Back to GetFilings.com
FORM 10-K
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, 1997 [ ] 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
- --------------------------------------------------------------------------------
The aggregate market value of voting Common Stock held by nonaffiliates of the
registrant is $35,463,300 as of February 27, 1998. 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 27, 1998 is 5,157,046.
- --------------------------------------------------------------------------------
Documents Incorporated by Reference
Portions of the annual proxy statement for the year ended December 31, 1997 are
incorporated by reference into Part III.
PERINI CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K
PAGE
----
PART I
- ------
Item 1: Business 2 - 12
Item 2: Properties 12
Item 3: Legal Proceedings 13
Item 4: Submission of Matters to a Vote of Security Holders 13
PART II
- -------
Item 5: Market for the Registrant's Common Stock and Related 13
Stockholder Matters
Item 6: Selected Financial Data 14
Item 7: Management's Discussion and Analysis of Financial 15 - 20
Condition and Results of Operations
Item 8: Financial Statements and Supplementary Data 20
Item 9: Disagreements on Accounting and Financial Disclosure 20
PART III
- --------
Item 10: Directors and Executive Officers of the Registrant 21 - 22
Item 11: Executive Compensation 22
Item 12: Security Ownership of Certain Beneficial Owners and 22
Management
Item 13: Certain Relationships and Related Transactions 22
PART IV
- -------
Item 14: Exhibits, Financial Statement Schedules and Reports on 23
Form 8-K
Signatures 24
1
PART I.
ITEM 1. BUSINESS
- ------------------
General
Perini Corporation and its subsidiaries (the "Company" unless the
context indicates otherwise) provides general contracting, including building
and civil construction, and construction management and design-build services to
private clients and public agencies throughout the United States and selected
overseas locations. The Company is also engaged in real estate development
operations which are conducted by Perini Land & Development Company, a
wholly-owned subsidiary with offices in Arizona, Georgia and Massachusetts. The
Company was incorporated in 1918 as a successor to businesses which had been
engaged in providing construction services since 1894.
Because the Company's results consist in part of a limited number of
large transactions in both construction and real estate, results in any given
fiscal quarter can vary depending on the timing of transactions and the
profitability of the projects being reported. As a consequence, quarterly
results may reflect such variations.
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, 1997.
Annual Report
On Form 10-K
Caption Page Number
------- -----------
Selected Consolidated Financial Information Page 14
Management's Discussion and Analysis Pages 15 - 20
Footnote 13 to the Consolidated Financial Statements, entitled Business Segments and Pages 48 - 50
Foreign Operations
While the "Selected Consolidated Financial Information" presents
certain lines of business information for purposes of consistency of
presentation for the five years ended December 31, 1997, additional information
(business segment and foreign operations) required by Statement of Financial
Accounting Standards No. 14 for the three years ended December 31, 1997 is
included in Note 13 to the Consolidated Financial Statements.
2
A summary of revenues by product line for the three years ended
December 31, 1997 is as follows:
Revenues (in thousands)
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
---- ---- ----
Construction:
Building $ 888,809 $ 834,888 $ 748,412
Heavy 387,224 389,540 308,261
-------------- -------------- --------------
Total Construction Revenues $ 1,276,033 $ 1,224,428 $ 1,056,673
-------------- -------------- --------------
Real Estate:
Sales of Real Estate $ 22,423 $ 7,639 $ 10,738
Building Rentals 9,481 19,446 16,799
Interest Income 12,347 14,406 12,396
All Other 4,207 4,365 4,462
-------------- -------------- --------------
Total Real Estate Revenues $ 48,458 $ 45,856 $ 44,395
-------------- -------------- --------------
Total Revenues $ 1,324,491 $ 1,270,284 $ 1,101,068
============== ============== =============
Construction
The general contracting and construction management services provided
by the Company consist of planning and scheduling the manpower, equipment,
materials and subcontractors required for the timely completion of a project in
accordance with the terms and specifications contained in a construction
contract. The Company was engaged in over 160 construction projects in the
United States and overseas during 1997. The Company has two principal
construction operations: building and civil.
The civil operation undertakes large heavy construction projects
throughout the United States, with current emphasis on major metropolitan areas
such as Boston, New York City, Chicago and Los Angeles. The civil operation
performs construction and rehabilitation of highways, subways, tunnels, dams,
bridges, airports, marine projects, piers and waste water treatment facilities.
The Company has been active in civil operations since 1894, and believes that it
has particular expertise in large and complex projects. The Company believes
that infrastructure rehabilitation is, and will continue to be, a significant
market in the late 1990's and beyond.
The building operation provides its services through regional offices
located in several metropolitan areas: Boston and Philadelphia, serving New
England and the Mid-Atlantic area; Detroit, operating in Michigan and the
Midwest region; and Phoenix and Las Vegas, serving Arizona, Nevada and
California. In 1992, the Company combined its building operations into a new
wholly-owned subsidiary, Perini Building Company, Inc. This new company combines
substantial resources and expertise to better serve clients within the building
construction market, and enhances Perini's name recognition in this market. The
Company undertakes a broad range of building construction projects including
hotels, casinos, health care, correctional facilities, sports complexes,
residential, commercial, civic, cultural and educational facilities.
Perini Management Services, Inc. (formerly Perini International
Corporation), a wholly-owned subsidiary, provides a broad range of both civil
and building construction services to U.S. government agencies in the U.S. and
selected overseas locations, funded primarily in U.S. dollars. In selected
situations, it pursues other work internationally.
3
Construction Strategy
The Company plans to continue to increase the amount of civil
construction work it performs because of the relatively higher margin
opportunities available from such work. The Company believes the best
opportunities for growth in the coming years are in the urban infrastructure
market, particularly in Boston, metropolitan New York, Los Angeles and other
major cities where it has a significant presence, and in other large, complex
projects. The Company's strategy in building construction is to maximize profit
margins; to take advantage of certain market niches; and to expand into new
markets compatible with its expertise. Internally, the Company plans to continue
both to strengthen its management through management development and job
rotation programs, and to improve efficiency through strict attention to the
control of overhead expenses and implementation of improved project management
systems. Finally, the Company continues to expand its expertise to assist public
owners to develop necessary facilities through creative public/private ventures.
During 1996, the Company also adopted a plan to enhance the
profitability of its construction operations by emphasizing gross margin and
bottom line improvement ahead of top line revenue growth. This plan calls for
the Company to focus its financial and human resources on construction
operations which are consistently profitable and to de-emphasize marginal
business units. During 1997, the Company closed or downsized and refocused four
business units and combined its two remaining civil construction entities (U.S.
Heavy and Metropolitan New York divisions) under a consolidated management
structure named "Perini Civil".
Backlog
As of December 31, 1997 the Company's construction backlog was $1.31
billion compared to backlogs of $1.52 billion and $1.53 billion as of December
31, 1996 and 1995, respectively.
Backlog (in thousands) as of December 31,
-----------------------------------------------------------------------------------------
1997 1996 1995
---- ---- ----
Northeast $ 574,779 44% $ 643,114 42% $ 749,017 49%
Mid-Atlantic 97,212 7 113,289 8 179,324 12
Southeast 46,629 4 56,925 4 33,223 2
Midwest 26,130 2 97,954 6 325,055 21
Southwest 481,068 37 425,901 28 94,725 6
West 28,707 2 139,079 9 134,259 9
Foreign 54,929 4 41,438 3 18,919 1
------------- -------- ------------- -------- ------------- -----
Total $ 1,309,454 100% $ 1,517,700 100% $ 1,534,522 100%
============= ======== ============= ======== ============= =====
The Company includes a construction project in its backlog at such time
as a contract is awarded or a firm letter of commitment is obtained. As a
result, the backlog figures are firm, subject only to the cancellation
provisions contained in the various contracts. The Company estimates that
approximately $536 million of its backlog will not be completed in 1998.
The Company's backlog in the Northeast region of the United States
remains strong because of its ability to meet the needs of the growing
infrastructure construction and rehabilitation market in this region,
particularly in the metropolitan Boston and New York City areas. The continued
increase in backlog in the Southwest region is indicative of the increased
demand by the hotel-casino market in Nevada, while the decrease in backlog in
the Midwest is due, in part, to a downsizing or closing of certain unprofitable
business units. Other fluctuations in backlog are viewed by management as
transitory.
4
Types of Contracts
The four general types of contracts in current use in the construction
industry are:
o Fixed price contracts ("FP"), which include unit price contracts,
usually transfer more risk to the contractor but offer the opportunity,
under favorable circumstances, for greater profits. With the Company's
increasing move into publicly bid civil construction projects, the
percentage of fixed price contracts continue to represent the major
portion of the backlog.
o Cost-plus-fixed-fee or award fee contracts ("CPFF") which provide
greater safety for the contractor from a financial standpoint but limit
profits.
o Guaranteed maximum price contracts ("GMP") which provide for a
cost-plus-fee arrangement up to a maximum agreed price. These contracts
place risks on the contractor but may permit an opportunity for greater
profits than cost-plus-fixed-fee contracts through sharing agreements
with the client on any cost savings.
o Construction management contracts ("CM") under which a contractor
agrees to manage a project for the owner for an agreed-upon fee which
may be fixed or may vary based upon negotiated factors. The contractor
generally provides services to supervise and coordinate the
construction work on a project, but does not directly purchase contract
materials, provide construction labor and equipment or enter into
subcontracts.
Historically, a high percentage of company contracts have been of the
fixed price type. Construction management contracts remain a relatively small
percentage of company contracts. A summary of revenues and backlog by type of
contract for the most recent three years follows:
Revenues - Year Ended
December 31, Backlog As Of December 31,
- ----------------------------------- -------------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
58% 59% 67% Fixed Price 53% 62% 74%
42 41 33 CPFF, GMP or CM 47 38 26
------- ------- ------- ------- ------- ----
100% 100% 100% 100% 100% 100%
======= ======= ======= ======= ======= ====
Clients
During 1997, the Company was active in the building, civil and
international construction markets. The Company performed work for over 120
federal, state and local governmental agencies or authorities and private
customers during 1997. No material part of the Company's business is dependent
upon a single or limited number of private customers; the loss of any one of
which would not have a materially adverse effect on the Company. As illustrated
in the following table, the Company continues to serve a significant number of
private owners. During the period 1995-1997, the portion of construction
revenues derived from contracts with various governmental agencies remains
relatively constant at 51% in 1997, 52% in 1996 and 56% in 1995.
Revenues by Client Source
Year Ended December 31,
-----------------------------------
1997 1996 1995
---- ---- ----
Private Owners 49% 48% 44%
Federal Governmental Agencies 5 5 8
State, Local and Foreign Governments 46 47 48
---- ---- ----
100% 100% 100%
==== ==== ====
5
All Federal government contracts are subject to termination provisions, but as
shown in the table above, the Company does not have a material amount of such
contracts.
General
The construction business is highly competitive. Competition is based
primarily on price, reputation for on time completion, quality, reliability and
financial strength of the contractor. While the Company experiences a great deal
of competition from other large general contractors, some of which may be larger
with greater financial resources than the Company, as well as from a number of
smaller local contractors, it believes it has sufficient technical, managerial
and financial resources to be competitive in each of its major market areas.
The Company will endeavor to spread the financial and/or operational
risk, as it has from time to time in the past, by participating in construction
joint ventures, both in a majority and in a minority position, for the purpose
of bidding on projects. These joint ventures are generally based on a standard
joint venture agreement whereby each of the joint venture participants is
usually committed to supply a predetermined percentage of capital, as required,
and to share in the same predetermined percentage of income or loss of the
project. Although joint ventures tend to spread the risk of loss, the Company's
initial obligations to the venture may increase if one of the other participants
is financially unable to bear its portion of cost and expenses. For a possible
example of this situation, see "Legal Proceedings" on page 13. For further
information regarding certain joint ventures, see Note 2 to Notes to
Consolidated Financial Statements.
While the Company's construction business may experience some adverse
consequences if shortages develop or if prices for materials, labor or equipment
increase excessively, provisions in certain types of contracts often shift all
or a major portion of any adverse impact to the customer. On fixed price type
contracts, the Company attempts to insulate itself from the unfavorable effects
of inflation by incorporating escalating wage and price assumptions, where
appropriate, into its construction bids. Gasoline, diesel fuel and other
materials used in the Company's construction activities are generally available
locally from multiple sources and have been in adequate supply during recent
years. Construction work in selected overseas areas primarily employs expatriate
and local labor which can usually be obtained as required. The Company does not
anticipate any significant impact in 1998 from material and/or labor shortages
or price increases.
Economic and demographic trends tend not to have a material impact on
the Company's civil construction operation. Instead, the Company's civil
construction markets are dependent on the amount of heavy civil infrastructure
work funded by various governmental agencies which, in turn, may depend on the
condition of the existing infrastructure or the need for new expanded
infrastructure. The building markets in which the Company participates are
dependent on economic and demographic trends, as well as governmental policy
decisions as they impact the specific geographic markets.
The Company has minimal exposure to environmental liability as a result
of the activities of Perini Environmental Services, Inc. ("Perini
Environmental"), a wholly-owned subsidiary of the Company 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 carry insurance or
receive satisfactory indemnification from customers to cover the risks
associated with this business. The Company also owns real estate in seven states
and as an owner, is subject to laws governing environmental responsibility and
liability based on ownership. The Company is not aware of any environmental
liability associated with its ownership of real estate property.
The Company has been subjected to a number of claims from former
employees of subcontractors regarding exposure to asbestos on the Company's
projects. None of the claims have been material. The Company also operates
construction machinery in its business and will, depending on the project or the
ease of access to fuel for
6
such machinery, install fuel tanks for use on-site. Such tanks run the risk of
leaking hazardous fluids into the environment. The Company, however, is not
aware of any emissions associated with such tanks or of any other significant
environmental liability associated with its construction operations or any of
its corporate activities.
Progress on projects in certain areas may 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 more volatile quarterly
operating results due to less progress than anticipated being achieved on
projects.
In the normal course of business, the Company periodically evaluates its
existing construction markets and seeks to identify any growing markets where it
feels it has the expertise and management capability to successfully compete or
withdraw from markets which are no longer economically attractive, which it did
during 1997 with two construction divisions in the Midwest and Perini
Environmental referred to above.
Real Estate
The Company's real estate development operations are conducted by Perini
Land & Development Company ("PL&D"), a wholly owned subsidiary, which has been
involved in real estate development since the early 1950's. PL&D has
traditionally engaged in real estate development in Arizona, California,
Florida, Georgia and Massachusetts.
In late 1996, PL&D changed its strategy on certain of its properties
from maximizing value by holding them through the necessary development and
stabilization periods to a new strategy of generating short-term liquidity
through an accelerated disposition or bulk sale. This change in strategy
substantially reduced the estimated future cash flow from these properties.
Therefore, an impairment loss on those properties resulted in PL&D recording a
non-cash charge in an aggregate amount of approximately $80 million as of
December 31, 1996, in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". An estimated allocation of the write-down,
by geographic areas, was California ($59 million), Arizona ($18 million), and
Florida ($3 million).
In early 1998, in its capacity as managing general partner of Rincon
Center Associates ("RCA"), a joint venture which owns Rincon Center, a mixed-use
property in San Francisco (see Real Estate Properties below), PL&D reached a
preliminary agreement, subject to various approvals and further negotiations,
with regard to the refinancing of the obligations on the project. If the
preliminary agreement is implemented, it is expected that RCA may lose all or
most of its beneficial interest in Rincon Center Phase I. In anticipation of the
completion of this transaction, a reserve of $17.2 million against the potential
write-off of a note receivable and other assets related to the Phase I portion
of the project was taken by RCA at December 31, 1997. PL&D's share of that
reserve is $7.8 million, which has been charged to existing reserves it carries
on the project. Based on a current net realizable value analysis, the Company's
investment in RCA will be recoverable from the full development and disposition
of the remaining segments of the property. If the preliminary refinancing
agreement is completed as currently proposed, all guarantees provided by RCA,
its partners and the Company, under the existing master lease covering Rincon
Phase I, would be released at that time in association with the termination of
the master lease.
PL&D will continue periodically to review its portfolio to assess the
desirability of accelerating its sales through price concessions or sale at an
earlier stage of development. In circumstances in which asset strategies are
changed, such as in 1997, and properties brought to market on an accelerated
basis, those assets, if necessary, are adjusted to reflect the lower of carrying
amounts or fair value less cost to sell. Similarly, if the long term outlook for
a property in development or held for future sale is adversely changed, the
Company will adjust its carrying value to reflect such an impairment in value.
To achieve full value for some of its real estate holdings, in
particular its investments in Rincon Center, PL&D may have to hold that property
several years and currently intends to do so.
7
Real Estate Strategy
Since 1990, PL&D has taken a number of steps to reduce the size of its
operations. In early 1990, all new real estate investment was suspended pending
market improvement, all but critical capital expenditures were curtailed on
on-going projects, and PL&D's work force was substantially reduced. Certain
project loans were extended, with such extensions usually requiring pay downs
and increased annual amortization of the remaining loan balance. Since that
time, PL&D has operated with a further reduced staff and has adjusted its
activity to meet the demands of the market. PL&D currently has offices in
Arizona, Georgia and Massachusetts.
PL&D's real estate development project mix includes planned community,
industrial park, commercial office, multi-unit residential, urban mixed use and
single family home developments. PL&D's emphasis is on the sale of completed
product and also developing the projects in its inventory with the highest near
term sales potential. It may also selectively seek new development opportunities
in which it serves as development manager with limited equity exposure, if any.
Real Estate Properties
The following is a description of the Company's major development
projects and properties by geographic area:
Florida
West Palm Beach and Palm Beach County - At Metrocentre, a 51-acre
commercial/office park which provides for 570,500 square feet of mixed
commercial uses at the intersection of Interstate 95 and 45th Street in West
Palm Beach, no property was sold in 1997. The park consists of 17 parcels, of
which 5 acres currently remain unsold.
Massachusetts
Perini Land and Development or Paramount Development Associates, Inc.
("Paramount"), a wholly-owned subsidiary of PL&D, own the following projects:
Raynham Woods Commerce Center, Raynham - In 1987, Paramount acquired a
409-acre site located in Raynham, Massachusetts. During 1988, Paramount
completed infrastructure work on a major portion of the site (330 acres) which
is being developed as a mixed use corporate campus style park known as "Raynham
Woods Commerce Center". From 1989 through 1995, Paramount sold an aggregate of
56 acres to various users, including the division of a major U.S. company for
use as its headquarters, to a developer who was working with a major national
retailer for a retail site, and to a major insurance company. In 1990, Paramount
built two commercial buildings in the park which are currently approximately 95%
occupied. The park is planned to eventually contain 2.5 million square feet of
office, R&D, light industrial and mixed commercial space. No sales were closed
in 1997. However, a sale of the two commercial buildings is under contract and
expected to close in early 1998.
Easton Business Center, Easton - In 1989, Paramount acquired a 40-acre
site in Easton, Massachusetts, which already had been partially developed.
Paramount completed the work and is currently marketing the site to
commercial/industrial users. No sales were closed in 1997.
Wareham - In early 1990, Paramount acquired an 18.9-acre parcel of land
at the junction of Routes 495 and 58 in Wareham, Massachusetts. The property is
being marketed to both retail and commercial/industrial users. No sales were
closed in 1997.
8
Georgia
The Villages at Lake Ridge, Clayton County - During 1987, PL&D (49%)
entered into a joint venture with 138 Joint Venture partners to develop a
348-acre planned commercial and residential community in Clayton County called
"The Villages at Lake Ridge," six miles south of Atlanta's Hartsfield
International Airport. The development plan calls for mixed residential
densities of apartments and moderate priced single-family homes totaling 1,158
dwelling units in the residential tracts, plus 220,000 square feet of retail and
220,000 square feet of office space in the commercial tracts. Since its
acquisition, the joint venture has put in a substantial portion of the
infrastructure, all of the recreational amenities, and through 1996 had sold 293
single family lots to builders , along with a 13.6 acre tract designed for 52
lots, a 16-acre parcel for use as an elementary school and developed a 278 unit
apartment complex which it later sold to a third party buyer. In 1997 the joint
venture sold an additional 19 lots to builders, an 8.7 acre tract designed for
36 lots and 2.9 acres of commercial property.
California
Rincon Center, San Francisco - Major construction on this mixed-use
project in downtown San Francisco was completed in 1989. The project,
constructed in two phases, consists of 320 residential units, approximately
423,000 square feet of office space, 63,000 square feet of retail space, and a
700-space parking garage. Following its completion in 1988, the first phase of
the project was sold and leased back by the developing partnership. The first
phase consists of about 223,000 square feet of office space and 42,000 square
feet of retail space. The Phase I office space is 100% leased with the regional
telephone directory company as the major tenant on a lease which runs to 2002.
The retail space is currently 97% leased. Phase II of the project, which began
operations in late 1989, consists of approximately 200,000 square feet of office
space, 21,000 square feet of retail space, a 14,000 square foot U.S. postal
facility, and 320 apartment units. Currently, 100% of the office space, 70% of
the retail space and 98% of the 320 residential unit are leased. The major
tenant in the office space in Phase II is a large national insurance company
which occupies 173,000 square feet. PL&D currently holds a 46% interest in, and
is managing general partner of, the partnership which developed the project. The
land related to this project is being leased from the U.S. Postal Service under
a ground lease which expires in 2050.
Two major loans on this property, in aggregate totaling over $75
million, were scheduled to mature in 1993. During 1993, both loans were extended
for five additional years. To extend these loans, PL&D provided approximately $6
million in new funds which were used to reduce the principal balances of the
loans. Between 1993 and 1998, PL&D has continued to provide funding used to
further amortize these loans. Both loans mature again in 1998. In late 1997, as
part of the agreement to extend the letter of credit which supports the tax
exempt bonds, PL&D allowed the lender to call the $3.65 million letter of credit
provided as support for the Rincon Phase II commercial loan and apply the
proceeds against the commercial loan balance. Rincon Center Associates has
reached a preliminary agreement for the restructure of the Rincon financing
which will , if completed, extend the Rincon Center Phase II loans until late
2000. As part of the restructure, Rincon Center Associates would be required to
make additional principal and interest payments early in 1998 and relinquish all
or most of its economic interest in Rincon Center Phase I, such relinquished
interests being derived from the terms of the master lease documents which would
be terminated at the closing of the transaction. Based on Company forecasts,
PL&D may be required to contribute as much as $7.2 million in 1998. However,
based on the completion of the refinancing, the cash flow expectations for the
property after 1998 are significantly improved from prior years.
In addition to the project financing and guarantees disclosed in Note 11
to Notes to Consolidated Financial Statements, the Company has advanced
approximately $89.2 million to the partnership through December 31, 1997, of
which approximately $7.1 million was advanced during 1997, primarily to pay down
some of the principal portion of project debt which was renegotiated during
1993. During 1993 PL&D agreed, if necessary, to lend Pacific Gateway Properties
(PGP), the other General Partner in the project, funds to meet its 20% share of
cash calls. In return, PL&D receives a priority return from the partnership on
those funds and penalty fees in the form of rights to certain distributions due
PGP by the partnership controlling Rincon. From 1993-1997, PL&D advanced $5.4
million under this agreement, primarily to meet the principal payment
obligations of the loan extensions
9
described above. These funds advanced as loans to PGP are in addition to the
advances described above.
The interest rates on much of the debt financing covering Rincon Center
are variable based on various rate indices. With the exception of approximately
$14 million of the financing, none of the debt has been hedged or capped and is
subject to market fluctuations. From time to time, the Company reviews the costs
and anticipated benefits from hedging Rincon Center's interest rate commitments.
Based on current costs to further hedge rate increases and market conditions,
the Company has elected not to provide any additional hedges at this time.
As part of the Rincon Center Phase I sale and operating lease-back
transaction, the lease provides that if an additional financial commitment to
replace at least $33 million of long-term financing has not been arranged by
January 1, 1998, the lessee will be deemed to have made an offer to purchase the
property for a stipulated amount of approximately $18.8 million in excess of the
then outstanding debt. An arrangement has been made to delay this event to allow
the parties to arrange for the financial restructuring as described above.
The Resort at Squaw Creek - Early in 1997, PL&D signed a letter of
intent to sell its interest in the joint venture through which the Company held
its ownership interest in the Resort. Based on the proposed transaction, the
Company took a write down on this project of approximately $57 million at the
end of 1996. The transaction closed in the second quarter of 1997.
Corte Madera, Marin County - After many years of intensive planning,
PL&D obtained approval for a 151 single-family home residential development on
its 85-acre site in Corte Madera and, in 1991, was successful in gaining water
rights for the property. In 1992, PL&D initiated development on the site which
was continued into 1993. This development is one of the last remaining in-fill
areas in southern Marin County. In 1993, when PL&D decided to scale back its
operations in California, it also decided to sell this development in a
transaction which closed in early 1994. The transaction calls for PL&D to get
the majority of its funds from the sale of residential units or upon the sixth
anniversary of the sale whichever takes place first, and, although indemnified,
to leave in place certain bonds and other assurances previously given to the
town of Corte Madera guaranteeing performance in compliance with approvals
previously obtained. Sale of the units began in August of 1995 and by the end of
1996, 39 sales were closed. During 1997, another 37 closings were recorded.
Arizona
Airport Commerce Center, Tucson - In 1982, the I-10 partnership
purchased 112 acres of industrially-zoned property near the Tucson International
Airport. During 1983, the partnership added 54 acres to that project, bringing
its total size to 166 acres. The partnership built and fully leased a 14,600
square foot office/warehouse building in 1987 on a building lot in the park,
which was sold during 1991. From 1990 through 1996, the partnership sold 73
acres within the park. In 1997 PL&D sold its remaining interest in the project
to its partner.
Perini Central Limited Partnership, Phoenix - In 1985, PL&D (75%)
entered into a joint venture with the Central United Methodist Church to master
plan and develop approximately 4.4 acres of the church's property in midtown
Phoenix. In 1990, the project was successfully rezoned to permit development of
580,000 square feet of office, 37,000 square feet of retail and 162 luxury
apartments. In early 1998, the Company entered into an agreement to sell the
property.
Grove at Black Canyon, Phoenix - The project consists of an office park
complex on a 30-acre site located off of Black Canyon Freeway, a major Phoenix
artery, approximately 20 minutes from downtown Phoenix. When complete, the
project will include approximately 650,000 square feet of office, hotel,
restaurant and/or retail space. Development, which began in 1986, is scheduled
to proceed in phases as market conditions dictate. In 1987, a 150,000 square
foot office building was completed within the park. The building leased up
immediately and maintained an average occupancy in the low 90% range until late
1997. The building is now 65% leased with approximately half of the building
leased to a major area utility company. The partnership is currently in
10
negotiations with two major tenants that, if successful, would bring the
occupancy level to 95%. During 1993, PL&D (50%) successfully restructured the
financing on the project by obtaining a seven year extension with some
amortization and a lower fixed interest rate. The annual amortization commitment
is not currently covered by operating cash flow. In the near term, it appears
approximately $700,000 per year of support to cover loan amortization will
continue to be required. In 1996, the lease covering space occupied by the major
office tenant was extended an additional seven years to the year 2004 on
competitive terms. In 1995, a day care center was completed on an 8-acre site
along the north entrance of the park. In 1997, a 1.5 acre site was sold to a
local small business for development of an owner occupied office building and a
2.7 acre site was sold to a national hotel chain for development of an
all-suites hotel. Both projects broke ground in the latter part of the year.
Sabino Springs Country Club, Tucson - During 1990, the Tucson Board of
Supervisors unanimously approved a plan for this 410-acre residential golf
course community close to the foothills on the east side of Tucson. In 1991,
that approval, which had been challenged, was affirmed by the Arizona Supreme
Court. When fully developed, the project will consist of 496 single-family
homes. In 1993, PL&D recorded the master plat on the project and sold a major
portion of the property to an international real estate company. An 18-hole
Robert Tent Jones, Jr. designed championship golf course and clubhouse were
completed within the project in 1995. Although it will require some
infrastructure development before sale, PL&D still retains 33 estate lots for
sale in future years.
General
The Company's real estate business is influenced by both economic
conditions and demographic trends. A depressed economy may result in lower real
estate values and longer absorption periods. Higher inflation rates may increase
the values of current properties, but often are accompanied by higher interest
rates which may result in a slow down in property sales because of higher
carrying costs. Important demographic trends are population and employment
growth. A significant reduction in either of these may result in lower real
estate prices and longer absorption periods.
Generally, there has been no material impact on PL&D's real estate
development operations over the past 10 years due to interest rate increases.
However, an extreme and prolonged rise in interest rates could create market
resistance for all real estate operations in general, and is always a potential
market obstacle. Historically, PL&D has, in some cases, employed hedges or caps
to protect itself against increases in interest rates on any of its variable
rate debt. The future use of such hedges or caps is somewhat restricted under
the terms of the New Credit Agreement.
Because several of the Company's real estate projects have been written
down to net realizable value, future gross profits from real estate sales will
be minimal, which has been the case during the three year period ended December
31, 1997.
Insurance and Bonding
All of the Company's properties and equipment, both directly owned or
owned through partnerships or joint ventures with others, are covered by
insurance and management believes that such insurance is adequate.
In conjunction with its construction business, the Company is often
required to provide various types of surety bonds. The Company has a co-surety
arrangement with three sureties, one of which it has dealt with for over 75
years, and it has never been refused a bond. Although from time-to-time the
surety industry encounters limitations affecting the bondability of very large
projects and the Company occasionally has encountered limits imposed by its
surety, these limits have not had an adverse impact on its operations.
Year 2000
The Company began a project to review all of its computer systems during
1995. Among the many considerations at that time was what impact, if any, would
the year 2000 have on computer systems. During 1997,
11
the Company made a commitment to purchase and install new computer systems to
meet its current and projected needs. In addition to providing new fully
integrated on line construction specific systems applications, the software
complies with the year 2000 requirement.
The process of implementing the new software package began in 1997 and was
completed early in 1998. Management believes that due to the implementation of
this new software package, the year 2000 issue will not have a material adverse
impact on the Company's operations.
Employees
The total number of personnel employed by the Company is subject to
seasonal fluctuations, the volume of construction in progress and the relative
amount of work performed by subcontractors. During 1997 the maximum number of
employees employed was approximately 2,200 and the minimum was approximately
1,900.
The Company operates as a union contractor. As such, it is a signatory
to numerous local and regional collective bargaining agreements, both directly
and through trade associations, throughout the country. These agreements cover
all necessary union crafts and are subject to various renewal dates. Estimated
amounts for wage escalation related to the expiration of union contracts are
included in the Company's bids on various projects and, as a result, the
expiration of any union contract in the current fiscal year is not expected to
have any material impact on the Company.
ITEM 2. PROPERTIES
- -------------------
Properties applicable to the Company's real estate development
activities are described in detail by geographic area in Item 1. Business on
pages 8 through 11. All other properties used in operations are summarized
below:
Owned or Leased Approximate Approximate Square
Principal Offices by Perini Acres Feet of Office Space
----------------- --------- ----- --------------------
Framingham, MA Owned 9 100,000
Phoenix, AZ Leased - 22,700
Southfield, MI Leased - 7,300
Hawthorne, NY Leased - 12,500
Atlantic City, NJ Leased - 900
Las Vegas, NV Leased - 2,900
Atlanta, GA Leased - 200
Chicago, IL Leased - 1,600
Philadelphia, PA Leased - 2,500
-------- -----------
9 150,600
======== ===========
Owned or Leased Approximate
Principal Permanent Storage Yards by Perini Acres
--------------------------------- --------- -----
Bow, NH Owned 70
Framingham, MA Owned 6
Las Vegas, NV Leased 2
Novi, MI Leased 3
-----
81
12
The Company's properties are generally well maintained, in good
condition, adequate and suitable for the Company's purpose and fully utilized.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
As previously reported, the Company is a party to an action entitled
Mergentime Corporation et. al. v. Washington Metropolitan Transit Authority v.
Insurance Company of North America (Civil Action No. 89-1055) in the U.S.
District Court for the District of Columbia. The action involves WMATA's
termination of the general contractor, a joint venture in which the Company was
a minority partner, on two contracts to construct a portion of the Washington,
D.C. subway system, and certain claims by the joint venture against WMATA for
claimed delays and extra work.
On July 30, 1993, the Court upheld the termination for default, and
found both joint venturers and their surety jointly and severally liable to
WMATA for damages in the amount of $16.5 million, consisting primarily of
WMATA's excess reprocurement costs, but specifically deferred ruling on the
amount of the joint venture's claims against WMATA. Since the other joint
venture partner may be unable to meet its financial obligations under the award,
the Company could be liable for the entire amount.
At the direction of the judge now presiding over the action, during the
third quarter of 1995, the parties submitted briefs on the issue of WMATA's
liability on the joint venture's claims for delays and for extra work. As a
result of that process, the company established a reserve with respect to the
litigation.
In July 1997, the remaining issues were ruled on by the Court, which
awarded approximately $4.3 million to the joint venture, thereby reducing the
net amount payable to approximately $12.2 million. The joint venture has
appealed the decision. As a result of the decision, there is no immediate impact
on the Company's Statement of Operations because of the reserve provided in
prior years. The actual funding of net damages, if any, will be deferred until
the appeal process is complete.
In the ordinary course of its construction business, the Company is
engaged in other lawsuits, arbitration and alternative dispute resolution
("ADR") proceedings. The Company believes that such proceedings are usually
unavoidable in major construction operations and that their resolution will not
materially affect its results of future operations and financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
- -------------------------------------------------------------------------
The Company's Common Stock is traded on the American Stock Exchange
under the symbol "PCR". The quarterly market price ranges (high-low) for 1997
and 1996 are summarized below:
1997 1996
------ ------
Market Price Range per Common Share: High Low High Low
- ----------------------------------- ---- --- ---- ---
Quarter Ended
March 31 9 1/2 - 6 7/8 9 - 7 1/2
June 30 7 3/4 - 6 1/4 12 1/8 - 7 3/4
September 30 8 3/8 - 7 12 1/4 - 8 5/8
December 31 9 3/8 - 7 13/16 9 1/4 - 7 1/2
13
For information on dividend payments, see Selected Financial Data in
Item 6 below and "Dividends" under Management's Discussion and Analysis in Item
7 below.
As of February 27, 1998, there were approximately 1,198 record holders
of the Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Selected Consolidated Financial Information
(In thousands, except per share data)
OPERATING SUMMARY 1997 1996 1995 1994 1993
------------- ------------ ------------ ------------ -------------
Revenues:
Construction Operations $ 1,276,033 $ 1,224,428 $ 1,056,673 $ 950,884 $ 1,030,341
Real Estate Operations 48,458 45,856 44,395 61,161 69,775
------------- ------------ ------------ ------------ -------------
Total Revenues $ 1,324,491 $ 1,270,284 $ 1,101,068 $ 1,012,045 $ 1,100,116
------------- ------------ ------------ ------------ -------------
Costs:
Cost of Operations $ 1,275,614 $ 1,215,806 $ 1,086,213 $ 960,248 $ 1,047,330
Write down of Certain Real Estate
Assets (Note 4) - 79,900 - - -
------------- ------------ ------------ ------------ -------------
$ 1,275,614 $ 1,295,706 $ 1,086,213 $ 960,248 $ 1,047,330
------------- ------------ ------------ ------------ -------------
Gross Profit (Loss) $ 48,877 $ (25,422) $ 14,855 $ 51,797 $ 52,786
General, Administrative & Selling
Expenses 30,556 33,988 37,283 42,985 44,212
------------- ------------ ------------ ------------ -------------
Income (Loss) From Operations $ 18,321 $ (59,410) $ (22,428) $ 8,812 $ 8,574
Other Income (Expense), Net (1,665) (492) 814 (856) 5,207
Interest Expense (10,334) (9,871) (8,582) (7,473) (5,655)
------------- ------------ ------------ ------------ -------------
Income (Loss) Before Income Taxes $ 6,322 $ (69,773) $ (30,196) $ 483 $ 8,126
(Provision) Credit for Income Taxes (950) (830) 2,611 (180) (4,961)
------------- ------------ ------------ ------------ -------------
Net Income (Loss) $ 5,372 $ (70,603) $ (27,585) $ 303 $ 3,165
------------- ------------ ------------ ------------ -------------
Per Share of Common Stock:
Basic and diluted earnings (loss) $ 0.01 $ (15.13) $ (6.38) $ (0.42) $ 0.24
------------- ------------ ------------ ------------ -------------
Cash dividends declared $ - $ - $ - $ - $ -
------------- ------------ ------------ ------------ -------------
Book value $ 2.44 $ 2.14 $ 17.06 $ 23.79 $ 24.49
------------- ------------ ------------ ------------ -------------
Weighted Average Number of
Common Shares Outstanding 5,059 4,808 4,655 4,380 4,265
------------- ------------ ------------ ------------ -------------
FINANCIAL POSITION SUMMARY
Working Capital $ 71,971 $ 56,744 $ 36,545 $ 29,948 $ 36,877
------------- ------------ ------------ ------------ -------------
Current Ratio 1.31:1 1.19:1 1.12:1 1.13:1 1.17:1
------------- ------------ ------------ ------------ -------------
Long-term Debt, less current
maturities $ 84,898 $ 96,893 $ 84,155 $ 76,986 $ 82,366
------------- ------------ ------------ ------------ -------------
Stockholders' Equity $ 40,900 $ 35,558 $ 105,606 $ 132,029 $ 131,143
------------- ------------ ------------ ------------ -------------
Ratio of Long-term Debt to Equity 2.08:1 2.72:1 .80:1 .58:1 .63:1
------------- ------------ ------------ ------------ -------------
Total Assets $ 414,924 $ 464,292 $ 539,251 $ 482,500 $ 476,378
------------- ------------ ------------ ------------ -------------
OTHER DATA
Backlog at Year End $ 1,309,454 $ 1,517,700 $ 1,534,522 $ 1,538,779 $ 1,238,141
------------- ------------ ------------ ------------ -------------
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Results of Operations -
1997 Compared to 1996
The Company's total operations resulted in net income of $5.4 million (or $.01
per Common Share) in 1997 compared to a net loss of $70.6 million (or $15.13 per
Common Share) in 1996. The improvement in 1997 results compared to 1996 is
substantially due to the non-recurring non-cash write-down in 1996 related to a
change in the Company's real estate strategy for certain properties from
maximizing value by holding them through the necessary development and
stabilization periods to a new strategy of generating short-term liquidity
through an accelerated disposition or bulk sale (see Notes 1(d) and 4 to Notes
to Consolidated Financial Statements).
Revenues amounted to $1.324 billion in 1997, a record level for the third
consecutive year, an increase of $54.2 million (or 4.3%), compared to 1996
revenues of $1.270 billion. This increase resulted primarily from increased
construction revenues of $51.6 million (or $4.2%) from $1.224 billion in 1996 to
$1.276 billion in 1997, due primarily to an increase in revenues from building
construction operations of $53.9 million (or 6.5%), from $834.9 million in 1996
to $888.8 million in 1997, which more than offset a slight decrease in revenues
from civil construction operations of $2.3 million (or 0.6%), from $389.5
million in 1996 to $387.2 million 1997. These revenue fluctuations reflect the
timing in the start-up of new construction projects, in particular several fast
track hotel/casino projects in the Southwestern United States, several
prison/detention and medical facilities projects in the Northeastern United
States, and several long-term infrastructure rehabilitation projects in the
metropolitan New York, Boston and Los Angeles areas. Revenues from real estate
operations increased $2.6 million , from $45.9 million in 1996 to $48.5 million
in 1997 because of revenues related to the sale of the Company's interest in The
Resort at Squaw Creek.
Gross profit increased by $74.3 million, from a loss of $25.4 million in 1996 to
a profit of $48.9 million in 1997 due to the 1996 non-recurring $79.9 million
real estate write-down. After adjusting for the 1996 real estate write-down, the
pro forma gross profit actually decreased by $5.6 million in 1997, from $54.5
million in 1996 to $48.9 million in 1997, in spite of the increase in revenues
described above, due primarily to a $5.2 million decrease in gross profit from
construction operations, from $55.4 million in 1996 to $50.2 million in 1997
because the increased profits related to the increase in construction revenues
was more than offset by additional write-downs related to contracts from two
unprofitable Midwest construction divisions, which are being closed. The impact
of these write-downs were partially offset by an approximate $3.2 million gain
from the sale of the Company's interest in two joint ventures (see Note 14 to
Notes to the Consolidated Financial Statements). The gross loss from real estate
operations was $1.3 million in 1997 compared to an adjusted gross loss of $0.9
million in 1996.
General, administrative and selling expenses decreased by $3.4 million (or 10%),
from $34.0 million in 1996 to $30.6 million in 1997 primarily due to the closing
out of two construction divisions in the Midwest and Perini Environmental
Services, Inc., its wholly-owned hazardous waste subsidiary.
Other income (expense), net increased $1.2 million, from a net expense of $0.5
million in 1996 to a net expense of $1.7 million in 1997 due primarily to
increased amortization of deferred debt expense related to the new credit
agreement, a $0.4 million decrease in gains on sales of fixed assets, and a $0.3
million decrease in minority interest.
Interest expense increased by $0.4 million (or 4%), from $9.9 million in 1996 to
$10.3 million in 1997 due to a higher average level of borrowings during 1997.
The lower than normal tax rate for the three year period ended December 31, 1997
is 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 1996
and 1995. As a result, an amount estimated to be approximately $75.0 million of
future pretax earnings should benefit from minimal, if any, federal tax charges.
The net deferred tax assets reflect management's estimate of the amount that
will, more likely than not,
15
be realized (see Note 5 to Notes to Consolidated Financial Statements).
Results of Operations -
1996 Compared to 1995
In spite of record revenues and earnings from domestic construction operations
during 1996, the Company's total operations resulted in a net loss of $70.6
million (or $15.13 per Common Share) on revenues of $1.3 billion in 1996
compared to a net loss of $27.6 million in 1995 (or $6.38 per Common Share) on
revenues of $1.1 billion. The reason for the net loss in 1996 was a change in
the Company's real estate strategy on certain of its properties from maximizing
value by holding them through the necessary development and stabilization
periods to a new strategy of generating short-term liquidity through an
accelerated disposition or bulk sale. The change in strategy substantially
reduced the estimated future cash flows from these properties. Therefore, a
non-cash impairment loss on those properties, in the aggregate amount of $79.9
million, was provided in 1996 in accordance with SFAS No. 121 (see Notes (1)(d)
and 4 to Notes to Consolidated Financial Statements).
Revenues amounted to $1.270 billion in 1996, a record level for the second
consecutive year, an increase of $169 million (or 15%) compared to the 1995
revenues of $1.101 billion. This increase was almost entirely due to an increase
in construction revenues of $167 million (or 16%), from $1.057 billion in 1995
to $1.224 billion in 1996. This increase in construction revenues was divided
fairly equally between building and heavy (or "civil") construction operations.
Building construction revenues increased $87 million (or 12%), from $748 million
in 1995 to $835 million in 1996 while civil construction revenues increased $80
million (or 26%), from $309 million in 1995 to $389 million in 1996. These
revenue increases reflect the impact of several fast track hotel/casino projects
in the western and midwestern United States, several prison/detention and
medical facilities projects in the northeastern United States, and several
long-term infrastructure rehabilitation projects in the metropolitan New York,
Boston and Los Angeles areas.
In spite of the 15% increase in revenues, the gross profit decreased $40.3
million, from a gross profit of $14.9 million in 1995 to a gross loss of $25.4
million in 1996. The primary reason for the gross loss in 1996 was the $79.9
million real estate write down referred to above which caused the increase in
gross loss from real estate from $1.0 million in 1995 to $80.9 million in 1996.
This increase in gross loss was partially offset by a substantial increase in
gross profit from construction operations of $39.6 million, from $15.9 million
in 1995 to $55.5 million in 1996. Overall gross profit margins on both building
and civil construction operations in 1996 exceeded those experienced in 1995.
The lower than normal gross profit from construction operations recognized in
1995 included a pretax charge, which aggregated $25.6 million, to provide for a
liability related to previously disclosed litigation in Washington, D.C. (see
Note 11 to Notes to Consolidated Financial Statements), and downward revisions
in estimated probable recoveries on certain outstanding contract claims. These
pretax charges in 1995, coupled with the increased construction revenues in 1996
referred to above, including the favorable profit impact in 1996 of several
large infrastructure projects, primarily in the metropolitan New York, Boston
and Los Angeles areas, resulted in the substantial increase in gross profit from
construction operations in 1996.
General, administrative and selling expenses decreased by $3.3 million (or 9%),
from $37.3 million in 1995 to $34.0 million in 1996 due primarily to continued
emphasis on reducing overall overhead expenses in conjunction with the Company's
re-engineering efforts commenced in prior years, the sale in June of 1996 of
Pioneer Construction, a former subsidiary of the Company located in West
Virginia, and the continuation of the gradual down-sizing of the Company's real
estate and environmental remediation construction operations.
Other income (expense), net decreased $1.3 million, from income of $.8 million
in 1995 to a loss of $.5 million in 1996 primarily due to higher bank charges
experienced in 1996 in conjunction with the Company's renegotiation of certain
provisions of its Revolving Credit Agreement and Bridge Loan Agreement and, to a
lesser degree, a reduction in gains from the sale of certain underutilized
operating facilities and less interest income.
Interest expense increased by $1.3 million (or 15%), from $8.6 million in 1995
to $9.9 million in 1996 due to a higher average level of borrowings during 1996.
16
The Company recognized income tax expense for the year ending December 31, 1996
of $.8 million on a pretax loss of $69.8 million, whereas in 1995, the Company
recognized a tax benefit of $2.6 million on a pretax loss of $30.2 million. The
1996 income tax expense is primarily for state income taxes relating to certain
jurisdictions in which the Company had net taxable income. The Company did not
provide any federal tax benefit in 1996, whereas in 1995, a partial tax benefit
was provided on the Company's pretax loss, due to certain accounting
limitations.
Financial Condition
Cash and Working Capital
During 1997, the Company provided $12.7 million in cash from operating
activities, primarily from proceeds related to the sale of The Resort at Squaw
Creek, and $14.6 million in cash from financing transactions, due to the net
proceeds received on the sale of Series B Preferred Stock less paydowns of
long-term debt. These funds were used for investing activities ($5.7 million)
primarily for joint ventures and to increase the cash on hand by $21.6 million.
During 1996, the Company used $24.3 million in cash for operating activities,
primarily for changes in working capital, and $21.1 million for investment
activities, primarily to fund construction and real estate joint ventures. These
uses of cash were provided by $21.6 million from financing activities, primarily
increases in borrowings under the Company's Revolving Credit and Bridge Loan
facilities, and a $19.3 million reduction in cash on hand.
During 1995, the Company provided $24.6 million in cash from operating
activities, primarily due to an overall increase in accounts payable and
advances from joint ventures; $9.0 million from financing activities due to an
increase in borrowings under its revolving credit facility; and $23.9 million
from cash distributions from certain joint ventures. These increases in cash
were used to increase cash on hand by $21.2 million, with the balance used for
various investment activities, primarily to fund construction and real estate
joint ventures.
Since 1990, the Company has paid down $45.6 million of real estate debt on
wholly-owned real estate projects (from $50.9 million to $5.3 million),
utilizing proceeds from sales of property and general corporate funds.
Similarly, real estate joint venture debt has been reduced by $167 million over
the same period. As a result, the Company has reached a point at which revenues
from further real estate sales that, in the past, have been largely used to
retire real estate debt will be increasingly available to improve general
corporate liquidity subject to certain restrictions contained in the New Credit
Agreement referred to in Note 3 to Notes to Consolidated Financial Statements.
With the exception of a major property referred to in Note 11 to Notes to
Consolidated Financial Statements, this trend should continue over the next
several years with debt on projects often being fully repaid prior to full
project sell-out. In addition, the Company made a strategic decision in the
early 1990's to change its mix of construction work by increasing the relative
percentage of potentially higher margin civil construction projects. The working
capital required to support civil construction projects is substantially more
than the normal building construction project because of its equipment intensive
nature, progress billing terms imposed by certain public owners and, in some
instances, time required to process contract change orders. The Company has
addressed these problems by relying on corporate borrowings, extending certain
maturing real estate loans (with such extensions usually requiring pay downs and
increased annual amortization of the remaining loan balance), suspending the
acquisition of new real estate inventory, significantly reducing development
expenses on certain projects, utilizing stock in payment of certain expenses,
utilizing cash internally generated from operations and selling its interest in
certain engineering and construction business units that were not an integral
part of the Company's ongoing building and civil construction operations. The
Company also implemented company-wide cost reduction programs in the early
1990's, and which are ongoing, to improve long-term financial results and
suspended the dividend on its Common Stock during the fourth quarter of 1990 and
suspended payment of dividends on its $21.25 Convertible Exchangeable Preferred
Stock in the first quarter of 1996. Also, the Company increased the aggregate
amount available under its revolving credit agreement during the period from $70
million to $114.5 million at December 31, 1997. In addition to internally
generated funds, at December 31, 1997, the Company has $31.5 million available
under its revolving credit facility. The financial covenants to which the
Company is subject include minimum levels of working capital, debt/net worth
ratio, net worth level, interest coverage and certain restrictions on real
estate investments, all as defined in the loan documents. Although the Company
would have been in violation of certain of the covenants during 1997, it
17
obtained waivers of such violations. Effective January 17, 1997, the Company's
liquidity and access to future borrowings, as required, during the next few
years were significantly enhanced by the issuance of $30 million in Redeemable
Series B Cumulative Convertible Preferred Stock (see Note 7 to Notes to
Consolidated Financial Statements) and the New Credit Agreement referred to in
Note 3 to Notes to Consolidated Financial Statements. Also, during 1997, the
Company made substantial progress on a strategy adopted at the end of 1996 that
called for liquidating certain real estate assets which were written down at
that time, resolving several major construction claims and minimizing overhead
expenses.
The working capital current ratio increased to 1.31:1 at the end of 1997,
compared to 1.19:1 at the end of 1996 and compared to 1.12:1 at the end of 1995.
Of the total working capital of $72.0 million at the end of 1997, approximately
$14.6 million may not be converted to cash within the next 12 to 18 months.
Long-term Debt
Long-term debt was $84.9 million at the end of 1997, a decrease of $12.0 million
compared with $96.9 million at the end of 1996, which was an increase of $12.7
million compared with $84.2 million at the end of 1995. The ratio of long-term
debt to equity increased from 0.80:1 at the end of 1995 to 2.72:1 at the end of
1996 and decreased to 2.08:1 at the end of 1997 due primarily to the negative
impact on equity of the net losses experienced by the Company in 1995 and 1996
and the net income in 1997.
Stockholders' Equity
The Company's book value per Common Share stood at $2.44 at December 31, 1997,
compared to $2.14 per Common Share and $17.06 per Common Share at the end of
1996 and 1995, respectively. The major factors impacting stockholders' equity
during the three-year period under review were the net income in 1997, the net
losses recorded in 1995 and 1996 and, to a lesser extent, Preferred dividends
paid or accrued, and stock issued in partial payment of certain expenses.
At December 31, 1997, there were 1,212 Common stockholders of record based on
the stockholders list maintained by the Company's transfer agent.
Dividends
There were no cash dividends declared or paid on the Company's outstanding
Common Stock during the three years ended December 31, 1997.
During 1995, the Company declared and paid the regular quarterly cash dividends
of $5.3125 per share on the Company's Convertible Exchangeable Preferred Shares
for an annual total of $21.25 per share (equivalent to quarterly dividends of
$.53125 per Depositary Share for an annual total of $2.125 per Depositary
Share). In conjunction with the covenants of the 1995 Amended Revolving Credit
Agreement (see Note 3 to Notes to Consolidated Financial Statements), the
Company was required to suspend the payment of quarterly dividends on its
Preferred Stock. Therefore, the dividend that normally would have been declared
during December of 1995 and payable on March 15, 1996, as well as subsequent
quarterly dividends in 1996 and 1997, have not been declared or paid (although
they have been fully accrued due to the "cumulative" feature of the Preferred
Stock). A New Credit Agreement, superseding the loan agreements referred to
above, was approved January 17, 1997 and provides that the Company may not pay
cash dividends or make other restricted payments, as defined, prior to September
30, 1998 and thereafter may not pay cash dividends or make other restricted
payments unless: (i) the Company is not in default under the New Credit
Agreement; (ii) commitments under the credit facility have been reduced to less
than $90 million; (iii) restricted payments in any quarter, when added to
restricted payments made in the prior three quarters, do not exceed fifty
percent (50%) of net income from continuing operations for the prior four
quarters; and (iv) net worth (after taking into consideration the amount of the
proposed cash dividend or restricted payment) is at least equal to the amount
shown below, adjusted for non-cash charges incurred in connection with any
disposition or
18
write-down of any real estate investment, provided that net worth must be at
least $60 million:
Net Worth
---------
(In thousands)
October 1, 1998 to December 30, 1998 $161,977
December 31, 1998 to March 31, 1999 $167,303
April 1, 1999 to June 30, 1999 $170,129
July 1, 1999 to September 30, 1999 $172,955
October 1, 1999 to January 1, 2000 $175,781
For purposes of the New Credit Agreement, net worth shall include the net
proceeds from the sale of the Series B Preferred Stock to the Investors. In
addition, under the terms of the Series B Preferred Stock, the Company may not
pay any cash dividends on its Common Stock until after September 1, 2001, and
then only to the extent such dividends do not exceed in aggregate more than
twenty-five percent (25%) of the Company's consolidated net income available for
distribution to Common shareholders (after Preferred dividends); provided,
however, that the Company shall have elected and paid cash dividends on the
Series B Preferred Stock for the preceding four quarters.
The Board of Directors intends to resume payment of dividends as the Company
satisfies the terms of the New Credit Agreement, the provisions of the Series B
Preferred Stock and the Board deems it prudent to do so.
Outlook
Looking ahead, the overall construction backlog at the end of 1997 was $1.309
billion, down 14% from the 1996 year end backlog of $1.518 billion. This
decrease primarily reflects suspension of work acquisition in certain divisions
that are being closed. This backlog has a good balance between building and
civil work and a relatively high overall estimated profit margin. Approximately
56% of the current backlog relates to building construction projects which
generally represent lower risk, lower margin work, and approximately 44% of the
current backlog relates to heavy construction projects which generally represent
higher risk, but correspondingly potentially higher margin work. During 1996,
the Company also adopted a plan to enhance the profitability of its construction
operations by emphasizing gross margin and bottom line improvement ahead of top
line revenue growth. This plan called for the Company to focus its financial and
human resources on construction operations which are consistently profitable and
to de-emphasize marginal business units. Consistent with that Plan, the Company
closed or downsized and refocused four business units during 1997. The Company
believes the outlook for its building and civil construction businesses
continues to be promising.
Because several of the Company's real estate projects have been written down to
net realizable value, future gross profits from real estate sales will be
minimal, which has been the case during the three year period ended December 31,
1997. A major objective for 1998 is the renegotiation and extension of debt at
Rincon Center (see Note 11 to Notes to Consolidated Financial Statements).
With the receipt of $30 million from the sale of its Redeemable Series B
Preferred Stock and the New Credit Agreement both becoming effective on January
17, 1997, the Company's near term liquidity position has improved substantially,
enabling payments to vendors to generally be made in accordance with normal
payment terms. In order to generate cash and reduce the Company's dependence on
bank debt to fund the working capital needs of its core construction operations
as well as to lower the Company's substantial interest expense and strengthen
the balance sheet in the longer term, the Company will continue to sell certain
real estate assets as market opportunities present themselves; to actively
pursue the favorable conclusion of various construction claims; to focus new
construction work acquisition efforts on various niche markets and geographic
areas where the Company has a proven history of success; to downsize or close
operations with marginal prospects for success; to continue to restrict the
payment of cash dividends on the Company's $1 par value Common Stock and $2.125
Depositary Convertible
19
Exchangeable Preferred Stock; and to continue to seek ways to control overhead
expenses. In addition, at the end of 1996 the Company completed a review of all
of its real estate assets which resulted in a change of strategies related to
certain of those assets to a new strategy of generating short-term liquidity.
This resulted in generating cash proceeds in excess of $20 million during 1997
and up to an additional $10 million which may be generated during 1998.
Management believes that cash generated from operations, existing credit lines,
additional borrowings and projected sale of certain real estate assets referred
to above should be adequate to meet the Company's funding requirements for at
least the next twelve months.
Forward-looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations, including "Outlook" and other sections of this Annual Report,
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements that are based on current expectations, estimates and
projections about the industries in which the Company operates, management's
beliefs and assumptions made by management. Words such as "expects",
"anticipates", "intends", "plans", "believes", "seeks", "estimates", variations
of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from those in such forward-looking statements. The Company undertakes
no obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The Reports of Independent Public Accountants, Consolidated Financial
Statements, and Supplementary Schedules, are set forth on the pages that follow
in this Report and are hereby incorporated herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
None.
20
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information to be set forth in the section
entitled "Election of Directors" in the definitive proxy statement involving
election of directors in connection with the Annual Meeting of Stockholders to
be held on May 14, 1998 (the "Proxy Statement"), which section is incorporated
herein by reference. The Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after December 31, 1997 pursuant to
Regulation 14A of the Securities and Exchange Act of 1934, as amended.
Listed below are the names, offices held, ages and business experience
of all executive officers of the Company.
Name, Offices Held and Age Year First Elected to Present Office and
Business Experience
- -------------------------- --------------------------------------------
David B. Perini, Director and Since January 1, 1998 he serves as a
Chairman - 60 Director and Chairman. Prior to that, he
served as a Director, President, Chief
Executive Officer and Acting Chairman since
1972. He became Chairman on March 17, 1978
and has worked for the Company since 1962 in
various capacities. Prior to being elected
President, he served as Vice President and
General Counsel.
Roger J. Ludlam, Director, He was elected President and Chief Executive
President and Chief Executive Officer effective January 1, 1998. Prior to
Officer - 55 that, he served as Senior Vice President,
Civil Construction since June 1997. Prior
thereto, he served as Chief Executive
Officer of Park Construction, a Minnesota
based civil construction contractor since
January 1994 and in a similar capacity for
S.J. Groves & Sons Company since 1989.
Robert Band, Executive Vice He was elected to his current position in
President, Chief Financial December 1997. Prior to that, he served as
Officer - 50 President of Perini Management Services,
Inc. 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.
Richard J. Rizzo, Executive He was elected to his current position
Vice President, Business effective January 1, 1998. Prior to that, he
Development - 54 served as Executive Vice President, Building
Construction since January 1994, which
entailed overall responsibility for the
Company's building construction operations.
Prior thereto, he served as President of
Perini Building Company (formerly known as
Mardian Construction Co.) since 1985, and in
various other operating capacities since
1977.
John H. Schwarz, Executive Vice He has served as Executive Vice President,
President, Finance and Finance and Administration since August
Administration of the Company 1994. He also served as Chief Executive
- - 59* Officer of Perini Land and Development
Company, which entails overall
responsibility for the Company's real estate
operations since April 1992 through 1995.
Prior to that, he served as Vice President,
Finance and Controls of Perini Land and
Development Company. Previously, he served
as Treasurer from August 1984, and Director
of Corporate Planning since May 1982. He
joined the Company in 1979 as Manager of
Corporate Development.
Donald E. Unbekant, Executive He has served in this capacity since January
Vice President, Civil 1994, which entails overall responsibility
Construction - 66* for the Company's civil construction
operations. Prior thereto, he served in the
Metropolitan New York Division of the
Company as President since 1992, Vice
President and General Manager since 1990 and
Division Manager since 1984.
* Messrs. Schwarz and Unbekant retired at the end of 1997.
21
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
- ------------------------------------------------------------------------
The Company's officers are elected on an annual basis at the Board of
Directors Meeting immediately following the Shareholders Meeting in May, to hold
such offices until the Board of Directors Meeting following the next Annual
Meeting of Shareholders and until their respective successors have been duly
appointed or until their tenure has been terminated by the Board of Directors,
or otherwise.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
In response to Items 11-13, reference is made to the information to be
set forth in the section entitled "Election of Directors" in the Proxy
Statement, which is incorporated herein by reference.
22
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PERINI CORPORATION AND SUBSIDIARIES
(a)1. The following financial statements and supplementary financial
information are filed as part of this report:
Pages
-----
FINANCIAL STATEMENTS OF THE REGISTRANT
Consolidated Balance Sheets as of December 31, 1997 and 1996 25 - 26
Consolidated Statements of Operations for the three years ended December 31, 1997, 1996 and 27
1995
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1997, 28
1996 and 1995
Consolidated Statements of Cash Flows for the three years ended December 31, 1997, 1996 and 29 - 30
1995
Notes to Consolidated Financial Statements 31 - 51
Report of Independent Public Accountants 52
(a)2. The following financial statement schedules are filed as part of this report:
Pages
-----
Report of Independent Public Accountants on Schedules 53
Schedule I -- Condensed Financial Information of Registrant 54 - 59
Schedule II -- Valuation and Qualifying Accounts and Reserves 60
All other schedules are omitted because of the absence of the conditions
under which they are required or because the required information is
included in the Consolidated Financial Statements or in the Notes
thereto.
(a)3. Exhibits
The exhibits which are filed with this report or which are incorporated
herein by reference are set forth in the Exhibit Index which appears on
pages 61 through 64. The Company will furnish a copy of any exhibit not
included herewith to any holder of the Company's Common and Preferred
Stock upon request.
(b) During the quarter ended December 31, 1997, the Registrant made no
filings on Form 8-K.
23
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
Perini Corporation
(Registrant)
Dated: March 30, 1998
David B. Perini
Chairman
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
(i) Principal Executive Officer
David B. Perini Chairman March 30, 1998
/s/David B. Perini
------------------
David B. Perini
(ii) Principal Financial Officer
Robert Band Executive Vice President,
Chief Financial Officer March 30, 1998
/s/Robert Band
--------------
Robert Band
(iii) Principal Accounting Officer
Barry R. Blake Vice President and
Controller March 30, 1998
/s/Barry R. Blake
-----------------
Barry R. Blake
(iv) Directors
David B. Perini )
Richard J. Boushka )
Marshall M. Criser )
Albert A. Dorman ) /s/ David B. Perini
Arthur J. Fox, Jr. ) David B. Perini
Nancy Hawthorne )
Michael R. Klein ) Attorney in Fact
Roger J. Ludlam ) Dated: March 30, 1998
Douglas J. McCarron )
John H. McHale )
Jane E. Newman )
Bart W. Perini )
Ronald N. Tutor )
24
Consolidated Balance Sheets
December 31, 1997 and 1996
(In thousands except per share data)
Assets
1997 1996
------------- -------------
CURRENT ASSETS:
Cash, including cash equivalents of $ 23,585 and $9,071 (Note 1) $ 31,305 $ 9,745
Accounts and notes receivable, including retainage of $54,234 and $63,423 139,221 188,120
Unbilled work (Note 1) 36,574 35,600
Construction joint ventures (Notes 1 and 2) 71,056 78,233
Real estate inventory, at the lower of cost or market (Notes 1 and 4) 25,145 37,914
Deferred tax asset (Notes 1 and 5) 1,067 3,513
Other current assets 1,808 1,655
------------- -------------
Total current assets $ 306,176 $ 354,780
------------- -------------
REAL ESTATE DEVELOPMENT INVESTMENTS (Notes 1 and 4):
Land held for sale or development (including land development costs) at
the lower of cost or market $ 7,093 $ 21,520
Investments in and advances to real estate joint ventures
(Notes 2 and 11) 86,598 71,253
Other - 49
------------- -------------
Total real estate development investments $ 93,691 $ 92,822
------------- -------------
PROPERTY AND EQUIPMENT, at cost (Note 1):
Land $ 826 $ 793
Buildings and improvements 13,026 13,075
Construction equipment 7,580 10,535
Other equipment 8,450 9,726
------------- -------------
$ 29,882 $ 34,129
Less - Accumulated depreciation 19,406 23,013
------------- -------------
Total property and equipment, net $ 10,476 $ 11,116
------------- -------------
OTHER ASSETS:
Other investments $ 3,069 $ 3,999
Goodwill (Note 1) 1,512 1,575
------------- -------------
Total other assets $ 4,581 $ 5,574
------------- -------------
$ 414,924 $ 464,292
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
25
Liabilities and Stockholders' Equity
1997 1996
--------------- --------------
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3) $ 11,873 $ 16,421
Accounts payable, including retainage of $49,884 and $57,131 145,118 183,407
Advances from construction joint ventures (Note 2) 29,801 47,544
Deferred contract revenue (Note 1) 17,117 23,841
Accrued expenses 30,296 26,823
--------------- --------------
Total current liabilities $ 234,205 $ 298,036
--------------- --------------
DEFERRED INCOME TAXES AND OTHER LIABILITIES (Notes 1, 5 & 6) $ 24,101 $ 31,297
--------------- --------------
LONG-TERM DEBT, less current maturities included above (Note 3):
Real estate development $ 322 $ 4,287
Other 84,576 92,606
--------------- --------------
Total long-term debt $ 84,898 $ 96,893
--------------- --------------
MINORITY INTEREST (Note 1) $ 1,064 $ 2,508
--------------- --------------
CONTINGENCIES AND COMMITMENTS (Note 11)
REDEEMABLE SERIES B CUMULATIVE CONVERTIBLE PREFERRED
STOCK (Note 7):
Authorized - 500,000 shares
Issued and outstanding - 164,300 shares ($32,860 aggregate liquidation
preference) $ 29,756 $ -
--------------- --------------
STOCKHOLDERS' EQUITY (Notes 1, 3, 7, 8, 9 and 10):
Preferred Stock, $1 par value -
Authorized - 500,000 shares
Designated, issued and outstanding - 100,000 shares of $21.25 Convertible
Exchangeable Preferred Stock ($25,000 aggregate liquidation preference) $ 100 $ 100
Series A junior participating Preferred Stock, $1 par value -
Designated - 200,000
Issued - none - -
Stock Purchase Warrants 2,233 -
Common Stock, $1 par value -
Authorized - 15,000,000 shares
Issued - 5,267,130 shares and 5,032,427 shares 5,267 5,032
Paid-in surplus 53,012 57,080
Retained earnings (deficit) (15,294) (20,666)
ESOT related obligations (2,663) ( 3,856)
--------------- --------------
$ 42,655 $ 37,690
Less - Common Stock in treasury, at cost - 110,084 shares and 133,779 shares 1,755 2,132
--------------- --------------
Total stockholders' equity $ 40,900 $ 35,558
--------------- --------------
$ 414,924 $ 464,292
=============== ==============
26
Consolidated Statements of Operations
For the Years Ended December 31, 1997, 1996 & 1995
(In thousands, except per share data)
1997 1996 1995
---------------- --------------- ----------------
REVENUES (Notes 2 and 13) $ 1,324,491 $ 1,270,284 $ 1,101,068
---------------- --------------- ----------------
COSTS AND EXPENSES (Notes 2 and 10):
Cost of operations $ 1,275,614 $ 1,215,806 $ 1,086,213
Write down of certain real estate assets (Note 4) - 79,900 -
General, administrative and selling expenses 30,556 33,988 37,283
---------------- --------------- ----------------
$ 1,306,170 $ 1,329,694 $ 1,123,496
---------------- --------------- ----------------
INCOME (LOSS) FROM OPERATIONS (Note 13) $ 18,321 $ (59,410) $ (22,428)
---------------- --------------- ----------------
Other income (expense), net (Note 6) (1,665) (492) 814
Interest expense (Note 3) (10,334) (9,871) (8,582)
---------------- --------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES $ 6,322 $ (69,773) $ (30,196)
(Provision) credit for income taxes (Notes 1 and 5) (950) (830) 2,611
---------------- --------------- ----------------
NET INCOME (LOSS) $ 5,372 $ (70,603) $ (27,585)
================ =============== ================
BASIC & DILUTED EARNINGS (LOSS) PER
COMMON SHARE (Note 1) $ 0.01 $ (15.13) $ (6.38)
================ =============== ================
The accompanying notes are an integral part of these consolidated financial
statements.
27
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1997, 1996 & 1995
(In thousands, except per share data)
Stock Retained ESOT
Preferred Purchase Common Paid-In Earnings Related Treasury
Stock Warrants Stock Surplus (Deficit) Obligation Stock Total
- ---------------------------- ---------- --------- ---------- ---------- ----------- ----------- ----------- ----------
Balance - December 31, 1994 $ 100 $ - $ 4,985 $ 59,001 $ 81,772 $ (6,009) $ (7,820) $ 132,029
- ---------------------------- ---------- --------- ---------- ---------- ----------- ----------- ----------- ----------
Net Loss - - - - (27,585) - - (27,585)
Preferred Stock-cash dividends
declared or accrued ($21.25 per
share*) - - - - (2,125) - - (2,125)
Treasury Stock issued in partial
payment of incentive
compensation - - - (1,342) - - 3,585 2,243
Payments related to ESOT notes - - - - - 1,044 - 1,044
Balance - December 31, 1995 $ 100 $ - $ 4,985 $ 57,659 $ 52,062 $ (4,965) $ (4,235) $ 105,606
- ---------------------------- ---------- --------- ---------- ---------- ----------- ----------- ----------- ----------
Net Loss - - - - (70,603) - - (70,603)
Preferred Stock dividends
accrued ($21.25 per share*) - - - - (2,125) - - (2,125)
Treasury Stock issued in
partial payment of incentive
compensation