UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K


x    ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 1995


     TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OF 15 (d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

Commission file number 1-6314
                               Perini Corporation
             (Exact name of registrant as specified in its charter)


              Massachusetts                              04-1717070
              -------------                              ----------
       State or other jurisdiction of       (I.R.S. Employer Identification No.)
        incorporation or organization)

              73 Mt. Wayte Avenue, Framingham, Massachusetts 01701
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code: 508-628-2000

           Securities registered pursuant to Section 12(b) of the Act:


         Title of Each Class           Name of each exchange on which registered
         -------------------           -----------------------------------------

    Common Stock, $1.00 par value             The American Stock Exchange
 
    $2.125 Depositary Convertible             The American Stock Exchange
       Exchangeable Preferred Shares, each
       representing 1/10th Share of $21.25
       Convertible Exchangeable Preferred
       Stock, $1.00 par value

        Securities registered pursuant to Section 12(g) of the Act: None

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.

The  aggregate  market  value  of  voting  stock  held by  nonaffiliates  of the
registrant is $29,652,513 as of March 1, 1996.

The number of shares of Common Stock, $1.00 par value per share,  outstanding at
March 1, 1996 is 4,723,754.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual proxy  statement for the year ended December 31, 1995 are
incorporated by reference into Part III.




                               PERINI CORPORATION

                             INDEX TO ANNUAL REPORT

                                  ON FORM 10-K



                                                                           PAGE
                                                                           ----
PART I
- ------
Item 1:             Business                                                 2
Item 2:             Properties                                              13
Item 3:             Legal Proceedings                                       13
Item 4:             Submission of Matters to a Vote of Security Holders     14

PART II
- -------
Item 5:             Market for the Registrant's Common Stock and Related    15
                      Stockholder Matters
Item 6:             Selected Financial Data                                 15
Item 7:             Management's Discussion and Analysis of Financial       16
                      Condition and Results of Operations
Item 8:             Financial Statements and Supplementary Data             19
Item 9:             Disagreements on Accounting and Financial Disclosure    19

PART III
- --------
Item 10:            Directors and Executive Officers of the Registrant      20
Item 11:            Executive Compensation                                  20
Item 12:            Security Ownership of Certain Beneficial Owners and     20
                      Management
Item 13:            Certain Relationships and Related Transactions          20

PART IV
- -------
Item 14:            Exhibits, Financial Statement Schedules and Reports on  21
                      Form 8-K

Signatures                                                                  22


                                      - 1 -





                                     PART I.

ITEM 1.   BUSINESS
- ------------------

General
- -------

         Perini  Corporation  and its  subsidiaries  (the  "Company"  unless the
context   indicates   otherwise)  is  engaged  in  two   principal   businesses:
construction and real estate  development.  The Company was incorporated in 1918
as a successor to  businesses  which had been engaged in providing  construction
services since 1894.

         The Company provides general contracting,  construction  management and
design-build  services to private  clients and public  agencies  throughout  the
United  States and selected  overseas  locations.  Historically,  the  Company's
construction business involved four types of operations: civil and environmental
("heavy"),  building,  international and pipeline. However, the Company sold its
pipeline construction business in January, 1993.

         The  Company's  real estate  development  operations  are  conducted by
Perini Land & Development  Company,  a  wholly-owned  subsidiary  with extensive
development  interests  concentrated in historically  attractive  markets in the
United States - Arizona, California, Florida, Georgia and Massachusetts, but has
not commenced the development of any new real estate projects since 1990.

         Because the Company's  results  consist in part of a limited  number of
large  transactions in both  construction and real estate,  results in any given
fiscal  quarter  can  vary  depending  on the  timing  of  transactions  and the
profitability  of the  projects  being  reported.  As a  consequence,  quarterly
results may reflect such variations.

         In 1988, the Company, in conjunction with two other companies, formed a
new entity called Perland Environmental Technologies, Inc. ("Perland").  Perland
provides  consulting,  engineering  and  construction  services  primarily  on a
turn-key  basis for hazardous  material  management and clean-up to both private
clients and public agencies nationwide.  The Company's investment in Perland was
increased  from 47  1/2%  to  100%  in  recent  years  as a  result  of  Perland
repurchasing its stock owned by the outside  investors.  During 1995,  Perland's
name was changed to Perini Environmental Services, Inc.

         In January 1993, the Company sold its  74%-ownership  in Majestic,  its
Canadian pipeline construction  subsidiary,  for $31.7 million which resulted in
an after tax gain of approximately $1.0 million.

         Although Majestic was profitable in both 1992 and 1991, it participated
in a sector of the  construction  business that was not directly  related to the
Company's core construction operations.  The sale of Majestic served to generate
liquid assets which improved the Company's financial condition without affecting
its core construction business.

         Effective  July  1,  1993,   the  Company   acquired  Gust  K.  Newberg
Construction  Co.'s ("Newberg")  interest in certain  construction  projects and
related equipment.  The purchase price for the acquisition was (i) approximately
$3 million  in cash for the  equipment  paid by a third  party  leasing  company
which,  in turn,  simultaneously  entered into an operating lease agreement with
the Company for the use of said  equipment,  (ii) $1 million in cash paid by the
Company and (iii) 50% of the aggregate net profits earned from each project from
April 1, 1993 through December 31, 1994 and, with regard to one project, through
December 31, 1995. This acquisition has been accounted for as a purchase.

                                      - 2 -





         Information on lines of business and foreign business is included under
the  following  captions of this  Annual  Report on Form 10-K for the year ended
December 31, 1995.

                                                              Annual Report
                                                              On Form 10-K
                        Caption                                Page Number
                        -------                                -----------
Selected Consolidated Financial Information                      Page 15
Management's Discussion and Analysis                             Page 16
Footnote 13 to the Consolidated Financial Statements,
   entitled Business Segments and Foreign Operations             Page 40


         While  the  "Selected   Consolidated  Financial  Information"  presents
certain  lines  of  business   information   for  purposes  of   consistency  of
presentation for the five years ended December 31, 1995, additional  information
(business  segment and foreign  operations)  required by  Statement of Financial
Accounting  Standards  No. 14 for the three  years  ended  December  31, 1995 is
included in Note 13 to the Consolidated Financial Statements.

         A  summary  of  revenues  by  product  line for the three  years  ended
December 31, 1995 is as follows:

                                               Revenues (in thousands)
                                               Year Ended December 31,
                                ------------------------------------------------
                                      1995              1994               1993
                                      ----              ----               ----
Construction:
  Building                      $  770,427        $  640,721          $  762,451
  Heavy                            286,246           310,163             267,890
                                ----------        ----------          ----------
    Total Construction Revenues $1,056,673        $  950,884          $1,030,341
                                ----------        ----------          ----------


Real Estate:
  Sales of Real Estate          $   10,738        $   33,188          $   40,053
  Building Rentals                  16,799            16,388              19,313
  Interest Income                   12,396             7,031               6,110
  All Other                          4,462             4,554               4,299
                                ----------        ----------          ----------
    Total Real Estate Revenues  $   44,395        $   61,161          $   69,775
                                ----------        ----------          ----------

      Total Revenues            $1,101,068        $1,012,045          $1,100,116
                                ==========        ==========          ==========

Construction
- ------------

         The general  contracting and construction  management services provided
by the Company  consist of planning  and  scheduling  the  manpower,  equipment,
materials and subcontractors  required for the timely completion of a project in
accordance  with  the  terms  and  specifications  contained  in a  construction
contract.  The  Company  was  engaged in over 160  construction  projects in the
United  States  and  overseas  during  1995.  The  Company  has three  principal
construction  operations:  heavy, building,  and international,  having sold its
Canadian pipeline  construction business in January 1993. The Company also has a
subsidiary engaged in hazardous waste remediation.

         The  heavy  operation  undertakes  large  civil  construction  projects
throughout the United States,  with current emphasis on major metropolitan areas
such as Boston,  New York City,  Chicago and Los  Angeles.  The heavy  operation
performs construction and rehabilitation of highways,  subways,  tunnels,  dams,
bridges,  airports, marine projects, piers and waste water treatment facilities.
The Company has been active in heavy operations since 1894, and believes that it
has particular  expertise in large and complex  projects.  The Company  believes
that infrastructure

                                      - 3 -





rehabilitation is and will continue to be a significant market in the 1990's.

         The building  operation  provides its services through regional offices
located in several  metropolitan  areas:  Boston and  Philadelphia,  serving New
England and the Mid-Atlantic  area;  Detroit and Chicago,  operating in Michigan
and the Midwest region;  and Phoenix,  Las Vegas, Los Angeles and San Francisco,
serving  Arizona,  Nevada and  California.  In 1992,  the Company  combined  its
building operations into a new wholly-owned subsidiary, Perini Building Company,
Inc.  This new company  combines  substantial  resources and expertise to better
serve clients within the building  construction  market,  and enhances  Perini's
name  recognition  in this  market.  The  Company  undertakes  a broad  range of
building construction projects including health care,  correctional  facilities,
sports complexes, hotels, casinos, residential,  commercial, civic, cultural and
educational facilities.

         The  international   operation  engages  in  both  heavy  and  building
construction services overseas,  funded primarily in U.S. dollars by agencies of
the United States government.  In selected  situations,  it pursues private work
internationally.

                              Construction Strategy
                              ---------------------

         The  Company  plans  to  continue  to  increase  the  amount  of  heavy
construction   work  it  performs  because  of  the  relatively   higher  margin
opportunities   available  from  such  work.  The  Company   believes  the  best
opportunities  for  growth in the coming  years are in the urban  infrastructure
market,  particularly in Boston, metropolitan New York, Chicago, Los Angeles and
other major  cities  where it has a  significant  presence,  and in other large,
complex projects. The Company's acquisition during 1993 of Chicago-based Newberg
referred to above is consistent  with this strategy.  The Company's  strategy in
building  construction  is to maximize  profit  margins;  to take  advantage  of
certain  market  niches;  and to expand  into new  markets  compatible  with its
expertise.  Internally,  the Company plans to continue  both to  strengthen  its
management  through  management  development and job rotation  programs,  and to
improve  efficiency through strict attention to the control of overhead expenses
and implementation of improved project management systems.  Finally, the Company
continues to expand its expertise to assist  public owners to develop  necessary
facilities through creative public/private ventures.

                                     Backlog
                                     -------

         As of December 31, 1995, the Company's  construction  backlog was $1.53
billion  compared to backlogs of $1.54  billion and $1.24 billion as of December
31, 1994 and 1993, respectively.

                                Backlog (in thousands) as of December 31,
                      -------------------------------------------------------
                             1995               1994               1993
                      -----------------  -----------------  -----------------
Northeast             $  749,017    49%  $  803,967    52%  $  552,035    45%
Mid-Atlantic             179,324    12       26,408     2       34,695     3
Southeast                 33,223     2          783     -       34,980     3
Midwest                  325,055    21      293,168    19      143,961    12
Southwest                 94,725     6      174,984    11      314,058    25
West                     134,259     9      193,996    13      143,251    11
Other Foreign             18,919     1       45,473     3       15,161     1
                      ----------   ----  ----------   ----  ----------   ---
  Total               $1,534,522   100%  $1,538,779   100%  $1,238,141   100%
                      ==========   ====  ==========   ====  ==========   ====

         The Company includes a construction project in its backlog at such time
as a contract  is awarded  or a firm  letter of  commitment  is  obtained.  As a
result,  the  backlog  figures  are  firm,  subject  only  to  the  cancellation
provisions  contained  in the  various  contracts.  The Company  estimates  that
approximately $657 million of its backlog will not be completed in 1996.

         The  Company's  backlog in the  Northeast  region of the United  States
remains  strong  because  of its  ability  to  meet  the  needs  of the  growing
infrastructure   construction   and   rehabilitation   market  in  this  region,
particularly in the metropolitan Boston and New York City areas. The increase in
the Midwest region primarily reflects an increase in building work in that area.
Other fluctuations in backlog are viewed by management as transitory.


                                      - 4 -





                               Types of Contracts
                               ------------------

         The four general types of contracts in current use in the  construction
industry are:

o        Fixed price  contracts  ("FP"),  which  include  unit price  contracts,
         usually transfer more risk to the contractor but offer the opportunity,
         under favorable circumstances,  for greater profits. With the Company's
         increasing  move into heavy and publicly bid building  construction  in
         response  to  current  opportunities,  the  percentage  of fixed  price
         contracts continue to represent the major portion of the backlog.

o        Cost-plus-fixed-fee contracts ("CPFF") which provide greater safety for
         the contractor from a financial standpoint but limit profits.

o        Guaranteed   maximum  price  contracts  ("GMP")  which  provide  for  a
         cost-plus-fee arrangement up to a maximum agreed price. These contracts
         place risks on the contractor but may permit an opportunity for greater
         profits than  cost-plus-fixed-fee  contracts through sharing agreements
         with the client on any cost savings.

o        Construction  management  contracts  ("CM")  under  which a  contractor
         agrees to manage a project for the owner for an  agreed-upon  fee which
         may be fixed or may vary based upon negotiated factors.  The contractor
         generally   provides   services  to  supervise   and   coordinate   the
         construction work on a project, but does not directly purchase contract
         materials,  provide  construction  labor and  equipment  or enter  into
         subcontracts.

         Historically,  a high percentage of company  contracts have been of the
fixed price type.  Construction  management  contracts remain a relatively small
percentage  of company  contracts.  A summary of revenues and backlog by type of
contract for the most recent three years follows:

Revenues - Year Ended                       Backlog As Of
    December 31,                             December 31,
- ---------------------                    --------------------
1995    1994     1993                    1995    1994    1993
- ----    ----     ----                    ----    ----    ----
 67%     54%      56%   Fixed Price       74%     68%     65%
 33      46       44    CPFF, GMP or CM   26      32      35
- ----    ----     ----                    ----    ----    ---
100%    100%     100%                    100%    100%    100%
====    ====     ====                    ====    ====    ====

                                     Clients
                                     -------

        During  1995,  the  Company  was  active  in  the  building,  heavy  and
international  construction  markets.  The Company  performed  work for over 100
federal,  state and local  governmental  agencies  or  authorities  and  private
customers  during 1995. No material part of the Company's  business is dependent
upon a single or  limited  number of private  customers;  the loss of any one of
which would not have a materially adverse effect on the Company.  As illustrated
in the following table, the Company  continues to serve a significant  number of
private  owners.  During  the period  1993-1995,  the  portion  of  construction
revenues  derived from  contracts  with various  governmental  agencies  remains
relatively constant at 56% in 1995 and 1994, and 54% in 1993.

                            Revenues by Client Source
                            -------------------------

                                                Year Ended December 31,
                                                -----------------------
                                      1995             1994               1993
                                      ----             ----               ----
Private Owners                         44%              44%                46%
Federal Governmental Agencies           8               11                 12
State, Local and Foreign Governments   48               45                 42
                                      ----             ----               ---
                                      100%             100%               100%
                                      ====             ====               ====

All Federal government contracts are subject to termination  provisions,  but as
shown in the table above,  the Company  does not have a material  amount of such
contracts.




                                      - 5 -





                                     General
                                     -------

        The construction  business is highly  competitive.  Competition is based
primarily on price,  reputation for quality,  reliability and financial strength
of the  contractor.  While the Company  experiences a great deal of  competition
from other large general  contractors,  some of which may be larger with greater
financial  resources than the Company, as well as from a number of smaller local
contractors,  it believes it has sufficient technical,  managerial and financial
resources to be competitive in each of its major market areas.

        The Company will  endeavor to spread the  financial  and/or  operational
risk, as it has from time to time in the past, by  participating in construction
joint ventures,  both in a majority and in a minority position,  for the purpose
of bidding on projects.  These joint ventures are generally  based on a standard
joint  venture  agreement  whereby  each of the joint  venture  participants  is
usually committed to supply a predetermined  percentage of capital, as required,
and to share in the  same  predetermined  percentage  of  income  or loss of the
project.  Although joint ventures tend to spread the risk of loss, the Company's
initial obligations to the venture may increase if one of the other participants
is financially  unable to bear its portion of cost and expenses.  For a possible
example of this  situation,  see  "Legal  Proceedings"  on page 13. For  further
information   regarding  certain  joint  ventures,   see  Note  2  to  Notes  to
Consolidated Financial Statements.

         While the Company's  construction  business may experience some adverse
consequences if shortages develop or if prices for materials, labor or equipment
increase  excessively,  provisions in certain types of contracts often shift all
or a major portion of any adverse  impact to the  customer.  On fixed price type
contracts,  the Company attempts to insulate itself from the unfavorable effects
of inflation  by  incorporating  escalating  wage and price  assumptions,  where
appropriate,  into its  construction  bids.  Gasoline,  diesel  fuel  and  other
materials used in the Company's construction  activities are generally available
locally from  multiple  sources and have been in adequate  supply  during recent
years. Construction work in selected overseas areas primarily employs expatriate
and local labor which can usually be obtained as required.  The Company does not
anticipate any  significant  impact in 1996 from material and/or labor shortages
or price increases.

        Economic and  demographic  trends tend not to have a material  impact on
the  Company's  heavy  construction  operation.  Instead,  the  Company's  heavy
construction  markets are dependent on the amount of heavy civil  infrastructure
work funded by various  governmental  agencies which, in turn, may depend on the
condition  of  the  existing   infrastructure  or  the  need  for  new  expanded
infrastructure.  The  building  markets in which the  Company  participates  are
dependent on economic and demographic  trends,  as well as  governmental  policy
decisions as they impact the specific geographic markets.

        The Company has minimal exposure to environmental  liability as a result
of  the   activities   of   Perini   Environmental   Services,   Inc.   ("Perini
Environmental"),  a wholly-owned subsidiary of the Company. Perini Environmental
provides  hazardous waste engineering and construction  services to both private
clients and public agencies nationwide.  Perini Environmental is responsible for
compliance  with  applicable law in connection  with its clean up activities and
bears the risk associated with handling such materials.

        In addition to strict  procedural  guidelines  for conduct of this work,
the  Company  and Perini  Environmental  generally  carry  insurance  or receive
satisfactory  indemnification  from customers to cover the risks associated with
this business.

        The  Company  also  owns  real  estate  nationwide,  most  of  which  is
residential,  and as an  owner,  is  subject  to  laws  governing  environmental
responsibility and liability based on ownership. The Company is not aware of any
environmental liability associated with its ownership of real estate property.

        The  Company  has been  subjected  to a number  of  claims  from  former
employees  of  subcontractors  regarding  exposure to asbestos on the  Company's
projects.  None of the claims  have been  material.  The Company  also  operates
construction machinery in its business and will, depending on the project or the
ease of access to fuel for such  machinery,  install fuel tanks for use on-site.
Such tanks run the risk of leaking  hazardous fluids into the  environment.  The
Company, however, is not aware of any emissions associated with such tanks or of
any other environmental liability associated with its construction operations or
any of its corporate activities.

         Progress  on  projects  in  certain  areas may be  delayed  by  weather


                                                       - 6 -





conditions depending on the type of project, stage of completion and severity of
the weather.  Such delays, if they occur, may result in more volatile  quarterly
operating results.

        In the normal course of business, the Company periodically evaluates its
existing construction markets and seeks to identify any growing markets where it
feels it has the expertise and management  capability to successfully compete or
withdraw from markets which are no longer economically attractive.

Real Estate
- -----------

        The Company's real estate development operations are conducted by Perini
Land & Development Company ("PL&D"), a wholly-owned  subsidiary,  which has been
involved in real estate development since the early 1950's. PL&D engages in real
estate development in Arizona,  California,  Florida, Georgia and Massachusetts.
However,  in 1993,  PL&D  significantly  reduced its staff in California and has
suspended any new land acquisition in that area. PL&D's  development  operations
generally  involve  identifying  attractive  parcels,  planning and development,
arranging  financing,   obtaining  needed  zoning  changes  and  permits,   site
preparation,   installation  of  roads  and  utilities  and  selling  the  land.
Originally,  PL&D concentrated on land development.  In appropriate  situations,
PL&D has also constructed buildings on the developed land for rental or sale.

        For the past five years PL&D has been affected by the reduced  liquidity
in real estate  markets  brought on by the  cutbacks  in real estate  funding by
commercial banks,  insurance  companies and other  institutional  lenders.  Many
traditional  buyers of PL&D  properties  are other  developers  or investors who
depend on third party  sources for funding.  As a result,  some  potential  PL&D
transactions  have been  cancelled,  altered or  postponed  because of financing
problems.  Over this period,  PL&D looked to foreign buyers not affected by U.S.
banking  policies  or in some  cases,  provided  seller  financing  to  complete
transactions.  Based on a weakening  in property  values which has come with the
industry credit crunch and the national real estate  recession,  PL&D took a $31
million  pre-tax net realizable  value writedown  against  earnings in 1992. The
charge  affected  those  properties  which PL&D had  decided to sell in the near
term.  Currently  it is  management's  belief  that its  remaining  real  estate
properties are not carried at amounts in excess of their net realizable  values.
PL&D   periodically   reviews  its  portfolio  to  assess  the  desirability  of
accelerating its sales through price  concessions or sale at an earlier stage of
development.  In  circumstances  in  which  asset  strategies  are  changed  and
properties  brought  to  market  on  an  accelerated  basis,  those  assets,  if
necessary, are adjusted to reflect the lower of cost or market value. To achieve
full value for some of its real estate  holdings,  in particular its investments
in Rincon  Center and the Resort at Squaw  Creek,  the  Company may have to hold
those properties several years and currently intends to do so.

                              Real Estate Strategy
                              --------------------

        Since  1990,  PL&D has taken a number of steps to  minimize  the adverse
financial  impact of current  market  conditions.  In early  1990,  all new real
estate  investment was suspended  pending market  improvement,  all but critical
capital  expenditures  were curtailed on on-going  projects and PL&D's workforce
was cut by over 60%.  Certain  project loans were extended,  with such extension
usually  requiring  paydowns and increased annual  amortization of the remaining
loan balance.  Going forward,  PL&D will operate with a reduced staff and adjust
its activity to meet the demands of the market.

        PL&D's real estate  development  project mix includes planned community,
industrial park,  commercial office,  multi-unit  residential,  urban mixed use,
resort and single  family  home  developments.  Given the  current  real  estate
environment,  PL&D's  emphasis  is on the  sale of  completed  product  and also
developing  the  projects  in its  inventory  with the  highest  near term sales
potential.  It may also selectively seek new development  opportunities in which
it serves as development manager with limited equity exposure, if any.

                             Real Estate Properties
                             ----------------------

        The  following  is a  description  of the  Company's  major  development
projects and properties by geographic area:

                                     Florida
                                     -------

        West Palm Beach and Palm Beach County - In 1994, PL&D completed the sale


                                      - 7 -





of all of the original 1,428 acres located in West Palm Beach at the development
known as "The Villages of Palm Beach Lakes".  PL&D's only continuing interest in
the  project  is its  ownership  in the Bear  Lakes  Country  Club  which  under
agreement with the membership can be turned over to the members when  membership
reaches 650. Current  membership is 438. The club includes two championship golf
courses designed by Jack Nicklaus.

        At Metrocentre,  a 51-acre commercial/office park at the intersection of
Interstate  95 and 45th Street in West Palm Beach,  one site totaling 2.78 acres
was  sold in  1995.  That  site was sold to a  national  motel  chain.  The park
consists of 17 parcels,  of which 2 1/4 (7.3 acres) currently remain unsold. The
park provides for 570,500 square feet of mixed commercial uses.

                                  Massachusetts
                                  -------------

        Perini Land and Development or Paramount  Development  Associates,  Inc.
("Paramount"), a wholly-owned subsidiary of PL&D, owns the following projects:

        Raynham Woods Commerce Center,  Raynham - In 1987,  Paramount acquired a
409-acre  site  located  in  Raynham,   Massachusetts,  on  which  it  had  done
preliminary  investigatory  and zoning  work under an  earlier  purchase  option
period.  During 1988,  Paramount  secured  construction  financing and completed
infrastructure  work on a major  portion of the site (330 acres)  which is being
developed as a mixed use  corporate  campus  style park known as "Raynham  Woods
Commerce Center". During 1989, Paramount completed the sale of a 24-acre site to
be used as a  headquarters  facility  for a division  of a major  U.S.  company.
During 1990,  construction was completed on this facility.  In 1990 construction
was also completed on two new commercial buildings by Paramount.  During 1992, a
17-acre  site was sold to a  developer  who was  working  with a major  national
retailer. The site has since been developed into the first retail project in the
park. No new land sales were made in 1993, but in 1994, an 11-acre site was sold
to the same major U.S.  company which had acquired  land in 1989,  and in 1995 a
4-acre site was sold to a major  insurance  company.  Although the two Paramount
commercial  buildings owned within the park  experienced some tenant turnover in
late 1994 and into  1995,  they  remain  90%  occupied.  The park is  planned to
eventually contain 2.5 million square feet of office,  R&D, light industrial and
mixed commercial space.

        Easton Business Center,  Easton - In 1989,  Paramount acquired a 40-acre
site in Easton,  Massachusetts,  which had  already  been  partially  developed.
Paramount  completed  the work in 1990 and is  currently  marketing  the site to
commercial/industrial users. No sales were closed in 1995.

        Wareham - In early 1990,  Paramount acquired an 18.9-acre parcel of land
at the junction of Routes 495 and 58 in Wareham, Massachusetts.  The property is
being  marketed to both retail and  commercial/industrial  users.  No sales were
closed in 1995.

                                     Georgia
                                     -------

        The Villages at Lake Ridge,  Clayton  County - During  1987,  PL&D (49%)
entered  into a joint  venture  with 138 Joint  Venture  partners  to  develop a
348-acre  planned  commercial and residential  community in Clayton County to be
called "The  Villages at Lake Ridge",  six miles south of  Atlanta's  Hartsfield
International  Airport.  By year end 1990,  the first phase  infrastructure  and
recreational  amenities were in place. In 1991, the joint venture  completed the
infrastructure  on 48 lots for phased  sales of improved  lots to single  family
home builders and sold nine.  During 1992,  the joint venture sold an additional
60 lots and also sold a 16-acre parcel for use as an elementary  school.  During
1993,  unusually wet weather in the spring delayed  construction on improvements
required to deliver lots as scheduled. As a result, the sale of an additional 58
lots in 1993 were below  expectation.  Although 1994 started off strong,  rising
interest  rates created a slowdown in activity  later in the year. For the year,
52 lots were sold.  In 1995,  the pace picked up again and a record 72 lots were
sold.  Because most of the homes built within the  development are to first time
buyers,  demand is  highly  sensitive  to  mortgage  rates  and  other  costs of
ownership.  Financing  restrictions generally require the joint venture to allow
developers to take down finished lots only as homes built on previously acquired
lots are sold.  As a result,  any  slowdown in home sales will  influence  joint
venture  sales  quickly  thereafter.   The  development  plan  calls  for  mixed
residential  densities of apartments  and moderate  priced  single-family  homes
totaling 1,158 dwelling units in the residential tracts plus 220,000 square feet
of retail and 220,000 square feet of office space in the commercial tracts.



                                      - 8 -





        The  Oaks at  Buckhead,  Atlanta  -  Sales  commenced  on this  217-unit
residential  condominium  project at a site in the  Buckhead  section of Atlanta
near the Lenox Square Mall in 1992. The project  consists of 201 residences in a
30-story tower plus 16 adjacent three-story townhome residences. At year end 207
units were either sold or under contract.  Sixty-nine of these units were closed
in 1995,  up from 53 for 1994.  PL&D (50%) is  developing  this project in joint
venture with a subsidiary of a major Taiwanese company.

                                   California
                                   ----------

        Rincon  Center,  San Francisco - Major  construction  on this  mixed-use
project  in  downtown  San  Francisco  was  completed  in  1989.   The  project,
constructed  in  two  phases,   consists  of  320   residential   rental  units,
approximately  423,000 square feet of office space, 63,000 square feet of retail
space,  and a 700-space  parking  garage.  Following its completion in 1988, the
first  phase  of the  project  was  sold  and  leased  back  by  the  developing
partnership.  The first phase  consists of about  223,000  square feet of office
space and 42,000 square feet of retail space. The Phase I office space continues
to be close to 100% leased with the regional telephone  directory company as the
major tenant on leases which run into early 1998.  The retail space is currently
90%  leased.  Phase II of the  project,  which  began  operations  in late 1989,
consists of  approximately  200,000  square feet of office space,  21,000 square
feet of retail  space,  a 14,000  square  foot  U.S.  postal  facility,  and 320
apartment units. Currently, close to 100% of the office space, 94% of the retail
space and  virtually  all of the 320  residential  units are  leased.  The major
tenant in the office  space in Phase II is the Ninth  Circuit  Federal  Court of
Appeals which is leasing  approximately  176,000 square feet. That lease expires
at the end of 1996. Currently, the space is being shown to potential tenants for
possible 1997 occupancy.  PL&D currently holds a 46% interest in and is managing
general  partner of the  partnership  which is developing the project.  The land
related to this project is being  leased from the U.S.  Postal  Service  under a
ground lease which expires in 2050.

        In addition to the project  financing  and  guarantees  disclosed in the
first, second and third paragraphs of Note 11 to Notes to Consolidated Financial
Statements,   the  Company  has  advanced   approximately  $78  million  to  the
partnership  through  December 31, 1995, of which  approximately  $5 million was
advanced  during 1995,  primarily to paydown  some of the  principal  portion of
project debt which was  renegotiated  during 1993.  In 1995,  operations  before
principal repayment of debt created a positive cash flow on an annual basis.

        Two major loans on this property in aggregate  totaling over $75 million
were scheduled to mature in 1993.  During 1993 both loans were extended for five
additional years. To extend these loans, PL&D provided  approximately $6 million
in new funds which were used to reduce the principal  balances of the loans.  In
1995 and over the next three years,  additional  amortization  will be required,
some of which may not be covered by operating cash flow and, therefore, at least
80% of those  funds  not  covered  by  operations  will be  provided  by PL&D as
managing general partner.  Lease payments and loan  amortization  obligations at
Rincon Center through 1997 are as follows: $7.5 million in 1996 and $7.3 million
in 1997. Based on Company forecasts,  it could be required to contribute as much
as $9.4 million to cover these and possible tenant improvement  requirements not
covered by project cash flow through 1997. While the budgeted shortfall includes
an estimate for tenant improvements,  they may or may not be required.  Although
management believes operating expenses will be covered by operating cash flow at
least through 1997, the interest  rates on much of the debt  financing  covering
Rincon Center are variable based on various rate indices.  With the exception of
approximately $20 million of the financing,  none of the debt has been hedged or
capped and is subject to market  fluctuations.  From time to time,  the  Company
reviews the costs and anticipated benefits from hedging Rincon Center's interest
rate  commitments.  Based on current costs to further  hedge rate  increases and
market conditions,  the Company has elected not to provide any additional hedges
at this time.

        As part of the Rincon One sale and operating lease-back transaction, the
joint venture agreed to obtain an additional  financial  commitment on behalf of
the lessor to replace at least $33 million of long-term  financing by January 1,
1998. If the joint venture has not secured a further extension or new commitment
for financing on the property for at least $33 million, the lessor will have the
right under the lease to require the joint  venture to purchase the property for
a  stipulated  amount  of  approximately  $18.8  million  in  excess of the then
outstanding debt.  Management  currently  believes it will be able to extend the
financing or refinance the building such that this sale back to the Company will
not occur.


        During  1993  PL&D  agreed,  if  necessary,   to  lend  Pacific  Gateway


                                      - 9 -





Properties  (PGP),  the other General Partner in the project,  funds to meet its
20% share of cash  calls.  In return  PL&D  receives a priority  return from the
partnership  on those  funds and  penalty  fees in the form of rights to certain
distributions due PGP by the partnership  controlling Rincon.  During 1993, 1994
and 1995, PL&D advanced $1.7 million, $.3 million and $.9 million, respectively,
under this agreement, primarily to meet the principal payment obligations of the
loan extensions described above.

        The Resort at Squaw Creek - During 1990,  construction  was completed on
the 405-unit  first phase of the hotel  complex of this major  resort-conference
facility.  In mid-December of that year, the resort was opened.  In 1991,  final
work was  completed on  landscaping  the golf course,  as well as the  remaining
facilities  to complete the first phase of the  project.  The first phase of the
project includes a 405-unit hotel, 36,000 square feet of conference  facilities,
a Robert Trent Jones, Jr. golf course,  48 single-family  lots, all but three of
which had been sold or put under contract by early 1993, three  restaurants,  an
ice skating rink, pool complex, fitness center and 11,500 square feet of various
retail support facilities. The second phase of the project is planned to include
an additional  409-unit hotel  facility,  36  townhouses,  27,000 square feet of
conference space, 5,000 square feet of retail space and a parking structure.  No
activity on the second phase will begin until stabilization is attained on phase
one and market conditions warrant additional investment.

        While  PL&D  has an  effective  18%  ownership  interest  in this  joint
venture, it has additional financial commitments as described below.

        In  addition  to the  project  financing  and  guarantees  disclosed  in
paragraphs  four  and  five  of  Note  11 to  Notes  to  Consolidated  Financial
Statements,  the Company  has  advanced  approximately  $76 million to the joint
venture  through  December 31,  1995,  of which  approximately  $3.3 million was
advanced during 1995, for the cost of operating expenses,  debt amortization and
interest payments. Further, it is anticipated the project may require additional
funding by PL&D before it reaches  stabilization  which may take several  years.
During 1992,  the majority  partner in the joint  venture sold its interest to a
group  put  together  by  an  existing  limited  partner.  As  a  part  of  that
transaction,  PL&D relinquished its managing general partnership position to the
buying group,  but retained a wide range of approval  rights.  The result of the
transaction  was to strengthen the financial  support for the project and led to
an extension of the bank  financing on the project to mid-1995.  The $48 million
of bank  financing  on the  project  was  extended  again in 1995 and  currently
matures in May,  1997,  with an option by the  borrower to extend an  additional
year.

        As part of Squaw Creek Associates partnership agreement,  either partner
may initiate a buy/sell  agreement on or after  January 1, 1997.  Such  buy/sell
agreement,  which is similar to those  often  found in real  estate  development
partnerships,  provides  for the  recipient  of the offer to have the  option of
selling its share or purchasing its partners share at the  proportionate  amount
applicable  based on the offer  price  and the  specific  priority  of payout as
called for under the  partnership  agreement  based on a sale and termination of
the  partnership.  The Company does not anticipate such a circumstance,  because
until the end of the year 2001,  the partner  would lose the  certainty  of a $2
million annual preferred return currently guaranteed by the Company. However, an
exercise of the  buy/sell  agreement  by its partner  could force the Company to
sell its ownership at a price  possibly  significantly  less than its full value
should the  Company be unable to buy out its  partner  and forced to sell at the
price initiated by its partner.

        The  operating  results  of this  project  are  weather  sensitive.  For
example,  a large snowfall in late 1994 helped improve results during the 1994-5
ski season.  As a result,  through  October of 1995,  the resort  showed  marked
improvement  over the previous  year.  Snowfall in late 1995,  however,  did not
match the previous  year which  adversely  affected  results in late 1995 and in
early 1996.

        Corte  Madera,  Marin County - After many years of  intensive  planning,
PL&D obtained approval for a 151 single-family  home residential  development on
its 85-acre site in Corte Madera and, in 1991,  was  successful in gaining water
rights for the property.  In 1992, PL&D initiated  development on the site which
was continued into 1993. This  development is one of the last remaining  in-fill
areas in southern  Marin  County.  In 1993,  when PL&D decided to scale back its
operations  in  California,  it also  decided  to  sell  this  development  in a
transaction  which closed in early 1994. The  transaction  calls for PL&D to get
the majority of its funds from the sale of  residential  units or upon the sixth
anniversary of the sale whichever takes place first and,  although  indemnified,
to leave in place certain  bonds and other  assurances  previously  given to the
town of Corte Madera  guaranteeing  performance  in  compliance  with  approvals
previously obtained.  Sale of the units began in August of 1995 and by year end,
10 units were under contract or closed.
                                     - 10 -





                                     Arizona
                                     -------

        I-10 West, Phoenix - In 1979, I-10 Industrial Park Developers  ("I-10"),
an Arizona partnership between Paramount Development Associates,  Inc. (80%) and
Mardian  Development  Company  (20%),  purchased   approximately  160  acres  of
industrially zoned land located  immediately south of the Interstate 10 Freeway,
between  51st and 59th Avenues in the City of Phoenix.  The project  experienced
strong  demand  through  1988.  With the  downturn  in the  Arizona  real estate
markets,  subsequent to 1988, sales slowed.  However, in 1995 the remaining 13.3
acres were sold and this project is sold out.

        Airport  Commerce  Center,  Tucson  -  In  1982,  the  I-10  partnership
purchased 112 acres of industrially zoned property near the Tucson International
Airport.  During 1983, the partnership added 54 acres to that project,  bringing
its total size to 166 acres.  This project has  experienced a low level of sales
activity  due to an excess  supply of  industrial  property in the  marketplace.
However,   the  partnership   built  and  fully  leased  a  14,600  square  foot
office/warehouse  building in 1987 on a building lot in the park, which was sold
during  1991.  In 1990,  the  partnership  sold 14 acres to a major  airline for
development as a processing center and, in 1992, sold a one acre parcel adjacent
to the existing property. After experiencing no new sales in 1993, approximately
12  acres  were  sold in 1994 and an  additional  24  acres  were  sold in 1995.
Currently, 87 acres remain to be sold.

        Perini  Central  Limited  Partnership,  Phoenix  - In 1985,  PL&D  (75%)
entered into a joint venture with the Central United  Methodist Church to master
plan and develop  approximately  4.4 acres of the  church's  property in midtown
Phoenix.  Located  adjacent to the Phoenix Art Museum and near the Heard Museum,
the  project  is  positioned  to become  the mixed use core of the newly  formed
Phoenix Arts District.  In 1990, the project was successfully  rezoned to permit
development of 580,000  square feet of office,  37,000 square feet of retail and
162 luxury apartments.  Plans for the first phase of this project, known as "The
Coronado" have been put on hold pending  improved  market  conditions.  In 1993,
PL&D  obtained a three-year  extension of the  construction  start date required
under the original  zoning and for the present is continuing to hold the project
in abeyance.

        Grove at Black Canyon,  Phoenix - The project consists of an office park
complex on a 30-acre site located off of Black Canyon  Freeway,  a major Phoenix
artery,  approximately  20 minutes from downtown  Phoenix.  When  complete,  the
project  will  include  approximately  650,000  square  feet of  office,  hotel,
restaurant and/or retail space.  Development,  which began in 1986, is scheduled
to proceed in phases as market  conditions  dictate.  In 1987, a 150,000  square
foot office  building was  completed  within the park and now is 97% leased with
approximately  half of the  building  leased to a major  area  utility  company.
During 1993, PL&D (50%)  successfully  restructured the financing on the project
by obtaining a seven year  extension  with some  amortization  and a lower fixed
interest rate. The annual  amortization  commitment is not currently  covered by
operating  cash flow,  which caused PL&D to have to provide  approximately  $1.2
million in 1994 and $.7 million in 1995 to cover the shortfall. In the near term
it appears approximately $700,000 per year of support to cover loan amortization
will continue to be required.  No new  development  within the park was begun in
1994 nor were any land sales  consummated.  However,  the lease  covering  space
occupied by the major office  tenant was extended an  additional  seven years to
the year 2004 on competitive  terms. In 1995, a day care center was completed on
an 8-acre site along the north entrance of the park.

        Sabino Springs  Country Club,  Tucson - During 1990, the Tucson Board of
Supervisors  unanimously  approved  a plan for this  410-acre  residential  golf
course  community  close to the  foothills on the east side of Tucson.  In 1991,
that approval,  which had been  challenged,  was affirmed by the Arizona Supreme
Court. When developed,  the project will consist of 496 single-family  homes. An
18-hole Robert Trent Jones, Jr. designed  championship golf course and clubhouse
were  completed  within the project in 1995.  In 1993,  PL&D recorded the master
plat on the project and sold a major portion of the property to an international
real estate company.  Although it will require some  infrastructure  development
before sale, PL&D still retains 33 estate lots for sale in future years.

        Capitol Plaza,  Phoenix - In 1988,  PL&D acquired a 1.75-acre  parcel of
land located in the  Governmental  Mall area of Phoenix.  Original plans were to
either develop a 200,000 square foot office building on the site to be available
to government  and government  related  tenants or to sell the site. The project
has currently been placed on hold pending a change in market conditions.


                                     - 11 -





                                     General
                                     -------

        The  Company's  real estate  business  is  influenced  by both  economic
conditions and demographic  trends. A depressed economy may result in lower real
estate values and longer absorption periods. Higher inflation rates may increase
the values of current  properties,  but often are accompanied by higher interest
rates  which may  result in a  slowdown  in  property  sales  because  of higher
carrying  costs.  Important  demographic  trends are  population  and employment
growth.  A  significant  reduction  in either of these may  result in lower real
estate prices and longer absorption periods.

        The well publicized  real estate problems  experienced by the commercial
bank and savings and loan  industries in the early 90's have resulted in sharply
curtailed  credit  available to acquire and develop real  estate;  further,  the
continuing  national  weakness in commercial  office  markets has  significantly
slowed  the  pace at which  PL&D has been  able to  proceed  on  certain  of its
development  projects and its ability to sell developed product.  In some or all
cases,  it has also  reduced the sales  proceeds  realized on such sales  and/or
required extended payment terms.

        Generally,  there has been no  material  impact on  PL&D's  real  estate
development  operations  over the past 10 years due to interest rate  increases.
However,  an extreme and  prolonged  rise in interest  rates could create market
resistance for all real estate operations in general,  and is always a potential
market obstacle.  PL&D, in some cases,  employs hedges or caps to protect itself
against  increases  in  interest  rates on any of its  variable  rate  debt and,
therefore,  is insulated  from  extreme  interest  rate risk on borrowed  funds,
although  specific projects may be impacted if the decision has been made not to
hedge or to hedge at higher than current rates.

        The Company has been  replacing  relatively  low cost  debt-free land in
Florida  acquired  in the late  1950's  with land  purchased  at current  market
prices.  In  1995  and  into  the  future,  as the  mix of  land  sold  contains
proportionately  less low cost land,  the gross  margin on real estate  revenues
will decrease.

Insurance and Bonding
- ---------------------

        All of the Company's  properties and  equipment,  both directly owned or
owned  through  partnerships  or joint  ventures  with  others,  are  covered by
insurance and management believes that such insurance is adequate.  However, due
to conditions in the insurance market, the Company's California properties, both
directly  owned and owned in partnership  with others,  are not fully covered by
earthquake insurance.

        In  conjunction  with its  construction  business,  the Company is often
required to provide  various types of surety  bonds.  The Company has dealt with
the same surety for over 75 years and it has never been refused a bond. Although
from  time-to-time  the surety  industry  encounters  limitations  affecting the
bondability of very large projects and the Company  occasionally has encountered
limits imposed by its surety, these limits have not had an adverse impact on its
operations.

Employees
- ---------

        The total  number of  personnel  employed  by the  Company is subject to
seasonal  fluctuations,  the volume of construction in progress and the relative
amount of work performed by  subcontractors.  During 1995, the maximum number of
employees  employed was  approximately  3,000 and the minimum was  approximately
2,100.

        The Company operates as a union  contractor.  As such, it is a signatory
to numerous local and regional collective bargaining  agreements,  both directly
and through trade associations,  throughout the country.  These agreements cover
all necessary union crafts and are subject to various  renewal dates.  Estimated
amounts for wage  escalation  related to the  expiration of union  contracts are
included  in the  Company's  bids on  various  projects  and,  as a result,  the
expiration of any union  contract in the current  fiscal year is not expected to
have any material impact on the Company.


                                     - 12 -





ITEM 2.  PROPERTIES
- -------------------

        Properties   applicable  to  the  Company's   real  estate   development
activities  are  described in detail by  geographic  area in Item 1. Business on
pages 7 through  12. All other  properties  used in  operations  are  summarized
below:

                      Owned or Leased  Approximate    Approximate Square
Principal Offices        by Perini        Acres      Feet of Office Space
- -----------------     ---------------  -----------   --------------------
Framingham, MA            Owned             9              110,000
Phoenix, AZ               Leased            -               22,000
Southfield, MI            Leased            -               13,900
San Francisco, CA         Leased            -                3,500
Hawthorne, NY             Leased            -               12,500
West Palm Beach, FL       Leased            -                5,000
Los Angeles, CA           Leased            -                2,000
Las Vegas, NV             Leased            -                3,000
Atlanta, GA               Leased            -                1,700
Chicago, IL               Leased            -               14,700
Philadelphia, PA          Leased            -                2,100
                                           --              -------
                                            9              190,400
                                           ==              =======
Principal Permanent Storage Yards
- ---------------------------------
Bow, NH                   Owned            70
Framingham, MA            Owned             6
E. Boston, MA             Owned             3
Las Vegas, NV             Leased            2
Novi, MI                  Leased            3
                                           --
                                           84
                                           ==

        The  Company's  properties  are  generally  well  maintained,   in  good
condition, adequate and suitable for the Company's purpose and fully utilized.

ITEM 3.  LEGAL PROCEEDINGS
- --------------------------

        As  previously  reported,  the Company is a party to an action  entitled
Mergentime  Corporation et. al. v. Washington  Metropolitan Transit Authority v.
Insurance  Company  of North  America  (Civil  Action No.  89-1055)  in the U.S.
District  Court for the  District  of  Columbia.  The  action  involves  WMATA's
termination of the general contractor,  a joint venture in which the Company was
a minority  partner,  on two contracts to construct a portion of the Washington,
D.C.  subway system,  and certain claims by the joint venture  against WMATA for
claimed delays and extra work.

        On July 30, 1993,  the Court  upheld the  termination  for default,  and
found both joint  venturers  and their surety  jointly and  severally  liable to
WMATA for  damages  in the  amount of $16.5  million,  consisting  primarily  of
WMATA's excess  reprocurement  costs,  but  specifically  deferred ruling on the
amount  of the joint  venture's  claims  against  WMATA.  Since the other  joint
venture partner may be unable to meet its financial obligations under the award,
the Company could be liable for the entire amount.

        At the direction of the judge now presiding over the action,  during the
third  quarter of 1995,  the  parties  submitted  briefs on the issue of WMATA's
liability  on the joint  venture's  claims for delays and for extra  work.  As a
result of that  process,  the company  established a reserve with respect to the
litigation.  Management  believes  the  reserve  should be adequate to cover the
potential ultimate liability in this matter.



                                     - 13 -





        In the  ordinary  course of its  construction  business,  the Company is
engaged in other lawsuits.  The Company  believes that such lawsuits are usually
unavoidable in major construction  operations and that their resolution will not
materially affect its results of future operations and financial position.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------

        None.



                                     - 14 -





                                    PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- --------------------------------------------------------------------------------

        The  Company's  common  stock is traded on the American  Stock  Exchange
under the symbol "PCR".  The quarterly  market price ranges  (high-low) for 1995
and 1994 are summarized below:


                                             1995                  1994
                                       --------------        --------------
Market Price Range per Common Share:    High     Low          High     Low
- -----------------------------------    ------   -----        ------   -----
Quarter Ended
  March 31                             11 7/8 -  9 3/8       13 7/8 - 11 1/4
  June 30                              11 1/2 -  9 1/2       13 3/8 - 10 7/8
  September 30                         13 3/8 - 10 1/8       11 1/2 -  9 1/8
  December 31                          12 1/4 -  7 7/8       11 1/8 -  9 1/8

        For  information on dividend  payments,  see Selected  Financial Data in
Item 6 below and "Dividends" under Management's  Discussion and Analysis on Item
7 below.

        As of March 1, 1996,  there were  approximately  1,327 record holders of
the Company's Common Stock.

ITEM 6.  SELECTED FINANCIAL DATA
- --------------------------------

RINCON CENTER ASSOCIATES
                                                           Balance Sheet
                                                       As of March 31,SELECTED CONSOLIDATED FINANCIAL INFORMATION

(In thousands, except per share data)
OPERATING SUMMARY 1995 1994 ASSETS 3/31/94 12/31/93 CASH $ 366,825 $ 120,129 ACCOUNTS RECEIVABLE 402,363 44,399 DEFERRED RENT RECEIVABLE 7,430,165 7,882,208 NOTES RECEIVABLE 15,751,844 15,828,196 REAL ESTATE PROPERTIES USED IN OPERATIONS, Net 116,802,510 118,021,303 LEASEHOLD IMPROVEMENTS, Net 2,235,690 1,854,719 OTHER ASSETS 2,195,626 2,855,012 ------------ ------------ Total Assets $145,185,023 $146,605,966 ============ ============ LIABILITIES CONSTRUCTION NOTES PAYABLE $ 62,182,500 $ 62,370,000 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 3,036,584 3,415,936 DEFERRED GROUND RENT, Net 7,197,194 7,306,810 DEFERRED LEASE EXPENSE, Net 1,609,927 3,101,814 DEFERRED INCOME 1,540,311 1,540,311 ACCRUED INTEREST DUE GENERAL PARTNERS 35,326,625 33,900,724 DUE TO PERINI LAND AND DEVELOPMENT COMPANY 69,759,693 68,499,293 DUE TO PACIFIC GATEWAY PROPERTIES, INC. 17,428,051 16,988,451 ------------ ------------ Total Liabilities $198,080,885 $197,123,339 PARTNERS' DEFICIT (52,895,862) (50,517,373) ------------- ------------- Liabilities and Partners' Deficit $145,185,023 $146,605,966 ============= =============
RINCON CENTER ASSOCIATES Income Statement For Period 1/1/93 thru 3/31/94 Current Year-To-Date Year-To-Date Period 3/31/94 3/31/931993 1992 1991 ---- ---- ---- ---- ---- REVENUE: Rental Income Revenues Construction operations $1,056,673 $ 1,448,804950,884 $1,030,341 $1,023,274 $ 4,328,191 $ 4,284,069 Parking Income 112,890 316,517 341,329 Interest Income 140,897 404,456 259,104919,641 Real estate operations 44,395 61,161 69,775 47,578 72,267 ----------- ----------- ----------- ----------- ---------- Total RevenueRevenues $1,101,068 $1,012,045 $1,100,116 $1,070,852 $ 1,702,591 $ 5,049,164 $ 4,884.502 OPERATIONS EXPENSE: Operating Expense $ 794,219 $ 2,181,212 $ 2,058,734 Ground Rent Expense 233,306 754,664 850,152991,908 ----------- ----------- ----------- Total Operating Expense----------- ---------- Gross Profit $ 1,027,52514,855 $ 2,935,87651,797 $ 2,908,88652,786 $ 22,189 $ 60,854 General, Administrative & Selling Expenses (37,283) (42,985) (44,212) (41,328) (48,530) ----------- ----------- ----------- NET OPERATING INCOME----------- ----------- Income (Loss) From Operations $ 675,066(22,428) $ 2,113,2888,812 $ 1,975,616 DEBT SERVICE: Sale Lease Back Basic Rent 442,468 1,327,405 873,3588,574 $ (19,139) $ 12,324 Other Income (Expense), Net 814 (856) 5,207 436 1,136 Interest Expense 217,945 581,225 630,971 LC Fees 44,601 133,802 215,818(8,582) (7,473) (5,655) (7,651) (9,022) ----------- ----------- ----------- Total Debt Service $ 705,014 $ 2,042,432 $ 1,720,327 INCOME OR (LOSS) B/F PARTNER EXPENSES & DEPRECIATION (29,948) 70,856 255,289 PARTNER EXPENSES: General Partner Loan Interest Expense $ 595,982 $ 1,709,665 1,524,815 General Partner LC Fees 43,400 (285,257) 215,753 Other 94 96 1,800 ----------- ----------- --------- Total Partner ExpensesIncome (Loss) Before Income Taxes $ 639,476(30,196) $ 1,424,504 1,742,368 DEPRECIATION: Amortization483 $ 26,3948,126 $ 69,421(26,354) $ 49,265 Depreciation 324,916 955,421 946,2594,438 (Provision) Credit for Income Taxes 2,611 (180) (4,961) 9,370 (1,260) ----------- ----------- ----------- ----------- ----------- Net Income (Loss) $ (27,585) $ 303 $ 3,165 $ (16,984) $ 3,178 ----------- ----------- ----------- ----------- ---------- Per Share of Common Stock: Earnings (loss) $ (6.38) $ (.42) $ .24 $ (4.69) $ .27 ----------- ----------- ----------- ----------- ---------- Cash dividends declared $ - $ - $ - $ - $ - ----------- ----------- ----------- ----------- ------ Book value $ 17.06 $ 23.79 $ 24.49 $ 23.29 $ 28.96 ----------- ----------- ----------- ----------- ---------- Weighted Average Number of Common Shares Outstanding 4,655 4,380 4,265 4,079 3,918 ----------- ----------- ----------- ----------- ---------- FINANCIAL POSITION SUMMARY Working Capital $ 36,545 $ 29,948 $ 36,877 $ 31,028 $ 30,724 ----------- ----------- ----------- ----------- ---------- Current Ratio 1.12:1 1.13:1 1.17:1 1.14:1 1.16:1 Long-term Debt, less current maturities $ 84,155 $ 76,986 $ 82,366 $ 85,755 $ 96,294 ----------- ----------- ----------- ----------- ---------- Stockholders' Equity $ 105,606 $ 132,029 $ 131,143 $ 121,765 $ 138,644 ----------- ----------- ----------- ----------- ---------- Ratio of Long-term Debt to Equity .80:1 .58:1 .63:1 .70:1 .69:1 ----------- ----------- ----------- ----------- ---------- Total Amortization/DepreciationAssets $ 351,310539,251 $ 1,024,842482,500 $ 995,524476,378 $ 470,696 $ 498,574 ----------- ----------- ----------- ----------- ---------- OTHER DATA Backlog at Year-end $1,534,522 $1,538,779 $1,238,141 $1,169,553 $1,233,958 ----------- ----------- ----------- ----------- ----------
- 15 - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS - 1995 COMPARED TO 1994 The Company's 1995 operations resulted in a net loss of $27.6 million or $6.38 per common share on revenues of $1.1 billion compared to net income of $.3 million or a loss of $.42 per common share (after giving effect to the dividend payments required on its preferred stock) on revenues of $1.0 billion in 1994. The primary reasons for this decrease in earnings were a pretax charge of $25.6 million in connection with previously disclosed litigation in Washington, D.C. and downward revisions in estimated probable recoveries on certain outstanding contract claims, and lower than normal profit margins on certain heavy construction contracts, including a significant reduction in the profit level on a tunnel project in the Midwest. Revenues reached a record level of $1.101 billion in 1995, an increase of $89 million (or 9%) compared to the 1994 revenues of $1.012 billion. This increase resulted primarily from an increase in construction revenues of $106 million (or 11%) from $.951 billion in 1994 to $1.057 billion in 1995. This increase in construction revenues resulted primarily from an increase in building construction revenues of $122 million (or 19%), from $626 million in 1994 to $748 million in 1995, primarily due to substantially increased volume in the Midwest region resulting from a substantially higher backlog in that area entering 1995 combined with several hotel/casino projects acquired during 1995. This increase was partially offset by a decrease in building construction revenues in the Eastern and Western regions, as well as in the overall heavy construction operations, due primarily to the timing in the start-up of several significant new projects and the completion early in 1995 of several other major projects. Revenues from real estate operations also decreased by $16.8 million (or 27%) from $61.2 million in 1994 to $44.4 million in 1995 due to the non-recurring sale in 1994 of two investment properties ($8.3 million) and fewer land sales in Massachusetts and California during 1995. In spite of the 9% increase in revenues, the gross profit in 1995 decreased by $36.9 million, from $51.8 million in 1994 to $14.9 million in 1995, due primarily to an overall decrease in gross profit from construction operations of $32.1 million (or 67%), from $48.0 million in 1994 to $15.9 million in 1995. The primary reasons for this decrease were a pretax charge of $25.6 million in connection with previously disclosed litigation in Washington, D.C. (as more fully discussed in Note 11 to Notes to Consolidated Financial Statements) and downward revisions in estimated probable recoveries on certain outstanding contract claims, and lower than normal profit margins on certain heavy construction contracts, including a significant reduction in the profit level on a tunnel project in the Midwest. In addition, the overall gross profit from real estate operations decreased by $4.8 million, from a profit of $3.8 million in 1994 to a loss of $1.0 million in 1995 due to the sale in 1994 of the last parcels of high margin land in Florida and in a project in Massachusetts which was partially offset by improved operating results in 1995 from its two major on-going operating properties in California. Total general, administrative and selling expenses decreased by $5.7 million (or 13%) from $43.0 million in 1994 to $37.3 million in 1995. This decrease primarily reflects reduced bonuses, an increased allocation of various insurance costs to projects in 1995, and a continuation during 1995 of the Company's re-engineering efforts commenced in prior years. The increase in other income (expense), net, of $1.7 million, from a net expense of $.9 million in 1994 to a net income of $.8 million in 1995, is primarily due to an increase in interest income and, to a lesser extent, a gain realized on the sale of certain underutilized operating facilities, including a quarry, in 1995. The increase in interest expense of $1.1 million (or 15%), from $7.5 million in 1994 to $8.6 million in 1995, primarily results from a higher average level of borrowings during 1995. The Company recognized a tax benefit in 1995 equal to $2.6 million or 9% of the pretax loss. A portion of the tax benefit related to the 1995 loss was not recognized because of certain accounting limitations. However, an amount estimated to be approximately $20 million of future pretax earnings should benefit from minimal, if any, tax charges. ---------------------------------------------------------- Looking ahead, we must consider the Company's construction backlog and - 16 - remaining inventory of real estate projects. The overall construction backlog at the end of 1995 was $1.535 billion which approximates the 1994 record year-end backlog of $1.539 billion. This backlog has a better balance between building and heavy work and a higher overall estimated profit margin. With the sale of the final 21 acres during 1994, the Company's Villages of Palm Beach Lakes, Florida land inventory was completely sold out. Because of its low book value, sales of this acreage have provided a major portion of the Company's real estate profit in recent years. With the sale of this property complete, the Company's ability to generate profit from real estate sales and the related gross margin will be reduced as was the case in 1995. Between 1989 and 1995, property prices in general have fallen substantially due to the reduced liquidity in real estate markets and reduced demand. Recently, the Company has noted improvement in some property areas. This trend has had some effect on residential property sales which were closed in 1995. However, this trend is still neither widespread nor proven to be sustainable. RESULTS OF OPERATIONS - 1994 COMPARED TO 1993 The Company's 1994 operations resulted in net income of $.3 million on revenues of $1.0 billion and a loss of 42 cents per common share (after giving effect to the dividend payments required on its preferred stock) compared to net income of $3.2 million or 24 cents per common share on revenues of $1.1 billion in 1993. In spite of the overall decrease in revenues during 1994, income from operations increased slightly compared to 1993 results. An increase in interest expense in 1994 and the non-recurring $1 million net gain after tax in 1993 from the sale by the Company of its 74%-ownership interest in Majestic Contractors Limited ("Majestic"), its Canadian pipeline subsidiary, contributed to the overall decrease in net income. Revenues amounted to $1.012 billion in 1994 compared to $1.100 billion in 1993, a decrease of $88 million (or 8%). This decrease resulted primarily from a net decrease in construction revenues of $79 million (or 8%) from $1.030 billion in 1993 to $.951 billion in 1994 due to a decrease in volume from building operations of $126 million (or 17%), from $752 million in 1993 to $626 million in 1994. The decrease in revenue from building operations was primarily due to the prolonged start-up phases on certain projects. This decrease was partially offset by an increase in revenues from civil and environmental construction operations of $47 million (or 17%), from $278 million in 1993 to $325 million in 1994, due to an increased heavy construction backlog going into 1994. In addition to the overall decrease in construction revenues, revenues from real estate operations decreased $8.6 million (or 12%), from $69.8 million in 1993 to $61.2 million in 1994, due primarily to the non-recurring sale ($23.2 million) in 1993 of a partnership interest in certain commercial rental properties in San Francisco and a $5.2 million decrease in land sales in Arizona. The decrease in real estate revenues was partially offset from the sale of two investment properties in 1994 ($8.3 million) and increased land sales in Massachusetts ($5.4 million) and California ($4.9 million). In spite of the 8% decrease in total revenues, the gross profit in 1994 decreased only $1.0 million (or 2%), from $52.8 million in 1993 to $51.8 million in 1994. The gross profit from construction operations decreased $1.1 million (or 2.3%), from $49.1 million in 1993 to $48.0 million in 1994, due to the negative profit impact from the reduction in building construction revenues referred to above and a loss from international operations resulting from unstable economic and political conditions in a certain overseas location where the Company is working. These decreases were partially offset by slightly higher margins on the construction work performed in 1994 (5.0% in 1994 compared with 4.8% in 1993) and a slight overall increase ($.1 million) in the gross profit from real estate operations, from $3.7 million in 1993 compared to $3.8 million in 1994. Total general, administrative and selling expenses decreased by $1.2 million (or 3%) in 1994, from $44.2 million in 1993 to $43.0 million in 1994 due to several factors, the more significant ones being a $2.1 million expense for severance incurred in 1993 in connection with re-engineering some of the business units, which was partially offset by the full year impact of expenses related to the acquisition referred to in Note 1 to Notes to Consolidated Financial Statements. The decrease in other income (expense), net of $6.1 million, from income of $5.2 million in 1993 to a net loss of $.9 million in 1994 is primarily due to the pretax gain in 1993 of $4.6 million on the sale of Majestic and, to a lesser degree, an increase in other expenses in 1994, primarily bank fees. The increase in interest expense of $1.8 million (or 32%), from $5.7 million in 1993 to $7.5 million in 1994 primarily results from higher interest rates during 1994 and higher average level of borrowings. - 17 - FINANCIAL CONDITION CASH AND WORKING CAPITAL During 1995, the Company provided $24.6 million in cash from operating activities, primarily due to an overall increase in accounts payable and advances from joint ventures; $9.0 million from financing activities due to an increase in borrowings under its revolving credit facility; and $23.9 million from cash distributions from certain joint ventures. These increases in cash were used to increase cash on hand by $21.2 million, with the balance used for various investment activities, primarily to fund construction and real estate joint ventures. In addition, the Company has future financial commitments to certain real estate joint ventures as described in Note 11 to Notes to Consolidated Financial Statements. During 1994, the Company used $15.6 million in cash for investment activities, primarily to fund construction and real estate joint ventures; $7.4 million for financing activities, primarily to pay down company debt; and $5.0 million to fund operating activities, primarily changes in working capital. During 1993, the Company used $39.1 million of cash for investment activities, primarily to fund construction and real estate joint ventures; $3 million for financing activities, primarily to pay down Company debt; and $1.6 million to fund operating activities, primarily changes in working capital. Since 1990, the Company has paid down $44.3 million of real estate debt on wholly-owned real estate projects (from $50.9 million to $6.6 million), utilizing proceeds from sales of property and general corporate funds. Similarly, real estate joint venture debt has been reduced by $158 million over the same period. As a result, the Company has reached a point at which revenues from further real estate sales that, in the past, have been largely used to retire real estate debt will be increasingly available to improve general corporate liquidity. With the exception of the major properties referred to in Note 11 to Notes to Consolidated Financial Statements, this trend should continue over the next several years with debt on projects often being fully repaid prior to full project sell-out. On the other hand, the softening of the national real estate market coupled with problems in the commercial banking industry have significantly reduced credit availability for both new real estate development projects and the sale of completed product, sources historically relied upon by the Company and its customers to meet liquidity needs for its real estate development business. The Company has addressed this problem by relying on corporate borrowings, extending certain maturing real estate loans (with such extensions usually requiring pay downs and increased annual amortization of the remaining loan balance), suspending the acquisition of new real estate inventory, significantly reducing development expenses on certain projects, utilizing treasury stock in partial payment of amounts due under certain of its incentive compensation plans, utilizing cash internally generated from operations and, during the first quarter of 1992, selling its interest in Monenco. In addition, in January 1993, the Company sold its majority interest in Majestic for approximately $31.7 million in cash. Since Majestic had been fully consolidated, the net result to the Company was to increase working capital by $8 million and cash by $4 million. In addition, the Company implemented a company-wide cost reduction program in 1990, and again in 1991 and 1993 to improve long-term financial results and suspended the dividend on its common stock during the fourth quarter of 1990. Also, the Company increased the aggregate amount available under its revolving credit agreement during the period from $70 million to $114.5 million at December 31, 1995. Effective February 26, 1996, the Company entered into a Bridge Loan Agreement for an additional $15 million through July 31, 1996 (see Note 4 to Notes to Consolidated Financial Statements). Management believes that cash generated from operations, existing credit lines and additional borrowings should probably be adequate to meet the Company's funding requirements for at least the next twelve months. However, the withdrawal of many commercial lending sources from both the real estate and construction markets and/or restrictions on new borrowings and extensions on maturing loans by these very same sources cause uncertainties in predicting liquidity. In addition to internally generated funds, the Company has access to additional funds under its long-term revolving credit facility and Bridge Loan Agreement. At December 31, 1995, the Company has $24.5 million available under its revolving credit facility and, effective February 26, 1996, an additional $15 million became available under the Bridge Loan Agreement. The financial covenants to which the Company is subject include minimum levels of working capital, debt/net worth ratio, net worth level and interest coverage, all as defined in the loan documents. Although the Company was in violation of certain of the covenants during the latter part of 1995, it obtained waivers of such violations and, effective February 26, 1996, received modifications to the Credit Agreement which eliminated any non-compliance. - 18 - The working capital current ratio stood at 1.12:1 at the end of 1995, compared to 1.13:1 at the end of 1994 and to 1.17:1 at the end of 1993. Of the total working capital of $36.5 million at the end of 1995, approximately $6 million may not be converted to cash within the next 12 to 18 months. LONG-TERM DEBT Long-term debt was $84.2 million at the end of 1995, which represented an increase of $7.2 million compared with $77 million at the end of 1994, which was a decrease of $5.4 million compared with $82.4 million at the end of 1993. The ratio of long-term debt to equity increased from .58:1 at the end of 1994 to .80:1 at the end of 1995 due to the increase in long-term debt coupled with the negative impact on equity as a result of the net loss experienced by the Company in 1995. The ratio of long-term debt to equity improved from .63:1 at the end of 1993 to .58:1 at the end of 1994 due to the decrease in long-term debt achieved in 1994. STOCKHOLDERS' EQUITY The Company's book value per common share stood at $17.06 at December 31, 1995, compared to $23.79 per common share and $24.49 per common share at the end of 1994 and 1993, respectively. The major factor impacting stockholders' equity during the three-year period under review was the net loss recorded in 1995 and, to a lesser extent, preferred dividends paid or accrued, and treasury stock issued in partial payment of incentive compensation. At December 31, 1995, there were 1,346 common stockholders of record based on the stockholders list maintained by the Company's transfer agent. DIVIDENDS During 1993 and 1994, the Company paid the regular quarterly cash dividends of $5.3125 per share on the Company's convertible exchangeable preferred shares for an annual total of $21.25 per share (equivalent to quarterly dividends of $.53125 per depositary share for an annual total of $2.125 per depositary share). During 1995, the Board of Directors continued to declare and pay the regular quarterly cash dividend on the Company's preferred stock through December 15, 1995. In conjunction with the covenants of the new Amended Revolving Credit Agreement (see Note 4 to Notes to Consolidated Financial Statements), the Company is required to suspend the payment of quarterly dividends on its preferred stock until the Bridge Loan commitment is no longer outstanding, if a default exists under the terms of the Amended Revolving Credit Agreement, or if the ratio of long-term debt to equity exceeds 50%. Therefore, the dividend that normally would have been declared during December of 1995 and payable on March 15, 1996 has not been declared (although it has been fully accrued due to the "cumulative" feature of the preferred stock). The Board of Directors intends to resume payment of the cumulative dividend on the Company's preferred stock as the Company satisfies the terms of the new credit agreement and the Board deems it prudent to do so. There were no cash dividends declared during the three-year period ended December 31, 1995 on the Company's outstanding common stock. It is Management's intent to recommend reinstating dividends on common stock once it is prudent to do so. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- The Reports of Independent Public Accountants, Consolidated Financial Statements, and Supplementary Schedules, are set forth on the pages that follow in this Report and are hereby incorporated herein. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. - 19 - PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ Reference is made to the information to be set forth in the section entitled "Election of Directors" in the definitive proxy statement involving election of directors in connection with the Annual Meeting of Stockholders to be held on May 16, 1996 (the "Proxy Statement"), which section is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 1995 pursuant to Regulation 14A of the Securities and Exchange Act of 1934, as amended. Listed below are the names, offices held, ages and business experience of all executive officers of the Company. NAME, OFFICES HELD YEAR FIRST ELECTED TO PRESENT OFFICE AND AGE AND BUSINESS EXPERIENCE David B. Perini, He has served as a Director, President, Chief Executive Director, Chairman, Officer and Acting Chairman since 1972. He became Chairman President and on March 17, 1978 and has worked for the Company since 1962 Chief Executive in various capacities. Prior to being elected President, he Officer - 58 served as Vice President and General Counsel. Richard J. Rizzo, He has served in this capacity since January, 1994, which Executive Vice entails overall responsibility for the Company's building President, Building construction operations. Prior thereto, he served as Construction - 52 President of Perini Building Company (formerly known as Mardian Construction Co.) since 1985, and in various other operating capacities since 1977. John H. Schwarz, He has served as Executive Vice President, Finance and Executive Vice Administration since August, 1994, and as Chief Executive President, Finance Officer of Perini Land and Development Company, which and Administration entails overall responsibility for the Company's real estate of the Company and operations since April, 1992. Prior to that, he served as Chief Executive Vice President, Finance and Controls of Perini Land and Officer of Perini Development Company. Previously, he served as Treasurer from Land and August, 1984, and Director of Corporate Planning since May, Development 1982. He joined the Company in 1979 as Manager of Corporate Company - 57 Development. Donald E. Unbekant, He has served in this capacity since January, 1994, which Executive Vice entails overall responsibility for the Company's civil and President, Civil environmental construction operations. Prior thereto, he and Environmental served in the Metropolitan New York Division of the Company Construction - 64 as President since 1992, Vice President and General Manager since 1990 and Division Manager since 1984. The Company's officers are elected on an annual basis at the Board of Directors Meeting immediately following the Shareholders Meeting in May, to hold such offices until the Board of Directors Meeting following the next Annual Meeting of Shareholders and until their respective successors have been duly appointed or until their tenure has been terminated by the Board of Directors, or otherwise. ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- In response to Items 11-13, reference is made to the information to be set forth in the section entitled "Election of Directors" in the Proxy Statement, which is incorporated herein by reference. - 20 - PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- PERINI CORPORATION AND SUBSIDIARIES ----------------------------------- (a)1. The following financial statements and supplementary financial information are filed as part of this report: Pages ----- Financial Statements of the Registrant -------------------------------------- Consolidated Balance Sheets as of December 31, 1995 and 1994 23 - 24 Consolidated Statements of Operations for the three years ended December 31, 1995, 1994 and 1993 25 Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1995, 1994 and 1993 26 Consolidated Statements of Cash Flows for the three years ended December 31, 1995, 1994 and 1993 27 - 28 Notes to Consolidated Financial Statements 29 - 41 Report of Independent Public Accountants 42 (a)2. The following financial statement schedules are filed as part of this report: Pages ----- Report of Independent Public Accountants on Schedule 43 Schedule II -- Valuation and Qualifying Accounts and Reserves 44 All other schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the Consolidated Financial Statements or in the Notes thereto. Separate condensed financial information of the Company has been omitted since restricted net assets of subsidiaries included in the consolidated financial statements and its equity in the undistributed earnings of 50% or less owned persons accounted for by the equity method do not, in the aggregate, exceed 25% of consolidated net assets. (a)3. Exhibits The exhibits which are filed with this report or which are incorporated herein by reference are set forth in the Exhibit Index which appears on pages 45 and 46. The Company will furnish a copy of any exhibit not included herewith to any holder of the Company's common and preferred stock upon request. (b) During the quarter ended December 31, 1995, the Registrant made no filings on Form 8-K. - 21 - SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. PERINI CORPORATION (Registrant) Dated: March 27, 1996 s/David B. Perini ----------------- David B. Perini Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- (i) Principal Executive Officer David B. Perini Chairman, President and Chief Executive Officer s/David B. Perini March 27, 1996 - ------------------ David B. Perini (ii) Principal Financial Officer John H. Schwarz Executive Vice President, Finance & Administration s/John H. Schwarz March 27, 1996 - ------------------ John H. Schwarz (iii) Principal Accounting Officer Barry R. Blake Vice President and Controller s/Barry R. Blake March 27, 1996 - ------------------ Barry R. Blake (iv) Directors David B. Perini ) Joseph R. Perini ) By Richard J. Boushka ) Marshall M. Criser ) s/David B. Perini ----------------- Thomas E. Dailey ) David B. Perini Albert A. Dorman ) Arthur J. Fox, Jr. ) Attorney in Fact John J. McHale ) Dated: March 27, 1996 Jane E. Newman ) Bart W. Perini ) - 22 - Consolidated Balance Sheets December 31, 1995 and 1994
(In thousands except per share data) Assets - ------ 1995 1994 ---- ---- CURRENT ASSETS: Cash, including cash equivalents of $29,059 and $3,518 (Note 1) $ 29,059 $ 7,841 Accounts and notes receivable, including retainage of $69,884 and $63,344 180,978 151,620 Unbilled work (Note 1) 28,304 20,209 Construction joint ventures (Notes 1 and 2) 61,846 66,346 Real estate inventory, at the lower of cost or market (Note 1) 14,933 11,525 Deferred tax asset (Notes 1 and 5) 13,039 6,066 Other current assets 2,186 3,041 -------- -------- Total current assets $330,345 $266,648 -------- -------- REAL ESTATE DEVELOPMENT INVESTMENTS: Land held for sale or development (including land development costs) at the lower of cost or market (Note 1) $ 41,372 $ 43,295 Investments in and advances to real estate joint ventures (Notes 1, 2 and 11) 148,225 148,843 Real estate properties used in operations, less accumulated depreciation of $3,444 and $3,698 2,964 6,254 Other 302 80 -------- -------- Total real estate development investments $192,863 $198,472 -------- -------- PROPERTY AND EQUIPMENT, at cost: Land $ 809 $ 1,134 Buildings and improvements 13,548 13,653 Construction equipment 15,597 15,249 Other equipment 9,911 12,552 -------- -------- $ 39,865 $ 42,588 Less - Accumulated depreciation (Note 1) 27,299 29,082 -------- -------- Total property and equipment, net $ 12,566 $ 13,506 -------- -------- OTHER ASSETS: Other investments $ 1,839 $ 2,174 Goodwill (Note 1) 1,638 1,700 -------- -------- Total other assets $ 3,477 $ 3,874 -------- -------- $539,251 $482,500
The accompanying notes are an integral part of these financial statements. - 23 - Liabilities and Stockholders' Equity
1995 1994 ---- ---- CURRENT LIABILITIES: Current maturities of long-term debt (Note 4) $ 5,697 $ 5,022 Accounts payable, including retainage of $58,749 and $52,224 197,052 148,055 Advances from construction joint ventures (Note 2) 34,830 8,810 Deferred contract revenue (Note 1) 23,443 38,929 Accrued expenses 32,778 35,884 --------- -------- Total current liabilities $293,800 $236,700 --------- -------- DEFERRED INCOME TAXES AND OTHER LIABILITIES (Notes 1, 5 & 6) 52,663 $ 33,488 --------- -------- LONG-TERM DEBT, less current maturities included above (Note 4): Real estate development $ 3,660 $ 6,502 Other 80,495 70,484 --------- -------- Total long-term debt $ 84,155 $ 76,986 --------- -------- MINORITY INTEREST (Note 1) $ 3,027 $ 3,297 --------- -------- CONTINGENCIES AND COMMITMENTS (Note 11) STOCKHOLDERS' EQUITY (Notes 1, 7, 8, 9 and 10): Preferred stock, $1 par value - Authorized - 1,000,000 shares Issued and outstanding - 100,000 shares ($25,000 aggregate liquidation preference) $ 100 $ 100 Series A junior participating preferred stock, $1 par value - Authorized - 200,000 Issued - none - - Common stock, $1 par value - Authorized - 15,000,000 shares Issued - 4,985,160 shares 4,985 4,985 Paid-in surplus 57,659 59,001 Retained earnings 52,062 81,772 ESOT related obligations (4,965) (6,009) --------- --------- $109,841 $139,849 Less - Common stock in treasury, at cost - 265,735 shares and 490,674 shares 4,235 7,820 --------- -------- Total stockholders' equity $105,606 $132,029 --------- -------- $539,251 $482,500
- 24 - Consolidated Statements of Operations For the years ended December 31, 1995, 1994 & 1993 (In thousands, except per share data)
1995 1994 1993 ---- ---- ---- REVENUES (Notes 2 and 13) $1,101,068 $1,012,045 $1,100,116 ----------- ----------- ---------- COSTS AND EXPENSES (Notes 2 and 10): Cost of operations $1,086,213 $ 960,248 $1,047,330 General, administrative and selling expenses 37,283 42,985 44,212 ----------- ----------- ---------- $1,123,496 $1,003,233 $1,091,542 ----------- ----------- ---------- INCOME (LOSS) FROM OPERATIONS (Note 13) $ (22,428) $ 8,812 $ 8,574 ----------- ----------- ---------- Other income (expense), net (Note 6) 814 (856) 5,207 Interest expense (Notes 3 and 4) (8,582) (7,473) (5,655) ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES $ (30,196) $ 483 $ 8,126 (Provision) credit for income taxes (Notes 1 and 5) 2,611 (180) (4,961) ----------- ----------- ----------- NET INCOME OR (LOSS) $(1,020,734) $(2,378,490) $(2,482,603)$ (27,585) $ 303 $ 3,165 =========== =========== ========== EARNINGS (LOSS) PER COMMON SHARE (Note 1) $ (6.38) $ (.42) $ .24 =========== =========== ==========
The accompanying notes are an integral part of these financial statements. - 25 - Consolidated Statements of Stockholders' Equity For the Years Ended December 31, 1995, 1994 & 1993 (In thousands, except per share data)
Cumulative ESOT Preferred Common Paid-In Retained Translation Related Treasury Stock Stock Surplus Earnings Adjustment Obligation Stock - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- -------------- Balance-December 31, 1992 $100 $4,985 $60,019 $ 82,554 $(4,696) $(7,888) $(13,309) - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- -------------- Net income - - - 3,165 - - - Preferred stock-cash dividends declared ($21.25 per share*) - - - (2,125) - - - Treasury stock issued in partial payment of incentive compensation - - (143) - - - 2,872 Restricted stock awarded - - (1) - - - 8 Related to Sale of Majestic - - - - 4,696 - - Payments related to ESOT notes - - - - - 906 - - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- -------------- Balance-December 31, 1993 $100 $4,985 $59,875 $ 83,594 $ - $(6,982) $(10,429) - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- -------------- Net Income - - - 303 - - - Preferred stock-cash dividends declared ($21.25 per share*) - - - (2,125) - - - Treasury stock issued in partial payment of incentive compensation - - (835) - - - 2,444 Restricted stock awarded - - (39) - - - 165 Payments related to ESOT - notes - - - - - 973 - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- -------------- Balance-December 31, 1994 $100 $4,985 $59,001 $ 81,772 $ - $(6,009) $ (7,820) - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- -------------- Net Loss - - - (27,585) - - - Preferred stock-cash dividends declared or accrued ($21.25 per share*) - - - (2,125) - - - Treasury stock issued in partial payment of incentive compensation - - (1,342) - - - 3,585 Payments related to ESOT notes - - - - - 1,044 - - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- -------------- Balance-December 31, 1995 $100 $4,985 $57,659 $ 52,062 $ - $(4,965) $ (4,235) - -------------------------------- ------------- --------- ------------ ------------ ------------- --------------- --------------
*Equivalent to $2.125 per depositary share (see Note 7). The accompanying notes are an integral part of these financial statements. - 26 - Consolidated Statements of Cash Flows For the years ended December 31, 1995, 1994 & 1993 (In thousands)
Cash Flows from Operating Activities: 1995 1994 1993 -------- -------- -------- Net income (loss) $(27,585) $ 303 $ 3,165 Adjustments to reconcile net income (loss) to net cash from operating activities - Depreciation and amortization 2,769 2,879 3,515 Non-current deferred taxes and other liabilities 19,175 (5,306) 11,239 Distributions greater (less) than earnings of joint ventures and affiliates 12,880 2,995 (2,821) Gain on sale of Majestic (Note 6) - - (4,631) Cash provided from (used by) changes in components of working capital other than cash, notes payable and current maturities of long-term debt 16,571 (14,119) (19,653) Real estate development investments other than joint ventures 2,757 11,451 10,908 Other non-cash items, net (2,174) (3,231) (3,299) --------- --------- --------- NET CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES $ 24,573 $ (5,028) $ (1,577) --------- --------- --------- Cash Flows from Investing Activities: Proceeds from sale of property and equipment $ 3,115 $ 989 $ 1,344 Cash distributions of capital from unconsolidated joint ventures $ 23,858 13,112 4,977 Acquisition of property and equipment (1,960) (2,493) (4,387) Improvements to land held for sale or development (193) (334) (4,227) Improvements to real estate properties used in operations (263) (140) (614) Capital contributions to unconsolidated joint ventures (29,373) (20,199) (24,579) Advances to real estate joint ventures, net (7,735) (6,559) (16,031) Proceeds from sale of Majestic, net of subsidiary's cash - - 4,377 Investments in other activities 190 14 - --------- --------- ------ NET CASH USED BY INVESTING ACTIVITIES $(12,361) $(15,610) $(39,140) --------- --------- --------- - 27 - Consolidated Statements of Cash Flows (Continued) For the years ended December 31, 1995, 1994 & 1993 (In thousands) Cash Flows from Financing Activities: Proceeds from long-term debt $ 12,033 $ 3,127 $ 8,014 Repayment of long-term debt (3,145) (10,129) (11,600) Cash dividends paid (2,125) (2,125) (2,125) Treasury stock issued 2,243 1,735 2,736 --------- --------- -------- NET CASH PROVIDED FROM (USED BY) FINANCING ACTIVITIES $ 9,006 $ (7,392) $ (2,975) --------- --------- --------- Net Increase (Decrease) in Cash $ 21,218 $(28,030) $(43,692) Cash and Cash Equivalents at Beginning of Year 7,841 35,871 79,563 --------- --------- -------- Cash and Cash Equivalents at End of Year $ 29,059 $ 7,841 $ 35,871 ========= ========= ======== Supplemental Disclosures of Cash Paid During the Year For: Interest $ 8,715 $ 7,308 $ 5,947 ========= ========= ======== Income tax payments $ 121 $ 1,176 $ 843 ========= ========= ========
The accompanying notes are an integral part of these financial statements. - 28 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 1995 1994 & 1993 [1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [a] Principles of Consolidation - ------------------------------- The consolidated financial statements include the accounts of Perini Corporation, its subsidiaries and certain majority-owned real estate joint ventures (the "Company"). All subsidiaries are currently wholly-owned. All significant intercompany transactions and balances have been eliminated in consolidation. Non-consolidated joint venture interests are accounted for on the equity method with the Company's share of revenues and costs in these interests included in "Revenues" and "Cost of Operations," respectively, in the accompanying consolidated statements of operations. All significant intercompany profits between the Company and its joint ventures have been eliminated in consolidation. Taxes are provided on joint venture results in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". Effective July 1, 1993, the Company acquired Gust K. Newberg Construction Co.'s ("Newberg") interest in certain construction projects and related equipment. The purchase price for the acquisition was (i) approximately $3 million in cash for the equipment paid by a third party leasing company, which in turn simultaneously entered into an operating lease agreement with the Company for the use of said equipment, (ii) $1 million in cash paid by the Company, and (iii) 50% of the aggregate of net profits earned from each project from April 1, 1993 through December 31, 1994 and, with regard to one project, through December 31, 1995. This acquisition has been accounted for as a purchase. If this acquisition had been consummated as of January 1, 1993, the 1993 pro forma results would have been. Revenues of $1,134,264,000 and Net Income of $3,724,000 ($.37 per common share). [b] Use of Estimates - -------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates 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. The most significant estimates with regard to these financial statements relate to the estimating of final construction contract profits in accordance with accounting for long term contracts (see Note 1(c) below), estimating of net realizable value of real estate development projects (see Note 1(d) below) and estimating potential liability in conjunction with certain contingencies and commitments, as discussed in Note 11. Actual results could differ from these estimates. [c] Method of Accounting for Contracts - -------------------------------------- Profits from construction contracts and construction joint ventures are generally recognized by applying percentages of completion for each year to the total estimated profits for the respective contracts. The percentages of completion are determined by relating the actual cost of the work performed to date to the current estimated total cost of the respective contracts. When the estimate on a contract indicates a loss, the Company's policy is to record the entire loss. The cumulative effect of revisions in estimates of total cost or revenue during the course of the work is reflected in the accounting period in which the facts that caused the revision became known. An amount equal to the costs attributable to unapproved change orders and claims is included in the total estimated revenue when realization is probable. Profit from claims is recorded in the year such claims are resolved. In accordance with normal practice in the construction industry, the Company includes in current assets and current liabilities amounts related to construction contracts realizable and payable over a period in excess of one year. Unbilled work represents the excess of contract costs and profits recognized to date on the percentage of completion accounting method over billings to date on certain contracts. Deferred contract revenue represents the excess of billings to date over the amount of contract costs and profits recognized to date on the percentage of completion accounting method on the remaining contracts. [d] Methods of Accounting for Real Estate Operations - ---------------------------------------------------- All real estate sales are recorded in accordance with SFAS No. 66. Gross profit is not recognized in full unless the collection of the sale price is reasonably assured and the Company is not obliged to perform significant activities after the sale. Unless both conditions exist, recognition of all or a part of gross profit is deferred. - 29 - The gross profit recognized on sales of real estate is determined by relating the estimated total land, land development and construction costs of each development area to the estimated total sales value of the property in the development. Real estate investments are stated at the lower of cost, which includes applicable interest and real estate taxes during the development and construction phases, or market. The market or net realizable value of a development is determined by estimating the sales value of the development in the ordinary course of business less the estimated costs of completion (to the stage of completion assumed in determining the selling price), holding and disposal. Estimated sales values are forecast based on comparable local sales (where applicable), trends as foreseen by knowledgeable local commercial real estate brokers or others active in the business and/or project specific experience such as offers made directly to the Company relating to the property. If the net realizable value of a development is less than the cost of a development, a provision is made to reduce the carrying value of the development to net realizable value. At present, the Company believes its real estate properties are carried at amounts at or below their net realizable values considering the expected timing of their disposal. [e] Depreciable Property and Equipment - -------------------------------------- Land, buildings and improvements, construction and computer-related equipment and other equipment are recorded at cost. Depreciation is provided primarily using accelerated methods for construction and computer-related equipment and the straight-line method for the remaining depreciable property. [f] Goodwill - ------------ Goodwill represents the excess of the costs of subsidiaries acquired over the fair value of their net assets as of the dates of acquisition. These amounts are being amortized on a straight-line basis over 40 years. [g] Income Taxes - ---------------- The Company follows Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," (see Note 5). [h] Earnings (Loss) Per Common Share - ------------------------------------ Computations of earnings (loss) per common share amounts are based on the weighted average number of common shares outstanding during the respective periods. During the three-year period ended December 31, 1995, earnings (loss) per common share reflect the effect of preferred dividends accrued during the year. Common stock equivalents related to additional shares of common stock issuable upon exercise of stock options (see Note 9) have not been included since their effect would be immaterial or antidilutive. Earnings (loss) per common share on a fully diluted basis are not presented because the effect of conversion of the Company's depositary convertible exchangeable preferred shares into common stock is antidilutive. [i] Cash and Cash Equivalents - ----------------------------- Cash equivalents include short-term, highly liquid investments with original maturities of three months or less. [j] Reclassifications - --------------------- Certain prior year amounts have been reclassified to be consistent with the current year classifications. - 30 - [2] JOINT VENTURES The Company, in the normal conduct of its business, has entered into partnership arrangements, referred to as "joint ventures," for certain construction and real estate development projects. Each of the joint venture participants is usually committed to supply a predetermined percentage of capital, as required, and to share in a predetermined percentage of the income or loss of the project. Summary financial information (in thousands) for construction and real estate joint ventures accounted for on the equity method for the three years ended December 31, 1995 follows: CONSTRUCTION JOINT VENTURES Financial position at December 31, 1995 1994 1993 --------- --------- --------- Current assets $227,578 $232,025 $241,905 Property and equipment, net 22,491 19,386 17,228 Current liabilities (151,311) (132,326) (151,181) --------- --------- --------- Net assets $ 98,758 $119,085 $107,952 ========= ========= ========= Operations for the year ended December 31, 1995 1994 1993 --------- --------- --------- Revenue $348,730 $544,546 $626,327 Cost of operations 329,414 505,347 574,383 --------- --------- --------- Pretax income $ 19,316 $ 39,199 $ 51,944 ========= ========= ========= Company's share of joint ventures Revenue $182,799 $241,784 $293,547 Cost of operations 177,990 224,039 272,137 --------- --------- --------- Pretax income $ 4,809 $ 17,745 $ 21,410 ========= ========= ========= Equity $ 61,846 $ 66,346 $ 61,156 ========= ========= ========= The Company has a centralized cash management arrangement with most construction joint ventures in which it is the sponsor. Under this arrangement, excess cash is controlled by the Company; cash is made available to meet the individual joint venture requirements, as needed; and interest income is credited to the ventures at competitive market rates. In addition, certain joint ventures sponsored by other contractors, in which the Company participates, distribute cash at the end of each quarter to the participants who will then return these funds at the beginning of the next quarter. Of the total cash advanced at the end of 1995 ($34.8 million) and 1994 ($8.8 million), approximately $12.1 million in 1995 and $5.5 million in 1994 was deemed to be temporary. REAL ESTATE JOINT VENTURES Financial position at December 31, 1995 1994 1993 --------- --------- --------- Property held for sale or development $ 18,350 $ 28,885 $ 35,855 Investment properties, net 173,468 177,258 191,606 Other assets 61,700 62,101 61,060 Long-term debt (72,603) (77,968) (103,090) Other liabilities* (305,755) (277,184) (256,999) ---------- --------- --------- Net assets (liabilities) $(124,840) $(86,908) $(71,568) ========== ========= ========= Operations for the year ended December 31, 1995 1994 1993 --------- --------- --------- Revenue $ 49,560 $ 58,326 $ 83,710 ---------- --------- --------- Cost of operations - Depreciation $ 7,304 $ 7,245 $ 8,660 Other 73,829 71,211 92,963 ---------- --------- --------- $ 81,133 $ 78,456 $101,623 ---------- --------- --------- Pretax income (loss) $ (31,573) $(20,130) $(17,913) ========== ========= ========= Company's share of joint ventures Revenue $ 23,424 $ 27,059 $ 43,590 ---------- --------- --------- Cost of operations - Depreciation $ 3,275 $ 3,323 $ 4,033 Other ** 20,888 26,682 40,716 ---------- --------- --------- $ 24,163 $ 30,005 $ 44,749 ---------- --------- --------- Pretax income (loss) $ (739) $ (2,946) $ (1,159) ========== ========= ========= Equity *** $ (49,580) $(33,091) $(27,768) ========== ========= ========= - 31 - * Included in "Other liabilities" are advances from joint venture partners in the amount of $236.8 million in 1993, $259.3 million in 1994, and $287.6 million in 1995. Of the total advances from joint venture partners, $165.9 million in 1993, $181.9 million in 1994, and $198.7 million in 1995 represented advances from the Company. ** Other costs are reduced by the amount of interest income recorded by the Company on its advances to the respective joint ventures. *** When the Company's equity in a real estate joint venture is combined with advances by the Company to that joint venture, each joint venture has a positive investment balance at December 31, 1995. [3] NOTES PAYABLE TO BANKS During 1994, the Company maintained unsecured short-term lines of credit totaling $18 million. In support of these credit lines, the Company paid fees approximating 1/4 of 1% of the amount of the lines. These lines were canceled as of December 12, 1994 upon the effective date of the expanded credit agreement referred to in Note 4 below. Information relative to the Company's short-term debt activity under such lines in 1994 follows (in thousands): 1994 Borrowings during the year: Average $10,992 Maximum $18,000 At year-end $ - Weighted average interest rates: During the year 7.4% At year-end - [4] LONG-TERM DEBT Long-term debt of the Company at December 31, 1995 and 1994 consists of the following (in thousands):
1995 1994 ---- ---- Real Estate Development: Industrial revenue bonds, at 65% of prime, payable in semi-annual installments $ 1,034 $ 1,310 Mortgages on real estate, at rates ranging from prime plus 1 1/2% to 10.82%, payable in installments 5,521 6,588 ------- ------- Total $ 6,555 $ 7,898 Less - current maturities 2,895 1,396 ------- ------- Net real estate development long-term debt $ 3,660 $ 6,502 ======= ======= Other: Revolving credit loans at an average rate of 8.1% in 1995 and 8.6% in 1994 $73,000 $62,000 ESOT Notes at 8.24%, payable in semi-annual installments (Note 7) 4,484 5,396 Industrial revenue bonds at various rates, payable in installments to 2005 4,000 4,000 Other indebtedness 1,813 2,714 ------- ------- Total $83,297 $74,110 Less - current maturities 2,802 3,626 ------- ------- Net other long-term debt $80,495 $70,484 ======= =======
Payments required under these obligations amount to approximately $5,697 in 1996, $74,877 in 1997, $3,128 in 1998, $2,150 in 1999, $ - in 2000 and $4,000 for the years 2001 and beyond. Effective December 12, 1994, the Company entered into a new revolving credit agreement with a group of major banks which provided, among other things, for the Company to borrow up to an aggregate of $125 million (aggregate limit under previous agreements was $85 million), with a $25 million maximum of such amount also being available for letters of credit, of which $17 million was outstanding at December 31, 1995. The Company may choose from three interest rate alternatives including a prime-based rate, as well as other interest rate options based on LIBOR (London inter- bank offered rate) or participating bank certificate of deposit rates. Borrowings and repayments may be made at any time through December 6, 1997, at which time all outstanding loans under the agreement must be paid or otherwise refinanced. The Company must pay a commitment fee of 1/2 - 32 - of 1% annually on the unused portion of the commitment. The aggregate $125 million commitment is subject to permanent partial reductions based on certain events, as defined, such as proceeds from real estate sales over a defined annual minimum, certain claims and future equity offerings and was reduced accordingly during 1995 by $10.5 million. The revolving credit agreement, as well as certain other loan agreements, provides for, among other things, maintaining specified working capital and tangible net worth levels and, additionally, imposes limitations on indebtedness and future investment in real estate development projects. As a result of the loss in the third quarter of 1995, the Company was in violation of certain of these financial covenants; however, the Company obtained waivers of any such violations and effective February 26, 1996, received modifications to the Credit Agreement which eliminated any non-compliance. Other modifications included, among other things, a requirement to reduce the amount of this loan commitment by $2 million per month for four months commencing the later of September 1, 1996 or the date of repayment and cancellation of the Bridge Loan referred to below; additional collateral which consists of all available assets not included as collateral in other agreements; and suspension of payment of the 53 1/8 cent per share quarterly dividend on the Company's Depositary Convertible Exchangeable Preferred Shares (see Note 7) until certain financial criteria are met. Also, effective February 26, 1996, the Company entered into a Bridge Loan Agreement with its revolver banks to borrow up to an additional $15 million through July 31, 1996 at an interest rate of prime plus 2%. The Bridge Loan Agreement provides for, among other things, interim mandatory reductions in the amount of the commitment equal to the net proceeds from sale of collateral not included in the Company's 1996 budget and 50% of the net proceeds from any new equity. [5] INCOME TAXES The Company accounts for income taxes in accordance with SFAS No. 109. This standard determines deferred income taxes based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities, given the provisions of enacted tax laws. The (provision) credit for income taxes is comprised of the following (in thousands): Federal State Total ------- ----- ----- 1995 Current $ - $ (11) $ (11) Deferred 2,726 (104) 2,622 -------- -------- -------- $ 2,726 $ (115) $ 2,611 ======== ======== ======== 1994 Current $ - $ (21) $ (21) Deferred (108) (51) (159) -------- -------- -------- $ (108) $ (72) $ (180) ======== ======== ======== 1993 Current $(2,824) $ (430) $(3,254) Deferred (1,808) 101 (1,707) -------- -------- -------- $(4,632) $ (329) $(4,961) ======== ======== ======== The table below reconciles the difference between the statutory federal income tax rate and the effective rate provided in the statements of operations. 1995 1994 1993 ---- ---- ---- Statutory federal income tax rate (34)% 34 % 34 % State income taxes, net of federal tax benefit - 4 2 Change in valuation allowance 25 - - Sale of Canadian subsidiary - - 24 Goodwill and other - (1) 1 ----- ----- ----- Effective tax rate (9)% 37 % 61 % ===== ===== ===== - 33 - The following is a summary of the significant components of the Company's deferred tax assets and liabilities as of December 31, 1995 and 1994 (in thousands):
1995 1994 ---------------------------------- ------------------------------- Deferred Deferred Tax Deferred Deferred Tax Tax Assets Liabilities Tax Assets Liabilities ---------- ----------- ---------- ----------- Provision for estimated losses $ 5,646 $ - $ 6,203 $ - Contract losses 5,642 - 887 - Joint ventures - construction - 4,929 - 8,088 Joint ventures - real estate - 20,419 - 25,668 Timing of expense recognition 4,253 - 13,867 - Capitalized carrying charges - 2,187 - 1,776 Net operating loss carryforwards 13,675 - 5,960 - Alternative minimum tax credit carryforwards 2,419 - 2,300 - General business tax credit carryforwards 3,532 - 3,637 - Foreign tax credit carryforwards 978 - 978 - Other, net 576 985 685 861 -------- -------- -------- -------- $36,721 $28,520 $34,517 $36,393 Valuation allowance for deferred tax assets (9,342) - (1,846) - -------- -------- -------- -------- Total $27,379 $28,520 $32,671 $36,393 ======== ======== ======== ========
The net of the above is deferred taxes in the amount of $1,141 in 1995 and $3,722 in 1994 which is classified in the respective Consolidated Balance Sheets as follows:
1995 1994 ---- ---- Long-term deferred tax liabilities (included in "Deferred Income Taxes and Other Liabilities") $14,180 $ 9,788 Short-term Deferred Tax Asset 13,039 6,066 ------- ------- $ 1,141 $ 3,722 ======= =======
A valuation allowance is provided to reduce the deferred tax assets to a level which, more likely than not, will be realized. The net deferred assets reflect management's estimate of the amount which will be realized from future taxable income which can be predicted with reasonable certainty. At December 31, 1995, the Company has unused tax credits and net operating loss carryforwards for income tax reporting purposes which expire as follows (in thousands): Unused Investment Foreign Net Operating Loss Tax Credits Tax Credits Carryforwards ----------- ----------- ------------- 1996-2000 $ - $ 978 $ - 2001-2004 3,532 - 968 2005-2010 - - 39,251 ------ ------ ------- $3,532 $ 978 $40,219 ====== ====== ======= Approximately $2.8 million of the net operating loss carryforwards can only be used against the taxable income of the corporation in which the loss was recorded for tax and financial reporting purposes. - 34 - [6] DEFERRED INCOME TAXES AND OTHER LIABILITIES AND OTHER INCOME (EXPENSE), NET DEFERRED INCOME TAXES AND OTHER LIABILITIES Deferred income taxes and other liabilities at December 31, 1995 and 1994 consist of the following (in thousands): 1995 1994 ------- ------ Deferred Income Taxes $14,180 $ 9,788 Insurance related liabilities 20,484 18,000 Employee benefit-related liabilities 5,110 4,700 Other 12,889 1,000 ------- ------- $52,663 $33,488 ======= ======= OTHER INCOME (EXPENSE), NET Other income (expense) items for the three years ended December 31, 1995 are as follows (in thousands): 1995 1994 1993 ------- ------- ------- Interest and dividend income $ 1,369 $ 205 $ 624 Minority interest (Note 1) 10 24 167 Gain on sale of Majestic - - 4,631 Bank fees (1,099) (1,100) (584) Miscellaneous income (expense), net 534 15 369 -------- -------- ------- $ 814 $ (856) $5,207 ======== ======== ======= [7] CAPITALIZATION In July 1989, the Company sold 262,774 shares of its $1 par value common stock, previously held in treasury, to its Employee Stock Ownership Trust ("ESOT") for $9,000,000. The ESOT borrowed the funds via a placement of 8.24% Senior Unsecured Notes ("Notes") guaranteed by the Company. The Notes are payable in 20 equal semi-annual installments of principal and interest commencing in January 1990. The Company's annual contribution to the ESOT, plus any dividends accumulated on the Company's common stock held by the ESOT, will be used to repay the Notes. Since the Notes are guaranteed by the Company, they are included in "Long-Term Debt" with an offsetting reduction in "Stockholders' Equity" in the accompanying Consolidated Balance Sheets. The amount included in "Long-Term Debt" will be reduced and "Stockholders' Equity" reinstated as the Notes are paid by the ESOT. In June 1987, net proceeds of approximately $23,631,000 were received from the sale of 1,000,000 depositary convertible exchangeable preferred shares (each depositary share representing ownership of 1/10 of a share of $21.25 convertible exchangeable preferred stock, $1 par value) at a price of $25 per depositary share. Annual dividends are $2.125 per depositary share and are cumulative. Generally, the liquidation preference value is $25 per depositary share plus any accumulated and unpaid dividends. The preferred stock of the Company, as evidenced by ownership of depositary shares, is convertible at the option of the holder, at any time, into common stock of the Company at a conversion price of $37.75 per share of common stock. The preferred stock is redeemable at the option of the Company at any time, in whole or in part, at declining premiums until June 1997 and thereafter at $25 per share plus any unpaid dividends. The preferred stock is also exchangeable at the option of the Company, in whole but not in part, on any dividend payment date into 8 1/2% convertible subordinated debentures due in 2012 at a rate equivalent to $25 principal amount of debentures for each depositary share. [8] SERIES A JUNIOR PARTICIPATING PREFERRED STOCK Under the terms of the Company's Shareholder Rights Plan, as amended, the Board of Directors of the Company declared a distribution on September 23, 1988 of one preferred stock purchase right (a "Right") for each outstanding share of common stock. Under certain circumstances, each Right will entitle the holder thereof to purchase from the Company one one-hundredth of a share (a "Unit") of Series A Junior Participating Cumulative Preferred Stock, $1 par value (the "Preferred Stock"), at an exercise price of $100 per Unit, subject to adjustment. The Rights will not be exercisable or transferable apart from the common stock until the occurrence of certain events viewed to be an attempt by a person or group to gain control of the Company (a "triggering - 35 - event"). The Rights will not have any voting rights or be entitled to dividends. Upon the occurrence of a triggering event, each Right will be entitled to that number of Units of Preferred Stock of the Company having a market value of two times the exercise price of the Right. If the Company is acquired in a merger or 50% or more of its assets or earning power is sold, each Right will be entitled to receive common stock of the acquiring company having a market value of two times the exercise price of the Right. Rights held by such a person or group causing a triggering event may be null and void. The Rights are redeemable at $.02 per Right by the Board of Directors at any time prior to the occurrence of a triggering event and will expire on September 23, 1998. [9] STOCK OPTIONS At December 31, 1995 and 1994, 481,610 shares of the Company's authorized but unissued common stock were reserved for issuance to employees under its 1982 Stock Option Plan. Options are granted at fair market value on the date of grant and generally become exercisable in two equal annual installments on the second and third anniversary of the date of grant and expire eight years from the date of grant. Options for 240,000 shares common stock granted in 1992 become exercisable on March 31, 2001 if the Company achieves a certain profit target in the year 2000; may become exercisable earlier if certain interim profit targets are achieved; and to the extent not exercised, expire 10 years from the date of grant. A summary of stock option activity related to the Company's stock option plan is as follows: Number of Number of Option Price Shares Shares Per Share Exercisable ------ --------- ----------- Outstanding at December 31, 1993 434,425 $11.06-$33.06 143,000 Granted 20,000 $13.00 Canceled (32,900) $11.06-$33.06 Outstanding at December 31, 1994 421,525 $11.06-$33.06 251,525 Granted 10,000 $10.44 Canceled (52,875) $11.06-$33.06 Outstanding at December 31, 1995 378,650 $10.44-$33.06 198,650 When options are exercised, the proceeds are credited to stockholders' equity. In addition, the income tax savings attributable to nonqualified options exercised are credited to paid-in surplus. [10] EMPLOYEE BENEFIT PLANS The Company and its U.S. subsidiaries have a defined benefit plan which covers its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The plan is noncontributory and benefits are based on an employee's years of service and "final average earnings", as defined. The plan provides reduced benefits for early retirement and takes into account offsets for social security benefits. All employees are vested after 5 years of service. Net pension cost for 1995, 1994 and 1993 follows (in thousands): 1995 1994 1993 ------ ------ ------ Service cost - benefits earned during the period $ 988 $ 1,178 $ 1,000 Interest cost on projected benefit obligation 2,956 2,936 2,862 Return on plan assets: Actual (6,971) 1,229 (4,002) Deferred 4,217 (3,839) 1,309 Other - - 19 -------- -------- -------- Net pension cost $ 1,190 $ 1,504 $ 1,188 ======== ======== ======== Actuarial assumptions used: Discount rate 7 %* 8 3/4%** 7 1/2% Rate of increase in compensation 4 %* 5 1/2% 5 1/2% Long-term rate of return on assets 8 % 8 % 8 % * Rates were changed effective December 31, 1995 and resulted in a net increase of $6.8 million in the projected benefit obligation referred to below. ** Rate was changed effective December 31, 1994 and resulted in a net decrease of $5.6 million in the projected benefit obligation referred to below. - 36 - The Company's plan has assets in excess of accumulated benefit obligation. Plan assets generally include equity and fixed income funds. The status of the Company's employee pension benefit plan is summarized below (in thousands):
December 31, 1995 1994 -------- -------- Assets available for benefits: Funded plan assets at fair value $37,542 $31,762 Accrued pension expense 4,122 3,610 -------- -------- Total assets $41,664 $35,372 -------- -------- Actuarial present value of benefit obligations: Accumulated benefit obligations, including vested benefits of $39,050 and $39,760 $30,537 $30,179 Effect of future salary increases 3,831 4,546 -------- -------- Projected benefit obligations $43,591 $35,083 -------- -------- Assets available more (less) than projected benefits $(1,927) $ 289 ======== ======== Consisting of: Unamortized net liability existing at date of adopting SFAS No. 87 $ (29) $ (36) Unrecognized net loss (2,408) (268) Unrecognized prior service cost 510 593 -------- -------- $(1,927) $ 289 ======== ========
The Company also has a contributory Section 401(k) plan and a noncontributory employee stock ownership plan (ESOP) which cover its executive, professional, administrative and clerical employees, subject to certain specified service requirements. Under the terms of the Section 401(k) plan, the provision is based on a specified percentage of profits, subject to certain limitations. Contributions to the related employee stock ownership trust (ESOT) are determined by the Board of Directors and may be paid in cash or shares of Company common stock. The Company's policy is generally to fund currently the costs accrued under the pension plan and the Section 401(k) plan. The Company also has an unfunded supplemental retirement plan for certain employees whose benefits under principal salaried retirement plans are reduced because of compensation limitations under federal tax laws. Pension expense for this plan was $.2 million in 1995 and 1994 and $.1 million in 1993. At December 31, 1995 the projected benefit obligation was $1.3 million. A corresponding accumulated benefit obligation of $.8 million has been recognized as a liability in the consolidated balance sheet and is equal to the amount of the vested benefits. In addition, the Company has an incentive compensation plan for key employees which is generally based on achieving certain levels of profit within their respective business units. The aggregate amounts provided under these employee benefit plans were $7.6 million in 1995, $9.2 million in 1994 and $8.5 million in 1993. The Company also contributes to various multiemployer union retirement plans under collective bargaining agreements, which provide retirement benefits for substantially all of its union employees. The aggregate amounts provided in accordance with the requirements of these plans were $12.6 million in 1995, $12.4 million in 1994, and $5.2 million in 1993. The Multiemployer Pension Plan Amendments Act of 1980 defines certain employer obligations under multiemployer plans. Information regarding union retirement plans is not available from plan administrators to enable the Company to determine its share of unfunded vested liabilities. [11] Contingencies and Commitments In connection with the Rincon Center real estate development joint venture, the Company's wholly-owned real estate subsidiary has guaranteed the payment of interest on both mortgage and bond financing covering a project with loans totaling $59 million; has issued a secured letter of credit to collateralize $3.7 million of these borrowings; has guaranteed amortization payments on these borrowings which the Company estimates to be a maximum of $7.2 million; and has guaranteed a master lease under a sale operating lease-back transaction. In calculating the potential obligation under the master lease guarantee, the Company has an agreement with its lenders which employs a 10% discount rate and no increases in future rental rates beyond current lease terms. Based on these assumptions, management believes its additional future obligation will not - 37 - exceed $2.3 million. The Company has also guaranteed the $3.7 million letter of credit, $5.0 million of the subsidiary's $7.2 million amortization guaranty and any obligation under the master lease during the next three years. As part of the sale operating lease-back transaction, the joint venture, in which the Company's real estate subsidiary is a 46% general partner, agreed to obtain a financial commitment on behalf of the lessor to replace at least $43 million of long-term financing by July 1, 1993. To satisfy this obligation, the partnership successfully extended existing financing to July 1, 1998. To complete the extension, the partnership had to advance funds to the lessor sufficient to reduce the financing from $46.5 million to $40.5 million. Subsequent payments through 1995 have further reduced the loan to $38.2 million. In addition, as part of the obligations of the extension, the partnership will have to further amortize the debt from its current level to $33 million through additional lease payments over the next three years. If by January 1, 1998, the joint venture has not received a further extension or new commitment for financing on the property for at least $33 million, the lessor will have the right under the lease to require the joint venture to purchase the property for approximately $18.8 million in excess of the then outstanding debt. In 1993, the joint venture also extended $29 million of the $61 million financing then outstanding through October 1, 1998. This extension required a $.6 million up front paydown. Subsequent payments through 1995 further reduced the loan by $2.7 million. The joint venture may be required to amortize up to $9.1 million more of the principal, however, under certain conditions, that amortization could be as low as $6.8 million. Total lease payments and loan amortization obligations at Rincon Center through 1997 are as follows: $7.5 million in 1996 and $7.3 million in 1997. It is expected that some but not all of these requirements will be generated by the project's operations. The Company's real estate subsidiary and, to a more limited extent, the Company, is obligated to fund any of the loan amortization and/or lease payments at Rincon in the event sufficient funds are not generated by the property or contributed to it by its partners. Based on current Company forecasts, it is expected the maximum exposure to service these commitments in each of the years through 1997 is as follows: $5.4 million in 1996 and $4.0 million in 1997. Both years include an estimate for tenant improvements which may or may not be required. In a separate agreement related to this same property, the 20% co-general partner has indicated it does not currently have nor does it expect to have the financial resources to fund its share of capital calls. Therefore, the Company's wholly-owned real estate subsidiary agreed to lend this 20% co-general partner on an as-needed basis, its share of any capital calls which the partner cannot meet. In return, the Company's subsidiary receives a priority return from the partnership on those funds it advances for its partner and penalty fees in the form of rights to certain other distributions due the borrowing partner from the partnership. The severity of the penalty fees increases in each succeeding year for the next several years. The subsidiary has advanced approximately $3 million to date under this agreement. In connection with a second real estate development joint venture known as the Resort at Squaw Creek, the Company's wholly-owned real estate subsidiary has guaranteed the payment of interest on mortgage financing with a total bank loan value currently estimated at $46 million; has guaranteed $10 million of loan principal; has posted a letter of credit for $2.0 million as its part of credit support required to extend the maturity of the loan to May 1997; and has guaranteed leases which aggregate $1.1 million on a present value basis as discounted at 10%. Effective May 1, 1995, the loan was renewed for an additional two years with an option to renew for a third year. Required principal payments are $250,000 per quarter for the first year and $500,000 per quarter for the second year. The subsidiary also has an obligation through the year 2001 to cover approximately a $2 million per year preferred return to its joint venture partner at the Resort if the funds are not generated from hotel operations. Although results have shown improvement since the Resort opened in late 1990, it is not expected that hotel operations will contribute to the obligation during 1996. Under the terms of the loan extension, payment of the preferred return out of operating profits requires lender approval. Included in the loan agreements related to the above joint ventures, among other things, are provisions that, under certain circumstances, could limit the subsidiary's ability to dividend funds to the Company. In the opinion of management, these provisions should not affect the operations of the Company or the subsidiary. On July 30, 1993, the U.S. District Court (D.C.), in a preliminary opinion, upheld terminations for default on two adjacent contracts for subway construction between Mergentime-Perini, under two joint ventures, and the Washington Metropolitan Area Transit Authority ("WMATA") and found the - 38 - Mergentime Corporation, Perini Corporation and the Insurance Company of North America, the surety, jointly and severally liable to WMATA for damages in the amount of $16.5 million, consisting primarily of excess reprocurement costs to complete the projects. Many issues were left partially or completely unresolved by the opinion, including substantial joint venture claims against WMATA. As a result of developments in the case during the third quarter of 1995, the Company established a reserve with respect to the litigation. Management believes the reserve should be adequate to cover the potential ultimate liability in this matter. Contingent liabilities also include liability of contractors for performance and completion of both company and joint venture construction contracts. In addition, the Company is a defendant in various lawsuits (some of which are for significant amounts). In the opinion of management, the resolution of these matters will not have a material effect on the accompanying financial statements. - 39 - [12] UNAUDITED QUARTERLY FINANCIAL DATA The following table sets forth unaudited quarterly financial data for the years ended December 31, 1995 and 1994 (in thousands, except per share amounts):
1995 by Quarter --------------------------------------------------------- 1st 2nd 3rd 4th --- --- --- --- Revenues $263,089 $306,961 $232,974 $298,044 Net income (loss) $ 872 $ 886 $(30,674) $ 1,331 Earnings (loss) per common share $ .08 $ .08 $ (6.61) $ .17 1994 by Quarter --------------------------------------------------------- 1st 2nd 3rd 4th --- --- --- --- Revenues $174,391 $243,105 $304,776 $289,773 Net income (loss) $ 792 $ (2,649) $ 984 $ 1,176 Earnings (loss) per common share $ .06 $ (.73) $ .10 $ .15
[13] BUSINESS SEGMENTS AND FOREIGN OPERATIONS The Company is currently engaged in the construction and real estate development businesses. The Company provides general contracting, construction management and design-build services to private clients and public agencies throughout the United States and selected overseas locations. The Company's construction business involves three types of operations: civil and environmental ("heavy"), building and international. The Company's real estate development operations are concentrated in Arizona, California, Florida, Georgia and Massachusetts; however, the Company has not commenced the development of any new real estate projects since 1990. The following tables set forth certain business and geographic segment information relating to the Company's operations for the three years ended December 31, 1995 (in thousands): Business Segments Revenues 1995 1994 1993 ------------ ----------- ---------- Construction $1,056,673 $ 950,884 $1,030,341 Real Estate 44,395 61,161 69,775 ------------ ----------- ---------- $1,101,068 $1,012,045 $1,100,116 ============ =========== ========== Income (Loss) From Operations 1995 1994 1993 ------------ ----------- ---------- Construction $ (15,322) $ 13,989 $ 15,164 Real Estate (2,921) 732 240 Corporate (4,185) (5,909) (6,830) ------------ ----------- ----------- $ (22,428) $ 8,812 $ 8,574 ============ =========== =========== Assets 1995 1994 1993 ------------ ------------ ---------- Construction $ 298,564 $ 262,850 $ 219,604 Real Estate 209,789 209,635 218,715 Corporate* 30,898 10,015 38,059 ------------ ------------ ---------- $ 539,251 $ 482,500 $ 476,378 ============ ============ RINCON CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP FINANCIAL STATEMENTS AS OF DECEMBER 31,========== Capital Expenditures 1995 1994 1993 1992 AND 1991 TOGETHER WITH AUDITORS' REPORT----------- ----------- ---------- Construction $ 1,960 $ 2,491 $ 4,387 Real Estate 9,555 10,274 23,590 ----------- ----------- ---------- $ 11,515 $ 12,765 $ 27,977 =========== =========== ========== - 40 - Depreciation 1995 1994 1993 ----------- ----------- ----------- Construction $ 2,369 $ 2,551 $ 2,552 Real Estate** 400 328 963 ----------- ----------- ----------- $ 2,769 $ 2,879 $ 3,515 =========== =========== =========== Geographic Segments Revenues 1995 1994 1993 ------------ ----------- ----------- United States $1,084,390 $ 996,832 $1,064,380 Foreign 16,678 15,213 35,736 ----------- ----------- ----------- $1,101,068 $1,012,045 $1,100,116 =========== =========== =========== Income (Loss) From Operations 1995 1994 1993 ----------- ----------- ----------- United States $ (15,405) $ 17,275 $ 17,249 Foreign (2,838) (2,554) (1,845) Corporate (4,185) (5,909) (6,830) ----------- ----------- ----------- $ (22,428) $ 8,812 $ 8,574 =========== =========== =========== Assets 1995 1994 1993 ----------- ----------- ----------- United States $503,114 $ 467,298 $ 433,488 Foreign 5,239 5,187 4,831 Corporate* 30,898 10,015 38,059 ----------- ----------- ----------- $539,251 $ 482,500 $ 476,378 =========== =========== =========== * In all years, corporate assets consist principally of cash, cash equivalents, marketable securities and other investments available for general corporate purposes. ** Does not include approximately $3 to $4 million of depreciation that represents its share from real estate joint ventures. (See Note 2 to Notes to the Consolidated Financial Statements.) Contracts with various federal, state, local and foreign governmental agencies represented approximately 56% of construction revenues in 1995 and 1994, and 54% in 1993. - 41 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the PartnersStockholders of Rincon Center Associates, A California Limited Partnership:Perini Corporation: We have audited the accompanying consolidated balance sheets of Rincon Center Associates, A California Limited PartnershipPERINI CORPORATION (a Massachusetts corporation) and subsidiaries as of December 31, 19931995 and 1992,1994, and the related consolidated statements of operations, changes in partners' deficitstockholders' equity and cash flows for each of the three years in the period ended December 31, 1993.1995. These financial statements are the responsibility of the Partnership'sCompany's management. Our responsibility is to express an opinion on these financial statements 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rincon Center Associates, A California Limited PartnershipPerini Corporation and subsidiaries as of December 31, 19931995 and 1992,1994, and the results of itstheir operations and itstheir cash flows for each of the three years in the period ended December 31, 1993,1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Boston, Massachusetts February 11, 1994 RINCON CENTER ASSOCIATES A CALIFORNIA LIMITED PARTNERSHIP BALANCE SHEETS26, 1996 - DECEMBER 31, 1993 AND 1992 1993 1992 ASSETS CASH $ 120,000 $ 272,000 ACCOUNTS RECEIVABLE, net of reserves of $239,000 and $95,000 at December 31, 1993 and 1992, respectively 44,000 2,074,000 DEFERRED RENT RECEIVABLE 7,883,000 7,626,000 NOTES RECEIVABLE 15,828,000 10,140,000 REAL ESTATE USED IN OPERATIONS, net 118,021,000 121,505,000 LEASEHOLD IMPROVEMENTS, net 1,855,000 1,894,000 OTHER ASSETS, net 2,855,000 2,368,000 ------------ ------------ Total assets $146,606,000 $145,879,000 ============ ============42 - LIABILITIES AND PARTNERS' DEFICIT CONSTRUCTION NOTES PAYABLE $ 62,370,000 $ 64,224,000 ACCOUNTS PAYABLE AND ACCURED LIABILITIES 3,416,000 3,607,000 ACCRUED GROUND RENT LIABILITY, net 7,307,000 7,636,000 ACCRUED LEASE LIABILITY, net 3,102,000 3,030,000 DEFERRED INCOME 1,540,000 1,540,000 ACCRUED INTEREST DUE GENERAL PARTNERS 33,901,000 27,432,000 DUE TO PERINI LAND AND DEVELOPMENT COMPANY 68,399,000 61,592,000 DUE TO PACIFIC GATEWAY PROPERTIES, INC. 17,089,000 15,390,000 ------------ ------------ Total liabilities $197,124,000 $184,451,000 COMMITMENTS (NOTE 3) PARTNERS' DEFICIT (50,518,000) (38,572,000) ------------- ------------ Total liabilities and partners'deficit $146,606,000 $145,879,000 ============ ============ The accompanying notes are an integral part of these financial statements. RINCON CENTER ASSOCIATES A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993 1993 1992 1991 REVENUE: Rental income $ 17,083,000 $ 17,583,000 $ 16,814,000 Parking and other income 1,260,000 1,150,000 1,195,000 ------------ ------------ ------------ Total revenue 18,343,000 18,733,000 18,009,000 ------------ ------------ ------------ EXPENSES: Operating 5,132,000 5,448,000 4,824,000 Administrative and other 1,556,000 1,313,000 1,437,000 Property taxes and insurance 2,438,000 3,200,000 1,835,000 Leases 4,515,000 3,775,000 4,755,000 Ground rent 3,391,000 3,407,000 3,437,000 Interest and letter of credit fees 10,582,000 10,862,000 12,802,000 Depreciation and amortization 4,040,000 4,726,000 3,487,000 ------------ ------------ ------------ Total expenses 31,654,000 32,731,000 32,577,000 INTEREST INCOME 1,365,000 1,062,000 1,023,000 ------------- ------------- ------------- Net loss $(11,946,000) $(12,936,000) $(13,545,000) ============= ============= ============= The accompanying notes are an integral part of these financial statements. RINCON CENTER ASSOCIATES A CALIFORNIA LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' DEFICIT FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993 General Limited Partners Partners Total BALANCE, DECEMBER 31, 1990 $ (5,923,000) $ (6,168,000) $(12,091,000) Net loss (6,786,000) (6,759,000) (13,545,000) ------------- ------------- ------------- BALANCE, DECEMBER 31, 1991 (12,709,000) (12,927,000) (25,636,000) Net loss (6,481,000) (6,455,000) (12,936,000) ------------- ------------- ------------- BALANCE, DECEMBER 31, 1992 (19,190,000) (19,382,000) (38,572,000) Net loss (5,985,000) (5,961,000) (11,946,000) ------------- ------------- ------------- BALANCE, DECEMBER 31, 1993 $(25,175,000) $(25,343,000) $(50,518,000) ------------- ------------- ------------- PARTNERS' PERCENTAGE INTEREST 50.10 49.90 100.00 ====== ===== ====== The accompanying notes are an integral part of these financial statements. RINCON CENTER ASSOCIATES A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993 1993 1992 1991 CASH FLOW FROM OPERATING ACTIVITIES: Net loss $(11,946,000) $(12,936,000) $(13,545,000) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization 4,040,000 4,726,000 3,487,000 (Increase) decrease in accounts receivable 2,030,000 (1,620,000) (102,000) (Increase) decrease in deferred rent receivable (257,000) (479,000) (2,170,000) (Increase) decrease in other assets (214,000) (598,000) (467,000) Increase (decrease) in accounts payable and accrued liabilities (191,000) 61,000 (1,072,000) (Decrease) in accrued ground rent liabilities (329,000) (329,000) (329,000) Increase (decrease) in accrued lease liability 72,000 (500,000) (946,000) Increase in accrued interest due general partners 6,469,000 5,271,000 7,918,000 ------------- ------------- ------------- Net cash used in operating activities (326,000) (6,404,000) (7,226,000) CASH FLOW FROM INVESTING ACTIVITIES: Expenditure on real estate used in operations (642,000) (369,000) (5,133,000) Additions to leasehold improvements (118,000) - (18,000) Additions to fixed assets (30,000) (73,000) (10,000) Increase in notes receivable (6,000,000) (32,000) (138,000) Payments on notes receivable 312,000 440,000 277,000 ------------- ------------- ------------- Net cash used in investing activities (6,478,000) (34,000) (5,022,000) ------------- ------------- ------------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from construction notes payable - 858,000 2,787,000 Payments on notes payable (1,854,000) - - Proceeds from advances from general 8,506,000 5,634,000 8,505,000 partners ------------- ------------- ------------- Net cash provided by financing activities 6,652,000 6,492,000 11,292,000 ------------- ------------- ------------- INCREASE (DECREASE) IN CASH (152,000) 54,000 (956,000) CASH AT BEGINNING OF YEAR 272,000 218,000 1,174,000 ------------- ------------ ------------- CASH AT END OF YEAR $ 120,000 $ 272,000 $ 218,000 ============ ============ ============
The accompanying notes are an integral part of these financial statements. RINCON CENTER ASSOCIATES A CALIFORNIA LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 1. PARTNERSHIP ORGANIZATION: Rincon Center Associates, A California Limited Partnership (the Partnership) was formed on September 18, 1984, to lease and develop land and buildings located in the Rincon Point-South Beach Redevelopment Project Area in the City and County of San Francisco, California. The Rincon Center Project (the Project) comprises commercial and retail space, 320 rental housing units and associated off-street parking. The Project was developed in two distinct segments: Rincon One and Rincon Two. Profits and losses are shared by the partners in accordance with their percentage interest as provided in the partnership agreement and as shown in the statements of changes in partners' deficit. Cash profits, as determined by the managing general partner, are distributed to the partners in the same percentage interest. Perini Land and Development Company (PL&D) is the managing general partner of the Partnership and has the responsibility for general management, administration and control of the Partnership's property, business addition, PL&D provides project and general accounting services to the Partnership (Note 7). Pacific Gateway Properties, Inc. (PGP), formerly Perini Investment Properties, Inc., is the other general partner. 2. SIGNIFICANT ACCOUNTING POLICIES: The accompanying financial statements have been prepared using the accrual basis of accounting. Real Estate Used in Operations Real estate used in operations includes all costs capitalized during the development of the project. These costs include interest and financing costs, ground rent expense during construction, property taxes, tenant improvements and other capitalizable overhead costs. Depreciation and Amortization The Partnership uses the straight-line method of depreciation. The significant asset groups and their estimated useful lives are: Structural components of buildings 60 years Nonstructural components of buildings 25 years All other depreciable assets 5-30 years Leasehold improvements are amortized using the straight-line method over the lesser of their useful lives or the lease terms. Income Taxes In accordance with federal and state income tax regulations, no income taxes are levied on the Partnership; rather, such taxes are levied on the individual partners. Consequently, no provision or liability for federal or state income taxes is reflected in the accompanying financial statements. Rental Income Certain lease agreements provide for periods of free rent or stepped increases in rent over the lease term. In such cases, revenue is recognized at a constant rate over the term of the lease. Amounts recognized as income but not yet due under the terms of the leases are shown in the accompanying balance sheets as deferred rent receivable. Statements of Cash Flows Cash paid for interest was $2,414,000, $3,199,000 and $4,015,000 in 1993,1992 and 1991, respectively. Accrued Lease Liability The Partnership is leasing Rincon One from Chrysler McNally (Chrysler) over a 25-year lease term (Note 3). In connection with this lease, the Partnership was granted a free rent concession for one year. The intent of Chrysler's free rent provision was to match a similar provision granted by the Partnership to an anchor sublease tenant of Rincon One, whose lease is for 10 years. The Partnership expensed rent in the first year of the lease and is amortizing the accrued lease liability related to Rincon One over 10 years to match the expense with the revenue recorded on the sublease. Three amendments to the master lease agreement were made in 1993 in connection with the extending of Chrysler's existing financing on the property (Note 3). The rent schedule was revised which resulted in an increase to the accrued lease liability during 1993 in order to normalize the rent expense over the remaining lease term. Other Assets Other assets include prepaid expenses, deferred lease commissions and fixed assets. Deferred lease commissions are amortized over the life of the lease. Fixed assets are amortized over the life of the asset, which is generally five years. Reclassification of Prior Year Amounts Certain prior year amounts have been reclassified to conform with the current year presentation. 3. OPERATING LEASE, RINCON ONE: On June 24, 1988, the Partnership sold Rincon One to Chrysler and subsequently leased the property back under a master lease with a basic term of 25 years and four 5-year renewal options at the Partnership's discretion. The transaction was accounted for as a sale and operating leaseback and the gain on the sale of $1,540,000 has been deferred. In connection with the sale and operating leaseback of Rincon One, Chrysler assumed and agreed to perform the Partnership's financing obligations. The Partnership, in accordance with the master lease and several amendments in 1993, obtained a financial commitment on behalf of Chrysler to replace at least $43,000,000 of long-term financing by July 1, 1993. To satisfy this obligation, the Partnership successfully extended existing financing to July 1, 1998. To complete the extension, the Partnership had to advance funds sufficient to reduce the financing from $46,500,000 to $40,500,000. The Partnership received a 10% secured note in the principal amount of $6,000,000 from Chrysler upon the Partnership's advance of funds to reduce the financing. If by January 1, 1998, the Partnership has not received a further extension or new commitment for financing on the property for at least $33,000,000, Chrysler will have the right under the lease to require the Partnership to purchase the property for a stipulated amount significantly in excess of the debt. The Partnership intends to obtain financing meeting the conditions of the lease prior to January 1, 1998. The master lease was amended several times in 1993 in connection with the extending of Chrysler's existing financing on the property through July 1, 1998. Payments under the master lease agreement may be adjusted to reflect adjustments in the rate of interest payable by Chrysler on the Rincon One debt. Future minimum lease payments based on scheduled payments under the master lease agreement are as follows: 1994 $ 6,565,000 1995 6,570,000 1996 6,550,000 1997 5,952,000 1998 5,634,000 Thereafter 85,120,000 4. NOTES RECEIVABLE: At December 31, 1993 and 1992, the Partnership had the following notes receivable: 1993 1992 Due from Chrysler secured by second deed on trust on Rincon One, bearing interest at 10 percent, with monthly principal and interest payments of $150,285 in 1993 and $92,383 in 1992; unpaid balance due July 2013 $15,469,000 $ 9,739,000 Notes from tenants secured by tenant improvements, bearing interest at 8 percent to 11 percent, with maturities from 1994 to 2001, due in monthly installments 359,000 401,000 ----------- ----------- $15,828,000 $10,140,000 =========== =========== In 1993, the Partnership received a 10% secured note in the principal amount of $6,000,000 from Chrysler upon the Partnership's advance of funds (Note 3). 5. GROUND LEASE: The Partnership entered into a 65-year ground lease with the United States Postal Service for the Project property on April 19, 1985. On June 24, 1988, this lease was bifurcated into two leases (Rincon One and Rincon Two). The terms of the original lease did not change; the dollar amounts were simply split between the two properties. Under the terms of the leases, the Partnership must make monthly lease payments (Basic Rent) of $101,750 and $173,250 for Rincon One and Rincon Two, respectively. In April, 1994 and every six years thereafter, the monthly base payments can be increased based on the increase in the Consumer Price Index subject to a minimum of 5 percent per year and a maximum of 8 percent per year. In addition, the Basic Rent can be increased based on reappraisal of the underlying property on the occurrence of certain events if those events occur prior to the regular reappraisal dates of April 19, 2019, and each twelfth year thereafter for the remainder of the lease term. The lease agreement calls for the payment of certain percentage rents based on revenues received from the subleasing of the Rincon One building. Percentage rents paid in 1993, 1992 and 1991 were $259,000, $267,000 and $271,000, respectively. This lease has been accounted for as an operating lease, with minimum future lease payments of: 1994 $ 4,120,000 1995 4,410,000 1996 4,410,000 1997 4,410,000 1998 4,290,000 Thereafter 894,853,000 During 1993, 1992 and 1991, Basic Rent was not capitalized because the entire project was placed in service. At December 31, 1990, ground rent of $10,407,312 was capitalized. Under the provisions of the original lease, no lease payments were to be made from the inception of the lease (April 19, 1985) until April 18, 1987, and one-half of the regular monthly payment was due for the period from April 19, 1987 to April 18, 1988. However, as allowed by the lease agreement, the Partnership deferred the payment of Basic Rent until the initial occupancy date, February 8, 1988. At December 31, 1993 and 1992, the deferred Basic Rent and interest for the period April 19, 1987 to April 18, 1988, amount to $552,000 and $685,000, respectively, and are being paid in 120 monthly installments together with interest at a rate based on the average discount rates of 90-day U.S. Treasury bills, which was approximately 3.88 percent for the year ended December 31, 1993. The rate will be adjusted every 90 days as long as a balance is due on the deferred rent. The remaining deferred ground rent related to the free rent period amounted to $6,754,000 and $6,951,000 at December 31, 1993 and 1992, respectively, and is being amortized over the lease term. 6. CONSTRUCTION NOTES PAYABLE: Residential The residential portion of the Project is being financed with a $36,000,000 loan from the Redevelopment Agency of the City and County of San Francisco (the Agency), of which $34,100,000 and $34,600,000 was outstanding at December 31, 1993 and 1992, respectively. The Agency raised these funds through the issuance of Variable Rate Demand Multifamily Housing Revenue Bonds (Rincon Center Project) 1985 Issue B (the Bonds). The interest rate on the Bonds is variable at the rate required to produce a market value for the Bonds equal to their par value. At December 31, 1993, 1992 and 1991, the effective interest rate on the bonds was 3.00 percent, 3.13 percent and 4.20 percent, respectively. Interest payments are to be made on the first business day of each March, June, September and December. The Partnership has the option to convert the Bonds to a fixed interest rate at any of the above interest payment dates. The fixed rate will be the rate required to produce a market value for the Bonds equal to their par value. After conversion to a fixed rate, interest payments must be made on each June 1 and December 1. The Partnership must repay the residential loan as the Bonds become due. The Bonds shall be redeemed in at least the minimum amounts set forth below: 1994 $ 600,000 1995 600,000 1996 600,000 1997 700,000 1998 900,000 Thereafter 30,700,000 The Bonds are due December 1, 2006. The Bonds are secured by an irrevocable letter of credit issued by Citibank in the name of the Partnership in the amount of approximately $36,200,000. In the event that drawings are made on the letter of credit, the Partnership has agreed to reimburse Citibank for such drawings pursuant to the terms of a Reimbursement Agreement. The Partnership obligations under the Reimbursement Agreement are secured by a deed of trust on the Project and the equity letters of credit and guarantees described below. Commercial The development and construction of the commercial portion of the Project was financed pursuant to a Construction Loan Agreement between the Partnership and Citibank of which $28,270,000 and $28,849,000 was outstanding at December 1993 and 1992, respectively. The loan, as is the irrevocable letter of credit supporting the residential bond, is secured by a deed of trust on the Project and equity letters of credit currently in the aggregate amount of $9,000,000, issued to Citibank by Bank of America, N.T. & S.A. on behalf of the general partners. PL&D has also provided a $3.5 million corporate guarantee to support the project financing. PGP and Perini Corporation, the parent company of PL&D, have agreed to reimburse Bank of America for any drawings under these letters of credit. An annual fee equal to prime plus 1 percent of the aggregate amount is due to PGP and PL&D for the use of these letters of credit. The loan is also secured by the guarantees described in Note 7. As of December 31, 1993 and 1992, $751,000 and $0, respectively, of accrued letter of credit fees were included in accrued interest due general partners in the accompanying balance sheets. The total fee in 1993, 1992 and 1991 was $751,000, $909,000 and $1,180,000, respectively. In 1993, the Partnership extended the loan to October 1, 1998, that required a $600,000 up front paydown and an additional fee of $105,000. The loan requires the Partnership to amortize $13,000,000 over the next five years. Amounts are payable as follows: $1,475,000 in 1994; $2,192,000 in 1995; $2,708,000 in 1996; $3,150,000 in 1997 and the remainder in 1998. The Partnership obtained a swap agreement with interest rates stepping up from 3.61% to 5.96% over the loan term. At December 31, 1993 the rate on the loan was 3.61%. At December 31, 1992, the Partnership has purchased an option to acquire an interest rate hedge for principal amounts totaling $46,500,000 at 11.5% until December 1993. The total fee paid of $51,000 is included in interest and letter of credit fees in 1992. Additionally, the Partnership obtained short-term financing to fund tenant improvements. The amount outstanding at December 31, 1993 and 1992, was $0 and $775,000, respectively. The loan was paid on March 31, 1993 by the Partnership. 7. TRANSACTIONS WITH GENERAL PARTNERS: PL&D has guaranteed the payment of both interest on the financing of the Project and operating deficit, if any. It has also guaranteed the master lease under the sale and operating lease-back transaction (Note 3). In accordance with the construction loan agreement (Note 6), the general partners have advanced monies to the Partnership to fund project costs. At December 31, 1993 and 1992, the general partners had advanced $85,488,000 and $76,982,000, respectively. The advances accrue interest at a rate of prime plus 2 percent. The related accrued interest liability of $33,901,000 and $27,432,000 as of December 31, 1993 and 1992, respectively, is reflected in the accompanying balance sheets. For the years ended December 31, 1993, 1992 and 1991, interest expense on partner advances was $6,469,000, $6,141,000 and $7,048,000, respectively. Effective January 1, 1988, PL&D retained Pacific Gateway Properties Management Corporation (PGPMC), a wholly owned subsidiary of PGP, to provide management and leasing services for the Project. As compensation for managing the facilities, the Partnership paid PGPMC a base management fee of $222,000 annually until leasing the residential portion of the Project was completed. At such time, the compensation increased to $319,200 per year or, if greater, the sum of 3 percent of the first $13,000,000 of the annual gross receipts plus 2 percent of receipts in excess of the $13,000,000. The fees incurred for the years ended December 31, 1993, 1992 and 1991 were $497,000, $485,000 and $514,000, respectively, and were included in administrative and other expenses in the accompanying statements of operations. At December 31, 1993 and 1992, $27,000 and $96,000, respectively, related to this fee had not been paid and is included in accounts payable and accrued liabilities. Additionally, the Partnership reimburses PGPMC for certain payroll costs. RINCON CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP FINANCIAL STATEMENTS AS OF DECEMBER 31, 1992, 1991 AND 1990 TOGETHER WITH AUDITORS' REPORT REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE ---------------------------------------------------- To the PartnersStockholders of Rincon Center Associates, A California Limited Partnership:Perini Corporation: We have audited, the accompanying balance sheets of Rincon Center Associates, A California Limited Partnership as of December 31, 1992 and 1991, and the related statements of operations, changes in partners' deficit and cash flows for the three years ended December 31, 1992, 1991 and 1990. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements 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 financial position of Rincon Center Associates, A California Limited Partnership as of December 31, 1992 and 1991, and the results of its operations and its cash flows for the three years ended December 31, 1992, 1991 and 1990, in conformity with generally accepted accounting principles. San Francisco, California, February 2, 1993 RINCON CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP BALANCE SHEETS--DECEMBER 31, 1992 AND 1991 1992 1991 ASSETS CASH $ 272,450 $ 217,525 ACCOUNTS RECEIVABLE, net of reserves of $94,969 and $60,213 at December 31, 1992 and 1991, respectively 2,073,326 452,754 DEFERRED RENT RECEIVABLE 7,626,401 7,147,821 NOTES RECEIVABLE 10,140,144 10,486,680 REAL ESTATE USED IN OPERATIONS, net 121,505,397 124,827,339 LEASEHOLD IMPROVEMENTS, net 1,894,035 2,151,027 OTHER ASSETS, net 2,367,087 2,536,882 ------------ ------------ Total assets $145,878,840 $147,820,028 ============ ============ LIABILITIES AND PARTNERS' DEFICIT CONSTRUCTION NOTES PAYABLE $ 64,223,609 $ 63,366,870 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 3,606,324 3,545,690 ACCRUED GROUND RENT LIABILITY, net 7,635,657 7,964,505 ACCRUED LEASE LIABILITY, net 3,029,494 3,529,855 DEFERRED INCOME 1,540,311 1,540,311 ACCRUED INTEREST DUE GENERAL PARTNERS 27,432,444 22,161,596 DUE TO PERINI LAND AND DEVELOPMENT COMPANY 61,592,314 57,132,226 DUE TO PACIFIC GATEWAY PROPERTIES, INC. 15,390,273 14,215,189 ------------ ------------ Total liabilities 184,450,426 173,456,242 PARTNERS' DEFICIT (38,571,586) (25,636,214) ------------ ------------ Liabilities and partners' deficit $145,878,840 $147,820,028 ============ ============ The accompanying notes are an integral part of these statements. RINCON CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990 1992 1991 1990 REVENUE: Rental income $ 17,583,217 $ 16,814,229 $10,657,413 Parking and other income 1,149,377 1,194,601 1,170,619 ------------ ------------ ----------- Total revenue 18,732,594 18,008,830 11,828,032 ------------ ------------ ----------- EXPENSES: Operating 5,146,334 4,315,732 3,395,729 Administrative and other 1,614,502 1,944,545 1,334,475 Property taxes and insurance 3,200,377 1,835,409 949,078 Leases 3,774,793 4,755,463 4,957,081 Ground rent 3,406,939 3,436,746 2,255,221 Interest and letter of credit fees 10,861,967 12,802,374 7,210,713 Depreciation and amortization 4,726,039 3,487,034 1,800,615 ------------ ------------ ------------ Total expenses 32,730,951 32,577,303 21,902,912 ------------ ------------ ------------ OTHER INCOME- Interest income 1,062,985 1,023,517 1,062,782 ------------ ------------ ------------ Net loss $(12,935,372) $(13,544,956) $(9,012,098) ============ ============ ============
The accompanying notes are an integral part of these statements. RINCON CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990 General Limited Partners Partners Total BALANCE, DECEMBER 31, 1989 $ (1,408,133) $ (1,671,027) $ (3,079,160) Net loss (4,515,061) (4,497,037) (9,012,098) ------------ ------------ ------------ BALANCE, DECEMBER 31, 1990 (5,923,194) (6,168,064) (12,091,258) Net loss (6,786,023) (6,758,933) (13,544,956) ------------ ------------ ------------ BALANCE, DECEMBER 31, 1991 (12,709,217) (12,926,997) (25,636,214) Net loss (6,480,621) (6,454,751) (12,935,372) ------------ ------------ ------------ BALANCE, DECEMBER 31, 1992 $(19,189,838) $(19,381,748) $(38,571,586) ============ ============ ============ PARTNERS' PERCENTAGE INTEREST 50.10% 49.90% 100.00% ===== ===== ====== The accompanying notes are an integral part of these statements. RINCON CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990 1992 1991 1990 CASH FLOW FROM OPERATING ACTIVITIES: Net loss $(12,935,372) $(13,544,956) $(9,012,098) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization 4,726,039 3,487,034 1,800,615 Increase in accounts receivable (1,620,572) (102,469) (210,746) Increase in deferred rent receivable (478,580) (2,169,965) (190,527) Increase in other assets (597,550) (465,927) (638,700) Decrease in other receivable - - 1,006,810 Increase (decrease) in accounts payable and accrued liabilities 60,634 (1,071,547) (4,685,396) Decrease in accrued ground rent liability (328,848) (328,848) (328,847) Decrease in accrued lease liability (500,361) (945,808) (1,716,176) Recognition of deferred income - (1,374) (67,996) Increase in accrued interest due general partners 5,270,848 7,918,261 6,701,884 ------------ ------------ ------------ Net cash used in operating activities (6,403,762) (7,225,599) (7,341,177) ------------ ------------ ------------ CASH FLOW FROM INVESTING ACTIVITIES: Expenditure on real estate used in operations (367,631) (5,133,601) (10,334,901) Additions to leasehold improvements - (17,782) (2,447,205) Additions to fixed assets (73,392) (10,676) (111,060) Issuance of notes receivable (32,206) (138,669) (346,830) Payments on notes receivable 440,005 277,301 221,562 ------------ ------------ ------------ Net cash used in investing activities (33,224) (5,023,427) (13,018,434) ------------ ------------ ------------ CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from construction notes payable 856,739 2,787,284 2,942,807 Proceeds from advances from general partners 5,635,172 8,504,998 18,012,417 ------------ ------------ ------------ Net cash provided by financing activities 6,491,911 11,292,282 20,955,224 ------------ ------------ ------------ INCREASE (DECREASE) IN CASH 54,925 (956,744) 595,613 CASH AT BEGINNING OF YEAR 217,525 1,174,269 578,656 ------------ ------------ ------------ CASH AT END OF YEAR $ 272,450 $ 217,525 $ 1,174,269 ============ ============ ============ The accompanying notes are an integral part of these statements. RINCON CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1992 1. PARTNERSHIP ORGANIZATION: Rincon Center Associates, A California Limited Partnership (the Partnership) was formed on September 18, 1984, to lease and develop land and buildings located in the Rincon Point-South Beach Redevelopment Project Area in the City and County of San Francisco, California. The Rincon Center Project (the Project) comprises commercial and retail space, 320 rental housing units and associated off-street parking. The Project was developed in two distinct segments: Rincon One and Rincon Two. Profits and losses are shared by the partners in accordance with their percentage interests as provided in the partnership agreement and as shown in the statement of changes in partners' deficit. Cash profits, as determined by the managing general partner, shall be distributed to the partners in the same percentage interest. Perini Land and Development Company (PL&D) is the managing general partner of the Partnership and has the responsibility for general management, administration and control of the Partnership's property, business and affairs. In addition, PL&D provides project and general accounting services to the Partnership (Note 7). Pacific Gateway Properties, Inc. (PGP), formerly Perini Investment Properties, Inc. is the other general partner. 2. SIGNIFICANT ACCOUNTING POLICIES: The accompanying financial statements have been prepared using the accrual basis of accounting. Real Estate Used in Operations Real estate used in operations includes all costs capitalized during the development of the project. These costs include interest and financing costs, ground rent expense during construction, property taxes, tenant improvements and other capitalizable overhead costs. In 1990, $5,935,541 of interest was capitalized. Depreciation and Amortization The Partnership uses the straight-line method of depreciation. The significant asset groups and their estimated useful lives are: Structural components of buildings 60 years Nonstructural components of 25 years buildings All other depreciable assets 5-30 years Leasehold improvements are amortized on the straight-line method over the lesser of their useful lives or the lease terms. Income Taxes In accordance with federal and state income tax regulations, no income taxes are levied on the Partnership; rather, such taxes are levied on the individual partners. Consequently, no provision or liability for federal or state income taxes is reflected in the accompanying financial statements. Rental Income Certain lease agreements provide for free rent or stepped increases in rent over the lease term. In such cases, revenue is recognized at a constant rate over the term of the lease. Amounts recognized as income but not yet due under the terms of the leases are shown on the balance sheets as deferred rent receivable. Statements of Cash Flows Cash paid for interest was $3,198,881 and $4,015,315 in 1992 and 1991, respectively. Cash paid for interest, net of capitalized interest and interest income paid on funds held in escrow and invested, was $3,190,246 in 1990. Accrued Lease Liability The Partnership is leasing Rincon One from Chrysler McNally (Chrysler) over a 25-year lease term (Note 3). In connection with this lease, the Partnership was granted a free rent concession for one year. The intent of Chrysler's free rent provision was to match a similar provision granted by the Partnership to an anchor sublease tenant of Rincon One, whose lease is for 10 years. The Partnership expensed rent in the first year of the lease and is amortizing the accrued lease liability related to Rincon One over 10 years to match the expense with the revenue recorded on the sublease. Other Assets Other assets include prepaid expenses, deferred lease commissions and fixed assets. Deferred lease commissions are amortized over the life of the lease. Fixed assets are amortized over the life of the asset, which is generally five years. Reclassification of Prior Year Amounts Certain prior year amounts have been reclassified to conform with the current year presentation. 3. OPERATING LEASE, RINCON ONE: On June 24, 1988, the Partnership sold Rincon One to Chrysler and subsequently leased the property back under a master lease with a basic term of 25 years and four 5-year renewal options at the Partnership's discretion. The transaction was accounted for as a sale and operating leaseback and the gain on the sale of $1,540,311 has been deferred. Payments under the master lease agreement may be adjusted to reflect adjustments in the rate of interest payable by Chrysler on the Rincon One debt. Future minimum lease payments based on scheduled payments under the master lease agreement are as follows: 1993 $ 6,639,000 1994 5,929,000 1995 5,929,000 1996 5,891,000 1997 5,906,000 Thereafter 106,405,000 The lease also permits the lessor to put the property back to the Partnership at stipulated prices beginning January 1, 1993, if long-term financing meeting certain conditions is not obtained. Financing has been arranged with the current lender which meets the conditions of the lease through April 1, 1998, subsequent to year-end. 4. NOTES RECEIVABLE: At December 31, 1992 and 1991, the Partnership had the following notes receivable: 1992 1991 Due from Chrysler secured by second deed of trust on Rincon One, bearing interest at 10 percent, with monthly principal and interest payments of $92,383 in 1992, 1991 and 1990; unpaid balance due July 2013 $ 9,739,079 $ 9,875,504 Notes from tenants secured by tenant improvements, bearing interest at 10 percent to 12 percent, with maturities from 1994 to 1998, due in monthly installments 629,179 611,176 ----------- ----------- $10,368,258 $10,486,680 =========== =========== 5. GROUND LEASE: The Partnership entered into a 65-year ground lease with the United States Postal Service for the Project property on April 19, 1985. On June 24, 1988, this lease was bifurcated into two leases (Rincon One and Rincon Two). The terms of the original lease did not change; the dollar amounts were simply split between the two properties. Under the terms of the leases, the Partnership must make monthly lease payments (Basic Rent) of $101,750 and $173,250 for Rincon One and Rincon Two, respectively. In February 1995 and every six years thereafter, the monthly base payments can be increased based on the increase in the Consumer Price Index subject to a minimum of 5 percent per year and a maximum of 8 percent per year. In addition, the Basic Rent can be increased based on reappraisal of the underlying property on the occurrence of certain events if those events occur prior to the regular reappraisal dates of April 19, 2020, and each twelfth year thereafter for the remainder of the lease term. The lease agreement calls for the payment of certain percentage rents based on revenues received from the subleasing of the Rincon One building. Percentage rents paid in 1992, 1991 and 1990 were $267,474, $271,388 and $221,454, respectively, and are included in ground rent expense. This lease has been accounted for as an operating lease, with minimum future lease payments of: 1993 $ 3,436,260 1994 3,436,260 1995 3,436,260 1996 3,436,260 1997 3,436,260 Thereafter 175,036,260 During 1990, Basic Rent relating only to those portions of Rincon Two under construction was capitalized. During 1992 and 1991, Basic Rent was not capitalized because the entire project was placed in service. At December 31, 1990, ground rent of $10,407,312 was capitalized. Under the provisions of the original lease, no lease payments were to be made from the inception of the lease (April 19, 1985) until April 18, 1987, and one-half of the regular monthly payment was due for the period from April 19, 1987, to April 18, 1988. However, as allowed by the lease agreement, the Partnership deferred the payment of Basic Rent until the initial occupancy date, February 8, 1988. At December 31, 1992 and 1991, the deferred Basic Rent and interest for the period April 19, 1987, to April 18, 1988, amount to $684,881 and $817,439, respectively, and are being paid in 120 monthly installments together with interest at a rate based on the average discount rates of 90-day U.S. Treasury bills, which was approximately 4.125 percent for the year ended December 31, 1992. The rate will be adjusted every 90 days as long as a balance is due on the deferred rent. The remaining deferred ground rent related to the free rent period amounted to $6,950,776 and $7,047,066 at December 31, 1992 and 1991, respectively, and is being amortized over the lease term. 6. CONSTRUCTION NOTES PAYABLE: Residential The residential portion of the Project is being financed with a $36,000,000 loan from the Redevelopment Agency of the City and County of San Francisco (the Agency), of which $34,600,000 and $35,100,000 was outstanding at December 31, 1992 and 1991, respectively. The Agency raised these funds through the issuance of Variable Rate Demand Multifamily Housing Revenue Bonds (Rincon Center Project) 1985 Issue B (the Bonds). The interest rate on the Bonds is variable at the rate required to produce a market value for the Bonds equal to their par value. At December 31, 1992, 1991 and 1990, the effective interest rate on the Bonds was 3.13 percent, 4.2 percent and 5.5 percent, respectively. Interest payments are to be made on the first business day of each March, June, September and December. The Partnership has the option to convert the Bonds to a fixed interest rate at any of the above interest payment dates. The fixed rate will be the rate required to produce a market value for the Bonds equal to their par value. After conversion to a fixed rate, interest payments must be made on each June 1 and December 1. The Partnership must repay the residential loan as the Bonds become due. The Bonds shall be redeemed in at least the minimum amounts set forth below: 1993 $ 500,000 1994 600,000 1995 600,000 1996 600,000 1997 700,000 Thereafter 31,600,000 The Bonds are due December 1, 2006. The Bonds are secured by an irrevocable letter of credit issued by Citibank in the name of the Partnership in the amount of approximately $36,200,000. In the event that drawings are made on the letter of credit, the Partnership has agreed to reimburse Citibank for such drawings pursuant to the terms of a Reimbursement Agreement. The Partnership obligations under the Reimbursement Agreement are secured by a deed of trust on the Project and the equity letters of credit and guarantees described below. Commercial The development and construction of the commercial portion of the Project is being financed pursuant to a Construction Loan Agreement between the Partnership and Citibank of which $28,849,475 and $27,990,000 was outstanding at December 31, 1992 and 1991, respectively. The loan, as is the irrevocable letter of credit supporting the residential bond, is secured by a deed of trust on the Project and equity letters of credit currently in the aggregate amount of $9,000,000, issued to Citibank by Bank of America, N.T. & S.A. on behalf of the general partners. PL&D has also provided a $3.5 million corporate guarantee to support the project financing. PGP and Perini Corporation, the parent company of PL&D, have agreed to reimburse Bank of America for any drawings under these letters of credit. An annual fee equal to prime plus 1 percent of the aggregate amount is due to PGP and PL&D for the use of these letters of credit. The loan is also secured by the guarantees described in Note 7. As of December 31, 1992 and 1991, $0 and $870,033, respectively, of accrued letter of credit fees were included in accrued interest due general partners in the accompanying balance sheet. The total fee in 1992, 1991 and 1990 was $908,733, $1,180,394 and $1,376,199, respectively. The loan matured on May 31, 1988, but was extended until May 31, 1993, for an additional fee of .5 percent of the maximum loan amount. The lender has indicated a willingness to renegotiate the loan at its maturity. Interest on the loan is generally at Citibank's base rate plus 1 percent, payable monthly. The Partnership has the option to convert the loan to a fixed rate of interest for a set period of time based upon the London Interbank Offered Rate (LIBOR) plus 1.5 percent at the time of the conversion. The interest rate shall be increased by .125 percent each year after the first two years of the extension period. At December 31, 1992, the Partnership had purchased an option to acquire an interest rate hedge for principal amounts totaling $46,500,000 at 11.5 percent until December 1993. The total fee paid of $51,000 is included in interest and letter of credit fees. Additionally, the Partnership obtained short-term financing to fund tenant improvements. The amount outstanding at December 31, 1992, was $774,134. This amount was due at December 31, 1992, but the bank agreed to extend the date to March 31, 1992, while the Partnership collected from the respective tenant. 7. RELATED PARTY TRANSACTIONS: PL&D has guaranteed the payment of both interest on the financing of the Project and operating deficits, if any. It has also guaranteed the master lease under the sale and operating lease-back transaction (Note 3). In accordance with the construction loan agreement (Note 6), the general partners have advanced monies to the Partnership to fund project costs. At December 31, 1992 and 1991, the general partners had advanced $76,982,587 and $71,347,415, respectively. The advances and accrued interest accrue interest at a rate of prime plus 2 percent. The related accrued interest liability of $27,432,445 and $21,291,563 as of December 31, 1992 and 1991, respectively is reflected in the accompanying balance sheet. For the years ended December 31, 1992, 1991 and 1990, interest expensed on partner advances was $6,140,883, $7,048,277 and $3,658,993, respectively. Effective January 1, 1988, PL&D retained Pacific Gateway Properties Management Corporation (PGPMC), a wholly owned subsidiary of PGP, to provide management and leasing services for the Project. As compensation for managing the facilities, the Partnership paid PGPMC a base management fee of $222,000 annually until leasing the residential portion of the Project was completed. At such time, the compensation increased to $319,200 per year or, if greater, the sum of 3 percent of the first $13,000,000 of the annual gross receipts plus 2 percent of receipts in excess of the $13,000,000. The fees incurred for the years ended December 31, 1992, 1991 and 1990, were $485,306, $513,950 and $346,241, respectively, and were included in administrative and other expense in the accompanying statement of operations. At December 31, 1992 and 1991, $96,294 and $100,353, respectively, related to this fee had not been paid and is included in accounts payable and accrued liabilities. Additionally, the partnership reimburses PGPMC for certain payroll costs. SQUAW CREEK ASSOCIATES BALANCE SHEET MARCH 31, 1994 ALL DEPARTMENTS CONSOLIDATED ASSETS CURRENT ASSETS: CASH $ 327,581.84 ACCOUNTS RECEIVABLE 2,371,634.21 INVENTORIES 1,078,549.79 PREPAID ASSETS 886,886.38 LAND HELD FOR SALE 314,457.01 -------------- TOTAL CURRENT ASSETS 4,979,109.23 PROPERTIES AND EQUIPMENT - COST: LAND 2,001,823.54 LAND IMPROVEMENTS 39,701,908.32 BUILDINGS AND IMPROVEMENTS 63,591,248.32 FURN., FIXT. & EQUIP. - COST 23,314,880.13 PROPERTIES UNDER CONSTRUCTION 421,160.40 -------------- TOTAL PROP. AND EQUIP. - COST 129,033.020.71 ACCUMULATED DEPRECIATION: ACC. DEP. - LAND IMPROVEMENTS (4,440,773.62) ACC. DEP. BUILDINGS & IMPROV. (3,764,788.21) ACC. DEP. - F, F, & E. (7,081,718.68) -------------- TOTAL ACCUMULATED DEPRECIATION (15,287.280.51) OTHER ASSETS - NET: OTHER ASSETS - GROSS 6,780,624.90 ACC. AMORT. - OTHER ASSETS (4,587,036.54) -------------- TOTAL OTHER ASSETS - NET 2,193,588.36 --------------- TOTAL ASSETS $120,916,437.79 =============== LIABILITIES AND CAPITAL CURRENT LIABILITIES: ACCOUNTS PAYABLE AND ACCRUALS $ 4,727,353.48 OTHER LIABILITIES - CURRENT 451,223.25 INTEREST PAYABLE - CURRENT 226,593.36 --------------- TOTAL CURRENT LIABILITIES 5,405,170.09 NON-CURRENT LIABILITIES: N/P - BANK OF AMERICA LOAN 48,013,422.86 N/P - GPH JUNIOR LOAN 14,931,327.00 I/P - GPH JUNIOR LOAN 4,921,622.52 --------------- TOTAL NON-CURRENT LIABILITIES 67,866,372.38 --------------- TOTAL LIABILITIES 73,271,542.47 PARTNERS CAPITAL CAPITAL ACCOUNTS: GLENCO - PERINI - HCV 63,090,864.86 PACIFIC SQUAW CREEK, INC. 33,270,026.85 --------------- CAPITAL ACCOUNTS 96,360,891.71 RETAINED EARNINGS - PRIOR YEAR (47,613,634.12) CURRENT YEAR P&L (1,102,362.27) ---------------- RETAINED EARNINGS (48,715,996.39) ---------------- PARTNERS CAPITAL 47,644,895.32 --------------- TOTAL LIABILITIES AND CAPITAL $120,916,437.79 =============== SQUAW CREEK ASSOCIATES INCOME STATEMENT ALL DEPARTMENTS CONSOLIDATED THREE MONTHS ENDED MARCH 31, 1994 --THIS YEAR-- --LAST YEAR-- --VARIANCE-- AMOUNT AMOUNT AMOUNT REVENUES: RESORT OPERATIONS $8,909,303.00 $9,032,880.00 $(123,577.00) HOMESITE SALES 0.00 175.000.00 (175,000.00) OTHER REVENUE 445.60 848.03 (402.43) ------------- ------------- ------------- TOTAL REVENUES 8,909,748.60 9,208,728.03 (298,979.43) ------------- ------------- ------------- COSTS AND EXPENSES RESORT OPERATIONS: DIR. COSTS AND EXP'S - 5,326,096.34 5,563,532.80 237,436.66 HOTEL SELLING, GENERAL & ADMIN. 1,673,116.50 1,791,269.00 118,152.50 FIXED HOTEL EXPENSES 385,470.38 21,526.00 (363,944.38) ------------- ------------- ------------- TOTAL RESORT 7,384,683.02 7,376,327.80 (8,355.22) OPERATIONS COST OF HOMESITES SOLD: COST OF HOMESITES SOLD 1,095.00 107,899.52 106,804.52 ------------- ------------- ------------ COST OF HOMESITES SOLD 1,095.00 107,899.52 106,804.52 OTHER GENERAL AND ADMIN.: OTHER GENERAL AND ADMIN. 135,394.01 111,168.33 (24,225.68) ------------- ------------- ------------- OTHER GENERAL AND 135,394.01 111,168.33 (24,225.68) ADMIN. ------------- ------------- ------------- NET OPERATING INCOME 1,388,576.57 1,613,332.38 (224,755.81) DEPRECIATION AND AMORTIZATION: DEPRECIATION EXPENSE 1,065,663.33 1,065,663.30 (0.03) AMORTIZATION EXPENSE 470,417.34 451,023.33 (19,394.01) ------------- -------------- ------------- TOTAL DEPRECIATION AND 1,536,080.67 1,516,686.63 (19,394.04) AMORT. INTEREST EXPENSE: INTEREST EXPENSE - B OF A 728,353.20 721,180.80 (7,172.40) LOAN INTEREST EXPENSE - GPW 226,504.97 224,275.00 (2,229.97) LOAN ------------- ------------- ------------- TOTAL INTEREST EXPENSE 954,858.17 945,455.80 (9,402.37) ------------- ------------- ------------- TOTAL COSTS AND 10,012,110.87 10,057,538.08 45,427.21 EXPENSES ------------- ------------- ------------- TOTAL INCOME/(LOSS) (1,102,362.27) (848,810.05) (253,552.22) ============== ============== ============= Squaw Creek Associates (a California general partnership) Financial Statements and Additional Information December 31, 1993 and 1992 Squaw Creek Associates (a California general partnership) Index to Financial Statements December 31, 1993 and 1992 Page Financial Statements with Standard Report Report of Independent Accountants 1 Financial Statements 2-6 Notes to Financial Statements 7-13 Additional Information Report of Independent Accountants on Additional Information14 Details of Cumulative Preferred Returns 15 Comparison of Resort Operations Revenues and Expenses to Annual Operating Plan 16-19 Schedule of Cash Flows Used in Operating Activities - Excluding Homesite Operations 20 Schedule of Changes in Partners' Capital 21 Report of Independent Accountants February 22, 1994 To the General Partners of Squaw Creek Associates In our opinion, the accompanying balance sheet and the related statements of operations, of changes in partners' capital and of cash flows present fairly, in all material respects, the financial position of Squaw Creek Associates (a California general partnership) at December 31, 1993 and 1992, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we planthe consolidated financial statements included in this Form 10-K, and performhave issued our report thereon dated February 26, 1996. Our audits were made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The supplemental schedule listed in the accompanying index is the responsibility of the Company's management and is presented for purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits to obtain reasonable assurance about whetherof the basic financial statements and, in our opinion, fairly states, in all material respects, the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supportingdata required to be set forth therein in relation to the amounts and disclosures in thebasic financial statements assessingtaken as a whole. ARTHUR ANDERSEN LLP Boston, Massachusetts February 26, 1996 - 43 - SCHEDULE II PERINI CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS OF DOLLARS)
Additions ---------------------- Balance at Charged Charged to Deductions Balance Beginning to Costs Other from at End Description of Year & Expenses Accounts Reserves of Year - ----------- ---------- ---------- ---------- ---------- ------- Year Ended December 31, 1995 - ---------------------------- Reserve for doubtful accounts $ 351 $ - $ - $ - $ 351 ======= ======= ==== ====== ======= Reserve for depreciation on $ 3,698 $ 387 $ - $ 641 (1) $ 3,444 ======= ======= ==== ====== ======= real estate properties used in operations Reserve for real estate $11,471 $ - $ - $ 974 (2) $10,497 ======= ======= ==== ====== ======= investments Year Ended December 31, 1994 - ---------------------------- Reserve for doubtful accounts $ 351 $ - $ - $ - $ 351 ======= ======= ==== ====== ======= Reserve for depreciation on $ 3,637 $ 328 $ - $ 267 (2) $ 3,698 ======= ======= ==== ====== ======= real estate properties used in operations Reserve for real estate $20,838 $ - $ - $9,367 (2) $11,471 ======= ======= ==== ====== ======= investments Year Ended December 31, 1993 - ---------------------------- Reserve for doubtful accounts $ 351 $ - $ - $ - $ 351 ======= ======= ==== ====== ======= Reserve for depreciation on real estate properties used in operations $ 3,181 $ 920 $ - $ 464 (2) $ 3,637 ======= ======= ==== ====== ======= Reserve for real estate investments $29,968 $ - $ - $9,130 (2) $20,838 ======= ======= ==== ====== =======
(1) Represents reserve reclassed with related asset to "Real estate inventory". (2) Represents sales of real estate properties. - 44 - EXHIBIT INDEX The following designated exhibits are, as indicated below, either filed herewith or have heretofore been filed with the accounting principles usedSecurities and significant estimates madeExchange Commission under the Securities Act of 1933 or the Securities Act of 1934 and are referred to and incorporated herein by management,reference to such filings. Exhibit 3. Articles of Incorporation and evaluatingBy-laws Incorporated herein by reference: 3.1 Restated Articles of Organization - As amended through July 7, 1994 - Exhibit 3.1 to 1994 Form 10-K, as filed. 3.2 By-laws - As amended through September 14, 1990 - Exhibit 3.2 to 1991 Form 10-K, as filed. Exhibit 4. Instruments Defining the overall financial statement presentation. We believe that our audits provideRights of Security Holders, Including Indentures Incorporated herein by reference: 4.1 Certificate of Vote of Directors Establishing a reasonable basisSeries of a Class of Stock determining the relative rights and preferences of the $21.25 Convertible Exchangeable Preferred Stock - Exhibit 4(a) to Amendment No. 1 to Form S-2 Registration Statement filed June 19, 1987; SEC Registration No. 33-14434. 4.2 Form of Deposit Agreement, including form of Depositary Receipt - Exhibit 4(b) to Amendment No. 1 to Form S-2 Registration Statement filed June 19, 1987; SEC Registration No. 33-14434. 4.3 Form of Indenture with respect to the 8 1/2% Convertible Subordinated Debentures Due June 15, 2012, including form of Debenture - Exhibit 4(c) to Amendment No. 1 to Form S-2 Registration Statement filed June 19, 1987; SEC Registration No. 33-14434. 4.4 Shareholder Rights Agreement and Certificate of Vote of Directors adopting a Shareholders Rights Plan providing for the opinion expressed above. The Partnership has inissuance of a Series A Junior Participating Cumulative Preferred Stock purchase rights as a dividend to all shareholders of record on October 6, 1988, as amended and restated as of May 17, 1990 - filed herewith. Exhibit 10. Material Contracts Incorporated herein by reference: 10.1 1982 Stock Option and Long Term Performance Incentive Plan - Exhibit A to Registrant's Proxy Statement for Annual Meeting of Stockholders dated April 15, 1992. 10.2 Perini Corporation Amended and Restated General Incentive Compensation Plan - Exhibit 10.2 to 1991 Form 10-K, as filed. 10.3 Perini Corporation Amended and Restated Construction Business Unit Incentive Compensation Plan - Exhibit 10.3 to 1991 Form 10-K, as filed. 10.4 $125 million Credit Agreement dated as of December 6, 1994 among Perini Corporation, the past relied upon,Banks listed herein, Morgan Guaranty Trust Company of New York, as Agent, and will continueShawmut Bank, N.A., Co-Agent Exhibit 10.4 to rely upon, cash provided by partner contributions to service operating cash shortfalls. Squaw Creek Associates (a California general partnership) Balance Sheet December 31, 1993 1992 Assets Current assets: Cash $ 454,395 $ 441,170 Accounts receivable1994 Form 10-K, as filed. - trade 838,554 1,038,319 Accounts receivable45 - other 660,821 375,649 Inventories 1,159,113 1,153,658 Prepaid expenses 652,009 486,347 Land held for sale 314,457 399,775 ------------ ------------ Total current assets 4,079,349 3,894,918 Property and equipment, net 114,117,662 117,699,950 Deferred expenses, net 2,552,040 3,985,846 Deposit for land purchase 375,000 - ------------ ------------ Total assets $121,124,051 $125,580,714 Liabilities and partners' capital Current liabilities: Trade and other accounts payable $ 3,399,876 $ 4,078,590 Construction payables 65,974 101,547 Due to affiliates 10,818 101,813 Customer advance deposits 730,187 850,827 Current portionEXHIBIT INDEX (Continued) 10.5 Amendment No. 1 as of obligations under capital leases 470,970 348,452 ------------ ------------ Total current liabilities 4,677,825 5,481,229 Notes payable 48,013,423 48,013,423 Partner loan 14,931,327 14,931,327 Accrued interest on partner loan 4,695,118 3,783,235 Obligations under capital leases, less current portion 589,848 951,806 ------------ ------------ Total liabilities 72,907,541 73,161,020 Commitments (Note 8) Partners' capital 48,216,510 52,419,694 ------------ ------------ Total liabities and partners' capital $121,124,051 $125,580,714 ============ ============ See accompanying notes to financial statements. Squaw Creek Associates (a California general partnership) Statement of Operations For the Year Ended December 31 1993 1992 Revenue Resort operations $29,038,722 $ 22,126,014 Sales of homesites 177,967 3,718,690 ----------- ------------ 29,216,689 25,844,704 ----------- ------------ Expenses Resort operations 20,919,792 19,741,176 Resort selling, general and administrative 6,224,580 6,826,032 Partnership selling, general and administrative 473,006 546,929 Cost of homesites sold, including selling and other expenses 111,696 2,215,547 Legal settlement - 1,723,158 ----------- ------------ 27,729,074 31,052,842 ----------- ------------ Income (loss) before depreciation, amortization and interest expense 1,487,615 (5,208,138) Depreciation and amortization 6,326,004 6,248,185 Interest expense 3,844,144 4,501,357 ------------ ------------ Net loss $(8,682,533) $(15,957,680) See accompanying notes to financial statements. Squaw Creek Associates (a California general partnership Statement of Changes in Partners' Capital Balance at December 31, 1991 $ 61,568,115 Contributions 14,657,060 Distributions (4,416,474) Reclassification (Note 1) (3,431,327) Net loss (15,957,680) ------------- Balance at December 31, 1992 52,419,694 Contributions 6,630,348 Distributions (2,150,999) Net loss (8,682,533) ------------- Balance at December 31, 1993 $ 48,216,510 ============ See accompanying notes to financial statements. Squaw Creek Associates (a California general partnership) Statement of Cash Flows For the year ended December 31, 1993 1992 Cash flows from operating activities Net loss $(8,682,533) $(15,957,680) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 6,326,004 6,248,185 Non-cash costs of homesites sold 85,318 1,796,487 Note receivable, homesites sold (87,500) - Changes in operating assets and liabilities: Accounts receivable and prepaid expenses (251,069) (529,593) Inventories (5,455) 410,349 Accounts payable and other liabilities (834,927) 1,367,535 Due to affiliates (90,995) (324,138) Accrued interest on partner loan 911,883 1,036,956 ------------ ------------- Net cash used in operating activities (2,629,274) (5,951,899) ------------ ------------- Cash flows from investing activities Additions to property and equipment (1,132,867) (1,848,602) Deposit for land purchase (375,000) - Deferred expenses - (662,149) ------------ ------------- Net cash used in investing activities (1,507,867) (2,510,751) ------------ ------------- Cash flows from financing activities Partner contributions 6,630,348 14,657,060 Partner distributions (2,063,499) (4,416,474) Repayment of note payable and obligations under capital leases (416,483) (1,996,238) ------------ ------------- Net cash provided by financing activities 4,150,366 8,244,348 ----------- ------------ Net increase (decrease) in cash 13,225 (218,302) Cash at beginning of year 441,170 659,472 ----------- ------------- Cash at end of year $ 454,395 $ 441,170 =========== ============ Supplemental disclosure of cash flow information Cash paid during the year for interest $ 3,141,989 $ 3,698,599 =========== ============ Supplemental disclosure of noncash investing and financing activities PursuantFebruary 26, 1996 to the second amendmentCredit Agreement dated as of December 6, 1994 among Perini Corporation, the Banks listed herein, Morgan Guaranty Trust Company of New York, as Agent, and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.), as Co- Agent - filed herewith. 10.6 Bridge Credit Agreement dated as of February 26, 1996 among Perini Corporation, the Bridge Banks listed herein, Morgan Guaranty Trust Company of New York, as Agent, and Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) as Co-Agent - filed herewith. Exhibit 22. Subsidiaries of Perini Corporation - filed herewith. Exhibit 23. Consent of Independent Public Accountants - filed herewith. Exhibit 24. Power of Attorney - filed herewith. Exhibit 27. Financial Data Schedule - filed herewith. - 46 - EXHIBIT 22 PERINI CORPORATION SUBSIDIARIES OF THE REGISTRANT Percentage of Interest or
Voting Name Place of Organization Securities Owned ---- --------------------- ---------------- Perini Corporation Massachusetts Perini Building Company, Inc. Arizona 100% Pioneer Construction, Inc. West Virginia 100% Perini Environmental Services, Inc. Delaware 100% International Construction Management Delaware 100% Services, Inc. Percon Constructors, Inc. Delaware 100% Perini International Corporation Massachusetts 100% Bow Leasing Company, Inc. New Hampshire 100% Perini Land & Development Company Massachusetts 100% Paramount Development Massachusetts 100% Associates, Inc. I-10 Industrial Park Developers Arizona General 80% Partnership Perini Resorts, Inc. California 100% Glenco-Perini - HCV Partners California Limited 45% Partnership Squaw Creek Associates California General 40% Partnership Perland Realty Associates, Inc. Florida 100% Rincon Center Associates California Limited 46% Partnership Perini Central Limited Partnership Arizona Limited 75% Partnership Perini Eagle Limited Partnership Arizona Limited 50% Partnership Perini/138 Joint Venture Georgia General 49% Partnership Perini/RSEA Partnership Georgia General 50% Partnership
- 47 - EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the Partnership agreement, during the year ended December 31, 1992, $3,431,327 was reclassified from partners' capital to partner loan (Notes 1 and 5). During the years ended December 31, 1993 and 1992, the Partnership executed lease arrangements which qualify for treatment as capital leases. Accordingly, the Partnership has recorded an asset under capital lease and related capital lease obligationuse of $177,043 and $311,060, respectively,our reports, dated February 26, 1996, included in Perini Corporation's Annual Report on this Form 10-K for the year ended December 31, 19931995, and 1992. Duringinto the year ended December 31, 1993,Company's previously filed Registration Statements Nos. 2-82117, 33-24646, 33-46961, 33-53190, 33-53192, 33-60654, 33- 70206, 33-52967 and 33-58519. ARTHUR ANDERSEN LLP Boston, Massachusetts March 26, 1996 - 48 - EXHIBIT 24 POWER OF ATTORNEY We, the Partnership distributed a note receivable worth $87,500undersigned, Directors of Perini Corporation, hereby severally constitute David B. Perini, John H. Schwarz and Richard E. Burnham, and each of them singly, our true and lawful attorneys, with full power to onethem and to each of its partners. 1. Organization Nature of Business Squaw Creek Associates, a California general partnership (the Partnership), was formed underthem to sign for us, and in our names in the provisions of a partnership agreement dated June 3, 1988 (the Agreement)capacities indicated below, any Annual Report on Form 10-K pursuant to own, develop and manage The Resort at Squaw Creek, a 405 room resort facility located in Olympic Valley, California (the Resort). The Resort was substantially complete on December 19, 1990 and commenced operations on that date. In addition, the Partnership has developed for sale 48 single family homesites on land surrounding the Resort. At December 31, 1993, 3 homesites remain unsold. Ownership During the year ended December 31, 1992, oneSection 13 or 15(d) of the general partnership interests was sold,Securities Exchange Act of 1934 to be filed with the Securities and the Agreement was amended. SubsequentExchange Commission and any and all amendments to said Annual Report on Form 10-K, hereby ratifying and confirming our signatures as they may be signed by our said Attorneys to said Annual Report on Form 10-K and to any and all amendments thereto and generally to do all such things in our names and behalf and in connectionour said capacities as will enable Perini Corporation to comply with this transaction, the Partnership successfully extended the maturity date of its note payable (Note 4). Currently, the Partnership is owned by Glenco-Perini-HCV (GPH), a California limited partnership (40%), and Pacific Squaw Creek, Inc. (PSC), a California corporation (60%). PSC serves as the managing partner and receives a management fee for services rendered to the Partnership based upon the results of operations, as defined in the amended Agreement. In conjunction with the change in ownership mentioned above, and under the provisions of the Securities Exchange Act of 1934, as amended, Agreement, certain modifications were made to the partners' capital accounts and the partner loan. As a result, the partner loan was increased by $3,431,327, the GPH capital account was decreased by the same amount and certain components of equity used to determine preferred returns were adjusted. 2. Accounting Policies Development costs Land acquisition costs and certain other development costs were incurred by affiliatesall requirements of the partners prior to the formation of the Partnership. These costs were assumed by GPH ($3,254,063)Securities and contributed to the Partnership as the initial capital contribution. The Partnership used the cost basis of the previous owners to record the landExchange Commission. WITNESS our hands and other development costs contributed. The Agreement assigned a value of $13,500,000 to the GPH contributions ($4,000,000 in cash and $9,500,000 attributable to the land) for the purpose of calculating certain preferred returns, as defined. Land development costs contributed to the Partnership and the cost incurred in connection with development of the Resort (including amenities) were capitalized and allocated to the related project components. Real estate taxes, insurance, general and administrative, marketing and interest expense were capitalized during the development period. No interest costs were capitalized during 1993 and 1992. Depreciation Depreciation is computed using the straight-line method over the estimated useful lives of the respective property (25 to 60 years) and equipment (5 to 12 years). For assets under capital lease, amortization is provided over the lesser of the estimated useful life of the asset or the lease term. Contributions The Agreement provides that funds required to support operation of the Resort in excess of funds available from operations must be provided by PSC and GPH in the form of additional capital contributions (Shortfall Contributions). The first $2,500,000 of Shortfall Contributions was the responsibility of GPH; all additional Shortfall Contributions require a 60% capital contribution by PSC and a 40% capital contribution by GPH. In addition, as defined in the Agreement, GPH is required to contribute cash necessary for the Partnership to make certain preferred return distributions to PSC. Allocation of profits and losses The Agreement provides that net profits of the Partnership are allocated to the partners in accordance with their respective percentage interests, after special allocations are made for depreciation and certain preferred returns, as defined. Net losses of the Partnership are allocated so as to entirely offset previous allocations of net profits and then as follows: $13,500,000 to GPH, to the extent of GPH's additional capital contributions (excluding Shortfall Contributions), then to GPH and PSC to the extent of their Shortfall Contributions and, thereafter, in accordance with the partners' respective interests. Distribution of cash flow Cash flow from operations and capital transactions are distributed to the partners in accordance with the Agreement. The Agreement provides that each of the partners are entitled to various preferred returns based upon specifically defined capital amounts. At December 31, 1993, PSC and GPH had cumulative preferred returns totaling $13,415,843 and $28,001,419, respectively. Inventories Inventories consist of food and beverage, apparel and other consumer products for retail sale at the Resort, and provisions (food and beverage and other incidentals) for use in Resort operations. Inventories are accounted forcommon seal on a first-in, first-out basis and are stated at the lower of cost or market. Inventories also include hotel supplies such as china, glassware, silver and other reusable items which are valued at original cost of the par stock purchased less a provision for normal use, damage and loss. All subsequent purchases of these items are expensed in the period purchased. Deferred expenses Costs incurred which relate to activities having future benefit to the Partnership are deferred. Deferred expenses principally include costs incurred in connection with bringing the Resort to full operational capacity. Such amounts are being amortized over a period of 60 months beginning at the date Resort operations commenced. Also included are deferred financing fees, which are amortized over the life of the related loan agreement. At December 31, 1993 and 1992, accumulated amortization totals $4,228,585 and $2,794,779, respectively. Land held for sale The Partnership has developed residential homesites on land adjacent to the Resort. Revenue from parcels sold is recognized at the time title passes to the buyer and full funding is received. Costs of parcels sold are based on an allocation of the cost of developing the parcels, determined using the ratio of each parcel's sales proceeds to the total expected sales proceeds for all parcels. The cost of developing the parcels includes certain marketing, selling, general and administrative and interest costs that were incurred during the development period. The Agreement provides that net proceeds from homesite sales be used to reduce the outstanding note payable balance and for remaining development costs. Deposit for land purchase The Partnership has cash that is held in escrow for the purchase of land located adjacent to the Resort (Note 8). Income taxes Consideration of income taxes is not necessary in the financial statements of the Partnership because, as a partnership, it is not subject to income tax and the tax effect of its activities accrues to the partners. 3. Property and Equipment Property and equipment consist of the following: 1993 1992 Land $ 1,574,202 $ 1,574,202 Land improvements 39,763,047 39,658,830 Buildings and improvement 63,376,837 62,935,293 Furniture, fixtures and equipment 21,211,236 20,765,426 Furniture, fixtures and equipment under capital lease 1,985,982 1,808,939 Construction in progress 507,546 381,075 ------------ ------------ 128,418,850 127,123,765 (14,301,188) (9,423,815) ------------- ------------- $114,117,662 $117,699,950 ============ ============ Certain of the above assets are pledged as security for the construction loan and the partner loan (Notes 4 and 5). Accumulated amortization on assets under capital lease totaled $1,060,923 and $639,286 at December 31, 1993 and 1992, respectively, and is included above. Related amortization expense for the years ended December 31, 1993 and 1992 totaled $421,637 and $332,985, respectively. 4. Note Payable The Partnership has outstanding a note payable relating to construction of the Resort and development of the homesites. Depending upon the form of the borrowing, interest is payable monthly at the applicable rate plus a margin of 1.25% for borrowings based on prime rate; a margin of 2.5% for borrowings based on the Eurodollar rate; or a margin of 2.625% for borrowings based upon the CD rate. The interest rate at December 31, 1993 and 1992 was 6%. During 1992, the note agreement was modified and extended through May 1, 1995. The note payable is secured by the Resort and remaining homesites, and by the assignment of certain agreements related principally to operation of the Resort. The terms of the loan agreement prohibit capital distributions from net operating cash flows of the Partnership until it is retired.set forth below. s/David B. Perini Land and Development Corporation (Perini), an affiliate of GPH, has provided a guarantee for $10,000,000 in outstanding principal and payment of unpaid interest on this loan. In addition, the partners have provided the lender with letters of credit totaling $4,000,000 at December 31, 1993 as guarantee of the related debt service obligation. 5. Partner Loan The Partnership has outstanding $14,931,327 in the form of a loan from GPH at December 31, 1993 and 1992. Under the terms of the Agreement, during the construction period the Partnership had the ability to borrow funds from GPH as necessary to pay for obligations arising from construction. The loan bears interest at the same rate of interest as due under the note payable discussed at Note 4. The loan and any accrued interest payable, except in certain circumstances described in the Agreement, will be repaid from positive cash flows from operations and has priority over other Partnership distributions of positive cash flows. The loan is secured by a second deed of trust on the Resort. Management has classified this loan and the related accrued interest as non-current liabilities since repayment of these amounts will not occur in 1994. Interest expense under the partner loan totaled $911,883 and $1,036,956 in 1993 and 1992, respectively. 6. Related Party Transactions The Partnership paid approximately $53,256 and $439,000 toDirector March 13, 1996 - ----------------- -------- -------------- David B. Perini and its affiliates during 1993 and 1992, respectively, for administrative services provided. During 1993, the Partnership incurred costs totalling $306,525 in connection with management services provided by PSC under the terms of the Agreement and the related amendment. In 1992, the Partnership incurred costs totaling $130,000 and $99,962 in connection with management services provided by GPH and PSC, respectively. During 1992, the Partnership entered into certain subleases for equipment withDate s/Joseph R. Perini and its parent corporation,Director March 13, 1996 - ------------------ -------- -------------- Joseph R. Perini Corporation. Under the sublease arrangements, the Partnership pays approximately $102,000 annually relating to leases which expire in 1996. 7. Resort Management Agreement The Resort is managed by Benchmark Management Company (BMC) under an agreement that provides for fees based upon the Resort's operating results. A total of $651,648 and $648,700 was paid to BMC for management services in 1993 and 1992, respectively. During 1992 the agreement with BMC was amended to allow for certain reductions in the management fee based on specified performance factors. As a result, the Partnership is owed approximately $555,200 and $325,000 by BMC for fee reductions at December 31, 1993 and 1992, respectively. 8. Commitments The Partnership has entered into various lease agreements for land, buildings and equipment. The lease terms are primarily for one or two year periods except as follows:Date s/Richard J. Boushka Director March 13, 1996 - -------------------- -------- -------------- Richard J. Boushka Date s/Marshall M. Criser Director March 13, 1996 - -------------------- -------- -------------- Marshall M. Criser Date s/Thomas E. Dailey Director March 13, 1996 - At December 31, 1993 the Partnership had two separate ground lease agreements for approximately 24 acres of land in Olympic Valley, California. The primary use of the land is for the Resort's golf course. These agreements include escalation clauses that will increase the scheduled rents due beginning in 1992 based on increases in the Consumer Price Index. Subsequent to December 31, 1993, the Partnership completed the purchase, for $350,000, of the land subject to one of these ground leases (Note 2). Accordingly, this lease is not included in the schedule of future minimum lease payments below.------------------ -------- -------------- Thomas E. Dailey Date s/Albert A. Dorman Director March 13, 1996 - ------------------ -------- -------------- Albert A. Dorman Date s/Arthur J. Fox, Jr. Director March 13, 1996 - -------------------- -------- -------------- Arthur J. Fox, Jr. Date Director March 13, 1996 - An operating lease through May-------------------- -------- -------------- Nancy Hawthorne Date s/John J. McHale Director March 13, 1996 for storage facilities. - ---------------- -------- -------------- John J. McHale Date s/Jane E. Newman Director March 13, 1996 - ---------------- -------- -------------- Jane E. Newman Date s/Bart W. Perini Director March 13, 1996 - Various capital and operating leases for equipment. Rent expense for land, building and equipment was approximately $311,000 and $497,000 for 1993 and 1992, respectively. The future minimum lease payments for all leases existing at December 31, 1993 are as follows: Capital Operating Leases Leases 1994 $ 601,128 $ 217,644 1995 585,478 215,311 1996 59,524 183,342 1997 2,576 158,696 1998---------------- -------- -------------- Bart W. Perini Date - 126,546 Thereafter49 - 3,818,327 ----------- ---------- 1,248,706 $4,719,866 ========== Less amounts representing interest (187,888) ----------- Present value of obligations 1,060,818 Less current portion of obligations under capital leases (470,970) ----------- $ 589,848 =========== 9. Legal Settlement The Partnership, together with its partners and several affiliated entities, was a defendant in a lawsuit seeking damages for alleged malicious prosecution in connection with a lawsuit the Partnership brought against the Institute for Conservation Education, the Sierra Club and several individuals alleging breach of contract, among other things, relating to agreements between the parties. During 1992 and prior to the scheduled court date, the Partnership agreed to a settlement of this matter. The aggregate settlement amount was $2,250,000; legal and related costs incurred by the Partnership relating to this matter totaled $1,075,890. Of the total costs, $1,325,890 was covered by the insurance carriers of the Partnership and its legal counsel. The remaining amounts are the direct responsibility of the Partnership, and have been properly recorded in the accompanying financial statements. As of December 31, 1993, all amounts have been paid. Audited Financial Statements and Other Financial Information Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Years ended December 31, 1991 and 1990 with Report of Independent Auditors Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Audited Financial Statements and Other Financial Information Years ended December 31, 1991 and 1990 CONTENTS Report of Independent Auditors 1 Audited Financial Statements Balance Sheets 2 Statements of Revenue and Expenses 4 Statements of Changes in Partners' Capital 5 Statement of Cash Flows 6 Notes to Financial Statements 7 Other Financial Information Report of Independent Auditors on Other Financial Information 16 Details of Cumulative Preferred Return 17 Comparison of Resort Operations Revenue and Expenses to Annual Operating Plan 18 Schedules of Cash Flows used by Operating Activities Excluding Homesite Operations, Accrued Interest Payable - Affiliate and Initial Purchase of Provisions Inventories 22 Schedule of Changes in Partners' Capital 23 Report of Independent Auditors The General Partners Squaw Creek Associates We have audited the accompanying balance sheets of Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) as of December 31, 1991 and 1990 and the related statements of revenue and expenses, changes in partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conduct 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 financial position of Squaw Creek Associates at December 31, 1991 and 1990, and the results of its operations and cash flows for the years then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that Squaw Creek Associates will continue as a going concern. As discussed in Note 1 to the financial statements, the Partnership has sustained operating cash flow deficits and operating losses and has been unable to reach agreement with its lender regarding terms of an extension of its note payable that was due on August 1, 1991. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In addition, recovery of the Partnership's investment in the Resort is dependent upon the Resort's ability to generate profits from operations and/or from disposition of the property, the achievement of which cannot be determined at this time. As discussed in Note 4 to the financial statements, in December 1990 the Partnership became a defendant in a lawsuit alleging malicious prosecution, among other claims, in connection with a lawsuit brought by the Partnership against a third party. The Partnership denies all liability and is vigorously defending against these claims. The ultimate outcome of this litigation cannot be determined. Accordingly, no provision for any liability that may result has been made in the financial statements. February 22, 1992 Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Balance Sheets December 31 1991 1990 Assets Current assets: Cash $ 659,472 $ 1,244,128 Accounts receivable: Trade 754,559 433,237 Other 202,971 177,688 ------------ ------------ 957,530 610,925 Inventories: Inventories - retail 676,214 397,170 Inventories - provisions 383,543 268,023 Hotel supplies 504,250 759,000 ------------ ------------ 1,564,007 1,424,193 Prepaid expenses 413,192 215,205 Land held for sale 2,196,262 3,528,103 ------------ ------------ Total current assets 5,790,463 7,022,554 Property and equipment, at cost: Land 925,397 925,397 Land improvements 29,696,458 24,188,117 Buildings and improvements 66,014,868 64,541,702 Furniture, fixtures and equipment 28,877,507 27,416,383 ------------ ------------ 125,514,230 117,071,599 Accumulated depreciation 4,690,428 80,640 ------------ ------------ 120,823,802 116,990,959 Deferred expenses (net of accumulated amortization of $1,518,154 and $0 at December 31, 1991 and 1990, respectively) 4,649,505 80,640 ------------ ------------ Total assets $131,263,770 $130,205,714 ============ ============ December 31 1991 1990 Liabilities and Partners' Capital Current Liabilities: Accounts payable: Construction $ 204,762 $ 10,274,938 Trade or other 3,561,882 2,220,323 Retainage payable 100,332 1,836,654 Due to affiliates 425,951 396,305 ------------ ------------ 4,292,927 14,728,220 Current portion of obligations under capital leases 457,619 256,000 Note payable 49,715,159 43,766,924 ------------ ------------ Total current liabilities 54,465,705 58,751,144 Obligations under capital leases, net of current portion 983,671 1,193,497 Accrued interest payable - affiliate 2,746,279 1,653,072 Loan payable - affiliate 11,500,000 11,500,000 ------------ ------------ Total liabilities 69,695,655 73,097,713 Partners' capital 61,568,115 57,108,001 ------------ ------------ Total liabilities and partners' $131,263,770 $130,205,714 capital ============ ============ See accompanying notes. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Statements of Revenue and Expenses Year ended December 31 1991 1990 Revenue: Resort operations $ 13,055,986 $ 787,800 Sales of homesites 2,742,833 2,305,000 ------------ ---------- 15,798,819 3,092,800 Costs and expenses: Resort operations: Direct costs and expenses 13,042,821 916,052 Selling, general and administrative expenses 10,288,443 646,168 Fixed expenses 817,661 62,814 Cost of homesites sold, including selling 2,246,386 1,369,708 and other expenses Depreciation and amortization 6,180,161 10,320 Interest expense 6,264,624 200,628 ------------ ---------- 38,840,096 3,205,690 ------------ ---------- Net loss $(23,041,277) $ (112,890) ============= =========== See accompanying notes. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Statements of Changes in Partners' Capital Partners' capital at December 31, 1989 $34,054,063 Additional capital contributions 23,166,828 Net loss (112,890) ------------ Partners' capital at December 31, 1990 57,108,001 Additional capital contributions 27,501,391 Net loss (23,041,277) ------------ Partners' capital at December 31, 1991 $61,568,115 =========== See accompanying notes. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Statements of Cash Flows Year ended December 31, 1991 1990 Operating activities Net loss $(23,041,277) $ (112,890) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization expense 6,180,161 10,320 Cost of homesites sold related to land and development costs 1,455,933 1,020,701 Increase in accrued interest payable to affiliate 1,093,207 1,173,252 Changes in operating assets and liabilities: Accounts receivable and prepaid expenses (544,592) (826,130) Inventories - retail (279,044) (397,170) Inventories - provisions (115,520) (268,023) Hotel supplies 254,750 (759,000) Accounts payable - trade and other 1,341,559 2,220,323 Due to affiliates - current 29,646 79,272 ------------ ------------ Net cash (used in) provided by operating activities (13,625,177) 2,140,655 Investing activities Additions to property, equipment and deferred expenses (8,307,348) (72,496,868) (Decrease) increase in construction accounts and retainage payable (11,806,498) 2,706,647 ------------- ----------- Net cash used in investing activities (20,113,846) (69,790,221) Financing activities Proceeds from loan payable - affiliate - 2,504,357 Proceeds from partners' capital contributions 27,501,391 23,166,828 Proceeds from note payable 7,068,806 44,053,145 Repayment of note payable and obligations under capital leases (1,415,830) (873,161) ------------- ------------ Net cash provided by financing activities 33,154,367 68,851,169 ------------- ----------- Net (decrease) increase in cash (584,656) 1,201,603 Cash at beginning of year 1,244,128 42,525 ------------- ----------- Cash at end of year $ 659,472 $ 1,244,128 ============ =========== Supplemental cash flow disclosures: Cash paid for interest $ 4,862,870 $ 159,000 ============ =========== See accompanying notes. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements December 31, 1991 and 1990 1. Accounting Policies Nature of Business Squaw Creek Associates (the Partnership) is a California general partnership formed through the Partnership Agreement (Agreement) dated June 3, 1988 to own, develop and manage a resort located in Placer County, California (the Resort). The Resort was substantially complete on December 19, 1990 and commenced operations on that date. Homesite sales activities commenced in 1990, with the first title closing occurring in September 1990. Revenue and expenses for the year ended December 31, 1990 are presented for the period subsequent to August 1990 for homesite sales and for the period subsequent to December 18, 1990 for Resort operations. The Partnership is owned by Glenco- Perini-HCV Partners (GPH), a California limited partnership, and Squaw Creek Investors Corporation (SCIC). GPH, a partnership owned by Glenco-Squaw Associates, Perini Resorts, Inc., and HCV Pacific Investors III, serves as a managing partner through its general partner, Perini Resorts, Inc., a wholly owned subsidiary of Perini Land & Development Company (Perini) which is a wholly owned subsidiary of Perini Corporation. GPH receives a management fee for services rendered to the Partnership based upon the results of operations as defined in the Agreement. The Partnership experienced operating cash flow deficits and operating losses in 1991. Additionally, the Partnership has been unable to reach agreement with its lender regarding terms of an extension of its note payable that was due on August 1, 1991. The Partnership has been unable to obtain other permanent financing and could be required to repay the outstanding loan if called by the lender. The Partnership has implemented plans to improve operating performance and has had ongoing discussions with its lender regarding its capital situation. The Partnership's financial condition and its inability to extend or to secure permanent financing raise substantial doubt regarding the Partnership's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. In addition, recovery of the Partnership's investment in the Resort is dependent upon its ability to generate profits from operations and/or from disposition of the property, the achievement of which cannot be determined at this time. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 1. Accounting Policies (continued) Development Costs Land acquisition costs and certain other development costs were incurred by Glenco-Squaw Associates and Perini prior to the formation of the Partnership. These costs were assumed by GPH ($3,254,063) and contributed to the Partnership as the initial capital contribution. The Partnership used the cost basis of the previous owners to record the land and other development costs contributed. The Agreement assigned to contribution value to the GPH contributions of $13,500,000 (consisting of $4,000,000 in cash equity and $9,500,000 in land equity) for the purpose of calculating certain preferred returns (see Note 2 for further discussion). SCIC's initial contribution was $8,312,981. Land development costs contributed to the Partnership and the cost incurred by the Partnership for developing the Resort (including amenities) are allocated to the related Project components. Real estate taxes, insurance, general and administrative, marketing and interest expense were capitalized during the development period. Interest cost capitalized amounted to $3,025,994 in 1990. No interest costs were capitalized in 1991. Contributions The Agreement provides that funds needed to operate the Resort in excess of funds available from the Resort's operations (cash shortfall) must be provided by SCIC and GPH in the form of additional capital contributions. The first $2,500,000 of cash shortfall was the responsibility of GPH with all additional cash shortfall contributions requiring a 60% capital contribution by SCIC and a 40% capital contribution by GPH. Starting in November 1991, SCIC has not made its required contributions under the cash shortfall provisions of the Agreement. Consequently, GPH has made the necessary contributions to fund all operating cash shortfalls, including amounts not funded by SCIC, under the default contribution provisions of the Agreement. The Agreement provides that in the event of default, the defaulting partner loses certain partnership rights, authorities and other distribution priorities. SCIC disputes that its actions and failure to fund its share of the cash shortfalls has resulted in its default. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 1. Accounting Policies (continued) Distribution of Cash Flows and Profits and Losses Operating cash flow, as defined by the Agreement, principally consists of net cash generated from operations of the Resort less interest and principal paid by the Partnership for indebtedness (excluding indebtedness and interest due to affiliate). Distributable cash flow, as defined by the Agreement, principally consists of operating cash flow and proceeds from capital transactions; however, if the operating cash flow after December 31, 1991 is insufficient to permit the payment of SCIC's 9% preferred return, GPH is to contribute the deficiency to the Partnership, thereby increasing distributable cash flow. The Agreement generally provides that distributable cash flows are shared by the partners in accordance with their respective percentage interests after repayment of: default contributions; the outstanding interest and principal of GPH's (affiliate) loans to the Partnership; the unpaid SCIC 9% preferred returns (see Note 2 for further discussion); and, the partners' additional capital contributions resulting from operating cash shortfalls and after repayment of certain other preferred returns and related contributions to capital by the partners (see Note 2 for further discussion). The Agreement generally provides that the net profits of the Partnership are allocated to the partners in accordance with their respective percentage interests after allocations are made for certain preferred returns (see Note 2 for further discussion). Net losses of the Partnership are generally allocated so as to entirely offset previous allocations of allocated net profits and then as follows: $13,500,000 to GPH, to the extent of GPH's additional capital contributions (excluding operating shortfall contribution amounts), to the extent of GPH's and SCIC's operating shortfall contribution amounts, and thereafter, in accordance with the partners' respective interests. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 1. Accounting Policies (continued) Capital Transactions Capital transactions, as defined by the Agreement, principally consist of dispositions of any of the Partnership assets other than through the ordinary course of business of the Resort and the net proceeds from refinancing or financing the indebtedness of the Partnership. The Agreement generally provides that the proceeds from capital transactions are distributed as other cash proceeds except that the distributions for the partners' unpaid preferred returns and related capital contribution amounts are performed in a different priority. Inventories Inventories consist of food and beverage, apparel and other consumer products for retail sale or rental to the Resort's patrons and provisions (food and beverage and other incidentals) for use in the Resort's operations. Retail, rental and provisions inventories are stated at the lower of cost (first-in, first-out method) or market. Hotel supplies consist of china, glassware, silver and other reusable items and are valued at the original cost of the par stock purchased less a provision for normal use, damage and loss. All subsequent purchases of hotel supplies are expensed in the period purchased. Deferred Expenses Costs which are incurred and which relate to activities having future benefit to the Partnership are deferred. Deferred expenses principally include costs associated with bringing the Resort to full operational capacity. Deferred expenses are being amortized over 60 months beginning in January 1991, the first full month subsequent to the date that Resort operations commenced. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 1. Accounting Policies (continued) Land Held for Sale The Partnership has developed residential homesites in conjunction with the development of the Resort. Revenue from the parcels sold is recognized at the time title passes to the buyer and full funding is received. The costs for parcels sold are based on the allocation of the costs of developing the parcels as determined using the ratio of each parcel's sales proceeds to the total expected sales proceeds for all parcels. The cost of developing the parcels includes certain marketing, selling, general and administrative and interest costs that were incurred during the development period. The Agreement calls for the net proceeds from the homesite sales to be used to reduce the outstanding note payable balance and the development costs. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective property (25 to 60 years) and equipment (5 to 12 years). For leased equipment, amortization is provided using the lesser of the estimated useful life or the lease term. The Partnership uses the mid-month convention whereby property and equipment placed in service on or before the fifteenth day of the month will be depreciated for the full month with no depreciation provided for property and equipment placed in service after the fifteenth day of the month. Income Taxes The Partnership is not subject to taxes on its income. Federal and state income tax regulations provide that the items of income, gain, loss, deduction, credit and tax preference of the Partnership are reportable by the partners in their income tax returns. Accordingly, no provision for income taxes has been made in these financial statements. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 2. Cumulative Preferred Return Under the terms of the Agreement, SCIC and GPH will receive cumulative preferred returns. SCIC's return is based upon 9% and 3% (noncompounded) returns on its adjusted contribution amount and a 12% return on its adjusted shortfall contribution amount, as defined in the Agreement. The total cumulative preferred return of SCIC amounted to approximately $7,950,000 for the period July 25, 1988 through December 31, 1991. GPH's return is based upon 12% and 9% (noncompounded) of its adjusted cash equity and adjusted phase I and phase II land equity amounts, respectively, 12% of the first $2,500,000 of its adjusted shortfall contribution amount and 24% of its adjusted default contribution amount as defined in the Agreement. The total cumulative preferred return of GPH amounted to approximately $12,104,000 for the period July 25, 1988 through December 31, 1991. Because there has been no net positive cash flows from operations, these amounts are unpaid at December 31, 1991. 3. Note Payable and Loan Payable - Affiliate The Partnership has a note payable relating to a construction loan agreement (loan agreement) that permits the Partnership to borrow funds as necessary to pay for project costs up to a maximum of $53,000,000. Depending upon the form of the borrowing, interest is payable monthly at the applicable rate plus: a margin of 1.25% for borrowings based on prime rate; a margin of 2.5% for borrowings based on the Eurodollar rate; or a margin of 2.625% for borrowings based upon the CD rate. The interest rate at December 31, 1991 was 7.75% (10.72% at December 31, 1990). The loan is secured by the Project and the assignment of certain agreements related to, among other things, the operation of the Project. Perini has guaranteed $10,000,000 of any outstanding principal balance, payment of unpaid interest and the lien free completion of the project. The loan was originally payable on August 1, 1991. The loan agreement permits the Partnership to extend the agreement through August 1, 1996. However, the Partnership has been unable to reach agreement with the lender as to the terms of extension. The Partnership is currently negotiating an extension to the loan agreement, and management believes it has performed its obligations under the loan agreement as if the loan had been extended. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 3. Notes Payable and Loan Payable - Affiliate (continued) The Partnership has an $11,500,000 loan payable to GPH, an affiliate, at December 31, 1991 and 1990. The Partnership, under the Agreement, has the ability to borrow funds from GPH as necessary (to the extent other funds are not available, as discussed in Note 1) to pay for obligations arising from construction. The loan bears interest at the same rate of interest as due under the note payable. The loan and any accrued interest payable, except in certain circumstances as described in the Agreement, will be repaid from positive cash flows from operations and has priority over the Partnership distributions of positive cash flows. Management has classified the note payable to affiliate (and related interest) as a long-term liability, as repayment of these amounts will not occur in 1992. 4. Commitments and Contingencies The partnership has entered into various lease agreements for land, buildings and equipment. The lease terms are primarily for one or two year periods except as follows: - - - The Partnership has two separate ground lease agreements for approximately 24 acres of land in Olympic Valley, California. The primary use of the land is for construction of the Resort's golf course. Under these agreements, the Partnership also leases ski lift equipment, two buildings and also receives certain rights to conduct snow skiing activities. These agreements contain rent escalation clauses that will increase the scheduled rents due beginning in 1992 based on increases in the consumer price index. An option under one of the lease agreements permits the Partnership to acquire a ten acre parcel for $2,900,000 before May 31, 1992, with a scheduled purchase price increase thereafter. - - - An operating lease through May 1996 for storage facilities. - - - Various capital and operating leases for equipment. Equipment accounted for as capital leases is recorded at the present value of future minimum rental payments and is included in the net book value of equipment at December 31, 1991 and 1990 in the amount of approximately $1,783,000 and $1,496,000, respectively. During 1991 and 1990, the Company acquired approximately $287,000 and $1,263,000, respectively, in equipment through lease financing. Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 4. Commitments and Contingencies (continued Rent expense for land, building and equipment was approximately $305,000 and $7,000 for 1991 and 1990, respectively. The future minimum lease payments for all leases are as follows: Capital Operating Leases Leases 1992 $ 504,824 $ 226,802 1993 474,283 206,833 1994 468,845 181,357 1995 442,132 177,773 1996 5,397 171,874 Thereafter - 3,295,145 ----------- ---------- 1,895,481 $4,259,784 ========== Amounts representing interest (454,191) ----------- Present value of obligations under capital 1,441,290 leases Less current portion of obligations under capital leases (457,619) ----------- $ 983,671 =========== The Partnership has recorded various other commitments under agreements with both third and related parties including the following: - - - An agreement to pay various amounts to a management company for services received based upon the results of Resort operations (approximately $376,000 in 1991 and $23,000 in 1990). - - - An agreement to pay various amounts to GPH for services received based upon the results of Resort operations and the gross sales of homesites (approximately $227,000 in 1991 and $79,000 in 1990). Squaw Creek Associates (a California general partnership) (dba The Resort at Squaw Creek) Notes to Financial Statements (continued) 4. Commitments and Contingencies (continued The Partnership is involved in litigation and various other legal matters which are being defended and handled in the ordinary course of business. Specifically, in December 1990, the Partnership, along with a number of related entities, including the partners of the Partnership, was named as a defendant in a lawsuit seeking damages for alleged malicious prosecution in connection with a lawsuit it brought against the Sierra Club alleging breach of contract, among other things, relating to certain agreements between the parties. The Partnership denies all liability and is vigorously defending against these claims. 5. Related Party Transactions The Partnership incurred approximately $1,111,000 and $1,774,000 in 1991 and 1990, respectively, for administrative, occupancy and management fees related to services provided by Perini. Perini has guaranteed to the Partnership, and to SCIC, the obligations of Perini Resorts, Inc., as the General Partner of GPH, including contributions of cash, under the shortfall contributions provision of the Agreement, and provision of certain services.