<PAGE>
===============================================================================
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 June 30, 1999
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.)
1450 Lake Robbins Drive, Suite 400, The Woodlands, TX 77380
(Address of Principal Executive Offices) (Zip Code)
(281) 765-4600
(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 June 30, 1999, 7,286,346 shares of Common Stock were outstanding.
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<PAGE>
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 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Part II - Other Information
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
-2-
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PITT-DES MOINES, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
----------------------- -----------------------
(in thousands, except per share amounts) 1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earned revenue $ 156,455 $ 140,188 $ 299,301 $ 263,558
Cost of earned revenue (133,430) (118,983) (255,744) (223,278)
--------- --------- --------- ---------
Gross profit from operations 23,025 21,205 43,557 40,280
Selling, general and administrative expenses (13,681) (14,039) (25,731) (25,591)
--------- --------- --------- ---------
Income from operations 9,344 7,166 17,826 14,689
Other income/(expense):
Interest income 190 203 367 342
Interest expense (944) (479) (1,646) (743)
Gain on sale of assets 9 9 959 27
Miscellaneous, net (207) (95) (403) (692)
--------- --------- --------- ---------
(952) (362) (723) (1,066)
--------- --------- --------- ---------
Income before income taxes 8,392 6,804 17,103 13,623
Income taxes (3,226) (2,654) (6,640) (5,305)
--------- --------- --------- ---------
Net income $ 5,166 $ 4,150 $ 10,463 $ 8,318
========= ========= ========= =========
Per common share:
Earnings per share $0.72 $0.59 $ 1.47 $ 1.18
========= ========= ========= =========
Earnings per share - assuming dilution $0.69 $0.55 $ 1.40 $ 1.13
========= ========= ========= =========
Cash dividend $0.17 $0.15 $ 0.34 $ 0.30
========= ========= ========= =========
Shares used to calculate: (in thousands)
Earnings per share 7,147 7,067 7,126 7,050
========= ========= ========= =========
Earnings per share - assuming dilution 7,502 7,531 7,476 7,364
========= ========= ========= =========
CONSOLIDATED RETAINED EARNINGS
Balance at the beginning of year $ 126,082 $ 110,096
Net income 10,463 8,318
Dividends paid (2,468) (2,186)
Other 2 207
--------- ---------
Balance at end of period $ 134,079 $ 116,435
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -------------
(in thousands) (Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 23,119 $ 8,447
Accounts receivable including retentions
(less allowances: 1999-$852; 1998-$793) 114,105 103,998
Inventories 24,842 31,118
Costs and estimated profits in excess
of billings 52,284 63,700
Deferred income taxes 5,823 5,876
Prepaid expenses 1,999 1,205
-------- --------
Total Current Assets 222,172 214,344
Other Assets 11,541 10,454
Goodwill 7,304 6,588
Property, Plant and Equipment
Land 7,674 9,637
Buildings 47,519 44,091
Machinery and equipment 79,714 75,712
-------- --------
134,907 129,440
Allowances for depreciation (75,550) (71,443)
-------- --------
Net Property, Plant and Equipment 59,357 57,997
-------- --------
$300,374 $289,383
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -------------
(in thousands) (Unaudited)
<S> <C> <C>
Liabilities
Current Liabilities
Accounts payable $ 37,749 $ 52,777
Accrued compensation, related taxes and benefits 14,577 14,200
Other accrued expenses 3,497 3,655
Billings in excess of costs and estimated profits 21,767 14,774
Income taxes 1,034 4,640
Casualty and liability insurance 8,365 5,784
-------- --------
Total Current Liabilities 86,989 95,830
Revolving Credit Facility 47,000 35,000
Deferred Income Taxes 6,980 6,937
Minority Interest 838 2,362
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 5,825 4,183
Retained earnings 134,079 126,082
Accumulated other comprehensive income (290) (290)
-------- --------
173,163 163,524
Treasury stock at cost
(1999-1,660,122 shares; 1998-1,700,552 shares) (12,243) (12,299)
Unearned compensation - restricted stock (2,353) (1,971)
-------- --------
Total Stockholders' Equity 158,567 149,254
-------- --------
$300,374 $289,383
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended
June 30,
---------------------
(in thousands) 1999 1998
--------- ---------
<S> <C> <C>
Cash Flow From Operating Activities
Net income $ 10,463 $ 8,318
Adjustments to reconcile net income to net
cash provided (utilized) by operating activities:
Depreciation 4,274 3,112
Gain on sale of assets (959) (27)
Minority interest, net of dividends paid 21 686
Other non-cash credits, net (26) 1,250
Change in operating assets and liabilities
(using) providing cash:
Accounts receivable (10,107) (18,104)
Inventories 6,276 2,523
Prepaid expenses (794) (382)
Costs, estimated profits and billings, net 18,409 16,825
Accounts payable (15,028) (19,189)
Accrued liabilities 2,896 3,147
Income taxes (3,817) (1,666)
-------- --------
Net cash provided (utilized) by operating activities 11,608 (3,507)
Cash Flows from Investing Activities
Capital expenditures (7,409) (7,281)
Proceeds from sale of assets 2,952 82
Acquisitions, net (2,182) --
Change in investments and other assets (265) (418)
-------- --------
Net cash utilized by investing activities (6,904) (7,617)
Cash Flows from Financing Activities
Proceeds from revolving credit facility 17,000 15,500
Payments of revolving credit facility (5,000) --
Dividends paid (2,468) (2,186)
Other 436 625
-------- --------
Net cash provided by financing activities 9,968 13,939
-------- --------
(Decrease) increase in cash and cash equivalents 14,672 2,815
Cash and cash equivalents at beginning of year 8,447 12,037
-------- --------
Cash and cash equivalents at end of period $ 23,119 $ 14,852
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-6-
<PAGE>
Item 1. Financial Statements (Continued)
PITT-DES MOINES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Note A. Significant Accounting Policies
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 six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. The December 31, 1998 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, 1998.
Reclassifications
Certain prior-year amounts have been reclassified to conform to the current-year
presentation.
Note B. Earnings Per Share
The following table sets forth the computation of earnings per share and
earnings per share assuming dilution:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
----------------- ------------------
(in thousands, except per share amounts) 1999 1998 1999 1998
------- ------- -------- -------
<S> <C> <C> <C> <C>
Numerator:
Net income $5,166 $4,150 $10,463 $8,318
====== ====== ======= ======
Denominator:
Weighted-average shares 7,147 7,067 7,126 7,050
Employee stock options and restricted stock 355 464 350 314
------ ------ ------- ------
Weighted-average shares-assuming dilution 7,502 7,531 7,476 7,364
====== ====== ======= ======
Earnings per share $ 0.72 $ 0.59 $ 1.47 $ 1.18
====== ====== ======= ======
Earnings per share-assuming dilution $ 0.69 $ 0.55 $ 1.40 $ 1.13
====== ====== ======= ======
</TABLE>
-7-
<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:
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands) 1999 1998
---------- -------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 778,036 $ 608,870
Estimated profits 97,740 71,450
--------- ---------
875,776 680,320
Less: Billings to date (845,259) (631,394)
--------- ---------
$ 30,517 $ 48,926
========= =========
</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>
June 30, December 31,
(in thousands) 1999 1998
--------- -------------
<S> <C> <C>
Costs and estimated profits in excess of billings $ 52,284 $ 63,700
Billings in excess of costs and estimated profits (21,767) (14,774)
-------- --------
$ 30,517 $ 48,926
======== ========
</TABLE>
Included in costs and estimated profits in excess of billings on uncompleted
contracts was approximately $6.5 million at June 30, 1999 and December 31, 1998,
relating to an unapproved change order arising from a dispute over design and
specification changes on a project that has been completed. 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. On June 4, 1996, certain of the defendants in said
action made counterclaims against the Company in amounts approximating $3.5
million. The Company and defendants in the above-captioned action have agreed
to settle all claims and counterclaims in this matter in consideration of the
Company's receipt of $12 million. The results of this payment are not reflected
in the above costs and estimated profits in excess of billings on uncompleted
contracts as the funds will not be received until the third quarter of 1999.
The effect of this payment will not have a material impact on the future results
of operations.
-8-
<PAGE>
Item 1. Financial Statements (Continued)
Note D. Contingencies
As previously reported, in a decision dated February 18, 1999, the United States
Court of Appeals for the Seventh Circuit affirmed the Company's July 31, 1997
conviction for two misdemeanor violations of federal Occupational Safety and
Health Administration regulations. As a result of that conviction, 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 had been
informed that it was not the target of the investigation but that it and other
companies in the steel bridge fabrication industry were subjects of the
investigation.
On July 29, 1999 the Department of Justice informed the Company that it has
closed its investigation in this matter. No proceedings were instituted against
the Company or any of its employees.
Various claims and legal proceedings are brought 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 properties, 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, and has been requested to participate as a PRP at one
additional site, 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 the cost of such future activities 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, 1998 and during
the six months ended June 30, 1999, for investigative and/or remedial activities
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
-9-
<PAGE>
Item 1. Financial Statements (Continued)
Note D. Contingencies (Continued)
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 such outcome could be material to the reported results of
operations for the period in which it occurs.
Note E. Business Segment Information
The Company has two reportable operating segments; Heavy Construction, which was
formerly reported as Engineering and Construction, and Steel Distribution. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies in the Company's 1998 Annual
Report except that inventory is accounted for on a First-In, First-Out basis at
the segment level compared to a Last-In, First-Out (LIFO) basis at the
consolidated level, and the Company does not allocate certain items to its
segments including general corporate expenses, incentive stock plan charges,
other income (expense), income tax expense and adjustments to the LIFO inventory
reserve.
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earned Revenue:
Heavy Construction $108,922 $ 86,905 $208,434 $163,793
Steel Distribution 48,798 54,172 93,364 101,544
Corporate and Other (1,265) (889) (2,497) (1,778)
-------- -------- -------- --------
$156,455 $140,188 $299,301 $263,558
======== ======== ======== ========
Income (Loss) from Operations:
Heavy Construction $ 6,448 $ 5,563 $ 14,334 $ 11,711
Steel Distribution 3,831 4,485 6,970 8,026
Corporate and Other (935) (2,881) (3,478) (5,047)
-------- -------- -------- --------
$ 9,344 $ 7,166 $ 17,826 $ 14,689
======== ======== ======== ========
</TABLE>
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1998.
The Company reported net income of $5.2 million, or $0.69 per diluted share, on
earned revenue of $156.5 million for the quarter ended June 30, 1999. These
results compare with net income of $4.2 million, or $0.55 per diluted share, on
earned revenue of $140.2 million for the second quarter of 1998.
HEAVY CONSTRUCTION
Heavy Construction posted earned revenue of $108.9 million, representing an
increase of $22.0 million, or 25 percent, over the prior year quarter. All
construction markets experienced double-digit percentage growth over the second
quarter of 1998, with the liquid and cryogenic storage and steel building
markets accounting for the majority of the increase. The liquid and cryogenic
storage group benefited from progress on contracts for conventional storage
tanks, while the steel building growth is attributable to strong market activity
in both the private and public sectors.
Selling, general and administrative (S,G&A) expense as a percentage of earned
revenue decreased 0.4 percentage points to 7.1 percent, compared with 7.5
percent in the second quarter of 1998. Income from operations rose $0.9 million
to $6.4 million for the second quarter, due to the earned revenue growth and
leverage of the S,G&A expense line over the prior year.
New awards increased $63.1 million, or 44 percent, to $206.4 million for the
quarter ended June 30, 1999. The growth in new awards resulted in a strong
backlog level of $377.8 million versus $268.1 million at June 30, 1998. 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 June 30, 1999 was approximately
$6.5 million relating to an unapproved change order arising from a dispute over
design and specification changes.
STEEL DISTRIBUTION
Steel Distribution's earned revenue decreased $5.4 million quarter-to-quarter
from $54.2 million to $48.8 million in 1999, despite a slight increase in
tonnage shipped. Lower transaction prices in the marketplace accounted for the
decrease from the prior year.
S,G&A expense in absolute dollars was up $0.3 million from second quarter 1998
levels. As a percentage of earned revenue, S,G&A expense increased to 7.9
percent, from 6.5 percent a year ago, due to the lower 1999 sales. Income from
operations of $3.8 million was down from $4.5 million in the second quarter of
1998 as a result of the aforementioned decrease in earned revenue.
-11-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
OTHER
Corporate unallocated expenses, consisting of salaries, benefits, outside
professional services, taxes and insurance, were $0.9 million in the second
quarter of 1999 compared with $2.9 million for the prior year quarter. The
decrease from 1998 relates primarily to lower compensation expense recognized
under an incentive stock plan and, to a lesser extent, adjustments to inventory
reserves.
Interest expense of $0.9 million in 1999 compares with $0.5 million in the
prior-year quarter. Interest expense is directly related to the level of net
borrowings the Company maintains throughout the period. The increase in
interest expense for 1999 resulted from the higher level of borrowings to fund
capital expansion and to finance general working capital needs. On June 30,
1999, the Company had $47 million of outstanding debt under its revolving credit
facility, compared with $26.5 million at June 30, 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998.
The Company reported net income of $10.5 million, or $1.40 per diluted share, on
earned revenue of $299.3 million for the six months ended June 30, 1999. These
results compare with net income of $8.3 million, or $1.13 per diluted share, on
earned revenue of $263.6 million for the six months ended June 30, 1998.
HEAVY CONSTRUCTION
The Heavy Construction segment reported a 27 percent increase in earned revenue
from $163.8 million to $208.4 million for the first half of 1999. This segment
experienced broad-based growth as the liquid and cryogenic storage, steel
bridge, and steel building markets all posted growth in excess of 25 percent.
The liquid and cryogenic storage market benefited from progress on contracts for
conventional storage tanks, while the steel building growth is attributable to
strong market activity in both the private and public sectors. The steel bridge
market posted growth over the prior year due to strong levels of private and
public infrastructure spending for bridge construction and repair.
S,G&A expense as a percentage of earned revenue dropped to 6.6 percent for the
first six months of 1999, from 7.6 percent for the period ended June 30, 1998.
Income from operations increased $2.6 million from $11.7 million a year ago to
$14.3 million for the first six months of 1999.
New awards rose $50.8 million, or 18 percent, to $330.7 million for the first
half of 1999.
-12-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
STEEL DISTRIBUTION
Steel Distribution reported earned revenue of $93.4 million, an 8 percent
decrease from $101.5 million in earned revenue for the six months ended June 30,
1998, despite a slight increase in tonnage shipped. Lower transaction prices in
the marketplace accounted for the decrease from the first half of 1998.
S,G&A expense in absolute dollars rose $0.5 million from the first half of 1998.
As a percentage of earned revenue, S,G&A expense increased to 8.0 percent, from
6.9 percent a year ago, due to the lower 1999 sales. Income from operations of
$7.0 million was down from $8.0 million in 1998 as a result of the decrease in
earned revenue.
OTHER
Corporate unallocated expenses, consisting of salaries, benefits, outside
professional services, taxes and insurance, were $3.5 million in the first half
of 1999 compared with $5.0 million for the comparable period of 1998. The
decrease from 1998 relates primarily to lower compensation expense recognized
under an incentive stock plan and adjustments to inventory reserves.
Interest expense of $1.6 million for the first six months of 1999 compares with
$0.7 million in the prior year. The increase in interest expense for the period
relates to the higher level of borrowings to fund capital expansion and to
finance general working capital needs.
The gain on sale of assets was $1.0 million in 1999, attributable to the sale of
idle property.
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 may not properly recognize dates after the year 1999,
which could cause those systems to produce invalid results or fail to operate.
This is commonly referred to as "the Year 2000 problem." The Company's Year
2000 plan encompasses three main phases: Assessment, Remediation and Testing.
All phases of the Year 2000 plan have generally been conducted by Information
Technology personnel. While the Company has not tracked these costs separately,
it does not believe the impact of the Year 2000 remediation efforts has had a
material impact on the Company's results of operations for the periods
presented, or that any additional costs will have a material impact on the
Company's future results of operations.
-13-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
YEAR 2000 (Continued)
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 and the Company
has established plans for remediation and testing which the Company anticipates
will conclude by the end of 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 most cases the Company has either made
the recommended changes, or contacted vendors to determine whether the equipment
will experience Year 2000 problems. The majority of the remaining systems have
been assessed and the Company has established plans for remediation and testing
which the Company anticipates will conclude by the end of the third quarter of
1999.
The Company has contacted its significant suppliers and financial institutions
but has not yet received adequate responses from all of them to determine 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 its Year 2000 program is addressing the Year
2000 issue in a timely manner. However, as noted above, the Company has not yet
completed all necessary phases of its Year 2000 program. In the event that the
Company does not complete any remaining phases, the Company may have to conduct
certain operations in an alternative manner. There can be no assurance that the
Company's results of operations would not be materially and adversely affected
by the delays and inefficiencies inherent in conducting operations in such a
manner. In addition, disruptions in the general economy or from third parties
resulting from Year 2000 issues could also materially adversely affect the
Company. The amount of potential liability and lost earned revenue, as a result
of the Company's failure to be Year 2000 compliant, a third party's failure to
be Year 2000 compliant or an economic slowdown, cannot be reasonably estimated.
The Company is currently evaluating contingency plans in the event of a Year
2000 failure. The Company anticipates that these contingency plans will be
completed by the end of the third quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1999, the Company's primary sources of
liquidity were proceeds from its revolving credit facility and cash flow
generated from operations, which were used for investing activities and funding
the growth in working capital. Working capital increased $16.7 million from
$118.5 million at December 31, 1998 to $135.2 million at June 30, 1999.
-14-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
Net cash provided by operating activities increased $15.1 million when compared
with the $3.5 million of cash utilized in the first half of 1998. An increase
in net income combined with decreases in inventories and cash utilized for
accounts receivable accounted for a majority of the improvement over the first
half of 1998. The changes in operating assets and liabilities vary from period
to period and are affected by the mix, stage of completion and commercial terms
of contracts.
Net cash utilized by investing activities of $6.9 million for the six months
ended June 30, 1999, consisted of capital expenditures and the acquisition of
the remaining 18 percent interest in Oregon Culvert Company, Inc. The Company
expended $7.4 million for capital improvements, including construction of a new
steel service center in Woodland, Washington, expansion and improvement of other
facilities and the purchase of additional field equipment. Also during the
first half of 1999, the Company realized $3.0 million in proceeds from the sale
of idle property. The Company anticipates that capital expenditures for fiscal
year 1999 will approximate the level of depreciation and amortization, although
there can be no assurance that such levels will not increase or decrease.
The Company continues 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, management
reviews and board approval. Management anticipates that investment and / or
acquisition opportunities will be available to the Company and intends to
investigate those opportunities for future growth and expansion of its business.
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 provided by financing activities consisted primarily of proceeds from the
Company's revolving credit facility. The Company paid cash dividends of $2.5
million, or $0.34 per share, compared with $2.2 million, or $0.30 per share,
during the six months ended June 30, 1999 and 1998, 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 $70.0 million unsecured revolving credit
facility which expires on January 31, 2002. On August 9, 1999, $37.0 million of
borrowings and $8.4 million of stand-by letters of credit were outstanding under
this credit facility.
-15-
<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
Due to current conditions in the credit markets and considering the favorable
terms of the Company's credit facility, management believes interest rate
exposure is minimal.
The Company has limited operations outside the United States. As such, there is
limited exposure to the Company's future earnings due to changes in foreign
currency exchange rates. A 10 percent appreciation of the United States dollar
against the related currencies would not have a significant effect on the future
earnings of the Company.
-16-
<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 4. Submission of Matters to a Vote of Security Holders
On May 6, 1999, the Company held its annual stockholders meeting. Only
holders of common stock of record at the close of business on March 15,
1999 were entitled to notice of and to vote at the Annual Meeting. As
of that date, the Company had outstanding 7,241,202 shares of common
stock. The three matters voted upon at the Annual Meeting were the
election of four directors, the ratification of the appointment of
Ernst & Young LLP as auditors for the year ending December 31, 1999,
and approval of an amendment to the Amended and Restated Articles of
Incorporation.
Each of the Company's nominees for director was reelected at the Annual
Meeting. The total number of votes cast for the election of directors
was 6,220,647. Following is a separate tabulation with respect to each
director:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
V. G. Beghini 6,169,533 51,114
R. W. Dean 6,171,253 49,394
W. R. Jackson 6,165,239 55,408
W. E. Lewellen 6,165,121 55,526
</TABLE>
The following directors' terms of office continued after the annual
stockholders meeting: J. C. Bates, P. O. Elbert, Wm. W. McKee, J. W.
Robinson, W. R. Jackson, Jr., A. J. Paddock and P. J. Townsend.
The total number of votes cast for the ratification of the appointment
of Ernst & Young LLP as auditors for the year ending December 31, 1999,
was 6,220,647 with 6,165,786 votes for, 53,053 votes against and 1,808
votes abstained.
The total number of votes cast for the approval of an amendment to the
Amended and Restated Articles of Incorporation was 6,220,647 with
6,107,492 votes for, 99,895 votes against and 13,260 votes abstained.
There were no broker non-votes with respect to the three matters voted
upon.
-17-
<PAGE>
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 June 30, 1999.
-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: August 13, 1999 By: /s/ Wm. W. McKee
--------------------------------
Wm. W. McKee
(President and
Chief Executive Officer)
Principal Financial Officer:
Date: August 13, 1999 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 JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 23,119
<SECURITIES> 0
<RECEIVABLES> 114,957
<ALLOWANCES> 852
<INVENTORY> 24,842
<CURRENT-ASSETS> 222,172
<PP&E> 134,907
<DEPRECIATION> 75,550
<TOTAL-ASSETS> 300,374
<CURRENT-LIABILITIES> 86,989
<BONDS> 47,000
0
0
<COMMON> 33,549
<OTHER-SE> 125,018
<TOTAL-LIABILITY-AND-EQUITY> 300,374
<SALES> 299,301
<TOTAL-REVENUES> 299,301
<CGS> 255,744
<TOTAL-COSTS> 255,744
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,646
<INCOME-PRETAX> 17,103
<INCOME-TAX> 6,640
<INCOME-CONTINUING> 10,463
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,463
<EPS-BASIC> 1.47
<EPS-DILUTED> 1.40
</TABLE>
