<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 SEPTEMBER 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 November 6, 1996.
<TABLE>
<CAPTION>
Class Outstanding
<S> <C>
Common Stock, $0.01 par value 18,121,253 shares
</TABLE>
This report on Form 10-Q, including all exhibits, contains 19 pages. The exhibit
index is located on page 18 of this report.
<PAGE> 2
GRANITE CONSTRUCTION INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets as of September 30, 1996 and
December 31, 1995............................................................4
Condensed Consolidated Statements
of Income for the Three Months and Nine
Months Ended September 30, 1996 and 1995.....................................5
Condensed Consolidated Statements
of Cash Flows for the Nine Months
Ended September 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.............................................none
Item 5. Other Information...............................................none
Item 6. Exhibits and Reports on Form 8-K..................................16
Exhibit Index.....................................................18
</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>
- --------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1996 1995
- --------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 38,441 $ 22,410
Short-term investments 22,372 44,582
Accounts receivable 177,233 142,055
Costs and estimated earnings in excess of billings 31,541 16,147
Inventories 13,838 10,180
Deferred income taxes 16,717 16,717
Equity in joint ventures 5,268 210
Other current assets 7,676 5,953
---------------------------
Total current assets 313,086 258,254
- --------------------------------------------------------------------------------------------------------------
Property and equipment 180,802 175,220
- --------------------------------------------------------------------------------------------------------------
Other assets 24,468 21,270
- --------------------------------------------------------------------------------------------------------------
$ 518,356 $ 454,744
==============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 11,687 $ 13,948
Accounts payable 80,904 68,056
Billings in excess of costs and estimated earnings 58,256 43,730
Accrued expenses and other current liabilities 73,195 55,341
---------------------------
Total current liabilities 224,042 181,075
- --------------------------------------------------------------------------------------------------------------
Long-term debt 39,697 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 18,161,611 shares, outstanding
18,121,253 shares; 1995- issued 17,897,018 shares,
outstanding 17,884,268 shares 182 179
Additional paid-in capital 37,321 32,715
Retained earnings 199,219 180,341
---------------------------
236,722 213,235
Unearned compensation (5,634) (3,115)
Treasury stock (741) (215)
---------------------------
230,347 209,905
- --------------------------------------------------------------------------------------------------------------
$ 518,356 $ 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $302,646 $306,588 $704,894 $638,545
Cost of revenue 261,830 266,039 620,218 554,580
--------------------------------------------------------
GROSS PROFIT 40,816 40,549 84,676 83,965
General and administrative expenses 17,221 20,334 49,486 50,302
--------------------------------------------------------
OPERATING PROFIT 23,595 20,215 35,190 33,663
- -----------------------------------------------------------------------------------------------
Other income (expense)
Interest income 1,698 1,794 5,070 4,523
Interest expense (1,156) (1,046) (2,934) (2,486)
Gain on sales of property
and equipment 306 387 2,466 909
Other, net (163) (172) (195) (493)
--------------------------------------------------------
685 963 4,407 2,453
- -----------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 24,280 21,178 39,597 36,116
Provision for income taxes 9,227 7,984 15,047 13,362
- -----------------------------------------------------------------------------------------------
NET INCOME $ 15,053 $ 13,194 $ 24,550 $ 22,754
===============================================================================================
Net income per share $ 0.83 $ 0.74 $ 1.36 $ 1.28
Weighted average shares
of common stock 18,069 17,879 18,033 17,784
Dividends per share $ 0.06 $ 0.05 $ 0.31 $ 0.23
===============================================================================================
</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>
- -------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 24,550 $ 22,754
Add (deduct) noncash items included in net income:
Depreciation, depletion and amortization 27,883 23,167
Gain on sales of property and equipment (2,466) (909)
Decrease in unearned compensation 1,475 1,168
Cash provided by (used in):
Accounts and notes receivable (38,152) (56,504)
Inventories (3,658) (80)
Equity in joint ventures (5,058) 2,389
Other assets (1,920) 980
Accounts payable 12,848 16,836
Billings in excess of costs and estimated earnings, net 915 23,331
Accrued expenses 17,661 9,929
------------------------
Net cash provided by operating activities 34,078 43,061
- -------------------------------------------------------------------------------------------
Investing Activities
Additions to property and equipment (38,965) (27,262)
Proceeds from sales of property and equipment 7,298 2,063
Additions to notes receivable (639) (1,334)
Repayments of notes receivable 535 1,487
Acquisition of Gibbons Company, net of cash acquired -- (1,280)
Additions to investments and other assets (1,038) (3,249)
Purchases of short-term investments (30,439) (25,961)
Maturities of short-term investments 52,649 31,874
------------------------
Net cash used by investing activities (10,599) (23,662)
- -------------------------------------------------------------------------------------------
Financing Activities
Additions to long-term debt 7,000 --
Repayments of long-term debt (9,058) (2,667)
Employee stock options exercised 615 703
Purchase of treasury stock (526) --
Dividends paid (5,479) (3,850)
------------------------
Net cash used by financing activities (7,448) (5,814)
- -------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 16,031 13,585
Cash and cash equivalents at beginning of period 22,410 17,649
------------------------
Cash and cash equivalents at end of period $ 38,441 $ 31,234
===========================================================================================
Supplementary Information Cash paid during the year for:
Interest $ 2,934 $ 2,486
Income taxes 2,950 7,858
Noncash investing and financing activity:
Financed acquisition of Gibbons Company $ - $ 31,750
===========================================================================================
</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 September 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 nine months ended September 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
September 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 $ - $ - $ - $ - $ 8,938 $6 $ - $ 8,944
Commercial Paper - - - - 10,897 3 (6) 10,894
Municipal Bonds 6,017 - - 6,017 2,012 4 - 2,016
Foreign Banker's Acceptances 2,982 - - 2,982 8,703 2 - 8,705
Domestic Banker's Acceptances - - - - 1,996 4 - 2,000
-------------------------------------------- ---------------------------------------------
8,999 - - 8,999 32,546 19 (6) 32,559
-------------------------------------------- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Available-For-Sale Available-For-Sale
September 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 10,360 4 (43) 10,321 4,859 45 - 4,904
Municipal Bonds 3,013 13 - 3,026 5,226 74 (32) 5,268
Domestic Banker's Acceptances - - - - 1,951 13 - 1,964
-------------------------------------------- ---------------------------------------------
13,373 17 (43) 13,347 12,036 132 (32) 12,136
-------------------------------------------- ---------------------------------------------
Total Short-Term Investments $22,372 $17 $(43) $22,346 $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 nine months ended September 30, 1996. At September 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 $8,999 $10,360 $19,359
After one year through five years - 3,013 3,013
- -------------------------------------------------------------------------------------------------
$8,999 $13,373 $22,372
=================================================================================================
</TABLE>
For the nine months ended September 30, 1996 and 1995, purchases and
maturities of short-term investments were as follows:
<TABLE>
<CAPTION>
------------------------------------------- -------------------------------------------
Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995
(Unaudited) (Unaudited)
Held-To- Available Total Held-To- Available Total
Maturity For Sale Maturity For Sale
------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases $21,122 $ 9,317 $30,439 $17,393 $ 8,568 $25,961
Maturities 40,300 12,349 52,649 21,900 9,974 31,874
------------------------------------------- -------------------------------------------
Net change $(19,178) $(3,032) $(22,210) $ (4,507) $(1,406) $(5,913)
=========================================== ===========================================
</TABLE>
3. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---------------------------------
(UNAUDITED)
<S> <C> <C>
Construction contracts
Completed and in progress $ 113,068 $81,240
Retentions 43,273 41,777
---------------------------------
156,341 123,017
Construction material sales 16,255 12,380
Other 5,356 7,556
---------------------------------
177,952 142,953
Less allowance for doubtful accounts 719 898
---------------------------------
$ 177,233 $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>
- ---------------------------------------------------------------------------------------------------
SEPTEMBER 30, December 31,
1996 1995
- ---------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Assets
Total $ 74,706 $125,019
Less other venturers' interest 52,294 87,513
- ---------------------------------------------------------------------------------------------------
Company's interest 22,412 37,506
- ---------------------------------------------------------------------------------------------------
Liabilities
Total 57,147 124,319
Less other venturers' interest 40,003 87,023
- ---------------------------------------------------------------------------------------------------
Company's interest 17,144 37,296
- ---------------------------------------------------------------------------------------------------
$ 5,268 $ 210
===================================================================================================
</TABLE>
6. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
---------------------------------------
(UNAUDITED)
<S> <C> <C>
Land $ 24,315 $ 14,019
Quarry property 25,640 35,194
Buildings and leasehold improvements 12,973 11,657
Equipment and vehicles 384,783 361,676
Office furniture and equipment 5,369 4,570
---------------------------------------
453,080 427,116
Less accumulated depreciation,
depletion and amortization 272,278 251,896
---------------------------------------
$180,802 $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>
SEPTEMBER 30, December 31,
1996 1995
---------------------------------------
(UNAUDITED)
<S> <C> <C>
Payroll and related employee benefits $21,816 $21,371
Accrued insurance 23,210 19,957
Income taxes payable 15,807 2,425
Other 12,362 11,588
---------------------------------------
$73,195 $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 nine months ended
September 30, 1996. Unearned compensation is amortized over the
restriction periods. Compensation expense related to restricted shares
was $491 and $389 for the three months ended and $1,475 and $1,168 for
the nine months ended September 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 nine months ended September 30, 1996, employee stock options
for 54,950 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, state and local spending levels,
pending state and federal legislation and future public and private bidding
opportunities. Actual results could differ materially from those discussed in
the forward-looking statements.
RESULTS OF OPERATIONS
Revenue for the quarter ended September 30, 1996 was $302.7 million, bringing
the nine month total to $704.9 million, a decrease of $3.9 million for the
quarter, or 1.3%, and an increase $66.4 million for the nine months, or 10.4%,
over the same periods last year.
REVENUE BY MARKET SECTOR
NINE MONTHS ENDED SEPTEMBER 30,
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995
$ % $ %
- - - -
<S> <C> <C> <C> <C>
Public 503.6 71.5% 494.1 77.4%
Private 132.7 18.8% 79.6 12.5%
Materials 68.6 9.7% 64.8 10.1%
------------------------------
704.9 100.0% 638.5 100.0%
==============================
</TABLE>
For the nine months ended September 30, 1996, revenue from public sector
contracts increased $9.5 million to $503.6 million, or 71.5% of total revenue,
from $494.1 million, or 77.4% of total revenue in 1995. Revenue from private
sector contracts of $132.7 million, or 18.8% of total revenue, was up $53.1
million from the nine months ended September 30, 1995 level of $79.6 million, or
12.5% of total revenue. Revenue in the Company's primary geographical area,
California, decreased to $375.6 million from $378.4 million last year and
decreased as a percent of total revenue to 53.3% from 59.3%.
Backlog at September 30, 1996 was $715.7 million, a $158.5 million increase from
September 30, 1995 and a $125.6 million increase from December 31, 1995. New
awards for the quarter totaled $382.5 million.
Major awards for the quarter include a $68.9 million interest in a joint venture
with Kiewit Pacific Company to build a dam embankment in Southern California, a
$51.6 million highway project in Florida, a $19.7 million highway widening near
Dallas, Texas, an $18.1 million project on I-4 near Tampa, Florida, and an $18.1
million highway project in Georgia.
AWARDS AND BACKLOG
END OF PERIOD
(IN MILLIONS)
<TABLE>
<CAPTION>
AWARDS BACKLOG
<S> <C> <C> <C>
1992
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
Q3 382.5 715.7
</TABLE>
11
<PAGE> 12
While the public sector backlog increased in total dollars from December 31,
1995, as a percent of total it remained approximately the same. The private
sector backlog represents an increase of $15.3 million over December 31, 1995
and an increase of $43.3 million from September 30, 1995.
BACKLOG BY MARKET SECTOR
($ MILLIONS)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
$ % $ %
- - - -
<S> <C> <C> <C> <C>
Public 634.7 88.7% 524.4 88.9%
Private 81.0 11.3% 65.7 11.1%
-----------------------------------------
715.7 100.0% 590.1 100.0%
=========================================
</TABLE>
Gross profit for the quarter ended September 30, 1996 was $40.8 million, or
13.5% of revenue, as compared to $40.5 million, or 13.2% of revenue, for 1995.
The nine month gross profit increased $0.7 million to $84.7 million, or 12.0% of
revenue versus $84.0 million or 13.1% in 1995.
General and administrative expenses for the three months ended September 30,
1996 decreased $3.1 million to $17.2 million, or 5.7% of revenue, as compared to
6.6% of revenue for the same quarter of 1995. This decrease primarily relates to
lower costs in the branch division associated with regionalization efforts and
the absence of a $1.5 million write-off the Company took in 1995 associated with
a lease abandonment. For the nine months, general and administrative expenses
decreased $0.8 million to $49.5 million and went down as a percent of revenue to
7.0% versus 7.9% last year.
Other income decreased $0.3 million for the quarter but increased $2.0 million
for the nine months ended September 30, 1996 primarily reflecting the Company's
share of gains on sales of surplus equipment in joint ventures in the second
quarter.
SEASONALITY OF BUSINESS
REVENUE AND NET INCOME BY QUARTER
($ MILLIONS)
<TABLE>
<CAPTION>
NET
REVENUE INCOME
------- ------
<S> <C> <C> <C>
1992
Q1 $ 68.0 $(3.9)
Q2 130.0 2.8
Q3 186.7 4.3
Q4 133.6 0.7
1993
Q1 77.5 (4.2)
Q2 142.9 -
Q3 183.6 5.8
Q4 166.4 2.9
1994
Q1 106.7 (2.1)
Q2 173.6 4.6
Q3 240.2 13.6
Q4 172.9 3.3
1995
Q1 105.3 1.2
Q2 226.7 8.3
Q3 306.6 13.2
Q4 256.2 5.8
1996
Q1 153.7 0.4
Q2 248.5 9.1
Q3 302.7 15.1
</TABLE>
Net income for the quarter ended September 30, 1996 was $15.1 million, or $0.83
per share, an increase of $1.9 million or $0.09 per share from the quarter ended
September 30, 1995 net income of $13.2 million, or $0.74 per share. The 14.1%
increase in net income is attributable to the successful execution of work and
the recognition of earnings on major projects that reached the 25% stage of
completion during the quarter. For the nine months, net income was $24.6
million, or $1.36 per share, a $1.8 million, or $0.08 per share increase from
the prior year net income of $22.8 million, or $1.28 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).
12
<PAGE> 13
OUTLOOK
In the wake of the November elections, there were a number of outcomes at the
federal, state and local level which could provide positive implications for the
Company in the long-term.
At the federal level, we believe that by reelecting President Clinton and
keeping the Republicans in control of Congress, there may be another opportunity
to transfer 4.3 cents of the federal gasoline tax currently being used for
deficit reduction to the highway trust as well as taking the highway trust funds
out of the federal unified budget, providing the potential for increased highway
expenditures.
At the state level, voters in California approved Proposition 204, which
provides $1.1 billion to restore and recharge the Sacramento Delta and the San
Francisco Bay. There will be a number of water-related projects that will
accompany this effort, especially in the area of water treatment. Also in
California, voters approved Proposition 209, the California Civil Rights
Initiative, which would, among other things, put an end to minority and
women-owned businesses from receiving preferential treatment in state
contracting. As expected, the enactment of Proposition 209 has been challenged
in court. It is unclear at this point in time what effect, if any, Prop. 209
will have on our business in California, as most projects contracted with the
state contain Federal funding which would not be affected by its passage.
At the local level, voters in Santa Clara County, California approved two
measures that could remove the current obstacles for increasing county sales tax
for transportation improvements. Measure A detailed specific projects that
voters "advised" county supervisors to undertake if any additional sales tax
monies were made available. Measure B raised the general sales tax by one-half
cent. The measures, in tandem, were designed to get around the stipulations of
Propositions 13 and 62 which require that any special tax, like one raised for
the specific purpose of transportation improvement, be approved by a two-thirds
majority. Raising the general sales tax requires only a simple majority to pass.
Measures A and B may serve as precedents for seventeen other California counties
looking to renew their sales tax-based transportation improvement programs. It
is widely anticipated, however, that these measures will be challenged in court.
Turning to the private sector, we would expect to see continued improvement as
economists expect California to lead the rest of the U.S. in job and economic
growth. Economic activity continues to be robust in the mountain states, all of
which should beget ample bidding opportunities for commercial/residential site
development projects. It should be noted, however, that the real estate sector
of the economy, which has historically led the state out of recession, is
actually lagging the recovery at this time.
The bidding outlook going forward is very bright, especially in our Heavy
Construction Division, where as part of joint ventures we are currently
estimating two projects valued at approximately $1 billion each, and three other
projects valued in excess of $100 million each. As we have stated in the past,
this high level of bidding activity reflects the strong public funding now
available from federal, state and local sources.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DOLLARS IN THOUSANDS 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents, September 30 $ 38,441 $ 31,234
Net cash provided (used) by:
Operating activities 34,078 43,061
Investing activities (10,599) (23,662)
Financing activities (7,448) (5,814)
- -------------------------------------------------------------------------------
</TABLE>
Cash provided by operating activities of $34.1 million for the nine months ended
September 30, 1996 represents a $9.0 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 provided from the performance of
contracts. Changes in cash provided from operations reflect seasonal variations
based on the amount and progress of work being performed.
Cash used by investing activities in 1996 improved $13.1 million primarily
reflecting a $16.3 million increase in net maturities of short-term investments
and $5.2 million additional proceeds in sales of property and equipment offset
by an $11.7 million increase in cash used to purchase property and equipment.
Cash used in financing activities decreased $1.6 million primarily reflecting
the increase of $1.6 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 $6.4 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 September 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
None
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
16
<PAGE> 17
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: November 14, 1996 William E. Barton
Vice President and Chief Financial
Officer
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<S> <C> <C>
11 Computation of Net Income per
Common and Common Equivalent
Share..............................................19
</TABLE>
18
<PAGE> 1
EXHIBIT 11
GRANITE CONSTRUCTION INCORPORATED
COMPUTATION OF NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(UNAUDITED -- IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 18,008 17,811 17,962 17,738
Computation of incremental outstanding shares:
Net effect of dilutive stock options based
on treasury stock method 61 68 71 47
- ---------------------------------------------------------------------------------------------------
Weighted average common shares outstanding,
as adjusted 18,069 17,879 18,033 17,785
===================================================================================================
Net income $15,053 $13,194 $24,550 $22,754
===================================================================================================
Net income per common and common
equivalent share $ 0.83 $ 0.74 $ 1.36 $ 1.28
===================================================================================================
</TABLE>
<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, SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 38,441
<SECURITIES> 22,372
<RECEIVABLES> 177,952
<ALLOWANCES> 719
<INVENTORY> 13,838
<CURRENT-ASSETS> 313,086
<PP&E> 453,080
<DEPRECIATION> 272,278
<TOTAL-ASSETS> 518,356
<CURRENT-LIABILITIES> 224,042
<BONDS> 39,697
0
0
<COMMON> 182
<OTHER-SE> 230,165
<TOTAL-LIABILITY-AND-EQUITY> 518,356
<SALES> 704,894
<TOTAL-REVENUES> 704,894
<CGS> 620,218
<TOTAL-COSTS> 669,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,934
<INCOME-PRETAX> 39,597
<INCOME-TAX> 15,047
<INCOME-CONTINUING> 24,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,550
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
