Securities and Exchange Commission Commission File No. 1-6314
Washington, DC 20549
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934.
For the fiscal year ended December 31, 2002
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to ____________
Perini Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04-1717070
(State of Incorporation) (IRS Employer Identification No.)
73 Mt. Wayte Avenue, Framingham, Massachusetts 01701
(Address of principal executive offices) (Zip Code)
(508) 628-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
Common Stock, $1.00 par value The American Stock Exchange
$2.125 Depositary Convertible Exchangeable The American Stock Exchange
Preferred Shares, each representing 1/10th
Share of $21.25 Convertible Exchangeable
Preferred Stock, $1.00 par value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X
Indicate by check mark if registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X
The aggregate market value of voting Common Stock held by nonaffiliates of the registrant is $20,659,948 as of June 28, 2002, the last business day of the registrant's most recently completed second quarter. The Company does not have any non-voting Common Stock.
The number of shares of Common Stock, $1.00 par value per share, outstanding at February 24, 2003 is 22,664,135.
Portions of the annual proxy statement for the year ended December 31, 2001 are incorporated by reference in Part III.
PERINI CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K
PAGE
PART I
Item 1: Business 2 - 11
Item 2: Properties 12
Item 3: Legal Proceedings 12 - 16
Item 4: Submission of Matters to a Vote of Security Holders 16 - 17
PART II
Item 5: Market for the Registrant's Common Stock and Related Stockholder Matters 18
Item 6: Selected Financial Data 19 - 20
Item 7: Management's Discussion and Analysis of Financial Condition and Results of
Operations 21 - 28
Item 7A: Quantitative and Qualitative Disclosure About Market Risk 28
Item 8: Financial Statements and Supplementary Data 28
Item 9: Change in and Disagreements with Accountants on Accounting and Financial
Disclosure 28
PART III
Item 10: Directors and Executive Officers of the Registrant 29
Item 11: Executive Compensation 29
Item 12: Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 29
Item 13: Certain Relationships and Related Transactions 29
PART IV
Item 14: Controls and Procedures 30
Item 15: Exhibits, Financial Statement Schedules and Reports on Form 8-K 30 - 31
Signatures 32
Certifications 33 - 34
PART I.
ITEM 1. BUSINESS
Forward-looking Statements
The statements contained in this Annual Report on Form 10-K 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 without limitation, statements regarding the Company's or its management's expectations, hopes, beliefs, intentions or strategies regarding the future. These forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the Company) or other assumptions 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; the availability of borrowed funds on terms acceptable to the Company; changes in federal and state appropriations for infrastructure projects; possible changes or developments in worldwide or domestic political, social, economic, business, industry, market and regulatory conditions or circumstances; and actions taken or not taken by third parties including the Company's customers, suppliers, business partners, and competitors and legislative, regulatory, judicial and other governmental authorities and officials. Also see "Risk Factors" on pages 9 and 10. Should one or more of these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Introduction
Perini Corporation and its subsidiaries (the "Company", unless the context indicates otherwise) are engaged in the construction business. The Company was incorporated in 1918 as a successor to businesses which had been engaged in providing construction services since 1894. The Company currently provides general contracting, construction management and design-build services to private clients and public agencies throughout the United States and selected overseas locations. The Company's construction business involves two basic segments or operations: building and civil.
The general building and civil contracting services provided by the Company consist of planning and scheduling the manpower, equipment, materials and subcontractors required for the timely completion of a project in accordance with the terms, plans and specifications contained in a construction contract. The Company provides these services by using traditional general contracting arrangements, such as fixed price, guaranteed maximum price and cost plus award fee contracts and, to a lesser extent, construction management or design-build contracting arrangements. These contract types and the risks generally inherent therein are discussed below:
Under certain situations which include, but are not limited to, contract type, project size, complexity or geographic location, the Company will continue to attempt to minimize its financial and/or operational risk, as it has in the past, by participating in construction joint ventures, often as the sponsor or manager of the project, for the purpose of bidding and, if awarded, performing the agreed upon construction services. These joint ventures are based on a joint venture agreement whereby each of the joint venture participants is usually committed to supply a predetermined percentage of capital, as required, and to share in the same predetermined percentage of income or loss of the project on a joint and several basis. Although joint venture arrangements tend to minimize the risk of loss, the Company's initial obligations to the joint venture may increase as a result of the joint and several nature of the arrangement if one of the other participants is financially unable to bear its portion of required capital contributions.
In the normal course of the business, the Company periodically evaluates its existing construction markets and seeks to identify any growing markets where it feels it has the expertise and management capability to successfully compete or decides to withdraw from markets which are no longer economically attractive.
Operating StructureThe building and civil segments operate as decentralized profit centers as more fully described below and independently identify, estimate and negotiate or submit bids to obtain projects and are accountable for the successful completion of projects awarded. Each segment has Company personnel assigned to perform the following functions: executive which coordinates and has overall responsibility for the other functions performed by the segment; work acquisition which includes business development, marketing, preconstruction services and the estimating process; operations which provides overall planning and supervision of the project teams including project staffing, such as project managers, superintendents, engineers, schedulers, equipment and safety personnel, as required for each project; and financial control which includes staffing of financial control personnel assigned to projects. These segments are supported by certain centralized corporate functions, including treasury, human resources, risk management, legal, internal audit, information technology, tax and accounting functions.
The building operation provides its services through regional offices located in several metropolitan areas: Boston, serving New England, the Mid-Atlantic and Southeast areas; and Phoenix and Las Vegas, serving Arizona, Nevada and California. The building operation also maintains satellite offices in Carlsbad, California, Celebration, Florida and Detroit, Michigan. The Company's building contracting services are provided by Perini Building Company, Inc., a wholly owned subsidiary. This company combines substantial resources and expertise to better serve clients within the building construction market and enhances Perini's name recognition in this market. The Company undertakes a broad range of building construction projects and is well known for its hospitality and gaming industry projects, and for its health care facilities, correctional facilities, sports complexes, multi-unit residential, commercial, civic, cultural and educational facilities. In addition, the Company completed the acquisition of James A. Cummings, Inc. ("Cummings"), an established building contractor in the South Florida region, in January 2003. Cummings will operate as a wholly owned subsidiary of the Company as part of the building construction segment.
Perini Management Services, Inc. ("PMSI", formerly Perini International Corporation), a wholly owned subsidiary, provides a broad range of construction services (primarily building) to United States government agencies in the U.S. and selected overseas locations, funded primarily in U.S. dollars. In addition, a joint venture managed by PMSI provides maintenance/modification and support services at ten nuclear power generating plant sites in the Midwest and in the East under a multi-year contract with a private client. In selected situations, PMSI pursues other work internationally. PMSI is combined with Perini Building Company to form the Company's building segment for financial reporting purposes.
The civil operation provides its services through regional offices located in the Boston and New York City metropolitan areas and undertakes large public civil projects in the East, with current emphasis on the major New York City and Boston metropolitan areas, and selectively in other geographic locations in the United States. The Company's civil contracting services are provided by "Perini Civil", which is an operating division of Perini Corporation, and include construction and rehabilitation of highways, bridges, subways, tunnels, airports, marine projects and waste water treatment facilities. The Company has been active in civil operations since 1894 and believes that it has particular expertise in large and complex civil construction projects. The Company believes that infrastructure rehabilitation is, and will continue to be, a significant market in 2003 and beyond.
Strategy
Overall, the Company continues to focus on optimizing value for its shareholders by actively pursuing higher margin projects in markets where it has considerable expertise and developing project opportunities through its strong client relationships, as well as managing its operations to achieve on-time delivery, tight cost controls, safe working conditions and high quality standards. The Company's current strategy is to concentrate on the civil construction market in the East and specialized niche building construction markets throughout the United States, with the goal in both markets to continue to increase profit margins. In addition, the Company is continuing the process of pursuing a strategy to profitably expand its construction business internally or through acquisition as it recently did with the acquisition of Cummings in January 2003. (See Note 14 of Notes to Consolidated Financial Statements.) The Company believes the best opportunities for growth in the coming years for its civil construction business are in the urban infrastructure market, particularly in metropolitan New York and Boston, and selectively in other large, complex projects throughout the United States. The Company's strategy in building construction is to take advantage of its positive reputation in certain niche markets and to expand into new markets compatible with its expertise. Internally, the Company plans to continue to improve efficiency through strict attention to project control procedures and the control of overhead expenses. Finally, the Company continues to expand its expertise to assist public owners to develop necessary facilities through creative alternative project delivery methods, including public/private ventures, design-build and design-build-operate-maintain ("DBOM") arrangements.
Revenues
Information on lines of business and foreign business is included under the following captions of this Annual Report on Form 10-K for the year ended December 31, 2002.
Annual Report
on Form 10-K
Caption Page Number
Selected Consolidated Financial Information 19 - 20
Management's Discussion and Analysis 21 - 28
Note 12 of Notes to Consolidated Financial Statements entitled "Business Segments" 62 - 64
While the "Selected Consolidated Financial Information" presents certain business segment information for purposes of consistency of presentation for the five years ended December 31, 2002, additional business segment information required by Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information", for the three years ended December 31, 2002 is included in Note 12 of Notes to Consolidated Financial Statements.
A summary of revenues by business segment for each of the three years in the period ended December 31, 2002 is as follows (in thousands):
Revenues For Year Ended December 31,
---------------------------------------------
2002 2001 2000
------------- ------------- -------------
Building $ 772,513 $ 1,199,439 $ 826,191
Civil 312,528 353,957 279,469
------------- ------------- -------------
Total $1,085,041 $ 1,553,396 $ 1,105,660
============= ============= =============
During 2002, the Company was active in the building, civil and, to a lesser extent, the international construction markets, and performed work for over 44 federal, state and local governmental agencies or authorities and private customers under approximately 78 separate contracts. A significant portion of the increase in building construction revenues during 2001 was due to the impact of the Mohegan Sun Phase II Expansion Project ("Mohegan Sun Project") initially obtained in 1999 (see comments under "Backlog" below) and two large hotel/casino projects in the southwestern region of the United States, all three of which were substantially complete in early 2002. Due to the Company's trend toward fewer but larger contracts, a material part of the Company's business has been dependent on a limited number of private customers and/or public agencies in recent years (see Note 12 of Notes to Consolidated Financial Statements).
Revenues by Client Source
Year Ended December 31,
-------------------------------
2002 2001 2000
-------- ------- --------
Private Owners 65% 73% 68%
Federal Governmental Agencies 5 3 4
State, Local and Foreign Governments 30 24 28
-------- ------- --------
100% 100% 100%
======== ======= ========
Historically, a high percentage of Company contracts have been of the fixed price and GMP type. A summary of revenues and backlog by type of contract for the most recent three years follows:
Revenues - Year Ended
December 31, Backlog as of December 31,
- -------------------------------- ------------------------------
2002 2001 2000 2002 2001 2000
- ---------- --------- --------- -------- -------- --------
35% 25% 32% Fixed Price 30% 41% 46%
65 75 68 CPAF, GMP or CM 70 59 54
- ---------- --------- --------- -------- -------- --------
100% 100% 100% 100% 100% 100%
========== ========= ========= ======== ======== ========
Backlog
The Company includes a construction project in its backlog at such times as a contract is awarded or a firm letter of commitment is obtained, and funding is in place. As a result, the backlog figures are firm, subject only to the cancellation provisions contained in the various contracts. Historically, these provisions have not had a material adverse effect on the Company.
As of December 31, 2002, the Company had a year end construction backlog of $990 million compared to $1.214 billion at December 31, 2001 and to the record year end backlog of $1.789 billion at December 31, 2000. The backlog is summarized below by geographic area and also by business segment:
Backlog (in thousands) as of December 31,
--------------------------------------------------------------------------
2002 2001 2000
----------------------- ----------------------- ----------------------
Northeast $ 219,619 22% $ 548,728 45% $ 1,219,166 68%
Mid-Atlantic 81,153 8 30,261 3 53,334 3
Southeast 106,742 11 9,058 1 115,165 6
Midwest 172,539 17 247,648 20 110,867 6
Southwest 134,381 14 141,478 12 206,796 12
West 198,251 20 135,709 11 885 -
Foreign 77,490 8 100,653 8 82,518 5
------------- ------- ------------- ------- ------------- -------
Total $ 990,175 100% $ 1,213,535 100% $ 1,788,731 100%
============= ======= ============= ======= ============= =======
The relatively high level of backlog in the Northeast region of the United States and overall record backlog at the end of 2000 was primarily due to the Mohegan Sun Project and several civil projects obtained as the Company continued to meet the needs of the growing infrastructure and rehabilitation market in this region, particularly the Metropolitan New York and Boston areas. The primary reasons for the decrease in backlog in the Northeast region and overall at the end of 2001 are due to the substantial completion of the Mohegan Sun Project and the slow down in the private and public works awards after the terrorist attacks in September of 2001. The primary reasons for the continued decrease in the level of backlog in the Northeast region and overall at the end of 2002 are a temporary decrease in the number of public works projects available to bid in Perini Civil's market area and increased competition encountered from other contractors when bidding on the reduced level of work available. The fluctuation in backlog in the other regions is partly due to the timing of the signing and start-up of new contracts rather than a longer term trend.
Backlog (in thousands) as of December 31,
-----------------------------------------------------------------------------
2002 2001 2000
------------------------ ----------------------- -----------------------
Building $ 779,613 79% $ 738,546 61% $ 1,051,364 59%
Civil 210,562 21 474,989 39 737,367 41
-------------- ------- ------------- ------ ------------- -------
Total $ 990,175 100% $ 1,213,535 100% $ 1,788,731 100%
============== ======= ============= ====== ============= =======
The Company estimates that approximately $260 million of its backlog at December 31, 2002 will not be completed in 2003.
The Contract Process
The Company identifies potential projects that it might be interested in pursuing from a variety of sources, including, but not limited to, advertisements by federal, state and local governmental agencies, meetings of the Company's business development personnel with potential customers to discuss their current and future construction projects or programs, meeting with knowledgeable participants in the construction industry such as architects, engineers, bankers and sureties, and general awareness of current events and trends in business and various levels of government spending and budgets.
After ascertaining the projects available, the Company further refines the list by considering other criteria, such as project size, duration, availability of estimating and project personnel, current backlog, perceived competitive advantages and disadvantages, prior experience on similar projects, contracting agency or owner, geographic location, type of contract and other financial and operational risk factors.
After deciding which contracts to pursue, the Company usually has to complete a prequalification process with the applicable agency or owner. The prequalification process generally limits bidders to those companies with operational experience and financial capability to effectively complete the particular project(s) in accordance with the plans, specifications and construction schedule.
The estimating process generally involves three phases. Initially, the Company performs a detailed review of the plans and specifications, summarizes the various types of work involved and related estimated quantities, determines the project duration or schedule, and highlights the unique and riskier aspects of the project. After the initial review, a decision is made to continue to pursue the project or not. Assuming the answer is positive, the Company performs the second phase of the estimating process which consists of estimating the cost and availability of labor, material, equipment, subcontractors and the project team required to complete the project on time and in accordance with the plans and specifications. The final phase consists of a detailed review of the estimate by management including, among other things, assumptions regarding cost, approach, means and methods, productivity and risk. After the final review of the cost estimate, management adds an amount for profit to arrive at the total bid amount.
Public bids to various governmental agencies are generally awarded to the lowest bidder. Bids or negotiated contracts with public or private owners are generally awarded to the lowest bidder, but many times other factors, such as shorter project schedules or prior experience with the owner, result in the award of the contract based upon factors other than price. Most public sector contracts provide for termination of the contract at the election of the contracting agency. In such events, the Company is generally entitled to receive reimbursement for all costs incurred on the project plus a reasonable profit. Many of the Company's contracts are subject to interim or final completion dates or milestones with liquidated damages assessed against the Company if the specified milestone dates are not achieved. Historically, such provisions have not had a material adverse effect on the Company.
During the normal course of most projects, the owner and sometimes the contractor initiate modifications or changes to the original contract to reflect, among other things, changes in specifications or design, method or manner of performance, facilities, equipment, materials, site conditions and period for completion of the work. Generally the scope and price of these modifications are documented in a "change order" to the original contract and reviewed, approved and paid in accordance with the normal change order provisions of the contract. Many times, the change orders define the scope of work and the contractor is directed to proceed, but the price of the work is subject to further negotiations after the work is performed by the contractor. Other times, an owner may direct the contractor to perform certain change order work when both scope and price are not approved in advance or are in dispute. If the owner decides the directive does not result in additional compensation to the contractor and the contractor believes the directives to be outside the scope of the original bid documents, or if the physical conditions found on the project site are different from those presented in the bid documents, or for any variety of other reasons the contractor believes the directive to perform the work creates costs that could not reasonably be anticipated from the bid documents, the contract permits the contractor to make a request for an adjustment to the contract price. Such adjustment requests are often called "contract claims". The process for resolving claims may vary from one contract to another but, in general, there is a process to attempt to resolve claims at the project supervisory level through the normal change order process or with higher levels of management within the organization of the contractor and the owner. Depending upon the terms of the contract, claim resolution may employ a variety of other resolution methods including mediation, binding or non-binding arbitration, or litigation. Regardless of the process, it is typical that when a potential claim arises on a project, the contractor has the contractual obligation to perform the work and must incur the related costs. The contractor does not recoup the costs until the claim is resolved. It is not uncommon for the claim resolution process to take months or years to resolve, especially if it involves litigation.
The Company's contracts generally involve work durations in excess of one year. Revenue on contracts in process is generally recorded under the percentage of completion contract accounting method. For a more detailed discussion of the Company's policy in these areas, see Note 1(d) of Notes to Consolidated Financial Statements, entitled "Method of Accounting for Contracts".
Because the Company's operating results are primarily generated from a limited number of significant active construction projects, operating results in any given fiscal quarter can vary depending on the timing of progress achieved and changes in the estimated profitability of the projects being reported. Progress on projects in certain areas may also be
delayed by weather conditions depending on the type of project, stage of completion and severity of the weather. Such delays, if they occur, may result in inconsistent quarterly operating results due to more or less progress than anticipated being achieved on certain projects. Therefore, the reported operating results for any one fiscal quarter may not be indicative of future results.
Competition
The construction business is highly competitive. Competition is based primarily on price, reputation for on time completion, quality and reliability, availability of surety capacity and financial strength of the contractor. While the Company experiences a great deal of competition from other large general contractors, some of which may be larger and have greater financial resources than the Company, as well as from a number of smaller local contractors, it believes it has sufficient technical, managerial and financial resources, combined with a positive reputation for performance, to be competitive in each of its major market areas.
Construction Costs
While the Company's construction business may experience some adverse consequences if shortages develop or if prices for materials, labor or equipment increase excessively, provisions in certain types of contracts often shift all or a major portion of any adverse impact to the owner. On fixed price contracts, the Company attempts to insulate itself from the unfavorable effects of inflation by incorporating escalating wage and price assumptions, where appropriate, into its construction bids. Construction and other materials used in the Company's construction activities are generally available locally from multiple sources and have been in adequate supply during recent years. Construction work in selected overseas areas primarily employs expatriate and local labor which can usually be obtained as required. The Company does not anticipate any significant impact in 2003 from material and/or labor shortages or price increases.
Certain Economic Trends
The Company's civil construction markets are dependent on the amount of civil infrastructure work funded by various governmental agencies which, in turn, may depend on the condition of the existing infrastructure, the need for new or expanded infrastructure and other federal, state or local government budget requirements. The building markets in which the Company participates are dependent on economic and demographic trends, as well as governmental policy decisions as they impact the specific geographic markets.
Government Regulations and Environmental Matters
The Company's operations are subject to compliance with regulatory requirements of federal, state and municipal authorities, including regulations covering labor relations, safety standards, affirmative action and the protection of the environment including requirements in connection with water discharge, air emissions and hazardous and toxic substance discharge. Under the Federal Clean Air Act and Clean Water Act, the Company must apply water or chemicals to reduce dust on road construction projects and to contain water contaminants in run-off water at construction sites. In certain circumstances, the Company may also be required to hire subcontractors to dispose of hazardous wastes encountered on a project in accordance with a plan approved in advance by the Owner. The Company believes that it is in substantial compliance with all applicable laws and regulations. However, future amendments to current laws or regulations imposing more stringent requirements could have a material adverse effect on the Company.
In addition, the Company believes it has minimal exposure to environmental liability as a result of the activities of Perini Environmental Services, Inc. ("Perini Environmental"), a wholly owned subsidiary of the Company that was phased out during 1997. Perini Environmental provided hazardous waste engineering and construction services to both private clients and public agencies nationwide. Perini Environmental was responsible for compliance with applicable laws in connection with its clean up activities and bore the risk associated with handling such materials. In addition to strict procedural guidelines for conduct of this work, the Company and Perini Environmental generally carried insurance or received satisfactory indemnification from customers to cover the risks associated with this business. During 2002, the Company also owned real estate in three states and as an owner, is subject to laws governing environmental responsibility
and liability based on ownership. The Company is not aware of any significant environmental liability associated with its ownership of real estate.
The Company has been named in five unresolved claims from former employees of subcontractors regarding exposure to asbestos on certain Company projects. All of these pending claims are covered by insurance.
Risk Factors
The Company and its business segments are subject to a number of risks, including those summarized below. Such risks could have a material adverse effect on the Company's financial condition, results of operations and cash flows. Also, see disclosure under "Forward-looking Statements" on page 2.
scheduling of other project work, as well as the specified contract milestone date(s). Significant extra work that isn’t resolved on a timely basis or is resolved for less than anticipated amounts also adversely impacts the Company’s working capital, cash flow and possibly earnings.
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 and Development Company ("PL&D"), the Company's real estate development subsidiary. Accordingly, approximately 95% of the property has been liquidated since June 30, 1999. Remaining properties are classified on the balance sheet as either "Land held for sale, net" or included in "Other Assets". (See Note 5 of Notes to Consolidated Financial Statements.)
PL&D or Paramount Development Associates, Inc. ("Paramount"), a wholly owned subsidiary of PL&D, owned the following real estate properties during 2002:
Massachusetts
Raynham Woods Commerce Center, Raynham - During the late 1980's, Paramount acquired a 409-acre site (equivalent to 300 net saleable acres) located in Raynham, Massachusetts and completed infrastructure work on a major portion of the site which was being developed as a mixed-use corporate park. From 1989 through 2001, an aggregate of 156 net acres was sold to various users. Paramount sold 19 net acres during 2002 which leaves approximately 125 buildable acres for sale.
Arizona
Sabino Springs Estates, Tucson - During 1990, the Tucson Board of Supervisors unanimously approved a plan for this 410-acre residential golf course community close to the foothills on the east side of Tucson. In 1993, PL&D sold a major portion of the property to an international real estate company, who completed a championship golf course and clubhouse within the project in 1995. During 2002, PL&D completed the sale of the balance of the property.
Insurance and Bonding
All of the Company's properties and equipment, both directly owned or owned through joint ventures with others, are covered by insurance and management believes that such insurance is adequate. In addition, the Company maintains general liability, excess liability and workers' compensation insurance in amounts it believes are consistent with its risk of loss and industry practice. During 2000 and 2001, the Company was able to significantly limit its financial risk under its workers' compensation and general liability insurance coverage by purchasing traditional insurance policies in a favorable insurance market. Due to tight conditions in the insurance market, effective for the calendar year 2002 and continuing into 2003, the Company found it necessary to purchase workers' compensation and general liability policies at substantially higher premiums with a Company self-insured deductible limit of $250,000 per occurrence, with appropriate aggregate caps on losses retained.
As a normal part of the construction business, the Company is often required to provide various types of surety bonds as an additional level of security of its performance. The Company's ability to obtain surety bonds primarily depends upon its capitalization, working capital, past performance, management expertise and certain external factors including the overall capacity of the surety market. Surety companies consider such factors in relationship to the amount
of the Company's backlog and their underwriting standards, which may change from time to time. Since 2001, the surety industry has undergone significant changes with several companies withdrawing completely from the industry or significantly reducing their bonding commitment. In addition, certain re-insurers of surety risk have limited their participation in this market since 2001. The Company has surety arrangements with several sureties, one of which it has dealt with for over 75 years and another of which owns approximately 21% of the Company's outstanding common stock (see Note 13 of Notes to Consolidated Financial Statements). While this tightening of the surety industry has not had a significant impact on the Company's operations, the inability to obtain surety bonds would have a material adverse effect on the Company's future business.
Employees
The total number of personnel employed by the Company is subject to seasonal fluctuations, the volume of construction in progress and the relative amount of work performed by subcontractors. During 2002, the average number of employees was approximately 3,200 with a maximum of approximately 4,800 and a minimum of approximately 1,800.
The Company operates as a union contractor. As such, it is a signatory to numerous local and regional collective bargaining agreements, both directly and through trade associations, throughout the country. These agreements cover all necessary union crafts and are subject to various renewal dates. Estimated amounts for wage escalation related to the expiration of union contracts are included in the Company's bids on various projects and, as a result, the expiration of any union contract in the next fiscal year is not expected to have any material impact on the Company.
ITEM 2. PROPERTIES
Properties for sale applicable to the Company's previously discontinued real estate activities are described in detail in Item 1. Business on page 10. Properties used in operations are summarized below:
Aproximate
Business Owned or Approximate Square
Segment(s) Leased by Perini Acres Feet of Office Space
------------------ ------------------ --------------- ---------------------
Principal Offices
- ------------------------
Framingham, MA Building and Civil Owned 9 100,000
Phoenix, AZ Building Leased - 22,700
Hawthorne, NY Civil Leased - 12,800
Las Vegas, NV Building Leased - 7,400
Celebration, FL Building Leased - 4,800
Carlsbad, CA Building Leased - 3,900
Detroit, MI Building Leased - 2,500
--------------- ---------------------
9 154,100
=============== =====================
Principal Permanent
Storage Yards
- ------------------------
Bow, NH Civil Owned 70
Framingham, MA Building and Civil Owned 6
Las Vegas, NV Building Leased 2
---------------
78
===============
The Company believes its properties are well maintained, in good condition, adequate and suitable for the Company's purpose and fully utilized.
ITEM 3. LEGAL PROCEEDINGS
Mergentime - Perini Joint Ventures vs. WMATA MatterOn May 11, 1990, contracts with two joint ventures in which Perini Corporation held a minority interest ("Joint Ventures") were terminated by the Washington Metropolitan Area Transit Authority ("WMATA") on two adjacent subway construction contracts in the District of Columbia. The contracts were awarded to the Joint Ventures in 1985 and 1986. However, Perini and Mergentime Corporation ("Mergentime"), the 60% managing partner, entered into an agreement in 1987 under which Perini withdrew from the Joint Ventures and Mergentime assumed complete control over the performance of both projects. This agreement did not relieve Perini of its responsibilities to WMATA as a Joint Venture partner. After Perini withdrew from the Joint Ventures, Mergentime and WMATA were embroiled in a dispute regarding progress on the projects. Each party blamed the other for delays that were impacting both cost and progress and the parties were unable to resolve their dispute. Ultimately, both construction contracts were terminated by WMATA and WMATA retained Perini, acting independently, to complete both projects.
Subsequently, the Joint Ventures brought an action in the United States District Court for the District of Columbia against WMATA, seeking damages for delays, unpaid extra work and wrongful termination and WMATA brought an action against the Joint Ventures seeking damages for additional costs to complete the projects. After a bench trial before two District Court Judges (the initial Judge died before the matter could be concluded), the District Court found the Joint Ventures liable to WMATA for damages in the amount of approximately $16.5 million and WMATA liable to the Joint Ventures for damages in the amount of approximately $4.3 million.
The Joint Ventures appealed the judgment to the United States Court of Appeals for the District of Columbia ("Court of Appeals"), arguing, among other things, that the second District Court Judge had issued his final decision
without fully familiarizing himself with the record of the initial District Court Judge. On February 16, 1999, the Court of Appeals vacated the District Court's final judgment and ordered the successor District Court Judge to review the findings of the initial Judge and hold further hearings in regard to the Joint Ventures' affirmative claims. In addition, the Court of Appeals held that statutory interest on any of the claims will not accrue until final judgment is entered sometime in the future. Later in 1999, the case was transferred to a new successor District Court Judge.
On February 28, 2001, the new successor District Court 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 Ventures' motion for a new trial be granted.
A new trial before the new successor District Court Judge was completed in January 2002 and a decision is still pending. The ultimate financial impact of the Judge's pending decision is not yet determinable; therefore, no provision for loss, if any, has been recorded in the financial statements.
Tutor-Saliba-Perini Joint Venture vs. Los Angeles 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 costs for extra work required by the MTA in connection with the construction of the Wilshire/Normandie Subway Station. TSP is seeking additional compensation from the MTA for claims related to the construction and in February 1999 the MTA countered with civil claims under the California False Claims Act against TSP, Tutor-Saliba Corporation, Perini Corporation and other parties. 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 (see Note 13).
Claims concerning the construction of the Wilshire/Normandie Subway Station were tried before a Jury in 2001. During trial, the Judge ruled that TSP had failed to comply with the Court's prior discovery orders and the Judge penalized TSP for its alleged non-compliance by dismissing TSP's claim and by ruling, without a Jury finding, that TSP was liable to the MTA for damages on the MTA's counterclaim. The Judge then instructed the Jury that TSP was liable to the MTA and charged the Jury with the responsibility of determining the amount of the damages based on the Judge's ruling. The Jury awarded the MTA approximately $29.6 million in damages.
On March 26, 2002, the Judge amended the award, ordering TSP to pay the MTA an additional $33.4 million in costs and attorney fees, with the aggregate $63.0 million award subject to interest at an annual rate of 10% from the date of the award.
TSP and the other plaintiffs/defendants in counterclaim have appealed the Judge's discovery sanction, the subsequent Jury award and the amended award. The ultimate financial impact of the Judge's ruling and/or the awards is not yet determinable. Therefore, no provision for loss, if any, has been recorded in the financial statements.
City of San Francisco vs. Tutor-Saliba, Perini & Buckley Joint Venture Matter
On November 1, 2002, the San Francisco City Attorney, on behalf of the City and County of San Francisco and the citizens of California ("Plaintiffs"), filed a civil action with a demand for a jury trial against Tutor-Saliba Corporation ("TSC"), the Tutor-Saliba, Perini & Buckley Joint Venture ("JV"), Perini Corporation ("Perini"), Buckley & Company, Inc. ("Buckley") and their bonding companies in the United States District Court in San Francisco relating to seven contracts for work on the expansion of the San Francisco International Airport. The Plaintiffs allege various overcharges, bidding violations, violations of minority contracting regulations, civil fraud, and violation of the California and San Francisco False Claims and California Unfair Competition Acts. In addition, the Plaintiffs allege that TSC has violated the United States Racketeer Influenced Corrupt Organizations Act. The Plaintiffs have asserted $30 million in damages and are seeking treble damages, various civil penalties and debarment of the JV and TSC from doing business with the City of San Francisco. The Plaintiffs have not allocated their claims for damages and penalties amongst the defendants or the seven contracts at issue, only two of which involved the JV. TSC is the managing partner of the JV, and in December
1997, Perini sold its entire 20% interest in the JV to TSC. TSC has agreed to indemnify Perini from any liability arising out of the joint venture, including legal fees and expenses.
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 ("MHD") 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, MHD ordered PKC to perform changes to the work and issued related direct cost changes with an estimated 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.
Certain of PKC's claims have been presented to a Disputes Review Board ("DRB") which consists of three construction experts chosen by the parties. To date, the DRB has ruled on a binding basis that PKC is entitled to additional compensation for its contract time delay claim in the amount of $17.4 million. A Judge of the Massachusetts Superior Court has issued a decision upholding the DRB's binding award to PKC. Although MHD challenged several of the DRB's decisions relative to the contract time delay award discussed above, PKC received a favorable ruling on March 20, 2002 from the Superior Court of the Commonwealth of Massachusetts that approved PKC's request to have MHD comply with the DRB's decision to award the $17.4 million for the time delay. The MHD has appealed the Superior Court decision to the Appeals Court of the Commonwealth of Massachusetts.
The DRB has also ruled on a binding basis that PKC is entitled to additional compensation for impacts and inefficiencies caused by MHD to PKC's underpinning work in the amount of $5.6 million and that PKC is entitled to additional compensation for impacts and inefficiencies caused by MHD to PKC's utility work in the amount of $11.5 million. PKC has filed applications in these actions seeking to confirm the awards and MHD has filed civil actions in Massachusetts Superior Court seeking to vacate these awards.
Under the Dispute Resolution Rules of the contract, either party may periodically terminate the services of some or all of the DRB members provided that members who are removed under this provision will remain on the DRB through the completion of any then pending claims. The MHD has chosen to remove the current DRB members under this provision and those members are in the process of completing hearings on all pending claims. Although the replacement DRB members have been agreed upon, proceedings before the current DRB and new DRB have been postponed pending resolution of the current negotiations discussed below.
The pending claims yet to be decided by the current/replacement DRB on a binding basis have an anticipated value of $43 million. The remaining claims to be decided by the replacement DRB on a non-binding basis have an anticipated value of $80 million.
On August 14, 2002 the Massachusetts Attorney General's office, pursuant to its authority under the Massachusetts False Claims Act, served a Civil Investigative Demand ("CID") on Perini and the other joint venture partners. The CID sought the production of certain construction claims documentation in connection with the Central Artery/Tunnel Contract No. C11A1. PKC vigorously denies that it submitted any false claims and is cooperating with the Attorney General's Office in the ongoing investigation.
In December 2002, PKC and MHD entered into an agreement whereby the parties agreed to attempt to resolve by negotiation and mediation all of the outstanding claims on the project. As part of the agreement, the MHD recommended for approval by the Massachusetts Turnpike Authority a contract modification that provides for provisional payments to PKC totaling $25 million against PKC's outstanding claims. To date, PKC has received $23.75 million of those provisional payments. The parties also agreed to stay the pending litigation and DRB proceedings during the negotiations. The ultimate financial impact of resolving all of the claims on this project is not yet determinable.
Perini Building Company, Inc. vs. Saginaw Chippewa Indian Tribe of Michigan Matter
In 1995, Perini Building Company, Inc. ("PBC"), a wholly owned subsidiary of Perini Corporation, was hired by the Saginaw Chippewa Indian Tribe ("Tribe") to construct a hotel/casino resort in Mt. Pleasant, Michigan. Since the design for the project was still in process at the time of contract, the parties planned to proceed with construction on a fast-track basis as the design was completed by the Tribe's architect. Although PBC completed a major portion of construction under this fast-track arrangement, a final design was never completed by the Tribe's architect. Ultimately, a dispute arose between the Tribe and the architect regarding the architect's failure to complete the design and the Tribe eventually terminated all contracts on the project, including its contract with the architect and its contract with PBC. Separate arbitration proceedings were then initiated between the Tribe and the architect and between the Tribe and PBC.
On June 5, 2000, the American Arbitration Association found in favor of PBC against the Tribe, awarding PBC approximately $8.9 million in damages, plus costs and attorney/consultants fees in the amount of approximately $1.2 million. On October 30, 2000, PBC filed an action to enforce the award in the Tribal Court of the Saginaw Chippewa Indian Tribe. On January 31, 2002, the Tribal Court refused to confirm the award, claiming that the Tribal Court does not have jurisdiction because the Tribe is immune from suit as a sovereign nation. The contract between PBC and the Tribe provides that PBC may seek enforcement of the award in United States Federal Court if the Tribal Court finds that it does not have jurisdiction. In February 2002, PBC filed an action to enforce the arbitration award in the United States District Court for Michigan ("USDC") and in March 2002 PBC moved for Summary Judgment of its claim in that action. In addition, in February 2002, PBC filed an appeal of the Tribal Court's refusal to enforce the award in the Saginaw Chippewa Appellate Court. The Tribe moved to dismiss the Federal Court action. On October 11, 2002, PBC's appeal to the Tribal Appellate Court was heard by a three judge panel.
Subsequent to the appeal hearing, negotiations between PBC and the Tribe produced a settlement of the dispute whereby PBC received a final cash payment in December 2002. Settlement of the dispute did not have a material impact on the Company's 2002 results of operations.
San Francisco State University vs. Perini Matter
This is an action originally brought in 1999 in San Francisco County Superior Court by San Francisco State University ("SFSU") against Perini and several subcontractors in conjunction with the design and construction of a student dormitory. SFSU alleged that the building suffered from water leakage and structural deficiencies. SFSU sought damages in excess of $85 million, including damages for leak repairs and mold abatement, damages for structural repairs, damages for economic losses, punitive damages and attorneys' fees. Perini asserted that the building was properly designed and constructed under the contractually identified building code.
Perini was defended by its insurance carriers under a reservation of rights. Perini had brought a third party action for comparative indemnity, equitable indemnity, implied contractual indemnity and declaratory relief against nine of Perini's subcontractors and lower-tier subcontractors.
The trial began on June 25, 2002 and proceeded until August 2, 2002 when all claims, counterclaims and crossclaims of all parties were settled and that settlement was approved by the Court. Under the terms of the settlement, Perini has paid to SFSU economic damages in the amount of $16.7 million and will make certain defined repairs and/or modifications to the building.
Also under the terms of the settlement, Perini's subcontractors and insurance carriers for both Perini and its subcontractors have contributed substantially to the total amount of the settlement. As a result, management believes that the settlement of this case will not have a material effect on the Company's results of operations or financial condition.
$21.25 Preferred Shareholders Class Action Lawsuit
On May 3, 2001 the Company, including several of its current and former directors ("Defendant Directors"), was served with a complaint entitled Frederick Doppelt, Arthur I. Caplan and Michael Miller v. Perini Corporation, et al, 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 ("$21.25 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 $21.25 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 Defendant Directors improperly authorized the exchange of Series B Preferred Stock for Common Stock without first paying all accrued dividends on the $21.25 Preferred Stock. More specifically, Plaintiffs allege that the Company and its Defendant Directors violated the terms of the $21.25 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 Defendant Directors issued a false and misleading prospectus in 1987 relating to the issuance of the $21.25 Preferred Stock. The Plaintiffs seek payment of accrued dividends, claiming they are owed approximately $11.7 million as of May 3, 2001, and other 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 whereby 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 moved to dismiss all of Plaintiffs' claims. On March 12, 2002, all claims against the Company and the Defendant Directors were dismissed by the United States District Court for the Southern District of New York.
In April 2002, the Plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit. On December 23, 2002, the Plaintiffs' appeal was dismissed by the United States Court of Appeals for the Second Circuit.
On October 15, 2002, the Plaintiffs filed a new action for breach of fiduciary duty against the Defendant Directors in the United States District Court for the District of Massachusetts. On January 6, 2003, the Defendant Directors moved to dismiss all of the Plaintiffs' Massachusetts claims. The Defendant Directors are awaiting the Plaintiffs' response.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names, offices held, ages and business experience of all executive officers of the Company.
Name, Offices Held and Age Year First Elected to Present Office and Business Experience
Ronald N. Tutor, Director, Chairman and Since March 29, 2000 he serves as a Director, Chairman and Chief
Chief Executive Officer - 62 Executive Officer. Prior to that, he served as a Director and Chairman
since July 1, 1999; a Director and Vice Chairman since January 1, 1998;
and as a Director and Acting Chief Operating Officer since January 17,
1997. He is the Chairman, President and Chief Executive Officer of
Tutor-Saliba Corporation, a California based construction contractor,
since prior to 1995 and has actively managed that company since 1966.
Robert Band, Director, President and Since March 29, 2000 he serves as a Director, President and Chief
Chief Operating Officer - 55 Operating Officer. Prior to that, he served as a Director, President and
Chief Executive Officer since May 12, 1999. He has served as Executive
Vice President and Chief Financial Officer since December 1997. Prior to
that, he served as President of Perini Management Services, Inc.
(formerly Perini International Corporation) since January 1996 and as
Senior Vice President, Chief Operating Officer of Perini International
Corporation since April 1995. Previously, he served as Vice President
Construction from July 1993 and in various operating and financial
capacities since 1973, including Treasurer from May 1988 to January 1990.
Zohrab B. Marashlian, President, Perini He was elected to his current position in December 1997, which entails
Civil Construction - 58 overall responsibility for the Company's civil construction operations.
Prior to that, he served as President of the Company's Metropolitan New
York Division since April 1995 and as Senior Vice President, Operations
of the Company's Metropolitan New York Division since January 1994.
Previously, he served in various project management capacities with the
Company since 1985, including Project Manager and Vice President - Area
Manager. Prior to that, he served in various capacities for the Company
on projects in New York and overseas since 1971.
Craig W. Shaw, President, Perini He was elected to his current position in October 1999, which entails
Building Company - 48 overall responsibility for the Company's building construction
operations. Prior to that he served as President, Perini Building
Company, Western U.S. Division since April 1995 and Senior Vice
President, Construction for Perini Building Company's Western U.S.
Division since January 1994 and as Vice President, Construction for
Perini Building Company's Western U.S. Division since 1986. Previously,
he served in various project management capacities with the Company since
1978, including Project Manager from 1979 to 1986.
The Company's officers are elected on an annual basis at the Board of Directors' Meeting immediately following the Annual Meeting of Stockholders in May, to hold such offices until the Board of Directors' Meeting following the next Annual Meeting of Stockholders and until their respective successors have been duly appointed or until their tenure has been terminated by the Board of Directors, or otherwise.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's Common Stock is traded on the American Stock Exchange under the symbol "PCR". The quarterly market high and low sales price ranges for 2002 and 2001 are summarized below:
2002 2001
------------------------ -------------------------
High Low High Low
---------- --------- ----------- ----------
Market Price Range per Common Share:
- ------------------------------------
Quarter Ended
March 31 $ 7.28 $ 5.75 $ 7.35 $ 2.94
June 30 6.40 3.40 10.00 5.90
September 30 4.58 3.50 9.40 5.45
December 31 4.44 3.00 7.60 6.10
Dividends
There were no cash dividends declared on the Company's Common Stock during 2002 and 2001. For additional information on dividend payments, see "Dividends" under Management's Discussion and Analysis in Item 7 below.
Holders
At February 24, 2003, there were 1,106 common stockholders of record based on the stockholders list maintained by the Company's transfer agent.
ITEM 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial Information
(In thousands, except per share data)
The following selected financial data has been derived from audited financial statements and should be read in conjunction with the consolidated financial statements, the related notes thereto and the independent auditors' report thereon, included elsewhere in this Form 10-K and in previously filed annual reports on Form 10-K of Perini Corporation.
2002 2001 2000 1999 1998
---------------- --------------- ---------------- ---------------- ---------------
OPERATING SUMMARY
- -----------------
CONTINUING OPERATIONS:
Revenues:
Building $ 772,513 $ 1,199,439 $ 826,191 $ 696,407 $ 679,296
Civil 312,528 353,957 279,469 323,077 332,026
---------------- --------------- ---------------- ---------------- ---------------
Total $ 1,085,041 $ 1,553,396 $ 1,105,660 $ 1,019,484 $ 1,011,322
Cost of Operations 1,026,391 1,495,834 1,053,328 969,015 957,651
---------------- --------------- ---------------- ---------------- ---------------
Gross Profit $ 58,650 $ 57,562 $ 52,332 $ 50,469 $ 53,671
G&A Expense 32,770 28,061 24,977 26,635 27,397
---------------- --------------- ---------------- ---------------- ---------------
Income From Operations $ 25,880 $ 29,501 $ 27,355 $ 23,834 $ 26,274
Other (Income) Expense, Net 520 227 (949) (72) 652
Interest Expense 1,485 2,006 3,966 7,128 8,473
---------------- --------------- ---------------- ---------------- ---------------
Income From Continuing
Operations Before Income Taxes $ 23,875 $ 27,268 $ 24,338 $ 16,778 $ 17,149
Provision (Credit) for Income Taxes 801 850 (43) 421 1,100
---------------- --------------- ---------------- ---------------- ---------------
Income From Continuing Operations $ 23,074 $ 26,418 $ 24,381 $ 16,357 $ 16,049
---------------- --------------- ---------------- ---------------- ---------------
DISCONTINUED OPERATIONS:
Loss From Operations $ - $ - $ - $ (694) $ (4,397)
Loss on Disposal of Real Estate
Business Segment - - - (99,311) -
---------------- --------------- ---------------- ---------------- ---------------
Loss From Discontinued Operations $ - $ - $ - $ (100,005) $ (4,397)
---------------- --------------- ---------------- ---------------- ---------------
Net Income (Loss) $ 23,074 $ 26,418 $ 24,381 $ (83,648) $ 11,652
================ =============== ================ ================ ===============
2002 2001 2000 1999 1998
---------------- --------------- ---------------- ---------------- ---------------
Per Share of Common Stock:
Basic Earnings (Loss):
Income From Continuing Operations $ 0.92 $ 1.07 $ 0.39 (1) $ 1.80 $ 1.91
Loss From Discontinued Operations - - - (0.12) (0.83)
Estimated Loss on Disposal - - - (17.72) -
---------------- --------------- ---------------- ---------------- ---------------
Total $ 0.92 $ 1.07 $ 0.39 $ (16.04) $ 1.08
================ =============== ================ ================ ===============
Diluted Earnings (Loss):
Income From Continuing Operations $ 0.91 $ 1.04 $ 0.39 (1) $ 1.80 $ 1.91
Loss From Discontinued Operations - - - (0.12) (0.83)
Estimated Loss on Disposal - - - (17.72) -
---------------- --------------- ---------------- ---------------- ---------------
Total $ 0.91 $ 1.04 $ 0.39 $ (16.04) $ 1.08
================ =============== ================ ================ ===============
Cash Dividend Declared $ - $ - $ - $ - $ -
---------------- --------------- ---------------- ---------------- ---------------
Book Value $ 2.72 $ 2.40 $ 1.57 $ (11.31) $ 4.17
---------------- --------------- ---------------- ---------------- ---------------
Weighted Average Common Shares Outstanding:
Basic 22,664 22,623 18,521 5,606 5,318
---------------- --------------- ---------------- ---------------- ---------------
Diluted 22,939 23,442 18,527 5,606 5,318
---------------- --------------------------------- ---------------- ---------------
FINANCIAL POSITION SUMMARY
- --------------------------
Working Capital $ 115,908 $ 93,369 $ 80,477 $ 48,430 $ 57,665
---------------- --------------- ---------------- ---------------- ---------------
Current Ratio (2) 1.44:1 1.24:1 1.20:1 1.15:1 1.20:1
---------------- --------------- ---------------- ---------------- ---------------
Long-term Debt, less current maturities $ 12,123 $ 7,540 $ 17,218 $ 41,091 $ 75,857
---------------- --------------- ---------------- ---------------- ---------------
Stockholders' Equity (Deficit) $ 86,649 $ 79,408 $ 60,622 $ (36,618) $ 50,558
---------------- --------------- ---------------- ---------------- ---------------
Ratio of Long-term Debt to Equity .14:1 .09:1 .28:1 n.a. 1.50:1
---------------- --------------- ---------------- ---------------- ---------------
Redeemable Series B Cumulative
Convertible Preferred Stock $ - $ - $ - $ 37,685 $ 33,540
---------------- --------------- ---------------- ---------------- ---------------
Total Assets (2) $ 402,389 $ 501,241 $ 487,478 $ 385,767 $ 452,496
---------------- ---------------- --------------- ---------------- ---------------
OTHER DATA
- ----------
Backlog at Year End $ 990,175 $ 1,213,535 $ 1,788,731 $ 1,658,077 $ 1,232,256
---------------- --------------- ---------------- ---------------- ---------------
(1) As discussed in Note (1)(i) of Notes to Consolidated Financial Statements, Basic and Diluted Earnings Per Share for 2000 have been restated.
(2) As discussed in Note (1)(b) of Notes to Consolidated Financial Statements, the Company now presents its interests in joint ventures in the Consolidated Balance Sheets using the proportionate consolidation method. Accordingly, the Current Ratio and Total Assets included above have been restated for all periods presented to reflect this change.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company was incorporated in 1918 as a successor to businesses which had been engaged in providing construction services since 1894. The Company currently provides general contracting, construction management and design-build services to private clients and public agencies throughout the United States and selected overseas locations. The Company's construction business involves two basic segments or operations: building and civil. The general building and civil contracting services provided by the Company consist of planning and scheduling the manpower, equipment, materials and subcontractors required for the timely completion of a project in accordance with the terms and specifications contained in a construction contract. The Company provides these services by using traditional general contracting arrangements, such as fixed price, guaranteed maximum price and cost plus award fee contracts and, to a lesser extent, construction management or design-build contracting arrangements. The Company, in the normal conduct of its business, enters into partnership arrangements, referred to as "joint ventures," for certain construction projects. Each of the joint venture participants is usually committed to supply a predetermined percentage of capital, as required, and to share in a predetermined percentage of the income or loss of the project.
Critical Accounting Policies
The Company's significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included in Item 15 of this Form 10-K.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's construction business involves making significant estimates and assumptions in the normal course of business relating to its Company and joint venture contracts due to, among other things, the one-of-a-kind nature of most of its projects, long-term duration of its contract cycle and type of contract utilized. Therefore, management believes that "Method of Accounting for Contracts" is the most important and critical accounting policy. The most significant estimates with regard to these financial statements relate to the estimating of total forecasted construction contract revenues, costs and profits in accordance with accounting for long-term contracts (see Note 1(d) of Notes to Consolidated Financial Statements) and estimating potential liabilities in conjunction with certain contingencies, including the outcome of pending or future litigation, arbitration or other dispute resolution proceedings relating to contract claims (see Note 2 of Notes to Consolidated Financial Statements). Actual results could differ in the near term from these estimates and such differences could result in a material adverse effect on the Company's financial condition, results of operations and cash flows.
Method of Accounting for Contracts - Revenues and profits from the Company's contracts and construction joint venture contracts are recognized by applying percentages of completion for the period to the total estimated profits for the respective contracts. Percentage of completion is determined by relating the actual cost of the work performed to date to the current estimated total cost of the respective contracts. When the estimate on a contract indicates a loss, the Company's policy is to record the entire loss during the accounting period in which it is estimated. In the ordinary course of business, at a minimum on a quarterly basis, the Company prepares updated estimates of the total forecasted revenue, cost and profit or loss for each contract. The cumulative effect of revisions in estimates of the total forecasted revenue and costs, including unapproved change orders and claims, during the course of the work is reflected in the accounting period in which the facts that caused the revision become known. The financial impact of these revisions to any one contract is a function of both the amount of the revision and the percentage of completion of the contract. An amount equal to the costs incurred which are attributable to unapproved change orders and claims is included in the total estimated revenue when realization is probable. (For a further discussion of unapproved change orders and claims, see "The Contract Process" under Item 1 on pages 6 through 8 of this Form 10-K.) Profit from unapproved change orders and claims is recorded in the period such amounts are resolved.
Deferred contract revenue represents the excess of billings to date over the amount of contract costs and profits (or contract revenue) recognized to date on the percentage of completion accounting method on certain contracts. Unbilled work represents the excess of contract costs and profits (or contract revenue) recognized to date on the percentage of completion accounting method over billings to date on the remaining contracts. Unbilled work results when (1) the appropriate contract revenue amount has been recognized in accordance with the percentage of completion accounting method, but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract and/or (2) costs, recorded at estimated realizable value, related to unapproved change orders or claims are incurred. For unapproved change orders or claims that cannot be resolved in accordance with the normal change order process as defined in the contract, the Company may employ other dispute resolution methods, including mediation, binding and non-binding arbitration, or litigation (see Item 3, Legal Proceedings in this Form 10-K and Note 2, "Contingencies and Commitments", of Notes to Consolidated Financial Statements). The prerequisite for billing unapproved change orders and claims is the final resolution and agreement between the parties. At December 31, 2002, unbilled work related to Company and joint venture contracts is discussed in Note 1(d) of Notes to Consolidated Financial Statements.
Accounting for Construction Joint Ventures - Prior to 2002, the Company's interests in construction joint ventures were accounted for on the equity method in the Consolidated Balance Sheets and on the proportionate consolidation method in the Consolidated Statements of Income, with the Company's share of revenues and costs in these interests included in Revenues and Cost of Operations, respectively. Beginning in 2002, construction joint venture interests are accounted for using the proportionate consolidation method in the Consolidated Balance Sheets as well as the Consolidated Statements of Income, whereby the Company's proportionate share of each joint venture's assets, liabilities, revenues and cost of operations are included in the appropriate classifications in the consolidated financial statements. The Company believes the change, which results in presenting all joint venture activity using a consistent methodology in both the Consolidated Balance Sheets and Consolidated Statements of Income, is preferable.
Although this change impacted various classifications within Current Assets and Current Liabilities in the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows, it had no impact on net working capital or other categories of long-term assets or liabilities in the Consolidated Balance Sheets. It also had no impact on the Consolidated Statements of Income or basic or diluted earnings per common share for any period presented. Prior year Consolidated Balance Sheets and Consolidated Statements of Cash Flows have been restated to conform to the 2002 presentation.
Defined Benefit Retirement Plan - The status of the Company's defined benefit pension plan obligations, related plan assets and cost is presented in Note 10 of Notes to Consolidated Financial Statements entitled "Employee Benefit Plans". Plan obligations and annual pension expense are determined by actuaries using a number of key assumptions which include, among other things, the discount rate, the estimated future return on plan assets and the anticipated rate of future salary increases. The discount rate of 7.25% used for purposes of computing the 2002 annual pension expense was determined at the beginning of the calendar year based on high-quality corporate bond yields as of that date. The Company plans to lower the discount rate used for computing the 2003 annual pension expense to 6.75% due to a decline in high-quality corporate bond yields as of the end of 2002.
The estimated return on plan assets is primarily based on historical long-term returns of equity and fixed income markets according to the Company's targeted allocation of plan assets (65% equity and 35% fixed income). While the weighted estimated return on asset rate has been 9% in recent years, the Company plans to lower this rate to 7.0% in 2003 based on recent equity market performance compared to long-term historical averages.
The plans' accumulated benefit obligation exceeded the fair value of plan assets on December 31, 2002 and 2001 in amounts greater than the accrued pension liability previously recorded. Accordingly, the Company increased its accrual by $13.7 million in 2002 and $5.9 million in 2001 with the offset to accumulated other comprehensive income (loss), a reduction of stockholders' equity.
As a result of the expected changes in assumptions for 2003 noted above and asset losses during 2002, the Company anticipates that pension expense will increase from $1.2 million in 2002 to $3.4 million in 2003. Cash contributions are anticipated to stay at the 2002 level of between $2 million and $3 million.
Related Party Transactions
As part of a $30 million equity infusion in January 1997, the Company entered into an agreement with Tutor-Saliba Corporation ("TSC"), a construction company based in California, and Ronald N. Tutor, Chief Executive Officer and sole stockholder of TSC, to provide certain management services. TSC participated in joint ventures with the Company before the agreement and continues to participate in joint ventures with the Company after the agreement. The Company's share of revenue from these joint ventures amounted to $48.8 million, $17.9 million and $4.6 million in 2002, 2001 and 2000, respectively. Primarily as a result of TSC participating in a $40 million equity infusion in March 2000, TSC currently owns approximately 12% of the Company's outstanding Common Stock. Mr. Tutor has been Chairman and Chief Executive Officer of the Company since March 2000. (For details of compensation to TSC and Mr. Tutor and other information on related party transactions, see Note 13 of Notes to Consolidated Financial Statements.)
Results of Operations -
2002 Compared to 2001
Net income for the year ended 2002 was $23.1 million, a 13% decrease from the record $26.4 million net income recorded in 2001. Basic earnings per common share were $0.92 for the year ended 2002 compared to $1.07 for the year ended 2001. Diluted earnings per common share were $0.91 per common share compared to $1.04 for the year ended 2001. Overall, the decrease in 2002 operating results reflects a continued strong but lower profit contribution from the building construction segment and an increased profit contribution from the civil construction segment.
Revenues from construction operations decreased by $468.4 million (or 30.2%), from $1,553.4 million in 2001 to $1,085.0 million in 2002. This decrease was due primarily to a decrease in building construction revenues of $426.9 million (or 35.6%), from $1,199.4 million in 2001 to $772.5 million in 2002. Civil construction revenues decreased $41.5 million (or 11.7%), from $354.0 million in 2001 to $312.5 million in 2002. The decrease in revenues from building construction operations was due primarily to the decrease in the Company's year-end backlog at December 31, 2001 compared to the record year-end backlog at December 31, 2000, including a decreased volume of work at the Mohegan Sun Project in Connecticut, as well as on two large hotel/casino projects in the southwestern United States, all of which were substantially completed in early 2002. The decrease in revenues from civil construction operations was also due primarily to the decrease in the Company's year-end backlog at December 31, 2001 compared to the record year-end backlog at December 31, 2000.
Income from construction operations (see Note 12 of Notes to Consolidated Financial Statements for business segment information) decreased by $2.9 million (or 8.2%), from $35.5 million in 2001 to $32.6 million in 2002. Building construction operating income decreased by $5.4 million, from $31.6 million in 2001 to $26.2 million in 2002, due primarily to the decrease in revenues discussed above. This decrease was partly offset by an increase in the average gross margin on building construction contracts from 4.0% in 2001 to 5.9% in 2002, due primarily to favorable close-out experience on several hotel/casino projects in 2002 and an upward profit revision on an overseas project. In addition, building construction operating income was negatively impacted by a $2.7 million (or 16.6%) increase in building construction-related general and administrative expenses primarily in connection with the pursuit of new work opportunities, including the opening of a new office near Orlando, Florida. Despite the decrease in revenues discussed above, civil construction operating income increased by $2.5 million, from $3.9 million in 2001 to $6.4 million in 2002, due primarily to an upward profit revision on a civil infrastructure project in New York City in 2002 as well as recognition of a smaller loss in 2002 compared to 2001 on a Central Artery/Tunnel "Big Dig" joint venture project in Boston, Massachusetts. In addition, civil construction operating income was negatively impacted by a $1.2 million (or 20.7%) increase in civil construction-related general and administrative expenses, due primarily to a reduced ability to allocate expenses to various joint ventures as well as an increase in outside professional fees.
Interest expense decreased by $0.5 million, from $2.0 million in 2001 to $1.5 million in 2002, due primarily to a reduction in the average amount of debt outstanding under the Company's Credit Agreement as well as lower interest rates in 2002.
The lower than normal tax rate for the three year period ended December 31, 2002 is primarily due to the utilization of tax loss carryforwards from prior years. Because of certain accounting limitations, the Company was not able to recognize a portion of the tax benefit related to the operating losses experienced in fiscal 1999, 1996 and 1995. As of December 31, 2002, an amount estimated to be approximately $79 million of future pretax earnings could benefit from minimal, if any, federal tax provisions. The net deferred tax assets reflect management's estimate of the amount that will, more likely than not, be realized (see Note 4 of Notes to Consolidated Financial Statements). In addition, the provision for income taxes in 2002 reflects the reversal of the federal alternative minimum tax provided in 2001 which is no longer required based on the provisions of the Job Creation and Worker Assistance Act of 2002, and the credit for income taxes in 2000 reflect the reversal of foreign taxes accrued in prior years that were no longer required.
Results of Operations -
2001 Compared to 2000
Net income for the year ended 2001 increased 8% to a record $26.4 million, compared to net income of $24.4 million for the year ended 2000. Basic earnings per common share were $1.07 for the year ended 2001, as compared to $0.39 for the year ended 2000. Diluted earnings per common share were $1.04 for the year ended 2001, as compared to $0.39 for the year ended 2000. Overall, the improved 2001 operating results reflect a continued strong and improved profit contribution from the building construction segment and, to a lesser extent, the positive impact of lower interest expense due primarily to continued reduction in the amount of long-term debt outstanding and lower interest rates in 2001.
Revenues from construction operations increased $447.7 million (or 40.5%), from $1,105.7 million in 2000 to a record $1,553.4 million in 2001. This increase was due primarily to an increase in building construction revenues of $373.2 million (or 45.2%), from $826.2 million in 2000 to $1,199.4 million in 2001. In addition, civil construction revenues increased $74.5 million (or 26.7%), from $279.5 million in 2000 to $354.0 million in 2001. The increase in revenues from building construction operations was due primarily to the Company's record year-end backlog at December 31, 2000, including an increase in the volume of work completed at the Mohegan Sun Project in Connecticut, as well as the construction of three large hotel/casino projects in the southwestern United States. The increase in revenues from civil construction operations also reflected the Company's record year-end backlog at December 31, 2000, including the start-up of several infrastructure projects in the metropolitan New York area.
Income from construction operations increased by $2.8 million (or 8.6%), from $32.7 million in 2000 to $35.5 million in 2001 due to an increase in income from building construction operations that more than offset a decrease in income from civil construction operations. Building construction operating income increased by $4.5 million (or 16.6%), from $27.1 million in 2000 to $31.6 million in 2001, due primarily to the increase in revenues discussed above which was largely offset by a decrease in the gross margin from 4.8% in 2000 to 4.0% in 2001 because 2000 included the favorable close-out of certain projects. In addition, building construction operating income was negatively impacted by a $3.6 million (or 28.3 %) 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 $1.7 million (or 30.4%), from $5.6 million in 2000 to $3.9 million in 2001, due primarily to a downward profit revision on a Central Artery/Tunnel "Big Dig" project in Boston, Massachusetts.
Other (income) expense decreased by $1.1 million, from a net income of $0.9 million in 2000 to a net expense of $0.2 million in 2001, due primarily to a decrease in interest income as a result of a decrease in the level of short-term cash investments, as well as lower interest rates in 2001.
Interest expense decreased by $2.0 million, from $4.0 million in 2000 to $2.0 million in 2001, due primarily to
the continued reduction in the amount of long-term debt outstanding under the Company's credit facility as described in Note 3 of Notes to Consolidated Financial Statements, as well as lower interest rates in 2001.
Financial Condition
Cash and Working Capital
Cash and cash equivalents as reported in the accompanying Consolidated Statements of Cash Flows consist of amounts held by the Company as well as the Company's proportionate share of amounts held by construction joint ventures. Cash held by the Company is available for general corporate purposes while cash held by construction joint ventures is available only for joint venture-related uses. Cash held by construction joint ventures is distributed from time to time to the Company and to the other joint venture participants in accordance with their percentage interest after the joint venture partners determine that a cash distribution is prudent. Cash distributions received by the Company from its construction joint ventures are then available for general corporate purposes. At December 31, 2002, 2001 and 2000, cash held by the Company and available for general corporate purposes was $11.2 million, $7.2 million and $34.0 million, respectively, and the Company's proportionate share of cash held by joint ventures and available only for joint venture-related uses was $35.8 million, $49.3 million and $61.8 million, respectively.
During 2002, the Company used $9.5 million of cash on hand to fund operating activities ($3.6 million), investing activities ($0.6 million), and to reduce debt by a net amount of $5.3 million. The $3.6 million in cash used by operating activities was due primarily to the need to fund working capital requirements on certain joint venture construction contracts where unapproved change orders and/or contract claims remain to be resolved. (See Note 1(d) of Notes to Consolidated Financial Statements.)
During 2001, the Company used $39.2 million of cash on hand to fund operating activities ($24.2 million); investing activities ($5.5 million), primarily for the acquisition of property and equipment; and financing activities ($9.5 million), primarily to reduce debt by a net amount of $9.8 million. Cash generated from operating activities decreased from a positive $0.8 million in 2000 to a negative $24.2 million in 2001 due primarily to the need to fund working capital requirements on certain Company construction contracts where unapproved change orders and/or contract claims remain to be resolved. (See Note 1(d) of Notes to Consolidated Financial Statements.)
During 2000, the Company generated $0.8 million in cash from operating activities and $0.1 million in cash from investing activities. The funds generated plus $7.4 million in cash on hand were used for financing activities ($8.3 million) primarily to reduce debt. Financing activities in 2000 include net proceeds of $37.3 million received from the issuance of Common Stock in connection with the recapitalization of the Company as discussed in Note 7 of Notes to Consolidated Financial Statements, as well as net proceeds of $7.1 million received from a refinancing of the Company's corporate headquarters building. These funds were primarily used to pay down debt.
During 2000, the Company's liquidity was significantly enhanced by the sale of 9,411,765 shares of Common Stock for an aggregate of $40 million (before fees and expenses) (see Note 7 of Notes to Consolidated Financial Statements) and by the refinancing of the Company's corporate headquarters building for $7.5 million (before fees and expenses) (see Note 3 of Notes to Consolidated Financial Statements). These financing transactions enabled the Company to reduce its dependence on bank debt to fund the working capital needs of its core construction operations, resulting in a significant reduction in interest expense. Also, in January 2002, the Company entered into an agreement with a new bank group to refinance its existing credit facility with a new $45 million revolving credit facility. In February 2003, the credit facility was amended to increase the revolving credit facility from $45 million to $50 million (see Note 3 of Notes to Consolidated Financial Statements), which will provide the Company with greater flexibility in providing the working capital needed to support the anticipated growth of the Company's construction activities. The financial covenants to which the Company is subject include, among other things, maintaining specified working capital, tangible net worth and operating profit levels, interest coverage minimums, and limitations on indebtedness, all as defined in the loan documents. Also, during the past three years, the Company has made substantial progress on its strategy for resolving several major construction claims and liquidating its real estate assets.
The Company had $115.9 million of working capital at the end of 2002 compared to $93.4 million at the end of 2001 and $80.5 million at the end of 2000. The working capital current ratio was 1.44:1 at the end of 2002 compared to 1.24:1 at the end of 2001 and 1.20:1 at the end of 2000.
Long-term Debt
Long-term debt was $12.1 million at the end of 2002, up from $7.5 million in 2001, and down compared to $17.2 million in 2000 and $41.1 million in 1999.
Stockholders' Equity
As more fully described in Note 7 of Notes to Consolidated Financial Statements, effective March 29, 2000, the Company completed a recapitalization which included the sale of 9,411,765 shares of Common Stock for an aggregate of $40 million in cash (before fees and expenses) and the exchange of 100% of its Redeemable Series B Cumulative Convertible Preferred Stock for an aggregate of 7,490,417 shares of Common Stock. The effect of the recapitalization on the Company's stockholders' equity was to increase stockholders' equity by approximately $76.2 million, from a negative net worth of approximately $36.6 million at December 31, 1999 to a positive net worth of approximately $39.6 million upon completion of the recapitalization.
The Company's book value per common share was $2.72 at December 31, 2002, compared to $2.40 at December 31, 2001, and $1.57 at December 31, 2000. The major factors impacting stockholders' equity during the three year period under review were the recapitalization completed in 2000, the net income recorded in all three years and, to a lesser extent, preferred dividends paid in-kind or accrued, and common stock options exercised. Also, the Company was required to recognize an additional minimum pension liability of approximately $13.7 million in 2002 and $5.9 million in 2001 in accordance with SFAS No. 87, "Employers' Accounting for Pensions" which resulted in an aggregate $19.6 million Accumulated Other Comprehensive Loss deduction in stockholders' equity. (See Note 10 of Notes to Consolidated Financial Statements.) Adjustments to the amount of this additional minimum pension liability will be recorded in future years based upon periodic re-evaluation of the funded status of the Company's pension plans.
Dividends
(a) Common Stock
There
were no cash dividends declared or paid on the Company’s outstanding Common
Stock during the three years ended December 31, 2002.
(b) $21.25 Preferred Stock
In
conjunction with the covenants of the Company’s prior Credit Agreements,
the Company was required to suspend the payment of quarterly dividends on its
$21.25 Preferred Stock until certain financial criteria were met. Quarterly
dividends on the $21.25 Preferred Stock have not been paid since 1995 (although
they have been fully accrued due to the “cumulative” feature of the
$21.25 Preferred Stock).
The aggregate amount of dividends in arrears is approximately $15,405,000 at December 31, 2002, which represents approximately $154.05 per share of $21.25 Preferred Stock or approximately $15.41 per Depositary Share and is included in “Other Long-term Liabilities” in the Consolidated Balance Sheets. Under the terms of the $21.25 Preferred Stock, the holders of Depositary Shares are entitled to elect two additional Directors when dividends have been deferred for more than six quarters, and they have done so at each of the last five Annual Meetings.
As of December 31, 2000, the financial criteria in the Company’s 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 $21.25 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:
The Board of Directors does not believe that it is, or will be, proper or prudent to pay or commit to pay dividends on the $21.25 Preferred Stock for the foreseeable future, and it is not obligated to do so under the terms of the $21.25 Preferred Stock.
(c) Series B Preferred Stock
For
an analysis of in-kind dividends paid on the Series B Preferred Stock for the
period from December 31, 1999 to March 29, 2000, the date on which the holders
of Series B Preferred Stock exchanged their shares of Series B Preferred Stock
into shares of the Company’s Common Stock, see Note 8(b) of Notes to
Consolidated Financial Statements.
Outlook