Item 1. Business
General
Pitt-Des Moines, Inc. and its subsidiaries (PDM or the Company) began conducting business in 1892. PDM 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 disposition of CVI's operations during the fourth quarter of 1994 (see Discontinued Operation note accompanying the consolidated financial statements), 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.
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.
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.
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 $461 million in 1995, compared with $408 million in 1994 and $324 million in 1993. For further financial information refer to Consolidated Financial Statements in PDM's 1995 Annual Report to Stockholders which are incorporated herein by reference.
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 $183 million on December 31, 1995 compared to $194 million on December 31, 1994. Substantially all backlog is expected to be completed during 1996.
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, 1995, the Company employed 2,082 persons, of which 635 were salaried personnel and 1,447 were hourly personnel.
Item 1. Business (Cont'd)
The financial information for business segments is included in the Business Segment Information section in PDM's 1995 Annual Report to stockholders, which section is incorporated herein by reference.
Item 2.
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, 1995:
Item 2. Properties (Cont'd)
__________ (1) Company leases land from outside third party. Lease will expire March 31, 1999. (2) Company leases land and building from outside third party. Lease will expire July 1, 1997. (3) Company leases land from outside third party. Lease will expire January 31, 2003. (4) Company pursues the sale or development of all idle facilities and regularly evaluates similar opportunities for facilities not fully utilized.
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.
Item 3.
Item 3. Legal Proceedings
There are various claims and legal proceedings against the Company arising in 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.
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. All of WPPSS' claims against the Company and its surety have been dismissed.
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 as required by OSHA law. See Accrued Liabilities note accompanying the consolidated financial statements in PDM's 1995 Annual Report to Stockholders, which note is incorporated herein by reference.
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 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 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 amount 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.
Item 4.
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.
PART II
Information for Items 5, 6 and 7 is included in PDM's 1995 Annual Report to Stockholders and is incorporated herein by reference (and except for these sections, and sections incorporated herein by reference in Items 1 and 8 of this report, PDM's Annual Report to Stockholders is not deemed to be filed as part of this report):
The financial statements consisting of Consolidated Statements of Income, Consolidated Statements of Financial Condition, Consolidated Statements of Cash Flows, Consolidated Statements of Stockholders' Equity, Notes to Consolidated Financial Statements, and Business Segment Information are included in the Consolidated Financial Statements section of PDM's 1995 Annual Report to Stockholders, which are incorporated herein by reference. The report of independent auditors on PDM's consolidated financial statements is in the Reports of Independent Auditors and Management section of PDM's 1995 Annual Report to Stockholders which is incorporated herein by reference.
The unaudited Two-Year Quarterly Results of Operations in PDM's 1995 Annual Report to Stockholders is incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable
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 April 1, 1996 (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 87
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 65 (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.
Wm. W. McKee, age 57 (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 48 (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.
Item 10. Directors and Executive Officers of the Registrant (Cont'd)
T. R. Lloyd, age 47 (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.
Regarding Section 16 compliance, reference is made to the information set forth under the caption "Compliance with Section 16 of the Exchange Act" in the Company's definitive Proxy Statement anticipated to be dated April 1, 1996 which information is incorporated herein by reference.
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.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements and Report of Independent Auditors previously incorporated by reference in Part II, Item 8 of this report are incorporated herein by reference:
Report of Independent Auditors
Consolidated Statements of Income -- Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Financial Condition as of December 31, 1995 and 1994
Consolidated Statements of Cash Flows -- Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity -- Years Ended December 31, 1995, 1994 and 1993
Notes To Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedule of Pitt-Des Moines, Inc. and subsidiaries is included in Item 14(d):
Schedule II. Valuation and Qualifying Accounts for years ended December 31, 1995, 1994 and 1993
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)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Cont'd)
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 as Exhibit 4.6 to the Company's annual report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference)
4.7 Sixth Amendment dated May 31, 1995 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, 1995 and incorporated herein by reference)
10.1* Agreement executed by and between the Company and Wm. 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)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Cont'd)
10.4* 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)
10.5* Summary of Company's 1995 Management Incentive Plan (MIP) (filed herewith)
10.6* Retirement Plan for PDM Outside Directors as amended, effective May 26, 1994 (filed as Exhibit 10.7 to the Company's annual report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference)
10.7* Retirement Plan for PDM Outside Directors as amended on September 14, 1995, 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 Those portions of the Annual Report to Stockholders for fiscal year ended December 31, 1995, which are incorporated herein by reference (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
(b) Reports on Form 8-K:
A Form 8-K dated December 7, 1995 was filed under Item 5.