UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

Commission file number

December 25, 2004

000-23943

PETER KIEWIT SONS’, INC.
(Exact name of registrant as specified in its charter)

Delaware

91-1842817

(State of Incorporation)

(I.R.S. Employer Identification No.)

Kiewit Plaza, Omaha, Nebraska

68131

(Address of principal executive offices)

(Zip Code)

(402) 342-2052
(Registrant’s telephone number, including area code)

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

None

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

Common Stock, par value $0.01

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes [X] No [  ]

The registrant’s stock is not publicly traded, and therefore, there is no ascertainable market value of voting stock held by non-affiliates.

28,438,455 shares of the registrant’s $0.01 par value Common Stock were issued and outstanding on February 28, 2005.

Portions of the registrant’s definitive proxy statement for its 2005 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

Page

Part I

Item 1.

Business

1

Item 2.

Properties

4

Item 3.

Legal Proceedings

6

Item 4.

Submissions of Matters to a Vote of Security Holders

7

Item 4A.

Executive Officers of the Registrant

7

Part II

Item 5.

Market for Registrant’s Common Equity and Related Stockholder Matters and

  Issuer Purchases of Equity Securities

9

Item 6.

Selected Financial Data

11

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 8.

Financial Statements and Supplementary Data

23

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

54

Item 9A

Controls and Procedures

54

Part III

Item 10.

Directors and Executive Officers of the Registrant

55

Item 11.

Executive Compensation

55

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related

  Stockholder Matters

55

Item 13.

Certain Relationships and Related Transactions

55

Item 14.

Principal Accountant Fees and Services

55

Part IV

Item 15.

Exhibits and Financial Statement Schedules

55

Signatures

58

PART I

Item 1.

Business.

Forward Looking Statements.

This document contains forward looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to Peter Kiewit Sons', Inc. (“PKS,” which together with its subsidiaries is referred to herein as the “Company”).  When used in this document, the words “anticipate,” “believe,” “estimate,” “expect” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document.

General.

The Company is one of the largest construction contractors in North America. The Company is also engaged in the coal mining business.  See Note 13 of the “Notes to Consolidated Financial Statements” for revenue and operating income by segment.  PKS was incorporated in Delaware in 1997, and is a successor to a Delaware corporation that was incorporated in 1941, which itself was the successor of a construction business enterprise founded in Omaha, Nebraska in 1884.

The Construction Business.

The Company, through its subsidiaries and joint ventures, performs construction services for a broad range of public and private customers primarily in the United States and Canada. New contract awards during 2004 were distributed among the following construction markets (approximately, by percentage of the Company’s share of total construction contract value): transportation (including highways, bridges, airports, mass transit and rail) – 57%; water supply/dams – 15%; power, heat, cooling – 9%; commercial building – 9%; petroleum – 4%; sewage and solid waste – 3%; and all other markets – 3%.  Construction revenue earned during 2004 was distributed among the following construction markets (approximately, by percentage of construction revenue earned): transportation (including highways, bridges, airports, mass transit and rail) – 61%; commercial building – 10%; power, heat, cooling  0; 8%; water supply/dams – 7%; petroleum – 7%; sewage and solid waste – 1%; and all other markets – 6%.

The Company primarily performs construction services as a general contractor. As a general contractor, the Company is responsible for the overall direction and management of construction projects and for completion of each contract in accordance with its terms, plans, and specifications. The Company plans and schedules the projects, procures materials, hires workers as needed, and awards subcontracts. The Company generally requires performance and payment bonds or other assurances of operational capability and financial capacity from its subcontractors.

Contract Types.

The Company performs its construction work under various types of contracts, including fixed unit or lump-sum price, guaranteed maximum price, and cost-reimbursable contracts.  Contracts are either competitively bid and awarded or negotiated.  The Company’s public contracts generally provide for the payment of a fixed price for the work performed. Profit on a fixed-price construction contract is realized on the difference between the contract price and the actual cost of construction, and the contractor bears the risk that it may not be able to perform all the work for the specified amount.  Profit on a cost-plus construction contract is realized as the percentage of completion, based upon costs incurred divided by projected costs, is applied to total estimated profit, and the owner bears the risk that total costs may exceed the estimated amount.  Credit risk with private owners is minimized because of statutory me chanics liens, which give the Company high priority in the event of lien foreclosures following financial difficulties of private owners.  Construction contracts generally provide for progress payments as work is completed, with a retainage, ranging from zero to ten percent, to be paid when performance is substantially complete.  In some instances, the Company is able to substitute bank letters of credit or escrowed securities in lieu of retainage.  Construction contracts frequently contain penalties or liquidated damages for late completion and infrequently provide bonuses for early completion.

Government Contracts.

Public contracts accounted for approximately 68% of the combined prices of construction contracts awarded to the Company and 74% of construction revenue earned by the Company during 2004.  During 2004, construction revenue recognized from a single owner represented 12% of the Company’s revenue.  Most of these contracts were awarded by government and quasi-government units under fixed price contracts after competitive bidding. Credit risk is minimal with public (government) owners since the Company ascertains that funds have been appropriated by the governmental project owner prior to commencing work on public projects.  Most public contracts are subject to termination at the election of the government. In the event of termination, however, the contractor is entitled to receive the contract price on completed work and payment of termination-related costs.

Competition.

A contractor’s competitive position is based primarily on its prices for construction services, ability to obtain performance bonds and in certain instances, its reputation for quality, timeliness, experience, and financial strength. The construction industry is highly competitive and lacks firms with dominant market power.  In 2004, Engineering News Record, a construction trade publication, ranked the Company as the seventh largest United States contractor in terms of 2003 revenue.  Also in terms of 2003 revenue, it ranked the Company first in the construction markets of bridges, highways and water supply, second in transportation and dams and in the top ten of various other construction markets.

Demand.

The volume and profitability of the Company’s construction work depends to a significant extent upon the general state of the economies of the United States and Canada, and the volume of work available to contractors. Fluctuating demand cycles are typical of the industry, and such cycles determine to a large extent the degree of competition for available projects. The Company’s construction operations could be adversely affected by labor stoppages or shortages, adverse weather conditions, shortages of supplies, or governmental action. The volume of available government work is affected by budgetary and political considerations. A significant decrease in the amount of new government contracts, for whatever reason, would have a material adverse effect on the Company.

Backlog.

At the end of 2004 and 2003, the Company had construction backlog (anticipated revenue from uncompleted contracts) of approximately $3.5 billion and $3.7 billion, respectively.  Of current construction backlog, approximately $1.4 billion is not expected to be completed during 2005.  Additionally, the Company was low bidder on $0.2 billion and $0.9 billion of jobs that have not yet been awarded at December 25, 2004 and December 27, 2003, respectively.  In 2004, the Company was the successful bidder on 232 jobs with total contract prices of approximately $2.6 billion and an average price of approximately $11.2 million per job whereas in 2003, the Company was the successful bidder on 288 jobs with total contract prices of approximately $2.0 billion and an average price of approximately $6.9 million per job.  There were 24 new projects with contract prices over $25 million, accounting for approximately 40% of the successful bid volume.  The Company’s 10 largest jobs in backlog make up 40% of total backlog at December 25, 2004.  A single owner makes up 16% of total construction backlog at December 25, 2004.

Joint Ventures.

The Company frequently enters into joint ventures to efficiently allocate expertise and resources among the venturers and to spread risks associated with particular construction projects. In most joint ventures, if one venturer is financially unable to bear its share of expenses, the other venturers will be required to pay those costs. The Company prefers to act as the sponsor of its joint ventures. The sponsor generally provides the project manager, the majority of venturer-provided personnel, and accounting and other administrative support services. The joint venture generally reimburses the sponsor for such personnel and services on a negotiated basis. The sponsor is generally allocated a majority of the venture’s profits and losses and usually has a controlling vote in joint venture decision-making.  In 2004, the Company derived approximately 85% of its construction joint venture revenue from sponsored joint ventures and appr oximately 15% from non-sponsored joint ventures.  The Company’s share of construction joint venture revenue accounted for approximately 27% of its 2004 total construction revenue.

Locations.

The Company has 20 principal construction operating offices located throughout North America, including its headquarters located in Omaha, Nebraska. Through its decentralized system of management, the Company has been able to quickly respond to changes in the local markets.  During 2004, the Company had construction projects in 29 states and 7 Canadian provinces.  Financial information about geographic areas for the fiscal years ended December 25, 2004, December 27, 2003 and December 28, 2002 is included in Note 13 of the "Notes to Consolidated Financial Statements".

The Coal Mining Business.

The Company owns and operates the Calvert Mine located in Texas and the Buckskin Mine located in Wyoming.  Each is a surface mining operation that produces coal used in domestic coal-fired electric generation facilities.  The Company produced and sold 10 million tons of coal from these mines in 2004.  The Company also manages two active surface coal mines located in the western United States for Level 3 Communications Inc. (“Level 3”).

Production and Distribution.

The Calvert Mine is located in Robertson County, Texas.  Overburden removal is conducted by means of a large, earth-moving machine called a dragline.  Mining operations are conducted by trucks and power shovels.  The Calvert Mine produces lignite for an electrical generation facility located adjacent to the mine.  The lignite is delivered to the facility by company-owned haul trucks.

The Buckskin Mine is located in Campbell County, Wyoming.  Overburden removal and mining operations are conducted by trucks and power shovels.  The mined coal is processed through a loading facility and is delivered by a railroad line operated by the BNSF Railway Company.

Customers.

Two significant customers account for 51.2% and 10.1% of the Coal Mining Business segment revenue.

Long-term Coal Supply Contracts and Backlog.

The Company’s coal sales generally are made under long-term supply contracts.  At the end of 2004 the Company had a sales backlog of approximately 85 million tons excluding tons subject to price re-bidding provisions.  The remaining terms on these contracts range from less than 1 year to 13 years.  

Each contract has a base price, and most contain provisions to adjust the base price for changes in statutes or regulations.  Certain contracts allow for price adjustments based on actual cost experience or as measured by public indices.  Each contract includes coal quality and delivery volume specifications and includes penalties for failure to meet these specifications.

Competition.

The coal industry is highly competitive.  The Company not only competes with other domestic and foreign coal suppliers, some of whom are larger, but also with alternative methods of generating electricity.  Demand for the Company’s coal is affected by political, economic and regulatory factors.  Sales from the Buckskin mine occur at the loading facility and require the customer to obtain transportation to their generating plant.  Transportation cost is a significant portion of the customer’s delivered cost of coal.  Many western coal companies are served by two railroads allowing the customer to potentially benefit from an additional distribution channel and competition between railroads compared to the single line available at the Buckskin Mine.

Environmental Protection.

Compliance with the U.S. and Canadian federal, state, provincial and local provisions regulating the discharge of materials into the environment, land restoration or otherwise relating to the protection of the environment, has not and is not expected to have a material effect upon the capital expenditures, results of operations, or competitive position of the Company’s operations.

Employees.

At the end of 2004, the Company employed approximately 14,000 people.  Included in this number are approximately 6,400 employees subject to various collective bargaining agreements with labor unions.  During 2004, the Company was a participant in approximately 183 collective bargaining agreements.  These agreements typically expire within 1 to 3 years.  The Company considers relations with its employees and labor unions to be good.

Available Information.

Financial and other information of the Company can be accessed, free of charge, at its website www.kiewit.com.  The Company makes available at its website its periodic annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

Item 2.

Properties.

The Company’s headquarters facilities are located in Omaha, Nebraska and are owned by the Company.

The Construction Business.

The Company has 19 construction district offices located in Arizona, California, Colorado, Georgia, Kansas, Massachusetts, Nebraska, New Jersey, Texas, Washington, Alberta and Quebec, 13 of which are owned facilities and 6 of which are leased facilities.  The Company also has 19 construction area offices located in Alaska, California, Colorado, Florida, Hawaii, Illinois, Nebraska, New Mexico, New York, Oregon, Rhode Island, British Columbia and Ontario, one of which is an owned facility and 18 of which are leased facilities.  The Company owns or leases numerous shops, equipment yards, storage facilities, warehouses, and construction material quarries.  Since construction projects are inherently temporary and location-specific, the Company owns approximately 1,400 portable offices, shops and transport trailers. The Company has a large construction equipment fleet, including approximately 3,200 trucks, pickups and automobiles and 1,300 heavy construction vehicles, such as graders, scrapers, backhoes and cranes.  Construction joint ventures in which the Company is a participant also own approximately an additional 210 portable offices, shops and transport trailers, 660 trucks, pickups and automobiles and 260 heavy construction vehicles.

The Coal Mining Business.

The Company’s two coal mines, the Calvert Mine and the Buckskin Mine, are located in Robertson County, Texas and Campbell County, Wyoming, respectively. The Company has a significant mining equipment fleet, including 1 dragline, 6 shovels/excavators, 80 other heavy mining vehicles and approximately 90 trucks, pickups, automobiles and transport trailers.

The Company estimates that its total recoverable coal reserves are in excess of 455 million tons, 1 million of which are owned by the Company with the remainder being available pursuant to federal and private coal leases. The yield from the mining of these reserves is based on an estimate of volume that can be economically and legally extracted to meet current market demand. The Company’s reserve estimates are prepared by experienced mining engineers and other operating personnel of the Company using drilling and geological studies in conjunction with mine planning software. The following table summarizes the Company’s principal mine locations and estimated reserves at December 25, 2004:

Annual Production

Nature of

Years Until Reserve

Estimated Reserves

Mine

(in millions of tons)

Interest

Depletion

(in millions of tons)

Buckskin Mine

20

Leased

23

431

Calvert Mine

2

Leased/Owned

13

24

Item 3.

Legal Proceedings.

On November 19, 2002, a suit was filed in the District Court, City and County of Broomfield, Colorado (the “Court”) for an unspecified amount of damages by Gary Haegle, derivatively on behalf of Level 3 against Walter Scott, Jr., James Q. Crowe, R. Douglas Bradbury, Charles C. Miller, III, Kevin V. O’Hara, Mogens C. Bay, William L. Grewcock, Richard Jaros, Robert E. Julian, David C. McCourt, Kenneth E. Stinson, Michael B. Yanney, Colin V. K. Williams (collectively, the “Level 3 Directors”) and PKS.  The suit alleges that the Level 3 Directors breached their fiduciary duty with respect to various transactions between Level 3 and PKS, and that PKS aided and abetted the Level 3 Directors in their alleged breach of fiduciary duty.  The suit also alleges that PKS exercised improper control over certain of the Level 3 Directors.  The defendants filed a motion to dismiss, which was denied by the court in ea rly October 2003.  Subsequently, the Board of Directors of Level 3 appointed a Special Litigation Committee comprised of an independent director with the exclusive power to conduct or cause to be conducted an impartial and independent investigation of all matters alleged by the Plaintiff and to determine whether the litigation should be maintained, terminated, or otherwise disposed, in accordance with its findings as to whether the litigation is in the best interests of Level 3.  On August 2, 2004, the Special Litigation Committee delivered its report in which it concluded that it is not in the best interests of either Level 3 or its stockholders to pursue any of the claims asserted by the plaintiff.  Level 3 has filed a motion to dismiss the suit based on the recommendation of the Special Litigation Committee.  The parties are now in the process of conducting discovery limited by the Court solely to issues regarding the independence and authority of the Special Litigation Committee and the reasonableness and good faith of the Special Litigation Committee’s investigation and analysis.  PKS believes that the factual allegations and legal claims made against it are without merit and intends to vigorously defend them.

On August 7, 2003, BBC-MEC, a Joint Venture (the "Joint Venture"), and its two joint venture partners, including Mass. Electric Construction Co., a subsidiary of PKS, received "target letters" from the U.S. Department of Justice and the United States Attorney for the District of Connecticut ("DOJ"), notifying the Joint Venture and its joint venture partners that each was a target of a criminal investigation in connection with a certain portion of the work performed by the Joint Venture to electrify a high speed rail line from New Haven, Connecticut, to Boston, Massachusetts. After several meetings and an extensive exchange of information between the Joint Venture and the DOJ, the DOJ notified The Joint Venture and its partners, by letter dated July 2, 2004, that it had reached a decision not to pursue criminal charges.  The DOJ is also conducting a civil investigation relating to certain proposed change orders and modificat ions that were issued in conjunction with the work.  In a meeting on July 30, 2004 the DOJ presented its concerns to the Joint Venture, including raising several new issues.  The Joint Venture provided a counter-presentation to the DOJ on January 18 and 19, 2005, which the DOJ is in the process of evaluating.  The Company is currently unable to determine the impact of the investigation upon the future financial position, results of operations or cash flows of either the Company or the Joint Venture.

The Company is party to many other pending legal proceedings incidental to the business of such entities. It is not believed that any resulting liabilities for legal proceedings, beyond amounts reserved, will materially affect the financial condition, future results of operation, or future cash flows of the Company.  

Item 4.

Submission of Matters to a Vote of Security Holders.

None during the three months ended December 25, 2004.

Item 4A.

Executive Officers of the Registrant.

The table below shows information as of February 28, 2005, about each executive officer of PKS, including his business experience during the past five years. PKS’ executive officers are elected annually to serve until their successors are elected and qualified or until their death, resignation or removal.

Name

Business Experience

Age

Scott L. Cassels

Mr. Cassels has been a Senior Vice President of Kiewit Corporation, a subsidiary of PKS, since December 2004, a Senior Vice President of Kiewit Construction Company, a subsidiary of PKS, since June 2002 and President of Gilbert Industrial Corporation, a subsidiary of PKS, since June 2002. Mr. Cassels was President of Gilbert Central Corp., a subsidiary of PKS, from June 2002 to June 2003 and was President of Gilbert Southern Corp., a subsidiary of PKS, from August 1994 to June 2002. Mr. Cassels has been a director of PKS since June 2004 and is a member of the Executive Committee of PKS’ board of directors.  

46

John B. Chapman

Mr. Chapman has been Vice President of Human Resources and Administration of PKS since August 1997.

59

Richard W. Colf

Mr. Colf has been an Executive Vice President of PKS since July 1998.  Mr. Colf has been an Executive Vice President of Kiewit Corporation, a subsidiary of PKS, since December 2004 and an Executive Vice President of Kiewit Pacific Co., a subsidiary of PKS, since September 1998. Mr. Colf has been a director of PKS since August 1997 and is a member of the Executive Committee of PKS’ board of directors.

61

Steven Hansen

Mr. Hansen has been a Senior Vice President of Kiewit Corporation since December 2004, a Senior Vice President of Kiewit Construction Company since June 1999 and a Senior Vice President of Kiewit Pacific Co. since June 1998.  Mr. Hansen has been a director of PKS since June 2004 and is a member of the Executive Committee of PKS’ board of directors.

58

Bruce E. Grewcock

Mr. Grewcock has been Chief Executive Officer of PKS since December 2004 and President of PKS since December 2000. Mr. Grewcock was Chief Operating Officer of PKS from December 2000 until December 2004 and was an Executive Vice President of PKS from August 1997 until December 2000. Mr. Grewcock has been President and Chief Executive Officer of Kiewit Corporation since December 2004. Mr. Grewcock has been a director of PKS since August 1997 and is a member of the Executive Committee of PKS’ board of directors.  Mr. Grewcock is the son of William L. Grewcock, a director of PKS.

51

Ben E. Muraskin

Mr. Muraskin has been the Treasurer of PKS since June 2003 and a Vice President of PKS since January 2000.

41

Christopher J. Murphy

Mr. Murphy has been a Vice President of PKS since August 2004. Mr. Murphy has been a Senior Vice President of Kiewit Corporation since December 2004. Mr. Murphy was President of Rinker Materials Corporation’s Western United States Division from October 2002 until August 2004. Mr. Murphy was a Director, President and Chief Executive Officer of Kiewit Materials Company, a former subsidiary of PKS, from June 2000 until October 2002. Mr. Murphy was President of Kiewit Mining Group Inc., a subsidiary of PKS, from July 1996 until June 2000.

50

Douglas E. Patterson

Mr. Patterson has been an Executive Vice President of PKS since November 2001.  Mr. Patterson has been an Executive Vice President of Kiewit Corporation since December 2004. Mr. Patterson was President of Gilbert Central Corp., Gilbert Industrial Corporation and Kiewit Engineering Co., all subsidiaries of PKS, from June 1999 until June 2001.  Mr. Patterson has been a director of PKS since June 2001 and is a member of the Executive Committee of PKS’ board of directors.

53

R. Michael Phelps

Mr. Phelps has been a Senior Vice President of Kiewit Corporation since December 2004, a Senior Vice President of Kiewit Construction Company since June 2004, a Senior Vice President of Kiewit Pacific Co. since June 1999, and a Senior Vice President of Kiewit Western Co., a subsidiary of PKS, since July 1999.  Mr. Phelps has been a director of PKS since June 2004 and is a member of the Executive Committee of PKS’ board of directors.

51

Michael J. Piechoski

Mr. Piechoski has been a Senior Vice President of PKS since December 2004 and Chief Financial Officer of PKS since November 2002.  Mr. Piechoski was a Vice President of PKS from June 2000 until December 2004.  Mr. Piechoski was Treasurer of PKS from June 2000 until June 2003.  Mr. Piechoski was Director of Audit of PKS from April 1999 until June 2000.  

50

Tobin A. Schropp

Mr. Schropp has been a Senior Vice President of PKS since November 2002 and General Counsel and Secretary of PKS since September 1998.  Mr. Schropp was a Vice President of PKS from September 1998 until November 2002.  

42

Kenneth E. Stinson

Mr. Stinson was Chief Executive Officer of PKS from March 1998 until December 2004 and was President of PKS from August 1997 until December 2000. Mr. Stinson has been a director and Chairman of the Board of PKS since August 1997.  Mr. Stinson is also currently a director and a member of the audit committee of ConAgra Foods, Inc., and is a director of Valmont Industries, Inc.  Mr. Stinson is the Chairman of the Executive Committee of PKS’ board of directors.

62

Michael J. Whetstine

Mr. Whetstine has been the Controller and Assistant Secretary of PKS since September 2003.  Mr. Whetstine has been a Vice President and the Controller of Kiewit Corporation since December 2004. Mr. Whetstine served as Controller for DTN Corporation from January 2001 until August 2003, and was Assistant Controller from February 2000 until January 2001.  Mr. Whetstine was affiliated with PricewaterhouseCoopers, LLP (formerly Coopers & Lybrand) for more than five years prior to February 2000.

38

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information.

As of December 25, 2004, PKS' $0.01 par value common stock ("Common Stock") was not listed on any national securities exchange or the NASDAQ National Market and there is no established public trading market for the Common Stock.

Company Repurchases.

Period

Total Number of

Shares of Common

Stock Repurchased

Average Price

Paid per Share of

Common Stock

October 1, 2004 through October 31, 2004

48,165

$32.00

November 1, 2004 through November 30, 2004

12,500

$32.00

December 1, 2004 through December 31, 2004

         -

         -

Total

60,665

$32.00

Pursuant to the terms of PKS’ Restated Certificate of Incorporation ("Certificate"), PKS is required to repurchase shares of Common Stock at a formula price, generally upon demand.  Common Stock can generally be issued only to employees and directors of the Company and can be resold only to PKS at a formula price based on the year-end book value of PKS.

Formula Price.

The formula price of the Common Stock is based on the book value of PKS.  A significant element of the Common Stock formula price is the subtraction of the book value of property, plant, and equipment used in the Company’s construction activities (approximately $98 million at December 25, 2004).

Restrictions.

Ownership of Common Stock is generally restricted to directors and active employees of PKS and is also conditioned upon the execution of repurchase agreements which restrict directors of PKS on the transfer of the Common Stock.  Upon retirement, termination of employment, or death, PKS is required to repurchase the Common Stock at the applicable formula price, generally upon demand.

Stockholders.

On February 28, 2005, PKS had the following numbers of stockholders and outstanding shares:

Class of Stock

Stockholders

Outstanding Shares

Common Stock

1,602

28,438,455

Dividends and Prices.

The chart below sets forth the cash dividends declared or paid on the Common Stock during, 2003 and 2004, and the formula price after each dividend payment.

Dividend Declared

Dividend Paid

Dividend

Per Share

Price Adjusted

Formula Price

October 25, 2002

January 6, 2003

$0.35

December 28, 2002

$27.15

April 25, 2003

May 1, 2003

$0.40

May 1, 2003

$26.75

October 31, 2003

January 5, 2004

$0.40

December 27, 2003

$32.45

April 30, 2004

May 3, 2004

$0.45

May 3, 2004

$32.00

PKS’ current dividend policy is to pay a regular cash dividend on Common Stock based on a percentage of the prior year’s ordinary income, with any special dividends to be based on extraordinary income.  

Item 6.

Selected Financial Data.

The following table presents selected historical financial data of the Company as of and for the fiscal years ended 2000 through 2004, and is derived from the Company's historical consolidated financial statements and the notes to those financial statements.  

Fiscal Year Ended

2004

2003

2002

2001

2000

(dollars in millions, except per share amounts)

Results of operations:

  Revenue

$

3,352

$

3,375

$

3,699

$

3,871

$

4,463

  Income from continuing operations

$

201

$

157

$

193

$

175

$

161

  Income from discontinued operations (1)

-

-

-

-

18

  Net income

$

201

$

157

$

193

$

175

$

179

Per common share:

  Basic:

    Income from continuing operations

$

6.62

$

5.38

$

6.37

$

5.72

$

4.97

    Income from discontinued operations (1)

-

-

-

-

.57

    Net income

$

6.62

$

5.38

$

6.37

$

5.72

$

5.54

  Diluted:

    Income from continuing operations

$

6.38

$

5.18

$

6.08

$

5.49

$

4.83

    Income from discontinued operations (1)

-

-

-

-

.55

    Net income

$

6.38

$

5.18

$

6.08

$

5.49

$

5.38

  Dividends (2)

$

.45

$

.80

$

.75

$

.65

$

.58

  Formula price (3)

$

38.50

$

32.45

$

27.15

$

21.50

$

17.70

  Book value

$

42.24

$

36.55

$

31.80

$

26.44

$

21.56

Financial position:

  Total assets

$

2,217

$

1,889

$

1,876

$

1,594

$

1,401

  Current portion of

    long-term debt

$

1

$

10

$

-

$

1

$

1

  Long-term debt, net of current portion

$

36

$

22

$

24

$

25

$

12

  Redeemable common stock (4)

$

1,333

$

1,106

$

995

$

835

$

696

(1)

On September 30, 2000, PKS effected a spin-off of its materials business to stockholders.  PKS has reclassified the results of its materials business as discontinued operations.

(2)

The 2003, 2002, 2001 and 2000 dividends include $.40, $.35, $.30 and $.30 for dividends declared in those years, respectively, but paid in January of the subsequent year.

(3)

Pursuant to the Certificate, the calculation of formula price, which is PKS’ stock price, is computed annually at the end of the fiscal year, except that adjustments to reflect dividends are made when declared.

(4)

Ownership of Common Stock is generally restricted to directors and active employees of PKS and is also conditioned upon the execution of repurchase agreements which restrict the transfer of the Common Stock.  Upon retirement, termination of employment, or death, PKS is required to repurchase the Common Stock at the applicable formula price, generally upon demand.  The aggregate redemption value of Common Stock at December 25, 2004 and December 27, 2003 was $1,215 million and $981 million, respectively.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Company primarily operates in the construction industry and currently has two reportable operating segments.  The Construction segment performs services for a broad range of public and private customers primarily in the United States and Canada.  Construction services are performed in the following construction markets: transportation (including highways, bridges, airports, mass transit and rail); commercial buildings; power, heat, cooling; water supply/dams; petroleum; and sewage and solid waste.  The Company’s Coal Mining segment owns and manages mines in the United States that sell primarily to electric utilities.

The Company primarily performs its construction services as a general contractor.  As a general contractor, the Company is responsible for the overall direction and management of construction projects and for completion of each contract in accordance with its terms, plans, and specifications.  The Company plans and schedules the projects, procures materials, hires workers as needed, and awards subcontracts. The Company generally requires performance and payment bonds or other assurances of operational capability and financial capacity from its subcontractors.

The Company performs its construction work under various types of contracts, including fixed unit or lump-sum price, guaranteed maximum price, and cost-reimbursable contracts.  Contracts are either competitively bid and awarded or negotiated.  The Company’s public contracts generally provide for the payment of a fixed price for the work performed.  Profit on a fixed-price construction contract is realized on the difference between the contract price and the actual cost of construction, and the contractor bears the risk that it may not be able to perform all the work for the specified amount.  Profit on a cost-plus construction contract is realized as the percentage of completion, based upon costs incurred divided by projected costs, is applied to total estimated profit, and the owner bears the risk that total costs may exceed the estimated amount.  Credit risk is minimal with public (government) owners since t he Company ascertains that funds have been appropriated by the governmental project owner prior to commencing work on public projects.  Most public contracts are subject to termination at the election of the government. In the event of termination, however, the contractor is entitled to receive the contract price on completed work and payment of termination-related costs.  Credit risk with private owners is minimized because of statutory mechanics liens, which give the Company high priority in the event of lien foreclosures following financial difficulties of private owners.  Construction contracts generally provide for progress payments as work is completed, with a retainage, ranging from zero to ten percent, to be paid when performance is substantially complete.  In some instances, the Company is able to substitute bank letters of credit or escrowed securities in lieu of retainage.  Construction contracts frequently contain penalties or liquidated damages for late completion and in frequently provide bonuses for early completion.

The construction industry is highly competitive and lacks firms with dominant market power.  A substantial portion of the Company’s business involves construction contracts obtained through competitive bidding.  A contractor’s competitive position is based primarily on its prices for construction services, its ability to obtain performance bonds, and in certain instances, its reputation for quality, timeliness, experience, and financial strength.  The volume and profitability of the Company’s construction work depends to a significant extent upon the general state of the economies of the United States and Canada, and the volume of work available to contractors. Fluctuating demand cycles are typical of the industry, and such cycles determine to a large extent the degree of competition for available projects. The Company’s construction operations could be adversely affected by labor stoppages or shortages, adverse weather conditions, shortages of supplies, or governmental action. The volume of available government work is affected by budgetary and political considerations. A significant decrease in the amount of new government contracts, for whatever reason, would have a material adverse effect on the Company.  Public contracts accounted for approximately 68% of the combined prices of construction contracts awarded to the Company and 74% of construction revenue earned by the Company during 2004.  Most of these contracts were awarded by government and quasi-government units under fixed price contracts after competitive bidding.  

The Company frequently enters into joint ventures to efficiently allocate expertise and resources among the venturers and to spread risks associated with particular projects. In most joint ventures, if one venturer is financially unable to bear its share of expenses, the other venturers may be required to pay those costs.  The Company prefers to act as the sponsor of its joint ventures.  The sponsor generally provides the project manager, the majority of venturer-provided personnel, and accounting and other administrative support services.  The joint venture generally reimburses the sponsor for such personnel and services on a negotiated basis. The sponsor is generally allocated a majority of the venture’s profits and losses and usually has a controlling vote in joint venture decision-making.  In 2004, the Company derived approximately 85% of its joint venture revenue from sponsored joint ventures and approxi mately 15% from non-sponsored joint ventures.  The Company’s share of joint venture revenue accounted for approximately 27% of its 2004 total construction revenue.

The Company owns and operates the Calvert Mine located in Texas and the Buckskin Mine located in Wyoming.  Each is a surface mining operation that produces coal used in domestic coal-fired electric generation facilities.  The Company also manages two active surface coal mines located in the western United States for Level 3.

The Company’s coal sales generally are made under long-term supply contracts.  Each contract has a base price, and most contain provisions to adjust the base price for changes in statutes or regulations.  Certain contracts allow for price adjustments based on actual cost experience or as measured by public indices.  Each contract includes coal quality and delivery volume specifications and includes penalties for failure to meet these specifications.

The coal mining industry is highly competitive.  The Company not only competes with other domestic and foreign coal suppliers, some of whom are larger, but also with alternative methods of generating electricity.  Demand for the Company’s coal is affected by political, economic and regulatory factors.  Sales from the Buckskin mine occur at the loading facility and require the customer to obtain transportation to their generating plant.  Transportation cost is a significant portion of the customer’s delivered cost of coal.  Many western coal companies are served by two railroads allowing the customer to potentially benefit from an additional distribution channel and competition between railroads compared to the single line available at the Buckskin mine.

Due to their competitive nature, the construction and coal mining industries experience lower margins than many other industries.  As a result, cost control is a primary focus of the Company.  The ability to control costs enables the Company to price more competitively and also to complete contracts profitably.  Further, since the formula price of Common Stock is based upon the Company’s book value, formula price is primarily driven by the Company’s ability to complete contracts profitably.  Consequently, the Company views both margin as a percentage of revenue and general and administrative expenses as a percentage of revenue as key measures of operating results.  

Results of Operations 2004 vs. 2003

Revenue.

Revenue from each of the Company’s segments was:

2004

2003

(dollars in millions)

Construction

$

3,265

$

3,328

Coal Mining

87

47

$

3,352

$

3,375

Total construction revenues decreased $63 million or 1.9% from the same period in 2003.  The Company recognized increases in claim settlements of $21 million and a $109 million increase in revenue on a large bridge project in California related to a significant change order.  The Company recognizes claims when they are settled.  As a result, the amount of claims settlements recognized varies with both the amount of settlements outstanding and the stage of the negotiation process for each claim.  However, these increases were more than offset by the fact that certain significant commercial rail, highway and power plant projects, because they were substantially complete in 2003, did not contribute significant revenues during 2004.  Although the Company added $3 billion of backlog during the twelve months ended December 25, 2004, much of this work did not contribute revenue at the same pace as the projects that completed during 2003.

Construction contract backlog was $3.5 billion and $3.7 billion at December 25, 2004 and December 27, 2003, respectively.  Additionally, the Company was low bidder on $0.2 billion and $0.9 billion of construction jobs that had not been awarded at December 25, 2004 and December 27, 2003, respectively.  Foreign operations, located primarily in Canada, represent 9% of construction backlog at December 25, 2004.  Domestic construction projects are spread geographically throughout the U.S.  The Company’s 10 largest jobs in backlog make up 40% of total backlog at December 25, 2004.  A single owner in the western region of the United States makes up 16% of total construction backlog at December 25, 2004.

Coal Mining revenues increased $40 million or 85.1% from the same period in 2003.  The increase is primarily attributable to revenues earned by the Buckskin Mine acquired on August 20, 2004.  (See Note 2 of the “Notes to Consolidated Financial Statements.”)

Coal Mining sales backlog at December 25, 2004 was approximately 85 million tons of coal excluding tons subject to price re-bidding provisions.  The remaining terms on these contracts range from less than 1 year to 13 years.

Margin.

Margin from each of the Company’s segments was:

2004

2003

(dollars in millions)

Construction

$

486

$

430

Coal Mining

23

18

$

509

$

448

Total construction margin increased $56 million or 13.0% from the same period in 2003. Total margin as a percentage of revenue for the year increased to 14.9% from 12.9% for the same period in 2003.   A decrease in job losses of $17 million and an increase in claim settlements of $21 million as well as improved cost containment, estimating and bidding efforts contributed to the increased margins.  Claim settlements for the twelve months ended December 25, 2004 and December 27, 2003 were $49 million and $28 million, respectively.

Total coal mining margin increased $5 million or 27.8% from the same period in 2003.  The increase is primarily attributable to revenues earned by the Buckskin Mine acquired on August 20, 2004.  (See Note 2 of the “Notes to Consolidated Financial Statements.”)  However, the highly competitive coal market in the area in which the Buckskin Mine operates resulted in margin decreasing as a percentage of revenue from 38.3% in 2003 to 26.4% in 2004.

General and Administrative Expenses.

General and administrative expense from each of the Company’s segments was:

2004

2003

(dollars in millions)

Construction

$

219

$

216

Coal Mining

7

7