UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 01701-9160
(Address of principal executive offices)
(Zip code)
(508)-628-2000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
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
Number of shares of common stock of registrant outstanding at November 13, 1996:
4,898,648
Page 1 of 15
<PAGE>
<TABLE>
<CAPTION>
PERINI CORPORATION & SUBSIDIARIES
INDEX
Page Number
-----------
<S> <C> <C>
Part I. - Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3
September 30, 1996 and December 31, 1995
Consolidated Condensed Statements of Income - 4
Three Months and Nine Months ended September 30, 1996
and 1995
Consolidated Condensed Statements of Cash Flows - 5
Nine Months ended September 30, 1996 and 1995
Notes to Consolidated Condensed Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of the Consolidated 8 - 11
Financial Condition and Results of Operations
Part II. - Other Information:
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12 - 14
Signatures 15
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 (1)
(In Thousands)
ASSETS
------
SEPT. 30, DEC. 31,
1996 1995
---------------- ----------------
<S> <C> <C>
Cash $ 14,895 $ 29,059
Accounts and Notes Receivable 185,807 180,978
Unbilled Work 39,736 28,304
Construction Joint Ventures 67,736 61,846
Real Estate Inventory, at the lower of cost or market 17,588 14,933
Deferred Tax Asset 18,984 13,039
Other Current Assets 6,481 2,186
---------------- ----------------
Total Current Assets $ 351,227 $ 330,345
---------------- ----------------
Land Held for Sale or Development $ 38,846 $ 41,372
Investments in and Advances to Real Estate Joint Ventures 156,778 148,225
Real Estate Properties Used in Operations 0 2,964
Other 189 302
---------------- ----------------
Total Real Estate Development Investments $ 195,813 $ 192,863
---------------- ----------------
Other Assets $ 5,279 $ 3,477
---------------- ----------------
Property and Equipment, less Accumulated Depreciation of $23,239 in 1996
and $27,299 in 1995 $ 11,378 $ 12,566
---------------- ----------------
$ 563,697 $ 539,251
================ ================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Maturities of Long-Term Debt $ 4,482 $ 5,697
Accounts Payable 196,190 197,052
Advances from Construction Joint Ventures 27,771 34,830
Deferred Contract Revenue 26,584 23,443
Accrued Expenses 19,942 32,778
---------------- ----------------
Total Current Liabilities $ 274,969 $ 293,800
---------------- ----------------
Deferred Income Taxes and Other Liabilities $ 59,110 $ 52,663
---------------- ----------------
Long-Term Debt, including real estate development debt of $5,760 in 1996
and $3,660 in 1995 $ 114,739 $ 84,155
---------------- ----------------
Minority Interest $ 2,916 $ 3,027
---------------- ----------------
Stockholders' Equity:
Preferred Stock $ 100 $ 100
Series A Junior Participating Preferred Stock --- ---
Common Stock 4,985 4,985
Paid-In Surplus 56,751 57,659
Retained Earnings 56,291 52,062
ESOT Related Obligations (3,976) (4,965)
---------------- ----------------
$ 114,151 $ 109,841
Less - Treasury Stock 2,188 4,235
---------------- ----------------
Total Stockholders' Equity $ 111,963 $ 105,606
---------------- ----------------
$ 563,697 $ 539,251
================ ================
</TABLE>
(1) Derived from the audited December 31, 1995 financial statements. The
accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Data)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1996 1995 1996 1995
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES FROM OPERATIONS:
Construction $ 319,645 $ 223,643 $ 885,398 $ 770,670
Real Estate 21,025 9,331 41,793 32,354
--------------- --------------- --------------- ----------------
TOTAL REVENUES FROM OPERATIONS $ 340,670 $ 232,974 $ 927,191 $ 803,024
--------------- --------------- --------------- ----------------
COST AND EXPENSES:
Cost of Operations (Note 2) $ 327,670 $ 255,988 $ 888,730 $ 801,447
General, Administrative and Selling Expenses 7,976 9,027 24,632 27,185
--------------- --------------- --------------- ----------------
$ 335,646 $ 265,015 $ 913,362 $ 828,632
--------------- --------------- --------------- ----------------
INCOME (LOSS) FROM OPERATIONS (Note 2) $ 5,024 $ (32,041) $ 13,829 $ (25,608)
Other Income (Expense), Net (13) (323) (382) (87)
Interest Expense (2,590) (2,178) (7,065) (6,121)
--------------- --------------- --------------- ----------------
Income (Loss) Before Income Taxes $ 2,421 $ (34,542) $ 6,382 $ (31,816)
(Provision) Benefit for Income Taxes (Note 3) (110) 3,868 (560) 2,900
--------------- --------------- --------------- ----------------
NET INCOME (LOSS) $ 2,311 $ (30,674) $ 5,822 $ (28,916)
=============== =============== =============== ================
EARNINGS (LOSS) PER COMMON SHARE (Note 4) $ 0.37 $ (6.61) $ 0.88 $ (6.58)
=============== =============== =============== ================
DIVIDENDS PER COMMON SHARE (Note 5) $ --- $ --- $ --- $ ---
=============== =============== =============== ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 4) 4,847,187 4,718,873 4,785,264 4,635,511
=============== =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(In Thousands)
NINE MONTHS
ENDED SEPT 30,
--------------
1996 1995
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 5,822 $ (28,916)
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization 1,938 1,782
Noncurrent deferred taxes and other liabilities 6,447 11,122
Distributions greater than earnings of joint ventures and affiliates 2,820 11,690
Cash provided from (used by) changes in components of working capital other
than cash, notes payable and current maturities of long-term debt (46,894) 12,012
Real estate development investments other than joint ventures 1,286 2,099
Other non-cash items, net (1,103) (965)
-------------- --------------
NET CASH (USED BY) PROVIDED FROM OPERATING ACTIVITIES $ (29,684) $ 8,824
-------------- --------------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment $ 1,551 $ 3,130
Cash distributions of capital from unconsolidated joint ventures 6,732 16,248
Acquisition of property and equipment (1,225) (1,524)
Improvements to land held for sale or development (397) (169)
Improvements to real estate properties used in operations (120) (133)
Capital contributions to unconsolidated joint ventures (14,654) (22,232)
Advances to real estate joint ventures, net (5,706) (6,431)
Investments in other activities (2,158) 234
-------------- --------------
NET CASH USED BY INVESTING ACTIVITIES $ (15,977) $ (10,877)
-------------- --------------
Cash Flows from Financing Activities:
Proceeds of long-term debt $ 32,355 $ 3,234
Repayment of long-term debt (1,997) (3,010)
Cash dividends paid --- (1,593)
Treasury stock issued 1,139 2,242
-------------- --------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES $ 31,497 $ 873
-------------- --------------
Net Decrease in Cash $ (14,164) $ (1,180)
Cash at Beginning of Year 29,059 7,841
-------------- --------------
Cash at End of Period $ 14,895 $ 6,661
============== ==============
Supplemental Disclosures of Cash paid during the period for:
Interest $ 6,717 $ 6,330
============== ==============
Income tax payments $ 201 $ 193
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) Significant Accounting Policies
The significant accounting policies followed by the Company and its
subsidiaries in preparing its consolidated financial statements are set
forth in Note (1) to such financial statements included in Form 10-K for
the year ended December 31, 1995. The Company has made no significant
change in these policies during 1996.
(2) Income (Loss) From Operations
The three and nine month periods ended September 30, 1995 include a
charge, which aggregated $25.6 million, to provide for a liability
related to previously disclosed litigation discussed under "Item 1.
Legal Proceedings" in the Company's Form 10-Q for the quarterly period
ended September 30, 1995, and downward revisions in estimated probable
recoveries on certain outstanding contract claims.
(3) Provision For Income Taxes
The lower than normal tax rate in 1996 is due to the realization of a
portion of the Federal tax benefit resulting from the operating loss
recorded in 1995. Because of certain accounting limitations, the Company
was not able to recognize a portion of the tax benefit related to the
operating loss experienced in fiscal 1995.
(4) Per Share Data
Computations of earnings per common share amounts are based on the
weighted average number of the Company's common shares outstanding
during the periods presented. Earnings per common share reflect the
effect of preferred dividends accrued during both the 1996 and 1995
three and nine month periods ended September 30, of $531,000 and
$1,593,000, respectively. Common stock equivalents related to additional
shares of common stock issuable upon exercise of stock options have not
been included since their effect would be antidilutive. Per share data
on a fully diluted basis is not presented because the effect of
conversion of the Company's depositary convertible exchangeable
preferred shares into common stock is also antidilutive.
(5) Cash Dividends
There were no cash dividends on common stock declared or paid during the
periods presented in the consolidated condensed financial statements
presented herein. As previously disclosed in the 1995 Form 10-K, in
conjunction with the covenants of the Company's Amended Revolving Credit
Agreement, the Company is required to suspend the payment of quarterly
dividends on its preferred stock until the Bridge Loan commitment is no
longer outstanding, if a default exists under the terms of the Amended
Revolving Credit Agreement, or if the ratio of long-term debt to equity
exceeds 50%. Therefore, the dividends on preferred stock that normally
would have been declared during December of 1995 and March, June and
September of 1996, and payable on March 15, June 15, September 15, and
December 15, 1996, respectively, have not been declared (although they
have been fully accrued due to the "cumulative" feature of the preferred
stock).
(6) Capitalization
In addition to its $114.5 million revolving credit agreement, effective
February 26, 1996, the Company entered into a Bridge Loan Agreement with
its revolver banks to borrow up to an additional $15 million through
July 31, 1996 at an interest rate of prime plus 2%. Subsequently, the
Bridge Loan Agreement has been increased to provide another $10 million
of borrowing capacity at an interest rate of prime plus 4% and extended
through the earlier of the closing of the below mentioned preferred
stock transaction or January 31, 1997. The Revolving Credit Agreement
has been renegotiated and will total $129.5 million subsequent to the
closing of the preferred stock transaction. Additionally, in July 1996,
the Company announced that it had entered into an agreement with an
investor group led by Richard C. Blum & Associates, L. P. of San
Francisco, California, for a $30 million investment in the form of a new
issuance of 150,150 shares of redeemable cumulative convertible junior
preferred stock in the Company. The preferred stock will
6
<PAGE>
(6) Capitalization (continued)
be convertible into shares of common stock of the Company at a
conversion price of approximately $9.68 per share. The issuance and
listing of any such common stock on the American Stock Exchange is
subject to shareholder ratification of the transaction at a Special
Meeting of Stockholders of the Company, the date of which has not been
set. The preferred shares will carry voting rights representing
approximately 37% of the outstanding common shares and will also entitle
the investor group to the appointment of three members to the Company's
Board of Directors. Subject to the ratification of the transaction by
the stockholders, the Company expects to be able to close the
transaction by year end.
(7) Management's Opinion
The unaudited consolidated condensed financial statements presented
herein have been prepared in accordance with the instructions to Form
10-Q and do not include all of the information and note disclosures
required by generally accepted accounting principles. These statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the year ended December
31, 1995. In the opinion of management, the accompanying unaudited
condensed financial statements include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the
Company's financial position as of September 30, 1996 and December 31,
1995 and results of operations and cash flows for the nine month periods
ended September 30, 1996 and 1995. The results of operations for the
nine month period ended September 30, 1996 may not be indicative of the
results that may be expected for the year ending December 31, 1996
because the Company's results generally consist of a limited number of
large transactions in both construction and real estate. Therefore, such
results can vary depending on the timing of transactions and the
profitability of projects being reported.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
RESULTS OF OPERATIONS
Comparison of the Third Quarter of 1996 with the Third Quarter of 1995
----------------------------------------------------------------------
Revenues increased $107.7 million (or 46.2%), from $233 million in 1995 to
$340.7 million in 1996. This increase resulted from increased construction
revenues of $96 million (or 42.9%), from $223.7 million in 1995 to $319.7
million in 1996, due primarily to an increase in revenues from building
operations of $70 million (or 45.2%), from $154.9 million in 1995 to $224.9
million in 1996. This increase was due primarily to the timing in the start-up
of certain fast track hotel/casino projects in the western United States as well
as several prison/detention and medical facilities projects in the northeastern
United States. Revenues from heavy operations increased by $26 million (or
37.8%), from $68.8 million in 1995 to $94.8 million in 1996 due primarily to the
favorable impact of several large infrastructure projects under way in late
1995, primarily in the metropolitan New York, Boston and Los Angeles areas. In
addition, revenues from real estate operations increased by $11.7 million, from
$9.3 million in 1995 to $21 million in 1996 due primarily to the Company's
acquisition during 1996 of an increased ownership position in The Resort at
Squaw Creek joint venture in California.
Along with the increase in revenues, the total gross profit increased
substantially, from a loss of $23 million in 1995 to a profit of $13 million in
1996, due to an overall increase in gross profit from construction operations of
$36.4 million, from a loss of $23.2 million in 1995 to a profit of $13.2 million
in 1996. The gross loss from construction operations recognized in 1995 included
a pretax charge, which aggregated $25.6 million, to provide for a liability
related to litigation involving a joint venture in which the Company was a
minority partner, and the Washington Metropolitan Transit Authority on two
subway construction projects in Washington, D.C., and downward revisions in
estimated probable recoveries on certain outstanding contract claims. In
addition, the 1995 gross profit was adversely impacted by an overall reduction
in the profit level on a tunnel project in the Midwest. The pretax charges in
1995, coupled with the increased construction revenues in 1996 referred to above
and the favorable profit impact in 1996 of several large infrastructure projects
underway in late 1995, primarily in the metropolitan New York, Boston and Los
Angeles areas, resulted in the substantial increase in gross profit from
construction operations in 1996. Real estate operations experienced a gross loss
of $.2 million in 1996 compared to a gross profit of $.2 million in 1995 due to
a lower volume of condominium sales in Georgia and land sales in Arizona during
1996.
The decrease in general, administrative and selling expenses of $1.0 million (or
11.6%), from $9 million in 1995 to $8 million in 1996, resulted primarily from
continued emphasis on reducing overall Company overhead expenses in conjunction
with the Company's re-engineering efforts commenced in prior years, the sale in
June of 1996 of Pioneer Construction, a former subsidiary of the Company located
in West Virginia which performed reclamation projects on abandoned mine lands in
that state, and the continuation of the down-sizing of the Company's
environmental remediation construction operation.
Interest expense increased by $.4 million (or 18.9%), from $2.2 million in 1995
to $2.6 million in 1996, due to a higher average level of borrowings during
1996.
The lower than normal tax rate in 1996 is due to the realization of a portion of
the Federal tax benefit resulting from the operating loss recorded in 1995.
Because of certain accounting limitations, the Company was not able to recognize
a portion of the tax benefit related to the operating loss experienced in fiscal
1995.
Comparison of the Nine Months Ended September 30, 1996 with the Nine Months
Ended September 30, 1995
------------------------
Revenues increased $124.2 million (or 15.5%), from $803 million in 1995 to
$927.2 million in 1996. This increase resulted from increased construction
revenues of $114.7 million (or 14.9%), from $770.7 million in 1995 to $885.4
million in 1996, due primarily to an increase in revenues from heavy
construction operations of $75.1 million (or 36.9%), from $203.7 million in 1995
to $278.8 million in 1996, as well as an
8
<PAGE>
increase in revenues from building construction operations of $39.6 million (or
7.0%), from $567 million in 1995 to $606.6 million in 1996. These revenue
fluctuations reflect the timing in the start-up of new construction projects, in
particular several fast track hotel/casino projects in the western and
midwestern United States, several prison/detention and medical facilities
projects in the northeastern United States, and several long-term infrastructure
rehabilitation projects in the metropolitan New York, Boston and Los Angeles
areas. Revenues from real estate operations increased $9.5 million, from $32.3
million in 1995 to $41.8 million in 1996 due primarily to the Company's
acquisition during 1996 of an increased ownership position in The Resort at
Squaw Creek joint venture in California.
Along with the increase in revenues, the total gross profit increased
substantially, from $1.6 million in 1995 to $38.5 million in 1996, due to an
overall increase in gross profit from construction operations of $37.3 million,
from $1.7 million in 1995 to $39 million in 1996. Overall gross profit margins
on both building and heavy construction operations in 1996 exceeded those
experienced in 1995. The marginal gross profit from construction operations
recognized in 1995 included a pretax charge, which aggregated $25.6 million, to
provide for a liability related to litigation involving a joint venture in which
the Company was a minority partner, and the Washington Metropolitan Transit
Authority on two subway construction projects in Washington, D.C., and downward
revisions in estimated probable recoveries on certain outstanding contract
claims as well as an overall reduction in the profit level on a tunnel project
in the Midwest. These pretax charges in 1995, coupled with the increased
construction revenues in 1996 referred to above and the favorable profit impact
in 1996 of several large infrastructure projects underway in late 1995,
primarily in the metropolitan New York, Boston and Los Angeles areas, resulted
in the substantial increase in gross profit from construction operations in
1996. Real estate operations experienced a gross loss of $.5 million in 1996
compared to a gross loss of $.1 million in 1995 due to a lower volume of land
sales in Florida, Arizona and Massachusetts.
General, administrative and selling expenses decreased by $2.6 million (or
9.4%), from $27.2 million in 1995 to $24.6 million in 1996 primarily due to
continued emphasis on reducing overall Company overhead expenses in conjunction
with the Company's re-engineering efforts commenced in prior years, the sale in
June of 1996 of Pioneer Construction, a former subsidiary of the Company located
in West Virginia which performed reclamation projects on abandoned mine lands in
that state, and the continuation of the gradual down-sizing of the Company's
real estate and environmental remediation construction operations.
Other expense increased $.3 million, from $.1 million in 1995 to $.4 million in
1996 primarily due to higher bank charges experienced in 1996 in conjunction
with the Company's renegotiation of certain provisions of its Revolving Credit
Agreement and Bridge Loan Agreement.
Interest expense increased by $.9 million (or 14.8%), from $6.1 million in 1995
to $7 million in 1996 due to a higher average level of borrowings during 1996.
The lower than normal tax rate in 1996 is due to the realization of a portion of
the Federal tax benefit resulting from the operating loss recorded in 1995.
Because of certain accounting limitations, the Company was not able to recognize
a portion of the tax benefit related to the operating loss experienced in fiscal
1995.
FINANCIAL CONDITION
Working capital increased $39.7 million, from $36.5 million at the end of 1995
to $76.2 million at September 30, 1996 primarily as a result of increased
borrowings under the Company's Revolving Credit Agreement. The current ratio
increased from 1.12:1 to 1.28:1 during this same period.
During the first nine months of 1996 the Company used $31.5 million in cash
provided from financing activities, primarily from net borrowings under its
long-term credit facilities, plus $14.2 million from cash on hand to fund its
construction and real estate operations, including $13.6 million for investments
in or advances to joint ventures.
Long-term debt at September 30, 1996 was $114.7 million, an increase of $30.5
million from December 31, 1995. The long-term debt to equity ratio at June 30,
1996 was 1.02 to 1, compared to .80 to 1 at December 31, 1995.
9
<PAGE>
The above factors reflect the Company's need to rely heavily on long-term
financing arrangements to fund the current working capital requirements of its
core construction business, primarily in its heavy/civil operations which
typically require a long start-up period and significant up-front working
capital, as well as to fund cash shortfalls experienced in its real estate
operations. In addition to internally generated funds, the Company has access to
funds under its $114.5 million long-term Credit Agreement. Effective February
26, 1996, the Company entered into a Bridge Loan Agreement for an additional $15
million through July 31, 1996. Subsequently, this Bridge Loan Agreement has been
extended through January 31, 1997. Additionally, in July 1996 the Company
announced that it had entered into an agreement with an investor group led by
Richard C. Blum & Associates, L. P. of San Francisco, California, for a $30
million investment in the form of a new issuance of 150,150 shares of cumulative
convertible junior preferred stock in the Company subject to certain closing
conditions. Initially, the Company expected to be able to close the transaction
in early October. However, certain regulations of the American Stock Exchange
require shareholder approval of the transaction in advance, therefore, the
anticipated closing date of the transaction is now expected by year end. At
September 30, 1996 there was no borrowing capacity available under the Company's
long-term credit facility and $5.8 million available under the Bridge Loan
Agreement.
OUTLOOK
The statements contained in this Outlook that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding the Company's expectations, hopes, beliefs, intentions or
strategies regarding the future. All forward-looking statements included in this
Outlook are based on information available to the Company on the date hereof. It
is important to note that the Company's actual results could differ materially
from those in such forward-looking statements.
Looking ahead, we must consider the Company's construction backlog and remaining
portfolio of real estate projects. The overall construction backlog at September
30, 1996 was a record $1.746 billion which represented a 12% increase from the
$1.559 billion at September 30, 1995. While approximately 60% of the current
backlog relates to building construction projects which generally represent
lower risk, lower margin work, approximately 40% of the current backlog relates
to heavy construction projects which generally represent higher risk, but
correspondingly higher margin work.
With the sale of the final 21 acres during 1994, the Company's Villages of Palm
Beach Lakes, Florida land was completely sold out. Because of its low book
value, sales of this acreage have provided a major portion of the Company's real
estate profit in recent years. With the sale of this property complete, the
Company's ability to generate profit from real estate sales and the related
gross margin will be reduced as was the case in 1995. In addition, nine
projects, which aggregate approximately 11% of the Company's real estate asset
values, are projected to produce an estimated average 4% gross margin over the
period through ultimate disposition. As such, future gross margins from sales of
real estate will be impacted by the operations and/or disposition of these
properties.
As reported in the Company's Form 10-K for the year ended December 31, 1995, the
Company's primary real estate assets are located in five states: Florida,
Massachusetts, Georgia, California and Arizona. The Company accounts for those
real estate assets in accordance with the provisions of the Statement of
Financial Accounting Standards No. 121. "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS #121).
Approximately 77% of the Company's real estate assets represent properties held
and used in rental and other operations. Cash flows to be derived from those
properties are dependent on the results of those operations and from the
ultimate sale of those properties. SFAS #121 requires that assets to be held and
used be revised for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Based on
the Company's current operating strategy, the estimated net future cash flows
from these properties exceed their carrying values. As a result, no impairment
is currently required to be recognized.
In addition, approximately 23% of the Company's real estate assets represent
fully or partially developed land held for sale in the normal course of
business. Cash flows to be derived from these properties are dependent on the
proceeds from the sale of these properties based on local market conditions.
SFAS #121 provides that when management has committed to a plan to dispose of
long-lived assets that the
10
<PAGE>
assets be reported at the lower of the carrying amount or fair value less cost
to sell. Based on the Company's current operating strategy, the estimated net
future cash flows from these properties exceed their carrying values. As a
result, no impairment is currently required to be recognized.
At least until the closing of the new equity investment discussed above, the
Company's financial resources and short-term liquidity position will continue to
be tight, resulting in the payment of many vendors beyond the Company's normal
payment terms. In the near term, the Company intends to continue to manage its
cash receipts and disbursements as effectively as possible in anticipation of
closing the new equity investment and the receipt of the proceeds related
thereto. In addition, the Company has been successful in extending its $15
million Bridge Loan Agreement until at least January 31, 1997 as well as in
arranging for $20 million in additional borrowing capacity through its bank
credit facility: $10 million via certain bonding arrangements in lieu of posting
letters of credit, and $10 million via a temporary loan made available to the
Company through a participation under the existing loan agreement by a group of
investors led by Richard C. Blum & Associates, L. P. of San Francisco, the
Company's potential new equity investor. This $10 million temporary financing
will be repayable by the Company at the earlier of the completion of the
proposed $30 million equity investment referred to above or January 31, 1997.
In order to generate cash and reduce the Company's dependence on bank debt to
fund the working capital needs of its core construction operations as well as to
lower the Company's substantial interest expense and strengthen the balance
sheet in the longer term, the Company will continue to sell certain real estate
assets as market opportunities present themselves; to actively pursue the
favorable conclusion of various construction claims; to focus new work
acquisition efforts on various niche markets and geographic areas where the
Company has a proven history of success; to down-size or close operations with
marginal prospects for success; to continue to restrict the payment of cash
dividends on the Company's $1 par value common stock and depositary convertible
exchangeable preferred stock; and to continue to seek ways to control overhead
expenses. In addition, the Company is reviewing all of the Company's real estate
assets and current strategies related to those assets with the possibility that
a plan may be developed to generate short term liquidity of up to an additional
$20 million for the Company. Currently, the Company's strategy has been to hold
its real estate assets through the necessary development and stabilization
periods to achieve full value. A strategy which includes an accelerated
disposition or bulk sale of certain of its real estate assets could
substantially reduce the estimated net future cash flows from these properties,
which would require the recognition of an impairment loss on those assets in
accordance with Statement of Financial Accounting Standards No. 121.
As the Company has not yet adopted a plan to dispose of any of its real estate
assets nor devoted a significant effort to a comprehensive disposition strategy,
it has not compiled detailed estimates, on a specific property basis, of the
potential writedown for these assets. However, as discussed above in connection
with the proposed investment by PB Capital, the Company has performed a
preliminary review of its real estate assets and estimates that a potential
writedown of $20,000,000 to $80,000,000 of the carrying values of these
properties may be required based upon various valuation methodologies including
discounted cash flows (after estimated costs to carry), comparable sales
transactions and unsolicited purchase offers received. This potential writedown
can be summarized as follows:
Location Potential Writedown
-------- -------------------
Arizona Properties $17,000,000 - $20,000,000
California Properties $53,000,000 - $57,000,000
Florida Properties $ 2,000,000 - $ 3,000,000
Management believes that cash generated from operations, existing credit lines
and additional borrowings, including the anticipated proceeds from the issuance
of cumulative convertible junior preferred stock referred to above, should
probably be adequate to meet the Company's funding requirements for at least the
next twelve months. However, the withdrawal of many commercial lending sources
from both the real estate and construction markets and/or restrictions on new
borrowings and extensions on maturing loans by these same sources cause
uncertainties in predicting liquidity.
11
<PAGE>
PART II. - OTHER INFORMATION
Item 1. - Legal Proceedings - None
Item 2. - Changes in Securities
(a) None
(b) None
Item 3. - Defaults Upon Senior Securities
(a) None
(b) Preferred Stock, $1 par value
As previously disclosed in the 1995 Form 10-K, in conjunction with the
covenants of the Company's Amended Revolving Credit Agreement, the
Company is required to suspend the payment of quarterly dividends on its
depositary convertible exchangeable preferred stock until the $15
million Bridge Loan commitment is no longer outstanding, if a default
exists under the terms of the Amended Revolving Credit Agreement, or if
the ratio of long-term debt to equity exceeds 50%. Therefore, the
dividends on the preferred stock that normally would have been declared
during December of 1995 and March, June and September of 1996, and
payable on March 15, June 15, September 15, and December 15, 1996,
respectively, have not been declared. The total amount of dividends in
arrears on the Company's preferred stock at the date of this filing is
$2,125,000.
Item 4. - Submission of Matters to a Vote of Security Holders - None
Item 5. - Other Information - None
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
- -----------------
Exhibit 4. Instruments Defining the Rights of Security Holders,
Including Indentures
4.5 Stock Purchase and Sale Agreement dated as
of July 24, 1996 by and among Richard C.
Blum & Associates, L.P., PB Capital
Partners, L.P., and Perini Corporation,
First Amendment to the Agreement dated
September 30, 1996 and October 9, 1996, and
Second Amendment to the Agreement dated
November 8, 1996 - filed herewith.
Exhibit 10. Material Contracts
10.7 Amendment No. 2 as of July 30, 1996 to the
Credit Agreement dated as of December 6,
1994 and Amendment No. 1 as of July 30, 1996
to the Bridge Credit Agreement dated
February 26, 1996 among Perini Corporation,
the Banks listed herein, Morgan Guaranty
Trust Company of New York, as Agent, and
Fleet National Bank of Massachusetts, as
Co-Agent - filed herewith.
10.8 Amendment No. 2 as of September 30, 1996 to
the Bridge Credit Agreement dated as of
February 26, 1996 among Perini Corporation,
the Banks listed herein, Morgan Guaranty
Trust Company of New York, as Agent, and
Fleet National Bank of Massachusetts, as
Co-Agent - filed herewith.
10.9 Amendment No. 3 as of October 2, 1996 to the
Bridge Credit Agreement dated as of February
26, 1996 among Perini Corporation, the Banks
listed herein, Morgan Guaranty Trust Company
of New York, as Agent, and Fleet National
Bank of Massachusetts, as Co-Agent - filed
herewith.
10.10 Amendment No. 4 as of October 15, 1996 to
the Bridge Credit Agreement dated as of
February 26, 1996 among Perini Corporation,
the Banks listed herein, Morgan Guaranty
Trust Company of New York, as Agent, and
Fleet National Bank of Massachusetts, as
Co-Agent - filed herewith.
10.11 Amendment No. 5 as of October 21, 1996 to
the Bridge Credit Agreement dated as of
February 26, 1996 among Perini Corporation,
the Banks listed herein, Morgan Guaranty
Trust Company of New York, as Agent, and
Fleet National Bank of Massachusetts, as
Co-Agent - filed herewith.
10.12 Amendment No. 6 as of October 24, 1996 to
the Bridge Credit Agreement dated as of
February 26, 1996 among Perini Corporation,
the Banks listed herein, Morgan Guaranty
Trust Company of New York, as Agent, and
Fleet National Bank of Massachusetts, as
Co-Agent - filed herewith.
10.13 Amendment No. 7 as of November 1, 1996 to
the Bridge Credit
13
<PAGE>
Agreement dated as of February 26, 1996
among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - filed herewith.
10.14 Amendment No. 8 as of November 4, 1996 to
the Bridge Credit Agreement dated as of
February 26, 1996 and Amendment No. 3 as of
November 4, 1996 to the Credit Agreement
dated December 6, 1994 among Perini
Corporation, the Banks listed herein, Morgan
Guaranty Trust Company of New York, as
Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - filed herewith.
10.15 Amendment No. 9 as of November 12, 1996 to
the Bridge Credit Agreement dated as of
February 26, 1996 and Amendment No. 4 as of
November 12, 1996 to the Credit Agreement
dated December 6, 1994 among Perini
Corporation, the Banks listed herein, Morgan
Guaranty Trust Company of New York, as
Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - filed herewith.
(b) Reports on Form 8-K - None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Perini Corporation
Registrant
Date: November 14, 1996 /s/ John H. Schwarz
-------------------
John H. Schwarz, Executive Vice President,
Finance and Administration
Date: November 14, 1996 /s/ Barry R. Blake
------------------
Barry R. Blake, Vice President and Controller
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule containes summary financial information extracted from
Consolidated Balance Sheets as of September 30, 1996 and the Consolidated
Statements of Operations for the nine months ended September 30, 1996 as
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,895
<SECURITIES> 0
<RECEIVABLES> 185,807
<ALLOWANCES> 0
<INVENTORY> 17,588
<CURRENT-ASSETS> 351,227 <F1>
<PP&E> 34,617
<DEPRECIATION> (23,239)
<TOTAL-ASSETS> 563,697 <F2>
<CURRENT-LIABILITIES> 274,969
<BONDS> 114,739
100
0
<COMMON> 4,985
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 563,697 <F3>
<SALES> 0
<TOTAL-REVENUES> 927,191
<CGS> 0
<TOTAL-COSTS> (888,730)
<OTHER-EXPENSES> (382)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,065)
<INCOME-PRETAX> 6,382 <F4>
<INCOME-TAX> 560
<INCOME-CONTINUING> 5,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,822
<EPS-PRIMARY> .88
<EPS-DILUTED> 0
<FN>
<F1> Includes Equity in Construction Joint Ventures of $67,736, Unbilled Work of
$39,736, and Other Short-Term Assets of $25,465, not currently reflected in
this tag list.
<F2> Includes investments in and advances to Real Estate Joint Ventures of
$156,778, Land Held for Sale or Development of $38,846, and Other Long-Term
Assets of $5,468, not currently reflected in this tag list.
<F3> Includes Deferred Income Taxes and Other Liabilities of $59,110, Minority
INterest of $2,916, Paid-In Surplus of $56,751, Retained Earnings of
$56,291, ESOT Related Obligations of $(3,976), and Treasury Stock of
$(2,188).
<F4> Includes General, Administrative and Selling Expenses of $(24,632), not
currently relfected on this tag list.
</FN>
</TABLE>
