SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____________ to ____________
Commission File number 0-3062
GUY F. ATKINSON COMPANY OF CALIFORNIA
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 94-1649018
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1001 Bayhill Drive, San Bruno, California 94066
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 876-1000
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Common stock as of November 11, 1996
Issued and outstanding - 8,987,467 shares
Page 1
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
3-4 Consolidated Balance Sheets
5 Consolidated Statements of Income
6 Consolidated Statements of Cash Flows
7 Notes to Consolidated Financial Statements
Page 2
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<CAPTION>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share and per share amounts)
- ---------------------------------------------------------------------------------------------------------------
September 30, December 31,
1996 1995
(unaudited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 3,497 $ 39,804
Accounts receivable 119,597 76,196
Costs and estimated earnings in excess of billings 27,933 28,751
Inventories and unamortized costs on contracts 21,245 20,987
Investments in joint ventures 42,204 32,272
Other current assets 6,533 5,244
- --------------------------------------------------------------------------------------------------------------
Total current assets 221,009 203,254
- --------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT At cost:
Land 2,572 2,683
Buildings 10,386 11,203
Construction equipment 31,973 36,036
Other equipment 8,498 7,478
- --------------------------------------------------------------------------------------------------------------
53,429 57,400
Less accumulated depreciation 30,679 28,163
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Total property, plant and equipment, net 22,750 29,237
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Other assets 2,337 2,353
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Total assets $ 246,096 $234,844
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See accompanying notes
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<TABLE>
<CAPTION>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share and per share amounts)
- ---------------------------------------------------------------------------------------------------------------
September 30, December 31,
1996 1995
(unaudited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, including current portion of long-term debt $ 29,104 $ 844
Accounts payable 70,345 86,671
Billings in excess of costs and estimated earnings 17,765 20,300
Accrued federal & foreign income taxes 7,476 5,020
Other accrued expenses 25,396 28,145
Deferred income taxes 248 248
Due to joint ventures 566 730
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities 150,900 141,958
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NON-CURRENT LIABILITIES
Long-term debt, less current portion 1,494 1,917
Deferred income taxes 88 88
Postretirement health care and postemployment benefit obligations 7,423 7,423
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 159,905 151,386
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STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01; 2,000,000 shares authorized;
none issued or outstanding
Common stock, par value $0.01; 20,000,000 shares authorized;
8,987,467 outstanding at September 30,1996 and
8,951,154 at December 31, 1995 1,895 1,895
Paid-in capital 13,262 13,085
Accumulated translation adjustment (4,392) (4,446)
Unearned compensation - (400)
Additional pension liability (344) (344)
Retained earnings 75,770 73,668
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Total stockholders' equity 86,191 83,458
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Total liabilities and stockholders' equity $ 246,096 $234,844
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See accompanying notes
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<CAPTION>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands of dollars except share and per share amounts)
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Quarter Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenue $ 126,011 $ 91,364 $ 353,910 $267,536
Cost of revenue 115,067 80,546 321,414 242,516
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Gross margin 10,944 10,818 32,496 25,020
General and administrative expenses 10,318 9,736 30,309 27,423
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Income (loss) from operations 626 1,082 2,187 (2,403)
Other income (expense)
Interest income 102 904 1,659 2,990
Interest expense (582) (172) (891) (430)
Miscellaneous 773 (305) 1,020 825
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Total other income 293 427 1,788 3,385
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Income before income taxes 919 1,509 3,975 982
Provision (benefit) for income taxes (82) 294 1,873 33
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Net income $ 1,001 $ 1,215 $ 2,102 $ 949
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Net income per share $ 0.11 $ 0.13 $ 0.23 $ 0.10
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Average number of shares and common
stock equivalents utilized in net income
per share calculation 9,458,000 9,231,000 9,374,000 9,157,000
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See accompanying notes
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<TABLE>
<CAPTION>
GUY F. ATKINSON COMPANY OF CALIFORNIA CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars except share and per share amounts)
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Nine Months Ended September 30, 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,102 $ 949
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 9,221 2,642
Deferred income taxes - 1
(Gain) on dispositions of property, plant and equipment (3,271) (2,954)
Changes in operating assets and liabilities:
Accounts receivable (43,375) (26,230)
Inventories and unamortized costs on contracts (255) 1,203
Investments in joint ventures (10,091) 3,006
Other current assets (1,290) (187)
Accounts payable and accrued expenses (19,094) 5,335
Accrued income taxes 2,456 (2,474)
Billings in excess of costs and estimated earnings, net (1,723) 18,228
Other, net 95 (87)
- ------------------------------------------------------------------------------------------------------------
Net cash (used in) operating activities (65,225) (568)
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Cash flows from investing activities:
Property, plant and equipment expenditures (8,534) (16,211)
Proceeds from dispositions of property, plant and equipment 9,078 6,932
Increase (decrease) in other assets, net 16 (894)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 560 (10,173)
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Cash flows from financing activities:
Short-term borrowings 28,300 -
Long-term borrowing (repayments), net (465) 138
Common stock issuance related to stock option awards 577 -
Cash dividends paid - (17,835)
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Net cash provided by (used in) financing activities 28,412 (17,697)
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Effect of exchange rate changes on cash (54) 1,070
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Net (decrease) in cash and short-term investments $(36,307) $(27,368)
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Supplementary information: Cash paid (received) during the period for:
Interest $ 3,016 $ 451
Federal, foreign and state income taxes (378) 3,675
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See accompanying notes
Page 6
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GUY F. ATKINSON COMPANY OF CALIFORNIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars except share and per share amounts)
FINANCIAL STATEMENT CONTENT
The information contained herein reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of results for the
interim periods.
<TABLE>
<CAPTION>
INVENTORIES AND UNAMORTIZED COSTS ON CONTRACTS
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Inventory classifications are as follows: September 30, 1996 December 31, 1995
(unaudited)
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<S> <C> <C>
Construction materials and supplies $ 1,792 $ 2,812
Unamortized costs on contracts 19,453 18,175
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$ 21,245 $ 20,987
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STOCK OPTIONS AND WARRANTS
At September 30, 1996, the Company had options outstanding with respect to
922,658 shares of common stock at exercise prices ranging from $6.55 to $11.95
per share. The right to exercise these options vests progressively over a four
year period commencing with the date of issue and expiring ten years from the
date of issue. In addition, there were stock warrants outstanding for 387,500
shares of common stock with an exercise price of $7.00 expiring in 1998.
EARNINGS PER SHARE
Net primary earnings per share of common and common stock equivalents are
calculated using the weighted average number of common shares outstanding, plus
the net additional number of shares which would be issuable upon the exercise of
stock options and warrants, assuming that the Company used the proceeds received
to repurchase outstanding shares at market prices.
LITIGATION AND CONTINGENCIES
On March 7, 1995, a complaint asserting breach of contract and other wrongdoing
in connection with the Company's sale of its manufacturing subsidiary, Lake
Center Industries, Inc., was filed against the Company and its financial advisor
by an unsuccessful bidder for Lake Center. The plaintiffs allege they have
suffered actual damages of $290 in connection with preparting their bid, and
also seek to recover $7,000 on a theory of unjust enrichment, together with an
additional $10,000 in punitive damages. The Company will vigorously defend this
suit, which it believes to be without merit, and further believes that the
outcome will not have a material adverse effect on its financial condition.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1996 VS. QUARTER ENDED SEPTEMBER 30, 1995
(in thousands of dollars except share and per share amounts)
Revenue:
The Company's revenue of $126,011 in the third quarter of 1996 increased by 38
percent over the corresponding $91,364 in the third quarter of 1995. The
increase in revenue was attributable to the substantial volume of new contract
awards in 1995 that is making a significant contribution to revenue in 1996. The
backlog of uncompleted contracts amounted to $598,732 at September 30, 1996,
representing an increase of 27 percent over the September 30, 1995 backlog of
$471,327.
Gross margin:
The Company's gross margin of $10,944 increased by 1 percent in the third
quarter of 1996 over the corresponding $10,818 in 1995. Gross margin in the 1995
period included $1,700 from the settlement of a construction claim. Excluding
this item from the 1995 period, the increase in gross margin from 1995 to 1996
was 20 percent.
General and administrative expense:
General and administrative expenses of $10,318 in 1996 were 6 percent higher
than the corresponding figure of $9,736 in 1995 due to an increased level of
business development activities in construction and water and wastewater
treatment, together with increased international market development.
Interest income:
Interest income decreased to $102 in 1996 from $904 in 1995 due to the reduced
level of invested cash in 1996.
Interest expense:
Interest expense increased to $582 in the third quarter of 1996 from $172 in
1995. The increase was due to the higher level of borrowings in 1996 compared
with 1995.
Miscellaneous:
Miscellaneous income amounted to $773 in 1996, compared with miscellaneous
expense of $305 in 1995. Miscellaneous income and expense consists of, among
other items, gains and losses from foreign exchange and property dispositions.
The $773 in 1996 included a gain of $530 from the collection of a receivable
which had previously been written-off as unrecoverable.
Income taxes and net income:
Income before taxes amounted to $919 in 1996, compared with $1,509 in 1995.
Income tax benefit was $82 in 1996 compared with an income tax expense of $294
in 1995. The 1995 tax expense was primarily attributable to state and foreign
income taxes, while the 1996 tax benefit was due to the recovery of federal and
foreign taxes expensed in earlier periods.
Net income for the third quarter of 1996 amounted to $1,001, compared with
$1,215 in the third quarter of 1995.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. NINE MONTHS ENDED SEPTEMBER 30, 1995
Revenue:
Revenue of $353,910 for the nine month period of 1996 increased by 32 percent
over the corresponding $267,536 in 1995, as new construction contracts awarded
in 1995 continue to contribute significantly to revenues in 1996.
Gross margin:
The Company's gross margin of $32,496 increased by 30 percent in the nine month
period of 1996 over the corresponding figure of $25,020 in 1995 due to the
increased volume of construction revenue.
General and administrative expense:
General and administrative expenses of $30,309 in 1996 were 11 percent higher
than the corresponding $27,423 in 1995. This increase is primarily attributable
to business development expenditures, as the Company pursues construction
opportunities both domestically and internationally.
Interest income:
Interest income decreased to $1,659 in the nine month period of 1996 from $2,990
in 1995 due to the reduced level of short-term investment balances in 1996.
Interest income in 1996 includes $1,060 earned on a deferred receivable as
outlined in the discussion of "Liquidity and Capital Resources."
Interest expense:
Interest expense increased to $891 in 1996 from $430 in 1995 due to a higher
average level of borrowings in 1996, compared with 1995.
Miscellaneous:
Miscellaneous income amounted to $1,020 in 1996, compared with $825 in 1995.
Miscellaneous income in 1996 included $530 from the collection of a receivable
previously written-off as unrecoverable, together with a gain of $620 from the
disposition of surplus real estate. 1995 miscellaneous income included a gain of
$1,900 from the disposition of surplus real estate.
Income taxes and net income:
Income before taxes amounted to $3,975 in the nine month period of 1996,
compared with $982 in the corresponding period of 1995. Income taxes gave rise
to an expense of $1,873 in 1996 compared with $33 in 1995. The 1996 income tax
expense was primarily attributable to foreign income taxes on foreign source
income, while the 1995 income tax expense was attributable to offsetting foreign
income taxes with the recovery of foreign taxes expensed in earlier periods.
Net income for the nine month period of 1996 amounted to $2,102, compared with
$949 in 1995.
Page 9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
Operating activities utilized cash of $65,225 in the nine month period of 1996,
compared with $568 during the corresponding period of 1995.
The utilization of cash by operating activities in 1996 is primarily
attributable to higher accounts receivable balances and an increased level of
investment in joint ventures, both of which result from the increased volume of
construction revenues in 1996 compared with 1995.
Specifically, the Company has an outstanding receivable of approximately $35,000
relating to a project to construct the first phase of a continuing care
retirement facility in Southern California. The funds to repay this receivable
are generated from the sale of residential units in the facility, the proceeds
of which are placed in an escrow account to be released and applied towards
payment of the receivable as certain milestones are met, including sale of a
certain number of the units and obtaining a state license. The Company has no
control over attainment of these milestones and, therefore, cannot estimate when
it will receive payment.
In addition, the Company has outstanding accounts receivable of approximately
$20,000 relating to a construction project in Indonesia. Collection of these
receivables has been delayed pending renegotiation of the contract to allow for
changes in contract scope and duration.
Investing activities generated cash of $560 in 1996, compared with a net
utilization of $10,173 in 1995 as the acquisition of new construction equipment
to service ongoing construction projects was offset by the selective disposition
of older equipment.
The Company's 1996 cash requirements for operations of $65,225 were financed by
drawing upon cash and short-term investments amounting to $36,307, and by
short-term borrowing of $28,300.
The Company has syndicated lines of credit of $15,000 expiring April 30, 1997
and $40,000 expiring June 30, 1997. The availability of these lines of credit is
reduced by any letters of credit which may be outstanding under the lines. At
September 30, 1996, the Company had $28,300 in outstanding borrowings and $6,098
in outstanding letters of credit.
The Company believes that its cash and short-term investments, together with
lines of credit and funds generated from operations and other sources will be
adequate to cover foreseeable future requirements.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the period.
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GUY F. ATKINSON COMPANY OF CALIFORNIA
AND CONSOLIDATED SUBSIDIARIES
SIGNATURE
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.
GUY F. ATKINSON COMPANY OF CALIFORNIA
By: /s/ Herbert D. Montgomery
Herbert D. Montgomery
Senior Vice President, Chief
Financial Officer and Treasurer
Date: November 12, 1996
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,952
<SECURITIES> 545
<RECEIVABLES> 119,597
<ALLOWANCES> 0
<INVENTORY> 21,245
<CURRENT-ASSETS> 221,009
<PP&E> 53,429
<DEPRECIATION> 30,679
<TOTAL-ASSETS> 246,096
<CURRENT-LIABILITIES> 150,900
<BONDS> 1,494
0
0
<COMMON> 1,895
<OTHER-SE> 84,296
<TOTAL-LIABILITY-AND-EQUITY> 246,096
<SALES> 0
<TOTAL-REVENUES> 353,910
<CGS> 0
<TOTAL-COSTS> 321,414
<OTHER-EXPENSES> 30,309
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 891
<INCOME-PRETAX> 3,975
<INCOME-TAX> 1,873
<INCOME-CONTINUING> 2,102
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,102
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0
</TABLE>
