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 June 30, 1997
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: (650) 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 September 23, 1997
Issued and outstanding - 8,987,467 shares
Page 1
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
3-4 Consolidated Balance Sheets
5 Consolidated Statements of Operations
6 Consolidated Statements of Cash Flows
7-8 Notes to Consolidated Financial Statements
Page 2
<PAGE>
<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share and per share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1997 1996
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,953 $ 7,854
Accounts receivable 127,173 118,964
Costs and estimated earnings in excess of billings 10,828 12,511
Inventories and unamortized costs on contracts 52,270 56,601
Investments in joint ventures 31,858 34,076
Deferred income taxes 223 225
Other current assets 3,720 3,986
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 237,025 234,217
- ------------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment At cost:
Land 2,403 2,528
Buildings 8,171 10,232
Construction equipment 26,089 32,928
Other equipment 8,744 8,314
- ------------------------------------------------------------------------------------------------------------------------------------
45,407 54,002
Less accumulated depreciation 31,350 25,341
- ------------------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment, net 14,057 28,661
- ------------------------------------------------------------------------------------------------------------------------------------
Other assets 1,322 2,345
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 252,404 $265,223
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes
</TABLE>
Page 3
<PAGE>
<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share and per share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1997 1996
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, including current portion of long-term debt $ 53,432 $ 33,402
Accounts payable 89,948 81,981
Billings in excess of costs and estimated earnings 23,482 21,422
Accrued federal & foreign income taxes 9,478 8,096
Other accrued expenses 27,562 21,953
Due to joint ventures 272 588
- -----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 204,174 167,442
- -----------------------------------------------------------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
Long-term debt, less current portion 846 1,210
Deferred income taxes 108 109
Postretirement health care and postemployment benefit obligations 7,178 7,178
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 212,306 175,939
- -----------------------------------------------------------------------------------------------------------------------------------
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 June 30, 1997 and
at December 31, 1996 1,896 1,896
Paid-in capital 13,262 13,262
Accumulated translation adjustment (4,544) (4,526)
Additional pension liability (35) (35)
Retained earnings 29,519 78,687
- -----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 40,098 89,284
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 252,404 $265,223
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes
</TABLE>
Page 4
<PAGE>
<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands of dollars except share and per share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Quarters ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 111,357 $ 128,714 $ 231,415 $ 227,899
Cost of revenue 138,594 115,787 247,111 206,347
- ------------------------------------------------------------------------------------------------------------------------------------
Gross margin (27,237) 12,927 (15,696) 21,552
Restructuring charges 6,906 - 6,906 -
General and administrative expenses 10,733 10,113 21,907 19,991
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (44,876) 2,814 (44,509) 1,561
Other income (expense)
Interest income 183 703 320 1,557
Interest expense (1,123) (152) (2,002) (309)
Miscellaneous (845) (375) (1,058) 247
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (1,785) 176 (2,740) 1,495
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (46,661) 2,990 (47,249) 3,056
Provision for income taxes 1,115 1,406 1,919 1,955
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (47,776) $ 1,584 $ (49,168) $ 1,101
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share of common stock $ (5.32) $ 0.17 $ (5.47) $ 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
Average number of shares of common stock equivalents
utilized in net income (loss) per share calculation 8,987,000 9,403,000 8,987,000 9,328,000
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes
</TABLE>
Page 5
<PAGE>
<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars except share and per share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (49,168) $ 1,101
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Restructuring charges 6,906 -
Depreciation and amortization 8,293 5,974
(Gain) on dispositions of property, plant and equipment (1,058) (2,759)
Changes in operating assets and liabilities:
Accounts receivable (8,373) (36,664)
Inventories and unamortized costs on contracts 4,145 (5,080)
Investments in joint ventures 1,880 (5,354)
Other current assets 264 (1,117)
Accounts payable and accrued expenses 9,844 (14,646)
Accrued income taxes 1,406 3,715
Billings in excess of costs and estimated earnings, net 3,757 18,044
Other, net (158) 56
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) operating activities (22,262) (36,730)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Property, plant and equipment expenditures (666) (6,637)
Proceeds from dispositions of property, plant and equipment 5,994 5,160
Increase (decrease) in other assets, net 18 (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 5,346 (1,478)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Short-term borrowings 20,030 2,200
Long-term debt repayments (364) (293)
Common stock issuance related to stock option awards - 422
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 19,666 2,329
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 349 (16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ 3,099 $ (35,895)
- ------------------------------------------------------------------------------------------------------------------------------------
Supplementary information:
Cash paid during the year for:
Interest $ 2,004 $ 300
Federal, foreign and state income taxes 272 (2,258)
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes
</TABLE>
Page 6
<PAGE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars except share and per share amounts)
- --------------------------------------------------------------------------------
1. SUBSEQUENT EVENTS
BANKRUPTCY
The company's $55,000 syndicated credit facility matured on June 30, 1997 and
has not been renewed. On June 13, 1997, the company was notified of the banks'
intention not to renew the credit facility. The company, therefore, fully drew
down the credit facility in the amount of $52,530 in borrowings and $2,470 in
letters of credit. The company was notified by its banks that, by reason of the
maturity of the credit facility, it is in default under the terms of the Credit
Agreement, and all amounts outstanding are subject to a default rate of
interest, currently equivalent to 11.25% per annum, which default rate is
subject to Court approval.
On August 10, 1997, the company, together with its two principal operating
subsidiaries, Guy F. Atkinson Company and Guy F. Atkinson Holdings, Ltd., filed
petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. These
petitions were filed in the United States Bankruptcy Court for the Northern
District of California, and were assigned case numbers 97-33694-TC, 97-33695-TC,
and 97-33696-TC.
The company and its subsidiaries are continuing to operate their businesses as
debtors-in-possession pursuant to the U.S. Bankruptcy Code.
DEBTOR-IN-POSSESSION FINANCING
On August 25, 1997, the company was authorized by the United States Bankruptcy
Court to enter into debtor-in-possession borrowing arrangements with its surety
companies to enable the company to finance its bonded construction projects. On
September 8, 1997, the company entered into a $60,000 revolving line of credit
from its surety companies. This line of credit, which was approved by the
Bankruptcy Court on September 12, 1997, bears interest at prime plus 0.75% and
is secured by a first priority lien on certain assets on bonded construction
projects. The credit line terminates on the earlier of October 31, 1997, the
sale of the company, or its emergence from bankruptcy under a confirmed Plan of
Reorganization.
POTENTIAL DELISTING
The NASDAQ Stock Market, Inc. has notified the company that the company's common
stock could be delisted as a result of the bankruptcy filing and the company's
failure, due to such filing, to file with the SEC its quarterly report for the
period ended June 30, 1997. The company has made a request for continued listing
on the NASDAQ National Market and such request is scheduled to be considered at
a hearing on September 25, 1997. While the company believes that with the filing
of this quarterly report, it is in compliance with all of the maintenance
criteria for NASDAQ National Market issuers, NASDAQ's rules permit it to suspend
or terminate the listing of securities of a company that has filed a bankruptcy
petition unless it is determined that "the public interest and the protection of
investors would be served" by continued listing.
Page 7
<PAGE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars except share and per share amounts)
- --------------------------------------------------------------------------------
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The accompanying financial statements have been prepared on a going concern
basis, under the assumption that assets will be realized, and liabilities
discharged, in the normal course of business. Management cannot predict whether
or when the company will emerge from bankruptcy. Accordingly, substantial doubt
exists as to the company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments that might
result from the realization of settlement or liquidation values for its assets.
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.
3. NEWLY ISSUED ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," No. 129,
"Disclosure of Information about Capital Structure," No. 130, "Reporting
Comprehensive Income," and No. 131 "Disclosures about Segments of an Enterprise
and Related Information." SFAS No. 128 establishes standards for computing and
presenting earnings per share (EPS), replacing the presentation of primary EPS
with a presentation of basic EPS. SFAS No. 129 consolidates the existing
disclosure requirements regarding an entity's capital structure. SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components within the financial statements. Comprehensive income is the
change in equity of a business enterprise during a period resulting from
transactions and other events and circumstances from nonowner sources. SFAS No.
131 establishes standards for the reporting of information about operating
segments in interim financial reports, as well as disclosures concerning
products and services, geographic areas and major customers. SFAS Nos. 128, 129,
130 and 131 are effective for financial statements issued for periods ending
after December 15, 1997, and accordingly management has not determined the
impact on the company's financial statements for the quarter ended June 30,
1997.
<TABLE>
4. INVENTORIES AND UNAMORTIZED COSTS ON CONTRACTS
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
The major classifications of inventory are as follows: June 30, 1997 December 31, 1996
(unaudited)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Construction materials, parts and supplies $ 1,747 $ 1,728
Unamortized costs on contracts 50,523 54,873
- -----------------------------------------------------------------------------------------------------------------------
$ 52,270 $ 56,601
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
5. STOCK OPTIONS AND WARRANTS
At June 30, 1997, the company had options outstanding with respect to 1,161,044
shares of common stock at exercise prices ranging from $6.55 to $13.38 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.
Page 8
<PAGE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars except share and per share amounts)
- --------------------------------------------------------------------------------
6. 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.
7. RESTRUCTURING
During the second quarter of 1997, the company recorded restructuring charges of
$6,906 in connection with the phasing out of the company's divisional structure,
and its restructuring as a single operational entity. This restructuring will
result in the elimination of certain offices and the consolidation of certain
facilities and support functions. The restructuring charge is made up as
follows:
Consolidation of offices and facilities $3,267
Reductions in staffing levels 2,056
Abandonment of non-productive assets 1,583
-------
$6,906
-------
8. 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 preparing 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.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On August 10, 1997, the company, together with its two principal operating
subsidiaries, Guy F. Atkinson Company and Guy F. Atkinson Holdings, Ltd., filed
petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. These
petitions were filed in the United States Bankruptcy Court for the Northern
District of California, and were assigned case numbers 97-33694-TC, 97-33695- TC
and 97-33696-TC. The company and its subsidiaries are continuing to operate
their businesses as debtors-in-possession pursuant to the U.S. Bankruptcy Code.
The company's financial statements for the quarter ended June 30, 1997, have
been prepared on a going concern basis, under the assumption that assets will be
realized, and liabilities discharged, in the normal course of business.
Management cannot predict whether or when the company will emerge from
bankruptcy. Accordingly, substantial doubt exists as to the company's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the realization of settlement or
liquidation values for its assets.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1997 VS. QUARTER ENDED JUNE 30, 1996
(in thousands of dollars except share and per share amounts)
Revenue:
The company's revenue of $111,357 in the second quarter of 1997 decreased by 13
percent from the corresponding $128,714 in the second quarter of 1996. This
decrease in revenue was primarily attributable to a decrease in international
construction work, which generated no revenues in the second quarter of 1997,
compared with $28,000 in the corresponding period of 1996.
The backlog of uncompleted contracts amounted to $643,522 at June 30, 1997,
representing an increase of 19 percent over the June 30, 1996 backlog of
$540,115. New contract awards for the six month period of 1997 were $265,597, an
increase of 110 percent over the $126,344 of new contract awards during the same
period in 1996. The effect of the company's Chapter 11 filing on backlog is
uncertain.
Gross margin:
The company's gross margin was $(27,237) in the second quarter of 1997, compared
with $12,927 in the corresponding period of 1996. Gross margin in the second
quarter of 1997 included no contribution from international work, while the 1996
gross margin included a contribution of $3,200. In addition, the 1997 period was
negatively impacted by charges totaling $32,900 as noted below:
Reduction in the carrying value of construction equipment which is in
the process of being sold. This charge is to adjust the book value of
the equipment to the estimated net sale proceeds.
Write-off of an investment in a joint venture formed to construct a
newsprint de-inking facility. This facility has been shut down by the
owner due to unfavorable market conditions, and recovery of the
investment is now considered unlikely.
Cost overruns of $5,000 on four construction contracts which the
company does not expect to recover through additional change orders or
asserted claims.
Provision of $18,000 for anticipated losses on two construction
projects for which change orders have been presented and included in
claims against the client.
Page 10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Restructuring charges:
During the second quarter of 1997, the company recorded restructuring charges of
$6,906 in connection with the phasing out of the company's divisional structure,
and its restructuring as a single entity. This restructuring will result in the
elimination of certain offices and the consolidation of certain facilities and
support functions. The restructuring charge is made up as follows:
Consolidation of offices and facilities $3,267
Reductions in staffing levels 2,056
Abandonment of non-productive assets 1,583
-------
$6,906
-------
General and administrative expense:
General and administrative expenses of $10,733 in 1997 were 6 percent higher
than the corresponding figure of $10,113 in 1996 due to the company's increased
business development and construction bidding activities in both domestic and
foreign construction markets.
Interest income:
Interest income decreased to $183 in 1997 from $703 in 1996. Interest income in
1996 included $636 earned on an interest-bearing account receivable.
Interest expense:
Interest expense increased to $1,123 in the second quarter of 1997 from $152 in
the corresponding 1996 period. This increase was due to the significantly higher
level of borrowings during the 1997 period compared with 1996.
Miscellaneous:
Net miscellaneous expense amounted to $845 in 1997, compared with $375 in 1996.
The expense for 1997 includes $2,659 related to the write-off of the company's
remaining investment in a geothermal property, offset by $2,000 in credits for
estimated reductions in environmental loss reserves.
Income taxes and net income:
The company's loss before taxes amounted to $46,661 in the second quarter of
1997, compared with income before taxes of $2,990 in the second quarter of 1996.
Income tax expense was $1,115 in 1997 compared with $1,406 in 1996. Income tax
expense in 1997 was attributable to certain foreign taxes which the company no
longer expects to recover. Income tax expense in 1996 was attributable to a
provision for foreign taxes on foreign source income.
The company recorded a net loss of $47,776 for the second quarter of 1997,
compared with net income of $1,584 in the corresponding period of 1996.
Page 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996
Revenue:
Revenue of $231,415 for the six month period of 1997 increased by 2 percent from
the corresponding $227,899 in 1996. A decrease in revenue in 1997 of $24,000
related to reduced international construction work was offset by increased
revenues in 1997 from domestic projects.
Gross margin:
The company's gross margin was $(15,696) in the six month period of 1997,
compared with $21,552 in the same period for 1996. Gross margin in 1997 included
$2,800 from international construction projects, compared with $5,400 in 1996.
Additionally, 1997 gross margins were negatively impacted by charges totaling
$32,900 as noted in the discussion of gross margin for the quarter ended June
30, 1997.
Restructuring charges:
As noted in the discussion of operations for the quarter ended June 30, 1997,
the company recorded restructuring charges of $6,906 in connection with the
phasing out of the company's divisional structure, and its restructuring as a
single operational entity.
General and administrative expense:
General and administrative expenses of $21,907 in 1997 were 10 percent higher
than the corresponding figure of $19,991 in 1996 due to the company's increased
business development and construction bidding activities in both domestic and
foreign markets.
Interest income:
Interest income decreased to $320 in 1997 from $1,557 in 1996. Interest income
in 1996 included $1,101 earned on an interest-bearing account receivable.
Interest expense:
Interest expense increased to $2,002 in the second quarter of 1997 from $309 in
the corresponding 1996 period. This increase was due to the significantly higher
level of borrowings during the 1997 period compared with 1996.
Miscellaneous:
Net miscellaneous expense amounted to $1,058 in 1997, compared with net
miscellaneous income of $247 in 1996. The expense for 1997 includes $2,659
related to the write-off of the company's remaining investment in a geothermal
property, offset by $2,000 in credits for estimated reductions in environmental
loss reserves, while the 1996 income was principally derived from gains from the
disposition of surplus property and equipment.
Income taxes and net income:
The company's loss before taxes amounted to $47,249 in the six month period of
1997, compared with income before taxes of $3,056 in the corresponding period of
1996. Income tax expense was $1,919 in 1997 compared with $1,955 in 1996. Income
tax expense in both periods was primarily attributable to foreign income taxes
on foreign source income, together with state income taxes.
Page 12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
The company recorded a net loss of $49,168 for the six month period of 1997,
compared with net income of $1,101 in the corresponding period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The company's liquidity position has deteriorated in 1997 due to its inability
to collect certain accounts receivable on a timely basis, combined with
protracted negotiations concerning the resolution of certain change orders and
claims, whereby the company is seeking to recover additional costs for which it
is not contractually responsible.
Specifically, the company has an account receivable of approximately $40,000
relating to a contract to construct the first phase of a continuing care
retirement facility in Southern California. This facility was completed in June
of 1996, and day-to-day operation of the facility is being performed under the
supervision of a court-appointed trustee-in-bankruptcy. As one of the secured
creditors, the company has taken an active role in submitting a plan of
reorganization for the facility. While there can be no assurance as to the
outcome of this matter, based on discussions with potential buyers of the
facility, the company believes it will ultimately be successful in recovering
the full amount of its receivable, although timing of collection is uncertain.
In addition, the company has accounts receivable of approximately $17,000, and
unamortized costs of approximately $23,000 relating to a completed contract to
construct a pulp mill in Indonesia. The unamortized costs represent additional
costs resulting from schedule delays, contract acceleration and other contract
changes beyond the company's control, for which it is seeking reimbursement,
while the accounts receivable represent agreed amounts owing for the performance
of contract work together with approved change orders. While there can be no
assurance as to the collectibility of these amounts, the company expects to be
fully reimbursed. The timing of collection will depend upon the progress of
negotiations with the owner of the facility and other responsible parties.
Also, the company has accounts receivable including retentions of approximately
$9,000, together with unamortized costs and costs and revenues in excess of
billings totaling approximately $7,000 relating to an ongoing contract to
construct a power plant on an existing lock and dam on the Ohio River. While
there can be no assurance as to the collectibility of these amounts, the company
expects to be fully reimbursed. The timing of collection will depend upon the
progress of the mediation process with the owner of the facility.
Operating activities utilized cash of $22,262 in the six month period of 1997,
compared with $36,730 during the corresponding period of 1996.
Cash utilization by operating activities in 1997 was attributable to the net
loss for the period, together with increased balances of accounts receivable,
partially offset by increased balances of accounts payable and accrued
liabilities.
Investing activities generated cash of $5,346 in 1997, compared with net
utilization of $1,478 in 1996. During 1997, the company has selectively disposed
of surplus properties and equipment that are no longer required.
Page 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
The company's combined net cash deficiency from operations and investing
activities amounted to $16,916 in 1997, compared with $38,208 in 1996. This
deficiency was financed in 1997 primarily by additional short-term borrowings of
$20,030, and, in 1996, primarily by a reduction in cash balances of $35,895.
The company's $55,000 syndicated credit facility matured on June 30, 1997 and
has not been renewed. On June 13, 1997, the company was notified of the banks'
intention not to renew the credit facility. The company, therefore, fully drew
down the credit facility in the amount of $52,530 in borrowings and $2,470 in
letters of credit. The company was notified by its banks that, by reason of the
maturity of the credit facility, it is in default under the terms of the Credit
Agreement, and all amounts outstanding are subject to a default rate of
interest, currently equivalent to 11.25% per annum, which default rate is
subject to allowance by the Court.
Following unsuccessful negotiations with the banks to amend the credit facility,
and with the expectation that the banks would place an administrative freeze on
approximately $17,000 of cash balances, the company filed a petition for relief
under Chapter 11 of the U.S. Bankruptcy Code on August 10, 1997, in order to
preserve its working capital position.
On August 13 and 25, 1997, the Bankruptcy Court entered orders authorizing the
use of cash in the company's bank accounts for the operations of the company's
business and the payment of operating expenses through October 31, 1997. The
funds available pursuant to these orders amount to $11,800. The next hearing on
continued use of cash collateral after October 1997 is scheduled for October 22,
1997.
On September 8, 1997, subject to Bankruptcy Court approval, the company and its
surety companies entered into a $60,000,000 debtor-in-possession revolving
credit facility to enable the company to finance costs (including related
general and administrative costs) associated with its bonded construction
projects. The Bankruptcy Court approved this credit facility on September 12,
1997.
The company believes that the availability of cash collateral and the new
debtor-in-possession credit facility described above will provide the company
with sufficient cash for operations, including its ongoing construction
projects, through October 31, 1997. The company also believes that extension of
these arrangements beyond that date will provide the company with sufficient
cash for operations, including ongoing construction projects, at least through
1997. There can be no assurance, however, that such arrangements will be
extended upon terms acceptable to the company, or at all.
The ability of the company to continue to operate its business also requires the
ability to bid on or make proposals for new construction work, which, in turn,
requires the continuing availability of surety bonds. The company's sureties
will consider issuing bonds for potential new construction projects on a
case-by-case basis, and there can be no assurance that the company will be able
to obtain the issuance of surety bonds to the extent required in order to
continue to operate its business.
The company has requested Bankruptcy Court approval to retain Salomon Brothers,
Inc. to advise on various strategic and financial alternatives, including a
possible sale of the company, a merger, or financing arrangements to
recapitalize the company.
CERTAIN INFORMATION CONTAINED HEREIN, MAY BE CONSIDERED FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING THE RISK THAT ACTUAL COSTS INCURRED IN CONNECTION WITH THE
Page 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
COMPANY'S FIXED PRICE CONTRACTS MAY EXCEED BUDGETED COSTS OR MAY EXCEED THE
CONTRACT PRICE; THAT THE COMPANY MAY BE UNABLE TO RECOVER FOR CLAIMS IN RESPECT
OF COST OVERRUNS; CREDIT RISK INCURRED BY THE COMPANY IN RESPECT OF ITS
PROJECTS; THAT THE COMPANY MAY BE UNABLE TO OBTAIN AN ADEQUATE AMOUNT OF NEW
CONSTRUCTION PROJECTS; THAT THE COMPANY MAY BE UNABLE TO OBTAIN SURETY BONDS FOR
NEW PROJECTS; AND OTHER RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S SEC
REPORTS, INCLUDING ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1996. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE MADE. THE
COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING
STATEMENTS.
Page 15
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) No reports on Form 8-K were filed during the period.
Page 16
<PAGE>
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: September 23, 1997
Page 17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,953
<SECURITIES> 0
<RECEIVABLES> 127,173
<ALLOWANCES> 0
<INVENTORY> 52,270
<CURRENT-ASSETS> 237,025
<PP&E> 45,407
<DEPRECIATION> 31,350
<TOTAL-ASSETS> 252,404
<CURRENT-LIABILITIES> 204,174
<BONDS> 846
0
0
<COMMON> 1,896
<OTHER-SE> 38,202
<TOTAL-LIABILITY-AND-EQUITY> 252,404
<SALES> 0
<TOTAL-REVENUES> 231,415
<CGS> 0
<TOTAL-COSTS> 247,111
<OTHER-EXPENSES> 28,813
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,002
<INCOME-PRETAX> (47,249)
<INCOME-TAX> 1,919
<INCOME-CONTINUING> (49,168)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,392)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
</TABLE>
