10-Q 1 d10q.txt FOR PERIOD ENDED 3/31/2001 ================================================================================ FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 1-5259 ______________________ PITT-DES MOINES, INC. (Exact name of registrant as specified in its charter) Commonwealth of Pennsylvania 25-0729430 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1450 Lake Robbins Drive, Suite 400, The Woodlands, TX 77380 (Address of Principal Executive Offices) (Zip Code) (281) 765-4600 (Registrant's Telephone Number, including Area Code) ______________________ Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ----- On April 30, 2001, 7,598,432 shares of Common Stock were outstanding. ================================================================================ TABLE OF CONTENTS Page Part I - Financial Information Item 1. Financial statements 3 Item 2. Management's discussion and analysis of financial condition and results of operations 11 Item 3. Quantitative and qualitative disclosures about market risk 13 Part II - Other Information Item 1. Legal proceedings 14 Item 6. Exhibits and reports on Form 8-K 14 Signatures 15

-2- Part I. Financial Information Item 1. Financial Statements PITT-DES MOINES, INC. Consolidated Statements of Income (Prior year restated for discontinued operations) (Unaudited)

See Notes to Consolidated Financial Statements. -3- Item 1. Financial Statements (Continued) PITT-DES MOINES, INC. Consolidated Statements of Financial Condition (Prior year restated for discontinued operations)

See Notes to Consolidated Financial Statements. -4- Item 1. Financial Statements (Continued) PITT-DES MOINES, INC. Consolidated Statements of Financial Condition (Prior year restated for discontinued operations)

See Notes to Consolidated Financial Statements. -5- Item 1. Financial Statements (Continued) PITT-DES MOINES, INC. Consolidated Statements of Cash Flows (Prior year restated for discontinued operations) (Unaudited)

See Notes to Consolidated Financial Statements. -6- Item 1. Financial Statements (Continued) PITT-DES MOINES, INC. Notes to Consolidated Financial Statements (Unaudited) Note A. Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. The December 31, 2000 Consolidated Statement of Financial Condition was derived from audited financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. As previously reported, the Company announced a plan to evaluate strategic alternatives to enhance shareholder value which resulted in the sale of one business group during 2000, the sale of two more businesses in the first quarter of 2001 and the adoption of a formal plan to dispose of another business group. These operations are being reported as discontinued operations. Prior year information has been restated for comparative purposes. Reclassifications Certain prior-year amounts have been reclassified to conform to the current-year presentation. The primary cause of the reclassifications is the transfer of several businesses to discontinued operations (Note D). Note B. Earnings Per Share The following table sets forth the computation of earnings per share and earnings per share assuming dilution:

-7- Item 1. Financial Statements (Continued) Note B. Earnings Per Share (Continued) Denominator: Weighted-average shares 7,527 7,269 Employee stock options and restricted stock 305 271 -------- -------- Weighted-average shares-assuming dilution 7,832 7,540 ======== ======== Earnings per share - basic Continuing operations $ 0.17 $ 0.14 Discontinued operations $ 1.77 $ 0.63 -------- -------- Net income $ 1.94 $ 0.77 ======== ======== Earnings per share-assuming dilution Continuing operations $ 0.16 $ 0.13 Discontinued operations $ 1.70 $ 0.61 -------- -------- Net income $ 1.86 $ 0.74 ======== ========

Note C. Costs and Estimated Profits on Uncompleted Contracts Costs and estimated profits on uncompleted contracts are summarized as follows:

Costs, estimated profits and billings on uncompleted contracts are included in the accompanying Consolidated Statements of Financial Condition under the following captions:

-8- Item 1. Financial Statements (Continued) Note D. Discontinued Operations As previously reported, the Company sold the following businesses: . On November 3, 2000, the Company sold all the stock of PDM Strocal, Inc. and Candraft Detailing, Inc., both wholly-owned subsidiaries. . On January 30, 2001, the Company sold all the stock of Oregon Culvert Co., Inc., a wholly-owned subsidiary. . On February 7, 2001, the Company sold certain assets and liabilities of its Engineered Construction and Water Storage divisions. Marketable securities in the Consolidated Statements of Financial Condition represent 2,040,816 shares of Chicago Bridge & Iron Company N.V. (CB&I) common stock received as part of the Engineered Construction and Water Storage divisions disposition. Fair value of the shares at March 31, 2001 is $48.5 million. However, CB&I retained a call on these shares and the maximum value to be received is $35.0 million. These transactions resulted in a $5.1 million gain on sales of businesses, net of tax. The gain was calculated as follows: (in millions) ------------- Proceeds from sales of discontinued operations (which includes $35 million of non-cash proceeds) $ 94.6 Less: Net basis in assets and liabilities of discontinued operations (79.2) Less: Applicable income taxes (10.3) ------- Net gain on sales of discontinued operations $ 5.1 ======= The effective tax rate on the sales of businesses is higher than the statutory rate due to foreign operating losses during the phase-out period, for which no tax benefit is realized. Subsequent to March 31, 2001, the Company adopted a formal plan to dispose of its Steel Service Centers division. The aforementioned operations are reported as discontinued operations in the accompanying financial statements. Net assets from discontinued operations in the accompanying balance sheet of $71.4 million includes $47.9 million of net current assets and $23.5 million of net non-current assets as of March 31, 2001. These amounts consist primarily of inventories, accounts receivable, property, plant and equipment and related liabilities. Revenues applicable to discontinued operations were $52.6 million and $150.7 million in the first quarter of 2001 and 2000, respectively. -9- Item 1. Financial Statements (Continued) Note E. Contingencies As previously reported, in a decision dated February 18, 1999, the United States Court of Appeals for the Seventh Circuit affirmed the Company's July 31, 1997 conviction for two misdemeanor violations of federal Occupational Safety and Health Administration regulations. As a result of that conviction, other claims, actions, or proceedings may be instituted against the Company. The Company cannot predict the likelihood of such a claim, action or proceeding being instituted against it, and cannot assess the availability of any insurance coverage or the possibility or materiality of an adverse result in the event of any such claim, action or proceeding in advance of a claim, action or proceeding being instituted. Various claims and legal proceedings are brought against the Company arising from the normal course of business. 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 properties, 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. The Company is participating as a potentially responsible party (PRP) at three different sites, and has been requested to participate as a PRP at one additional site, 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 the cost of such future activities will not have a material effect on the Company's financial position, results of operations or liquidity. Additionally, amounts reflected in results of operations and in the statements of financial condition during the three years ended December 31, 2000 and during the three months ended March 31, 2001 for investigative and/or remedial activities have also not been material. 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 that the ultimate outcome of any matter currently pending against the Company will not materially affect the financial position of the Company although such outcome could be material to the reported results of operations for the period in which it occurs. -10- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS As previously reported, the Company announced a plan to evaluate strategic alternatives to enhance shareholder value which resulted in the sale of one business group during 2000, the sale of two more businesses in the first quarter of 2001 and the adoption of a formal plan to dispose of another business group. These operations are being reported as discontinued operations, therefore, the following discussion relates only to the continuing operations of the Company. Prior year information has been restated for comparative purposes. Three months ended March 31, 2001 compared with three months ended March 31, 2000. The Company reported net income of $14.6 million, or $1.86 per diluted share, for the quarter ended March 31, 2001. The net income consisted of $1.3 million of income from continuing operations, on earned revenue of $20.6 million, and income from discontinued operations of $13.3 million. These results compare with net income of $5.6 million, or $0.74 per diluted share, for the first quarter of 2000. The prior year net income consisted of $1.0 million of income from continuing operations, on earned revenue of $28.0 million, and income from discontinued operations of $4.6 million. The Company posted earned revenue of $20.6 million compared with $28.0 million in 2000. The decrease relates primarily to the mix of contracts. Gross margin improved over the prior-year quarter due to a shift in the mix of contracts from lower margin to higher margin work and realization of operating efficiencies. Selling, general and administrative (S,G&A) expense as a percentage of earned revenue increased 1.8 percentage points to 17.5 percent, due primarily to the decrease in earned revenue. S,G&A decreased in absolute dollars as a result of lower general corporate headquarter costs. Income from operations decreased $0.3 million from $2.3 million in 2000. The impact of lower earned revenue was only partially offset by improved gross margins and lower S,G&A expenses. Interest expense of $0.2 million in 2001 compares with $0.3 million in the prior-year quarter. Interest expense is directly related to the level of net borrowings the Company maintains throughout the period. On March 31, 2001, the Company had no outstanding debt under its revolving credit facility, compared with $15 million at March 31, 2000. The gain on sale of assets of $0.3 million for 2001 is attributable to the sale of idle properties, while the loss on sale of assets of $0.2 million in 2000 relates to the write-down of an idle property to the estimated net realizable value. New awards were $29.1 million for the quarter ended March 31, 2001. Backlog increased from year-end 2000 levels, totaling $94.2 million at March 31, 2001. -11- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) LIQUIDITY AND CAPITAL RESOURCES During the three months ended March 31, 2001, the Company's primary source of liquidity was proceeds from sales of businesses. As a result of these sales, working capital increased $87.8 million from $15.6 million at December 31, 2000 to $103.4 million at March 31, 2001. Net cash provided by operating activities of $17.9 million was $33.4 million higher than the level of the prior-year quarter. Activities related to discontinued operations, higher net income and a decrease in accounts receivable contributed to the improved cash flow from operating activities. Net cash provided by investing activities of $58.8 million for the three months ended March 31, 2001, consisted primarily of proceeds from the sales of businesses. The sales proceeds were partially offset by $1.9 million of capital expenditures. The Company anticipates that capital expenditures for fiscal year 2001 will be considerably higher than the level of depreciation and amortization due to expansion of the bridge fabrication plant in Palatka, Florida. On July 10, 2000, the Company announced it has engaged the firm of Tanner & Co., Inc., as the Company's financial advisor, to assist the Board of Directors' consideration of strategic alternatives to enhance shareholder value, including the potential sale or other disposition of part or all of the Company. As discussed in the Discontinued Operations footnote, two businesses were sold during the first quarter of 2001. The Company sold Oregon Culvert Co., Inc. for $8.3 million in cash and its Engineered Construction and Water Storage divisions for $40 million in cash and $44 million of Chicago Bridge & Iron Company N.V. (CB&I) common stock. Subsequent to the initial transaction, 807,356 shares were returned to CB&I in exchange for $9 million. Also, as discussed in the Discontinued Operations footnote, the Company adopted a formal plan to dispose of another business group. If a deal is ultimately consummated, it may have a favorable impact on the Company's liquidity. The Company, jointly with Tanner & Co., continues to evaluate strategic alternatives for the remaining businesses. Cash utilized by financing activities consisted primarily of payments on the Company's revolving credit facility. The Company paid cash dividends of $1.5 million, or $0.20 per share, during the three months ended March 31, 2001 and 2000. The Company has on hand and access to sufficient sources of funds to meet its anticipated operating and capital needs. These sources include cash on hand and the unused portion of a $22.5 million unsecured revolving credit facility which expires on January 31, 2002. On March 10, 2001, $4.6 million of stand-by letters of credit were outstanding under this credit facility. As a result of the aforementioned sales transactions, the Company currently believes it has sufficient cash on hand to limit the amount of borrowings under its credit facility in 2001. -12- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) FORWARD-LOOKING STATEMENTS Any of the comments in this quarterly report that refer to the Company's estimated or future results, margins on existing or future projects, long-term profitability and demand and growth trends for Pitt-Des Moines, Inc., are forward-looking and reflect the Company's current analysis of existing trends and information. Actual results may differ materially from current expectations or projections based on a number of factors affecting the Company's businesses. The Company's estimates of future performance depend on, among other things, the likelihood of receiving certain new awards. While these estimates are based on the good faith judgment of management, these estimates frequently change based on new facts which become available. In addition, the timing of receipt of revenue by the Company from engineering and construction projects can be affected by a number of factors outside the control of the Company. The Company's businesses are also subject to fluctuations in demand and to changing global economic and political conditions which are beyond the control of the Company and may cause actual results to differ from the forward-looking statements contained in this quarterly report. These forward-looking statements represent the Company's judgment only as of the date of this quarterly report. As a result, the reader is cautioned not to rely on these forward-looking statements. The Company disclaims any intent or obligation to update these forward-looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Due to current conditions in the credit markets and considering the favorable terms of the Company's credit facility, management believes interest rate exposure is minimal. -13- Part II - Other Information Item 1. Legal Proceedings Refer to Part I Item 1, Note E of the Notes to Consolidated Financial Statements for information, which information is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (b) Reports on Form 8-K. The Registrant filed a Form 8-K dated February 7, 2001, reporting the disposition of its Engineered Construction and Water Divisions under "Item 2. Acquisition or Disposition of Assets." -14- Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Pitt-Des Moines, Inc. ------------------------------- (Registrant) Principal Executive Officer: Date: May 15, 2001 By: /s/ Wm. W. McKee -------------------------------- Wm. W. McKee (President and Chief Executive Officer) Principal Financial Officer: Date: May 15, 2001 By: /s/ R. A. Byers ------------------------------- R. A. Byers (Vice President Finance and Treasurer) -15-

PITT DES MOINES INC 10-Q