SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission File
December 30, 1995 Number 0-15658
PETER KIEWIT SONS', INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0210602
(State of Incorporation) (I.R.S. Employer
Identification No.)
1000 Kiewit Plaza, Omaha, Nebraska 68131
(Address of principal executive offices) (Zip Code)
(402) 342-2052
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Class B Construction & Mining Group Nonvoting Restricted
Redeemable Convertible Exchangeable Common Stock, par value
$.0625
Class C Construction & Mining Group Restricted Redeemable
Convertible Exchangeable Common Stock, par value $.0625
Class D Diversified Group Convertible Exchangeable
Common Stock, par value $.0625
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The registrant's stock is not publicly traded, and therefore
there is no ascertainable aggregate market value of voting stock
held by nonaffiliates.
As of March 15, 1996, the number of outstanding shares of each
class of the Company's common stock was:
Class B -263,468
Class C -9,957,413
Class D -23,222,259
Portions of the Company's definitive Proxy Statement for the 1996
Annual Meeting of Stockholders are incorporated by reference into
Part III of this Form 10-K.
The following amendment is filed for the purpose of correcting the date on the
Report of Independent Accountants.
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this amendment
to be signed on its behalf by the undersigned thereunto duly
authorized.
Peter Kiewit Sons', Inc.
Dated: May 2, 1996 /s/ Richard R. Jaros
Richard R. Jaros
Executive Vice
President Chief
Financial Officer
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Index to Financial Statements
and Financial Statement Schedule
Report of Independent Accountants
Consolidated Financial Statements as
of December 30, 1995 and December 31, 1994
and for the three years ended December 30, 1995:
Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements
Consolidated Financial Statement Schedule for the
three years ended December 30, 1995:
II--Valuation and Qualifying Accounts and Reserves
Schedules not indicated above have been omitted because of the
absence of the conditions under which they are required or
because the information called for is shown in the consolidated
financial statements or in the notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Peter Kiewit Sons', Inc.
We have audited the consolidated financial statements and the
financial statement schedule of Peter Kiewit Sons', Inc. and
Subsidiaries as listed in the index on the preceding page of this
Form 10-K. These financial statements and the financial
statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Peter Kiewit Sons', Inc. and Subsidiaries
as of December 30, 1995 and December 31, 1994, and the
consolidated results of their operations and their cash flows for
each of the three years in the period ended December 30, 1995 in
conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
March 19, 1996, except as for Note 19, as to
which the date is March 27, 1996
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the three years ended December 30, 1995
(dollars in millions, except per share data) 1995 1994 1993
Revenue $ 2,902 $ 2,704 $ 2,050
Cost of Revenue (2,474) (2,314) (1,742)
------- ------- --------
428 390 308
General and Administrative Expenses (266) (225) (154)
------ ----- -----
Operating Earnings 162 165 154
Other Income (Expense):
Gain on Subsidiary's Stock Transactions, net 3 54 211
Investment Income, net 79 43 17
Interest Expense, net (25) (38) (14)
Other,net 157 16 24
----- ---- ----
214 75 238
Equity Loss in MFS (131) (102) (13)
----- ----- ----
Earnings Before Income Taxes and
Minority Interest 245 138 379
Income Tax Benefit (Provision) 11 (29) (118)
Minority Interest in Net (Income) Loss of
Subsidiaries (12) 1 -
----- ---- -----
Net Earnings $ 244 $ 110 $ 261
======= ===== =====
Net Earnings Attributable to Class
B&C Stock $ 104 $ 77 $ 80
======= ===== =====
Net Earnings Attributable to Class D Stock $ 140 $ 33 $ 181
======= ===== =====
Net Earnings Per Common and Common
Equivalent Share:
Class B&C $ 7.78 $4.92 $4.63
======= ===== =====
Class D $ 6.45 $1.63 $9.08
======= ====== =====
See accompanying notes to consolidated financial statements.
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 30, 1995 and December 31, 1994
(dollars in millions, except per share data) 1995 1994
Assets
Current Assets:
Cash and cash equivalents $ 457 $ 400
Marketable securities 604 910
Receivables, less allowance of $12 and $9 329 414
Note receivable from sale of discontinued
operations - 29
Costs and earnings in excess of billings on
uncompleted contracts 78 126
Investment in construction joint ventures 73 69
Deferred income taxes 66 74
Other 59 81
---- ----
Total Current Assets 1,666 2,103
Property, Plant and Equipment, at cost:
Land 33 30
Buildings 98 206
Equipment 1,246 1,739
----- -----
1,377 1,975
Less accumulated depreciation and amortization (710) (731)
----- -----
Net Property, Plant and Equipment 667 1,244
Investments 538 313
Intangible Assets, net 515 749
Other Assets 77 83
------- -------
$ 3,463 $ 4,492
======= =======
See accompanying notes to consolidated financial statements.
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 30, 1995 and December 31, 1994
(dollars in millions, except per share data) 1995 1994
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 240 $ 344
Short-term borrowings 45 -
Current portion of long-term debt:
Telecommunications 36 26
Other 6 7
Accrued costs and billings in excess of
revenue on uncompleted contracts 121 143
Accrued insurance costs 79 75
Other 139 206
------ ------
Total Current Liabilities 666 801
Long-Term Debt, less current portion:
Telecommunications 264 827
Other 106 81
Deferred Income Taxes 236 302
Retirement Benefits 54 67
Accrued Reclamation Costs 100 103
Other Liabilities 216 127
Minority Interest 214 448
Stockholders' Equity:
Preferred stock, no par value, authorized
250,000 shares:
no shares outstanding in 1995 and 1994 - -
Common stock, $.0625 par value,
$1.5 billion aggregate redemption value:
Class B, authorized 8,000,000 shares: 263,468
outstanding in 1995 and 1,000,400
outstanding in 1994 - -
Class C, authorized 125,000,000 shares:
10,616,901 outstanding in 1995 and
15,087,028 outstanding in 1994 1 1
Class D, authorized 50,000,000 shares:
23,024,974 outstanding in 1995 and
20,391,568 outstanding in 1994 1 1
Additional paid-in capital 210 182
Foreign currency adjustment (6) (7)
Net unrealized holding gain (loss) 17 (8)
Retained earnings 1,384 1,567
----- -----
Total Stockholders' Equity 1,607 1,736
----- -----
$ 3,463 $ 4,492
======= =======
See accompanying notes to consolidated financial statements
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three years ended December 30, 1995
(dollars in millions) 1995 1994 1993
Cash flows from continuing operations:
Net Earnings $ 244 $ 110 $ 261
Adjustments to reconcile net
earnings to net cash provided by
continuing operations:
Depreciation, depletion and amortization 152 217 99
(Gain) loss on sale of property, plant
and equipment, and other investments (40) 5 23
Gain on subsidiary's stock transactions,
net (3) (54) (211)
Equity (earnings) loss 116 (10) (10)
Noncash interest expense - 40 -
Minority interest in subsidiaries 12 (50) (3)
Decline in market value of investments - - 21
Retirement benefits paid (2) (6) (17)
Deferred income taxes (147) (40) 57
Change in working capital items:
Receivables 3 (49) 9
Other current assets 19 (67) (48)
Payables - 42 47
Other liabilities 80 19 13
Other - 8 45
----- ----- -----
Net cash provided by continuing operations 434 165 286
Cash flows from investing activities:
Proceeds from sales and maturities of
marketable securities 605 1,876 4,927
Purchases of marketable securities (613) (1,718) (5,231)
Acquisitions, excluding cash acquired (231) (254) (146)
Proceeds from sale of cellular properties - 182 -
Proceeds from sale of property, plant and
equipment, and other investments 29 20 38
Capital expenditures (161) (513) (192)
Investments in affiliates (29) (34) (14)
Acquisition of minority interest - (6) (2)
Deferred development costs and other (38) (49) (35)
----- ----- -----
Net cash used in investing activities $ (438) $ (496) $ (655)
See accompanying notes to consolidated financial statements.
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three years ended December 30, 1995
(continued)
(dollars in millions) 1995 1994 1993
Cash flows from financing activities:
Long-term debt borrowings $ 52 $ 693 $ 21
Payments on long-term debt,
including current portion (52) (309) (8)
Net change in short-term borrowings 45 - (80)
Issuances of common stock 25 21 24
Issuances of subsidiaries' stock - 70 458
Repurchases of common stock (6) (31) (54)
Dividends paid (13) (13) (27)
----- ----- -----
Net cash provided by financing activities 51 431 334
Cash flows from discontinued packaging
operations:
Proceeds from sales of discontinued
packaging operations 29 5 110
Other cash provided by
discontinued packaging operations - - 20
----- ----- -----
Net cash provided by discontinued
packaging operations 29 5 130
Cash and cash equivalents of MFS
at beginning of year (22) - -
Effect of exchange rates on cash 3 (1) (2)
----- ----- ------
Net increase in cash and cash equivalents 57 104 93
Cash and cash equivalents at
beginning of year 400 296 203
----- ----- -----
Cash and cash equivalents at end of year $ 457 $ 400 $ 296
===== ===== ======
Supplemental disclosure of cash
flow information:
Taxes $ 201 $ 115 $ 83
Interest 35 41 7
Noncash investing and financing activities:
Dividend of investment in MFS $399 $ - $ -
Issuance of C-TEC redeemable preferred
stock for acquisition 39 - -
Disposition of gold operations in
exchange of Kinross common stock 21 - -
Issuance of MFS stock for acquisitions - 71 -
MFS stock transactions to settle contingent
purchase price adjustment - 25 -
See accompanying notes to consolidated financial statements.
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the three years ended December 30, 1995
Class Class Net
B & C D Additional Foreign Unrealized
Common Common Paid-in Currency Holding Retained
Stock Stock Capital Adjustment Gain (Loss) Earnings Total
(dollars in millions)
Balance at
December 26,
1992 $ 1 $ 1 $ 145 $ 3 $ - $ 1,308 $1,458
Issuances
of stock - - 24 - - - 24
Repurchases
of stock - - (5) - - (49) (54)
Foreign
currency
adjustment - - - (6) - - (6)
Net
unrealized
holding gain - - - - 9 - 9
Net earnings - - - - - 261 261
Dividends:(a)
Class B&C
($.70 per
common share) - - - - - (11) (11)
Class D ($.50
per common
share) - - - - - (10) (10)
----- ----- ---- ---- ---- ---- ----
Balance at
December 25,
1993 1 1 164 (3) 9 1,499 1,671
Issuances of
stock - - 21 - - - 21
Repurchases
of stock - - (3) - - (28) (31)
Foreign
currency
adjustment - - - (4) - - (4)
Net
unrealized
holding
(loss) - - - - (17) - (17)
Net
earnings - - - - - 110 110
Dividends:(b)
Class B&C
($.90 per
common
share) - - - - - (14) (14)
------ ----- ----- ---- ---- ----- -----
Balance at
December
31, 1994 $ 1 $ 1 $ 182 $ (7) $ (8) $ 1,567 $ 1,736
See accompanying notes to consolidated financial statements
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the three years ended December 30, 1995
(continued)
Class Class Net
B & C D Additional Foreign Unrealized
Common Common Paid-in Currency Holding Retained
Stock Stock Capital Adjustment Gain (Loss) Earnings Total
Balance at
December
31, 1994 $ 1 $ 1 $ 182 $ (7) $ (8) $ 1,567 $1,736
Issuances
of stock - - 29 - - - 29
Repurchases
of stock - - (1) - - (5) (6)
Foreign
currency
adjustment - - - 1 - - 1
Net
unrealized
holding gain - - - - 25 - 25
Net earnings - - - - - 244 244
Dividends: (c)
Class B&C
($1.05 per
common
share) - - - - - (12) (12)
Class D
($.50 per
common
share) - - - - - (11) (11)
MFS
Dividend - - - - - (399) (399)
Balance
at
December
30, 1995 $ 1 $ 1 $ 210 $ (6) $ 17 $1,384 $ 1,607
(a)Includes $.40 per share for dividends on Class B&C Stock
declared in 1993 but paid in January 1994.
(b)Includes $.45 per share for dividends on Class B&C Stock
declared in 1994 but paid in January 1995.
(c)Includes $.60 and $.50 per share for dividends on Class B&C
Stock and Class D Stock, respectively, declared in 1995 but
paid in January 1996.
See accompanying notes to consolidated financial statements.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts
of Peter Kiewit Sons', Inc. and subsidiaries in which it
owns more than 50% of the voting stock ("PKS" or "the
Company"), which are engaged in enterprises primarily
related to construction, mining and telecommunications.
Fifty-percent-owned mining joint ventures are consolidated
on a pro rata basis. Investments in other companies in
which the Company exercises significant influence over
operating and financial policies and construction joint
ventures are accounted for by the equity method. In
addition, the Company accounts for its investments in
international energy projects using the equity method. The
Company accounts for its share of the operations of the
construction joint ventures on a pro rata basis in the
consolidated statements of earnings. All significant
intercompany accounts and transactions have been
eliminated.
Construction Contracts
The Company operates generally within North America as a
general contractor and engages in various types of
construction projects for both public and private owners.
Credit risk is minimal with public (government) owners
since the Company ascertains that funds have been
appropriated by the governmental project owner prior to
commencing work on public projects. Most public contracts
are subject to termination at the election of the
government. In the event of termination, the Company is
entitled to receive the contract price on completed work
and reimbursement of termination related costs. Credit
risk with private owners is minimized because of statutory
mechanics liens, which give the Company high priority in
the event of lien foreclosures following financial
difficulties of private owners.
The construction industry is highly competitive and lacks
firms with dominant market power. A substantial portion of
the Company's business involves construction contracts
obtained through competitive bidding. The volume and
profitability of the Company's construction work depends to
a significant extent upon the general state of the
economies in which it operates and the volume of work
available to contractors. The Company's construction
operations could be adversely affected by labor stoppages
or shortages, adverse weather conditions, shortages of
supplies, or other governmental action.
The Company recognizes revenue on long-term construction
contracts and joint ventures on the
percentage-of-completion method based upon engineering
estimates of the work performed on individual contracts.
Provisions for losses are recognized on uncompleted
contracts when they become known. Claims for additional
revenue are recognized in the period when allowed. It is
at least reasonably possible that engineering estimates of
the work performed on individual contracts will be revised
in the near term.
Assets and liabilities arising from construction
activities, the operating cycle of which extends over
several years, are classified as current in the financial
statements. A one-year time period is used as the basis
for classification of all other current assets and
liabilities.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Coal Sales Contracts
The Company's coal is sold primarily under long-term
contracts with electric utilities, which burn coal in order
to generate steam to produce electricity. A substantial
portion of the Company's coal sales were made under long-
term contracts during 1995, 1994 and 1993. The remainder
of the Company's sales are made on the spot market where
prices are substantially lower than those in the long-term
contracts. As the long-term contracts expire, a higher
proportion of the Company's sales will occur on the spot
market.
The coal industry is highly competitive. The Company
competes not only with other domestic and foreign coal
suppliers, some of whom are larger and have greater capital
resources than the Company, but also with alternative
methods of generating electricity and alternative energy
sources. Many of the Company's competitors are served by
two railroads and, due to the competition, often benefit
from lower transportation costs than the Company which is
served by a single railroad. Additionally, many
competitors have lower stripping ratios than the Company,
often resulting in lower comparative costs of production.
The Company is also required to comply with various
federal, state and local laws concerning protection of the
environment. The Company believes its compliance with
environmental protection and land restoration laws will not
affect its competitive position since its competitors are
similarly affected by such laws.
The Company and its mining ventures have entered into
various agreements with its customers which stipulate
delivery and payment terms for the sale of coal. Prior to
1993, one of the primary customers deferred receipt of
certain commitments by purchasing undivided fractional
interests in coal reserves of the Company and the mining
ventures. Under the arrangements, revenue was recognized
when cash was received. The agreements with this customer
were renegotiated in 1992. In accordance with the
renegotiated agreements, there were no sales of interests
in coal reserves subsequent to January 1, 1993. The Company
has the obligation to deliver the coal reserves to the
customer in the future if the customer exercises its
option. If the option is exercised, the Company presently
intends to deliver coal from unaffiliated mines and a mine
in which the Company has a 50% interest. In the opinion of
management, the Company has sufficient coal reserves to
cover the above sales commitments.
The Company's coal sales contracts are with several
electric utility and industrial companies. In the event
that these customers do not fulfill contractual
responsibilities, the Company would pursue the available
legal remedies.
Telecommunications Revenues
C-TEC Corporation's ("C-TEC"), most significant operating
groups are its local telephone service and cable system
operations. C-TEC's telephone network access revenues are
derived from net access charges, toll rates and settlement
arrangements for traffic that originates or terminates
within C-TEC's local telephone company. Revenues from
telephone services and basic and premium cable programming
services are recorded in the month the service is provided.
The telecommunications industry is subject to local, state
and federal regulation. Consequently, the ability of the
telephone and cable groups to generate increased volume and
profits is largely
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
dependent upon regulatory approval to expand customer
bases, increase prices and limit expenses.
Competition for the cable group's services traditionally
has come from broadcast television, video rentals and
direct broadcast satellite received on home dishes. Future
competition is expected from telephone companies.
Concentration of credit risk with respect to accounts
receivable are limited due to the dispersion of customer
base among geographic areas and remedies provided by terms
of contracts and statutes.
Depreciation and Amortization
Property, plant and equipment are recorded at cost.
Depreciation and amortization for the majority of the
Company's property, plant and equipment are computed on
accelerated and straight-line methods. Depletion of
mineral properties is provided primarily on an
units-of-extraction basis determined in relation to
estimated reserves.
In accordance with industry practice, certain telephone
plant owned by C-TEC valued at $233 million is depreciated
based on the estimated remaining lives of the various
classes of depreciable property and straight-line composite
rates. When property is retired, the original cost, plus
cost of removal, less salvage, is charged to accumulated
depreciation.
Intangible Assets
Intangible assets primarily include amounts allocated upon
purchase of existing operations, franchise and subscriber
lists and development costs. These assets are amortized on
a straight-line basis over the expected period of benefit,
which does not exceed 40 years.
The Company reviews the carrying amount of intangible
assets for impairment whenever events or changes in cir-
cumstances indicate that the carrying amount may not be
recoverable. Measurement of any impairment would include a
comparison of estimated future operating cash flows
anticipated to be generated during the remaining life of
the asset to the net carrying value of the asset.
Pension Plans
The Company maintains defined benefit plans primarily for
packaging employees who retired prior to the disposition of
the packaging operations. Benefits paid under the plans
are based on years of service for hourly employees and
years of service and rates of pay for salaried employees.
Substantially all of C-TEC's employees are included in a
trusteed noncontributory defined benefit plan. Upon
retirement, employees are provided a monthly pension based
on length of service and compensation.
The plans are funded in accordance with the requirements of
the Employee Retirement Income Security Act of 1974.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Reserves for Reclamation
The Company follows the policy of providing an accrual for
reclamation of mined properties, based on the estimated
cost of restoration of such properties, in compliance with
laws governing strip mining. It is at least reasonably
possible that the estimated cost of restoration will be
revised in the near-term.
Foreign Currencies
The local currencies of foreign subsidiaries are the
functional currencies for financial reporting purposes.
Assets and liabilities are translated into U.S. dollars at
year-end exchange rates. Revenue and expenses are
translated using average exchange rates prevailing during
the year. Gains or losses resulting from currency
translation are recorded as adjustments to stockholders'
equity.
Subsidiary Stock Sales and Issuances
The Company recognizes gains and losses from the sales and
issuances of stock by its subsidiaries.
Earnings Per Share
Primary earnings per share of common stock have been
computed using the weighted average number of shares
outstanding during each year. Fully diluted earnings per
share have not been presented because it is not materially
different from primary earnings per share. The number of
shares used in computing earnings per share were as
follows:
1995 1994 1993
Class B & C 13,384,434 15,697,724 17,290,971
Class D 21,718,792 20,438,806 19,941,885
Income Taxes
Deferred income taxes are provided for the differences
between the financial reporting and tax basis of the
Company's assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected
to reverse.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Reclassifications
Where appropriate, items within the consolidated financial
statements and notes thereto have been reclassified from
previous years to conform to current year presentation.
Fiscal Year
The Company's fiscal year ends on the last Saturday in
December. There were 52 weeks in fiscal years 1995 and
1993 and 53 weeks in the fiscal year 1994.
C-TEC has a calendar fiscal year.
(2) MFS Spin-off
The PKS Board of Directors approved a plan to make a tax-
free distribution of its entire ownership interest in MFS
Communications Company, Inc. ("MFS"), effective September
30, 1995, to the Class D stockholders (the "Spin-off") at a
special meeting on September 25, 1995.
The Spin-off was completed after PKS and Kiewit Diversified
Group, Inc., a wholly owned first tier subsidiary of PKS
("KDG"), agreed with MFS to effect a recapitalization of MFS
pursuant to which KDG exchanged a portion of the MFS Common
Stock held by KDG for certain high-vote convertible
preferred stock. In addition, prior to completing the Spin-
off, PKS purchased additional shares of MFS Common Stock
which were subsequently distributed to the Class D
stockholders.
PKS completed an exchange offer prior to the Spin-off
whereby 4,000,000 shares of Class B Stock and Class C Stock
(Class B&C") were exchanged for 1,666,384 shares of Class
D Stock on terms similar to those under which Class B&C
Stock can be converted into Class D Stock during the annual
conversion period provided for in the Company's Certificate
of Incorporation. The conversion ratio used in the exchange
was calculated using final 1994 stock prices adjusted for
1995 dividends.
After the recapitalization of MFS and the exchange offer
discussed above, shares were distributed on the basis of
approximately 1.741 shares of MFS Common Stock and
approximately .651 shares of MFS Preferred Stock for each
share of outstanding Class D Stock.
The net investment in MFS distributed on September 30, 1995
was approximately $399 million.
The results of operations of MFS have been classified as a
single line item on the statements of earnings for the
three years ended December 30, 1995. MFS is consolidated
in the 1994 balance sheet and the 1994 and 1993 statements
of cash flows.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Operating results of MFS through September 30, 1995 and for
fiscal years 1994 and 1993 are summarized as follows:
(dollars in millions) 1995 1994 1993
Revenue $ 412 $ 287 $ 141
Loss from operations (176) (136) (31)
Net loss (196) (151) (16)
PKS' share of loss in MFS (131) (102) (13)
Included in the income tax benefit on the consolidated
statement of earnings for the year ended December 30, 1995,
is $93 million of tax benefits from the reversal of certain
deferred tax liabilities, recognized on gains from previous
MFS stock transactions, that will not be taxed due to the
Spin-off.
(3) Acquisitions
During 1995, the Company and its subsidiaries acquired the
entities described below. The Company has accounted for
the transactions as purchases and consolidated the
operating results since the acquisition dates. Purchase
prices in excess of the fair market values of net assets
acquired have been recorded as goodwill, in intangible
assets.
C-TEC completed the first step of an acquisition of Twin
County Trans Video, Inc. ("Twin County") in May 1995. Twin
County provides cable television service to 74,000
subscribers in eastern Pennsylvania. In consideration for
40% of the capital stock of Twin County, C-TEC paid $26
million in cash and issued a $4 million note of its
subsidiary, C-TEC Cable Systems, Inc. In addition, C-TEC
paid $11 million in consideration of a noncompete
agreement. The remaining outstanding common stock of Twin
County was acquired in September 1995 in exchange for $52
million stated value redeemable preferred stock of C-TEC.
The preferred stock has a stated dividend rate of 5%,
beginning January 1, 1996. The fair value of the preferred
stock, as determined by an independent appraiser, is $39
million and is recorded in other liabilities. Goodwill of
$18 million is being amortized over 10 years.
Pursuant to a stock rights offering in August 1995, C-TEC
acquired majority voting control of Mercom, Inc. ("Mercom")
through the exercise of stock rights and over subscription
privileges. Immediately prior to the rights offering, C-
TEC owned 43% of the outstanding common stock of Mercom and
accounted for it under the equity method. For the
aggregate consideration of approximately $7 million, C-TEC
increased its ownership interest to 62% and accordingly
consolidated Mercom in its financial statements. C-TEC's
total investment exceeded the underlying equity of Mercom
by $11 million which is amortized over 15 years.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
The following unaudited pro forma information shows the
results of the Company as though the C-TEC acquisitions
occurred at the beginning of 1995 and 1994. These results
include certain adjustments, primarily increased
amortization, and do not necessarily indicate future
results, nor the results of historical operations had the
acquisitions actually occurred on the assumed dates.
(in millions, except per share data) 1995 1994
Revenue $ 2,920 $ 2,741
Net Earnings 239 102
Earnings Per Share of Class D Stock 6.23 1.26
(4) Gain on Subsidiary's Stock Transactions, net
In May 1993, MFS sold 12.7 million shares of common stock
to the public at an initial offering price of $20 per share
for $233 million, net of certain transaction costs. An
additional 4.6 million shares were sold to the public in
September 1993, at a price of $50 per share for $218
million, net of certain transaction costs. Substantially
all of the net proceeds from the offerings funded MFS'
growth.
In 1994, the Company settled a contingent purchase price
adjustment resulting from MFS' 1990 purchase of Chicago
Fiber Optic Corporation ("CFO"). The former shareholders
of CFO accepted MFS stock previously held by the Company,
valued at current market prices, as payment of the
obligation.
The above transactions, along with the stock issuances by
MFS for acquisitions and employee stock options, reduced
the Company's ownership in MFS to 71%, 67% and 66% at the
end of 1993, 1994 and at September 30, 1995. As a result,
the Company recognized gains of $211 million, $54 million
and $3 million in 1993, 1994 and 1995 representing the
increase in its proportionate share of MFS equity.
Deferred income taxes had been established on these gains
prior to the Spin-off.
(5) Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to
determine classification and fair values of financial
instruments:
Cash and Cash Equivalents
Cash equivalents generally consist of highly liquid
instruments purchased with an original maturity of three
months or less. The securities are stated at cost, which
approximates fair value.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Marketable Securities and Non-current Investments
The Company has classified all marketable securities and
non-current investments not accounted for under the equity
method as available-for-sale. The amortized cost of the
securities used in computing unrealized and realized gains
and losses is determined by specific identification. Fair
values are estimated based on quoted market prices for the
securities on hand or for similar investments. Fair values
of certificates of deposit approximate cost. Net
unrealized holding gains and losses are reported as a
separate component of stockholders' equity, net of tax.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
The following summarizes the cost, unrealized holding gains
and losses, and estimated fair values of marketable
securities and non-current investments at December 30, 1995
and December 31, 1994.
Unrealized Unrealized
Amortized Holding Holding Fair
(dollars in millions) Cost Gains Losses Value
1995
Kiewit Mutual Fund:
Short-term government $ 121 $ 2 $ - $ 123
Intermediate term bond 90 5 - 95
Tax exempt 138 4 - 142
Equity 10 2 - 12
Equity securities 8 3 - 11
U.S. debt securities 58 - - 58
Federal agency securities 8 - - 8
Municipal debt securities 14 - - 14
Corporate debt securities 134 - - 134
Collateralized mortgage
obligations - 2 - 2
Certificates of deposit 5 - - 5
---- ---- ---- ----
$ 586 $ 18 $ - $ 604
===== ====== ===== =====
Non-current Investments:
Equity securities $ 68 $ 10 $ - $ 78
===== ===== ===== =====
1994
Kiewit Mutual Fund:
Short-term government $ 69 $ - $ 1 $ 68
Intermediate term bond 232 - 5 227
Tax exempt 39 - 1 38
Equity securities 4 - 1 3
U.S. Debt securities 322 - 3 319
Federal agency securities 77 - - 77
Municipal debt securities 15 - - 15
Corporate debt securities 145 - 2 143
Collateralized mortgage
obligations 12 1 3 10
Certificates of deposit 10 - - 10
----- ---- ---- ----
$ 925 $ 1 $ 16 $910
===== ===== ==== ====
Non-current Investments:
Equity securities $ 59 $ 5 $ 2 $ 62
===== ===== ==== ====
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
For debt securities, amortized costs do not vary
significantly from principal amounts. Realized gains and
losses on sales of marketable securities were $1
million and $3 million in 1995, $2 million and $18 million
in 1994 and $31 million and $64 million in 1993.
At December 30, 1995 the contractual maturities of the debt
securities are as follows:
(dollars in millions) Amortized Cost Fair Value
U.S. debt securities:
Less than 1 year $ 42 $ 42
1-5 years 16 16
-------- -------
$ 58 $ 58
======== ========
Federal agency securities:
Less than 1 year $ 8 $ 8
======== =======
Municipal debt securities:
1-5 years $ 11 $ 11
5-10 years - -
Over 10 years 3 3
------- -------
$ 14 $ 14
======== ========
Corporate debt securities:
Less than 1 year $ 33 $ 33
1-5 years 81 81
5-10 years 20 20
------- -------
$ 134 $ 134
======= =======
Certificates of deposit:
Less than 1 year $ 4 $ 4
1-5 years 1 1
------- -------
$ 5 $ 5
======= =======
Maturities for the mutual fund, equity securities and
collateralized mortgage obligations have not been presented as
they do not have a single maturity date.
Short-term Borrowings.
Short-term borrowings approximate fair value due to the
short period of time to maturity.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Long-term Debt
The fair value of debt was estimated using the incremental
borrowing rates of the Company for debt of the same
remaining maturities. With the exception of C-TEC, the fair
value of debt approximates the carrying amount. C-TEC's Senior
Secured Notes and the Credit Agreement with National Bank
for Cooperatives have an aggregate fair value of $253
million.
(6) Retainage on Construction Contracts
Marketable securities at December 30, 1995 and December 31,
1994 include approximately $62 million and $61 million of
investments which are being held by the owners of various
construction projects in lieu of retainage.
Receivables at December 30, 1995 and December 31, 1994
include approximately $50 million and $48 million of
retainage on uncompleted projects, the majority of which is
expected to be collected within one year.
(7) Investment in Construction Joint Ventures
The Company has entered into a number of construction joint
venture arrangements. Under these arrangements, if one
venturer is financially unable to bear its share of the
costs, the other venturers will be required to pay those
costs.
Summary joint venture financial information follows:
Financial Position (dollars in millions) 1995 1994
Total Joint Ventures
Current assets $ 655 $ 563
Other assets (principally construction
equipment) 52 50
------- -------
707 613
Current liabilities (584) (503)
------- -------
Net assets $ 123 $ 110
======= ======
Company's Share
Equity in net assets $ 67 $ 67
Receivable from joint ventures 6 2
------- ------
Investment in construction joint ventures $ 73 $ 69
======= ======
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Operations (dollars in millions) 1995 1994 1993
Total Joint Ventures
Revenue $ 1,211 $ 1,034 $ 906
Costs 1,108 937 841
------- ------- -----
Operating income $ 103 $ 97 $ 65
======= ======= =====
Company's Share
Revenue $ 691 $ 523 $ 430
Costs 622 473 372
------- ------ -----
Operating income $ 69 $ 50 $ 58
======= ====== =====
Management of the nonsponsored Denmark tunnel project
completed a cost estimate in 1993 which indicated a
favorable variance in the estimated costs of the project. As
a result of this cost estimate and negotiations with the
owner, the Company's management reduced reserves by $20
million which had been maintained to provide for the
Company's share of estimated losses on the project. Based on
1995 estimates, management believes that the resolution of
the uncertainties in completing the tunnel should not
materially affect the Company's financial position, future
results of operations or future cash flows.
(8) Investments
In February 1995, CalEnergy Company, Inc. ("CE"), formerly
named California Energy Company Inc., an equity method
investee, completed the purchase of Magma Power Company.
The cash transaction, valued at $950 million, was partially
financed by the sale of 17 million shares of CE common stock
at $17 per share. As part of this offering, the Company
purchased 1.5 million shares. In addition, during the
second quarter of 1995, the Company purchased an additional
200,000 common shares of CE. At December 30, 1995, the
Company owns 21% of CE's outstanding common stock and has a
cumulative investment in CE common stock of $153 million,
$37 million in excess of the Company's proportionate share
of CE's equity. The excess investment is being amortized
over 20 years. Equity earnings, net of goodwill
amortization, were $10 million, $5 million and $7 million in
1995, 1994 and 1993. CE common stock is traded on the New
York Stock Exchange. On December 30, 1995, the market value
of the Company's investment in CE common stock was $211
million.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
In 1995, 1994 and 1993, the Company also recorded dividends
in kind of $1 million, $5 million and $5 million declared by
CE consisting of voting convertible preferred stock. The
stock dividends brought the Company's total investment in
convertible preferred stock to $65 million. In March 1995,
CE exchanged the preferred stock for 9.5% Convertible
Subordinated Debentures (the "Debentures") that pay interest
semi-annually. The Debentures mature in December 2003 and
are convertible into CE common stock at a conversion price
of $18.375 per share any time prior to maturity. CE may
prepay the Debentures if the share price of CE stock is at
least 150% of the conversion price for any 20 trading days
out of any 30 consecutive trading days.
On February 20, 1996 the Company exercised 1.5 million CE
options at a price of $9 per share. The transaction
increased the Company's ownership interest in CE to 24%. In
addition, the Company has 4.3 million options to purchase
additional CE stock at prices of $11.625 - $12 per share
The following is summarized financial information of
CalEnergy Company Inc.:
Financial Position (dollars in millions) 1995 1994
Current assets $ 418 $ 518
Other assets 2,236 613
-------- ------
Total assets 2,654 1,131
Current liabilities 564 309
Other liabilities 1,546 578
Redeemable preferred stock - 64
------ ----
Total liabilities 2,110 951
------ ----
Net assets $ 544 $ 180
======== =====
Operations (dollars in millions) 1995 1994 1993
Revenue $ 399 $ 186 $ 132
====== ===== =====
Net income available to common
stockholders $ 62 $ 32 $ 43
====== ===== =====
In 1995, a $3 million purchase increased the Company's
interest in an electrical contracting business to 49%. The
cumulative investment in common stock, accounted for on the
equity method, totals $26 million, $3 million in excess of
the Company's share of equity. The excess investment is
being amortized over 15 years. The contracting business is
not publicly traded and does not have a readily determinable
market value. The Company is committed to acquire 80%
ownership by 1997.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
In January 1995, C-TEC purchased, for $84 million in cash, a
40% equity position in Megacable, S.A. De C.V.
("Megacable"), Mexico's second largest cable television
operator with 174,000 subscribers in twelve cities. C-TEC
accounts for its investment using the equity method. The
excess cost over the underlying net assets of Megacable,
approximately $94 million, is being amortized on a straight
line basis over 15 years. C-TEC's share of Megacable's
earnings, net of goodwill amortization was a $3 million loss
in 1995.
Pursuant to a joint venture agreement with CE, the Company
is an equity investor in the Mahanagdong geothermal
power project and the Casecnan power/irrigation project in
the Philippines. Both projects are under construction. To
date the Company has invested $89 million in the Philippine
projects. The Company also expects to be an equity investor
with CE in additional geothermal projects in Indonesia. To
date investments in these projects total $9 million.
Investments also include equity securities classified as
non-current and carried at the fair value of $78 million.
(9) Intangible Assets
Intangible assets consist of the following at December 30, 1995
and December 31, 1994:
(dollars in million) 1995 1994
Goodwill $ 216 $ 483
Franchise and subscriber lists 224 145
Licenses and right-of-way - 15
Noncompete agreements 86 15
Deferred development costs 47 65
Toll road franchise costs 109 75
Other 4 19
---- -----
686 817
Less accumulated amortization (171) (68)
----- -----
$ 515 $ 749
===== =====
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
(10) Short-Term Borrowings
The Company has established lines of credit with Union Bank
of Switzerland for $35 million, Bank of America for $50
million and Banque de Nationale de Paris for $30 million.
Under these agreements the Company had $45 million
outstanding at December 30, 1995 at a weighted average
interest rate of 5.78%.
(11) Long-Term Debt
At December 30, 1995 and December 31, 1994, long-term debt
was as follows:
(dollars in millions) 1995 1994
Telecommunications:
C-TEC Long-term Debt (with recourse only to C-TEC):
Credit Agreement - National Bank for Cooperatives
(7.51% due 2009) $ 119 $ 128
Senior Secured Notes -
( 9.65% due 1999)
(includes unamortized premium of $5 and $6 based on
imputed rate of 6.12%) 150 156
Term Credit Agreement - Morgan Guaranty Trust Company
(7% due 2002) 19 -
Promissory Note - Twin County Acquisition
(5% due 2003) 4 -
Revolving Credit Agreements and Other 8 4
MFS Long-term Debt (with recourse only to MFS):
9.375% Senior Discount Notes, Due 2004,
with semi-annual interest payments 1999-2004 - 549
Notes Payable, Due 1995, (Prime plus 1.5%) - 16
----- -----
300 853
Other PKS Long-term Debt:
9.5% to 11.1% Notes to former stockholders due 1996-2001 6 12
6.25% to 8.75% Convertible debentures due 2002-2005 8 8
Construction loans and other 98 68
---- ----
112 88
---- ----
412 941
Less current portion (42) (33)
---- -----
$ 370 $ 908
===== =====
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
In March 1994, C-TEC's telephone group entered into a $135
million Credit Agreement with the National Bank for
Cooperatives ("National"). The funds were used to prepay
outstanding borrowings with the United States of America.
Substantially all the assets of C-TEC's telephone group are
subject to liens under this Credit Agreement. In addition,
the telephone group is restricted from paying dividends in
excess of the prior year net income.
The Senior Secured notes are collateralized by pledges of
the stock of C-TEC's cable group. The notes contain
restrictive covenants which require, among other things,
specific debt to cash flow ratios.
Mercom, a consolidated subsidiary of C-TEC, has pledged the
common stock of its operating subsidiaries as collateral for
the Term Credit Agreement ("Agreement") with Morgan Guaranty
Trust Company ("Morgan"). In addition, a first lien on
certain material assets of Mercom and its subsidiaries has
been granted to Morgan. The Agreement contains a
restrictive covenant which requires Mercom to maintain a
specified debt to cash flow ratio.
In connection with the acquisition of Twin County Trans
Video, Inc., C-TEC Cable Systems, Inc., a wholly owned
subsidiary of C-TEC, issued a $4 million 5% promissory note.
The note is unsecured.
C-TEC's cable group has Revolving Credit agreements which
are collateralized by a pledge of the stock of the cable
group subsidiaries. At December 30, 1995 the borrowings
available under the agreement total $12 million. The
commitments are reduced on a quarterly basis through
maturity in September 1996. The cable group had borrowings
of $7 million (6.7% weighted average interest rate) as of
December 1995.
The convertible debentures are convertible during October of
the fifth year preceding their maturity date. Each annual
series may be redeemed in its entirety prior to the due date
except during the conversion period. Debentures were
converted into 59,935, 12,594 and 14,322 shares of Class C
common stock and 69,022, 12,594 and 14,322 shares of Class
D common stock in 1995, 1994 and 1993 . As part of the
exchange offer completed prior to the MFS Spin-off, all
holders of 1990 and 1991 debentures and 1993 D debentures
converted their debentures into Class C and Class D common
stock. At December 30, 1995, 360,453 shares of Class C
common stock are reserved for future conversions.
Other PKS debt consists primarily of construction financing
of a privately owned toll road which will be converted to
term debt upon completion of the project. Variable interest
rates on this debt ranged from 7% to 10% at December 30,
1995. The Company capitalized $7 million of interest in
1995.
Scheduled maturities of long-term debt through 2000 are as
follows (in millions): 1996 - $42; 1997 - $57; 1998 - $63;
1999 - $64 and $17 in 2000.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
(12) Income Taxes
An analysis of the income tax benefit (provision) before
minority interest for the three years ended December 30,
1995 follows:
(dollars in millions) 1995 1994 1993
Current:
U.S. federal $ (127) $ (54) $ (52)
Foreign - (10) (2)
State (9) (5) (7)
------ ----- ------
(136) (69) (61)
Deferred:
U.S. federal 146 27 (59)
Foreign (4) 5 1
State 5 8 1
------- ----- -----
147 40 (57)
------- ----- -----
$ 11 $ (29) $ (118)
====== ====== ======
The United States and foreign components of earnings, for
tax reporting purposes, before equity loss in MFS (recorded
net of tax), minority interest and income taxes follow:
(dollars in millions) 1995 1994 1993
United States $ 370 $ 224 $ 385
Foreign 6 16 7
------ ------ -----
$ 376 $ 240 $ 392
====== ======= =====
A reconciliation of the actual income tax benefit
(provision) and the tax computed by applying the U.S.
federal rate (35%) to the earnings before equity loss in MFS
(recorded net of tax), minority interest and income taxes
for the three years ended December 30, 1995 follows:
(dollars in millions) 1995 1994 1993
Computed tax at statutory rate $ (132) $ (84) $ (137)
State income taxes (8) (3) (4)
Depletion 3 4 4
Dividend exclusion - 3 4
Tax exempt interest 3 4 -
Prior year tax adjustments 56 54 13
MFS deferred tax 93 - -
Goodwill amortization (4) (2) 1
Other - (5) 1
------- ------- ------
$ 11 $ (29) $ (118)
======= ======= =======
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
The Company files a consolidated federal income tax return
including its domestic subsidiaries as allowed by the
Internal Revenue Code. Possible taxes, beyond those provided
on remittances of undistributed earnings of foreign
subsidiaries, are not expected to be material.
The components of the net deferred tax liabilities for the
years ended December 30, 1995 and December 31, 1994
were as follows:
(dollars in millions) 1995 1994
Deferred tax liabilities:
Investments in securities $ 15 $ (5)
Investments in joint ventures 8 69
Investments in subsidiaries 10 99
Asset bases - accumulated depreciation 194 200
Deferred coal sales 39 11
Other 26 32
------- -------
Total deferred tax liabilities 292 406
Deferred tax assets:
Construction accounts 3 12
Insurance claims 37 39
Compensation - retirement benefits 28 21
Provision for estimated expenses 24 10
Net operating losses of subsidiaries 5 84
Alternative minimum tax credits of
subsidiary 5 13
Other 26 51
Valuation allowance (6) (52)
------- --------
Total deferred tax assets 122 178
------- --------
Net deferred tax liabilities $ 170 $ 228
======= ========
(13) Employee Benefit Plans
The Company makes contributions, based on collective
bargaining agreements related to its construction
operations, to several multi-employer union pension plans.
These contributions are included in the cost of revenue.
Under federal law, the Company may be liable for a portion
of plan deficiencies; however, there are no known
deficiencies.
The Company's defined benefit pension plans cover primarily
packaging employees who retired prior to the disposition of
the packaging operations. The expense related to these
plans was approximately $7 million, $1 million and $7
million in 1995, 1994 and 1993.
C-TEC maintains a separate defined benefit plan for
substantially all of its employees. The prepaid pension
cost and expense related to this plan is not significant at
December 30, 1995 and December 31, 1994, and for the three
years ended December 30, 1995.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
The Company also had a long-term incentive plan, consisting
of stock appreciation rights, for certain employees. This
plan concluded in 1994. The expense related to this plan
was $2 million and $3 million in 1994 and 1993.
Substantially all employees of the Company, with the
exception of C-TEC employees, are covered under the
Company's profit sharing plans. The expense related to these
plans was $3 million, $2 million and $2 million in 1995,
1994 and 1993.
(14) Postretirement Benefits
In addition to providing pension and other supplemental
benefits, the Company provides certain health care and life
insurance benefits primarily for packaging employees who
retired prior to the disposition of certain packaging
operations and C-TEC employees who retired prior to 1993.
Employees become eligible for these benefits if they meet
minimum age and service requirements or if they agree to
contribute a portion of the cost. These benefits have not
been funded.
In March 1995, the Company settled its liability with
respect to certain postretirement life insurance benefits.
The Company purchased insurance coverage from a third party
insurance company for approximately $14 million to be paid
over seven years. The settlement did not have a material
impact on the Company's financial position, results of
operations or cash flows.
The net periodic costs for health care benefits were less
than $1 million in 1995, $1 million in 1994 and $4 million
in 1993. In all years, the costs related primarily to
interest on accumulated benefits.
The accrued postretirement benefit liability as of December
30, 1995 was as follows:
Health
(dollars in millions) Insurance
Retirees $ 31
Fully eligible active plan participants -
Other active plan participants -
------
Total accumulated postretirement
benefit obligation 31
Unrecognized prior service cost 19
Unrecognized net loss (7)
------
Accrued postretirement benefit liability $ 43
======
The unrecognized prior service cost resulted from certain
modifications to the postretirement benefit plan for
packaging employees which reduced the accumulated
postretirement benefit obligation. The Company may make
additional modifications in the future.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
A 7.7% increase in the cost of covered health care benefits
was assumed for fiscal 1995. This rate is assumed to
gradually decline to 6.2% in the year 2020 and remain at
that level thereafter. A 1% increase in the health care
trend rate would increase the accumulated postretirement
benefit obligation ("APBO") by less than $1 million at
year-end 1995. The weighted average discount rate used in
determining the APBO was 6.75%.
(15) Stockholders' Equity
Class B and Class C shares can be issued only to Company
employees and can be resold only to the Company at a formula
price based on the book value of the Construction & Mining
Group. The Company is generally required to repurchase
Class B and Class C shares for cash upon stockholder demand.
Class D shares have a formula price based on the book value
of the Diversified Group. The Company must generally
repurchase Class D shares for cash upon stockholder demand
at the formula price, unless the Class D shares become
publicly traded. Although almost all the Class D shares are
owned by employees and former employees, such shares are not
subject to ownership or transfer restrictions.
For the three years ended December 30, 1995, issuances
and repurchases of common shares, including conversions,
were as follows:
Class B Class C Class D
Common Common Common
Stock Stock Stock
Shares issued in 1993 - 1,027,657 748,026
Shares repurchased in 1993 76,600 2,217,122 841,808
Shares issued in 1994 - 1,018,144 777,556
Shares repurchased in 1994 180,000 2,247,186 396,684
Shares issued in 1995 - 1,021,875 2,675,553
Shares repurchased in 1995 736,932 5,492,002 42,147
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
(16) Industry and Geographic Data
The Company operates primarily in three reportable
segments: construction, mining and telecommunications.
MFS' results have been classified as a single line item on
the statements of earnings and consolidated on the balance
sheet in 1994 and 1993.
A summary of the Company's operations by geographic area
and industry follows:
Geographic Data (dollars in millions) 1995 1994 1993
Revenue:
United States $ 2,535 $ 2,425 $ 1,823
Canada 281 233 175
Other 86 46 52
------- ------- -------
$ 2,902 $ 2,704 $ 2,050
======= ======= =======
Operating earnings:
United States $ 145 $ 151 $ 129
Canada 7 14 3
Other 10 - 22
------- ------- -------
$ 162 $ 165 $ 154
======= ======= =======
Identifiable assets:
United States $ 2,521 $ 3,832 $ 2,901
Canada 90 102 82
Other 116 27 29
Corporate (1) 736 531 622
------- ------- -------
$ 3,463 $ 4,492 $ 3,634
======= ======= =======
(1) Principally cash, cash equivalents, marketable
securities, notes receivable from sales of discontinued
operations and investments in all years.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
Industry Data (dollars in millions) 1995 1994 1993
Revenue:
Construction $ 2,297 $ 2,143 $ 1,757
Mining 247 246 230
Telecommunications 325 291 48
Other 33 24 15
------- ------- -------
$ 2,902 $ 2,704 $ 2,050
======= ======= =======
Operating earnings:
Construction $ 81 $ 55 $ 85
Mining 107 106 98
Telecommunications 37 27 6
Other (63) (23) (35)
------- ------- -------
$ 162 $ 165 $ 154
======= ======= =======
Identifiable assets:
Construction $ 910 $ 896 $ 816
Mining 415 396 440
Telecommunications 1,141 2,551 1,682
Other 261 118 74
Corporate (1) 736 531 622
------- ------ ------
$ 3,463 $ 4,492 $ 3,634
======= ======= =======
Capital expenditures:
Construction $ 79 $ 61 $ 48
Mining 4 3 5
Telecommunications 72 426 127
Other 6 12 5
Corporate - 11 7
------- ------ -------
$ 161 $ 513 $ 192
======= ======= =======
Depreciation, depletion and amortization:
Construction $ 56 $ 49 $ 43
Mining 7 11 13
Telecommunications 81 149 35
Other 5 6 6
Corporate 3 2 2
------- ------- ------
$ 152 $ 217 $ 99
======= ======= =======
(1) Principally cash, cash equivalents, marketable
securities, notes receivable from sales of discontinued
operations and investments in all years.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
(17) Summarized Financial Information
Holders of Class B&C Stock (Construction & Mining Group) and
Class D Stock (Diversified Group) are stockholders of PKS.
The Construction & Mining Group contains the Company's
traditional construction and materials operations performed
by Kiewit Construction Group Inc. and certain mining
services performed by Kiewit Mining Group Inc. The
Diversified Group contains coal mining properties owned by
Kiewit Coal Properties Inc., communications companies owned
by C-TEC, a minority interest in CE and miscellaneous
investments. Corporate assets and liabilities which are not
separately identified with the ongoing operations of the
Construction & Mining Group or the Diversified Group are
allocated equally between the groups.
A summary of the results of operations and financial
position for the Construction & Mining Group and the
Diversified Group follows. These summaries were derived
from the audited financial statements of the respective
groups which are exhibits to this Annual Report.
All significant intercompany accounts and transactions,
except those directly between the Construction & Mining
Group and the Diversified Group, have been eliminated.
(dollars in millions except per share) 1995 1994 1993
Construction & Mining Group:
Results of Operations:
Revenue $ 2,330 $ 2,175 $ 1,783
======= ======= =======
Net Earnings $ 104 $ 77 $ 80
======= ======= =======
Earnings Per Share $ 7.78 $ 4.92 $ 4.63
======= ======= =======
Working capital $ 248 $ 333 $ 372
Total assets 987 963 889
Long-term debt,less current portion 9 9 10
Stockholders' equity 467 505 480
Included within the results of operations is mine management
income from the Diversified Group of $19 million, after-tax, in 1995,
1994 and 1993.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
(dollars in millions except share data) 1995 1994 1993
Diversified Group:
Results of Operations:
Revenue $ 580 $ 537 $ 267
====== ===== =====
Net Earnings $ 140 $ 33 $ 181
====== ===== =====
Earnings per Share $ 6.45 $1.63 $9.08
====== ===== =====
Financial Position:
Working capital $ 752 $ 969 $ 993
Total assets 2,490 3,537 2,759
Long-term debt, less current portion 361 899 452
Stockholders' equity 1,140 1,231 1,191
Included within results of operations is mine management fees paid
to the Construction & Mining Group of $19 million, after-tax, in 1995,
1994 and 1993.
(18) Other Matters
In June 1995, the Company exchanged its interest in a wholly-
owned subsidiary involved in gold mining activities for
4,000,000 common shares of Kinross Gold Corporation
("Kinross"), a publicly traded corporation. The Company
recognized a $21 million pre-tax gain on the exchange based
on the difference between the book value of the subsidiary
and the fair market value of the Kinross stock on the date
of the transaction. This gain is included in other income
in the consolidated statements of earnings.
In May 1995, the lawsuit titled Whitney Benefits, Inc. and
Peter Kiewit Sons' Co. v. The United States was settled.
In 1983, plaintiffs alleged that the enactment of the
Surface Mining Control and Reclamation Act of 1977 had
prevented the mining of their Wyoming coal deposits and
constituted a government taking without just compensation.
In settlement of all claims, plaintiffs agreed to deed the
coal deposits to the government and the government agreed to
pay plaintiffs $200 million, of which Peter Kiewit Sons'
Co., a KDG subsidiary, received approximately $135 million
in June 1995 and recorded it in other income on the
consolidated statement of earnings.
In 1994, several former stockholders of a MFS subsidiary
filed a lawsuit against MFS, KDG and the chief executive
officer of MFS, in the United States District Court for the
Northern District of Illinois, Case No. 94C-1381. These
shareholders sold shares of the subsidiary to MFS in
September 1992. MFS completed an initial public offering in
May 1993. Plaintiffs allege that MFS fraudulently
concealed material information about its plans from them,
causing them to sell their shares at an inadequate price.
Plaintiffs have alleged damages of at least $100 million.
Defendants have meritorious defenses and intend to
vigorously contest this lawsuit. Defendants expect that a
trial will be held in 1996. Prior to the initial public
offering, KDG agreed to indemnify MFS against any
liabilities arising from the September 1992 sale; if MFS is
deemed to be liable to plaintiffs, KDG will be required to
satisfy MFS' liabilities pursuant to the indemnity
agreement.
PETER KIEWIT SONS', INC.
Notes to Consolidated Financial Statements
The Company is involved in various other lawsuits, claims
and regulatory proceedings incidental to its business.
Management believes that any resulting liability, beyond
that provided, should not materially affect the Company's
financial position, future results of operations or future
cash flows.
In many pending proceedings, the Company is one of numerous
defendants who may be "potentially responsible parties"
liable for the cleanup of hazardous substances deposited in
landfills or other sites. The Company has established
reserves to cover its probable liabilities for environmental
cases and believes that any additional liabilities will not
materially affect the Company's financial condition, future
results of operations or future cash flows.
It is customary in the Company's industries to use various
financial instruments in the normal course of business.
These instruments include items such as letters of credit.
Letters of credit are conditional commitments issued on
behalf of the Company in accordance with specified terms and
conditions. As of December 30, 1995, the Company had
outstanding letters of credit of approximately $140
million.
A subsidiary of the Company, Continental Holdings Inc.,
remains contingently liable as a guarantor of $53 million of
debt relating to various businesses which have been sold.
The Company leases various buildings and equipment under
both operating and capital leases. Minimum rental payments
on buildings and equipment subject to noncancelable
operating leases during the next 29 years aggregate $88
million.
In November 1995, C-TEC announced that it had engaged an
investment banker to assist with evaluating strategic
alternatives for its various business units with a view
toward enhancing shareholder value. C-TEC is now planning
to distribute to its shareholders in a tax-free spin-off the
Telephone Group, the Communications Services Group, and
certain other assets. Following the spin-off, C-TEC plans
to combine its remaining businesses, which will consist of
its domestic Cable Group, with a third party pursuant to a
tax-free, stock-for-stock transaction. C-TEC has received
a number of inquiries regarding its domestic Cable Group
and is holding discussions with interest parties.
(19) Subsequent Events
In March 1996, RCN Corporation ("RCN") a subsidiary of KDG,
entered into an asset purchase agreement, along with other
ancillary agreements, with Liberty Cable Company, Inc.
("Liberty") to purchase an 80 percent interest in certain
private cable systems in New York City and selected areas of
New Jersey. The transaction closed on March 6, 1996. The
cable systems provide subscription television services using
microwave frequencies. RCN deposited $27 million in an
escrow account which was released on the closing date.
In addition, RCN issued a $15 million promissory note
that is expected to be paid during 1996.
In March, under the terms of an agreement, RCN will pay C-TEC
approximately $123 million for certain of C-TEC's assets, including
Long Distance Group, C-TEC International, which holds the 40%
interest in Megacable, S.A. de C.V., and Residential Communications
Network, a start-up joint effort with RCN which plans to provide
telecommunications services to the residential market. RCN will
purchase Residential Communications Network for cash in a
transaction expected to close in April 1996. RCN's purchase of
the other business for cash or C-TEC stock, at RCN's option, is
expected to close in the second half of 1996. The transactions
are subject to certain conditions including the receipt of all
necessary regulatory approvals. The agreement with RCN contains
a repurchase option under which C-TEC can reacquire the businesses
if a restructuring of C-TEC's main businesses does not occur.
Additionally, C-TEC retains a warrant to reacquire a six percent
stake in Residential Communications Network. The agreement with
RCN was approved by a special committee of the board of directors
of C-TEC, composed of directors unaffiliated with either RCN or
the Company.
SCHEDULE II
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Additions Amounts
Balance, Charged to Charged Balance
Beginning Costs and to End of
(dollars in millions) of Period Expenses Reserves Other Period
Year ended December 30, 1995
Allowance for doubtful
trade accounts $ 9 $ 5 $ (2) $ - $ 12
Reserves:
Insurance claims 75 18 (14) - 79
Retirement benefits 67 3 (2) (14) (a) 54
Year ended December 31, 1994
Allowance for doubtful
trade accounts $ 7 $ 5 $ (3) $ - $ 9
Reserves:
Insurance claims 67 19 (11) - 75
Retirement benefits 71 2 (6) - 67
Year ended December 25, 1993
Allowance for doubtful
trade accounts $ 7 $ 5 $ (6) $ 1 $ 7
Reserves:
Insurance claims 66 14 (13) - 67
Retirement benefits 74 12 (17) 2 71
(a) The Company settled its liability with respect to certain
postretirement life insurance benefits by purchasing insurance
coverage from a third party insurance company.
