The books are closing on 2005 and it was a very good year for some of the biggest engineering and construction companies in the U.S. Kiewit, Fluor, Emcor Group and other companies reported robust sales or solid profits or fattening backlogs or a combination of all three.
But the wealth production by Framingham, Mass.-based Perini Corp. (NYSE-PCR) may be the most intriguing.
Perini’s solidly profitable annual operating results, announced Feb. 23, were masked by a roughly $40-million charge related to a 20-year-old joint venture project for the Washington Metropolitan Area Transit Authority. The project involved building a station and associated tunnels and at that time the value of the work was $44.3 million. The joint venture clashed with WMATA over delays and overruns and the two sides went to trial. In 1993 a federal judge, dying of a terminal illness, issued a long opinion, but then both sides began fighting over the legality of the successor judge’s decisions on new motions. Years and interest accumulated until last November, when the U.S. District Court for the District of Columbia ruled against the Perini ventures. Another ruling against the contractor in February may be appealed, Perini says. Roughly half the charge was for interest.
Riding a steady diet of Las Vegas casino resort contracts, Perini’s pretax earnings would have been $47.3 million, on $1.73 billion in construction revenue, for 2005. “Without the WMATA charge, we would have achieved our second consecutive year of record pretax earnings,” notes Perini President Robert Band in a statement. The company’s Las Vegas backlog swelled by $5.2 billion just in the fourth quarter alone.
Perini officials could not be reached to discuss exactly why the WMATA charge was taken now, but business experts generally say taking a charge at a time of strength is preferable.
Shareholders have seen the value of Perini stock roughly double in the last year, closing March 14 at about $29 a share.
The major investors who control the company have converted Perini’s shares into mountains of money recently. Perini Chairman Ronald N. Tutor, who individually and through his Sylmar, Calif.-based Tutor-Saliba Corp., has a controlling interest in the company, made the most. In December and January Tutor and Tutor-Saliba sold shares, at between $22 and $24 a share, worth about $71 million. Blum Capital Partners L.P. sold shares in Perini worth another $60 million in the same price range. Tutor and Tutor-Saliba exercised options to acquire more Perini shares, at $8.365 a share, with a total value of about $40 million in December, 2005.