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, 1998
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, 1998, 5,413,647 shares of common stock of the registrant were
outstanding.
Page 1 of 15
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PERINI CORPORATION & SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
Page Number
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Part I. - Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3
September 30, 1998 and December 31, 1997
Consolidated Condensed Statements of Income - 4
Three Months and Nine Months ended September 30, 1998
and 1997
Consolidated Condensed Statements of Cash Flows - 5
Nine Months ended September 30, 1998 and 1997
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
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2
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<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
(In Thousands)
ASSETS
SEPT. 30, DEC. 31,
1998 1997
---------------- ----------------
<S> <C> <C>
Cash $ 57,466 $ 31,305
Accounts and Notes Receivable 108,439 139,221
Unbilled Work 21,121 36,574
Construction Joint Ventures 71,330 71,056
Real Estate Inventory, at the lower of cost or market 16,348 25,145
Deferred Tax Asset 986 1,067
Other Current Assets 4,841 1,808
---------------- ----------------
Total Current Assets $ 280,531 $ 306,176
---------------- ----------------
Land Held for Sale or Development $ 14,656 $ 7,093
Investments in and Advances to Real Estate Joint Ventures 85,600 86,598
---------------- ----------------
Total Real Estate Development Investments $ 100,256 $ 93,691
---------------- ----------------
Other Assets $ 4,231 $ 4,581
---------------- ----------------
Property and Equipment, less Accumulated Depreciation of $18,078 in 1998
and $19,406 in 1997 $ 9,398 $ 10,476
---------------- ----------------
$ 394,416 $ 414,924
================ ================
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LIABILITIES AND STOCKHOLDERS' EQUITY
================ ================
<S> <C> <C>
Current Maturities of Long-Term Debt $ 3,317 $ 11,873
Accounts Payable 115,660 145,118
Advances from Construction Joint Ventures 20,080 29,801
Deferred Contract Revenue 24,660 17,117
Accrued Expenses 37,256 30,296
---------------- ----------------
Total Current Liabilities $ 200,973 $ 234,205
---------------- ----------------
Deferred Income Taxes and Other Liabilities $ 12,300 $ 24,101
---------------- ----------------
Long-Term Debt, including real estate development debt of $0 in 1998
and $322 in 1997 $ 98,152 $ 84,898
---------------- ----------------
Minority Interest $ 1,064 $ 1,064
---------------- ----------------
Redeemable Convertible Series B Preferred Stock $ 32,562 $ 29,756
---------------- ----------------
Stockholders' Equity:
Preferred Stock $ 100 $ 100
Series A Junior Participating Preferred Stock --- ---
Stock Purchase Warrants 2,233 2,233
Common Stock 5,506 5,267
Paid-In Surplus 50,728 53,012
Retained Deficit (6,224) (15,294)
ESOT Related Obligations (1,501) (2,663)
---------------- ----------------
$ 50,842 $ 42,655
Less - Treasury Stock 1,477 1,755
---------------- ----------------
Total Stockholders' Equity $ 49,365 $ 40,900
---------------- ----------------
$ 394,416 $ 414,924
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands, Except Per Share Data)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997 1998 1997
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
REVENUES FROM OPERATIONS:
Construction $ 247,730 $ 320,711 $ 740,693 $ 999,879
Real Estate 3,556 7,458 18,186 44,433
------------- --------------- -------------- ---------------
TOTAL REVENUES FROM OPERATIONS $ 251,286 $ 328,169 $ 758,879 $ 1,044,312
------------- --------------- -------------- ---------------
COST AND EXPENSES:
Cost of Operations $ 238,591 $ 314,971 $ 721,358 $ 1,005,770
General, Administrative and Selling Expenses 6,137 7,207 20,501 22,143
------------- -------------- -------------- ---------------
$ 244,728 $ 322,178 $ 741,859 $ 1,027,913
------------- -------------- -------------- ---------------
INCOME FROM OPERATIONS $ 6,558 $ 5,991 $ 17,020 $ 16,399
Other Income (Expense), Net (391) (233) (829) (1,158)
Interest Expense (2,040) (2,611) (6,341) (7,670)
------------- -------------- -------------- ---------------
Income Before Income Taxes $ 4,127 $ 3,147 $ 9,850 $ 7,571
Provision for Income Taxes (Note 2) (390) (220) (780) (450)
------------- -------------- -------------- ---------------
NET INCOME $ 3,737 $ 2,927 $ 9,070 $ 7,121
============= ============== ============== ===============
BASIC AND DILUTED EARNINGS PER COMMON SHARE (Note 3) $ 0.42 $ 0.30 $ 0.88 $ 0.64
============= ============== ============== ===============
DIVIDENDS PER COMMON SHARE (Note 4) $ --- $ --- $ --- $ ---
============= ============== ============== ===============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 3) 5,413,647 5,157,046 5,288,825 5,030,093
============== =============== ============== ================
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
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<TABLE>
<CAPTION>
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(In Thousands)
NINE MONTHS
ENDED SEPT 30,
1998 1997
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 9,070 $ 7,121
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization 1,735 2,073
Noncurrent deferred taxes and other liabilities 395 (18,896)
Distributions greater than earnings of joint ventures and affiliates 391 2,829
Cash provided from (used by) changes in components of working capital other
than cash, notes payable and current maturities of long-term debt 3,114 (32,997)
Sale of interest in real estate joint ventures --- 19,856
Real estate development investments other than joint ventures 7,130 2,630
Other non-cash items, net (911) (1,800)
-------------- --------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES $ 20,924 $ (19,184)
-------------- --------------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment $ 518 $ 733
Cash distributions of capital from unconsolidated joint ventures 2,795 5,630
Acquisition of property and equipment (568) (1,181)
Improvements to land held for sale or development (256) (334)
Capital contributions to unconsolidated joint ventures (2,424) (4,271)
Advances to real estate joint ventures, net (3,066) (7,700)
Investments in other activities 303 768
-------------- --------------
NET CASH USED BY INVESTING ACTIVITIES $ (2,698) $ (6,355)
-------------- --------------
Cash Flows from Financing Activities:
Series B preferred stock issued, net $ --- $ 26,558
Proceeds of long-term debt 14,600 17,885
Repayment of long-term debt (9,298) (13,449)
Common stock issued 2,482 1,701
Treasury stock issued 151 165
-------------- --------------
NET CASH PROVIDED FROM FINANCING ACTIVITIES $ 7,935 $ 32,860
-------------- --------------
Net Increase in Cash $ 26,161 $ 7,321
Cash at Beginning of Year 31,305 9,745
-------------- --------------
Cash at End of Period $ 57,466 $ 17,066
============== ==============
Supplemental Disclosures of Cash paid during the period for:
Interest $ 6,128 $ 7,580
============== ==============
Income tax payments $ 135 $ 349
============== ==============
Supplemental Disclosures of Non-cash Transactions:
Dividends paid in shares of Series B Preferred Stock (Note 4) $ 2,527 $ 2,028
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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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, 1997. The Company has made no significant
change in these policies during 1998.
(2) Provision For Income Taxes
The lower-than-normal tax rate in 1998 and 1997 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 basic and diluted earnings per common share ("EPS")
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,
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income $ 3,737 $ 2,927 $ 9,070 $ 7,121
------------ ------------ ------------ ------------
Less:
Accrued dividends on Senior Preferred Stock (531) (531) (1,593) (1,592)
Dividends declared on Series B Preferred Stock (863) (782) (2,527) (2,028)
Accretion deduction required to reinstate
mandatory redemption value of Series B
Preferred Stock over a period of 8-10 years (93) (95) (280) (279)
------------ ------------ ------------ ------------
$(1,487) $(1,408) $(4,400) $(3,899)
------------ ------------ ------------ ------------
Earnings Available for Common Shares $ 2,250 $ 1,519 $ 4,670 $ 3,222
============ ============ ============ ============
</TABLE>
Basic EPS equals diluted EPS for the periods presented due to the immaterial
effect of stock options and the antidilutive effect of conversion of the
Company's depositary convertible exchangeable preferred shares into common
stock.
(4) 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 conjunction with the covenants of the
Amended and Restated Credit Agreement effective January 17, 1997, the
Company is required to suspend the payment of quarterly dividends on its
$21.25 preferred stock ("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 $6,374,000 at September 30, 1998 which represents
approximately $63.74 per share of Preferred Stock or approximately $6.37
per Depositary Share and is included in Long Term Other Liabilities in
the accompanying Consolidated Balance Sheet. Under the terms of the
Preferred Stock, the holders of the Depositary Shares were entitled to
elect two additional Directors since dividends have been
6
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PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(4) Dividends (continued)
deferred for more than six quarters and such directors were elected at
the May 14 Annual Meeting. Quarterly In-kind dividends (based on an
annual rate of 10%) were paid on March 16, 1998 on the Series B
Preferred Stock to the stockholders of record on March 2, 1998. The
dividend was paid in the form of approximately 4,108 additional shares
of Series B Preferred Stock valued at $200.00 per share for a total of
$821,501. In-kind dividends for the second quarter were paid on June 15,
1998 to stockholders of record on June 1, 1998. The dividend was paid in
the form of approximately 4,210 additional shares of Series B Preferred
Stock valued at $200.00 per share for a total of $842,039. In-kind
dividends for the third quarter were paid on September 15, 1998 to
stockholders of record on September 1, 1998. The dividend was paid in
the form of approximately 4,315 additional shares of Series B Preferred
Stock valued at $200.00 per share for a total of $863,088.
(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, 1997. 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, 1998 and December 31,
1997 and results of operations and cash flows for the three month and
nine month periods ended September 30, 1998 and 1997. The results of
operations for the nine month period ended September 30, 1998 may not be
indicative of the results that may be expected for the year ending
December 31, 1998, 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) Impact of Recently Issued Accounting Standards
During the quarter ended March 31, 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards ("SFAS") No.
130 "Reporting Comprehensive Income". There was no impact to the
accompanying consolidated condensed financial statements due to the
adoption of this statement, therefore, no additional disclosure is
required.
In June 1998 the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Financial Instruments and Hedging
Activities. The statement establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement and requires that the company must formally
document, designate, and assess the effectiveness of transactions that
receive hedge accounting.
Statement No. 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the Statement as of the beginning of
any fiscal quarter after issuance. Statement No. 133 cannot be applied
retroactively.
The Company does not hold any significant derivative instruments or
engage in significant hedging activities and, therefore, the impact of
adopting Statement No. 133 is expected to be immaterial. The Company
plans to adopt Statement No. 133 on January 1, 1999, the start of the
next fiscal year.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
Results of Operations
- ---------------------
Comparison of the Third Quarter of 1998 with the Third Quarter of 1997
Revenues decreased $76.9 million (or 23.4%), from $328.2 million in 1997 to
$251.3 million in 1998. This decrease resulted from a decrease in construction
revenues of $73 million (or 22.8%) from $320.7 million in 1997 to $247.7 million
in 1998, due primarily to decreases in revenues from both building and civil
construction operations. Revenues from building operations decreased $60.0
million (or 27.6%) from $217.3 million in 1997 to $157.3 million in 1998, due
primarily from a decrease in revenues from correctional facilities projects in
the East and airport facilities projects in the West. Revenues from civil
operations decreased $13 million (or 12.6%) from $103.4 million in 1997 to $90.4
million in 1998, due primarily to the timing in the start up of new work in the
Northeast. In addition, the decision to phase out two construction divisions in
the Midwest also contributed to the decrease in revenues from both the building
and civil operations. The decline in real estate revenues of $3.9 million is
primarily due to non-recurring revenues related to the 1997 sale of certain
property in Arizona.
In spite of the overall 23% decrease in total revenues described above, total
gross profit of $12.7 million only decreased by $.5 million (or 3.8%) due
primarily to improved margins on both the building and civil construction work
performed in 1998.
The decrease in general, administrative and selling expenses of $1.1 million (or
15.3%), from $7.2 million in 1997 to $6.1 million in 1998, resulted primarily
from phasing out of two construction divisions in the Midwest, as well as
efficiencies achieved by combining certain other divisions.
Interest expense decreased by $.6 million from $2.6 million in 1997 to $2.0
million in 1998 due primarily to lower average levels of borrowing during 1998.
The lower than normal tax rate in 1998 and 1997 for all periods presented is due
to the utilization of tax loss carryforwards 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.
Comparison of the Nine Months Ended September 30, 1998 with the Nine Months
Ended September 30, 1997
Revenues decreased $285.4 million (or 27.3%) from $1,044.3 million in 1997 to
$758.9 million in 1998. This decrease resulted from a decrease in construction
revenues of $259.2 million (or 25.9%) from $999.9 million in 1997 to $740.7
million in 1998, due primarily from a decrease in revenues from both building
and civil construction operations. Revenues from building operations decreased
$203.2 million (or 28.8%) from $706.1 million in 1997 to $502.9 million in 1998,
due primarily to the timing of the start up of new hotel/casino projects in Las
Vegas, a decrease in revenues from airport facilities and a sports complex in
the West, and a decrease in revenues from correctional facilities projects in
the East. Revenues from civil construction operations decreased $56.0 million
(or 19.1%) from $293.8 million in 1997 to $237.8 million in 1998, due primarily
to the timing in the start up of new work in the Northeast. The phasing out of
two divisions in the Midwest also contributed to the decrease in revenues from
both the building and civil operations. The decline in real estate revenues of
$26.2 million (or 59.0%) is primarily due to the non-recurring revenues related
to the 1997 sale of the Company's interest in the Resort at Squaw Creek.
In spite of the decrease in revenues, the total gross profit only decreased
slightly, from $38.5 million in 1997 to $37.5 million in 1998, due primarily to
improved margins on both the building and civil work performed in 1998.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
General, administrative and selling expenses decreased by $1.6 million (or
7.2%), from $22.1 million in 1997 to $20.5 million in 1998 primarily due to the
phasing out of two construction divisions in the Midwest.
Other income (expense) net decreased $.3 million, from a net expense of $1.1
million in 1997 to a net expense of $.8 million in 1998 due primarily to an
increase in short-term interest income and a decrease in bank financing fees.
Interest expense decreased by $1.3 million (or 16.9%), from $7.7 million in 1997
to $6.4 million in 1998 due primarily to lower average levels of borrowing
during 1998.
Financial Condition
Working capital increased $7.6 million, from $72.0 million at the end of 1997 to
$79.6 million at September 30, 1998. The current ratio increased from 1.31 to 1
to 1.40 to 1 during this same period.
During the first nine months of 1998, the Company generated $20.9 million from
operating activities, primarily from general operations, and another $7.9
million from financing activities, primarily from an increase in borrowings
under its revolving credit facility. These funds were used to fund investing
activities of $2.7 million, primarily advances to real estate joint ventures,
and to increase cash on hand by $26.1 million.
Long term debt at September 30, 1998 was $98.2 million, an increase of $13.3
million from December 31, 1997. The long-term debt to equity ratio at September
30, 1998 was 1.99 to 1, compared to 2.08 to 1 at December 31, 1997.
At September 30, 1998, the Company had $14.8 million available under its line of
credit facilities. Management believes that cash generated from operations and
its existing credit lines should be adequate to meet the Company's funding
requirements for at least the next twelve months.
Outlook
- -------
o General - 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.
o Construction - Looking ahead, we must consider the Company's
construction backlog and remaining portfolio of real estate projects.
The overall construction backlog at September 30, 1998 was at $1.321
billion which represented a slight increase over the backlog at December
31, 1997. While approximately 45% of the current backlog relates to
building construction projects which generally represent lower risk,
lower margin work, approximately 55% of the current backlog relates to
heavy construction projects which generally represent higher risk, but
correspondingly higher margin work.
o Rincon Center - As previously reported in Note 11 of the December 31,
1997 Consolidated Financial Statements included in the Company's 1997
Form 10-K, the Company's Real Estate subsidiary, Perini Land and
Development Company, the managing general partner of Rincon Center
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
Associates, has reached a preliminary agreement with the parties in
Rincon Center, a mixed-use property in San Francisco, subject to various
approvals and further negotiations, with regard to restructuring certain
financial obligations and ownership interests. While further
negotiations with and final approval by the various parties involved are
ongoing, the Company has received the appropriate waivers or assurances
to date that (i) the Lessor on Rincon I will continue to defer
enforcement of the purchase requirement provisions under the Master
Lease, and (ii) while the $33 million loan to the Lessor on Rincon I has
matured and the $14.6 million loan on Rincon II has matured, the lenders
have deferred enforcement of any remedies pending completion of the
restructuring discussions. It continues to be the opinion of management
that the final resolution of these negotiations and restructure of
certain financial obligations will not have a material impact on the
results of operations or financial condition as reported in the
financial statements included in this Form 10-Q.
o Year 2000 Readiness Disclosures - Since many computers, related software
and certain devices with embedded microchips record only the last two
digits of a year, they may not be able to recognize that January 1, 2000
(or subsequent dates) comes after December 31, 1999. This situation
could cause erroneous calculations or system shutdowns, causing problems
that could range from merely inconvenient to significant.
As previously reported in the Company's 1997 Form 10-K, the Company
began a project to review all of its computer systems in 1995. One
factor, among many, to consider was what impact, if any, would the Year
2000 have on computer systems. As a result of this project, the Company
implemented new fully integrated online construction specific financial
systems during the first quarter of 1998 which are Year 2000 compliant.
The cost of these new systems, including the hardware, software and
implementation costs, approximated $1.5 million which was capitalized
and is being amortized over five years on a straight-line basis.
The Company recognizes the Year 2000 issue could be an overall business
problem, not just a technical problem. Therefore, it established a Year
2000 Committee early in 1998 to identify all of the other potential Year
2000 problems that could impact the Company, including readiness issues
for its computer applications and business processes, non-information
technology systems such as those of its facilities and equipment, along
with relationships with third parties, such as our customers, vendors,
subcontractors, joint venture, and other business partners; develop
plans to evaluate the significance of the potential problem; develop
plans to remedy or minimize the potential problem; assign appropriate
resources; and monitor the implementation of the plans. During the third
quarter of 1998, the Committee, which includes both the Company's
Chairman and CEO, designated the Year 2000 Project Manager. The Project
Manager has organized a Year 2000 Team, consisting of specific
individuals assigned from each operating unit and each corporate
department. In addition, the Company developed, published and commenced
implementation of its Year 2000 Readiness Plan which has as its overall
objective "to eliminate or minimize the potential internal and external
impact of the Year 2000 issue on the normal business operations of the
Company, its subsidiaries, and joint ventures in a timely and cost
effective manner". In addition to addressing its own computer
applications, facilities, and construction equipment, the Plan includes
communication with critical third parties as stated above. The Year 2000
Plan includes the following phases: (1) potential problem
identification, (2) resource commitment, (3) inventory, (4) assessment,
(5) prioritization, (6) remediation, and (7) testing. While the Company
completed the problem identification and resource commitment phases
during the third quarter, it is in various stages of the "inventory",
"assessment", "prioritize", and "remediation" phases. As part of the
Plan, the Company is evaluating alternative solutions and developing
contingency plans for handling certain critical areas in the event
remediation is unsuccessful. Completion of the Year 2000 Plan, including
final testing and development of contingency plans, is scheduled for
October 1999.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
The cost for the Company to achieve Year 2000 readiness, excluding the
costs of the new financial systems referred to above, is currently
estimated to be from $300,000 to $500,000.
While the Company currently does not anticipate any material disruption
in its operations as a result of any failure by the Company to be in
compliance, the Company has not yet received adequate information
concerning the Year 2000 compliance status of its subcontractors,
suppliers, customers and various other third parties concerning its
completed or in process projects. In the event that any of the Company's
significant subcontractors, suppliers, customers or other third parties
do not successfully and timely achieve Year 2000 compliance, the
Company's business or operations could be adversely affected.
11
<PAGE>
PART II. - OTHER INFORMATION
Item 1. - Legal Proceedings - None
Item 2. - Changes in Securities
(a) None
(b) None
(c) None
Item 3. - Defaults Upon Senior Securities
(a) None
(b) In accordance with the provisions of the 1995 Amended Revolving Credit
Agreement and the Credit Agreement which became effective on January 17,
1997, 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 1998 for a total arrearage of $63.74 per share
(or $6.37 per depositary share) which aggregates $6,374,000 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.
12
<PAGE>
PART II. - OTHER INFORMATION (CONTINUED)
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 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.
13
<PAGE>
PART II. - OTHER INFORMATION (CONTINUED)
10.2 Perini Corporation Amended and Restated General
Incentive Compensation Plan - Exhibit 10.2 to
1997 Form 10-K filed on March 30, 1998.
10.3 Perini Corporation Amended and Restated
Construction Business Unit Incentive Compensation
Plan - Exhibit 10.3 to 1997 Form 10-K filed on
March 30, 1998.
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.
(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 12, 1998 /s/ Robert Band
---------------
Robert Band, Executive Vice President,
Chief Financial Officer
Date: November 12, 1998 /s/ Barry R. Blake
------------------
Barry R. Blake, Vice President and Controller
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule containes summary financial information extracted from
Consolidated Balance Sheets as of September 30, 1998 and the Consolidated
Statements of Operations for the three months and nine months ended September
30, 1998 as qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 57,466
<SECURITIES> 0
<RECEIVABLES> 108,439
<ALLOWANCES> 0
<INVENTORY> 16,348
<CURRENT-ASSETS> 280,531 <F1>
<PP&E> 27,476
<DEPRECIATION> (18,078)
<TOTAL-ASSETS> 394,416 <F2>
<CURRENT-LIABILITIES> 200,973
<BONDS> 98,152
32,562
100
<COMMON> 5,506
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 394,416 <F3>
<SALES> 0
<TOTAL-REVENUES> 758,879
<CGS> 0
<TOTAL-COSTS> 721,358
<OTHER-EXPENSES> (829)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,341)
<INCOME-PRETAX> 9,850 <F4>
<INCOME-TAX> 780
<INCOME-CONTINUING> 9,070
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,070
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
<FN>
<F1> Includes Equity in Construction Joint Ventures of $71,330, Unbilled Work of
$21,121, and Other Short-Term Assets of $5,827, not currently reflected in
this tag list.
<F2> Includes investments in and advances to Real Estate Joint Ventures of
$85,600, Land Held for Sale or Development of $14,656, and Other Long-Term
Assets of $4,231, not currently reflected in this tag list.
<F3> Includes Deferred Income Taxes and Other Liabilities of $12,300, Minority
Interest of $1,064, Paid-In Surplus of $50,728, Retained Deficit of
$(6,224), ESOT Related Obligations of $(1,501), Treasury Stock of $(1,477),
and Stock Purchase Warrants of $2,233.
<F4> Includes General, Administrative and Selling Expenses of $(20,501), not
currently reflected on this tag list.
</FN>
</TABLE>
