UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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
At November 13, 1997, 5,157,046 shares of common stock of the registrant were
outstanding.
Page 1 of 16
<PAGE>
PERINI CORPORATION & SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
Page Number
-----------
<S> <C> <C>
Part I. - Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3
September 30, 1997 and December 31, 1996
Consolidated Condensed Statements of Income - 4
Three Months and Nine Months ended September 30, 1997
and 1996
Consolidated Condensed Statements of Cash Flows - 5
Nine Months ended September 30, 1997 and 1996
Notes to Consolidated Condensed Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of the Consolidated 9 - 11
Financial Condition and Results of Operations
Part II. - Other Information:
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12 - 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13 - 15
Signatures 16
</TABLE>
2
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (1)
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
SEPT. 30, DEC. 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Cash $ 17,066 $ 9,745
Accounts and Notes Receivable 179,268 188,120
Unbilled Work 39,835 35,600
Construction Joint Ventures 74,266 78,233
Real Estate Inventory, at the lower of cost or market 18,710 37,914
Deferred Tax Asset 2,150 3,513
Other Current Assets 7,639 1,655
---------------- ----------------
Total Current Assets $ 338,934 $ 354,780
---------------- ----------------
Land Held for Sale or Development $ 19,210 $ 21,520
Investments in and Advances to Real Estate Joint Ventures 78,010 71,253
Other --- 49
---------------- ----------------
Total Real Estate Development Investments $ 97,220 $ 92,822
---------------- ----------------
Other Assets $ 4,760 $ 5,574
---------------- ----------------
Property and Equipment, less Accumulated Depreciation of $20,366 in 1997
and $23,013 in 1996 $ 10,614 $ 11,116
---------------- ----------------
$ 451,528 $ 464,292
================ ================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Maturities of Long-Term Debt $ 6,907 $ 16,421
Accounts Payable 172,142 183,407
Advances from Construction Joint Ventures 17,131 47,544
Deferred Contract Revenue 21,677 23,841
Accrued Expenses 39,295 26,823
---------------- ----------------
Total Current Liabilities $ 257,152 $ 298,036
---------------- ----------------
Deferred Income Taxes and Other Liabilities $ 12,401 $ 31,297
---------------- ----------------
Long-Term Debt, including real estate development debt of $549 in 1997
and $4,287 in 1996 $ 108,096 $ 96,893
---------------- ----------------
Minority Interest $ 1,064 $ 2,508
---------------- ----------------
Redeemable Convertible Series B Preferred Stock $ 28,862 $ ---
---------------- ----------------
Stockholders' Equity:
Preferred Stock $ 100 $ 100
Series A Junior Participating Preferred Stock --- ---
Stock Purchase Warrants 2,233 ---
Common Stock 5,267 5,032
Paid-In Surplus 54,437 57,080
Retained Deficit (13,545) (20,666)
ESOT Related Obligations (2,784) (3,856)
---------------- ----------------
$ 45,708 $ 37,690
Less - Treasury Stock 1,755 2,132
---------------- ----------------
Total Stockholders' Equity $ 43,953 $ 35,558
---------------- ----------------
$ 451,528 $ 464,292
================ ================
</TABLE>
(1) Derived from the audited December 31, 1996 financial statements.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Data)
<TABLE>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES FROM OPERATIONS:
Construction $ 320,711 $ 319,645 $ 999,879 $ 885,398
Real Estate 7,458 21,025 44,433 41,793
--------------- --------------- --------------- ----------------
TOTAL REVENUES FROM OPERATIONS $ 328,169 $ 340,670 $ 1,044,312 $ 927,191
--------------- --------------- --------------- ----------------
COST AND EXPENSES:
Cost of Operations $ 314,971 $ 327,670 $ 1,005,770 $ 888,730
General, Administrative and Selling Expenses 7,207 7,976 22,143 24,632
--------------- --------------- --------------- ----------------
$ 322,178 $ 335,646 $ 1,027,913 $ 913,362
--------------- --------------- --------------- ----------------
INCOME FROM OPERATIONS $ 5,991 $ 5,024 $ 16,399 $ 13,829
Other Income (Expense), Net (233) (13) (1,158) (382)
Interest Expense (2,611) (2,590) (7,670) (7,065)
--------------- --------------- --------------- ----------------
Income Before Income Taxes $ 3,147 $ 2,421 $ 7,571 $ 6,382
(Provision) Benefit for Income Taxes (Note 2) (220) (110) (450) (560)
--------------- --------------- --------------- ----------------
NET INCOME $ 2,927 $ 2,311 $ 7,121 $ 5,822
=============== =============== =============== ================
EARNINGS PER COMMON SHARE (Note 3) $ 0.30 $ 0.37 $ 0.64 $ 0.88
=============== =============== =============== ================
DIVIDENDS PER COMMON SHARE (Note 4) $ --- $ --- $ --- $ ---
=============== =============== =============== ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 3) 5,157,046 4,847,187 5,030,093 4,785,264
=============== =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(In Thousands)
<TABLE>
NINE MONTHS
ENDED SEPT 30,
1997 1996
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 7,121 $ 5,822
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization 2,073 1,938
Noncurrent deferred taxes and other liabilities (18,896) 6,447
Distributions greater than earnings of joint ventures and affiliates 2,829 2,820
Cash provided from (used by) changes in components of working capital other
than cash, notes payable and current maturities of long-term debt (32,997) (46,894)
Sale of interest in real estate joint ventures 19,856 ---
Real estate development investments other than joint ventures 2,630 1,286
Other non-cash items, net (1,800) (1,103)
-------------- --------------
NET CASH USED BY OPERATING ACTIVITIES $ (19,184) $ (29,684)
-------------- --------------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment $ 733 $ 1,551
Cash distributions of capital from unconsolidated joint ventures 5,630 6,732
Acquisition of property and equipment (1,181) (1,225)
Improvements to land held for sale or development (334) (397)
Improvements to real estate properties used in operations --- (120)
Capital contributions to unconsolidated joint ventures (4,271) (14,654)
Advances to real estate joint ventures, net (7,700) (5,706)
Investments in other activities 768 (2,158)
-------------- --------------
NET CASH USED BY INVESTING ACTIVITIES $ (6,355) $ (15,977)
-------------- --------------
Cash Flows from Financing Activities:
Series B preferred stock issued, net $ 26,558 $ ---
Proceeds of long-term debt 17,885 32,355
Repayment of long-term debt (13,449) (1,997)
Common stock issued 1,701 ---
Treasury stock issued 165 1,139
-------------- --------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES $ 32,860 $ 31,497
-------------- --------------
Net Increase (Decrease) in Cash $ 7,321 $ (14,164)
Cash at Beginning of Year 9,745 29,059
-------------- --------------
Cash at End of Period $ 17,066 $ 14,895
============== ==============
Supplemental Disclosures of Cash paid during the period for:
Interest $ 7,580 $ 6,717
============== ==============
Income tax payments $ 349 $ 201
============== ==============
</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, 1996. The Company has made no significant
change in these policies during 1997.
The Financial Accounting Standards Board has issued Statement No. 128
Earnings per Share. The Company will implement the provisions of the
Statement for the year ending December 31, 1997. The Statement requires
replacement of primary earnings per shares (EPS) with basic EPS, which
is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding. Diluted EPS, which
gives effect to all dilutive potential common shares outstanding, will
still be required. All prior-period EPS data presented shall be
restated. The EPS amounts shown on the Company's consolidated statement
of operations for the three month and nine month periods ended September
30, 1997 and September 30, 1996 are the equivalents of basic EPS.
Diluted EPS are not required (see Note 3 below).
The Financial Accounting Standards Board has issued Statement No. 129
Disclosure of Information about Capital. The Statement continues the
requirements to disclose certain information about an enterprise's
capital structure prescribed by previous accounting standards. The
Company's current disclosures are in compliance with the requirements of
the Statement.
The Financial Accounting Standards Board has issued Statement No. 130
Reporting Comprehensive Income. The Company will implement the
provisions of the Statement in the quarter ending March 31, 1998. The
Statement requires an enterprise to report certain changes in
stockholders' equity that are not reported in net income, except those
resulting from investments by and distributions to stockholders, and
display these gains and losses below net income in the income statement,
in a separate statement that begins with net income or in the statement
of changes in stockholders' equity. The provisions of the Statement are
limited to issues of reporting and presentation and do not affect
matters of recognition and measurement of items of comprehensive income.
Consequently, the Company does not expect the effect of its adoption of
the Statement to be material.
The Financial Accounting Standards Board has issued Statement No. 131
Disclosures about Segments of an Enterprise and Related Information
which supersedes Statement No. 14 Financial Reporting for Segments of a
Business Enterprise. The Company will implement the provisions of the
Statement for the year ending December 31, 1998. Generally, financial
information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. The Statement requires an enterprise to
report a measure of segment profit or loss, certain specific revenue and
expense items and segment assets. It requires reconciliations of total
segment revenues, total segment profit or loss, total segment assets,
and other amounts disclosed for segments to corresponding amounts in the
enterprise's financial statements. It requires an enterprise to report
information about the revenues derived from its products or services (or
groups of similar products and services), about the countries in which
the enterprise earns revenues and holds assets, and about major
customers. The provisions of the Statement relate primarily to issues of
reporting and presentation, and the Company does not expect the effect
of its adoption of the Statement to be material.
6
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(2) Provision For Income Taxes
The lower-than-normal tax rate in 1997 and 1996 reflects the realization
of a portion of the tax benefit not recognized in prior years due to
certain accounting limitations.
(3) 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 available for common shares are
calculated as follows (in thousands):
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income $ 2,927 $ 2,311 $ 7,121 $ 5,822
------------ ------------ ------------ ------------
Less:
Accrued dividends on Senior Preferred Stock $ (531) $ (531) $ (1,592) $ (1,592)
Dividends declared on Series B Preferred Stock (782) --- (2,028) ---
Accretion deduction required to reinstate
mandatory redemption value of Series B
Preferred Stock over a period of 8-10 years (95) --- (279) ---
------------ ------------ ------------ ------------
$ (1,408) $ (531) $ (3,899) $ (1,592)
------------ ------------ ------------ ------------
Earnings Available for Common Shares $ 1,519 $ 1,780 $ 3,222 $ 4,230
============ ============ ============ ============
</TABLE>
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 and Series B
preferred shares into common stock is also antidilutive.
(4) Dividends
There were no cash dividends on common stock declared or paid during the
periods included in the consolidated condensed financial statements
presented herein.
As previously disclosed, in conjunction with the covenants of the
Company's Amended Revolving Credit Agreement as well as the New Credit
Agreement, effective January 17, 1997, the Company is required to
suspend the payment of quarterly dividends on its $21.25 preferred stock
(equivalent to $2.125 per depositary share) ("Senior Preferred Stock")
until certain financial criteria are met. Therefore, the dividends on
the Senior Preferred Stock have not been declared since 1995 (although
they have been fully accrued due to the "cumulative" feature of the
Senior Preferred Stock). The aggregate amount of dividends in arrears is
approximately $4,250,000 at September 30, 1997, which represents
approximately $42.50 per share of Preferred Stock or approximately $4.25
per depositary share.
7
<PAGE>
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
In-kind dividends (based on an annual rate of 10%) were paid on the
Series B Preferred Stock as follows:
<TABLE>
Payment
---------------------------------------
Series B At $200.00
Record Date Payment Date Shares per Share
- -------------------------- -------------------------- ---------------- ----------------
<S> <C> <C> <C>
March 1, 1997 March 17, 1997 2,419 $ 483,815
June 1, 1997 June 16, 1997 3,814 $ 762,846
September 2, 1997 September 15, 1997 3,910 $ 781,916
</TABLE>
(5) Basis of Presentation
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, 1996. 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, 1997 and results of
operations and cash flows for the nine month periods ended September 30,
1997 and 1996. The results of operations for the nine month period ended
September 30, 1997 may not be indicative of the results that may be
expected for the year ending December 31, 1997, 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.
(6) New Equity and New Credit Agreement
As disclosed in Note 14 to the Company's financial statements included
in the Company's Form 10-K for the year ended December 31, 1996, on
January 17, 1997, the Company's stockholders approved two proposals that
allowed the Company to close its new equity transaction and receive net
proceeds of approximately $27 million. Concurrent with the closing of
the equity transaction, the Company entered into a new renegotiated
Revolving Credit Agreement.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
Results of Operations
- ---------------------
Comparison of the Third Quarter of 1997 with the Third Quarter of 1996
Revenues decreased $12.5 million (or 3.7%), from $340.7 million in 1996 to
$328.2 million in 1997. While total construction revenues remained at
approximately $320 million during both 1997 and 1996, real estate revenues
decreased by $13.5 million (or 64%), from $21.0 million in 1996 to $7.5 million
in 1997 primarily due to less revenues from The Resort at Squaw Creek which was
sold during the second quarter of 1997. Increases in construction revenues due
to the timing in the start-up of certain fast track hotel/casino projects in the
Western United States and the impact of several large infrastructure projects in
the Metropolitan New York area were offset by decreases in revenues from the
Midwest area due primarily to the two divisions which the Company is in the
process of phasing out.
While the gross profit from construction operations remained at approximately
$13 million during both 1997 and 1996, the gross profit from real estate
operations increased by $.5 million, from a loss of $.2 million in 1996 to a
profit of $.3 million in 1997 due primarily to improved operating performance
from certain properties in the Southwest. Increased gross profit from
construction operations related to the revenue increases referred to above were
offset by additional losses incurred on the closeout of certain projects in the
Midwest including those related to the two divisions which the Company is in the
process of phasing out.
The decrease in general, administrative and selling expenses of $.8 million (or
10%), from $8 million in 1996 to $7.2 million in 1997, resulted primarily from
phasing out of two divisions in the Midwest.
The lower than normal tax rate in 1997 and 1996 is due to the realization of a
portion of the Federal tax benefit resulting from the operating loss recorded in
prior years, because of certain accounting limitations.
Comparison of the Nine Months Ended September 30, 1997 with the Nine Months
Ended September 30, 1996
Revenues increased $117.1 million (or 12.6 %), from $927.2 million in
1996 to $1,044.3 billion in 1997. This increase resulted from increased
construction revenues of $114.5 million (or 12.9%), from $885.4 million in 1996
to $999.9 million in 1997, due primarily to an increase in revenues from
building construction operations of $99.5 million (or 16.4 %), from $606.6
million in 1996 to $706.1 million in 1997, as well as an increase in revenues
from civil construction operations of $15.0 million (or 5.4%), from $278.8
million in 1996 to $293.8 million in 1997. 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 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 $2.6 million, from $41.8 million in 1996 to $44.4 million
in 1997 because of revenues related to the sale of the Company's interest in The
Resort at Squaw Creek.
In spite of the increase in revenues described above, total gross profit
remained the same at approximately $38.5 million. The gross loss from real
estate operations remained at approximately $.5 million. In spite of the
increase in construction revenues referred to above, the overall gross profit
remained the same at approximately $39.0 million since the increased profits
related to revenue increases were offset by losses incurred in closing out work
in two Midwest divisions, which the Company is in the process of phasing out,
and an increase in the estimated loss on the completion of a large tunnel
project in the Midwest.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
General, administrative and selling expenses decreased by $2.5 million (or 10
%), from $24.6 million in 1996 to $22.1 million in 1997 primarily due to the
phasing out of two divisions in the Midwest.
Other income (expense) net increased $.8 million, from a net expense of $.3
million in 1996 to a net expense of $1.1 million in 1997 due primarily to
increased amortization of deferred debt expense related to the new credit
agreement.
Interest expense increased by $.6 million (or 9%), from $7.1 million in 1996 to
$7.7 million in 1997 due to a higher average level of borrowings during 1997 as
well as higher effective interest rates.
The lower than normal tax rate in 1997 is due to the utilization of tax loss
carry forwards from prior years. Because of certain accounting limitations, the
Company was not able to recognize a portion of the tax benefit related to the
operating losses experienced in fiscal 1996 and 1995.
Financial Condition
- -------------------
Working capital increased $25.0 million, from $56.7 million at the end of 1996
to $81.7 million at September 30, 1997 primarily as a result of increased
borrowings under the Company's Revolving Credit Agreement. The current ratio
increased from 1.19 to 1 to 1.32 to 1 during this same period.
During the first nine months of 1997, the Company generated $32.8 million in
cash from financing activities, primarily from the $26.6 million in net proceeds
from the sale of the Series B Preferred Stock. These funds, as well as the cash
generated from the sale of the Company's interest in The Resort at Squaw Creek,
were used to fund operating activities of $19.2 million, investment activities
of $6.3 million, primarily advances to real estate joint ventures, and to
increase cash on hand by $7.3 million.
Long term debt at September 30, 1997 was $108.1 million, an increase of $11.2
million from December 31, 1996. The long-term debt to equity ratio at September
30, 1997 was 2.46 to 1, compared to 2.72 to 1 at December 31, 1996.
In addition, in connection with Rincon Center, a mixed-use development in San
Francisco, Perini Land and Development Company ("PL&D"), the Company's real
estate subsidiary, continued discussions with parties including the Master
Lessor and Lenders toward reaching agreement on the replacement or extension of
various financings which mature in 1998. In October, the Lender provided a
short-term extension on one segment of that financing to facilitate continued
discussions. PL&D, in turn, provided a $3.7 million unscheduled paydown of loan
principal through the calling of a Letter of Credit it had provided as
collateral for the loan. The $3.7 million was funded through short-term
borrowings.
Effective January 17, 1997 the Company's liquidity and access to future
borrowings, as required, during the next few years were significantly enhanced
by the $27 million in net proceeds received upon the issuance of the new Series
B Preferred Stock and a new renegotiated Revolving Credit Agreement. Under the
new Credit Agreement, the previous Revolving Credit Agreement and Bridge Loan
Facility were combined into a single $129.5 million credit facility and the
expiration dates extended from 1997 to January 1, 2000. The new Credit Agreement
provides for scheduled mandatory reductions in the commitment in the amount of
$15.0 million in 1997, $15.0 million in 1998, $12.5 million in 1999 and the
balance in 2000. Management believes that cash generated from operations,
existing credit lines and additional borrowings should be adequate to meet the
Company's funding requirements for at least the next twelve months.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
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, 1997 was a $1.4 billion, which represented a 5% decrease over the backlog at
December 31, 1996. While approximately 51% of the current backlog relates to
building construction projects, which generally represent lower risk and lower
margin work, approximately 49% of the current backlog relates to civil
construction projects, which generally represent higher risk, but
correspondingly higher margin work.
The Company's strategic plan to generate up to $30 million in short-term
liquidity from certain of its real estate properties, through accelerated sales,
is proceeding according to plan.
11
<PAGE>
PART II. - OTHER INFORMATION
Item 1. - Legal Proceedings
- ---------------------------
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. As a
result of developments in the case during the third quarter of 1995, the Company
established a reserve with respect to the litigation.
In July 1997, the remaining issues were ruled on by the Court, which awarded
approximately $4.3 million to the joint venture, thereby reducing the net amount
payable to approximately $12.2 million. The joint venture currently plans to
appeal the decision. As a result of the decision, there is no immediate impact
on the Company's Statement of Income because of the reserve provided in prior
years. The actual funding of net damages, if any, will be deferred until the
appeal process is complete.
Item 2. - Changes in Securities
- -------------------------------
(a)(b)(c) On January 17, 1997, the Company issued and sold 150,150 shares
of Series B Cumulative Convertible Preferred Stock, par value
$1.00 per share (the "Series B Preferred"), to PB Capital
Partners, L.P., The Union Labor Life Insurance Company Separate
Account P and The Common Fund for Non-Profit Organizations for
a price of $200 per share, or a total purchase price of
$30,030,000. Dividends are payable on the Series B Preferred
either in cash or in additional shares of Series B Preferred (a
"Payment- In-Kind"). The cash dividend rate is 7 percent (9
percent upon the occurrence of certain defaults) and the
Payment-In-Kind dividend rate is 10 percent (12 percent upon
the occurrence of certain defaults) of the Liquidation
Preference, which is equal to $200 per share of Series B
Preferred. The terms of the Series B Preferred provide that no
cash dividends or other cash distributions may be paid in
respect of the Company's Common Stock until 2001, at which time
limited dividends may be paid if authorized by the Board of
Directors.
Each share of Series B Preferred is convertible, at any time,
at the election of the holder, into fully paid and
nonassessable shares of Common Stock at the rate of that number
of shares of Common Stock that is equal to the Liquidation
Preference. Holders of the Series B Preferred have voting
rights equal to the number of shares of Common Stock into which
it is convertible and will vote as a class with holders of the
Common Stock.
Upon the issuance of the Series B Preferred, the rights of
existing stockholders were affected in several principal ways.
As the Series B Preferred is convertible and have voting rights
equal to the number of shares of Common Stock into which it is
convertible, the voting rights of existing stockholders is
diluted. In addition, the right of the holders of the Series B
Preferred to designate certain directors and members of the
Executive Committee, including providing such Executive
Committee members with an effective veto over certain major
decisions of the Company, is also a dilutive effect on the
voting rights of stockholders. In addition, the Series B
Preferred may also have a dilutive effect on the earnings per
share of the Company due to the increase in number of shares of
Common Stock on a fully diluted basis. Furthermore, the book
value of each share of Common Stock may decrease due to a
conversion price below book value.
Registration under the Securities Act of 1933, as amended (the
"Act"), of the Series B
12
<PAGE>
PART II. - OTHER INFORMATION (CONTINUED)
Preferred was not required for the reason that the Series B
Preferred was issued and sold to a limited number of investors
and accomplished in transactions not involving a public
offering within the meaning of Section 4(2) of the Act.
Item 3. - Defaults Upon Senior Securities
- -----------------------------------------
(a) None
(b) In accordance with the provisions of the 1995 Amended Revolving
Credit Agreement and the recently renegotiated new Credit
Agreement, the Company suspended payment of quarterly dividends
on its $21.25 Convertible Exchangeable Preferred Stock ("Senior
Preferred Stock") commencing with the dividend that normally
would have been declared during December, 1995 through the
dividend that would normally have been declared during
September, 1997 for a total arrearage of $42.50 per share (or
$4.25 per depositary share) which aggregates $4,250,000 to
date. While these dividends have not been declared or paid,
they have been fully accrued in accordance with the
"cumulative" feature of the stock.
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) 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 - As amended
through January 17, 1997 - Exhibit 3.1 to 1996
Form 10-K filed March 31, 1997.
3.2 By-laws - As amended and restated as of January
17, 1997 - Exhibit 3.2 to Form 8-K filed on
February 14, 1997.
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.
13
<PAGE>
PART II. - OTHER INFORMATION (CONTINUED)
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 dated as of
September 23, 1988, as amended and restated as
of May 17, 1990, as amended and restated as of
January 17, 1997, between Perini Corporation and
State Street Bank and Trust Company, as Rights
Agent - Exhibit 4.4 to Amendment No. 1 to
Registration Statement on Form 8-A/A filed on
January 29, 1997.
4.5 Stock Purchase and Sale Agreement dated as of
July 24, 1996 by and among the Company, PB
Capital and RCBA, as amended - Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q/A for the
fiscal quarter ended September 30, 1996 filed
on December 11, 1996.
4.8 Certificate of Vote of Directors Establishing a
Series of Preferred Stock determining the
relative rights and preferences of the Series B
Cumulative Convertible Preferred Stock, dated
January 16, 1997 - Exhibit 4.8 to Form 8-K filed
on February 14, 1997.
4.9 Stock Assignment and Assumption Agreement dated
as of December 13, 1996 by and among the Company,
PB Capital and ULLICO (filed as Exhibit 4.1 to
the Schedule 13D filed by ULLICO on December 16,
1996 and incorporated herein by reference).
4.10 Stock Assignment and Assumption Agreement dated
as of January 17, 1997 by and among the Company,
RCBA and The Common Fund - Exhibit 4.10 to Form
8-K filed on February 14, 1997.
4.11 Voting Agreement dated as of January 17, 1997 by
and among PB Capital, David B. Perini, Perini
Memorial Foundation, David B. Perini Testamentary
Trust, Ronald N. Tutor, and Tutor-Saliba
Corporation - Exhibit 4.11 to Form 8-K filed on
February 14, 1997.
4.12 Registration Rights Agreement dated as of January
17, 1997 by and among the Company, PB Capital and
ULLICO - Exhibit 4.12 to Form 8-K filed on
February 14, 1997.
Exhibit 10. Material Contracts
Incorporated herein by reference:
10.1 1982 Stock Option and Long Term Performance
Incentive Plan - Exhibit A to Registrant's Proxy
Statement for Annual Meeting of Stockholders
dated April 15, 1992.
10.2 Perini Corporation Amended and Restated General
Incentive Compensation Plan - Exhibit 10.2 to
1991 Form 10-K, as filed.
10.3 Perini Corporation Amended and Restated
Construction Business Unit Incentive Compensation
Plan - Exhibit 10.3 to 1991 Form 10-K, as filed.
14
<PAGE>
PART II. - OTHER INFORMATION (CONTINUED)
10.4 Management Agreement dated as of January 17, 1997
by and among the Company, Ronald N. Tutor and
Tutor-Saliba Corporation - Exhibit 10.16 to Form
8-K filed on February 14, 1997.
10.5 Amended and Restated Credit Agreement dated as of
January 17, 1997 among Perini Corporation, the
Banks listed herein and Morgan Guaranty Trust
Company of New York, as Agent, and Fleet National
Bank, as Co-Agent - Exhibit 10.17 to Form 10-K
filed March 31, 1997.
Filed herewith:
10.6 Amendment No. 1 as of November 10, 1997 to the
Amended and Restated Credit Agreement dated as of
January 17, 1997 among Perini Corporation, the
Banks listed herein and Morgan Guaranty Trust
Company of New York, as Agent, and Fleet National
Bank of Massachusetts, as Co-Agent - filed
herewith.
(b) None
15
<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, 1997 /s/ John H. Schwarz
John H. Schwarz, Executive Vice President,
Finance and Administration
Date: November 14, 1997 /s/ Barry R. Blake
Barry R. Blake, Vice President and Controller
16
[CONFORMED COPY]
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT NO. 1 dated as of November 10, 1997 among PERINI
CORPORATION (the "Borrower"), the BANKS listed on the signature pages
hereof (collectively, the "Banks") and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent (the "Agent").
WITNESSETH:
WHEREAS, the Borrower, the Banks and the Agent are parties to an
Amended and Restated Credit Agreement dated as of January 17, 1997 (the
"Credit Agreement");
WHEREAS, the Borrower has requested an amendment to the operating
cash flow covenant contained in Section 5.10 of the Credit Agreement for the
period from January 1, 1997 through September 30, 1997;
WHEREAS, the Borrower and the Banks have agreed to modify the
obligations of the Borrower under Section 9.03 of the Credit Agreement to pay
certain out-of-pocket expenses of the Agent;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
shall have the meaning assigned to such term in the Credit Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall from and after the date
hereof refer to the Credit Agreement as amended hereby.
SECTION 2. Amendment of Minimum Operating Cash Flow Covenant.
Section 5.14 of the Credit Agreement is amended to change the minimum
amount of Operating Cash Flow required for the period from January 1, 1997
<PAGE>
through September 30, 1997 from "$0" to "(8,000,000)".
SECTION 3. Amendments to Expense Provision. Section 9.03(a) of the
Credit Agreement is amended (a) to change the reference to "$60,000" therein
to "$85,000" and (b) to change the reference to "$50,000" therein to
"$75,000".
SECTION 4. Agreement to Provide Detailed Plan. The Borrower agrees
to provide each Bank, prior to the date of its meeting with the Banks in
December, 1997, a plan describing the steps that it will take to ensure its
future compliance with the covenants contained in the Credit Agreement,
which plan shall be in sufficient detail as may be reasonably acceptable to the
Required Banks.
SECTION 5. Representations and Warranties Correct; No Default. The
Borrower and each Subsidiary Guarantor represents and warrants that on and
as of the date hereof, after giving effect to this Amendment No. 1, (a) the
representations and warranties of each Obligor contained in each Financing
Document, as amended, to which it is a party are true and (b) no Default
under the Credit Agreement exists.
SECTION 6. Effect of Amendments. Except as expressly set forth herein,
the amendments contained herein shall not constitute an amendment or waiver
of any term or condition of the Credit Agreement or of any other Financing
Document, and all such terms and conditions shall remain in full force and
effect and are hereby ratified and confirmed in all respects.
SECTION 7. Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 8. Counterparts. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 9. Consent by Subsidiary Guarantors. By signing this
Amendment below, each Subsidiary Guarantor affirms its obligations under the
Subsidiary Guarantee Agreement and acknowledges that this Amendment shall
2
<PAGE>
ot alter, release, discharge or otherwise affect any of such obligations, all of
which shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
SECTION 10. Effectiveness. This Amendment No. shall become
effective as of the date hereof when the Agent shall have received duly executed
counterparts hereof signed by the Borrower, the Required Banks and the Agent
(or, in the case of any party as to which an executed counterpart shall not have
been received, the Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
party).
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of
the date first above written.
PERINI CORPORATION
By: /s/ John H. Schwarz
Exec. V.P., Finance & Administration
BANKS:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent and as a Bank
By: /s/ Stephen J. Hannan
FLEET NATIONAL BANK
By: /s/ Frederick W. Reinhardt
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Marlene M. Tuma
3
<PAGE>
BANKBOSTON, N.A.
By: /s/ David F. Eusden
COMERICA BANK
By: ____________________
HARRIS TRUST & SAVINGS BANK
By: /s/ Michael C. Wood
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Kenneth J. Mooney
Each of the undersigned Subsidiary Guarantors
consents to the foregoing Consent and confirms
its agreement with Section 9 of the Consent:
PERINI BUILDING COMPANY, INC.
By: /s/ Susan C. Mellace
V.P. & Treasurer
PERINI INTERNATIONAL CORPORATION
By: /s/ Barry R. Blake
Assistant Treasurer
PERINI LAND AND DEVELOPMENT COMPANY, INC.
By: /s/ Carl P. Gauthier
V.P. and Secretary
4
<PAGE>
R.E. DAILEY & CO.
By: /s/ David B. Perini
President
PARAMOUNT DEVELOPMENT ASSOCIATES, INC.
By: /s/ Carl P. Gauthier
V.P. and Secretary
PERINI ENVIRONMENTAL SERVICES, INC.
By: /s/ David B. Perini
Director
PERINI RESORTS, INC.
By: /s/ Carl P. Gauthier
V.P. and Secretary
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule containes summary financial information extracted from
Consolidated Balance Sheets as of September 30, 1997 and the Consolidated
Statements of Operations for the nine months ended September 30, 1997 as
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 17,066
<SECURITIES> 0
<RECEIVABLES> 179,268
<ALLOWANCES> 0
<INVENTORY> 18,710
<CURRENT-ASSETS> 338,934 <F1>
<PP&E> 30,980
<DEPRECIATION> (20,366)
<TOTAL-ASSETS> 451,528 <F2>
<CURRENT-LIABILITIES> 257,152
<BONDS> 108,096
100
0
<COMMON> 5,267
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 451,528 <F3>
<SALES> 0
<TOTAL-REVENUES> 1,044,312
<CGS> 0
<TOTAL-COSTS> 1,005,770
<OTHER-EXPENSES> (1,158)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,670)
<INCOME-PRETAX> 7,571 <F4>
<INCOME-TAX> 450
<INCOME-CONTINUING> 7,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,121
<EPS-PRIMARY> .64
<EPS-DILUTED> 0
<FN>
<F1> Includes Equity in Construction Joint Ventures of $74,266, Unbilled Work of
$39,835, and Other Short-Term Assets of $9,789, not currently reflected in
this tag list.
<F2> Includes investments in and advances to Real Estate Joint Ventures of
$78,010, Land Held for Sale or Development of $19,210, and Other Long-Term
Assets of $4,760, not currently reflected in this tag list.
<F3> Includes Deferred Income Taxes and Other Liabilities of $12,401, Minority
Interest of $1,064, Paid-In Surplus of $54,437, Retained Deficit of
$(13,545), ESOT Related Obligations of $(2,784), Treasury Stock of
$(1,755), Stock Purchase Warrants of $2,233 and Redeemable Convertible
Series B Preferred Stock of $28,862.
<F4> Includes General, Administrative and Selling Expenses of $(22,143), not
currently reflected on this tag list.
</FN>
</TABLE>
