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 1450 Lake Robbins Drive, Suite 400, The Woodlands, Texas 77380, telephone number (281) 765-4600.
PDM is a diversified engineering and construction company, and a distributor of a broad range of carbon steel products. The Company currently operates through two business segments: Heavy Construction, and Steel Distribution. The Heavy Construction segment specializes in the engineering and design, procurement, fabrication, erection and rehabilitation of steel products including liquid and cryogenic storage and processing systems, water storage systems, bridges and buildings. The Steel Distribution segment processes and distributes a full line of heavy carbon steel products and manufactures and markets corrugated metal culvert pipe and accessories.
A summary of the Company's products and services by business segment is set forth below.
Heavy Construction
The Heavy Construction business provides:
a) 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. We have 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, we fabricate and erect 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.
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 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.
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.
Item 1. Business (Cont'd)
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.
h) The capability to fabricate and erect structural steel for commercial, institutional and public sector buildings for government agencies, private developers and general contractors.
i) 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 Distribution
The Company's Steel Distribution segment operates eight steel service centers and three culvert facilities located in the West and Midwest regions of the United States. During 1999, the Company completed construction of a new steel service center in Woodland, Washington. This new facility serves Portland, Seattle and the entire Pacific Northwest.
In early 1999, the Company acquired the remaining interest in Oregon Culvert Company, Inc., which operates facilities in Washington and Oregon.
The steel service centers process and distribute to end users a general line of carbon steel products including plates, sheets, structural shapes, bars, tubes, pipe and other miscellaneous metal products. This segment also manufactures and markets to end users corrugated metal culvert pipe and accessories. The Steel Distribution segment's primary markets include steel fabricators, original equipment manufacturers, mining, logging, agricultural and road construction industries.
The Company and the industry as a whole deem the maintenance of adequate levels of inventory to be integral to the Steel Distribution 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 Heavy Construction segment's work is secured through open competitive bidding or through direct negotiations with industry or government agencies.
Item 1. Business (Cont'd)
Competition is based primarily on performance including the ability to provide design, engineering and on-site field construction services in a cost-effective and timely manner. The Steel Distribution segment's volume of business is based on the price, delivery, credit terms, and first stage preprocessing of products that it offers to its customers as well as the segment's reputation.
The Company's earned revenue was $629 million in 1999, compared with $567 million in 1998 and $475 million in 1997. For further financial information refer to the Consolidated Financial Statements contained in PDM's 1999 Annual Report to Stockholders and 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.
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 $300 million on December 31, 1999 compared to $346 million on December 31, 1998. Substantially all backlog is expected to be completed during 2000. The decrease in backlog from 1998 is attributable to lower sales activity for the Liquid and Cryogenic Storage group and Steel Building group. The Liquid and Cryogenic Storage group experienced decreased market activity as soft demand from oil and gas companies and weak South American economies negatively impacted capital spending. The Steel Building group new awards were down from 1998's historical high, but demand is expected to be strong in 2000 resulting in solid bidding activity.
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, 1999, the Company employed 2,783 persons, of which 831 were salaried personnel and 1,952 were hourly personnel.
Financial information for the Company's two business segments is included in the Business Segment Information Section of PDM's 1999 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 by segment, location, type of facility, year operations began, and square footage of property owned or leased on December 31, 1999:
Item 2. Properties (Cont'd)
- ---------- (1) Company leases building from outside third party.
(2) Company leases land and building from outside third party.
(3) Company leases land from outside third party.
(4) Company pursues the sale or development of all idle facilities and regularly evaluates similar opportunities for facilities not fully utilized.
(5) Company is leasing facility to outside third party.
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
See Contingencies note accompanying the consolidated financial statements contained in PDM's 1999 Annual Report to Stockholders, which note is incorporated herein by reference.
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 of this report and is incorporated herein by reference.
PART II
Information for Items 5, 6, 7 and 7A is included in PDM's 1999 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):
Item 8.
Item 8. Financial Statements and Supplemental Data
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 1999 Annual Report to Stockholders, which is incorporated herein by reference. The report of independent auditors on PDM's consolidated financial statements is contained in the Report of Independent Auditors and Management section of PDM's 1999 Annual Report to Stockholders, which is incorporated herein by reference. The unaudited Two Year Quarterly Results of Operations contained in PDM's 1999 Annual Report to Stockholders is incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.
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 30, 2000 (the "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 91
Director since 1940; Chairman Emeritus since 1988; formerly Chairman of the Board since 1971. Mr. Jackson has been with the Company since 1936 and is the father of Mr. Jackson, Jr. and Mrs. Townsend.
P. O. Elbert, age 69
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 61 (2)
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 52 (2)
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 51 (2)
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 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 of the Company.
Item 11.
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," and "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.
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.
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.
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, 1999, 1998 and 1997
Consolidated Statements of Financial Condition as of December 31, 1999 and 1998
Consolidated Statements of Cash Flows -- Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity -- Years Ended December 31, 1999, 1998 and 1997
Notes To Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedule of Pitt-Des Moines, Inc. and subsidiaries should be read in conjunction with the Company's consolidated financial statements in the Annual Report.
Schedule II. Valuation and Qualifying Accounts for years ended December31, 1999, 1998 and 1997
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 March 31, 1999 and incorporated herein by reference)
3.2 Bylaws, as amended to date (filed as Exhibit 3.2 to the Company's annual report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Cont'd)
4.1 Revolving Credit and Letter of Credit Issuance Agreement dated as of February 16, 1999 by and among Pitt-Des Moines, Inc. and PNC Bank, National Association, Wells Fargo Bank, N.A., American National Bank and LaSalle National Bank (filed as Exhibit 4.1 to the Company's annual report on Form 10-K for the year ended December 31, 1998 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* Amendment to agreement executed by and between the Company and Wm. W. McKee filed as Exhibit 10.1 hereto (filed as Exhibit 10.2 to the Company's annual report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.3* 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)
10.4* Amendment to agreement executed by and between the Company and R. A. Byers filed as Exhibit 10.3 hereto (filed as Exhibit 10.4 to the Company's annual report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.5* 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)
10.6* Amendment to agreement executed by and between the Company and T. R. Lloyd filed as Exhibit 10.5 hereto (filed as Exhibit 10.6 to the Company's annual report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.7* 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)
10.8* Summary of Company 1999 Management Incentive Plan (MIP) (filed herewith)
10.9* 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)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Cont'd)
10.10* Retirement Plan for PDM Outside Directors, effective May 26, 1994, as amended on September 14, 1995 (filed as Exhibit 10.7 to the Company's annual report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference)
10.11* Stock Option Plan of 1990 (filed as Exhibit 4.01 to the Company's Registration Statement No. 333-34787 on Form S-8 filed May 7, 1990 and incorporated herein by reference)
10.12* 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)
10.13* Amendment to 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 10.12 hereto (filed as Exhibit 10.13 to the Company's annual report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.14* 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)
10.15* Amendment to Investment Letter and Registration Rights Agreement dated September 21, 1993 by and between Pitt-Des Moines, Inc. and P. O. Elbert filed as Exhibit 10.14 hereto (filed as Exhibit 10.15 to the Company's annual report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.16* Directors Stock Plan (filed under the Company's Registration Statement No. 333-13043 on Form S-8 dated September 30, 1996 and incorporated herein by reference)
10.17* Stock Option Agreement executed by and between the Company and P. O. Elbert (filed as Exhibit 10.12 to the Company's annual report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference)
10.18* Amendment to Stock Option Agreement executed by and between the Company and P. O. Elbert filed as Exhibit 10.17 hereto (filed as Exhibit 10.15 to the Company's annual report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Cont'd)
10.19* Supplemental Benefit and Supplemental Salaried Retirement Plan (filed as Exhibit 10.15 to the Company's annual report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.20* Long Term Incentive Stock Plan of 1997 (filed under the Company's Registration Statement No. 333-68853 on Form S-8 dated December 14, 1998 and incorporated herein by reference)
13 Those portions of the Annual Report to Stockholders for fiscal year ended December 31, 1999, 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:
None.
- ------------------------ * Denotes management contract or compensatory plan or arrangement.
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 28, 2000 By: /s/ Wm. W. McKee --------------------------------- Wm. W. McKee President and 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 28, 2000 - ------------------------------------ Executive Officer and Wm. W. McKee Director
Principal Financial and Accounting Officer:
/s/ R. A. Byers Chief Financial Officer March 28, 2000 - ------------------------------------ and Chief Accounting R. A. Byers Officer
Other Directors:
/s/ J. C. Bates Director March 28, 2000 - ------------------------------------ J. C. Bates
/s/ V. G. Beghini Director March 28, 2000 - ------------------------------------ V. G. Beghini
Signatures (Cont'd) Signatures Title Date
/s/ R. W. Dean Director March 28, 2000 - -------------------------- R. W. Dean
/s/ P. O. Elbert Director March 28, 2000 - -------------------------- P. O. Elbert
/s/ W. L. Friend Director March 28, 2000 - -------------------------- W. L. Friend
/s/ W. R. Jackson Director March 28, 2000 - -------------------------- W. R. Jackson
/s/ W. R. Jackson, Jr. Director March 28, 2000 - -------------------------- W. R. Jackson, Jr.
/s/ W. E. Lewellen Director March 28, 2000 - -------------------------- W. E. Lewellen
/s/ A. J. Paddock Director March 28, 2000 - -------------------------- A. J. Paddock
/s/ J. W. Robinson Director March 28, 2000 - -------------------------- J. W. Robinson
/s/ P. J. Townsend Director March 28, 2000 - -------------------------- P. J. Townsend
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Pitt-Des Moines, Inc.
- --------------------- (1) Write-off of accounts deemed to be uncollectible and adjustment of accruals.