UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number
September 30, 2002 000-23943
PETER KIEWIT SONS', INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1842817
(State of Incorporation) (I.R.S. Employer Identification No.)
Kiewit Plaza, Omaha Nebraska 68131
(Address of principal executive offices) (Zip Code)
(402) 342-2052
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
The number of shares outstanding of each of the registrant's
classes of common stock as of November 12, 2002:
Title of Class Shares Outstanding
Common Stock, $0.01 par value 31,289,655
_____________________________________________________________________________
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Index
Page
- -----------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. 1
Consolidated Condensed Statements of Earnings for
the three and nine months ended September 30, 2002 and 2001 2
Consolidated Condensed Balance Sheets as of
September 30, 2002 and December 29, 2001 3
Consolidated Condensed Statements of Cash Flows for the
nine months ended September 30, 2002 and 2001 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 15
Item 3. Quantitative and Qualitative Disclosure about Market Risk. 21
Item 4. Controls and Procedures 21
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings. 22
Item 4. Submission of Matters to a Vote of Security Holders. 22
Item 6. Exhibits and Reports on Form 8-K. 22
Signatures 22
Certifications 23
- -----------------------------------------------------------------------------
i
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Independent Accountants' Review Report
The Board of Directors and Stockholders
Peter Kiewit Sons', Inc.:
We have reviewed the consolidated condensed balance sheets of Peter Kiewit
Sons', Inc. and subsidiaries as of September 30, 2002, and the related
consolidated condensed statements of earnings for the three and nine month
periods ended September 30, 2002 and 2001, and the consolidated condensed
statements of cash flows for the nine month periods ended September 30, 2002
and 2001. These consolidated condensed financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally accepted in the
United States of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated condensed financial statements referred to
above for them to be in conformity with accounting principles generally
accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Peter Kiewit Sons', Inc. and subsidiaries as of December 29, 2001, and the
related consolidated statements of earnings, changes in redeemable common
stock and comprehensive income, and cash flows for the year then ended (not
presented herein); and in our report dated March 15, 2002, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated condensed
balance sheet as of December 29, 2001, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
(signed) KPMG LLP
Omaha, Nebraska
November 12, 2002
1
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(unaudited)
(dollars in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------ ------ ------ ------
Revenue $1,132 $1,004 $ 2,819 $ 2,944
Cost of revenue (959) (920) (2,471) (2,739)
----- ----- ------ ------
173 84 348 205
General and administrative expenses (49) (46) (150) (138)
Gain on sale of operating assets 1 3 15 14
----- ----- ------ ------
Operating earnings 125 41 213 81
Other income (expense):
Investment (losses) income and
equity earnings 3 1 (6) 10
Interest expense (1) (1) (2) (2)
Other, net 4 1 10 8
----- ----- ------ ------
6 1 2 16
----- ----- ------ ------
Earnings before income taxes and
minority interest 131 42 215 97
Minority interest in net earnings
of subsidiaries - 1 - -
Provision for income taxes (52) (17) (86) (39)
----- ----- ------ ------
Net earnings $ 79 $ 26 $ 129 $ 58
===== ===== ====== ======
Net earnings per share:
Basic $ 2.59 $ .84 $ 4.30 $ 1.93
===== ===== ====== ======
Diluted $ 2.46 $ .81 $ 4.10 $ 1.86
===== ===== ====== ======
See accompanying notes to consolidated condensed financial statements.
2
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
September 30, December 29,
2002 2001
(dollars in millions) (unaudited)
- ----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 90 $ 216
Investments, primarily investments
available-for-sale, at fair market value 110 108
Receivables, less allowance of $7 and $7 526 544
Unbilled contract revenue 197 115
Contract costs in excess of related revenue 42 41
Investment in construction joint ventures 307 112
Deferred income taxes 53 59
Other 18 12
----- -----
Total current assets 1,343 1,207
Property, plant and equipment, less
accumulated depreciation and amortization
of $460 and $446 320 285
Other assets 98 102
----- -----
$1,761 $1,594
===== =====
Liabilities and Redeemable Common Stock
Current liabilities:
Accounts payable, including retainage
of $63 and $63 $ 202 $ 242
Current portion of long-term debt - 1
Accrued costs on construction contracts 281 154
Billings in excess of related costs and
earnings 151 145
Accrued insurance costs 69 65
Accrued payroll 28 32
Other 25 39
----- -----
Total current liabilities 756 678
Long-term debt, less current portion 25 25
Deferred income taxes 36 30
Accrued reclamation 10 10
Minority interest - 16
Preferred stock, no par value, 250,000 shares
authorized, no shares outstanding - -
Redeemable common stock ($654 million and
$679 million aggregate redemption value):
Common stock, $.01 par value, 125 million
shares authorized 31,003,755 and 31,588,125
outstanding - -
Additional paid-in capital 222 206
Accumulated other comprehensive loss,
net of tax benefit (16) (11)
Retained earnings 728 640
----- -----
Total redeemable common stock 934 835
----- -----
$1,761 $1,594
===== =====
- -----------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
3
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
-----------------
(dollars in millions) 2002 2001
- -----------------------------------------------------------------------------
Cash flows from operations:
Net cash provided by operations $ 11 $ 121
----- -----
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities 10 3
Proceeds from maturities of available-for-sale securities 2 1
Purchases of available-for-sale securities (23) -
Purchases of other investments - (20)
Proceeds from sales of property, plant and equipment 22 19
Acquisitions, net of cash acquired (17) (36)
Capital expenditures (100) (94)
Additions to notes receivable - (2)
Payments received on notes receivable 4 2
----- -----
Net cash used in investing activities (102) (127)
----- -----
Cash flows from financing activities:
Long-term debt payments (1) (6)
Issuance of common stock 29 37
Repurchases of common stock (42) (49)
Dividends paid (21) (19)
----- -----
Net cash used in financing activities (35) (37)
----- -----
Net decrease in cash and cash equivalents (126) (43)
Cash and cash equivalents at beginning of period 216 302
----- -----
Cash and cash equivalents at end of period $ 90 $ 259
===== =====
Noncash investing activities:
Issuance of debt for acquisition $ - $ 10
===== =====
- ------------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
4
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
1. Basis of Presentation:
The consolidated condensed balance sheet of Peter Kiewit Sons', Inc.
(the "Company") at December 29, 2001 has been condensed from the Company's
audited financial statements as of that date. All other financial statements
contained herein are unaudited and, in the opinion of management, contain all
adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of financial position and results of operations and cash
flows for the periods presented. The Company's accounting policies and
certain other disclosures are set forth in the notes to the consolidated
financial statements contained in the Company's Annual Report on Form 10-K.
Management believes that the disclosures are adequate to make the information
presented not misleading.
The results of operations for the three and nine months ended September 30,
2002 are not necessarily indicative of the results to be expected for the
full year.
When appropriate, items within the consolidated condensed financial
statements have been reclassified in the previous periods to conform to
current year presentation.
2. Acquisitions:
On July 31, 2001, a subsidiary of the Company merged with General
Construction Company ("GCC"), a marine construction business located in
Poulsbo, Washington, pursuant to which the Company acquired 100% of the
outstanding common stock of GCC for $48 million. The results of GCC's
operations have been included in the consolidated financial statements since
that date. The merger occurred as part of the Company's plan to expand its
businesses.
The following table summarizes the estimated fair value of the GCC assets
acquired and liabilities assumed at the date of acquisition.
As of
(dollars in millions) July 31, 2001
- -----------------------------------------------------------------------------
Current assets $ 28
Property and equipment 36
Non-tax deductible goodwill 18
-----
Total assets acquired 82
-----
Current liabilities 20
Long-term debt 5
Deferred taxes 9
-----
Total liabilities assumed 34
-----
Net assets acquired $ 48
=====
5
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
2. Acquisitions, Continued:
On June 28, 2002, a subsidiary of the Company acquired the remaining 20%
minority interest in ME Holding Inc. ("ME"), an electrical subcontractor
located in Boston, Massachusetts. The payment for such minority interest was
$17 million.
The following table summarizes the estimated fair value of the ME assets
acquired and liabilities assumed at the date of acquisition.
As of
(dollars in millions) June 30, 2002
- --------------------------------------------------------------------------
Current assets $ 29
Property and equipment 1
Non-tax deductible goodwill 1
-----
Total assets acquired 31
Current liabilities assumed 14
-----
Net assets acquired $ 17
=====
The following unaudited, pro-forma financial information assumes the GCC
and ME acquisitions occurred at the beginning of 2001. These results have
been prepared for comparative purposes only and do not purport to be
indicative of what would have occurred had the acquisition been made at the
beginning of 2001, or the results which may occur in the future.
Three Months Ended Nine Months Ended
September 30, September 30
(dollars in millions, ------------------ -----------------
except per share data) 2002 2001 2002 2001
- ------------------------------------------------------------------------------
Revenue $1,132 $1,020 $2,819 $3,013
===== ===== ===== =====
Net earnings $ 79 $ 27 $ 129 $ 59
===== ===== ===== =====
Net earnings per share:
Basic $ 2.59 $ .86 $ 4.31 $ 1.94
===== ===== ===== =====
Diluted $ 2.46 $ .83 $ 4.10 $ 1.87
===== ===== ===== =====
6
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
3. Earnings Per Share:
Basic earnings per share has been computed using the weighted average
number of shares outstanding during each period. Diluted earnings per share
gives effect to convertible debentures considered to be dilutive common stock
equivalents. The potentially dilutive convertible debentures are calculated
in accordance with the "if converted" method. This method assumes that the
after-tax interest expense associated with the debentures is an addition to
income and the debentures are converted into equity with the resulting common
shares being aggregated with the weighted average shares outstanding.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
- -----------------------------------------------------------------------------
Net earnings available to common
stockholders (in millions) $ 79 $ 26 $ 129 $ 58
Add: Interest expense, net of tax
effect, associated with convertible
debentures 1 * 1 *
------ ------ ------ ------
Net earnings for diluted shares $ 80 $ 26 $ 130 $ 58
====== ====== ====== ======
Total number of weighted average
shares outstanding used to compute
basic earnings per share
(in thousands) 30,471 31,205 30,074 30,258
Additional dilutive shares assuming
conversion of convertible
debentures 1,612 1,364 1,615 1,366
------ ------ ------ ------
Total number of shares used to compute
diluted earnings per share 32,083 32,569 31,689 31,624
====== ====== ====== ======
Net earnings:
Basic earnings per share $ 2.59 $ .84 $ 4.30 $ 1.93
====== ====== ====== ======
Diluted earnings per share $ 2.46 $ .81 $ 4.10 $ 1.86
====== ====== ====== ======
* Interest expense attributable to convertible debentures was less than $.5
million
7
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
4. Financial Instruments:
Construction contracts generally provide for progress payments as work is
completed, a portion of which is customarily retained until performance is
substantially complete. In some instances, the Company is able to substitute
bank letters of credit or escrowed securities in lieu of a retainage.
Substituting securities in lieu of a retainage is a technique employed by
construction companies to earn interest on retained balances.
Receivables at September 30, 2002 and December 29, 2001 include approximately
$135 million and $155 million, respectively, of retainage on uncompleted
projects, the majority of which is expected to be collected within one year.
Included in the retainage amounts at September 30, 2002 and December 29, 2001
are $52 million and $59 million, respectively, of securities which are not
yet due. Securities at September 30, 2002 and December 29, 2001 in the
amount of $38 million and $36 million, respectively, are carried at fair
value which is determined based on quoted market prices for the securities on
hand or for similar investments. Net unrealized holding gains and losses, if
any, are reported as a separate component of accumulated other comprehensive
income, net of tax. Securities at September 30, 2002 and December 29, 2001
in the amount of $14 million and $23 million, respectively, relate to stock
warrants which are carried at fair value. Such fair value is based on a
valuation model. Unrealized gains and losses are recognized as a component
of investment income in the Consolidated Condensed Statements of Earnings.
Also included in receivables at September 30, 2002 and December 29, 2001 is
$1 million and $1 million, respectively, of securities in lieu of retainage
held by the owners which are now due as the contracts are completed.
5. Goodwill and Intangible Assets:
Amortizable intangibles consist of the following at September 30, 2002 and
December 29, 2001:
September 30, 2002 December 29, 2001
---------------------------- ---------------------------
Gross Carrying Accumulated Gross Carrying Accumulated
(dollars in millions) Amount Amortization Amount Amortization
- ------------------------------------------------------------------------------
Coal contracts $ 59 $ (8) $ 59 $ (5)
Other 3 - 3 -
----- ----- ----- -----
$ 62 $ (8) $ 62 $ (5)
===== ===== ===== =====
Amortization expense recognized on intangibles for the three months ended
September 30, 2002 and 2001 was $1 million and $1 million, respectively. For
the nine months ended September 30, 2002 and 2001, amortization expense
recognized on intangibles was $3 million and $3 million, respectively.
Future amortization expense is estimated to be $4 million for each of the
fiscal years ended 2002-2006.
Goodwill increased $1 million to $27 million at September 30, 2002 from the
net carrying amount at December 29, 2001. The increase is estimated goodwill
on the ME acquisition described in Note 2.
8
PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
5. Goodwill and Intangible Assets, Continued:
Following are net earnings and earnings per share as adjusted for the
adoption of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets":
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
(dollars in millions, 2002 2001 2002 2001
except per share data)
- -----------------------------------------------------------------------------
Reported net earnings $ 79 $ 26 $ 129 $ 58
Add back: Goodwill
amortization, net of tax - - - 1
----- ----- ----- -----
Adjusted net earnings $ 79 $ 26 $ 129 $ 59
===== ===== ===== =====
Basic earnings per share:
Reported net earnings $ 2.59 $ .84 $ 4.30 $ 1.93
Goodwill amortization,
net of tax - .01 - .02
----- ----- ----- -----
Adjusted basic earnings per share $ 2.59 $ .85 $ 4.30 $ 1.95
===== ===== ===== =====
Diluted earnings per share:
Reported net earnings $ 2.46 $ .81 $ 4.10 $ 1.86
Goodwill amortization, net of tax - .01 - .02
----- ----- ----- -----
Adjusted diluted earnings per
share $ 2.46 $ .82 $ 4.10 $ 1.88
===== ===== ===== =====
9
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
6. Comprehensive Income:
Comprehensive income includes net income, unrealized gains (losses) on
securities and foreign currency translation adjustments which are charged or
credited to the cumulative translation account within Redeemable Common Stock.
Comprehensive income for the three and nine months ended September 30, 2002
and 2001 is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
(dollars in millions) 2002 2001 2002 2001
- ------------------------------------------------------------------------------
Net earnings $ 79 $ 26 $ 129 $ 58
Other comprehensive income, before tax:
Unrealized losses arising
during period (1) - (6) -
Foreign currency translation
adjustments (5) (3) (2) (4)
Income tax benefit related to items
of other comprehensive income 2 1 3 1
----- ----- ----- -----
Comprehensive income $ 75 $ 24 $ 124 $ 55
===== ===== ===== =====
7. Segment Data:
The Company primarily operates in the construction industry and currently has
one reportable operating segment. The Construction segment performs services
for a broad range of public and private customers primarily in North America.
Construction services are performed in the following construction markets:
transportation (including highways, bridges, airports, railroads and mass
transit), commercial buildings, water supply, sewage and waste disposal,
dams, mining, power, telecommunication infrastructure, heating and cooling,
and oil and gas. Sources of revenue for the "other" category consist
primarily of the Company's coal sales.
Intersegment sales are recorded at cost. Operating earnings is comprised of
net sales less all identifiable operating expenses, allocated general and
administrative expenses, gain on sale of operating assets, depreciation and
amortization. Investment income, interest expense and income taxes have been
excluded from segment operations. The management fee earned by the Company
for mine management services is excluded from the segment information that
follows as it is included in other income on the Statement of Earnings and
not included in operating earnings. Segment asset information has not been
presented as it is not reported to or reviewed by the chief operating
decision maker.
Three Months Ended Three Months Ended
September 30, 2002 September 30, 2001
------------------ ------------------
(dollars in millions) Construction Other Construction Other
- ----------------------------------------------------------------------------
Revenue - external customers $1,121 $ 11 $ 993 $ 11
===== ===== ===== =====
Operating earnings $ 123 $ 2 $ 38 $ 3
===== ===== ===== =====
10
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
7. Segment Data, Continued:
Nine Months Ended Nine Months Ended
September 30, 2002 September 30, 2001
(dollars in millions) Construction Other Construction Other
- -----------------------------------------------------------------------------
Revenue - external customers $2,786 $ 33 $2,913 $ 31
===== ===== ===== =====
Operating earnings $ 204 $ 9 $ 73 $ 8
===== ===== ===== =====
During the three and nine months ended September 30, 2001, the Company earned
11.2% and 22.0%, respectively, of revenues from Level 3 Communications, Inc.
("Level 3"). This project was substantially complete at the end of 2001.
8. Other Matters:
Materials Spin-Off:
On September 30, 2000, the Company distributed all of the 32,288,840 shares
of common stock ("Materials Stock") of its former subsidiary, Kiewit
Materials Company ("Materials"), it then held to stockholders of the Company
in a Spin-off (the "Materials Spin-off"). As a result of the Materials Spin-
off, the Company and Materials now operate as two separate independent
companies.
In connection with the Materials Spin-off, Materials and the Company entered
into various agreements including a Separation Agreement (the "Materials
Separation Agreement") and a Tax Sharing Agreement (the "Materials Tax
Sharing Agreement").
The Materials Separation Agreement provides for the allocation of certain
risks and responsibilities between Materials and the Company and for cross-
indemnifications that are intended to allocate financial responsibility to
the Company for liabilities arising out of the construction business and to
allocate to Materials liabilities arising out of the Materials Businesses.
On July 9, 2002, Materials, Jem Lear Acquisition Company, Inc. ("Purchaser")
and Rinker Materials Corporation entered into an Agreement and Plan of Merger
("Merger Agreement") pursuant to which Purchaser would merge into Materials
(the "Merger") subsequent to the completion of Purchaser's tender offer to
purchase at least 90% of the issued and outstanding Materials Stock.
Purchaser effected the merger on September 25, 2002. In connection with the
execution of the Merger Agreement, and in consideration of the payment of
$150,000 to the Company by Materials at the effective time of the Merger, the
Company and Materials entered into an Amendment to Separation Agreement
pursuant to which: (i) the Company agreed to continue to provide certain
administrative services to Materials and its subsidiaries for a period of
time subsequent to the effective time of the Merger; (ii) the Company agreed
to provide Materials with a transition period of up to nine months following
the effective time of the Merger to continue to use the name "Kiewit" as part
of the name "Kiewit Materials Company"; (iii) the Company and Materials
agreed to use their respective best efforts to amend an existing Cement
Purchase Agreement between Kiewit Construction Group Inc. and California
Portland Cement Company to release Kiewit Construction Group Inc. of its
obligations under such agreement; (iv) the Company agreed to indemnify
Materials from certain kinds of claims made by or on behalf of stockholders
or former stockholders of Materials relating to sales of Materials Stock by
such stockholders; and (v) a subsidiary of the Company would acquire certain
real property owned by a subsidiary of Materials on or prior to the effective
time of the Merger.
11
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
8. Other Matters, Continued:
Under the Materials Tax Sharing Agreement, with respect to periods, or
portions thereof, ending on or before the Materials Spin-off, Materials and
the Company generally will be responsible for paying the taxes relating to
such returns, including any subsequent adjustments resulting from the
redetermination of such tax liabilities by the applicable taxing authorities,
that are allocable to the materials business and construction business,
respectively. The Materials Tax Sharing Agreement also provides that
Materials and the Company will indemnify the other from certain taxes and
expenses that would be assessed if the Materials Spin-off were determined to
be taxable, but solely to the extent that such determination arose out of the
breach by Materials or the Company, respectively, of certain representations
made to the Internal Revenue Service in connection with the private letter
ruling issued with respect to the Materials Spin-off.
Other:
On April 25, 2001, Bibb and Associates, Inc. ("Bibb"), a subsidiary of the
Company, was served with a complaint (the "Complaint") filed in the Circuit
Court of Jackson County, Missouri (the "Court"), in an action brought by
Kansas City Power & Light ("KCPL") with respect to a January 13, 1999
explosion at KCPL's Hawthorn No. 5 power plant. The Complaint lists a total
of 13 defendants, and generally alleges as to Bibb, strict liability,
negligence, professional gross negligence, fraud, negligent misrepresentation
and wrongful inducement to contract. The Complaint also names the Company,
and alleges that the Company is either the alter ego of Bibb or the successor
to Bibb's liability. The Complaint alleges damages in excess of $450 million
including property damage, costs of replacement of power and lost profits.
On October 18, 2001, the Company filed a motion to dismiss the action for
lack of personal jurisdiction. During February 2002, the Company's motion
was overruled, pending the results of final discovery on the issue of
jurisdiction, and the Court ordered the parties to proceed with such
discovery. The Company believes that the factual allegations and legal
claims asserted against Bibb and the Company by KCPL are without merit and
intends to vigorously defend them.
The Company is involved in various other lawsuits and claims incidental to
its business. Management believes that any resulting liability, beyond that
provided, should not materially affect the Company's financial position,
future results of operations or future cash flows.
During the nine months ended September 30, 2002, the Company settled claims
on two significant joint venture projects for a gain of $37 million.
It is customary in the Company's industry to use various financial
instruments in the normal course of business. These instruments include
items such as letters of credit. Letters of credit are conditional
commitments issued on behalf of the Company in accordance with specified
terms and conditions. The Company has informal arrangements with a number of
banks to provide such commitments. As of September 30, 2002, the Company had
outstanding letters of credit of approximately $256 million.
12
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PETER KIEWIT SONS', INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - (Continued)
9. Recent Accounting Pronouncements:
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143 (SFAS 143),
"Accounting for Asset Retirement Obligations". SFAS 143 applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and (or) the normal operation
of a long-lived asset. The provisions of SFAS 143 will be effective for
fiscal years beginning after June 15, 2002. Under SFAS 143: (1) retirement
obligations, measured at fair value, will be recognized when they are
incurred and displayed as liabilities, and (2) the associated asset
retirement costs will be capitalized as part of the carrying amount of the
long-lived asset and subsequently allocated to expense over the asset's
useful life.
The Company does not anticipate the adoption of SFAS No. 143 to have a
material effect on its consolidated financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144 (SFAS 144), "Accounting for the
Impairment or Disposal of Long-Lived Assets" which supersedes both FASB
Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-lived Assets to be Disposed Of" and the accounting and
reporting provisions of APB Opinion No. 30 (Opinion 30), "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business (as previously
defined in that Opinion). SFAS 144 retains the fundamental provisions in
SFAS 121 for recognizing and measuring impairment losses on long-lived assets
held for use and long-lived assets to be disposed of by sale, while also
resolving significant implementation issues associated with SFAS 121. For
example, SFAS 144 provides guidance on how a long-lived asset that is used as
part of a group should be evaluated for impairment, establishes criteria for
when a long-lived asset is held for sale, and prescribes the accounting for a
long-lived asset that will be disposed of other than by sale. SFAS 144
retains the basic provisions of Opinion 30 on how to present discontinued
operations in the income statement but broadens that presentation to include
a component of an entity (rather than a segment of a business). Unlike SFAS
121, an impairment assessment under SFAS 144 will never result in a write-
down of goodwill. Rather, goodwill is evaluated for impairment under SFAS
No. 142, "Goodwill and Other Intangible Assets".
The Company adopted SFAS 144 this year. Adoption of SFAS 144 has not had a
material impact on the Company's financial statements.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. SFAS No. 145 is effective for fiscal years beginning after
May 15, 2002. The Company does not anticipate that adoption of SFAS No. 145
will result in any material changes to its financial position or results of
operations.
In July 2002, the FASB issued SFAS No. 146, Accounting For Costs Associated
with Exit or Disposal Activities. SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002. The Company does not
anticipate that adoption of SFAS No. 146 will result in any material changes
to its financial position or results of operations.
13
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This document contains forward looking statements and information that
are based on the beliefs of management as well as assumptions made by and
information currently available to the Company. When used in this document,
the words "anticipate," "believe," "estimate," "expect" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current
views of the Company with respect to future events and are subject to certain
risks or uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this document.
Results of Operations - Third Quarter 2002 vs. Third Quarter 2001
Revenue.
Revenue for the third quarter of 2002 consisted of $712 million from sole
contracts, $409 million from joint ventures and $11 million from other
sources. Total revenues increased $128 million or 13% from the same period
in 2001. The increase was primarily attributed to a $246 million increase in
revenue earned on joint venture projects for the third quarter of 2002 from
the same period in 2001. The joint venture increase is primarily attributed
to projects awarded to the Company during the years 2001 and 2002. Partially
offsetting the increase were decreases in revenue earned on a significant
fiber optic project of $102 million and other sole contract projects of $16
million. The fiber optic project was substantially complete at the end of
2001.
Contract backlog at September 30, 2002 increased to $4.4 billion from $4.2
billion at December 29, 2001. Foreign operations, located primarily in
Canada, represent 6.8% of backlog. Domestic projects are spread
geographically throughout the U.S. The Company's share of a highway contract
in Colorado and a bridge contract in California makes up 16% and 14%,
respectively, of total backlog.
Margin.
Margins for the third quarter of 2002 consisted of $74 million from sole
contracts, $95 million from joint ventures and $4 million from other sources.
Total margin increased $89 million or 106% from the same period in 2001.
Construction margin, as a percentage of revenue, excluding the significant
fiber optic project, for the third quarter of 2002 increased to 15.3%
compared to 10.6% for the same period in 2001. The increased margin is
primarily attributable to $37 million of claim settlements reached on two
significant joint venture projects during the third quarter of 2002.
General and Administrative Expenses.
General and administrative expenses for the third quarter of 2002 increased
$3 million to $49 million compared to the same period in 2001. The increase
was primarily attributable to costs incurred related to a potential corporate
conversion to a limited partnership. As a percentage of revenue, general and
administrative expenses for the third quarter of 2002 decreased to 4.3%
compared to 4.6% from the same period in 2001.
Gain on Sale of Operating Assets.
Net gains on the disposition of property, plant and equipment and other
assets decreased to $1 million during the third quarter of 2002 from $3
million the same period in 2001. Several large pieces of equipment were sold
at a gain in the third quarter of 2001, resulting in higher gains compared to
the same period in 2002.
14
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Investment Income and Equity Earnings, net.
Investment income and equity earnings increased $2 million for the third
quarter of 2002 from the same period in 2001. During the third quarter 2002,
the Company recognized a $4 million unrealized holding gain on its investment
in stock warrants acquired in December 2001 and a $2 million unrealized
holding loss on an investment in a limited investment partnership. The
Company also experienced a decline in interest rates earned on money market
and bond funds from approximately 0.9% for the third quarter of 2001 to
approximately 0.4% for the same period in 2002. Another contributing factor
was the change in the Company's portfolio mix from primarily interest-bearing
money market funds during the third quarter 2001 to a diversified portfolio
that includes bond and stock mutual funds that primarily recognize changes in
market value as a separate component of accumulated other comprehensive
income. A $3 million investment carried at cost was written off during the
third quarter of 2001 due to an other-than-temporary decline in market value.
Other, net.
Other income is comprised primarily of mine management fee income. Fees for
these services for the third quarter of 2002 and 2001 were $2 million and $1
million, respectively. The Company's fee is a percentage of adjusted
operating earnings of coal mines managed, as defined in a mine management
agreement. The mines earn the majority of their revenues under long-term
contracts. The remainder of the mines' sales are made on the spot market
where prices are substantially lower than those of the long-term contracts.
Provision for income taxes.
The effective income tax rate for the three months ended September 30, 2002
and 2001 was 40%. This rate differs from the federal statutory rate of 35%
primarily due to state income taxes.
Results of operations - Nine Months 2002 vs. Nine Months 2001
Revenue.
Revenue for the nine months ended September 30, 2002 consisted of $1,942
million from sole contracts, $844 million from joint ventures and $33 million
from other sources. Total revenues decreased $125 million or 4% from the
same period in 2001. The decrease was primarily attributed to a $577 million
reduction in revenue earned on a significant fiber optic project for the nine
months ended September 30, 2002 from the same period in 2001. This project
was substantially complete at the end of 2001. Partially offsetting the
decrease were increases in other sole contract projects of $43 million, joint
venture projects of $407 million and other sources of $2 million. These
increases are primarily attributed to projects awarded to the Company during
the years 2001 and 2002.
Margin.
Margins for the nine months ended September 30, 2002 consisted of $187
million from sole contracts, $148 million from joint ventures and $13 million
from other sources. Total margin increased $143 million or 70% from the same
period in 2001. Construction margin, as a percentage of revenue, excluding
the significant fiber optic project, for the nine months ended September 30,
2002 increased to 11.9% compared to 7.5% in 2001. The increased margin is
primarily attributable to a reduction in joint venture losses, claim
settlements of $37 million on two significant joint venture projects and loss
recoveries of $18 million on two sole contract projects during the nine
months ended September 30, 2002. Margins on a significant fiber optic
project decreased $15 million for the nine months ended September 30, 2002 as
compared to the same period in 2001. This project was substantially complete
at the end of 2001.
Job loss accruals to provide for the entire amount of future estimated losses
on construction contracts in progress decreased to $60 million at
September 30, 2002 from $70 million at December 29, 2001. The decrease is
primarily attributable to the utilization of $17 million of loss accruals on
jobs that were substantially complete or settled by September 30, 2002 and
the utilization of $4 million of loss accruals on jobs that had loss accruals
at December 29, 2001 that were not completed at September 30, 2002. This
decrease was partially offset by $11 million of loss accruals on new jobs at
September 30, 2002 that previously did not have loss accruals at
December 29, 2001
15
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General and Administrative Expenses.
General and administrative expenses for the nine months ended September 30,
2002 increased $12 million to $150 million compared to the same period in
2001. As a percentage of revenue, general and administrative expenses for
the nine months ended September 30, 2002 increased to 5.3% compared to 4.7%
for the same period in 2001. This increase was primarily attributed to the
acquisition of a marine construction operation in Washington State on
July 31, 2001, a $3 million contribution to a charitable foundation and $5
million of costs incurred related to a potential corporate conversion to a
limited partnership.
Gain on Sale of Operating Assets.
Net gains on the disposition of property, plant and equipment and other
assets increased to $15 million during the nine months ended September 30,
2002 from $14 million the same period in 2001. The increase is due to
increased sales of excess construction equipment.
Investment Income and Equity Earnings, net.
Investment income and equity earnings decreased $16 million for the nine
months ended September 30, 2002 from the same period in 2001. During the
nine months ended September 30, 2002, the Company recognized an $8 million
unrealized holding loss on its investment in stock warrants acquired in
December 2001 and a $3 million loss on an investment in a limited investment
partnership. The Company also experienced a decline in interest rates earned
on money market and bond funds from approximately 3.6% for the nine months
ended September 30, 2001 to approximately 1.3% for the same period in 2002.
Another contributing factor was the change in the Company's portfolio mix
from primarily interest-bearing money market funds during the third quarter
2001 to a diversified portfolio that includes bond and stock mutual funds
that primarily recognize changes in market value as a separate component of
accumulated other comprehensive income. A $3 million investment carried at
cost was written off during the nine months ended September 30, 2001 due to
an other-than-temporary decline in market value.
Other, net.
Other income is comprised primarily of mine management fee income. Fees for
these services for the nine months ended September 30, 2002 and 2001 were $5
million and $4 million, respectively. The Company's fee is a percentage of
adjusted operating earnings of coal mines managed, as defined in a mine
management agreement. The mines earn the majority of their revenues under
long-term contracts. The remainder of the mines' sales are made on the spot
market where prices are substantially lower than those of the long-term
contracts.
Provision for income taxes.
The effective income tax rate for the nine months ended September 30, 2002
and 2001 was 40%. This rate differs from the federal statutory rate of 35%
primarily due to state income taxes
16
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Financial Condition - September 30, 2002 vs. December 29, 2001
Cash and cash equivalents decreased $126 million to $90 million at
September 30, 2002 from $216 million at December 29, 2001. The decrease
reflects net cash provided by operations of $11 million; offset by net cash
used in investing activities of $102 million and $35 million used in
financing activities.
Net cash provided by operating activities for the nine months ended
September 30, 2002 decreased by $110 million to $11 million as compared to
the same period in 2001. This decrease was primarily due to increased
working capital requirements for construction contracts, increased net
contributions to investment in construction joint ventures of $49 million and
increased federal income taxes paid of $49 million as compared to the same
period in 2001. The decreases were partially offset by $70 million cash
received during the nine months ended September 30, 2002 on a settlement
reached in December 2001. Cash provided or used by operating activities is
affected to a large degree by the mix, timing, stage of completion and terms
of individual contracts which are reflected in changes through current assets
and liabilities.
Net cash used in investing activities for the nine months ended September 30,
2002 decreased by $25 million to $102 million as compared to the same period
in 2001. This decrease was due primarily to a decrease in purchases of other
investments of $20 million, a decrease in acquisitions of $19 million,
additional proceeds from sales and maturities of securities of $8 million and
an increase in sales of property, plant and equipment of $3 million. This
decrease was partially offset by an increase of cash used for higher capital
expenditures of $6 million, predominately related to the continued
development of an operating office in Texas, and purchases of available-for-
sale securities of $23 million.
Capital spending varies due to the nature and timing of jobs awarded.
Acquisitions depend largely on market conditions.
Net cash used in financing activities for the nine months ended September 30,
2002 decreased by $2 million to $35 million as compared to the same time
period in 2001. This decrease was primarily due to a reduction in
repurchases of common stock of $7 million and a decrease in payments of long-
term debt of $5 million. The decreases were partially offset by a reduction
in issuances of common stock of $8 million.
Liquidity.
The Company continues to explore opportunities to expand and develop new
businesses and anticipates investing between $50 and $100 million annually to
expand its operations. Other long-term liquidity uses include the payment of
income taxes and the payment of dividends. As of September 30, 2002, the
Company had no material firm binding purchase commitments related to its
investments other than meeting the normal course of business needs of its
construction joint ventures. The Company paid dividends during the nine
months ended September 30, 2002 and 2001 of $21 million and $19 million,
respectively. These amounts were determined by the Board of Directors and
were paid in January and May of each such year. The Company also has the
commitment to repurchase Common Stock at any time during the year from
shareholders. The Company is exploring a potential corporate conversion to a
limited partnership. If the conversion proposal is approved by the Company's
stockholders and the merger is consummated, the limited partnership, which
will continue the Company's business, will provide conversion tax draws to
former stockholders of the Company of approximately $155 million. Assuming
the merger is consummated in 2003, these payments are anticipated to be made
on or before April 25, 2004.
The Company's current financial condition, together with anticipated cash
flows from operations, should be sufficient for immediate cash requirements
and future investing activities. The Company does not presently have any
committed bank credit facilities. In the past, the Company has been able to
borrow on terms satisfactory to it. The Company believes that, to the extent
necessary, it will likewise be able to borrow funds on acceptable terms for
the foreseeable future.
17
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Critical Accounting Policies.
Revenue Recognition - Construction Contracts:
The Company operates as a general contractor throughout North America and
engages in various types of construction projects for both public and private
owners. Credit risk is minimal with public (government) owners since the
Company ascertains that funds have been appropriated by the governmental
project owner prior to commencing work on public projects. Most public
contracts are subject to termination at the election of the government.
However, in the event of termination, the Company is entitled to receive the
contract price on completed work and reimbursement of termination-related
costs. Credit risk with private owners is minimized because of statutory
mechanics liens, which give the Company high priority in the event of lien
foreclosures following financial difficulties of private owners.
The construction industry is highly competitive and lacks firms with dominant
market power. A substantial portion of the Company's business involves
construction contracts obtained through competitive bidding. A company's
ability to bid on new projects is affected by many factors, including its
ability to obtain performance bonds. Currently, the Company has not
experienced, nor does management anticipate, any problems securing performance
bonds on future projects. The volume and profitability of the Company's
construction work depends to a significant extent upon the general state of the
economies of North America and the volume of work available to contractors.
The Company's construction operations could be adversely affected by labor
stoppages or shortages, adverse weather conditions, shortages of supplies or
other governmental action.
The Company uses the percentage of completion method of accounting on long-term
construction contracts. For fixed-price construction contracts, an estimated
percentage of completion for each contract, as determined by the Company's
engineering estimate based on the amount of work performed, is applied to total
estimated revenue. For cost-plus construction contracts, the percentage of
completion, based upon costs incurred divided by projected costs, is applied to
total estimated profit. Provision is made for the entire amount of future
estimated losses on construction contracts in progress; claims for additional
contract compensation, however, are not reflected in the accounts until the
period in which such claims are settled. Claims are considered settled when
cash is received or upon receipt of a signed written agreement with respect to
such claims. Revisions in cost and profit estimates during the course of the
work are reflected in the accounting period in which the facts which require
the revision become known. It is at least reasonably possible that cost and
profit estimates will be revised in the near-term.
In accordance with industry practice, amounts realizable and payable under
contracts which may extend beyond one year are included in current assets and
liabilities.
Investments:
The Company continually evaluates its investments for other than temporary
declines in value. Several factors are analyzed in evaluating investments,
including an analysis of the relevant company, its industry, valuation levels
and subsequent developments. Unrealized losses that are determined to be other
than temporary are recognized in earnings.
Included in accounts receivable retainage are securities in the amount of $14
million that relate to stock warrants which are carried at fair value. Such
fair value is estimated based on a valuation model. Unrealized gains and
losses are recognized as a component of investment income in the Consolidated
Statement of Earnings.
Construction Joint Ventures:
The Company has entered into a number of construction joint venture
arrangements which are accounted for under the equity method in the balance
sheet and on a pro rata basis in the statement of earnings. Under these
arrangements, if one venturer is financially unable to bear its share of the
costs, the other venturers will be required to pay those costs.
18
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Property, Plant and Equipment:
Property, plant and equipment are recorded at cost. Depreciation for the
majority of the Company's property, plant and equipment is calculated using
accelerated methods. The estimated useful lives of the Company's property,
plant and equipment are as follows:
Buildings 5 - 39 years
Equipment 3 - 20 years
A change in depreciation methods or estimated useful lives could have a
significant impact to earnings.
Accrued Insurance Costs:
The Company is self-insured for certain general, auto and worker's compensation
claims, and accrues for the estimated ultimate liability for incurred losses,
both reported and unreported. The Company bases its estimate of loss on
historic trends modified for recent events. It is at least reasonably possible
that the estimate of ultimate liability will be revised in the near-term.
19
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Item 3. Quantitative and Qualitative Disclosure about Market Risk.
The Company holds a diversified portfolio of investments that includes cash,
high quality commercial paper of maturities less than 90 days, U.S.
Government debt obligations, money market, stock and bond mutual funds and
stock warrants. Except for cash, each of these investments is subject, in
varying degrees, to market risks, interest rate risks, economic risks and
credit risks. These risks, among others, can result in loss of principal.
In addition, the Company is a limited partner in an investment limited
partnership (the "Partnership"). The investment objective of the Partnership
is to generate current income and capital appreciation while minimizing the
potential for loss of principal. The Partnership may use a variety of
investment strategies with the principal one being merger arbitrage. In
general, a merger arbitrage strategy involves purchasing the stock of a
company being acquired or merging with another company and selling short the
stock of the acquiring company. A particular merger arbitrage transaction
will either derive a profit or a loss depending on the price differential
between the price of the securities when purchased and the price ultimately
realized when the transaction is completed. The primary risk is that a loss
could result if the transaction is not completed. The Partnership invests in
a diversified portfolio of these types of transactions to minimize risk of
loss.
Stock warrants are accounted for under SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities". The value of the warrants is primarily
based on the volatility of the underlying stock, the price of the underlying
stock and the time period until the warrants expire. The risk to the value
of the stock warrants predominately relates to the potential change in
volatility and price of the underlying stock.
Item 4. Controls and Procedures
Under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
the Company has evaluated the effectiveness of the design and operation of
its disclosure controls and procedures within 90 days of the filing date of
this quarterly report, and, based on their evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that these disclosure
controls and procedures are effective. There were no significant changes in
the Company's internal controls or in other factors that would significantly
affect these controls subsequent to the date of their evaluation.
20
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material changes in the legal proceedings reported in the
Company's previously filed quarterly report on Form 10-Q for the period ended
March 31, 2002.
Item 4. Submission of Matters to a Vote of Security Holders.
The Corporation's annual meeting of stockholders was held on June 15, 2002.
The holders of 28,775,663 of the 29,802,755 outstanding shares of $0.01 par
value common stock ("Common Stock") were present in person or by proxy at the
annual meeting. At such meeting, the following slate of nominees for
director was proposed by the incumbent directors. No additional nominations
were received and all of the nominees proposed by the board were elected to
serve one-year terms.
Director Nominee Votes For Withheld
Mogens C. Bay 28,749,213 26,450
Richard W. Colf 28,759,413 16,250
James Q. Crowe 27,651,227 1,124,436
Richard Geary 28,751,809 23,854
Bruce E. Grewcock 28,755,413 20,250
William L. Grewcock 28,758,313 17,350
Allan K. Kirkwood 28,759,413 16,250
Michael R. McCarthy 28,759,413 16,250
Douglas E. Patterson 28,684,113 91,550
Walter Scott, Jr. 28,759,413 16,250
Kenneth E. Stinson 28,758,713 16,950
George B. Toll, Jr. 28,625,853 149,810
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
15.1 Letter re unaudited interim financial information
99.1 Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
Current Report on Form 8-K dated August 14, 2002 reporting
Statements Under Oath of Principal Executive Officer and
Principal Financial Officer regarding facts and circumstances
relating to exchange act filings, which Report was filed with
the Securities and Exchange Commission on August 14, 2002.
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
Date: November 12, 2002
PETER KIEWIT SONS', INC.
/s/ Michael J. Piechoski
- -------------------------------------
Michael J. Piechoski
Vice President and Chief Financial Officer
21
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CERTIFICATIONS
I, Kenneth E. Stinson, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Peter Kiewit Sons',
Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Kenneth E. Stinson
- -----------------------------
Kenneth E. Stinson
Chief Executive Officer
22
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I, Michael J. Piechoski, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Peter Kiewit Sons',
Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Michael J. Piechoski
- ---------------------------------
Michael J. Piechoski
Chief Financial Officer
23
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