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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-5259
____________________
PITT-DES MOINES, INC.
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 25-0729430
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10200 Grogan's Mill Road, Suite 300, The Woodlands, TX 77380
(Address of Principal Executive Offices) (Zip Code)
(281) 774-2200
(Registrant's Telephone Number, including Area Code)
____________________
Indicate by check 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 [_]
On September 30, 1998, 7,245,690 shares of Common Stock were outstanding.
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TABLE OF CONTENTS
PAGE
Part I - Financial Information
Item 1. Financial statements 3
Item 2. Management's discussion and analysis of
financial condition and results of operations 13
Part II - Other Information
Item 1. Legal proceedings 18
Item 6. Exhibits and reports on Form 8-K 18
Signatures 19
Exhibit Index 20
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<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PITT-DES MOINES, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- ----------------------
<S> <C> <C> <C> <C>
(in thousands, except per share amounts) 1998 1997 1998 1997
--------- -------- --------- ---------
Earned revenue $ 154,777 $114,662 $ 418,335 $ 343,478
Cost of earned revenue (133,388) (98,969) (356,666) (296,209)
--------- -------- --------- ---------
Gross profit from operations 21,389 15,693 61,669 47,269
Selling, general and administrative expenses (12,891) (10,499) (38,482) (32,621)
--------- -------- --------- ---------
Income from operations 8,498 5,194 23,187 14,648
Other income/(expense):
Interest income 115 179 457 532
Interest expense (484) (196) (1,227) (428)
Gain on sale of assets 23 332 50 385
Miscellaneous, net 349 (201) (343) (512)
--------- -------- --------- ---------
3 114 (1,063) (23)
--------- -------- --------- ---------
Income before income taxes 8,501 5,308 22,124 14,625
Income taxes (3,328) (2,110) (8,633) (5,756)
--------- -------- --------- ---------
Net income $ 5,173 $ 3,198 $ 13,491 $ 8,869
========= ======== ========= =========
Per common share:
Earnings per share $ 0.73 $ 0.46 $ 1.91 $ 1.27
Earnings per share--assuming dilution $ 0.69 $ 0.45 $ 1.82 $ 1.25
Shares used to calculate: (in thousands)
Earnings per share 7,085 7,017 7,062 6,993
Earnings per share--assuming dilution 7,513 7,150 7,414 7,095
Cash dividend $ 0.15 $ 0.138 $ 0.45 $ 0.413
CONSOLIDATED RETAINED EARNINGS
Balance at the beginning of year $ 110,001 $ 99,344
Net income 13,491 8,869
Dividends paid (3,272) (2,885)
Other (107) 173
--------- ---------
$ 120,113 $ 105,501
========= =========
</TABLE>
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<PAGE>
Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Consolidated Statements of Financial Condition
September 30, December 31,
1998 1997
------------- ------------
(in thousands) (Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 15,926 $ 12,037
Accounts receivable including retentions
(less allowances: 1998-$545; 1997-$1,059) 92,113 78,216
Inventories 21,814 26,236
Costs and estimated profits in excess
of billings 53,742 46,493
Deferred income taxes 4,527 4,527
Prepaid expenses 2,918 1,086
-------- --------
Total Current Assets 191,040 168,595
Other Assets 8,650 7,793
Goodwill 6,637 6,172
Property, Plant and Equipment
Land 7,611 7,611
Buildings 44,161 41,630
Machinery and equipment 79,310 69,972
-------- --------
131,082 119,213
Allowances for depreciation (74,218) (70,349)
-------- --------
Net Property, Plant and Equipment 56,864 48,864
-------- --------
Total Assets $263,191 $231,424
======== ========
See Notes to Consolidated Financial Statements.
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<PAGE>
Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- -------------
(in thousands) (Unaudited)
<S> <C> <C>
Liabilities
Current Liabilities
Accounts payable $ 34,002 $ 48,811
Accrued compensation, related taxes and benefits 11,286 12,492
Other accrued expenses 3,841 2,283
Billings in excess of costs and estimated profits 18,014 9,906
Income taxes 4,933 2,889
Casualty and liability insurance 8,290 6,041
-------- --------
Total Current Liabilities 80,366 82,422
Revolving Credit Facility 32,000 11,000
Deferred Income Taxes 5,834 5,802
Minority Interest 2,267 2,537
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 8,946,468 shares 33,549 33,549
Additional paid-in capital 3,565 95
Retained earnings 120,113 110,001
-------- --------
157,227 143,645
Treasury stock at cost
(1998-1,700,778 shares; 1997-1,933,094 shares) (12,301) (13,982)
Unearned compensation--restricted stock (2,202) ---
-------- --------
Total Stockholders' Equity 142,724 129,663
-------- --------
Total Liabilities and Stockholders' Equity $263,191 $231,424
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
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Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30,
--------------------
(in thousands) 1998 1997
-------- --------
Cash Flow From Operating Activities
Net income $ 13,491 $ 8,869
Adjustments to reconcile net income to net
cash utilized by operating activities:
Depreciation 4,679 4,381
Gain on sale of assets (50) (385)
Minority interest, net of dividends paid (270) 99
Other non-cash (credits) debits, net 1,500 (240)
Change in operating assets and liabilities
(using) providing cash:
Accounts receivable (13,897) (8,239)
Inventories 4,422 2,895
Prepaid expenses (1,832) (816)
Costs, estimated profits and billings, net 859 (2,288)
Accounts payable (14,809) (11,134)
Accrued liabilities 2,633 2,933
Income taxes 2,044 (711)
-------- --------
Net cash utilized by operating activities (1,230) (4,636)
Cash Flows from Investing Activities
Capital expenditures (12,739) (4,773)
Proceeds from sale of assets 112 587
Acquisitions, net of cash acquired (614) (8,342)
Change in investments and other assets (178) 1,075
-------- --------
Net cash utilized by investing activities (13,419) (11,453)
Cash Flows from Financing Activities
Proceeds from revolving credit facility 21,000 17,000
Dividends paid (3,272) (2,885)
Other 810 538
-------- --------
Net cash provided by financing activities 18,538 14,653
-------- --------
(Decrease) increase in cash and cash equivalents 3,889 (1,436)
Cash and cash equivalents at beginning of year 12,037 16,815
-------- --------
Cash and cash equivalents at end of period $ 15,926 $ 15,379
======== ========
See Notes to Consolidated Financial Statements.
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Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Note A. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. The December 31, 1997 Consolidated Statement of
Financial Condition was derived from audited financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS No. 130), is effective January 1, 1998. This Statement
establishes standards for reporting and display of comprehensive income and its
components. Comprehensive income includes net income and all other changes in
stockholders' equity except those resulting from investments and distributions
to owners. The Company has had no significant reportable transactions under the
provisions of SFAS No. 130 for the periods reported.
Software Costs
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" (SOP 98-1) requires the capitalization
of certain costs incurred in connection with developing or obtaining software
for internal use. Qualifying software costs are capitalized and amortized over
the estimated useful life of the software. Prior to the adoption of SOP 98-1,
software costs were expensed as incurred. Restatement of prior-year financial
statements was not permitted. The adoption of SOP 98-1 did not have a material
impact on the Corporation's financial position or results of operations.
Segment Disclosure
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS No. 131), establishes new
standards for reporting information about operating segments in interim and
annual financial statements. This statement is effective for 1998. Management
does not anticipate that the adoption of this statement will have a significant
effect on the Company's reported segments.
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Item 1. Financial Statements (Continued)
Note A. Basis of Presentation (Continued)
Derivative Instruments and Hedging Activities
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) is effective in years
starting after June 15, 1999. SFAS No. 133 addresses the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. The Company does not currently utilize
derivatives or engage in hedging activities; therefore, management does not
anticipate that the adoption of this statement will have a material impact on
the Company's financial position or results of operations.
Restricted Stock
The market value of restricted stock at the time of grant is recorded as
unearned compensation in a separate component of stockholders' equity and
adjusted to current market at each reporting period. Unearned compensation is
amortized to expense over the vesting period assuming certain performance
criteria are met.
Note B. Earnings Per Share
The following table sets forth the computation of earnings per share and
earnings per share assuming dilution:
Three months Nine months
ended ended
September 30, September 30,
--------------- ---------------
(in thousands, except per share amounts) 1998 1997 1998 1997
------ ------ ------ ------
Numerator:
Net income $5,173 $3,198 $13,491 $8,869
====== ====== ======= ======
Denominator:
Weighted-average shares 7,085 7,017 7,062 6,993
Employee stock options 428 133 352 102
------ ------ ------- ------
Weighted-average shares-assuming dilution 7,513 7,150 7,414 7,095
====== ====== ======= ======
Earnings per share $ 0.73 $ 0.46 $ 1.91 $ 1.27
====== ====== ======= ======
Earnings per share-assuming dilution $ 0.69 $ 0.45 $ 1.82 $ 1.25
====== ====== ======= ======
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<PAGE>
Item 1. Financial Statements (Continued)
Note C. Costs and Estimated Profits on Uncompleted Contracts
Costs and estimated profits on uncompleted contracts are summarized as follows:
September 30, December 31,
(in thousands) 1998 1997
---------- ---------
Costs incurred on uncompleted contracts $ 647,182 $ 679,157
Estimated profits 83,795 91,177
---------- ---------
730,977 770,334
Less: Billings to date (695,249) (733,747)
---------- ---------
$ 35,728 $ 36,587
========== =========
Costs, estimated profits and billings on uncompleted contracts are included in
the accompanying Consolidated Statements of Financial Condition under the
following captions:
September 30, December 31,
(in thousands) 1998 1997
-------- -------
Costs and estimated profits in excess of billings $ 53,742 $46,493
Billings in excess of costs and estimated profits (18,014) (9,906)
-------- -------
$ 35,728 $36,587
======== =======
Included in costs and estimated profits in excess of billings on uncompleted
contracts was approximately $6.5 million at September 30, 1998 and December 31,
1997, relating to an unapproved change order arising from a dispute over design
and specification changes.
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.
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Item 1. Financial Statements (Continued)
Note D. Contingencies
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 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").
By December 31, 1996, the Company's insurance carriers 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
appealed that dismissal and in an order dated March 24, 1997, the Occupational
Safety and Health Review Commission reversed the dismissal and entered an order
staying any further proceedings pending final disposition of the OSHA Criminal
Proceeding.
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 "OSHA Criminal
Proceeding"). On July 31, 1997, in the OSHA Criminal Proceeding, a jury returned
a verdict of guilty against the Company for two counts of misdemeanor violations
of OSHA regulations resulting in the deaths of two men killed in the accident. A
sentencing hearing was held on March 20, 1998 in the OSHA Criminal Proceeding
and the Company was fined $1,000,250 and the fine was paid on March 27, 1998.
On October 27, 1998 a three judge panel of the United States Court of Appeals
for the Seventh Circuit heard oral argument on the Company's appeal in the OSHA
Criminal Proceeding. Management and counsel believe that the Company has
significant and meritorious points for sustaining the Company's appeal in the
OSHA Criminal Proceeding.
As a result of the Justice Department's actions, other claims, actions, or
proceedings may be instituted against the Company. 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.
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<PAGE>
Item 1. Financial Statements (Continued)
Note D. Contingencies (Continued)
While the investigation remains pending, the Company does not believe it will
become a target of the investigation or that a criminal action will be
instituted against it in these matters. If the Company becomes 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.
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, 1997 and during the nine months ended
September 30, 1998, 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.
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.
This quarterly report on Form 10-Q contains certain forward-looking statements
as to the outcome of various claims and legal proceedings. Actual results may
differ with respect to such claims and proceedings as a result of factors over
which the Company does not have any control, including, but not limited to, new
developments, changes in the laws or regulations and the positions taken by the
opposing parties, the courts or the finders of fact.
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<PAGE>
Item 1. Financial Statements (Continued)
Note E. Common Stock Split
On May 7, 1998, the Company declared a two for one stock split effective in the
form of a stock dividend payable June 26, 1998 to stockholders of record at the
close of business on June 12, 1998. Per share amounts, market prices, number of
shares and stock option amounts have been adjusted for the stock split for all
periods presented.
Note F. Restricted Stock Awards
Under the Long Term Incentive Stock Plan of 1997, the Company may award shares
of restricted stock to eligible employees, which prior to vesting, are subject
to restrictions on sale or other transfer.
The initial grant of 154,000 restricted shares was effective as of November 6,
1997, subject to approval by the stockholders of the Company, which was obtained
on May 7, 1998.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1997.
The Company reported net income of $5.2 million, or $0.69 per diluted share, on
earned revenue of $154.8 million for the quarter ended September 30, 1998. These
results compare with net income of $3.2 million, or $.45 per share, on earned
revenue of $114.7 million for the third quarter of 1997.
ENGINEERING AND CONSTRUCTION
Engineering and Construction posted earned revenue of $100.4 million,
representing an increase of $36.5 million, or 57 percent, over the prior year
quarter. All product groups experienced growth over the third quarter of 1997.
Performance of contracts related to liquid and cryogenic storage and steel
bridges accounted for the majority of the increase in earned revenue.
Selling, general and administrative (S,G&A) expense as a percentage of earned
revenue improved 1.5 percentage points to 6.3 percent, compared with 7.8 percent
in the third quarter of 1997. Income from operations, which benefited from the
above mentioned contract performance, rose $2.0 million to $6.6 million for the
third quarter.
New awards increased $24.2 million, or 27 percent, to $115.1 million for the
quarter ended September 30, 1998. The growth in new awards resulted in a strong
backlog level of $287.7 million versus $223.0 million at September 30, 1997. As
indicated in "Costs and Estimated Profits on Uncompleted Contracts" in Notes to
Consolidated Financial Statements, included in costs and estimated profits in
excess of billings on uncompleted contracts at September 30, 1998, was
approximately $6.5 million relating to an unapproved change order arising from a
dispute over design and specification changes.
STEEL DISTRIBUTION
Steel Distribution earned revenue increased $4.1 million, or 8 percent, quarter-
to-quarter from $51.0 million to $55.1 million in 1998. Increased steel service
center volumes accounted for the growth over the prior year quarter.
S,G&A expense as a percentage of earned revenue decreased to 6.4 percent from
6.9 percent for the comparable period of 1997. Income from operations rose 23
percent to $5.2 million from $4.2 million in the prior year. Higher volumes
coupled with lower operating expenses as a percentage of earned revenue
contributed to the growth in income from operations.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
RESULTS OF OPERATIONS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997.
The Company reported net income of $13.5 million, or $1.82 per diluted share, on
earned revenue of $418.3 million for the nine months ended September 30, 1998.
Excluding the impact of $2.1 million of compensation expense recognized under an
incentive stock plan, net income would have been $14.8 million, or $1.99 per
share. These results compare with net income of $8.9 million, or $1.25 per
share, on earned revenue of $343.5 million for the nine months ended September
30, 1997.
ENGINEERING AND CONSTRUCTION
Engineering and Construction earned revenue increased $66.2 million, or 33
percent, to $264.1 million for the first nine months of 1998. All product
groups experienced growth over the comparable period of 1997. Performance of
contracts related to liquid and cryogenic storage and steel bridges contributed
the majority of the increase in earned revenue.
S,G&A expense as a percentage of revenue improved nearly one percentage point,
decreasing to 7.1 percent from 8.0 percent in 1997. Income from operations
increased $7.3 million, or 63 percent, to $18.9 million for the nine months
ended September 30, 1998. Performance of the above mentioned contracts,
improved gross margins and lower S,G&A expense as a percentage of earned revenue
accounted for the growth in income from operations.
New awards rose $42.8 million, or 17 percent, to $295.9 million for the first
nine months of 1998.
STEEL DISTRIBUTION
Steel Distribution earned revenue increased $15.3 million, or 11 percent, to
$156.7 million for the nine months ended September 30, 1998. Increased steel
service center volumes coupled with incremental revenues from General Steel
Corporation, an acquisition completed during the first quarter of 1997,
contributed to the growth in earned revenue.
S,G&A expense as a percentage of earned revenue improved to 6.7 percent from 7.2
percent for the comparable period of 1997. Income from operations increased 8
percent to $13.2 million for the first nine months of 1998. Higher volumes and
lower S,G&A expense as a percentage of earned revenue, accounted for the growth
in income from operations.
-14-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
OTHER
As indicated in the "Contingencies" section of the Notes to Consolidated
Financial Statements, the Company's future results of operations could be
materially adversely affected by the Company's conviction on July 31, 1997 of
two misdemeanors for violations of the Occupational Safety Health Act (and
regulations promulgated thereunder)(see Note D "Contingencies" Notes to
Consolidated Financial Statements).
YEAR 2000
The Company initiated a review of its software systems in 1997 in view of the
fact that certain systems will not properly recognize dates after the year 1999,
which could cause those systems to produce invalid results. This is commonly
referred to as "the Year 2000 problem".
The Company has completed the assessment phase of all major information
technology systems. The majority of these systems, including software
applications, have been updated through the normal course of upgrades and
program maintenance. The remaining systems have been assessed with remediation
and testing plans scheduled to conclude by the third quarter of 1999.
The Company has substantially completed the assessment phase of operating
equipment which utilizes non-information technology systems, typically embedded
technology such as micro controllers. In some cases the Company has either made
the required changes or determined the equipment is already in compliance. The
majority of the remaining systems have been assessed with remediation and
testing plans scheduled to conclude by the third quarter of 1999.
The Company has contacted its significant suppliers and financial institutions
but has not yet determined the status of their Year 2000 compliance. Management
continues to evaluate what impact the failure of these organizations to become
Year 2000 compliant could have on the Company's consolidated financial position
or results of operations.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. As noted above, the Company has
not completed all necessary phases of the Year 2000 program. In the event that
the Company does not complete any additional phases, the Company may be unable
to effectively operate some of its business operations. In addition, disruptions
in the general economy resulting from Year 2000 issues could also materially
adversely affect the Company. The amount of potential liability and lost
revenue, as a result of the Company's incompliance or an economic slowdown,
cannot be reasonably estimated.
The Company is currently evaluating contingency plans in the event it does not
complete all phases of the Year 2000 program. The Company plans to evaluate the
status of completion in the first quarter of 1999 and finalize such plans if
necessary.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1998, the Company's primary sources
of liquidity were proceeds from the revolving credit facility and cash flow
generated from operations which were used for investing activities and to fund
the growth in working capital. Working capital increased $24.5 million from
$86.2 million at December 31, 1997 to $110.7 million at September 30, 1998. On
September 30, 1998, cash and cash equivalents were $15.9 million compared with
$12.0 million on December 31, 1997.
Net cash utilized by operating activities of $1.2 million decreased by $3.4
million when compared with the same period in 1997. An increase in net income
coupled with the favorable change in certain operating assets and liabilities
accounted for the decrease in net cash outflows. The changes in operating
assets and liabilities from period to period are affected by the mix, stage of
completion and commercial terms of contracts.
Net cash utilized by investing activities of $13.4 million for the nine months
ended September 30, 1998 was primarily for capital expenditures. These
expenditures consisted of plant machinery and equipment and construction of a
new structural steel fabricating facility in Eloy, Arizona, which began
operating in April 1998.
Cash utilized by investing activities of $11.5 million during the first nine
months of 1997 related primarily to the acquisition of General Steel
Corporation. 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. The Company expects that any such
acquisitions will be financed from cash on hand or available funds under the
Company's revolving credit facility.
Cash provided by financing activities consisted primarily of proceeds from the
revolving credit facility. The Company paid cash dividends of $3.3 million, or
$0.45 per share, and $2.9 million, or $0.413 per share, during the nine months
ended September 30, 1998, and 1997, respectively.
The Company has on hand and access to sufficient sources of funds to meet its
anticipated operating, expansion and capital needs. These sources include cash
on hand and the unused portion of a $40.0 million unsecured revolving credit
facility which matures December 31, 1999. This facility contains an annual
option to renew for an additional one-year period, subject to lender approval.
On November 10, 1998, $32.0 million of borrowings and $7.7 million of stand-by
letters of credit were outstanding under this credit facility.
-16-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
FORWARD-LOOKING STATEMENTS
Any of the comments in this quarterly report that refer to the Company's
estimated or future results, margins on existing or future projects, long-term
profitability, Year 2000 issues and demand and growth trends for Pitt-Des
Moines, Inc., are forward-looking and reflect the Company's current analysis of
existing trends and information. Actual results may differ materially from
current expectations or projections based on a number of factors affecting the
Company's businesses. The Company's estimates of future performance depend on,
among other things, the likelihood of receiving certain new awards. While these
estimates are based on the good faith judgment of management, these estimates
frequently change based on new facts which become available. In addition, the
timing of receipt of revenue by the Company from engineering and construction
projects can be affected by a number of factors outside the control of the
Company. The Company's businesses are also subject to fluctuations in demand
and to changing global economic and political conditions which are beyond the
control of the Company and may cause actual results to differ from the forward-
looking statements contained in this quarterly report.
These forward-looking statements represent the Company's judgment only as of the
date of this quarterly report. As a result, the reader is cautioned not to rely
on these forward-looking statements. The Company disclaims any intent or
obligation to update these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
-17-
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Refer to Part I Item 1, Notes C and D of the Notes to Consolidated
Financial Statements for information, which information is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company during
the quarter ended September 30, 1998.
-18-
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pitt-Des Moines, Inc.
---------------------
(Registrant)
Principal Executive Officer:
Date: November 13, 1998 By: /s/ Wm. W. McKee
-----------------------------
Wm. W. McKee
(President and
Chief Executive Officer)
Principal Financial Officer:
Date: November 13, 1998 By: /s/ R. A. Byers
----------------------------
R. A. Byers
(Vice President
Finance and Treasurer)
-19-
<PAGE>
EXHIBIT INDEX
Exhibit
Number
-------
27 Financial Data Schedule
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 15,926
<SECURITIES> 0
<RECEIVABLES> 92,658
<ALLOWANCES> 545
<INVENTORY> 21,814
<CURRENT-ASSETS> 191,040
<PP&E> 131,082
<DEPRECIATION> 74,218
<TOTAL-ASSETS> 263,191
<CURRENT-LIABILITIES> 80,366
<BONDS> 32,000
0
0
<COMMON> 33,549
<OTHER-SE> 109,175
<TOTAL-LIABILITY-AND-EQUITY> 263,191
<SALES> 418,335
<TOTAL-REVENUES> 418,335
<CGS> 356,666
<TOTAL-COSTS> 356,666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,227
<INCOME-PRETAX> 22,124
<INCOME-TAX> 8,633
<INCOME-CONTINUING> 13,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,491
<EPS-PRIMARY> 1.91<F1>
<EPS-DILUTED> 1.82<F1>
<FN>
<F1>A 2-for-1 stock split occurred during the prior quarter effective June 26,
1998. Prior Financial Data Schedules (excluding the schedules for the quarters
ended March 31, 1998 and 1997) have not been restated for the recapitalization.
</FN>
</TABLE>
