UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[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.
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
PAGE
PART I
Item 1: Business 2
Item 2: Properties 17
Item 3: Legal Proceedings 18
Item 4: Submission of Matters to Vote of Security 18
Holders
PART II
Item 5: Market for the Registrant's Common Stock and 19
Related Stockholder Matters
Item 6: Selected Financial Data 19
Item 7: Management's Discussion and Analysis of 20
Financial Condition and Results of Operations
Item 8: Financial Statements and Supplementary Data 24
Item 9: Disagreements on Accounting and Financial 24
Disclosure
PART III
Item 10: Directors and Executive Officers of the 25
Registrant
Item 11: Executive Compensation 26
Item 12: Security Ownership of Certain Beneficial 26
Owners and Management
Item 13: Certain Relationships and Related Transactions 26
PART IV
Item 14: Exhibits, Financial Statement Schedules and 27
Reports on Form 8-K
Signatures 29
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.
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.
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 19
Management's Discussion and Analysis Page 20
Footnote 14 to the Consolidated Financial Page 49
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 49 and 50.
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
Revenues $1,030,341 $1,023,274 $919,641
---------- ---------- --------
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
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 and 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 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.
<TABLE>
<CAPTION>
Backlog (in thousands) as of December 31,
-----------------------------------------------------------------------------------
1993 1992 1991
----------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
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%
========== ==== ========== ==== ========== ====
</TABLE>
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 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.
<TABLE>
Revenues by Client Source
--------------------------
<CAPTION>
Year Ended December 31,
--------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Private Owners 46% 43% 44%
Federal Governmental Agencies 12 6 2
State, Local and Foreign Governments 42 51 54
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
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.
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.
It is not expected that compliance with statutory requirements regarding
environmental quality will necessitate significant capital outlays or have a
material effect on the Company's operations.
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 has decided to sell in the near term. No adjustments were made
in other properties which are held for longer term investment such as Rincon
Center and The Resort at Squaw Creek.
Real Estate Strategy
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
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
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 on page 47.
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, on pages 46 and 47, 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
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. 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
fifth paragraph of Note 11 to Notes to the Consolidated Financial Statements
on page 47, 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 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,
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
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
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 15. All other properties used in operations are summarized
below:
<TABLE>
<CAPTION>
Owned or Leased Approximate Approximate Square
Principal Offices by Perini Acres Feet of Office Space
----------------- --------------- ----------- --------------------
<S> <C> <C> <C>
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
==
</TABLE>
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
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 business.
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:
<TABLE>
<CAPTION>
1993 1992
-------------- --------------
Market Price Range per Common Share: High Low High Low
----------------------------------- ------ ----- ------ -----
<S> <C> <C> <C> <C>
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
</TABLE>
For information on dividend payments, see Selected Financial Data
in Item 6 below and "Dividends" under Management's Discussion and
Analysis on page 24.
As of March 4, 1994, there was approximately 1,523 record holders
of the Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
<CAPTION>
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
========== =========== ========== =========== ==========
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 $30 million pretax net
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 and, to a lesser degree, an 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 $30 million pretax net realizable value writedown in 1992
referred to previously, the sale of certain commercial rental properties also
referred to previously, profitable land sales in Florida and an 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.
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 36).
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
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.
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
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.
As mentioned previously, 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. 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. 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 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.
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 43).
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.
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,
Chairman, President and Chief President, Chief Executive Officer
Executive Officer - 56 and Acting 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
Executive Vice President, July, 1992, which entails overall
Construction - 61 responsibility 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 present
Senior Vice President, Finance capacity since June, 1984, which
and 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 He has served in his present
Executive Officer of Perini capacity since April, 1992, which
Land and Development Company - entails overall responsibility for
55 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
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 30 - 31
1992
Consolidated Statements of Operations for the three years 32
ended December 31, 1993, 1992 and 1991
Consolidated Statements of Stockholders' Equity for the 33
three years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the three years 34 - 35
ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements 36 - 50
Report of Independent Public Accountants 51
(a)2. The following financial statement schedules are filed as part of
this report:
Pages
Report of Independent Public Accountants on Schedules 52
Schedule II -- Amounts Receivable from Related Parties and 53
Underwriters, Promoters and Employees other than Related
Parties
Schedule VIII -- Valuation and Qualifying Accounts and 54
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.
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 55 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: March 24, 1994 s/James M. Markert
James M. Markert
Senior Vice President,
Finance and Administration
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 &
Chief Executive Officer
s/David B. Perini March 24, 1994
- -----------------
David B. Perini
(ii) Principal Financial
Officer
James M. Markert Senior Vice President
Finance & Administration
s/James M. Markert March 24, 1994
- ------------------
James M. Markert
(iii) Principal Accounting
Officer
Barry R. Blake Vice President and
Controller
s/Barry R. Blake March 24, 1994
- ----------------
Barry R. Blake
(iv) Directors
David B. Perini )
Joseph R. Perini ) By
Richard J. Boushka )
Marshall M. Criser ) s/James M. Markert
Thomas E. Dailey ) ------------------
Albert A. Dorman ) James M. Markert
Arthur J. Fox, Jr. )
Nancy Hawthorne ) Attorney in Fact
Marshall A. Jacobs ) Dated: March 24, 1994
Robert M. Jenney )
James M. Markert )
John J. McHale )
Jane E. Newman )
Bart W. Perini )
<TABLE>
Consolidated Balance Sheets
December 31, 1993 and 1992
(In thousands except per share data)
<CAPTION>
Assets
<S> <C> <C>
-------- --------
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 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
-------- --------
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
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
Liabilities and Stockholders' Equity
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
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
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
======== ========
</TABLE>
<TABLE>
Consolidated Statements of Operations
For the years ended December 31, 1993, 1992 & 1991
(In thousands, except per share data)
<CAPTION>
1993 1992 1991
---------- ---------- --------
<S> <C> <C> <C>
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
========== =========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1993, 1992 & 1991
(In thousands, except per share data)
<CAPTION> 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.
<TABLE>
Consolidated Statements of Cash Flows
For the years ended December 31, 1993, 1992 & 1991
(In thousands)
1993 1992 1991
-------- --------- --------
<S> <C> <C> <C>
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
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES $(39,140) $(15,731) $(50,898)
--------- --------- ---------
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)
========= ========= =========
</TABLE>
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
the accompanying consolidated statements of operations.
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.
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. If the estimated total costs exceed the estimated total sales
value, a provision is made to reduce the carrying value of the development by
the amount of this excess. These provisions (or writedowns to net realizable
value) amounted to $31.4 million in 1992 and $2.8 million in 1991.
Certain interest expense incurred by the Company is capitalized as part of
the costs of property being developed or constructed. Interest capitalized
was $.2 million in 1993 and 1992, and $2.2 million in 1991.
Real estate taxes applicable to property being developed or constructed are
generally capitalized as part of "Real Estate Properties Under Construction"
or "Land Development Costs."
[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.
[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:
<TABLE>
Construction Joint Ventures
<CAPTION>
Financial position at December 31, 1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
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
======== ======== ========
Investment $ 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 December 31, 1993 1992 1991
-------- -------- --------
Revenue $ 83,710 $ 64,776 $ 59,501
Cost of operations 101,623 95,823 89,938
--------- --------- ---------
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)
========= ========= =========
Investment $(27,768) $(23,542) $ (4,889)
========= ========= =========
</TABLE>
[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):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
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 - -
</TABLE>
[4] LONG-TERM DEBT
Long-term debt of the Company at December 31, 1993 and 1992 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
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
======= =======
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
======= =======
</TABLE>
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):
<TABLE>
<CAPTION>
Federal Foreign State Total
------- ------- ----- -----
<S> <C> <C> <C> <C>
1993
Current $(2,824) $ - $ (430) $(3,254)
Deferred (1,808) - 101 (1,707)
-------- -------- -------- --------
$(4,632) $ - $ (329) $(4,961)
======== ======== ======== ========
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)
======== ======== ======== ========
</TABLE>
The domestic and foreign components of income (loss) before income taxes are
as follows (in thousands):
<TABLE>
<CAPTION>
U.S. Foreign Total
-------- ------- ---------
<S> <C> <C> <C>
1993 $ 8,126 $ - $ 8,126
1992 $(42,238) $15,884 $(26,354)
1991 $ 328 $ 4,110 $ 4,438
</TABLE>
The table below reconciles the difference between the statutory federal income
tax rate and the effective rate provided in the statements of operations.
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
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%
==== ===== ====
</TABLE>
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):
<TABLE>
<CAPTION>
Deferred Deferred Tax
Tax Assets Liabilities
---------- ------------
<S> <C> <C>
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 -
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
======== =======
</TABLE>
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):
<TABLE>
<CAPTION>
Unused Investment Foreign Net Operating Loss
Tax Credits Tax Credits Carryforwards
----------------- ----------- ------------------
<S> <C> <C> <C>
1994-1998 $ 32 $1,352 $ -
1999-2002 935 - -
2003-2006 3,071 - 2,700
------ ------ -------
$4,038 $1,352 $ 2,700
====== ====== =======
</TABLE>
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):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------- -------
<S> <C> <C> <C>
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
======= ======== =======
</TABLE>
[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.
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:
<TABLE>
<CAPTION>
Number of
Number of Option Price Shares
Shares Per Share Exercisable
--------- ------------ -----------
<S> <C> <C> <C>
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
</TABLE>
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):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
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%
</TABLE>
*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):
<TABLE>
<CAPTION>
December 31,
-----------------------
1993 1992
------- -------
<S> <C> <C>
Assets available for benefits:
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
======= =======
</TABLE>
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.
In connection with a real estate development joint venture, 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 under which management believes the subsidiary's
additional funding obligation on a 10% present value basis 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 a stipulated amount significantly 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.
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, 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%.
In connection with a third real estate development joint venture, 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.
[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):
<TABLE>
<CAPTION>
1993 by Quarter
---------------------------------------------------
1st 2nd 3rd 4th
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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)
</TABLE>
[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):
<TABLE>
<CAPTION>
Business Segments
Revenues
1993 1992 1991
---------- ---------- --------
<S> <C> <C> <C>
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
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
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
=========== =========== =========
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
---------- ---------- --------
$ 476,378 $ 470,696 $498,574
========== ========== ========
</TABLE>
*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,
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
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
<TABLE>
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)
<CAPTION> Balance at
Balance Deductions End of Period
at ---------------------- ---------------
Beginning Amounts Amounts Not
Name of Debtor of Period Additions Written-Off Collected Current Current
-------------- --------- --------- ----------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1993
----
Pacific Gateway
Properties, Inc. $302 $ - $250 $ - $ 52 $ -
==== ==== ==== ==== ==== ====
1992
----
Pacific Gateway
Properties, Inc. $441 $ - $139 $ - $302 $ -
(1) ==== ==== ==== ==== ==== ====
1991
----
Perini Investment
Properties, Inc. $259 $182 $ - $ - $441 $ -
==== ==== ==== ==== ==== ====
</TABLE>
(1) In 1992, Perini Investment Properties, Inc. changed its name to Pacific
Gateway Properties, Inc.
<TABLE>
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)
<CAPTION>
Additions
----------------------
Balance at Charged Charged to Deductions Balance
Beginning to Costs Other from at End
Description of Year & Expenses Accounts Reserves of Year
----------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
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 accounts $ 967 $ - $ - $ 225 (1) $ 742
======= ======= ==== ====== =======
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
======= ======= ==== ====== =======
</TABLE>
(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
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
Filed herewith
Exhibit 24. Power of Attorney
Filed herewith
<TABLE>
EXHIBIT 22
PERINI CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Percentage of
<CAPTION> Interest or
Place Voting
Name of Organization Securities Owned
---------------------------------------- --------------- ----------------
<S> <C> <C>
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 Management Delaware 100%
Services, Inc.
Percon Constructors, Inc. Delaware 100%
Perini International Corporation Massachusetts 100%
Perini Land & Development Company Delaware 100%
Paramount Development Massachusetts 100%
Associates, Inc.
I-10 Industrial Park Developers Arizona General 80%
Partnership
Ring Mountain Associates California General 50%
Partnership
Perini Resorts, Inc. California 100%
Glenco-Perini - HCV Partners California Limited 45%
Partnership
Squaw Creek Associates California General 40%
Partnership
Perland Realty Associates, Inc. Florida 100%
Perini Lake Tahoe Properties, Inc. California 100%
Golden Gateway North California Limited 58%
Partnership
Rincon Center Associates California Limited 46%
Partnership
International Towers Development Co. California General 49.5%
Partnership
Perini Central Limited Partnership Arizona Limited 75%
Partnership
Phoenix Associates Land Venture Arizona General 50%
Partnership
Perini/138 Joint Venture Georgia General 49%
Partnership
Garden Lakes Apartments Joint Georgia General 49.5%
Venture Partnership
Perini/RSEA Partnership Georgia General 50%
Partnership
</TABLE>
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 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 and 33-70206.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
March 24, 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
- ----------------- ----------------------------
David B. Perini Date
s/Joseph R. Perini Director March 24, 1994
- ------------------ ----------------------------
Joseph R. Perini Date
s/Richard J. Boushka Director March 24, 1994
- -------------------- ----------------------------
Richard J. Boushka Date
s/Marshall M. Criser Director March 24, 1994
- -------------------- ----------------------------
Marshall M. Criser Date
s/Thomas E. Dailey Director March 24, 1994
- ------------------ ----------------------------
Thomas E. Dailey Date
s/Albert A. Dorman Director March 24, 1994
- ------------------ ----------------------------
Albert A. Dorman Date
s/Arthur J. Fox, Jr. Director March 24, 1994
- -------------------- ----------------------------
Arthur J. Fox, Jr. Date
s/Nancy Hawthorne Director March 24, 1994
- ----------------- ----------------------------
Nancy Hawthorne Date
s/Marshall A. Jacobs Director March 24, 1994
- -------------------- ----------------------------
Marshall A. Jacobs Date
s/Robert M. Jenney Director March 24, 1994
- ------------------ ----------------------------
Robert M. Jenney Date
s/James M. Markert Director March 24, 1994
- ------------------ ----------------------------
James M. Markert Date
s/John J. McHale Director March 24, 1994
- ---------------- ----------------------------
John J. McHale Date
s/Jane E. Newman Director March 24, 1994
- ---------------- ----------------------------
Jane E. Newman Date
s/Bart W. Perini Director March 24, 1994
- ---------------- ----------------------------
Bart W. Perini Date
