<TABLE>
RINCON CENTER ASSOCIATES
Balance Sheet
As of March 31, 1994
ASSETS
3/31/94 12/31/93
<S> <C> <C>
CASH $ 366,825 $ 120,129
ACCOUNTS RECEIVABLE 402,363 44,399
DEFERRED RENT RECEIVABLE 7,430,165 7,882,208
NOTES RECEIVABLE 15,751,844 15,828,196
REAL ESTATE PROPERTIES USED IN OPERATIONS, Net 116,802,510 118,021,303
LEASEHOLD IMPROVEMENTS, Net 2,235,690 1,854,719
OTHER ASSETS 2,195,626 2,855,012
------------ ------------
Total Assets $145,185,023 $146,605,966
============ ============
LIABILITIES
CONSTRUCTION NOTES PAYABLE $ 62,182,500 $ 62,370,000
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 3,036,584 3,415,936
DEFERRED GROUND RENT, Net 7,197,194 7,306,810
DEFERRED LEASE EXPENSE, Net 1,609,927 3,101,814
DEFERRED INCOME 1,540,311 1,540,311
ACCRUED INTEREST DUE GENERAL PARTNERS 35,326,625 33,900,724
DUE TO PERINI LAND AND DEVELOPMENT COMPANY 69,759,693 68,499,293
DUE TO PACIFIC GATEWAY PROPERTIES, INC. 17,428,051 16,988,451
------------ ------------
Total Liabilities $198,080,885 $197,123,339
PARTNERS' DEFICIT (52,895,862) (50,517,373)
------------- -------------
Liabilities and Partners' Deficit $145,185,023 $146,605,966
============= =============
</TABLE>
<TABLE>
RINCON CENTER ASSOCIATES
Income Statement
For Period 1/1/93 thru 3/31/94
Current Year-To-Date Year-To-Date
Period 3/31/94 3/31/93
<S> <C> <C> <C>
REVENUE:
Rental Income $ 1,448,804 $ 4,328,191 $ 4,284,069
Parking Income 112,890 316,517 341,329
Interest Income 140,897 404,456 259,104
----------- ----------- -----------
Total Revenue $ 1,702,591 $ 5,049,164 $ 4,884.502
OPERATIONS EXPENSE:
Operating Expense $ 794,219 $ 2,181,212 $ 2,058,734
Ground Rent Expense 233,306 754,664 850,152
----------- ----------- -----------
Total Operating Expense $ 1,027,525 $ 2,935,876 $ 2,908,886
----------- ----------- -----------
NET OPERATING INCOME $ 675,066 $ 2,113,288 $ 1,975,616
DEBT SERVICE:
Sale Lease Back Basic Rent 442,468 1,327,405 873,358
Interest Expense 217,945 581,225 630,971
LC Fees 44,601 133,802 215,818
----------- ----------- -----------
Total Debt Service $ 705,014 $ 2,042,432 $ 1,720,327
INCOME OR (LOSS) B/F PARTNER EXPENSES & DEPRECIATION (29,948) 70,856 255,289
PARTNER EXPENSES:
General Partner Loan Interest Expense $ 595,982 $ 1,709,665 1,524,815
General Partner LC Fees 43,400 (285,257) 215,753
Other 94 96 1,800
----------- ----------- ---------
Total Partner Expenses $ 639,476 $ 1,424,504 1,742,368
DEPRECIATION:
Amortization $ 26,394 $ 69,421 $ 49,265
Depreciation 324,916 955,421 946,259
----------- ----------- -----------
Total Amortization/Depreciation $ 351,310 $ 1,024,842 $ 995,524
----------- ----------- -----------
NET INCOME OR (LOSS) $(1,020,734) $(2,378,490) $(2,482,603)
============ ============ ============
</TABLE>
RINCON CENTER ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993, 1992 AND 1991
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Rincon Center Associates,
A California Limited Partnership:
We have audited the accompanying balance sheets of Rincon Center Associates,
<PAGE>
A California Limited Partnership as of December 31, 1993 and 1992, and the
related statements of operations, changes in partners' deficit and cash flows
for the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rincon Center Associates, A
California Limited Partnership as of December 31, 1993 and 1992, and the
results of its operations and its cash flows for the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles.
Boston, Massachusetts
February 11, 1994
RINCON CENTER ASSOCIATES
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS - DECEMBER 31, 1993 AND 1992
1993 1992
ASSETS
CASH $ 120,000 $ 272,000
ACCOUNTS RECEIVABLE, net of reserves
of $239,000 and $95,000 at
December 31, 1993 and 1992,
respectively 44,000 2,074,000
DEFERRED RENT RECEIVABLE 7,883,000 7,626,000
NOTES RECEIVABLE 15,828,000 10,140,000
REAL ESTATE USED IN OPERATIONS, net 118,021,000 121,505,000
LEASEHOLD IMPROVEMENTS, net 1,855,000 1,894,000
OTHER ASSETS, net 2,855,000 2,368,000
------------ ------------
Total assets $146,606,000 $145,879,000
============ ============
<PAGE>
LIABILITIES AND PARTNERS' DEFICIT
CONSTRUCTION NOTES PAYABLE $ 62,370,000 $ 64,224,000
ACCOUNTS PAYABLE AND ACCURED
LIABILITIES 3,416,000 3,607,000
ACCRUED GROUND RENT LIABILITY, net 7,307,000 7,636,000
ACCRUED LEASE LIABILITY, net 3,102,000 3,030,000
DEFERRED INCOME 1,540,000 1,540,000
ACCRUED INTEREST DUE GENERAL
PARTNERS 33,901,000 27,432,000
DUE TO PERINI LAND AND DEVELOPMENT
COMPANY 68,399,000 61,592,000
DUE TO PACIFIC GATEWAY PROPERTIES,
INC. 17,089,000 15,390,000
------------ ------------
Total liabilities $197,124,000 $184,451,000
COMMITMENTS (NOTE 3)
PARTNERS' DEFICIT (50,518,000) (38,572,000)
------------- ------------
Total liabilities and
partners'deficit $146,606,000 $145,879,000
============ ============
The accompanying notes are an integral part of these financial
statements.
RINCON CENTER ASSOCIATES
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
1993 1992 1991
REVENUE:
Rental income $ 17,083,000 $ 17,583,000 $ 16,814,000
Parking and other
income 1,260,000 1,150,000 1,195,000
------------ ------------ ------------
Total revenue 18,343,000 18,733,000 18,009,000
------------ ------------ ------------
EXPENSES:
Operating 5,132,000 5,448,000 4,824,000
Administrative and
other 1,556,000 1,313,000 1,437,000
Property taxes and
insurance 2,438,000 3,200,000 1,835,000
<PAGE>
Leases 4,515,000 3,775,000 4,755,000
Ground rent 3,391,000 3,407,000 3,437,000
Interest and letter
of credit fees 10,582,000 10,862,000 12,802,000
Depreciation and
amortization 4,040,000 4,726,000 3,487,000
------------ ------------ ------------
Total expenses 31,654,000 32,731,000 32,577,000
INTEREST INCOME 1,365,000 1,062,000 1,023,000
------------- ------------- -------------
Net loss $(11,946,000) $(12,936,000) $(13,545,000)
============= ============= =============
The accompanying notes are an integral part of these financial
statements.
RINCON CENTER ASSOCIATES
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
General Limited
Partners Partners Total
BALANCE,
DECEMBER 31, 1990 $ (5,923,000) $ (6,168,000) $(12,091,000)
Net loss (6,786,000) (6,759,000) (13,545,000)
------------- ------------- -------------
BALANCE,
DECEMBER 31, 1991 (12,709,000) (12,927,000) (25,636,000)
Net loss (6,481,000) (6,455,000) (12,936,000)
------------- ------------- -------------
BALANCE,
DECEMBER 31, 1992 (19,190,000) (19,382,000) (38,572,000)
Net loss (5,985,000) (5,961,000) (11,946,000)
------------- ------------- -------------
BALANCE,
DECEMBER 31, 1993 $(25,175,000) $(25,343,000) $(50,518,000)
------------- ------------- -------------
PARTNERS' PERCENTAGE
INTEREST 50.10 49.90 100.00
====== ===== ======
<PAGE>
The accompanying notes are an integral part of these financial
statements.
RINCON CENTER ASSOCIATES
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
1993 1992 1991
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(11,946,000) $(12,936,000) $(13,545,000)
Adjustments to reconcile net loss to net
cash used in operating activities -
Depreciation and amortization 4,040,000 4,726,000 3,487,000
(Increase) decrease in accounts receivable 2,030,000 (1,620,000) (102,000)
(Increase) decrease in deferred rent
receivable (257,000) (479,000) (2,170,000)
(Increase) decrease in other assets (214,000) (598,000) (467,000)
Increase (decrease) in accounts payable and
accrued liabilities (191,000) 61,000 (1,072,000)
(Decrease) in accrued ground rent
liabilities (329,000) (329,000) (329,000)
Increase (decrease) in accrued lease
liability 72,000 (500,000) (946,000)
Increase in accrued interest due general
partners 6,469,000 5,271,000 7,918,000
------------- ------------- -------------
Net cash used in operating activities (326,000) (6,404,000) (7,226,000)
CASH FLOW FROM INVESTING ACTIVITIES:
Expenditure on real estate used in
operations (642,000) (369,000) (5,133,000)
Additions to leasehold improvements (118,000) - (18,000)
Additions to fixed assets (30,000) (73,000) (10,000)
Increase in notes receivable (6,000,000) (32,000) (138,000)
Payments on notes receivable 312,000 440,000 277,000
------------- ------------- -------------
Net cash used in investing activities (6,478,000) (34,000) (5,022,000)
------------- ------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from construction notes payable - 858,000 2,787,000
Payments on notes payable (1,854,000) - -
Proceeds from advances from general 8,506,000 5,634,000 8,505,000
partners ------------- ------------- -------------
Net cash provided by financing
activities 6,652,000 6,492,000 11,292,000
------------- ------------- -------------
INCREASE (DECREASE) IN CASH (152,000) 54,000 (956,000)
CASH AT BEGINNING OF YEAR 272,000 218,000 1,174,000
------------- ------------ -------------
CASH AT END OF YEAR $ 120,000 $ 272,000 $ 218,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
RINCON CENTER ASSOCIATES
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
1. PARTNERSHIP ORGANIZATION:
Rincon Center Associates, A California Limited Partnership (the Partnership)
was formed on September 18, 1984, to lease and develop land and buildings
located in the Rincon Point-South Beach Redevelopment Project Area in the
City and County of San Francisco, California. The Rincon Center Project (the
Project) comprises commercial and retail space, 320 rental housing units and
associated off-street parking. The Project was developed in two distinct
segments: Rincon One and Rincon Two.
Profits and losses are shared by the partners in accordance with their
percentage interest as provided in the partnership agreement and as shown in
the statements of changes in partners' deficit. Cash profits, as determined
by the managing general partner, are distributed to the partners in the same
percentage interest.
Perini Land and Development Company (PL&D) is the managing general partner of
the
Partnership and has the responsibility for general management, administration
and control of the Partnership's property, business
addition, PL&D provides project and general accounting services to the
Partnership (Note 7). Pacific Gateway Properties, Inc. (PGP), formerly
Perini Investment Properties, Inc., is the other general partner.
2. SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements have been prepared using the accrual
basis of accounting.
Real Estate Used in Operations
Real estate used in operations includes all costs capitalized during the
development of the project. These costs include interest and financing
costs, ground rent expense during construction, property taxes, tenant
improvements and other capitalizable overhead costs.
Depreciation and Amortization
The Partnership uses the straight-line method of depreciation. The
significant asset groups and their estimated useful lives are:
Structural components of buildings 60 years
Nonstructural components of buildings 25 years
All other depreciable assets 5-30 years
Leasehold improvements are amortized using the straight-line method over the
lesser of their useful lives or the lease terms.
Income Taxes
In accordance with federal and state income tax regulations, no income taxes
are levied on the Partnership; rather, such taxes are levied on the
individual partners. Consequently, no provision or liability for federal or
<PAGE>
state income taxes is reflected in the accompanying financial statements.
Rental Income
Certain lease agreements provide for periods of free rent or stepped
increases in rent over the lease term. In such cases, revenue is recognized
at a constant rate over the term of the lease. Amounts recognized as income
but not yet due under the terms of the leases are shown in the accompanying
balance sheets as deferred rent receivable.
Statements of Cash Flows
Cash paid for interest was $2,414,000, $3,199,000 and $4,015,000 in 1993,1992
and 1991, respectively.
Accrued Lease Liability
The Partnership is leasing Rincon One from Chrysler McNally (Chrysler) over a
25-year lease term (Note 3). In connection with this lease, the Partnership
was granted a free rent concession for one year. The intent of Chrysler's
free rent provision was to match a similar provision granted by the
Partnership to an anchor sublease tenant of Rincon One, whose lease is for 10
years. The Partnership expensed rent in the first year of the lease and is
amortizing the accrued lease liability related to Rincon One over 10 years to
match the expense with the revenue recorded on the sublease.
Three amendments to the master lease agreement were made in 1993 in
connection with the extending of Chrysler's existing financing on the
property (Note 3). The rent schedule was revised which resulted in an
increase to the accrued lease liability during 1993 in order to normalize the
rent expense over the remaining lease term.
Other Assets
Other assets include prepaid expenses, deferred lease commissions and fixed
assets. Deferred lease commissions are amortized over the life of the lease.
Fixed assets are amortized over the life of the asset, which is generally
five years.
Reclassification of Prior Year Amounts
Certain prior year amounts have been reclassified to conform with the current
year presentation.
3. OPERATING LEASE, RINCON ONE:
On June 24, 1988, the Partnership sold Rincon One to Chrysler and
subsequently leased the property back under a master lease with a basic term
of 25 years and four 5-year renewal options at the Partnership's discretion.
The transaction was accounted for as a sale and operating leaseback and the
gain on the sale of $1,540,000 has been deferred.
In connection with the sale and operating leaseback of Rincon One, Chrysler
assumed and agreed to perform the Partnership's financing obligations. The
Partnership, in accordance with the master lease and several amendments in
1993, obtained a financial commitment on behalf of Chrysler to replace at
least $43,000,000 of long-term financing by July 1, 1993. To satisfy this
obligation, the Partnership successfully extended existing financing to July
1, 1998. To complete the extension, the Partnership had to advance funds
sufficient to reduce the financing from $46,500,000 to $40,500,000. The
Partnership received a 10% secured note in the principal amount of $6,000,000
from Chrysler upon the Partnership's advance of funds to reduce the
financing. If by January 1, 1998, the Partnership has not received a further
extension or new commitment for financing on the property for at least
$33,000,000, Chrysler will have the right
<PAGE>
under the lease to require the Partnership to purchase the property for a
stipulated amount significantly in excess of the debt. The Partnership
intends to obtain financing meeting the conditions of the lease prior to
January 1, 1998.
The master lease was amended several times in 1993 in connection with the
extending of Chrysler's existing financing on the property through July 1,
1998.
Payments under the master lease agreement may be adjusted to reflect
adjustments in the rate of interest payable by Chrysler on the Rincon One
debt. Future minimum lease payments based on scheduled payments under the
master lease agreement are as follows:
1994 $ 6,565,000
1995 6,570,000
1996 6,550,000
1997 5,952,000
1998 5,634,000
Thereafter 85,120,000
4. NOTES RECEIVABLE:
At December 31, 1993 and 1992, the Partnership had the following notes
receivable:
1993 1992
Due from Chrysler secured by second deed
on trust on Rincon One, bearing interest
at 10 percent, with monthly principal
and interest payments of $150,285 in
1993 and $92,383 in 1992; unpaid balance
due July 2013 $15,469,000 $ 9,739,000
Notes from tenants secured by tenant
improvements, bearing interest at 8
percent to 11 percent, with maturities
from 1994 to 2001, due in monthly
installments 359,000 401,000
----------- -----------
$15,828,000 $10,140,000
=========== ===========
In 1993, the Partnership received a 10% secured note in the principal amount
of $6,000,000 from Chrysler upon the Partnership's advance of funds (Note 3).
5. GROUND LEASE:
The Partnership entered into a 65-year ground lease with the United States
Postal Service for the Project property on April 19, 1985. On June 24, 1988,
this lease was bifurcated into two leases (Rincon One and Rincon Two). The
terms of the original lease did not change; the dollar amounts were simply
split between the two properties. Under the terms of the leases, the
Partnership must make monthly lease payments (Basic Rent) of $101,750 and
$173,250 for Rincon One and Rincon Two, respectively. In April, 1994 and
every six years thereafter, the monthly base payments can be increased based
on the increase in the Consumer Price Index subject to a minimum of 5 percent
per year and a maximum of 8 percent per year. In addition, the Basic Rent
can be increased based on reappraisal of the underlying property on the
occurrence of certain events if those events occur prior to the regular
reappraisal dates of April 19, 2019, and each twelfth year thereafter for the
remainder of the lease term.
The lease agreement calls for the payment of certain percentage rents based
on revenues received from the subleasing of the Rincon One building.
Percentage rents paid in 1993, 1992 and 1991 were $259,000, $267,000 and
$271,000, respectively.
This lease has been accounted for as an operating lease, with minimum future
lease payments of:
1994 $ 4,120,000
1995 4,410,000
1996 4,410,000
1997 4,410,000
1998 4,290,000
Thereafter 894,853,000
During 1993, 1992 and 1991, Basic Rent was not capitalized because the entire
project was placed in service. At December 31, 1990, ground rent of
$10,407,312 was capitalized. Under the provisions of the original lease, no
lease payments were to be made from the inception of the lease (April 19,
1985) until April 18, 1987, and one-half of the regular monthly payment was
due for the period from April 19, 1987 to April 18, 1988. However, as
allowed by the lease agreement, the Partnership deferred the payment of Basic
Rent until the initial occupancy date, February 8, 1988. At December 31,
1993 and 1992, the deferred Basic Rent
and interest for the period April 19, 1987 to April 18, 1988, amount to
$552,000 and $685,000, respectively, and are being paid in 120 monthly
installments together with interest at a rate based on the average discount
rates of 90-day U.S. Treasury bills, which was approximately 3.88 percent for
the year ended December 31, 1993. The rate will be adjusted every 90 days as
long as a balance is due on the deferred rent. The remaining deferred ground
rent related to the
free rent period amounted to $6,754,000 and $6,951,000 at December 31, 1993
and 1992, respectively, and is being amortized over the lease term.
6. CONSTRUCTION NOTES PAYABLE:
Residential
The residential portion of the Project is being financed with a $36,000,000
loan from the Redevelopment Agency of the City and County of San Francisco
(the Agency), of which $34,100,000 and $34,600,000 was outstanding at
December 31, 1993 and 1992, respectively. The Agency raised these funds
through the issuance of Variable Rate Demand Multifamily Housing Revenue
Bonds (Rincon Center Project) 1985 Issue B (the Bonds).
The interest rate on the Bonds is variable at the rate required to produce a
market value for the Bonds equal to their par value. At December 31, 1993,
1992 and 1991, the effective interest rate on the bonds was 3.00 percent,
3.13 percent and 4.20 percent, respectively. Interest payments are to be
made on the first business day of each March, June, September and December.
The Partnership has the option to convert the Bonds to a fixed interest rate
at any of the above interest payment dates. The fixed rate will be the rate
required to produce a market value for the Bonds equal to their par value.
After conversion to a fixed rate, interest payments must be made on each June
1 and December 1.
The Partnership must repay the residential loan as the Bonds become due. The
Bonds shall be redeemed in at least the minimum amounts set forth below:
1994 $ 600,000
1995 600,000
1996 600,000
1997 700,000
1998 900,000
Thereafter 30,700,000
The Bonds are due December 1, 2006. The Bonds are secured by an irrevocable
letter of credit issued by Citibank in the name of the Partnership in the
<PAGE>
amount of approximately $36,200,000. In the event that drawings are made on
the letter of credit, the Partnership has agreed to reimburse Citibank for
such drawings pursuant to the terms of a Reimbursement Agreement. The
Partnership obligations under the Reimbursement Agreement are secured by a
deed of trust on the Project and the equity letters of credit and guarantees
described below.
Commercial
The development and construction of the commercial portion of the Project was
financed pursuant to a Construction Loan Agreement between the Partnership
and Citibank of which $28,270,000 and $28,849,000 was outstanding at December
1993 and 1992, respectively. The loan, as is the irrevocable letter of
credit supporting the residential bond, is secured by a deed of trust on the
Project and equity letters of credit currently in the aggregate amount of
$9,000,000, issued to Citibank by Bank of America, N.T. & S.A. on behalf of
the general partners. PL&D has also provided a $3.5 million corporate
guarantee to support the project financing. PGP and Perini Corporation, the
parent company of PL&D, have agreed to reimburse Bank of America for any
drawings under these letters of credit. An annual fee equal to prime plus 1
percent of the aggregate amount is due to PGP and PL&D for the use of these
letters of credit. The loan is also secured by the guarantees described in
Note 7. As of December 31, 1993 and 1992, $751,000 and $0, respectively, of
accrued letter of credit fees were included in accrued interest due general
partners in the accompanying balance sheets. The total fee in 1993, 1992 and
1991 was $751,000, $909,000 and $1,180,000, respectively.
In 1993, the Partnership extended the loan to October 1, 1998, that required
a $600,000 up front paydown and an additional fee of $105,000. The loan
requires the Partnership to amortize $13,000,000 over the next five years.
Amounts are payable as follows: $1,475,000 in 1994; $2,192,000 in 1995;
$2,708,000 in 1996; $3,150,000 in 1997 and the remainder in 1998. The
Partnership obtained a swap agreement with interest rates stepping up from
3.61% to 5.96% over the loan term. At December 31, 1993 the rate on the loan
was 3.61%.
At December 31, 1992, the Partnership has purchased an option to acquire an
interest rate hedge for principal amounts totaling $46,500,000 at 11.5% until
December 1993. The total fee paid of $51,000 is included in interest and
letter of credit fees in 1992.
Additionally, the Partnership obtained short-term financing to fund tenant
improvements. The amount outstanding at December 31, 1993 and 1992, was $0
and $775,000, respectively. The loan was paid on March 31, 1993 by the
Partnership.
7. TRANSACTIONS WITH GENERAL PARTNERS:
PL&D has guaranteed the payment of both interest on the financing of the
Project and operating deficit, if any. It has also guaranteed the master
lease under the sale and operating lease-back transaction (Note 3).
In accordance with the construction loan agreement (Note 6), the general
partners have advanced monies to the Partnership to fund project costs. At
December 31, 1993 and 1992, the general partners had advanced $85,488,000 and
$76,982,000, respectively. The advances accrue interest at a rate of prime
plus 2 percent. The related accrued interest liability of $33,901,000 and
$27,432,000 as of December 31, 1993 and 1992, respectively, is reflected in
the accompanying balance sheets. For the years ended December 31, 1993, 1992
and 1991, interest expense on partner advances was $6,469,000, $6,141,000 and
$7,048,000, respectively.
Effective January 1, 1988, PL&D retained Pacific Gateway Properties
Management Corporation (PGPMC), a wholly owned subsidiary of PGP, to provide
management and leasing services for the Project. As compensation for
managing the facilities, the Partnership paid PGPMC a base management fee of
<PAGE>
$222,000 annually until leasing the residential portion of the Project was
completed. At such time, the compensation increased to $319,200 per year or,
if greater, the sum of 3 percent of the first $13,000,000 of the annual gross
receipts plus 2 percent of receipts
in excess of the $13,000,000. The fees incurred for the years ended December
31, 1993, 1992 and 1991 were $497,000, $485,000 and $514,000, respectively,
and were included in administrative and other expenses in the accompanying
statements of operations. At December 31, 1993 and 1992, $27,000 and
$96,000, respectively, related to this fee had not been paid and is included
in accounts payable and accrued liabilities. Additionally, the Partnership
reimburses PGPMC for certain payroll costs.
RINCON CENTER ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1992, 1991 AND 1990
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Rincon Center Associates,
A California Limited Partnership:
We have audited the accompanying balance sheets of Rincon Center Associates,
A California Limited Partnership as of December 31, 1992 and 1991, and the
related statements of operations, changes in partners' deficit and cash flows
for the three years ended December 31, 1992, 1991 and 1990. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rincon Center Associates, A
California Limited Partnership as of December 31, 1992 and 1991, and the
results of its operations and its cash flows for the three years ended
December 31, 1992, 1991 and 1990, in conformity with generally accepted
accounting principles.
San Francisco, California,
February 2, 1993
<PAGE>
RINCON CENTER ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS--DECEMBER 31, 1992 AND 1991
1992 1991
ASSETS
CASH $ 272,450 $ 217,525
ACCOUNTS RECEIVABLE, net of
reserves of $94,969 and $60,213
at December 31, 1992 and 1991,
respectively 2,073,326 452,754
DEFERRED RENT RECEIVABLE 7,626,401 7,147,821
NOTES RECEIVABLE 10,140,144 10,486,680
REAL ESTATE USED IN OPERATIONS,
net 121,505,397 124,827,339
LEASEHOLD IMPROVEMENTS, net 1,894,035 2,151,027
OTHER ASSETS, net 2,367,087 2,536,882
------------ ------------
Total assets $145,878,840 $147,820,028
============ ============
LIABILITIES AND PARTNERS' DEFICIT
CONSTRUCTION NOTES PAYABLE $ 64,223,609 $ 63,366,870
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 3,606,324 3,545,690
ACCRUED GROUND RENT LIABILITY,
net 7,635,657 7,964,505
ACCRUED LEASE LIABILITY, net 3,029,494 3,529,855
DEFERRED INCOME 1,540,311 1,540,311
ACCRUED INTEREST DUE GENERAL
PARTNERS 27,432,444 22,161,596
DUE TO PERINI LAND AND
DEVELOPMENT COMPANY 61,592,314 57,132,226
DUE TO PACIFIC GATEWAY
PROPERTIES, INC. 15,390,273 14,215,189
------------ ------------
Total liabilities 184,450,426 173,456,242
PARTNERS' DEFICIT (38,571,586) (25,636,214)
------------ ------------
Liabilities and partners'
deficit $145,878,840 $147,820,028
============ ============
The accompanying notes are an integral part of these statements.
<PAGE>
RINCON CENTER ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
<TABLE>
1992 1991 1990
<S> <C> <C> <C>
REVENUE:
Rental income $ 17,583,217 $ 16,814,229 $10,657,413
Parking and other
income 1,149,377 1,194,601 1,170,619
------------ ------------ -----------
Total revenue 18,732,594 18,008,830 11,828,032
------------ ------------ -----------
EXPENSES:
Operating 5,146,334 4,315,732 3,395,729
Administrative and
other 1,614,502 1,944,545 1,334,475
Property taxes and
insurance 3,200,377 1,835,409 949,078
Leases 3,774,793 4,755,463 4,957,081
Ground rent 3,406,939 3,436,746 2,255,221
Interest and letter of
credit fees 10,861,967 12,802,374 7,210,713
Depreciation and
amortization 4,726,039 3,487,034 1,800,615
------------ ------------ ------------
Total expenses 32,730,951 32,577,303 21,902,912
------------ ------------ ------------
OTHER INCOME- Interest
income 1,062,985 1,023,517 1,062,782
------------ ------------ ------------
Net loss $(12,935,372) $(13,544,956) $(9,012,098)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
RINCON CENTER ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
General Limited
Partners Partners Total
BALANCE, DECEMBER 31, 1989 $ (1,408,133) $ (1,671,027) $ (3,079,160)
Net loss (4,515,061) (4,497,037) (9,012,098)
------------ ------------ ------------
BALANCE, DECEMBER 31, 1990 (5,923,194) (6,168,064) (12,091,258)
Net loss (6,786,023) (6,758,933) (13,544,956)
------------ ------------ ------------
<PAGE>
BALANCE, DECEMBER 31, 1991 (12,709,217) (12,926,997) (25,636,214)
Net loss (6,480,621) (6,454,751) (12,935,372)
------------ ------------ ------------
BALANCE, DECEMBER 31, 1992 $(19,189,838) $(19,381,748) $(38,571,586)
============ ============ ============
PARTNERS' PERCENTAGE
INTEREST 50.10% 49.90% 100.00%
===== ===== ======
The accompanying notes are an integral part of these statements.
RINCON CENTER ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
1992 1991 1990
CASH FLOW FROM OPERATING
ACTIVITIES:
Net loss $(12,935,372) $(13,544,956) $(9,012,098)
Adjustments to
reconcile net loss
to net cash used in
operating
activities-
Depreciation and
amortization 4,726,039 3,487,034 1,800,615
Increase in accounts
receivable (1,620,572) (102,469) (210,746)
Increase in deferred
rent receivable (478,580) (2,169,965) (190,527)
Increase in other
assets (597,550) (465,927) (638,700)
Decrease in other
receivable - - 1,006,810
Increase (decrease) in
accounts payable and
accrued liabilities 60,634 (1,071,547) (4,685,396)
Decrease in accrued
ground rent
liability (328,848) (328,848) (328,847)
Decrease in accrued
lease liability (500,361) (945,808) (1,716,176)
Recognition of
deferred income - (1,374) (67,996)
Increase in accrued
interest due general
partners 5,270,848 7,918,261 6,701,884
------------ ------------ ------------
Net cash used in
operating
activities (6,403,762) (7,225,599) (7,341,177)
------------ ------------ ------------
CASH FLOW FROM INVESTING
ACTIVITIES:
<PAGE>
Expenditure on real
estate used in
operations (367,631) (5,133,601) (10,334,901)
Additions to leasehold
improvements - (17,782) (2,447,205)
Additions to fixed
assets (73,392) (10,676) (111,060)
Issuance of notes
receivable (32,206) (138,669) (346,830)
Payments on notes
receivable 440,005 277,301 221,562
------------ ------------ ------------
Net cash used in
investing
activities (33,224) (5,023,427) (13,018,434)
------------ ------------ ------------
CASH FLOW FROM FINANCING
ACTIVITIES:
Proceeds from
construction
notes payable 856,739 2,787,284 2,942,807
Proceeds from advances
from general
partners 5,635,172 8,504,998 18,012,417
------------ ------------ ------------
Net cash provided by
financing
activities 6,491,911 11,292,282 20,955,224
------------ ------------ ------------
INCREASE (DECREASE) IN
CASH 54,925 (956,744) 595,613
CASH AT BEGINNING OF
YEAR 217,525 1,174,269 578,656
------------ ------------ ------------
CASH AT END OF YEAR $ 272,450 $ 217,525 $ 1,174,269
============ ============ ============
The accompanying notes are an integral part of these statements.
RINCON CENTER ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1992
1. PARTNERSHIP ORGANIZATION:
Rincon Center Associates, A California Limited Partnership (the Partnership)
was formed on September 18, 1984, to lease and develop land and buildings
located in the Rincon Point-South Beach Redevelopment Project Area in the
City and County of San Francisco, California. The Rincon Center Project (the
Project) comprises commercial and retail space, 320 rental housing units and
associated off-street parking. The Project was developed in two distinct
segments: Rincon One and Rincon Two.
Profits and losses are shared by the partners in accordance with their
percentage interests as provided in the partnership agreement and as shown in
<PAGE>
the statement of changes in partners' deficit. Cash profits, as determined
by the managing general partner, shall be distributed to the partners in the
same percentage interest.
Perini Land and Development Company (PL&D) is the managing general partner of
the Partnership and has the responsibility for general management,
administration and control of the Partnership's property, business and
affairs. In addition, PL&D provides project and general accounting services
to the Partnership (Note 7). Pacific Gateway Properties, Inc. (PGP),
formerly Perini Investment Properties, Inc. is the other general partner.
2. SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements have been prepared using the accrual
basis of accounting.
Real Estate Used in Operations
Real estate used in operations includes all costs capitalized during the
development of the project. These costs include interest and financing
costs, ground rent expense during construction, property taxes, tenant
improvements and other capitalizable overhead costs. In 1990, $5,935,541 of
interest was capitalized.
Depreciation and Amortization
The Partnership uses the straight-line method of depreciation. The
significant asset groups and their estimated useful lives are:
Structural components of buildings 60 years
Nonstructural components of 25 years
buildings
All other depreciable assets 5-30
years
Leasehold improvements are amortized on the straight-line method over the
lesser of their useful lives or the lease terms.
Income Taxes
In accordance with federal and state income tax regulations, no income taxes
are levied on the Partnership; rather, such taxes are levied on the
individual partners. Consequently, no provision or liability for federal or
state income taxes is reflected in the accompanying financial statements.
Rental Income
Certain lease agreements provide for free rent or stepped increases in rent
over the lease term. In such cases, revenue is recognized at a constant rate
over the term of the lease. Amounts recognized as income but not yet due
under the terms of the leases are shown on the balance sheets as deferred
rent receivable.
Statements of Cash Flows
Cash paid for interest was $3,198,881 and $4,015,315 in 1992 and 1991,
respectively. Cash paid for interest, net of capitalized interest and
interest income paid on funds held in escrow and invested, was $3,190,246 in
1990.
Accrued Lease Liability
The Partnership is leasing Rincon One from Chrysler McNally (Chrysler) over a
25-year lease term (Note 3). In connection with this lease, the Partnership
was granted a free rent concession for one year. The intent of Chrysler's
<PAGE>
free rent provision was to match a similar provision granted by the
Partnership to an anchor sublease tenant of Rincon One, whose lease is for 10
years. The Partnership expensed rent in the first year of the lease and is
amortizing the accrued lease liability related to Rincon One over 10 years to
match the expense with the revenue recorded on the sublease.
Other Assets
Other assets include prepaid expenses, deferred lease commissions and fixed
assets. Deferred lease commissions are amortized over the life of the lease.
Fixed assets are amortized over the life of the asset, which is generally
five years.
Reclassification of Prior Year Amounts
Certain prior year amounts have been reclassified to conform with the current
year presentation.
3. OPERATING LEASE, RINCON ONE:
On June 24, 1988, the Partnership sold Rincon One to Chrysler and
subsequently leased the property back under a master lease with a basic term
of 25 years and four 5-year renewal options at the Partnership's discretion.
The transaction was accounted for as a sale and operating leaseback and the
gain on the sale of $1,540,311 has been deferred.
Payments under the master lease agreement may be adjusted to reflect
adjustments in the rate of interest payable by Chrysler on the Rincon One
debt. Future minimum lease payments based on scheduled payments under the
master lease agreement are as follows:
1993 $ 6,639,000
1994 5,929,000
1995 5,929,000
1996 5,891,000
1997 5,906,000
Thereafter 106,405,000
The lease also permits the lessor to put the property back to the Partnership
at stipulated prices beginning January 1, 1993, if long-term financing
meeting certain conditions is not obtained. Financing has been arranged with
the current lender which meets the conditions of the lease through April 1,
1998, subsequent to year-end.
4. NOTES RECEIVABLE:
At December 31, 1992 and 1991, the Partnership had the following notes
receivable:
1992 1991
Due from Chrysler secured by second
deed of trust on Rincon One,
bearing interest at 10 percent,
with monthly principal and interest
payments of $92,383 in 1992, 1991
and 1990; unpaid balance due July
2013 $ 9,739,079 $ 9,875,504
Notes from tenants secured by
tenant improvements, bearing
interest at 10 percent to
12 percent, with maturities from
1994 to 1998, due in monthly
installments 629,179 611,176
----------- -----------
<PAGE>
$10,368,258 $10,486,680
=========== ===========
5. GROUND LEASE:
The Partnership entered into a 65-year ground lease with the United States
Postal Service for the Project property on April 19, 1985. On June 24, 1988,
this lease was bifurcated into two leases (Rincon One and Rincon Two). The
terms of the original lease did not change; the dollar amounts were simply
split between the two properties. Under the terms of the leases, the
Partnership must make monthly lease payments (Basic Rent) of $101,750 and
$173,250 for Rincon One and Rincon Two, respectively. In February 1995 and
every six years thereafter, the monthly base payments can be increased based
on the increase in the Consumer Price Index subject to a minimum of 5 percent
per year and a maximum of 8 percent per year. In addition, the Basic Rent
can be increased based on reappraisal of the underlying property on the
occurrence of certain events if those events occur prior to the regular
reappraisal dates of April 19, 2020, and each twelfth year thereafter for the
remainder of the lease term.
The lease agreement calls for the payment of certain percentage rents based
on revenues received from the subleasing of the Rincon One building.
Percentage rents paid in 1992, 1991 and 1990 were $267,474, $271,388 and
$221,454, respectively, and are included in ground rent expense.
This lease has been accounted for as an operating lease, with minimum future
lease payments of:
1993 $ 3,436,260
1994 3,436,260
1995 3,436,260
1996 3,436,260
1997 3,436,260
Thereafter 175,036,260
During 1990, Basic Rent relating only to those portions of Rincon Two under
construction was capitalized. During 1992 and 1991, Basic Rent was not
capitalized because the entire project was placed in service. At
December 31, 1990, ground rent of $10,407,312 was capitalized.
Under the provisions of the original lease, no lease payments were to be made
from the inception of the lease (April 19, 1985) until April 18, 1987, and
one-half of the regular monthly payment was due for the period from April 19,
1987, to April 18, 1988. However, as allowed by the lease agreement, the
Partnership deferred the payment of Basic Rent until the initial occupancy
date, February 8, 1988. At December 31, 1992 and 1991, the deferred Basic
Rent and interest for the period April 19, 1987, to April 18, 1988, amount to
$684,881 and $817,439, respectively, and are being paid in 120 monthly
installments together with interest at a rate based on the average discount
rates of 90-day U.S. Treasury bills, which was approximately 4.125 percent
for the year ended December 31, 1992. The rate will be adjusted every 90
days as long as a balance is due on the deferred rent. The remaining
deferred ground rent related to the free rent period amounted to $6,950,776
and $7,047,066 at December 31, 1992 and 1991, respectively, and is being
amortized over the lease term.
6. CONSTRUCTION NOTES PAYABLE:
Residential
The residential portion of the Project is being financed with a $36,000,000
loan from the Redevelopment Agency of the City and County of San Francisco
(the Agency), of which $34,600,000 and $35,100,000 was outstanding at
December 31, 1992 and 1991, respectively. The Agency raised these funds
through the issuance of Variable Rate Demand Multifamily Housing Revenue
Bonds (Rincon Center Project) 1985 Issue B (the Bonds).
<PAGE>
The interest rate on the Bonds is variable at the rate required to produce a
market value for the Bonds equal to their par value. At December 31, 1992,
1991 and 1990, the effective interest rate on the Bonds was 3.13 percent,
4.2 percent and 5.5 percent, respectively. Interest payments are to be made
on the first business day of each March, June, September and December.
The Partnership has the option to convert the Bonds to a fixed interest rate
at any of the above interest payment dates. The fixed rate will be the rate
required to produce a market value for the Bonds equal to their par value.
After conversion to a fixed rate, interest payments must be made on each
June 1 and December 1.
The Partnership must repay the residential loan as the Bonds become due. The
Bonds shall be redeemed in at least the minimum amounts set forth below:
1993 $ 500,000
1994 600,000
1995 600,000
1996 600,000
1997 700,000
Thereafter 31,600,000
The Bonds are due December 1, 2006. The Bonds are secured by an irrevocable
letter of credit issued by Citibank in the name of the Partnership in the
amount of approximately $36,200,000. In the event that drawings are made on
the letter of credit, the Partnership has agreed to reimburse Citibank for
such drawings pursuant to the terms of a Reimbursement Agreement. The
Partnership obligations under the Reimbursement Agreement are secured by a
deed of trust on the Project and the equity letters of credit and guarantees
described below.
Commercial
The development and construction of the commercial portion of the Project is
being financed pursuant to a Construction Loan Agreement between the
Partnership and Citibank of which $28,849,475 and $27,990,000 was outstanding
at December 31, 1992 and 1991, respectively. The loan, as is the irrevocable
letter of credit supporting the residential bond, is secured by a deed of
trust on the Project and equity letters of credit currently in the aggregate
amount of $9,000,000, issued to Citibank by Bank of America, N.T. & S.A. on
behalf of the general partners. PL&D has also provided a $3.5 million
corporate guarantee to support the project financing. PGP and Perini
Corporation, the parent company of PL&D, have agreed to reimburse Bank of
America for any drawings under these letters of credit. An annual fee equal
to prime plus 1 percent of the aggregate amount is due to PGP and PL&D for
the use of these letters of credit. The loan is also secured by the
guarantees described in Note 7. As of December 31, 1992 and 1991, $0 and
$870,033, respectively, of accrued letter of credit fees were included in
accrued interest due general partners in the accompanying balance sheet. The
total fee in 1992, 1991 and 1990 was $908,733, $1,180,394 and $1,376,199,
respectively.
The loan matured on May 31, 1988, but was extended until May 31, 1993, for an
additional fee of .5 percent of the maximum loan amount. The lender has
indicated a willingness to renegotiate the loan at its maturity. Interest on
the loan is generally at Citibank's base rate plus 1 percent, payable
monthly. The Partnership has the option to convert the loan to a fixed rate
of interest for a set period of time based upon the London Interbank Offered
Rate (LIBOR) plus 1.5 percent at the time of the conversion. The interest
rate shall be increased by .125 percent each year after the first two years
of the extension period.
At December 31, 1992, the Partnership had purchased an option to acquire an
interest rate hedge for principal amounts totaling $46,500,000 at
11.5 percent until December 1993. The total fee paid of $51,000 is included
in interest and letter of credit fees.
<PAGE>
Additionally, the Partnership obtained short-term financing to fund tenant
improvements. The amount outstanding at December 31, 1992, was $774,134.
This amount was due at December 31, 1992, but the bank agreed to extend the
date to March 31, 1992, while the Partnership collected from the respective
tenant.
7. RELATED PARTY TRANSACTIONS:
PL&D has guaranteed the payment of both interest on the financing of the
Project and operating deficits, if any. It has also guaranteed the master
lease under the sale and operating lease-back transaction (Note 3).
In accordance with the construction loan agreement (Note 6), the general
partners have advanced monies to the Partnership to fund project costs. At
December 31, 1992 and 1991, the general partners had advanced $76,982,587 and
$71,347,415, respectively. The advances and accrued interest accrue interest
at a rate of prime plus 2 percent. The related accrued interest liability of
$27,432,445 and $21,291,563 as of December 31, 1992 and 1991, respectively is
reflected in the accompanying balance sheet. For the years ended
December 31, 1992, 1991 and 1990, interest expensed on partner advances was
$6,140,883, $7,048,277 and $3,658,993, respectively.
Effective January 1, 1988, PL&D retained Pacific Gateway Properties
Management Corporation (PGPMC), a wholly owned subsidiary of PGP, to provide
management and leasing services for the Project. As compensation for
managing the facilities, the Partnership paid PGPMC a base management fee of
$222,000 annually until leasing the residential portion of the Project was
completed. At such time, the compensation increased to $319,200 per year or,
if greater, the sum of 3 percent of the first $13,000,000 of the annual gross
receipts plus 2 percent of receipts in excess of the $13,000,000. The fees
incurred for the years ended December 31, 1992, 1991 and 1990, were $485,306,
$513,950 and $346,241, respectively, and were included in administrative and
other expense in the accompanying statement of operations. At December 31,
1992 and 1991, $96,294 and $100,353, respectively, related to this fee had
not been paid and is included in accounts payable and accrued liabilities.
Additionally, the partnership reimburses PGPMC for certain payroll costs.
SQUAW CREEK ASSOCIATES
BALANCE SHEET
MARCH 31, 1994
ALL DEPARTMENTS CONSOLIDATED
ASSETS
CURRENT ASSETS:
CASH $ 327,581.84
ACCOUNTS RECEIVABLE 2,371,634.21
INVENTORIES 1,078,549.79
PREPAID ASSETS 886,886.38
LAND HELD FOR SALE 314,457.01
--------------
TOTAL CURRENT ASSETS 4,979,109.23
PROPERTIES AND EQUIPMENT - COST:
LAND 2,001,823.54
<PAGE>
LAND IMPROVEMENTS 39,701,908.32
BUILDINGS AND IMPROVEMENTS 63,591,248.32
FURN., FIXT. & EQUIP. - COST 23,314,880.13
PROPERTIES UNDER CONSTRUCTION 421,160.40
--------------
TOTAL PROP. AND EQUIP. - COST 129,033.020.71
ACCUMULATED DEPRECIATION:
ACC. DEP. - LAND IMPROVEMENTS (4,440,773.62)
ACC. DEP. BUILDINGS & IMPROV. (3,764,788.21)
ACC. DEP. - F, F, & E. (7,081,718.68)
--------------
TOTAL ACCUMULATED DEPRECIATION (15,287.280.51)
OTHER ASSETS - NET:
OTHER ASSETS - GROSS 6,780,624.90
ACC. AMORT. - OTHER ASSETS (4,587,036.54)
--------------
TOTAL OTHER ASSETS - NET 2,193,588.36
---------------
TOTAL ASSETS $120,916,437.79
===============
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUALS $ 4,727,353.48
OTHER LIABILITIES - CURRENT 451,223.25
INTEREST PAYABLE - CURRENT 226,593.36
---------------
TOTAL CURRENT LIABILITIES 5,405,170.09
NON-CURRENT LIABILITIES:
N/P - BANK OF AMERICA LOAN 48,013,422.86
N/P - GPH JUNIOR LOAN 14,931,327.00
I/P - GPH JUNIOR LOAN 4,921,622.52
---------------
TOTAL NON-CURRENT LIABILITIES 67,866,372.38
---------------
TOTAL LIABILITIES 73,271,542.47
PARTNERS CAPITAL
<PAGE>
CAPITAL ACCOUNTS:
GLENCO - PERINI - HCV 63,090,864.86
PACIFIC SQUAW CREEK, INC. 33,270,026.85
---------------
CAPITAL ACCOUNTS 96,360,891.71
RETAINED EARNINGS - PRIOR YEAR (47,613,634.12)
CURRENT YEAR P&L (1,102,362.27)
----------------
RETAINED EARNINGS (48,715,996.39)
----------------
PARTNERS CAPITAL 47,644,895.32
---------------
TOTAL LIABILITIES AND CAPITAL $120,916,437.79
===============
SQUAW CREEK ASSOCIATES
INCOME STATEMENT
ALL DEPARTMENTS CONSOLIDATED
THREE MONTHS ENDED MARCH 31, 1994
--THIS YEAR-- --LAST YEAR-- --VARIANCE--
AMOUNT AMOUNT AMOUNT
REVENUES:
RESORT OPERATIONS $8,909,303.00 $9,032,880.00 $(123,577.00)
HOMESITE SALES 0.00 175.000.00 (175,000.00)
OTHER REVENUE 445.60 848.03 (402.43)
------------- ------------- -------------
TOTAL REVENUES 8,909,748.60 9,208,728.03 (298,979.43)
------------- ------------- -------------
COSTS AND EXPENSES
RESORT OPERATIONS:
DIR. COSTS AND EXP'S - 5,326,096.34 5,563,532.80 237,436.66
HOTEL
SELLING, GENERAL & ADMIN. 1,673,116.50 1,791,269.00 118,152.50
FIXED HOTEL EXPENSES 385,470.38 21,526.00 (363,944.38)
------------- ------------- -------------
TOTAL RESORT 7,384,683.02 7,376,327.80 (8,355.22)
OPERATIONS
COST OF HOMESITES SOLD:
COST OF HOMESITES SOLD 1,095.00 107,899.52 106,804.52
------------- ------------- ------------
COST OF HOMESITES SOLD 1,095.00 107,899.52 106,804.52
OTHER GENERAL AND ADMIN.:
OTHER GENERAL AND ADMIN. 135,394.01 111,168.33 (24,225.68)
------------- ------------- -------------
<PAGE>
OTHER GENERAL AND 135,394.01 111,168.33 (24,225.68)
ADMIN. ------------- ------------- -------------
NET OPERATING INCOME 1,388,576.57 1,613,332.38 (224,755.81)
DEPRECIATION AND
AMORTIZATION:
DEPRECIATION EXPENSE 1,065,663.33 1,065,663.30 (0.03)
AMORTIZATION EXPENSE 470,417.34 451,023.33 (19,394.01)
------------- -------------- -------------
TOTAL DEPRECIATION AND 1,536,080.67 1,516,686.63 (19,394.04)
AMORT.
INTEREST EXPENSE:
INTEREST EXPENSE - B OF A 728,353.20 721,180.80 (7,172.40)
LOAN
INTEREST EXPENSE - GPW 226,504.97 224,275.00 (2,229.97)
LOAN ------------- ------------- -------------
TOTAL INTEREST EXPENSE 954,858.17 945,455.80 (9,402.37)
------------- ------------- -------------
TOTAL COSTS AND 10,012,110.87 10,057,538.08 45,427.21
EXPENSES ------------- ------------- -------------
TOTAL INCOME/(LOSS) (1,102,362.27) (848,810.05) (253,552.22)
============== ============== =============
Squaw Creek Associates
(a California general partnership)
Financial Statements
and Additional Information
December 31, 1993 and 1992
Squaw Creek Associates
(a California general partnership)
Index to Financial Statements
December 31, 1993 and 1992
Page
Financial Statements with Standard Report
Report of Independent Accountants 1
Financial Statements 2-6
Notes to Financial Statements 7-13
Additional Information
Report of Independent Accountants on Additional Information14
Details of Cumulative Preferred Returns 15
Comparison of Resort Operations Revenues and Expenses to Annual
Operating Plan 16-19
Schedule of Cash Flows Used in Operating Activities - Excluding
Homesite Operations 20
<PAGE>
Schedule of Changes in Partners' Capital 21
Report of Independent Accountants
February 22, 1994
To the General Partners
of Squaw Creek Associates
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in partners' capital and of cash flows present fairly,
in all material respects, the financial position of Squaw Creek Associates (a
California general partnership) at December 31, 1993 and 1992, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The Partnership has in the past relied upon, and will continue to rely upon,
cash provided by partner contributions to service operating cash shortfalls.
Squaw Creek Associates
(a California general partnership)
Balance Sheet
December 31,
1993 1992
Assets
Current assets:
Cash $ 454,395 $ 441,170
Accounts receivable - trade 838,554 1,038,319
Accounts receivable - other 660,821 375,649
Inventories 1,159,113 1,153,658
Prepaid expenses 652,009 486,347
Land held for sale 314,457 399,775
------------ ------------
Total current assets 4,079,349 3,894,918
Property and equipment, net 114,117,662 117,699,950
Deferred expenses, net 2,552,040 3,985,846
Deposit for land purchase 375,000 -
------------ ------------
Total assets $121,124,051 $125,580,714
Liabilities and partners' capital
Current liabilities:
Trade and other accounts payable $ 3,399,876 $ 4,078,590
Construction payables 65,974 101,547
Due to affiliates 10,818 101,813
<PAGE>
Customer advance deposits 730,187 850,827
Current portion of obligations under
capital leases 470,970 348,452
------------ ------------
Total current liabilities 4,677,825 5,481,229
Notes payable 48,013,423 48,013,423
Partner loan 14,931,327 14,931,327
Accrued interest on partner loan 4,695,118 3,783,235
Obligations under capital leases, less current
portion 589,848 951,806
------------ ------------
Total liabilities 72,907,541 73,161,020
Commitments (Note 8)
Partners' capital 48,216,510 52,419,694
------------ ------------
Total liabities and partners' capital $121,124,051 $125,580,714
============ ============
See accompanying notes to financial statements.
Squaw Creek Associates
(a California general partnership)
Statement of Operations
For the Year Ended
December 31
1993 1992
Revenue
Resort operations $29,038,722 $ 22,126,014
Sales of homesites 177,967 3,718,690
----------- ------------
29,216,689 25,844,704
----------- ------------
Expenses
Resort operations 20,919,792 19,741,176
Resort selling, general and administrative 6,224,580 6,826,032
Partnership selling, general and
administrative 473,006 546,929
Cost of homesites sold, including selling
and other expenses 111,696 2,215,547
Legal settlement - 1,723,158
----------- ------------
27,729,074 31,052,842
----------- ------------
Income (loss) before depreciation,
amortization and interest expense 1,487,615 (5,208,138)
Depreciation and amortization 6,326,004 6,248,185
Interest expense 3,844,144 4,501,357
------------ ------------
Net loss $(8,682,533) $(15,957,680)
See accompanying notes to financial statements.
Squaw Creek Associates
(a California general partnership
Statement of Changes in Partners' Capital
<PAGE>
Balance at December 31, 1991 $ 61,568,115
Contributions 14,657,060
Distributions (4,416,474)
Reclassification (Note 1) (3,431,327)
Net loss (15,957,680)
-------------
Balance at December 31, 1992 52,419,694
Contributions 6,630,348
Distributions (2,150,999)
Net loss (8,682,533)
-------------
Balance at December 31, 1993 $ 48,216,510
============
See accompanying notes to financial statements.
Squaw Creek Associates
(a California general partnership)
Statement of Cash Flows
For the year ended
December 31,
1993 1992
Cash flows from operating activities
Net loss $(8,682,533) $(15,957,680)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 6,326,004 6,248,185
Non-cash costs of homesites sold 85,318 1,796,487
Note receivable, homesites sold (87,500) -
Changes in operating assets and
liabilities:
Accounts receivable and prepaid
expenses (251,069) (529,593)
Inventories (5,455) 410,349
Accounts payable and other
liabilities (834,927) 1,367,535
Due to affiliates (90,995) (324,138)
Accrued interest on partner loan 911,883 1,036,956
------------ -------------
Net cash used in operating activities (2,629,274) (5,951,899)
------------ -------------
Cash flows from investing activities
Additions to property and equipment (1,132,867) (1,848,602)
Deposit for land purchase (375,000) -
Deferred expenses - (662,149)
------------ -------------
Net cash used in investing activities (1,507,867) (2,510,751)
------------ -------------
Cash flows from financing activities
Partner contributions 6,630,348 14,657,060
Partner distributions (2,063,499) (4,416,474)
<PAGE>
Repayment of note payable and obligations
under capital leases (416,483) (1,996,238)
------------ -------------
Net cash provided by financing activities 4,150,366 8,244,348
----------- ------------
Net increase (decrease) in cash 13,225 (218,302)
Cash at beginning of year 441,170 659,472
----------- -------------
Cash at end of year $ 454,395 $ 441,170
=========== ============
Supplemental disclosure of cash flow
information
Cash paid during the year for interest $ 3,141,989 $ 3,698,599
=========== ============
Supplemental disclosure of noncash investing and financing activities
Pursuant to the second amendment to the Partnership agreement, during the
year ended December 31, 1992, $3,431,327 was reclassified from partners'
capital to partner loan (Notes 1 and 5).
During the years ended December 31, 1993 and 1992, the Partnership executed
lease arrangements which qualify for treatment as capital leases.
Accordingly, the Partnership has recorded an asset under capital lease and
related capital lease obligation of $177,043 and $311,060, respectively, for
the year ended December 31, 1993 and 1992.
During the year ended December 31, 1993, the Partnership distributed a note
receivable worth $87,500 to one of its partners.
1. Organization
Nature of Business
Squaw Creek Associates, a California general partnership (the Partnership),
was formed under the provisions of a partnership agreement dated June 3, 1988
(the Agreement) to own, develop and manage The Resort at Squaw Creek, a 405
room resort facility located in Olympic Valley, California (the Resort). The
Resort was substantially complete on December 19, 1990 and commenced
operations on that date. In addition, the Partnership has developed for sale
48 single family homesites on land surrounding the Resort. At December 31,
1993, 3 homesites remain unsold.
Ownership
During the year ended December 31, 1992, one of the general partnership
interests was sold, and the Agreement was amended. Subsequent to and in
connection with this transaction, the Partnership successfully extended the
maturity date of its note payable (Note 4). Currently, the Partnership is
owned by Glenco-Perini-HCV (GPH), a California limited partnership (40%), and
Pacific Squaw Creek, Inc. (PSC), a California corporation (60%). PSC serves
as the managing partner and receives a management fee for services rendered
to the Partnership based upon the results of operations, as defined in the
amended Agreement.
In conjunction with the change in ownership mentioned above, and under the
provisions of the amended Agreement, certain modifications were made to the
partners' capital accounts and the partner loan. As a result, the partner
loan was increased by $3,431,327, the GPH capital account was decreased by
the same amount and certain components of equity used to determine preferred
returns were adjusted.
2. Accounting Policies
<PAGE>
Development costs
Land acquisition costs and certain other development costs were incurred by
affiliates of the partners prior to the formation of the Partnership. These
costs were assumed by GPH ($3,254,063) and contributed to the Partnership as
the initial capital contribution. The Partnership used the cost basis of the
previous owners to record the land and other development costs contributed.
The Agreement assigned a value of $13,500,000 to the GPH contributions
($4,000,000 in cash and $9,500,000 attributable to the land) for the purpose
of calculating certain preferred returns, as defined.
Land development costs contributed to the Partnership and the cost incurred
in connection with development of the Resort (including amenities) were
capitalized and allocated to the related project components. Real estate
taxes, insurance, general and administrative, marketing and interest expense
were capitalized during the development period. No interest costs were
capitalized during 1993 and 1992.
Depreciation
Depreciation is computed using the straight-line method over the estimated
useful lives of the respective property (25 to 60 years) and equipment (5 to
12 years). For assets under capital lease, amortization is provided over the
lesser of the estimated useful life of the asset or the lease term.
Contributions
The Agreement provides that funds required to support operation of the Resort
in excess of funds available from operations must be provided by PSC and GPH
in the form of additional capital contributions (Shortfall Contributions).
The first $2,500,000 of Shortfall Contributions was the responsibility of
GPH; all additional Shortfall Contributions require a 60% capital
contribution by PSC and a 40% capital contribution by GPH. In addition, as
defined in the Agreement, GPH is required to contribute cash necessary for
the Partnership to make certain preferred return distributions to PSC.
Allocation of profits and losses
The Agreement provides that net profits of the Partnership are allocated to
the partners in accordance with their respective percentage interests, after
special allocations are made for depreciation and certain preferred returns,
as defined. Net losses of the Partnership are allocated so as to entirely
offset previous allocations of net profits and then as follows: $13,500,000
to GPH, to the extent of GPH's additional capital contributions (excluding
Shortfall Contributions), then to GPH and PSC to the extent of their
Shortfall Contributions and, thereafter, in accordance with the partners'
respective interests.
Distribution of cash flow
Cash flow from operations and capital transactions are distributed to the
partners in accordance with the Agreement. The Agreement provides that each
of the partners are entitled to various preferred returns based upon
specifically defined capital amounts. At December 31, 1993, PSC and GPH had
cumulative preferred returns totaling $13,415,843 and $28,001,419,
respectively.
Inventories
Inventories consist of food and beverage, apparel and other consumer products
for retail sale at the Resort, and provisions (food and beverage and other
incidentals) for use in Resort operations. Inventories are accounted for on
a first-in, first-out basis and are stated at the lower of cost or market.
Inventories also include hotel supplies such as china, glassware, silver and
other reusable items which are valued at original cost of the par stock
purchased less a provision for normal use, damage and loss. All subsequent
purchases of these items are expensed in the period purchased.
<PAGE>
Deferred expenses
Costs incurred which relate to activities having future benefit to the
Partnership are deferred. Deferred expenses principally include costs
incurred in connection with bringing the Resort to full operational capacity.
Such amounts are being amortized over a period of 60 months beginning at the
date Resort operations commenced. Also included are deferred financing fees,
which are amortized over the life of the related loan agreement.
At December 31, 1993 and 1992, accumulated amortization totals $4,228,585 and
$2,794,779, respectively.
Land held for sale
The Partnership has developed residential homesites on land adjacent to the
Resort. Revenue from parcels sold is recognized at the time title passes to
the buyer and full funding is received. Costs of parcels sold are based on
an allocation of the cost of developing the parcels, determined using the
ratio of each parcel's sales proceeds to the total expected sales proceeds
for all parcels. The cost of developing the parcels includes certain
marketing, selling, general and administrative and interest costs that were
incurred during the development period. The Agreement provides that net
proceeds from homesite sales be used to reduce the outstanding note payable
balance and for remaining development costs.
Deposit for land purchase
The Partnership has cash that is held in escrow for the purchase of land
located adjacent to the Resort (Note 8).
Income taxes
Consideration of income taxes is not necessary in the financial statements of
the Partnership because, as a partnership, it is not subject to income tax
and the tax effect of its activities accrues to the partners.
3. Property and Equipment
Property and equipment consist of the following:
1993 1992
Land $ 1,574,202 $ 1,574,202
Land improvements 39,763,047 39,658,830
Buildings and improvement 63,376,837 62,935,293
Furniture, fixtures and equipment 21,211,236 20,765,426
Furniture, fixtures and equipment
under capital lease 1,985,982 1,808,939
Construction in progress 507,546 381,075
------------ ------------
128,418,850 127,123,765
(14,301,188) (9,423,815)
------------- -------------
$114,117,662 $117,699,950
============ ============
Certain of the above assets are pledged as security for the construction loan
and the partner loan (Notes 4 and 5).
Accumulated amortization on assets under capital lease totaled $1,060,923 and
$639,286 at December 31, 1993 and 1992, respectively, and is included above.
Related amortization expense for the years ended December 31, 1993 and 1992
totaled $421,637 and $332,985, respectively.
4. Note Payable
The Partnership has outstanding a note payable relating to construction of
the Resort and development of the homesites. Depending upon the form of the
<PAGE>
borrowing, interest is payable monthly at the applicable rate plus a margin
of 1.25% for borrowings based on prime rate; a margin of 2.5% for borrowings
based on the Eurodollar rate; or a margin of 2.625% for borrowings based upon
the CD rate. The interest rate at December 31, 1993 and 1992 was 6%. During
1992, the note agreement was modified and extended through May 1, 1995.
The note payable is secured by the Resort and remaining homesites, and by the
assignment of certain agreements related principally to operation of the
Resort. The terms of the loan agreement prohibit capital distributions from
net operating cash flows of the Partnership until it is retired. Perini Land
and Development Corporation (Perini), an affiliate of GPH, has provided a
guarantee for $10,000,000 in outstanding principal and payment of unpaid
interest on this loan. In addition, the partners have provided the lender
with letters of credit totaling $4,000,000 at December 31, 1993 as guarantee
of the related debt service obligation.
5. Partner Loan
The Partnership has outstanding $14,931,327 in the form of a loan from GPH at
December 31, 1993 and 1992. Under the terms of the Agreement, during the
construction period the Partnership had the ability to borrow funds from GPH
as necessary to pay for obligations arising from construction. The loan
bears interest at the same rate of interest as due under the note payable
discussed at Note 4. The loan and any accrued interest payable, except in
certain circumstances described in the Agreement, will be repaid from
positive cash flows from operations and has priority over other Partnership
distributions of positive cash flows. The loan is secured by a second deed
of trust on the Resort. Management has classified this loan and the related
accrued interest as non-current liabilities since repayment of these amounts
will not occur in 1994.
Interest expense under the partner loan totaled $911,883 and $1,036,956 in
1993 and 1992, respectively.
6. Related Party Transactions
The Partnership paid approximately $53,256 and $439,000 to Perini and its
affiliates during 1993 and 1992, respectively, for administrative services
provided.
During 1993, the Partnership incurred costs totalling $306,525 in connection
with management services provided by PSC under the terms of the Agreement and
the related amendment. In 1992, the Partnership incurred costs totaling
$130,000 and $99,962 in connection with management services provided by GPH
and PSC, respectively.
During 1992, the Partnership entered into certain subleases for equipment
with Perini and its parent corporation, Perini Corporation. Under the
sublease arrangements, the Partnership pays approximately $102,000 annually
relating to leases which expire in 1996.
7. Resort Management Agreement
The Resort is managed by Benchmark Management Company (BMC) under an
agreement that provides for fees based upon the Resort's operating results.
A total of $651,648 and $648,700 was paid to BMC for management services in
1993 and 1992, respectively. During 1992 the agreement with BMC was amended
to allow for certain reductions in the management fee based on specified
performance factors. As a result, the Partnership is owed approximately
$555,200 and $325,000 by BMC for fee reductions at December 31, 1993 and
1992, respectively.
8. Commitments
<PAGE>
The Partnership has entered into various lease agreements for land, buildings
and equipment. The lease terms are primarily for one or two year periods
except as follows:
- - - At December 31, 1993 the Partnership had two separate ground lease
agreements for approximately 24 acres of land in Olympic Valley,
California. The primary use of the land is for the Resort's golf course.
These agreements include escalation clauses that will increase the
scheduled rents due beginning in 1992 based on increases in the Consumer
Price Index. Subsequent to December 31, 1993, the Partnership completed
the purchase, for $350,000, of the land subject to one of these ground
leases (Note 2). Accordingly, this lease is not included in the schedule
of future minimum lease payments below.
- - - An operating lease through May 1996 for storage facilities.
- - - Various capital and operating leases for equipment.
Rent expense for land, building and equipment was approximately $311,000
and $497,000 for 1993 and 1992, respectively. The future minimum lease
payments for all leases existing at December 31, 1993 are as follows:
Capital Operating
Leases Leases
1994 $ 601,128 $ 217,644
1995 585,478 215,311
1996 59,524 183,342
1997 2,576 158,696
1998 - 126,546
Thereafter - 3,818,327
----------- ----------
1,248,706 $4,719,866
==========
Less amounts representing interest (187,888)
-----------
Present value of obligations 1,060,818
Less current portion of obligations under
capital leases (470,970)
-----------
$ 589,848
===========
9. Legal Settlement
The Partnership, together with its partners and several affiliated entities,
was a defendant in a lawsuit seeking damages for alleged malicious
prosecution in connection with a lawsuit the Partnership brought against the
Institute for Conservation Education, the Sierra Club and several individuals
alleging breach of contract, among other things, relating to agreements
between the parties. During 1992 and prior to the scheduled court date, the
Partnership agreed to a settlement of this matter. The aggregate settlement
amount was $2,250,000; legal and related costs incurred by the Partnership
relating to this matter totaled $1,075,890. Of the total costs, $1,325,890
was covered by the insurance carriers of the Partnership and its legal
counsel. The remaining amounts are the direct responsibility of the
Partnership, and have been properly recorded in the accompanying financial
statements. As of December 31, 1993, all amounts have been paid.
<PAGE>
Audited Financial Statements
and Other Financial Information
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Years ended December 31, 1991 and 1990
with Report of Independent Auditors
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Audited Financial Statements
and Other Financial Information
Years ended December 31, 1991 and 1990
CONTENTS
Report of Independent Auditors 1
Audited Financial Statements
Balance Sheets 2
Statements of Revenue and Expenses 4
Statements of Changes in Partners' Capital 5
Statement of Cash Flows 6
Notes to Financial Statements 7
Other Financial Information
Report of Independent Auditors on Other Financial
Information 16
Details of Cumulative Preferred Return 17
Comparison of Resort Operations Revenue and Expenses to
Annual Operating Plan 18
Schedules of Cash Flows used by Operating Activities
Excluding Homesite Operations, Accrued Interest Payable -
Affiliate and Initial Purchase of Provisions Inventories 22
Schedule of Changes in Partners' Capital 23
Report of Independent Auditors
The General Partners
Squaw Creek Associates
We have audited the accompanying balance sheets of Squaw Creek Associates (a
California general partnership) (dba The Resort at Squaw Creek) as of
December 31, 1991 and 1990 and the related statements of revenue and
expenses, changes in partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the
<PAGE>
Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conduct our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Squaw Creek Associates at
December 31, 1991 and 1990, and the results of its operations and cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that Squaw
Creek Associates will continue as a going concern. As discussed in Note 1 to
the financial statements, the Partnership has sustained operating cash flow
deficits and operating losses and has been unable to reach agreement with its
lender regarding terms of an extension of its note payable that was due on
August 1, 1991. These conditions raise substantial doubt about the
Partnership's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1 to the financial
statements. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. In addition, recovery of
the Partnership's investment in the Resort is dependent upon the Resort's
ability to generate profits from operations and/or from disposition of the
property, the achievement of which cannot be determined at this time.
As discussed in Note 4 to the financial statements, in December 1990 the
Partnership became a defendant in a lawsuit alleging malicious prosecution,
among other claims, in connection with a lawsuit brought by the Partnership
against a third party. The Partnership denies all liability and is
vigorously defending against these claims. The ultimate outcome of this
litigation cannot be determined. Accordingly, no provision for any liability
that may result has been made in the financial statements.
February 22, 1992
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Balance Sheets
December 31
1991 1990
Assets
Current assets:
Cash $ 659,472 $ 1,244,128
Accounts receivable:
Trade 754,559 433,237
Other 202,971 177,688
------------ ------------
<PAGE>
957,530 610,925
Inventories:
Inventories - retail 676,214 397,170
Inventories - provisions 383,543 268,023
Hotel supplies 504,250 759,000
------------ ------------
1,564,007 1,424,193
Prepaid expenses 413,192 215,205
Land held for sale 2,196,262 3,528,103
------------ ------------
Total current assets 5,790,463 7,022,554
Property and equipment, at cost:
Land 925,397 925,397
Land improvements 29,696,458 24,188,117
Buildings and improvements 66,014,868 64,541,702
Furniture, fixtures and equipment 28,877,507 27,416,383
------------ ------------
125,514,230 117,071,599
Accumulated depreciation 4,690,428 80,640
------------ ------------
120,823,802 116,990,959
Deferred expenses (net of accumulated
amortization of $1,518,154 and $0 at
December 31, 1991 and 1990, respectively) 4,649,505 80,640
------------ ------------
Total assets $131,263,770 $130,205,714
============ ============
December 31
1991 1990
Liabilities and Partners' Capital
Current Liabilities:
Accounts payable:
Construction $ 204,762 $ 10,274,938
Trade or other 3,561,882 2,220,323
Retainage payable 100,332 1,836,654
Due to affiliates 425,951 396,305
------------ ------------
4,292,927 14,728,220
Current portion of obligations under
capital leases 457,619 256,000
<PAGE>
Note payable 49,715,159 43,766,924
------------ ------------
Total current liabilities 54,465,705 58,751,144
Obligations under capital leases, net
of current portion 983,671 1,193,497
Accrued interest payable - affiliate 2,746,279 1,653,072
Loan payable - affiliate 11,500,000 11,500,000
------------ ------------
Total liabilities 69,695,655 73,097,713
Partners' capital 61,568,115 57,108,001
------------ ------------
Total liabilities and partners' $131,263,770 $130,205,714
capital ============ ============
See accompanying notes.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Statements of Revenue and Expenses
Year ended December 31
1991 1990
Revenue:
Resort operations $ 13,055,986 $ 787,800
Sales of homesites 2,742,833 2,305,000
------------ ----------
15,798,819 3,092,800
Costs and expenses:
Resort operations:
Direct costs and expenses 13,042,821 916,052
Selling, general and administrative
expenses 10,288,443 646,168
Fixed expenses 817,661 62,814
Cost of homesites sold, including selling 2,246,386 1,369,708
and other expenses
Depreciation and amortization 6,180,161 10,320
Interest expense 6,264,624 200,628
------------ ----------
<PAGE>
38,840,096 3,205,690
------------ ----------
Net loss $(23,041,277) $ (112,890)
============= ===========
See accompanying notes.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Statements of Changes in Partners' Capital
Partners' capital at December 31, 1989 $34,054,063
Additional capital contributions 23,166,828
Net loss (112,890)
------------
Partners' capital at December 31, 1990 57,108,001
Additional capital contributions 27,501,391
Net loss (23,041,277)
------------
Partners' capital at December 31, 1991 $61,568,115
===========
See accompanying notes.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Statements of Cash Flows
Year ended December 31,
1991 1990
Operating activities
Net loss $(23,041,277) $ (112,890)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization expense 6,180,161 10,320
Cost of homesites sold related to land and
development costs 1,455,933 1,020,701
Increase in accrued interest payable to
affiliate 1,093,207 1,173,252
<PAGE>
Changes in operating assets and
liabilities:
Accounts receivable and prepaid expenses (544,592) (826,130)
Inventories - retail (279,044) (397,170)
Inventories - provisions (115,520) (268,023)
Hotel supplies 254,750 (759,000)
Accounts payable - trade and other 1,341,559 2,220,323
Due to affiliates - current 29,646 79,272
------------ ------------
Net cash (used in) provided by operating
activities (13,625,177) 2,140,655
Investing activities
Additions to property, equipment and
deferred expenses (8,307,348) (72,496,868)
(Decrease) increase in construction accounts
and retainage payable (11,806,498) 2,706,647
------------- -----------
Net cash used in investing activities (20,113,846) (69,790,221)
Financing activities
Proceeds from loan payable - affiliate - 2,504,357
Proceeds from partners' capital
contributions 27,501,391 23,166,828
Proceeds from note payable 7,068,806 44,053,145
Repayment of note payable and obligations
under capital leases (1,415,830) (873,161)
------------- ------------
Net cash provided by financing activities 33,154,367 68,851,169
------------- -----------
Net (decrease) increase in cash (584,656) 1,201,603
Cash at beginning of year 1,244,128 42,525
------------- -----------
Cash at end of year $ 659,472 $ 1,244,128
============ ===========
Supplemental cash flow disclosures:
Cash paid for interest $ 4,862,870 $ 159,000
============ ===========
See accompanying notes.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements
December 31, 1991 and 1990
1. Accounting Policies
Nature of Business
Squaw Creek Associates (the Partnership) is a California general partnership
formed through the Partnership Agreement (Agreement) dated June 3, 1988 to
own, develop and manage a resort located in Placer County, California (the
Resort). The Resort was substantially complete on December 19, 1990 and
commenced operations on that date. Homesite sales activities commenced in
1990, with the first title closing occurring in September 1990. Revenue and
expenses for the year ended December 31, 1990 are presented for the period
subsequent to August 1990 for homesite sales and for the period subsequent to
December 18, 1990 for Resort operations. The Partnership is owned by Glenco-
<PAGE>
Perini-HCV Partners (GPH), a California limited partnership, and Squaw Creek
Investors Corporation (SCIC). GPH, a partnership owned by Glenco-Squaw
Associates, Perini Resorts, Inc., and HCV Pacific Investors III, serves as a
managing partner through its general partner, Perini Resorts, Inc., a wholly
owned subsidiary of Perini Land & Development Company (Perini) which is a
wholly owned subsidiary of Perini Corporation. GPH receives a management fee
for services rendered to the Partnership based upon the results of operations
as defined in the Agreement.
The Partnership experienced operating cash flow deficits and operating losses
in 1991. Additionally, the Partnership has been unable to reach agreement
with its lender regarding terms of an extension of its note payable that was
due on August 1, 1991. The Partnership has been unable to obtain other
permanent financing and could be required to repay the outstanding loan if
called by the lender. The Partnership has implemented plans to improve
operating performance and has had ongoing discussions with its lender
regarding its capital situation. The Partnership's financial condition and
its inability to extend or to secure permanent financing raise substantial
doubt regarding the Partnership's ability to continue as a going concern.
These financial statements do not include any adjustments that might result
from the outcome of this uncertainty. In addition, recovery of the
Partnership's investment in the Resort is dependent upon its ability to
generate profits from operations and/or from disposition of the property, the
achievement of which cannot be determined at this time.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
1. Accounting Policies (continued)
Development Costs
Land acquisition costs and certain other development costs were incurred by
Glenco-Squaw Associates and Perini prior to the formation of the Partnership.
These costs were assumed by GPH ($3,254,063) and contributed to the
Partnership as the initial capital contribution. The Partnership used the
cost basis of the previous owners to record the land and other development
costs contributed. The Agreement assigned to contribution value to the GPH
contributions of $13,500,000 (consisting of $4,000,000 in cash equity and
$9,500,000 in land equity) for the purpose of calculating certain preferred
returns (see Note 2 for further discussion). SCIC's initial contribution was
$8,312,981. Land development costs contributed to the Partnership and the
cost incurred by the Partnership for developing the Resort (including
amenities) are allocated to the related Project components. Real estate
taxes, insurance, general and administrative, marketing and interest expense
were capitalized during the development period. Interest cost capitalized
amounted to $3,025,994 in 1990. No interest costs were capitalized in 1991.
Contributions
The Agreement provides that funds needed to operate the Resort in excess of
funds available from the Resort's operations (cash shortfall) must be
provided by SCIC and GPH in the form of additional capital contributions.
The first $2,500,000 of cash shortfall was the responsibility of GPH with all
additional cash shortfall contributions requiring a 60% capital contribution
by SCIC and a 40% capital contribution by GPH.
Starting in November 1991, SCIC has not made its required contributions under
the cash shortfall provisions of the Agreement. Consequently, GPH has made
<PAGE>
the necessary contributions to fund all operating cash shortfalls, including
amounts not funded by SCIC, under the default contribution provisions of the
Agreement. The Agreement provides that in the event of default, the
defaulting partner loses certain partnership rights, authorities and other
distribution priorities. SCIC disputes that its actions and failure to fund
its share of the cash shortfalls has resulted in its default.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
1. Accounting Policies (continued)
Distribution of Cash Flows and Profits and Losses
Operating cash flow, as defined by the Agreement, principally consists of net
cash generated from operations of the Resort less interest and principal paid
by the Partnership for indebtedness (excluding indebtedness and interest due
to affiliate). Distributable cash flow, as defined by the Agreement,
principally consists of operating cash flow and proceeds from capital
transactions; however, if the operating cash flow after December 31, 1991 is
insufficient to permit the payment of SCIC's 9% preferred return, GPH is to
contribute the deficiency to the Partnership, thereby increasing
distributable cash flow.
The Agreement generally provides that distributable cash flows are shared by
the partners in accordance with their respective percentage interests after
repayment of: default contributions; the outstanding interest and principal
of GPH's (affiliate) loans to the Partnership; the unpaid SCIC 9% preferred
returns (see Note 2 for further discussion); and, the partners' additional
capital contributions resulting from operating cash shortfalls and after
repayment of certain other preferred returns and related contributions to
capital by the partners (see Note 2 for further discussion).
The Agreement generally provides that the net profits of the Partnership are
allocated to the partners in accordance with their respective percentage
interests after allocations are made for certain preferred returns (see Note
2 for further discussion). Net losses of the Partnership are generally
allocated so as to entirely offset previous allocations of allocated net
profits and then as follows: $13,500,000 to GPH, to the extent of GPH's
additional capital contributions (excluding operating shortfall contribution
amounts), to the extent of GPH's and SCIC's operating shortfall contribution
amounts, and thereafter, in accordance with the partners' respective
interests.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
1. Accounting Policies (continued)
Capital Transactions
Capital transactions, as defined by the Agreement, principally consist of
dispositions of any of the Partnership assets other than through the ordinary
course of business of the Resort and the net proceeds from refinancing or
financing the indebtedness of the Partnership. The Agreement generally
<PAGE>
provides that the proceeds from capital transactions are distributed as other
cash proceeds except that the distributions for the partners' unpaid
preferred returns and related capital contribution amounts are performed in a
different priority.
Inventories
Inventories consist of food and beverage, apparel and other consumer products
for retail sale or rental to the Resort's patrons and provisions (food and
beverage and other incidentals) for use in the Resort's operations. Retail,
rental and provisions inventories are stated at the lower of cost (first-in,
first-out method) or market.
Hotel supplies consist of china, glassware, silver and other reusable items
and are valued at the original cost of the par stock purchased less a
provision for normal use, damage and loss. All subsequent purchases of hotel
supplies are expensed in the period purchased.
Deferred Expenses
Costs which are incurred and which relate to activities having future benefit
to the Partnership are deferred. Deferred expenses principally include costs
associated with bringing the Resort to full operational capacity. Deferred
expenses are being amortized over 60 months beginning in January 1991, the
first full month subsequent to the date that Resort operations commenced.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
1. Accounting Policies (continued)
Land Held for Sale
The Partnership has developed residential homesites in conjunction with the
development of the Resort. Revenue from the parcels sold is recognized at
the time title passes to the buyer and full funding is received. The costs
for parcels sold are based on the allocation of the costs of developing the
parcels as determined using the ratio of each parcel's sales proceeds to the
total expected sales proceeds for all parcels. The cost of developing the
parcels includes certain marketing, selling, general and administrative and
interest costs that were incurred during the development period. The
Agreement calls for the net proceeds from the homesite sales to be used to
reduce the outstanding note payable balance and the development costs.
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the respective property (25 to 60 years)
and equipment (5 to 12 years). For leased equipment, amortization is
provided using the lesser of the estimated useful life or the lease term.
The Partnership uses the mid-month convention whereby property and equipment
placed in service on or before the fifteenth day of the month will be
depreciated for the full month with no depreciation provided for property and
equipment placed in service after the fifteenth day of the month.
Income Taxes
The Partnership is not subject to taxes on its income. Federal and state
income tax regulations provide that the items of income, gain, loss,
deduction, credit and tax preference of the Partnership are reportable by the
partners in their income tax returns. Accordingly, no provision for income
<PAGE>
taxes has been made in these financial statements.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
2. Cumulative Preferred Return
Under the terms of the Agreement, SCIC and GPH will receive cumulative
preferred returns. SCIC's return is based upon 9% and 3% (noncompounded)
returns on its adjusted contribution amount and a 12% return on its adjusted
shortfall contribution amount, as defined in the Agreement. The total
cumulative preferred return of SCIC amounted to approximately $7,950,000 for
the period July 25, 1988 through December 31, 1991. GPH's return is based
upon 12% and 9% (noncompounded) of its adjusted cash equity and adjusted
phase I and phase II land equity amounts, respectively, 12% of the first
$2,500,000 of its adjusted shortfall contribution amount and 24% of its
adjusted default contribution amount as defined in the Agreement. The total
cumulative preferred return of GPH amounted to approximately $12,104,000 for
the period July 25, 1988 through December 31, 1991. Because there has been
no net positive cash flows from operations, these amounts are unpaid at
December 31, 1991.
3. Note Payable and Loan Payable - Affiliate
The Partnership has a note payable relating to a construction loan agreement
(loan agreement) that permits the Partnership to borrow funds as necessary to
pay for project costs up to a maximum of $53,000,000. Depending upon the
form of the borrowing, interest is payable monthly at the applicable rate
plus: a margin of 1.25% for borrowings based on prime rate; a margin of 2.5%
for borrowings based on the Eurodollar rate; or a margin of 2.625% for
borrowings based upon the CD rate. The interest rate at December 31, 1991
was 7.75% (10.72% at December 31, 1990).
The loan is secured by the Project and the assignment of certain agreements
related to, among other things, the operation of the Project. Perini has
guaranteed $10,000,000 of any outstanding principal balance, payment of
unpaid interest and the lien free completion of the project.
The loan was originally payable on August 1, 1991. The loan agreement
permits the Partnership to extend the agreement through August 1, 1996.
However, the Partnership has been unable to reach agreement with the lender
as to the terms of extension. The Partnership is currently negotiating an
extension to the loan agreement, and management believes it has performed its
obligations under the loan agreement as if the loan had been extended.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
3. Notes Payable and Loan Payable - Affiliate (continued)
The Partnership has an $11,500,000 loan payable to GPH, an affiliate, at
December 31, 1991 and 1990. The Partnership, under the Agreement, has the
ability to borrow funds from GPH as necessary (to the extent other funds are
<PAGE>
not available, as discussed in Note 1) to pay for obligations arising from
construction. The loan bears interest at the same rate of interest as due
under the note payable. The loan and any accrued interest payable, except in
certain circumstances as described in the Agreement, will be repaid from
positive cash flows from operations and has priority over the Partnership
distributions of positive cash flows. Management has classified the note
payable to affiliate (and related interest) as a long-term liability, as
repayment of these amounts will not occur in 1992.
4. Commitments and Contingencies
The partnership has entered into various lease agreements for land, buildings
and equipment. The lease terms are primarily for one or two year periods
except as follows:
- - - The Partnership has two separate ground lease agreements for approximately
24 acres of land in Olympic Valley, California. The primary use of the
land is for construction of the Resort's golf course. Under these
agreements, the Partnership also leases ski lift equipment, two buildings
and also receives certain rights to conduct snow skiing activities. These
agreements contain rent escalation clauses that will increase the
scheduled rents due beginning in 1992 based on increases in the consumer
price index. An option under one of the lease agreements permits the
Partnership to acquire a ten acre parcel for $2,900,000 before May 31,
1992, with a scheduled purchase price increase thereafter.
- - - An operating lease through May 1996 for storage facilities.
- - - Various capital and operating leases for equipment. Equipment accounted
for as capital leases is recorded at the present value of future minimum
rental payments and is included in the net book value of equipment at
December 31, 1991 and 1990 in the amount of approximately $1,783,000 and
$1,496,000, respectively. During 1991 and 1990, the Company acquired
approximately $287,000 and $1,263,000, respectively, in equipment through
lease financing.
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
4. Commitments and Contingencies (continued
Rent expense for land, building and equipment was approximately $305,000 and
$7,000 for 1991 and 1990, respectively. The future minimum lease payments
for all leases are as follows:
Capital Operating
Leases Leases
1992 $ 504,824 $ 226,802
1993 474,283 206,833
1994 468,845 181,357
1995 442,132 177,773
1996 5,397 171,874
Thereafter - 3,295,145
----------- ----------
1,895,481 $4,259,784
==========
Amounts representing interest (454,191)
-----------
<PAGE>
Present value of obligations under capital 1,441,290
leases
Less current portion of obligations under
capital leases (457,619)
-----------
$ 983,671
===========
The Partnership has recorded various other commitments under agreements with
both third and related parties including the following:
- - - An agreement to pay various amounts to a management company for services
received based upon the results of Resort operations (approximately
$376,000 in 1991 and $23,000 in 1990).
- - - An agreement to pay various amounts to GPH for services received based
upon the results of Resort operations and the gross sales of homesites
(approximately $227,000 in 1991 and $79,000 in 1990).
Squaw Creek Associates
(a California general partnership)
(dba The Resort at Squaw Creek)
Notes to Financial Statements (continued)
4. Commitments and Contingencies (continued
The Partnership is involved in litigation and various other legal matters
which are being defended and handled in the ordinary course of business.
Specifically, in December 1990, the Partnership, along with a number of
related entities, including the partners of the Partnership, was named as a
defendant in a lawsuit seeking damages for alleged malicious prosecution in
connection with a lawsuit it brought against the Sierra Club alleging breach
of contract, among other things, relating to certain agreements between the
parties. The Partnership denies all liability and is vigorously defending
against these claims.
5. Related Party Transactions
The Partnership incurred approximately $1,111,000 and $1,774,000 in 1991 and
1990, respectively, for administrative, occupancy and management fees related
to services provided by Perini.
Perini has guaranteed to the Partnership, and to SCIC, the obligations of
Perini Resorts, Inc., as the General Partner of GPH, including contributions
of cash, under the shortfall contributions provision of the Agreement, and
provision of certain services.
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ___________________
Commission file number 1-6314
PERINI CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-1717070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
73 Mt. Wayte Avenue, Framingham, Massachusetts 01701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 508-628-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
Common Stock, $1.00 par value The American Stock Exchange
$2.125 Depositary Convertible Exchangeable
Preferred Shares, each representing 1/10th
Share of $21.25 Convertible Exchangeable
Preferred Stock, $1.00 par value The American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of voting stock held by nonaffiliates of the
registrant is $38,731,414 as of March 4, 1994.
<PAGE>
The number of shares of Common Stock, $1.00 par value per share, outstanding
at March 4, 1994 is 4,330,807.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement for the year ended December 31, 1993
are incorporated by reference into Part III.
PERINI CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K/A
PAGE
----
PART I
------
Item 1: Business 2
Item 2: Properties 19
Item 3: Legal Proceedings 20
Item 4: Submission of Matters to Vote of Security 20
Holders
PART II
-------
Item 5: Market for the Registrant's Common Stock 21
and Related Stockholder Matters
Item 6: Selected Financial Data 21
Item 7: Management's Discussion and Analysis of 22
Financial Condition and Results of
Operations
Item 8: Financial Statements and Supplementary Data 28
Item 9: Disagreements on Accounting and Financial 28
Disclosure
PART III
--------
Item 10: Directors and Executive Officers of the 29
Registrant
Item 11: Executive Compensation 30
Item 12: Security Ownership of Certain Beneficial 30
Owners and Management
Item 13: Certain Relationships and Related 30
Transactions
PART IV
-------
<PAGE>
Item 14: Exhibits, Financial Statement Schedules and 31
Reports on Form 8-K
Signatures 33
PART I.
ITEM 1. BUSINESS
General
Perini Corporation and its subsidiaries (the "Company" unless the context
indicates otherwise) is engaged in two principal businesses: construction and
real estate development. The Company, incorporated in 1918 as a successor to
businesses which had been engaged since 1894 in providing construction
services, will celebrate its 100th anniversary in 1994.
The Company provides general contracting, construction management and
design-build services to private clients and public agencies throughout the
United States and selected overseas locations. Historically, the Company's
construction business involved four types of operations: civil and
environmental ("heavy"), building, international and pipeline. However, the
Company sold its pipeline construction business in January, 1993 (see Note 1
to the Consolidated Financial Statements).
The Company's real estate development operations are conducted by Perini
Land & Development Company, a wholly-owned subsidiary with extensive
development interests concentrated in historically attractive markets in the
United States - Arizona, California, Florida, Georgia and Massachusetts, but
has not commenced the development of any new real estate projects since 1990.
Because the Company's results consist in part of a limited number of large
transactions in both construction and real estate, results in any given
quarter can vary depending on the timing of transactions and the
profitability of the projects being reported. As a consequence, quarterly
results may reflect such variations.
In 1988, the Company, in conjunction with two other companies, formed a
new entity called Perland Environmental Technologies, Inc. ("Perland").
Perland provides consulting, engineering and construction services primarily
on a turn-key basis for hazardous material management and clean-up to both
private clients and public agencies nationwide. The outlook for this
business on a long-term basis appears to be attractive because of the
environmental protection laws enacted by Congress. During the fourth quarter
of 1991 and early in 1992, Perland repurchased its stock owned by the other
outside investors, resulting in an increase in the Company's ownership from
its original investment of 47 1/2% to slightly more than 90%.
In March 1992, Majestic sold its 41%-interest in Monenco, a company
primarily involved in providing engineering services in Canada and throughout
the world, resulting in a pretax gain to the Company of approximately $2
million.
In January 1993, the Company sold its 74%-ownership in Majestic, its
Canadian pipeline construction subsidiary, for $31.7 million which resulted
in an after tax gain of approximately $1.0 million.
Although these companies were profitable in both 1992 and 1991, they
participated in sectors of the construction business that were not directly
related to the Company's core construction operations. The sale of these
companies served to generate liquid assets which improved the Company's
financial condition without affecting its core construction business.
<PAGE>
Effective July 1, 1993, the Company acquired Gust K. Newberg Construction
Co.'s ("Newberg") interest in certain construction projects and related
equipment. The purchase price for the acquisition was (i) approximately $3
million in cash for the equipment paid by a third party leasing company,
which in turn simultaneously entered into an operating lease agreement with
the Company for the use of said equipment, (ii) the greater of $1 million or
25% of the aggregate pretax earnings during the period from April 1, 1993
through December 31, 1994, net of payments accruing to Newberg as described
in (iii) below, and (iii) 50% of the aggregate of net profits earned from
each project from April 1, 1993 through December 31, 1994 and, with regard to
one project through December 31, 1995. This acquisition is being accounted
for as a purchase.
Information on lines of business and foreign business is included under
the following captions of this Annual Report on Form 10K for the year ended
December 31, 1993.
Annual Report
On Form 10K
Caption Page Number
-------------
Selected Consolidated Financial Information Page 21
Management's Discussion and Analysis Page 22
Footnote 14 to the Consolidated Financial Page 53
Statements, entitled Business Segments and
Foreign Operations
While the "Selected Consolidated Financial Information" presents certain
lines of business information for purposes of consistency of presentation for
the five years ended December 31, 1993, additional information (business
segment and foreign operations) required by Statement of Financial Accounting
Standards No. 14 for the three years ended December 31, 1993 is included in
Note 14 to the Consolidated Financial Statements on pages 53 and 54.
A summary of revenues by product line for the three years ended December
31, 1993 is as follows:
Revenues (in thousands)
Year Ended December 31,
1993 1992 1991
Construction:
Building $ 736,116 $ 620,628 $ 507,399
Heavy 294,225 288,158 288,686
Pipeline - 100,929 69,470
Engineering Services - 13,559 54,086
---------- ---------- ----------
Total Construction $ 919,641
Revenues $1,030,341 $1,023,274 ----------
---------- ----------
Revenues (in thousands)
Year Ended December 31,
1993 1992 1991
Real Estate:
Sales of Real Estate $ 40,053 $ 12,636 $ 41,548
Building Rentals 19,313 24,208 17,866
<PAGE>
Interest Income 6,110 6,452 9,000
All Other 4,299 4,282 3,853
---------- ---------- ----------
Total Real Estate $ 69,775 $ 47,578 $ 72,267
Revenues ---------- ---------- ----------
Total Revenues $1,100,116 $1,070,852 $ 991,908
========== ========== ==========
Construction
The general contracting and construction management services provided by
the Company consist of planning and scheduling the manpower, equipment,
materials and subcontractors required for the timely completion of a project
in accordance with the terms and specifications contained in a construction
contract. The Company was engaged in over 145 construction projects in the
United States and overseas during 1993. The Company has three principal
construction operations: heavy, building, and international, having sold its
Canadian pipeline construction business in January 1993, and its interest in
an engineering services business in March 1992. The Company also has a
subsidiary engaged in hazardous waste remediation.
The heavy operation undertakes large civil construction projects
throughout the United States, with current emphasis on major metropolitan
areas, such as Boston, New York City, Chicago and Los Angeles. The heavy
operation performs construction and rehabilitation of highways, subways,
tunnels, dams, bridges, airports, marine projects, piers and waste water
treatment facilities. The Company has been active in heavy operations since
1894, and believes that it has particular expertise in large and complex
projects. The Company believes that infrastructure rehabilitation is and
will continue to be a significant market in the 1990's.
The building operation provides its services through regional offices
located in several metropolitan areas: Boston and Philadelphia, serving New
England and the Mid-Atlantic area; Detroit and Chicago, operating in Michigan
and the Midwest region; and Phoenix, Las Vegas, Los Angeles and San
Francisco, serving Arizona, Nevada and California. In 1992, the Company
combined its building operations into a new wholly-owned subsidiary, Perini
Building Company, Inc. This new company combines substantial resources and
expertise to better serve clients within the building construction market,
and enhances Perini's name recognition in this market. The Company
undertakes a broad range of building construction projects including health
care, correctional facilities, sports complexes, hotels, casinos,
residential, commercial, civic, cultural and educational facilities.
The international operation engages in both heavy and building
construction services overseas, funded primarily in U.S. dollars by agencies
of the United States government. In selected situations, it pursues private
work internationally.
Construction Strategy
The Company plans to continue to increase the amount of heavy construction
work it performs because of the relatively higher margin available on such
work. The Company believes the best opportunities for growth in the coming
years are in the urban infrastructure market, particularly in Boston,
metropolitan New York, Chicago, Los Angeles and other major cities where it
has a significant presence, and in other large, complex projects. The
Company's acquisition during 1993 of Chicago-based Newberg referred to above
is consistent with this strategy. The Company's strategy in building
construction is to maximize profit margins; to take advantage of certain
<PAGE>
market niches; and to expand into new markets compatible with its expertise.
Internally, the Company plans to continue both to strengthen its management
through management development and job rotation programs, and to improve
efficiency through strict attention to the control of overhead expenses and
implementation of improved project management systems. Finally, a department
was formed in 1992 to improve the Company's focus on strategic planning,
construction project development and project finance, and marketing.
Backlog
As of December 31, 1993, the Company's construction backlog was $1.24
billion compared to backlogs of $1.17 billion and $1.23 billion as of
December 31, 1992 and 1991, respectively.
Backlog (in thousands) as of December 31,
1993 1992 1991
Northeast $ 552,035 45% $ 451,746 39% $ 460,482 37%
Mid-Atlantic 34,695 3 34,840 3 92,130 8
Southeast 34,980 3 53,971 5 8,847 1
Midwest 143,961 12 211,649 18 129,103 11
Southwest 314,058 25 256,973 22 91,897 7
West 143,251 11 123,384 10 274,657 22
Canada - - 711 - 90,152 7
Other Foreign 15,161 1 36,279 3 86,690 7
---------- ---- ---------- ---- ---------- ----
Total $1,238,141 100% $1,169,553 100% $1,233,958 100%
========== ==== ========== ==== ========== ====
The Company includes a construction project in its backlog at such time as
a contract is awarded or a firm letter of commitment is obtained. As a
result, the backlog figures are firm, subject only to the cancellation
provisions contained in the various contracts. The Company estimates that
approximately $475 million of its backlog will not be completed in 1994.
The Company's backlog in the Northeast region of the United States remains
strong because of its ability to meet the needs of the growing infrastructure
construction and rehabilitation market in this region, particularly in the
metropolitan Boston and New York City areas. The increase in the Southwest
region reflects certain fast-track hotel/casino projects. The decrease in
the Other Foreign region reflects a severe decline in U.S. Government-
sponsored foreign construction. Other fluctuations in backlog are viewed by
management as transitory.
Types of Contracts
The four general types of contracts in current use in the construction
industry are:
- Fixed price contracts ("FP"), which include unit price
contracts, usually transfer more risk to the contractor but
offer the opportunity, under favorable circumstances, for
greater profits. With the Company's increasing move into heavy
and publicly bid building construction in response to current
opportunities, the percentage of fixed price contracts continue
to represent the major portion of the backlog.
- Cost-plus-fixed-fee contracts ("CPFF") which provide greater
safety for the contractor from a financial standpoint but limit
profits.
- Guaranteed maximum price contracts ("GMP") which provide for a
cost-plus-fee arrangement up to a maximum agreed price. These
contracts place risks on the contractor but may permit an
opportunity for greater profits than cost-plus-fixed-fee
contracts through sharing agreements with the client on any
cost savings.
- Construction management contracts ("CM") under which a
contractor agrees to manage a project for the owner for an
agreed-upon fee which may be fixed or may vary based upon
negotiated factors. The contractor generally provides services
to supervise and coordinate the construction work on a project,
but does not directly purchase contract materials, provide
construction labor and equipment or enter into subcontracts.
Historically, a high percentage of company contracts have been of the
fixed price type. Construction management contracts remain a relatively
small percentage of company contracts. A summary of revenues and backlog by
type of contract for the most recent three years follows:
Revenues - Year Ended Backlog As Of
December 31, December 31,
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
56% 68% 57% Fixed Price 65% 64% 64%
44 32 43 CPFF, GMP or CM 35 36 36
---- ---- ---- ----- ---- ----
100% 100% 100% 100% 100% 100%
==== ==== ==== ==== ==== ====
Clients
During 1993, the Company was active in the building, heavy and
international construction markets. The Company performed work for over 100
federal, state and local governmental agencies or authorities and private
customers during 1993. No material part of the Company's business is
dependent upon a single or limited number of private customers; the loss of
any one of which would not have a materially adverse effect on the Company.
As illustrated in the following table, the Company continues to serve a
significant number of private owners. During the period 1991-1993, the
portion of construction revenues derived from contracts with various
governmental agencies remained relatively constant at 56% in 1991, 57% in
1992 and 54% in 1993.
Revenues by Client Source
Year Ended December 31,
1993 1992 1991
---- ---- ----
Private Owners 46% 43% 44%
Federal Governmental Agencies 12 6 2
State, Local and Foreign Governments 42 51 54
---- ---- ----
100% 100% 100%
==== ==== ====
<PAGE>
All Federal government contracts are subject to termination provisions, but
as shown in the table above, the Company does not have a material amount of
such contracts.
General
The construction business is highly competitive. Competition is based
primarily on price, reputation for quality, reliability and financial
strength of the contractor. While the Company experiences a great deal of
competition from other large general contractors, some of which may be larger
with greater financial resources than the Company, as well as from a number
of smaller local contractors, it believes it has sufficient technical,
managerial and financial resources to be competitive in each of its major
market areas.
The Company will endeavor to spread the financial and/or operational
risk, as it has from time to time in the past, by participating in
construction joint ventures, both in a majority and in a minority position,
for the purpose of bidding on projects. These joint ventures are generally
based on a standard joint venture agreement whereby each of the joint venture
participants is usually committed to supply a predetermined percentage of
capital, as required, and to share in the same predetermined percentage of
income or loss of the project. Although joint ventures tend to spread the
risk of loss, the Company's initial obligations to the venture may increase
if one of the other participants is financially unable to bear its portion of
cost and expenses. For a possible example of this situation, see "Legal
Proceedings" on page 20. For further information regarding certain joint
ventures, see Note 2 of the Notes to Consolidated Financial Statements.
While the Company's construction business may experience some adverse
consequences if shortages develop or if prices for materials, labor or
equipment increase excessively, provisions in certain types of contracts
often shift all or a major portion of any adverse impact to the customer. On
fixed price type contracts, the Company attempts to insulate itself from the
unfavorable effects of inflation by incorporating escalating wage and price
assumptions, where appropriate, into its construction bids. Gasoline, diesel
fuel and other materials used in the Company's construction activities are
generally available locally from multiple sources and have been in adequate
supply during recent years. Construction work in selected overseas areas
primarily employs expatriate and local labor which can usually be obtained as
required. The Company does not anticipate any significant impact in 1994
from material and/or labor shortages or price increases.
Economic and demographic trends tend not to have a material impact on
the Company's heavy construction operation. Instead, the Company's heavy
construction markets are dependent on the amount of heavy civil
infrastructure work funded by various governmental agencies which, in turn,
may depend on the condition of the existing infrastructure or the need for
new expanded infrastructure. The building markets in which the Company
participants are dependent on economic and demographic trends, as well as
governmental policy decisions as they impact the specific geographic markets.
The Company has minimal exposure to environmental liability as a result
of the activities of Perland Environmental Technologies, Inc. ("Perland"), a
90%-owned subsidiary of the Company. Perland provides hazardous waste
engineering and construction services to both private clients and public
agencies nationwide. Perland is responsible for compliance with applicable
law in connection with its clean up activities and bears the risk associated
with handling such materials.
In addition to strict procedural guidelines for conduct of this work,
the Company and Perland generally carry insurance or receive satisfactory
indemnification from customers to cover the risks associated with this
business.
<PAGE>
The Company also owns real estate nationwide, most of which is
residential, and as an owner, is subject to laws governing environmental
responsibility and liability based on ownership. The Company is not aware of
any environmental liability associated with its ownership of real estate
property.
The Company has been subjected to a number of claims from former
employees of subcontractors regarding exposure to asbestos on the Company's
projects. None of the claims have been material. The Company also operates
construction machinery in its business and will, depending on the project or
the ease of access to fuel for such machinery, install fuel tanks for use on-
site. Such tanks run the risk of leaking hazardous fluids into the
environment. The Company, however, is not aware of any emissions associated
with such tanks or of any other environmental liability associated with its
construction operations or any of its corporate activities.
Progress on projects in certain areas may be delayed by weather
conditions depending on the type of project, stage of completion and severity
of the weather. Such delays, if they occur, may result in more volatile
quarterly operating results.
In the normal course of business, the Company periodically evaluates its
existing construction markets and seeks to identify any growing markets where
it feels it has the expertise and management capability to successfully
compete or withdraw from markets which are no longer economically attractive.
Real Estate
The Company's real estate development operations are conducted by Perini
Land & Development Company ("PL&D"), a wholly-owned subsidiary, which has
been involved in real estate development since the early 1950's. PL&D
engages in real estate development in Arizona, California, Florida, Georgia
and Massachusetts. However, in 1993, PL&D significantly reduced its staff in
California and has suspended any new land acquisition in that area. PL&D's
development operations generally involve identifying attractive parcels,
planning the development, arranging financing, obtaining needed zoning
changes and permits, site preparation, installation of roads and utilities
and selling the land. Originally, PL&D concentrated on land development. In
appropriate situations, PL&D has also constructed buildings on the developed
land for rental or sale.
For the past three to four years PL&D has been severely affected by the
reduced liquidity in real estate markets brought on by the cutbacks in real
estate funding by commercial banks, insurance company and other institutional
lenders. Many traditional buyers of PL&D properties are other developers or
investors who depend on third party sources for funding. As a result, some
potential PL&D transactions have been cancelled, altered or postponed because
of financing problems. Over this period, PL&D looked to foreign buyers not
affected by U.S. banking policies or in some cases, provided seller financing
to complete transactions. PL&D also experienced slowdowns in negotiations in
the sale of PL&D developed income properties or residential units because of
economic uncertainties and the reluctance of some buyers to commit to
acquisitions in the current environment. Based on a weakening in property
values which has come with the industry credit crunch and the national real
estate recession, PL&D took a $30 million pre-tax net realizable value
writedown against earnings in 1992. The charge affected those properties
which PL&D had decided to sell in the near term. Currently it is
management's belief that its remaining real estate properties are not carried
at amounts in excess of their net realizable values. To achieve full value
for some of its real estate holdings, in particular its investments in Rincon
Center and the Resort at Squaw Creek, the Company may have to hold those
properties several years and currently intends to do so.
Real Estate Strategy
<PAGE>
Since 1990, PL&D has taken a number of steps to minimize the adverse
financial impact of current market conditions. In early 1990, all new real
estate investment was suspended pending market improvement, all but critical
capital expenditures were curtailed on on-going projects and PL&D's workforce
was cut by over 60%. Certain project loans were extended, with such
extension usually requiring paydowns and increased annual amortization of the
remaining loan balance. Going forward, PL&D will operate with a reduced
staff and adjust its activity to meet the demands of the market.
PL&D's real estate development project mix includes planned community,
industrial park, commercial office, multi-unit residential, urban mixed use,
resort and single family home developments. Given the current real estate
environment, PL&D's emphasis is on the sale of completed product and also
developing the projects in its inventory with the highest near term
sales potential. It may also selectively seek new development opportunities
in which it serves as development manager with limited equity exposure, if
any.
Real Estate Properties
The following is a description of the Company's major development
projects and properties by geographic area:
Florida
West Palm Beach and Palm Beach County - At year end, only 21 acres
remained unsold of the original 1,428 acres located in West Palm Beach, at
the development known as "The Villages of Palm Beach Lakes" . Of the
remaining acreage all but 3 acres are currently under contract to be sold in
1994. "The Villages" is a planned community development that, when complete
based on current plans, will provide approximately 6,750 residential dwelling
units and related commercial developments, clustered around two championship
golf courses designed by Jack Nicklaus.
From 1982 to 1989, Burg & DiVosta, one of Florida's largest
privately-owned building firms, built and sold 2,264 townhouse units in "The
Villages". Burg & DiVosta also delivered 575 zero-lot-line three bedroom,
two bath, single-family homes within several subdivisions of "The Villages"
and 480 mid-rise condominium units.
In 1991, the final 57 of 83 lots at Bear Lakes Estates, an upscale
single family neighborhood within "The Villages", were sold to a residential
developer who is currently building out the development.
In 1993, PL&D sold tracts totaling approximately 52 acres and placed
under contract for closing in 1994 another 18 acres.
At "Congress Crossing", a 24-acre planned commercial urban development
at 45th Street and Congress Avenue, the final 1.5 acres within the park was
sold in 1993.
At Metrocentre, a 51-acre commercial/office park at the intersection of
Interstate 95 and 45th Street in West Palm Beach, a 1.5 acre site was sold in
1993 for use as a medical center. The park consists of 17 parcels, of which
5 remain unsold at year-end. The park provides for 570,500 square feet of
mixed commercial uses.
PL&D also sold a 16-acre site on Australian Avenue in West Palm Beach in
1993. That parcel was sold to a religious congregation who are building a
tabernacle and community recreational facility on the site.
Massachusetts
<PAGE>
Perini Land and Development or Paramount Development Associates, Inc.
("Paramount"), a wholly-owned subsidiary of PL&D, owns the following
projects:
Raynham Woods Commerce Center, Raynham - In 1987, Paramount acquired a
409
acre site located in Raynham, Massachusetts, on which it had done preliminary
investigatory and zoning work under an earlier purchase option period.
During 1988, Paramount secured construction financing and completed
infrastructure work on a major portion of the site (330 acres) which is being
developed as a mixed-use corporate campus style park known as "Raynham Woods
Commerce Center". During 1989, Paramount completed the sale of a 24-acre
site to be used as a headquarters facility for a division of a major U.S.
company. During 1990, construction was completed on this facility. In 1990
construction was also completed on two new commercial buildings by Paramount.
During 1992, a 17-acre site was sold to a developer who was working with a
major national retailer. The site has since been developed into the first
retail project in the park. No new land sales were made in 1993, but both of
Paramount's commercial buildings within the park continue to be close to
fully leased at year-end. The park is planned to eventually contain 2.5
million square feet of office, R&D, light industrial and mixed commercial
space.
Robin Hill, Marlborough - The Robin Hill project is located at the
intersection of Routes 495 and 290 in Marlborough, Massachusetts. The major
portion of this property was sold in 1985-1987. Paramount exercised its
option to purchase an additional 53 acres of contiguous property in 1989. In
1993, this site was identified as the potential location for a new retail
center and is currently under an agreement of sale to close sometime in 1994.
Easton Business Center, Easton - In 1989, Paramount acquired a 40-acre
site in Easton, Massachusetts, which had already been partially developed.
Paramount completed the work in 1990 and is currently marketing the site to
commercial/industrial users. No sales were closed in 1993.
Wareham - In early 1990, Paramount acquired an 18.9 acre parcel of land
at the junction of Routes 495 and 58 in Wareham, Massachusetts. The property
is being marketed to both retail and commercial/industrial users. No sales
were closed in 1993.
Easton Industrial Park, Easton - In 1992, PL&D acquired four
single-story industrial/office buildings located in the Easton Industrial
Park with an aggregate square footage of 110,000 for $500,000 plus assumption
of $4.5 million in third party debt. The buildings, originally developed by
Paramount, were acquired from Pacific Gateway Properties (formerly Perini
Investment Properties) as part of an overall settlement agreement. Late in
1993, these buildings were put under a contract of sale and were sold in
early 1994.
Georgia
The Villages at Lake Ridge, Clayton County - During 1987, PL&D (49%)
entered into a joint venture with 138 Joint Venture partners to develop a
348-acre planned commercial and residential community in Clayton County to be
called "The Villages at Lake Ridge", six miles south of Atlanta's Hartsfield
International Airport. By year end 1990, the first phase infrastructure and
recreational amenities were in place. In 1991, the joint venture completed
the infrastructure on 48 lots for phased sales of improved lots to single
family home builders and sold nine. During 1992, the joint venture sold an
additional 60 lots and also sold a 16-acre parcel for use as an elementary
school. During 1993, unusually wet weather in the spring delayed
construction on improvements required to deliver lots as scheduled. As a
result, the sale of an additional 58 lots in 1993 were below expectation.
However, current backlog plus construction progress during 1993 should result
in greater lot sales in 1994. Interest in single family lots continues to be
<PAGE>
strong, but financing restrictions generally require the joint venture to
allow developers to take down finished lots only as homes built on previously
acquired lots are sold. The development plan calls for mixed residential
densities of apartments and moderate priced single-family homes totalling
1,158 dwelling units in the residential tracts plus 220,000 square feet of
retail and 220,000 square feet of office space in the commercial tracts.
Garden Lakes - During 1993 PL&D (49.5%), in joint venture, maintained
close to a fully leased status at its 278-unit apartment complex on an 18.5
acre tract within the Villages at Lake Ridge. Construction on the project
was completed in 1990. Also during 1993, a sale of the property was
negotiated with closing occurring in January 1994. The property continues to
yield positive cash flow to the partnership.
The Oaks at Buckhead, Atlanta - Sales commenced on this 217-unit
residential condominium project at a site in the Buckhead section of Atlanta
near the Lenox Square Mall in 1992. The project consists of 201 residences
in a 30-story tower plus 16 adjacent three-story townhome residences. At
year end 73 units were either sold or under contract. PL&D (50%) is
developing this project in joint venture with a subsidiary of a major
Taiwanese company.
In connection with the project financing on the Oaks, PL&D has committed
to certain guarantees described in the sixth paragraph of Note 11 to Notes to
the Consolidated Financial Statements which starts on page 50.
California
Golden Gateway Commons, San Francisco - In 1993 the remaining 263,500
square feet of commercial office/retail space and 375 parking spaces owned by
the Golden Gateway North partnership were sold. The Golden Gateway Commons
was developed in the late '70's and early '80's and was owned by the Golden
Gateway North, a partnership, in which PL&D-owned entities held an
approximately 58% interest.
Rincon Center, San Francisco - Major construction on this mixed-use
project in downtown San Francisco was completed in 1989. The project,
constructed in two phases, consists of 320 residential rental units,
approximately 423,000 square feet of office space, 63,000 square feet of
retail space, and a 700-space parking garage. Following its completion in
1988, the first phase of the project was sold and leased back by the
developing partnership. The first phase consists of about 223,000 square
feet of office space and 42,000 square feet of retail space. The Phase I
office space continues to be close to 100% leased with the regional telephone
directory company as the major tenant. The retail space was 86% leased at
year end. Phase II of the project, which began operations in late 1989,
consists of approximately 200,000 square feet of office space, 21,000 square
feet of retail space, a 14,000 square foot U.S. postal facility, and 320
apartment units. At year end, close to 100% of the office space, 94% of the
retail space and all but 10 of the 320 residential units were leased. The
major tenant in the office space in Phase II is the Ninth Circuit Federal
Court of Appeals which is leasing approximately 176,000 square feet. PL&D
currently holds a 46% interest in and is managing general partner of the
partnership which is developing the project. The land related to this
project is being leased from the U.S. Postal Service under a ground lease
which expires in 2050.
In addition to the project financing and guarantees disclosed in the
second and third paragraphs of Footnote 11 to Notes to the Consolidated
Financial Statements, which starts on page 50, the Company has advanced
approximately $70 million to the partnership through December 31, 1993, of
which approximately $8 million was advanced during 1993, primarily to paydown
some of the principal portion of project debt which was renegotiated during
1993. Although the project is close to fully occupied, rent concessions
during 1993 prevented operations from exceeding breakeven on a cash flow
<PAGE>
basis. Those concessions have ended and in 1994 operations are expected to
generate positive cash flow before any required principal paydowns on loans.
Two major loans on this property in aggregate totaling over $75 million were
scheduled to mature in 1993. During 1993 both loans were extended for five
additional years. To extend these loans, PL&D provided approximately $6
million in new funds which were used to reduce the principal balances of the
loans. Going forward, additional amortization will be required, some of
which may not be covered by operating cash flow and, therefore, at least 80%
of those funds not covered by operations will be provided by PL&D as managing
general partner. Lease payments and loan amortization obligations at Rincon
Center through 1997 are as follows: $4,226,000 in 1994; $4,948,000 in 1995;
$5,531,000 in 1996; $5,886,000 in 1997. Based on Company forecasts, it could
be required to contribute as much as $6-7 million in aggregate to cover these
requirements not covered by project cash flow through 1997. Although
management believes operating expenses will be covered by operating cash flow
at least through 1997, the Company's share of project depreciation which
could be as much as $2 million annually, will not be covered through
operating profit and therefore will continue to reduce the Company's reported
earnings by that amount. In addition, interest rates on much of the debt
financing covering Rincon Center are variable based on various rate indices.
With the exception of approximately $20 million of the financing, none of the
debt has been hedged or capped and is subject to market fluctuations. From
time to time the Company reviews the costs and anticipated benefits from
hedging Rincon Center's interest rate commitments. Current Company forecasts
anticipate a 50 basis point annual increase in rates between 1994 and 1997.
In view of this expectation of interest rate risk and current costs to
further hedge rate increases, the Company has elected not to hedge all
interest rates.
As part of the Rincon One sale and operating lease-back transaction, the
joint venture agreed to obtain an additional financial commitment on behalf
of the lessor to replace at least $33 million of long-term financing by
January 1, 1998. If the joint venture has not secured a further extension or
new commitment for financing on the property for at least $33 million, the
lessor will have the right under the lease to require the joint venture to
purchase the property for a stipulated amount of approximately $18.8 million
in excess of the then outstanding debt. Management believes it will be able
to extend the financing or refinance the building such that this sale back to
the Company will not occur. During the past year PL&D agreed, if necessary,
to lend Pacific Gateway Properties (PGP) funds to meet its 20% share of cash
calls. In return PL&D receives a priority return from the partnership on
those funds and penalty fees in the form of rights to certain distributions
due PGP by the partnership controlling Rincon. During 1993, PL&D advanced
$1.7 million under this agreement, primarily to meet the principal payment
obligations of the loan extensions described above.
The Resort at Squaw Creek - During 1990, construction was completed on
the 405-unit first phase of the hotel complex of this major resort-conference
facility. In mid-December of that year, the resort was opened. In 1991,
final work was completed on landscaping the golf course, as well as the
remaining facilities to complete the first phase of the project. The first
phase of the project includes a 405-unit hotel, 36,000 square feet of
conference facilities, a Robert Trent Jones, Jr. golf course, 48
single-family lots, all of which had been sold or put under contract by early
1993, three restaurants, an ice skating rink, pool complex, fitness center
and 11,500 square feet of various retail support facilities. The second
phase of the project is planned to include an additional 409-unit hotel
facility, 36 townhouses, 27,000 square feet of conference space, 5,000 square
feet of retail space and a parking structure. No activity on the second
phase will begin until stabilization is attained on phase one and market
conditions warrant additional investment.
While PL&D has an effective 18% ownership interest in the joint venture,
it has additional financial commitments as described below.
In addition to the project financing and guarantees disclosed in the
<PAGE>
fifth paragraph of Note 11 to Notes to the Consolidated Financial Statements,
which starts on page 50, the Company has advanced approximately $68 million
to the joint venture through December 31, 1993, of which approximately $2
million was advanced during 1993, for the cost of operating expenses and
interest payments. Further, it is anticipated the project may require
additional funding by PL&D before it reaches stabilization which may take
several years. During 1992, the majority partner in the joint venture sold
its interest to a group put together by an existing limited partner. As a
part of that transaction, PL&D relinquished its managing general partnership
position to the buying group, but retained a wide range of approval rights.
The result of the transaction was to strengthen the financial support for the
project and led to an extension of the bank financing on the project to
mid-1995. The $48 million of bank financing on the project currently matures
in May, 1995. Preliminary conversations have taken place with the project's
lead bank and management anticipates extension or replacement of the loan.
However, as with any real estate financing, there is no assurance that an
extension or replacement financing will be available. In the event that were
to happen, the property would be subject to foreclosure and possible sale at
a value below the Company's present investment basis.
As part of Squaw Creek Associates partnership agreement, either partner
may initiate a buy/sell agreement on or after January 1, 1997. Such buy/sell
agreement, which is similar to those often found in real estate development
partnerships, provides for the recipient of the offer to have the option of
selling its share or purchasing its partners share at the proportionate
amount applicable based on the offer price and the specific priority of
payout as called for under the partnership agreement based on a sale and
termination of the partnership. The Company does not anticipate such a
circumstance, because until the end of the year 2001, the partner would lose
the certainty of a $2 million annual preferred return currently guaranteed by
the Company. However, an exercise of the buy/sell agreement by its partner
could force the Company to sell its ownership at a price possibly
significantly less than its full value should the Company be unable to buy
out its partner and were forced to sell at the price initiated by its
partner.
The operating results of this project are weather sensitive. A large
snowfall in late 1992 and early 1993 helped improve results in the first
quarter of 1993 and, for the full year, the resort showed marked improvement
over the previous year. Occupancy for 1993, its third year of operation, was
approximately 60%, up from 50% the previous year.
Corte Madera, Marin County - After many years of intensive planning,
PL&D obtained approval for a 151 single-family home residential development
on its 85-acre site in Corte Madera and, in 1991, was successful in gaining
water rights for the property. In 1992, PL&D initiated development on the
site which was continued into 1993. This development is one of the last
remaining in-fill areas in southern Marin County. In 1993, when PL&D decided
to scale back its operations in California, it also decided to sell this
development in a transaction set to close in early 1994 which calls for PL&D
to get the majority of its funds from the sale of residential units or upon
the sixth anniversary of the sale whichever takes place first and, although
indemnified, to leave in place certain bonds and other assurances previously
given to the town of Corte Madera guaranteeing performance in compliance with
approvals previously obtained.
Arizona
I-10 West, Phoenix - In 1979, I-10 Industrial Park Developers ("I-10"),
an Arizona partnership between Paramount Development Associates, Inc. (80%)
and Mardian Development Company (20%), purchased approximately 160 acres of
industrially zoned land located immediately south of the Interstate 10
Freeway, between 51st and 59th Avenues in the city of Phoenix. The project
experienced strong demand through 1988. With the recent downturn in the
Arizona real estate markets, sales have slowed. No sales were made in 1993,
<PAGE>
leaving approximately 13 acres unsold.
Airport Commerce Center, Tucson - In 1982, the I-10 partnership
purchased 112 acres of industrially zoned property near the Tucson
International Airport. During 1983, the partnership added 54 acres to that
project, bringing its total size to 166 acres. This project has experienced
a low level of sales activity due to an excess supply of industrial property
in the marketplace. However, the partnership built and fully leased a 14,600
square foot office/warehouse building in 1987 on a building lot in the park,
which was sold during 1991. In 1990, the partnership sold 14 acres to a
major airline for development as a processing center and, in 1992, sold a one
acre parcel adjacent to the existing property. No new land sales were made
since. At year end, approximately 123 acres remain to be sold.
Perini Central Limited Partnership, Phoenix - In 1985, PL&D (75%)
entered into a joint venture with the Central United Methodist Church to
master plan and develop approximately 4.4 acres of the church's property in
midtown Phoenix. Located adjacent to the Phoenix Art Museum and near the
Heard Museum, the project is positioned to become the mixed use core of the
newly formed Phoenix Arts District. In 1990, the project was successfully
rezoned to permit development of 580,000 square feet of office, 37,000 square
feet of retail and 162 luxury apartments. Plans for the first phase of this
project, known as "The Coronado" have been put on hold pending improved
market conditions and in 1993, PL&D obtained a three-year extension of the
construction start date required under the original zoning.
Grove at Black Canyon, Phoenix - The project consists of an office park
complex on a 30-acre site located off of Black Canyon Freeway, a major
Phoenix artery, approximately 20 minutes from downtown Phoenix. When
complete, the project will include approximately 650,000 square feet of
office, hotel, restaurant and/or retail space. Development, which began in
1986, is scheduled to proceed in phases as market conditions dictate. In
1987, a 150,000 square foot office building was completed within the park and
now is 93% leased with approximately half of the building leased to a major
area utility company. During 1993, PL&D (50%) successfully restructured the
financing on the project by obtaining a seven-year extension with some
amortization and a lower interest rate. The annual amortization commitment
is not currently covered by operating cash flow. No new development within
the park was begun in 1993 nor were any land sales consummated.
Sabino Springs Country Club, Tucson - During 1990, the Tucson Board of
Supervisors unanimously approved a plan for this 410-acre residential golf
course community close to the foothills on the east side of Tucson. In 1991,
that approval which had been challenged, was affirmed by the Arizona Supreme
Court. When developed, the project will consist of 496 single-family homes
and an 18-hole Robert Trent Jones, Jr. designed championship golf course and
club. In 1993, PL&D recorded the master plat on the project and sold a major
portion of the property to an international real estate company. PL&D will
retain 33 estate lots for sale in future years.
Capitol Plaza, Phoenix - In 1988, PL&D acquired a 1 3/4-acre parcel of
land located in the Governmental Mall area of Phoenix. Original plans were
to either develop a 200,000 square foot office building on the site to be
available to government and government related tenants or to sell the site.
The project has currently been placed on hold pending a change in market
conditions.
General
The Company's real estate business is influenced by both economic
conditions and demographic trends. A depressed economy may result in lower
real estate values and longer absorption periods. Higher inflation rates may
increase the values of current properties, but often are accompanied by
higher interest rates which may result in a slowdown in property sales
because of higher carrying costs. Important demographic trends are
<PAGE>
population and employment growth. A significant reduction in either of these
may result in lower real estate prices and longer absorption periods.
The well publicized problems in the commercial bank and savings and loan
industries over the past several years have resulted in sharply curtailed
credit available to acquire and develop real estate; further, the current
national real estate recession has significantly slowed the pace at which
PL&D has been able to proceed on certain of its development projects and its
ability to sell developed product. In some or all cases, it has also reduced
the sales proceeds realized on such sales and/or required extended payment
terms.
Generally, there has been no material impact on PL&D's real estate
development operations over the past 10 years due to interest rate increases.
However, an extreme and prolonged rise in interest rates could create market
resistance for all real estate operations in general, and is always a
potential market obstacle. PL&D, in some cases, employs hedges or caps to
protect itself against increases in interest rates on any of its variable
rate debt and, therefore, is insulated from extreme interest rate risk on
borrowed funds, although specific projects may be impacted if the decision
has been made not to hedge or to hedge at higher than current rates.
The Company has been replacing relatively low cost debt-free land in
Florida acquired in the late 1950's with land purchased at current market
prices. In the future, as the mix of land sold contains proportionately less
low cost land, the gross margin on real estate revenues will decrease.
Insurance and Bonding
All of the Company's properties and equipment, both directly owned or
owned through partnerships or joint ventures with others, are covered by
insurance and management believes that such insurance is adequate. However,
due to conditions in the insurance market, the Company's California
properties, both directly owned and owned in partnership with others, are not
fully covered by earthquake insurance.
In conjunction with its construction business, the Company is often
required to provide various types of surety bonds. The Company has dealt
with the same surety for over 75 years and it has never been refused a bond.
Although from time-to-time the surety industry encounters limitations
affecting the bondability of very large projects, the Company has not
encountered any limit on its bonding ability that has adversely impacted its
operations.
Employees
The total number of personnel employed by the Company is subject to
seasonal fluctuations, the volume of construction in progress and the
relative amount of work performed by subcontractors. During 1993, the
maximum number of employees employed approximately 2,600 and the minimum was
approximately 1,900.
The Company operates as a union contractor. As such, it is a signatory
to numerous local and regional collective bargaining agreements, both
directly and through trade associations, throughout the country. These
agreements cover all necessary union crafts and are subject to various
renewal dates. Estimated amounts for wage escalation related to the
expiration of union contracts are included in the Company's bids on various
projects and, as a result, the expiration of any union contract in the
current fiscal year is not expected to have any material impact on the
Company.
ITEM 2. PROPERTIES
<PAGE>
Properties applicable to the Company's real estate development
activities are described in detail by geographic area in Item 1. Business on
pages 9 through 18. All other properties used in operations are summarized
below:
Approximate
Owned or Leased Approximate Square Feet of
Principal Offices by Perini Acres Office Space
----------------- --------------- ----------- --------------
Framingham, MA Owned 9 110,000
Phoenix, AZ Owned 1 22,000
Southfield, MI Leased - 13,900
San Francisco, CA Leased - 11,000
Hawthorne, NY Leased - 8,800
Burlington, MA Leased - 10,300
West Palm Beach, FL Leased - 5,000
Pasadena, CA Leased - 4,000
Las Vegas, NV Leased - 3,000
Atlanta, GA Leased - 1,700
Chicago, IL Leased - 14,700
Philadelphia, PA Leased - 2,100
-- -------
10 206,500
== =======
Principal Permanent Storage Yards
Bow, NH Owned 70
Framingham, MA Owned 6
E. Boston, MA Owned 4
Las Vegas, NV Leased 2
Novi, MI Leased 3
--
85
==
The Company's properties are generally well maintained and in good condition.
ITEM 3. LEGAL PROCEEDINGS
- - - On July 30, 1993, the U.S. District Court (D.C.) upheld the Contracting
Officer's terminations for default, both dated May 11, 1990, on two
adjacent contracts for subway construction between Mergentime-Perini
(two joint ventures) and the Washington Metropolitan Area Transit
Authority ("WMATA") and found the Mergentime Corporation, Perini
Corporation and the Insurance Company of North America, the surety,
jointly and severally liable to WMATA for damages in the amount of $16.5
million, consisting primarily of excess reprocurement costs. The court
deferred ruling on the net value of the joint ventures' major claims
against WMATA. Any such amounts awarded to the joint ventures could
serve to offset the above damages award. Originally Mergentime
Corporation was the sponsor and manager of both joint ventures with a
60% interest in each. Perini held the remaining 40%. The contracts
were awarded in 1985 and 1986 but in 1987, Perini and Mergentime entered
<PAGE>
into an agreement whereby Perini withdrew from the joint ventures, but
remained obligated to WMATA under the contracts. At that point,
Mergentime assumed full control over the performance of both projects.
After the termination of the joint ventures' contracts in May of 1990,
Perini Corporation, acting independently, was awarded a separate
contract by WMATA to finish these projects, both of which were
successfully completed on schedule.
Mergentime may be unable to meet its financial obligations under the
award. In such event the Company, as a joint venture partner, could be
liable for the entire amount. Currently, both parties have filed post-
trial motions with the District Court attacking the decision and award.
For the purpose of these motions, the successor judge (who was recently
named) is treating the judgment as one that is not a final judgment and
thus not one from which an appeal lies pending rulings on the motions.
Although no date has been set for a review of the post-trial motions,
the Court has indicated that such consideration will require substantial
effort and that it intends to give this case the consideration it
deserves.
The ultimate financial impact, if any, of this judgment is not yet
determinable, and therefore, no impact is reflected in the 1993
financial statements.
In the ordinary course of its construction business, the Company is
engaged in other lawsuits. The Company believes that such lawsuits are
usually unavoidable in major construction operations and that their
resolution will not materially affect its results of future operations
and financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the American Stock Exchange
under the symbol "PCR". The quarterly market price ranges (high-low)
for 1993 and 1992 are summarized below:
1993 1992
Market Price Range per Common Share: ------------ ------------
High Low High Low
---- --- ---- ---
Quarter Ended
March 31 18 5/8 - 14 1/8 14 3/8 - 11 3/4
June 30 14 7/8 - 13 14 3/4 - 11 5/8
September 30 13 1/2 - 9 7/8 13 1/8 - 10 7/8
December 31 12 3/4 - 10 1/8 18 3/4 - 10 1/4
For information on dividend payments, see Selected Financial Data in
Item 6 below and "Dividends" under Management's Discussion and
Analysis on page 27.
As of March 4, 1994, there was approximately 1,523 record holders of
the Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
<TABLE>
<PAGE>
OPERATING SUMMARY 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues
Construction operations $1,030,341 $1,023,274 $ 919,641 $ 983,689 $ 830,553
Real estate operations 69,775 47,578 72,267 31,331 70,216
---------- ---------- ---------- ---------- ----------
Total Revenues $1,100,116 $1,070,852 $ 991,908 $1,015,020 $ 900,769
========== ========== ========== ========== ==========
Gross Profit $ 52,786 $ 22,189 $ 60,854 $ 43,388 $ 74,377
---------- ---------- ---------- ---------- ----------
Net Income (Loss) $ 3,165 $ (16,984) $ 3,178 $ (2,575) $ 13,152
---------- ----------- ---------- ----------- ----------
Per Share of Common Stock:
Net income (loss) $ .24 $ (4.69) $ .27 $ (1.20) $ 3.11
---------- ----------- ---------- ----------- ----------
Cash dividends declared $ - $ - $ - $ .60 $ .80
---------- ----------- ---------- ---------- ----------
Book value $ 24.49 $ 23.29 $ 28.96 $ 28.48 $ 30.10
---------- ---------- ---------- ---------- ----------
Weighted Average Number
of Common Shares Outstanding 4,265 4,079 3,918 3,916 3,545
---------- ---------- ---------- ---------- ----------
FINANCIAL POSITION SUMMARY
Working Capital $ 36,877 $ 31,028 $ 30,724 $ 33,756 $ 40,203
---------- ---------- ---------- ---------- ----------
Current Ratio 1.17:1 1.14:1 1.16:1 1.16:1 1.21:1
---------- ---------- ---------- ---------- ----------
Long-term Debt, less current
maturities $ 82,366 $ 85,755 $ 96,294 $ 100,912 $ 82,848
---------- ---------- ---------- ---------- ----------
Stockholders' Equity $ 131,143 $ 121,765 $ 138,644 $ 136,682 $ 142,970
---------- ---------- ---------- ---------- ----------
Ratio of Long-term Debt to
Equity .63:1 .70:1 .69:1 .74:1 .58:1
---------- ---------- ---------- ---------- ----------
Total Assets $ 476,378 $ 470,696 $ 498,574 $ 509,707 $ 456,000
---------- ---------- ---------- ---------- ----------
OTHER DATA
Backlog at Year-end $1,238,141 $1,169,553 $1,233,958 $1,091,077 $1,018,912
---------- ---------- ---------- ---------- ----------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATION -
1993 COMPARED TO 1992
The improved operating results in 1993 resulted in net income of $3.2 million
(or $.24 per common share) compared to a net loss in 1992 of $17 million (or
$4.69 per common share). The primary reason for this improvement was the
nominal profit generated by real estate operations in 1993 compared to a $47
million operating loss in 1992 which included a $31.4 million pretax net
<PAGE>
realizable value writedown on certain real estate assets management decided
to liquidate in the near-term. However, profits from construction operations
decreased due primarily to the mix of work performed in 1993, relatively more
of the lower margin building work and relatively less of the higher margin
heavy and pipeline construction work, the latter being due to the sale by the
Company of its 74%-ownership interest in Majestic Contractors Limited
("Majestic"), its Canadian pipeline construction subsidiary, in January,
1993.
Revenues reached a new record for the second consecutive year and amounted to
$1.100 billion in 1993 compared to $1.071 billion in 1992, an increase of $29
million (or 3%). This increase resulted primarily from a net increase in
construction revenues of $7 million from $1.023 million in 1992 to $1.030
million in 1993 due primarily to an increase in volume from building
operations of $113 million (or 19%), from $604 million in 1992 to $717
million in 1993 due to an increased backlog going into 1993 and certain fast-
track hotel/casino projects included in the backlog, and to a lesser degree,
a small increase in heavy construction revenues. These increases more than
offset the $101 million decrease in revenues from pipeline construction due
to the sale referred to above and a $14 million decrease from engineering
services due to the sale of Monenco Group Ltd. ("Monenco") in the first
quarter of 1992. In addition, revenues from real estate operations increased
by $22.2 million, from $47.6 million in 1992 to $69.8 million in 1993 due
primarily to the sale of a partnership interest in certain commercial rental
properties in San Francisco ($23.2 million) and, to a lesser degree, a $7
million increase in land sales in Florida.
Gross profit in 1993 increased by $30.6 million, from $22.2 million in 1992
to $52.8 million in 1993 due primarily to a $47.2 million increase from real
estate operations, from a $43.5 million loss in 1992 to a $3.7 million profit
in 1993. This improvement from real estate operations is due primarily to
the non-recurring $31.4 million pretax net realizable value writedown in 1992
referred to previously, the profitable sale of certain commercial rental
properties in San Francisco, profitable land sales in Florida and a $1.3
million improvement in results from a major ongoing operating property, The
Resort at Squaw Creek. This increase in gross profit was offset by a
decrease in gross profit from construction operations of $16.6 million, from
$65.7 million in 1992 to $49.1 million in 1993 due primarily to the sale of
Majestic and Monenco referred to above, a combined $18 million decrease.
Total general, administrative and selling expenses increased by $2.9 million
(or 7%) in 1993, from $41.3 million in 1992 to $44.2 million in 1993 due to
several
factors, including $2.2 million related to the acquisition referred to in
Note 1 to Notes to the Consolidated Financial Statements on page 36, a $2.1
million expense for severance incurred in connection with re-engineering some
of the business units, and additional personnel for the Company's ongoing
heavy construction operations. These increases were partially offset by the
$5.1 million decrease resulting from the sale of Majestic referred to above.
The increase in other income of $4.8 million, from $.4 million in 1992 to
$5.2 million in 1993 is due to the gain of $4.6 million on the sale of
Majestic and a decrease in the deduction for minority interest, both of which
were partially offset by the nonrecurring gain of $2 million from the sale of
Monenco in 1992.
The decrease in interest expense of $2 million (or 26%), from $7.7 million in
1992 to $5.7 million in 1993 primarily results from lower interest rates
during 1993 and lower average borrowings due to the continued pay down of
real estate and other debt, and, to a lesser degree, less interest expense
related to Majestic due to the sale.
The higher-than-normal tax rate in 1993 is due to additional tax provided on
the gain on the sale of Majestic for the difference between the book and tax
bases of the Company's investment in this subsidiary.
<PAGE>
Looking ahead, we must consider the Company's construction backlog and
remaining inventory of real estate projects. While the overall construction
backlog at December 31, 1993 was 6% higher than the 1992 level, slightly less
than half of this backlog was obtained in the fourth quarter of 1993. With
several of the contracts in the backlog going through the start-up phase and
severe winter weather in the Northeast, construction revenues should be lower
during the first half of 1994 and higher in the second half of 1994, as
compared with prior year amounts. This increase in backlog can be
attributable to an increase in the backlog of heavy construction contracts.
This increase could indicate a relative increase in higher margin heavy
construction revenues in the future.
At December 31, 1993, only 21 acres of the Company's Villages of Palm Beach
Lakes, Florida land remain in inventory. Because of its low book value,
sales of this acreage have provided a major portion of the Company's real
estate profit in recent years. When this is fully sold, the Company's
ability to generate profit from real estate sales and the related gross
margin will be reduced. Since 1989, property prices in general have fallen
substantially due to the liquidity in real estate markets and reduced demand.
Recently, the Company has noted improvement in some property areas. This
trend has had some effect on residential property sales negotiated by the
Company for 1994 closings, but is still not widespread nor proven to be
sustainable. The Company's profitability will also be affected by the
continuation of from $3-4 million of annual depreciation recognized through
its share of ownership in joint venture properties which to date has not been
fully covered by operating profit.
For 1994, the Company has currently under contract for scheduled closings two
major land sales, one in Florida and the other in Massachusetts. If both
transactions meet their scheduled closing dates, they will produce over $6
million in revenue and have an important profit impact on the Company.
However, until the sale of the project actually occurs, this revenue and
profit cannot be assured since it is not unusual for such closings to be
delayed or cancelled.
RESULTS OF OPERATIONS -
1992 COMPARED TO 1991
Operations in 1992 resulted in a net loss of $17 million (or $4.69 per common
share) compared to 1991 net income of $3.2 million (or $.27 per common
share). The primary reason for this decline in earnings was a substantial
loss recorded by the Company's real estate operations, due to a combination
of significant operating losses and a $30 million pre-tax net realizable
value writedown in the fourth quarter of 1992 on certain real estate assets
management decided to liquidate in the near-term. These losses and writedown
resulted from a weakening in property values caused by the continuing adverse
impact of the national real estate recession, the surplus of real estate
product for sale in most markets, and severely restricted financing sources
(both domestic and foreign) for potential buyers due to the well-publicized
problems in the commercial banking industry. Overall construction
operations, on the other hand, reached an all-time record level of
profitability in 1992 due to the fourth consecutive year of record earnings
from domestic construction operations, as well as a significant increase in
earnings from Canadian pipeline operations. In January 1993, the Company
sold its investment in the Canadian pipeline operation (see Note 1 to Notes
to the Consolidated Financial Statements on page 40).
Revenues reached a record of $1.071 billion in 1992 compared to $992 million
in 1991, an increase of $79 million (or 8%). This increase reflected an
overall increase in construction revenues of $103 million (or 11%), from $920
million in 1991 to $1.023 billion in 1992, which was partially offset by a
decline in real estate revenues of $24 million (or 33%), from $72 million in
1991 to $48 million in 1992. The increase in construction revenues was due
primarily to increased volume from building construction operations which
increased $97 million (or 19%), from $507 million in 1991 to $604 million in
<PAGE>
1992, resulting from a high level of activity in the hotel/casino market as
well as a higher overall backlog of work going into 1992 compared to 1991.
In addition, revenues from Canadian pipeline operations increased $32 million
(or 46%), from $69 million in 1991 to $101 million in 1992, due primarily to
higher margins on projects obtained in the resurgent Canadian natural gas
pipeline construction market. Revenues from international construction
operations increased $32 million, more than tripling the 1991 level of $15
million, due primarily to a higher backlog of work entering 1992 compared to
1991. These increases in construction revenues were partially offset by a
decrease in volume from engineering services of $41 million, from $54 million
in 1991 to $13 million in 1992 due to the sale in the first quarter of 1992
of the Company's investment in Monenco and, to a lesser degree, a decrease in
volume from heavy operations of $10 million (or 4%) from $263 million in 1991
to $253 million in 1992 due to the timing in start-up of new projects. The
decrease in real estate revenues was due to a decrease in real estate
closings, primarily in the California and Florida market areas where sales
activity remained constrained due to the factors noted above.
Gross profit in 1992 decreased $38.7 million (or 64%), from $60.9 million in
1991 to $22.2 million in 1992 due primarily to a $43.1 million decrease from
real estate operations, from a $.4 million loss in 1991 to a $43.5 million
loss in 1992, caused by the reasons mentioned above. Gross profit from
construction operations increased $4.4 million (or 7%), from $61.3 million in
1991 to $65.7 million in 1992 due primarily to the higher revenues discussed
above as well as strong operating results achieved in Canada where certain
pipeline projects were successfully completed.
Total general, administrative and selling expenses decreased $7.2 million (or
15%) from $48.5 million in 1991 to $41.3 million in 1992 due primarily to the
impact of cost reduction programs implemented in recent years throughout the
Company's corporate, construction and real estate operations and, to a lesser
degree, a reduction in sales commissions resulting from the decrease in real
estate land sales.
Other income decreased $.7 million, from $1.1 million in 1991 to $.4 million
in 1992. A $2 million gain relating to the Company's sale of its 45%-
interest in Monenco in 1992 was more than offset by the increase in the
deduction for minority interest in the 1992 earnings of Majestic.
Interest expense decreased $1.4 million, from $9 million in 1991 to $7.6
million in 1992, due primarily to lower average interest rates on borrowings
under the Company's credit facilities and repayment of loans in early 1992
relating to the sale of Monenco.
The tax credit for 1992 reflects an effective tax rate of 36% compared to the
Federal statutory rate of 34%, because of the impact of foreign and state tax
credits.
FINANCIAL CONDITION
CASH AND WORKING CAPITAL
During 1993, the Company used $39.1 million of cash for investment
activities, primarily to fund construction and real estate joint ventures; $3
million for financing activities, primarily to pay down company debt; and
$1.6 million to fund operating activities, primarily changes in working
capital. In the future, the Company has additional financial commitments to
certain real estate joint ventures as described in Footnote 11 to Notes to
the Consolidated Financial Statements which start on page 50.
During 1992, the Company provided $55.4 million of cash from operations and
$14.2 million of cash from the sale of its investment in Monenco. Of this
amount, $29.9 million was used for investing activities, primarily in two
real estate joint ventures and, to a lesser degree, real estate properties
used in operations; $7.1 million was used for financing activities, primarily
<PAGE>
to pay down company debt; and the remaining amount ($31.7 million, net)
increased cash on hand.
During 1991, the Company used $50.9 million of cash for investing activities,
primarily in two real estate joint ventures and, to a lesser degree, in land
held for sale or development and construction equipment, and a net of $24.2
million of cash primarily to pay down company debt. These uses of cash were
funded by cash provided by operations ($70.9 million) and an overall
reduction in cash of $4.2 million. The two recently completed real estate
development joint ventures referred to above are currently experiencing
operating profits before depreciation, but show negative cash flow after debt
service.
Since 1990 the Company has paid down $33.2 million of real estate debt on
wholly-owned real estate projects (from $50.9 million to $17.7 million)
utilizing proceeds from sales of property and general corporate funds.
Similarly, real estate joint venture debt has been reduced by $127 million
over the same period. As a result, the Company has reached a point at which
revenues from further real estate sales which, in the past, have been largely
used to retire real estate debt will be increasingly available to improve
general corporate liquidity. With the exception of the major properties
mentioned above, this trend should continue over the next several years with
debt on projects often being fully repaid prior to full project sell out. On
the other hand, the softening of the national real estate market coupled with
problems in the commercial banking industry have significantly reduced credit
availability for both new real estate development projects and the sale of
completed product, sources historically relied upon by the Company and its
customers to meet liquidity needs for its real estate development business.
The Company has addressed this problem by relying on corporate borrowings,
extending certain maturing real estate loans (with such extensions usually
requiring pay downs and increased annual amortization of the remaining loan
balance), suspending the acquisition of new real estate inventory,
significantly reducing development expenses on certain projects, utilizing
treasury stock in partial payment of amounts due under certain of its
incentive compensation plans, utilizing cash internally generated from
operations and, during the first quarter of 1992, selling its interest in
Monenco. In addition, in January, 1993, the Company sold its majority
interest in Majestic for approximately $31.7 million in cash. Since Majestic
had been fully consolidated, the net result to the Company was to increase
working capital by $8 million and cash by $4 million. In addition, the
Company implemented a company-wide cost reduction program in 1990, and again
in 1991 and 1993 to improve long-term financial results and suspended the
dividend on its common stock during the fourth quarter of 1990. Also, the
Company increased the aggregate amount available under its revolving credit
agreement from $53 million to $70 million in May, 1993. Management believes
that cash generated from operations, existing credit lines and additional
borrowings should probably be adequate to meet the Company's funding
requirements for at least the next twelve months. However, the withdrawal of
many commercial lending sources from both the real estate and construction
markets and/or restrictions on new borrowings and extensions on maturing
loans by these very same sources cause uncertainties in predicting liquidity.
In addition to internally generated funds, the Company has access to
additional funds under its $18 million short-term lines of credit and its $70
million long-term revolving credit facility. At December 31, 1993, the
Company has $18 million available under its short-term lines of credit and
$.5 million available under its revolving credit facility.
The full amount available under the credit facilities may be borrowed during
any fiscal quarter. However, financial covenants limiting the debt to equity
ratio contained in the agreements governing these facilities limit the amount
of borrowings which may be outstanding at the end of any fiscal quarter.
Based on these covenants, $4.3 million of additional borrowing capacity was
available at December 31, 1993. The financial covenants to which the Company
is subject include minimum levels of working capital, debt/net worth ratio,
net worth level and interest coverage all as defined in the loan documents.
The Company is in compliance with all of its covenants as of the most recent
<PAGE>
balance sheet date.
The working capital current ratio improved to 1.17:1 at the end of 1993,
compared to 1.14:1 at the end of 1992 and 1.16:1 at the end of 1991. Of the
total working capital of $36.9 million at the end of 1993, $15 million may
not be converted to cash within the next 12-18 months.
LONG-TERM DEBT
Long-term debt was $82.4 million at the end of 1993 which represented a
decrease of $3.4 million compared with $85.8 million at the end of 1992,
which was a decrease of $10.5 million from the $96.3 million at the end of
1991. Of the total decrease in 1992, $5.5 million was due to repayment of
loans relating to the purchase of Monenco in 1987 and, to a lesser degree,
equipment financings. The ratio of long-term debt to equity stood at .63:1
at the end of 1993 compared to .70:1 at the end of 1992 and .69:1 at the end
of 1991.
STOCKHOLDERS' EQUITY
The Company's book value per common share stood at $24.49 at December 31,
1993, compared to $23.29 per common share and $28.96 per common share at the
end of 1992 and 1991, respectively. The major factors impacting
stockholders' equity during the three-year period under review were results
of operations, preferred dividends and, in 1992 and 1993, treasury stock
issued in partial payment of incentive compensation.
At December 31, 1993, there were 1,433 common stockholders of record based on
the stockholders list maintained by the Company's transfer agent.
DIVIDENDS
There were no cash dividends declared during 1993, 1992 or 1991 on the
Company's outstanding common stock. It is management's intent to recommend
reinstating dividends on common stock once it is prudent to do so. In 1987,
the Company issued 1,000,000 depositary convertible exchangeable preferred
shares, each depositary share representing ownership of 1/10 of a share of
$21.25 convertible exchangeable preferred stock. During the three-year
period ended December 31, 1993, the Board of Directors declared regular
quarterly cash dividends of $5.3125 per share for the annual total of $21.25
per share (equivalent to quarterly dividends of $.53125 per depositary share
for an annual total of $2.125 per depositary share). Dividends on preferred
shares are cumulative and are payable quarterly before any dividends may be
declared or paid on the common stock of the Company (see Note 7 to Notes to
the Consolidated Financial Statements on page 47).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Reports of Independent Public Accountants, Consolidated Financial
Statements, and Supplementary Schedules, are set forth on the pages
that follow in this Report and are hereby incorporated herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III.
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information to be set forth in the section
entitled "Election of Directors" in the definitive proxy statement
involving election of directors in connection with the Annual Meeting
of Stockholders to be held on May 19, 1994 (the "Proxy Statement"),
which section is incorporated herein by reference. The Proxy
Statement will be filed with the Securities and Exchange Commission
not later than 120 days after December 31, 1993 pursuant to
Regulation 14A of the Securities and Exchange Act of 1934, as
amended.
Listed below are the names, offices held, ages and business
experience of all executive officers of the Company.
Year First Elected To Present
Name, Offices Held and Age Office and Business Experience
- - -------------------------- ------------------------------
David B. Perini, Director, He has served as a Director, President,
Chairman, President and Chief Chief Executive Officer and Acting
Executive Office - 56 Chairman since 1972. He became Chairman
on March 17, 1978 and has worked for the
Company since 1962 in various capacities.
Prior to being elected President, he
served as Vice President and General
Counsel.
Thomas E. Dailey, Director, He served in this capacity since July,
Executive Vice President, 1992, which entails overall responsibility
Construction - 61 for all of the Company's building, heavy and
international construction operations.
Prior to that, he served as President,
Construction Group since January, 1986.
Since June, 1984, he had been serving
as Vice President and General Manager,
Western Building Division. Before that
he was Chairman of the Company's
Detroit-based subsidiary, R. E. Dailey &
Co. Joining that company in 1956, he
was elected Vice President in 1964,
President in 1968 and Chairman in 1977.
James M. Markert, Director, He has served in his
Sr. Vice President, Finance and present capacity since June, 1984, which
Administration - 60 entails overall
responsibility for the Company's
financial and administrative matters.
Previously, he was Treasurer of Fluor
Corporation since 1980.
John H. Schwarz, Chief Exec. He has served in his present capacity
Officer of Perini Land and since April, 1992, which entails overall
Development Company - 55 responsibility for the Company's real
estate operations. Prior to that, he
served as Vice President, Finance and
Controls of Perini Land and Development
Company. Previously, he served as
Treasurer from August, 1984, and Director
of Corporate Planning since May, 1982.
He joined the Company in 1979 as Manager
of Corporate Development.
The Company's officers are elected on an annual basis at the Board of
Directors Meeting immediately following the Shareholders Meeting in May, to
<PAGE>
hold such offices until the Board of Directors Meeting following the next
Annual Meeting of Shareholders and until their respective successors have
been duly appointed or until their tenure has been terminated by the Board of
Directors, or otherwise.
_____________________________________________________________________________
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In response to Items 11-13, reference is made to the information to
be set forth in the section entitled "Election of Directors" in the
Proxy Statement, which is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PERINI CORPORATION AND SUBSIDIARIES
(a)1. The following financial statements and supplementary financial
information are filed as part of this report:
Pages
Financial Statements of the Registrant
Consolidated Balance Sheets as of December 31, 1993 and 34 - 35
1992
Consolidated Statements of Operations for the three years 36
ended December 31, 1993, 1992 and 1991
Consolidated Statements of Stockholders' Equity for the 37
three years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the three years 38 - 39
ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements 40 - 54
Report of Independent Public Accountants 55
(a)2. The following financial statement schedules are filed as part of
this report:
Pages
Report of Independent Public Accountants on Schedules 56
Schedule II -- Amounts Receivable from Related Parties and 57
Underwriters, Promoters and Employees other than Related
Parties
Schedule VIII -- Valuation and Qualifying Accounts and 58
Reserves
All other schedules are omitted because of the absence of the
conditions under which they are required or because the required
information is included in the Consolidated Financial Statements or
in the Notes thereto.
<PAGE>
Separate condensed financial information of the Company has been
omitted since restricted net assets of subsidiaries included in the
consolidated financial statements and its equity in the
undistributed earnings of 50% or less owned persons accounted for by
the equity method do not, in the aggregate, exceed 25% of
consolidated net assets.
(a)3. Exhibits
The exhibits which are filed with this report or which are
incorporated herein by reference are set forth in the Exhibit Index
which appears on pages 59 through 60. The Company will furnish a
copy of any exhibit not included herewith to any holder of the
Company's common and preferred stock upon request.
(b) During the quarter ended December 31, 1993, the Registrant made no
filings on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
PERINI CORPORATION
(Registrant)
Dated: August 2, 1994 s/David B. Perini
-----------------
David B. Perini
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Signature Title Date
(i) Principal Executive
Officer
David B. Perini Chairman, President
and Chief Executive
Officer
s/David B. Perini August 2, 1994
- - -----------------
David B. Perini
(ii) Principal Financial
Officer
John H. Schwarz Executive Vice
President,
Finance &
Administration
s/John H. Schwarz August 2, 1994
- - -----------------
John H. Schwarz
(iii) Principal Accounting
Officer
<PAGE>
Barry R. Blake Vice President and
Controller
s/Barry R. Blake August 2, 1994
- - ----------------
Barry R. Blake
(iv) Directors
David B. Perini )
Joseph R. Perini )By
Richard J. Boushka )
Marshall M. Criser )s/David B. Perini
Thomas E. Dailey )-----------------
Albert A. Dorman ) David B. Perini
Arthur J. Fox, Jr. )
Nancy Hawthorne )
Marshall A. Jacobs ) Attorney in Fact
Robert M. Jenney ) Dated: August 1, 1994
James M. Markert )
John J. McHale )
Jane E. Newman )
Bart W. Perini )
Consolidated Balance Sheets
December 31, 1993 and 1992
(In thousands except per share data)
Assets
1993 1992
---- ----
CURRENT ASSETS:
Cash, including cash equivalents of $20,354 and
$52,749 (Note 1) $ 35,871 $ 79,563
Accounts and notes receivable, including
retainage of $45,084 and $48,748 123,009 123,189
Unbilled work 14,924 8,878
Construction joint ventures (Notes 1 and 2) 61,156 29,654
Real estate inventory, at the lower of cost or
market (Note 1) 11,666 7,225
Deferred income taxes (Notes 1 and 5) 7,702 -
Other current assets 3,274 3,505
-------- --------
Total current assets $257,602 $252,014
-------- --------
REAL ESTATE DEVELOPMENT INVESTMENTS:
Land held for sale or development (including
land development costs) at the lower of cost
or market (Note 1) $ 48,011 $ 46,943
Investments in and advances to real estate
joint ventures (Notes 1, 2 and 11) 138,095 127,104
Real estate properties used in operations, less
accumulated depreciation of $3,638 and $3,181 12,678 16,235
Other - 636
-------- --------
Total real estate development investments $198,784 $190,918
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Land $ 1,451 $ 1,307
Buildings and improvements 15,566 15,455
Construction equipment 16,440 40,388
Other equipment 11,625 11,624
-------- --------
<PAGE>
$ 45,082 $ 68,774
Less - Accumulated depreciation (Note 1) 28,986 44,233
-------- --------
Total property and equipment, net $ 16,096 $ 24,541
-------- --------
OTHER ASSETS:
Other investments $ 2,188 $ 1,473
Goodwill (Note 1) 1,708 1,750
-------- --------
Total other assets $ 3,896 $ 3,223
-------- --------
$476,378 $470,696
======== ========
The accompanying notes are an integral part of these financial statements.
Liabilities and Stockholders' Equity
1993 1992
-------- --------
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 4) $ 7,617 $ 10,776
Accounts payable, including retainage of $45,508 and
$34,168 136,231 134,750
Deferred contract revenue 25,867 25,768
Accrued expenses 47,827 49,170
Accrued income taxes (Notes 1 and 5) 3,183 522
-------- --------
Total current liabilities $220,725 $220,986
-------- --------
DEFERRED INCOME TAXES AND OTHER LIABILITIES (Notes 1
and 5) $ 38,794 $ 30,830
-------- --------
LONG-TERM DEBT, less current maturities included above
(Note 4):
Real estate development $ 11,382 $ 17,661
Other 70,984 68,094
-------- --------
Total long-term debt $ 82,366 $ 85,755
-------- --------
MINORITY INTEREST (Note 1) $ 3,350 $ 11,360
-------- --------
CONTINGENCIES AND COMMITMENTS (Note 11)
STOCKHOLDERS' EQUITY (Notes 1, 7, 8, 9 and 10):
Preferred stock, $1 par value -
Authorized - 1,000,000 shares
Issued and outstanding - 100,000 shares
($25,000 aggregate liquidation preference) $ 100 $ 100
Series A junior participating preferred stock,
$1 par value -
Authorized - 200,000
Issued - none
Common stock, $1 par value -
Authorized - 7,500,000 shares
Issued - 4,985,160 shares 4,985 4,985
Paid-in surplus 59,875 60,019
Retained earnings 83,594 82,554
<PAGE>
Cumulative translation adjustment - (4,696)
ESOT related obligations (6,982) (7,888)
------- ---------
$141,572 $135,074
Less - Common stock in treasury, at cost - 654,353
shares and 835,036 shares 10,429 13,309
-------- --------
Total stockholders' equity $131,143 $121,765
-------- --------
$476,378 $470,696
======== ========
Consolidated Statements of Operations
For the years ended December 31, 1993, 1992 & 1991
(In thousands, except per share data)
1993 1992 1991
---------- ---------- --------
REVENUES (Notes 2 and 14) $1,100,116 $1,070,852 $991,908
COSTS AND EXPENSES (Notes 2 and
10):
Cost of operations $1,047,330 $1,048,663 $931,054
General, administrative and
selling expenses 44,212 41,328 48,530
---------- ---------- --------
$1,091,542 $1,089,991 $979,584
---------- ---------- --------
INCOME (LOSS) FROM OPERATIONS
(Note 14) $ 8,574 $ (19,139) $ 12,324
---------- ----------- --------
Other income, net (Note 6) 5,207 436 1,136
Interest expense, net of
capitalized amounts
(Notes 1, 3 and 4) (5,655) (7,651) (9,022)
----------- ----------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES $ 8,126 $ (26,354) $ 4,438
(Provision) credit for income
taxes (Notes 1 and 5) (4,961) 9,370 (1,260)
----------- ----------- ---------
NET INCOME (LOSS) $ 3,165 $ (16,984) $ 3,178
=========== =========== =========
EARNINGS (LOSS) PER COMMON
SHARES (Note 1) $ .24 $ (4.69) $ .27
========== =========== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1993, 1992 & 1991
(In thousands, except per share data)
<TABLE>
Cumulative ESOT
Preferred Common Paid-In Retained Translation Related Treasury
Stock Stock Surplus Earnings Adjustment Obligation Stock
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-December 31, 1990 $100 $4,985 $60,635 $100,610 $(3,080) $(9,528) $(17,040)
Net income - - - 3,178 - - -
Preferred stock-cash
dividends declared ($21.25
per share*) - - - (2,125) - - -
Restricted stock awarded - - (8) - - - 80
Translation adjustment - - - - 45 - -
Payments related to ESOT
notes - - - - - 792 -
Balance-December 31, 1991 $100 $4,985 $60,627 $101,663 $(3,035) $(8,736) $(16,960)
Net Income (loss) - - - (16,984) - - -
Preferred stock-cash
dividends declared ($21.25
per share*) - - - (2,125) - - -
Treasury stock issued in
partial payment of incentive
compensation - - (606) - - - 3,642
Restricted stock awarded - - (2) - - - 9
Translation adjustment - - - - (1,661) - -
Payments related to ESOT
notes - - - - - 848 -
Balance-December 31, 1992 $100 $4,985 $60,019 $ 82,554 $(4,696) $(7,888) $(13,309)
Net income - - - 3,165 - - -
Preferred stock-cash
dividends declared ($21.25
per share*) - - - (2,125) - - -
Treasury stock issued in
partial payment of incentive
compensation - - (143) - - - 2,872
Restricted stock awarded - - (1) - - - 8
Related to Sale of Majestic
- - - - 4,696 - -
Payments related to ESOT
notes - - - - - 906 -
Balance-December 31, 1993 $100 $4,985 $59,875 $ 83,594 $ - $(6,982) $(10,429)
</TABLE>
*Equivalent to $2.125 per depositary share (see Note 7).
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Cash Flows
For the years ended December 31, 1993, 1992 & 1991
(In thousands)
1993 1992 1991
-------- --------- --------
<PAGE>
Cash Flows from Operating Activities:
Net income (loss) $ 3,165 $(16,984) $ 3,178
Adjustments to reconcile net income
(loss) to net cash from operating
activities -
Depreciation and amortization 3,515 6,297 7,190
Non-current deferred taxes and other
liabilities 11,239 (13,236) 3,406
Distributions greater (less) than
earnings of joint ventures and
affiliates (2,821) 9,412 (2,291)
Writedown of certain real estate
properties - 31,368 2,800
(Gain) on sale of Monenco - (1,976) -
(Gain) on sale of Majestic (Notes 1
and 6) (4,631) - -
(Gain) loss on sale of fixed assets (299) (570) (94)
Minority interest, net (78) 2,001 1,292
Cash provided from (used by) changes in
components of working capital other
than cash, notes payable and current
maturities of long-term debt (19,653) 35,819 29,549
Real estate development investments
other than joint ventures 10,908 6,253 18,322
Other non-cash items, net (2,922) (2,972) 7,501
--------- --------- --------
NET CASH FROM OPERATING ACTIVITIES $ (1,577) $ 55,412 $ 70,853
--------- --------- --------
Cash Flows from Investing Activities:
Proceeds from sale of property and
equipment $ 1,344 $ 1,890 $ 1,815
Cash distributions of capital from
unconsolidated joint ventures 4,977 3,413 4,469
Acquisition of property and equipment (4,387) (4,044) (6,614)
Improvements to land held for sale or
development (4,227) (4,341) (8,307)
Improvements to and acquisitions of
real estate properties used in
operations (614) (6,310) (894)
Capital contributions to unconsolidated
joint ventures (24,579) (8,425) (8,503)
Advances to real estate joint ventures,
net (16,031) (12,091) (33,991)
Proceeds from sale of Monenco shares - 14,180 -
Proceeds from sale of Majestic, net of
subsidiary's cash 4,377 - -
Investments in other activities - (3) 1,127
--------- --------- ---------
<PAGE>
NET CASH USED BY INVESTING ACTIVITIES $(39,140) $(15,731) $(50,898)
--------- --------- ---------
Consolidated Statements of Cash Flows
(Continued)
For the years ended December 31, 1993,
1992 & 1991
(In thousands)
Cash Flows from Financing Activities:
Proceeds from long-term debt $ 8,014 $ 9,571 $ 4,563
Repayment of long-term debt (11,600) (17,590) (18,661)
Cash dividends paid (2,125) (2,125) (2,125)
Treasury stock issued 2,736 3,043 72
Repayment of notes payable to banks - - (8,000)
--------- --------- ---------
NET CASH USED BY FINANCING ACTIVITIES $ (2,975) $ (7,101) $(24,151)
--------- --------- ---------
Effect of Exchange Rate Changes on Cash $ - $ (831) $ 18
--------- --------- ---------
Net Increase (Decrease) in Cash $(43,692) $ 31,749 $ (4,178)
Cash and Cash Equivalents at Beginning of
Year 79,563 47,814 51,992
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 35,871 79,563 $ 47,814
========= =========
=========
Supplemental Disclosures of Cash Paid
During the Year For:
Interest, net of amounts capitalized $ 5,947 $ 10,995 $ 7,953
========= ========= =========
Income tax payments (refunds) $ 843 $ (2,603) $(10,446)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1992 & 1991
[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[a] Principles of Consolidation
The consolidated financial statements include the accounts of Perini
Corporation, its subsidiaries and certain majority-owned real estate joint
ventures (the "Company"). All subsidiaries are wholly-owned except Majestic
Contractors Limited ("Majestic"), which was approximately 74%-owned and
Perland Environmental Technologies, Inc., which is approximately 90%-owned.
All significant intercompany transactions and balances have been eliminated
in consolidation. Non-consolidated joint venture interests are accounted for
on the equity method with the Company's share of revenues and costs in these
interests included in "Revenues" and "Cost of Operations," respectively, in
<PAGE>
the accompanying consolidated statements of operations. All significant
intercompany profits between the Company and its joint ventures have been
eliminated in consolidation. Taxes are provided on joint venture results in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes.
In January, 1993, the Company sold its 74%-ownership in Majestic, its
Canadian pipeline construction subsidiary, for $31.7 million which resulted
in an after tax gain of approximately $1.0 million.
Effective July 1, 1993, the Company acquired Gust K. Newberg Construction
Co.'s ("Newberg") interest in certain construction projects and related
equipment. The purchase price for the acquisition was (i) approximately $3
million in cash for the equipment paid by a third party leasing company,
which in turn simultaneously entered into an operating lease agreement with
the Company for the use of said equipment, (ii) the greater of $1 million or
25% of the aggregate pretax earnings during the period from April 1, 1993
through December 31, 1994, net of payments accruing to Newberg as described
in (iii) below, and (iii) 50% of the aggregate of net profits earned from
each project from April 1, 1993 through December 31, 1994 and, with regard to
one project through December 31, 1995. This acquisition is being accounted
for as a purchase. If this acquisition had been consummated as of January 1,
1992, the 1992 and 1993 pro forma results would have been, respectively,
Revenues of $1,164,444,000 and $1,134,264,000 and Net Income (Loss) of
$(14,935,000) ($(4.18) per common share) and $3,724,000 ($.37 per common
share).
[b] Translation of Foreign Currencies
The accounts of the Canadian subsidiary are translated in accordance with
Statement of Financial Accounting Standards (SFAS) No. 52, under which
translation adjustments are accumulated directly as a separate component of
stockholders' equity. Gains and losses on foreign currency transactions are
included in results of operations during the period in which they arise.
[c] Method of Accounting for Contracts
Profits from construction contracts and construction joint ventures are
generally recognized by applying percentages of completion for each year to
the total estimated profits for the respective contracts. The percentages of
completion are determined by relating the actual cost of the work performed
to date to the current estimated total cost of the respective contracts.
When the estimate on a contract indicates a loss, the Company's policy is to
record the entire loss. The cumulative effect of revisions in estimates of
total cost or revenue during the course of the work is reflected in the
accounting period in which the facts which caused the revision became known.
An amount equal to the costs attributable to unapproved change orders and
claims is included in the total estimated revenue when realization is
probable. Profit from claims is recorded in the year such claims are
resolved.
In accordance with normal practice in the construction industry, the Company
includes in current assets and current liabilities amounts related to
construction contracts realizable and payable over a period in excess of one
year. Unbilled work represents the excess of contract costs and profits
recognized to date on the percentage of completion accounting method over
billings to date on certain contracts. Deferred contract revenue represents
the excess of billings to date over the amount of contract costs and profits
recognized to date on the percentage of completion accounting method on the
remaining contracts.
[d] Methods of Accounting for Real Estate Operations
All real estate sales are recorded in accordance with SFAS. No. 66. Gross
profit is not recognized in full unless the collection of the sale price is
reasonably assured and the Company is not obliged to perform significant
activities after the sale. Unless both conditions exist, recognition of all
or a part of gross profit is deferred.
<PAGE>
The gross profit recognized on sales of real estate is determined by relating
the estimated total land, land development and construction costs of each
development area to the estimated total sales value of the property in the
development. Real estate investments are stated at the lower of cost, which
includes applicable interest and real estate taxes during the development and
construction phases, or market. The market or net realizable value of a
development is determined by estimating the sales value of the development in
the ordinary course of business less the estimated costs of completion (to
the stage of completion assumed in determining the selling price), holding
and disposal. Estimated sales values are forecast based on comparable local
sales (where applicable), trends as foreseen by knowledgeable local
commercial real estate brokers or others active in the business and/or
project specific experience such as offers made directly to the Company
relating to the property. If the net realizable value of a development is
less than the cost of a development, a provision is made to reduce the
carrying value of the development to net realizable value. These provisions
(or writedowns to net realizable value) amounted to $31.4 million in 1992 and
$2.8 million in 1991. At present, the Company believes its remaining real
estate properties are carried at amounts at or below their net realizable
values considering the expected timing of their disposal.
Interest expense incurred by the Company and capitalized during the
development or construction phase amounted to $.2 million in 1993 and 1992,
and $2.2 million in 1991.
[e] Depreciable Property and Equipment
Land, buildings and improvements, construction and computer-related equipment
and other equipment are recorded at cost. Depreciation is provided primarily
using accelerated methods for construction and computer-related equipment and
the straight-line method for the remaining depreciable property.
[f] Goodwill
Goodwill represents the excess of the costs of subsidiaries acquired over the
fair value of their net assets as of the dates of acquisition. These amounts
are being amortized on a straight-line basis over 40 years.
[g] Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," the
adoption of which did not result in a material impact on the accompanying
financial statements (see Note 5).
It is the policy of the Company to accrue appropriate U.S. and foreign income
taxes on earnings of foreign subsidiaries which are intended to be remitted
to the Company.
[h] Earnings Per Common Share
Computations of earnings per common share amounts are based on the weighted
average number of common shares outstanding during the respective periods.
During the three-year period ended December 31, 1993, earnings per common
share reflect the effect of preferred dividends accrued during the year.
Common stock equivalents related to additional shares of common stock
issuable upon exercise of stock options (see Note 9) have not been included
since their effect would be immaterial or antidilutive. Earnings per common
share on a fully diluted basis are not presented because the effect of
conversion of the Company's depositary convertible exchangeable preferred
shares into common stock is antidilutive.
[i] Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with original
maturities of three months or less.
[j] Reclassifications
Certain prior year amounts have been reclassified to be consistent with the
current year classifications.
<PAGE>
[2] JOINT VENTURES
The Company, in the normal conduct of its business, has entered into certain
partnership arrangements, referred to as "joint ventures," for construction
and real estate development projects. Each of the joint venture participants
is usually committed to supply a predetermined percentage of capital, as
required, and to share in a predetermined percentage of the income or loss of
the project. Summary financial information (in thousands) for construction
and real estate joint ventures accounted for on the equity method for the
three years ended December 31, 1993 follows:
Construction Joint Ventures
Financial position at December 31, 1993 1992 1991
-------- --------- ---------
Current assets $241,905 $216,568 $177,388
Property and equipment, net 17,228 18,203 10,434
Current liabilities (151,181) (155,026) (103,785)
--------- --------- ---------
Net assets $107,952 $ 79,745 $ 84,037
========= ========= =========
Operations for the year ended
December 31, 1993 1992 1991
--------- --------- ---------
Revenue $626,327 $487,758 $419,772
Cost of operations 574,383 445,494 381,508
--------- --------- ---------
Pretax income $ 51,944 $ 42,264 $ 38,264
========= ========= =========
Company's share of joint ventures
Revenue $293,547 $254,265 $207,458
Cost of operations 272,137 231,564 184,996
--------- --------- ---------
Pretax income $ 21,410 $ 22,701 $ 22,462
========= ========= =========
Equity $ 61,156 $ 29,654 $ 29,958
========= ========= =========
Real Estate Joint Ventures
Financial position at December 31, 1993 1992 1991
--------- --------- ---------
Property held for sale or
development $ 35,855 $ 17,902 $ 50,822
Investment properties, net 191,606 243,477 239,089
Other assets 61,060 59,688 51,664
Long-term debt (103,090) (151,538) (168,937)
Other liabilities* (256,999) (229,865) (205,326)
--------- --------- ---------
Net assets (liabilities) $(71,568) $(60,336) $(32,688)
========= ========= =========
Operations for the year ended 1993 1992 1991
December 31, --------- --------- ---------
Revenue $ 83,710 $ 64,776 $ 59,501
Cost of operations 101,623 95,823 89,938
--------- --------- ---------
<PAGE>
Pretax income (loss) $(17,913) $(31,047) $(30,437)
--------- --------- ---------
Company's share of joint ventures
Revenue $ 43,590 $ 27,118 $ 38,223
Cost of operations 50,339 46,423 42,523
--------- --------- ---------
Pre-tax income (loss) $ (6,749) $(19,305) $ (4,300)
========= ========= =========
Equity ** $(27,768) $(23,542) $ (4,889)
========= ========= =========
* Included in "Other Liabilities" are advances from joint venture partners
in the amount of $181.3 million in 1991, $209.0 million in 1992 and
$239.4 million in 1993. Of the total advances from joint venture
partners, $127.1 million in 1991, $150.6 million in 1992 and $165.9
million in 1993 represented advances from the Company.
** When the Company's equity in a real estate joint venture is combined
with advances by the Company to that joint venture, each joint venture
has a positive investment balance at December 31, 1993.
[3] NOTES PAYABLE TO BANKS
The Company maintains unsecured short-term lines of credit totaling $18
million at December 31, 1993. In support of these credit lines, the Company
generally has agreed to pay fees which approximate 1/4 of 1% of the amount of
the lines. Information relative to the Company's short-term debt activity
under such lines in 1993 and 1992 follows (in thousands):
1993 1992
------- -------
Borrowings during the year:
Average $ 8,451 $ 3,980
Maximum $18,000 $17,000
At year-end $ - $ -
Weighted average interest rates:
During the year 6.2% 6.4%
At year-end - -
[4] LONG-TERM DEBT
Long-term debt of the Company at December 31, 1993 and 1992 consists of the
following (in thousands):
1993 1992
------- -------
Real Estate Development:
Industrial revenue bonds, primarily at
65% of prime, payable in semi-annual
installments $ 1,683 $ 5,340
Mortgages on real estate, at rates
ranging from 4 7/8% to 10.82%, payable
in installments 16,027 19,732
Other indebtedness - 687
------- -------
Total $17,710 $25,759
Less - current maturities 6,328 8,098
------- -------
Net real estate development long-term
debt $11,382 $17,661
======= =======
<PAGE>
Other:
Revolving credit loans at an average rate
of 5.8% in 1993 and 5% in 1992 $60,000 $53,125
ESOT Notes at 8.24%, payable in
semi-annual installments (Note 7) 6,238 7,014
Industrial revenue bonds at various
rates, payable in installments to 2005 4,000 5,254
Other indebtedness 2,035 5,379
-------
-------
Total $72,273 $70,772
Less - current maturities 1,289 2,678
------- -------
Net other long-term debt $70,984 $68,094
======= =======
Payments required under these obligations amount to approximately $7,617 in
1994, $5,359 in 1995, $62,666 in 1996, $2,656 in 1997, $3,601 in 1998 and
$8,084 for the years 1999 and beyond.
The Company's revolving credit agreement, as amended, with a group of major
banks provides for, among other things, the Company to borrow up to an
aggregate of $70 million, with a $15 million maximum of such amount also
being available for letters of credit. The Company may choose from three
interest rate alternatives including a prime-based rate, as well as other
interest rate options based on LIBOR (London inter-bank offered rate) or
participating bank certificate of deposit rates. Borrowings and repayments
may be made at any time through April 30, 1996, at which time all outstanding
loans under the agreement must be paid or otherwise refinanced. The Company
must pay a commitment fee of 1/2 of 1% annually on the unused portion of the
commitment.
The revolving credit agreement, as well as certain other loan agreements,
provides for, among other things, maintaining specified working capital and
tangible net worth levels and, additionally, imposes limitations on
indebtedness and future investment in real estate development projects.
[5] INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109 on accounting for
income taxes. This standard determines deferred income taxes based on the
estimated future tax effects of differences between the financial statement
and tax basis of assets and liabilities, given the provisions of enacted tax
laws. Prior to the implementation of this statement, the Company accounted
for income taxes under Accounting Principles Board Opinion No. 11. The
impact of adopting SFAS No. 109 was not material, and accordingly, there is
no cumulative effect of a change in accounting method presented in the
statement of operations for the year ended December 31, 1993. Prior year
financial statements have not been restated to apply the provisions of SFAS
No. 109.
The (provision) credit for income taxes is comprised of the following (in
thousands):
Federal Foreign State Total
------- ------- ----- -----
1993
Current $(2,824) $ - $ (430) $(3,254)
Deferred (1,808) - 101 (1,707)
-------- -------- -------- --------
$(4,632) $ - $ (329) $(4,961)
======== ======== ======== ========
<PAGE>
1992
Current $ - $(5,486) $ (325) $(5,811)
Deferred 13,236 814 1,131 15,181
------- -------- -------- --------
$13,236 $(4,672) $ 806 $ 9,370
======= ======== ======== ========
1991
Current $ 5,964 $(2,497) $ (200) $ 3,267
Deferred (5,325) 742 56 (4,527)
-------- -------- -------- --------
$ 639 $(1,755) $ (144) $(1,260)
======== ======== ======== ========
The domestic and foreign components of income (loss) before income
taxes are as follows (in thousands):
U.S. Foreign Total
-------- ------- --------
1993 $ 8,126 $ - $ 8,126
1992 $(42,238) $15,884 $(26,354)
1991 $ 328 $ 4,110 $ 4,438
The table below reconciles the difference between the statutory
federal income tax rate and the effective rate provided in the
statements of operations.
1993 1992 1991
---- ---- ----
Statutory federal income
tax rate 34% (34)% 34%
Foreign taxes - (1) 3
State income taxes, net
of federal tax benefit 2 (1) -
Reversal of tax valuation
reserves no longer
required - - (10)
Sale of Canadian
subsidiary 24 - -
Other 1 - 1
---- ----- ----
61% (36)% 28%
==== ===== ====
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of December 31, 1993 (in thousands):
Deferred Deferred Tax
Tax Assets Liabilities
---------- ------------
Provision for estimated losses $ 9,684 $ -
Contract losses 2,841 -
Joint ventures - construction - 6,996
Joint ventures - real estate - 18,078
Timing of expense recognition 5,012 -
Capitalized carrying charges - 2,301
Net operating loss carryforwards 916 -
Alternative minimum tax credit
carryforwards 3,567 -
General business tax credit
carryforwards 4,038 -
<PAGE>
Foreign tax credit carryforwards 1,352 -
Other, net 422 -
------- -------
$27,832 $27,375
Valuation allowance for deferred tax
assets (2,251) -
-------- -------
Total $25,581 $27,375
======== =======
The valuation allowance for deferred tax assets is principally attributable
to the net operating loss carryforwards of Perland Environmental
Technologies, Inc. and foreign tax credit carryforwards resulting from the
1993 sale of the Company's Canadian subsidiary. Any portion of the valuation
allowance attributable to these deferred tax assets for which benefits are
subsequently recognized will be applied to reduce income tax expense.
At December 31, 1993, the Company has unused tax credits and net operating
loss carryforwards for income tax reporting purposes which expire as follows
(in thousands):
Unused Investment Foreign Net Operating Loss
Tax Credits Tax Credits Carryforwards
----------------- ----------- -----------------
1994-1998 $ 32 $1,352 $ -
1999-2002 935 - -
2003-2006 3,071 - 2,700
------ ------ -------
$4,038 $1,352 $ 2,700
====== ====== =======
Approximately $2.7 million of the net operating loss carryforwards can only
be used against the taxable income of the corporation in which the loss was
recorded for tax and financial reporting purposes.
[6] OTHER INCOME, NET
Other income items for the three years ended December 31, 1993 are as follows
(in thousands):
1993 1992 1991
------ ------- -------
Interest and dividend income $ 624 $ 1,783 $ 1,016
Minority interest (Note 1) 167 (3,039) (76)
Gain on sale of Majestic (Note 1) 4,631 - -
Gain on sale of investment in
Monenco - 1,976 -
Miscellaneous income (expense), net (215) (284) 196
------- -------- -------
$5,207 $ 436 $ 1,136
======= ======== =======
[7] CAPITALIZATION
In July 1989, the Company sold 262,774 shares of its $1 par value common
stock, previously held in treasury, to its Employee Stock Ownership Trust
("ESOT") for $9,000,000. The ESOT borrowed the funds via a placement of
8.24% Senior Unsecured Notes ("Notes") guaranteed by the Company. The Notes
are payable in 20 equal semi-annual installments of principal and interest
commencing in January 1990. The Company's annual contribution to the ESOT,
plus any dividends accumulated on the Company's common stock held by the
ESOT, will be used to repay the Notes. Since the Notes are guaranteed by the
Company, they are included in "Long-Term Debt" with an offsetting reduction
in "Stockholders' Equity" in the accompanying consolidated balance sheets.
<PAGE>
The amount included in "Long-Term Debt" will be reduced and "Stockholders'
Equity" reinstated as the Notes are paid by the ESOT.
In June 1987, net proceeds of approximately $23,631,000 were received from
the sale of 1,000,000 depositary convertible exchangeable preferred shares
(each depositary share representing ownership of 1/10 of a share of $21.25
convertible exchangeable preferred stock, $1 par value) at a price of $25 per
depositary share. Annual dividends are $2.125 per depositary share and are
cumulative. Generally, the liquidation preference value is $25 per
depositary share plus any accumulated and unpaid dividends. The preferred
stock of the Company, as evidenced by ownership of depositary shares, is
convertible at the option of the holder, at any time, into common stock of
the Company at a conversion price of $37.75 per share of common stock. The
preferred stock is redeemable at the option of the Company at any time after
June 15, 1990, in whole or in part, at declining premiums until June 1997 and
thereafter at $25 per share plus any unpaid dividends. The preferred stock
is also exchangeable at the option of the Company, in whole but not in part,
on any dividend payment date into 8 1/2% convertible subordinated debentures
due in 2012 at a rate equivalent to $25 principal amount of debentures for
each depositary share.
[8] SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Under the terms of the Company's Shareholder Rights Plan, as amended, the
Board of Directors of the Company declared a distribution on September 23,
1988 of one preferred stock purchase right (a "Right") for each outstanding
share of common stock. Under certain circumstances, each Right will entitle
the holder thereof to purchase from the Company one one-hundredth of a share
(a "Unit") of Series A Junior Participating Cumulative Preferred Stock, $1
par value (the "Preferred Stock"), at an exercise price of $100 per Unit,
subject to adjustment. The Rights will not be exercisable or transferable
apart from the common stock until the occurrence of certain events viewed to
be an attempt by a person or group to gain control of the Company (a
"triggering event"). The Rights will not have any voting rights or be
entitled to dividends.
Upon the occurrence of a triggering event, each Right will be entitled to
that number of Units of Preferred Stock of the Company having a market value
of two times the exercise price of the Right. If the Company is acquired in
a merger or 50% or more of its assets or earning power is sold, each Right
will be entitled to receive common stock of the acquiring company having a
market value of two times the exercise price of the Right. Rights held by
such a person or group causing a triggering event may be null and void.
The Rights are redeemable at $.02 per Right by the Board of Directors at any
time prior to the occurrence of a triggering event and will expire on
September 23, 1998.
[9] STOCK OPTIONS
At December 31, 1993 and 1992, 481,610 shares of the Company's authorized but
unissued common stock were reserved for issuance to employees under its 1982
Stock Option Plan. Options are granted at fair market value on the date of
grant and generally become exercisable in two equal annual installments on
the second and third anniversary of the date of grant and expire eight years
from the date of grant. The options granted in 1992 become exercisable on
March 31, 2001 if the Company achieves a certain profit target in the year
2000, may become exercisable earlier if certain interim profit targets are
achieved, and, to the extent not exercised, expire 10 years from the date of
grant. A summary of stock option activity related to the Company's stock
option plan is as follows:
<PAGE>
Number of
Number of Option Price Shares
Shares Per Share Exercisable
--------- ------------ -----------
Outstanding at
December 31, 1991 216,925 $11.06-$33.06 71,025
Granted 252,000 $16.44
Canceled (30,100) $11.06-$33.06
Outstanding at
December 31, 1992 438,825 $11.06-$33.06 91,075
Granted - -
Canceled (4,400) $11.06-$33.06
Outstanding at
December 31, 1993 434,425 $11.06-$33.06 143,000
When options are exercised, the proceeds are credited to stockholders'
equity. In addition, the income tax savings attributable to nonqualified
options exercised is credited to paid-in surplus.
[10] EMPLOYEE BENEFIT PLANS
The Company and its U.S. subsidiaries have a defined benefit plan which
covers its executive, professional, administrative and clerical employees,
subject to certain specified service requirements. The plan is
noncontributory and benefits are based on an employee's years of service and
"final average earnings", as defined. The plan provides reduced benefits for
early retirement and takes into account offsets for social security benefits.
All employees are vested after 5 years of service. Net pension cost for
1993, 1992 and 1991 follows (in thousands):
1993 1992 1991
------ ------ ------
Service cost - benefits earned during
the period $1,000 $ 896 $ 949
Interest cost on projected benefit
obligation 2,862 2,314 2,456
Return on plan assets:
Actual (4,002) (1,220) (5,143)
Deferred 1,309 (1,043) 2,895
Other 19 19 18
------ ------- -------
Net pension cost $1,188 $ 966 $1,175
====== ======= =======
Actuarial assumptions used:
Discount rate 7 1/2%* 8 1/2% 8 1/2%
Rate of increase in compensation 5 1/2%* 6 1/2% 6 1/2%
Long-term rate of return on assets 8%* 9% 9%
* Rates were changed effective December 31, 1993 and resulted in a net
increase of $3.1 million in the projected benefit obligation referred to
below.
The Company's plan has assets in excess of accumulated benefit obligation.
Plan assets generally include equity and fixed income funds. The status of
the Company's employee pension benefit plan is summarized below (in
thousands):
December 31,
1993 1992
------ -------
Assets available for benefits:
<PAGE>
Funded plan assets at fair value $32,795 $30,305
Accrued pension expense 3,780 2,592
------- -------
Total assets $36,575 $32,897
------- -------
Actuarial present value of benefit
obligations:
Accumulated benefit obligations,
including vested benefits of $31,837
and $26,790 $32,463 $27,243
Effect of future salary increases 6,468 6,229
------- -------
Projected benefit obligations $38,931 $33,472
------- -------
Assets available less than projected
benefits $ 2,356 $ 575
======= =======
Consisting of:
Unamortized net liability existing at
date of adopting SFAS No. 87 $ 41 $ 47
Unrecognized net loss 2,260 460
Unrecognized prior service cost 55 68
------- -------
$ 2,356 $ 575
======= =======
The Company's policy is generally to fund currently the costs accrued under
the pension plan and the Section 401(k) plan described below.
The Company also has noncontributory Section 401(k) and employee stock
ownership plans (ESOP) which cover its executive, professional,
administrative and clerical employees, subject to certain specified service
requirements. Under the terms of the Section 401(k) plan, the provision is
based on a specified percentage of profits, subject to certain limitations.
Contributions to the related employee stock ownership trust (ESOT) are
determined by the Board of Directors and may be paid in cash or shares of
company common stock.
In addition, the Company has an incentive compensation plan for key employees
which is generally based on achieving certain levels of profit within their
respective business units.
The aggregate amounts provided under these employee benefit plans were $9.1
million in 1993, $10.8 million in 1992 and $12.7 million in 1991.
The Company also contributes to various multiemployer union retirement plans
under collective bargaining agreements, which provide retirement benefits for
substantially all of its union employees. The aggregate amounts provided in
accordance with the requirements of these plans were $5.2 million in 1993,
$11.2 million in 1992 and $8.5 million in 1991. The Multiemployer Pension
Plan Amendments Act of 1980 defines certain employer obligations under
multiemployer plans. Information regarding union retirement plans is not
available from plan administrators to enable the Company to determine its
share of unfunded vested liabilities.
[11] CONTINGENCIES and COMMITMENTS
At December 31, 1993, the Company has guaranteed approximately $1.7 million
of debt incurred by various joint ventures in addition to the guarantees
referred to below.
<PAGE>
In connection with a real estate development joint venture known as Rincon
Center, the Company's wholly-owned real estate subsidiary has guaranteed the
payment of interest on both mortgage and bond financing covering a project
with loans totaling $62 million; has issued a secured letter of credit to
collateralize $4.5 million of these borrowings; has guaranteed amortization
payments up to $10.4 million on these borrowings; and has guaranteed a master
lease under a sale operating lease-back transaction. In calculating the
potential obligation under the master lease guarantee, the Company has an
agreement with its lenders which employs a 10% discount rate and no increases
in future rental rates beyond current lease terms. Based on these
assumptions, management believes its additional future obligation will not
exceed $2.6 million. The Company has also guaranteed $5.0 million of the
subsidiary's $10.4 million amortization guaranty and any obligation under the
master lease during the next five years. As part of the sale operating
lease-back transaction, the joint venture, in which the Company's real estate
subsidiary is a 46% general partner, agreed to obtain a financial commitment
on behalf of the lessor to replace at least $43 million of long-term
financing by July 1, 1993. To satisfy this obligation, the partnership
successfully extended existing financing to July 1, 1998. To complete the
extension, the partnership had to advance funds sufficient to reduce the
financing from $46.5 million to $40.5 million. In addition, as part of the
obligations of the extension, the partnership will have to further amortize
the debt from its current $40.5 million to $33 million over the next five
years. If by January 1, 1998, the joint venture has not received a further
extension or new commitment for financing on the property for at least $33
million, the lessor will have the right under the lease to require the joint
venture to purchase the property for $18.8 million in excess of the debt.
In 1993, the joint venture also extended $29 million of the $62 million
financing mentioned above through October 1, 1998. This extension required a
$.6 million up front paydown and also requires the joint venture to amortize
up to $13 million of the principal over the next five years. Under certain
conditions, the amortization could be as low as $9 million. It is expected
that some but not all of the amortization requirements will be generated by
the project's operations. The Company is obligated to fund any of the
following loan amortization and/or lease payments at Rincon in the event
sufficient funds are not generated by the property or contributed to by its
partners: $4,226,000 in 1994; $4,948,000 in 1995; $5,531,000 in 1996; and
$5,886,000 in 1997. Based on current Company forecasts, it is expected the
maximum exposure to service these commitments in each of the years through
1997 is as follows: $1,200,000 in 1994; $1,800,000 in 1995; $2,200,000 in
1996; and $1,200,000 in 1997.
In a separate agreement related to this same property, the 20% co-general
partner has indicated it does not have nor does it expect to have the
financial resources to fund its share of capital calls. Therefore, the
Company's wholly-owned real estate subsidiary agreed to lend this 20% co-
general partner on an as-needed basis, its share of any capital calls which
the partner cannot meet. In return, the Company's subsidiary receives a
priority return from the partnership on those funds it advances for its
partner and penalty fees in the form of rights to certain other distributions
due the borrowing partner from the partnership. The severity of the penalty
fees increases in each succeeding year for the next several years. During
1993, the subsidiary advanced $1.7 million under this agreement, primarily to
meet the principal payment obligations of the loan extensions described
above.
In connection with a second real estate development joint venture known as
the Resort at Squaw Creek, the Company's wholly-owned real estate subsidiary
has guaranteed the payment of interest on mortgage financing with a total
bank loan value currently estimated at $48 million; has guaranteed $10
million of loan principal; has posted a letter of credit for $1.6 million as
its part of credit support required to extend the maturity of the $48 million
loan to May, 1995, which letter of credit is guaranteed by both the Company
and its subsidiary; and has guaranteed leases which aggregate $2 million on a
present value basis as discounted at 10%. It also has an obligation through
<PAGE>
the year 2001 to cover approximately a $2 million per year preferred return
at the Resort if the funds are not generated from hotel operations. Although
results have shown improvement since the Resort opened in late 1990, it is
not expected that hotel operations will contribute to the obligation during
1994. Although the results of the hotel's operations can be somewhat weather
dependent, management believes that operations should contribute increasing
amounts toward the coverage of the preferred return over the next three to
four years and will at some point during that period, fully cover it.
In connection with a third real estate development joint venture known as The
Oaks, the Company's wholly-owned real estate subsidiary has guaranteed 50% of
the outstanding loan, up to a maximum of $12.5 million of principal of the
loan, of which $5.6 million represents the subsidiary's share of the amount
outstanding at December 31, 1993.
Included in the loan agreements related to the above joint ventures, among
other things, are provisions that, under certain circumstances, could limit
the subsidiary's ability to transfer funds to the Company. In the opinion of
management, these provisions should not affect the operations of the Company
or the subsidiary.
On July 30, 1993, the U.S. District Court (D.C.), in a preliminary opinion,
upheld terminations for default on two adjacent contracts for subway
construction between Mergentime-Perini, under two joint ventures, and the
Washington Metropolitan Area Transit Authority ("WMATA") and found the
Mergentime Corporation, Perini Corporation and the Insurance Company of North
America, the surety, jointly and severally liable to WMATA for damages in the
amount of $16.5 million, consisting primarily of excess reprocurement costs
to complete the projects. Many issues were left partially or completely
unresolved by the opinion, including substantial joint venture claims against
WMATA. Any such amounts awarded to the joint ventures could serve to offset
the above damages awarded. The ultimate financial impact, if any, of this
judgement is not yet determinable, and therefore, no impact is reflected in
the 1993 financial statements.
Contingent liabilities also include liability of contractors for performance
and completion of both company and joint venture construction contracts. In
addition, the Company is a defendant in various lawsuits (some of which are
for significant amounts). In the opinion of management, the resolution of
these matters will not have a material effect on the accompanying financial
statements.
[12] RELATED PARTY TRANSACTIONS
During 1984, the Company transferred certain of its income producing real
estate properties and real estate joint venture interests to a new company,
Perini Investment Properties, Inc. (PIP) and distributed the common stock of
PIP to the company's shareholders on a share-for-share basis. In 1992 PIP
changed its name to Pacific Gateway Properties, Inc. (PGP), reflecting that
company's new West Coast focus and minimal ongoing interdependence with
Perini Corporation. Hereafter, PIP will be referred to as PGP. Initially, a
majority of PGP's directors were also directors of the Company and, the two
companies also had the same initial controlling stockholder group.
Currently, the two companies have only one common director.
Pursuant to a Service Agreement with PGP, which was terminated effective June
30, 1991, the Company provided certain management, operational, accounting,
tax and other administrative services to PGP for a fee based on a formula
that included an annual base fee and property acquisition fees plus
reimbursement for certain expenses. Fees and expenses under this agreement
amounted to $182,000 in 1991.
PGP is a partner in certain of the real estate joint ventures discussed in
Note 2 and in the first real estate development joint venture referred to in
Note 11.
<PAGE>
[13] UNAUDITED QUARTERLY FINANCIAL DATA
The following table sets forth unaudited quarterly financial data for the
years ended December 31, 1993 and 1992 (in thousands except per share
amounts):
1993 by Quarter
1st 2nd 3rd 4th
-------- -------- -------- --------
Revenues $258,043 $348,004 $274,795 $219,274
Net income $ 745 $ 965 $ 679 $ 776
Earnings per common share $ .05 $ .10 $ .04 $ .05
1992 by Quarter
1st 2nd 3rd 4th
-------- -------- -------- --------
Revenues $246,126 $238,059 $289,602 $297,065
Net income (loss) $ 1,510 $ 960 $ 2,701 $(22,155)
Earnings (loss) per common
share $ .25 $ .10 $ .53 $ (5.47)
[14] BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company is currently engaged in the construction and real estate
development businesses. The following tables set forth certain business and
geographic segment information relating to the Company's operations for the
three years ended December 31, 1993 (in thousands):
Business Segments
Revenues
1993 1992 1991
---------- ---------- --------
Construction $1,030,341 $1,023,274 $919,641
Real Estate 69,775 47,578 72,267
---------- ---------- --------
$1,100,116 $1,070,852 $991,908
========== ========== ========
Income (Loss) From Operations
1993 1992 1991
---------- ---------- ---------
Construction $ 15,164 $ 34,387 $ 24,938
Real Estate 240 (47,206) (7,239)
Corporate (6,830) (6,320) (5,375)
----------- ----------- ---------
$ 8,574 $ (19,139) $ 12,324
=========== ===========
=========
Assets
1993 1992 1991
---------- ---------- --------
Construction $ 219,604 $ 214,089 $198,971
Real Estate 218,715 204,713 252,870
<PAGE>
Corporate* 38,059 51,894 46,733
---------- ---------- --------
$ 476,378 $ 470,696 $498,574
========== ========== ========
Capital Expenditures
1993 1992 1991
---------- ---------- --------
Construction $ 4,387 $ 4,042 $ 6,599
Real Estate 23,590 29,131 44,207
---------- ---------- --------
$ 27,977 $ 33,173 $ 50,806
========== ========== ========
Depreciation
1993 1992 1991
---------- ---------- --------
Construction $ 2,552 $ 5,489 $ 6,342
Real Estate 963 808 848
---------- ---------- --------
$ 3,515 $ 6,297 $ 7,190
========== ========== ========
Geographic Segments
Revenues
1993 1992 1991
---------- ---------- --------
United States $1,064,380 $ 909,358 $859,398
Canada - 107,709 109,764
Other Foreign 35,736 53,785 22,746
---------- ---------- --------
$1,100,116 $1,070,852 $991,908
========== ========== ========
Income (Loss) From Operations
1993 1992 1991
---------- ----------- --------
United States $ 17,249 $ (28,994) $ 13,478
Canada - 12,812 4,218
Other Foreign (1,845) 3,363 3
Corporate (6,830) (6,320) (5,375)
----------- ----------- ---------
$ 8,574 $ (19,139) $ 12,324
=========== =========== =========
Assets
1993 1992 1991
---------- ---------- ---------
United States $ 433,488 $ 365,997 $408,797
Canada - 46,089 40,895
Other Foreign 4,831 6,716 2,149
Corporate* 38,059 51,894 46,733
---------- ---------- --------
<PAGE>
$ 476,378 $ 470,696 $498,574
========== ========== ========
*In all years, corporate assets consist principally of cash, cash
equivalents, marketable securities and other investments available for
general corporate purposes.
Contracts with various federal, state, local and foreign governmental
agencies represented approximately 54% of construction revenues in 1993, 57%
in 1992 and 56% in 1991.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Perini Corporation:
We have audited the accompanying consolidated balance sheets of PERINI
CORPORATION (a Massachusetts corporation) and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Perini
Corporation and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
February 11, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To the Stockholders of Perini Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in this Form 10-
K/A, and have issued our report thereon dated February 11, 1994. Our audits
were made for the purpose of forming an opinion on the consolidated financial
statements taken as a whole. The supplemental schedules listed in the
accompanying index are the responsibility of the Company's management and are
<PAGE>
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
February 11, 1994
SCHEDULE II
PERINI CORPORATION AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS OF DOLLARS)
Balance Deductions Balance at
at ---------------------- End of Period
Beginning Amounts Amounts Not
Name of Debtor of Period Additions Collected Written-Off Current Current
- - -------------- --------- --------- --------- ----------- ------- -------
1993
Pacific Gateway
Properties, Inc. $302 $ - $250 $ - $ 52 $ -
==== ==== ==== ==== ==== ====
1992
Pacific Gateway
Properties, Inc. $441 $ - $139 $ - $302 $ -
(1) ==== ==== ==== ==== ==== ====
1991
Perini
Investment $259 $182 $ - $ - $441 $ -
Properties, Inc. ==== ==== ==== ==== ==== ====
(1) In 1992, Perini Investment Properties, Inc. changed its name to Pacific
Gateway Properties, Inc.
SCHEDULE VIII
PERINI CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS OF DOLLARS)
Additions
Balance at Charged Charged to Deductions Balance
Beginning to Costs Other from at End
Description of Year & Expenses Accounts Reserves of Year
- - ----------- ---------- ---------- ---------- ---------- -------
<PAGE>
Year Ended
December 31, 1993
- - -----------------
Reserve for doubtful
accounts $ 351 $ - $ - $ - $ 351
======= ======= ==== ====== =======
Reserve for
depreciation on
real estate
properties used
in operations $ 3,181 $ 920 $ - $ 464 (3) $ 3,637
======= ======= ==== ====== =======
Reserve for real
estate investments $29,968 $ - $ - $9,130 (2) $20,838
======= ======= ==== ====== =======
Year Ended
December 31, 1992
- - -----------------
Reserve for doubtful
accounts $ 742 $ - $ - $ 391 (1) $ 351
======= ======= ==== ====== =======
Reserve for
depreciation on
real estate
properties used
in operations $ 2,428 $ 974 $ - $ 221 (2) $ 3,181
======= ======= ==== ====== =======
Reserve for real
estate investments $ 4,732 $31,368 $ - $6,132 (2) $29,968
======= ======= ==== ====== =======
Year Ended
December 31, 1991
- - -----------------
Reserve for doubtful $ 967 $ - $ - $ 225 (1) $ 742
accounts ======= ======= ==== ====== =======
Reserve for
depreciation on
real estate
properties used
in operations $ 2,996 $ 626 $ - $1,194 (2) $ 2,428
======= ======= ==== ====== =======
Reserve for real
estate investments $ 1,932 $ 3,300 $ - $ 500 (3) $ 4,732
======= ======= ==== ====== =======
(1) Represents write-off of uncollectible accounts and reversal of reserves
no longer required.
(2) Represents sales of real estate properties.
(3) Represents sale of real estate asset and reversal of reserve no longer
required.
EXHIBIT INDEX
<PAGE>
The following designated exhibits are, as indicated below, either filed
herewith or have heretofore been filed with the Securities and Exchange
Commission under the Securities Act of 1933 or the Securities Act of 1934 and
are referred to and incorporated herein by reference to such filings.
Exhibit 3. Articles of Incorporation and By-laws
Incorporated herein by reference:
3.1 Restated Articles of Organization - Exhibit 4 to Form S-2
Registration Statement filed April 28, 1989; SEC Registration No.
33-28401.
3.2 By-laws - As amended through September 14, 1990 - Exhibit 3.2 to
1991 Form 10K, as filed.
Exhibit 4. Instruments Defining the Rights of Security Holders,
Including Indentures
Incorporated herein by reference:
4.1 Certificate of Vote of Directors Establishing a Series of a Class of
Stock determining the relative rights and preferences of the $21.25
Convertible Exchangeable Preferred Stock - Exhibit 4(a) to Amendment
No. 1 to Form S-2 Registration Statement filed June 19, 1987; SEC
Registration No. 33-14434.
4.2 Form of Deposit Agreement, including form of Depositary Receipt -
Exhibit 4(b) to Amendment No. 1 to Form S-2 Registration Statement
filed June 19, 1987; SEC Registration No. 33-14434.
4.3 Form of Indenture with respect to the 8 1/2% Convertible
Subordinated Debentures Due June 15, 2012, including form of
Debenture - Exhibit 4(c) to Amendment No. 1 to Form S-2 Registration
Statement filed June 19, 1987; SEC Registration No. 33-14434.
4.4 Shareholder Rights Agreement and Certificate of Vote of Directors
adopting a Shareholders Rights Plan providing for the issuance of a
Series A Junior Participating Cumulative Preferred Stock purchase
rights as a dividend to all shareholders of record on October 6,
1988, incorporated by reference from Current Report on Form 8-K
filed on May 25, 1990.
Exhibit 10. Material Contracts
Incorporated herein by reference:
10.1 1982 Stock Option and Long Term Performance Incentive Plan -
Registrant's Proxy Statement for Annual Meeting of Stockholders
dated April 27, 1987.
10.2 Perini Corporation Amended and Restated General Incentive
Compensation Plan - Exhibit 10.2 to 1991 Form 10K, as filed.
10.3 Perini Corporation Amended and Restated Construction Business
Unit Incentive Compensation Plan - Exhibit 10.3 to 1991 Form
10K, as filed.
Exhibit 22. Subsidiaries of Perini Corporation
Filed herewith
Exhibit 23. Consent of Independent Public Accountants
<PAGE>
Filed herewith
Exhibit 24. Power of Attorney
Filed herewith
EXHIBIT 22
PERINI CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Percentage of
Interest or
Place Voting
Name of Organization Securities Owned
---- --------------- ----------------
Perini Corporation Massachusetts
Perini Building Company, Inc. Arizona 100%
(Formerly Mardian
Construction Company)
R.E. Dailey & Co. Michigan 100%
Pioneer Construction, Inc. West Virginia 100%
Perland Environmental Delaware 90.5%
Technologies, Inc.
International Construction Delaware 100%
Management Services, Inc.
Percon Constructors, Inc. Delaware 100%
Perini International Massachusetts 100%
Corporation
Perini Land & Development Delaware 100%
Company
Paramount Development Massachusetts 100%
Associates, Inc.
I-10 Industrial Park Arizona General 80%
Developers Partnership
Ring Mountain Associates California 50%
General
Partnership
Perini Resorts, Inc. California 100%
Glenco-Perini - HCV California 45%
Partners Limited
Partnership
Squaw Creek Associates California 40%
General
Partnership
Perland Realty Associates, Florida 100%
Inc.
Perini Lake Tahoe Properties, California 100%
Inc.
Golden Gateway North California 58%
Limited
Partnership
Rincon Center Associates California 46%
Limited
Partnership
International Towers California 49.5%
Development Co. General
Partnership
Perini Central Limited Arizona Limited 75%
Partnership Partnership
Phoenix Associates Land Arizona General 50%
Venture Partnership
Perini/138 Joint Venture Georgia General 49%
Partnership
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Garden Lakes Apartments Joint Georgia General 49.5%
Partnership
Venture
Perini/RSEA Partnership Georgia General 50%
Partnership
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports, dated February 11, 1994, included in Perini Corporation's Annual
Report on this Form 10-K/A for the year ended December 31, 1993, and into the
Company's previously filed Registration Statements No. 2-82117, 33-24646, 33-
46961, 33-53190, 33-53192, 33-60654, 33-70206 and 33-52967.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
August 2, 1994
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned, Directors of Perini Corporation, hereby severally
constitute David B. Perini, James M. Markert and Robert E. Higgins, and each
of them singly, our true and lawful attorneys, with full power to them and to
each of them to sign for us, and in our names in the capacities indicated
below, any Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 to be filed with the Securities and Exchange
Commission and any and all amendments to said Annual Report on Form 10-K,
hereby ratifying and confirming our signatures as they may be signed by our
said Attorneys to said Annual Report on Form 10-K and to any and all
amendments thereto and generally to do all such things in our names and
behalf and in our said capacities as will enable Perini Corporation to comply
with the provisions of the Securities Exchange Act of 1934, as amended, and
all requirements of the Securities and Exchange Commission.
WITNESS our hands and common seal on the date set forth below.
s/David B. Perini Director March 24, 1994
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David B. Perini Date
s/Joseph R. Perini Director March 24, 1994
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Joseph R. Perini Date
s/Richard J. Boushka Director March 24, 1994
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Richard J. Boushka Date
s/Marshall M. Criser Director March 24, 1994
- - -------------------- ----------------------------
Marshall M. Criser Date
s/Thomas E. Dailey Director March 24, 1994
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Thomas E. Dailey Date
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s/Albert A. Dorman Director March 24, 1994
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Albert A. Dorman Date
s/Arthur J. Fox, Jr. Director March 24, 1994
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Arthur J. Fox, Jr. Date
s/Nancy Hawthorne Director March 24, 1994
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Nancy Hawthorne Date
s/Marshall A. Jacobs Director March 24, 1994
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Marshall A. Jacobs Date
s/Robert M. Jenney Director March 24, 1994
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Robert M. Jenney Date
s/James M. Markert Director March 24, 1994
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James M. Markert Date
s/John J. McHale Director March 24, 1994
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John J. McHale Date
s/Jane E. Newman Director March 24, 1994
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Jane E. Newman Date
s/Bart W. Perini Director March 24, 1994
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Bart W. Perini Date
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