Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation second quarter 2022 earnings conference call. My name is Rob, and I'll be your coordinator for today. At this time, all participants are in listen-only mode. Following management's prepared remarks, we'll be opening the call for a question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. At this time, I'll turn the conference over to your host for today, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.
Hello, everyone, and thank you for joining us. With me today are Ronald Tutor, Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during this call, we will be making forward-looking statements, which are based on management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find our disclosures about risk factors that could potentially contribute to such differences in our Form 10-K, which we filed on February 24th, 2022, and in the Form 10-Q that we filed earlier today. The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required by law. Thank you, and I will now turn the call over to Ronald Tutor.
Thanks, Jorge. Good morning, and thank you for joining us. As you have probably seen from our earnings release this morning, we delivered mixed results for the second quarter of 2022. The positive highlight is we continue to generate very strong operating cash of $58 million for the quarter, which, when combined with the record cash we generated in the first quarter, totaling just under $179 million for the first six months of 2022, an amount that is already greater than any full -year of operating cash we produced since the merger of Perini and Tutor-Saliba in 2008. Unlike last quarter, our operating cash was largely driven by the resolution of certain disputes and collections of certain successfully negotiated and approved change orders.
I will add that we are still anticipating significant cash generation through the remainder of this year as well as, of course, in 2023. New awards and backlogs were another highlight of our second quarter results. We booked $1.1 billion of new awards and contract adjustments during the second quarter, which helped us to achieve solid year-over-year backlog growth of 14%. Our backlog now stands at $8.5 billion, compared to $7.5 billion in June 2021, and nearly 60% of our current backlog is comprised of higher margin civil work, which bodes well for our earnings potential over the next several years. We will detail some of our major new second quarter awards as well as our opportunities in a moment.
Unfortunately, our second quarter earnings were negatively impacted by several factors, including certain unfavorable project adjustments, certain settlements of claims and change orders, an unexpected partial revenue reversal of a previously awarded legal damages in a judgment from, and the reduced profits due to lower revenue volume in the quarter. Gary will provide you some of the details regarding these impacts a bit later. Consequently, we reported a loss of $1.23 per diluted share for the second quarter of 2022. Despite our obvious disappointment in these earnings for the quarter and the year -to -date, we continue to make major progress in resolving unapproved change orders and claims, which had and will continue to have a positive impact on cash flow. Over the next 30-60 days, we will be attempting to settle significant disputes on certain major projects.
The uncertainty related to the outcome of these settlement discussions makes it very difficult to reliably predict at this time what our expected earnings will be for the remainder of the year. The settlements can positively or negatively impact earnings while generating significant cash. Consequently, we have decided to withdraw our guidance for 2022 and expect to issue new guidance once we have better visibility into this potential timing and magnitude of settlements, which we expect to have by this time in the third quarter earnings announcement. I'm encouraged that we continue to experience strong demand for our services, even in spite of the current inflationary environment and concerns over a potential recession.
Our civil business in particular is and has historically been very resilient during economic downturns as governments tend to invest even more in civil infrastructure during such period as a means of bolstering jobs and promoting long-term benefits. This is certainly even more true today given the passage of last year's infrastructure bill for which funding to project owners is beginning to flow.
As I mentioned, we booked $1.1 billion of new awards and contract adjustments in the second quarter. The most significant awards included $293 million of additional funding of changes on the mass transit project in California High-Speed Rail, $95 million for an educational facility in California, an $85 million housing project in Alaska, and several projects in Guam, including a $107 million military housing, an $84 million wharf improvement, and two other military facilities at $73 million and $49 million respectively. Awaiting imminent owners' decisions and announcements on two very large prospective opportunities, namely the $3 billion Newark AirTrain replacement project, for which I expect to have an announcement within 30 days, and two projects that comprise the $5 billion Maryland Express Lanes project for Accelerate Maryland Partners, which we expect an announcement in two weeks.
We are preparing to bid and hopefully capture our share of various other large new projects later this year and in 2023, including the $3 billion shipyard and dry dock project in Hawaii for the U.S. Navy, which bids in October 2022. The $2 billion Brooklyn Jail project for the New York City Department of Design and Construction, which should propose an award in the first quarter of 2023. The $1.5 billion JFK Roadways and Ground Transportation Center for the Port Authority of New York, which we have asked for an extension and expect to bid in the first quarter of 2023. The $1.5 billion East San Fernando Valley Light Rail Project for the Los Angeles MTA. Again, first quarter of 2023.
The $1.5 billion Inglewood Automated People Mover , which we have put back into the third quarter of 2023. Last week, it was announced we are the apparent low bidder for the $519 million Raritan River Bridge Replacement Project in New Jersey. There were only two other bidders for the project, which is a further example of the limited competition that we are often seeing for major projects we are pursuing. We anticipate a contract award for the Raritan River Bridge in the fourth quarter of this year. In addition, last week, Rudolph and Sletten was notified by one of its major customers that it has been selected as the preferred general contractor to be awarded a large new hospital campus project in California. The initial contract award will be rather modest, as it will represent only early-stage preliminary work.
After this initial work and subsequent pre-construction is completed, we anticipate booking approximately $800 million into backlog by approximately the fourth quarter of 2023. We were also informed this week that we are the low bidder with written notification to follow shortly on a very significant civil project on the East Coast. We will be providing further information regarding this project in the next 30 days. Finally, we still have other new awards pending, including two gaming projects in California, collectively valued at over $5 million, that we now believe will be awarded in the fourth quarter.
$500 million.
$500 million. Excuse me. It is unfortunate that our strong second quarter and record year-to-date cash flow and our backlog growth were overshadowed by the various negative impacts to earnings. However, we are collecting cash, and we are encouraged by the progress in resolving these continuing disputes, which I've stated in the past, the majority of which should be concluded by the end of 2023. We anticipate substantial further backlog growth over the next two quarters. Thank you. With that, I'll turn the call over to Gary.
Thank you, Ron. Good morning, everyone. This quarter, I'll begin by discussing our strong operating cash results. Then I will review our other financial results, including the factors that negatively impacted our earnings, and finally, some commentary on our balance sheet. Operating cash flow continues to be the highlight of 2022 for us. We generated $58 million of operating cash during the quarter, compared to usage of $85 million for the same quarter of last year. The current year, second quarter operating cash flow was our third-best operating cash result of any second quarter since the merger in 2008. Considering that for the 13 years since the merger, before this quarter, our second quarter operating cash flow on average has been just slightly positive. Therefore, the $58 million of operating cash for this quarter is excellent.
Even more impressive, our operating cash flow for the first six months of 2022 was nearly $179 million. By far, the best operating cash result for the first six months of any year since 2008. It should be noted that we have generated more operating cash in these first six months of 2022 than we have during any full year. Like last quarter, our strong operating cash generation was largely driven by improved collection activity, including the continued resolution of certain claims and unapproved change orders that previously required the use of cash. Excuse me. We expect continued strong operating cash generation for the remainder of 2022 as well as next year, based on projected cash collections both from project execution activities and the resolution of various other outstanding claims and change orders.
Next, let's shift gears and discuss our revenue and the items that impacted our earnings. Revenue for the second quarter of 2022 was $861 million, down from $1.2 billion for the same quarter of last year. Civil segment revenue was $404 million, compared to $555 million for the comparable prior year quarter. Building segment revenue was $267 million, compared to $383 million for the second quarter of last year. Specialty contractors revenue was $190 million compared to $281 million. The lower revenue in all three segments reflected reduced project execution activities on various projects, most of which are completed or nearing completion, partially offset by increased activities on certain newer civil and building segment projects.
The revenue decline was also partly attributable to the follow-on impact of the COVID-19 pandemic, which, as we have discussed in the past, delayed bidding activities and awards of certain new projects during 2020 and much of 2021. In other words, we believe that our current revenue run rate would be notably larger if not for the COVID-19 impact, as our backlog would likely be significantly higher than where it currently stands, and we would be converting that larger backlog into more revenue. We believe that as newer projects accelerate and contribute more meaningfully to earnings, we should see fourth quarter revenue more comparable to the same quarter of last year and ultimately start to see revenue growth by early 2023.
We reported a loss from construction operations of $91 million for the second quarter of 2022, compared to income from construction operations of $69 million for the same quarter of last year. The civil segment had a loss from construction operations of $10 million. The buildings segment reported a very small loss from construction operations, and the specialty contractor segment reported a loss of $67 million. As Ron mentioned, our second quarter earnings this year were significantly reduced by several factors that negatively impacted our results. Let's review them now.
The largest negative impact for the second quarter of 2022 was $33.5 million associated with an unfavorable adjustment for the unforeseen cost of project closeout issues, remediation work, extended project supervision, and associated labor inefficiencies on electrical component of a transportation project in the Northeast and the specialty contractor segment, which is nearing completion. Despite the charge that we took on this project in the quarter, the project remains profitable, just at a lower profit margin than before. This unfavorable project adjustment alone accounted for a $0.47 reduction in earnings per diluted share for the second quarter of 2022.
We also received a legal ruling during the second quarter of 2022 that resulted in an unexpected partial reversal of legal damages that had been previously awarded to us related to a completed electrical project in New York in the specialty contractor segment. Consequently, we recorded an unfavorable adjustment of $17.8 million or $0.25 in EPS for the second quarter. It is important to note that last year's second quarter EPS included a $0.28 favorable benefit related to the same dispute due to an award in our favor by the trial court at that time. For this matter, we believe that the courts got it right the first time when we received the favorable decision. As such, we intend to appeal the latest ruling and are optimistic that we will ultimately prevail.
In addition, we reached a settlement with an owner in the second quarter on some long-disputed matters pertaining to a completed civil segment project in Maryland, which resulted in an unfavorable impact of $16.2 million and accounted for a further $0.23 reduction in earnings per share for the quarter, with cash associated with the settlement expected in the third quarter. Also negatively impacting earnings for the second quarter of 2022 was a temporary negative impact of the successful negotiation of additional change orders on a civil segment mass transit project in California. As explained last quarter for the same project, the additional work approved in the quarter was of lower risk and therefore carried a lower margin percentage than the project's overall project profit margin.
As a result, even though the total profit in dollars that we will ultimately be recognizing for this project increased with the approval of the change orders, the cumulative margin percentage for the project declined slightly. The combination of the slight decline in the project's overall profit margin percentage and a small decrease in the project's percentage of completion as a result of this change order settlement resulted in an $11 million decrease in the profit recognized for the project in the second quarter. For the first six months of 2022, the impact was $29 million.
In summary, we successfully negotiated significant change orders in both the first and second quarters that increased the overall profit of the project, but the accounting treatment for the change orders resulted in negative cumulative corrections to earnings in both quarters. It is important to note that the reductions in earnings for the last two quarters are only temporary, since they will reverse themselves and be recognized in profit over the remaining life of the project. For the current year, the negative impact to earnings per share for the successful negotiations of these change orders was $0.18 for the second quarter and $0.45 in total for the first two quarters.
Finally, our earnings for the second quarter of 2022 were negatively impacted by lower profits associated with the lower revenue, with much of the lower volume due to the follow-on impacts of COVID that I mentioned earlier. Moving on. Interest expense for the second quarter of 2022 was $16 million, down 10% compared to $18 million for the second quarter of 2021. The decrease was principally due to the absence of amortization of discounted debt issuance costs on the convertible notes that we repaid last year, as well as a lower average balance on revolver this quarter compared to the second quarter of last year, partially offset by higher borrowing costs this year.
The income tax benefit for the second quarter of 2022 was $44 million, compared to income tax expense of $11 million for the prior year second quarter, and the corresponding effective tax rate was 41.3% for the second quarter of this year, compared to 20.4% for the comparable quarter of last year. In periods reporting pre-tax losses, the tax benefit increases the effective income tax rate because it increases the tax benefit generated from the pre-tax loss. The tax benefits that caused the higher tax rate for the second quarter were primarily the earnings attributable to non-controlling interest for which income taxes are not the responsibility of the company and state income tax benefits net of federal tax benefits.
The effective income tax rate for the quarter reflects the impact of a relatively low projected pre-tax loss for the year, which magnifies the impact of tax benefits on the effective income tax rate. The various negative adjustments that I've mentioned were the catalyst for our earnings underperformance in the quarter. Net loss attributable to Tutor Perini for the second quarter of 2022 was $63 million, or a loss of $1.23 per share, compared to net income attributable to Tutor Perini of $31 million or $0.61 of earnings per share for the same quarter of last year.
To reiterate what Ron said earlier, while we are disappointed with our earnings performance this year, we are encouraged by the progress we have made in resolving certain unapproved change orders and claims, the settlements of which have had and will continue to have a positive impact on cash flow. As for our balance sheet, our net debt as of June 30, 2022 was $659 million, down 17% compared to $791 million as of December 31st, 2021. We remain within our debt covenant compliance limits and anticipate that will continue to be the case in the foreseeable future. As Ron mentioned earlier, over the next month or so, we will be attempting to settle significant disputes on certain major projects.
Due to the uncertainty related to the outcome of these settlement discussions and the potential financial impacts they could have, positively or negatively, we are withdrawing our guidance for 2022 at this time. We expect to issue new guidance once we have greater visibility into the timing and magnitude of any potential settlements, which we expect to have by the time of our third quarter earnings announcement. Regardless of the outcome of any potential settlements, however, we now expect a net loss for this year. The upside to these potential settlements is that there is an excellent opportunity to continue to generate significant operating cash in the short term. Thank you. With that, I will turn the call back over to Ron.
Thank you, Gary. To recap, we generated solid operating cash of $58 million in the quarter, record operating cash of nearly $179 million through the first six months of the year, and are expecting our full- year operating cash to be far above our previous annual record of $173 million. In so many words, we have a significant level, as everyone knows, of costs in excess. We have analyzed dates for all of their resolves, whether it be trial dates, mediations, ongoing negotiations. It is still my belief that the majority of those will either be adjudicated or resolved by the end of 2023, with only a handful going into 2024.
Despite a hiccup from time to time with the legal system not always being totally predictable, we continue to have significant settlements and resolutions and the collections of cash which I expect to continue through the end of 2023, with particular emphasis on the second half of 2022. In addition, our backlog is up 14% year-over-year, driven by a steady stream of sizable new awards. I'm in belief with preliminary statements made that we could significantly add to that backlog by the end of the year, given the two major proposals in and a third one going in in October. We look forward to an obvious return to more consistently solid earnings per share next year and beyond, as we focus on collecting cash in the short term. Thank you.
With that, I'll turn the call over to the operator for questions.
Thank you. At this time, we'll be conducting a question -and -answer session. If you'd like to ask a question, please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Thank you. Our first question is from the line of Steven Fisher with UBS. Please proceed with your questions.
Thanks. Good morning. I know the second half we're gonna be impacted by these claim settlements and that's uncertain, but just curious about how you see the operational performance in the second half and how much of uncertainty there is a factor in withdrawing the guidance as well. Like, are you thinking that you could confidently be back to, you know, more normalized margin ranges for at least building and civil for the second half of the year?
If you look at the analysis of the significance of our second quarter losses, there are individual events that should not be repeated. The most significant reason that we held our guidance is we have two very large claims in final stages of negotiations, and yet we're uncertain as to how that might end or if we'll even settle for that matter. That should conclude itself in the next 60-90 days. As far as operations, the one project that received a significant write-down in the specialty groups should resolve that issue, and I see more of a leveling in operations. Civil lost an appeal on a big lawsuit. We lost.
The most unbelievable, we had a judgment for $41 million and the appellate court decided the court couldn't award certain aspects and then remanded it back to the same judge that gave us the award and told them to come back with a final judgment. Everything that could go wrong in the second quarter went wrong, but none of it repeats itself. However, I continue to emphasize, the second half of this year and next year, we are going to clean up our costs in excess, and the enormity of those costs in excess will be collected. The only question mark is what, if any, write-downs we take around those collections. Sometimes we do better, sometimes we do worse, but we're determined to collect the money we're due, and you're seeing just a taste of it in the first six months.
Okay, it sounds like.
Steve-
Go ahead, Gary.
Yeah, Steven, I just wanted to indicate one thing. As Ron went through those things and went from segment to segment, just wanna make sure that you understand that that partial reversal that we're talking about, that was in specialty.
Yes. Yeah.
Yeah. Okay.
It sounds like you're not discouraging us from thinking about more normalized margins in the second half of the year in at least civil and building. I know specialty has kind of had some ongoing challenges, but it sounds like, you know, we should have some degree of confidence in normalized in the second half of this year, other than, I guess, low volume impact. Is that right?
Well, that's the other thing. We've had a, you know, the civil group back east who has consistently delivered over the years excellent results and profits. Because of COVID, there's been virtually, in the last 18 months, two years, nothing bidding. As a result, their backlog has dwindled and their operation has dwindled from potentially $700 million-$800 million a year of revenue, where I don't anticipate $250 million this year. Their profit delivery has basically dwindled to nothing. It's no reflection on the operation, it's the fact that East Coast has had no work. New York virtually stopped, as did New Jersey and Pennsylvania. However, given that, we have two enormous projects we're waiting word on, and we're very confident that we're going to get a sizable portion, if not all of it.
We'll learn that in the next 30-60 days, which of course would bode well for the next years to come for New York. There's just a lot of things in the queue.
Okay. Then just to follow up, in terms of the inflationary environment, clearly a lot of uncertainty there, but it does seem like costs continue to move higher. I'm curious, as you're kind of pursuing some of these very large programs that are gonna be over multiple years, how are you planning for inflation in those bids today, to be able to capture that uncertainty and ensure that you're gonna have profitability on these projects?
These multi-billion-dollar projects involve so much contract negotiation before we tender a bid. Invariably, both of the large projects that are awaiting notice of award or at least results, we negotiated escalation clauses because we refuse to take the risk.
Of steel escalation, fuel escalation, asphalt that derives from fuel. Both times the owners agreed to escalation clauses where they would be responsible. With our position being very simply, escalation is out of control. You have to take the risk or our contingencies will be so enormous we will not take that risk. If you don't deliver that risk or assume it, we won't bid the job. When there's only two bidders, that doesn't put them in a very good negotiating position. We've been able to transfer that risk to the owners on all these billion-dollar-plus jobs, and we continue to insist that has to be.
Okay. Thanks very much.
Our next question comes from the line of Alex Rygiel with B. Riley. Please proceed with your questions.
Gary, can you help us understand, inflationary pressures on margins over the next couple quarters?
You know, based on Ron's comment right there on these mega projects that are being bid, we're putting in escalation clauses. We try to do that on the, we'll say the medium smaller projects as well. Those that where we're unsuccessful to do that, then we try to make sure that we have as much contingency in there to cover those type things. We think that the margins should be not significantly impacted by inflation, Alex.
Ron, can you provide a target for cash collection in the second half of the year?
It'll be very significant. I'd rather not be specific because there's so many factors involved, but it will not be trivial.
Yeah. Would you characterize the first half of the year to have been a significant cash flow collection period?
Well, if the six months was the biggest cash flow we've had in the last 14 years, for an entire year, I'd call it significant.
You know, Alex, I'd reiterate what Ron is saying. We agree totally. You know, it's so unpredictable with you know, the timing of some of these settlements that are ongoing and when certain arbitration litigation activities will take place in order to know exactly what quarter, you know, certain cash collections will fall. If you broaden the horizon and, you know, Ron talked about cleaning up, you know, these significant unbilleds, as we progress through this year and through next year.
If you look at where our market cap is now and you say over the next year, maybe even if you go next year and a half, and we're gonna collect cash that exceeds our market cap, at least that's what we firmly believe. That's our expectation. You know, that's another way to look at it, to give you some type of scale over a longer term. Again, we don't want to provide an estimate for a shorter term because of the volatility or the uncertainty with respect to how long it actually takes to close in on some of these items.
Thank you.
You're welcome.
The next question is from the line of Brent Thielman with D.A. Davidson. Please proceed with your question.
Oh, my questions have been asked. Thanks, guys. Best of luck.
Thank you.
Thank you. At this time, if no additional questions, I would like to turn the floor back to management for further remarks.
Thank you, everyone. Hopefully, we've answered whatever questions you had, and we'll talk to you the next quarter.
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.