10-K405 1 FORM 10-K 405 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ------ ------ COMMISSION FILE NUMBER 1-5259 PITT-DES MOINES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) PENNSYLVANIA 25-0729430 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) ------------------------------------------------------------------------------- 3400 GRAND AVENUE, PITTSBURGH, 15225 PENNSYLVANIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 412-331-3000 (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, no par value American Stock Exchange ------------------------------------------------------------------------------- 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, 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 [X] The aggregate market value of the registrant's voting stock held by non- affiliates was at least $44,134,788 on February 28, 1995, based upon the average between the highest and lowest sales prices of the registrant's Common Stock as reported in the consolidated transactions reporting system. Common Stock outstanding as of February 28, 1995--2,321,903 shares. Documents Incorporated By Reference: Certain portions of the documents of the Registrant listed below have been incorporated by reference into the indicated parts of this Annual Report on Form 10-K: Notice of Annual Meeting of Stockholders and Proxy Statement anticipated to be dated March 31, 1995...................................Part III, Items 10-13 Annual Report to Stockholders for fiscal year ended December 31, 1994.............................................Part II, Item 7 =============================================================================== PART I Item 1. Business General Pitt-Des Moines, Inc. and its subsidiaries (PDM or the Company) began conducting business in 1892 and was incorporated in Pennsylvania on February 14, 1916. The Company's principal executive offices are located at 3400 Grand Avenue, Pittsburgh, Pennsylvania 15225, telephone number (412) 331-3000. Effective with the discontinuance of CVI's operations during the fourth quarter of 1994 (see Discontinued Operation Footnote), the Company is comprised of three business segments: Engineered Construction Division, Steel Construction and Steel Service Centers. Each segment is a profit center except the Steel Construction business segment which is divided into three profit centers as noted below. A summary of the Company's products and services by business segment is set forth below. Additional business segment information is included in Part II of this Form 10-K. Engineered Construction Division In 1994, the Engineered Construction Division was reorganized into three project groups: Water, Industrial, and International and Technology. These market groups provide: a) The capability to design, fabricate and erect many types of facilities and structures; services offered include research and design, material selection, preparation of detailed drawings, shop fabrication, field erection and subcontract management. b) The capability to design, fabricate and erect elevated and flat bottom water storage tanks for water service and fire protection requirements and treatment tanks for the purification, filtration and softening of water. The principal purchasers of the Company's water storage tanks and wastewater treatment facilities are government agencies and private industry. c) The capability to design, fabricate and erect oil and chemical storage tanks used for storing crude oil, petroleum, gasoline and other petroleum derivatives and chemicals. The Company has developed and patented certain systems, parts and sealing devices which help to reduce the hazards of fire and explosion from the stored products, as well as to decrease air pollution and vapor loss. Additionally, the Company fabricates and erects various vessels used in the processing of a variety of oil and chemical products. The oil and chemical tanks, sealing devices and process vessels are produced principally for the petroleum, petrochemical, chemical and food processing industries as well as government agencies. -2- Item 1. Business (Cont'd) d) The capability to fabricate and erect miscellaneous plate work which includes penstocks and breechings, stacks and stack liners, scrubbers, absorbers, flow conductors and heat exchangers for utilities and private industry. e) The capability to design, fabricate and erect high speed wind tunnels, altitude test chambers, hydrospace test facilities and high vacuum and thermal test facilities for use in connection with energy, aerospace and defense research. f) The capability to design and build supercritical fluid extraction facilities for the food processing industry. g) The capability to design and build anaerobic digesters for the wastewater treatment industry. Steel Construction On September 1, 1994, the Company acquired the bridge fabricating assets of Phoenix Steel, Inc., located in Eau Claire, Wisconsin. These assets were combined with the bridge fabricating assets of Hartwig Mfg. Corp. (which was merged with and into the Company on December 31, 1994) to form the PDM Bridge Division. PDM Bridge, PDM Strocal, Inc. and PDM Chicago Steel Construction comprise the three profit centers of Steel Construction which provide: a) The capability to fabricate and erect structural steel for commercial, institutional and public sector buildings for government agencies, private developers and general contractors. b) The capability to fabricate structural steel for new bridges and fabricate and erect structural steel for bridge rehabilitation for government agencies and general contractors. Steel Service Centers The Steel Service Centers operate six steel service centers and three culvert facilities located in the West and Midwest regions of the United States. This Division processes and distributes to the end users, a general line of carbon steel products including plates, sheets, structural shapes, bars, tubes, pipe and other miscellaneous metal products. This Division also manufactures and markets to the end users, corrugated metal culvert pipe and accessories. The Steel Service Centers' primary markets include steel fabricators, original equipment manufacturers and the mining, logging, agricultural and road construction industries. -3- Item 1. Business (Cont'd) Steel Service Centers (Cont'd) The Company and the industry as a whole deem the maintenance of adequate levels of inventory to be integral to the Service Center business. The Company believes that it has adequate levels of inventory on hand to meet current and anticipated customer demand. Other Several large companies compete nationally in some product lines with the Company and there are several local and regional companies that compete in certain product lines in specific geographic areas. The majority of the Company's business is secured through open competitive bidding or through direct negotiations with industry or government agencies. Competition is based primarily on performance including the ability to provide design, engineering and on-site field construction services in a cost-effective, timely manner. The Steel Service Centers' volume of business is based on the price, delivery and credit terms, and first stage preprocessing operations offered to its customers as well as its reputation. Earned revenue was $408 million in 1994, compared with $324 million in 1993 and $355 million in 1992. For further financial information refer to pages 16 through 37. The principal raw materials essential to the Company's business are steel, alloys and other metal plates and structural sections. The Company procures these raw materials from various domestic and foreign sources including, the mills of USX Corporation, Bethlehem Steel Corporation, Northwestern Steel and Wire Company, Nucor Steel, British Steel and Mitsubishi International Corporation. The Company has a license and technical assistance agreement with Roediger, a German corporation, which gives the Company exclusive rights in North America and other selected countries worldwide to use the Roediger technology, a process which utilizes anaerobic digestion in the treatment of wastewater. Revenues to date from this technology have not been material to the Company. Some components of the other products made and erection techniques used by the Company are covered by patents owned or licensed by the Company. None of these are deemed to be material to the Company from an overall financial viewpoint. The Company had a backlog of uncompleted contracts of $194 million on December 31, 1994 compared to $190 million on December 31, 1993. Substantially all backlog is expected to be completed during 1995. Factors such as the type and scope of operations in progress at any given time, including weather conditions at field sites, create fluctuations in the employment level at PDM. On December 31, 1994, the Company employed 2,257 persons, of which 683 were salaried personnel and 1,574 were hourly personnel. -4- Item 1. Business (Cont'd) International sales during 1994 were minimal as the Company continues to concentrate on a few selected foreign projects and to negotiate additional cooperation agreements which allow for the supply of experience and technology without incurring overseas, on-site risk. Item 2. Properties Operations of the Company are conducted at both owned and leased properties. In addition, certain owned properties of the Company are leased to third party tenants. The following table indicates each of the Company's facilities in the United States by: segment, location, type of facility, year operations began, and square footage of property owned or leased on December 31, 1994:
YEAR TYPE OF OPERATIONS SQUARE LOCATION FACILITY BEGAN FOOTAGE Engineered Construction Division Birmingham, Alabama (1) Warehouse and office 1994 4,000 Fresno, California Toolhouse 1963 52,140 Clive, Iowa Fabrication plant and office 1955 176,537 Des Moines, Iowa Toolhouse 1900 29,000 Pittsburgh, Pennsylvania Office and toolhouse 1908 98,776 Warren, Pennsylvania Fabrication plant 1959 125,960 Franklin, Tennessee Toolhouse 1977 28,220 Hitchcock, Texas Toolhouse 1994 5,000 Provo, Utah Fabrication plant 1959 154,950 Steel Construction Stockton, California Fabrication plant and office 1987 140,840 Chicago, Illinois Fabrication plant and office 1987 520,800 Eau Claire, Wisconsin Fabrication plant and office 1994 265,528 Wausau, Wisconsin Fabrication plant and office 1991 164,580 Steel Service Centers Fresno, California Warehouse and office 1955 112,800 Santa Clara, California Warehouse and office 1947 108,528 Stockton, California Warehouse and office 1955 191,493 Cedar Rapids, Iowa Warehouse and office 1976 66,800 Sparks, Nevada Warehouse and office 1974 64,936 Tualatin, Oregon Warehouse and office 1964 31,620 Spanish Fork, Utah Warehouse and office 1977 74,280 Arlington, Washington (2) Warehouse and office 1993 13,965
-5- Item 2. Properties (Cont'd)
YEAR TYPE OF OPERATIONS SQUARE LOCATION FACILITY BEGAN FOOTAGE Idle Holdings, Including Plant and Property (3) Sacramento, California Land 1966 -- Des Moines, Iowa Fabrication plant and office 1900 339,100 Baltimore, Maryland Land 1960 -- Hilliard, Ohio Fabrication plant and office 1971 179,000 Pittsburgh, Pennsylvania Office 1908 10,234 Lubbock, Texas (4) Warehouse and office 1979 31,000 Provo, Utah Office 1959 15,731
__________ (1) Company leases land from outside third party. Lease will expire March 31, 1999. (2) Company leases land from outside third party. Lease will expire January 31, 2003. (3) Company pursues the sale or development of all idle facilities and regularly evaluates similar opportunities for facilities not fully utilized. (4) Company is leasing facility to a third party with a purchase option which expires on December 31, 1995. The properties listed above are utilized by the Company's business segments as indicated. The Company's production capacity is adequate for its present needs. The Company believes that its properties have been adequately maintained, are generally in good condition and are suitable for the Company's business as now conducted. -6- Item 3. Legal Proceedings There are various claims and legal proceedings against the Company arising in the normal course of business. As previously reported, in May 1984, Washington Public Power Supply System (WPPSS) filed a complaint against the Company and its surety in the United States District Court for the Eastern District of Washington. Various claims in connection with retrofit work performed by the Company at Nuclear Unit #2, Hanford, Washington, were alleged. Four alternative damages theories were presented, ranging in amounts from $53 million to $86 million. In January 1986, the District Court granted partial summary judgment and dismissed some of WPPSS' claims. After a trial in June 1986, and a jury verdict favorable to the Company, the Court entered final judgment dismissing all the claims of WPPSS against the Company. WPPSS filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. In May 1989, the Court of Appeals affirmed the judgment of the District Court that the Company was not liable for breach of warranties in connection with its construction of the retrofit of the containment vessel at Nuclear Unit #2, Hanford, Washington. However, the Court of Appeals remanded the case to the District Court for a determination of whether WPPSS had released its claims against the Company for breach of contract with respect to the Company's retrofit contract. After several preliminary rulings in 1990 in favor of the Company, the District Court entered an order dismissing WPPSS' complaint with prejudice on May 1, 1991. In an order filed January 26, 1993, the United States Court of Appeals affirmed the judgment of the District Court in part, but reversed and again remanded the case to the District Court for determination of whether WPPSS had released its claims against the Company for breach of contract with respect to the retrofit contract, including its original claims for consequential damages. A jury trial was held in the District Court commencing June 27, 1994. On July 11, 1994, the jury returned a verdict in the Company's favor, ruling that WPPSS has no breach of contract claims against the Company by reason of the containment vessel retrofit. WPPSS has again filed notice of appeal to the United States Court of Appeals for the Ninth Circuit. Although counsel is unable to predict with certainty the ultimate outcome, management and counsel believe the Company has significant and meritorious defenses to any claims and intend to pursue them vigorously. On November 3, 1993, an accident occurred at the construction site of a new United States Post Office in Chicago where the Company's Steel Construction business segment was in the process of fabricating and erecting the steel structure of the building. Two men were killed and five seriously injured when a portion of the erected steel collapsed. An investigation is being conducted by the Federal Occupational Safety and Health Administration (OSHA) and the Justice Department. See Accrued Liabilities note accompanying the consolidated financial statements. -7- Item 3. Legal Proceedings (Cont'd) The Company's operations, including idle facilities and other property, are subject to and affected by federal, state and local laws and regulations regarding protection of the environment. The Company accrues for environmental costs where such obligations are either known or considered probable and can be reasonably estimated. The Company is participating as a potentially responsible party (PRP) at three different sites pursuant to proceedings under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Other parties have also been identified as PRP's at the sites. Investigative and/or remedial activities are ongoing. The Company believes, based upon information presently available to it, that such future costs will not have a material effect on the Company's financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup costs or the allocation of such costs among PRP's or a determination that the Company is potentially responsible for the release of hazardous substances at sites other than those currently identified, could result in additional costs. Management believes it is improbable that the ultimate outcome of any matter currently pending against the Company will materially affect the financial position of the Company; accordingly, no provision for such liability has been recorded in the Company's consolidated financial statements in the Annual Report. Item 4. Submission of Matters to a Vote of Security Holders Not applicable Executive Officers of the Registrant Information regarding executive officers of the Registrant is presented in Part III following and incorporated herein by reference. -8- PART II Item 5. Market for Registrants Common Equity and Related Stockholder Matters The Company's common stock is traded on the American Stock Exchange under the symbol "PDM". The following is the range of high and low sales prices and quarterly dividends paid per share for fiscal 1994 and 1993 by quarters.
Price Range Quarterly ------------------ Dividends High Low Per Share ------- ------ -------- 1994 First Quarter $36 $27 $.22-1/2 Second Quarter 32-1/2 27 .22-1/2 Third Quarter 33 26 .22-1/2 Fourth Quarter 35-3/4 28-1/2 .22-1/2 -------- $.90 ======== 1993 First Quarter $37-1/2 $32-1/2 $.22-1/2 Second Quarter 33 24 .22-1/2 Third Quarter 30-7/8 26 .22-1/2 Fourth Quarter 28-3/4 24-1/2 .22-1/2 -------- $.90 ========
On February 28, 1995, there were 2,321,903 shares outstanding and approximately 448 stockholders of record of the Company's Common Stock. -9- Item 6. Selected Financial Data The following table summarizes information with respect to the operations of the Company.
(Dollars in thousands, except per share amounts) 1994 1993 1992 1991 1990 ------------------------------------------------ ---- ---- ---- ---- ---- Operating Performance (1) Earned Revenue $408,061 $323,707 $355,043 $370,318 $346,964 Income (loss) from operations 15,508 (2,689) 4,681 11,323 15,301 Net Income (loss): Continuing operations 11,980 567 4,080 8,315 10,031 Discontinued operations, net 80 471 820 (462) (1,604) -------- -------- -------- -------- -------- Net income 12,060 1,038 4,900 7,853 8,427 Income (loss) per common share: Continuing operations 5.16 .25 1.68 3.37 4.07 Discontinued operations .03 .20 .34 (.19) (.65) -------- -------- -------- -------- -------- Net income per common share 5.19 .45 2.02 3.18 3.42 Financial Position Total assets $214,201 $177,803 $166,074 $176,001 $167,915 Long-term debt 22,000 - - 2,135 9,926 Stockholders' equity 98,549 88,473 89,678 91,512 85,627 Other Information For the year: Cash provided (utilized) by operations $ (2,784) $ (3,767) $ 21,414 $ 13,871 $ 22,544 Depreciation expense 5,037 4,145 4,314 4,178 3,570 Capital expenditures 7,919 3,942 4,491 4,417 5,018 Dividends per common share .90 .90 .90 .825 .90 At year end: Book value per common share $ 42.44 $ 38.07 $ 38.63 $ 37.36 $ 34.97 Employees 2,257 1,987 2,066 2,285 2,297
(1) Restated to reflect CVI Incorporated as a discontinued operation. Note: Refer to the Accrued Liabilities, Contingencies and Commitments notes accompanying the consolidated financial statements which are included in Part II of this Form 10-K. -10- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is provided to increase understanding of, and should be read in conjunction with, the consolidated financial statements and accompanying notes. In addition, the following discussion and analysis should be read in conjunction with the Review of Operations section of the Annual Report to Stockholders for the fiscal year ended December 31, 1994 hereof which is incorporated herein by reference. Effective October 31, 1994, the Company accounts for CVI Incorporated as a discontinued operation, and accordingly, the amounts included in continuing operations and the management discussion and analysis of continuing operations exclude this business. RESULTS OF OPERATIONS The Company realized income from continuing operations of $12.0 million in 1994 compared with $567,000 in 1993 and $4.1 million in 1992. The related earnings per share were $5.16 in 1994 compared with $.25 in 1993 and $1.68 in 1992. Earned revenue increased 26 percent in 1994 compared with 1993 but decreased 8.8 percent in 1993 compared with 1992. All of the Company's business segments increased profitability in 1994 compared with 1993. This increase may be attributed to the upturn in the economy. Profitability decreased to a loss of $2.7 million in 1993 when compared to 1992. The Company normally lags the general economy and as a result the Company's overall financial performance in 1993 was affected by the recession. Engineered Construction Division Earned revenue for the Engineered Construction Division (ECD) was $177.3 million in 1994 compared with $128.4 million and $187.9 million in 1993 and 1992, respectively. ECD's earned revenue represented 43 percent of consolidated revenues in 1994. Operating profitability increased $12.9 million to $11.2 million in 1994 compared with a loss of $1.7 million in 1993. Income from operations in 1994 was adversely affected by approximately $1.5 million of costs related to the WPPSS litigation. The Company has incurred substantially all of the costs related to the 1993 Midwest flood. At December 31, 1994, actual flood related costs were $8.5 million and future costs are estimated to be $500,000. During 1994, the Company re-evaluated its estimated accrual for the costs associated with the flood and eliminated amounts that were no longer believed to be necessary. This reduction improved net income by $.26 per share. As previously reported, these costs were reimbursed under the Company's insurance policy. During 1994, ECD took advantage of the recovering economy by expanding volume and realizing higher margins on contracts. The decrease in profitability of $7.7 million in 1993 when compared to 1992, was attributed to poor economic conditions. New awards of $199.0 million in 1994, represented a 24 percent increase over the 1993 awards of $160.3 million. New awards were $138.8 million in 1992. The increase over the past three years exemplifies this Division's ability to compete in various market conditions. -11- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Capital expenditures of $3.9 million in 1994 were primarily for a new office building, computer and construction equipment. During 1993, expenditures of $882,000 were for the purchase of plant and construction equipment and in 1992, expenditures for construction and computer aided design equipment totaled $1.6 million. Steel Construction As described in the Notes to Consolidated Financial Statements under Acquisitions, on September 1, 1994, the Company acquired the bridge fabricating assets of Phoenix Steel, Inc., (Phoenix) located in Eau Claire, Wisconsin. The total cost of this acquisition was $13.5 million, $8.0 million for working capital and $5.5 million for property, plant and equipment. These assets were combined with the bridge fabricating assets of Hartwig Mfg. Corp. to form the PDM Bridge Division, a profit center in the Steel Construction business segment. Accordingly, the consolidated statement of financial condition on December 31, 1994 includes the assets of Phoenix. The acquisition was accounted for as a purchase and the results of operations of Phoenix are included in the consolidated financial statements from the date of acquisition. This segment has seen a steady increase in earned revenues over the last three years. In 1992, revenues were $81.6 million which increased to $95.8 million in 1993, and in 1994 rose to a level of $101.9 million. The increase in 1993 was primarily due to the substantial completion of the United States Post Office project in Chicago. For a discussion of certain potential liabilities which may arise from an accident which occurred at this project, see "Accrued Liabilities" in the Notes to Consolidated Financial Statements. In 1994, the McCormick Place Exhibition Center project accounted for almost 12 percent of consolidated revenues. Due to the expected completion of this project, 1995 results for Chicago Steel Construction are not expected to be at 1994 levels. Operating profitability increased to $2.8 million in 1994 from $431,000 in 1993. The reasons for this increase are two-fold. In 1994, one major contract, as mentioned earlier, contributed significantly to the increase in profitability. Also, a $2.0 million non-recurring charge for insurance coverage deductibles and future uninsured costs was recorded in 1993, thus reducing profitability. In 1994, new awards were $92.7 million compared with $121.3 million in 1993 and $98.9 million in 1992. The increase in 1993 was attributed to the McCormick Place Exhibition Center contract award of $68 million. Capital expenditures, exclusive of business acquisitions, were $661,000 in 1994 compared with $1.5 million and $1.8 million in 1993 and 1992, respectively. During the last three years, a significant portion of capital expenditures were for purchases of plant and construction equipment. In 1992, the Chicago facility was renovated to expand its structural bridge fabrication capabilities. -12- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Steel Service Centers The Company's Steel Service Centers accounted for 32 percent of consolidated earned revenues in 1994. Earned revenue was $128.9 million in 1994 compared with $99.5 million in 1993 and $85.5 million in 1992. This steady increase in revenue was primarily the result of this Division's ability to capture additional market share through competitive pricing. Operating profitability increased approximately 49 percent to $7.5 million in 1994, compared with $5.1 million in 1993. This increase was due to higher volumes realized and improved margins on goods sold. The profitability was relatively unchanged for 1993 when compared to 1992. During 1994 and 1993, capital expenditures of $3.4 million and $1.6 million, respectively, were primarily used for expansions of physical plants, processing and warehouse equipment and to upgrade the delivery fleet. In 1992, $1.1 million was used to finance expansion projects at the various plant facilities. Other Corporate unallocated expenses, consisting primarily of salaries, benefits, outside professional services, taxes and insurance, were $6.0 million in 1994 compared with $6.5 million and $6.7 million in 1993 and 1992, respectively. In 1994, the Company's interest income was $627,000 compared with $540,000 in 1993 and $685,000 in 1992. Interest income increased in 1994 reflecting the rise in interest rates. During 1993, interest income decreased as a result of a lower level of interest earning funds. In 1994, interest expense increased to $898,000 as a result of the Company's increase in net borrowings on its revolving credit facility. As of December 31, 1994, the Company had debt obligations of $22.0 million. The gain on the sale of assets was $3.6 million in 1994 compared with $3.6 million in 1993 and $930,000 in 1992. In 1994, the Company realized gains on the sale of PDM Saudi Arabia Ltd. (PDM SA), a joint venture, and idle properties. The Company expects the sale of PDM SA to have no material effect on the profitability of continuing operations. During 1993, gains realized consisted primarily of the sale of idle properties compared with gains on the sale of foreign marketable securities in 1992. The effective income tax rate was 36 percent in 1994 compared with 47 percent in 1993 and 34 percent in 1992. In 1994, the effective tax rate was favorably impacted by the realization of a tax benefit related to the previously mentioned sale of a foreign investment. In 1993, the effective tax rate was adversely impacted as a result of foreign taxes of $81,000 with no corresponding tax credit. The Company's operations, including idle facilities and other property, are subject to federal, state and local laws and regulations regarding protection of the environment. The Company accrues for environmental costs where such obligations are either known or considered probable and can be reasonably estimated. -13- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) The Company has been notified it is a potentially responsible party (PRP) at three waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Other parties have also been identified as PRP's at the sites. Investigative and/or remedial activities are ongoing. The Company believes, based upon the information presently available to it, that such costs will not have a material adverse effect on the Company's financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, changes in site cleanup costs or the allocation of such costs among PRP's, or a determination that the Company is potentially responsible for the release of waste or pollutants at sites other than those currently identified, could result in additional costs. Inflation and changing prices did not significantly impact the Company during the last three years. LIQUIDITY AND CAPITAL RESOURCES During 1994, the Company's primary sources of liquidity included cash provided by financing activities and cash on hand. These sources primarily financed acquisitions, capital expenditures, working capital requirements and the payment of dividends. On December 31, 1994, cash and cash equivalents were $11.7 million compared with $15.9 million and $19.9 million on December 31, 1993 and 1992, respectively. The increase in working capital in 1994 compared to 1993, was primarily the result of an increase in accounts receivable, due to volume and timing of payments, offset by a net increase in contract related billings over costs. Capital expenditures, exclusive of business acquisitions, during 1994 were $7.9 million compared with $3.9 million and $4.5 million during 1993 and 1992, respectively. In 1994, capital expenditures were primarily for plant and construction equipment and a new office building in Clive, Iowa. This building serves as the new headquarters for the Engineered Construction Division, as the former office building was destroyed by the flood in July 1993. On September 1, 1994, the Company acquired the bridge fabricating assets of Phoenix Steel, Inc., a steel bridge fabricator. The total cost of this acquisition was $13.5 million. In addition, the Company intends to continue to pursue acquisition opportunities closely aligned with its existing core businesses. The Company paid total cash dividends of $.90 per common share in 1994. On February 28, 1995, the Board of Directors declared an increase to the quarterly dividends to $.25 per common share for the first quarter of 1995. The payment of future dividends will be evaluated based on business conditions. The Company has on hand and access to sufficient sources of funds to meet its anticipated operating, expansion and capital needs. These sources include cash on hand and a $40.0 million unsecured revolving credit facility which matures on December 31, 1996. This facility contains an annual option to renew for an additional one-year period, subject to lender approval. On December 31, 1994, $22.0 million of borrowings, at prime rate, and $13.0 million of stand-by letters of credit were outstanding under this agreement. During the fourth quarter of 1994, the revolving credit facility was increased to $40.0 million to allow the Company to borrow for working capital requirements. -14- Item 8. Financial Statements and Supplemental Data Report of Independent Auditors STOCKHOLDERS AND BOARD OF DIRECTORS PITT-DES MOINES, INC. We have audited the accompanying consolidated statements of financial condition of Pitt-Des Moines, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pitt-Des Moines, Inc. and subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in the notes to the consolidated financial statements, Washington Public Power Supply System (WPPSS) brought a complaint against the Company in 1984 seeking unspecified damages for contract work completed in a prior year. The ultimate outcome of this matter is still uncertain and cannot be presently determined. Accordingly, no provision for any liability that may result has been made in the financial statements. /s/ ERNST & YOUNG LLP ---------------------------- ERNST & YOUNG LLP Pittsburgh, Pennsylvania March 2, 1995 -15- PITT-DES MOINES, INC. Consolidated Statements of Income Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------- ------------- ------------- Earned revenue $408,060,623 $323,706,896 $355,042,813 Cost of earned revenue 357,639,136 293,377,923 315,734,211 ------------ ------------ ------------ Gross profit from operations 50,421,487 30,328,973 39,308,602 Selling, general and administrative expenses 34,913,770 33,018,179 34,627,936 ------------ ------------ ------------ Income (loss) from operations 15,507,717 (2,689,206) 4,680,666 Other income (expense): Interest income 626,841 540,008 685,406 Interest expense (897,993) (219,752) (199,646) Gain on sale of assets 3,576,760 3,595,414 929,296 Miscellaneous, net (157,233) (155,047) 73,983 ------------ ------------ ------------ 3,148,375 3,760,623 1,489,039 ------------ ------------ ------------ Income from operations before taxes 18,656,092 1,071,417 6,169,705 Income tax expense 6,676,271 504,438 2,090,123 ------------ ------------ ------------ Income from continuing operations 11,979,821 566,979 4,079,582 Income from discontinued operations, net of taxes 80,362 470,962 820,431 ------------ ------------ ------------ Net income $ 12,060,183 $ 1,037,941 $ 4,900,013 ============ ============ ============ Income per common share: Continuing operations $ 5.16 $ 0.25 $ 1.68 Discontinued operations 0.03 0.20 0.34 ------------ ------------ ------------ Net income per common share $ 5.19 $ 0.45 $ 2.02 ============ ============ ============ Average common shares outstanding 2,323,651 2,323,645 2,414,670 ============ ============ ============
See Notes to Consolidated Financial Statements. -16- PITT-DES MOINES, INC. Consolidated Statements of Financial Condition December 31, 1994 and 1993
Assets 1994 1993 ------------- ------------- Current Assets Cash and cash equivalents $ 11,668,341 $ 15,946,321 Accounts and notes receivable 90,731,715 60,782,038 Inventories 19,867,066 18,119,248 Costs and estimated profits in excess of billings 30,193,058 28,618,657 Deferred income taxes 5,367,748 7,938,680 Prepaid expenses 931,974 1,595,318 ------------ ------------ Total current assets 158,759,902 133,000,262 Other Assets 10,330,365 6,619,911 Net Assets of Discontinued Operations 2,685,379 - Property, Plant and Equipment Land 6,959,818 7,350,952 Buildings 30,370,577 30,455,806 Machinery and equipment 59,264,513 59,936,962 ------------ ------------ 96,594,908 97,743,720 Allowances for depreciation (54,169,075) (59,560,936) ------------ ------------ Net property, plant and equipment 42,425,833 38,182,784 ------------ ------------ $214,201,479 $177,802,957 ============ ============
See Notes to Consolidated Financial Statements. -17- PITT-DES MOINES, INC. Consolidated Statements of Financial Condition December 31, 1994 and 1993
Liabilities and Stockholders' Equity 1994 1993 ------------- ------------- Current Liabilities Accounts payable $ 47,328,315 $ 41,325,840 Accrued compensation, related taxes and benefits 10,582,861 9,082,627 Other accrued expenses 3,163,269 3,963,152 Accrued expenses related to flood 500,000 4,272,049 Billings in excess of costs and estimated profits 14,309,207 10,319,772 Income taxes 2,118,274 1,149,057 Casualty and liability insurance 8,949,713 12,608,799 ------------ ------------ Total current liabilities 86,951,639 82,721,296 Revolving Credit Facility 22,000,000 - Deferred Income Taxes 5,573,065 5,700,661 Minority Interest 1,127,755 908,080 Contingencies and Commitments Stockholders' Equity Preferred stock--par value $.01 per share; authorized 3,000,000 shares; issued--none Common stock--no par value; authorized 15,000,000 shares; issued 2,982,156 shares 33,549,255 33,549,255 Retained earnings 79,201,572 69,055,440 ------------ ------------ 112,750,827 102,604,695 Treasury stock at cost (1994--660,253 shares; 1993--658,178 shares) (14,201,807) (14,131,775) ------------ ------------ Total stockholders' equity 98,549,020 88,472,920 ------------ ------------ $214,201,479 $177,802,957 ============ ============
See Notes to Consolidated Financial Statements. -18- PITT-DES MOINES, INC. Consolidated Statements of Cash Flows Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992 ------------- ------------ ------------ Cash Flows from Operating Activities Net income $ 12,060,183 $ 1,037,941 $ 4,900,013 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,036,755 4,145,385 4,314,124 Discontinued operations (1,397,613) 4,617,346 503,906 Gain on sale of assets (3,576,760) (3,595,414) (929,296) Deferred income taxes (credits) 2,141,057 (979,567) (605,216) Minority interest in earnings, net of dividends paid 219,675 37,150 46,649 Other non-cash credits, net (301,288) (536,498) (882,725) Change in operating assets and liabilities providing (using) cash: Accounts and notes receivable (31,132,161) (7,448,578) 10,418,222 Inventories (3,396,234) (2,821,023) (3,828,788) Prepaid expenses 663,337 (1,296,847) 1,822,326 Costs, estimated profits and billings, net 10,937,843 (3,901,538) 2,126,431 Accounts payable 6,720,222 3,372,152 4,949,623 Accrued liabilities (1,727,972) 2,909,863 660,776 Income taxes 969,217 693,051 (2,082,137) ------------ ----------- ------------ Net cash provided (utilized) by operating activities (2,783,739) (3,766,577) 21,413,908 Cash Flows from Investing Activities Capital expenditures (7,919,020) (3,941,566) (4,491,121) Proceeds from sale of assets 3,838,022 4,977,159 1,020,382 Insurance proceeds from flood damage - 10,000,000 - Costs incurred related to flood damage (3,589,298) (5,727,951) - Acquisitions, net of cash acquired (13,499,394) (1,298,174) - Decrease in short-term investments - - 4,017,345 Change in investments and other assets (340,468) (1,122,699) (82,925) ------------ ----------- ------------ Net cash provided (utilized) by investing activities (21,510,158) 2,886,769 463,681 Cash Flows from Financing Activities Proceeds from debt obligations 28,000,000 - 9,000,000 Payments of debt obligations (6,000,000) (875,000) (17,395,000) Purchase of treasury stock - - (4,615,000) Dividends paid (2,091,114) (2,091,581) (2,176,563) Other 107,031 (151,515) 57,609 ------------ ----------- ------------ Net cash provided (utilized) by financing activities 20,015,917 (3,118,096) (15,128,954) ------------ ----------- ------------ Increase (decrease) in cash and cash equivalents (4,277,980) (3,997,904) 6,748,635 Cash and cash equivalents at beginning of year 15,946,321 19,944,225 13,195,590 ------------ ----------- ------------ Cash and Cash Equivalents at End of Year $ 11,668,341 $15,946,321 $ 19,944,225 ============ =========== ============
See Notes To Consolidated Financial Statements. -19- PITT-DES MOINES, INC. Consolidated Statements of Stockholders Equity Years Ended December 31, 1994, 1993 and 1992
Treasury Stock ---------------------------- Retained Number of Common Stock Earnings Cost Shares ------------ ----------- ------------ ------------ Balance on December 31, 1991 $ 33,549,255 $67,574,680 $ (9,611,919) (532,978) Net income 4,900,013 Cash dividends ($.90 per share) (2,176,563) Purchase of treasury stock (4,615,000) (130,000) Other 16,140 41,469 2,300 ------------ ----------- ------------ -------- Balance on December 31, 1992 33,549,255 70,314,270 (14,185,450) (660,678) Net income 1,037,941 Cash dividends ($.90 per share) (2,091,581) Other (205,190) 53,675 2,500 ------------ ----------- ------------ -------- Balance on December 31, 1993 33,549,255 69,055,440 (14,131,775) (658,178) Net income 12,060,183 Cash dividends ($.90 per share) (2,091,114) Other 177,063 (70,032) (2,075) ------------ ----------- ------------ -------- Balance on December 31, 1994 $ 33,549,255 $79,201,572 $(14,201,807) (660,253) ============ =========== ============ ========
See Notes To Consolidated Financial Statements. -20- PITT-DES MOINES, INC. Notes To Consolidated Financial Statements Significant Accounting Policies Principles of Consolidation -- The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Certain amounts in the 1992 and 1993 consolidated financial statements and notes to consolidated financial statements have been reclassified to conform with the 1994 presentation. Additionally, as further described in the following Notes To Consolidated Financial Statements, prior year amounts have been reclassified to present CVI Incorporated as a discontinued operation. Classifications of Current Assets and Liabilities -- The Company includes in current assets and current liabilities amounts realizable and payable under contracts which extend beyond one year. Other assets and liabilities are classified as current or non-current on the basis of expected realization or payment within or beyond one year, respectively. Cash and Cash Equivalents -- Cash and cash equivalents are defined as cash and short-term investments with maturities of three months or less at the time of acquisition. Inventories -- Inventories of raw materials and fabricated parts are principally valued at the lower of last-in, first-out (LIFO) cost or market except for certain inventories which are valued at the lower of first-in, first-out (FIFO) cost or market. Contract material inventories included in accumulated contract costs are valued using the specific identification method. Property, Plant and Equipment -- Land, buildings, machinery and equipment are carried at cost. Buildings, machinery and equipment, including capitalized leases, are depreciated by accelerated methods. Revenue Recognition -- The Company follows the percentage of completion method of reporting income from contracts. This method takes into account the cost, estimated profit and earned revenue to date on contracts not yet completed. Revenue recognized is the portion of the total contract price that the man-hours expended to date bears to the estimated final total man-hours, based on current estimates of man-hours to complete. Revenue recognition is not related to progress billings to customers. As long-term contracts extend over one or more years, revisions in estimates of costs and estimated profits during the course of work are reflected in the accounting period in which the facts which require the revision become known. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is recognized in the financial statements. Revenue from change orders and claims is recognized when the settlement is probable and the amount can be reasonably estimated. Contract costs include all direct -21- Notes To Consolidated Financial Statements (Cont'd) material, labor, subcontract costs and those indirect costs related to contract performance. Costs and estimated profits in excess of billings are classified as a current asset. Amounts billed in excess of costs and estimated profits are classified as a current liability. Income Taxes -- Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Net Income per Share of Common Stock -- Earnings per share is based on the weighted average number of shares outstanding during the year and include the dilutive effect of the assumed exercise of outstanding stock options, as computed under the treasury stock method. Acquisitions Cascade Culvert Corp. -- On November 30, 1993, Oregon Culvert Co., Inc., a majority-owned subsidiary, acquired the assets and assumed certain liabilities of Cascade Culvert Corp., a corrugated metal culvert pipe manufacturer. The total cost of this acquisition was $1.3 million. Phoenix Steel, Inc. -- On September 1, 1994, the Company acquired the bridge fabricating assets of Phoenix Steel, Inc., a steel bridge fabricator. The total cost of this acquisition was $13.5 million. In addition, $1.5 million will be paid, and expensed as incurred, in connection with non-compete agreements, expiring in December 1999, with the former shareholders of Phoenix Steel, Inc. These acquisitions were accounted for as purchases and, accordingly, the acquired assets and liabilities were recorded at their estimated fair value at the date of their respective acquisitions. Operating results have been included since acquisition dates but pro forma information has not been presented because it is immaterial. Discontinued Operation On October 31, 1994, the Company sold substantially all of the assets of CVI Incorporated, a wholly owned subsidiary, to Process Systems International, Inc., a subsidiary of Chart Industries, Inc., for consideration of $5.7 million, consisting of $650,000 in cash and a promissory note of $5.0 million, to be paid in installments over four years from the date of sale. Net assets from discontinued operations in the accompanying consolidated balance sheet is $2.7 million, composed of $236,000 of net current assets and $2.5 million of net non-current assets as of December 31, 1994. These amounts consist primarily of accounts receivable, contract related assets and liabilities, property, plant and equipment and related liabilities. -22- Notes To Consolidated Financial Statements (Cont'd) Revenues applicable to discontinued operations were $15.1 million, $30.6 million, and $27.9 million in 1994, 1993, and 1992, respectively. Discontinued operations, net in the accompanying consolidated statements of income is composed of the following for the years ended December 31:
Dollars in thousands 1994 1993 1992 ------ ----- ----- Income (loss) from operations, net of income tax expense (benefit) of $(214) in 1994, $337 in 1993 and $612 in 1992. $(493) $ 471 $ 820 Gain from disposal, net of income tax expense of $383 in 1994. 573 - - ----- ----- ----- $ 80 $ 471 $ 820 ===== ===== =====
Accounts and Notes Receivable On December 31, 1994 and 1993, accounts receivable included approximately $17.7 million and $15.2 million, respectively, which have been billed under retainage provisions in contracts and will become due upon completion of the contracts. Accounts receivable on December 31, 1994 included approximately $1.4 million which is expected to be collected after December 31, 1995. The allowance for doubtful accounts was approximately $1.0 million on December 31, 1994 and 1993, respectively. The majority of accounts receivable are from customers in various locations and industries throughout the United States. The Company maintains adequate reserves for potential credit losses and such losses have been minimal and within management's estimates. Inventories Inventories aggregating approximately $18.3 million and $14.5 million on December 31, 1994 and 1993, respectively, are valued at the lower of LIFO cost or market. If these amounts had been valued on the FIFO method, which approximates replacement cost, these amounts would have been approximately $14.7 million and $13.0 million higher than reported on December 31, 1994 and 1993, respectively. Inventories carried on a FIFO basis were $1.6 million and $3.6 million on December 31, 1994 and 1993, respectively. -23- Notes To Consolidated Financial Statements (Cont'd) Costs and Estimated Profits on Uncompleted Contracts Costs and estimated profits on uncompleted contracts are summarized as follows for December 31:
1994 1993 ------------- ------------- Costs incurred on uncompleted contracts $ 533,689,497 $ 413,203,152 Estimated profits 54,272,616 45,266,904 ------------- ------------- 587,962,113 458,470,056 Billings to date (572,078,262) (440,171,171) ------------- ------------- $ 15,883,851 $ 18,298,885 ============= =============
Costs, estimated profits and billings on uncompleted contracts are included in the accompanying Consolidated Statements of Financial Condition under the following captions for December 31:
1994 1993 ------------- ------------- Costs and estimated profits in excess of billings $ 30,193,058 $ 28,618,657 Billings in excess of costs and estimated profits (14,309,207) (10,319,772) ------------ ------------ $ 15,883,851 $ 18,298,885 ============ ============
Other Assets Other assets include prepaid pension costs, notes receivable and foreign marketable equity securities. During 1994, the Company sold an investment in PDM Saudi Arabia, a joint venture, and realized a gain of approximately $2.7 million. On December 31, 1994 and 1993, the Company held 11,000 shares of a foreign marketable equity security at a cost of $1,162 with a market value of $65,000 as of December 31, 1994. In 1992, the Company sold 133,100 shares and realized a gain of approximately $970,000. -24- Notes To Consolidated Financial Statements (Cont'd) Pensions The Company has a number of noncontributory defined benefit pension plans covering most employees. Plans covering salaried employees provide monthly benefits at retirement age based on the participant's monthly salary and years of employment. Plans covering hourly employees generally provide benefits of stated amounts for each year of service although certain of such plans provide benefits based on the participant's hourly wage rate and years of service. The plans permit the Company, at any time, to amend or terminate the plans subject to union approval, if applicable. The Company's policy is to fund the legal minimum required contributions. Plan assets on December 31, 1994 consisted primarily of listed stocks, bonds, investments in pooled funds and group annuity contracts of insurance carriers. The Company also makes contributions to certain multi-employer defined benefit pension plans for field union employees. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of man-hours worked. Company contributions and cost recognized for these plans were approximately $675,000, $521,000 and $598,000 for the years ended December 31, 1994, 1993 and 1992, respectively. The estimated accumulated plan benefits and plan assets for these plans are not available. The Company sponsors defined contribution plans which cover nearly all salaried employees, certain hourly groups in accordance with their union labor contracts and nearly all non-union field employees. Based upon the plan, the Company contributions represent either a stated matching percentage of the participant's basic contribution or a stated rate per hour worked. Company contributions and cost recognized for these plans were $1.3 million, $1.2 million and $1.8 million for the years ended December 31, 1994, 1993 and 1992, respectively. Net periodic pension expense (income) for the Company's continuing operations defined benefit pension plans include the following components for the years ended December 31:
1994 1993 1992 ------------ ------------ ------------ Service cost-benefits earned during the period $ 1,287,601 $ 1,115,407 $ 1,020,083 Interest cost on projected benefit obligation 3,727,962 3,538,634 3,379,094 Actual (return) loss on plan assets 677,553 (5,581,253) (2,920,634) Net amortization, deferral and other (6,038,666) 535,543 (2,420,376) ----------- ----------- ----------- Net periodic pension (income) $ (345,550) $ (391,669) $ (941,833) =========== =========== ===========
-25- Notes To Consolidated Financial Statements (Cont'd) As a result of restructuring activities, curtailment losses of $218,000 are reflected in the net amortization and deferral component of net periodic pension expense for the year ended December 31, 1993. The following assumptions were used in the determination of net periodic cost for the years ended December 31:
1994 1993 1992 ----- ----- ----- Discount rate 7.5% 8.9% 8.9% Rates of increase in compensation levels 6.0% 6.5% 6.5% Expected long-term rates of return on assets 9.0% 9.0% 9.0%
Interest rates used to discount actuarial liabilities to present value at December 31, 1994 and 1993 were 8.5 percent and 7.5 percent, respectively. The following table sets forth the status of the Company's defined benefit pension plans:
December 31, 1994 December 31, 1993 ------------------------------------ ----------------------------- Plans Whose Plans Whose Plans Whose Plans Whose Assets Exceed Accumulated Assets Exceed Accumulated Accumulated Benefits Accumulated Benefits Benefits Exceed Assets Benefits Exceed Assets Actuarial present value of benefit obligations: Vested benefit obligation $ 35,236,306 $ 4,739,165 $ 36,239,672 $ 4,847,060 ============ =========== ============ =========== Accumulated benefit obligation $ 36,166,544 $ 5,013,504 $ 37,130,744 $ 5,109,075 ============ =========== ============ =========== Plan assets at fair value $ 47,878,627 $ 3,598,344 $ 51,697,963 $ 3,604,678 Projected benefit obligation (42,565,855) (5,445,862) (44,543,929) (5,797,994) ------------ ----------- ------------ ----------- Plan assets in excess of (less than) projected benefit obligation 5,312,772 (1,847,518) 7,154,034 (2,193,316) Unrecognized net loss 3,149,077 250,015 2,628,690 721,312 Unrecognized net (asset) obligation (4,194,771) (65,528) (4,967,955) (4,169) Unrecognized prior service cost 1,624,892 886,579 434,241 645,403 Adjustment to recognize minimum liability - (711,847) - (774,134) ------------ ----------- ------------ ----------- Pension asset (liability) recognized in Consolidated Statements of Financial Condition $ 5,891,970 $(1,488,299) $ 5,249,010 $(1,604,904) ============ =========== ============ ===========
Amounts shown above for Plans Whose Accumulated Benefits Exceed Assets at December 31, 1994 and 1993 exclude the Projected benefit obligation of $4.2 million and $4.6 million, respectively, and associated plan assets of $3.6 million and $3.3 million, respectively, relating to discontinued operations. -26- Notes To Consolidated Financial Statements (Cont'd) Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106). The Company has elected to recognize this change in accounting on a prospective recognition basis utilizing a twenty-year amortization as permitted by SFAS No. 106. The adoption of SFAS No. 106 did not have a material impact on the Company's financial position or results of operations. Accrued Liabilities On July 11, 1993, the Company's Des Moines Steel Construction plant, and the Engineered Construction Division's office building, both located in Des Moines, Iowa, were severely damaged by the devastating flood in the Midwest. The Company has completed the flood related cleanup of both facilities and has incurred substantially all of the costs associated with the flood. Actual flood related costs through December 31, 1994 were $8.5 million with estimated future costs of approximately $500,000. During the fourth quarter of 1994, the Company reversed approximately $1.0 million of anticipated flood costs since it was determined that these costs would not be incurred. The Engineered Construction Division now operates from a newly constructed office building located in Clive, Iowa. On November 3, 1993, an accident occurred at the construction site of a new United States Post Office in Chicago where the Company's Steel Construction business segment was in the process of erecting the steel structure of the building. Two men were killed and five seriously injured when a portion of the erected steel collapsed. An investigation is being conducted by the Federal Occupational Safety and Health Administration (OSHA) and the Justice Department. OSHA has cited the Company for safety violations and has assessed $147,000 in fines and penalties, which the Company is contesting. The Justice Department, as required by OSHA law, is investigating whether to institute criminal action against the Company as a result of the accident. The Company cannot predict whether or not such action will be instituted. If such action is commenced, and the Company is found in violation of these laws, management believes that the resulting fines, penalties and costs of defense, which would be uninsured, would not be material to the Company's financial condition, although it could be material to the Company's reported results of operations for the period in which such payments are incurred. The Company believes that it has significant and meritorious defenses to any such charges and intends to vigorously defend them. Although the Company has insurance coverages containing various deductible clauses totalling $1.5 million, the Company and its insurance carriers are assessing the damages and related policy coverages. A charge of $2.0 million was recorded in the fourth quarter of 1993 relating to this accident. There may be uninsured costs relating to this accident for which PDM would be liable. -27- Notes To Consolidated Financial Statements (Cont'd) Employee Stock Ownership Plan The Company has a noncontributory Employee Stock Ownership Plan (ESOP) which provides salaried employees, who have at least one year of continuous service, an opportunity to own Company Common Stock and to accumulate additional retirement benefits. The Company's contributions, whether in cash or in stock, are determined annually by the Board of Directors in an amount not to exceed the maximum allowable as an income tax deduction. Company contributions are 100 percent vested after five years of continuous service. The ESOP contribution is allocated to the participant's account based upon the actual salary paid to the participant during that year. The Company's contributions, recorded as compensation expense, were approximately $507,000, $543,000 and $557,000 for the years ended December 31, 1994, 1993 and 1992, respectively. Revolving Credit Facility The Company has an unsecured revolving credit agreement with several banks from which it may borrow up to $40 million. This agreement matures on December 31, 1996, at which time all borrowings must be repaid in full. This agreement contains an annual option to renew for an additional one-year period, subject to lender approval. The agreement provides for various interest rate options at the Company's election. A commitment fee of one-fourth of one percent per annum is charged on any unused amount of this revolving credit commitment. This agreement contains restrictive financial covenants that require minimum levels of net worth and maintenance of specific financial ratios. On December 31, 1994, $22.0 million of borrowings, at the prime rate, and $13.0 million of stand-by letters of credit were outstanding under this agreement. The Company made cash payments of interest totaling $613,000 for the year ended December 31, 1994 and $385,000 and $562,000 for the years ended December 31, 1993 and 1992, respectively. -28- Notes To Consolidated Financial Statements (Cont'd) Income Taxes The income tax expense (benefit) included in the Consolidated Statements of Income is as follows for the years ended December 31:
1994 1993 1992 ---------- ----------- ----------- Current: Federal $3,415,816 $1,558,663 $2,947,596 State 800,000 141,166 560,598 Foreign 408,048 94,837 23,309 ---------- ---------- ---------- Total current 4,623,864 1,794,666 3,531,503 Deferred: Federal 1,716,378 (736,852) (640,770) State 504,752 (216,693) (188,462) ---------- ---------- ---------- Total deferred 2,221,130 (953,545) (829,232) ---------- ---------- ---------- Total income tax expense $6,844,994 $ 841,121 $2,702,271 ========== ========== ==========
The income tax expense (benefit) applicable to continuing and discontinued operations is as follows for the years ended December 31:
1994 1993 1992 ---------- ----------- ----------- Provision for continuing operations: Current $4,535,213 $1,484,005 $2,695,384 Deferred 2,141,058 (979,567) (605,261) ---------- ---------- ---------- Total provision for continuing operations 6,676,271 504,438 2,090,123 Provisions for discontinued operations: Current 88,651 310,661 836,164 Deferred 80,072 26,022 (224,016) ---------- ---------- ---------- Total provision for discontinued operations 168,723 336,683 612,148 ---------- ---------- ---------- Total income tax expense $6,844,994 $ 841,121 $2,702,271 ========== ========== ==========
-29- Notes To Consolidated Financial Statements (Cont'd) Income Taxes (Cont'd) A reconciliation of statutory federal income tax to the income tax expense on the income from continuing operations is as follows for the years ended December 31:
1994 1993 1992 ----------- --------- ----------- Statutory federal income tax expense $6,343,072 $364,282 $2,097,700 Increase (decrease) in taxes resulting from: Tax benefit from sale of PDM Saudi Arabia (525,936) - - State taxes less federal benefit 521,482 68,090 341,427 Other, net 337,653 72,066 (349,004) ---------- -------- ---------- Income tax expense-continuing operations $6,676,271 $504,438 $2,090,123 ========== ======== ==========
Deferred taxes reflected the tax effects of differences between the amounts recorded as assets and liabilities for financial reporting purposes and the amounts recorded for income tax purposes. The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows for December 31:
1994 1993 ---------- ---------- Deferred tax assets: Casualty and liability insurance $2,851,135 $4,503,964 Contract related amounts 156,233 553,450 Inventory 369,115 569,402 Employee benefits 1,644,065 1,486,094 Accounts receivable allowance 347,200 390,320 Accrued expenses related to flood - 435,450 ---------- ---------- Total deferred tax assets $5,367,748 $7,938,680 ========== ========== Deferred tax liabilities: Accelerated depreciation $3,016,078 $3,432,995 Pensions 2,210,302 2,070,754 Other 346,685 196,912 ---------- ---------- Total deferred tax liabilities $5,573,065 $5,700,661 ========== ==========
Income taxes paid for the years ended December 31, 1994, 1993 and 1992 were approximately $3.7 million, $1.1 million and $5.6 million, respectively. -30- Notes To Consolidated Financial Statements (Cont'd) Stock Plan The Stock Option Plan of 1990 (Plan) provides for grants of incentive stock options to officers and key employees. The Plan is administered by a committee consisting of at least three directors of the Company, none of whom are eligible to participate in the Plan. A total of 200,000 shares of the Company's Common Stock may be issued pursuant to the Plan. Grant prices are determined by the committee and are established at the fair market value of the Company's Common Stock at the date of grant. Options vest over a four-year period in equal annual amounts, or over such other period as the committee shall determine, and may be accelerated in the event of certain other circumstances such as death or disability of the optionee. These options generally expire within ten years after the date of grant. The following table summarizes option activity for the two years ended December 31, 1994:
Option Price Range Shares Per Share ---------- ------------------ Outstanding on December 31, 1992 76,500 $30.75-$37.25 ------- ------------- Exercised (2,500) $30.75 Surrendered (8,500) $30.75 ------- ------------- Outstanding on December 31, 1993 65,500 $30.75-$37.25 ======= ============= Outstanding on December 31, 1994 65,500 $30.75-$37.25 ======= ============= Exercisable: December 31, 1993 43,625 $30.75-$37.25 December 31, 1994 61,500 $30.75-$37.25 ======= ============= Available for future grant: December 31, 1993 130,000 December 31, 1994 130,000 =======
-31- Notes To Consolidated Financial Statements (Cont'd) Contingencies There are various claims and legal proceedings against the Company arising from the normal course of business. As previously reported, in May 1984, Washington Public Power Supply System (WPPSS) filed a complaint against the Company and its surety in the United States District Court for the Eastern District of Washington. Various claims in connection with retrofit work performed by the Company at Nuclear Unit #2, Hanford, Washington, were alleged. Four alternative damages theories were presented, ranging in amounts from $53 million to $86 million. In January 1986, the District Court granted partial summary judgment and dismissed some of WPPSS' claims. After a trial in June 1986, and a jury verdict favorable to the Company, the Court entered final judgment dismissing all the claims of WPPSS against the Company. WPPSS filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. In May 1989, the Court of Appeals affirmed the judgment of the District Court that the Company was not liable for breach of warranties in connection with its construction of the retrofit of the containment vessel at Nuclear Unit #2, Hanford, Washington. However, the Court of Appeals remanded the case to the District Court for a determination of whether WPPSS had released its claims against the Company for breach of contract with respect to the Company's retrofit contract. After several preliminary rulings in 1990 in favor of the Company, the District Court entered an order dismissing WPPSS' complaint with prejudice on May 1, 1991. In an order filed January 26, 1993, the United States Court of Appeals affirmed the judgment of the District Court in part, but reversed and again remanded the case to the District Court for determination of whether WPPSS had released its claims against the Company for breach of contract with respect to the retrofit contract, including its original claims for consequential damages. A jury trial was held in the District Court commencing June 27, 1994. On July 11, 1994, the jury returned a verdict in the Company's favor, ruling that WPPSS has no breach of contract claims against the Company by reason of the containment vessel retrofit. WPPSS has again filed notice of appeal to the United States Court of Appeals for the Ninth Circuit. Although counsel is unable to predict with certainty the ultimate outcome, management and counsel believe the Company has significant and meritorious defenses to any claims, and intend to pursue them vigorously. The Company's operations, including idle facilities and other property, are subject to and affected by federal, state and local laws and regulations regarding the protection of the environment. The Company accrues for environmental costs where such obligations are either known or considered probable and can be reasonably estimated. -32- Notes To Consolidated Financial Statements (Cont'd) The Company is participating as a potentially responsible party (PRP) at three different sites pursuant to proceedings under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Other parties have also been identified as PRP's at the sites. Investigative and/or remedial activities are ongoing. The Company believes, based upon information presently available to it, that such future costs will not have a material effect on the Company's financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup costs or the allocation of such costs among PRP's or a determination that the Company is potentially responsible for the release of hazardous substances at sites other than those currently identified, could result in additional costs. Management believes it is improbable that the ultimate outcome of any matter currently pending against the Company will materially affect the financial position of the Company; accordingly, no provision for such liability has been recorded in the accompanying financial statements. Commitments On April 19, 1990, the Company entered into agreements with members of the Jackson family, principal stockholders, to purchase shares of the Company's Common Stock upon the stockholder's death. Consummation of the transactions with the estates of such shareholders were, in each case, contingent upon the amount of such estate's holdings in shares of the Company's Common Stock. The requirements to purchase these shares have not been met. -33-
Business Segment Information Years ended December 31, 1994 1993 1992 ------------ ------------ ------------ Earned Revenue Engineered Construction Division $177,337,825 $128,444,623 $187,926,709 Steel Construction 101,871,144 95,755,727 81,610,826 Steel Service Centers 128,851,654 99,506,546 85,505,278 ------------ ------------ ------------ $408,060,623 $323,706,896 $355,042,813 ============ ============ ============ Income (Loss) from Operations Engineered Construction Division $ 11,180,896 $ (1,716,243) $ 5,964,269 Steel Construction 2,767,438 430,963 394,589 Steel Service Centers 7,528,151 5,068,260 5,032,076 Corporate and other (5,968,768) (6,472,186) (6,710,268) ------------ ------------ ------------ $ 15,507,717 $ (2,689,206) $ 4,680,666 ============ ============ ============ Identifiable Assets Engineered Construction Division $ 61,826,921 $ 49,564,994 $ 49,092,935 Steel Construction 75,024,678 48,941,685 44,828,049 Steel Service Centers 41,421,278 33,221,009 25,648,817 Corporate and other 33,243,223 33,904,461 30,723,794 ------------ ------------ ------------ Continuing operations 211,516,100 165,632,149 150,293,595 Discontinued operations 2,685,379 12,170,808 15,780,805 ------------ ------------ ------------ $214,201,479 $177,802,957 $166,074,400 ============ ============ ============ Capital Expenditures Engineered Construction Division $ 3,868,223 $ 881,772 $ 1,576,912 Steel Construction 660,540 1,493,362 1,783,155 Steel Service Centers 3,375,412 1,561,748 1,120,754 Corporate and other 14,845 4,684 10,300 ------------ ------------ ------------ Continuing operations 7,919,020 3,941,566 4,491,121 Discontinued operations 23,987 158,920 181,246 ------------ ------------ ------------ $ 7,943,007 $ 4,100,486 $ 4,672,367 ============ ============ ============ Depreciation Engineered Construction Division $ 1,906,768 $ 1,543,513 $ 1,722,082 Steel Construction 1,902,787 1,674,637 1,628,400 Steel Service Centers 1,192,176 883,991 911,584 Corporate and other 35,024 43,244 52,058 ------------ ------------ ------------ Continuing operations 5,036,755 4,145,385 4,314,124 Discontinued operations 593,254 631,520 619,159 ------------ ------------ ------------ $ 5,630,009 $ 4,776,905 $ 4,933,283 ============ ============ ============
-34- In 1994, Steel Construction's earned revenue includes $48.3 million related to the McCormick Place Exhibition Center. In 1993, Steel Construction's earned revenue included $39.5 million related to the United States Post Office project. For the year ended 1992, neither any single customer, nor any customer outside the United States, accounted for 10 percent or more of total earned revenue. -35- Two Year Quarterly Results of Operation As indicated in the Notes To Consolidated Financial Statements, during the fourth quarter of 1994, the Company sold a substantial portion of CVI Incorporated. The results of operations have been restated to report CVI as a discontinued operation as follows:
Quarters ended ---------------------------------------------------- March 31, June 30, September 30, December 31, ---------- --------- -------------- ------------- 1994 Earned revenue as reported $98,483 $105,818 $111,861 $106,980 Less discontinued operations 3,261 5,160 4,357 2,304 ------- -------- -------- -------- Earned revenue from continuing operations 95,222 100,658 107,504 104,676 ------- -------- -------- -------- Gross profit as reported 9,680 12,004 13,513 17,678 Less discontinued operations 440 825 718 471 ------- -------- -------- -------- Gross profit from continuing operations 9,240 11,179 12,795 17,207 ------- -------- -------- -------- Income before taxes as reported 604 3,695 6,801 7,805 Less discontinued operations (628) (113) (83) 1,073 ------- -------- -------- -------- Income before taxes from continuing operations 1,232 3,808 6,884 6,732 ------- -------- -------- -------- Income from continuing operations 758 2,300 4,805 4,117 Income (loss) from discontinued operations (388) (70) (51) 589 ------- -------- -------- -------- Net income $ 370 $ 2,230 $ 4,754 $ 4,706 ======= ======== ======== ======== Net income (loss) per share: Continuing operations $ .33 $ .99 $ 2.06 $ 1.77 Discontinued operations (.17) (.03) (.02) .25 ------- -------- -------- -------- Net income per share $ .16 $ .96 $ 2.04 $ 2.02 ======= ======== ======== ======== 1993 Earned revenue as reported $81,909 $ 90,374 $ 92,320 $ 89,744 Less discontinued operations 7,674 8,861 6,706 7,399 ------- -------- -------- -------- Earned revenue from continuing operations 74,235 81,513 85,614 82,345 ------- -------- -------- -------- Gross profit as reported 8,082 7,379 10,716 9,546 Less discontinued operations 1,889 1,262 1,058 1,185 ------- -------- -------- -------- Gross profit from continuing operations 6,193 6,117 9,658 8,361 ------- -------- -------- -------- Income (loss) before taxes as reported (1,419) (1,857) 4,773 382 Less discontinued operations 767 256 (10) (205) ------- -------- -------- -------- Income (loss) before taxes from continuing operations (2,186) (2,113) 4,783 587 ------- -------- -------- -------- Income (loss) from continuing operations (1,353) (1,245) 2,852 313 Income (loss) from discontinued operations 474 158 (6) (155) ------- -------- -------- -------- Net income (loss) $ (879) $ (1,087) $ 2,846 $ 158 ======= ======== ======== ======== Net income (loss) per share: Continuing operations $ (.58) $ (.54) $ 1.22 $ .14 Discontinued operations .20 .07 0.00 (.07) ------- -------- -------- -------- Net income (loss) per share $ (.38) $ (.47) $ 1.22 $ .07 ======= ======== ======== ========
-36- A separate computation of earnings per share is made for each quarter presented. The dilutive effect on earnings per share resulting from the assumed exercise of stock options is included in each quarter in which dilution occurs. The earnings per share computation for the year is a separate annual calculation. Accordingly, the sum of the quarterly earnings per share amounts will not necessarily equal the earnings per share for the year. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable -37- PART III Item 10. Directors and Executive Officers of the Registrant (1) Regarding the directors of the Registrant, reference is made to the information set forth under the caption "Election of Directors" in the Company's definitive Proxy Statement anticipated to be dated March 31, 1995 (Proxy Statement) which information is incorporated herein by reference. The principal executive officers of the Company and their recent business experience are as follows: W. R. Jackson, age 86 Director since 1940; Chairman Emeritus since 1988; formerly Chairman of the Board since 1971. Mr. Jackson has been with the Company since 1936. P. O. Elbert, age 64 (2) Director since 1988; Chairman of the Board of the Company since 1990; formerly President of the Company since 1988 and President, PDM Structural Group since 1987. Mr. Elbert joined the Company in 1987. Prior to 1987, Mr. Elbert was Vice Chairman of Chicago Steel Corporation since 1986; formerly a partner of Elbert and McKee Company since 1984; formerly President and Chief Executive Officer of Flint Steel Corporation since 1979; and formerly Group Vice President of Inryco, Inc., a subsidiary of Inland Steel Company since 1969. W. W. McKee, age 56 (3) Director since 1988; President and Chief Executive Officer of the Company since 1990; formerly President, PDM Plate Group since May 1987 and formerly Executive Vice President, PDM Structural Group since April 1987. Mr. McKee joined the Company in 1987. Prior to 1987, Mr. McKee was Secretary of Chicago Steel Corporation since 1986; formerly a partner of Elbert and McKee Company since 1984; formerly a consultant with McKee and Associates since 1983; formerly President of Hogan Manufacturing since 1980; and formerly President of Herrick Corporation since 1973. R. A. Byers, age 47 (3) Treasurer since 1988 and Vice President, Finance and Administration since 1987; formerly Vice President, Finance since 1984; formerly Controller since 1982; formerly Assistant Controller since 1981; formerly Manager of Financial Reporting since 1979; and formerly with Ernst & Young LLP for ten years. -38- Item 10. Directors and Executive Officers of the Registrant (Cont'd) T. R. Lloyd, age 46 (3) Secretary and General Counsel since 1990; formerly Senior Attorney of Buchanan Ingersoll Professional Corporation, since 1989; formerly Vice President, Secretary and General Counsel for Arch Mineral Corporation since 1984; and formerly Director and Secretary of U.S. Steel Mining Co., Inc. since 1979. ____________________ (1) Except where otherwise indicated, all references are to positions held with Pitt-Des Moines, Inc. Each executive officer of the Company is elected annually by the Board of Directors until his successor is elected and qualified, and each has served continually as an officer since first elected. (2) The Company has a severance agreement with Mr. Elbert. (3) The Company has agreements with each of Messrs. McKee, Byers and Lloyd covering, among other things, their positions as executive officers of the Company after a change of control. Item 11. Executive Compensation Reference is made to the information set forth under the captions "Board of Directors and Committees of the Board," "Executive Compensation and Other Information," "Compensation Committee Interlocks and Insider Participation" appearing in the Company's Proxy Statement, which information is incorporated herein by reference; provided, however, that the information set forth under the captions "Compensation Committee Report on Executive Compensation" and "Performance Graph" in the proxy Statement shall not be deemed to be soliciting material or to be "filed" with the Commission or subject to Regulation 14A or 14C (other than as provided in Item 402 of Regulation S-K) or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. Item 12. Security Ownership of Certain Beneficial Owners and Management Reference is made to the information contained under the captions "Stockholdings of Management" and "Principal Holders of Common Stock" in the Company's Proxy Statement which information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Reference is made to the information contained under the caption "Compensation Committee Interlocks and Insider Participation" in the Company's Proxy Statement which information is incorporated herein by reference. -39- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents filed as part of this Report: 1. The following consolidated financial statements of Pitt-Des Moines, Inc. and subsidiaries are included in Item 8: Page Number in This Report -------------- Report of Independent Auditors 15 Consolidated Statements of Income -- Years Ended December 31, 1994, 1993 and 1992 16 Consolidated Balance Sheets as of December 31, 1994 and 1993 17-18 Consolidated Statements of Cash Flows -- Years Ended December 31, 1994, 1993 and 1992 19 Consolidated Statements of Stockholders' Equity -- Years Ended December 31, 1994, 1993 and 1992 20 Notes To Consolidated Financial Statements 21-37 2. The following consolidated financial statement schedule of Pitt- Des Moines, Inc. and subsidiaries is included in Item 14(d): II. Valuation and Qualifying Accounts for years ended December 31, 1994, 1993 and 1992 46 -40- Item 14. Exhibits, Financial Statement Schedules and Reports on form 8-K (Cont'd) All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits: 3.1 Articles of Incorporation, as amended to date (filed as Exhibit 3.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) 3.2 Bylaws, as amended to date (filed as Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) 4.1 Amended and Restated Credit Agreement dated as of June 30, 1992 by and among Pitt-Des Moines, Inc. and Pittsburgh National Bank, Wells Fargo Bank, N.A. and American National Bank (filed as Exhibit 4.1 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference) 4.2 First Amendment dated November 23, 1992 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.2 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference) 4.3 Second Amendment dated June 10, 1993 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1992 and incorporated herein by reference) 4.4 Third Amendment dated December 16, 1993 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.2 to the Company's annual report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference) 4.5 Fourth Amendment dated June 14, 1994 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarter report on Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by reference) 4.6 Fifth Amendment dated December 8, 1994 to Credit Agreement filed as Exhibit 4.1 hereto (filed herewith) 10.1* Agreement executed by and between the Company and W. W. McKee (filed as Exhibit 10.1 to the Company's annual report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference) 10.2* Agreement executed by and between the Company and R. A. Byers (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1991 and incorporated herein by reference) -41- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Cont'd) 10.3* Agreement executed by and between the Company and T. R. Lloyd (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1991 and incorporated herein by reference) 10.4* Severance Pay Agreement executed by and between the Company and P. O. Elbert (filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1991 and incorporated herein by reference) 10.5* Management Incentive Plan (filed as Exhibit 10.5 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference) 10.6* Summary of Company's 1994 Management Incentive Plan (MIP) (filed herewith) 10.7* Retirement Plan for PDM Outside Directors as amended, effective May 26, 1994 (filed herewith) 10.8* Stock Option Plan of 1990 (filed as Exhibit 4.01 to the Company's Registration Statement No. 33-34787 on Form S-8 filed May 7, 1990 and incorporated herein by reference) 10.9* Investment Letter and Registration Rights Agreement dated September 21, 1993 by and between Pitt-Des Moines, Inc. and William W. McKee, Jr. (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference) 10.10* Investment Letter and Registration Rights Agreement dated September 21, 1993 by and between Pitt-Des Moines, Inc. and Phillip O. Elbert (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference) 11 Computation of Per Share Earnings (filed herewith) 13 "Review of Operations" from Annual Report to Stockholders for fiscal year ended December 31, 1994 (filed herewith) 21 Subsidiaries of Pitt-Des Moines, Inc. (filed herewith) 23 Consent of Independent Auditors, Ernst & Young LLP (filed herewith) 27 Financial Data Schedule -42- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Cont'd) (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the quarter ended December 31, 1994. ------------------------ * Denotes management contract or compensatory plan or arrangement. -43- Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PITT-DES MOINES, INC. March 29, 1995 By: /s/ Wm. W. McKee ---------------------------- Wm. W. McKee President Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date Principal Executive Officer: /s/ Wm. W. McKee President, Chief March 29, 1995 ------------------------------------ Executive Officer and Wm. W. McKee Director Principal Financial and Accounting Officer: /s/ R. A. Byers Chief Financial Officer March 29, 1995 ------------------------------------ and Chief Accounting R. A. Byers Officer Other Directors: /s/ J. C. Bates Director March 29, 1995 ------------------------------------ J. C. Bates /s/ R. W. Dean Director March 29, 1995 ------------------------------------ R. W. Dean -44- Signatures (Cont'd) Signatures Title Date /s/ P. O. Elbert Director March 29, 1995 ------------------------------------ P. O. Elbert /s/ W. R. Jackson Director March 29, 1995 ------------------------------------ W. R. Jackson /s/ W. R. Jackson, Jr. Director March 29, 1995 ------------------------------------ W. R. Jackson, Jr. /s/ W. E. Lewellen Director March 29, 1995 ------------------------------------ W. E. Lewellen /s/ J. H. Long Director March 29, 1995 ------------------------------------ J. H. Long /s/ A. J. Paddock Director March 29, 1995 ------------------------------------ A. J. Paddock /s/ P. J. Townsend Director March 29, 1995 ------------------------------------ P. J. Townsend -45- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Pitt-Des Moines, Inc.
Additions Deductions(1) ------------ -------------- Balance at Charged to Beginning of Costs and Credited Balance at End Description Period Expenses to Asset of Period ----------- ------------ ---------- ---------- -------------- Deducted from accounts receivable as allowance for doubtful accounts: Year ended December 31, 1994 $975,000 $209,000 $261,000 $923,000 Year ended December 31, 1993 $1,011,000 $911,000 $947,000 $975,000 Year ended December 31, 1992 $1,013,000 $157,000 $159,000 $1,011,000
--------------------- (1) Write-off of accounts deemed to be uncollectible -46- EXHIBIT INDEX 3.1 Articles of Incorporation, as amended to date (filed as Exhibit 3.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) 3.2 Bylaws, as amended to date (filed as Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) 4.1 Amended and Restated Credit Agreement dated as of June 30, 1992 by and among Pitt-Des Moines, Inc. and Pittsburgh National Bank, Wells Fargo Bank, N.A. and American National Bank (filed as Exhibit 4.1 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference) 4.2 First Amendment dated November 23, 1992 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.2 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference) 4.3 Second Amendment dated June 10, 1993 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1992 and incorporated herein by reference) 4.4 Third Amendment dated December 16, 1993 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.4 to the Company's annual report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference) 4.5 Fourth Amendment dated June 14, 1994 to Credit Agreement filed as Exhibit 4.1 hereto (filed as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by reference) 4.6 Fifth Amendment dated December 8, 1994 to Credit Agreement filed as Exhibit 4.1 hereto (filed herewith) 10.1 Agreement executed by and between the Company and W. W. McKee (filed as Exhibit 10.1 to the Company's annual report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference) 10.2 Agreement executed by and between the Company and R. A. Byers (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1991 and incorporated herein by reference) 10.3 Agreement executed by and between the Company and T. R. Lloyd (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1991 and incorporated herein by reference) -47- EXHIBIT INDEX (Cont'd) 10.4 Severance Pay Agreement executed by and between the Company and P. O. Elbert (filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1991 and incorporated herein by reference) 10.5 Management Incentive Plan (filed as Exhibit 10.5 to the Company's annual report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference. 10.6 Summary of Company's 1994 Management Incentive Plan (MIP) (filed herewith) 10.7 Retirement Plan for PDM Outside Directors as amended, effective May 26, 1994 (filed herewith) 10.8 Stock Option Plan of 1990 (filed as Exhibit 4.01 to the Company's Registration Statement No. 33-34787 on Form S-8 filed May 7, 1990 and incorporated herein by reference) 10.9 Investment Letter and Registration Rights Agreement dated September 21, 1993 by and between Pitt-Des Moines, Inc. and William W. McKee, Jr. (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference) 10.10 Investment Letter and Registration Rights Agreement dated September 21, 1993 by and between Pitt-Des Moines, Inc. and Phillip O. Elbert (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference) 11 Computation of Per Share Earnings (filed herewith) 13 "Review of Operations" from Annual Report to Stockholders for fiscal year ended December 31, 1994 (filed herewith) 21 Subsidiaries of Pitt-Des Moines, Inc. (filed herewith) 23 Consent of Independent Auditors, Ernst & Young LLP (filed herewith) 27 Financial Data Schedule -48- EX-4.6 2 RESTATED CREDIT AGREE Exhibit 4.6 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS FIFTH AMENDMENT ("Fifth Amendment") made as of December 8, 1994, by and among PITT-DES MOINES, INC., a Pennsylvania corporation, as borrower (the "Borrower"), PNC BANK, NATIONAL ASSOCIATION (formerly Pittsburgh National Bank), WELLS FARGO BANK, N.A. and AMERICAN NATIONAL BANK, as lenders (individually "PNC", "Wells" and "American" and a "Bank" and collectively the "Banks"), PNC BANK, NATIONAL ASSOCIATION (formerly Pittsburgh National Bank) as agent for the Banks (in such capacity the "Agent"), and PNC BANK, NATIONAL ASSOCIATION (formerly Pittsburgh National Bank), as the issuer of Letters of Credit (in such capacity the "Issuing Bank"), amends certain provisions of that certain Amended and Restated Credit Agreement dated as of June 30, 1992 as previously amended by the First Amendment to Amended and Restated Credit Agreement dated as of November 10, 1992, the Second Amendment to Amended and Restated Credit Agreement dated as of June 10, 1993, the Third Amendment to Amended and Restated Credit Agreement dated as of December 16, 1993 and the Fourth Amendment to Amended and Restated Credit Agreement dated as of June 24, 1994 (said Credit Agreement as amended from time to time herein the "Original Credit Agreement"). WITNESSETH: WHEREAS, the Borrower, the Banks, the Issuing Bank and the Agent wish to amend the Original Credit Agreement as provided herein. NOW, THEREFORE, in consideration of the mutual promises and the mutual covenants made herein and in the Original Credit Agreement and other valuable consideration and with the intent to be legally bound hereby, the parties hereto agree as follows: ARTICLE I AMENDMENTS TO ORIGINAL CREDIT AGREEMENT Section 1.01 Amendment to Subsection 1.1a of the Original Credit --------------------------------------------------- Agreement. Section 1.1a of the Original Credit Agreement is hereby amended (i) --------- to delete the reference to "Thirty Million Dollars ($30,000,000)" in the first sentence and substitute in place thereof a reference to "Forty Million Dollars ($40,000,000)" and (ii) to delete the reference to "$30,000,000" in the second sentence and substitute in place thereof a reference to "the Revolving Credit Commitment". Exhibit 4.6 (Cont'd) FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (Cont'd) Section 1.02 Amendment to Subsection 1.1b of the Original Credit --------------------------------------------------- Agreement. Section 1.1b of the Original Credit Agreement is hereby amended to --------- delete the chart set forth therein and to substitute in place thereof the following chart:
===================================================================== Maximum Dollar Amount On and After the Name Pro Rata Share Fifth Amendment Effective Date to and Including the Maturity Date --------------------------------------------------------------------- PNC 40% $16,000,000 --------------------------------------------------------------------- Wells 40% $16,000,000 --------------------------------------------------------------------- American 20% $ 8,000,000 =====================================================================
Section 1.03 Amendment to Subsection 1.2a of the Original Credit --------------------------------------------------- Agreement. Section 1.2a of the Original Credit Agreement is hereby amended to --------- delete the reference to "$30,000,000" and to substitute in place thereof a reference to "the Revolving Credit Commitment". Section 1.04 Amendment to Section 3.4 of the Original Credit Agreement. --------------------------------------------------------- Section 3.4 of the Original Credit Agreement is hereby amended to delete the reference to "the Borrower's Form 10-K filed with the Securities and Exchange Commission on or about March 30, 1992" and substitute in place thereof a reference to "the Borrower's Form 10-Q filed with the Securities and Exchange Commission on or about November 14, 1994". Section 1.05 Amendment to Section 3.09(xi) of the Original Credit ---------------------------------------------------- Agreement. Section 3.09(xi) of the Original Credit Agreement shall be amended --------- and restated in its entirety as follows: Except and to the extent reflected in the Borrower's consolidated balance sheet, no Benefit Arrangement provides post-retirement benefits other than pensions which would be required to be accounted for in the income statement, balance sheet and footnotes of the financial report of the Borrower or any ERISA Affiliate in the manner described in the Financing Accounting Standards Board, Proposed Statement of Financial Accounting Standards, Employer's Accounting for Post-Retirement Benefits -------------------------------------------------- Other Than Pensions, if the same were effective for the current fiscal -------------------- year of the Borrower or any ERISA affiliate. Exhibit 4.6 (Cont'd) FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (Cont'd) Section 1.06 Amendment to Subsection 9.1 of Original Credit Agreement. --------------------------------------------------------- (i) The following definitions set forth in Subsection 9.1 of the Original Credit Agreement are hereby amended and restated as follows: "Revolving Credit Commitment" means the several undertakings by the Banks to make a $40,000,000 revolving credit facility available to the Borrower as set forth in Section 1.1 hereof. "Revolving Credit Note" means any individual promissory note of the Borrower evidencing Indebtedness of the Borrower under the Revolving Credit Commitment, which note is in the form attached as Exhibit "A" to this Agreement, and all extensions, renewals, amendments, substitutions or replacements of such promissory notes, including, any Second Amended and Restated Revolving Credit Note. (ii) The following new definitions are inserted into Section 9.1 of the Original Credit Agreement in alphabetical order: "Amended and Restated Revolving Credit Note" means any Amended and Restated Revolving Credit Note, substantially in the form of Exhibit "A" and dated December 8, 1994. "Fifth Amendment" shall mean that Fifth Amendment to Amended and Restated Credit Agreement dated as of December 8, 1994 between the Borrower and the Banks. "Fifth Amendment Effective Date" shall mean the date when all of the conditions set forth in Section 3.04 of the Fifth Amendment are satisfied or waived. Section 1.07 Amendment to the Exhibits to the Original Credit Agreement. ---------------------------------------------------------- Exhibit "A" to the Original Credit Agreement shall be deleted and Exhibit "A" attached to the Fifth Amendment shall be substituted in place thereof. Section 1.08 Amendments to Schedules to the Original Credit Agreement. -------------------------------------------------------- Schedule 3.1b, Schedule 3.9 and Schedule 3.16 to the Original Credit Agreement are deleted and Schedule 3.1b, Schedule 3.9 and Schedule 3.16 attached to this Fifth Amendment are substituted in place thereof. Exhibit 4.6 (Cont'd) FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (Cont'd) Section 1.09 No Other Amendments. The amendments to the Original Credit ------------------- Agreement set forth in Sections 1.01 through and including Section 1.08 do not either implicitly or explicitly alter, waive or amend, except as expressly provided in this Fifth Amendment, the provisions of the Original Credit Agreement. The amendments set forth in Sections 1.01 through and including Section 1.08 hereof do not waive, now or in the future, compliance with any other covenant, term or condition to be performed or complied with nor do they impair any rights or remedies of the Banks, the Issuing Bank or the Agent under the Original Credit Agreement with respect to any such violation. ARTICLE II BORROWER'S SUPPLEMENTAL REPRESENTATIONS As an inducement to the Banks, the Issuing Bank and the Agent to enter into this Fifth Amendment hereunder, the Borrower represents and warrants that: Section 2.01. Incorporation by Reference. Borrower hereby incorporates -------------------------- herein by reference and repeats herein for the benefit of the Banks, the Issuing Bank and the Agent the representations and warranties made by it in Sections 3.1 through 3.20, both inclusive, of the Original Credit Agreement and for purposes hereof such representations and warranties, shall be deemed to extend to and cover this Fifth Amendment and any loan document related thereto. ARTICLE III MISCELLANEOUS Section 3.01 Ratification of Terms. This Fifth Amendment shall be --------------------- construed in connection with and as part of the Original Credit Agreement. Except as expressly amended by prior Amendments to the Credit Agreement and this Fifth Amendment, the Original Credit Agreement and each and every representation, warranty, covenant, term and condition contained therein is specifically ratified and confirmed. Section 3.02 Counterparts. This Fifth Amendment may be executed in any ------------ number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Fifth Amendment by telecopier shall be effective as of delivery of a manually executed counterpart of this Fifth Amendment. Section 3.03 Capitalized Terms. Except for proper nouns and as ----------------- otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Original Credit Agreement, as amended hereby. Exhibit 4.6 (Cont'd) FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (Cont'd) Section 3.04 Conditions Precedent. This Fifth Amendment shall become -------------------- effective (the "Amendment Effective Date") on the date on which Borrower shall provide to the Banks, the Issuing Bank and the Agent the following: (A) A duly executed counterpart original of this Fifth Amendment; (B) A duly executed original Second Amended and Restated Revolving Credit Note for each Bank; (C) Updated Schedules to the Original Credit Agreement, as necessary; (D) A certificate of the chief financial officer of the Borrower certifying that, as of the date of this Fifth Amendment, no Event of Default shall have occurred and be continuing and no event, condition, act or omission has occurred and is continuing which, with the passage of time, the giving of notice or both, would constitute a Event of Default, or would result from the execution of this Fifth Amendment; (E) A certified copy of the corporate action of the Borrower authorizing the execution and delivery of the performance under this Fifth Amendment; (F) A certificate of incumbency that certifies the names of the officers of the Borrower authorized to sign this Agreement and all supplemental documentation and which contains a true signature of each such officer; (G) A certificate, duly certified as of the date hereof by the secretary of assistant secretary of the Borrower stating that (i) the Articles of Incorporation of the Borrower delivered to the Agent on June 29, 1990 remain in full force and effect on the date hereof and have not been amended or modified in any manner and (ii) the by-laws of the Borrower delivered to the Agent on June 29, 1990 remain in full force and effect on the date hereof and have not been amended or modified in any manner; (H) A good standing certificate from the Secretary of State of Pennsylvania; (I) Such other instruments, documents and opinions of counsel as the Agent shall reasonably require, all of which shall be satisfactory in form and content to the Agent and its special counsel, Tucker Arensberg, P.C. Section 3.05 Effective Date. From and after the Amendment Effective -------------- Date, all references in the Original Credit Agreement to the Original Credit Agreement shall be deemed to be references to the Original Credit Agreement as amended hereby. Exhibit 4.6 (Cont'd) FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (Cont'd) Section 3.06 Entire Agreement. This Fifth Amendment contains the entire ---------------- agreement between the parties relating to the subject matter hereof; there are merged herein all prior representations, promises and conditions, whether oral or written, in connection with the subject matter hereof, and any representation, promise or condition not incorporated herein shall not be binding upon the parties. Section 3.07 Severability. Whenever possible each provision of this ------------ Fifth Amendment shall be interpreted in such manner as to be effective and valid under applicable law but if any provision of this Fifth Amendment or any part of such provision shall be prohibited by or invalid under applicable law, such provision of part thereof shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Fifth Amendment. Section 3.08 Governing Law. THIS FIFTH AMENDMENT AND THE RIGHTS AND ------------- OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. Section 3.09 Headings. The headings of this Fifth Amendment are for -------- purposes of reference only and shall not limit or otherwise affect the meaning thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Exhibit 4.6 (Cont'd) FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (Cont'd) IN WITNESS WHEREOF, the parties hereto, with the intent to be legally bound hereby have caused this Fifth Amendment to be duly executed by their proper and duly authorized officers as of the day and year first above written. ATTEST: (SEAL) PITT-DES MOINES, INC. /s/ Thomas R. Lloyd /s/ Richard A. Byers ---------------------- ---------------------------------- Name: Thomas R. Lloyd Name: Richard A. Byers Title: Secretary Title: Vice President Finance and Administration PNC BANK, NATIONAL ASSOCIATION (formerly Pittsburgh National Bank) as a Bank, as the Issuing Bank and as the Agent /s/ Louann E. Tronsberg ---------------------------------- Name: Louann E. Tronsberg Title: Vice President WELLS FARGO BANK, N.A. /s/ Stephen M. Smith ---------------------------------- Name: Stephen M. Smith Title: Assistant Vice President AMERICAN NATIONAL BANK /s/ James Popp ---------------------------------- Name: James Popp Title: ---------------------------- EX-10.6 3 MANAGEMENT INCENT PLAN Exhibit 10.6 SUMMARY OF COMPANY'S 1994 MANAGEMENT INCENTIVE PLAN (MIP) Pitt-Des Moines, Inc. Under the terms of the MIP, a minimum rate of return of (threshold) on stockholders' equity must be achieved before bonuses can be awarded. The threshold for executive officers was established at the after-tax cost of capital on the assumption that returns in excess of the threshold would lead to increases in stockholder value. Once this criteria is met, the total amount of bonus available for distribution to eligible executive officers, including the Company's Chief Executive Officer ("CEO") under the MIP is based on a percentage in excess of the minimum return on stockholders' equity. Individual bonus amounts paid to the Company's executive officers for services rendered in 1994, including the CEO, were based on a pre-determined percentage limitation on each individual's base salary (in no case does the applicable limit exceed 100% of base salary) and the percentage of the overall MIP target achieved. These pre- determined percentages were established by the Compensation Committee. Under the terms of the MIP, the Company's eligible executive officers were entitled to receive and were awarded bonuses under the MIP for the year ended December 31, 1994. EX-10.7 4 RETIREMENT PLAN Exhibit 10.7 RETIREMENT PLAN FOR PDM NON-EMPLOYEE DIRECTORS (Effective for Directors retired or deceased after May 26, 1994.) Pitt-Des Moines, Inc. 1. Definition This Retirement Plan is for the benefit of present and future Directors who, after attainment of age 65, resign from the Board of Directors or die while serving as a member of the Board of Directors, and who have completed five years of service as a non-employee Director, and who do not have a vested right to a benefit under any pension plan of the Company or any subsidiary of the Company. Such person shall be referred to for the purpose of this Pension Plan as a Qualifying Director. 2. Benefits A Qualifying Director will be entitled to receive a percentage (payable quarerly) of the annual directorship retainer (excluding fees or retainers for committee membership or for attendance at any meeting) in effect on the date of his/her resignation or retirement. After five years of service, the entitlement is 50 percent and this entitlement will increase 10 percent for each completed year of service up to and including 100 percent. No further increase in the percentage of entitlement will occur after 10 years of service, and there is no entitlement if retirement or resignation occurs prior to five years of service as a Board Member. The retirement benefit will continue for the life of the Director. Past service of present Qualifying Directors shall be counted in determining length of service. 3. Other Provisions If a Qualifying Director dies while serving on the Board and has a surviving spouse, 50 percent of the benefit to which he/she would then be entitled to, if he/she had been retired at time of deat, will be paid to the spouse as long as he/she lives. If a Qualifying Director dies while receiving a benefit under this Retirement Plan, and the Qualifying Director has a surviving spouse at the time of death, the spouse will receive 50 percent of the benefit as long as he/she lives. 4. Ineligibility for Benefits A Director removed for "conduct detrimental" to the Company shall be ineligible for benefits under this Plan. For the purpose of this Plan, a Director shall be considered removed for "conduct detrimental" to the Company if in the sole opinion of no less than 75 percent of Exhibit 10.7 (Cont'd) RETIREMENT PLAN FOR PDM NON-EMPLOYEE DIRECTORS (Cont'd) all the Directors of the Board of Directors of the Company, evidenced by a duly adopted resolution of the Board of Directors, the removal of such Director from the Board of Directors is the result of conduct materially and demonstrably injurious to the Company or is the result of any other conduct that adversely reflects on the Directors' fitness to serve on the Board of Directors. 5. Funding No funds shall be set aside for the purpose of making payments under this Retirement Plan and said payments shall be considered as general operating expense. 6. Administration The Plan shall be administered by the Board of Directors and it will decide all matters involving interpretation and application of the Plan. 7. Amendments or Termination of Plan The Board of Directors shall have the right to amend or terminate this Plan at any time at its sole discretion. However, no such amendment or termination shall adversely affect the rights of any Qualifying Director who, at the time of such amendment or termination, is either receiving benefits pursuant to the terms of this Plan or who would be eligible to receive such benefits if such Director had resigned from the Board of Directors immediately prior to such amendment or termination. This Plan shall not give any Qualifying Director the right to continue as a Member of the Board of Directors. 8. Effective Date This Plan replaces that certain Retirement Plan of PDM Outside Directors which was effective as to non-employee Directors retired or deceased between October 1, 1987 and May 26, 1994, and is effective for non-employee Directors who die or retire after May 26, 1994 in accordance with the above terms and conditions. EX-11 5 EARNINGS STATEMENT Exhibit 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Pitt-Des Moines, Inc.
Years Ended December 31, 1994 1993 1992 ----------- ---------- ---------- Primary Average shares outstanding 2,323,651 2,323,645 2,414,670 Dilutive stock options based on treasury stock method using average market price 1,699 2,002 10,841 ----------- ---------- ---------- 2,325,350 2,325,647 2,425,511 =========== ========== ========== Income from continuing operations 11,979,821 566,979 4,079,582 Income from discontinued operations, net of taxes 80,362 470,962 820,431 ----------- ---------- ---------- Net income $12,060,183 $1,037,941 $4,900,013 =========== ========== ========== Income per common share: Continuing operations $5.16 $0.25 $1.68 Discontinued operations .03 .20 .34 ----------- ---------- ---------- Net income per common share $5.19 $ .45 $2.02 =========== ========== ========== Fully Diluted Average shares outstanding 2,323,651 2,323,645 2,414,670 Dilutive stock options based on treasury stock method using greater of year-end or average market price 1,699 2,002 11,444 ----------- ---------- ---------- 2,325,350 2,325,647 2,426,114 =========== ========== ========== Income from continuing operations 11,979,821 566,979 4,079,582 Income from discontinued operations, net of taxes 80,362 470,962 820,431 ----------- ---------- ---------- Net income $12,060,183 $1,037,941 $4,900,013 =========== ========== ========== Income per common share: Continuing operations $5.16 $0.25 $1.68 Discontinued operations .03 .20 .34 ----------- ---------- ---------- Net income per common share $5.19 $ .45 $2.02 =========== ========== ==========
EX-13 6 REVIEW OF OPERATIONS Exhibit 13 REVIEW OF OPERATIONS ENGINEERED CONSTRUCTION DIVISION In January 1994, the Engineered Construction Division was reorganized into three project groups, each focusing on specific customers: Industrial, International and Technology and Water. This new focus, combined with a growing economy and continuing efforts to increase quality and productivity, brought substantial improvement in financial results for 1994. Demand was better than anticipated with higher revenues across all markets. Industrial Projects Group The Industrial Projects Group experienced an exceptional year in 1994. Revenues exceeded forecasts and new bookings were running at improved levels through year end. The Wilmington Liquid Bulk Terminal facility was completed several months ahead of schedule, demonstrating this group's ability to complete complex liquid storage projects within demanding time and cost constraints. The Wilmington facility involved the design, engineering, fabrication, project management and construction of a complete terminal expansion on a turnkey basis. PDM is one of few companies having the technology, experience and management expertise to undertake and accomplish a project of this complexity. In Tucson, Arizona, six flat bottom storage tanks will be the showcase for a new PDM/CoreTank(R) engineering innovation. This design features double bottom steel tanks integrated with electronic leak detection systems, providing customers with superior protection against the risk of potential spills. In addition, the Industrial Projects Group is performing tank repair and maintenance activities at Tosco's refinery in Martinez, California. Similar work extending the life of older tanks is becoming a significant market opportunity for the Industrial Projects Group. Finally, the Industrial Projects Group and the International and Technology Projects Group teamed together to obtain four separate contracts in thermal energy storage systems. These systems will enable commercial, industrial and institutional facilities to take advantage of technology in heat transfer to reduce the cost of heating and cooling by shifting electrical load to off-peak hours. International and Technology Projects Group The International and Technology Projects Group revenues increased from sales to customers in Latin America and the Caribbean, and from increased liquid natural gas (LNG) activity in both the international and domestic markets. Internationally, PDM's global reputation for quality design, safety, and construction of LNG work resulted in new projects being secured in Qatar and Argentina. Storage tank maintenance work emerged as an important market for the International and Technology Projects Group as well, with Amerada-Hess calling on PDM to perform the ongoing tank maintenance and repair at its St. Croix refinery in the Virgin Islands. Exhibit 13 (Cont'd) REVIEW OF OPERATIONS (Cont'd) In 1994 PDM completed work on the fluidized bed iron carbide reactor for Nucor in Trinidad. In addition to the reactor vessel and internals, PDM constructed cyclones, ore silos and associated tanks. Latin America and the Caribbean will continue to be an area of concentration for 1995, with continued growth anticipated. As energy demand increases, natural gas is seen as an increasingly attractive, environmentally safe fuel, encouraging the development of LNG import/export terminals. PDM excels at turnkey LNG projects, handling all aspects of design, engineering, fabrication and construction. A resurgence of LNG activity was also seen on the domestic side. Long-lead equipment procurement and engineering began for a turnkey LNG liquefaction plant at Cove Point, Maryland. This project highlights PDM's close strategic relationship with Air Products and Chemicals, widely recognized as the world leader in LNG liquefaction technology. The International and Technology Projects Group contracted to complete a third autoclave system for Boeing at their Frederickson, Washington plant. Pitt- Des Moines, Inc. received an award for "Fabricated Product of the Year" for 1993 from the Steel Plate Fabricators Association for design and engineering work on the two Boeing Autoclave systems previously completed. In addition, PDM completed construction of a vacuum test chamber for laser experiments at TRW's San Juan Capistrano test site. Water Projects Group The Water Projects Group revenues exceeded budget as the housing market remained relatively stable despite the rise in interest rates. PDM, an industry leader in elevated water tanks for decades, took new strides in 1994 with the purchase of a majority interest in HyCon, Inc., a foundation and painting company. This purchase has added to PDM's product line the capability to construct Composite Elevated Tanks (CET's) which are welded elevated steel tanks supported by reinforced concrete rather than steel pedestals. This purchase also enhances the foundation and painting capabilities of the Engineered Construction Division. Noteworthy projects for 1994 included an ornamental reservoir in Columbus, Ohio that will feature artwork designed by local art students, and new awards of 2.0 million gallon hydropillars in Warren County, Ohio and Niagara Falls, New York, and a 1.5 million gallon hydropillar in Moon Township, Pennsylvania. During 1995 the Water Projects Group will complete the erection of three 1.5 million gallon hydropillars in Bowie, Maryland. PDM was honored with three "Steel Tank of the Year" awards for 1993 from the Steel Plate Fabricators Association. Award winning projects were two 5 million gallon reservoirs with ellipsoidal roofs in Birmingham, Alabama, a standpipe in Attleboro, Massachusetts, and two anaerobic egg-shaped digesters in Appleton, Wisconsin. Exhibit 13 (Cont'd) REVIEW OF OPERATIONS (Cont'd) Divisional PDM's long-standing reputation for quality work continues to be recognized by customers and strategic partners alike. The division was named a preferred supplier of Bechtel and continued to build on its existing preferred supplier relationships with Praxair and Air Products and Chemicals. Construction of a new office building in Clive, Iowa has been completed. This building replaces the office which was damaged beyond repair in the 1993 Des Moines flood. With a strong backlog already in place for 1995, the Engineered Construction Division is well positioned for 1995. STEEL CONSTRUCTION Well positioned as a low-cost producer, Steel Construction returned to profitability in 1994, in spite of difficult business conditions, and increased its market share as a result of strategic acquisitions. PDM BRIDGE Effective September 1, 1994, the Company acquired the bridge fabricating assets of one of its primary Midwestern competitors, Phoenix Steel, Inc. located in Eau Claire, Wisconsin. This acquisition presented a strategic opportunity to replace the loss of capacity caused by the flood of 1993 and the related closing of PDM's Des Moines, Iowa structural facility. These assets were combined with the bridge fabrication assets of Hartwig Mfg. Corp., Wausau, Wisconsin, to form the PDM Bridge Division. The Phoenix acquisition added capabilities which complemented the existing strengths of Hartwig. The newly acquired facilities provide capability for the fabrication of deeper, heavier bridge components, and its state-of-the-art paint shop expands PDM's ability to meet the growing demands throughout the bridge industry for sophisticated multi-coat paint systems. Operating together, these facilities have the equipment and experience to bid the complete range of bridge projects, from the most complex movable and truss bridges to simple plate girder work. Furthermore, the acquisition of Phoenix expanded PDM's market area from twelve states to over twenty, reaching markets from the East Coast to the Rockies. Two significant new projects for 1995, the St. Croix River Crossing in Hudson, Wisconsin, and the Dartmouth Project in Minneapolis, Minnesota, highlight the teamwork between the two plants. Both of these new projects will be jointly fabricated, with the large welded plate girders to be handled at Eau Claire, while Wausau simultaneously completes smaller components. Although PDM Bridge anticipates a year in which the federal and state infrastructure spending will remain flat, margins are expected to gradually improve. As we enter 1995, PDM Bridge has a healthy backlog with reasonable gross margins, a position unique in the industry, and one that reinforces its position as a low-cost, high-quality bridge fabricator. Exhibit 13 (Cont'd) REVIEW OF OPERATIONS (Cont'd) CHICAGO STEEL CONSTRUCTION Chicago Steel Construction's activities in 1994 were dominated by the fabrication and erection of one of the nation's largest structural steel projects: The McCormick Place Expansion in Chicago. When complete, the McCormick Place structure will contain over 40,000 tons of steel, six times as much as a typical 50-story office building. The scale of this project and the expertise with which it has been accomplished, exemplifies the reason Chicago Steel Construction is considered a key player in major structural steel projects. The tight schedule for McCormick Place was intensified by ongoing design changes. In order to ensure that material could be continuously furnished for erection by the three jobsite cranes, Chicago Steel Construction implemented computerized production software which enabled PDM managers to reduce the time required to design and fabricate a beam by over 60 percent. This software was an adaptation of that utilized at another PDM location, an example of sharing information and experience across PDM's operating units. Chicago Steel Construction is faced with a shrinking backlog which could produce layoffs in 1995. However, its flexibility to compete, not only in private and public sector building construction, but also in bridge fabrication, could lead to new opportunities in 1995. PDM STROCAL, INC. PDM Strocal's management strength and excellent competitive position combined to post the third straight year of profitability, despite continued weakness in the building market in California and project delays associated with the Northridge earthquake. The Northridge earthquake caused the delay of both in-process work and bid activity as the industry awaited results of earthquake testing programs. This resulted in the further consolidation of the industry in the region, with Strocal seeing 50 percent fewer competitors today than three years ago. Backlog entering 1995 is dramatically higher than last year's depressed levels. Equally important, the average tonnage of these new projects is more appropriately sized to Strocal's capabilities. Strocal is looking forward to improved profitability in 1995. STEEL SERVICE CENTERS "Service, When and Where You Need It." That philosophy has helped PDM's Steel Service Center Division achieve three consecutive years of record sales and profits. The Steel Service Center Division capitalized on a three-year strategic expansion plan to achieve record sales. Revenues improved 29 percent, and pre- tax profits increased 60 percent, as the market demand for steel products grew vigorously through all of 1994. Tons shipped rose 23 percent to a record 192,000 tons. Exhibit 13 (Cont'd) REVIEW OF OPERATIONS (Cont'd) Capital improvements undertaken as part of the Division's three-year strategic expansion were critical to achieving these results. The expansion program included additions to facilities and delivery fleet at all service center locations to accommodate greater volumes. Plasma cutting machines were also added at all service center locations, increasing the efficiency of operations, and enhancing the Division's ability to deliver value for customers through pre-processing of standard products. The Division's computer software system was upgraded to improve responsiveness to customers and streamline operations. New imaging software allows for archiving of mill test reports in digital form. These reports can be instantly retrieved for transmittal to customers. Software improvements were made to purchasing systems, enabling the Division to better manage inventory and improve return on investment. As a result of these and other initiatives, the Division was once again ranked in the upper quartile of performance in a nationwide comparison published by the Steel Service Center Institute. Beyond the growing economy, several trends contributed to the Steel Service Centers' heightened demand in 1994. Due to the extended lead times at many mills, manufacturers turned to steel service centers to complete their needs. Also, supplies of light gauge sheet and plate steel were limited, due to increased construction demand and the strong auto market. The long-time strategic relationships which the PDM Steel Service Center Division enjoys with several mills were critical in this market environment, allowing PDM to continue to supply customers' requirements. Strategic acquisitions also contributed to the 1994 results. The purchase of the inventory and delivery fleet of a former competitor, Industrial Tube Company in San Jose, California, added profitability at all California locations. 1994 also marked the first full year of operation for the former Cascade Culvert facility as a unit of the Division's Oregon Culvert operation. This location was able to achieve a 25 percent increase in sales for the year. As expected, this acquisition has improved the Company's ability to serve customers in the culvert markets of the Northwest and Alaska. Both Oregon and Washington Culvert operations experienced excellent growth in 1994. Most elements of the Division's three-year strategic plan are implemented and the personnel are in place to handle higher sales volumes. The Steel Service Center Division looks forward to another exceptional year in 1995. EX-21 7 SUBSIDIARIES Exhibit 21 SUBSIDIARIES OF THE COMPANY Pitt-Des Moines, Inc. December 31, 1994
% Subsidiaries Owned Incorporated Operations Canadian Des Moines Industries Ltd. 100 Canada Inactive Hammond Latino Americana, S.A. 100 Panama Inactive HyCon, Inc. 81 Alabama Foundation & painting contractor Hydrostorage, Inc. 100 Tennessee Inactive Oregon Culvert Co., Inc. 81 Oregon Culvert Mfg. d/b/a Washington Culvert Co. PDM Argentina, SA 100 Argentina Steel Fab. PDM Australia Pty. Ltd. 100 Australia Inactive PDM International Ltd. 100 Delaware Inactive PDM Latin America Ltd. 100 Georgia Inactive Construcciones Pitt-Des Moines Venezuela, C.A. 100 Venezuela Steel Fab. PDM Services A.G. 100 Liechtenstein Inactive PDM Strocal, Inc. 100 Pennsylvania Steel Fab. PDM Virgin Islands, Ltd. 100 Virgin Islands Inactive P.T. Perkasa Daya Megah (PDM Indonesia) (1) 100 Indonesia Inactive PDM Bonaire, N.V. 100 Bonaire Inactive Pittsburgh-Des Moines Sdn. Bhd.(PDM Malaysia) 100 Malaysia Inactive PDM Bridge Corporation 100 Delaware Inactive PDM Ohio 100 Ohio Cryogenic & High Vacuum Component & Fabrication
NOTES OF EXPLANATION (1) Managed by PDM Services A.G. EX-23 8 CONSENT OF AUDITORS Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-34787) pertaining to the Stock Option Plan of 1990 of Pitt-Des Moines, Inc. of our report dated March 2, 1995, with respect to the consolidated financial statements and schedule of Pitt-Des Moines, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1994. ERNST & YOUNG LLP Pittsburgh, Pennsylvania March 28, 1995 EX-27 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM *THE ANNUAL REPORT TO SHAREHOLDERS FOR FISCAL YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. *IDENTIFY THE FINANCIAL STATEMENT(S) TO BE REFERENCED IN THE LEGEND: SEE ABOVE 12-MOS DEC-31-1994 DEC-31-1994 11,668,341 0 91,731,715 1,000,000 19,867,066 158,759,902 96,594,908 54,169,075 214,201,479 86,951,639 22,000,000 33,549,255 0 0 64,999,765 214,201,479 408,060,623 408,060,623 357,639,136 357,639,136 37,164,152 0 897,993 18,656,092 6,676,271 11,979,821 80,362 0 0 12,060,183 5.19 5.19