SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 2 to
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission File
December 27, 1997 Number 0-15658
LEVEL 3 COMMUNICATIONS, INC.
(formerly known as 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) 536-3677
(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:
Common Stock, par value $.01
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 aggregate market value of the registrant's stock ("Common
Stock") held by nonaffiliates as of March 15, 1998 was $7.3
billion, based on the closing price of the registrant's common
stock on the NASDAQ OTC Bulletin Board on that date.
As of March 15, 1998, 146,943,752 shares of the Common Stock
were outstanding.
INTRODUCTION
This Form 10-K/A amends the Form 10-K filed by Peter Kiewit
Sons', Inc. (the "Company") on March 31, 1998, as amended by a
Form 10-K/A Amendment No. 1 to Form 10-K filed by the Company on
April 23, 1998. This Form 10-K/A is being filed solely to set
forth the information required by Part III (Items 10, 11, 12 and
13) of Form 10-K, because a definitive proxy statement containing
such information will not be filed within 120 days after the end
of the fiscal year covered by the Company's original Form 10-K
filing. This Form 10-K/A amends Part III of the Company's
original Form 10-K filing only, and all other portions of the
Company's original 10-K filing remain in effect.
On March 31, 1998, the Company exchanged for all of its then
outstanding Class C Stock for all of the capital stock of a
subsidiary (the "Construction Subsidiary") holding the stock of
Kiewit Construction Group Inc. ("KCG"), the construction
subsidiary of the Company (the "Split-Off"). In connection
with the Split-Off, the Company was renamed "Level 3
Communications, Inc." and the Construction Subsidiary was
renamed "Peter Kiewit Sons', Inc." (In this Form 10-K/A, the
Construction Subsidiary is referred to as "New PKS").
ITEM 10. MANAGEMENT
Directors and Executive Officers
Set forth below is information as of April 27, 1998 about
each director and executive officer of the Company, including his
business experience during the past five years.
Name Age Position
Walter Scott, Jr. 66 Chairman of the Board
James Q. Crowe 48 President, Chief Executive Officer and Director
R. Douglas Bradbury 47 Executive Vice President, Chief Financial Officer
and Director
Kevin J. O'Hara 37 Executive Vice President and Chief Operating Officer
Terrence J. Ferguson 55 Senior Vice President, General Counsel and Secretary
Robert B. Daugherty 75 Director
William L. Grewcock 72 Director
Charles M. Harper 70 Director
Richard R. Jaros 46 Director
Robert E. Julian 58 Director
David C. McCourt 40 Director
Kenneth E. Stinson 55 Director
Michael B. Yanney 63 Director
Walter Scott, Jr. has been the Chairman of the Board of the
Company since September 1979, and a director of the Company since
April 1964. Mr. Scott has been Chairman Emeritus of New PKS
since the Split-Off. Mr. Scott is also a director of Berkshire
Hathaway Inc., Burlington Resources Inc., CalEnergy Company, Inc.
("CalEnergy"), ConAgra, Inc., Commonwealth Telephone
Enterprises Inc. ("Commonwealth Telephone"), RCN Corporation
("RCN"), U.S. Bancorp and Valmont Industries, Inc.
James Q. Crowe has been the President and Chief Executive
Officer of the Company since August 1997, and a director of the
Company since June 1993. Mr. Crowe was President and Chief
Executive Officer of MFS Communications Company, Inc. ("MFS")
from June 1993 to June 1997. Mr. Crowe also served as Chairman
of the Board of WorldCom, Inc. ("WorldCom") from January 1997
until July 1997, and as Chairman of the Board of MFS from 1992
through 1996. Mr. Crowe is presently a director of Commonwealth
Telephone, RCN and InaCom Communications, Inc.
R. Douglas Bradbury has been Executive Vice President and
Chief Financial Officer of the Company since August 1997 and a
director of the Company since March 1998. Mr. Bradbury served as
Chief Financial Officer of MFS from 1992 to 1996, Senior Vice
President of MFS from 1992 to 1995, and Executive Vice President
of MFS from 1995 to 1996.
Kevin J. O'Hara has been Executive Vice President of the
Company since August 1997, and Chief Operating Officer of the
Company since March 1998. Prior to that, Mr. O'Hara served as
President and Chief Executive Officer of MFS Global Network
Services, Inc. from 1995 to 1997, and as Senior Vice President of
MFS and President of MFS Development, Inc. from October 1992 to
August 1995. From 1990 to 1992, he was a Vice President of MFS
Telecom, Inc. ("MFS Telecom").
Terrence J. Ferguson has been Senior Vice President, General
Counsel and Secretary of the Company since August 1997. Prior to
that he was a Senior Vice President of MFS from September 1992 to
February 1997, General Counsel from January 1992 to February 1997
and Secretary from November 1991 to February 1997.
Robert B. Daugherty has been a director of the Company since
January 1986. Mr. Daugherty has been a Director of Valmont
Industries, Inc. for more than the past five years, and formerly
was Chairman of the Board and Chief Executive Officer of Valmont
Industries, Inc.
William L. Grewcock has been a director of the Company since
January 1968. Prior to the Split-Off, Mr. Grewcock was Vice
Chairman of the Company for more than five years.
Charles M. Harper has been a director of the Company since
January 1986. Mr. Harper was Chairman of the Board of RJR
Nabisco Holdings Corp. ("RJR Nabisco") from May 1993 to May
1996 and Chief Executive Officer of RJR Nabisco from May 1993 to
December 1995. Prior to that, Mr. Harper was Chairman of the
Board and Chief Executive Officer of ConAgra, Inc. Mr. Harper is
currently a director of ConAgra, Inc., E.I. DuPont de Nemours and
Company, Norwest Corporation and Valmont Industries, Inc.
Richard R. Jaros has been a director of the Company since
June 1993 and served as President of the Company from 1996 to
1997. Mr. Jaros served as Executive Vice President of the
Company from 1993 to 1997 and Chief Financial Officer of the
Company from 1995 to 1997. He also served as President and Chief
Operating Officer of CalEnergy from 1992 to 1993, and is
presently a director of CalEnergy, Commonwealth Telephone and
RCN.
Robert E. Julian has been a director of the Company since
March 31, 1998. Mr. Julian has also been Chairman of the Board
of PKSIS since 1995. From 1992 to 1995 Mr. Julian served as
Executive Vice President and Chief Financial Officer of the
Company.
David C. McCourt has been a director of the Company since
March 31, 1998. Mr. McCourt has also served as Chairman and
Chief Executive Officer of Commonwealth Telephone, Cable
Michigan, Inc. and RCN since October 1997. From 1993 to 1997 Mr.
McCourt served as Chairman of the Board and Chief Executive
Officer of C-TEC Corporation. Mr. McCourt is also a director of
Mercom, Inc.
Kenneth E. Stinson has been a director of the Company since
January 1987. Mr. Stinson has been Chairman of the Board and
Chief Executive Officer of New PKS since the Split-Off. Prior to
the Split-Off, Mr. Stinson was Executive Vice President of the
Company for more than the last five years. Mr. Stinson is also a
director of ConAgra, Inc. and Valmont Industries, Inc.
Michael B. Yanney has been a director of the Company since
March 31, 1998. He has served as Chairman of the Board,
President and Chief Executive Officer of America First Companies
L.L.C. for more than the last five years. Mr. Yanney is also a
director of Burlington Northern Santa Fe Corporation, RCN, Forest
Oil Corporation and Mid-America Apartment Communities, Inc.
ITEM 11. COMPENSATION
1997 Executive Officer and Director Compensation
The table below shows the annual compensation of the chief
executive officer and the next four most highly compensated
executive officers of the Company for the 1997 fiscal year (the
"Named Executive Officers").
Annual Compensation
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
Walter Scott, Jr.
Chief Executive Officer 1997 872,551 2,000,000 191,109(1)
1996 715,000 2,000,000 276,400
1995 630,000 1,250,000 157,800
Kenneth E. Stinson
Executive Vice
President 1997 476,669 1,500,000
1996 402,500 900,000
1995 351,300 600,000
Richard Geary
Executive Vice
President of KCG 1997 285,919 770,000
1996 270,750 600,000
1995 252,800 525,000
George B. Toll, Jr.
Executive Vice
President of KCG 1997 257,705 650,000
1996 231,250 500,000
1995 201,250 400,000
Allan K. Kirkwood
Senior Vice President of
Kiewit Pacific Co., a
KCG subsidiary 1997 221,250 360,000
1996 192,350 310,000
1995 166,150 240,000
(1) Other Annual Compensation means perquisites and other
personal benefits received by each of the Named
Executive Officers, if over $50,000. The only
reportable amounts are the non-business use of Company
aircraft attributable to Mr. Scott. Aircraft usage
values are calculated under federal income tax
regulations and are reported as taxable income by Mr.
Scott.
Each of the Named Executive Officers other than Mr. Scott
set forth above is now employed by New PKS and is no longer an
officer of the Company. Mr. Scott continues as Chairman of the
Board of the Company, but is no longer the Chief Executive
Officer of the Company. Richard R. Jaros, who resigned as an
Executive Vice President of the Company effective July 31, 1997,
received a salary of $458,574 and a bonus of $262,350 for fiscal
year 1997. Messrs. Crowe, Bradbury, O'Hara and Ferguson, the
four current executive officers of the Company who were employed
by the Company during 1997, were paid salaries for 1997 of
$144,129, $102,564, $82,051 and $52,019 respectively, and no
other reportable compensation, during 1997. Each such executive
officer was employed by the Company for only part of fiscal year
1997.
During 1997, each of the directors of the Company who were
not employed by the Company during 1997 received directors fees
consisting of an annual retainer of $30,000 (pro-rated in the
case of Mr. Crowe, who was employed by the Company for part of
1997) and fees of $1,200 per board meeting and $1,500 for the
annual shareholder's meeting.
Compensation Committee Interlocks and Insider Participation
Prior to the Split-Off, the Compensation Committee of the
Company consisted of Messrs. Daugherty and Harper and Mr. Peter
Kiewit, Jr., none of whom is an officer or employee of PKS. Each
of Messrs. Daugherty, Harper and Kiewit purchased Common Stock
from PKS in 1997. See "Certain Relationships and Related
Transactions."
After the Split-Off, the Compensation Committee of the
Company consists of Messrs. Yanney, McCourt and Jaros, none of
whom is an officer or employee of the Company. Each of Messrs.
Yanney and McCourt purchased Common Stock from the Company in
1997. Mr. Jaros has entered into a separation agreement with the
Company, pursuant to which, among other things, he has received
certain severance payments. See "Certain Relationships and
Related Transactions."
Change in Control Arrangements
The Company's 1995 Stock Plan (the "Plan") provides that
upon a change in control of the Company (as defined in the Plan),
(i) all awards under the Plan shall become immediately vested and
(ii) the Committee may cancel any outstanding awards under the
Plan upon ten days' advance written notice, and pay the value of
such awards to the holders thereof in cash or stock. Messrs.
Crowe, Bradbury, O'Hara and Ferguson are all participants in the
Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with
respect to the beneficial ownership of Common Stock as of March
31, 1998 by the Company's directors, certain executive officers
and directors and executive officers as a group, and each person
known by the Company to beneficially own more than 5% of the
outstanding Common Stock.
Number of Shares of Percent of
Name(1) Common Stock Common Stock
Walter Scott, Jr.(2) 17,686,247 12.1%
James Q. Crowe 5,666,360 3.9%
R. Douglas Bradbury 1,277,595 *
Kevin J. O'Hara(3) 878,080 *
Robert B. Daugherty - *
William L. Grewcock(4) 5,762,070 3.9%
Charles M. Harper 95,000 *
Richard R. Jaros(5) 1,748,749 1.2%
Robert E. Julian 1,996,790 1.4%
David C. McCourt 57,500 *
Kenneth E. Stinson 150,280 *
Michael B. Yanney 50,000 *
Directors and Executive
Officers as a Group 35,886,556 24.2%
Donald L. Sturm(6) 9,111,875 6.2%
_______________
*Less than 1%
(1) The address of each person set forth above other than Mr.
Sturm is c/o the Company, 3555 Farnam Street, Omaha,
Nebraska 68131.
(2) Includes 49,850 shares of Common Stock held by the Suzanne
Scott Irrevocable Trust as to which Mr. Scott shares voting
and investment powers, and 30,769 shares of Common Stock to
be owned by Mr. Scott as a result of the conversion of the
80,000 shares of Class R Stock owned currently by Mr. Scott,
assuming a Conversion Value (as defined in the Level 3
Certificate of Incorporation) of $25 and a stock price of
$65 per share.
(3) Includes 23,000 shares of Common Stock held by Kevin J.
O'Hara Family LTD Partnership.
(4) Includes 577,320 shares of Common Stock held by Grewcock
Family Limited Partnership. Includes 175,615 shares of
Common Stock held by the Bill & Berniece Grewcock Foundation
as to which Mr. Grewcock shares voting and investment
powers, and 630 shares of Common Stock to be owned by Mr.
Grewcock as a result of the conversion of the 1,638 shares
of Class R Stock owned currently by Mr. Grewcock, assuming a
Conversion Value of $25 and a stock price of $65 per share.
(5) Includes 185,000 shares of Common Stock held by the Jaros
Family Limited Partnership. Includes 1,000,000 shares of
Common Stock subject to options granted to Mr. Jaros. See
"Certain Relationships and Related Transactions."
(6) Mr. Sturm's business address is 3033 East First Avenue,
Denver, Colorado 80206. Based on the Company's records as
of February 28, 1998, Mr. Sturm owns 7,805,155 shares of
Common Stock, and has voting and investment power with
respect to 1,306,720 shares held by trusts and partnerships
established for family members.
ITEM 13. CERTAIN TRANSACTIONS AND RELATIONSHIPS
In connection with his retention as Chief Executive Officer
of the Company, Mr. Crowe entered into an engagement agreement
(the "Engagement Agreement") with the Company. Under the
Engagement Agreement, the Company acquired from Mr. Crowe, Mr.
Bradbury and Mr. Ferguson, Broadband Capital Group, L.L.C., a
company formed to develop investment opportunities, for a
purchase price of $68,523, the owners' cash investment in that
company. Pursuant to the Engagement Agreement, the Company sold
5,000,000 shares of Common Stock to Mr. Crowe and 1,250,000
shares of Common Stock to Mr. Bradbury, in each case at $10.85
per share. The Engagement Agreement also provided that the
Company would make available for sale, from time to time prior to
the consummation of the Split-Off, to certain employees of the
Company designated by Mr. Crowe, including Mr. O'Hara and Mr.
Ferguson, in connection with the implementation of the current
business plan of the Company ("Employees"), up to an aggregate
of 5,250,000 shares of Common Stock at $10.85 per share.
The Company entered into agreements with each Business Plan
Employee that provided that the Company may repurchase any Common
Stock sold to the Business Plan Employee if the Business Plan
Employee resigns at any time before January 1, 1999.
On August 5, 1997, the Company purchased a jet aircraft from
a company controlled by Mr. Crowe for $5.7 million, the price
paid by the company for the aircraft in June 1997. The Company
and Mr. Crowe have entered into an aircraft operating lease,
under which Mr. Crowe may lease the aircraft for personal use at
rates specified by certain Federal Aviation Administration
regulations. The Company anticipates that Mr. Crowe will lease
approximately 15% of the aircraft's annual flight time, and will
pay the Company approximately $70,000 per year at the current
lease rate.
The Company entered into a separation agreement with Mr.
Jaros, a director of the Company, in connection with the
resignation of Mr. Jaros as President of Kiewit Diversified Group
Inc., a subsidiary of the Company, effective July 31, 1997.
Under the separation agreement, the Company paid Mr. Jaros $1.8
million on July 31, and agreed to pay Mr. Jaros the balance of
his 1997 salary ($187,500) between August 1 and December 31, 1997
and a bonus payment of $262,350 when the Company made its
customary executive bonus payments in 1998. The Company also
agreed to amend the option agreements with Mr. Jaros with respect
to the options to purchase 750,000 shares of Common Stock at
$8.08 per share granted to Mr. Jaros in 1995, and the options to
purchase 250,000 shares of Common Stock at $9.90 per share
granted to Mr. Jaros in 1996, to provide that those options would
be fully vested on July 31, 1997, and would be exercisable at any
time during the ten-year term of the original option agreements.
In December 1996, the Company agreed to sell 50,000 shares
of Common Stock to Mr. Harper, 50,000 shares of Common Stock to
Mr. Daugherty and 40,000 shares of Common Stock to Mr. Kiewit, in
each case at $9.90 per share. Those stock purchase transactions
were consummated in March 1997.
In October 1997, the Company sold 50,000 shares of Common
Stock to Mr. Yanney and 50,000 shares of Common Stock to Mr.
McCourt, in each case at $10.85 per share.
The Company loaned George B. Toll, Jr. $800,000 during 1994
in connection with the purchase of a residence and relocation
expenses. The full principal amount of his demand note payable
to the Company is currently outstanding. Mr. Toll was a director
and executive officer of the Company prior to the Split-Off, but
is no longer either a director or executive officer of the
Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 27th day of April, 1998.
LEVEL 3 COMMUNICATIONS, INC.
By: /s/ James Q. Crowe
James Q. Crowe
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on the
27th day of April, 1998.
/s/ James Q. Crowe Chairman of the Board and President
James Q. Crowe (Director and Principal Executive Officer)
/s/ R. Douglas Bradbury Chief Financial Officer
R. Douglas Bradbury (Director and Principal Financial Officer)
/s/ Eric J. Mortensen Controller
Eric J. Mortensen (Principal Accounting Officer)
/s/ Walter Scott, Jr. /s/ Robert B. Daugherty
Walter Scott, Jr., Director Robert B. Daugherty, Director
/s/ William L. Grewcock /s/ Charles M. Harper
William L. Grewcock, Director Charles M. Harper, Director
/s/ Richard R. Jaros /s/ Robert E. Julian
Richard R. Jaros, Director Robert E. Julian, Director
/s/ David C. McCourt /s/ Kenneth E. Stinson
David C. McCourt, Director Kenneth E. Stinson, Director
/s/ Michael B. Yanney
Michael B. Yanney, Director
