SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
Securities Registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of January 31, 1998, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was $2,813,077 based on closing sale prices on
the NASDAQ National Market System. This calculation does not reflect a
determination that certain persons are affiliates of the registrant for any
other purpose.
The number of shares of common stock, $0.01 par value, outstanding as of January
31, 1998 was 8,987,467.
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Description of Company's Present Status
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 reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code"). These petitions were filed in the
United States Bankruptcy Court for the Northern District of California (the
"Bankruptcy Court"), and were assigned case numbers 97-33694-TC, 97-33695-TC,
and 97- 33696-TC (the "Bankruptcy Cases"). The filing of the Bankruptcy Cases
was necessitated by the Company's deteriorating cash flow situation, by the
maturing on June 30, 1997, of the Company's bank lines of credit totaling
approximately $55 million, and by the Company's unsuccessful efforts to
negotiate renewals of its bank credit lines or otherwise to secure additional
financing.
On September 8, 1997, in order to finance its operations under
Bankruptcy Court protection, the Company secured a $60 million
"debtor-in-possession" loan facility from its sureties (the "Bonding
Companies'). In addition, the Company retained Salomon Brothers, Inc. to advise
on various strategic and financial alternatives, including a potential business
combination. Through Salomon Brothers, Inc., the Company actively pursued the
possibility of a sale, merger or other business combination for the Company as a
whole or for its assets and business.
In November 1997, the Company entered into an agreement with Morrison
Knudsen Corporation ("MK") pursuant to which MK was to perform a "due diligence"
review of the Company's business, assets and liabilities and develop a proposal
to the Company for a business combination between MK and the Company, and the
Company would pay MK's fees and expenses associated with the transaction. This
agreement was subject to Bankruptcy Court approval. In December 1997, the
Company's motion for an order authorizing the agreement was denied by the
Bankruptcy Court.
Ultimately, although a number of parties initially expressed interest
in a sale, merger or other business combination, no such transaction occurred
due to the lack of a buyer or merger partner.
On January 9, 1998, the Bankruptcy Court approved an Interim Procedures
Agreement (the "IPA") with The Clark Construction Group, Inc., ("Clark").
Pursuant to the IPA, the Company engaged Clark as an independent contractor to
provide construction management services to the Company on an interim basis.
Clark's services consisted of management of the Company's sole venture
construction contracts covered by outstanding completion bonds (the "Bonded
Project"). All phases of management were included, including management of
subcontractors, scheduling, quality control and inspection. In order to perform
these services, Clark was permitted to hire the Company's employees (who had
been engaged largely in the same activities--managing the Bonded Projects--while
working for the Company). This interim arrangement remained in place through
January 31, 1998, on which date the Bonding Companies exercised their right to
assume control of the Bonded Projects from the Company. Clark, using the same
employees who formerly were employed by the Company, continued to manage the
Bonded Projects on behalf of the Bonding Companies.
On February 4, 1998, the Company and Clark entered into an Asset
Purchase Agreement under which Clark would purchase from the Company certain
equipment and contracts, the Atkinson name, and all of the Company's
intellectual property, goodwill and going concern value. The Asset Purchase
Agreement was approved by the Bankruptcy Court on February 6, 1998. Pursuant to
the Asset Purchase Agreement, on February 23, 1998, Clark purchased the Atkinson
name and the Company's intellectual property, goodwill and going concern value
for a purchase price of $1 million. In addition, under the Asset Purchase
Agreement Clark agreed that the Company's former employees who had been hired by
Clark would be made available to the Company at a cost intended to reflect the
cost to Clark of the employees' services, support services required for the
employees, and overhead associated with the employees. These
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employees would be available on an "as needed" basis to assist the company with
completion of construction projects (other than the Bonded Projects) and with
other activities as well.
Due to the Company's inability to obtain new surety bonds since the
filing of the Bankruptcy Cases, the Company has been unable to take on any new
projects since that time.
Given the Company's inability to consummate a sale or merger
transaction as a going concern, and its inability to obtain new financing or
undertake new projects, the Company is winding up its business by completing
existing projects, resolving pending disputes, and selling all other assets.
The Company's assets presently consist of claims in respect of various
completed construction projects, ongoing construction projects (to the extent
such projects may be completed on a profitable basis), joint venture interests
in entities formed for the purpose of carrying out construction jobs, certain
smaller ongoing businesses, real estate, and other miscellaneous assets. The net
amounts to be realized by the Company from the sale or other realization on
these assets is unknown at this time.
Future payments to unsecured creditors whose claims arose prior to the
commencement of the Company's Chapter 11 case ("pre-petition creditors") and to
shareholders (after pre- petition creditors have been paid in full) will depend
on the amount of proceeds, if any, available after payment in full of expenses,
unsecured creditors whose claims arose after commencement of the Company's
Chapter 11 case ("post-petition creditors"), and secured creditors. There are
currently outstanding more than $90 million of secured claims against the
Company. The amount of pre-petition claims is difficult to estimate, but it is
expected to increase as existing projects are completed. Expenses resulting from
the process of winding up the Company's business and the Bankruptcy Cases are
also difficult to estimate. As a result, although the Company presently expects
that pre-petition creditors will be paid in full and a small amount will be
available to distribute to shareholders, this result is subject to substantial
uncertainty and possible wide variations. Even relatively small percentage
variances in actual outcomes relative to the Company's estimates could result in
the Company's shareholders losing their entire investment and pre-petition
creditors not receiving payment in full, or any payment at all. There can be no
assurance that any amounts at all will be paid to pre-petition creditors or to
shareholders.
The process of winding up the business of the Company will likely take
several years, and in all likelihood the amounts, if any, paid or to be paid to
pre-petition creditors or shareholders will not be known until virtually the end
of the process.
On March 27, 1998, the Bankruptcy Court appointed Mr. E. Lawrence Hill
to act as the Responsible Officer of the Company. The concept of a Responsible
Officer arises under the Bankruptcy Code, and the role of a Responsible Officer
can vary considerably from case to case depending on the circumstances. In this
instance Mr. Hill will be acting essentially as the Chief Executive Officer of
the Company. He will report to a four-person Executive Committee composed of one
representative from each of the four major parties or constituencies in the
Bankruptcy Cases (the Banks, the Bonding Companies, the pre-petition creditors
and the Company), but the Executive Committee will not have the authority to
override his decisions. Important decisions will be subject to approval of the
Bankruptcy Court, and the parties in the case will have an opportunity to object
to decisions with which they disagree.
The time within which the Company has the exclusive right under the
Bankruptcy Code to file a plan of reorganization has been extended by the
Bankruptcy Court until August 3, 1998. In connection with obtaining such
extension, the Company has agreed not to file a plan of
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reorganization that does not have the support of the Unsecured Creditors
Committee (the "Committee"), the Company's principal secured lenders (the
"Banks"), and the Bonding Companies without first making a reasonable good faith
attempt to meet and confer with such parties. If the Company files a plan that
does not have the support of the Committee, the Banks and the Bonding Companies,
any of them may file a competing plan, even if the exclusivity period has not
expired.
The Company has requested permission from the Securities and Exchange
Commission to modify its public reporting obligations for the term of the
Bankruptcy Cases. The Company sought approval to file monthly operating reports
prepared for the Bankruptcy Court under cover of Form 8-K, in lieu of the
Company's Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. A
response to the modified reporting request is expected from the Securities and
Exchange Commission in the near future.
Statements in this report which are prefaced with words such as
"expects," "anticipates," "believes" and similar words and other statements of
similar sense are forward-looking statements. These statements are based on the
Company's current expectations and estimates as to prospective events and
circumstances which may or may not be within the Company's control and as to
which there can be no firm assurances given. These forward-looking statements,
like any other forward-looking statements, involve risks and uncertainties that
could cause actual results to differ materially from those projected or
anticipated. Among the risks that could cause actual results to differ
materially from those projected or anticipated are risks associated with the
outcome of litigation; risks inherent in the construction industry, such as cost
overruns, accidents and claims; delays in liquidation of the Company's assets,
such as delays in completion of litigation or delays in completion of
construction projects; increased administrative expenses as a result of the
Bankruptcy Cases or as a result in delays in winding up the Company's business;
and changes in market value of assets held for sale.
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Item 8. Financial Statements and Supplementary Data
(a) Financial Statements
Page
6-7 Consolidated Balance Sheets, as of December 31, 1997 and 1996
8 Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995
9 Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995
10 Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
11-15 Notes to Consolidated Financial Statements
(b) Financial statement schedules:
Financial statement schedules are omitted because the conditions
requiring their filing do not exist, or because the required
information is given in the financial statements, including the notes
thereto.
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<TABLE>
Guy F. Atkinson Company of California
Consolidated Balance Sheets (unaudited)
(in thousands of dollars except share and per share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 25,443 $ 7,854
Accounts receivable 120,616 118,964
Costs and estimated earnings in excess of billings 2,937 12,511
Inventories and unamortized costs on contracts in progress 49,253 56,601
Investments in joint ventures 28,309 34,076
Deferred income taxes - 225
Other current assets 3,741 3,986
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Total current assets 230,299 234,217
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Property, plant and equipment At cost:
Land 2,552 2,528
Buildings 8,053 10,232
Construction equipment 12,669 32,928
Other equipment 8,365 8,314
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31,639 54,002
Less accumulated depreciation 22,023 25,341
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Total property, plant and equipment, net 9,616 28,661
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Other assets 1,243 2,345
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Total assets $ 241,158 $265,223
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The accompanying notes are an integral part of these financial statements
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</TABLE>
<PAGE>
<TABLE>
Guy F. Atkinson Company of California
Consolidated Balance Sheets (unaudited)
(in thousands of dollars except share and per share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, including current portion of long-term debt $ 105,359 $ 33,402
Accounts payable 66,766 81,981
Billings in excess of costs and estimated earnings 21,249 21,422
Accrued federal & foreign income taxes 1,231 8,096
Other accrued expenses 35,004 21,953
Due to joint ventures 1,595 588
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Total current liabilities 231,204 167,442
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Non-current liabilities
Long-term debt, less current portion 836 1,210
Deferred income taxes - 109
Postretirement health care and postemployment benefit obligations 7,178 7,178
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Total liabilities 239,218 175,939
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Contingencies (Note 16)
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 issued
and outstanding at December 31, 1997 and at December 31, 1996 1,896 1,896
Paid-in capital 13,262 13,262
Accumulated translation adjustment (3,709) (4,526)
Unearned compensation - -
Additional pension liability (35) (35)
Retained earnings (9,474) 78,687
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Total stockholders' equity 1,940 89,284
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Total liabilities and stockholders' equity $241,158 $265,223
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The accompanying notes are an integral part of these financial statements
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</TABLE>
<PAGE>
<TABLE>
Guy F. Atkinson Company of California
Consolidated Statements of Stockholders' Equity (unaudited)
(in thousands of dollars except share and per share amounts)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Stock Accumulated Unearned Additional
Number Paid-in Translation Compen- Pension Retained
of Shares Amount Capital Adjustment sation Liability Earnings
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<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 8,950,824 1,894 13,185 (5,249) (736) - 87,894
Changes for the year - 1995:
Net income 3,609
Cash dividend - $2.00 per share (17,835)
Restricted shares:
Forfeited (33,600) (336) 336
Stock options exercised 33,930 1 236
Foreign currency translation 803
Additional minimum pension liability (344)
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Balance, December 31, 1995 8,951,154 1,895 13,085 (4,446) (400) (344) 73,668
Changes for the year - 1996:
Net income 5,019
Restricted shares:
Forfeited (40,000) (400) 400
Stock options exercised 76,313 1 577
Foreign currency translation (80)
Additional minimum pension liability 309
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Balance, December 31, 1996 8,987,467 $ 1,896 $ 13,262 $(4,526) $ - $ (35) $ 78,687
Changes for the year - 1997:
Net income (88,161)
Foreign currency translation 817
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Balance, December 31, 1997 8,987,467 $ 1,896 $ 13,262 $(3,709) $ - $ (35) $ (9,474)
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The accompanying notes are an integral part of these financial statements
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</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>
- ------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 1997 1996 1995
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<S> <C> <C> <C>
Revenue $ 370,551 $468,467 $ 416,995
Cost of revenue 406,122 424,217 377,823
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Gross margin (35,571) 44,250 39,172
Restructuring charges 5,906 - -
General and administrative expenses 43,427 39,335 38,551
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Income (loss) from operations (84,904) 4,915 621
Other income (expense)
Interest income 963 1,801 3,784
Interest expense (6,664) (1,684) (904)
Miscellaneous, net (4,061) 1,781 1,249
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Total other income (expense) (9,762) 1,898 4,129
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Income (loss) before taxes (94,666) 6,813 4,750
Provision (benefit) for income taxes (6,505) 1,794 1,141
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Net income (loss) $ (88,161) $ 5,019 $ 3,609
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Net income (loss) per share of common stock $(9.81) $ 0.54 $ 0.39
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Average number of shares of common stock and common stock
equivalents utilized in net income (loss) per share calculation 8,987,000 9,359,000 9,161,000
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The accompanying notes are an integral part of these financial statements
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</TABLE>
<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>
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As of December 31, 1997 1996 1995
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<S> <C> <C> <C>
Operating activities
Net income (loss) $ (88,161) $ 5,019 $ 3,609
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Restructuring charges 5,906 - -
Depreciation, depletion and amortization 10,673 4,693 6,666
Deferred income taxes 113 (451) 444
(Gain) on dispositions of property, plant and equipment 76 (3,724) (3,028)
Changes in operating assets and liabilities:
Accounts receivable (2,548) (42,832) (43,080)
Inventories and unamortized costs on contracts 6,331 (35,619) (963)
Investments in joint ventures 6,659 (1,957) 8,845
Other current assets 237 1,257 (2,089)
Accounts payable and accrued expenses (5,222) (10,524) 46,353
Accrued income taxes (6,738) 3,076 (1,877)
Billings in excess of costs and estimated earnings, net 9,480 17,377 (21,033)
Other, net (148) (425) (259)
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Net cash provided by (used in) operating activities (63,342) (64,110) (6,412)
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Cash flows from investing activities:
Property, plant and equipment expenditures (924) (10,016) (23,022)
Proceeds from dispositions of property, plant and equipment 7,269 9,609 7,791
Increase (decrease) in other assets, net 1,102 8 40
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Net cash provided by (used in) investing activities 7,447 (399) (15,191)
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Cash flows from financing activities:
Short-term borrowings (repayments), net 72,309 32,500 -
Proceeds of long-term borrowings - 50 812
Long-term debt repayments (727) (700) (911)
Common stock issuance related to stock option awards - 577 237
Cash dividends paid - - (17,835)
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Net cash provided by (used in) financing activities 71,582 32,427 (17,697)
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Effect of exchange rate changes on cash 1,902 132 663
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Net increase (decrease) in cash and cash equivalents $ 17,589 $(31,950) $ (38,637)
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Supplementary information:
Cash paid during the period for:
Interest $ 3,118 $ 3,826 $ 553
Federal, foreign and state income taxes (138) 561 2,563
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The accompanying notes are an integral part of these financial statements
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</TABLE>
<PAGE>
Guy F. Atkinson Company of California Notes to unaudited
Consolidated Financial Statements
(in thousands of dollars except share and per share amounts)
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1. Chapter 11 Proceedings and Basis of Financial Statement Presentation
On August 10, 1997, the Company filed a petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Subsequent to that date, the Company has
been operating its business as a debtor-in-possession subject to the
jurisdiction of the U.S. Bankruptcy Court for the Northern District of
California. For a description of the Company's present status, please refer to
the portion of the Company's report for the year ended December 31, 1997, on
Form 10-K, under the heading "Description of Company's Present Status."
On February 6, 1998, the U.S. Bankruptcy Court approved the sale of certain
assets of the Company to the Clark Construction Group, Inc., pursuant to an
asset purchase agreement. Under this agreement the Clark Construction Group,
Inc., acquired the name, intellectual property, goodwill and going concern value
of the Company.
As a consequence of the aforementioned transaction, the Company is no longer
bidding on new construction projects, and is seeking to complete its existing
backlog of contracts and conclude the sale of its remaining assets in an orderly
fashion.
The consolidated financial statements of the Company have been presented in
accordance with the American Institute of Certified Public Accountants Statement
of Position 90-7 "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code," and have been prepared in accordance with generally accepted
accounting principles applicable to a going concern, which contemplates
continuity of operations, realization of assets and the liquidation of
liabilities and commitments in the normal course of business.
The bankruptcy filing, together with the sale of certain assets described above
and the losses from operations raise substantial doubt about the Company's
ability to continue as a going concern. The appropriateness of using the going
concern basis is dependent upon, among other things, the ability of the Company
to generate sufficient cash from the completion of its remaining backlog of
construction contracts, and from the sale of its assets, as well as the ability
to continue to use cash and other collateral. The Company's ability to continue
to use cash and other collateral depends upon the consent of its banks and other
secured and unsecured creditors.
THESE FINANCIAL STATEMENTS HAVE BEEN PREPARED ON THE BASIS THAT THE COMPANY IS A
"GOING CONCERN." THE COMPANY IS NOT A "GOING CONCERN" AND IN FACT IS PRESENTLY
IN THE PROCESS OF WINDING UP ITS BUSINESS. THE INFORMATION CONTAINED IN THESE
FINANCIAL STATEMENTS IS BASED ON HISTORICAL INFORMATION AND HAS BEEN PREPARED
AND IS PRESENTED ON THE SAME BASIS AS THE COMPANY'S FINANCIAL STATEMENTS FOR
PRIOR PERIODS. THE ACTUAL AMOUNTS REALIZED FROM THE ASSETS OF THE COMPANY MAY
VARY WIDELY FROM THE AMOUNTS SHOWN ON THESE FINANCIAL STATEMENTS, AND THE
COMPANY WILL INCUR SUBSTANTIAL COSTS IN ORDER TO REALIZE SUCH AMOUNTS. NO
INFERENCE MAY BE DRAWN FROM THESE FINANCIAL STATEMENTS ABOUT AMOUNTS, IF ANY,
THAT ULTIMATELY WILL BE AVAILABLE TO DISTRIBUTE TO THE COMPANY'S CREDITORS AND
SHAREHOLDERS.
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Guy F. Atkinson Company of California
Notes to unaudited Consolidated Financial Statements
(in thousands of dollars except share and per share amounts)
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2. Summary of Significant Accounting Policies
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include Guy F. Atkinson Company of
California and its subsidiaries. Investments in joint ventures are recorded on
the equity method. Significant transactions between the Company and its
subsidiaries are eliminated in consolidation.
Construction Contract Accounting
Construction revenue and gross margin, including the Company's share of
joint-venture contracts, are recognized using the percentage of completion
method. This method applies the ratio of costs incurred to Company engineers'
estimates of total costs on a contract-by-contract basis. These estimates
include provisions for known and anticipated cost overruns, if any exist or are
expected to occur, and may be subject to revision in the normal course of
business.
Revenue from claims by the Company for additional contract compensation is
recorded when agreed to by the owner. Provision is made currently for any
anticipated future losses on contracts in progress.
The classification of construction contract-related current assets and current
liabilities is based on the Company's contract performance cycle, which may
exceed one year.
Foreign Exchange
The Company has assets, liabilities and transactions in foreign currencies,
principally the Canadian dollar, which potentially expose it to the risk of
foreign exchange gains and losses.
Cash and Cash Equivalents
Cash equivalents consists of highly-liquid securities with an original maturity
of three months or less.
Inventories and Unamortized Costs on Contracts
Inventories are valued at the lower of cost (principally first-in, first-out) or
market prices. Unamortized costs on contracts include the cost of plant and
project facilities to be absorbed over the life of the projects, the estimated
value of recoverable assets, and costs related to unpriced change orders and
claims for additional contract compensation to the extent their recovery is
probable. The amount of costs relating to unpriced change orders and claims that
is included in inventories and unamortized costs on contracts is the lesser of
the actual amount of costs incurred or the estimated amount that is recoverable
as additional compensation. These
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Guy F. Atkinson Company of California
Notes to unaudited Consolidated Financial Statements
(in thousands of dollars except share and per share amounts)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies, continued
estimates are based upon management's expectations regarding the probability of
future recovery and may be subject to revision in the normal course of business.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Major improvements and
renewals are capitalized, while maintenance and repairs are charged to cost as
incurred.
The Company depreciates all property, plant, and equipment over its expected
useful life on a straight-line basis. The depreciation expense is determined by
means of management estimates of expected useful life, salvage value and asset
usage. These estimates may be subject to revision in the normal course of
business.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable for the period and the change during the period in deferred tax
assets and liabilities.
Earnings Per Share
Earnings per share of common stock and common stock equivalents are calculated
using the weighted average number of common shares outstanding, plus (in periods
where they have a dilutive effect) 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.
3. Cash and Cash Equivalents
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Cash and cash equivalents consist of the following: 1997 1996
- --------------------------------------------------------------------------------
Investment-grade commercial paper 6,814 1,770
Cash balances 18,629 6,084
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Total cash and short-term investments $ 25,443 $ 7,854
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4. Accounts Receivable
Accounts receivable include retained percentages of $31,174 and $31,044 at
December 31, 1997 and 1996 respectively. The amount for 1997 is expected to be
collected during 1998 and later years.
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Guy F. Atkinson Company of California Notes to unaudited
Consolidated Financial Statements
(in thousands of dollars except share and per share amounts)
5. Inventories and Unamortized Costs on Contracts
- --------------------------------------------------------------------------------
The major classifications of inventory are as follows: 1997 1996
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Construction materials, parts and supplies $ 2,724 $ 1,728
Unamortized costs on contracts 46,529 54,873
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$ 49,253 $ 56,601
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Unamortized costs on contracts include $32,472 (1996 - $8,500) of costs relating
to claims, and $10,882 (1996 - $41,767) of costs relating to unapproved change
orders.
6. Miscellaneous Income (Expense)
Miscellaneous income (expense) includes those items of income and expense which
are not derived from operations. This category consists of gains or losses from
the disposition of property, plant, and equipment, foreign exchange gains or
losses, and gains or losses resulting from other non-operating items.
Miscellaneous income (expense) in 1997, includes a loss of $2,659 related to the
write-off of the company's remaining investment in a geothermal property,
together with $2,009 in foreign exchange losses.
Miscellaneous income (expense) in 1996, includes gains of $1,761 on property
dispositions.
7. Litigation and Contingencies
Litigation
The nature of the construction business periodically results in liens, disputes,
suits and claims. Certain claims and suits have been brought against the Company
in connection with contractual disputes, alleging personal injury, property or
other damages. Disputes are generally negotiated to settlement or litigated,
with judgments against the Company being either promptly satisfied or appealed.
Company policy is to accrue amounts for any liabilities which it
believes will result from claims and suits against the Company. These amounts
are based upon management's estimates of the most likely outcome of such claims
and suits, and may be materially different from the amounts asserted by the
claimants.
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 believes this suit to be
without merit.
Page 14
<PAGE>
Guy F. Atkinson Company of California Notes to unaudited
Consolidated Financial Statements
(in thousands of dollars except share and per share amounts)
- --------------------------------------------------------------------------------
7. Litigation and Contingencies, continued
Environmental Liabilities
The Company has certain potential environmental remediation obligations with
respect to properties which have been sold. In recording the sale of these
properties, the Company set aside a portion of the sale proceeds as reserves to
cover the potential future costs of such environmental remediation which may
become necessary. The portion of the sale proceeds which was set aside was based
upon management's best estimate of potential future costs, if any. These
estimates may be subject to revision in the normal course of business.
- --------------------------------------------------------------------------------
The following is a summary of environmental liabilities: 1997 1996
- --------------------------------------------------------------------------------
Reserves for anticipated environmental remediation
obligations $ 2,269 $ 2,269
Less expenditures to date 875 390
- --------------------------------------------------------------------------------
$ 1,394 $ 1,879
- --------------------------------------------------------------------------------
<TABLE>
8. Quarterly Financial Data - Unaudited
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1997 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 120,058 $ 111,357 $ 95,306 $ 43,830
- --------------------------------------------------------------------------------------------------------------------
Gross margin 11,541 (27,237) 4,627 (24,502)
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1,392) $ (47,776) $ (6,597) $ (32,396)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) per share of common stock $ (0.15) $ (5.32) $ (0.73) $ (3.61)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- --------------------------------------------------------------------------------------------------------------------
Revenue $ 99,185 $ 128,714 $126,011 $ 114,557
- --------------------------------------------------------------------------------------------------------------------
Gross margin 8,625 12,927 10,944 11,754
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (483) $ 1,584 $ 1,001 $ 2,917
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) per share of common stock $ (0.05) $ 0.17 $ 0.11 $ 0.31
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
1995 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- --------------------------------------------------------------------------------------------------------------------
Revenue $ 89,738 $ 86,434 $ 91,364 $ 149,459
- --------------------------------------------------------------------------------------------------------------------
Gross margin 6,938 7,264 10,818 14,152
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (987) $ 721 $ 1,215 $ 2,660
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) per share of common stock $ (0.11) $ 0.08 $ 0.13 $ 0.29
- --------------------------------------------------------------------------------------------------------------------
Page 15
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ John F. Whitsett
John F. Whitsett
Chief Executive Officer
Chairman of the Board
Date: June 18, 1998
Page 16
<PAGE>
