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, 1999 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 12, 1999:
Title of Class Shares Outstanding
Common Stock, $0.01 par value 34,876,718
PETER KIEWIT SONS', INC.
Index
Page
- ------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
Consolidated Condensed Statements of Earnings for the three and nine
months ended September 30, 1999 and 1998 1
Consolidated Condensed Balance Sheets as of September 30, 1999 and
December 26, 1998 2
Consolidated Condensed Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk. 14
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K. 15
Signatures 15
Index to Exhibits 16
______________________________________________________________________________
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,
------------------- -----------------
1999 1998 1999 1998
------------------------------------------
(dollars in millions, except per share data)
- --------------------------------------------
Revenue $1,067 $ 963 $ 2,842 $ 2,533
Cost of Revenue (972) (878) (2,631) (2,347)
------ ----- ------- -------
95 85 211 186
General and Administrative Expenses (33) (33) (108) (111)
------ ----- ------- -------
Operating Earnings 62 52 103 75
Other Income (Expense):
Investment (Loss) Income (14) 3 (7) 9
Interest Expense (1) (1) (2) (2)
Other, net 11 21 42 49
------ ----- ------- -------
(4) 23 33 56
------ ----- ------- -------
Earnings Before Income Taxes 58 75 136 131
Provision for Income Taxes (23) (30) (54) (52)
------ ----- ------- -------
Net Earnings $ 35 $ 45 $ 82 $ 79
====== ===== ======= =======
Net Earnings per Share:
Basic $ 1.00 $1.28 $ 2.40 $ 2.41
====== ===== ======= =======
Diluted $ .98 $1.27 $ 2.35 $ 2.38
====== ===== ======= =======
______________________________________________________________________________
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Consolidated Condensed Balance Sheets
September 30, December 26,
1999 1998
(dollars in millions) (unaudited)
- ------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 306 $ 227
Marketable securities 12 9
Receivables, less allowance of $4 and $4 511 454
Unbilled contract revenue 134 88
Contract costs in excess of related revenue 30 26
Investment in construction joint ventures 175 190
Deferred income taxes 75 64
Other 21 15
------ ------
Total Current Assets 1,264 1,073
Property, Plant and Equipment, less accumulated
depreciation and amortization of $496 and $482 232 208
Other Assets 111 96
------ ------
$1,607 $1,377
====== ======
Liabilities and Redeemable Common Stock
Current Liabilities:
Accounts payable, including retainage
of $54 and $47 $ 206 $ 182
Current portion of long-term debt 3 8
Accrued costs on construction contracts 216 125
Billings in excess of related costs and earnings 173 132
Accrued insurance costs 89 81
Other 58 63
------ ------
Total Current Liabilities 745 591
Long-term debt, less current portion 14 13
Other liabilities 69 70
Minority interest 12 12
------ ------
Total Liabilities 840 686
Redeemable Common Stock
($546 million aggregate redemption value):
Common stock, par $0.01; and 34,892,418 and
35,692,820 shares outstanding - -
Additional paid in capital 175 161
Accumulated other comprehensive income (6) (22)
Retained earnings 598 552
------ ------
Total Redeemable Common Stock 767 691
------ ------
$1,607 $1,377
====== ======
______________________________________________________________________________
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) 1999 1998
- ------------------------------------------------------------------------------
Cash flows from operations:
Net cash provided by operations $187 $ 154
Cash flows from investing activities:
Proceeds from sales and maturities of
marketable securities 1 19
Purchases of marketable securities (4) (7)
Proceeds from sales of property, plant and equipment 22 21
Acquisitions, net of cash acquired (36) (3)
Distributions from investees 6 8
Capital expenditures (45) (75)
---- -----
Net cash used in investing activities (56) (37)
Cash flows from financing activities:
Net payments on short-term debt - (5)
Payments on long-term debt (22) -
Issuance of common stock 25 67
Repurchases of common stock (39) (29)
Dividends paid (16) (13)
Exchange of Class C Stock for Class D Stock, net - (122)
---- -----
Net cash used in financing activities (52) (102)
---- -----
Net increase in cash and cash equivalents 79 15
Cash and cash equivalents at beginning of period 227 232
---- -----
Cash and cash equivalents at end of period $306 $ 247
==== =====
______________________________________________________________________________
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 and materials businesses 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 materials businesses which
together comprised the Construction and Mining Group (the "Construction &
Mining Group"), to the Company in exchange for 30,711,680 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 primarily owned by the former
holders of Level 3's Class C Stock. Prior to consummation of the Transaction,
Level 3's Class C Common Stock was convertible into Level 3's $0.0625 par
value Class D Diversified Group Common Stock ("Class D 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 26, 1998
has been condensed from the Company'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
consolidated financial statements contained in the Company's Annual Report on
Form 10-K.
Receivables at September 30, 1999 and December 26, 1998 include approximately
$97 million and $86 million of retainage on uncompleted projects, the majority
of which is expected to be collected within one year. Included in the
retainage amounts are $26 million and $26 million of securities which are
being held by the owners of various construction projects in lieu of
retainage. Also included in accounts receivable are $15 million and $15
million of securities held by the owners which are now due as the contracts
are completed. These securities are carried at fair value which is determined
based on quoted market prices for the securities on hand or for similar
investments. Net unrealized holding gains and losses, if any, are reported as
a separate component of accumulated other comprehensive income, net of tax.
The results of operations for the nine months ended September 30, 1999 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,
------------------ -----------------
1999 1998 1999 1998
--------------------------------------
Net earnings available to common
shareholders (in millions) $ 35 $ 45 $ 82 $ 79
Add: Interest expense, net of tax effect,
associated with convertible debentures * * * *
------- ------- ------- -------
Net earnings for diluted shares $ 35 $ 45 $ 82 $ 79
======= ======= ======= =======
Total number of weighted average shares
outstanding used to compute basic
earnings per share (in thousands) 34,932 35,104 34,119 32,668
Additional dilutive shares assuming
conversion of convertible debentures 700 360 705 360
------- ------- ------- -------
Total number of shares used to compute
diluted earnings per share 35,632 35,464 34,824 33,028
======= ======= ======= =======
Net earnings
Basic earnings per share $ 1.00 $ 1.28 $ 2.40 $ 2.41
Diluted earnings per share $ .98 $ 1.27 $ 2.35 $ 2.38
* Interest expense attributable to convertible debentures was less than $.5
million.
On January 11, 1999, the Company declared a four-for-one stock split in the
form of a stock dividend of three shares of Common Stock for each share of
common stock issued and outstanding, payable on January 15, 1999. All share
and per share amounts for all periods presented have been retroactively
restated to reflect the stock split.
3. Comprehensive Income:
Comprehensive income includes net earnings, 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 the three months and nine months ended September 30,
1999 and 1998 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
(dollars in millions) 1999 1998 1999 1998
______________________________________________________________________________
Net Earnings $35 $45 $82 $79
Other comprehensive income, before tax:
Foreign currency translation adjustments (1) (3) 3 (3)
Unrealized gains arising during period 5 - 3 -
Reclassification adjustments for losses
included in net earnings 18 - 18 -
Income tax (expense) benefit related to
items of other comprehensive incom (7) 1 (8) 1
--- --- --- ---
Comprehensive Income $50 $43 $98 $77
=== === === ===
4. Segment Data:
The Company is managed and operated in two segments, Construction and
Materials. The Construction segment performs services for a broad range of
public and private customers primarily in North America. Construction
services are performed in the following construction markets: transportation
(including highways, bridges, airports, railroads and mass transit),
commercial buildings, water supply, sewage and waste disposal, dams, mining,
power, telecommunication infrastructure, heating and cooling, and oil and gas.
The Materials segment primarily operates in the Southwest and Northwest
portions of the United States. This segment produces construction materials
including ready-mix concrete, asphalt, sand and gravel, landscaping materials
and railroad ballast.
Intersegment sales are recorded at cost. Operating earnings is comprised of
net sales less all identifiable operating expenses, allocated general and
administrative expenses, depreciation and amortization. Investment income,
interest expense, other income and income taxes have been excluded from
segment operations.
<TABLE>
Elimination
of Total
External Intersegment Total Intersegment Consolidated Operating
(dollars in millions) Revenues Revenues Revenues Revenues Revenues Earnings
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended 9/30/99
- -------------------------
Construction $2,526 $- $2,526 $ - $2,526 $78
Materials $ 316 $6 $ 322 $(6) $ 316 $25
Three Months Ended 9/30/99
- --------------------------
Construction $ 957 $- $ 957 $ - $ 957 $50
Materials $ 110 $6 $ 116 $(6) $ 110 $12
Nine Months Ended 9/30/98
- -------------------------
Construction $2,277 $- $2,277 $ - $2,277 $60
Materials $ 256 $7 $ 263 $(7) $ 256 $15
Three Months Ended 9/30/98
- --------------------------
Construction $ 871 $- $ 871 $ - $ 871 $44
Materials $ 92 $3 $ 95 $(3) $ 92 $ 8
</TABLE>
5. Other Matters:
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 was
determined to be taxable for any other reason, those 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 was to 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 were to decline 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
were to sell 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.
On February 28, 1999, the Company purchased the remaining 60% of a materials
operation in the Portland, Oregon/Vancouver, Washington area. Goodwill
recognized on the purchase is being amortized over 20 years. Had the results
of operations of this acquisition been consolidated for the periods presented,
there would have been no material impact to the Company's results.
The Company and certain other defendants are party to certain litigation
involving repairs to runways at Denver International Airport. In December
1998, a jury determined that the defendants were liable for compensatory and
punitive damages. The Company intends to appeal the verdict. 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.
The Company is involved in various other lawsuits and claims 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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations - Third Quarter 1999 vs. Third Quarter 1998
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," "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.
Revenue from each of the Company's segments was (in millions):
Three Months Ended
September 30,
------------------
1999 1998
---- ----
Construction $ 957 $ 871
Materials 110 92
------ ------
$1,067 $ 963
====== ======
Construction. Revenues for the construction business increased $86 million or
10% for the three months ended September 30, 1999 as compared to the same time
period in 1998. The increase is due to favorable market conditions in the
business sectors that the Company operates.
Contract backlog at September 30, 1999 was $4.4 billion of which 6% is
attributable to foreign operations located in Canada. Domestic projects are
spread geographically throughout the U.S.
Margins as a percentage of revenue on construction projects for the three
months ended September 30, 1999 were consistent with margins in the same time
period in 1998, increasing from 8.4% to 8.5%.
Materials. Revenues increased 20% to $110 million during the third quarter
1999 when compared to the same period in 1998. A continued strong market for
materials products in the Southwest that resulted in additional unit sales of
asphalt, ready mix and aggregates accounted for much of the increase.
Additional ballast sales at a quarry located in Wyoming plus the acquisition
of the remaining 60% of a materials operation acquired as of February 28, 1999
account for the balance of the increase.
Margins increased 17% from $12 million to $14 million during 1999 compared to
the third quarter of 1998. The 100% inclusion of the acquired materials
operations account for the increase in margins.
General and Administrative Expenses. General and administrative expenses
remained consistent with prior year levels as a proportionate increase in
administration costs was not necessary to support the Company's revenue
growth.
Investment (Loss) Income. During the current period, the Company determined
that the decline in market value of an investment security was other-than-
temporary. This investment was written down to the current market value and a
loss of $18 million was recognized in the Statement of Earnings. This
investment had been carried at market value and the write-down had been
recorded as an unrealized loss as a separate component of other comprehensive
income. As a result, this write-down had no effect on total comprehensive
income or total redeemable common stock. Subsequent changes in the market
value of the security will be included as a separate component of
comprehensive income.
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 $10 million decrease resulted primarily
from a decrease in gains on equipment sales.
The Company manages certain coal mines for Level 3. Fees for these services
were $9 million in 1999 and $10 million in 1998. The Company's fee is a
percentage of adjusted operating earnings of the coal mines. 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. After a significant long-term contract expires next year, adjusted
operating earnings at the mines will decrease substantially, thereby similarly
decreasing the management fee earned by the Company.
Additionally, the Minerals Management Service and Montana Department of
Revenue have issued assessments to the Level 3 mines for the underpayment of
royalties and production taxes. Level 3 is vigorously contesting the
assessments. If Level 3 pays these assessments, the payments could materially
decrease future mine management fees, but will not affect fees previously
received.
Provision for income taxes. The effective income tax rates in 1999 and 1998
differ from the federal statutory rate of 35% due primarily to state income
taxes.
Results of Operations - Nine Months 1999 vs. Nine Months 1998
Revenue from each of the Company's segments was (in millions):
Nine Months Ended
September 30,
-----------------
1999 1998
---- ----
Construction $2,526 $2,277
Materials 316 256
------ ------
$2,842 $2,533
====== ======
Construction. Revenues for the construction business increased $249 million
or 11% from the same time period in 1998. The increase is due to favorable
market conditions in the business sectors that the Company operates.
Margins on construction projects as a percentage of revenue for the nine
months ended September 30, 1999 were consistent with margins in the same
period in 1998, decreasing from 7.2% to 7.1%.
Materials. Materials revenues increased 23% to $316 million for the year in
1999 when compared to 1998. A continued strong market for materials products
in the Southwest that resulted in additional unit sales of asphalt, ready mix
and aggregates accounted for much of the increase. Additional ballast sales
at quarries located in Wyoming and Utah plus the acquisition of the remaining
60% of a materials operation acquired as of February 28, 1999 account for the
balance of the increase.
Materials margins increased 41% from $22 million to $31 million when compared
to 1998. The inclusion of the acquired materials operations combined with the
elimination of losses taken in 1998 for the Oak Mountain coal operations
contributed to the increase.
General and Administrative Expenses. General and administrative expenses
decreased 3% in 1999. The decrease was attributable to cost containment and
reassignment of overhead personnel.
Investment (Loss) Income. During the current period, the Company determined
that the decline in market value of an investment security was other-than-
temporary. This investment was written down to the current market value and a
loss of $18 million was recognized in the Statement of Earnings. This
investment had been carried at market value and the write-down had been
recorded as an unrealized loss as a separate component of other comprehensive
income. As a result, this write-down had no effect on total comprehensive
income or total redeemable common stock. Subsequent changes in the market
value of the security will be included as a separate component of
comprehensive income.
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 $7 million decrease resulted primarily
from a decrease in the mine management fee.
The Company manages certain coal mines for Level 3. Fees for these services
were $23 million in 1999 and $27 million in 1998. The Company's fee is a
percentage of adjusted operating earnings of the coal mines. 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. After a significant long-term contract expires next year, adjusted
operating earnings at the mines will decrease substantially, thereby similarly
decreasing the management fee earned by the Company.
Additionally, the Minerals Management Service and Montana Department of
Revenue have issued assessments to the Level 3 mines for the underpayment of
royalties and production taxes. Level 3 is vigorously contesting the
assessments. If Level 3 pays these assessments, the payments could materially
decrease future mine management fees, but will not affect fees previously
received.
Provision for income taxes. The effective income tax rates in 1999 and 1998
differ from the federal statutory rate of 35% due primarily to state income
taxes.
Financial Condition - September 30, 1999 vs. December 26, 1998
The Company's working capital increased $37 million or 8% during the first
nine months of 1999. Sources of cash primarily included $187 million of cash
provided by operations, $22 million in proceeds from the sale of property,
plant and equipment and $6 million in distributions from equity method
investees and $25 million from the issuance of common stock. Uses of cash
primarily included stock repurchases of $39 million, dividends of $16 million,
purchases of marketable securities of $4 million, repayment of debt of $22
million, $36 million for the acquisition of materials operations and $45
million for the purchase of property, plant and equipment.
The Company anticipates investing between $50 and $100 million annually in its
construction and materials businesses. In addition to normal spending, the
Company expects to make significant investments in construction joint ventures
in 1999. The Company continues to explore opportunities to acquire additional
businesses. Other long-term liquidity uses include the payment of income
taxes and the payment of dividends. 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 June 1998, the financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
established accounting and reporting standards for derivative instruments and
for hedging activities. This statement is effective for all fiscal years
beginning after June 15, 2000. Management does not expect adoption of this
statement to materially affect the Company's financial statements as the
Company has no material derivative instruments or hedging activities.
Year 2000 Update
General. The Company's Year 2000 Effort (the "Effort") is proceeding on
schedule. The Effort 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. All material internal systems have been tested for Year 2000
compliance and are currently functioning. As a result, the Company does not
believe that a contingency plan with regard to the Internal component of the
Effort is necessary. The Effort did not delay any other information system
projects as several systems were already scheduled to be revised.
External. The primary external factor which could interrupt 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 interrupt 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 Effort was not material to the
Company's financial position. The total cost of the Effort was approximately
$5 million.
Risks. 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 Effort 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 Effort 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 Effort.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Not Applicable.
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 12, 1999 /s/ Kenneth M. Jantz
---------------------
Kenneth M. Jantz
Vice President and Treasurer
PETER KIEWIT SONS', INC.
INDEX TO EXHIBITS
Exhibit
No.
-------
27 Financial Data Schedule (For electronic filing purposes only)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> SEP-30-1999
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0
0
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