The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The significant accounting policies followed by the Company and its subsidiaries in preparing its consolidated financial statements are set forth in Note (1) to such financial statements included in Form 10-K for the year ended December 31, 2000. The Company has made no significant change in these policies during 2001.
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(3) Recapitalization (continued)
Concurrent with the closing of the Purchase and as a condition thereto, the Company exchanged 100% of its Redeemable Series B Cumulative Convertible Preferred Stock (the “Series B Preferred Stock”) (which had a current accreted face amount of approximately $41.2 million) for an aggregate of 7,490,417 shares of common stock at an exchange price of $5.50 per share (the “Exchange” and together with the Purchase, the “Transaction”).
A Special Committee of the Company’s Board of Directors approved the Transaction after receiving a fairness opinion from an investment banking firm. A majority of outstanding common shares, including a majority of shares held by disinterested shareholders, were voted in favor of the Transaction at a Special Meeting of Stockholders held on March 29, 2000.
In connection with the Transaction and as a condition thereto, the Company also entered into an Amended and Restated Credit Agreement with its lenders that extended the credit facility from January 2001 to January 2003 (see Note 4).
The effect of the Transaction on Stockholders’ Equity was to increase Stockholders’ Equity by approximately $76.2 million; $37.3 million from the Purchase (gross proceeds of $40.0 million less related capital expenses of $2.7 million) and $38.9 million from the Exchange (accreted value of $41.2 million less non-accreted capital expenses of $2.3 million).
(4) Long-term Debt
In conjunction with the recapitalization of the Company as described in Note 3, effective March 29, 2000, the Company entered into an Amended and Restated Credit Agreement (the “New Credit Agreement”) with its lenders that extended the credit facility from January 2001 to January 2003. The New Credit Agreement provides for a $35 million term loan (the “Term Loan”) and a $21 million revolving credit facility (the “Revolving Credit Facility”). The New Credit Agreement requires that the Company repay the Term Loan in quarterly installments through 2002 and the Revolving Credit Facility by January 21, 2003. Commitments under the New Credit Agreement have been reduced to $33.3 million as of September 30, 2001 as a result of scheduled Term Loan payments and proceeds from sales of certain real estate. In addition, on September 6, 2000, the Company completed a refinancing of its corporate headquarters building for $7.5 million at an annual interest rate of approximately 9%. The loan is payable in equal monthly installments of $67,300 over a ten year period, with a balloon payment of $5.3 million due in 2010.
(5) Provision For Income Taxes
The (provision) credit for income taxes reflects a lower-than-normal tax rate in both 2001 and 2000 due primarily to the realization of a portion of the federal tax benefit not recognized in prior years due to certain accounting limitations. In addition, the credit for income taxes for the nine months ended September 30, 2000 reflects the reversal of foreign taxes accrued in prior years that were no longer required.
(6) Per Share Data
Computations of basic and diluted earnings per common share (“EPS”) amounts are based on the weighted average number of the Company’s common shares outstanding during the periods presented. The actual basic and diluted EPS for the three and nine month periods ended
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(6) Per Share Data (continued)
September 30, 2001 and 2000 and the pro forma basic and diluted EPS for the nine months ended September 30, 2000, assuming the Transaction described in Note 3 closed on January 1, 2000, are calculated as follows (in thousands, except per share amounts):
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------ -----------------------------------------
2001 2000 2001 2000 2000
Actual Actual Actual Pro Forma Actual
---------- --------- ---------- ------------ ----------
Net Income $ 5,843 $ 5,938 $ 20,022 $ 17,020 $ 17,020
---------- --------- ---------- ------------ ----------
Less:
- - Accrued dividends on $21.25 Preferred Stock $ (532) $ (532) $ (1,594) $ (1,594) $ (1,594)
- - Dividends declared on Series B Preferred Stock - - - - (a) (1,161)
- - Accretion deduction required to reinstate mandatory
redemption value of Series B Preferred Stock over a
period of 8-10 years - - - - (a) (96)
Plus - Interest Expense - - - 863 (b) -
---------- --------- ---------- ------------ ----------
$ (532) $ (532) $ (1,594) $ (731) $ (2,851)
---------- --------- ---------- ------------ ----------
Total Available for Common Stockholders $ 5,311 $ 5,406 $ 18,428 $ 16,289 $ 14,169
========== ========= ========== ============ ==========
Weighted average shares outstanding for basic EPS 22,641 22,584 22,610 22,584 (c) 17,156
Effect of dilutive stock options outstanding 1,108 (d) 16 (e) 774 (d) - 5 (e)
---------- --------- ---------- ------------ ----------
Weighted average shares outstanding for diluted EPS 23,749 22,600 23,384 22,584 17,161
Basic earnings per Common Share $ 0.23 $ 0.24 $ 0.82 $ 0.72 $ 0.83
========== ========= ========== ============ ==========
Diluted earnings per Common Share $ 0.22 $ 0.24 $ 0.79 $ 0.72 $ 0.83
========== ========= ========== ============ ==========
(a) For pro forma purposes it is assumed that the Series B Preferred Stock was exchanged for shares of Common Stock as of January 1, 2000. Therefore, the deduction of $1,161 for dividends declared on the Series B Preferred Stock and the deduction of $96 for accretion applicable to the Series B Preferred Stock are not required when calculating the pro forma earnings per share for the nine months ended September 30, 2000.
(b) The pro forma adjustment reducing interest expense by $863 is based on the assumption that the net cash proceeds of $37.3 million ($40 million less estimated related expenses of $2.7 million) received from the New Investors was used to reduce debt under the Company's Revolving Credit Facility as of January 1, 2000 based on the average effective borrowing rate of 9.25% experienced during the first three months of 2000.
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(6) Per Share Data (continued)
(c) Adjusted to give effect to (i) the sale of 9,411,765 shares of Common Stock to the New Investors and (ii) the exchange of the Series B Preferred Stock (which had a current accreted face amount of $41,197) for 7,490,417 shares of Common Stock assuming the Transaction closed on January 1, 2000.
(d) Options to purchase 574,000 shares of Common Stock at prices ranging from $8.10 to $16.44 per share were outstanding at September 30, 2001 but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the Common Stock. In addition, the effect of the assumed conversion of the Company's $21.25 Preferred Stock and stock purchase warrants into Common Stock is antidilutive.
(e) Options to purchase 3,326,500 shares of Common Stock at prices ranging from $4.50 to $16.44 per share were outstanding at September 30, 2000 but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the Common Stock. In addition, the effect of the assumed conversion of the Company's $21.25 Preferred Stock and stock purchase warrants into Common Stock is antidilutive.
(7) Dividends
(a) Common Stock - There were no cash dividends on common stock declared or paid during the periods presented in the consolidated condensed financial statements presented herein.
(b) $21.25 Preferred Stock - As previously disclosed, in conjunction with the covenants of the Company's current and prior Credit Agreements, the Company was required to suspend the payment of quarterly dividends on its $21.25 Preferred Stock ("Preferred Stock") until certain financial criteria were met. Therefore, the dividends on the Preferred Stock have not been declared since 1995 (although they have been fully accrued due to the "cumulative" feature of the Preferred Stock). The aggregate amount of dividends in arrears is approximately $12,749,000 at September 30, 2001 which represents approximately $127.49 per share of Preferred Stock or approximately $12.75 per Depositary Share and is included in "Other Long-term Liabilities" in the accompanying Consolidated Condensed Balance Sheets. Under the terms of the Preferred Stock, the holders of the Depositary Shares were entitled to elect two additional Directors since dividends had been deferred for more than six quarters and they did so at each of the last four Annual Meetings of Stockholders.
Although these bank restrictions were satisfied as of December 31, 2000 and may not apply in the future, the Board of Directors does not believe that it is proper or prudent to pay or commit to pay dividends on the Preferred Stock (or the Common Stock) for the foreseeable future based on the Company's other working capital requirements. See additional comments under "Financial Condition" on page 14 herein.
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(7) Dividends (continued)
(c) Series B Preferred Stock - Quarterly In-kind dividends (based on an annual rate of 10%) were paid on March 15, 2000 on the Series B Preferred Stock to the stockholders of record on March 1, 2000. The dividends were paid in the form of approximately 5,004 additional shares of Series B Preferred Stock valued at $200.00 per share for a total of $1,000,918. In addition, accrued in-kind dividends were paid on the Series B Preferred Stock for the 14-day period from March 16, 2000 through March 29, 2000, the date on which the holders of the Series B Preferred Stock exchanged 100% of their shares of Series B Preferred Stock for shares of the Company's Common Stock (see Note 3). The dividends were paid in the form of approximately 798 additional shares of Series B Preferred Stock valued at $200.00 per share for a total of $159,621.
(8) Discontinued Operations
Effective June 30, 1999, management adopted a plan to withdraw completely from the real estate development business and to wind down the operations of Perini Land and Development Company ("PL&D"), the Company's real estate development subsidiary. Therefore, both historical and current real estate results have been presented as a discontinued operation in accordance with accounting principles generally accepted in the United States.
The Company had a reasonable expectation that the plan, when adopted, could be executed within a twelve-month period. Although more than 90% of the plan was successfully executed by December 31, 2000, the plan was not entirely completed because potential buyers who had executed purchase and sale agreements with the Company withdrew from the purchase of two properties, namely the bulk sale of all of the Massachusetts properties and the sale of the Perini Central property in Phoenix, Arizona. In addition, a program to pursue the bulk sale of the Sabino Springs property in Tucson, Arizona has been unsuccessful to date. When the initially anticipated bulk sales of certain properties did not materialize, the Company adopted a dual strategy of selling individual projects or parcels while continuing to pursue a bulk sale of the remaining properties. In the first nine months of 2001, the Company completed the sales of a property in Wareham, Massachusetts, two parcels in Raynham, Massachusetts, and the Perini Central property in Phoenix, Arizona. Remaining properties to be sold include certain parcels in Raynham, Massachusetts and the Sabino Springs property in Tucson, Arizona. These properties are actively being marketed for sale as individual parcels or as a bulk sale. In the absence of a bulk sale, and with a potential prolonged slowdown in the United States economy, the Company currently estimates that sales of these remaining properties will be concluded sometime during the next 36 to 48 months.
At September 30, 2001 and December 31, 2000, the net current assets of discontinued real estate development operations consisted primarily of real estate properties for sale. The revenues related to discontinued real estate operations are summarized below (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2001 2000 2001 2000
---- ---- ---- ----
Revenues $953 $ 1,380 $1,936 $ 2,334
========== ========== ========== ==========
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
(9) Business Segments
The following tables set forth certain updated business segment information relating to the Company’s operations for the three month and nine month periods ended September 30, 2001 and 2000 (in thousands):
Nine months ended September 30, 2001
Reportable Segments
----------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------- -------------- ------------ ----------------
Revenues $937,581 $ 253,295 $ 1,190,876 $ - $ 1,190,876
Income from Operations $ 25,456 $ 1,083 $ 26,539 $ (3,992) * $ 22,547
Assets $196,624 $ 154,034 $ 350,658 $ 40,937 ** $ 391,595
Nine months ended September 30, 2000
Reportable Segments
----------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------- -------------- ------------ ----------------
Revenues $548,898 $ 210,943 $ 759,841 $ - $ 759,841
Income from Operations $ 21,440 $ 1,546 $ 22,986 $ (3,904) * $ 19,082
Assets $132,885 $ 132,553 $ 265,438 $ 52,828 ** $ 318,266
Three months ended September 30, 2001
Reportable Segments
----------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------- -------------- ------------ ----------------
Revenues $326,698 $ 90,778 $ 417,476 $ - $ 417,476
Income from Operations $ 9,790 $ (1,883) $ 7,907 $ (1,318) * $ 6,589
Three months ended September 30, 2000
Reportable Segments
----------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
------------- ------------- -------------- ------------ ----------------
Revenues $230,000 $ 79,991 $ 309,991 $ - $ 309,991
Income from Operations $ 8,073 $ 43 $ 8,116 $ (1,394) * $ 6,722
* In all periods, consists of corporate general and administrative expenses.
** In all periods, corporate assets consist principally of cash, cash equivalents, marketable securities and other investments available for general corporate purposes plus the net assets of discontinued operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
Results of Operations
Comparison of the Third Quarter of 2001 with the Third Quarter of 2000
Overall revenue from construction operations increased by $107.5 million (or 34.7%), from $310.0 million in 2000 to $417.5 million in 2001. This resulted from increased construction revenues in both building and civil construction operations. Building construction revenues increased by $96.7 million (or 42.0%), from $230.0 million in 2000 to $326.7 million in 2001 due primarily to an increase in the volume of work completed at the Mohegan Sun Casino Expansion project in the eastern United States and the start-up of three hotel/casino projects in the southwestern United States later in 2000. Civil construction revenues increased by $10.8 million (or 13.5%), from $80.0 million in 2000 to $90.8 million in 2001 due primarily to the start-up of several infrastructure projects in the metropolitan New York area later in 2000.
Overall, pretax income increased by $0.1 million (or 1.7%), from $6.0 million in 2000 to $6.1 million in 2001. The positive profit impact of the increased revenues discussed above was largely offset by a lower average gross margin from the Company's construction operations, as well as an increase in construction-related general and administrative expenses.
Income from construction operations decreased by $0.2 million (or 2.5%), from $8.1 million in 2000 to $7.9 million in 2001. Building construction operating income increased by $1.8 million, from $8.0 million in 2000 to $9.8 million in 2001, primarily due to the increase in revenues discussed above which was largely offset by a decrease in the average gross margin from 4.7% in 2000 to 4.2% in 2001 because 2000 included the favorable close out of certain projects. In addition, building construction operating income was negatively impacted by a $1.2 million (or 44.4%) increase in building construction-related general and administrative expenses primarily in connection with the pursuit of new work opportunities. Despite the increase in civil construction revenues discussed above, civil construction operating income decreased by $2.0 million, from a $0.1 million profit in 2000 to a $1.9 million loss in 2001, due primarily to a downward profit revision on a Central Artery/Tunnel project in Boston, Massachusetts.
Interest expense decreased by $0.3 million, from $0.7 million in 2000 to $0.4 million in 2001, due primarily to a reduction in the debt outstanding under the term loan portion of the Company's New Credit Agreement as described in Note 4 of Notes to Consolidated Condensed Financial Statements, as well as lower interest rates in 2001.
The provision for income taxes reflects a lower than normal tax rate for both 2001 and 2000 due to the realization of a portion of the federal tax benefit not recognized in prior years due to certain accounting limitations.
Comparison of the Nine Months Ended September 30, 2001 with the Nine Months Ended
September 30, 2000
Overall revenue from construction operations increased by $431.1 million (or 56.7%), from $759.8 million in 2000 to $1,190.9 million in 2001. This increase resulted from an increase in building construction revenues of $388.7 million (or 70.8%), from $548.9 million in 2000 to $937.6 million in 2001, due primarily to an increase in the volume of work completed at the Mohegan Sun Casino Expansion project in the
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
eastern United States and the start-up of three hotel/casino projects in the southwestern United States. Civil construction revenues increased by $42.4 million (or 20.1%), from $210.9 million in 2000 to $253.3 million in 2001, due primarily to the start-up of several infrastructure projects in the metropolitan New York area.
Overall, pretax income increased by $4.4 million (or 26.7%), from $16.5 million in 2000 to $20.9 million in 2001. This increase primarily reflects the increased revenues discussed above as well as lower interest expense.
Income from construction operations increased by $3.6 million (or 15.7%), from $23.0 million in 2000 to $26.6 million in 2001. Building construction operating income increased by a net of $4.0 million, from $21.5 million in 2000 to $25.5 million in 2001, due to the increase in revenues discussed above which was partially reduced by a decrease in average gross margin from 5.5% in 2000 to 3.9% in 2001 because 2000 included the favorable close out of certain projects. In addition, building construction operating income was negatively impacted by a $2.6 million (or 29.5%) increase in building construction-related general and administrative expenses primarily in connection with the pursuit of new work opportunities. Despite the increase in civil construction revenues discussed above and a decrease in civil construction-related general and administrative expenses, operating income decreased by $0.4 million, from $1.5 million in 2000 to $1.1 million in 2001, due primarily to a downward profit revision on a Central Artery/Tunnel project in Boston, Massachusetts.
Interest expense decreased by $1.6 million, from $3.2 million in 2000 to $1.6 million in 2001, due to (1) the reduction in debt achieved at the end of the first quarter of 2000 as a result of the new equity transaction described in Note 3 of Notes to Consolidated Condensed Financial Statements, (2) lower interest rates in 2001, and (3) continued reduction in the debt outstanding under the term loan portion of the Company's New Credit Agreement as described in Note 4 of Notes to Consolidated Condensed Financial Statements.
The $0.7 million decrease in other income (expense), from income of $0.6 million in 2000 to an expense of $0.1 million in 2001, is primarily due to a decrease in interest income on short-term investments.
The credit (provision) for income taxes reflects a lower than normal tax rate for both 2001 and 2000 due to the realization of a portion of the federal tax benefit not recognized in prior years due to certain accounting limitations. In addition, the credit for income taxes in 2000 reflects the reversal of foreign taxes accrued in prior years that were no longer required.
Financial Condition
Working capital increased $8.4 million, from $80.5 million at the end of 2000 to $88.9 million at September 30, 2001. The current ratio increased from 1.27:1.00 to 1.31:1.00 during the same period.
During the first nine months of 2001, the Company used $31.5 million in cash to fund $6.0 million used by operating activities, primarily for changes in working capital; $18.3 million for investing activities, primarily to fund construction joint ventures; and $7.2 million for financing activities, primarily to reduce debt by a net amount of $7.4 million.
Long-term debt at September 30, 2001 was $9.7 million, a decrease of $7.5 million from December 31, 2000. The long-term debt to equity ratio at September 30, 2001 was .12:1.00 compared to .28:1.00 at
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
December 31, 2000.
Periodically, the Company receives permanent cash distributions of profit from its construction joint ventures. In addition, the Company has access to temporary cash distributions of available operating funds from certain joint ventures in which it participates. Generally, these joint ventures distribute cash at the end of each quarter to the participants who will then return these funds at the beginning of the next quarter.
Effective March 29, 2000, the Company entered into a New Credit Agreement with its lenders. The New Credit Agreement provides for a $35 million Term Loan and a $21 million Revolving Credit Facility. The New Credit Agreement requires, among other things, that the Company repay the Term Loan quarterly through 2002 and the Revolving Credit Facility by January 21, 2003. Under the terms of the New Credit Agreement, the Company had $21 million available to borrow under the maximum commitment of $33.3 million at September 30, 2001. In addition, on September 6, 2000, the Company completed a refinancing of its corporate headquarters building for $7.5 million at an annual interest rate of approximately 9%. The loan is payable in monthly installments over a ten-year period with a balloon payment of $5.3 million due in 2010. Management believes that cash generated from operations and existing credit lines should be adequate to meet the Company's funding requirements for at least the next twelve months.
In conjunction with the covenants of the Company's current and prior Credit Agreements, the Company was required to suspend the payment of quarterly dividends on its $21.25 Preferred Stock ("Preferred Stock") until certain financial criteria were met. The aggregate amount of dividends in arrears is approximately $12,749,000 at September 30, 2001. As of December 31, 2000, the financial criteria in the Credit Agreement which restricted the payment of dividends were satisfied, thereby making the resumption of dividends possible if the Company believed that its working capital was sufficient to warrant the resumption of payment of the regular dividend or any of the dividends in arrears on the Preferred Stock. The Company does not currently have any plans or target date for when this action may occur. This decision is based on the following circumstances:
- A strong working capital position provides the Company the option of performing large projects without a joint venture partner or to assume the sponsoring partner position resulting in a larger proportionate interest and a greater share of joint venture profits.
- A significant amount of working capital is dedicated to the funding requirements of the Company's construction backlog, including collection of receivables, and the timely resolution of unapproved change orders and contract claims.
- The Company is currently in the process of pursuing a strategy to profitably expand its construction business internally or through acquisition, either of which will likely require additional capital.
- The Company is currently in the process of replacing its existing Credit Agreement with a new bank group which may result in future restrictions on the Company's ability to pay dividends.
Outlook- Construction Operations - The overall construction backlog at September 30, 2001 was $1.45 billion, a 19% decrease from the $1.79 billion record year-end backlog at December 31, 2000. With a strong
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
backlog in hand, the Company plans to continue its strategy of improving the profitability of its construction operations by emphasizing gross margin and bottom line improvement. The Company is also continuing the process of pursuing a strategy to profitably expand its construction business internally or through acquisition.
- Management believes that the events of September 11, 2001, coupled with a prolonged slowdown in the United States economy, may result in a slowdown in the growth of the Company's gaming and hospitality building markets. This slowdown is more likely to impact the large destination resort areas such as Las Vegas and Atlantic City rather than the regional resorts such as Native American-owned casino gaming, both of which are strong contributors to the Company's results. Conversely, the planned economic stimulus package should also result in an increase in publicly-funded civil infrastructure repair projects, thereby providing new work opportunities for the Company's civil construction operation. At this time, management believes that the overall impact of this slowdown will be moderate with conditions improving by the second half of 2002.
Forward-looking StatementsThe statements contained in this Management's Discussion and Analysis of the Consolidated Condensed Financial Statements, including "Outlook", and other sections of this Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, hopes, beliefs, intentions or strategies regarding the future. Forward-looking statements involve a number of risks, uncertainties or other factors that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the continuing validity of the underlying assumptions and estimates of total forecasted project revenues, costs and profits and project schedules; the outcomes of pending or future litigation, arbitration or other dispute resolution proceedings; changes in federal and state appropriations for infrastructure projects; possible changes or developments in worldwide or domestic social, economic, business, industry, market and regulatory conditions or circumstances; and actions taken or omitted to be taken by third parties including the Company's customers, suppliers, business partners, and competitors and legislative, regulatory, judicial and other governmental authorities and officials.
QUANTITATIVE AND QUALITATIVE DISLOSURES ABOUT MARKET RISK
There has been no material change in the Company's exposure to market risk since December 31, 2000.
Part II. - Other Information
Item 1. - Legal Proceedings
Preferred Shareholders Class Action Lawsuit
On May 3, 2001 the Company was served with a Complaint entitled Frederick Doppelt, Arthur I.
Caplan and Michael Miller v. Perini Corporation, Ronald N. Tutor, Robert Band, Christopher H. Lee,
Marshall M. Criser, Arthur J. Fox, Jr., Michael R. Klein, Richard J. Boushka, Peter Arkley,
Robert A. Kennedy, Jane E. Newman, Douglas J. McCarron, Nancy Hawthorne, Raymond R.
Oneglia, Albert A. Dorman and John J. McHale, Supreme Court of the State of New York, County of
New York, Civil Action No. 602156/01. Each plaintiff is a holder of the Company's $21.25
Convertible Exchangeable Preferred Stock ("Preferred Stock"). One plaintiff, Mr. Doppelt, is a
current Director of the Company and one plaintiff, Mr. Caplan, is a former Director of the Company.
Plaintiffs purport to bring the action individually and on behalf of the entire class of holders of the
Preferred Stock.
The Plaintiffs have asserted claims for breach of contract, breach of fiduciary duty, fraud and
negligent misrepresentation. The Plaintiffs principally allege that the Company and its Directors
improperly authorized the exchange of Series B Preferred Stock for Common Stock without first
paying all accrued dividends on the Preferred Stock. More specifically, plaintiffs allege that the
Company and its Directors violated the terms of the Preferred Stock when, in March 2000, the
Company authorized the exchange of Series B Preferred Stock for Common Stock. The Plaintiffs
further allege that the Company and its Directors issued a false and misleading prospectus in 1987
relating to the issuance of the Preferred Stock. The Plaintiffs seek payment of accrued dividends in
the amount of approximately $11.7 million and unspecified punitive and exemplary damages.
On May 23, 2001, the Company and the Defendant Directors removed the action from the Supreme
Court of New York to the United States District Court for the Southern District of New York.
On June 26, 2001, the Plaintiffs filed an Amended Complaint. Through the Amended Complaint, the
Plaintiffs limited their Class Action to an action for Breach of Contract against the Company and an
action for Breach of Fiduciary Duty against the Defendant Directors. The Company and the
Defendant Directors filed their formal Response to the Complaint on August 10, 2001.
WMATA Matter
On July 30, 1993, the U.S. District Court for the District of Columbia, in a preliminary opinion, upheld
termination 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 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. In July 1997, the remaining issues were ruled on by a successor judge, who
awarded approximately $4.3 million to the joint venture, thereby reducing the net amount payable to
approximately $12.2 million. The joint venture appealed the decision and filed a motion for a new
trial.
Part II. - Other Information (Continued)
On February 16, 1999, the U.S. Court of Appeals for the District of Columbia vacated the April 1995
and July 1997 Orders and remanded the case back to the successor judge with instructions for the
successor judge to consider certain post-trial motions to the same extent an original judge would
have, and to make findings and conclusions regarding the unresolved issues, giving appropriate
consideration to whether or not witnesses must be recalled. During 1999, a new successor judge
was appointed.
On February 28, 2001, the new successor judge informed the parties that in the absence of a new
trial, he could not certify adequate familiarity with the record to complete the remaining proceedings;
therefore, he ordered that the joint venture's motion for a new trial be granted, with a preliminary
pretrial conference scheduled for April 9, 2001. This decision means that the original July 30, 1993
Decision and Order of the U.S. District Court no longer has any force or effect and that the interim
judgment in favor of WMATA for $16.5 million was set aside.
The trial concluded before the successor judge on October 25, 2001. A decision is expected sometime
in the first quarter of 2002.
Tutor-Saliba-Perini v. MTA Matter
During 1995, a joint venture, Tutor-Saliba-Perini ("TSP"), in which Perini Corporation is a 40% minority
partner and Tutor-Saliba Corporation of Sylmar, CA is the 60% managing partner, filed a complaint in the
Superior Court of the State of California for the County of Los Angeles against the Los Angeles County
Metropolitan Transportation Authority ("MTA") seeking to recover cost for extra work required by the MTA
in connection with the construction of the Wilshire/Normandie Subway Station. Mr. Ronald N. Tutor, the
Chairman and CEO of Perini Corporation since March of 2000, is also the CEO and the sole stockholder
of Tutor-Saliba Corporation. In February 1999, the MTA filed a cross complaint against TSP,
Tutor-Saliba Corporation, Perini Corporation, and their respective surety companies (together the "cross
defendants").
Trial of the complaint and the cross complaint began on May 14, 2001, with the selection of the jury.
During the trial, the judge found TSP liable to the MTA, as a sanction, because of the alleged failure of
TSP to comply with certain discovery requirements. The jury was charged with the responsibility of
determining damages based on the judge's order. On August 1, 2001, the jury found damages in favor of
cross-complainant, the MTA, and against cross-defendants in the amount of $29.6 million.
TSP has appealed the decision. The ultimate financial impact, if any, of this case is not yet determinable
and, therefore, no impact is reflected in the Company's financial statements.
Perini/Kiewit/Cashman Joint Venture - Central Artery/Tunnel Project Matter
Perini/Kiewit/Cashman Joint Venture ("PKC"), a joint venture in which Perini Corporation holds a 56%
interest and is the managing partner, is currently pursuing a series of claims for additional contract time
and/or compensation against the Massachusetts Highway Department ("Owner") for work performed by
PKC on a portion of the Central Artery/Tunnel project in Boston, Massachusetts. The claims relate to
the construction of the Northbound Mainline Central Artery Tunnel from Kneeland Street to Congress
Street. During construction the Owner ordered PKC to perform changes to the work and issued related
direct cost changes with a value, excluding time delay and inefficiency costs, in excess of $100 million. In
addition, PKC encountered a number of unforeseen conditions during construction that greatly increased
PKC's cost of performance.
PKC's claims are currently being presented to a Disputes Review Board ("DRB") which consists of
three (3)Construction Experts chosen by the parties. To date, the DRB has ruled that PKC is entitled to
additional compensation for its contract time delay claim in the amount of $17.4 million. The claims yet to
be heard by the DRB have a stated value in excess of $93 million. The majority of those claims
(approximately $75 million) will be decided by the DRB, as arbitrators, on a binding basis. The remaining
Part II. - Other Information (Continued)
claims will be decided by a separate DRB under the original contract provisions on a non-binding basis.
The DRB is currently considering PKC's utility impact claim with additional claims to be presented in 2002.
The Owner has brought a separate proceeding in the Massachusetts Superior Court challenging the
authority of the DRB to issue its rulings and the substance of the DRB's decisions to date. This challenge
includes, but is not limited to, a challenge based upon the rulings of a prior DRB and/or the prior decisions
of the Owner's representative on the Project. These challenges, along with a request by PKC to confirm
the latest decision of the DRB, are currently before the Massachusetts Superior Court. The ultimate
financial impact of resolving the claims and related court actions cannot be determined at this time.
Item 2. - Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) None
(d) Not applicable
Item 3. - Defaults Upon Senior Securities
(a) None
(b) In accordance with the covenants of the 1995 Amended Revolving Credit Agreement, the First
Amended and Restated Credit Agreement effective January 17, 1997 and the Second Amended
and Restated Credit Agreement effective March 29, 2000, the Company was required to suspend the
payment of quarterly dividends on its $21.25 Convertible Exchangeable Preferred Stock ("Preferred
Stock") until certain financial criteria were met, commencing with the dividend that normally would
have been declared during December 1995 through the dividend that normally would have been
declared during September 2001. As of September 30, 2001, the aggregate amount of dividends in
arrears is approximately $12,749,000, which represents approximately $127.49 per share of Preferred
Stock or approximately $12.75 per Depositary Share. While these dividends have not been declared or
paid, they have been fully accrued in accordance with the "cumulative" feature of the Preferred Stock.
Item 4. - Submission of Matters to a Vote of Security Holders
(a) None
(b) Not applicable
(c) Not applicable
(d) Not applicable
Item 5. - Other Information - None
Item 6. - Exhibits and Reports on Form 8-K
(a) The following designated exhibits are, as indicated below, either filed herewith or have heretofore been
filed with Securities and Exchange Commission under the Securities Act of 1933 or the Securities Act
of 1934 and are referred to and incorporated herein by reference to such filings:
Part II. - Other Information (Continued)
Exhibit 3. Articles of Incorporation and By-laws
Incorporated herein by reference:
3.1 Restated Articles of Organization - As amended through March 29, 2000 - Exhibit 3.1
to Form 8-K filed on April 12, 2000.
3.2 By-laws - As amended and restated as of March 29, 2000 - Exhibit 3.2 to Form 8-K
filed on April 12, 2000.
Exhibit 4. Instruments Defining the Rights of Security Holders, Including Indentures
Incorporated herein by reference:
4.1 Certificate of Vote of Directors Establishing a Series 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 - Exhibit4(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 dated as of September 23, 1988, as amended and
restated as of May 17, 1990, as amended and restated as of January 17, 1997, between
Perini Corporation and State Street Bank and Trust Company, as Rights Agent -
Exhibit 4.4 to Amendment No. 1 to Registration Statement on Form 8-A/A filed on
January 29, 1997, and as further amended as of March 29, 2000 - Exhibit 4.3 to Form
8-K filed on April 12, 2000.
4.5 Stock Purchase and Sale Agreement dated as of July 24, 1996 by and among the
Company, PB Capital and RCBA, as amended - Exhibit 4.5 to the Company's Quarterly
Report on Form 10-Q/A for the fiscal quarter ended September 30, 1996 filed on
December 11, 1996 and as amended by the Termination/Amendment Agreement on
March 29, 2000 - Exhibit 4.4 to Form 8-K filed on April 12, 2000.
4.8 Certificate of Vote of Directors Establishing a Series of Preferred Stock determining the
relative rights and preferences of the Series B Cumulative Convertible Preferred Stock,
dated January 16, 1997 - Exhibit 4.8 to Form 8-K filed on February 14, 1997.
4.13 Exchange Agreement by and between Perini Corporation and The Union Labor Life
Insurance Company, acting on behalf of its Separate Account P, dated as of February 7,
2000 - Exhibit 10.1 to Form 8-K filed on April 12, 2000.
4.14 Exchange Agreement by and between Perini Corporation and PB Capital Partners, L.P.,
dated as of February 14, 2000 - Exhibit 10.2 to Form 8-K filed on April 12, 2000.
Part II. - Other Information (Continued)
4.15 Exchange Agreement by and between Perini Corporation and The Common Fund for
Non-Profit Organizations, dated as of February 14, 2000 - Exhibit10.3 to Form 8-K
filed on April 12, 2000.
4.16 Registration Rights Agreement by and among Perini Corporation, Tutor- Saliba
Corporation, Ronald N. Tutor, O&G Industries, Inc. and National Union Fire
Insurance Company of Pittsburgh, Pa., BLUM Capital Partners, L.P., PB Capital
Partners, L.P. The Common Fund for Non-Profit Organizations, and The Union Labor
Life Insurance Company, acting on behalf of its Separate Account P, dated as of
March 29, 2000 - Exhibit 4.1 to Form 8-K filed on April 12, 2000.
4.17 Shareholders' Agreement by and among Perini Corporation, Tutor-Saliba Corporation,
Ronald N. Tutor, O&G Industries, Inc. and National Union Fire Insurance Company
of Pittsburgh, Pa., BLUM Capital Partners, L.P., PB Capital Partners, L.P., The Common
Fund for Non-Profit Organizations, and The Union Labor Life Insurance Company,
acting on behalf of its Separate Account P, dated as of March 29, 2000 - Exhibit 4.2 to
Form 8-K filed on April 12, 2000.
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 1997 Form 10-K filed on March 30, 1998.
10.3 Perini Corporation Amended and Restated Construction Business Unit Incentive
Compensation Plan - Exhibit 10.3 to 1997 Form 10-K filed on March 30, 1998.
10.16 Management Agreement dated as of January 17, 1997 by and among the Company,
Ronald N. Tutor and Tutor-Saliba Corporation - Exhibit 10.16 to Form 8-K filed on
February 14, 1997.
10.30 Second Amended and Restated Credit Agreement dated as of March 29, 2000 among
Perini Corporation, the Banks listed herein and Morgan Guaranty Trust Company of
New York, as Agent and Fleet National Bank, as Co-Agent - Exhibit 10.4 to Form 8-K
filed on April 12, 2000.
10.31 Amendment No. 2 dated as of December 31, 1999 to the Management Agreement by
and among the Company, Ronald N. Tutor and Tutor-Saliba Corporation - Exhibit 10.31
to Form 10-Q filed on May 9, 2000.
10.32 Special Equity Incentive Plan - Exhibit A to Registrant's Proxy Statement for Annual
Meeting of Stockholders dated April 19, 2000.
10.33 Securities Purchase Agreement by and among Perini Corporation and Tutor- Saliba
Corporation, O&G Industries, Inc. and National Union Fire Insurance Company of
Pittsburgh, PA, dated as of February 5, 2000 - Exhibit 10.1 to Form 8-K filed on
February 9, 2000.
10.34 Promissory Note dated as of September 6, 2000 by and among Mt. Wayte Realty, LLC
(a wholly-owned subsidiary of Perini Corporation) and The Manufacturers Life
Insurance Company (U.S.A.) - Exhibit 10.34 to Form 10-Q filed on November 6, 2000.
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
Perini Corporation
------------------
Registrant
Date: November 8, 2001 /s/Robert Band
------------------------------------------------------
Robert Band, President and Chief Operating Officer
Date: November 8, 2001 /s/Michael E. Ciskey
----------------------------------------------------
Michael E. Ciskey, Vice President and Controller
