UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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
incorporation or organization)
Identification No.)
73 MT. WAYTE AVENUE, FRAMINGHAM, MASSACHUSETTS 01701-9160
(Address of principal executive offices)
(Zip code)
(508)-628-2000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
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
Number of shares of common stock of registrant outstanding at August 12, 1999:
5,680,485
Page 1 of 21
PERINI CORPORATION & SUBSIDIARIES
INDEX
Page Number
-----------
Part I. - Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3
June 30, 1999 and December 31, 1998
Consolidated Condensed Statements of Operations - 4
Three Months and Six Months ended June 30, 1999 and 1998
Consolidated Condensed Statements of Cash Flows - 5
Six Months ended June 30, 1999 and 1998
Notes to Consolidated Condensed Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of the Consolidated 10 - 14
Financial Condition and Results of Operations
Part II. - Other Information:
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15 - 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16 - 20
Signatures 21
2
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
JUNE 30, 1999 AND DECEMBER 31, 1998
(In Thousands)
ASSETS
JUNE 30, DEC. 31,
1999 1998
-------------- -------------
(Note 3)
Cash $ 51,983 $ 46,507
Accounts and Notes Receivable 148,463 113,052
Unbilled Work 18,806 19,585
Construction Joint Ventures 74,619 67,100
Net Current Assets of Discontinued Operations (Note 3) 15,311 8,068
Deferred Tax Assets 1,076 1,076
Other Current Assets 4,943 2,469
-------------- -------------
Total Current Assets $ 315,201 $ 257,857
-------------- -------------
Net Long-Term Assets of Discontinued Operations (Note 3) $ --- $ 104,017
-------------- -------------
Other Assets $ 4,321 $ 3,734
-------------- -------------
Property and Equipment, less Accumulated Depreciation of $16,874 in 1999 and
$16,378 in 1998 $ 9,769 $ 9,858
-------------- -------------
$ 329,291 $ 375,466
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Maturities of Long-Term Debt $ 18,697 $ 2,036
Accounts Payable 141,336 127,349
Advances from Construction Joint Ventures 15,749 17,300
Deferred Contract Revenue 27,654 14,350
Accrued Expenses 37,076 38,763
-------------- -------------
Total Current Liabilities $ 240,512 $ 199,798
-------------- -------------
Deferred Income Taxes and Other Liabilities $ 18,637 $ 15,713
-------------- -------------
Long-Term Debt, less current maturities included above $ 77,371 $ 75,857
-------------- -------------
Redeemable Convertible Series B Preferred Stock $ 35,566 $ 33,540
-------------- -------------
Stockholder's Equity (Deficit):
Preferred Stock $ 100 $ 100
Series A Junior Participating Preferred Stock --- ---
Stock Purchase Warrants 2,233 2,233
Common Stock 5,743 5,506
Paid-In Surplus 46,763 49,219
Retained Deficit (96,521) (3,642)
ESOT Related Obligations (120) (1,381)
-------------- -------------
$ (41,802) $ 52,035
Less - Treasury Stock 993 1,477
-------------- -------------
Total Stockholders' Equity (Deficit) $ (42,795) $ 50,558
-------------- -------------
$ 329,291 $ 375,466
============== =============
The accompanying notes are an integral part of these financial statements.
3
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Data)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
--------------- --------------- -------------- --------------
(Note 3) (Note 3)
CONTINUING OPERATIONS:
Construction Revenues $ 279,527 $ 273,761 $ 531,346 $ 492,963
--------------- --------------- -------------- --------------
Cost And Expenses:
Cost of Operations $ 266,267 $ 261,186 $ 507,021 $ 468,253
General, Administrative and Selling Expenses 6,267 7,186 12,435 13,535
--------------- --------------- -------------- --------------
$ 272,534 $ 268,372 $ 519,456 $ 481,788
--------------- --------------- -------------- --------------
INCOME FROM OPERATIONS $ 6,993 $ 5,389 $ 11,890 $ 11,175
Other Expense, Net (584) (173) (888) (428)
Interest Expense (1,788) (1,466) (3,376) (4,213)
--------------- --------------- -------------- --------------
Income from Continuing Operations before Income Taxes $ 4,621 $ 3,750 $ 7,626 $ 6,534
Provision for Income Taxes (Note 4) 300 200 500 390
--------------- --------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS $ 4,321 $ 3,550 $ 7,126 $ 6,144
--------------- --------------- -------------- --------------
DISCONTINUED OPERATIONS (Note 3):
Loss from Operations (Note 4) $ (313) $ (436) $ (694) $ (811)
Estimated Loss on Disposal of Real Estate
Business Segment (Note 4) (99,311) --- (99,311) ---
--------------- --------------- -------------- --------------
LOSS FROM DISCONTINUED OPERATIONS $ (99,624) $ (436) $ (100,005) $ (811)
--------------- --------------- -------------- --------------
NET INCOME (LOSS) $ (95,303) $ 3,114 $ (92,879) $ 5,333
=============== =============== ============== ==============
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE (Note 5):
Income from Continuing Operations $ .49 $ .39 $ .73 $ .62
Loss from Discontinued Operations (.05) (.08) (.13) (.16)
Estimated Loss on Disposal (17.67) --- (17.92) ---
--------------- --------------- -------------- --------------
Total $ (17.23) $ (.31) $ (17.32) $ .46
--------------- --------------- -------------- --------------
DIVIDENDS PER COMMON SHARE (Note 6) $ --- $ --- $ --- $ ---
=============== =============== ============== ==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 5) 5,621,366 5,294,042 5,541,019 5,235,329
=============== =============== ============== ==============
The accompanying notes are an integral part of these financial statements.
4
PERINI CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(In Thousands)
SIX MONTHS
ENDED JUNE 30,
1999 1998
------------ --------------
(Note 3)
Cash Flows from Operating Activities:
Net Income (Loss) $ (92,879) $ 5,333
Adjustments to reconcile net income (loss) to net cash from operating activities:
Loss from discontinued operations 100,005 811
Depreciation and amortization 1,609 1,512
Noncurrent deferred taxes and other liabilities 2,924 480
Distributions greater (less) than earnings of joint ventures and affiliates (1,108) 668
Cash provided from (used by) changes in components of working capital other
than cash, net current assets of discontinued operations and current maturities
of long-term debt (14,000) 26,592
Other non-cash items, net (148) 48
------------ --------------
NET CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES $ (3,597) $ 35,444
------------ --------------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment $ 215 $ 461
Cash distributions of capital from unconsolidated joint ventures 1,050 2,018
Acquisition of property and equipment (758) (428)
Capital contributions to unconsolidated joint ventures (7,575) ---
Investment in discontinued operations (Note 3) (3,231) (1,396)
Investment in other activities (1,044) 54
------------ --------------
NET CASH PROVIDED FROM (USED BY) INVESTING ACTIVITIES $ (11,343) $ 709
------------ --------------
Cash Flows from Financing Activities:
Proceeds of long-term debt $ 19,064 $ 2,000
Repayment of long-term debt --- (24,245)
Common Stock issued 1,197 2,482
Treasury Stock issued 155 151
------------ --------------
NET CASH PROVIDED FROM (USED BY) FINANCING ACTIVITIES $ 20,416 $(19,612)
------------ --------------
Net Increase in Cash $ 5,476 $ 16,541
Cash at Beginning of Year 46,507 31,305
------------ --------------
Cash at End of Period $ 51,983 $ 47,846
============ ==============
Supplemental Disclosure of Cash paid during the period for:
Interest $ 3,573 $ 3,331
============ ==============
Income tax payments $ 69 $ 261
============ ==============
Supplemental Disclosures of Non-cash Transactions:
Dividends paid in shares of Series B Preferred Stock (Note 6) $ 1,836 $ 1,664
============ ==============
The accompanying notes are an integral part of these financial statements.
5
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) Basis of Presentation
The unaudited consolidated condensed financial statements presented herein have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. These statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-K for the year ended December 31, 1998. In the opinion of management, the
accompanying unaudited condensed financial statements include all adjustments,
consisting only of normal recurring adjustments, except for the presentation of
Discontinued Operations and related non-cash provision for estimated loss on
disposal of the Company's real estate development business segment as more fully
described in Note 3 below, necessary to present fairly the Company's financial
position as of June 30, 1999 and December 31, 1998 and results of operations and
cash flows for the three month and six month periods ended June 30, 1999 and
1998. The results of operations for the six month period ended June 30, 1999 may
not be indicative of the results that may be expected for the year ending
December 31, 1999 because the Company's results generally consist of a limited
number of large transactions in both construction and real estate. Therefore,
such results can vary depending on the timing of transactions and the
profitability of projects being reported.
(2) Significant Accounting Policies
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,
1998. The Company has made no significant change in these policies during 1999.
(3) 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 through
June 30, 1999 have been presented as a discontinued operation in accordance with
generally accepted accounting principles. Based on the plan, the 1999 second
quarter and six month results include a $99,311,000 non-cash provision which
represents the estimated loss on disposal of this business segment. This
non-cash charge reflects the estimated impact of the previously announced
foreclosure proceedings on the Rincon Center property located in San Francisco
and the reduction in projected future cash flow from the disposition of PL&D's
remaining real estate development operations resulting from the change in
strategy of holding the properties through the necessary development and
stabilization periods to a new strategy of generating short-term liquidity
through an accelerated disposition or bulk sale. The estimated loss on disposal
of the real estate business segment also includes a provision for shut down
costs related to PL&D during the wind down period. No Federal tax benefit was
attributable to the estimated loss on disposal of the real estate business
segment (see Note 4). Several of the remaining real estate properties now being
offered for sale are currently under or are pending a purchase and sale
agreement.
At June 30, 1999 the net assets of discontinued real estate development
operations, consisting primarily of real estate properties for sale, have been
reclassified as current assets at estimated net realizable value. At December
31, 1998 the net current assets of discontinued real estate development
operations consist primarily of certain real estate properties for sale. The net
long-
6
PERINI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
term assets of discontinued operations at December 31, 1998 consist primarily of
land held for sale or development and investments in and advances to real estate
joint ventures. In accordance with generally accepted accounting principles, the
results of discontinued real estate development operations have been
reclassified to "Loss from Operations" of Discontinued Operations. In connection
therewith, the revenues related to these operations are summarized below (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues $4,199 $4,450 $8,931 $14,630
============== ========== ============ ===============
(4) Provision For Income Taxes
The provision for income taxes applicable to Income from Continuing Operations
reflects a lower-than-normal tax rate in 1999 and 1998 due to the realization of
a portion of the Federal tax benefit not recognized in prior years due to
certain accounting limitations. No tax benefit was attributable to Losses from
Discontinued Operations in either 1999 or 1998 due to the same accounting
limitations.
(5) Per Share Data
Computations of basic and diluted earnings (loss) per common share amounts are
based on the weighted average number of the Company's common shares outstanding
during the periods presented. Earnings from Income from Continuing Operations
available for common shares are calculated as follows (in thousands, except per
share amounts):
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
Income from Continuing Operations $ 4,321 $ 3,550 $ 7,126 $ 6,144
------------ ----------- ------------ ------------
Less:
- Accrued dividends on $21.25 Senior Preferred Stock $ (531) $ (531) $ (1,062) $ (1,062)
- - Dividends declared on Series B Preferred Stock (929) (842) (1,836) (1,664)
- - Accretion deduction required to reinstate mandatory
redemption value of Series B Preferred Stock over a
period of 8-10 years (94) (92) (189) (187)
------------ ------------ ----------- ------------
$ (1,554) $ (1,465) $ (3,087) $ (2,913)
------------ ----------- ------------ ------------
Earnings from Income from Continuing Operations available
for Common Stockholders $ 2,767 $ 2,085 $ 4,039 $ 3,231
============ =========== ============ ============
Weighted average shares outstanding 5,621 5,294 5,541 5,235
------------ ----------- ------------ ------------
Basic and diluted earnings per Common Share on Income
from Continuing Operations $ 0.49 $ 0.39 $ 0.73 $ 0.62
============ =========== ============ ============
Basic EPS equals diluted EPS for the periods presented due to the immaterial
effect of stock options and the antidilutive effect of conversion of the
Company's depositary convertible exchangeable preferred shares, Series B
preferred shares and stock purchase warrants into common stock.
7
(6) Dividends
There were no cash dividends on common stock declared or paid during the periods
presented in the consolidated condensed financial statements presented herein.
As previously disclosed, in conjunction with the covenants of the Company's
Revolving Credit Agreement, the Company is required to suspend the payment of
quarterly dividends on its $21.25 preferred stock ("Senior Preferred Stock")
until certain financial criteria are met. Therefore, the dividends on the Senior
Preferred Stock have not been declared since 1995 (although they have been fully
accrued due to the "cumulative" feature of the Senior Preferred Stock). The
aggregate amount of dividends in arrears is approximately $7,968,000 at June 30,
1999 which represents approximately $79.68 per share of Preferred Stock or
approximately $7.97 per Depositary Share and is included in "Other Liabilities"
(long-term) in the accompanying Consolidated Condensed Balance Sheet. 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 both the May 14, 1998 and the May 13, 1999
Annual Meetings.
Quarterly In-kind dividends (based on an annual rate of 10%) were paid on March
15, 1999 on the Series B Preferred Stock to the stockholders of record on March
1, 1999. The dividend was paid in the form of approximately 4,534 additional
shares of Series B Preferred Stock valued at $200.00 per share for a total of
$906,783. In-kind dividends for the second quarter were paid on June 15, 1999 to
stockholders of record on June 1, 1999. The dividend was paid in the form of
approximately 4,647 additional shares of Series B Preferred Stock valued at
$200.00 per share for a total of $929,453.
(7) Business Segments
The following tables set forth certain updated business segment information
relating to the Company's operations for the three and six month periods ended
June 30, 1999 and 1998 (in thousands):
Three months ended June 30, 1999
- --------------------------------
Reportable Segments
-------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
Revenues $201,726 $ 77,801 $279,527 $ - $279,527
Income (Loss) from Ops. $ 4,831 $ 3,886 $ 8,717 $(1,724)* $ 6,993
Three months ended June 30, 1998
- --------------------------------
Reportable Segments
---------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
Revenues $189,320 $ 84,441 $273,761 $ - $273,761
Income (Loss) from Ops. $ 5,156 $ 2,268 $ 7,424 $(2,035)* $ 5,389
Six months ended June 30, 1999
- ------------------------------
Reportable Segments
-------------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
Revenues $384,692 $146,654 $531,346 $ - $531,346
Income (Loss) from Ops. $ 9,454 $ 5,856 $ 15,310 $(3,420)* $ 11,890
Assets $152,757 $106,091 $258,848 $70,443** $329,291
8
Six months ended June 30, 1998
- ------------------------------
Reportable Segments
---------------------------------------
Consolidated
Building Civil Totals Corporate Totals
---------- ---------- ----------- ----------- ------------
Revenues $345,548 $147,415 $492,963 $ - $492,963
Income (Loss) from Ops. $ 9,984 $ 5,025 $ 15,009 $ (3,834)* $ 11,175
Assets $113,988 $104,654 $218,642 $161,615** $380,257
* 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.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
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 through
June 30, 1999 have been presented as a discontinued operation in accordance with
generally accepted accounting principles. Based on the plan, the 1999 second
quarter and six month results include a $99,311,000 non-cash provision which
represents the estimated loss on disposal of this business segment. This
non-cash charge reflects the estimated impact of the previously announced
foreclosure proceedings on the Rincon Center property located in San Francisco
and the reduction in projected future cash flow from the disposition of PL&D's
remaining real estate development operations resulting from the change in
strategy of holding the properties through the necessary development and
stabilization periods to a new strategy of generating short-term liquidity
through an accelerated disposition or bulk sale. The estimated loss on disposal
of the real estate business segment also includes a provision for shut down
costs related to PL&D during the wind down period. No Federal tax benefit was
attributable to the estimated loss on disposal of the real estate business
segment (see Note 4). Several of the remaining real estate properties now being
offered for sale are currently under or are pending a purchase and sale
agreement.
Results of Operations from Continuing Operations
Comparison of the Second Quarter of 1999 with the Second Quarter of 1998
Overall revenue from construction operations increased by $5.7 million (or
2.1%), from $273.8 million in 1998 to $279.5 million in 1999. This increase
represents increased revenues from building operations of $12.4 million (or
6.6%), from $189.3 million in 1998 to $201.7 million in 1999 due primarily to
the start-up of several new fast track hotel/casino projects. This revenue
increase was partially offset by a decrease in revenues from civil operations of
$6.7 million (or 7.8%), from $84.5 million in 1998 to $77.8 million in 1999
resulting from less new work acquired during 1999.
Overall, income from construction operations (before corporate G&A expenses)
increased $1.3 million (or 17.6%), from $7.4 million in 1998 to $8.7 million in
1999. This increase represents increased operating income from civil operations
of $1.6 million (or 70.0%), from $2.3 million in 1998 to $3.9 million in 1999
primarily because of profit write downs on certain projects recorded during
second quarter of 1998. This increase in operating income was partially offset
by an operating income decrease from building operations of $.3 million (or
5.9%), from $5.1 million in 1998 to $4.8 million in 1999 because of the
favorable close out of several projects during 1998.
Other expense, net increased by $.4 million from $.2 million in 1998 to $.6
million in 1999 due to an increase in bank financing fees.
Interest expense increased by $.3 million from $1.5 million in 1998 to $1.8
million in 1999 due primarily to higher average levels of borrowing in 1999
under the Company's Revolving Credit Agreement.
The provision for income taxes applicable to Income from Continuing Operations
reflected a lower-than-normal tax rate in 1999 and 1998 due to the realization
of a portion of the Federal tax benefit not recognized in prior years due to
certain accounting limitations. No tax benefit was attributable to Losses from
Discontinued Operations in either 1999 or 1998 due to the same accounting
limitations.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Continued)
Comparison of the Six Months Ended June 30, 1999 with the
Six Months Ended June 30, 1998
Overall revenue from construction operations increased $38.4 million (or 7.8%),
from $493.0 million in 1998 to $531.4 million in 1999. This increase was
entirely the result of an increase in revenues from building operations of $39.1
million (or 11.3%), from $345.6 million in 1998 to $384.7 million in 1999 due
primarily to the start up of several new fast track hotel/casino projects during
both the first and second quarters of 1999. The revenue from civil operations
was approximately $147 million during both 1999 and 1998.
Overall, income from construction operations (before corporate G&A expenses)
increased by $.3 million (or 2.0%), from $15.0 million in 1998 to $15.3 million
in 1999. The increase in operating income results from an increase from civil
operations of $.9 million (or 18.0%), from $5.0 million in 1998 to $5.9 million
in 1999, primarily because of profit write downs on certain projects recorded
during the second quarter of 1998 and a $.3 million reduction in G&A expenses.
This increase in operating income was partially offset by a decrease in
operating income from building operations of $.6 million (or 6.0%), from $10.0
million in 1998 to $9.4 million in 1999 because of the favorable close out of
several projects during 1998. Corporate G&A expenses decreased by $.4 million
(or 10.5%) from $3.8 million in 1998 to $3.4 million in 1999 as the impact of
various ongoing cost reduction programs continues to be realized.
Other expenses, net increased by $.5 million, from $.4 million in 1998 to $.9
million in 1999 as a result of increased bank financing fees.
Interest expense decreased by $.8 million, from $4.2 million in 1998 to $3.4
million in 1999 due primarily to a reduction in the average amount borrowed
under the Company's Revolving Credit Agreement during the first quarter of 1999.
Financial Condition
- -------------------
Working capital increased $16.6 million, from $58.1 million at the end of 1998
to $74.7 million at June 30, 1999. The current ratio increased from 1.29:1 to
1.31:1 during this same period.
During the first six months of 1999, the Company used $19.1 million of
additional borrowings under the Company's Revolving Credit Agreement to fund
$3.6 million used by operating activities, primarily for changes in working
capital, and $11.3 million for investing activities, primarily to fund the
working capital needs of construction joint ventures.
Long-term debt at June 30, 1999 was $77.4 million, an increase of $1.5 million
from December 31, 1998. Effective March 23, 1999, the Company finalized certain
changes to its Revolving Credit Agreement with its Bank Group, including
extending the Revolving Credit Agreement from January 3, 2000 to January 3,
2001. Other changes to the Revolving Credit Agreement include, among other
things, a scheduled mandatory reduction in the maximum commitment of $20.0
million in 1999 and $15.0 million in 2000, with the balance in 2001, additional
permanent mandatory reductions, as defined, from the net proceeds from real
estate sales, an interest rate increase of 1/2 of 1% in 1999 and an additional
1/4 of 1% increase in 2000, and a one-time bank fee of $483,000. At June 30,
1999, the Company had $1.8 million available to borrow under its $91.8 million
Revolving Credit Agreement.
As a result of the net loss recorded in the second quarter of 1999, the
Company's stockholders' equity was reduced to a negative $42.8 million.
Management is currently working with its investment bankers to develop plans to
raise additional capital, restore balance sheet net worth and improve liquidity.
Management believes that cash generated from operations, existing credit lines,
and additional borrowings
11
should be adequate to meet the Company's funding requirements for at least the
next twelve months.
Outlook
- -------
o General - The statements contained in this Outlook 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. All forward-looking statements included in this Outlook are
based on information available to the Company on the date hereof. It is
important to note that the Company's actual results could differ
materially from those in such forward-looking statements, whether as a
result of new information, future events or otherwise.
o Continuing Construction Operations - Looking ahead, we must consider the
Company's construction backlog. The overall construction backlog at June
30, 1999 was at $1.612 billion, a 30.8% increase from the backlog at
December 31, 1998. Projects awarded during 1999 and included in the
backlog at June 30, 1999 totaled in excess of $825 million, including
the previously announced construction management services contract for
the $650 million Mohegan Sun Phase II Expansion Project in Uncasville,
CT. Approximately 60% of the current backlog relates to building
construction projects which generally represent lower risk, lower margin
work and approximately 40% of the current backlog relates to heavy
construction projects which generally represent higher risk, but
correspondingly higher margin work.
o Discontinued Real Estate 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 &
Development Company ("PL&D"), the Company's real estate development
subsidiary. As previously reported, the non-binding agreement between
PL&D, the Managing General Partner of Rincon Center Associates, and the
lenders to Rincon Center, a mixed-use property in San Francisco, will
not be implemented because of the failure to obtain agreement of all
necessary parties. The lenders have issued formal notices of default
thereby commencing the foreclosure process. Also, management decided to
adopt a change in strategy with regards to the remaining real estate
development properties, from one of holding the properties through the
necessary development and stabilization periods to a new strategy of
generating short-term liquidity through an accelerated disposition or
bulk sale. While the decision to discontinue real estate development
operations resulted in the recognition of a significant non-cash charge
in the second quarter of 1999 and eroded the Company's net worth, it is
the opinion of management that this decision will allow the Company to
improve its short-term liquidity and to better focus its management and
financial resources on the Company's profitable core building and civil
construction business. Several of the remaining real estate properties
now being offered for sale are currently under or are pending a purchase
and sale agreement. It is the opinion of management that the provision
for the estimated loss on disposal of the Company's real estate business
segment is adequate; however, any significant changes to the assumptions
inherent in the calculation of the provision, such as the anticipated
timing of closings or sales price of the properties, could result in
future adjustments of the provision.
Rebuilding Equity - As a result of the net loss recorded in the second
quarter of 1999, the Company's stockholders' equity was reduced to a
deficit of $42.8 million. Management is currently working with its
investment bankers to develop plans to raise additional capital, restore
balance sheet net worth and improve liquidity.
o Year 2000 Readiness Disclosures - Since many computers, related software
and certain devices
12
with embedded microchips record only the last two digits of a year, they
may not be able to recognize that January 1, 2000 (or subsequent dates)
comes after December 31, 1999. This situation could cause erroneous
calculations or system shutdowns, causing problems that could range from
merely inconvenient to significant.
As previously reported, the Company began a project to review all of its
computer systems in 1995. One factor, among many, to consider was what
impact, if any, would the Year 2000 have on computer systems. As a
result of this project, the Company implemented new fully integrated
on-line construction specific financial systems during the first quarter
of 1998 which are Year 2000 compliant. The cost of these new systems,
including the hardware, software and implementation costs, approximated
$1.5 million which was capitalized and is being amortized over ten years
on a straight-line basis.
The Company recognizes the Year 2000 issue could be an overall business
problem, not just a technical problem. Therefore, it established a Year
2000 Committee early in 1998 to identify all of the other potential Year
2000 problems that could impact the Company, including readiness issues
for its computer applications and business processes, non-information
technology systems such as those of its facilities and equipment, along
with relationships with third parties, such as our customers, vendors,
subcontractors, joint ventures, and other business partners; develop
plans to evaluate the significance of the potential problem; develop
plans to remedy or minimize the potential problem; assign appropriate
resources; and monitor the implementation of the plans. During the third
quarter of 1998, the Committee, which included both the Company's
Chairman and CEO, designated the Year 2000 Project Manager. The Project
Manager has organized a Year 2000 Team, consisting of specific
individuals assigned from each operating unit and each corporate
department. In addition, the Company developed, published and commenced
implementation of its Year 2000 Readiness Plan which has as its overall
objective "to eliminate or minimize the potential internal and external
impact of the Year 2000 issue on the normal business operations of the
Company, its subsidiaries, and joint ventures in a timely and cost
effective manner". In addition to addressing its own computer
applications, facilities, and construction equipment, the Plan includes
communication with critical third parties as stated above.
The Year 2000 Plan includes the following phases: (1) potential problem
identification, (2) resource commitment, (3) inventory, (4) assessment,
(5) prioritization, (6) remediation and (7) testing. While the Company
completed the problem identification, resource commitment and
prioritization phases during 1998, and inventory phase during the first
quarter of 1999, it is currently in various stages of the "assessment",
"testing", and "remediation" phases as of June 30, 1999. As part of the
Plan, the Company is evaluating alternative solutions and developing
contingency plans for handling certain critical areas in the event
remediation is unsuccessful. Completion of the Year 2000 Plan, including
final testing and development of final contingency plans, is currently
on schedule and should be completed by its October 1999 targeted
completion date. The Company currently estimates that costs related to
the Year 2000 Plan, over and above the cost of the new financial systems
referred to above, will approximate $0.3 million which are being
expensed as incurred.
The Company, as a general contractor, generally provides its
construction services in accordance with detailed contracts and
specifications provided by its clients. Also, the Company recently
installed all new mission critical financial system software on new
hardware, all of which are Year 2000 compliant. In light of the above,
the Company has defined its most reasonably likely worst case scenario
at this stage of implementing its Year 2000 Plan to include last minute
inquiries and requests for assistance in determining Year 2000
compliance by some limited number of clients who have not properly
prepared
13
for this event. In addition, the possible filing of frivolous lawsuits
against the Company, among others, by a party or parties that claim they
were adversely impacted by a Year 2000 issue related to one of the many
projects with which the Company was associated is also a concern. The
Company currently plans to have a Year 2000 Urgent Response Team defined
and available to respond to last minute Year 2000 issues raised by
clients or others in a timely, proactive and cost effective manner. In
addition, the Company currently plans to develop prepackaged legal
defenses in advance assuming various types of complaints.
14
PART II. - OTHER INFORMATION
Item 1. - Legal Proceedings - None
Item 2. - Changes in Securities
(a) None
(b) None
(c) None
Item 3. - Defaults Upon Senior Securities
(a) None
(b) In accordance with the provisions of the 1995 Amended Revolving Credit
Agreement and the Credit Agreement which became effective on January 17,
1997, the Company suspended payment of quarterly dividends on its $21.25
Convertible Exchangeable Preferred Stock ("Senior Preferred Stock")
commencing with the dividend that normally would have been declared
during December 1995 through the dividend that would normally have been
declared during June 1999 for a total arrearage of $79.68 per share (or
$7.97 per depositary share) which aggregates approximately $7,968,000 to
date. While these dividends have not been declared or paid, they have
been fully accrued in accordance with the "cumulative" feature of the
stock.
Item 4. - Submission of Matters to a Vote of Security Holders
(a) May 13, 1999 - Annual Meeting of Stockholders
(b) Not applicable
(c) (1) Nominees for Class III Directors as listed in the proxy statement,
to hold office for a three year term, expiring in 2002 and until their
successors are chosen and qualified, were elected by holders of Common
Stock and Series B Preferred Stock with the following vote:
Number of Votes
-------------------------------------------------------------------
Authority
Class III Director For Against Withheld
- ----------------------------------------------- ---------------------- --------------------- ---------------
Nancy Hawthorne 8,808,360 --- 57,319
Douglas J. McCarron 8,806,229 --- 59,450
David B. Perini 8,814,088 --- 51,591
15
Part II. - Other Information (Continued)
(2) Two nominees for Preferred Directors (the "Preferred Directors") as
listed in the proxy statement to hold office until the earlier of (i)
the 2000 Annual Meeting of Stockholders and until their successors are
chosen and qualified, or (ii) all dividends in arrears on the Preferred
Stock have been paid or declared and funds therefor set apart for
payment, were elected by the Depositary, based on the two nominees who
received the greatest number of votes as indicated by the holders of the
Depositary Shares. A summary of the voting results follows:
Number of Votes
------------------------------------------------------
Nominees for Authority
Preferred Directors For Against Withheld
---------------------------------------- -------------- ------------------ ---------------
Arthur I. Caplan 931,389 --- 6,700
Frederick Doppelt 929,789 --- 8,300
(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 the 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:
Exhibit 3. Articles of Incorporation and By-laws
Incorporated herein by reference:
3.1 Restated Articles of Organization - As amended
through January 17, 1997 - Exhibit 3.1 to 1996
Form 10-K filed March 31, 1997.
3.2 By-laws - As amended and restated as of January
17, 1997 - Exhibit 3.2 to Form 8-K filed on
February 14, 1997.
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 - Exhibit 4(b) to Amendment
No. 1 to Form S-2 Registration Statement filed
June 19, 1987; SEC Registration No. 33-14434.
16
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.
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.
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.
4.9 Stock Assignment and Assumption Agreement dated
as of December 13, 1996 by and among the
Company, PB Capital and ULLICO (filed as Exhibit
4.1 to the Schedule 13D filed by ULLICO on
December 16, 1996 and incorporated herein by
reference).
4.10 Stock Assignment and Assumption Agreement dated
as of January 17, 1997 by and among the Company,
RCBA and The Common Fund - Exhibit 4.10 to Form
8-K filed on February 14, 1997.
4.11 Voting Agreement dated as of January 17, 1997 by
and among PB Capital, David B. Perini, Perini
Memorial Foundation, David B. Perini
Testamentary Trust, Ronald N. Tutor, and
Tutor-Saliba Corporation - Exhibit 4.11 to Form
8-K filed on February 14, 1997.
4.12 Registration Rights Agreement dated as of
January 17, 1997 by and among the Company, PB
Capital and ULLICO - Exhibit 4.12 to Form 8-K
filed on February 14, 1997.
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.
17
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.
10.4 $125 million Credit Agreement dated as of
December 6, 1994 among Perini Corporation, the
Banks listed herein, Morgan Guaranty Trust
Company of New York, as Agent, and Shawmut Bank,
N.A., Co-Agent - Exhibit 10.4 to 1994 Form 10-K,
as filed.
10.5 Amendment No. 1 as of February 26, 1996 to the
Credit 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 - Exhibit 10.5 to 1995 Form 10-K, as
filed.
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 - Exhibit 10.6 to 1995 Form 10-K, as
filed.
10.7 Amendment No. 2 as of July 30, 1996 to the
Credit Agreement dated as of December 6, 1994
and Amendment No. 1 as of July 30, 1996 to the
Bridge Credit Agreement dated February 26, 1996
among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.7 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.8 Amendment No. 2 as of September 30, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.8 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.9 Amendment No. 3 as of October 2, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.9 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.10 Amendment No. 4 as of October 15, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.10 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
18
10.11 Amendment No. 5 as of October 21, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.11 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.12 Amendment No. 6 as of October 24, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.12 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.13 Amendment No. 7 as of November 1, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 among Perini Corporation, the Banks listed
herein, Morgan Guaranty Trust Company of New
York, as Agent, and Fleet National Bank of
Massachusetts, as Co-Agent - Exhibit 10.13 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.14 Amendment No. 8 as of November 4, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 and Amendment No. 3 as of November 4, 1996
to the Credit Agreement dated 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, as Co-Agent - Exhibit 10.14 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
10.15 Amendment No. 9 as of November 12, 1996 to the
Bridge Credit Agreement dated as of February 26,
1996 and Amendment No. 4 as of November 12, 1996
to the Credit Agreement dated 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, as Co-Agent - Exhibit 10.15 to
Perini Corporation's Form 10-Q/A for the fiscal
quarter ended September 30, 1996 filed on
December 11, 1996.
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.
10.17 Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.17 to
1996 Form 10-K - as filed.
10.18 Amendment No. 1 as of November 10, 1997 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.18 to
1998 Form 10-K - as filed.
19
10.19 Amendment No. 2 as of August 31, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.19 to
1998 Form 10-K - as filed.
10.20 Amendment No. 3 as of September 9, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.20 to
1998 Form 10-K - as filed.
10.21 Amendment No. 4 as of September 30, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.21 to
1998 Form 10-K - as filed.
10.22 Amendment No. 5 as of November 16, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.22 to
1998 Form 10-K - as filed.
10.23 Amendment No. 6 as of December 1, 1998 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.23 to
1998 Form 10-K - as filed.
10.24 Amendment No. 7 as of March 23, 1999 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 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 10.24 to
Perini Corporation's Form 10-Q for the fiscal
quarter ended March 31, 1999 filed on May 14,
1999.
10.25 Amendment No. 8 as of July 19, 1999 to the
Amended and Restated Credit Agreement dated as
of January 17, 1997 among Perini Corporation,
the Banks listed herein and Morgan Guaranty
Trust Company of New York, as Agent, and Fleet
National Bank, as Co-Agent - filed herewith.
(b) Reports on Form 8-K - None.
20
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: August 13, 1999 /s/ Robert Band
-----------------------------------------------
Robert Band, President, Chief Executive Officer
and Chief Financial Officer
Date: August 13, 1999 /s/ Michael E. Ciskey
-----------------------------------------------
Michael E. Ciskey, Vice President and Controller
21