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, 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 November 14, 1997
Issued and outstanding - 8,987,467 shares
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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
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<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share and per share amounts)
<CAPTION>
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September 30, December 31,
1997 1996
(unaudited)
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 35,148 $ 7,854
Accounts receivable 126,815 118,964
Costs and estimated earnings in excess of billings 3,973 12,511
Inventories and unamortized costs on contracts 73,479 56,601
Investments in joint ventures 35,712 34,076
Deferred income taxes - 225
Other current assets 4,199 3,986
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Total current assets 279,326 234,217
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Property, plant and equipment At cost:
Land 2,403 2,528
Buildings 8,170 10,232
Construction equipment 24,911 32,928
Other equipment 8,653 8,314
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44,137 54,002
Less accumulated depreciation 31,738 25,341
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Total property, plant and equipment, net 12,399 28,661
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Other assets 1,287 2,345
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Total assets $ 293,012 $ 265,223
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See accompanying notes
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</TABLE>
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<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share and per share amounts)
<CAPTION>
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September 30, December 31,
1997 1996
(unaudited)
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, including current portion of long-term debt $ 102,591 $ 33,402
Accounts payable 77,352 81,981
Billings in excess of costs and estimated earnings 28,408 21,422
Accrued federal & foreign income taxes 9,422 8,096
Other accrued expenses 32,932 21,953
Due to joint ventures 728 588
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Total current liabilities 251,433 167,442
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Non-current liabilities
Long-term debt, less current portion 826 1,210
Deferred income taxes 108 109
Postretirement health care and postemployment benefit obligations 7,178 7,178
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Total liabilities 259,545 175,939
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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, 1997 and
at December 31, 1996 1,896 1,896
Paid-in capital 13,262 13,262
Accumulated translation adjustment (4,578) (4,526)
Additional pension liability (35) (35)
Retained earnings 22,922 78,687
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Total stockholders' equity 33,467 89,284
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Total liabilities and stockholders' equity $ 293,012 $ 265,223
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See accompanying notes
</TABLE>
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<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands of dollars except share and per share amounts)
<CAPTION>
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Quarters ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenue $95,306 $126,011 $326,721 $353,910
Cost of revenue 90,679 115,067 337,790 321,414
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Gross margin 4,627 10,944 (11,069) 32,496
Restructuring charges - - 6,906 -
General and administrative expenses 9,837 10,318 31,744 30,309
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Income (loss) from operations (5,210) 626 (49,719) 2,187
Other income (expense)
Interest income 378 102 698 1,659
Interest expense (1,710) (582) (3,712) (891)
Miscellaneous 26 773 (1,032) 1,020
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Total other income (expense) (1,306) 293 (4,046) 1,788
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Income (loss) before income taxes (6,516) 919 (53,765) 3,975
Provision for income taxes 81 (82) 2,000 1,873
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Net income (loss) $(6,597) $ 1,001 $(55,765) $ 2,102
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Net income (loss) per share of common stock $ (0.73) $ 0.11 $ 6.20) $ 0.23
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Average number of shares of common stock equivalents
utilized in net income (loss) per share calculation 8,987,000 9,458,000 8,987,000 9,374,000
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See accompanying notes
</TABLE>
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<TABLE>
GUY F. ATKINSON COMPANY OF CALIFORNIA CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands of dollars except share and per share amounts)
<CAPTION>
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Nine Months Ended September 30, 1997 1996
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<S> <C> <C>
Operating activities
Net income (loss) $(55,765) $ 2,102
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Restructuring charges 6,906 -
Depreciation and amortization 9,048 9,221
(Gain) on dispositions of property, plant and equipment (1,040) (3,271)
Changes in operating assets and liabilities:
Accounts receivable (8,015) (43,375)
Inventories and unamortized costs on contracts (17,065) (255)
Investments in joint ventures (1,518) (10,091)
Other current assets 8 (1,290)
Accounts payable and accrued expenses 1,617 (19,094)
Accrued income taxes 1,348 2,456
Billings in excess of costs and estimated earnings, net 15,538 (1,723)
Other, net (191) 95
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Net cash (used in) operating activities (49,129) (65,225)
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Cash flows from investing activities:
Property, plant and equipment expenditures (763) (8,534)
Proceeds from dispositions of property, plant and equipment 6,975 9,078
Increase in other assets, net 1,058 16
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Net cash provided by investing activities 7,270 560
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Cash flows from financing activities:
Short-term borrowings 69,182 28,300
Long-term debt repayments (378) (465)
Common stock issuance related to stock option awards - 577
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Net cash provided by financing activities 68,804 28,412
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Effect of exchange rate changes on cash 349 (54)
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Net increase (decrease) in cash and cash equivalents $ 27,294 $(36,307)
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Supplementary information:
Cash paid during the year for:
Interest $ 2,614 $ 3,016
Federal, foreign and state income taxes 345 (378)
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See accompanying notes
</TABLE>
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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)
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1. PETITION FOR RELIEF UNDER CHAPTER 11
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.
Under Chapter 11, enforcement of certain secured and unsecured claims against
the company that were in existence prior to the filing of the petitions has been
stayed while the company and its subsidiaries continue to operate their
businesses as debtors-in-possession pursuant to the U.S. Bankruptcy Code.
The company's $55,000 syndicated credit facility matured on June 30, 1997. Prior
to maturity, the company had drawn down the full amount of the facility in the
sum of $52,530 in borrowings and $2,470 in letters of credit. Such amount
remains outstanding. In addition, with the authorization of the United States
Bankruptcy Court, the company secured a $60,000 revolving line of credit from
its bonding companies.
The United States Bankruptcy Court has approved the company's continued use of
the banks' and bonding companies' collateral and cash collateral, in the normal
course of business. The right to continued use of collateral and line of credit
terminates on the earliest of:
(i) The effective date of any confirmed Chapter 11 plan
(ii) The conversion of the case to a Chapter 7 case
(iii) A sale, merger, or business combination of the company
(iv) January 30, 1998
Without the continued use of collateral and availability of the line of credit,
the company cannot continue as a going concern. The right to continued use of
collateral and availability of the line of credit is presently scheduled to
expire no later than January 30, 1998. Although the company would expect to
file, at the appropriate time, a motion to extend that date, there can be no
assurance that the Bankruptcy Court would grant such a motion, and no assurance
as to the terms and conditions under which the Bankruptcy Court would do so.
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.
Subject to the foregoing, 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.
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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)
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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 September 30,
1997.
<TABLE>
4. INVENTORIES AND UNAMORTIZED COSTS ON CONTRACTS
<CAPTION>
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The major classifications of inventory are as follows: September 30, 1997 December 31, 1996
(unaudited)
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<S> <C> <C>
Construction materials, parts and supplies $ 1,809 $ 1,728
Unamortized costs on contracts 71,670 54,873
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$73,479 $56,601
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</TABLE>
5. STOCK OPTIONS AND WARRANTS
At September 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.
6. EARNINGS PER SHARE
Net primary earnings per share of common stock 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.
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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)
- --------------------------------------------------------------------------------
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, together with a saving of ongoing costs
associated with the eliminated offices, facilities and 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. This suit is presently subject to
the automatic stay of the United States Bankruptcy Court, and will not proceed
until the stay is lifted or the conclusion of the company's Chapter 11 case. The
amount of any award to plaintiff would be a general unsecured prepetition
obligation of the company subject to the outcome of the company's Chapter 11
case.
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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.
Under Chapter 11, enforcement of certain secured and unsecured claims against
the company that were in existence prior to the filing of the petitions have
been stayed while the company and its subsidiaries continue to operate their
businesses as debtors-in-possession pursuant to the U.S. Bankruptcy Code.
The company's financial statements for the quarter ended September 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 SEPTEMBER 30, 1997 VS. QUARTER ENDED SEPTEMBER 30, 1996
(in thousands of dollars except share and per share amounts)
REVENUE:
The company's revenue of $95,306 in the third quarter of 1997 decreased by 24
percent from the corresponding $126,011 in the third quarter of 1996. This
decrease in revenue was primarily attributable to a decrease in international
construction work, which generated no revenues in the third quarter of 1997,
compared with $30,800 in the corresponding period of 1996.
The backlog of uncompleted contracts amounted to $658,692 at September 30, 1997,
representing an increase of 10 percent over the September 30, 1996 backlog of
$598,732. New contract awards for the nine month period of 1997 were $376,072,
an increase of 21 percent over the $310,972 of new contract awards during the
same period in 1996. The effect of the company's Chapter 11 filing on backlog is
uncertain. In particular, backlog at September 30, 1997 includes $452,790
representing the company's share of the backlog of uncompleted contracts in
which the company is a joint venture participant. In order to maintain its
percentage share in these joint ventures, the company is required to contribute
capital to joint ventures where necessary to fund joint venture contract
obligations. The company is presently in default with respect to its capital
contributions to several joint ventures, and is unable to make such
contributions without additional financing. If the company fails to maintain its
percentage share in these joint ventures, its backlog will be substantially
reduced.
GROSS MARGIN:
The company's gross margin was $4,627 in the third quarter of 1997, compared
with $10,944 in the corresponding period of 1996. Gross margin in the third
quarter of 1997 included no contribution from international work, while the 1996
gross margin included a contribution of $3,071. Additionally, the 1996 period
included a gross margin contribution of $1,342 from a cogeneration power project
which completed in the second quarter of 1997, while the 1997 period was
negatively impacted by $1,239 of costs related to the resolution of construction
disputes and the collection of accounts receivable, as noted in the liquidity
discussion.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
GENERAL AND ADMINISTRATIVE EXPENSE:
General and administrative expenses of $9,837 in 1997 were 5 percent lower than
the corresponding figure of $10,318 in 1996. The 1997 period included $1,493 of
bankruptcy-related expenses, without which, general and administrative expenses
would have been 19% lower than in 1996. The reduction of expenses in the third
quarter of 1997 was attributable to the company's restructuring and cost
reduction program implemented in the second quarter of 1997.
INTEREST INCOME:
Interest income increased to $378 in 1997 from $102 in 1996, as a consequence of
higher average cash balances during 1997.
INTEREST EXPENSE:
Interest expense increased to $1,710 in the third quarter of 1997 from $582 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 income amounted to $26 in 1997, compared with $773 in 1996.
The 1996 expense included a gain of $530 from the collection of an account
receivable which had previously been written-off as unrecoverable.
INCOME TAXES AND NET INCOME:
The company's loss before taxes amounted to $6,516 in the third quarter of 1997,
compared with income before taxes of $919 in the third quarter of 1996. Income
tax expense was $81 in 1997 compared with a benefit of $82 in 1996. Income tax
expense in 1997 was primarily state and foreign taxes, while the 1996 benefit
was attributable to the recovery of income taxes expensesd in prior periods.
The company recorded a net loss of $6,597 for the third quarter of 1997,
compared with net income of $1,001 in the corresponding period of 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30, 1996
REVENUE:
Revenue of $326,721 for the nine month period of 1997 decreased by 8 percent
from the corresponding $353,910 in 1996. A decrease in revenue in 1997 of
$54,251 related to reduced international construction work was partially offset
by higher revenues in 1997 from domestic projects.
GROSS MARGIN:
The company's gross margin was $(11,069) in the nine month period of 1997,
compared with $32,496 in the same period for 1996. Gross margin in 1997 included
$2,978 from international construction projects, compared with $8,494 in 1996.
Additionally, 1997 gross margins were negatively impacted by charges totaling
$32,900 as noted below:
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
A reduction in the carrying value of construction equipment which is in
the process of being sold. The charge is to adjust the book value of
the equipment to the estimated net sale proceeds.
The 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 considered unlikely.
Cost overruns on four construction projects which the company does not
expect to recover through additional change orders or asserted claims.
Provisions for anticipated losses on two construction projects for
which change orders have been presented and included in claims against
the owner.
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 operational entity. This restructuring will
result in the elimination of certain offices and the consolidation of certain
facilities and support functions, together with a saving of ongoing costs
associated with the eliminated offices, facilities and 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 $31,744 in 1997 were 5 percent higher
than the corresponding figure of $30,309 in 1996. The expense for 1997 included
$1,493 of bankruptcy- related expenses, without which, general and
administrative expenses would have been comparable to 1996.
INTEREST INCOME:
Interest income decreased to $698 in 1997 from $1,659 in 1996. Interest income
in 1996 included $1,060 earned on an interest-bearing account receivable.
INTEREST EXPENSE:
Interest expense increased to $3,712 in the nine-month period of 1997 from $891
in the corresponding 1996 period. This increase was due to the substantially
higher level of borrowings during the 1997 period compared with 1996.
MISCELLANEOUS:
Net miscellaneous expense amounted to $1,032 in 1997, compared with net
miscellaneous income of $1,020 in 1996. The expense for 1997 included $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 included $530 from the collection of an
account receivable previously written-off as unrecoverable, together with a gain
of $620 from the disposition of surplus property.
Page 12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
INCOME TAXES AND NET INCOME:
The company's loss before taxes amounted to $53,765 in the nine month period of
1997, compared with income before taxes of $3,975 in the corresponding period of
1996. Income tax expense was $2,000 in 1997 compared with $1,873 in 1996. Income
tax expense in both periods was primarily attributable to foreign income taxes.
The company recorded a net loss of $55,765 for the nine month period of 1997,
compared with net income of $2,102 in the corresponding period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The company's liquidity position has deteriorated significantly 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 proposing 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 $14,600, and a
substantial balance of unamortized costs 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. The
accounts receivable represent agreed amounts owing for the performance of
contract work together with approved change orders. The amount collected in
respect of the accounts receivable, and 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 $8,200, together with a substantial balance of unamortized costs
relating to an ongoing contract to construct a power plant on an existing lock
and dam on the Ohio River. The amount collected in respect of the accounts
receivable, and the timing of collection will depend upon the progress of
negotiations with the owner of the facility.
Operating activities utilized cash of $49,129 in the nine month period of 1997,
compared with $65,225 during the corresponding period of 1996. Cash utilization
by operating activities in 1997 was primarily the result of the net loss for the
period, while utilization in 1996 was attributable to the increased balances of
accounts receivable.
Investing activities generated cash of $7,270 in 1997, compared with $560 in
1996. During 1997, the company has selectively disposed of surplus properties
and equipment that are no longer required to be used in its business.
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 $41,859 in 1997, compared with $64,665 in 1996. During
1997, the company financed its deficiency with additional short-term borrowings
of $69,182, with the excess being added to operating cash balances. During 1996,
the deficiency was financed by a reduction in cash balances of $36,307, combined
with additional short-term borrowings of $28,300.
The company's current financing facilities include:
o A $55,000 syndicated credit facility, with interest at prime plus 3/4%
per annum, which matured on June 30, 1997 and has not been renewed.
Prior to maturity, the company had drawn down the full amount of the
facility in the sum of $52,530 in borrowings and $2,470 in letters of
credit. Such amounts remain outstanding. The company has been
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.
o A $60,000 debtor-in-possession credit facility from the company's
sureties, with interest at prime plus 3/4% per annum, approved by the
United States Bankruptcy Court. The purpose of this facility is to
provide financing to ensure the completion of the company's bonded
construction projects
The United States Bankruptcy Court has approved the company's continued use of
the banks' and bonding companies' collateral and cash collateral, in the normal
course of business. The right to continued use of collateral and line of credit
terminates on the earliest of:
o The effective date of a confirmed Chapter 11 plan
o The conversion of the case to a Chapter 7 case
o A sale, merger, or business combination of the company
o January 30, 1998
The company believes that the availability of cash collateral and the
debtor-in-possession credit facility described above will provide the company
with sufficient cash for operations, including its ongoing construction
projects, through January 30, 1998. The company also believes that, in order to
continue its operations, including ongoing construction projects, beyond the end
of January, 1998, it will require the extension of the above arrangements. 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 is presently
unable to obtain surety bonds for new projects other than joint ventures, 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 retained 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
Page 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
ACTUAL COSTS INCURRED IN CONNECTION WITH THE 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 THAT MAY
BE INCURRED BY THE COMPANY RELATED TO ITS PROJECTS; THAT PAYMENT OF AMOUNTS
DUE TO THE COMPANY MAY BE SUBSTANTIALLY DELAYED DUE TO EVENTS BEYOND THE
COMPANY'S CONTROL; 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) A report on Form 8-K was filed on August 14, 1997, reporting the
Company's press release dated August 11, 1997, which announced
commencement of Chapter 11 case by the Company.
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: November 14, 1997
Page 17
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 35,148
<SECURITIES> 0
<RECEIVABLES> 126,815
<ALLOWANCES> 0
<INVENTORY> 73,479
<CURRENT-ASSETS> 279,326
<PP&E> 44,137
<DEPRECIATION> 31,728
<TOTAL-ASSETS> 293,012
<CURRENT-LIABILITIES> 251,433
<BONDS> 826
0
0
<COMMON> 1,896
<OTHER-SE> 31,571
<TOTAL-LIABILITY-AND-EQUITY> 293,012
<SALES> 0
<TOTAL-REVENUES> 326,721
<CGS> 0
<TOTAL-COSTS> 337,790
<OTHER-EXPENSES> 38,650
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,712
<INCOME-PRETAX> (53,765)
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (55,765)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55,765)
<EPS-PRIMARY> (6.20)
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