<PAGE>
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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, 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 September 30, 1999, 7,342,746 shares of Common Stock were outstanding.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
Part I - Financial Information
<S> <C> <C>
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 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
EXHIBIT INDEX 19
</TABLE>
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<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 nine months
ended September 30, ended September 30,
----------------------- -----------------------
(in thousands, except per share amounts) 1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earned revenue $ 160,343 $ 154,777 $ 459,644 $ 418,335
Cost of earned revenue (135,954) (133,388) (391,698) (356,666)
--------- --------- --------- ---------
Gross profit from operations 24,389 21,389 67,946 61,669
Selling, general and administrative expenses (14,671) (12,891) (40,402) (38,482)
--------- --------- --------- ---------
Income from operations 9,718 8,498 27,544 23,187
Other income/(expense):
Interest income 274 115 641 457
Interest expense (635) (484) (2,281) (1,227)
Gain on sale of assets 39 23 998 50
Miscellaneous, net 78 349 (325) (343)
--------- --------- --------- ---------
(244) 3 (967) (1,063)
--------- --------- --------- ---------
Income before income taxes 9,474 8,501 26,577 22,124
Income taxes (3,642) (3,328) (10,282) (8,633)
--------- --------- --------- ---------
Net income $ 5,832 $ 5,173 $ 16,295 $ 13,491
========= ========= ========= =========
Per common share:
Earnings per share $ 0.81 $ 0.73 $ 2.28 $ 1.91
========= ========= ========= =========
Earnings per share - assuming dilution $ 0.77 $ 0.69 $ 2.17 $ 1.82
========= ========= ========= =========
Cash dividend $ 0.17 $ 0.15 $ 0.51 $ 0.45
========= ========= ========= =========
Shares used to calculate: (in thousands)
Earnings per share 7,218 7,085 7,157 7,062
========= ========= ========= =========
Earnings per share - assuming dilution 7,586 7,513 7,513 7,414
========= ========= ========= =========
CONSOLIDATED RETAINED EARNINGS
Balance at the beginning of year $ 126,082 $ 110,096
Net income 16,295 13,491
Dividends paid (3,716) (3,272)
Other 1 (201)
--------- ---------
Balance at end of period $ 138,662 $ 120,114
========= =========
</TABLE>
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,
1999 1998
-------------- -------------
(in thousands) (Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 22,395 $ 8,447
Accounts receivable including retentions
(less allowances: 1999-$861; 1998-$793) 106,428 103,998
Inventories 25,574 31,118
Costs and estimated profits in excess
of billings 42,550 63,700
Deferred income taxes 5,877 5,876
Prepaid expenses 1,179 1,205
-------- --------
Total Current Assets 204,003 214,344
Other Assets 12,317 10,454
Goodwill 7,244 6,588
Property, Plant and Equipment
Land 7,738 9,637
Buildings 46,924 44,091
Machinery and equipment 80,026 75,712
-------- --------
134,688 129,440
Allowances for depreciation (75,365) (71,443)
-------- --------
Net Property, Plant and Equipment 59,323 57,997
-------- --------
$282,887 $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>
September 30, December 31,
1999 1998
-------------- -------------
(in thousands) (Unaudited)
<S> <C> <C>
Liabilities
Current Liabilities
Accounts payable $ 34,867 $ 52,777
Accrued compensation, related taxes and benefits 17,147 14,200
Other accrued expenses 3,953 3,655
Billings in excess of costs and estimated profits 24,314 14,774
Income taxes 839 4,640
Casualty and liability insurance 9,447 5,784
-------- --------
Total Current Liabilities 90,567 95,830
Revolving Credit Facility 20,000 35,000
Deferred Income Taxes 6,980 6,937
Minority Interest 858 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 5,309 4,183
Retained earnings 138,662 126,082
Accumulated other comprehensive income (290) (290)
-------- --------
177,230 163,524
Treasury stock at cost
(1999-1,603,722 shares; 1998-1,700,552 shares) (11,812) (12,299)
Unearned compensation - restricted stock (936) (1,971)
-------- --------
Total Stockholders' Equity 164,482 149,254
-------- --------
$282,887 $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 nine months ended
September 30,
---------------------
(in thousands) 1999 1998
--------- ---------
<S> <C> <C>
Cash Flow From Operating Activities
Net income $ 16,295 $ 13,491
Adjustments to reconcile net income to net
cash provided (utilized) by operating activities:
Depreciation 6,248 4,679
Gain on sale of assets (998) (50)
Minority interest, net of dividends paid 39 (270)
Other non-cash credits, net 76 1,500
Change in operating assets and liabilities
(using) providing cash:
Accounts receivable (2,430) (13,897)
Inventories 5,544 4,422
Prepaid expenses 26 (1,832)
Costs, estimated profits and billings, net 30,690 859
Accounts payable (17,910) (14,809)
Accrued liabilities 6,950 2,633
Income taxes (4,012) 2,044
-------- --------
Net cash provided (utilized) by operating activities 40,518 (1,230)
Cash Flows from Investing Activities
Capital expenditures (9,421) (12,739)
Proceeds from sale of assets 3,070 112
Acquisitions, net (2,182) (614)
Change in investments and other assets (531) (178)
-------- --------
Net cash utilized by investing activities (9,064) (13,419)
Cash Flows from Financing Activities
Proceeds from revolving credit facility 17,000 21,000
Payments of revolving credit facility (32,000) - -
Dividends paid (3,716) (3,272)
Other 1,210 810
-------- --------
Net cash provided (utilized) by financing activities (17,506) 18,538
-------- --------
Increase in cash and cash equivalents 13,948 3,889
Cash and cash equivalents at beginning of year 8,447 12,037
-------- --------
Cash and cash equivalents at end of period $ 22,395 $ 15,926
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
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<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 nine months ended September 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 Nine months
ended September 30, ended September 30,
------------------- -------------------
(in thousands, except per share amounts) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income $5,832 $5,173 $16,295 $13,491
====== ====== ======= =======
Denominator:
Weighted-average shares 7,218 7,085 7,157 7,062
Employee stock options and restricted stock 368 428 356 352
------ ------ ------- -------
Weighted-average shares-assuming dilution 7,586 7,513 7,513 7,414
====== ====== ======= =======
Earnings per share $ 0.81 $ 0.73 $ 2.28 $ 1.91
====== ====== ======= =======
Earnings per share-assuming dilution $ 0.77 $ 0.69 $ 2.17 $ 1.82
====== ====== ======= =======
</TABLE>
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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:
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands) 1999 1998
-------------- -------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 706,698 $ 608,870
Estimated profits 99,890 71,450
--------- ---------
806,588 680,320
Less: Billings to date (788,352) (631,394)
--------- ---------
$ 18,236 $ 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>
September 30, December 31,
(in thousands) 1999 1998
-------------- -------------
<S> <C> <C>
Costs and estimated profits in excess of billings $ 42,550 $ 63,700
Billings in excess of costs and estimated profits (24,314) (14,774)
-------- --------
$ 18,236 $ 48,926
======== ========
</TABLE>
As reported earlier, in the matter captioned PITT-DES MOINES, INC. V.
METROPOLITAN PIER & EXPOSITION AUTHORITY ET AL. the Company and defendants in
that action agreed to settle all claims and counterclaims in consideration of
the Company's receipt of $12 million. The result of this payment is reflected
as a reduction in the above costs and estimated profits in excess of billings on
uncompleted contracts.
-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.
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 nine months ended September 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 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.
-9-
<PAGE>
Item 1. Financial Statements (Continued)
Note E. Business Segment Information
The Company has two reportable operating segments; Heavy 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 Nine months
ended September 30, ended September 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earned Revenue:
Heavy Construction $108,504 $100,351 $316,938 $264,145
Steel Distribution 52,994 55,138 146,357 156,682
Corporate and Other (1,155) (712) (3,651) (2,492)
-------- -------- -------- --------
$160,343 $154,777 $459,644 $418,335
======== ======== ======== ========
Income (Loss) from Operations:
Heavy Construction $ 9,374 $ 6,251 $ 23,708 $ 17,963
Steel Distribution 4,426 5,218 11,396 13,244
Corporate and Other (4,082) (2,971) (7,560) (8,020)
-------- -------- -------- --------
$ 9,718 $ 8,498 $ 27,544 $ 23,187
======== ======== ======== ========
</TABLE>
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1998.
The Company reported net income of $5.8 million, or $0.77 per diluted share, on
earned revenue of $160.3 million for the quarter ended September 30, 1999.
These results compare with net income of $5.2 million, or $0.69 per diluted
share, on earned revenue of $154.8 million for the third quarter of 1998.
HEAVY CONSTRUCTION
Heavy Construction posted earned revenue of $108.5 million, representing an
increase of $8.2 million, or 8 percent, over the prior year quarter. The steel
buildings and water storage markets accounted for the majority of the increase.
The steel buildings market has benefited from a consistent flow of sizable
contracts, further increasing utilization of the Eloy, Arizona facility which
was brought on line in 1998. Strong demand from municipalities, as they
experience ample funds from higher tax receipts, contributed to the continued
growth within the water storage market.
Income from operations rose $3.1 million, or 50 percent, for the third quarter
due to the earned revenue growth and leverage of the operating expense lines
over the prior year. All construction markets reported higher gross margins
resulting in a 2.1 percentage point improvement from the third quarter of 1998.
Lower selling, general and administrative (S,G&A) expense as a percentage of
earned revenue, which decreased to 6.0 percent from 6.3 percent a year ago, also
contributed to the growth in operating income.
New awards decreased $16.5 million, or 14 percent, to $98.6 million for the
quarter ended September 30, 1999. While the steel buildings and steel bridges
markets accounted for the lower third quarter awards, both anticipate stronger
levels of bidding activity in the fourth quarter of 1999 and beginning of 2000.
Despite the lower quarterly new awards, backlog stood at $369.0 million at
September 30, 1999 versus $287.7 million at September 30, 1998.
STEEL DISTRIBUTION
Steel Distribution's earned revenue decreased $2.1 million quarter-to-quarter
from $55.1 million to $53.0 million in 1999, despite a 5 percent increase in
tonnage shipped. Lower transaction prices accounted for the decrease from the
prior year. However, if recent price increases on some of the Company's key
product lines hold and strong demand in the Western U.S. continues, future
results should be favorably impacted.
Income from operations of $4.4 million was down from $5.2 million in the third
quarter of 1998 as a result of the aforementioned decrease in earned revenue and
higher S,G&A costs. Despite the lower sales, gross margins were equivalent to
prior year. S,G&A expense in absolute dollars was up $0.5 million from third
quarter 1998 levels due to incremental costs associated with new
-11-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
STEEL DISTRIBUTION (continued)
or expanded steel service center operations. As a percentage of earned revenue,
S,G&A expense increased to 7.5 percent, from 6.4 percent a year ago.
OTHER
Corporate unallocated expenses, consisting of salaries, benefits, outside
professional services, taxes and insurance, were $4.1 million in the third
quarter of 1999 compared with $3.0 million for the prior year quarter. The
increase from 1998 relates primarily to compensation expense recognized under a
management incentive program and incentive stock plan.
Interest expense of $0.6 million in 1999 was $0.1 million higher than in the
prior-year quarter. Interest expense is directly related to the level of net
borrowings the Company maintains throughout the period. On September 30, 1999,
the Company had $20 million of outstanding debt under its revolving credit
facility, compared with $32.0 million at September 30, 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1998.
The Company reported net income of $16.3 million, or $2.17 per diluted share, on
earned revenue of $459.6 million for the nine months ended September 30, 1999.
These results compare with 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.
HEAVY CONSTRUCTION
The Heavy Construction segment reported a 20 percent increase in earned revenue
from $264.1 million to $316.9 million for the first nine months of 1999. This
segment experienced broad-based growth as all construction markets posted
double-digit percentage growth over the comparable period in 1998. The majority
of the increase was contributed by the liquid and cryogenic storage market which
benefited from progress on contracts for conventional storage tanks, while the
steel buildings market growth was attributable to a consistent flow of sizable
contracts, which further increased utilization of the Eloy, Arizona facility.
Income from operations increased $5.7 million from $18.0 million a year ago to
$23.7 million for the first nine months of 1999. Earned revenue growth and
leverage of the S,G&A expense line over the prior year accounted for the
improvement over 1998. S,G&A expense as a percentage of earned revenue dropped
to 6.4 percent for the first nine months of 1999, from 7.1 percent for the
period ended September 30, 1998.
-12-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
HEAVY CONSTRUCTION (continued)
New awards rose $40.1 million, or 14 percent, to $336.0 million for the first
nine months of 1999 due primarily to increased water storage and steel bridges
awards activity. The water storage market posted higher new awards on solid
demand from municipalities, while the steel bridges market benefited from strong
levels of private and public infrastructure spending for bridge construction and
repair.
STEEL DISTRIBUTION
Steel Distribution reported earned revenue of $146.4 million, a 7 percent
decrease from $156.7 million in earned revenue for the nine months ended
September 30, 1998, despite a slight increase in tonnage shipped. Lower
transaction prices in the marketplace accounted for the decrease from the first
nine months of 1998.
Income from operations of $11.4 million was down from $13.2 million in 1998 as a
result of the decrease in earned revenue and higher S,G&A costs. S,G&A expense
in absolute dollars rose $0.9 million from the first nine months of 1998,
primarily due to incremental costs associated with new or expanded steel service
center operations. As a percentage of earned revenue, S,G&A expense increased
to 7.8 percent, from 6.7 percent a year ago.
OTHER
Corporate unallocated expenses, consisting of salaries, benefits, outside
professional services, taxes and insurance, were $7.6 million in the first nine
months of 1999 compared with $8.0 million for the comparable period of 1998.
The slight decrease from 1998 was primarily due to lower compensation expense
recognized under an incentive stock plan.
Interest expense of $2.3 million for the first nine months of 1999 compares with
$1.2 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).
-13-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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 the Company's
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.
The Company has completed the assessment phase and remediation 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 Company has established plans for the remaining
testing which the Company anticipates will conclude by December of 1999.
The Company has completed the assessment phase and remediation phase of all
critical operating equipment which utilizes non-information technology systems,
typically embedded technology such as micro controllers. The Company has either
made the recommended changes, or contacted vendors to determine whether the
equipment will experience Year 2000 problems. The Company has established plans
for the remaining testing which the Company anticipates will conclude by
December of 1999.
The Company has contacted its significant suppliers and financial institutions
to determine the status of their Year 2000 compliance. Of the suppliers and
financial institutions that responded, none have reported that they expect any
significant problems as a result of the Year 2000 issue. However, some
institutions have not returned what the Company deems adequate responses to
determine the status of their Year 2000 compliance. Therefore, 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 the testing phase of its Year 2000 program. In the event that the
Company does not complete the testing phase and certain remediation efforts
fail, 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.
-14-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
YEAR 2000 (continued)
The Company has evaluated contingency plans in the event of a Year 2000 failure
and intends to rely primarily on existing emergency backup plans. These plans
are utilized periodically in instances of power outages, inclement weather
conditions, etc.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1999, the Company's primary source of
liquidity was cash flow generated from operations, which was partially utilized
for investing activities. Working capital decreased $5.1 million from $118.5
million at December 31, 1998 to $113.4 million at September 30, 1999.
Net cash provided by operating activities increased $41.7 million when compared
with the $1.2 million of cash utilized in the first nine months of 1998. A
significant net decrease in costs, estimated profits and billings, net and
accounts receivable accounted for the improvement over the first nine months 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 $9.1 million for the nine months
ended September 30, 1999, consisted of capital expenditures and the acquisition
of the remaining 18 percent interest in Oregon Culvert Company, Inc. for $2.2
million. The Company expended $9.4 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 nine months of 1999, the Company realized $3.1
million in proceeds from the sale of idle property. The Company anticipates
that capital expenditures for the remainder of 1999 will approximate the level
of depreciation and amortization.
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 utilized by financing activities consisted primarily of payments on the
Company's revolving credit facility. The Company also paid cash dividends of
$3.7 million, or $0.51 per share, compared with $3.3 million, or $0.45 per
share, during the nine months ended September 30, 1999 and 1998, respectively.
-15-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
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 November 8, 1999, $15 million of
borrowings and $8.6 million of stand-by letters of credit were outstanding under
this credit facility.
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 the Company,
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 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, 1999.
-17-
<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 12, 1999 By: /s/ Wm. W. McKee
--------------------------------
Wm. W. McKee
(President and
Chief Executive Officer)
Principal Financial Officer:
Date: November 12, 1999 By: /s/ R. A. Byers
-------------------------------
R. A. Byers
(Vice President
Finance and Treasurer)
-18-
<PAGE>
EXHIBIT INDEX
Exhibit
Number
------
(27) Financial Data Schedule
-19-
<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, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 22,395
<SECURITIES> 0
<RECEIVABLES> 107,289
<ALLOWANCES> 861
<INVENTORY> 25,574
<CURRENT-ASSETS> 204,003
<PP&E> 134,688
<DEPRECIATION> 75,365
<TOTAL-ASSETS> 282,887
<CURRENT-LIABILITIES> 90,567
<BONDS> 20,000
0
0
<COMMON> 33,549
<OTHER-SE> 130,933
<TOTAL-LIABILITY-AND-EQUITY> 282,887
<SALES> 459,644
<TOTAL-REVENUES> 459,644
<CGS> 391,698
<TOTAL-COSTS> 391,698
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,281
<INCOME-PRETAX> 26,577
<INCOME-TAX> 10,282
<INCOME-CONTINUING> 16,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,295
<EPS-BASIC> 2.28
<EPS-DILUTED> 2.17
</TABLE>
