<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTER ENDED JUNE 30, 1996
Commission File No. 0-18350
GRANITE CONSTRUCTION INCORPORATED
State of Incorporation: I.R.S. Employer Identification
Delaware Number: 77-0239383
Corporate Administration:
585 West Beach Street
Watsonville, California 95076
(408) 724-1011
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 shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 31, 1996.
Class Outstanding
Common Stock, $0.01 par value 18,121,253 shares
This report on Form 10-Q, including all exhibits, contains 20 pages. The exhibit
index is located on page 19 of this report.
<PAGE> 2
GRANITE CONSTRUCTION INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets as of June 30, 1996 and
December 31, 1995......................................................... 4
Condensed Consolidated Statements
of Income for the Three Months and Six
Months Ended June 30, 1996 and 1995....................................... 5
Condensed Consolidated Statements
of Cash Flows for the Six Months
Ended June 30, 1996 and 1995.............................................. 6
Notes to the Condensed Consolidated
Financial Statements......................................................7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................................11-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................none
Item 2. Changes in Securities...........................................none
Item 3. Defaults upon Senior Securities.................................none
Item 4. Submission of Matters to a Vote
of Security Holders............................................ 16
Item 5. Other Information.............................................. none
Item 6. Exhibits and Reports on Form 8-K............................... 17
Exhibit Index.................................................. 19
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
3
<PAGE> 4
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
JUNE 30, December 31,
1996 1995
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 13,664 $ 22,410
Short-term investments 13,792 44,582
Accounts receivable 164,410 142,055
Costs and estimated earnings in excess of billings 31,169 16,147
Inventories 13,290 10,180
Deferred income taxes 16,717 16,717
Equity in joint ventures 7,180 210
Other current assets 5,335 5,953
-------------------------------
Total current assets 265,557 258,254
- -------------------------------------------------------------------------------------------------------------
Property and equipment 189,065 175,220
- -------------------------------------------------------------------------------------------------------------
Other assets 22,394 21,270
- -------------------------------------------------------------------------------------------------------------
$ 477,016 $ 454,744
=============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 11,687 $ 13,948
Accounts payable 69,287 68,056
Billings in excess of costs and estimated earnings 53,872 43,730
Accrued expenses and other current liabilities 61,663 55,341
-----------------------------
Total current liabilities 196,509 181,075
- -------------------------------------------------------------------------------------------------------------
Long-term debt 40,364 39,494
- -------------------------------------------------------------------------------------------------------------
Deferred income taxes 24,270 24,270
- -------------------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, $0.01 par value, authorized
3,000,000 shares, none outstanding -- --
Common stock, $0.01 par value, authorized 27,000,000
shares; 1996- issued 18,160,111 shares, outstanding
18,119,753 shares; 1995- issued 17,897,018 shares,
outstanding 17,884,268 shares 182 179
Additional paid-in capital 37,304 32,715
Retained earnings 185,253 180,341
-----------------------------
222,739 213,235
Unearned compensation (6,125) (3,115)
Treasury stock (741) (215)
-----------------------------
215,873 209,905
- -------------------------------------------------------------------------------------------------------------
$ 477,016 $ 454,744
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 5
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 248,499 $ 226,684 $ 402,248 $ 331,957
Cost of revenue 219,281 196,979 358,388 288,541
---------------------------------------------------------------
GROSS PROFIT 29,218 29,705 43,860 43,416
General and administrative expenses 16,780 16,912 32,265 29,968
---------------------------------------------------------------
OPERATING PROFIT 12,438 12,793 11,595 13,448
- ---------------------------------------------------------------------------------------------------------
Other income (expense)
Interest income 1,418 1,267 3,372 2,729
Interest expense (837) (960) (1,778) (1,440)
Gain on sales of property
and equipment 1,747 231 2,160 522
Other, net (39) (312) (32) (321)
---------------------------------------------------------------
2,289 226 3,722 1,490
- ---------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 14,727 13,019 15,317 14,938
Provision for income taxes 5,596 4,687 5,820 5,378
- ---------------------------------------------------------------------------------------------------------
NET INCOME $ 9,131 $ 8,332 $ 9,497 $ 9,560
=========================================================================================================
Net income per share $ 0.51 $ 0.47 $ 0.53 $ 0.54
Weighted average shares
of common stock 18,052 17,840 18,017 17,748
Dividends per share $ 0.06 $ 0.15 $ 0.25 $ 0.19
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited- In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
-------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 9,497 $ 9,560
Add (deduct) noncash items included in net income:
Depreciation, depletion and amortization 18,273 14,724
Gain on sales of property and equipment (2,160) (522)
Decrease in unearned compensation 984 779
Cash provided by (used in):
Accounts and notes receivable (23,858) (24,663)
Inventories (3,110) (1,027)
Equity in joint ventures (6,970) 305
Other assets 226 705
Accounts payable 1,231 5,098
Billings in excess of costs and estimated earnings, net (3,574) 321
Accrued expenses 6,129 1,595
-------------------------
Net cash provided (used) by operating activities (3,332) 6,875
- ------------------------------------------------------------------------------------------------------------
Investing Activities
Additions to property and equipment (31,779) (19,218)
Proceeds from sales of property and equipment 1,258 1,283
Additions to notes receivable (114) (1,333)
Repayments of notes receivable 226 206
Acquisition of Gibbons Company, net of cash acquired -- 1,567
Additions to investments and other assets (84) (36)
Purchases of short-term investments (16,871) (11,427)
Maturities of short-term investments 47,661 26,306
-------------------------
Net cash provided (used) by investing activities 297 (2,652)
- ------------------------------------------------------------------------------------------------------------
Financing Activities
Additions to long-term debt 7,000 --
Repayments of long-term debt (8,391) (1,480)
Employee stock options exercised 598 96
Purchase of treasury stock (526) --
Dividends paid (4,392) (1,180)
-------------------------
Net cash used by financing activities (5,711) (2,564)
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (8,746) 1,659
Cash and cash equivalents at beginning of period 22,410 17,649
-------------------------
Cash and cash equivalents at end of period $ 13,664 $ 19,308
============================================================================================================
Supplementary Information
Cash paid during the year for:
Interest $ 1,778 $ 1,118
Income taxes 346 1,849
Noncash investing and financing activity:
Financed acquisition of Gibbons Company $ -- $ 34,550
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE> 7
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------
1. BASIS OF PRESENTATION: The condensed consolidated financial statements
included herein have been prepared by Granite Construction Incorporated
(the "Company"), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted, although the Company believes the disclosures
which are made are adequate to make the information presented not
misleading. Further, the condensed consolidated financial statements
reflect, in the opinion of management, all normal recurring adjustments
necessary to present fairly the financial position at June 30, 1996 and
the results of operations and cash flows for the periods presented. The
December 31, 1995 condensed consolidated balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
Interim results are subject to significant seasonal variations and the
results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
2. SHORT-TERM INVESTMENTS:
<TABLE>
<CAPTION>
Held-To-Maturity Held-To-Maturity
June 30, 1996 December 31, 1995
(Unaudited)
Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency
Obligations $ 2,003 $ - $ (1) $ 2,002 $ 8,938 $6 $ - $ 8,944
Commercial Paper - - - - 10,897 3 (6) 10,894
Municipal Bonds - - - - 2,012 4 - 2,016
Foreign Banker's Acceptances 990 - - 990 8,703 2 - 8,705
Domestic Banker's Acceptances 999 - - 999 1,996 4 - 2,000
---------------------------------------- ----------------------------------------
3,992 - (1) 3,991 32,546 19 (6) 32,559
---------------------------------------- ----------------------------------------
<CAPTION>
Available-For-Sale Available-For-Sale
June 30, 1996 December 31, 1995
(Unaudited)
Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency
Obligations 7,788 6 (72) 7,722 4,859 45 - 4,904
Municipal Bonds 2,012 13 - 2,025 5,226 74 (32) 5,268
Domestic Banker's Acceptances - - - - 1,951 13 - 1,964
---------------------------------------- ----------------------------------------
9,800 19 (72) 9,747 12,036 132 (32) 12,136
---------------------------------------- ----------------------------------------
Total Short-Term Investments $13,792 $19 $(73) $13,738 $44,582 $151 $(38) $44,695
======================================== ========================================
</TABLE>
7
<PAGE> 8
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------
2. SHORT-TERM INVESTMENTS, CONTINUED:
There were no sales of investments classified as
available-for-sale for the six months ended June 30, 1996. At June 30,
1996, scheduled maturities of investments are as follows (unaudited):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Held-To- Available-
Maturity For-Sale Total
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Within one year $3,992 $7,788 $11,780
After one year through five years - 2,012 2,012
- --------------------------------------------------------------------------
$3,992 $9,800 $13,792
==========================================================================
</TABLE>
For the six months ended June 30, 1996 and 1995, purchases and
maturities of short-term investments were as follows:
<TABLE>
<CAPTION>
--------------------------------------- ---------------------------------------
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
(Unaudited) (Unaudited)
Held-To- Available Held-To- Available
Maturity For Sale Total Maturity For Sale Total
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases $ 9,542 $ 7,329 $ 16,871 $ 6,692 $ 4,735 $ 11,427
Maturities 36,300 11,361 47,661 20,900 5,406 26,306
------------------------------------- ---------------------------------------
Net change $(26,758) $ (4,032) $(30,790) $(14,208) $ (671) $(14,879)
================================================================================
</TABLE>
3. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1996 1995
--------------------------
(UNAUDITED)
<S> <C> <C>
Construction contracts
Completed and in progress $ 97,594 $ 81,240
Retentions 44,062 41,777
--------------------------
141,656 123,017
Construction material sales 16,329 12,380
Other 7,128 7,556
--------------------------
165,113 142,953
Less allowance for doubtful accounts 703 898
--------------------------
$164,410 $142,055
==========================
</TABLE>
8
<PAGE> 9
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
4. INVENTORIES: Inventories consist primarily of quarry products valued at
the lower of average cost or market.
5. EQUITY IN JOINT VENTURES: The Company participates in various
construction joint venture partnerships. Generally, each construction
joint venture is formed to accomplish a specific project and is
dissolved upon completion of the project. The combined assets,
liabilities and net assets of these ventures are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1996 1995
- ---------------------------------------------------------- ---------------- ------------
(UNAUDITED)
<S> <C> <C>
Assets
Total $99,787 $125,019
Less other venturers' interest 69,851 87,513
- ---------------------------------------------------------------------------------------
Company's interest 29,936 37,506
- ---------------------------------------------------------------------------------------
Liabilities
Total 75,855 124,319
Less other venturers' interest 53,099 87,023
- ---------------------------------------------------------------------------------------
Company's interest 22,756 37,296
- ---------------------------------------------------------------------------------------
$ 7,180 $ 210
=======================================================================================
</TABLE>
6 PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1996 1995
-------------------------------
(UNAUDITED)
<S> <C> <C>
Land $ 13,979 $ 14,019
Quarry property 35,894 35,194
Buildings and leasehold improvements 13,000 11,657
Equipment and vehicles 386,812 361,676
Office furniture and equipment 4,997 4,570
-------------------------------
454,682 427,116
Less accumulated depreciation,
depletion and amortization 265,617 251,896
-------------------------------
$189,065 $175,220
===============================
</TABLE>
9
<PAGE> 10
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1996 1995
------------------------
(UNAUDITED)
<S> <C> <C>
Payroll and related employee benefits $19,672 $21,371
Accrued insurance 21,769 19,957
Income taxes payable 8,245 2,425
Other 11,977 11,588
------------------------
$61,663 $55,341
========================
</TABLE>
8. STOCKHOLDERS' EQUITY: Under the terms of the Company's 1990 Omnibus
Stock and Incentive Plan, 209,697 shares of restricted common stock
were issued and 116,837 shares vested during the six months ended June
30, 1996. Unearned compensation is amortized over the restriction
periods. Compensation expense related to restricted shares was $492 and
$390 for the three months ended and $984 and $779 for the six months
ended June 30, 1996 and 1995, respectively. During 1996, the Company
purchased, in satisfaction of certain officers' income tax liabilities
related to the maturation of restricted stock issues, 27,608 shares
which are classified as treasury stock.
During the six months ended June 30, 1996, employee stock options for
53,450 shares at $11.34 per share were exercised.
9. INCOME TAXES: The provision for income taxes is computed using the
anticipated effective tax rate for the year.
10. NET INCOME PER SHARE: Income per share amounts are computed using the
weighted average number of common and common equivalent (dilutive stock
options) shares outstanding during each period. Common share
equivalents are included in the weighted average number of common
shares outstanding only when the effect is not antidilutive.
11. CONTINGENCIES: The Company is currently a party to various claims and
legal proceedings, none of which is considered by management to be
material to the Company's financial position.
12. STOCK SPLIT: On March 5, 1996, the Board of Directors approved a three
for two stock split in the form of a 50% stock dividend paid on April
19, 1996 to stockholders of record on March 31, 1996. All references in
the financial statements to number of shares and per share amounts of
the Company's common stock have been retroactively restated to reflect
the increased number of shares outstanding.
13. RECLASSIFICATION: Certain previously reported amounts have been
reclassified to conform with the current period presentation.
10
<PAGE> 11
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors affecting the Company's financial position and operating results during
the periods included in the accompanying condensed consolidated financial
statements.
This discussion and analysis of financial condition and results of operations
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements about future federal and state spending levels, pending
state and federal legislation and future public and private bidding
opportunities. Actual results could differ materially from those projected in
the forward-looking statements.
RESULTS OF OPERATIONS
Revenue for the quarter ended June 30, 1996 was $248.5 million, bringing the six
month total to $402.2 million, an increase of $21.8 million, or 9.6% and $70.2
million, or 21.2%, respectively, over the same periods last year.
For the six months ended June 30, 1996, revenue from public sector contracts
increased $23.0 million to $287.0 million, or 71.4% of total revenue, from
$264.0 million, or 79.5% of total revenue in 1995. Revenue from private sector
contracts of $73.6 million, or 18.3% of total revenue, was up $38.7 million from
the six months ended June 30, 1995 level of $34.9 million, or 10.5% of total
revenue. Revenue in the Company's primary geographical area, California,
increased to $216.6 million from $203.1 million last year but decreased as a
percent of total revenue to 53.8% from 61.1% resulting from the Company's
ongoing diversification strategy.
[PIE GRAPH]
REVENUE BY MARKET SECTOR
SIX MONTHS ENDED JUNE 30,
(In Millions)
<TABLE>
<CAPTION>
1996
--------------------------
<S> <C> <C>
Public $287.0 71.4%
Private 73.6 18.3
Materials 41.6 10.3
---------- --------
$402.2 100.0%
========== ========
<CAPTION>
1995
-----------------------------
<S> <C> <C>
Public $264.0 79.5%
Private 34.9 10.5
Materials 33.1 10.0
---------- ---------
$332.0 100.0%
========== ========
</TABLE>
Backlog at June 30, 1996 was $635.8 million, an $84.8 million decrease from June
30, 1995 and a $45.7 million increase from December 31, 1995. New awards for the
quarter totaled $259.9 million and do not include a $51.6 million Florida
highway contract awarded in July 1996.
[GRAPH]
AWARDS AND BACKLOG
END OF PERIOD
(In Millions)
<TABLE>
<CAPTION>
Awards Backlog
--------- ----------
1992
- ------
<S> <C> <C>
Q1 $ 62.4 $ 286.4
Q2 177.2 333.6
Q3 169.8 316.7
Q4 62.1 245.2
1993
- ------
Q1 319.6 487.3
Q2 157.4 501.9
Q3 325.2 643.4
Q4 182.7 659.7
1994
- ------
Q1 111.8 664.7
Q2 149.0 640.1
Q3 194.9 594.9
Q4 128.2 550.2
1995
- ------
Q1 199.5 644.4
Q2 302.9 720.6
Q3 143.1 557.2
Q4 289.2 590.1
1996
- ------
Q1 188.0 624.3
Q2 259.9 635.8
</TABLE>
11
<PAGE> 12
The public sector backlog decrease to 84.4% of total backlog from 88.9% at
December 31, 1995 and 94.1% at June 30, 1995 reflects the improved private
sector backlog of $98.9 million, or 15.6% of total backlog. This private sector
backlog represents an increase of $33.2 million over December 31, 1995 and an
increase of $56.1 million from June 30, 1995.
[PIE GRAPH]
BACKLOG BY MARKET SECTOR
(In Millions)
<TABLE>
<CAPTION>
June 30, 1996
----------------------------
<S> <C> <C>
Public $536.9 84.4%
Private 98.9 15.6
---------- --------
$635.8 100.0%
========== ========
<CAPTION>
December 31, 1995
-----------------------------
<S> <C> <C>
Public $524.4 88.9%
Private 65.7 11.1
---------- ---------
$590.1 100.0%
========== ========
</TABLE>
Gross profit for the quarter ended June 30, 1996 was $29.2 million, or 11.8% of
revenue, as compared to $29.7 million, or 13.1% of revenue, for 1995. The six
month gross profit increased $0.5 million to $43.9 million, or 10.9% of revenue
versus $43.4 million or 13.1% in 1995. The change in gross profit reflects the
successful execution of a higher volume of work, offset partially by the
dilutive effect of major projects which contributed to revenues but have yet to
reach the 25% completion threshold whereby the Company would begin to recognize
earnings.
General and administrative expenses for the three months ended June 30, 1996
decreased $0.1 million to $16.8 million, or 6.8% of revenue, as compared to 7.5%
of revenue for the same quarter of 1995. For the six months, general and
administrative expenses increased $2.3 million to $32.3 million, but went down
as a percent of revenue to 8.0% versus 9.0% last year. The six month increase
primarily reflects the additional overhead in the first quarter of 1996 from the
Utah branch acquired in the second quarter of 1995 and other costs associated
with a higher volume of work.
Other income increased $2.1 million for the quarter and $2.2 million for the six
months ended June 30, 1996 primarily reflecting the Company's share of gains on
sales of surplus equipment in joint ventures.
Net income for the quarter ended June 30, 1996 was $9.1 million, or $0.51 per
share, an increase of $0.8 million or $0.04 per share from the quarter ended
June 30, 1995 net income of $8.3 million, or $0.47 per share. For the six
months, net income was $9.5 million, or $0.53 per share, a $0.1 million, or
$0.01 per share decrease from the prior year net income of $9.6 million, or
$0.54 per share (as adjusted for a three for two stock split effective April 19,
1996). (See Note 12 of the Notes to the Condensed Consolidated Financial
Statements).
[GRAPH]
SEASONALITY OF BUSINESS
REVENUE AND NET INCOME BY QUARTER
(In Millions)
<TABLE>
<CAPTION>
Net Income Revenue
--------------- -----------
1992
- ------
<S> <C> <C>
Q1 $ -3.9 $ 68.0
Q2 2.8 130.0
Q3 4.3 186.7
Q4 0.7 133.6
1993
- ------
Q1 -4.2 77.5
Q2 - 142.9
Q3 5.8 183.6
Q4 2.9 166.4
1994
- ------
Q1 -2.1 106.7
Q2 4.6 173.6
Q3 13.6 240.2
Q4 3.3 172.9
1995
- ------
Q1 1.2 105.3
Q2 8.3 226.7
Q3 13.2 306.6
Q4 5.8 256.2
1996
- ------
Q1 0.4 153.7
Q2 9.1 248.5
</TABLE>
12
<PAGE> 13
OUTLOOK
Going forward, we are pursuing a number of quality bid opportunities across the
country, including a $1.0 billion design-build freeway reconstruction project in
Salt Lake City, private toll roads in Minnesota, Delaware and Oregon and
numerous highway projects in Florida, California, Nevada, Arizona, lllinois and
Texas.
Moreover, we anticipate continued improvement in private sector opportunities in
many of our geographic markets as California and the mountain states continue to
outperform the rest of the country from an economic standpoint. This should
translate into increased commercial/residential site development opportunities
as well as the potential for a slight margin improvement in our public sector
marketplace.
We have been successful in growing our business outside our California base, as
evidenced by the fact that 45% of our second quarter revenue was contributed by
our non-California operations. For example, in Florida the Company now has about
$118 million worth of work underway. Our goal is to continue to expand our
business throughout the United States.
The high level of bidding activity we are currently engaged in is driven in
great degree by the strong public sector funding now available from federal,
state and local sources. Looking out to next year, Congress is expected to
appropriate about $19.6 billion for transportation-related construction in
fiscal year 1997, a decrease of less than 1% from the prior year's
appropriation. With the current cost-cutting mood of Congress, our industry has
been somewhat successful in convincing federal policy makers that continued
investment in our transportation infrastructure is vital to a thriving economy.
Elsewhere, the debate continues in California as to whether money from the state
highway account should be used for the seismic retrofit of the toll bridges in
the San Francisco Bay area. Proposition 192, the $2 billion seismic retrofit
bond measure approved by voters in March, was supposed to cover the cost of
finishing the state's retrofit program. However, just before the election, the
state disclosed that the cost of retrofitting the San Francisco - Oakland Bay
Bridge was estimated to cost almost double the amount that had been earmarked in
Prop 192 to retrofit all of the state's toll bridges. Bay Area politicians want
to use the highway account to make up the shortfall while we believe toll
revenues should be used to complete the retrofitting of the state's toll
bridges. Currently, lawmakers in Sacramento are attempting to forge a
compromise. Clearly, tapping the state highway account to pay for the toll
bridge retrofit effort would have a significant impact on our California road
building business.
Also in Washington, there is a move afoot to transfer the 4.3 cents of the
federal gasoline tax currently being used for deficit reduction to the highway
trust fund, which would provide additional dollars for highway construction.
Senator Byrd has authored an amendment that has bipartisan support on Capitol
Hill and could likely be acted upon after Congress ends its summer recess.
Elsewhere in Washington, the move to take the highway trust funds out of the
unified federal budget has passed the House but has stalled in the Senate.
13
<PAGE> 14
Locally in California, the fate of using county sales tax for transportation
improvements will most likely be decided in November in Santa Clara County.
Under the confines of Propositions 13 and 62, any special tax, like one raised
for the specific purpose of transportation improvement, must have a two-thirds
majority to pass. In an effort to get around this obstacle, the Santa Clara
County Supervisors recently approved putting two measures on the November
ballot. The first would increase the general sales tax by one-half cent. The
other is advisory only and would indicate the voters' preference to the
Supervisors, detailing specific projects that could be completed with the
additional sales tax monies. The ability of 17 other California counties to
renew their sales tax- based transportation improvement programs will hinge on
what happens this Fall in Santa Clara County.
Finally, recognizing that we are heavily dependent on the sometimes whimsical
political process for public sector funding, we intend to diversify our sources
of revenue and profits over a broader range of markets while at the same time
retaining a tight focus on heavy civil construction and aggregate materials
production. The intent is to provide a better balance between public and private
markets and take advantage of opportunities in other construction sectors.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
DOLLARS IN THOUSANDS 1996 1995
- --------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents, June 30 $ 13,664 $ 19,308
Net cash provided (used) by:
Operating activities (3,332) 6,875
Investing activities 297 (2,652)
Financing activities (5,711) (2,564)
- --------------------------------------------------------------------
</TABLE>
Cash used by operating activities of $3.3 million for the six months ended June
30, 1996 represents a $10.2 million decrease from the 1995 amount for the same
period. The decrease primarily reflects the change to equity in construction
joint ventures and net cash used in the performance of contracts. Changes in
cash provided from operations reflect seasonal variations based on the amount
and progress of work being performed.
Cash provided by investing activities in 1996 improved $2.9 million primarily
reflecting a $15.9 million increase in net maturities of short-term investments
offset by a $12.6 million increase in cash used to purchase property and
equipment.
Cash used in financing activities decreased $3.1 million primarily reflecting
the increase of $3.2 million in dividends paid in 1996 due to the increased
quarterly dividend and special dividend declared in the first quarter of 1996.
Repayments of long-term debt increased $6.9 million and were offset by
borrowings of $7.0 million.
The Company's current borrowing capacity under its restated revolving line of
credit is $50 million of which $32.5 million was available on June 30, 1996. The
Company believes that its current cash balances combined with cash flows from
operations and cash available under its revolving credit agreements will be
sufficient to meet its operating needs, anticipated capital expenditure plans
and other financial commitments at least through 1996.
14
<PAGE> 15
PART II. OTHER INFORMATION
15
<PAGE> 16
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders on May 20, 1996,
the following members were elected to the Board of Directors:
<TABLE>
<CAPTION>
AFFIRMATIVE NEGATIVE VOTES WITHHELD
VOTES VOTES ABSTAINED NONVOTE
----- ----- --------- -------
<S> <C> <C> <C> <C>
Richard C. Solari 14,420,565 - 167,378 3,500,165
David H. Watts 14,421,915 - 166,028 3,500,165
Joseph J. Barclay 14,505,465 - 82,478 3,500,165
Brian C. Kelly 14,369,900 - 218,043 3,500,165
</TABLE>
The following proposal was approved at the Company's Annual Meeting:
<TABLE>
<CAPTION>
AFFIRMATIVE NEGATIVE VOTES WITHHELD
VOTES VOTES ABSTAINED NONVOTE
----- ----- --------- -------
<S> <C> <C> <C> <C>
To ratify the appointment of
Coopers & Lybrand, L.L.P.
as the independent
accountants of the Company
for the fiscal year ending
December 31, 1996 14,516,043 65,490 6,410 3,500,165
</TABLE>
16
<PAGE> 17
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 11 - Computation of Net Income per Common
and Common Equivalent Share
b) Reports on Form 8-K
None
17
<PAGE> 18
SIGNATURES
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.
GRANITE CONSTRUCTION INCORPORATED
By: /s/ William E. Barton
---------------------------
Date: August 14, 1996 William E. Barton
----------------------- Vice President and Chief Financial
Officer
18
<PAGE> 19
SIGNATURES
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.
GRANITE CONSTRUCTION INCORPORATED
By:
---------------------------
Date: August 14, 1996 William E. Barton
----------------------- Vice President and Chief Financial
Officer
18
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
11 Computation of Net Income per
Common and Common Equivalent
Share..................................................... 20
</TABLE>
19
<PAGE> 21
EXHIBIT 11
GRANITE CONSTRUCTION INCORPORATED
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 17,985 17,790 17,941 17,706
Computation of incremental outstanding shares:
Net effect of dilutive stock options based
on treasury stock method 67 50 76 42
- -----------------------------------------------------------------------------------------
Weighted average common shares outstanding,
as adjusted 18,052 17,840 18,017 17,748
=========================================================================================
Net income $ 9,131 $ 8,332 $ 9,497 $ 9,560
=========================================================================================
Net income per common and common
equivalent share $ 0.51 $ 0.47 $ 0.53 $ 0.54
=========================================================================================
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS, CONDENSED CONSOLIDATED STATEMENTS OF INCOME, AND
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q, JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 13,664
<SECURITIES> 13,792
<RECEIVABLES> 165,113
<ALLOWANCES> 703
<INVENTORY> 13,290
<CURRENT-ASSETS> 265,557
<PP&E> 454,682
<DEPRECIATION> 265,617
<TOTAL-ASSETS> 477,016
<CURRENT-LIABILITIES> 196,509
<BONDS> 40,364
0
0
<COMMON> 182
<OTHER-SE> 215,691
<TOTAL-LIABILITY-AND-EQUITY> 477,016
<SALES> 402,248
<TOTAL-REVENUES> 402,248
<CGS> 358,388
<TOTAL-COSTS> 390,653
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,778
<INCOME-PRETAX> 15,317
<INCOME-TAX> 5,820
<INCOME-CONTINUING> 9,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,497
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
