Perini 10-K 2008
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
COMMISSION FILE NUMBER: 1-6314
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(Registrants telephone number, including area code): (508) 628-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment of this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller Reporting Company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of the voting stock held by nonaffiliates of the registrant was $1,536,676,616 as of June 30, 2007, the last business day of the Registrants most recently completed second fiscal quarter.
As of February 15, 2008, 27,147,000 shares of the registrants common stock, $1.00 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The purpose of this Amendment No. 1 on Form 10-K/A (the Amendment ) is to amend and restate Part III, Items 10 through 14 of the Annual Report on Form 10-K of Perini Corporation (the Company, we, our, or Perini ) for the fiscal year ended December 31, 2007, which was filed with the Securities and Exchange Commission (the SEC ) on February 28, 2008 (the Original Form 10-K), to include information previously omitted in reliance on General Instruction G to Form 10-K, which permits registrants to incorporate by reference certain information from a definitive proxy statement in connection with the election of directors. The Company is filing this Amendment because the Companys definitive proxy statement for its 2008 annual meeting will be filed more than 120 days after the end of the Companys fiscal year. Accordingly, Part III of the Original Form 10-K is hereby amended and restated as set forth below. This Amendment also includes the certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). As no financial statements are contained within this Amendment, we do not include the certifications pursuant to Section 906 of Sarbanes-Oxley.
Except as described in this Explanatory Note, no other information in the Original Form 10-K is modified or amended hereby (other than the omission of the Exhibits and Financial Statement Schedules that were filed only with the Original Form 10-K), and this Amendment does not otherwise reflect events occurring after the original filing date of February 28, 2008. Accordingly, this Form 10-K/A should be read in conjunction with the Original Form 10-K and our other filings with the SEC.
Directors and Executive Officers of the Registrant
The following table shows, as of February 28, 2008, the names and ages of our current directors. Information relating to our executive officers is set forth in Part I of our Annual Report on Form 10-K filed on February 28, 2008, and is hereby incorporated herein by reference.
Ronald N. Tutor has served as our Chief Executive Officer since March 2000, as Chairman since July 1999, and as a director since January 1997. Mr. Tutor also serves as Chairman, President and Chief Executive Officer of Tutor-Saliba Corporation, a privately-held California corporation engaged in the construction industry. On April 2, 2008, we agreed to a merger with Tutor-Saliba Corporation and signed a definitive merger agreement to effect the transaction. Completion of the merger is subject to various conditions, including approval of our shareholders. A summary of the merger agreement and several related agreements (including a five-year employment agreement with Mr. Tutor), along with copies of the agreements, are included in our Current Report on Form 8-K filed with the SEC on April 7, 2008.
Robert Band has served as a director since May 1999. He has also served as Chief Operating Officer since March 2000 and as President since May 1999. He has served as President of Perini Management Services, Inc. since 1996. He has served in various operating and financial positions with Perini Corporation since 1973, including Executive Vice President and Chief Financial Officer from 1997-1999. He also serves as a director of Jewish Family Services of Metrowest, a not-for-profit entity.
Michael R. Klein has served as a director since January 1997 and as Vice Chairman of our Board since September 2000. He is also the designated Lead Director. Mr. Klein, a private investor, serves as Chairman of the Board of Directors and member of the Nominating Committee of CoStar Group, Inc., a publicly held provider of commercial real estate information, as Chairman of the Sunlight Foundation, a non-profit organization and as Chairman of the Board of Le Paradou, LLC, a privately held company. He is also the Lead Director and member of the Governance Committee of SRA International, Inc., a publicly-traded provider of technology and strategic consulting services and solutions, and a director of AStar Air Cargo, Inc., and OZ Fitness, Inc., which are privately held. Mr. Klein was a partner of the law firm Wilmer Cutler Pickering from 1974 until 2004, and when Wilmer Cutler Pickering merged with the law firm Hale and Dorr LLP in 2004 became a partner of Wilmer Cutler Pickering Hale and Dorr LLP until his retirement in 2005.
Peter Arkley has served as a director since May 2000. He has served as the President/CEO of AON Construction Services Group, an insurance and bonding brokerage firm, since 2006 and prior to that was Managing Principal of Aon Risk Services, Inc. since 1994. He is also a director of Valley Crest Companies, a privately-held company, and of Greater Los Angeles Zoo Association, a non-profit organization.
Raymond R. Oneglia has served as a director since March 2000. He has also served as Vice Chairman of the Board of Directors of O&G Industries, Inc., a Connecticut corporation engaged in the construction industry, since 1997 and has served in various operating and administrative capacities since 1970.
Robert L. Miller has served as a director since 2004. In 1979, he cofounded West Venture Development Co., a homebuilding and commercial real estate company, and acted as President until its sale in 1991. Previously he was a construction manager with Morrison-Knudsen Inc. He was chairman of the board of Monroc Corp., a public concrete and aggregate company based in Salt Lake City, Utah from 1995-1998. He is presently on the valuations committee of Caltius Mezzanine Partners, a capital source company in Los Angeles. Since 2000, he is a principal in Robert L. Miller & Assoc., Inc., a real estate development firm.
Willard W. Brittain, Jr. became a director in November 2004. He has served as Chairman and Chief Executive Officer of Professional Resources on Demand, a private senior executive staffing company since 2002. He previously served as Chief Operating Officer of PwC Consulting since 2000, and Chief Operating Officer of PricewaterhouseCoopers, LLP since 1997. Mr. Brittain also serves on the board of Analysts International, where he is a member of the audit and compensation committees, and DaVita Corporation, where he serves on the compliance and public policy committees. Both are publicly held companies.
Robert A. Kennedy has served as a director since March 2000. He has been an independent financial consultant since 2003. From 1993 to 2003, Mr. Kennedy served in various capacities, including as Vice President of Special Projects, for The Union Labor Life Insurance Company, a provider of insurance and financial services to its union members and related trust funds.
The Companys officers are elected on an annual basis at the Board of Directors Meeting immediately following the annual meeting of shareholders, to hold such offices until the Board of Directors Meeting following the next annual meeting of shareholders and until their respective successors have been duly appointed or until their tenure has been terminated by the Board of Directors, or until their earlier resignation, removal or death.
Our Board of Directors (Board) currently has eight directors. In accordance with our By-Laws and the requirements of the Massachusetts Business Corporations Act, our Board is divided into three classes, with each Director serving for a term of three years. As a consequence, the term of only one class of Directors expires each year, and their successors are elected for terms of three years. At each annual meeting of stockholders, the successors to one class of directors then serving are elected to serve from the time of their election and qualification until the third annual meeting following their election or until their successors have been duly elected and qualified, or until their earlier resignation, removal or death.
Our Board is comprised of six directors (Mr. Oneglia, Mr. Klein, Mr. Brittain, Mr. Miller, Mr. Kennedy, and Mr. Arkley) who qualify as independent directors pursuant to the corporate governance standards for companies listed on the New York Stock Exchange (NYSE). In determining independence pursuant to NYSE standards, each year the Board determines whether directors have a direct or indirect material relationship with the Company, including its subsidiaries, that may interfere with their ability to exercise their independence from the Company. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among others. In evaluating the independence of each non-employee director, the Board considered several factors. With respect to Mr. Oneglia, the Board considered the relationship between O&G Industries, Inc., of which Mr. Oneglia is Vice Chairman of the Board and a principal stockholder, and Perini including the construction joint ventures between Perini and O&G Industries. The Board determined that the joint ventures did not impact Mr. Oneglias independence from Perini management because (1) the joint ventures are formed for the limited purposes of performing specific contractual requirements for owners as is commonplace in the construction business, (2) Mr. Oneglia is not personally involved in the management of these joint ventures and (3) Perini and O&G have an equal vote in the governance of such joint ventures. With respect to Mr. Arkley, the Board considered the relationship between AON Risk Services (AON), of which Mr. Arkley is President of the Construction Services Group, and Perini, an insurance and bonding client of AON. The Board has determined that his independence from Perini management is not impacted because (1) services provided by AON are supplied to Perini on similar terms as to AONs other clients and (2) Mr. Arkley is not involved in the day to day management of the Perini relationship. No other independent directors had material relationships with Perini other than in their capacities as directors.
Committees of the Board of Directors
Our bylaws authorize our Board to appoint one or more committees, each consisting of one or more directors. The Board currently has three standing committees: an Audit Committee, a Corporate Governance and Nominating Committee and a Compensation Committee.
Our Board has an Audit Committee, which consists of Willard W. Brittain, Jr. (Chair), Michael R. Klein, Raymond R. Oneglia and Robert A. Kennedy. Each of the members of the Audit Committee meets the independence and experience requirements of the rules of the NYSE and the Securities and Exchange Commission, as affirmed by the Board. Based upon review of his qualifications, the Board has designated Mr. Brittain as the Committees financial expert, as defined by Item 407 of Regulation S-K. The primary duties and responsibilities of the Audit Committee are to:
The Audit Committee has the authority to retain special legal, accounting or other consultants to advise the Committee.
Corporate Governance and Nominating Committee
Our Board has a Corporate Governance and Nominating Committee, which consists of Michael R. Klein (Chair), Peter Arkley, and Raymond R. Oneglia. Each member of the Committee is an independent director, as defined by the NYSE and as affirmed by the Board. The duties of the Corporate Governance and Nominating Committee include:
Potential Board candidates may include candidates nominated by stockholders in accordance with our By-Laws, those identified by a search firm retained for such purpose, or other candidates. The minimum qualifications and specific qualities and skills required for directors are set forth in the Corporate Governance Guidelines. Any person whose name is so submitted will be evaluated in light of the needs of Perini and the candidates qualities, skills and characteristics. Any nominee recommended by a stockholder will be reviewed and considered in the same manner as any other nominee.
The Corporate Governance and Nominating Committee has the authority to retain consultants or other experts as it considers necessary to assist in the performance of its duties.
Our Board has a Compensation Committee, which consists of Ramond R. Oneglia (Chair), Michael R. Klein and Robert L. Miller. Each member of the Committee is an independent director, as defined by the NYSE and as affirmed by the Board.
The principal powers and duties of the Compensation Committee as established by the Board are to:
The Compensation Committee has the authority to retain special consultants to advise the Committee as it considers necessary.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has served as one of our officers or employees at any time. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the Board or compensation committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires our Executive Officers (as defined in regulations issued by the SEC) and Directors, and persons who own more than ten percent of a registered class of Perinis equity securities (collectively, Insiders), to file initial reports of ownership and reports of changes in ownership of our common stock (including options and warrants to acquire common stock) with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such reports of ownership received by us and certifications from our Executive Officers and Directors, we believe that during fiscal year 2007 all filing requirements applicable to our Insiders were met.
Corporate Governance Policies
We have developed Corporate Governance Guidelines and a Code of Business Conduct and Ethics to outline our commitment to carefully govern the operation of our business and compliance with applicable laws and regulations, while maintaining the highest ethical standards. This policy applies to all of our officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. Perinis Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on our website at http://www.perini.com. In order to access this portion of our website, click on the Corporate Governance tab. Interested parties may obtain printed copies of these documents by writing to the Investor Relations Department of the Company at 73 Mt. Wayte Avenue, Framingham, MA 01701. Any amendments to, or waivers of, the Code of Business Conduct and Ethics which applies to our Directors, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or any person performing similar functions will be disclosed on our website promptly following the date of such amendment or waiver.
Compensation Discussion and Analysis
Our executive compensation program is intended to attract and retain talented executive officers and key employees who will continue to contribute to Perinis long-term success. We believe that it is important to tie compensation to our operating and financial goals, thereby aligning more closely the interest of management with that of our stockholders. We are mindful of the limited pool of available talent and consider competitive conditions when determining compensation.
In recognition of the variability of the building industry, we have historically believed that compensation focusing on shorter term corporate goals is more appropriate for the Company and our stockholders and more effective in retaining and motivating our key executive talent. As a result, our compensation practices for our named executive officers have emphasized annual cash compensation (base salary and annual cash incentive awards). Long term awards have not historically been granted on a regular basis, but instead have been granted when the Compensation Committee has determined an award to be appropriate based on the circumstances prevailing at the time. During 2008, however, we have commenced a project to review our executive compensation practices to determine whether our practices continue to best serve the Company and our stockholders. We expect this review to be more extensive, and our compensation policies and practices to be subject to more substantial revision, if we complete the announced merger with Tutor-Saliba Corporation, as we discuss below on page 10 under the heading Recent Events.
Consistent with this approach, we have historically aimed to have the target annual cash compensation for our named executive officers fall within the 50th to 75th percentile for comparable executives of our relevant competitors. The Compensation Committee slots each of our named executive officer into this range based on the Committees evaluation of the value of that officer to the Company and the amount of compensation necessary to encourage that officer to remain employed by the Company and to appropriately focus that officer on achieving the Companys corporate goals. To ensure that a significant amount of each named executive officers total cash compensation is at risk and earned only if the Companys goals are achieved, approximately 40-50% of each such officers target annual cash compensation is provided in the form of an annual incentive bonus opportunity, with the balance provided in the form of a fixed base salary.
To execute this strategy, the Compensation Committee has engaged Watson Wyatt to perform an executive compensation review with respect to the Companys named executive officers. The most recent review was completed in 2007. Reviewing the relevant data for each of Washington Group International, Shaw Group, Peter Kiewit Sons, Granite Construction, URS Corp., Aecom Technology Corp., Chicago Bridge & Iron Co., Emcor Group Inc., Foster Wheeler, Ltd, Jacobs Engineering Group Inc. and TextraTech Inc., Watson Wyatt established a range of annual cash compensation for each of our named executive officers at the time. Using this data and consistent with the methodology described above, the Committee set the target annual cash compensation for our named executive officers to fall within the 50-75th percentile of annual cash compensation for comparable officers of these companies. As described in more detail below, this methodology was not applied to Mr. Burk, who was hired by the Company in 2007 (following completion of Watson Wyatts study).
Elements of Compensation
As noted above, our executive compensation program primarily relies on annual cash compensation to retain and motivate our named executive officers. Accordingly, base salaries and annual incentive awards are the primary components of our program. In addition, the Committee has used ad hoc grants of long-term incentive awards when deemed appropriate by the Committee based on conditions prevailing at the time. Finally, the Company provides certain retirement benefits to our named executive officers to encourage long-term service to the Company.
The base salary of each of our named executive officers is fixed compensation that is not directly tied to the performance of the Company. We pay base salaries to fairly compensate our named executive officers for the services they provide during the year and because we believe our executive compensation program would not be competitive and effective in retaining our named executive officers if we did not pay base salaries. With the exception of Mr. Burk, who was hired in 2007, the base salaries of our named executive officers were initially established in 2004 at the time Watson Wyatt prepared an initial benchmarking study. At that time, the Committee determined the appropriate level of each named executive officers target total annual cash compensation based on Watson Wyatts study and the Committees evaluation of the appropriate position for each such named executive officer within the desired range for our relevant competitors. The Committee then established the base salary for each named executive officer within this range, generally determining that approximately 40-50% of the target total annual cash compensation for each named executive officer (other than Mr. Burk) was the appropriate amount for base salaries.
Since this initial establishment of the base salaries of our named executive officers in 2004, the Committee has annually reviewed them to determine whether any increases are appropriate. Base salaries are generally increased in March or April of each year, with any increase reflected only prospectively. (As a result, the amount of salary paid to an executive in a fiscal year is less than the increased annual salary amount set by the Committee during that year.) As part of the annual review process in 2007, the Committee also relied on the study prepared by Watson Wyatt in 2007 to confirm that base salaries of our named executive officers (other than Mr. Burk), along with their annual incentive award, would remain within the 50-75th percentile for total annual cash compensation for comparable officers of companies included in the study. The Committee also continued to include 50-60% of target annual cash compensation in the performance-based annual incentive opportunity. In 2007, the base salaries of three of our named executive officers were increased by the following amounts: Mr. Tutor $100,000; Mr. Band $50,000 and Mr. Caspers $75,000. The base salary of our other named executive officers did not change in 2007.
The Committee determined these increases to be appropriate because of its view that Mr. Tutor has unique talents that have been demonstrated throughout his tenure, Mr. Band has led the recent above average performance for both the Company as a whole and as President of Perini Management Services, Inc., and Mr. Caspers is critical to our successful gaming and hospitality business, and works in the highly competitive Las Vegas market. In addition, the Committee considered Mr. Caspers promotion to President of Perini Building Company when deciding on the increase in his salary.
Although the above discussion indicates that Mr. Tutor receives a base salary from the Company, Mr. Tutors base salary was not, in fact, paid directly to him by the Company in 2007. Rather, he was compensated through a Management Agreement with Tutor-Saliba Corporation. However, the Compensation Committee applies similar methodology to determining payments under this agreement as it does to setting executive salary levels.
Mr. Burks base salary was established when he was hired in 2007. At the time of his employment, the Committee believed that it was appropriate and important for Mr. Burk to receive a significant long-term equity award to more significantly tie his earnings to the performance of the Company. Taking this award into account, the Company established Mr. Burks annual base salary at $375,000, which is between the 25-50th percentile for base salaries of comparable officers included in the last compensation study prepared by Watson Wyatt.
Incentive Compensation Plans Annual Awards
As described above, our historic executive compensation program has emphasized the importance of annual cash compensation in motivating and retaining our named executive officers. To provide appropriate incentives to our named executive officers, approximately 40-50% of their target annual cash compensation is comprised of an annual incentive bonus opportunity that is paid only if the Company achieves pre-established performance goals set by the Committee.
For 2007, the Committee established a target annual bonus for each named executive officer that was payable only if the Company achieved the applicable performance goal established by the Committee. If the Company achieved 80% of this goal, each named executive officer would receive 80% of his target annual bonus amount. If the Company achieved between 80% and 100% of this goal, each named executive officer would receive between 80% and 100% of his target annual bonus amount. Each named executive officers annual bonus was capped at 100% of his applicable target bonus, regardless of whether the Company exceeded the applicable performance goal.
The table below shows the threshold, target and maximum bonus opportunities as a percentage of actual base compensation paid in 2007 for our named executive officers:
The dollar amounts corresponding to these percentages are included in the table captioned Grants of Plan-Based Awards Table on page 13.
For 2007, the Committee selected the Companys pre-tax income as the applicable performance goal for the annual bonuses for our named executive officers because this goal encourages executives to both obtain new projects for the Company and to complete the Companys projects on a cost efficient basis. The applicable target goal set by the Committee for 2007 was $116,500,000 of pre-tax income. Because the Company exceeded this goal and earned $154,395,000 of pre-tax income in 2007, each named executive officer was paid his maximum target bonus. Mr. Burk received a target annual bonus amount equal to 75% of his prorated base compensation in 2007, which is the maximum bonus for which he is eligible.
As noted earlier, regular grants of long-term incentives have not played a significant role in our executive compensation because of our historic belief that year-to-year incentives better focus our executives on achieving the Companys performance objectives. Accordingly, with the exception of Mr. Burk, we did not grant long-term incentive awards to our named executive officers in 2007. This decision was due in part to the fact that our named executive officers had received a significant grant of long-term equity awards in 2006 and in part to the Committees determination that another grant of long-term incentives in 2007 was not necessary to appropriately incent our named executive officers.
Mr. Burk received a grant of 50,000 restricted stock units, each of which represents the right to receive one share of our common stock upon vesting. Fifty percent of these awards vested on January 5, 2008 with the balance vesting on January 5, 2009 if Mr. Burk is then employed by the Company. The Committee granted this award to Mr. Burk to immediately provide him with a significant equity stake in the Company so that his earnings are directly and materially tied to the performance of the Company. As noted earlier, this award was taken into account in determining Mr. Burks base salary and 2007 annual bonus opportunity.
In addition to providing annual compensation to our named executive officers, we believe it is imperative that employees provide for their retirement years and believe that it is our obligation to contribute as well. Attractive retirement benefits are essential when competing in the marketplace for talented and qualified employees.
We have a tax-qualified Section 401(k) Retirement Plan covering all of our executive, professional, administrative and clerical employees who are over 21 years of age and who have completed three months of service with us. Employer contributions into the 401(k) plan are based on a non-discretionary match of employees contributions, as defined. The Compensation Committee reviews the employer match formula periodically, comparing the formula to that of similar companies, and improves the formula when it deems appropriate; the most recent change became effective in January 2007.
We also have a defined benefit pension plan for all of our full-time employees who were employed prior to June 1, 2004 when the plan was frozen, meaning that final average earnings and years of service will remain at the June 1, 2004 level for purposes of calculating future benefits. To the extent covered remuneration is limited by the Internal Revenue Code of 1986, as amended, certain pension benefits payable have been augmented through our Benefit Equalization Plan, which was also frozen at June 1, 2004. Following the freezing of the pension plan, in 2004 the Compensation Committee voted to improve the Companys contribution toward employees retirement by enhancing the 401(k) match formula.
Role of Executive Officers in Setting Compensation
We believe that our Chief Executive Officer is best positioned to evaluate both the performance of our other named executive officers and the competitive market for senior executives in our industry. Accordingly, the Committee works closely with Mr. Tutor in establishing the compensation of our other named executive officers. For 2007, Mr. Tutor recommended to the Committee the increases in base salaries and the target annual bonus amounts that he believed appropriate for our named executive officers (other than himself), all within the general framework of our compensation philosophy discussed above. After discussion with Mr. Tutor and careful evaluation of his recommendations, the Committee approved these recommendations.
Impact of Accounting and Tax Treatment
We believe that the primary goals of our executive compensation program are to attract and retain valued and important named executive officers, to clearly identify for our named executive officers the corporate goals and objectives important to the Company, to motivate our named executive officers to achieve these goals and to fairly reward our named executive officers for achieving these goals. Accordingly, the accounting and tax treatment of our executive compensation program, while important, is not a determining factor in structuring our program. We appropriately account for our executive compensation and, to the extent consonant with the goals of our executive
compensation program, we attempt to structure our executive compensation program to preserve the deductibility of amounts paid to our named executive officers. With respect to 2007, we believe that the cash compensation paid to our named executive officers is fully deductible.
In April 2008 we entered into a merger agreement with Tutor-Saliba Corporation. If the merger is completed, we will be a significantly larger and more diverse company. In connection with the signing of the merger agreement, we negotiated and signed a five-year employment agreement with Mr. Tutor that will become effective only if we consummate that transaction. In addition, if we consummate the transaction, we may implement other changes to our executive compensation philosophy and approach. We intend to work with Watson Wyatt in evaluating potential changes to levels and elements of compensation, as well as to our compensation programs and policies in light of the impact of the merger on our business. We also are considering the possibility of entering into employment agreements with some of our executives in connection with the merger.
Compensation Committee Report
During 2007, the Compensation Committee of the Board consisted of three Directors, each of whom is independent under the rules of the New York Stock Exchange. The Committee met seven times during 2007.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis (CD&A) for the year ended December 31, 2007. In reliance on those reviews and discussions, the Committee has recommended to the Board, and the Board has approved, that the CD&A be included in the Companys Annual Report on Form 10-K/A for 2007. This Report is provided by the following independent directors, who comprise the Compensation Committee:
RAYMOND R. ONEGLIA (CHAIR)
ROBERT L. MILLER
MICHAEL R. KLEIN
Summary Compensation Table
The table below summarizes the total compensation paid to or earned by each of our named executive officers for the fiscal years ended December 31, 2007 and December 31, 2006.
Messrs. Shaw and Caspers, with the concurrence of the Compensation Committee, had a portion of their annual incentive payments allocated to a bonus pool for the benefit of employees who work for Perini Building Company and who are otherwise not eligible to participate in the incentive compensation plan. As a result, the incentive payments made to Messrs. Shaw and Caspers for 2007 were reduced by $21,250 and $20,500 ($20,600 and $13,600 for 2006), respectively, to fund these allocations.
The $26,300 listed for Mr. Burk includes temporary housing expenses ($15,800) and vehicle allowance ($3,600). It also includes life insurance premiums.
The $62,000 listed for Mr. Ciskey includes temporary housing expenses ($27,300) and company vehicle use ($13,800). It also includes his 401(k) match ($9,000), tax gross-up ($9,700) and life insurance premiums.
The $92,100 listed for Mr. Shaw includes temporary housing expenses ($45,300), company vehicle use ($23,800), and club membership dues ($10,500). It also includes his 401(k) match ($9,000) and life insurance premiums.
The $35,800 listed for Mr. Band includes company vehicle use ($12,400), his 401(k) match ($9,000), tax gross-up ($8,900) and life insurance premiums.
The $56,700 listed for Mr. Caspers includes company vehicle use ($23,250), temporary housing expenses ($12,100), club membership dues ($7,300), and travel allowance. It also includes his 401(k) match ($9,000) and life insurance premiums.
Grants of Plan-Based Awards Table
The Non-Equity Incentive Plan is discussed on page 8. These awards were granted in March 2007 (awards to Mr. Burk were granted upon commencement of his employment September, 2007) contingent upon the attainment of 2007 pretax income goals. The related goals were established by the Compensation Committee following consultation with management, and were set at a level that the Committee believed was achievable with a high level of effort. The goals were met, and the Committee voted to make the maximum payout according to the plan formula to the above individuals in April, 2008.
The Equity Incentive Plan, the 2004 Stock Option and Incentive Plan, is discussed under Long-Term Incentives on page 9. The restricted stock units awarded above are valued at $53.22, the closing price of our common stock on the measurement date, in accordance with FAS123(R). These awards are subject to time-based vesting: 50% vested in January 2008 and 50% is scheduled to vest in January 2009.
Outstanding Equity Awards at Fiscal Year-End Table
(T) - Units are time-vested
(P) - Units are performance-vested
Option Exercises and Stock Vested Table
Pension Benefits for 2007 Fiscal Year
The Company has a defined benefit pension plan that covers its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The plan is noncontributory and benefits are based on an employees years of service and final average earnings, as defined. The plan provides reduced benefits for early retirement and takes into account offsets for social security benefits. All employees are vested after five years of service. The Company also has an unfunded supplemental retirement plan (the Benefits Equalization Plan, or BEP) for certain employees whose benefits under the defined benefit pension plan were reduced because of compensation limitations under federal tax laws.
The normal retirement benefit under these plans is equal to:
.75% of final average earnings, as defined, not in excess of covered compensation (as defined), multiplied by years of service, up to 25; plus
1.5% of final average earnings, as defined, in excess of covered compensation (as defined), multiplied by years of service, up to 25.
Our plans provide for early retirement upon either the attainment of age 55 and 10 years of service, or the completion of 25 years of service. Accordingly, Mr. Ciskey, Mr. Shaw and Mr. Band are all currently eligible for early retirement benefits. Under our plans, a participant who elects early retirement may elect to receive either an immediate early retirement income equal to 91% of his or her normal retirement benefit or a deferred benefit. Upon the attainment of age 62 and completion of 25 years of service, the participant may receive an unreduced pension equal to his or her normal retirement benefit. A reduced benefit is available for a participant who elects early retirement and wishes to receive benefits prior to age 62.
Effective June 1, 2004, all benefit accruals under the Companys pension plans were frozen; however, the current vested benefits will be preserved. Accordingly, our named executive officers will not earn additional pension benefits, but they may become eligible for an early retirement benefit (which will be based on their frozen normal retirement benefit) based on service after June 1, 2004.
None of our named executive officers have written employment agreements with the Company or any arrangement that provides termination benefits.
The following table sets forth compensation information for 2007 for each member of our Board.
Our Compensation Committee determines the level of compensation to be paid to our Board. Periodically, this committee reviews the functions being performed by the Board and its committees, as well as the board compensation paid by similar companies, in order to determine whether an adjustment should be made.
Fees for our outside directors consist of an annual retainer fee of $40,000, payable in cash or common stock at each directors option, plus 1,000 shares of common stock. Fees paid in company stock are included in the Stock Awards column above. Directors also receive $900 per Board meeting attended in person and $300 per meeting attended telephonically. Members of the Audit Committee receive $2,000 per meeting attended in person and $500 per meeting attended telephonically. The Audit Committee Chair receives an additional annual retainer of $10,000. Ronald N. Tutor, our Chairman and Chief Executive Officer, does not receive director fees since he is party to a management agreement described in Certain Relationships and Related Transactions and Director Independence.
No directors had outstanding stock options at December 31, 2007.
Director and Officer Indemnification
Our Articles of Organization provide that no director shall be personally liable to us or to our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the directors duty of loyalty to us or our stockholders, for acts or omissions not in good faith, for acts or omissions involving intentional misconduct or a knowing violation of law or for any transaction from which the director derived an improper personal benefit. Our By-Laws provide that our directors and officers will be indemnified against liabilities that arise from their service as directors and officers, subject to certain exceptions. We have obtained insurance which insures our directors and officers against certain losses and which insures us against our obligations to indemnify our directors and officers.
The following table sets forth certain information concerning beneficial ownership as of March 31, 2008 of our common stock by each Director; each Executive Officer named in the summary compensation table; all Directors and Executive Officers as a Group; and all persons we know to hold in excess of 5% of our common stock.
In preparing the following table, we relied upon statements filed with the SEC by beneficial owners of more than 5% of the outstanding shares of our common stock pursuant to Section 13(d) or 13(g) of the Exchange Act, unless we knew or had reason to believe that the information contained in such statements was not complete or accurate, in which case we relied upon information which we considered to be accurate and complete. Unless otherwise indicated, the address of each of the individuals and entities named below is: c/o Perini Corporation, 73 Mt. Wayte Avenue, Framingham, Massachusetts 01701.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth certain summary information with respect to stock options granted and available for future grants under equity compensation plans as of December 31, 2007:
Certain Relationships and Related Party Transactions
We have adopted the Code of Business Conduct and Ethics for executive officers and directors that addresses potential conflict of interest situations, including related party transactions. Under this policy, any questions are required to be directed to our Chief Compliance Officer, and suspected violations are required to be reported to the Chief Compliance Officer or the Chair of the Audit Committee. In addition, our Audit Committee is responsible for reviewing and evaluating potential transactions with related parties, and then advising the Board whether such transactions are appropriate.
The transactions described below were reviewed and approved by the Audit Committee in accordance with our policies. In addition, we believe that the transactions described below were on terms that were at least as favorable to us as we would have expected to negotiate with other unaffiliated third parties at the point in time these transactions were consummated.
Tutor-Saliba Management Agreement
In January 1997, we entered into a management agreement with Tutor-Saliba, a California corporation engaged in the construction industry, and Ronald N. Tutor, chief executive officer and primary beneficial owner of Tutor-Saliba, to provide certain management services. The management agreement has been renewed annually by our Compensation Committee, which consists entirely of independent directors, under the same basic terms and conditions as the initial agreement except that the amount of the fee payable thereunder by us to Tutor-Saliba has been increased. In March 2007, the Compensation Committee voted to increase the annual payment to $1,000,000.
Tutor-Saliba Joint Ventures
Historically, we have participated in joint ventures with Tutor-Saliba and currently participate in certain joint ventures with them. Some of these joint venture projects have been managed by Tutor-Saliba and others have been managed by us. These joint ventures generated total revenues of $96.0 million in 2007 of which our share contributed $70.6 million to our consolidated revenues for the year ended December 31, 2007.
O&G Joint Ventures
We also have participated in certain joint ventures with O&G Industries, Inc., of which Raymond R. Oneglia, one of our directors, is vice chairman of the board of directors. These joint ventures generated total revenues of $4.4 million in 2007 of which our share contributed $3.1 million to our consolidated revenues for the year ended December 31, 2007.
In January 2008 Tutor-Saliba acquired a plumbing contractor which at the time of such acquisition had subcontracts with Perini totaling approximately $63.7 million.
Merger Agreement and related transactions
The following transactions were recommended to the Board by a special committee of the Board comprised solely of independent directors, and then approved by the full Board (with Mr. Tutor not participating or voting).
On April 2, 2008, we entered into an agreement and plan of merger (the Merger Agreement) with Tutor-Saliba Corporation pursuant to which Tutor-Saliba will merger with one of our wholly-owned subsidiaries. Upon the effective time of this merger, Tutor-Saliba shareholders will receive a total of 22,987,293 shares of Perini common stock in exchange for their shares of Tutor-Saliba common stock, which will represent approximately 45% of the
outstanding Perini common stock following the completion of the transaction. The total transaction value will be approximately $862 million based on Perinis closing price of $38.10 on April 1, 2008. The consummation of the merger is subject to the satisfaction or waiver of customary closing conditions, including the receipt of required regulatory approvals and approval by Perini shareholders. On that same day, in connection with the execution of the Merger Agreement, we entered into a Shareholders Agreement with Mr. Tutor, as shareholder representative, and the shareholders of Tutor-Saliba who will become shareholders of Perini upon consummation of the merger discussed above. This Shareholders Agreement addresses the post-merger composition of our Board, restrictions on Mr. Tutor and other former Tutor-Saliba shareholders from taking certain actions to obtain control of Perini or to vote more than 20% of the outstanding shares of Perini common stock and limitations on their right to sell Perini common stock acquired in the merger. We also entered into a five-year employment agreement with Mr. Tutor pursuant to which Mr. Tutor will serve as Chief Executive Officer of Perini, as a member of Perinis Board of Directors, and Chairman of the Board. Under the terms of the employment agreement, Mr. Tutor will receive an initial annual base salary of $1,500,000, subject to annual review and upward adjustment, an annual performance-based cash bonus equal to 175% of his base salary if target performance levels established by the Compensation Committee are satisfied (with greater or lesser amounts paid if performance levels are above or below such target level), and will be eligible to participate in Perinis equity incentive plan to be adopted after the merger is completed. Mr. Tutor is also entitled to various perquisites and benefits set forth in the employment agreement, and will receive severance if we terminate Mr. Tutors employment for any reason other than for Cause or disability or Mr. Tutor terminates his employment for Good Reason (as such terms are defined in the Employment Agreement). Both the Shareholders Agreement and the employment agreement with Mr. Tutor will take effect only if and when the merger is completed, although both agreements have been fully executed by all parties. We describe the Merger Agreement, the Shareholders Agreement and the employment agreement in greater detail in the Current Report on Form 8-K that we filed with the SEC on April 7, 2008. That filing also includes copies of all three agreements.
See Item 10 of Part III of this Form 10-K/A for information regarding director independence.
During the years ended December 31, 2007 and 2006, we retained Deloitte & Touche LLP to provide services in the following categories and amounts:
The Audit Committee has considered the nature of the tax services provided by Deloitte & Touche LLP in 2006 and concluded they are compatible with maintaining the auditors independence.
Pre-Approval Policy and Procedures
The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by the Companys independent auditors. These policies generally provide that the Company will not engage its independent auditors to provide audit and non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.
From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to the Company by its independent auditors during the next 12 months. Any such pre-approval is detailed as to the particular service or type of service to be provided and is also generally subject to a maximum dollar amount.
The Audit Committee has also delegated to the Chair of the Audit Committee the authority to approve any audit or non-audit services to be provided to the Company by its independent auditors. Any approval of services by the Chair of the Audit Committee pursuant to this delegated authority is reported at the next meeting of the Audit Committee.
The following exhibits are filed herewith:
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized on April 29, 2008.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.