Tutor Perini Corp. added to its operating profit and net income in the first nine months of 2020, far surpassing 2019, when the California contractor booked a big project-related loss and wrote down the value of some assets.
While minimizing its coronavirus pandemic costs, the publicly-traded company (TPC-NYSE) this year has sailed along with cash-generating projects, disputed invoices settled in its favor and help from tax breaks incorporated in pandemic financial relief legislation passed by Congress in March, according to its latest financial reports and company statements.
Tutor Perini reported net income of $73 million for the first nine months of 2020, on revenue of $4 billion, compared with a $302-million loss, on $3.3 billion in revenue, in the same period last year. The company's civil and building segments performed especially well, CEO Ronald Tutor told a conference call for investment analysts on Nov. 4.
In addition to work performed under the Tutor Perini name, the company operates several prominent contractors, including infrastructure company Lunda Construction and building contractor Rudolph & Sletten. In August, Tutor Perini completed a $600-million round of refinancing, closing on a $425-million term loan and a $175-million revolving credit agreement, it reported.
In wide-ranging comments to the analysts, Tutor, who is also company chairman, said of the pandemic, "we are prospering despite it."
When one of its project workers tests positive, Tutor said, others around that worker are quarantined and "we replace them from the unions" and work continues.
Most public works agencies have agreed to reimburse Tutor Perini for virus-related costs, including direct costs such as layoffs and sick leaves. It is unlikely the company will be reimbursed for virus-caused delays, he added.
Backlog in some market sectors remains a question.
The company's key heavy-civil division won't see new major awards until the second or third quarter of 2021, said Tutor, if an anticipated government rescue package stabilizes public works agency revenue. After that, "we can have a better handle on how and when we replace our major works backlog," Tutor added.
"One of the obvious things is, of course, that the civil building pipeline can't be shut down indefinitely," Tutor told the analysts.
Tax Code Change Saves Millions
Tutor Perini also was able to add to its profits by taking advantage of new tax rules passed as pandemic relief by Congress, saving millions.
Under the federal Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March, Congress opened a way for companies whose allowable tax deductions are greater than their taxable revenue to apply the deductions over more prior years than previously permitted. Known as net operating loss carrybacks, the measures help companies smooth out volatility in their taxable earnings.
The benefit was especially valuable now because in prior years—before a major cut in corporate taxes passed by Congress in 2017—the tax rate was significantly higher. So the carryback now can be applied to years before 2017 when the corporate rate was 35%. The current rate is 21%.
Tutor Perini Chief Financial Officer Gary Smalley said the company was able to reduce the taxes it owed in the 2020 third quarter to $37,000, compared to a tax expense of $5.6 million for the same quarter of 2019.
Because of the CARES Act, for the most recent quarter, "we had a very nominal income tax expense," said Smalley.
This story was corrected on Nov. 11 to show that the revenue for the first nine months of 2020 was $4 billion, compared to $3.3 billion for the same period in the year prior.