UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number
September 30, 1998 000-23943
PETER KIEWIT SONS', INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1842817
(State of Incorporation) (I.R.S. Employer Identification No.)
Kiewit Plaza, Omaha Nebraska 68131
(Address of principal executive offices) (Zip Code)
(402) 342-2052
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each of the registrant's classes
of common stock as of November 16, 1998:
Title of Class Shares Outstanding
Common Stock, $0.01 par value 8,928,245
PETER KIEWIT SONS', INC.
Index
Page
______________________________________________________________________________
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
Consolidated Condensed Statements of Earnings for the three
months and nine months ended September 30, 1998 and 1997 2
Consolidated Condensed Balance Sheets as of September 30, 1998
and December 27, 1997 3
Consolidated Condensed Statements of Cash Flows for the nine
months ended September 30, 1998 and 1997 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K. 14
Signatures 14
Index to Exhibits 15
______________________________________________________________________________
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PETER KIEWIT SONS', INC.
Consolidated Condensed Statements of Earnings
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(dollars in millions, except per share data)
______________________________________________________________________________
Revenue $ 963 $ 824 $ 2,533 $ 1,968
Cost of Revenue (878) (754) (2,347) (1,784)
---- ---- ------ ------
85 70 186 184
General and Administrative Expenses (33) (31) (111) (100)
---- ---- ------ ------
Operating Earnings 52 39 75 84
Other Income (Expense):
Investment Income, net 3 3 9 10
Interest Expense, net (1) (2) (2) (3)
Other, net 21 15 49 50
---- ---- ------ ------
23 16 56 57
---- ---- ------ ------
Earnings Before Income Taxes 75 55 131 141
Provision for Income Taxes (30) (21) (52) (57)
---- ---- ---- ----
Net Earnings $ 45 $ 34 $ 79 $ 84
==== ==== ====== ======
Net Earnings per Share:
Basic $5.13 $3.38 $ 9.63 $ 8.76
==== ==== ====== ======
Diluted $5.08 $3.24 $ 9.52 $ 8.38
==== ==== ====== ======
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Consolidated Condensed Balance Sheets
September 30, December 27,
1998 1997
(dollars in millions) (unaudited)
_______________________________________________________________________________
Assets
Current Assets:
Cash and cash equivalents $ 247 $ 232
Marketable securities 15 26
Receivables, less allowance of $7 and $9 519 430
Costs and earnings in excess of
billings on uncompleted contracts 90 119
Investment in construction joint ventures 177 176
Deferred income taxes 74 61
Other 15 13
----- -----
Total Current Assets 1,137 1,057
Property, Plant and Equipment, less accumulated
depreciation and amortization of $472 and $446 216 197
Other Assets 102 87
----- -----
$1,455 $1,341
===== =====
Liabilities and Redeemable Common Stock
Current Liabilities:
Accounts payable, including retainage
of $45 and $37 $ 230 $ 208
Current portion of long-term debt 3 5
Accrued construction costs and billings in excess
of revenue on uncompleted contracts 314 217
Accrued insurance costs 84 76
Other 67 73
----- -----
Total Current Liabilities 698 579
Long-term debt, less current portion 12 22
Other Liabilities 84 77
Minority Interest 11 11
----- -----
Total Liabilities 805 689
Redeemable Common Stock ($450 million aggregate
Redemption value in 1998):
Common stock, par $0.01 and $0.0625, 8,931,045
and 10,132,343 shares outstanding in 1998 and
1997, respectively - 1
Additional paid in capital 165 116
Foreign currency adjustment (9) (7)
Net unrealized holding loss (11) (11)
Retained earnings 505 553
----- ----
Total Redeemable Common Stock 650 652
----- -----
$1,455 $1,341
===== =====
_____________________________________________________________________________
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Consolidated Condensed Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
-----------------
(dollars in millions) 1998 1997
_____________________________________________________________________________
Cash flows from operations:
Net cash provided by operations $ 154 $170
Cash flows from investing activities:
Proceeds from sales and maturities of
marketable securities 19 51
Purchases of marketable securities (7) (24)
Proceeds from sales of property, plant and equipment 21 34
Distributions from long-term investments 8 4
Contributions to long-term investments (3) (20)
Capital expenditures (75) (89)
---- ---
Net cash used in investing activities (37) (44)
Cash flows from financing activities:
Long-term debt borrowing - 3
Short-term debt borrowing 20 -
Payments on short-term debt (25) -
Issuance of common stock 67 34
Repurchases of common stock (29) (2)
Dividends paid (13) (13)
Exchange of Class C Stock for Class D Stock, net (122) (72)
---- ---
Net cash used in financing activities: (102) (50)
Net increase in cash and cash equivalents 15 76
Cash and cash equivalents at beginning of period 232 173
---- ---
Cash and cash equivalents at end of period $ 247 $249
==== ===
______________________________________________________________________________
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Notes to Consolidated Condensed Financial Statements
1. Basis of Presentation:
Peter Kiewit Sons', Inc. (the "Company") was formed by its former parent,
Level 3 Communications, Inc. (formerly Peter Kiewit Sons', Inc.) ("Level 3"),
in connection with a transaction (the "Transaction") intended to separate the
construction business and the diversified business of Level 3 into two
independent companies. On March 31, 1998, pursuant to the terms of a
Separation Agreement between the Company, Level 3 and certain other parties
(the "Separation Agreement"), Level 3 consummated the Transaction by: (i)
transferring 100 shares of the $100 par value common stock ("KCG Stock") of
Kiewit Construction Group Inc. ("KCG"), representing all of the issued and
outstanding shares of KCG Stock, as well as certain other assets and
liabilities related to the construction and mining business which together
comprised the Construction and Mining Group (the "Construction & Mining
Group"), to the Company in exchange for 7,677,920 shares of the $.01 par value
common stock of the Company ("Common Stock") (125 million shares authorized)
and (ii) distributing 100% of its shares of the Common Stock to the holders of
Level 3's $0.0625 par value Class C Construction & Mining Group Restricted
Redeemable Convertible Exchangeable Common Stock ("Class C Stock") as of
March 31, 1998, in exchange for such shares of Class C Stock. Prior to the
Transaction, the Company was a wholly-owned subsidiary of Level 3. As a result
of the Transaction, the Company is now owned by the former holders of Level 3's
Class C Stock. As the Construction & Mining Group comprised all of the net
assets and operations of the Company at the time of the Transaction, the
Construction & Mining Group is the Company's predecessor. Thus, the term "The
Company", as used herein, refers to Peter Kiewit Sons', Inc., its predecessor,
and its consolidated subsidiaries.
The consolidated condensed balance sheet of the Company at December 27, 1997
has been condensed from the Construction & Mining Group's audited balance sheet
as of that date. All other financial statements contained herein are unaudited
and, in the opinion of management, contain all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of financial
position and results of operations for the periods presented. The Company's
accounting policies and certain other disclosures are set forth in the notes to
the financial statements of the Construction and Mining Group for the year
ended December 27, 1997 contained in the Company's Current Report on Form 8-K,
dated March 27, 1998, filed April 13, 1998 and amended May 1, 1998.
Receivables at September 30, 1998 and December 27, 1997 include approximately
$121 million and $114 million, respectively of retainage on uncompleted
projects, the majority of which is expected to be collected within one year.
Included in the retainage amounts are $46 million and $44 million of securities
which are being held by the owners of various construction projects in lieu of
retainage.
The results of operations for the nine months ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
When appropriate, items within the consolidated condensed financial statements
have been reclassified in the previous periods to conform to current year
presentation.
2. Earnings Per Share:
Basic earnings per share have been computed using the weighted average number
of shares outstanding during each period. Diluted earnings give effect to
convertible debentures considered to be dilutive common stock equivalents.
Dilutive potential common shares are calculated in accordance with the "if
converted" method. This method assumes that the after-tax interest expense
associated with the debentures is an addition to income and the debentures are
converted into equity with the resulting common shares being aggregated with
the weighted average shares outstanding.
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------------ -----------------
Net earnings available to common
shareholders (in millions) $ 45 $ 34 $ 79 $ 84
Add: Interest expense, net of tax effect,
associated with convertible debentures* - - - -
Net earnings for diluted shares $ 45 $ 34 $ 79 $ 84
Total number of weighted average shares
outstanding used to compute basic
earnings per share (in thousands) 8,776 10,086 8,167 9,570
Additional dilutive shares assuming
conversion of convertible debentures 90 437 90 437
Total number of shares used to compute
diluted earnings per share 8,866 10,523 8,257 10,007
Net earnings
Basic earnings per share $ 5.13 $ 3.38 $ 9.63 $ 8.76
Diluted earnings per share $ 5.08 $ 3.24 $ 9.52 $ 8.38
* Interest expense attributable to convertible debentures was less than $.5
million in 1998 and 1997.
3. Comprehensive Income:
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income".
SFAS 130 establishes new rules for the reporting of comprehensive income and
its components; however the adoption of the standard had no impact on the
Company's current or previously reported net income or redeemable common stock.
The standard requires the display and reporting of comprehensive income, which
includes all changes in stockholders' equity with the exception of additional
investments by stockholders or distributions to stockholders. Comprehensive
income for the Company includes net income, unrealized gains (losses) on
securities, and foreign currency translation adjustments, which are charged or
credited to the cumulative translation account within redeemable common stock.
Comprehensive income for September 30, 1998 and 1997 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
(dollars in millions) 1998 1997 1998 1997
_______________________________________________________________________________
Net Earnings $45 $34 $79 $84
Other comprehensive income, before tax:
Foreign currency translation adjustments (3) (3) (3) (5)
Unrealized gains (losses) arising
during period - 3 - (7)
Income tax (expense) benefit related to
items of other comprehensive income 1 - 1 5
-- -- -- --
Comprehensive Income $43 $34 $77 $77
== == == ==
4. Preferred Stock:
The Company has authorized 250,000 shares of no par value Preferred Stock, the
terms of which shall be determined from time-to-time by the board of
directors. No shares of Preferred Stock are currently issued and outstanding.
5. Other Matters:
The Company is involved in various lawsuits, claims and regulatory proceedings
incidental to its business. Management believes that any resulting liability,
beyond that provided, should not materially affect the Company's financial
position, future results of operations or future cash flows.
In connection with the Transaction, the Company and Level 3 entered into
various agreements including a Separation Agreement, a Tax-Sharing Agreement
and an amended Mine Management Agreement.
The Separation Agreement provides for the allocation of certain risks and
responsibilities between Level 3 and the Company and for cross-indemnifications
that are intended to allocate financial responsibility to the Company for
liabilities arising out of the construction business and to allocate to Level 3
financial responsibility for liabilities arising out of the non-construction
businesses. The Separation Agreement also provides for the payment, by the
Company, of a majority of the third party costs and expenses associated with
the Transaction.
Under the Tax Sharing Agreement, with respect to periods, or portions thereof,
ending on or before the closing date of the Transaction, Level 3 and the
Company generally will be responsible for paying the taxes relating to such
periods, including any subsequent adjustments resulting from the
redetermination of such tax liabilities by the applicable taxing authorities,
that are allocable to the non-construction businesses and construction
businesses, respectively. The Tax Sharing Agreement also provides that Level 3
and the Company will indemnify the other from certain taxes and expenses that
would be assessed if the Transaction was determined to be taxable, but solely
to the extent that such determination arose out of the breach by Level 3 or the
Company, respectively, of certain representations made to the Internal Revenue
Service in connection with the ruling issued with respect to the Transaction or
made in the Tax-Sharing Agreement. If the Transaction were determined to be
taxable for any other reason, those taxes ("Transaction Taxes") would be
allocated 50% to Level 3 and 50% to the Company. Finally, under certain
circumstances, Level 3 would make certain liquidated damage payments to the
Company if the Transaction was determined to be taxable in order to take into
account the fact that the Transaction is taxable to the holders of Common
Stock.
Additionally, the Mine Management Agreement, pursuant to which the Company
provides mine management and related services to Level 3's coal mining
operations, was amended to provide the Company with a right of offer in the
event that Level 3 would determine to sell any or all of its coal mining
properties. Under the right of offer, Level 3 would be required to offer to
sell those properties to the Company at the price that Level 3 would seek to
sell the properties to a third party. If the Company declined to purchase the
properties at that price, Level 3 would be free to sell them to a third party
for an amount greater than or equal to that price. If Level 3 sold the
properties to a third party, thus terminating the Mine Management Agreement, it
would be required to pay the Company an amount equal to the discounted present
value of the Mine Management Agreement, determined, if necessary, by an
appraisal process.
In September 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company must adopt this statement
when preparing financial statements for the year ended December 26, 1998.
Management is reviewing the requirements of this Statement and believes it will
change the extent of its current business segment disclosure. This Statement
does not impact the basic consolidated financial statements; it affects the
presentation of segment information in the Notes to the Consolidated Financial
Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This document contains forward looking statements and information that are
based on the beliefs of management as well as assumptions made by and
information currently available to the Company. When used in this document,
the words "anticipate," "believe," "estimate" and "expect" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks
or uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this document. The
Company assumes no responsibility to update forward-looking information
contained herein.
Results of Operations - Third Quarter 1998 vs. Third Quarter 1997
Revenue from each of the Company's businesses for the three months ended
September 30, 1998 was (in millions):
Three Months Ended
September 30,
------------------
1998 1997
---- ----
Construction $871 $741
Materials 92 83
--- ---
$963 $824
=== ===
Construction. Revenues for the construction business increased $130 million or
17.5% for the three months ended September 30, 1998 as compared to the same
time period in 1997. The increase in revenues resulted from several new
domestic cogeneration facilities and other new projects. Another major factor
was the "I-15" project, a $1.4 billion ($780 million the Company's share)
design-build joint venture to reconstruct 16 miles of interstate through the
Salt Lake City, Utah area.
Contract backlog at September 30, 1998 was nearly $5 billion of which 2% is
attributable to foreign operations located primarily in Canada. Domestic
projects are spread geographically throughout the U.S.
Margins on construction projects as a percentage of revenue for the three
months ended September 30, 1998 decreased slightly to 8.4% from 8.8% for the
same time period in 1997.
In September of 1997, a Presidential Decree was issued in Indonesia affecting
the construction and start-up dates for a number of private power projects. As
a result of the Decree and the continued fluctuations in the value of the
Indonesian currency, several projects in Indonesia for a U.S. client have been
suspended. The suspension had no material impact on the Company, as
substantially all payments have been received for work performed and the costs
of demobilizing the project were not significant.
Materials. Revenues for the materials business were up 11%, from $83 million
to $92 million, for the three months ended September 30, 1998 as compared to
the same time period in 1997. Greater sales volume and higher average selling
prices for aggregates, ready mix concrete and asphalt products resulted in a
16% increase which was offset by the decrease in revenues from the Oak Mountain
Coal operations. The investment in Oak Mountain was sold on June 9, 1998. The
Oak Mountain investment was previously written off as an impaired asset in
December 1997, thus, no gain or loss resulted from the sale.
Margins from materials sales as a percentage of revenue for the three months
ended September 30, 1998 increased by 7% from the same period in 1997. The
increase in margins was attributable to higher average selling prices,
improvements in the performance of recent acquisitions and the elimination of
losses from the Oak Mountain Coal operations.
General and Administrative Expenses. General and administrative expenses
increased 6.5% from 1997 for the three month period ended September. The
increase was attributable to increased costs related to higher construction and
materials revenues. G&A expense, as a percent of revenue, decreased from 3.8%
in 1997 to 3.4% in 1998 as a proportionate increase in administration costs
were not necessary to support the Company's revenue growth.
Investment Income, net. Investment income remained unchanged from the same
time period in 1997.
Other, net. Other income is primarily comprised of mine management fee income
from Level 3 and gains and losses on the disposition of property, plant and
equipment and other assets. The mine management fee increased by $3 million
while an increase in the amount of equipment sold during the third quarter of
1998 resulted in a $6 million increase in gains from sales.
The mines managed by the Company for Level 3 earn the majority of their
revenues under long-term contracts. The remainder of the mines' sales are made
on the spot market where prices are substantially lower than those of the long-
term contracts. As the long-term contracts expire over the next two to five
years, operating earnings at the mines will decrease substantially. Since the
mine management fee is based upon the operating earnings of the mines, the fee
will be similarly affected.
Results of Operations - Nine Months 1998 vs. Nine Months 1997
Revenue from each of the Company's businesses for the nine months ended
September 30, 1998 was (in millions):
Nine Months Ended
September 30,
-----------------
1998 1997
---- ----
Construction $2,277 $1,757
Materials 256 211
----- -----
$2,533 $1,968
===== =====
Construction. Revenues for the construction business increased $520 million or
30% from the same time period in 1997. $181 million of the increase in
revenues resulted from several new domestic cogeneration facilities. Joint
ventures performing electrical work on railway systems contributed another $80
million. Another major factor was the "I-15" project, a $1.4 billion ($780
million the Company's share) design-build joint venture to reconstruct 16 miles
of interstate through the Salt Lake City, Utah area which contributed $133
million to the increase. Several new projects account for the remainder of the
increase.
Margins on construction projects as a percentage of revenue for the nine months
ended September 30, 1998 decreased to 7.2% from 9.7% for the same time period
in 1997. The favorable resolution of project uncertainties, change order
settlements and bonuses for cost savings and early completion increased margins
for the first nine months of 1997. Margins in the first nine months of 1995
and 1996 were 7.6% and 8.9% respectively.
In September of 1997, a Presidential Decree was issued in Indonesia affecting
the construction and start-up dates for a number of private power projects. As
a result of the Decree and the continued fluctuations in the value of the
Indonesian currency, several projects in Indonesia for a U.S. client have been
suspended. The suspension had no material impact on the Company, as
substantially all payments have been received for work performed and the costs
of demobilizing the project were not significant.
Materials. Revenues for the materials business were up 21%, from $211 million
to $256 million, for the nine months ended September 30, 1998 as compared to
the same time period in 1997. Greater sales volume and higher average selling
prices for aggregates, ready mix concrete and asphalt products contributed to
the majority of the increase. The investment in the Oak Mountain Coal Mine was
sold on June 9, 1998. The Oak Mountain investment was previously written off
as an impaired asset in December 1997. Thus, no gain or loss resulted from the
sale.
Margins from materials sales as a percentage of revenue for the nine months
ended September 30, 1998 increased 2% over the same time period in 1997. The
slight increase in margins can be attributed to higher average selling prices
and improvements in the performance of recent acquisitions.
General and Administrative Expenses. General and administrative expenses
increased 11% in 1998. The increase was attributable to increased costs
related to higher Construction and Materials revenues. G & A expense, as a
percent of revenue, decreased from 5.1% in 1997 to 4.4% in 1998 as a
proportionate increase in administration costs were not necessary to support
the Company's revenue growth.
Investment Income, net. Investment income remained relatively unchanged from
the same time period in 1997.
Other, net. Other income is primarily comprised of mine management fee income
from Level 3 and gains and losses on the disposition of property, plant and
equipment and other assets. The mine management fee increased by $4 million
while a decrease in the amount of equipment sold during 1998 resulted in a $7
million decrease in gains from sales.
The mines managed by the Company for Level 3 earn the majority of their
revenues under long-term contracts. The remainder of the mines' sales are made
on the spot market where prices are substantially lower than those of the long-
term contracts. As the long-term contracts expire over the next two to five
years, operating earnings at the mines will decrease substantially. Since the
mine management fee is based upon the operating earnings of the mines, the fee
will be similarly affected.
Financial Condition - September 30, 1998 vs. December 27, 1997
The Company's working capital decreased $39 million or 8% during the first nine
months of 1998. The decline was primarily due to cash used when shareholders
elected to exchange their Class C Stock for Class D Stock, totaling $122
million, repurchases of Class C Stock of $29 million, dividends of $13 million
and repayment of short-term debt of $25 million. In addition, the Company had
capital expenditures of $75 million. Partially funding these outflows was $154
million of cash provided by operations, the issuance of common stock of $67
million, $12 million in net proceeds from the sale and maturity of marketable
securities and $21 million in proceeds from the sale of property, plant and
equipment.
The Company anticipates investing between $50 and $100 million annually in its
construction business. In addition to normal spending, the Company expects to
make significant investments in new construction joint ventures in 1998. The
Company continues to explore opportunities to acquire additional businesses.
Other long-term liquidity uses include the payment of income taxes and
repurchases of common stock and the payment of dividends, including an $.80 per
share dividend declared in April and paid in May, 1998. The Company's current
financial condition and borrowing capacity together with anticipated cash flows
from operations should be sufficient for immediate cash requirements and future
investing activities.
In September 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company must adopt this statement
when preparing financial statements for the year ended December 26, 1998.
Management is reviewing the requirements of this Statement and believes it will
change the extent of its current business segment disclosure. This Statement
does not impact the basic consolidated financial statements; it affects the
presentation of segment information in the Notes to the Consolidated Financial
Statements.
Year 2000 Update:
General. The Company's Year 2000 Project ( the "Project") is proceeding on
schedule. The Project is comprised of two components: Internal, which
includes updating and replacing all computer systems which are not Year 2000
compliant, and External, which requires developing strategies to protect the
Company from disruptions caused by third parties not being Year 2000 compliant.
Internal. The most significant Internal component is the replacement of the
current mainframe payroll system with a client server-based system. The new
system is intended to bring payroll systems into Year 2000 compliance. All
other internal systems materially affecting operations have already been
updated. The Internal systems component of the Project is expected to be
completed in mid-1999, well ahead of the Year 2000 deadline. The Project did
not delay any other Information System projects as several systems were already
scheduled to be revised. The Company does not believe that a backup plan is
necessary as the project is sufficiently well enough along. Check writing with
manual intervention would be in place to handle payroll on a short-term basis
if the Project was not completed before the Year 2000 deadline. The Company's
ability to process payroll and make the associated tax payment, in the long-
term, would be adversely affected if the deadline is not met.
External. The primary External factor which could have a negative impact on
The Company's operations is the inability of third party owners to pay the
Company on a timely basis for work performed as a result of their Year 2000
problem. A large portion of the Company's domestic construction work is with
federal, state and local government agencies. If these agencies are unable to
make payments due to their own Internal Year 2000 problems, the Company could
experience cash flow problems.
Another potentially significant External factor which could have a negative
impact on the Company's operations is the inability of major equipment
suppliers to supply the company with the equipment needed to complete various
construction projects as a result of their Year 2000 problems. Other major
purchasing components, primarily permanent materials, have alternative
procurement sources, in the event that the primary supplier encounters
problems.
Costs. The total cost associated with the Project is not expected to be
material to the Company's financial position. The estimated total cost of the
Project is approximately $5.9 million, of which $3.1 million has been spent to
date.
Risks. The failure to correct a material Internal Year 2000 problem could
result in the disruption of some normal activities and negatively impact the
Company's ability to complete projects on a timely basis. Such failures could
materially and adversely affect the Company's results of operations, liquidity
and financial condition. Due to the general uncertainty inherent in the Year
2000 problem, resulting in large part from the uncertainty of the Year 2000
readiness of third party suppliers and owners, the Company is unable to
determine at this time whether the consequences of External Year 2000 failures
will have a material impact on the Company's results of operations, liquidity
or financial condition. The Project is expected to significantly reduce the
Company's level of uncertainty about the Year 2000 problem and, in particular,
about the Year 2000 compliance and readiness of its material third party
suppliers and owners. The Company believes that, with the implementation of
new business systems and completion of the Project as scheduled, the
possibility of significant interruptions of normal operations should be
reduced.
Forward Looking Statements. The discussion of the Company's efforts and
management's expectations relating to the Year 2000 problem are forward-looking
statements. The Company's ability to achieve Year 2000 compliance and the
costs associated therewith could be adversely impacted by, among other things,
the availability and cost of programming and testing resources, the ability of
third party suppliers and customers to bring their systems into Year 2000
compliance, and unanticipated problems identified in the implementation of the
Project.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PETER KIEWIT SONS', INC.
Date: November 16, 1998 /s/ Kenneth M. Jantz
------------------------
Kenneth M. Jantz
Vice President and
Principal Financial Officer
PETER KIEWIT SONS', INC.
INDEX TO EXHIBITS
Exhibit
No.
-------
27 Financial Data Schedule (For electronic filing purposes only)
8
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<PERIOD-END> SEP-30-1998
<CASH> 247
<SECURITIES> 15
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<ALLOWANCES> 7
<INVENTORY> 0
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0
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<INCOME-PRETAX> 131
<INCOME-TAX> 52
<INCOME-CONTINUING> 79
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79
<EPS-PRIMARY> 9.63
<EPS-DILUTED> 9.52
</TABLE>
