<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-5259
PITT-DES MOINES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0729430
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3400 Grand Avenue, Pittsburgh, Pennsylvania 15225
(Address of principal executive offices) (Zip Code)
412-331-3000
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, no par value American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the registrant's voting stock held by
non-affiliates was at least $53,987,963 on February 28, 1997, based upon the
average between the highest and lowest sales prices of the registrant's Common
Stock as reported in the consolidated transactions reporting system.
<TABLE>
<S> <C>
Common Stock outstanding as of February 28, 1997.................................2,322,001 shares.
</TABLE>
Documents Incorporated By Reference:
Certain portions of the documents of the Registrant listed below have been
incorporated by reference into the indicated parts of this Annual Report on Form
10-K:
<TABLE>
<S> <C>
Proxy Statement anticipated to be dated March 31, 1997...........................Part III, Items 10-13
Annual Report to Stockholders for fiscal year ended December 31, 1996............Part I and Part II
</TABLE>
================================================================================
<PAGE>
PART I
Item 1. Business
General
Pitt-Des Moines, Inc. and its subsidiaries (PDM or the Company) began
conducting business in 1892 and was incorporated in Pennsylvania on February 14,
1916. The Company's principal executive offices are located at 3400 Grand
Avenue, Pittsburgh, Pennsylvania 15225, telephone number (412) 331-3000.
Effective with the disposition of CVI's operations during the fourth quarter
of 1994 (see Discontinued Operation note accompanying the consolidated financial
statements), the Company is comprised of three business segments: Engineered
Construction Division, Steel Construction and Steel Service Centers. Each
segment is a profit center except the Steel Construction business segment which
is divided into individual profit centers as noted below.
A summary of the Company's products and services by business segment is set
forth below.
Engineered Construction Division
In 1994, the Engineered Construction Division was reorganized into three
project groups: Water, Industrial, and International and Technology. These
market groups provide:
a) The capability to design, fabricate and erect many types of facilities and
structures; services offered include research and design, material
selection, preparation of detailed drawings, shop fabrication, field
erection and subcontract management.
b) The capability to design, fabricate and erect elevated and flat bottom
water storage tanks for water service and fire protection requirements and
treatment tanks for the purification, filtration and softening of water.
The principal purchasers of the Company's water storage tanks and
wastewater treatment facilities are government agencies and private
industry.
c) The capability to design, fabricate and erect oil and chemical storage
tanks used for storing crude oil, petroleum, gasoline and other petroleum
derivatives and chemicals. The Company has developed and patented certain
systems, parts and sealing devices which help to reduce the hazards of fire
and explosion from the stored products, as well as to decrease air
pollution and vapor loss. Additionally, the Company fabricates and erects
various vessels used in the processing of a variety of oil and chemical
products. The oil and chemical tanks, sealing devices and process vessels
are produced principally for the petroleum, petrochemical, chemical and
food processing industries as well as government agencies.
-2-
<PAGE>
Item 1. Business (Cont'd)
d) The capability to fabricate and erect miscellaneous plate work which
includes penstocks and breechings, stacks and stack liners, scrubbers,
absorbers, flow conductors and heat exchangers for utilities and private
industry.
e) The capability to design, fabricate and erect high speed wind tunnels,
altitude test chambers, hydrospace test facilities and high vacuum and
thermal test facilities for use in connection with energy, aerospace and
defense research.
f) The capability to design and build supercritical fluid extraction
facilities for the food processing industry.
g) The capability to design and build anaerobic digesters for the wastewater
treatment industry.
Steel Construction
On September 1, 1994, the Company acquired the bridge fabricating assets of
Phoenix Steel, Inc., located in Eau Claire, Wisconsin. These assets were
combined with the bridge fabricating assets of Hartwig Mfg. Corp. (which was
merged with and into the Company on December 31, 1994) to form the PDM Bridge
Division. On February 17, 1997, the Company announced plans to begin
construction of a new structural steel fabricating facility located in the
southwestern part of the United States. This new facility is expected to be
operational in the third quarter of 1997. Along with this plan, the Company
announced the decision to close the Chicago Steel Construction facility
located in Melrose Park, Illinois. Certain employees and equipment from the
Melrose Park facility are expected to be redeployed to both the new facility
as well as existing bridge fabricating plants in Wisconsin. On March 10, 1997,
the Company acquired Candraft Detailing, Inc., an engineering drafting company
serving the steel building and bridge fabrication industry, located in
Vancouver, British Columbia. This acquisition is expected to enhance the
drafting capabilities of the Steel Construction business segment. The Steel
Construction business segment will continue to provide:
a) The capability to fabricate and erect structural steel for commercial,
institutional and public sector buildings for government agencies, private
developers and general contractors.
b) The capability to fabricate structural steel for new bridges and fabricate
and erect structural steel for bridge rehabilitation for government
agencies and general contractors.
-3-
<PAGE>
Item 1. Business (Cont'd)
Steel Service Centers
The Steel Service Centers operate seven steel service centers and three
culvert facilities located in the West and Midwest regions of the United
States. On January 31, 1997, the Company acquired 90% of the stock of General
Steel Corporation, a steel service center facility, located in Vancouver,
Washington. This acquisition will expand this segments market area into the
Pacific Northwest. The Steel Service Centers process and distribute to the end
users, a general line of carbon steel products including plates, sheets,
structural shapes, bars, tubes, pipe and other miscellaneous metal products.
This Division also manufactures and markets to the end users, corrugated metal
culvert pipe and accessories. The Steel Service Centers' primary markets
include steel fabricators, original equipment manufacturers and the mining,
logging, agricultural and road construction industries.
The Company and the industry as a whole deem the maintenance of adequate
levels of inventory to be integral to the Service Center business. The Company
believes that it has adequate levels of inventory on hand to meet current and
anticipated customer demand.
Other
Several large companies compete nationally in some product lines with the
Company and there are several local and regional companies that compete in
certain product lines in specific geographic areas. The majority of the
Company's business is secured through open competitive bidding or through direct
negotiations with industry or government agencies. Competition is based
primarily on performance including the ability to provide design, engineering
and on-site field construction services in a cost-effective, timely manner. The
Steel Service Centers' volume of business is based on the price, delivery and
credit terms, and first stage preprocessing operations, offered to its customers
as well as its reputation.
Earned revenue was $468 million in 1996, compared with $461 million in 1995
and $408 million in 1994. For further financial information refer to
Consolidated Financial Statements in PDM's 1996 Annual Report to Stockholders
and incorporated herein by reference.
The principal raw materials essential to the Company's business are steel,
alloys and other metal plates and structural sections. The Company procures
these raw materials from various domestic and foreign sources including, the
mills of USX Corporation, Bethlehem Steel Corporation, Northwestern Steel and
Wire Company, Nucor Steel, British Steel and Mitsubishi International
Corporation.
The Company has a license and technical assistance agreement with Roediger, a
German corporation, which gives the Company exclusive rights in North America
and other selected countries worldwide to use the Roediger technology, a process
which utilizes anaerobic digestion in the treatment of wastewater. Revenues to
date from this technology have not been material to the Company.
-4-
<PAGE>
Item 1. Business (Cont'd)
Some components of the other products made and erection techniques used by the
Company are covered by patents owned or licensed by the Company. None of these
are deemed to be material to the Company from an overall financial viewpoint.
The Company had a backlog of uncompleted contracts of $172 million on December
31, 1996 compared to $183 million on December 31, 1995. Substantially all
backlog is expected to be completed during 1997.
Factors such as the type and scope of operations in progress at any given
time, including weather conditions at field sites, create fluctuations in the
employment level at PDM. On December 31, 1996, the Company employed 2,006
persons, of which 649 were salaried personnel and 1,357 were hourly personnel.
The financial information for business segments is included in the Business
Segment Information section in PDM's 1996 Annual Report to stockholders, which
section is incorporated herein by reference.
Item 2. Properties
Operations of the Company are conducted at both owned and leased properties.
In addition, certain owned properties of the Company are leased to third party
tenants. The following table indicates each of the Company's facilities in the
United States by: segment, location, type of facility, year operations began,
and square footage of property owned or leased on December 31, 1996:
<TABLE>
<CAPTION>
YEAR
TYPE OF OPERATIONS SQUARE
LOCATION FACILITY BEGAN FOOTAGE
<S> <C> <C> <C>
Engineered Construction Division
Harpersville, Alabama (1) Warehouse and office 1994 11,500
Fresno, California Toolhouse 1963 52,140
Clive, Iowa Fabrication plant and office 1955 176,540
Des Moines, Iowa Toolhouse 1900 29,000
Pittsburgh, Pennsylvania Office and toolhouse 1908 98,780
Warren, Pennsylvania Fabrication plant 1959 125,960
Franklin, Tennessee Toolhouse 1977 28,220
Hitchcock, Texas (2) Toolhouse 1994 5,000
The Woodlands, Texas (3) Office 1996 19,300
Provo, Utah Fabrication plant 1959 154,950
</TABLE>
-5-
<PAGE>
Item 2. Properties (Cont'd)
<TABLE>
<CAPTION>
YEAR
TYPE OF OPERATIONS SQUARE
LOCATION FACILITY BEGAN FOOTAGE
<S> <C> <C> <C>
Steel Construction
Stockton, California Fabrication plant and office 1987 143,000
Chicago, Illinois Fabrication plant and office 1987 520,800
Eau Claire, Wisconsin Fabrication plant and office 1994 309,500
Wausau, Wisconsin Fabrication plant and office 1991 157,000
Port Coquitlam, B.C. Canada (4) Office 1997 12,300
Steel Service Centers
Fresno, California Warehouse and office 1955 112,800
Santa Clara, California Warehouse and office 1947 108,530
Stockton, California Warehouse and office 1955 191,500
Cedar Rapids, Iowa Warehouse and office 1976 66,800
Sparks, Nevada Warehouse and office 1974 78,940
Tualatin, Oregon Warehouse and office 1964 31,620
Spanish Fork, Utah Warehouse and office 1977 74,280
Arlington, Washington (5) Warehouse and office 1993 13,970
Vancouver, Washington (6) Warehouse and office 1997 138,600
Idle Holdings, Including Plant and Property (7)
Sacramento, California Land 1966 --
Des Moines, Iowa Fabrication plant and office 1900 339,100
Hilliard, Ohio Fabrication plant and office 1971 179,000
Pittsburgh, Pennsylvania Office 1908 10,234
Provo, Utah (8) Office 1959 15,731
- ----------
</TABLE>
(1) Company leases land and building from outside third party with an option
to purchase. Lease will expire January 31, 2001.
(2) Company leases land and building from outside third party. Lease will
expire July 1, 1997.
(3) Company leases building from outside third party. Lease will expire August
31, 2006.
(4) Company leases building from outside third party. Lease will expire
November 30, 2002.
(5) Company leases land from outside third party. Lease will expire January
31, 2003.
(6) Company leases land and building from outside third party. Lease will
expire September 1, 1999.
(7) Company pursues the sale or development of all idle facilities and
regularly evaluates similar opportunities for facilities not fully
utilized.
(8) Company is leasing facility to outside third party. Lease will expire
January 31, 1998.
-6-
<PAGE>
Item 2. Properties (Cont'd)
The properties listed above are utilized by the Company's business segments as
indicated. The Company's production capacity is adequate for its present needs.
The Company believes that its properties have been adequately maintained, are
generally in good condition and are suitable for the Company's business as now
conducted.
Item 3. Legal Proceedings
See Contingencies note accompanying the consolidated financial statements in
PDM's 1996 Annual Report to Stockholders, which note is incorporated herein by
reference.
On May 14, 1996 the Company filed an action in the United States District
Court for the Northern District of Illinois (Eastern Division) captioned
PITT-DES MOINES, INC. V. METROPOLITAN PIER & EXPOSITION AUTHORITY ET AL.,
seeking reimbursement in excess of $15.0 million for additional work and making
other claims in connection with this matter. On June 4, 1996, certain of the
defendants in said action made counterclaims against the Company in amounts
approximating $3.5 million. While counsel believes that the Company has a basis
for the claim, neither management nor counsel is able to predict with certainty
the ultimate resolution of this matter. As additional information becomes
available, the Company may revise its estimate of potential recovery, which
could result in a material adjustment to the results of operations in future
periods.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Executive Officers of the Registrant
Information regarding executive officers of the Registrant is presented in
Part III following and incorporated herein by reference.
-7-
<PAGE>
PART II
Information for Items 5, 6 and 7 is included in PDM's 1996 Annual Report to
Stockholders and is incorporated herein by reference (and except for these
sections, and sections incorporated herein by reference in Items 1 and 8 of this
report, PDM's Annual Report to Stockholders is not deemed to be filed as part of
this report):
<TABLE>
<CAPTION>
ANNUAL REPORT
TO STOCKHOLDERS
ITEM NO. TITLE SECTION/TITLE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 5. Market for Registrant's Common Equity Common Stock Information
and Related Stockholder Matters included in Stockholders'
Reference section
Item 6. Selected Financial Data Five-Year Selected
Financial Data
Item 7. Management's Discussion and Analysis Management's Discussion
of Financial Condition and Results of and Analysis
Operations
Item 8. Financial Statements and Supplemental Data
</TABLE>
The financial statements consisting of Consolidated Statements of Income,
Consolidated Statements of Financial Condition, Consolidated Statements of Cash
Flows, Consolidated Statements of Stockholders' Equity, Notes to Consolidated
Financial Statements, and Business Segment Information are included in the
Consolidated Financial Statements section of PDM's 1996 Annual Report to
Stockholders, which are incorporated herein by reference. The report of
independent auditors on PDM's consolidated financial statements is in the Report
of Independent Auditors and Management section of PDM's 1996 Annual Report to
Stockholders which is incorporated herein by reference.
The unaudited Two-Year Quarterly Results of Operations in PDM's 1996 Annual
Report to Stockholders is incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable
-8-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant (1)
Regarding the directors of the Registrant, reference is made to the
information set forth under the caption "Election of Directors" in the Company's
definitive Proxy Statement anticipated to be dated March 31, 1997 (Proxy
Statement) which information is incorporated herein by reference.
The principal executive officers of the Company and their recent business
experience are as follows:
W. R. Jackson, age 88
Director since 1940;
Chairman Emeritus since 1988; formerly Chairman of the Board since 1971.
Mr. Jackson has been with the Company since 1936.
P. O. Elbert, age 66
Director since 1988;
Chairman of the Board of the Company since 1990; formerly President of the
Company since 1988 and President, PDM Structural Group since 1987. Mr. Elbert
joined the Company in 1987. Prior to 1987, Mr. Elbert was Vice Chairman of
Chicago Steel Corporation since 1986; formerly a partner of Elbert and McKee
Company since 1984; formerly President and Chief Executive Officer of Flint
Steel Corporation since 1979; and formerly Group Vice President of Inryco,
Inc., a subsidiary of Inland Steel Company since 1969.
Wm. W. McKee, age 58 (2)
Director since 1988;
President and Chief Executive Officer of the Company since 1990; formerly
President, PDM Plate Group since May 1987 and formerly Executive Vice
President, PDM Structural Group since April 1987. Mr. McKee joined the Company
in 1987. Prior to 1987, Mr. McKee was Secretary of Chicago Steel Corporation
since 1986; formerly a partner of Elbert and McKee Company since 1984;
formerly a consultant with McKee and Associates since 1983; formerly President
of Hogan Manufacturing since 1980; and formerly President of Herrick
Corporation since 1973.
R. A. Byers, age 49 (2)
Treasurer since 1988 and Vice President, Finance and Administration since
1987; formerly Vice President, Finance since 1984; formerly Controller since
1982; formerly Assistant Controller since 1981; formerly Manager of Financial
Reporting since 1979; and formerly with Ernst & Young LLP for ten years.
-9-
<PAGE>
Item 10. Directors and Executive Officers of the Registrant (Cont'd)
T. R. Lloyd, age 48 (2)
Secretary and General Counsel since 1990; formerly Senior Attorney of Buchanan
Ingersoll Professional Corporation, since 1989; formerly Vice President,
Secretary and General Counsel for Arch Mineral Corporation since 1984; and
formerly Director and Secretary of U.S. Steel Mining Co., Inc. since 1979.
____________________
(1) Except where otherwise indicated, all references are to positions held with
Pitt-Des Moines, Inc. Each executive officer of the Company is elected
annually by the Board of Directors until his successor is elected and
qualified, and each has served continually as an officer since first
elected.
(2) The Company has agreements with each of Messrs. McKee, Byers and Lloyd
covering, among other things, their positions as executive officers of the
Company after a change of control.
Regarding Section 16 compliance, reference is made to the information set forth
under the caption "Compliance with Section 16 of the Exchange Act" in the
Company's definitive Proxy Statement anticipated to be dated March 31, 1997
which information is incorporated herein by reference.
Item 11. Executive Compensation
Reference is made to the information set forth under the captions "Board of
Directors and Committees of the Board," "Executive Compensation and Other
Information," "Compensation Committee Interlocks and Insider Participation"
appearing in the Company's Proxy Statement, which information is incorporated
herein by reference; provided, however, that the information set forth under the
captions "Compensation Committee Report on Executive Compensation" and
"Performance Graph" in the proxy Statement shall not be deemed to be soliciting
material or to be "filed" with the Commission or subject to Regulation 14A or
14C (other than as provided in Item 402 of Regulation S-K) or to the liabilities
of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the information contained under the captions
"Stockholdings of Management" and "Principal Holders of Common Stock" in the
Company's Proxy Statement which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Reference is made to the information contained under the caption "Compensation
Committee Interlocks and Insider Participation" in the Company's Proxy Statement
which information is incorporated herein by reference.
-10-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements and Report of
Independent Auditors previously incorporated by reference in Part II,
Item 8 of this report are incorporated herein by reference:
Report of Independent Auditors
Consolidated Statements of Income -- Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Financial Condition as of December 31,
1996 and 1995
Consolidated Statements of Cash Flows -- Years Ended December 31,
1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity -- Years Ended
December 31, 1996, 1995 and 1994
Notes To Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedule of Pitt-Des
Moines, Inc. and subsidiaries is included in Item 14(d):
Schedule II. Valuation and Qualifying Accounts for years ended
December 31, 1996, 1995 and 1994
All other schedules are omitted because they are not applicable or
the required information is shown in the consolidated financial
statements or notes thereto.
3. Exhibits:
3.1 Articles of Incorporation, as amended to date (filed as Exhibit 3.1
to the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 1989 and incorporated herein by reference)
3.2 Bylaws, as amended to date (filed as Exhibit 3.2 to the Company's
quarterly report on Form 10-Q for the quarter ended September 30,
1989 and incorporated herein by reference)
-11-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on form 8-K
(Cont'd)
4.1 Amended and Restated Credit Agreement dated as of June 30, 1992 by
and among Pitt-Des Moines, Inc. and Pittsburgh National Bank, Wells
Fargo Bank, N.A. and American National Bank (filed as Exhibit 4.1 to
the Company's annual report on Form 10-K for the year ended December
31, 1992 and incorporated herein by reference)
4.2 First Amendment dated November 23, 1992 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.2 to the Company's annual
report on Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference)
4.3 Second Amendment dated June 10, 1993 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly
report on Form 10-Q for the quarter ended June 30, 1992 and
incorporated herein by reference)
4.4 Third Amendment dated December 16, 1993 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.2 to the Company's annual
report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference)
4.5 Fourth Amendment dated June 14, 1994 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarter
report on Form 10-Q for the quarter ended June 30, 1994 and
incorporated herein by reference)
4.6 Fifth Amendment dated December 8, 1994 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference)
4.7 Sixth Amendment dated May 31, 1995 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly
report On form 10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference)
4.8 Seventh Amendment dated June 30, 1996 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly
report on Form 10-Q for the quarter ended June 30, 1996 and
incorporated herein by reference)
10.1* Agreement executed by and between the Company and Wm. W. McKee (filed
as Exhibit 10.1 to the Company's annual report on Form 10-K for the
year ended December 31, 1990 and incorporated herein by reference)
10.2* Agreement executed by and between the Company and R. A. Byers (filed
as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for
the quarter ended June 30, 1991 and incorporated herein by reference)
-12-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on form 8-K
(Cont'd)
10.3* Agreement executed by and between the Company and T. R. Lloyd (filed
as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for
the quarter ended June 30, 1991 and incorporated herein by reference)
10.4* Management Incentive Plan (filed as Exhibit 10.5 to the Company's
annual report on Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference)
10.5* Summary of Company 1996 Management Incentive Plan (MIP) (filed
herewith)
10.6* Retirement Plan for PDM Outside Directors as amended, effective May
26, 1994 (filed as Exhibit 10.7 to the Company's annual report on
Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference)
10.7* Retirement Plan for PDM Outside Directors as amended on September 14,
1995, effective May 26, 1994 (filed as Exhibit 10.7 to the Company's
annual report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference)
10.8* Stock Option Plan of 1990 (filed as Exhibit 4.01 to the Company's
Registration Statement No. 33-34787 on Form S-8 filed May 7, 1990 and
incorporated herein by reference)
10.9* Investment Letter and Registration Rights Agreement dated September
21, 1993 by and between Pitt-Des Moines, Inc. and William W. McKee,
Jr. (filed as Exhibit 10.1 to the Company's quarterly report on Form
10-Q for the quarter ended September 30, 1993 and incorporated herein
by reference)
10.10* Investment Letter and Registration Rights Agreement dated September
21, 1993 by and between Pitt-Des Moines, Inc. and Phillip O. Elbert
(filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q
for the quarter ended September 30, 1993 and incorporated herein by
reference)
10.11* Directors Stock Plan (filed under the Company's Registration
Statement No. 333-13043 on Form S-8 dated September 30, 1996 and
incorporated herein by reference)
10.12* Stock Option Agreement executed by and between the Company and P.O.
Elbert (filed herewith)
11 Computation of Per Share Earnings (filed herewith)
13 Those portions of the Annual Report to Stockholders for fiscal year
ended December 31, 1996, which are incorporated herein by reference
(filed herewith)
-13-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Cont'd)
21 Subsidiaries of Pitt-Des Moines, Inc. (filed herewith)
23 Consent of Independent Auditors, Ernst & Young LLP (filed herewith)
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended December
31, 1996.
- ------------------------
* Denotes management contract or compensatory plan or arrangement.
-14-
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
PITT-DES MOINES, INC.
March 26, 1997 By: /s/ Wm. W. McKee
-------------------------
Wm. W. McKee
President
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
Principal Executive Officer:
/s/ Wm. W. McKee President, Chief March 26, 1997
- ---------------------------- Executive Officer and
Wm. W. McKee Director
Principal Financial and Accounting Officer:
/s/ R. A. Byers Chief Financial Officer March 26, 1997
- ---------------------------- and Chief Accounting
R. A. Byers Officer
Other Directors:
/s/ J. C. Bates Director March 26, 1997
- ----------------------------
J. C. Bates
/s/ R. W. Dean Director March 26, 1997
- ----------------------------
R. W. Dean
-15-
<PAGE>
Signatures (Cont'd)
Signatures Title Date
/s/ P. O. Elbert Director March 26, 1997
- ----------------------------
P. O. Elbert
/s/ W. R. Jackson Director March 26, 1997
- ----------------------------
W. R. Jackson
/s/ W. R. Jackson, Jr. Director March 26, 1997
- ----------------------------
W. R. Jackson, Jr.
/s/ W. E. Lewellen Director March 26, 1997
- ----------------------------
W. E. Lewellen
/s/ A. J. Paddock Director March 26, 1997
- ----------------------------
A. J. Paddock
/s/ J. W. Robinson Director March 26, 1997
- ----------------------------
J. W. Robinson
/s/ P. J. Townsend Director March 26, 1997
- ----------------------------
P. J. Townsend
-16-
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Pitt-Des Moines, Inc.
<TABLE>
<CAPTION>
Additions Deductions(1)
------------- -------------
Balance at Charged to
Beginning of Costs and Credited Balance at End
Description Period Expenses to Asset of Period
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deducted from accounts receivable
as allowance for doubtful accounts:
Year ended December 31, 1996 $868,000 $90,000 $90,000 $868,000
Year ended December 31, 1995 $ 923,000 $220,000 $275,000 $868,000
Year ended December 31, 1994 $ 975,000 $209,000 $261,000 $923,000
</TABLE>
- ---------------------
(1) Write-off of accounts deemed to be uncollectible
<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation, as amended to date (filed as Exhibit 3.1 to
the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 1989 and incorporated herein by reference)
3.2 Bylaws, as amended to date (filed as Exhibit 3.2 to the Company's
quarterly report on Form 10-Q for the quarter ended September 30, 1989
and incorporated herein by reference)
4.1 Amended and Restated Credit Agreement dated as of June 30, 1992 by and
among Pitt-Des Moines, Inc. and Pittsburgh National Bank, Wells Fargo
Bank, N.A. and American National Bank (filed as Exhibit 4.1 to the
Company's annual report on Form 10-K for the year ended December 31, 1992
and incorporated herein by reference)
4.2 First Amendment dated November 23, 1992 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.2 to the Company's annual report
on Form 10-K for the year ended December 31, 1992 and incorporated herein
by reference)
4.3 Second Amendment dated June 10, 1993 to Credit Agreement filed as Exhibit
4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1992 and incorporated herein by
reference)
4.4 Third Amendment dated December 16, 1993 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.4 to the Company's annual report
on Form 10-K for the year ended December 31, 1993 and incorporated herein
by reference)
4.5 Fourth Amendment dated June 14, 1994 to Credit Agreement filed as Exhibit
4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by
reference)
4.6 Fifth Amendment dated December 8, 1994 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.6 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated herein
by reference)
4.7 Sixth Amendment dated May 31, 1995 to Credit Agreement filed as Exhibit
4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly report On
form 10-Q for the quarter ended June 30, 1995 and incorporated herein by
reference)
4.8 Seventh Amendment dated June 30, 1996 to Credit Agreement filed as
Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly
report on Form 10-Q for the quarter ended June 30, 1996 and incorporated
herein by reference)
<PAGE>
EXHIBIT INDEX (Cont'd)
10.1 Agreement executed by and between the Company and Wm. W. McKee (filed as
Exhibit 10.1 to the Company's annual report on Form 10-K for the year
ended December 31, 1990 and incorporated herein by reference)
10.2 Agreement executed by and between the Company and R. A. Byers (filed as
Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1991 and incorporated herein by reference)
10.3 Agreement executed by and between the Company and T. R. Lloyd (filed as
Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1991 and incorporated herein by reference)
10.4 Management Incentive Plan (filed as Exhibit 10.5 to the Company's annual
report on Form 10-K for the year ended December 31, 1992 and incorporated
herein by reference)
10.5 Summary of Company's 1996 Management Incentive Plan (MIP) (filed
herewith)
10.6 Retirement Plan for PDM Outside Directors as amended, effective May 26,
1994 (filed as Exhibit 10.7 to the Company's annual report on Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference)
10.7 Retirement Plan for PDM Outside Directors as amended on September 14,
1995, effective May 26, 1994 (filed as Exhibit 10.7 to the Company's
annual report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference)
10.8 Stock Option Plan of 1990 (filed as Exhibit 4.01 to the Company's
Registration Statement No. 33-34787 on Form S-8 filed May 7, 1990 and
incorporated herein by reference)
10.9 Investment Letter and Registration Rights Agreement dated September 21,
1993 by and between Pitt-Des Moines, Inc. and William W. McKee, Jr.
(filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for
the quarter ended September 30, 1993 and incorporated herein by
reference)
10.10 Investment Letter and Registration Rights Agreement dated September 21,
1993 by and between Pitt-Des Moines, Inc. and Phillip O. Elbert (filed as
Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference)
10.11 Directors Stock Plan (filed under the Company's Registration Statement
No. 333-13043 on Form S-8 dated September 30, 1996 and incorporated
herein by reference)
10.12 Stock Option Agreement executed by and between the Company and P.O.
Elbert (filed herewith)
<PAGE>
EXHIBIT INDEX (Cont'd)
11 Computation of Per Share Earnings (filed herewith)
13 Those portions of the Annual Report to Stockholders for fiscal year ended
December 31, 1996, which are incorporated herein by reference (filed
herewith)
21 Subsidiaries of Pitt-Des Moines, Inc. (filed herewith)
23 Consent of Independent Auditors, Ernst & Young LLP (filed herewith)
27 Financial Data Schedule
<PAGE>
Exhibit 10.5
SUMMARY OF COMPANY'S 1996 MANAGEMENT INCENTIVE PLAN (MIP)
Pitt-Des Moines, Inc.
Under the terms of the MIP, a minimum rate of return of (threshold) on
stockholders' equity must be achieved before bonuses can be awarded. The
threshold for executive officers was established at the after-tax cost of
capital on the assumption that returns in excess of the threshold would lead to
increases in stockholder value. Once this criteria is met, the total amount of
bonus available for distribution to eligible executive officers, including the
Company's Chief Executive Officer ("CEO") under the MIP is based on a percentage
in excess of the minimum return on stockholders' equity. Individual bonus
amounts paid to the Company's executive officers for services rendered in 1996,
including the CEO, were based on a pre-determined percentage limitation on each
individual's base salary (in no case does the applicable limit exceed 100% of
base salary) and the percentage of the overall MIP target achieved. These pre-
determined percentages were established by the Compensation Committee.
Under the terms of the MIP, the Company's eligible executive officers were
entitled to receive and were awarded bonuses under the MIP for the year ended
December 31, 1996.
<PAGE>
Exhibit 10.12
PITT-DES MOINES, INC.
---------------------
STOCK OPTION AGREEMENT
----------------------
Date of Grant of this Option: May 2, 1996
THIS AGREEMENT made by and between PITT-DES MOINES, INC., a Pennsylvania
corporation (hereinafter called the "Company"), and P.O. Elbert (hereinafter
called the "Optionee") is made as of the above date under the Pitt-Des Moines,
Inc. Stock Option Plan of 1990 (the "Plan").
WITNESSETH:
1. The Company grants to the Optionee an Incentive Stock Option to purchase
25,000 shares of the Company's Common stock, no par value, at the price of
$42.75 per share, subject to the terms and conditions in the Plan and herein.
2. This Option must be exercised within ten (10) years from May 2, 1996, the
date of the grant of this option.
3. In consideration of the grant of this Option, the Optionee hereby agrees
to remain in the employment of the Company or one of its subsidiaries, at the
pleasure of the Company or such subsidiary, for at least one year from the date
of the grant of this Option.
4. It is intended that this Option constitute an Incentive Stock Option
under Section 422A of the Internal Revenue Code of 1986, as amended, and,
therefore, this Option shall in all events be subject to the limitations set
forth in Section 8 of the Plan with respect to Incentive Stock Options.
5. The Optionee may exercise this Option only in accordance with the
following conditions:
(a) This Option may only be exercised: (i) on or after the date the
Company enters into an agreement for its liquidation, merger or consolidation,
or for a sale of substantially all of the Company's assets (a "Disposition of
the Company"); or (ii) on or after the date the Company's Board of Directors
agrees to, endorses or recommends to its shareholders any proposed transaction
in the voting shares of the Company which would or could effect any such
liquidation, merger, consolidation or sale (a "Disposition of the Company's
Shares"); provided however that notwithstanding Sections 8(c)(iii), (iv), (v)
----------------
and (vi) of the Plan, any Options herein granted shall be void if Optionee for
any reason ceases to be an employee of the Company before the date any
Disposition of the Company is agreed to by the Company or the date any
Disposition of the Company's Shares is recommended by the Board.
(b) Notwithstanding the foregoing, this Option may not be exercised in
the event that any transaction described in paragraph 5(a) involves any entity
(other than the Company) in which the Company's management employees, including
Optionee, hold, as a group, any ownership interest, directly or indirectly,
which interest exceeds 1% of the value of that entity.
<PAGE>
6. All terms and conditions of the Plan are incorporated herein as if fully
set out in this Agreement and in the event of any conflict between the terms
herein or those in the Plan, except as noted in the proviso in paragraph 5(a)
above, those of the Plan shall control.
IN WITNESS WHEREOF, the undersigned have executed this Stock Option
Agreement effective as of the date first above written.
EXECUTED IN DUPLICATE
ATTEST: PITT-DES MOINES, INC.
/s/ T.R. Lloyd /s/ Wm. W. McKee
- -------------------- --------------------
Secretary Wm. W. McKee
President & C.E.O.
WITNESS:
/s/ R.A. Byers /s/ P.O. Elbert
- -------------------- --------------------
P.O. Elbert
<PAGE>
Exhibit 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Pitt-Des Moines, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Primary
Average shares outstanding 3,484,552 3,482,290 3,485,476
Dilutive stock options based on
treasury stock method using
average market price 41,552 13,223 2,549
----------- ----------- -----------
3,526,104 3,495,513 3,488,025
=========== =========== ===========
Income from continuing operations $12,551,221 $13,019,460 $11,979,821
Income from discontinued operations, net of taxes - - 80,362
----------- ----------- -----------
Net income $12,551,221 13,019,460 $12,060,183
=========== =========== ===========
Income per common share:
Continuing operations $ 3.56 $ 3.72 $ 3.44
Discontinued operations .00 .00 .02
----------- ----------- -----------
Net income per common share $ 3.56 $ 3.72 $ 3.46
=========== =========== ===========
Fully Diluted
Average shares outstanding 3,484,552 3,482,290 3,485,476
Dilutive stock options based on treasury stock
method using greater of year-end or average
market price 44,002 17,102 2,549
----------- ----------- -----------
3,528,554 3,449,392 3,488,025
=========== =========== ===========
Income from continuing operations $12,551,221 $13,019,460 $11,979,821
Income from discontinued operations, net of taxes - - 80,362
----------- ----------- -----------
Net income $12,551,221 $13,109,460 $12,060,183
=========== =========== ===========
Income per common share:
Continuing operations $ 3.56 $ 3.72 $ 3.44
Discontinued operations .00 .00 .02
----------- ----------- -----------
Net income per common share $ 3.56 $ 3.72 $ 3.46
=========== =========== ===========
</TABLE>
<PAGE>
EXHIBIT 13
Portions of the 1996 Annual Report to Stockholders
Pitt-Des Moines, Inc.
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------------------
(Dollars in thousands, except per share amounts) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Earned revenue $468,274 $461,274 $408,061 $323,707 $355,043
Income (loss) from operations 20,588 22,077 15,508 (2,689) 4,681
Net Income:
Continuing operations 12,551 13,019 11,980 567 4,080
Discontinued operations - - 80 471 820
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 12,551 $ 13,019 $ 12,060 $ 1,038 $ 4,900
- ------------------------------------------------------------------------------------------------------------------------------------
Income per common share:
Continuing operations $ 3.56 $ 3.72 $ 3.44 $ 0.16 $ 1.12
Discontinued operations - - 0.02 0.14 0.23
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per common share $ 3.56 $ 3.72 $ 3.46 $ 0.30 $ 1.35
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets $199,885 $201,136 $214,201 $177,803 $166,074
Long-term debt - 13,000 22,000 - -
Stockholders' equity 118,619 108,942 98,549 88,473 89,678
OTHER INFORMATION
For the year:
Cash provided (utilized) by operations $ 24,749 $ 14,630 $ (2,784) $ (3,767) $ 21,414
Depreciation expense 5,681 5,554 5,037 4,145 4,314
Capital expenditures 4,153 5,304 7,919 3,942 4,491
Dividends per common share 0.86 0.66 0.60 0.60 0.60
At year end:
Book value per common share $ 34.06 $ 31.31 $ 28.30 $ 25.38 $ 25.75
Employees 2,006 2,082 2,257 1,987 2,066
- ------------------------------------------------------------------------------------------------------------------------------------
Per share amounts have been restated to account for the three for two stock
split for all periods presented.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis is provided to increase understanding of,
and should be read in conjunction with, the consolidated financial statements
and accompanying notes and the Review of Operations section of this document.
All per share amounts included in this discussion have been restated to
account for the three for two stock split for holders of the Company's Common
Stock as of March 14, 1997 as approved by the Board of Directors on February 13,
1997.
RESULTS OF OPERATIONS
The Company realized net income of $12.6 million in 1996 compared with $13.0
million in 1995 and $12.0 million in 1994. The related earnings per share were
$3.56 in 1996 compared with $3.72 in 1995 and $3.46 in 1994. Earned revenue
increased $7.0 million in 1996 compared with 1995 and increased $53.2 million in
1995 when compared with 1994. Income from operations of $20.6 million in 1996
decreased $1.5 million from $22.1 million in 1995 and increased $6.6 million in
1995 when compared with $15.5 million in 1994. In 1996, the increase in earned
revenue can be primarily attributed to an increase in Steel Service Centers
earned revenue while the decrease in income from operations was primarily the
result of the decrease in Steel Construction caused by a combination of lower
volumes and a reduction to the estimated profitability of certain contracts. In
1995, the increase in earned revenue was the result of improvements realized in
all three segments while the increase in income from operations was the result
of increases in Steel Construction and Steel Service Centers. For additional
discussion on the results of operations refer to the individual business segment
narratives below.
ENGINEERED CONSTRUCTION DIVISION
Earned revenue for the Engineered Construction Division (ECD) was $193.1 million
in 1996 compared with $190.8 million and $177.3 million in 1995 and 1994,
respectively. This segment operates as three market focused project groups each
concentrating on specific customers. Economic conditions and competitive
environments, in which ECD competes, vary independently from market to market
and year to year. These external factors, outside of management's control,
contribute to the financial results. The increase in earned revenue of $2.3
million in 1996 was primarily the result of improvements realized in the
industrial market where a higher volume of contract revenue was recognized. The
increase in earned revenue of $13.4 million in 1995 was attributable to
improvements realized in the water storage and international and technology
markets.
Income from operations of $8.2 million in 1996 decreased $900,000 from $9.1
million reported for 1995. The most significant impact on income from operations
was the increase in selling, general and administrative (S,G&A) expenses
associated with the relocation of ECD headquarters to Houston, Texas that
occurred during the third quarter of 1996. This move was made to promote future
growth opportunities in a geographic market area where many existing and
potential customers are located. Absent the costs associated with the Houston
move, S,G&A expenses remained relatively constant as a percent of earned revenue
from 1994 through 1996, at 7%, 8% and 8%, respectively. In 1995, income from
operations decreased $2.1 million from $11.2 million in 1994. A downturn in
activity in terms of volume and contract margins in the industrial markets, when
compared with 1994, contributed significantly to this decrease. During 1994, ECD
took advantage of the recovering economy by expanding volume and realizing
higher margins on contracts.
New awards were $201.8 million, $174.9 million and $199.0 million in 1996,
1995 and 1994, respectively. This resulted in backlog levels of $101.7 million,
$93.1 million and $108.9 million in 1996, 1995 and 1994, respectively. Markets,
in which ECD competes, improved in 1994 and new awards were affected
accordingly. During 1995, new awards were down particularly in the international
markets as a result of the devaluation of the Mexican peso which affected
opportunities in Latin America and the Caribbean. New awards improved, primarily
in the industrial and international and technology markets, to $201.8 million in
1996. This resulted in a strong backlog level of $101.7 million entering 1997.
Capital expenditures of $2.5 million and $2.3 million in 1996 and 1995,
respectively were primarily for construction and computer equipment. During
1994, expenditures of $3.9 million were for a new office building, computer and
construction equipment.
STEEL CONSTRUCTION
Earned revenue for this segment was $114.3 million, $119.7 million and $101.9
million for 1996, 1995 and 1994, respectively. During 1994, building
construction activity, particularly in Chicago Steel Construction, dominated
earned revenue for this segment. Also in September 1994, the bridge fabricating
assets of Phoenix Steel, Inc. were acquired and combined with existing bridge
fabricating assets in Wisconsin to form PDM Bridge. The full benefit of this
acquisition was realized in 1995 by enhancing capabilities to fabricate larger,
more complex bridge structures which in turn enabled this segment to compete in
a larger market area. This resulted in the improvement realized in earned
revenue during 1995. In 1996, the decrease in earned revenue was primarily the
result of the decline in availability of large bridge contracts which is
directly related to federal and state infrastructure spending.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
On February 17, 1997, the Company announced plans to close its structural
steel fabricating facility in Melrose Park, Illinois as a result of a shrinking
market for large-scale construction projects in the Chicago area. During 1996,
this facility accounted for 30 percent of Steel Construction's earned revenue.
The costs associated with this shutdown will be reflected in the 1997 first
quarter financial statements and are not expected to be material.
In February 1997, the Company also announced plans to begin construction
of a new structural steel fabricating facility in the southwestern part of the
United States. This will expand the Company's capabilities to fabricate and
erect structural steel buildings in the west coast and southwest markets, where
the demand for such products is currently strong. This new facility is expected
to be operational in the third quarter of 1997 and is not expected to
significantly impact 1997 operating results for this segment. Certain employees
and equipment from the Melrose Park facility are expected to be redeployed to
both the new facility as well as existing bridge fabricating plants in
Wisconsin.
Additionally, on March 10, 1997, the Company announced the acquisition of
Candraft Detailing, Inc., an engineering drafting company, located in Vancouver,
British Columbia. While this acquisition is expected to enhance the drafting
capabilities of the Steel Construction business segment, it is not expected to
have a significant impact on earned revenue.
Over the three year period ended in 1996, income from operations for Steel
Construction responded in much the same way as earned revenue. In 1994,
building construction activity, particularly in the Chicago area, was the
primary contributor to the $2.8 million reported. During 1995, the increase in
income from operations to $7.6 million was driven primarily by the above-
mentioned enhanced bridge fabrication capabilities along with the increased
availability of large bridge contracts. In 1996, the decrease in profitability
in building construction contracts contributed to the decreased levels of income
from operations when compared with 1995. S,G&A expenses as a percent of earned
revenue for the Steel Construction business segment were 5%, 6% and 6% for the
years ended 1994, 1995 and 1996, respectively.
As indicated in "Costs and Estimated Profits on Uncompleted Contracts"
in the Notes to Consolidated Financial Statements, Steel Construction's costs
and estimated profits in excess of billings on uncompleted contracts for 1996
and 1995 includes approximately $6.5 million and $6.0 million, respectively,
relating to an unapproved change order arising from a dispute over design and
specification changes on a project currently under construction. On May 14, 1996
the Company filed an action in the United States District Court for the Northern
District of Illinois (Eastern Division) captioned PITT-DES MOINES, INC. V.
METROPOLITAN PIER & EXPOSITION AUTHORITY ET AL. seeking reimbursement in excess
of $15.0 million for additional work and making other claims in connection with
this matter. On June 4, 1996, certain of the defendants in said action made
counterclaims against the Company in amounts approximating $3.5 million. While
counsel believes that the Company has a basis for the claim, neither management
nor counsel is able to predict with certainty the ultimate resolution of this
matter. As additional information becomes available, the Company may revise its
estimate of potential recovery, which could result in a material adjustment to
the results of operations in future periods.
Steel Construction reported new awards of $95.6 million, $126.6 million and
$92.7 million for the years ended 1996, 1995 and 1994, respectively. Backlog of
$70.4 million, $89.0 million and $82.1 million were reported for the years ended
1996, 1995 and 1994, respectively. The decrease in 1996 in new awards and
backlog was primarily the result of the lack of building construction awards in
the Chicago area along with the decline in bridge awards, each as discussed
above.
Capital expenditures, exclusive of business acquisitions, were $484,000
in 1996 compared with $919,000 and $661,000 in 1995 and 1994, respectively.
During the last three years, capital expenditures were for plant and
construction equipment.
STEEL SERVICE CENTERS
Steel Service Centers earned revenue was $160.9 million in 1996 compared with
$150.8 million and $128.9 million in 1995 and 1994, respectively. Income from
operations was $13.1 million in 1996 compared with $11.9 million and $7.5
million in 1995 and 1994, respectively. Additionally, S,G&A expenses as a
percent of earned revenue held steady at 8%, 7% and 7% for the years ended 1994,
1995 and 1996, respectively. The increases experienced over the past three
years, in terms of earned revenue and income from operations, have been
primarily the result of a combination of increased demand as a result of the
ongoing economic recovery across the western United States and the benefit of
strategic capital expansion programs initiated in 1994. These capital expansion
programs have facilitated growth by providing capacity to capture additional
market share. On January 31, 1997, the Company acquired 90% of the stock of
General Steel Corporation located in Vancouver, Washington. The acquisition of
this steel service center will expand the Company's Steel Service Center
Division into the Pacific Northwest. Management expects this expansion to
contribute to this segment's continued improvement in performance into 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's Sparks, Nevada service center was flooded on January 1,
1997, and as a result, it operated on a limited basis until the restoration of
the facility was completed in mid-February. Although costs associated with the
flood were covered by insurance, earned revenue of the Steel Service Centers for
the first quarter may be lower than that of the previous year quarter.
Capital expenditures in 1996 of $1.0 million and $2.1 million in 1995 were
for plant equipment. During 1994, capital expenditures of $3.4 million were
primarily used for expansions of physical plants, processing and warehouse
equipment and upgrading the delivery fleet.
OTHER
Corporate unallocated expenses, consisting primarily of salaries, benefits,
outside professional services, taxes and insurance, were $6.8 million in 1996
compared with $6.5 million and $6.0 million in 1995 and 1994, respectively.
In 1996, the Company's interest income was $1.3 million compared with $1.2
million in 1995 and $627,000 in 1994. Interest income increased in 1996 and 1995
as a result of increased levels of short-term interest-bearing funds and
interest on long-term notes receivable.
Interest expense of $1.3 million in 1996 compares with $1.9 million in
1995 and $898,000 in 1994. Interest expense is directly related to the level of
net borrowings the Company maintains throughout each year. On December 31, 1996
the Company had no outstanding debt obligations under the revolving credit
facility compared with $13 million and $22 million of debt obligations at
December 31, 1995 and 1994, respectively.
The gains on sale of assets were $560,000, $95,000 and $3.6 million in
1996, 1995 and 1994, respectively. In all three years, gains on the sale of idle
properties were recognized. In addition to the sale of idle properties, in 1996
the Company realized a gain on the sale of a foreign investment and in 1994
realized a gain on the sale of PDM Saudi Arabia Ltd., a joint venture.
The effective tax rate was 39 percent in 1996 and 1995 compared with 36
percent in 1994. In 1994, the effective tax rate was favorably impacted by the
realization of a tax benefit related to the previously mentioned sale of a joint
venture.
Inflation and changing prices did not significantly impact the Company
during the last three years.
LIQUIDITY AND CAPITAL RESOURCES
The increase in cash flows from operating activities in 1996 when compared with
1995, is due primarily to decreases in net operating assets and liabilities. The
changes in operating assets and liabilities from year to year are affected by
the mix, stage of completion and commercial terms of contracts. In 1996,
decreases in receivables and increases in advance billings on contracts had a
positive effect on cash flow from operations.
The decrease in cash utilized by investing activities in 1996 and 1995
compared with 1994 is primarily attributable to the acquisition of the bridge
fabricating assets of Phoenix Steel Inc., a steel bridge fabricator, on
September 1, 1994. The total cost of this acquisition was $13.5 million. Capital
expenditures, exclusive of business acquisitions, in 1996 were $4.2 million
compared with $5.3 million and $2.9 million in 1995 and 1994, respectively.
In January 1997, the Company acquired General Steel Corporation located in
Vancouver, Washington, a steel service center delivering a general line of
carbon steel products in Oregon and Washington. On March 10, 1997, the Company
acquired Candraft Detailing, Inc., an engineering drafting company serving the
steel building and bridge fabrication industry located in Vancouver, British
Columbia. The total costs of these acquisitions were $8.3 million. The Company
intends to continue to evaluate and selectively pursue opportunities for growth
or expansion of its business through investment in or acquisition of
complementary businesses. Acquisition and investment candidates are evaluated
based on various criteria in a process which includes due diligence reviews.
Management anticipates that investment and/or acquisition opportunities will be
available to the Company and intends to investigate those opportunities which
are consistent with the Company's core business and expertise. The Company
expects that any such acquisitions will be financed from cash on hand or
available under the Company's revolving credit facility. In certain cases,
acquisitions may be funded using stock or pursuant to stand-alone credit
facilities.
Cash utilized by financing activities consisted primarily of dividend
payments and payment of debt obligations. The Company paid cash dividends of
$3.0 million ($.86 per share) in 1996 compared with $2.3 million ($.66 per
share) in 1995 and $2.1 million ($.60 per share) in 1994.
On February 13, 1997, the Board of Directors declared a 50% increase in its
quarterly dividend to $.275 per share on its post-split shares. The payment of
future dividends will be evaluated based on business conditions.
The Company has on hand and access to sufficient sources of funds to meet
its anticipated operating, expansion and capital needs, including the
construction of the new structural steel fabricating facility in the
southwestern part of the United States. These sources include the unused portion
of a $40.0 million unsecured revolving credit facility which contains an annual
option to renew for an additional one-year period, subject to lender approval.
On December 31, 1996, $10.6 million of stand-by letters of credit were
outstanding under this agreement. The Company expects to borrow under the credit
facility for working capital requirements in 1997.
<PAGE>
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
Years ended December 31,
- ----------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNED REVENUE
Engineered Construction Division $193,098,579 $190,778,590 $177,337,825
Steel Construction 114,282,912 119,690,135 101,871,144
Steel Service Centers 160,892,019 150,805,331 128,851,654
- ----------------------------------------------------------------------------------
$468,273,510 $461,274,056 $408,060,623
- ----------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Engineered Construction Division $ 8,154,976 $ 9,088,399 $ 11,180,896
Steel Construction 6,177,390 7,607,683 2,767,438
Steel Service Centers 13,078,895 11,927,971 7,528,151
Corporate and other (6,823,541) (6,547,366) (5,968,768)
- ----------------------------------------------------------------------------------
$ 20,587,720 $ 22,076,687 $ 15,507,717
- ----------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Engineered Construction Division $ 58,313,226 $ 59,919,222 $ 61,826,921
Steel Construction 61,626,687 69,129,166 75,024,678
Steel Service Centers 42,993,504 40,809,816 41,421,278
Corporate and other 36,951,967 31,278,073 35,928,602
- ----------------------------------------------------------------------------------
$199,885,384 $201,136,277 $214,201,479
- ----------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Engineered Construction Division $ 2,483,940 $ 2,296,679 $ 3,868,223
Steel Construction 483,777 919,330 660,540
Steel Service Centers 1,014,284 2,065,521 3,375,412
Corporate and other 170,930 22,124 38,832
- ----------------------------------------------------------------------------------
$ 4,152,931 $ 5,303,654 $ 7,943,007
- ----------------------------------------------------------------------------------
DEPRECIATION
Engineered Construction Division $ 2,007,767 $ 1,875,229 $ 1,906,768
Steel Construction 2,110,631 2,196,098 1,902,787
Steel Service Centers 1,519,868 1,442,272 1,192,176
Corporate and other 42,711 148,588 628,278
- ----------------------------------------------------------------------------------
$ 5,680,977 $ 5,662,187 $ 5,630,009
- ----------------------------------------------------------------------------------
</TABLE>
For the years ended 1996 and 1995, neither any single customer, nor any customer
outside the United States, accounted for 10 percent or more of total earned
revenue. In 1994, Steel Construction's earned revenue includes $48.3 million
related to the fabrication and construction of the McCormick Place Exhibition
Center.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earned revenue $468,273,510 $461,274,056 $408,060,623
Cost of earned revenue 403,799,573 398,731,887 357,639,136
- -------------------------------------------------------------------------------------------------
Gross profit from operations 64,473,937 62,542,169 50,421,487
Selling, general and administrative expenses 43,886,217 40,465,482 34,913,770
- -------------------------------------------------------------------------------------------------
Income from operations 20,587,720 22,076,687 15,507,717
Other income (expense):
Interest income 1,320,422 1,234,367 626,841
Interest expense (1,269,500) (1,927,010) (897,993)
Gain on sale of assets 559,581 95,044 3,576,760
Miscellaneous, net (569,197) (223,620) (157,233)
- -------------------------------------------------------------------------------------------------
41,306 (821,219) 3,148,375
- -------------------------------------------------------------------------------------------------
Income from continuing operations before taxes 20,629,026 21,255,468 18,656,092
Income tax expense 8,077,805 8,236,008 6,676,271
- -------------------------------------------------------------------------------------------------
Income from continuing operations 12,551,221 13,019,460 11,979,821
Income from discontinued operations, net of taxes - - 80,362
- -------------------------------------------------------------------------------------------------
Net income $ 12,551,221 $ 13,019,460 $ 12,060,183
- -------------------------------------------------------------------------------------------------
Income per common share:
Continuing operations $ 3.56 $ 3.72 $ 3.44
Discontinued operations - - 0.02
- -------------------------------------------------------------------------------------------------
Net income per common share $ 3.56 $ 3.72 $ 3.46
- -------------------------------------------------------------------------------------------------
Shares used to calculate income per share 3,526,104 3,499,392 3,488,025
- -------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION> December 31,
-------------------------------------------------------------------
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 16,814,884 $ 9,507,815
Accounts and notes receivable 72,423,871 77,517,346
Inventories 18,192,154 16,417,820
Costs and estimated profits in excess of billings 36,830,613 38,166,308
Deferred income taxes 4,475,749 4,871,911
Prepaid expenses 822,020 913,589
- ------------------------------------------------------------------------------------------------------------
Total current assets 149,559,291 147,394,789
OTHER ASSETS 8,300,139 9,509,912
PROPERTY, PLANT AND EQUIPMENT
Land 7,273,815 7,391,811
Buildings 35,212,608 35,383,724
Machinery and equipment 65,457,202 62,300,639
- ------------------------------------------------------------------------------------------------------------
107,943,625 105,076,174
Allowances for depreciation (65,917,671) (60,844,598)
- ------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 42,025,954 44,231,576
- ------------------------------------------------------------------------------------------------------------
$199,885,384 $201,136,277
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION> December 31,
--------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 41,593,198 $ 41,610,979
Accrued compensation, related taxes and benefits 12,005,337 11,739,433
Other accrued expenses 2,063,670 2,378,643
Billings in excess of costs and estimated profits 10,732,270 6,435,634
Income taxes 493,568 1,344,994
Casualty and liability insurance 7,132,397 8,816,939
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 74,020,440 72,326,622
REVOLVING CREDIT FACILITY - 13,000,000
DEFERRED INCOME TAXES 5,698,945 5,601,219
MINORITY INTEREST 1,546,645 1,266,930
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock -- par value $.01 per share; authorized 3,000,000 shares;
issued -- none
Common stock -- no par value; authorized 15,000,000 shares;
issued 4,473,234 shares 33,549,255 33,549,255
Retained earnings 99,343,523 89,677,480
- ----------------------------------------------------------------------------------------------------------------
132,892,778 123,226,735
Treasury stock at cost (1996 -- 990,233 shares; 1995 -- 993,785 shares) (14,273,424) (14,285,229)
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 118,619,354 108,941,506
- ----------------------------------------------------------------------------------------------------------------
$199,885,384 $201,136,277
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 12,551,221 $ 13,019,460 $ 12,060,183
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 5,680,977 5,553,960 5,036,755
Discontinued operations - (341,873) (1,397,613)
Gain on sale of assets (559,581) (95,044) (3,576,760)
Deferred income taxes 493,889 523,991 2,141,057
Minority interest in earnings, net of dividends paid 279,715 139,175 219,675
Other non-cash credits, net (547,440) 141,077 (301,288)
Change in operating assets and liabilities providing (using) cash:
Accounts and notes receivable 5,798,778 14,991,156 (31,132,161)
Inventories (1,774,334) 3,449,246 (3,396,234)
Prepaid expenses 91,569 18,385 663,337
Costs, estimated profits and billings, net 5,632,331 (15,846,823) 10,937,843
Accounts payable (17,781) (5,717,336) 6,720,222
Accrued liabilities (2,028,861) (431,779) (1,727,972)
Income taxes (851,427) (773,280) 969,217
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided (utilized) by operating activities 24,749,056 14,630,315 (2,783,739)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,152,931) (5,303,654) (7,919,020)
Proceeds from sale of assets 1,459,907 508,286 3,838,022
Costs incurred related to flood damage - - (3,589,298)
Acquisitions, net of cash acquired - - (13,499,394)
Change in other assets 1,124,410 (368,499) (340,468)
- ----------------------------------------------------------------------------------------------------------------------
Net cash utilized by investing activities (1,568,614) (5,163,867) (21,510,158)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit facility 8,000,000 4,000,000 28,000,000
Payments of revolving credit facility (21,000,000) (13,000,000) (6,000,000)
Dividends paid (3,020,275) (2,321,336) (2,091,114)
Other 146,902 (305,638) 107,031
- ----------------------------------------------------------------------------------------------------------------------
Net cash (utilized) provided by financing activities (15,873,373) (11,626,974) 20,015,917
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 7,307,069 (2,160,526) (4,277,980)
Cash and cash equivalents at beginning of year 9,507,815 11,668,341 15,946,321
- ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,814,884 $ 9,507,815 $ 11,668,341
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Treasury stock
-----------------------------------
Common stock Retained earnings Cost Number of shares
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance on December 31, 1993 $33,549,255 $69,055,440 $(14,131,775) (987,267)
Net income 12,060,183
Cash dividends ($.60 per share) (2,091,114)
Other 177,063 (70,032) (3,113)
- -----------------------------------------------------------------------------------------------------------------------
Balance on December 31, 1994 33,549,255 79,201,572 (14,201,807) (990,380)
Net income 13,019,460
Cash dividends ($0.66 per share) (2,321,336)
Other (222,216) (83,422) (3,405)
- -----------------------------------------------------------------------------------------------------------------------
Balance on December 31, 1995 33,549,255 89,677,480 (14,285,229) (993,785)
Net income 12,551,221
Cash dividends ($0.86 per share) (3,020,275)
Other 135,097 11,805 3,552
- -----------------------------------------------------------------------------------------------------------------------
Balance on December 31, 1996 $33,549,255 $99,343,523 $(14,273,424) (990,233)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS SEGMENTS
PDM is a diversified engineering and construction company that is comprised of
three business segments.
The Engineered Construction Division designs, fabricates and constructs
water storage tanks, anaerobic wastewater systems, processing, refining and
storage facilities, and specially engineered products such as low-temperature
and cryogenic systems, high vacuum and thermal test facilities and supercritical
fluid extraction facilities.
Steel Construction is engaged in fabricating and erecting structural steel
for commercial, institutional and public sector buildings, bridge rehabilitation
and fabricating structural steel for new bridges.
Steel Service Centers provide warehousing, first-stage processing and
distribution of carbon steel products including plates, sheets, bars, tubes,
shapes, pipe and other miscellaneous metal products. The culvert facilities
manufacture and market corrugated metal culvert pipe and accessories.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Pitt-Des Moines,
Inc. and its subsidiaries (Company). Intercompany accounts and transactions
have been eliminated in consolidation.
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the balance sheet dates
and the reported amounts of revenue and expenses during the reporting periods
for long-term contracts.
RECLASSIFICATIONS
Certain amounts in the 1994 and 1995 consolidated financial statements and notes
to consolidated financial statements have been reclassified to conform with the
1996 presentation.
CLASSIFICATIONS OF CURRENT ASSETS AND LIABILITIES
The Company includes in current assets and current liabilities amounts
realizable and payable under contracts which extend beyond one year. Other
assets and liabilities are classified as current or non-current on the basis of
expected realization or payment within or beyond one year, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as cash and short-term investments with
maturities of three months or less at the time of acquisition.
INVENTORIES
Inventories of raw materials and fabricated parts are principally valued at the
lower of last-in, first-out (LIFO) cost or market except for certain inventories
which are valued at the lower of first-in, first-out (FIFO) cost or market.
Contract material inventories included in accumulated contract costs are
valued using the specific identification method.
PROPERTY, PLANT AND EQUIPMENT
Land, buildings, machinery and equipment are carried at cost. Buildings,
machinery and equipment, including capitalized leases, are depreciated by
accelerated methods.
In January 1996, the Company adopted the Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS No. 121). The effect of adoption was
not material. At December 31, 1996, $5.4 million of long-lived assets to be
disposed of, including $2.5 million of long-lived assets from discontinued
operations, were included in Property, Plant and Equipment.
REVENUE RECOGNITION
The Company follows the percentage of completion method of reporting income from
contracts. This method takes into account the cost, estimated profit and earned
revenue to date on contracts not yet completed. Revenue recognized is the
portion of the total contract price that the man-hours expended to date bears to
the estimated final total man-hours, based on current estimates of man-hours to
complete. Revenue recognition is not related to progress billings to customers.
As long-term contracts extend over one or more years, revisions in
estimates of costs and estimated profits during the course of work are reflected
in the accounting period in which the facts which require the revision become
known. At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is recognized in the financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has a history of making reasonably dependable estimates of
the extent of progress towards completion, contract revenues, and contract costs
on its long-term contracts. However, due to uncertainties inherent in the
estimation process, actual results could differ materially from those estimates.
Revenue from change orders and claims is recognized when the settlement is
probable and the amount can be reasonably estimated. Contract costs include all
direct material, labor, subcontract costs and those indirect costs related to
contract performance. Costs and estimated profits in excess of billings are
classified as a current asset. Amounts billed in excess of costs and estimated
profits are classified as a current liability.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns.
NET INCOME PER SHARE OF COMMON STOCK
Earnings per share is based on the weighted average number of shares outstanding
during the year and include the dilutive effect of the assumed exercise of
outstanding stock options, as computed under the treasury stock method.
ACQUISITION
On September 1, 1994, the Company acquired the bridge fabricating assets of
Phoenix Steel, Inc., a steel bridge fabricator. The total cost of this
acquisition was $13.5 million.
The acquisition was accounted for as a purchase and, accordingly, the
acquired assets and liabilities were recorded at their estimated fair value at
the date of acquisition. Operating results have been included since the
acquisition date, but pro forma information has not been presented because it is
immaterial.
ACCOUNTS AND NOTES RECEIVABLE
On December 31, 1996 and 1995, accounts receivable include approximately $17.1
million and $19.6 million, respectively, which have been billed under retainage
provisions in contracts and will become due upon completion of the contracts.
Accounts receivable on December 31, 1996 include approximately $1.8 million
which is expected to be collected after December 31, 1997. The allowance for
doubtful accounts was approximately $900,000 on December 31, 1996 and 1995,
respectively.
The majority of accounts receivable are from customers in various
locations and industries throughout the United States. The Company maintains
adequate reserves for potential credit losses and such losses have been minimal
and within management's estimates.
INVENTORIES
Inventories aggregating approximately $16.8 million and $14.9 million on
December 31, 1996 and 1995, respectively, are valued at the lower of LIFO cost
or market. If these amounts had been valued on the FIFO method, which
approximates replacement cost, these amounts would have been approximately $15.5
million and $15.7 million higher than reported on December 31, 1996 and 1995,
respectively.
Inventories carried on a FIFO basis were $1.4 million and $1.5 million on
December 31, 1996 and 1995, respectively.
DISCONTINUED OPERATION
On October 31, 1994, the Company sold substantially all of the operating assets
of CVI Incorporated, a wholly owned subsidiary, to Process Systems
International, Inc., a subsidiary of Chart Industries, Inc., for consideration
of $5.7 million.
Discontinued operations, net of taxes in the accompanying consolidated
statements of income is composed of the following:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
(Dollars in thousands) 1996 1995 1994
- -------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from operations,
net of income tax expense
(benefit) of $27 in 1996,
$94 in 1995 and $(214) in 1994. $ - $ - $(493)
Gain from disposal, net
of income tax expense
of $383 in 1994. - - 573
- -------------------------------------------------------------
$ - $ - $ 80
- -------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS
Costs and estimated profits on uncompleted contracts are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Costs incurred on
uncompleted contracts $ 646,533,535 $ 542,631,132
Estimated profits 88,728,735 69,861,448
- ------------------------------------------------------------------------
735,262,270 612,492,580
Billings to date (709,163,927) (580,761,906)
- ------------------------------------------------------------------------
$ 26,098,343 $ 31,730,674
- ------------------------------------------------------------------------
</TABLE>
Costs, estimated profits and billings on uncompleted contracts are
included in the accompanying Consolidated Statements of Financial Condition
under the following captions:
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Costs and estimated
profits in excess of billings $ 36,830,613 $38,166,308
Billings in excess of costs
and estimated profits (10,732,270) (6,435,634)
- -------------------------------------------------------------------------
$ 26,098,343 $31,730,674
- -------------------------------------------------------------------------
</TABLE>
Included in costs and estimated profits in excess of billings on uncompleted
contracts was approximately $6.5 million and $6.0 million at December 31, 1996
and 1995, respectively, relating to an unapproved change order arising from a
dispute over design and specification changes on a project currently under
construction.
On May 14, 1996 the Company filed an action in the United States District
Court for the Northern District of Illinois (Eastern Division) captioned PITT-
DES MOINES, INC. V. METROPOLITAN PIER & EXPOSITION AUTHORITY ET AL. seeking
reimbursement in excess of $15.0 million for additional work and making other
claims in connection with an unapproved change order arising from a dispute over
design and specification changes to a project under construction. On June 4,
1996 certain of the defendants in said action made counterclaims against the
Company in amounts approximating $3.5 million. While counsel believes that the
Company has a basis for the claim, neither management nor counsel is able to
predict with certainty the ultimate resolution of this matter. As additional
information becomes available, the Company may revise its estimate of potential
recovery, which could result in a material adjustment to the results of
operations in future periods.
OTHER ASSETS
Other assets include prepaid pension costs and notes receivable.
PENSIONS
The Company has a number of noncontributory defined benefit pension plans
covering most employees. Plans covering salaried employees provide monthly
benefits at retirement age based on the participant's monthly salary and years
of employment. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service although certain of such plans provide
benefits based on the participant's hourly wage rate and years of service. The
plans permit the Company, at any time, to amend or terminate the plans subject
to union approval, if applicable.
The Company's policy is to fund the legal minimum required contributions.
Plan assets on December 31, 1996 consisted primarily of listed stocks, bonds,
investments in pooled funds and group annuity contracts of insurance carriers.
The Company also makes contributions to certain multi-employer defined
benefit pension plans primarily for field union employees. These contributions
are determined in accordance with the provisions of negotiated labor contracts
and generally are based on the number of man-hours worked. Company contributions
and cost recognized for these plans were approximately $664,000, $738,000 and
$675,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The
estimated accumulated plan benefits and plan assets for these plans are not
available.
The Company sponsored or contributed to union sponsored defined
contribution plans which cover nearly all salaried employees, certain hourly
groups in accordance with their union labor contracts and nearly all non-union
field employees. Based upon the plan, the Company contributions represent either
a stated matching percentage of the participant's basic contribution or a stated
rate per hour worked. Company contributions and cost recognized for these plans
were $1.6 million, $1.6 million and $1.3 million for the years ended December
31, 1996, 1995 and 1994, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net periodic pension expense (income) for the Company's continuing
operations defined benefit pension plans included the following components:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 1,475,183 $ 1,169,634 $ 1,287,601
Interest cost on projected benefit obligation 4,311,399 4,258,907 3,727,962
Actual (return) loss on plan assets (10,163,666) (14,100,076) 677,553
Net amortization, deferral and other 3,842,415 8,812,612 (6,038,666)
- ----------------------------------------------------------------------------------------------------------------------------
Net periodic pension (income) expense $ (534,669) $ 141,077 $ (345,550)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
The following assumptions were used in the determination of net periodic cost:
Years ended December 31,
-----------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 8.5% 7.5%
Rates of increase in compensation levels 5.5% 6.5% 6.0%
Expected long-term rates of return on assets 9.0% 9.0% 9.0%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The interest rate used to discount actuarial liabilities to present value at
December 31, 1996 and 1995 was 7.5%.
The following table sets forth the status of the Company's defined
benefit pension plans:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------------------------- -----------------------------------
Plans whose Plans whose Plans whose Plans whose
assets exceed accumulated assets exceed accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 48,440,023 $ 3,440,538 $ 44,780,865 $ 5,311,910
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $ 49,873,918 $ 3,626,261 $ 45,937,231 $ 5,595,363
- -------------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value $ 70,953,591 $ 2,290,079 $ 62,285,463 $ 3,922,870
Projected benefit obligation (57,835,463) (3,626,261) (53,190,866) (5,595,363)
- -------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected
benefit obligation 13,118,128 (1,336,182) 9,094,597 (1,672,493)
Unrecognized net (gain) loss (5,527,306) 251,355 (1,910,489) 334,527
Unrecognized net (asset) obligation (2,871,426) 34,777 (3,489,410) (59,064)
Unrecognized prior service cost 1,776,666 485,219 1,578,444 701,390
Adjustment to recognize minimum liability - (771,351) - (976,853)
- -------------------------------------------------------------------------------------------------------------------------------
Pension asset (liability) recognized in
Consolidated Statements of Financial Condition $ 6,496,062 $(1,336,182) $ 5,273,142 $(1,672,493)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has a noncontributory Employee Stock Ownership Plan (ESOP) which
provides salaried employees, who have at least one year of continuous service,
an opportunity to own Company Common Stock and to accumulate additional
retirement benefits. The Company's contributions, whether in cash or in stock,
are determined annually by the Board of Directors in an amount not to exceed the
maximum allowable as an income tax deduction. Company contributions are 100
percent vested after five years of continuous service. The ESOP contribution is
allocated to the participant's account based upon the actual salary paid to the
participant during that year. The following table sets forth the status of the
Company's ESOP:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Contributions $ 663,000 $ 639,000 $ 507,000
Dividends paid on ESOP shares $ 83,000 $ 55,000 $ 42,000
Number of shares held by ESOP 94,860 76,644 66,435
Plan assets at market value $2,600,000 $2,000,000 $1,400,000
- -------------------------------------------------------------------------
</TABLE>
REVOLVING CREDIT FACILITY
The Company has an unsecured revolving credit agreement with several banks from
which it may borrow up to $40 million. This agreement matures on December 31,
1998, at which time all borrowings must be repaid in full. This Agreement
contains an annual option to renew for an additional one-year period, subject to
lender approval. Borrowings under the revolving credit agreement bear interest
at the prime rate or at rates based on the London Interbank Offered Rate
(LIBOR), or other rates which are mutually acceptable to the banks and the
Company. A commitment fee of one-fourth of one percent per annum is charged on
any unused amount of this revolving credit commitment. This agreement contains
restrictive financial covenants that require minimum levels of net worth and
maintenance of specific financial ratios. On December 31, 1996, $10.6 million of
stand-by letters of credit were outstanding under this agreement.
The Company made cash payments of interest totaling $1.2 million for the
year ended December 31, 1996 and $2.7 million and $613,000 for the years ended
December 31, 1995 and 1994, respectively.
COMMON STOCK SPLIT
On February 13, 1997, the Company declared a 3 for 2 stock split effective in
the form of a stock dividend payable March 28, 1997 to stockholders of record at
the close of business on March 14, 1997. Per share amounts, market prices,
number of shares and stock option amounts have been adjusted for the stock split
for all periods presented.
STOCK PLAN
The Stock Option Plan of 1990 (Plan) provides for grants of incentive stock
options to officers and key employees. The Plan is administered by a committee
consisting of at least three directors of the Company, none of whom are eligible
to participate in the Plan. A total of 300,000 shares of the Company's Common
Stock may be issued pursuant to the Plan. Grant prices are determined by the
committee and are established at the fair market value of the Company's Common
Stock at the date of grant. Options vest over a four-year period in equal annual
amounts, or over such other period as the committee shall determine, and may be
accelerated in the event of certain other circumstances such as death or
disability of the optionee. These options generally expire within ten years
after the date of grant. The following table summarizes option activity for the
two years ended December 31, 1996:
<TABLE>
<CAPTION>
Option price range
Shares per share
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding on December 31, 1994 98,250 $20.50 -- $24.83
- -------------------------------------------------------------------------
Granted 108,750 $23.17
Surrendered (10,500) $24.67 -- $24.83
- -------------------------------------------------------------------------
Outstanding on December 31, 1995 196,500 $20.50 -- $24.83
- -------------------------------------------------------------------------
Granted 60,000 $27.33 -- $28.50
Exercised (6,000) $20.50
- -------------------------------------------------------------------------
Outstanding on December 31, 1996 250,500 $20.50 -- $28.50
- -------------------------------------------------------------------------
Exercisable:
December 31, 1995 113,437 $20.50 -- $24.83
December 31, 1996 140,625 $20.50 -- $24.83
- -------------------------------------------------------------------------
Available for future grant:
December 31, 1995 96,750
December 31, 1996 36,750
- -------------------------------------------------------------------------
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). SFAS No. 123 establishes financial accounting and
reporting standards for stock-based compensation plans and to transactions in
which an entity issues its equity instruments to acquire goods and services from
non-employees. The new accounting standards prescribed by SFAS No. 123 are
optional, and the Company has elected to continue to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" Pro
forma disclosures relating to net income and earnings per share, as required
under SFAS No. 123, have not been provided as they do not materially differ from
amounts reported.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
The income tax expense (benefit) included in the Consolidated Statements of
Income is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $5,698,508 $5,618,289 $3,415,816
State 1,250,000 1,300,000 800,000
Foreign 446,011 263,705 408,048
- -----------------------------------------------------------------------------------------------------------------
Total current 7,394,519 7,181,994 4,623,864
Deferred:
Federal 548,900 886,742 1,716,378
State 161,442 260,805 504,752
- -----------------------------------------------------------------------------------------------------------------
Total deferred 710,342 1,147,547 2,221,130
- -----------------------------------------------------------------------------------------------------------------
Total income tax expense $8,104,861 $8,329,541 $6,844,994
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The income tax expense (benefit) applicable to continuing and discontinued
operations is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for continuing operations:
Current $7,583,916 $7,712,017 $4,535,213
Deferred 493,889 523,991 2,141,058
- -----------------------------------------------------------------------------------------------------------------
Total provision for continuing operations 8,077,805 8,236,008 6,676,271
Provisions for discontinued operations:
Current (189,397) (530,023) 88,651
Deferred 216,453 623,556 80,072
- -----------------------------------------------------------------------------------------------------------------
Total provisions for discontinued operations 27,056 93,533 168,723
- -----------------------------------------------------------------------------------------------------------------
Total income tax expense $8,104,861 $8,329,541 $6,844,994
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of statutory federal income tax to the income tax expense on
the income from continuing operations is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax expense $7,220,159 $7,226,859 $6,343,072
Increase (decrease) in taxes resulting from:
Tax benefit from sale of a foreign investment - - (525,936)
State taxes less federal benefit 812,500 858,000 521,482
Other, net 45,146 151,149 337,653
- ----------------------------------------------------------------------------------------------------------------
Income tax expense -- continuing operations $8,077,805 $8,236,008 $6,676,271
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred taxes reflected the tax effects of differences between the
amounts recorded as assets and liabilities for financial reporting purposes and
the amounts recorded for income tax purposes. The tax effects of significant
temporary differences giving rise to deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31,
- ---------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Casualty and liability insurance $1,997,372 $2,595,613
Contract related amounts 127,900 131,980
Inventory 185,513 102,931
Employee benefits 1,817,764 1,694,187
Accounts receivable allowance 347,200 347,200
- ---------------------------------------------------------------------------------
Total deferred tax assets $4,475,749 $4,871,911
- ---------------------------------------------------------------------------------
Deferred tax liabilities:
Accelerated depreciation $3,058,632 $3,263,232
Pension 2,727,323 2,333,870
Other (87,010) 4,117
- ---------------------------------------------------------------------------------
Total deferred tax liabilities $5,698,945 $5,601,219
- ---------------------------------------------------------------------------------
</TABLE>
Income taxes paid for the years ended December 31, 1996, 1995 and 1994 were
approximately $8.2 million, $7.1 million and $3.7 million, respectively.
CONTINGENCIES
There are various claims and legal proceedings against the Company arising from
the normal course of business. Although counsel is unable to predict with
certainty the ultimate outcome, management and counsel believe the Company has
significant and meritorious defenses to any claims, and intend to pursue them
vigorously.
The Company's operations, including idle facilities and other property, are
subject to and affected by federal, state and local laws and regulations
regarding the protection of the environment. The Company accrues for
environmental costs where such obligations are either known or considered
probable and can be reasonably estimated.
The Company is participating as a potentially responsible party (PRP) at
three different sites pursuant to proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA). Other parties
have also been identified as PRP's at the sites. Investigative and/or remedial
activities are ongoing. The Company believes, based upon information presently
available to it, that such future costs will not have a material effect on the
Company's financial position, results of operations or liquidity. Additionally,
amounts reflected in results of operations and in the statements of financial
condition during the three years ended December 31, 1996, have also not been
material. However, the imposition of more stringent requirements under
environmental laws or regulations, new developments or changes regarding site
cleanup costs or the allocation of such costs among PRP's or a determination
that the Company is potentially responsible for the release of hazardous
substances at sites other than those currently identified, could result in
additional costs.
As previously reported, on November 3, 1993, an accident occurred at the
construction site of a new United States Post Office in Chicago where the
Company's Steel Construction business segment was in the process of erecting the
steel structure of the building. Two men were killed and five seriously injured
when a portion of the erected steel collapsed. Various personal injury claims
had been asserted against the Company, and others, as a result of the accident
(the "Personal Injury Cases"). As of December 31, 1996, the Company's insurance
carriers have settled all of the claims against the Company in the Personal
Injury Cases in which the Company was a defendant without the Company incurring
any additional cost.
An investigation of the November 3, 1993 accident was conducted by the
Federal Occupational Safety and Health Administration (OSHA) and the Justice
Department as required by OSHA law. OSHA has cited the Company for safety
violations and has assessed $147,000 in civil penalties. In an order dated April
28, 1995, an administrative law judge dismissed OSHA's case assessing civil
penalties. OSHA's appeal of this decision is pending before the Occupational
Safety and Health Review Commission.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As a result of the OSHA/Justice Department investigation, on August 23,
1996, the Company was served with an indictment issued by a grand jury for the
United States District Court for the Northern District of Illinois. The
indictment alleges that the Company is guilty of two misdemeanors for violations
of the Occupational Safety Health Act (and regulations promulgated thereunder)
concerning the erection of structural steel members around the time of the
November 3, 1993 accident and that such violations caused the deaths of the two
men killed in the accident. The Department of Justice has reported that the
maximum criminal fines and penalties which can be assessed, if the Company is
convicted of both misdemeanors, is $1.0 million.
On September 17, 1996 the Company entered a plea of not guilty to the
alleged misdemeanors and demanded a jury trial at which it intends to vigorously
defend itself against the allegations. The Company believes that it has
significant and meritorious defenses to the alleged misdemeanors.
If the Company is convicted of the alleged misdemeanors, management
believes that the resulting fines, penalties and costs of defense, which would
be uninsured, would not be material to the Company's financial condition,
although they could be material to the Company's reported results of operations
for the period in which such payments are incurred. As a result of the Justice
Department's actions, other claims, or proceedings may be instituted against the
Company. While the Company has no reason to believe that any such claim, action
or proceeding will be instituted against it, the Company cannot predict the
likelihood of such a claim, action or proceeding being instituted against it,
and cannot assess the availability of any insurance coverage or the possibility
or materiality of an adverse result in the event of any such claim, action or
proceeding in advance of a claim, action or proceeding being instituted.
On June 20, 1996 the Company was served with a subpoena to appear and
produce documents before a grand jury of the United States District Court for
the Western District of Wisconsin in connection with the United States
Department of Justice Antitrust Division's investigation of bid rigging and
other criminal violations in the steel bridge fabrication industry. The Company
has been informed that it is not the target of the investigation at present but
that it and other companies in the steel bridge fabrication industry are the
subjects of the investigation.
The Company has no reason to believe that it will become a target of the
investigation or that a criminal action will be instituted against it in these
matters. If the Company became a target or a criminal investigation were
instituted, the Company believes that it would have significant and meritorious
defenses to any such charges and would vigorously defend against them.
Management believes that the ultimate outcome of any matter currently
pending against the Company will not materially affect the financial position of
the Company although they could be material to the reported results of
operations for the period in which they occur.
SUBSEQUENT EVENTS
On January 31, 1997, the Company acquired General Steel Corporation, a steel
service center located in Vancouver, Washington. This acquisition will expand
the Company's Steel Service Center Division, headquartered in Stockton,
California, into the Pacific Northwest.
On February 17, 1997, the Company announced plans for its wholly-owned
subsidiary, PDM Strocal, Inc. to begin construction of a new structural steel
fabricating facility in the southwestern part of the United States. The new
facility will expand the capabilities of PDM Strocal (located in Stockton,
California), and is expected to be operational in the third quarter of 1997. At
the same time, the Company also announced the decision to close its structural
steel fabricating facility in Melrose Park, Illinois, redeploying some employees
and equipment to the new plant as well as to existing bridge fabricating plants
in Wisconsin. The cost associated with this shutdown will be reflected in the
1997 first quarter financial statements.
On March 10, 1997, the Company acquired Candraft Detailing, Inc., an
engineering drafting company serving the steel building and bridge fabrication
industry, located in Vancouver, British Columbia. This acquisition is expected
to enhance the drafting capabilities of the Steel Construction business segment.
BUSINESS SEGMENT INFORMATION
For business segment information for years ended December 31, 1996, 1995 and
1994, see Business Segment Information in Consolidated Financial Statements
section in the 1996 Annual Report to Stockholders.
<PAGE>
REPORT OF INDEPENDENT AUDITORS AND MANAGEMENT
REPORT OF INDEPENDENT AUDITORS
STOCKHOLDERS AND BOARD OF DIRECTORS
PITT-DES MOINES
We have audited the accompanying consolidated statements of financial condition
of Pitt-Des Moines, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Pitt-Des Moines, Inc. and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 4, 1997
REPORT OF MANAGEMENT
The management of Pitt-Des Moines, Inc. and its subsidiaries is responsible for
preparing the financial statements and for ensuring that other information
included in this annual report is consistent therewith. Estimates and judgments
are necessary ingredients in the preparation of the financial statements.
Management is considerate of these estimates and judgments and believes that the
financial statements and other financial information included herein have been
prepared, in all material respects, in conformity with accounting principles
that are generally accepted, appropriate in the circumstances and consistently
applied. The financial statements have been audited by Ernst & Young LLP,
independent auditors.
In order to prepare the financial statements, Pitt-Des Moines, Inc.
maintains and relies upon a system of internal accounting control. This system
is designed to provide reasonable assurance that assets are safeguarded,
transactions are executed in accordance with management's authorization and
transactions are recorded properly. This system is tested and evaluated by Pitt-
Des Moines, Inc.'s internal auditors. Ernst & Young LLP evaluates the system of
internal accounting control to determine the extent and timing of the procedures
they deem necessary to express an opinion on the financial statements, taken as
a whole.
Oversight of the audit process is provided by the Audit Committee of the
Board of Directors. The Audit Committee meets with the internal auditors and the
independent auditors to discuss and review audit scope and audit findings. The
internal and independent auditors have free access to the Audit Committee;
management is not present during these discussions unless requested by the Audit
Committee. The Audit Committee also recommends to the Board of Directors the
appointment of the independent auditors.
Management recognizes its responsibility for fostering a strong ethical
climate so that the business of Pitt-Des Moines, Inc. is conducted according to
the highest standard of corporate conduct.
/s/ Wm. W. McKee
Wm. W. McKee
President and Chief Executive Officer
/s/ R. A. Byers
R. A. Byers
Vice President Finance and Treasurer
<PAGE>
TWO YEAR QUARTERLY RESULTS OF OPERATIONS
(UNAUDITED)
The following is a summary of the quarterly results of operations:
<TABLE>
<CAPTION>
Quarters ended
------------------------------------------------------------------
(Dollars in thousands, except per share amounts) March 31, June 30, September 30, December 31,
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 (1)
Earned revenue $115,966 $121,649 $120,795 $109,864
Gross profit from operations 14,931 15,678 16,686 17,179
Income before income taxes 5,210 5,606 5,137 4,676
Net income 3,174 3,426 3,103 2,848
Net income per share $ 0.90 $ 0.97 $ 0.88 $ 0.81
- --------------------------------------------------------------------------------------------------------------------------
1995
Earned revenue $119,242 $113,468 $123,186 $105,378
Gross profit from operations 13,295 14,798 17,151 17,298
Income before income taxes 3,699 4,330 6,857 6,369
Net income 2,279 2,627 4,158 3,955
Net income per share $ 0.65 $ 0.75 $ 1.19 $ 1.13
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A separate computation of earnings per share is made for each quarter presented.
The dilutive effect on earnings per share resulting from the assumed exercise of
stock options is included in each quarter in which dilution occurs. The earnings
per share computation for the year is a separate annual calculation.
Accordingly, the sum of the quarterly earnings per share amounts will not
necessarily equal the earnings per share for the year.
(1) During the fourth quarter of 1996, adjustments were recorded to increase
contract costs which reduced net income by $0.31 per share.
<PAGE>
STOCKHOLDERS' REFERENCE
COMMON STOCK INFORMATION
The following table sets forth, for the periods indicated, the high and low
stock prices of the Common Stock and the dividends paid per share of Common
Stock.
<TABLE>
<CAPTION>
Price range Quarterly
------------------------ dividends
High Low per share
- ---------------------------------------------------------
<S> <C> <C> <C>
1996
First Quarter $31 1/8 $26 $.32
Second Quarter 30 1/8 27 1/4 .18
Third Quarter 29 5/8 28 1/8 .18
Fourth Quarter 28 3/8 26 7/8 .18
- ---------------------------------------------------------
$.86
- ---------------------------------------------------------
1995
First Quarter 24 5/8 $21 .16 1/2
Second Quarter 24 1/4 21 5/8 .16 1/2
Third Quarter 25 1/8 21 1/2 .16 1/2
Fourth Quarter 26 1/8 24 .16 1/2
- ---------------------------------------------------------
$.66
- ---------------------------------------------------------
</TABLE>
On February 28, 1997, there were 3,483,001 shares outstanding and approximately
435 stockholders of record of the Company's Common Stock.
STOCK TRADING
The Company's Common Stock is traded on the American Stock Exchange (symbol
PDM).
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE COMPANY
Pitt-Des Moines, Inc.
December 31, 1996
<TABLE>
<CAPTION>
Percentage of Jurisdiction of
Name of Subsidiary Ownership Incorporation
<S> <C> <C>
Canadian Des Moines Industries Ltd. 100 Canada
Candraft Detailing, Inc. (1) 100 Canada
Construcciones Pitt-Des Moines Venezuela, C.A. 100 Venezuela
General Steel Corporation (2) 90 Washington
Hammond Latino Americana, S.A. 100 Panama
HyCon, Inc. 81 Alabama
Hydrostorage, Inc. 100 Tennessee
Oregon Culvert Co., Inc. 81 Oregon
d/b/a Washington Culvert Co.
PDM Argentina, SA 100 Argentina
PDM Bonaire, N.V. 100 Netherlands Antilles
PDM Bridge Corporation 100 Delaware
PDM Chile Limitada 100 Chile
PDM El Salvador, S.A. de C.V. 100 El Salvador
PDM International Ltd. 100 Delaware
PDM Latin America Ltd. 100 Georgia
PDM Ohio, Inc. 100 Ohio
PDM Strocal, Inc. 100 Pennsylvania
PDM Virgin Islands, Ltd. 100 Virgin Islands
Pittsburgh-Des Moines Sdn. Bhd. (PDM Malaysia) 100 Malaysia
P.T. Perkasa Daya Megah (PDM Indonesia) 100 Indonesia
</TABLE>
(1) Acquired March 10, 1997
(2) Acquired January 31, 1997
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Pitt-Des Moines, Inc. of our report dated March 4, 1997, included in the
Pitt-Des Moines, Inc. 1996 Annual Report.
Our audit also included the financial statement schedule of Pitt-Des Moines,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8 (No. 33-34787) pertaining to the Stock Option Plan of 1990 of Pitt-
Des Moines, Inc.; Form S-8 (No. 333-13043) pertaining to the Pitt-Des Moines,
Inc. Directors Stock Plan of our report dated March 4, 1997, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Pitt-Des
Moines, Inc.
/s/ ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
March 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 16,815
<SECURITIES> 0
<RECEIVABLES> 73,292
<ALLOWANCES> 868
<INVENTORY> 18,192
<CURRENT-ASSETS> 149,559
<PP&E> 107,944
<DEPRECIATION> 65,918
<TOTAL-ASSETS> 199,885
<CURRENT-LIABILITIES> 74,020
<BONDS> 0
0
0
<COMMON> 33,549
<OTHER-SE> 85,070
<TOTAL-LIABILITY-AND-EQUITY> 199,885
<SALES> 468,274
<TOTAL-REVENUES> 468,274
<CGS> 403,800
<TOTAL-COSTS> 403,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,270
<INCOME-PRETAX> 20,629
<INCOME-TAX> 8,078
<INCOME-CONTINUING> 12,551
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,551
<EPS-PRIMARY> 3.56<F1>
<EPS-DILUTED> 3.56<F1>
<FN>
<F1>PER SHARE AMOUNTS HAVE BEEN RESTATED TO ACCOUNT FOR THE THREE FOR TWO STOCK
SPLIT.
</FN>
</TABLE>
