FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period to
Commission file 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)
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(s)), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of each class of the
issuer's common stock, as of May 1, 1996:
Class B Common Stock .............. 268,468 shares
Class C Common Stock .............. 9,939,001 shares
Class D Common Stock .............. 23,217,100 shares
PETER KIEWIT SONS', INC.
Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
Consolidated Condensed Balance Sheets
Consolidated Condensed Statements of Cash Flows
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits
PETER KIEWIT SONS', INC.
Consolidated Condensed Statements of Operations
(Unaudited)
Three months ended
March 31
(dollars in millions, except per share data) 1996 1995
Revenue $ 656 $ 563
Cost of Revenue (576) (490)
------ ------
80 73
General and Administrative Expenses (59) (52)
------ ------
Operating Earnings 21 21
Other Income (Expense):
Investment Income, net 20 15
Interest Expense, net (8) (9)
Other, net 6 13
------ ------
18 19
Equity Loss in MFS - (42)
------ ------
Earnings (Loss) Before Income Taxes
and Minority Interest 39 (2)
Provision for Income Taxes (14) (21)
Minority Interest in Net Income
of Subsidiaries - (3)
------ ------
Net Earnings (Loss) $ 25 $ (26)
====== ======
Earnings (Loss) Attributable
to Class B&C Stock $ 7 $ (2)
====== ======
Earnings (Loss) Attributable to Class D Stock $ 18 $ (24)
====== ======
Net Earnings (Loss) per Common and Common
Equivalent Share:
Class B&C $ .66 $ (.16)
====== ======
Class D $ .77 $(1.14)
====== ======
Cash Dividends per Common Share:
Class B&C $ - $ -
====== ======
Class D $ - $ -
====== ======
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Consolidated Condensed Balance Sheets
March 31, December 30,
1996 1995
(dollars in millions, except per share data) (unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 367 $ 457
Marketable securities 615 604
Receivables, less allowance of $22 and $12 279 329
Costs and earnings in excess of
billings on uncompleted contracts 94 78
Investment in construction joint ventures 78 73
Deferred income taxes 73 66
Other 50 47
----- -----
Total Current Assets 1,556 1,654
Property, Plant and Equipment,
less accumulated depreciation and
amortization of $717 and $710 676 667
Investments 583 542
Intangible Assets, net 490 478
Other Assets 79 114
------ ------
$3,384 $3,455
====== ======
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Consolidated Condensed Balance Sheets
March 31, December 30,
1996 1995
(dollars in millions, except per share data) (unaudited)
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 192 $ 240
Short-term borrowings 25 45
Current portion of long-term debt:
Telecommunications 35 36
Other 2 6
Accrued costs and billings in excess
of revenue on uncompleted contracts 122 121
Accrued insurance costs 81 79
Other 137 127
------ ------
Total Current Liabilities 594 654
Long-Term Debt, less current portion:
Telecommunications 260 264
Other 111 106
Deferred Income Taxes 232 236
Retirement Benefits 52 54
Accrued Reclamation Costs 101 100
Other Liabilities 196 220
Minority Interest 219 214
Stockholders' Equity:
Preferred stock, no par value, authorized
250,000 shares: no shares outstanding - -
Common stock, $.0625 par value,
$1.5 billion aggregate redemption value:
Class B, authorized 8,000,000 shares:
263,468 outstanding in 1996 and 1995 - -
Class C, authorized 125,000,000 shares:
9,954,006 outstanding in 1996 and
10,616,901 in 1995 1 1
Class D, authorized 50,000,000 shares:
23,219,744 outstanding in 1996 and
23,027,974 in 1995 1 1
Additional paid-in capital 208 210
Foreign currency adjustment (6) (6)
Net unrealized holding gain 17 17
Retained earnings 1,398 1,384
------ ------
Total Stockholders' Equity 1,619 1,607
------ ------
$ 3,384 $3,455
======= ======
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three months ended
March 31
(dollars in millions) 1996 1995
Cash flows from continuing operations:
Net cash provided by continuing operations $ 53 $ 12
Cash flows from investing activities:
Proceeds from sales and maturities of
marketable securities 103 347
Purchases of marketable securities (116) (114)
Proceeds from sale of property, plant
and equipment, and other investments 9 3
Capital expenditures (28) (141)
Acquisitions and investments in affiliates (54) (130)
Deferred development costs and other (5) (12)
----- -----
Net cash used in investing activities (91) (47)
Cash flows from financing activities:
Proceeds from long-term debt borrowings 6 21
Payments on long-term debt, including
current portion (8) (12)
Net change in short-term borrowings (20) -
Repurchases of common stock (12) (5)
Dividends paid (18) (7)
Other - 1
----- -----
Net cash used in financing activities (52) (2)
Cash flows from proceeds due to sales of
discontinued packaging operations: - 29
----- -----
Net change in cash and cash equivalents (90) (8)
Cash and cash equivalents at beginning of period 457 400
----- -----
Cash and cash equivalents at end of period $ 367 $ 392
===== =====
Noncash investing activities:
Issuance of MFS stock for purchase of
telecommunications companies $ - $ 6
See accompanying notes to consolidated condensed financial statements.
PETER KIEWIT SONS', INC.
Notes to Consolidated Condensed Financial Statements
1. Basis of Presentation
The consolidated condensed balance sheet of Peter Kiewit
Sons', Inc. ("PKS") and subsidiaries (the "Company") at
December 30, 1995 has been condensed from the Company's
audited balance sheet as of that date. All other financial
statements contained herein are unaudited and, in the
opinion of management, contain all adjustments (consisting
only of normal recurring accruals) necessary for a fair
presentation of financial position and results of operations
for the periods presented. The Company's accounting
policies and certain other disclosures are set forth in the
notes to the consolidated financial statements contained in
the Company's Annual Report on Form 10-K for the year ended
December 30, 1995.
Marketable securities at March 31, 1996 and December 30,
1995 include approximately $60 million and $62 million,
respectively, of investments which are being held by the
owners of various construction projects in lieu of
retainage. Receivables at March 31, 1996 and December 30,
1995 include approximately $54 million and $50 million,
respectively of retainage on uncompleted projects, the
majority of which is expected to be collected within one
year.
Where appropriate, items within the consolidated condensed
financial statements have been reclassified from the
previous periods to conform to current year presentation.
2. Earnings (Loss) Per Share:
Primary earnings (loss) per share of common stock have been
computed using the weighted average number of shares
outstanding during each period. Fully diluted earnings
(loss) per share have not been presented because they are
not materially different from primary earnings (loss) per
share. The number of shares used in computing earnings
(loss) per share was as follows:
Three Months Ended
March 31,
1996 1995
Class B&C 10,257,392 13,909,422
Class D 23,236,057 21,265,769
3. 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 Corporation ("C-TEC"), a minority interest in
CalEnergy Company, Inc. ("CE"), international energy projects
and miscellaneous investments, all owned by Kiewit Diversified
Group Inc. ("KDG"). 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 two groups.
A summary of the results of operations and financial
position for the Construction & Mining Group and the
Diversified Group follows. The summary information for
December 30, 1995 was derived from the audited financial
statements of the respective groups which were exhibits to
the 1995 Annual Report. All other summary information was
derived from the unaudited financial statements of the
respective groups which are exhibits to this Form 10-Q. All
significant intercompany accounts and transactions, except
those directly between the Construction & Mining Group and
the Diversified Group, have been eliminated (in millions,
except per share data).
Construction & Mining Group:
Three Months Ended
March 31
1996 1995
Results of Operations:
Revenue $ 502 $ 426
Net earnings (loss) 7 (2)
Earnings (loss) per share .66 (.16)
March 31, December 30,
1996 1995
Financial Position:
Working capital $ 243 $ 248
Total assets 925 981
Long-term debt, less current portion 9 9
Stockholders' equity 453 467
Included within the results of operations is mine management
income from the Diversified Group of $7 million in 1996 and
$8 million in 1995.
Diversified Group:
Three Months Ended
March 31
1996 1995
Results of Operations:
Revenue $ 155 $ 141
Net earnings (loss) 18 (24)
Earnings (loss) per share .77 (1.14)
March 31, December 30,
1996 1995
Financial Position:
Working capital $ 719 $ 752
Total assets 2,464 2,488
Long-term debt, less current portion 362 361
Stockholders' equity 1,166 1,140
Included within the results of operations is mine management
expense paid to the Construction & Mining Group of $7
million in 1996 and $8 million in 1995.
4. Acquisitions:
On March 6, 1996, RCN Corporation ("RCN") a subsidiary of
KDG, closed an asset purchase agreement, along with other
ancillary agreements, with Liberty Cable Company, Inc.
("Liberty") to purchase an indirect 80% interest in certain private
cable systems in New York City and selected areas of New
Jersey. The cable systems provide subscription television
services using microwave frequencies. RCN paid sellers $27
million on the closing date and has a contingent payment
obligation of $15 million that it expects to pay in full
during 1996. Payment of the obligation is contingent upon
Liberty attaining specific levels of subscribers. The
transaction was accounted for as a purchase and Liberty's
operating results have been consolidated since the
acquisition date. Intangible assets recognized to date are
approximately $18 million, which are being amortized over
periods of 5 to 15 years. Payments of the obligation will
also be included in intangible assets. Liberty's 1995 and
1996 operating results prior to the acquisition were not
significant relative to the Company's results.
PETER KIEWIT SONS', INC.
Notes to Consolidated Condensed Financial Statements
5. Investments:
In February 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 to $12 per share.
Of these, 3.3 million options at $12 per share may be
exercised if CE's common stock trades at or above $24 per
share for 180 consecutive days.
6. Other Matters:
In 1994, several former shareholders of a subsidiary of MFS
Communications Company, Inc. ("MFS") 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' liability pursuant to the indemnity
agreement.
The Company is involved in various other lawsuits, claims
and regulatory proceedings incidental to its business.
Management believes that any resulting liability for legal
proceedings beyond that provided should not materially
affect the Company's financial position, future results of
operations or future cash flows.
7. Subsequent Event:
On April 1, 1996, RCN purchased Residential Communications
Network from C-TEC for cash of $17.5 million. Residential
Communications Network is a start-up joint effort with RCN
which plans to provide telecommunications services to the
residential market. The transaction will be accounted for
as a purchase.
PETER KIEWIT SONS', INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Separate management's discussion and analysis of financial
condition and results of operations for the Kiewit Construction &
Mining Group and the Kiewit Diversified Group have been filed as
part of Exhibits 99.A and 99.B to this report. The Company will
furnish without charge a copy of such exhibits upon the written
request of a stockholder addressed to Stock Registrar, Peter
Kiewit Sons', Inc., 1000 Kiewit Plaza, Omaha, Nebraska 68131.
Revenue from each of the Company's business segments for the
three months ended March 31, comprised the following (in
millions):
1996 1995
Construction $ 499 $ 419
Mining 56 65
Telecommunications 90 73
Other 11 6
---- ----
$656 $563
==== ====
Results of Operations- First Quarter 1995 vs. First Quarter 1994
Construction. Construction and materials revenue increased by
$80 million or 19% during the first quarter of 1996 compared to
the same period in 1995. Materials sales increased by 30% due to
more favorable weather and market conditions during the first
quarter. Also contributing to the increase was a 66% increase in
joint venture revenue primarily from new work and the San Joaquin
Toll Road project.
Contract backlog at March 31, 1996 was $1.9 billion, of which 8%
is attributable to foreign operations, principally, Canada and
the Philippines. Projects on the west coast account for 35% of
the total backlog which includes $95 million from the San Joaquin
Toll Road project.
Gross margins on construction and materials projects increased to
4.8% for the first quarter of 1996 versus 3.3% for the same time
period in 1995. Increased operational efficiencies, primarily on
joint venture projects, as well as claim settlements favorably
affected construction margins. The growing materials business
also continued to have a positive impact on margins.
Mining. Mining revenue decreased $9 million in the first quarter
of 1996 when compared to the first quarter of 1995. The decrease
is primarily the result of fewer spot market sales of coal
combined with less precious metal sales. Spot market coal sales
were lower due to competition within the coal industry and greater
hydro-electric power generation in the western United States.
Precious metal inventory was essentially liquidated in 1995
resulting in the decrease in 1996. Alternate source coal sales
were virtually unchanged from the first quarter of 1995.
PETER KIEWIT SONS', INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating margins increased approximately 4% in the first quarter
of 1996 when compared to the first quarter of 1995. The
reduction of lower margin spot market coal sales and precious
metal sales increased margins. In addition, the constant level
of high margin alternate source coal sales for both periods
combined with the overall reduction in revenue contributed to the
increase in operating margins.
Telecommunications. Sales for C-TEC's telephone group increased
$3 million or 8% for the first quarter of 1996 as compared to the
same period in 1995. The increase is primarily due to higher
local network revenue, intrastate access revenue and long
distance toll revenue. Cable revenue increased $14 million or
59% in 1996. The acquisition of Twin County Trans Video, Inc.
("Twin County") and the consolidation of Mercom, Inc. ("Mercom")
in 1995 and rate increases in April 1995 and February 1996 are
primarily responsible for the increase.
The cost of revenue for C-TEC's telephone group in 1996 remained
relatively stable as compared to 1995. The cable group's costs
increased primarily due to the expenses associated with the
additional Twin County and Mercom subscribers and higher
programming fees. Also contributing to the increase was
additional depreciation and amortization expense resulting from
the Twin County and Mercom acquisitions.
General and Administrative Expenses. General and administrative
expenses increased 13% in 1996. The expenses associated with the
C-TEC restructuring, and higher compensation expenses contributed
to the increase.
Investment Income, net. Investment income for the first three
months of 1996 increased 33% as compared to the same period in
1995. Improvements in the net earnings attributable to equity
method investees, primarily from CE, smaller equity losses from
Megacable S.A. de C.V., and increases in interest and dividend
income contributed to the higher earnings.
Other, net. Other income includes gains and losses on the
disposition of property, plant and equipment and other assets,
gains on subsidiary stock transactions and other items. In 1996,
the lack of gains on subsidiary stock transactions and declines
in other income relating to C-TEC were partially offset by
increased gains on the sale of construction equipment.
Equity Loss in MFS. MFS is a leading provider of communications
services to business. The Company spun-off its investment in MFS
to Class D stockholders on September 30, 1995. Prior to the spin-
off, the Company included its proportionate share of MFS' losses
in the statement of operations. The significant initial
development and roll out expenses associated with the expansion
activities announced by MFS in 1993 and 1995 adversely affected
MFS' 1995 results.
PETER KIEWIT SONS', INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Provision for Income Taxes. The effective income tax rate in
1996 differs from the expected statutory rate of 35% primarily
due to state income taxes. In 1995 the net operating loss
limitations of MFS and the settlement of prior period issues,
resulted in the higher effective rate.
Financial Condition - March 31, 1996 vs. December 30, 1995
The Company's working capital decreased $38 million or 4% during
the first quarter of 1996. The decrease was mainly due to cash
used to fund investing and financing activities. The decrease
was partially offset by cash flows from operations.
Investing activities include $54 million of investments, $28
million of capital expenditures, net purchases of marketable
securities of $13 million and $6 million of deferred development
costs. The investments primarily include KDG's $27 million
outlay for an indirect 80% interest in Liberty, the exercise of CE options
to purchase CE stock for $14 million, $4 million investment in a
Philippine power project and $4 million investment in three
Indonesia power projects. These capital outlays were partially
offset by $9 million of proceeds from the sale of property, plant
and equipment and other assets.
Financing sources include $6 million of long-term debt borrowing
for the construction financing of a privately owned toll road.
Financing uses consisted of $20 million for the repayment of
short-term borrowing, C-TEC's $7 million outlay for the payment
of long-term debt, $12 million for stock repurchases and $18
million of cash dividends paid to Class B&C and Class D
stockholders. In April 1996, the Company declared a $.60 per
share dividend for Class B&C Stock payable in May 1996.
In addition to the C-TEC activities described below, the Company
anticipates making significant investments in its construction
and mining businesses, including opportunities to acquire
additional businesses. The Company also anticipates making significant
investments in its infrastructure, telecommunications and energy
businesses - including its joint venture agreement with CE covering
international power project development activities - and searching
for opportunities to acquire businesses which provide for long-term
growth. The Company may also exercise 3.3 million CE options at $12
per share if CE's common stock continues to trade at or above $24
per share for 180 consecutive days. Other long-term liquidity
uses include payment of income taxes and repurchasing the Company's stock.
The Company's current financial condition and borrowing capacity
should be sufficient for immediate operating and investing activities.
On November 8, 1995, C-TEC announced that it is evaluating
strategic options for its various business units with a view
toward enhancing shareholder value. Specifically, C-TEC is
evaluating the advisability and feasibility of separating or
restructuring its local telephone business, its cable television
business, and its various other communications businesses. C-TEC
engaged the investment banking firm Merrill Lynch & Co. to assist
with the process. No assurances can be given that any
transactions will be consummated.
In March 1996, under the terms of an agreement, RCN agreed to pay
C-TEC approximately $123 million for certain of C-TEC's assets,
including the long distance group, C-TEC International, which
holds the 40% interest in Megacable, S.A. de C.V., and a $13
million note payable by Mazon Corporativo, S.A. de C.V., and
Residential Communications Network. RCN purchased Residential
Communications Network for cash in a transaction that closed on
April 1, 1996. RCN's purchase of the other businesses 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 6% 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 C-TEC or the Company.
PETER KIEWIT SONS', INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
MFS Litigation.
In 1994, several former shareholders of an 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 intends to
vigorously contest this lawsuit. Defendants expect
that a trial will be held in 1996. Prior to the
initial 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.
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits filed as part of this report are listed
below.
Exhibit
Number
27 Financial Data Schedule (for electronic
filing purposes only)
99.A Kiewit Construction & Mining Group
Financial Statements and Management's
Discussion and Analysis of Financial
Condition and Results of Operations.
99.B Kiewit Diversified Group Financial
Statements and Management's Discussion and
Analysis of Financial Condition and Results
of Operations.
(b) No reports on Form 8-K were filed by the
Company during the first quarter of 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
PETER KIEWIT SONS', INC.
Dated: May 15, 1996 \s\Richard R. Jaros
Richard R. Jaros
Executive Vice President
Chief Financial Officer
PETER KIEWIT SONS', INC.
INDEX TO EXHIBITS
Exhibit
No.
27 Financial Data Schedule (For electronic filing purposes only)
99.A Kiewit Construction & Mining Group Financial Statements
and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
99.B Kiewit Diversified Group Financial Statements and
Management's Discussion and Analysis of Financial
Condition and Results of Operations.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial informtion extracted from the Form 10-Q
for the period ending March 31, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-31-1996
<CASH> 367
<SECURITIES> 615
<RECEIVABLES> 301
<ALLOWANCES> 22
<INVENTORY> 19
<CURRENT-ASSETS> 1,556
<PP&E> 1,393
<DEPRECIATION> 717
<TOTAL-ASSETS> 3,384
<CURRENT-LIABILITIES> 594
<BONDS> 371
<COMMON> 2
0
0
<OTHER-SE> 1,617
<TOTAL-LIABILITY-AND-EQUITY> 3,384
<SALES> 555
<TOTAL-REVENUES> 656
<CGS> 503
<TOTAL-COSTS> 576
<OTHER-EXPENSES> 59
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 39
<INCOME-TAX> 14
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> $.66<F1>
<EPS-DILUTED> $.66<F1>
<FN>
<F1>$.66 represents Class C Stock earnings per share, Class D Stock earnings per
share $.77.
</FN>
</TABLE>
Exhibit 99.A
KIEWIT CONSTRUCTION & MINING GROUP
Index to Financial Statements and
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Statements:
Condensed Statements of Operations for the three months
ended March 31, 1996 and 1995
Condensed Balance Sheets as of March 31, 1996 and
December 30, 1995
Condensed Statements of Cash Flows for the three months
ended March 31, 1996 and 1995
Notes to Condensed Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
KIEWIT CONSTRUCTION & MINING GROUP
Condensed Statements of Operations
(unaudited)
Three months ended
March 31
(dollars in millions, except per share data) 1996 1995
Revenue $ 502 $ 426
Cost of Revenue (478) (409)
------- ------
24 17
General and Administrative Expenses (30) (32)
------- ------
Operating Loss (6) (15)
Other Income (Expense):
Investment Income, net 4 3
Interest Expense, net (1) (1)
Other, net 14 11
------- ------
17 13
------- ------
Earnings (Loss) Before Income Taxes 11 (2)
Provision for Income Taxes (4) -
------- ------
Net Earnings (Loss) $ 7 $ (2)
======= ======
Earnings (Loss) per Common and Common
Equivalent Share $ .66 $ (.16)
====== ======
See accompanying notes to condensed financial statements.
KIEWIT CONSTRUCTION & MINING GROUP
Condensed Balance Sheets
March 31, December 30,
1996 1995
(dollars in millions) (unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 90 $ 94
Marketable securities 115 120
Receivables, less allowance of $20 and $10 199 258
Costs and earnings in excess of
billings on uncompleted contracts 94 78
Investment in construction joint ventures 78 73
Deferred income taxes 67 61
Other 12 13
----- -----
Total Current Assets 655 697
Property, Plant and Equipment, less accumulated
depreciation and amortization of $414 and $421 159 161
Investments 93 83
Other Assets 18 40
----- -----
$ 925 $ 981
===== =====
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, including retainage
of $40 and $42 $ 150 $ 179
Short-term borrowings 25 45
Current portion of long-term debt - 2
Accrued construction costs and billings in excess
of revenue on uncompleted contracts 109 111
Accrued insurance costs 81 79
Other 47 33
----- -----
Total Current Liabilities 412 449
Long-Term Debt, less current portion 9 9
Other Liabilities 51 56
Stockholders' Equity (Redeemable common stock,
$331 million aggregate redemption value):
Common equity 456 471
Net unrealized holding gain 2 1
Foreign currency adjustment (5) (5)
----- -----
Total Stockholders' Equity 453 467
----- -----
$ 925 $ 981
===== =====
See accompanying notes to condensed financial statements.
KIEWIT CONSTRUCTION & MINING GROUP
Condensed Statements of Cash Flows
(unaudited)
Three months ended
March 31
(dollars in millions) 1996 1995
Cash flows from operations:
Net cash provided by operations $ 50 $ 41
Cash flows from investing activities:
Proceeds from sales and maturities of
marketable securities 36 102
Purchases of marketable securities (34) (42)
Proceeds from sales of property, plant and equipment 8 3
Acquisitions (3) -
Capital expenditures (12) (22)
Other - (1)
------ -----
Net cash provided by (used in) investing activities (5) 40
Cash flows from financing activities:
Payments on long-term debt, including current portion (1) (3)
Net change in short-term borrowings (20) -
Repurchases of common stock (3) (3)
Dividends paid (6) (7)
Exchange of Class B&C Stock for Class D Stock, net (19) (54)
----- -----
Net cash used in financing activities (49) (67)
----- -----
Net change in cash and cash equivalents (4) 14
Cash and cash equivalents at beginning of period 94 70
----- -----
Cash and cash equivalents at end of period $ 90 $ 84
===== =====
See accompanying notes to condensed financial statements.
KIEWIT CONSTRUCTION & MINING GROUP
Notes to Condensed Financial Statements
1. Basis of Presentation:
The condensed balance sheet of Kiewit Construction & Mining
Group (the "Group") at December 30, 1995 has been condensed
from the Group's audited balance sheet as of that date. All
other financial statements contained herein are unaudited
and have been prepared using the historical amounts included
in the Peter Kiewit Sons', Inc. ("PKS") consolidated
condensed financial statements. The Group's accounting
policies and certain other disclosures are set forth in the
notes to the financial statements contained in PKS' Annual
Report on Form 10-K as an exhibit for the year ended
December 30, 1995.
Although the financial statements of PKS' Construction &
Mining Group and Diversified Group separately report the
assets, liabilities and stockholders' equity of PKS
attributed to each such group, legal title to such assets
and responsibility for such liabilities will not be affected
by such attribution. Holders of Class B&C Stock and Class D
Stock are stockholders of PKS. Accordingly, the PKS
consolidated condensed financial statements and related
notes as well as those of the Kiewit Diversified Group
should be read in conjunction with these financial
statements.
Marketable securities at March 31, 1996 and December 30,
1995 include approximately $60 million and $62 million,
respectively, of investments which are being held by the
owners of various construction projects in lieu of
retainage. Receivables at March 31, 1996 and December 30,
1995 include approximately $54 million and $50 million,
respectively, of retainage on uncompleted projects, the
majority of which is expected to be collected within one
year.
Where appropriate, items within the condensed financial
statements have been reclassified from the previous periods
to conform to current year presentation.
2. Earnings (Loss) Per Share:
Primary earnings (loss) per share of common stock have been
computed using the weighted average number of shares
outstanding during each period. Fully diluted earnings
(loss) per share have not been presented because they are
not materially different from primary earnings (loss) per
share. The number of shares used in computing earnings
(loss) per share was 10,257,392 for the three months ended
March 31, 1996 and 13,909,422 for the three months ended
March 31, 1995.
KIEWIT CONSTRUCTION & MINING GROUP
Notes to Condensed Financial Statements
3. Summarized Financial Information:
The Group's 50% portion of PKS' corporate assets and
liabilities and related transactions, which are not
separately identified with the ongoing operations of the
Construction & Mining Group or the Diversified Group, and
items attributable to the Group are as follows:
(dollars in millions)
March 31, December 30,
1996 1995
Cash and cash equivalents $ - $ 4
Marketable securities 9 10
Property, plant and equipment, net 5 5
Other assets 3 4
------ ------
Total Assets $ 17 $ 23
====== ======
Accounts payable $ 25 $ 10
Long-term debt, including current portion 9 11
Other liabilities 1 -
------ ------
Total Liabilities $ 35 $ 21
====== ======
Three Months Ended
March 31,
1996 1995
Other income (expense), net $ (1) $ (1)
Corporate general and administrative costs have been
allocated to the Group. These allocations were less than $1
million for the three months ended March 31, 1996 and 1995.
Mine management income from the Diversified Group was $7
million and $8 million for the three months ended March 31,
1996 and 1995.
4. Other Matters:
The Group is involved in various lawsuits, claims and
regulatory proceedings incidental to its business.
Management believes that any resulting liability, beyond
that provided, should not materially affect the Group's
financial position, future results of operations or future
cash flows.
KIEWIT CONSTRUCTION & MINING GROUP
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - First Quarter 1996 vs. First Quarter 1995
Revenue from each of the Group's business segments was (in
millions):
Three Months Ended
March 31
1996 1995
Construction $ 499 $ 421
Other 3 5
----- -----
$ 502 $ 426
===== =====
Construction. Construction and materials revenue increased by
$78 million or 19% during the first quarter of 1996 compared to
the same period in 1995. Materials sales increased by 30% due to
more favorable weather and market conditions during the first
quarter. Also contributing to the increase was a 66% increase in
joint venture revenue primarily from new work and the San Joaquin
Toll Road project.
Contract backlog at March 31, 1996 was $1.9 billion, of which 8%
is attributable to foreign operations, principally, Canada and
the Philippines. Projects on the west coast account for 35% of
the total backlog which includes $95 million from the San Joaquin
Toll Road project.
Gross margins on construction and materials projects increased to
4.8% for the first quarter of 1996 versus 3.3% for the same
period in 1995. Increased operational efficiencies, primarily on
joint venture projects, as well as claim settlements, favorably
affected construction margins. The growing materials business
also continued to have a positive impact on margins.
General and Administrative Expenses. General and administrative
expenses decreased 6% in the first three months of 1996. An overall
decline in administrative expenses, particularly computer operating
expenses, was partially offset by an increase in compensation expense.
Investment Income, net. The improvement in investment income is
attributable to the decline in losses on the sale of securities
and higher equity earnings primarily from an investment in an
electrical contractor.
Other, net. Other income is primarily comprised of mine
management income from the Diversified Group and gains and losses
on the disposition of property, plant and equipment and other
assets. In 1996, the Group recognized $7 million in gains on the
sale of operating assets as compared to $2 million in 1995. Mine
management income declined slightly from $8 million in 1995 to $7
million in 1996.
KIEWIT CONSTRUCTION & MINING GROUP
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition - March 31, 1996 vs. December 30, 1995
The Group's working capital decreased $5 million or 2% during the
first quarter of 1996. The decline was primarily due to the
exchange for Class D Stock and repurchase of Class B&C Stock
totaling $22 million, the repayment of $20 million on short-term
borrowings and dividend payments of $6 million. In addition to
the cash used in financing activities, the Group had capital
expenditures, net of sales proceeds, of $4 million. Partially
funding these outflows was $50 million of cash provided by
operations and $2 million of net proceeds from the sale and
maturity of marketable securities.
The Group anticipates investing between $40 and $75 million
annually in its construction business, including opportunities to
acquire additional businesses and purchasing additional shares
of an electrical contractor - the Group is committed to 80%
ownership in 1997. Other long term liquidity uses include
the payment of income taxes, repurchases and conversions of
common stock and the payment of dividends, including a $.60 per
share dividend payable in May 1996. The Group's current
financial condition and borrowing capacity together with
anticipated cash flows from operations should be sufficient for
immediate cash requirements and future investing activities.
Exhibit 99.B
KIEWIT DIVERSIFIED GROUP
Index to Financial Statements and
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Statements:
Condensed Statements of Operations for the
three months ended March 31, 1996 and 1995
Condensed Balance Sheets as of March 31, 1996
and December 30, 1995
Condensed Statements of Cash Flows for the
three months ended March 31, 1996 and 1995
Notes to Condensed Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
KIEWIT DIVERSIFIED GROUP
Condensed Statements of Operations
(unaudited)
Three months ended
March 31
(dollars in millions, except per share data) 1996 1995
Revenue $ 155 $ 141
Cost of Revenue (99) (85)
------ ------
56 56
General and Administrative Expenses (36) (28)
------ ------
Operating Earnings 20 28
Other Income (Expense):
Investment Income, net 16 12
Interest Expense, net (7) (8)
Other, net (1) 10
------ ------
8 14
Equity Loss in MFS - (42)
------ ------
Earnings Before Income Taxes and
Minority Interest 28 -
Provision for Income Taxes (10) (21)
Minority Interest in Net Income
of Subsidiaries - (3)
------ ------
Net Earnings (Loss) $ 18 $ (24)
====== ======
Earnings (Loss) Per Common & Common
Equivalent Share $ .77 $(1.14)
====== ======
See accompanying notes to condensed financial statements.
KIEWIT DIVERSIFIED GROUP
Condensed Balance Sheets
March 31, December 30,
1996 1995
(dollars in millions) (unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 277 $ 363
Marketable securities 500 484
Receivables, less allowance of $2 and $2 82 81
Deferred income taxes 6 5
Other 38 34
------ ------
Total Current Assets 903 967
Property, Plant and Equipment,
less accumulated depreciation and
amortization of $303 and $289 517 506
Investments 490 459
Intangible Assets, net 475 462
Other Assets 79 94
------ ------
$2,464 $2,488
====== ======
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 42 $ 61
Current portion of long-term debt:
Telecommunications 35 36
Other 2 4
Accrued costs and billings in excess
of revenue on uncompleted contracts 13 10
Accrued reclamation and other mining costs 17 18
Other 75 86
------ ------
Total Current Liabilities 184 215
Long-Term Debt, less current portion:
Telecommunications 260 264
Other 102 97
Deferred Income Taxes 234 235
Retirement Benefits 52 54
Accrued Reclamation Costs 100 99
Other Liabilities 147 170
Minority Interest 219 214
Stockholders' Equity (Redeemable common stock
$1,149 million aggregate redemption value):
Common equity 1,152 1,125
Foreign currency adjustment (1) (1)
Net unrealized holding gain 15 16
------ ------
Total Stockholders' Equity 1,166 1,140
------ ------
$2,464 $2,488
====== ======
See accompanying notes to condensed financial statements.
KIEWIT DIVERSIFIED GROUP
Condensed Statements of Cash Flows
(unaudited)
Three months ended
March 31
(dollars in millions) 1996 1995
Cash flows from operations:
Net cash provided by (used in)
continuing operations $ 16 $ (29)
Cash flows from investing activities:
Proceeds from sales and maturities of
marketable securities and investments 67 245
Purchases of marketable securities (82) (72)
Capital expenditures (16) (119)
Acquisitions and investment in affiliates (64) (129)
Deferred development costs and other (4) (12)
----- -----
Net cash used in investing activities (99) (87)
Cash flows from financing activities:
Proceeds from long-term debt borrowings 6 21
Payments on long-term debt, including
current portion (7) (9)
Repurchases of common stock (9) (2)
Exchange of Class B&C Stock for Class D Stock 19 54
Payments of dividends (12) -
Other - 1
----- -----
Net cash provided by (used in)
financing activities (3) 65
Cash flows from proceeds due to sales of
discontinued packaging operations - 29
----- -----
Net change in cash and cash equivalents (86) (22)
Cash and cash equivalents at beginning of period 363 330
----- -----
Cash and cash equivalents at end of period $ 277 $ 308
===== =====
Noncash investing activities:
Issuance of MFS stock for the purchase of
telecommunications companies $ - $ 6
See accompanying notes to condensed financial statements.
KIEWIT DIVERSIFIED GROUP
Notes to Condensed Financial Statements
1. Basis of Presentation:
The condensed balance sheet of Kiewit Diversified Group (the
"Group") at December 30, 1995 has been condensed from the
Group's audited balance sheet as of that date. All other
financial statements contained herein are unaudited and have
been prepared using historical amounts included in the Peter
Kiewit Sons', Inc. ("PKS") consolidated condensed financial
statements. The Group's accounting policies and certain
other disclosures are set forth in the notes to the
financial statements contained in PKS' Annual Report on Form
10-K as an exhibit for the year ended December 30, 1995.
Although the financial statements of PKS' Construction &
Mining Group and Diversified Group separately report their
assets, liabilities and stockholders' equity of PKS
attributed to each such group, legal title to such assets
and responsibility for such liabilities will not be affected
by such attribution. Holders of Class B&C Stock and Class D
Stock are stockholders of PKS. Accordingly, the PKS
consolidated condensed financial statements and related
notes as well as those of the Kiewit Construction & Mining
Group should be read in conjunction with these financial
statements.
Where appropriate, items within the condensed financial
statements have been reclassified from the previous periods
to conform to current year presentation.
2. Earnings (Loss) Per Share:
Primary earnings (loss) per share of common stock have been
computed using the weighted average number of shares
outstanding during each period. Fully diluted earnings
(loss) per share have not been presented because they are
not materially different from primary earnings (loss) per
share. The number of shares used in computing earnings
(loss) per share was 23,236,057 for the three months ended
March 31, 1996 and 21,265,769 for the three months ended
March 31, 1995
3. Summarized Financial Information:
The Group's 50% portion of PKS' corporate assets and
liabilities and related transactions, which are not
separately identified with the ongoing operations of the
Construction & Mining Group or the Diversified Group, and
specifically attributable items are as follows:
KIEWIT DIVERSIFIED GROUP
Notes to Condensed Financial Statements
(dollars in millions)
March 31, December 30,
1996 1995
Cash and cash equivalents $ - $ -
Marketable securities 9 10
Property, plant and equipment, net 5 5
Other assets 3 3
---- ----
Total Assets $ 17 $ 18
==== ====
Accounts payable $ 13 $ 23
Long-term debt, including current portion 2 3
Other liabilities 1 -
---- ----
Total Liabilities $ 16 $ 26
==== ====
Three Months Ended
March 31,
1996 1995
Other income (expense), net (1) 1
Corporate general and administrative costs have been
allocated to the Group. These allocations were $2 million
and $1 million for the three months ended March 31, 1996 and
1995.
Mine management expense from the Construction & Mining Group
was $7 million and $8 million for the three months ended
March 31, 1996 and 1995.
4. Acquisitions:
On March 6, 1996, RCN Corporation ("RCN") a subsidiary of
KDG, closed an asset purchase agreement, along with other
ancillary agreements, with Liberty Cable Company, Inc.
("Liberty") to purchase an indirect 80% interest in certain private
cable systems in New York City and selected areas of New
Jersey. The cable systems provide subscription television
services using microwave frequencies. RCN paid sellers $27
million on the closing date and has a contingent payment
obligation of $15 million that it expects to pay in full
during 1996. Payment of the obligation is contingent upon
Liberty attaining specific levels of subscribers. The
transaction was accounted for as a purchase and Liberty's
operating results have been consolidated since the
acquisition date. Intangible assets recognized to date are
approximately $18 million, which are being amortized over
periods of 5 to 15 years. Payments of the obligation will
also be included in intangible assets. Liberty's 1995 and
1996 operating results prior to the acquisition were not
significant relative to the Group's results.
KIEWIT DIVERSIFIED GROUP
Notes to Condensed Financial Statements
5. Investments:
In February 1996, the Group exercised 1.5 million CE options
at a price of $9 per share. The transaction increased the
Group's ownership interest in CE to 24%. In addition, the
Group has 4.3 million options to purchase additional CE
stock at prices of $11.625 to $12 per share. Of these, 3.3
million options at $12 per share may be exercised if CE's
common stock trades at or above $24 per share for 180
consecutive days.
6. Other Matters:
In 1994, several former shareholders 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' liability
pursuant to the indemnity agreement.
The Group is involved in other various lawsuits, claims and
regulatory proceedings incidental to its business.
Management believes that any resulting liability for legal
proceedings beyond that provided should not materially
affect the Group's financial position, future results of
operations or future cash flows.
7. Subsequent Event:
On April 1, 1996, RCN purchased Residential Communications
Network from C-TEC for cash of $17.5 million. Residential
Communications Network is a start-up joint effort with RCN
which plans to provide telecommunications services to the
residential market. The transaction will be accounted for
as a purchase.
KIEWIT DIVERSIFIED GROUP
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations - First Quarter 1996 vs. First Quarter 1995
Mining. Mining revenue decreased $7 million in the first quarter
of 1996 when compared to the first quarter of 1995. The decrease
is primarily the result of fewer spot market sales of coal. Spot
market coal sales were lower due to the competition within the
coal industry and greater hydro-electric power generation in the
western United States. Alternate source coal sales were
virtually unchanged from the first quarter of 1995.
Operating margins increased approximately 4% in the first quarter
of 1996 when compared to the first quarter of 1995. The
reduction of lower margin spot market coal sales increased
margins. In addition, the constant level of high margin
alternate source coal sales for both periods combined with the
overall reduction in revenue contributed to the increase in
operating margins.
Telecommunications. Sales for C-TEC's telephone group increased $3
million or 8% for the first quarter of 1996 as compared to the same period
in 1995. The increase is primarily due to higher local network
revenue, intrastate access revenue and long distance toll
revenue. Cable revenue increased $14 million or 59% in 1996.
The acquisition of Twin County Trans Video, Inc. ("Twin County")
and the consolidation of Mercom, Inc. ("Mercom") in 1995 and rate
increases in April 1995 and February 1996 are primarily
responsible for the increase.
The cost of revenue for C-TEC's telephone group in 1996 remained
relatively stable as compared to 1995. The cable group's costs
increased primarily due to the expenses associated with the
additional Twin County and Mercom subscribers and higher
programming fees. Also contributing to the increase was
additional depreciation and amortization expenses resulting from
the Twin County and Mercom acquisitions.
General and Administrative Expenses. General and administrative
expenses increased 29% in 1996. The expenses associated with the
C-TEC restructuring and higher compensation expenses contributed
to the increase.
Investment Income, net. Investment income in the first three
months of 1996 increased 33% as compared to the same period in
1995. Improvements in the net earnings attributable to equity
method investees, primarily from CE, smaller equity losses from Megacable
S.A. de C.V., and increases in interest and dividend income contributed
to the higher earnings.
Other, net. Other income includes gains and losses on the
disposition of property, plant and equipment and other assets,
gains on subsidiary stock transactions and other items. In 1996,
the lack of gains on subsidiary stock transactions and a decrease
in other income related to C-TEC, resulted in the decline of
other income.
KIEWIT DIVERSIFIED GROUP
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - First Quarter 1996 vs. First Quarter 1995
Equity Loss in MFS. MFS is a leading provider of communications
services to business. PKS spun-off its investment in MFS to
Class D stockholders on September 30, 1995. Prior to the spin-
off, the Group included its proportionate share of MFS' losses in
the statement of operations. The significant initial development
and roll out expenses associated with the expansion activities
announced in 1993 and 1995 adversely affected MFS' results.
Provision for Income Taxes. In 1995 the net operating loss
limitations of MFS and the settlement of prior period issues,
resulted in the higher effective rate.
Financial Condition - March 31, 1996 vs. December 30, 1995
Due to the significant investing activities described below, the
Group's working capital decreased $33 million or 4% in the first
quarter of 1996.
Investing activities include $64 million of investments, $16
million of capital expenditures, net purchases of marketable
securities of $15 million and $6 million of deferred development
costs. The investments primarily include C-TEC's $13 million
outlay for a note from Kiewit Construction and Mining Group,
which is receivable from Mazon Corporativo, S.A. de C.V., KDG's
$27 million indirect investment in Liberty, the exercise of CE options to
purchase CE stock for $14 million, $4 million investment in a
Philippine power project and $4 million investment in three
Indonesia power projects. These capital outlays were partially
offset by $2 million of proceeds from the sale of property, plant
and equipment and other assets.
Financing sources include $19 million for the exchange of Class B&C
Stock for Class D Stock and $6 million for the construction financing
of a privately owned toll road. Financing uses consist of $12 million
for the payment of dividends, $9 million for stock repurchases and $1
million of payments on stockholder notes and C-TEC's $6 million outlay
for the payment of long-term debt.
In addition to the C-TEC activities described below, the Group
anticipates making significant investments in its infrastructure,
telecommunications and energy businesses - including its joint
venture agreement with CE covering international power project
development activities - and searching for opportunities to
acquire businesses which provide for long-term growth. The Group
may also exercise 3.3 million CE options at $12 per share if CE's
common stock continues to trade at or above $24 per share for
180 consecutive days. Other long-term liquidity uses include
payment of income taxes and repurchasing the Group's stock. The
Group's current financial condition and borrowing capacity should
be sufficient for immediate operating and investing activities.
KIEWIT DIVERSIFIED GROUP
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition - March 31, 1996 vs. December 30, 1995
On November 8, 1995, C-TEC announced that it is evaluating
strategic options for its various business units with a view
toward enhancing shareholder value. Specifically, C-TEC is
evaluating the advisability and feasibility of separating or
restructuring its local telephone business, its cable television
business, and its various other communications businesses. C-TEC
engaged the investment banking firm Merrill Lynch & Co. to assist
with the process. No assurances can be given that any
transactions will be consummated.
In March 1996, under the terms of an agreement, RCN agreed to pay
C-TEC approximately $123 million for certain of C-TEC's assets,
including the long distance group, C-TEC International, which
holds the 40% interest in Megacable, S.A. de C.V., and a $13
million note payable by Mazon Corporativo, S.A. de C.V. and
Residential Communications Network. RCN purchased Residential
Communications Network for cash in a transaction that closed on
April 1, 1996. RCN's purchase of the other businesses 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 6% 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 C-TEC or PKS.
