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Previous: PARK ELECTROCHEMICAL CORP, SC 13G/A, 2000-11-06 |
Next: PERINI CORP, 10-Q, EX-10, 2000-11-06 |
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, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6314
(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 6, 2000: 22,584,469
PERINI CORPORATION & SUBSIDIARIES
INDEX
Page Number
Part I. - Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3
September 30, 2000 and December 31, 1999
Consolidated Condensed Statements of Operations - 4
Three Months and Nine Months ended September 30, 2000 and 1999
Consolidated Condensed Statements of Cash Flows - 5
Nine Months ended September 30, 2000 and 1999
Notes to Consolidated Condensed Financial Statements 6 - 12
Item 2. Management's Discussion and Analysis of the Consolidated Financial 13 - 17
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Part II. - Other Information:
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18 - 21
Signatures 22
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(In Thousands)
ASSETS SEPT. 30, DEC. 31,
2000 1999
------------- --------------
Cash (Note 4) $ 38,615 $ 58,193
Accounts and Notes Receivable 141,623 93,785
Unbilled Work 17,205 14,283
Construction Joint Ventures 94,523 82,493
Net Current Assets of Discontinued Operations (Note 8) 11,763 12,695
Other Current Assets 1,155 647
------------- --------------
Total Current Assets $ 304,884 $ 262,096
------------- --------------
Other Assets $ 3,545 $ 3,575
------------- --------------
Property and Equipment, less Accumulated Depreciation of $17,952 in 2000 and
$17,438 in 1999 $ 9,837 $ 9,817
------------- --------------
$ 318,266 $ 275,488
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Maturities of Long-Term Debt (Note 4) $ 11,860 $ 32,158
Accounts Payable 120,964 83,578
Advances from Construction Joint Ventures 16,395 14,104
Deferred Contract Revenue 32,266 45,088
Accrued Expenses 45,071 38,738
------------- --------------
Total Current Liabilities $ 226,556 $ 213,666
------------- --------------
Deferred Income Taxes and Other Liabilities $ 18,139 $ 19,664
------------- --------------
Long-Term Debt, less current maturities included above (Note 4) $ 19,772 $ 41,091
------------- --------------
Redeemable Convertible Series B Preferred Stock (Note 3) $ - $ 37,685
------------- --------------
Stockholders' Equity (Deficit) (Note 3):
Preferred Stock $ 100 $ 100
Series A Junior Participating Preferred Stock - -
Stock Purchase Warrants 2,233 2,233
Common Stock 22,645 5,743
Paid-In Surplus 100,056 43,561
Retained Earnings (Deficit) (70,270) (87,290)
------------- --------------
$ 54,764 $ (35,653)
Less - Treasury Stock 965 965
------------- --------------
Total Stockholders' Equity (Deficit) $ 53,799 $ (36,618)
------------- --------------
$ 318,266 $ 275,588
============= ==============
The accompanying notes are in integral part of these financial statements.
PERINI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Share Data)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------------- -----------------------------
2000 1999 2000 1999
------------- -------------- ------------- -------------
(Note 8)
CONTINUING OPERATIONS:
Construction Revenues (Note 9) $ 309,991 $ 244,887 $ 759,841 $ 776,233
Cost of Operations 297,502 230,708 722,700 737,729
------------- -------------- ------------- -------------
Gross Profit $ 12,489 $ 14,179 $ 37,141 $ 38,504
General and Administrative Expenses 5,767 7,434 18,059 19,869
------------- -------------- ------------- -------------
INCOME FROM OPERATIONS (Note 9) $ 6,722 $ 6,745 $ 19,082 $ 18,635
Other Income (Expense), Net (50) (96) 604 (984)
Interest Expense (664) (2,048) (3,196) (5,424)
------------- -------------- ------------- -------------
Income from Continuing Operations before Income Taxes $ 6,008 $ 4,601 $ 16,490 $ 12,227
Credit (Provision) for Income Taxes (Note 5) (70) - 530 (500)
------------- -------------- ------------- -------------
INCOME FROM CONTINUING OPERATIONS $ 5,938 $ 4,601 $ 17,020 $ 11,727
------------- -------------- ------------- -------------
LOSS FROM DISCONTINUED OPERATIONS (Notes 5 and 8) $ - $ - $ - $(100,005)
------------- -------------- ------------- -------------
NET INCOME (LOSS) $ 5,938 $ 4,601 $ 17,020 $ (88,278)
============= ============== ============= =============
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE (Note 6):
Income from Continuing Operations $ 0.24 $ 0.53 $ 0.83 $ 1.26
Loss from Discontinued Operations - - - (17.91)
------------- -------------- ------------- -------------
Total $ 0.24 $ 0.53 $ 0.83 $ (16.65)
============= ============== ============= =============
DIVIDENDS PER COMMON SHARE (Note 7) $ - $ - $ - $ -
============= ============== ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 6) 22,584,469 5,680,485 17,156,031 5,582,859
============= ============== ============= =============
The accompanying notes are in integral part of these financial statements.
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(In Thousands)
NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
2000 1999
------------ -------------
(Note 8)
Cash Flows from Operating Activities:
Net Income (Loss) $ 17,020 $ (88,278)
Adjustments to reconcile net income (loss)to net cash from operating activities:
Loss from discontinued operations - 100,005
Depreciation and amortization 1,612 2,328
Noncurrent deferred taxes and other liabilities (3,119) 179
Distributions greater than earnings of joint ventures and affiliates 9,784 1,156
Cash used by changes in components of working capital other
than cash, net current assets of discontinued operations and current maturities of
long-term debt (17,297) (26,884)
Other non-cash items, net (328) (34)
------------ -------------
NET CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES $ 7,672 $ (11,528)
------------ -------------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment $ 431 $ 492
Cash distributions of capital from unconsolidated joint ventures 350 1,475
Acquisition of property and equipment (1,325) (1,222)
Capital contributions to unconsolidated joint ventures (22,121) (9,910)
Proceeds from (investment in) discontinued operations (Note 8) 932 (2,126)
Investment in other activities (1,206) (624)
------------ -------------
NET CASH USED BY INVESTING ACTIVITIES $ (22,939) $ (11,915)
------------ -------------
Cash Flows from Financing Activities:
Proceeds from issuance of Common Stock, net $ 37,306 $ 1,197
Proceeds from long-term debt 7,911 9,790
Reduction of long-term debt (49,528) (581)
Treasury Stock issued - 155
------------ -------------
NET CASH (USED BY) PROVIDED FROM FINANCING ACTIVITIES $ (4,311) $ 10,561
------------ -------------
Net Decrease in Cash $ (19,578) $ (12,882)
Cash at Beginning of Year 58,193 46,507
------------ -------------
Cash at End of Period $ 38,615 $ 33,625
============ =============
Supplemental Disclosure of Cash paid during the period for:
Interest $ 3,400 $ 5,627
============ =============
Income tax payments $ 389 $ 110
============ =============
Supplemental Disclosures of Non-cash Transactions:
Dividends paid in shares of Series B Preferred Stock (Note 7) $ 1,161 $ 2,789
============ =============
Conversion of Series B Preferred Stock into Common Stock
at $5.50 per share (Note 3) $ 38,942 $ -
============ =============
The accompanying notes are an integral part of these financial statements.
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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, 1999. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting only of normal recurring adjustments, except for the presentation of Discontinued Operations as more fully described in Note 8 below, necessary to present fairly the Company’s financial position as of September 30, 2000 and December 31, 1999 and results of operations and cash flows for the three month and nine month periods ended September 30, 2000 and 1999. The results of operations for the nine month period ended September 30, 2000 may not be indicative of the results that may be expected for the year ending December 31, 2000 because the Company’s results are primarily generated from a limited number of significant active construction contracts. Therefore, such results can vary depending on the timing of progress achieved and changes in estimated profitability of projects being reported.
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, 1999. The Company has made no significant change in these policies during 2000.
On March 29, 2000 (the “Closing Date”), the Company completed the sale of 9,411,765 shares of its common stock, par value $1.00 (the “Common Stock”), for an aggregate of $40 million, or $4.25 per share (the “Purchase”), to Tutor-Saliba Corporation (“TSC”), O&G Industries, Inc. (“O&G”), and National Union Fire Insurance Company of Pittsburgh, Pa., a wholly owned subsidiary of American International Group, Inc. (“National Union” and together with TSC and O&G, the “New Investors”) pursuant to a Securities Purchase Agreement dated as of February 5, 2000 by and among the Company and the New Investors. Tutor-Saliba Corporation is owned and controlled by Ronald N. Tutor, who serves as Chairman of the Company’s Board of Directors and Chief Executive Officer.
In connection with the Purchase, TSC acquired 2,352,942 shares of Common Stock for a total consideration of $10,000,000, O&G acquired 2,352,941 shares of Common Stock for a total consideration of $10,000,000 and National Union acquired 4,705,882 shares of Common Stock for a total consideration of $20,000,000.
Concurrent with the closing of the Purchase and as a condition thereto, the Company exchanged 100% of its Redeemable Series B Cumulative Convertible Preferred Stock (the “Series B Preferred Stock”) (which had a current accreted face amount of approximately $41.2 million) for an aggregate of 7,490,417 shares of common stock at an exchange price of $5.50 per share (the “Exchange” and together with the Purchase, the “Transaction”) pursuant to certain Exchange Agreements by and
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
between the Company and each of The Union Labor Life Insurance Company, acting on behalf of its Separate Account P (“ULLICO”), PB Capital Partners, L.P. (“PB Capital”) and The Common Fund for Non-Profit Organizations (“The Common Fund”).
In connection with the Transaction, the Company amended its By-Laws to remove provisions creating an Executive Committee of the Board of Directors and granting certain powers to it and amended its Restated Articles of Organization as of the Closing Date to increase the number of authorized shares of Common Stock from 15,000,000 shares to 40,000,000 shares and to amend the Series B Preferred Stock Certificate of Vote. The Company also entered into a Shareholders’ Agreement and a Registration Rights Agreement, each by and among the Company, the New Investors, Ronald N. Tutor, BLUM Capital Partners, L.P., PB Capital, The Common Fund and ULLICO dated as of the Closing Date. The Shareholders’ Agreement contains provisions that define, among other things, certain put and call rights and rights of first refusal between National Union and TSC, tag-along rights of the New Investors and former holders of Series B Preferred Stock and certain procedures to protect the Company’s use of its net operating losses (“NOLs”) for tax purposes. Since the Common Stock issued in connection with the Transaction was not registered under the Securities Act, the Registration Rights Agreement contains provisions that define the rights of the New Investors and former holders of Series B Preferred Stock to require the Company, under certain circumstances, to register some or all of the shares under the Securities Act. In addition, the Company entered into an Amendment to the Shareholder Rights Agreement dated as of the Closing Date whereby the Transaction would not trigger the dilutive provisions of the Agreement.
A Special Committee of the Company’s Board of Directors approved the Transaction after receiving a fairness opinion from the investment banking firm of Houlihan Lokey Howard & Zukin. A majority of outstanding common shares, including a majority of shares held by disinterested shareholders, were voted in favor of the Transaction at a Special Meeting of Stockholders held on March 29, 2000.
The shares of Common Stock issued in the Purchase represent approximately 42% of the Company’s voting rights and the New Investors have the right to nominate three members to the Company’s Board of Directors. The New Investors designated Ronald N. Tutor, Raymond R. Oneglia and Christopher H. Lee as their nominees and they were appointed Directors of the Company as of March 29, 2000. The former holders of the Series B Preferred Stock now control approximately 33% of the Company’s voting rights and continue to be entitled to nominate two members to the Company’s Board of Directors. The former holders of Series B Preferred Stock designated Michael R. Klein and Robert A. Kennedy as their nominees and they were appointed Directors of the Company as of March 29, 2000.
In connection with the Transaction and as a condition thereto, the Company also entered into an Amended and Restated Credit Agreement with its lenders that extended the credit facility from January 2001 to January 2003 (see Note 4).
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
The effect of the Transaction on Stockholders’ Equity was to increase Stockholders’ Equity by approximately $76.2 million, from a negative net worth of approximately $36.6 million to a positive net worth of approximately $39.6 million upon the closing of the Transaction on March 29, 2000. An analysis of Stockholders’ Equity for the nine months ended September 30, 2000 follows (in thousands):
Stock Retained
Preferred Purchase Common Paid-In Earnings Treasury
Stock Warrants Stock Surplus (Deficit) Stock Total
------------- ------------- ------------- ------------- ------------- ------------- -----------
Balance - December 31, 1999 $ 100 $ 2,233 $ 5,743 $ 43,561 $ (87,290) $ (965) $ (36,618)
Net income - - - - 17,020 - 17,020
Preferred Stock dividends accrued
($15.94 per share*) (Note 7) - - - (1,594) - - (1,594)
Series B Preferred Stock in-kind
dividends issued (Note 7) - - - (1,161) - - (1,161)
Accretion related to Series B Preferred
Stock - - - (96) - - (96)
Net proceeds received from issuance
of Common Stock - - 9,412 27,894 - - 37,306
Exchange of Series B Preferred Stock
for Common Stock - - 7,490 31,452 - - 38,942
-----------------------------------------------------------------------------------------------
Balance - September 30, 2000 $ 100 $ 2,233 $ 22,645 $ 100,056 $ (70,270) $ (965) $53,799
===============================================================================================
*Equivalent to $1.594 per Depositary Share
In conjunction with the recapitalization of the Company as described in Note 3, effective March 29, 2000, the Company entered into an Amended and Restated Credit Agreement (the “New Credit Agreement”) with its lenders that extended the credit facility from January 2001 to January 2003. The New Credit Agreement provides for a $35 million term loan (the “Term Loan”) and a $21 million revolving credit facility (the “Revolving Credit Facility”). The New Credit Agreement requires that the Company repay the Term Loan in quarterly installments through 2002 and the Revolving Credit Facility by January 21, 2003. Commitments under the New Credit Agreement have been reduced to $44.5 million as of September 30, 2000 as a result of scheduled Term Loan payments and proceeds from sales of certain real estate. In addition, on September 6, 2000, the Company completed a refinancing of its corporate headquarters building for $7.5 million at an annual interest rate of approximately 9%. In connection with the refinancing, approximately $.8 million was set aside in escrow for immediate and future repairs and improvements to the
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
structure and the grounds. The loan is payable in equal monthly installments of $67,300 over a ten year period, with a balloon payment of $5.3 million due in 2010.
The credit (provision) for income taxes applicable to Income from Continuing Operations reflects a lower-than-normal tax rate in both 2000 and 1999 due primarily to the realization of a portion of the Federal tax benefit not recognized in prior years due to certain accounting limitations. No tax benefit was attributable to Loss from Discontinued Operations in 1999 due to the same accounting limitations. In addition, the credit for income taxes applicable to Income from Continuing Operations for the nine months ended September 30, 2000 reflects the reversal of foreign taxes accrued in prior years that are no longer required.
Computations of basic and diluted earnings (loss) per common share (“EPS”) amounts are based on the weighted average number of the Company’s common shares outstanding during the periods presented. The actual basic and diluted EPS for the three and nine month periods ended September 30, 2000 and 1999 and the pro forma basic and diluted EPS for the nine months ended September 30, 2000, assuming the Transaction described in Note 3 closed on January 1, 2000, are calculated as follows (in thousands, except per share amounts):
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
------------------------------------------------------------------------------
2000 1999 2000 2000 1999
Actual Actual Pro Forma Actual Actual
------------- ---------------- ------------ ----------- -----------
Income from Continuing Operations $ 5,938 $ 4,601 $ 17,020 $17,020 $11,727
------------- ---------------- ------------ ----------- -----------
Less:
- Accrued dividends on $21.25 Senior Preferred Stock $ (532) $ (531) $ (1,594) $(1,594) $ (1,593)
- Dividends declared on Series B Preferred Stock - (953) - (a) (1,161) (2,789)
- Accretion deduction required to reinstate mandatory
redemption value of Series B Preferred Stock over a
period of 8-10 years - (95) - (a) (96) (284)
Plus - Interest Expense - - 863 (b) - -
------------- ---------------- ------------ ----------- -----------
$ (532) $ (1,579) $ (731) $(2,851) $ (4,666)
------------- ---------------- ------------ ----------- -----------
Earnings from Continuing Operations $ 5,406 $ 3,022 $ 16,289 $14,169 $ 7,061
Loss from Discontinued Operations - - - - (100,005)
------------- ---------------- ------------ ----------- -----------
Total Available for Common Stockholders $ 5,406 $ 3,022 $ 16,289 $14,169 $ (92,944)
============= ================ ============ =========== ===========
Weighted average shares outstanding 22,584 5,680 22,584 (c) 17,156 5,583
------------- ---------------- ------------ ----------- -----------
Basic and diluted earnings (loss) per Common Share
from -
Continuing Operations $ 0.24 $ 0.53 $ 0.72 $ 0.83 $ 1.26
Discontinued Operations - - - - (17.91)
------------- ---------------- ------------ ----------- -----------
Total $ 0.24 $ 0.53 $ 0.72 $ 0.83 $ (16.65)
============= ================ ============ =========== ===========
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(a) For pro forma purposes it is assumed that the Series B Preferred Stock was converted into shares of Common Stock as of January 1, 2000. Therefore, the deduction of $1,161 for dividends declared on the Series B Preferred Stock and the deduction of $96 for accretion applicable to the Series B Preferred Stock are not required when calculating the pro forma earnings per share from continuing operations for the nine months ended September 30, 2000.
(b) The pro forma adjustment reducing interest expense by $863 is based on the assumption that the net cash proceeds of $37.3 million ($40 million less estimated related expenses of $2.7 million) received from the New Investors was used to reduce debt under the Company’s Revolving Credit Facility as of January 1, 2000 based on the average effective borrowing rate of 9.25% experienced during the first three months of 2000.
(c) Adjusted to give effect to (i) the sale of 9,411,765 shares of Common Stock to the New Investors and (ii) the exchange of the Series B Preferred Stock (which had a current accreted face amount of $41,197) for 7,490,417 shares of Common Stock assuming the Transaction closed on January 1, 2000.
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 and stock purchase warrants into common stock.
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 Company’s Credit Agreements, the Company is required to suspend the payment of quarterly dividends on its $21.25 Preferred Stock (“Preferred Stock”) until certain financial criteria are met. Therefore, the dividends on the Preferred Stock have not been declared since 1995 (although they have been fully accrued due to the “cumulative” feature of the Preferred Stock). The aggregate amount of dividends in arrears is approximately $10,624,000 at September 30, 2000 which represents approximately $106.24 per share of Preferred Stock or approximately $10.62 per Depositary Share and is included in “Deferred Income Taxes and Other Liabilities” (long-term) in the accompanying Consolidated Condensed Balance Sheets. Under the terms of the Preferred Stock, the holders of the Depositary Shares were entitled to elect two additional Directors since dividends had been deferred for more than six quarters and they did so at each of the Annual Meetings of Stockholders held on May 14, 1998, May 13, 1999, and May 25, 2000.
Quarterly In-kind dividends (based on an annual rate of 10%) were paid on March 15, 2000 on the Series B Preferred Stock to the stockholders of record on March 1, 2000. The dividends were paid in the form of approximately 5,004 additional shares of Series B Preferred Stock valued at $200.00 per share for a total of $1,000,918. In addition, accrued in-kind dividends were paid on the Series B Preferred Stock for the 14-day period from March 16, 2000 through March 29, 2000, the date on which the holders of the Series B Preferred Stock exchanged 100% of their shares of Series B Preferred Stock for shares of the Company’s Common Stock (see Note 3). The dividends were paid in the form of approximately 798 additional shares of Series B Preferred Stock valued at $200.00 per share for a total of $159,621.
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
Effective June 30, 1999, management adopted a plan to withdraw completely from the real estate development business and to wind down the operations of Perini Land and Development Company (“PL&D”), the Company’s real estate development subsidiary. Therefore, both historical and current real estate results have been presented as a discontinued operation in accordance with generally accepted accounting principles. Based on the plan, in the second quarter of 1999, the Company recorded a $99,311,000 non-cash provision which represents the estimated loss on disposal of this business segment. This non-cash charge reflects the impact of the disposition of the Rincon Center property located in San Francisco and the reduction in projected future cash flow from the disposition of PL&D’s remaining real estate development operations resulting from the change in strategy of holding the properties through the necessary development and stabilization periods to a new strategy of generating short-term liquidity through an accelerated disposition or bulk sale. The estimated loss on disposal of the real estate business segment also includes a provision for shut down costs related to PL&D during the wind down period. No Federal tax benefit was attributable to the estimated loss on disposal of the real estate business segment (see Note 5). Several of the remaining real estate properties now being offered for sale are currently under or are pending purchase and sale agreements.
At September 30, 2000 and December 31, 1999, the net current assets of discontinued real estate development operations consisted primarily of real estate properties for sale. In accordance with generally accepted accounting principles, the results of discontinued real estate development operations have been reclassified to “Loss from Discontinued Operations”. In connection therewith, the revenues related to these operations are summarized below (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues $1,380 $12,121 $2,334 $21,052
============ ============ ============= ============
The following tables set forth certain updated business segment information relating to the Company’s operations for the three month and nine month periods ended September 30, 2000 and 1999 (in thousands):
Three months ended September 30, 2000
------------------------------------------------------------
Reportable Segments
--------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------ ------------- ------------ ----------------
Revenues $230,000 $ 79,991 $309,991 $ - $ 309,991
Income from Operations $ 8,073 $ 43 $ 8,116 $ (1,394)* $ 6,722
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
Three months ended September 30, 1999
-----------------------------------------------
Reportable Segments
--------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------ ------------- ------------ ----------------
Revenues $164,532 $ 80,355 $244,887 $ - $ 244,887
Income from Operations $ 4,760 $ 4,038 $ 8,798 $ (2,053)* $ 6,745
Nine months ended September 30, 2000
-----------------------------------------------
Reportable Segments
--------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------ ------------- ------------ ----------------
Revenues $548,898 $210,943 $759,841 $ - $ 759,841
Income from Operations $ 21,440 $ 1,546 $ 22,986 $ (3,904)* $ 19,082
Assets $132,885 $132,553 $265,438 $ 52,828 ** $ 318,266
Nine months ended September 30, 1999
-----------------------------------------------
Reportable Segments
--------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------ ------------- ------------ ----------------
Revenues $549,224 $227,009 $776,233 $ - $ 776,233
Income from Operations $ 14,214 $ 9,894 $ 24,108 $ (5,473)* $ 18,635
Assets $138,133 $104,270 $242,403 $ 51,436 ** $ 293,839
*In all periods, consists of corporate general and administrative expenses.
**In all periods, corporate assets consist principally of cash, cash equivalents, marketable securities and other investments available for general corporate purposes plus the net assets of discontinued operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
Results of Operations
Comparison of the Third Quarter of 2000 with the Third Quarter of 1999
Overall revenue from construction operations increased by $65.1 million (or 26.6%), from $244.9 million in 1999 to $310.0 million in 2000. This increase resulted from an increase in building construction revenues of $65.5 million (or 39.8%), from $164.5 million in 1999 to $230.0 million in 2000, due primarily to an increase in the volume of work completed at the Mohegan Sun Casino Expansion project in the eastern United States. Civil construction revenues were relatively consistent between years; $80.0 million in 2000 compared to $80.4 million in 1999.
Income from continuing operations increased by $1.3 million (or 29%), from $4.6 million in 1999 to $5.9 million in 2000. This increase reflects lower corporate and construction-related general and administrative expenses as well as lower interest expense due to the reduction in debt achieved at the end of the first quarter of 2000 as a result of the new equity transaction.
Income from construction operations decreased by $.7 million (or 8%), from $8.8 million in 1999 to $8.1 million in 2000. Civil construction operating income decreased by $4.0 million, from $4.0 million in 1999 to break even in 2000, reflecting losses recorded on a tunnel project in New York City and on a mass transportation project in Puerto Rico. This decrease was partially offset by an increase in building construction operating income of $3.3 million, from $4.8 million in 1999 to $8.1 million in 2000 due to the favorable close out in 2000 of certain completed projects. A $.7 million decrease in corporate general and administrative expenses, from $2.1 million in 1999 to $1.4 million in 2000, also served to partly offset the decrease in income from civil construction operations. This improvement was the result of a reduction in outside legal expenses.
Interest expense decreased by $1.3 million, from $2.0 million in 1999 to $.7 million in 2000, due primarily to the reduction in debt achieved at the end of the first quarter of 2000 as a result of the closing of the new equity transaction described in Note 3 of Notes to Consolidated Condensed Financial Statements.
The provision for income taxes applicable to Income from Continuing Operations reflects a lower than normal tax rate for both 2000 and 1999 due to the realization of a portion of the Federal tax benefit not recognized in prior years due to certain accounting limitations.
Comparison of the Nine Months Ended September 30, 2000 with the
Nine Months Ended September 30, 1999
Revenues decreased $16.4 million (or 2.1%) from $776.2 million in 1999 to $759.8 million in 2000. This decrease reflects a reduction in civil construction revenues of $16.1 million (or 7.1%), from $227.0 million to $210.9 million, primarily due to the completion of several large joint venture projects in California and New York and the timing in start up of new work acquired. Building construction revenues were relatively consistent between years; $549.2 million in 1999 compared to $548.9 million in 2000.
Income from continuing operations increased by $5.3 million (or 45%), from $11.7 million in 1999 to $17.0 million in 2000. The increase in income from continuing operations reflects improved gross profit margins in building construction and lower corporate general and administrative expenses. In addition, the favorable operating results reflect the impact of lower finance-related charges due to the recapitalization of the Company completed at the end of the first quarter of 2000 and a decrease in income taxes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(Continued)
Income from construction operations decreased by $1.1 million (or 4.6%), from $24.1 million in 1999 to $23.0 million in 2000 primarily due to a decreased profit contribution from civil construction operations. Civil construction operating income decreased by $8.4 million, from $9.9 million in 1999 to $1.5 million in 2000, due primarily to downward revisions of estimated profit on certain infrastructure projects and, to a lesser extent, the decrease in revenues described above. This decrease was largely offset by an increase in building construction operating income of $7.3 million, from $14.2 million in 1999 to $21.5 million in 2000, reflecting an increase in average gross margin from 4.3% in 1999 to 5.5% in 2000 due primarily to the favorable close out of certain completed projects. In addition, a $1.6 million decrease in corporate general and administrative expenses from $5.5 million in 1999 to $3.9 million in 2000 contributed to the overall increase in total operating income of $.5 million, from $18.6 million in 1999 to $19.1 million in 2000. The decrease in corporate general and administrative expenses was primarily the result of a reduction in outside legal expenses.
The $1.6 million increase in other income (expense), from a $1.0 million expense in 1999 to $.6 million of income in 2000, is the result of a $.9 million decrease in amortization of deferred debt expense relating to the Company's revolving credit agreement which was fully amortized at the end of 1999, and a $.8 million decrease in bank financing fees.
Interest expense decreased by $2.2 million, from $5.4 million in 1999 to $3.2 million in 2000, due primarily to the reduction in debt achieved at the end of the first quarter of 2000 as a result of the new equity transaction described in Note 3 of Notes to Consolidated Condensed Financial Statements.
The credit (provision) for income taxes applicable to Income from Continuing Operations reflects a lower than normal tax rate for both 2000 and 1999 due to the realization of a portion of the Federal tax benefit not recognized in prior years due to certain accounting limitations. No tax benefit was attributable to Loss from Discontinued Operations in 1999 due to the same accounting limitations. In addition, the credit for income taxes applicable to Income from Continuing Operations in 2000 reflects the reversal of foreign taxes accrued in prior years that are no longer required.
Discontinued Operations
As more fully described in Note 8 of Notes to the Consolidated Condensed Financial Statements, effective June 30, 1999, management adopted a plan to withdraw completely from the real estate development business and to wind down the operations of Perini Land and Development Company, the Company's real estate development subsidiary. Therefore, both historical and current real estate results have been presented as a discontinued operation in accordance with generally accepted accounting principles.
Financial Condition
As more fully described in Note 3 of Notes to the Consolidated Condensed Financial Statements, effective March 29, 2000, the Company completed a recapitalization which included the sale of 9,411,765 shares of Common Stock for an aggregate of $40 million in cash (before fees and expenses) and the exchange of 100% of its Redeemable Series B Cumulative Convertible Preferred Stock for an aggregate of 7,490,417 shares of Common Stock. The effect of the recapitalization on the Company's stockholders' equity was to increase stockholders' equity by approximately $76.2 million, from a negative net worth of approximately $36.6 million to a positive net worth of approximately $39.6 million. In addition, the recapitalization and the concurrent negotiation of an Amended and Restated Credit Agreement (the "New Credit Agreement")
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(Continued)
described below served to significantly enhance the Company's working capital and liquidity required to support its ongoing construction operations.
Working capital increased $29.9 million, from $48.4 million at the end of 1999 to $78.3 million at September 30, 2000. The current ratio increased from 1.23:1 to 1.35:1 during the same period.
During the first nine months of 2000, the Company generated $7.7 million of cash from operations, primarily from joint venture profit distributions, as well as $37.3 million of net proceeds received from the issuance of Common Stock described above and $7.9 million of new long-term debt, primarily from the refinancing of the Company's corporate headquarters building described below. These proceeds as well as $19.6 million of cash on hand were used to fund $23.0 million for investing activities, primarily to fund construction joint ventures, and $49.5 million to reduce debt.
Long-term debt at September 30, 2000 was $19.8 million, a decrease of $21.3 million from December 31, 1999. The long-term debt to equity ratio at September 30, 2000 was .37:1. At December 31, 1999, a long-term debt to equity ratio could not be calculated due to the Company's negative equity position at that time.
Effective March 29, 2000, the Company entered into a New Credit Agreement with its lenders. The New Credit Agreement provides for a $35 million Term Loan and a $21 Revolving Credit Facility. The New Credit Agreement requires, among other things, that the Company repay the Term Loan quarterly through 2002 and the Revolving Credit Facility by January 21, 2003. Under the terms of the New Credit Agreement, the Company had $21 million available to borrow under the maximum commitment of $44.5 million at September 30, 2000. In addition, on September 6, 2000, the Company completed a refinancing of its corporate headquarters building for $7.5 million at an annual interest rate of approximately 9%. The loan is payable in monthly installments over a ten year period with a balloon payment of $5.3 million due in 2010. Management believes that cash generated from operations and existing credit lines should be adequate to meet the Company's funding requirements for at least the next twelve months.
Outlook
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(Continued)
Forward-looking Statements
The statements contained in this Management's Discussion and Analysis of the Consolidated Condensed Financial Statements, including "Outlook", and other sections of this Form 10-Q 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. Forward-looking statements involve a number of risks, uncertainties or other factors that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the continuing validity of the underlying assumptions and estimates of total forecasted project revenues, costs and profits and project schedules; the outcomes of pending or future litigation, arbitration or other dispute resolution proceedings; changes in federal and state appropriations for infrastructure projects; possible changes or developments in worldwide or domestic social, economic, business, industry, market and regulatory conditions or circumstances; and
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(Continued)
actions taken or omitted to be taken by third parties including the Company's customers, suppliers, business partners, and competitors and legislative, regulatory, judicial and other governmental authorities and officials.
QUANTITATIVE AND QUALITATIVE DISLOSURES ABOUT MARKET RISK
There has been no material change in the Company's exposure to market risk since December 31, 1999.
Part II. - Other Information
Item 1. - Legal Proceedings - None Item 2. - Changes in Securities and Use of Proceeds (a) None (b) None (c) None (d) Not applicable Item 3. - Defaults Upon Senior Securities (a) None (b) In accordance with the provisions of the 1995 Amended Revolving Credit Agreement, the First Amended and Restated Credit Agreement effective January 17, 1997 and the Second Amended and Restated Credit Agreement effective March 29, 2000, the Company suspended payment of quarterly dividends on its $21.25 Convertible Exchangeable Preferred Stock ("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 2000 for a total arrearage of $106.24 per share (or $10.62 per depositary share) which aggregates approximately $10,624,000 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 (a) None (b) Not applicable (c) Not applicable (d) Not applicable 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 Securities and Exchange Commission under the Securities Act of 1933 or the the Securities Act of 1934 and are referred to and incorporated herein by reference to such filings:
Part II. - Other Information (Continued)
Exhibit 3. Articles of Incorporation and By-laws
Incorporated herein by reference:
3.1 Restated Articles of Organization - As amended through March 29, 2000 -
Exhibit 3.1 to Form 8-K filed on April 12, 2000.
3.2 By-laws - As amended and restated as of March 29, 2000 - Exhibit 3.2 to
Form 8-K filed on April 12, 2000.
Exhibit 4. Instruments Defining the Rights of Security Holders, Including Indentures
Incorporated herein by reference:
4.1 Certificate of Vote of Directors Establishing a Series of a Class of Stock
determining the relative rights and preferences of the $21.25 Convertible
Exchangeable Preferred Stock - Exhibit 4(a) to Amendment No. 1 to Form S-
2 Registration Statement filed June 19, 1987; SEC Registration No. 33-
14434.
4.2 Form of Deposit Agreement, including form of Depositary Receipt - Exhibit
4(b) to Amendment No. 1 to Form S-2 Registration Statement filed June 19,
1987; SEC Registration No. 33-14434.
4.3 Form of Indenture with respect to the 8 1/2% Convertible Subordinated
Debentures Due June 15, 2012, including form of Debenture - Exhibit 4(c) to
Amendment No. 1 to Form S-2 Registration Statement filed June 19, 1987;
SEC Registration No. 33-14434.
4.4 Shareholder Rights Agreement 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, and as
further amended as of March 29, 2000 - Exhibit 4.3 to Form 8-K filed on April
12, 2000.
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 and as amended by the
Termination/Amendment Agreement on March 29, 2000 - Exhibit 4.4 to Form
8-K filed on April 12, 2000.
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.
Part II. - Other Information (Continued)
4.13 Exchange Agreement by and between Perini Corporation and The Union
Labor Life Insurance Company, acting on behalf of its Separate Account P,
dated as of February 7, 2000 - Exhibit 10.1 to Form 8-K filed on April 12,
2000.
4.14 Exchange Agreement by and between Perini Corporation and PB Capital
Partners, L.P., dated as of February 14, 2000 - Exhibit 10.2 to Form 8-K filed
on April 12, 2000.
4.15 Exchange Agreement by and between Perini Corporation and The Common
Fund for Non-Profit Organizations, dated as of February 14, 2000 - Exhibit
10.3 to Form 8-K filed on April 12, 2000.
4.16 Registration Rights Agreement by and among Perini Corporation, Tutor-
Saliba Corporation, Ronald N. Tutor, O&G Industries, Inc. and National Union
Fire Insurance Company of Pittsburgh, Pa., BLUM Capital Partners, L.P., PB
Capital Partners, L.P. The Common Fund for Non-Profit Organizations, and
The Union Labor Life Insurance Company, acting on behalf of its Separate
Account P, dated as of March 29, 2000 - Exhibit 4.1 to Form 8-K filed on
April 12, 2000.
4.17 Shareholders' Agreement by and among Perini Corporation, Tutor-Saliba
Corporation, Ronald N. Tutor, O&G Industries, Inc. and National Union Fire
Insurance Company of Pittsburgh, Pa., BLUM Capital Partners, L.P., PB
Capital Partners, L.P., The Common Fund for Non-Profit Organizations, and
The Union Labor Life Insurance Company, acting on behalf of its Separate
Account P, dated as of March 29, 2000 - Exhibit 4.2 to Form 8-K filed on
April 12, 2000.
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 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.
10.16 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.
Part II. - Other Information (Continued)
10.30 Second Amended and Restated Credit Agreement dated as of March 29,
2000 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 10.4 to Form 8-K filed on April 12, 2000
10.31 Amendment No. 2 dated as of December 31, 1999 to the Management
Agreement by and among the Company, Ronald N. Tutor and Tutor-Saliba
Corporation - Exhibit 10.31 to Form 10-Q filed on May 9, 2000.
10.32 Special Equity Incentive Plan - Exhibit A to Registrant's Proxy Statement for
Annual Meeting of Stockholders dated April 19, 2000.
10.33 Securities Purchase Agreement by and among Perini Corporation and Tutor-
Saliba Corporation, O&G Industries, Inc. and National Union Fire Insurance
Company of Pittsburgh, PA, dated as of February 5, 2000 - Exhibit 10.1 to Form
8-K filed on February 9, 2000.
Filed herewith:
10.34 Promissory Note dated as of September 6, 2000 by and among Mt. Wayte
Realty, LLC (a wholly-owned subsidiary of Perini Corporation) and The
Manufacturers Life Insurance Company (U.S.A.).
(b) Reports on Form 8-K - None
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 6, 2000 /s/ Robert Band
---------------------------------------------------------------
Robert Band, President and Chief Operating Officer
Date: November 6, 2000 /s/ Michael E. Ciskey
--------------------------------------------------------------
Michael E. Ciskey, Vice President and Controller
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