impacted the fair value of liability-classified awards. These awards are remeasured at fair value at the end of each reporting period with the change in fair value recognized in earnings.

Current wording

Loss from construction operations for the nine months ended September 30, 2024 was $17.5 million compared to $92.1 million for the same period in 2023. For the nine-month period of 2024, the improvement was primarily due to the absence of certain prior-year net unfavorable adjustments, as discussed further below in Results of Segment Operations, contributions totaling $78.5 million related to the increased project execution activities discussed above, and a favorable adjustment of $10.2 million in the first quarter of 2024 on a Civil segment mass-transit project in California related to a dispute resolution and associated expected cost savings. The improvement for the period was partially offset by the impact of the net unfavorable adjustments in the third quarter of 2024 discussed in the paragraph above, an unfavorable adjustment of $12.4 million in the second quarter of 2024 due to the impact of a settlement on two completed Civil segment highway projects in the Northeast, and an unfavorable adjustment of $12.0 million in the first quarter of 2024 due to an arbitration ruling that only provided a partial award to the Company pertaining to a completed Specialty Contractors segment electrical project in New York.

Previous wording

Income tax expense was $7.3 million and $14.6 million for the three and six months ended June 30, 2024, respectively, compared to income tax expense of $0.2 million for the three months ended June 30, 2023, and an income tax benefit of $47.9 million for the six months ended June 30, 2023. See Corporate, Tax and Other Matters below for a discussion of the changes in the effective tax rate.

Current wording

Income tax benefit was $33.9 million and $19.4 million for the three and nine months ended September 30, 2024, respectively, compared to $4.1 million and $52.0 million for the same periods in 2023. See Corporate, Tax and Other Matters below for a discussion of the changes in the effective tax rate.

Previous wording

Diluted earnings per common share for the three and six months ended June 30, 2024 was $0.02 and $0.31, respectively, compared to diluted loss per common share of $0.72 and $1.68, respectively, for the same periods in 2023. The improvement for both periods in 2024 was primarily due to the factors discussed above that resulted in the positive change in income (loss) from construction operations for such periods.

Current wording

Diluted loss per common share for the three and nine months ended September 30, 2024 was $1.92 and $1.61, respectively, compared to diluted loss per common share of $0.71 and $2.39, respectively, for the same periods in 2023. The change for both periods in 2024 was primarily due to the factors discussed above that resulted in the change in loss from construction operations for such periods.

Previous wording

Consolidated new awards for the three and six months ended June 30, 2024 totaled $1.6 billion and $2.4 billion, respectively, compared to $4.0 billion and $4.7 billion for the same periods in 2023. The 2023 periods included the award of the $2.95 billion Brooklyn Jail project in New York. The Civil and Building segments were the primary contributors to the new awards activity in the second quarter of 2024. The most significant new awards and contract adjustments in the second quarter of 2024 included the Company’s proportionate share of its contract value for a $1.3 billion bridge replacement project in Connecticut; a $216 million airport terminal connectors project at Fort Lauderdale-Hollywood International Airport in Florida; $144 million of additional funding for certain mass-transit projects in California; a $136 million highway and bridge project in the Midwest; a $127 million electrical project in New York; a $74 million military facilities project in Guam; and $71 million of additional funding for various healthcare projects in California.

Current wording

Consolidated new awards for the three and nine months ended September 30, 2024 totaled $4.7 billion and $7.1 billion, respectively, compared to $0.8 billion and $5.6 billion for the same periods in 2023. The Civil and Building segments were the primary contributors to the new awards activity in the third quarter of 2024. The most significant new awards and contract adjustments in the third quarter of 2024 included a $1.66 billion mass-transit project in Hawaii; a $1.1 billion water conveyance tunnel project in New York; a healthcare campus project in California valued at more than $1 billion; $138 million of additional funding for certain mass-transit projects in California; and a $113 million military facility project in Guam.

Previous wording

Consolidated backlog as of June 30, 2024 was $10.4 billion, up slightly compared to $10.2 billion as of December 31, 2023. As of June 30, 2024, the mix of backlog by segment was approximately 42% for Civil, 40% for Building and 18% for Specialty Contractors.

Current wording

Consolidated backlog as of September 30, 2024 was $14.0 billion, up 38% compared to $10.2 billion as of December 31, 2023, setting a new all-time record that far exceeded the previous record backlog of $11.6 billion reported for the first quarter of 2019. As of September 30, 2024, the mix of backlog by segment was approximately 49% for Civil, 37% for Building and 14% for Specialty Contractors. The Company has submitted or will submit proposals on various large projects and expects owners’ decisions in the fourth quarter of 2024. Accordingly, ending backlog for the fourth quarter of 2024 could reflect further significant growth.

Previous wording

The outlook for the Company’s revenue growth over the next several years remains favorable. However, revenue growth could be hampered by unanticipated project delays or the timing of project bids, awards, commencements, ramp-up activities and completions. We anticipate that we will continue to win our share of significant new project awards resulting from long-term, well-funded capital spending plans by state, local and federal customers, as well as limited competition for some of the largest project opportunities.

Current wording

The outlook for the Company’s revenue growth over the next several years remains favorable, especially due to strong new award bookings in the third quarter of 2024, as well as other significant awards that could potentially be booked over the next few months. Many of these newer projects will be executed over a longer timeframe compared to other projects booked in recent years. However, revenue growth could be hampered by unanticipated project delays or the timing of project bids, awards, commencements, ramp-up activities and completions. We anticipate that we will continue to win our share of significant new project awards resulting from long-term, well-funded capital spending plans by state, local and federal customers, as well as limited competition for many of the larger project opportunities.

Previous wording

Since 2014, voters in 43 states have approved 85 percent of over 3,000 state and local ballot measures, raising an estimated $342 billion in new and renewed revenue funding for transportation investments. The largest of these was in Los Angeles County, where Measure M, a half-cent sales tax increase, was approved in 2016 and is expected to generate $120 billion of funding over 40 years. Funding from this measure is supporting, and is expected to continue to support, several of the Company’s current and prospective projects. Despite numerous interest rate increases since March 2022, rates are still at levels that we believe are conducive to continued spending on certain types of projects that have strong end-market demand with adequate available funding, such as mass transit, transportation, bridges, and healthcare, educational, and correctional and detention facilities, among others. Many economists believe that interest rates will begin to fall as early as September 2024, though the actual timing and extent of any reductions remains uncertain. Lower interest rates could support additional demand for continued infrastructure spending. In contrast, should interest rates rise, they could reach levels that may further negatively impact demand, especially for certain types of Building segment projects that have already been experiencing such impacts, such as commercial offices and tenant improvement projects, which tend to be more economically sensitive than projects handled by our Civil segment.

Current wording

Since 2014, voters in 43 states have approved 85 percent of over 3,000 state and local ballot measures, raising an estimated $342 billion in new and renewed revenue funding for transportation investments. The largest of these was in Los Angeles County, where Measure M, a half-cent sales tax increase, was approved in 2016 and is expected to generate $120 billion of funding over 40 years. Funding from this measure is supporting, and is expected to continue to support, several of the Company’s current and prospective projects. More recently, there were more than $50 billion in various state and local transit funding measures on the ballots for elections in November 2024. Despite numerous interest rate increases since March 2022, rates remain at levels that we believe are conducive to continued spending on certain types of projects that have strong end-market demand with adequate available funding, such as mass transit, transportation, bridges, and healthcare, education, and correctional and detention facilities, among others. For the first time in four years, interest rates were lowered in September 2024, and many economists expect further rate reductions over the remainder of 2024 and in 2025, though the actual timing and extent of any future rate reductions remains uncertain. Lower interest rates could support additional demand for continued infrastructure spending. In contrast, should interest rates rise, they could reach levels that may negatively impact demand, especially for certain types of Building segment projects that have already been experiencing such impacts, such as commercial offices and tenant improvement projects, which tend to be more economically sensitive than projects handled by our Civil segment.

Previous wording

Revenue and income from construction operations for the Civil segment are summarized as follows:

Current wording

Revenue and income (loss) from construction operations for the Civil segment are summarized as follows:

Previous wording

Revenue for the three months ended June 30, 2024 decreased slightly compared to the same period in 2023, primarily due to the absence of prior-year favorable adjustments, as described in the paragraph below, largely offset by a net increase in project execution activities in the current-year period. The net increase in project execution activities was primarily driven by certain mass-transit projects in California, two airport projects in the Northern Mariana Islands and the tunneling component of an energy project in British Columbia, partially offset by reduced project execution activities on a completed transportation project in the Northeast and a mass-transit project in the Midwest that is nearing completion. Revenue for the six months ended June 30, 2024 increased 13% compared to the same period in 2023, primarily due to net increased project execution activities on the same projects discussed above, partially offset by the absence of certain prior-year net favorable adjustments, as described in the paragraph below.

Current wording

Revenue for the three months ended September 30, 2024 increased 5% compared to the same period in 2023, primarily due to a net increase in project execution activities driven by certain large mass-transit projects, two airport projects in the Northern Mariana Islands, and the tunneling component of an energy project in British Columbia, partially offset by reduced project execution activities on a mass-transit project in the Midwest that is nearing completion. The increase was also due to the absence of certain prior-year net unfavorable adjustments discussed in the paragraph below. Revenue for the nine months ended September 30, 2024 increased 10% compared to the same period in 2023, primarily due to contributions from the net increased project execution activities mentioned above. The increase for both periods of 2024 was partially offset by an unfavorable adjustment related to an unexpected adverse arbitration decision on a legacy dispute related to a completed bridge project in California, which the Company will appeal.

Previous wording

Income from construction operations for the three and six months ended June 30, 2024 was $75.6 million and $146.3 million, respectively, compared to $105.4 million and $123.4 million for the same periods in 2023. For the second quarter of 2024, the decrease was primarily due to the absence of prior-year favorable adjustments totaling $58.1 million on a mass-transit project in California associated with changes in estimates due to improved performance, as well as a current-year unfavorable adjustment of $12.4 million due to the impact of a settlement on two completed highway projects in the Northeast. The impact of these unfavorable changes was partially offset by contributions related to the net increased project execution activities discussed above. For the first six months of 2024, the increase was due to contributions related to the net increased project execution activities discussed above and a $10.2 million favorable adjustment on a mass-transit project in California related to a dispute resolution and associated expected cost savings. The increase was also due to the absence of a prior-year unfavorable adjustment of $13.1 million on a completed transportation project in the Northeast, split evenly between the Civil and Building segments, due to the settlement of certain change orders during project closeout. These improvements were mostly offset by the absence of prior-year net favorable adjustments totaling $30.1 million on a mass-transit project in California associated with changes in estimates due to improved performance and the unfavorable adjustment that impacted the second quarter of 2024, as discussed above.

Current wording

Income from construction operations for the nine months ended September 30, 2024 was $133.8 million compared to $170.3 million for the same period in 2023. The decrease was due to the same factors discussed above for the third quarter of 2024, as well as an unfavorable adjustment of $12.4 million in the second quarter of 2024 that was due to the impact of a settlement on two completed highway projects in the Northeast, mostly offset by a $10.2 million favorable adjustment in the first quarter of 2024 on a mass-transit project in California related to a dispute resolution and associated expected cost savings. The decrease was also due to the absence of prior-year net favorable adjustments totaling $25.6 million on a mass-transit project in California associated with changes in estimates due to improved performance, partially offset by contributions totaling $57.7 million related to the net increase in project execution activities discussed above and the absence of the Civil segment’s portion of prior-year unfavorable adjustments of $13.8 million on a completed transportation project in the Northeast due to the settlement of certain change orders during project closeout.

Previous wording

Operating margin was 13.8% and 14.4% for the three and six months ended June 30, 2024, respectively, compared to 19.0% and 13.7% for the same periods in 2023. The changes in operating margin were principally due to the above-mentioned factors that drove the changes in revenue and income from construction operations.

Current wording

Operating margin was (2.3)% and 8.6% for the three and nine months ended September 30, 2024, respectively, compared to 9.0% and 12.0% for the same periods in 2023. The changes in operating margin were principally due to the above-mentioned factors that drove the changes in revenue andincome (loss) from construction operations.

Previous wording

Backlog for the Civil segment was $4.4 billion as of June 30, 2024 compared to $4.6 billion as of June 30, 2023. The segment continues to experience strong demand reflected in a large, multi-year pipeline of prospective projects, supported by substantial anticipated funding from various voter-approved transportation measures, the BIL, and by public agencies’ long-term spending plans. We believe that the Civil segment is well-positioned to capture its share of these prospective projects, but the timing of new awards remains uncertain.

Current wording

Backlog for the Civil segment was $6.9 billion as of September 30, 2024, up 52% compared to $4.5 billion as of September 30, 2023. The segment continues to experience strong demand reflected in a large, multi-year pipeline of prospective projects, supported by substantial anticipated funding from various voter-approved transportation measures, the BIL, and by public agencies’ long-term spending plans. We believe that the Civil segment is well-positioned to capture its share of these prospective projects.

Previous wording

Revenue for the three months ended June 30, 2024 increased 26% compared to the same period in 2023, primarily due to increased project execution activities on various healthcare and educational facility projects in California and a detention facility project in New York. Revenue for the six months ended June 30, 2024 increased 48% compared to the same period in 2023, primarily due to contributions from the increased project execution activities mentioned above, as well as the absence of a prior-year unfavorable adjustment related to an adverse legal ruling on a completed mixed-use project in New York.

Current wording

Revenue for the three months ended September 30, 2024 increased 19% compared to the same period in 2023, primarily due to increased project execution activities on various healthcare and educational facility projects in California and a detention facility project in New York. Revenue for the nine months ended September 30, 2024 increased 37% compared to the same period in 2023, primarily due to contributions from the increased project execution activities mentioned above, as well as the absence of a prior-year unfavorable adjustment related to an adverse legal ruling on a completed mixed-use project in New York. The increase for both periods of 2024 was partially offset by an unfavorable adjustment in the third quarter of 2024 related to a settlement on a legacy dispute related to a completed government facility project in Florida.

Previous wording

Income from construction operations for the three and six months ended June 30, 2024 was $5.0 million and $21.2 million, respectively, compared to loss from construction operations of $13.8 million and $84.0 million for the same periods in 2023. For the second quarter of 2024, the improvement was primarily due to the increased project execution activities discussed above, as well as the absence of a prior-year unfavorable adjustment of $13.1 million on a completed transportation project in the Northeast, split evenly between the Civil and Building segments, due to the settlement of certain change orders during project closeout. For the first six months of 2024, the significant improvement was principally due to the absence of the aforementioned prior-year unfavorable adjustment related to the adverse legal ruling on a completed mixed-use project in New York that resulted in a non-cash charge of $83.6 million, of which $72.2 million impacted the Building segment, as well as contributions related to the increased project execution activities discussed above.

Current wording

Loss from construction operations for the three months ended September 30, 2024 was $3.9 million and income from construction operations for the nine months ended September 30, 2024 was $17.3 million, compared to income from construction operations of $0.1 million and loss from construction operations of $83.9 million for the respective periods in 2023. For the third quarter of 2024, the decrease was primarily the result of an unfavorable adjustment of $20.0 million related to the same settlement on a legacy dispute related to a completed government facility project in Florida, mostly offset by the increased project execution activities discussed above, as well as the absence of the Building segment’s portion of a prior-year unfavorable adjustment of $7.0 million on a completed transportation project in the Northeast due to the settlement of certain change orders during project closeout. For the first nine months of 2024, the significant improvement was principally due to the absence of the aforementioned prior-year unfavorable adjustment related to the adverse legal ruling on a completed mixed-use project in New York that resulted in a non-cash charge of $83.6 million, of which $72.2 million impacted the Building segment, and contributions related to the increased current-year project execution activities discussed above. The improvement was partially offset by the unfavorable impact of the aforementioned settlement on a legacy dispute related to a completed government facility project in Florida.

Previous wording

Operating margin was 1.2% and 2.6% for the three and six months ended June 30, 2024, respectively, compared to (4.2)% and (15.0)% for the same periods in 2023. The improvements in operating margin were principally due to the aforementioned factors that drove the changes in revenue and income (loss) from construction operations.

Current wording

Operating margin was (0.9)% and 1.4% for the three and nine months ended September 30, 2024, respectively, compared to 0.0% and (9.1)% for the same periods in 2023. The changes in operating margin were principally due to the aforementioned factors that drove the changes in revenue and income (loss) from construction operations.

Previous wording

New awards in the Building segment totaled $436.7 million and $841.0 million for the three and six months ended June 30, 2024, respectively, compared to $2.6 billion and $2.8 billion for the same periods in 2023. The 2023 periods included the award of the Brooklyn Jail project in New York. The most significant new awards and contract adjustments in the second quarter of 2024 included a $216 million airport terminal connectors project at Fort Lauderdale-Hollywood International Airport in Florida; $71 million of additional funding for various healthcare projects in California; and a $49 million government facility rehabilitation project in California. The proliferation of remote and hybrid work settings at many companies, along with continued higher interest rates, could continue to result in certain delayed or even canceled Building segment project opportunities, particularly in the corporate office end market. However, other Building segment end markets, such as correctional and detention facilities, healthcare, education, industrial/manufacturing, and hospitality and gaming, continue to show strong demand for new and renovated facilities.

Current wording

New awards in the Building segment totaled $1.4 billion and $2.2 billion for the three and nine months ended September 30, 2024, respectively, compared to $249.0 million and $3.0 billion for the same periods in 2023. The nine-month period of 2023 included the award of the Brooklyn Jail project in New York. The most significant new awards and contract adjustments in the third quarter of 2024 included more than $1 billion of additional funding for a healthcare campus project in California. Certain Building segment end markets, such as correctional and detention facilities, healthcare, education, industrial/manufacturing, and hospitality and gaming, continue to show strong demand for new and renovated facilities. However, the proliferation of remote and hybrid work settings at many companies, along with continued higher interest rates, could continue to result in delayed or even canceled Building segment project opportunities, particularly in the corporate office end market.

Previous wording

Backlog for the Building segment was $4.2 billion as of June 30, 2024, down 6% compared to $4.5 billion as of June 30, 2023. We believe that the Building segment continues to experience strong customer demand as reflected by a large volume of prospective projects across various end markets and geographic locations, but the timing of new awards remains uncertain.

Current wording

Backlog for the Building segment was $5.1 billion as of September 30, 2024, the highest backlog for the segment since 2008, and up 18% compared to $4.3 billion as of September 30, 2023. We believe that the Building segment continues to experience strong customer demand as reflected by a large volume of prospective projects across various end markets and geographic locations. In addition, there are various healthcare and education projects underway in California that are in the pre-construction phase, with only a relatively modest amount of our current backlog represented by those projects. Over the next one to two years, these projects are expected to advance into the construction phase, and subsequently we anticipate that we will book significant additional backlog for these projects as a result.

Previous wording

Revenue for the three months ended June 30, 2024 increased 20% compared to the same period in 2023, partially due to the absence of prior-year unfavorable adjustments related to changes in estimates on the electrical and mechanical scope of a completed transportation project in the Northeast associated with a change in the expected recovery on certain unapproved change orders, as well as a prior-year adverse legal ruling on an educational facilities project in New York. The increase was partially offset by reduced project execution activities on an industrial facility project in Arizona and various electrical and mechanical projects in New York, all of which are complete or nearing completion. Revenue for the six months ended June 30, 2024 decreased 2% compared to the same period in 2023.

Current wording

Revenue for the three months ended September 30, 2024 decreased 42% compared to the same period in 2023, primarily due to reduced project execution activities on various electrical and mechanical projects in New York and Florida, all of which are complete or nearing completion. Revenue for the nine months ended September 30, 2024 decreased 15% compared to the same period in 2023, primarily due to the same factors discussed above for the third quarter, as well as reduced project execution activities on an industrial facility project in Arizona. The decrease for the first nine months of 2024 was partially offset by the absence of certain prior-year unfavorable adjustments described in the paragraph below.

Previous wording

Loss from construction operations for the three and six months ended June 30, 2024 was $7.8 million and $26.2 million, respectively, compared to loss from construction operations of $69.8 million and $82.3 million for the same periods in 2023. For the second quarter of 2024, the improvement was primarily due to the absence of prior-year unfavorable adjustments, including $35.8 million due to changes in estimates on the electrical and mechanical scope of the above-mentioned transportation project in the Northeast, as well as a non-cash charge of $24.7 million on an educational facilities project in New York that resulted from an adverse court ruling. For the first six months of 2024, the improvement was primarily due to the absence of the same prior-year unfavorable adjustments as discussed above for the second quarter of 2024, as well as the absence of a prior-year unfavorable adjustment related to the adverse legal ruling on a completed mixed-use project in New York that resulted in a non-cash charge of $83.6 million, of which $11.4 million impacted the Specialty Contractors segment. The improvement was partially offset by an unfavorable adjustment of $12.0 million in the first quarter of 2024 due to an arbitration ruling pertaining to a completed electrical project in New York that only provided a partial award to the Company.

Current wording

Loss from construction operations for the nine months ended September 30, 2024 was $83.1 million compared to $120.7 million for the same period in 2023. The improvement was primarily due to the absence of certain prior-year unfavorable adjustments, including $57.0 million due to changes in estimates on the electrical and mechanical scope of the above-mentioned transportation project in the Northeast; a non-cash charge of $25.1 million on an educational facilities project in New York that resulted from an adverse court ruling; an adverse legal ruling on a completed mixed-use project in New York that resulted in a non-cash charge of $83.6 million, of which $11.4 million impacted the Specialty Contractors segment; and the aforementioned $9.4 million unfavorable adjustment on a completed mass-transit project in California. The improvement was partially offset by the unfavorable adjustments impacting the third quarter of 2024, reduced project execution activities for the nine-month period of 2024 discussed above and an unfavorable adjustment of $12.0 million in the first quarter of 2024 due to an arbitration ruling pertaining to a completed electrical project in New York that only provided a partial award to the Company.

Previous wording

Operating margin was (4.8)% and (8.0)% for the three and six months ended June 30, 2024, respectively, compared to (51.2)% and (24.7)% for the same periods in 2023. The changes in operating margin were principally due to the aforementioned factors that drove the changes in revenue and loss from construction operations.

Current wording

Operating margin was (56.2)% and (19.4)% for the three and nine months ended September 30, 2024, respectively, compared to (22.0)% and (23.8)% for the same periods in 2023. The changes in operating margin were principally due to the aforementioned factors that drove the changes in revenue and loss from construction operations.

Previous wording

New awards in the Specialty Contractors segment totaled $313.0 million and $453.3 million for the three and six months ended June 30, 2024, respectively, compared to $716.3 million and $870.4 million for the same periods in 2023. The most significant new award in the second quarter of 2024 was a $127 million electrical project in New York.

Current wording

New awards in the Specialty Contractors segment totaled $227.8 million and $681.1 million for the three and nine months ended September 30, 2024, respectively, compared to $128.5 million and $1.0 billion for the same periods in 2023.

Previous wording

Backlog for the Specialty Contractors segment was $1.9 billion as of June 30, 2024, up 2.1% compared to $1.8 billion as of June 30, 2023. The Specialty Contractors segment continues to be primarily focused on servicing the Company’s current and prospective large Civil and Building segment projects, particularly in the Northeast and California. We believe that the segment remains well-positioned to capture its share of new projects, leveraging the size and scale of our business units that operate in New York, Texas, Florida and California and the strong reputation held by these business units for high-quality work on large, complex projects.

Current wording

Backlog for the Specialty Contractors segment was $2.0 billion as of September 30, 2024, up 12% compared to $1.8 billion as of September 30, 2023. The Specialty Contractors segment continues to be primarily focused on servicing the Company’s current and prospective large Civil and Building segment projects, particularly in the Northeast and California. We believe that the segment remains well-positioned to capture its share of new projects, leveraging the size and scale of our business units that operate in New York, Texas, Florida and California and the strong reputation held by these business units for high-quality work on large, complex projects.

Previous wording

Corporate general and administrative expenses were $31.5 million and $51.3 million during the three and six months ended June 30, 2024, respectively, compared to $18.6 million and $35.0 million for the same periods in 2023. The increase in the three and six months ended June 30, 2024 was primarily due to higher compensation-related expenses, mainly attributable to higher share-based compensation expense. The increase in share-based compensation expense was primarily due to a substantial increase in the Company’s stock price during the 2024 periods, which impacted the fair value of liability-classified awards. These awards are remeasured at fair value at the end of each reporting period with the change in fair value recognized in earnings.

Current wording

Corporate general and administrative expenses were $32.5 million and $83.8 million during the three and nine months ended September 30, 2024, respectively, compared to $21.1 million and $56.1 million for the same periods in 2023. The increase in the three and nine months ended September 30, 2024 was primarily due to higher compensation-related expenses, mainly attributable to higher share-based compensation expense. The increase in share-based compensation expense was primarily due to a substantial increase in the Company’s stock price during the 2024 periods, which impacted the fair value of liability-classified awards. These awards are remeasured at fair value at the end of each reporting period with the change recognized in earnings.

Previous wording

Other Income, Net, Interest Expense and Income Tax (Expense) Benefit

Current wording

Other Income, Net, Interest Expense and Income Tax Benefit

Previous wording

Other income, net for the three and six months ended June 30, 2024 increased $2.7 million and $1.6 million, respectively, compared to the same periods in 2023.

Current wording

Other income, net for the three and nine months ended September 30, 2024 increased $1.5 million and $3.2 million, respectively, compared to the same periods in 2023.

Previous wording

Interest expense for the three months ended June 30, 2024 increased by $1.1 million compared to the same period in 2023. Interest expense for the six months ended June 30, 2024 decreased by $1.1 million compared to the same period in 2023.

Current wording

Interest expense for the three months ended September 30, 2024 increased by $0.9 million compared to the same period in 2023. Interest expense for the nine months ended September 30, 2024 decreased by $0.2 million compared to the same period in 2023. With the anticipated prepayment of a portion of the outstanding Term Loan B in the fourth quarter of 2024 and the first quarter of 2025, as discussed further in Liquidity and Capital Resources, the Company expects interest expense to decrease in 2025 and beyond.

Previous wording

The Company recognized an income tax expense of $7.3 million and $14.6 million for the three and six months ended June 30, 2024, respectively. The effective income tax rate was 31.3% and 25.1% for the three and six months ended June 30, 2024, respectively. The effective income tax rate for both the three and six months ended June 30, 2024 was higher than the 21.0% federal statutory income tax rate primarily due to non-deductible expenses and state income taxes (net of the federal tax benefit), partially offset by the earnings attributable to noncontrolling interests (for which income taxes are not the responsibility of the Company).

Current wording

The effective income tax rate for both the three and nine months ended September 30, 2024 was higher than the 21.0% federal statutory income tax rate primarily due to earnings attributable to noncontrolling interests (for which income taxes are not the responsibility of the Company) and state income taxes (net of the federal tax benefit), partially offset by non-deductible expenses.

Previous wording

The Company recognized an income tax expense of $0.2 million for the three months ended June 30, 2023 and an income tax benefit of $47.9 million for the six months ended June 30, 2023. The effective income tax rate was (1.2)% and 42.2% for the three and six months ended June 30, 2023, respectively. The effective income tax rate for the three months ended June 30, 2023 was lower than the 21.0% federal statutory rate primarily due to the impact of a cumulative catch-up adjustment associated with the change in the Company’s projected 2023 effective tax rate that resulted from the revision of the Company’s forecast. The effective income tax rates for both periods were impacted by relatively large tax benefits generated against a forecasted pre-tax loss for the year, which magnified the impact these tax benefits had on the effective income tax rate. In periods with pre-tax losses, tax benefits generated during the period increase the effective income tax rate (and, thus, the income tax benefit to the Company) rather than decreasing the effective rate, as in periods with pre-tax income. The tax benefits that caused a higher effective tax rate primarily included the earnings attributable to noncontrolling interests (for which income taxes are not the responsibility of the Company) and state income taxes (net of the federal tax benefit), partially offset by non-deductible expenses.

Current wording

The Company recognized an income tax benefit of $4.1 million and $52.0 million for the three and nine months ended September 30, 2023. The effective income tax rate was 13.7% and 36.2% for the three and nine months ended September 30, 2023, respectively. The effective income tax rate for the three months ended September 30, 2023 was lower than the 21.0% federal statutory rate primarily due to the impact of a cumulative catch-up adjustment associated with the change in the Company’s projected 2023 effective tax rate that resulted from the revision of the Company’s forecast. The effective income tax rates for both periods were impacted by relatively large tax benefits generated against a forecasted pre-tax loss for the year, which magnified the impact these tax benefits had on the effective income tax rate. In periods with pre-tax losses, tax benefits generated during the period increase the effective income tax rate (and, thus, the income tax benefit to the Company) rather than decreasing the effective rate, as in periods with pre-tax income. The tax benefits that caused a higher effective tax rate were primarily state income taxes (net of the federal tax benefit), earnings attributable to noncontrolling interests (for which income taxes are not the responsibility of the Company) and a reduction in reserves for unrecognized tax benefits, partially offset by non-deductible expenses.

Previous wording

Liquidity is provided by available cash and cash equivalents, cash generated from operations, credit facilities and access to capital markets. We have a committed line of credit totaling $170.0 million, which may be used for revolving loans, letters of credit and/or general purposes. We believe that cash generated from operations, along with our unused credit capacity and available cash balances as of June 30, 2024, will be sufficient to fund working capital needs and debt maturities for the next 12 months and beyond, as discussed further in Debt below. We generated significant operating cash flow in the first six months of 2024 as discussed below in Cash and Working Capital. We expect strong operating cash flow to continue for the remainder of 2024, based on projected cash collections, both from project execution activities and the resolution of additional outstanding claims and unapproved change orders, including COVID-19-related cost recoveries from certain customers. For example, the cash collections associated with the above-mentioned settlement on two completed Civil segment highway projects in the Northeast are expected to have a significant positive impact on the Company’s third-quarter cash generated from operations. In addition, we expect to benefit from the utilization of available net operating loss carryforwards to reduce our cash outflows for income taxes.

Current wording

Liquidity is provided by available cash and cash equivalents, cash generated from operations, credit facilities and access to capital markets. We have a committed line of credit totaling $170.0 million, which may be used for revolving loans, letters of credit and/or general purposes. We believe that cash generated from operations, along with our unused credit capacity and available cash balances as of September 30, 2024, will be sufficient to fund working capital needs and debt maturities for the next 12 months and beyond, as discussed further below in Debt. We generated significant cash from operations in the first nine months of 2024 as discussed below in Cash and Working Capital. As discussed above in Operating Results, we expect cash generated from operations ranging from $250 million to $400 million in the fourth quarter of 2024 (and, consequently, $425 million to $575 million of cash generated from operations for the full year of 2024), expected to be driven by collections of approximately $180 million related to the resolution of the aforementioned third-quarter 2024 settlements, as well as cash generation related to project execution activities for new and existing projects. The wide range in the estimated generation of operating cash in the fourth quarter of 2024 is due to the uncertainty as to the precise timing of when certain large payments will be collected, though any amounts in this range that are not collected in the fourth quarter of 2024 are expected to be collected in the first quarter of 2025. We intend to utilize some of the cash flow from operations expected in the fourth quarter of 2024 to prepay $100 million to $150 million of our outstanding Term Loan B debt by the end of 2024, of which $50 million has already been prepaid subsequent to the third quarter of 2024. Further estimated prepayments of $50 million to $75 million of the Term Loan B debt are anticipated in the first quarter of 2025. In addition, we expect to benefit from the utilization of available net operating loss carryforwards to reduce our cash outflows for income taxes.

Previous wording

Cash and cash equivalents were $267.1 million as of June 30, 2024 compared to $380.6 million as of December 31, 2023. Cash immediately available for general corporate purposes was $84.1 million and $145.1 million as of June 30, 2024 and December 31, 2023, respectively, with the remainder being amounts held by our consolidated joint ventures and also our proportionate share of cash held by our unconsolidated joint ventures. Cash held by our joint ventures is available only for joint venture-related uses, including distributions to joint venture partners. In addition, our restricted cash and restricted investments totaled $146.6 million as of June 30, 2024 compared to $144.4 million as of December 31, 2023. Restricted cash and restricted investments at June 30, 2024 were primarily held to secure insurance-related contingent obligations and deposits.

Current wording

Cash and cash equivalents were $287.4 million as of September 30, 2024 compared to $380.6 million as of December 31, 2023. Cash immediately available for general corporate purposes was $118.4 million and $145.1 million as of September 30, 2024 and December 31, 2023, respectively, with the remainder being amounts held by our consolidated joint ventures and also our proportionate share of cash held by our unconsolidated joint ventures. Cash held by our joint ventures is available only for joint venture-related uses, including distributions to joint venture partners. In addition, our restricted cash and restricted investments totaled $149.5 million as of September 30, 2024 compared to $144.4 million as of December 31, 2023. Restricted cash and restricted investments at September 30, 2024 were primarily held to secure insurance-related contingent obligations and deposits.

Previous wording

During the six months ended June 30, 2024, net cash provided by operating activities was $151.4 million, the second-largest result for the first six months of any year since the merger between Tutor-Saliba Corporation and Perini Corporation in 2008. The net cash provided by operating activities for the 2024 period was primarily due to cash generated by earnings sources and a reduction in net project working capital. The reduction in net project working capital was primarily due to an increase in accounts payable, as a result of the timing of payments to subcontractors and vendors, partially offset by a decrease in billings in excess of costs and estimated earnings (“BIE”). During the six months ended June 30, 2023, net cash provided by operating activities was $77.7 million. The net cash provided by operating activities for the 2023 period was primarily due to a reduction in net project working capital, partially offset by cash utilized by earnings sources. The reduction in net project working capital was primarily due to a decrease in costs and estimated earnings in excess of billings (“CIE”) and an increase in BIE, partially offset by an increase in accounts receivable.

Current wording

During the nine months ended September 30, 2024, net cash provided by operating activities was $174.0 million. The net cash provided by operating activities for the 2024 period was primarily due to cash generated by earnings sources and a reduction in net project working capital. The reduction in net project working capital was primarily due to an increase in accounts payable, as a result of the timing of payments to subcontractors and vendors, and a decrease in costs and estimated earnings in excess of billings (“CIE”), partially offset by an increase in accounts receivable and a decrease in billings in excess of costs and estimated earnings (“BIE”). As of September 30, 2024, BIE of $1.05 billion exceeded CIE of $966.3 million resulting in a net BIE position for the first time since 2011. During the nine months ended September 30, 2023, net cash provided by operating activities was $180.8 million, which was the second-largest result for the first nine months of any year since the merger between Tutor-Saliba Corporation and Perini Corporation in 2008. The net cash provided by operating activities for the nine-month period of 2023 was primarily due to a decrease in investments in project working capital, partially offset by cash utilized by earnings sources. The decrease in investments in project working capital was primarily due to a decrease in CIE, an increase in accounts payable due to the timing of payments to suppliers and subcontractors and an increase in BIE.

Previous wording

Cash flow from operating activities for the first six months of 2024 increased $73.8 million compared to the same period in 2023. The increase in cash flow from operating activities for the first six months of 2024 compared to 2023 primarily reflects cash generated by earning sources in the current period compared to cash used by earnings sources in the same period last year, partially offset by a smaller reduction in net project working capital in the current period compared to the prior-year period. The smaller reduction in net project working capital in the 2024 period was primarily due to a current-year increase in CIE compared to a decrease last year, and a current-year decrease in BIE compared to an increase last year, partially offset by a current-year increase in accounts payable compared to a decrease last year. Both periods were positively impacted by collections associated with previously disputed matters.

Current wording

Cash flow from operating activities for the first nine months of 2024 decreased $6.8 million compared to the same period in 2023. The decrease in cash flow from operating activities for the first nine months of 2024 compared to 2023 primarily reflects a smaller reduction in net project working capital in the current period compared to the prior-year period, mostly offset by cash generated by earning sources in the current period compared to cash used by earnings sources in the same period last year. The smaller reduction in net project working capital in the 2024 period was primarily due to a current-year increase in accounts receivable compared to a decrease last year, a current-year decrease in BIE compared to an increase last year, and a smaller current-year decrease in CIE compared to last year, partially offset by a larger current-year increase in accounts payable compared to last year. Both periods were positively impacted by collections associated with previously disputed matters.

Previous wording

Net cash used in investing activities during the first six months of 2024 was $24.0 million primarily due to the acquisition of property and equipment for projects (i.e., capital expenditures) totaling $21.4 million and net cash used in investment transactions of $4.1 million. Net cash used in investing activities during the first six months of 2023 was $29.2 million primarily due to the acquisition of property and equipment for projects totaling $30.6 million, as well as net cash used in investment transactions of $5.3 million, partially offset by proceeds from the sale of property and equipment of $6.8 million.

Current wording

Net cash used in investing activities during the first nine months of 2024 was $27.3 million primarily due to the acquisition of property and equipment for projects (i.e., capital expenditures) totaling $28.3 million and net cash used in investment transactions of $2.0 million, partially offset by proceeds from the sale of property and equipment of $2.9 million. Net cash used in investing activities during the first nine months of 2023 was $43.4 million primarily due to the acquisition of property and equipment for projects totaling $45.6 million, as well as net cash used in investment transactions of $6.9 million, partially offset by proceeds from the sale of property and equipment of $9.0 million.

Previous wording

Net cash used in financing activities was $242.6 million for the first six months of 2024, which was primarily driven by a $202.9 million net repayment of debt (including the 2024 Senior Notes issuance of $400.0 million and the 2017 Senior Notes redemption of $500.0 million, as well as the $91.0 million principal repayment on the Term Loan B, all of which are discussed below in Debt), $25.1 million of payments for debt issuance costs related to debt transactions during the period and $12.4 million of distributions to noncontrolling interests. Net cash used in financing activities was $47.9 million for the first six months of 2023, which was primarily driven by a $33.8 million net repayment of debt and $13.3 million of net distributions to noncontrolling interests.

Current wording

Net cash used in financing activities was $240.0 million for the first nine months of 2024, which was primarily driven by a $199.3 million net repayment of debt (including the 2024 Senior Notes issuance of $400.0 million and the 2017 Senior Notes redemption of $500.0 million, as well as the $91.0 million principal prepayment on the Term Loan B, all of which are discussed below in Debt), $25.1 million of payments for debt issuance costs related to debt transactions during the period and $12.3 million of net distributions to noncontrolling interests. Net cash used in financing activities was $79.3 million for the first nine months of 2023, which was primarily driven by a $56.0 million net repayment of debt and $22.0 million of net distributions to noncontrolling interests.

Previous wording

At June 30, 2024, we had working capital of $1.3 billion, a ratio of current assets to current liabilities of 1.65 and a ratio of debt to equity of 0.51, compared to working capital of $1.4 billion, a ratio of current assets to current liabilities of 1.66 and a ratio of debt to equity of 0.70 at December 31, 2023.

Current wording

At September 30, 2024, we had working capital of $1.2 billion, a ratio of current assets to current liabilities of 1.55 and a ratio of debt to equity of 0.55, compared to working capital of $1.4 billion, a ratio of current assets to current liabilities of 1.66 and a ratio of debt to equity of 0.70 at December 31, 2023.

Previous wording

As of June 30, 2024, the Revolver had unused available borrowing capacity of $170.0 million, and the outstanding balance of the Term Loan B and the 2024 Senior Notes were $274.0 million and $400.0 million, respectively.

Current wording

As of September 30, 2024, the Revolver had unused available borrowing capacity of $170.0 million, and the outstanding balance of the Term Loan B and the 2024 Senior Notes were $272.9 million and $400.0 million, respectively.