<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 31, 2000
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File No. 1-12911
GRANITE CONSTRUCTION INCORPORATED
State of Incorporation: I.R.S. Employer Identification
Delaware Number: 77-0239383
Corporate Administration:
525 West Beach Street
Watsonville, California 95076
(831) 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 May 9, 2000.
<TABLE>
<CAPTION>
Class Outstanding
----------------------------- -----------------
<S> <C>
Common Stock, $0.01 par value 27,289,616 shares
</TABLE>
<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 March 31, 2000 and
December 31, 1999...........................................................4
Condensed Consolidated Statements
of Income for the Three Months Ended
March 31, 2000 and 1999.....................................................5
Condensed Consolidated Statements
of Cash Flows for the Three Months
Ended March 31, 2000 and 1999...............................................6
Notes to the Condensed Consolidated
Financial Statements.....................................................7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...........................................................11-16
Item 3. Quantitative and Qualitative Disclosures about Market Risk.................17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..........................................................19
Item 2. Changes in Securities......................................................19
Item 3. Defaults upon Senior Securities............................................19
Item 4. Submission of Matters to a Vote of Security Holders........................19
Item 5. Other Information..........................................................19
Item 6. Exhibits and Reports on Form 8-K...........................................20
Exhibit Index..............................................................22
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
3
<PAGE> 4
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
===============================================================================================
MARCH 31, December 31,
2000 1999
- -----------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 42,613 $ 61,832
Short-term investments 35,806 46,245
Accounts receivable 161,936 211,609
Costs and estimated earnings in excess of billings 15,736 14,105
Inventories 17,300 12,823
Deferred income taxes 14,885 14,885
Equity in construction joint ventures 33,837 30,611
Other current assets 8,059 10,211
-------------------------
Total current assets 330,172 402,321
- ---------------------------------------------------------------------------------------------
Property and equipment 249,644 242,913
- ---------------------------------------------------------------------------------------------
Other assets 46,799 34,338
- ---------------------------------------------------------------------------------------------
$ 626,615 $ 679,572
=============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 5,985 $ 5,985
Accounts payable 74,480 95,662
Billings in excess of costs and estimated earnings 50,097 66,342
Accrued expenses and other current liabilities 76,448 90,675
-------------------------
Total current liabilities 207,010 258,664
- ---------------------------------------------------------------------------------------------
Long-term debt 64,813 64,853
- ---------------------------------------------------------------------------------------------
Deferred income taxes 28,323 28,323
- ---------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, $0.01 par value, authorized
3,000,000 shares, none outstanding -- --
Common stock, $0.01 par value, authorized 50,000,000
shares; issued and outstanding 27,284,991 shares in
2000 and 26,995,506 in 1999 273 270
Additional paid-in capital 56,304 49,817
Retained earnings 283,691 285,832
-------------------------
340,268 335,919
Unearned compensation (13,799) (8,187)
-------------------------
326,469 327,732
- ---------------------------------------------------------------------------------------------
$ 626,615 $ 679,572
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
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 March 31, 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Construction $ 193,349 $ 187,972
Material sales 23,081 26,832
---------------------------
Total revenue 216,430 214,804
---------------------------
Cost of revenue:
Construction 168,448 168,338
Material sales 21,607 23,137
---------------------------
Total cost of revenue 190,055 191,475
---------------------------
GROSS PROFIT 26,375 23,329
General and administrative expenses 22,859 19,622
---------------------------
OPERATING INCOME 3,516 3,707
- -------------------------------------------------------------------------------
Other income (expense)
Interest income 3,177 2,779
Interest expense (1,712) (1,843)
Gain on sales of property
and equipment 981 299
Other, net (232) (877)
---------------------------
2,214 358
- -------------------------------------------------------------------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 5,730 4,065
Provision for income taxes 3,506 1,565
- -------------------------------------------------------------------------------
NET INCOME $ 2,224 $ 2,500
===============================================================================
Net income per share
Basic $ 0.08 $ 0.09
Diluted $ 0.08 $ 0.09
Weighted average shares
of common stock
Basic 26,225 26,495
Diluted 26,728 27,398
Dividends per share $ 0.16 $ 0.19
===============================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
==================================================================================================
THREE MONTHS ENDED MARCH 31, 2000 1999
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 2,224 $ 2,500
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 10,688 9,957
Gain on sales of property and equipment (981) (299)
Decrease in unearned compensation 1,300 1,050
Common stock contributed to ESOP -- 2,146
Equity in loss of affiliates and other 812 1,364
Changes in assets and liabilities:
Accounts and notes receivable 49,526 30,766
Inventories (4,477) (2,139)
Equity in construction joint ventures (3,226) (3,239)
Other assets (296) 2,921
Accounts payable (21,182) (23,731)
Billings in excess of costs and estimated earnings, net (17,876) (5,196)
Accrued expenses (16,702) (18,058)
-----------------------
Net cash used by operating activities (190) (1,958)
- --------------------------------------------------------------------------------------------------
Investing Activities
Purchases of short-term investments (19,837) (28,036)
Maturities of short-term investments 30,276 42,999
Additions to property and equipment (17,782) (27,564)
Proceeds from sales of property and equipment 1,452 1,143
Investment in affiliates (13,477) --
Development and sale of land and other investing activities 2,728 453
-----------------------
Net cash used by investing activities (16,640) (11,005)
- --------------------------------------------------------------------------------------------------
Financing Activities
Repayments of long-term debt (40) (57)
Employee stock options exercised 371 51
Repurchase of common stock (830) (17,067)
Dividends paid (1,890) (1,659)
-----------------------
Net cash used by financing activities (2,389) (18,732)
- --------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (19,219) (31,695)
Cash and cash equivalents at beginning of period 61,832 62,470
-----------------------
Cash and cash equivalents at end of period $ 42,613 $ 30,775
==================================================================================================
Supplementary Information
Cash paid during the period for:
Interest $ 2,017 $ 2,203
Income taxes 4,154 3,196
Noncash investing and financing activity:
Restricted stock issued for services $ 6,912 $ 6,429
Dividends accrued but not paid 4,366 5,182
Financed acquisition of property and equipment -- 1,700
==================================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
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 March 31, 2000 and
the results of operations and cash flows for the periods presented. The
December 31, 1999 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 three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the full year.
2. INVENTORIES: Inventories consist primarily of quarry products valued at
the lower of average cost or market.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARCH 31, December 31,
2000 1999
(UNAUDITED)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Land $ 37,451 $ 36,485
Quarry property 46,955 46,891
Buildings and leasehold improvements 36,583 33,791
Equipment and vehicles 488,042 478,990
Office furniture and equipment 7,668 7,110
-------------------------
616,699 603,267
Less accumulated depreciation,
depletion and amortization 367,055 360,354
- --------------------------------------------------------------------------------
$249,644 $242,913
================================================================================
</TABLE>
7
<PAGE> 8
Granite Construction Incorporated
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands, Except per Share Data)
4. EARNINGS PER SHARE: In accordance with the disclosure requirements of
SFAS 128, a reconciliation of the numerator and denominator of basic and
diluted earnings per share is provided as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
NUMERATOR - BASIC AND DILUTED EARNINGS PER SHARE
Net income $ 2,224 $ 2,500
=============================================================================================
DENOMINATOR - BASIC EARNINGS PER SHARE
Common stock outstanding 27,044 27,552
Less restricted stock outstanding 819 1,057
--------------------
TOTAL 26,225 26,495
--------------------
Basic earnings per share $ 0.08 $ 0.09
=============================================================================================
DENOMINATOR - DILUTED EARNINGS PER SHARE
Denominator - Basic Earnings per Share 26,225 26,495
Effect of Dilutive Securities:
Common stock options 8 47
Warrants 87 240
Restricted stock 408 616
--------------------
TOTAL 26,728 27,398
--------------------
Diluted earnings per share $ 0.08 $ 0.09
=============================================================================================
</TABLE>
5. 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.
6. RECLASSIFICATIONS: Certain prior year financial statement items have
been reclassified to conform to the current year's presentation.
7. INVESTMENT IN T.I.C. HOLDINGS, INC.: The Company currently holds a 30%
minority interest in T.I.C. Holdings, Inc. ("TIC"). The Company and TIC
reached an agreement under which the Company will sell its minority
interest back to TIC over a three and one half-year period. Under the
agreement TIC will have the opportunity to repurchase shares sooner
based on an agreed to formula.
8
<PAGE> 9
Granite Construction Incorporated
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands, Except per Share Data)
8. INVESTMENT IN WILDER CONSTRUCTION: In January 2000, the Company
purchased 30% of the common stock of Wilder Construction Company
("Wilder") for a purchase price of $13.1 million. The purchase agreement
provides for the Company to increase its ownership in Wilder to between
51% and 60% in 2002 and to 75% in 2004. Founded in 1911, Wilder is a
heavy-civil construction company with regional offices located in
Washington, Oregon and Alaska. Wilder has annual revenues of
approximately $150 million and employs approximately 650 people
throughout the Northwest and Alaska.
9. BUSINESS SEGMENT INFORMATION:
The Company has two reportable segments: the Branch Division and
the Heavy Construction Division (HCD). The Branch Division is comprised
of branch offices that serve local markets, while HCD pursues major
infrastructure projects throughout the nation. HCD generally has large
heavy-civil projects with contract amounts in excess of $15 million and
contract durations greater than two years, while the Branch Division
projects are typically smaller in size and shorter in duration. HCD has
been the primary participant in the Company's construction joint
ventures.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on operating profit or loss which does not
include income taxes, interest income, interest expense or other income
(expense).
<TABLE>
<CAPTION>
Information about Profit and Assets:
- -------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, HCD BRANCH TOTAL
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000
Revenues from external customers $ 90,029 $ 126,401 $ 216,430
Intersegment revenue transfer (3,552) 3,552 --
----------------------------------------
Net revenue 86,477 129,953 216,430
Depreciation and amortization 1,867 7,725 9,592
Operating profit 9,327 771 10,098
Property and equipment 27,121 201,623 228,744
- -------------------------------------------------------------------------------------
1999
Revenues from external customers $ 78,723 $ 136,081 $ 214,804
Intersegment revenue transfer (4,741) 4,741 --
----------------------------------------
Net revenue 73,982 140,822 214,804
Depreciation and amortization 1,947 7,105 9,052
Operating profit 2,066 7,815 9,881
Property and equipment 28,948 181,318 210,266
- -------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
Granite Construction Incorporated
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands, Except per Share Data)
9. BUSINESS SEGMENT INFORMATION, CONTINUED:
<TABLE>
<CAPTION>
Reconciliation of Segment Profit to the Company's Consolidated Totals:
- --------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Total profit for reportable segments $ 10,098 $ 9,881
Other income 2,214 358
Unallocated other corporate expenses (6,582) (6,174)
- -------------------------------------------------------------------------------
Income before provision for income taxes $ 5,730 $ 4,065
===============================================================================
</TABLE>
10
<PAGE> 11
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING DISCLOSURE:
This report contains forward-looking statements; such as
statements related to the impact of government regulations on the
Company's operations, the existence of bidding opportunities and the
impact of legislation, availability of highway funds and economic
conditions on the Company's future results. Additionally,
forward-looking statements include statements that can be identified by
the use of forward-looking terminology such as "believes," "expects,"
"appears, " "may," "will," "should," or "anticipates" or the negative
thereof or comparable terminology, or by discussions of strategy.
All such forward-looking statements are subject to risks and
uncertainties that could cause actual results of operations and
financial condition and other events to differ materially from those
expressed or implied in such forward-looking statements. Specific risk
factors include, without limitation, changes in the composition of
applicable federal and state legislation appropriation committees;
federal and state appropriation changes for infrastructure spending; the
general state of the economy; weather conditions; competition and
pricing pressures; and state referendums and initiatives.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(In Millions) 2000 1999 CHANGE %
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Branch Division ................. $129.9 $140.8 $(10.9) (7.7)
Heavy Construction Division ..... 86.5 74.0 12.5 16.9
------ ------ ------ ------
$216.4 $214.8 $ 1.6 0.8
====== ====== ====== ======
</TABLE>
Revenue and Backlog: Branch Division revenue from both construction
and material sales decreased in the first quarter of 2000 compared to the
corresponding 1999 quarter due primarily to more typical rainfall levels in the
West compared to the unusually dry 1999 quarter. Heavy Construction Division
("HCD") revenue increased in the quarter over the corresponding 1999 quarter due
to continued dry weather conditions in Texas and Florida and a strong portfolio
of work carried forward from 1999. Revenue from private sector contracts
increased to 26.0% of total revenue in the first quarter of 2000 from 23.0% of
total revenue in the 1999 quarter. As further described in the "Outlook" section
of this report the market for commercial and residential site development
continues to be strong.
11
<PAGE> 12
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
BACKLOG BY MARKET SECTOR
(IN MILLIONS)
MARCH 31, MARCH 31, VARIANCE
2000 1999 AMOUNT PERCENT
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS
Federal $ 48.4 $ 17.4 $ 31.0 178.2
State 454.4 627.2 (172.8) (27.6)
Local 113.7 157.0 (43.3) (27.6)
----------------------------------------------------
Total public sector 616.5 801.6 (185.1) (23.1)
Private sector 161.5 112.6 48.9 43.4
- -------------------------------------------------------------------------------------
$ 778.0 $ 914.2 $ (136.2) (14.9)
=====================================================================================
</TABLE>
The Company's backlog at March 31, 2000 was $778.0 million, down
$136.2 million, or 14.9% from March 31, 1999 and a decrease of $15.3 million, or
1.9% from December 31, 1999. The decrease in backlog was due primarily to the
absence of HCD awards in the fourth quarter of 1999 and the first quarter 2000.
New awards for the quarter totaled $201.1 million and included a $19.8 million
highway contract in Utah, a $17.8 million contract in Nevada and an $11.9
million highway contract in California. Private sector backlog increased $48.9
million at March 31, 2000 as compared to March 31, 1999. This increase is due
primarily to the growth in the market for commercial and residential site
development, particularly in the West. Public sector backlog decreased $185.1
million at March 31, 2000 as compared to March 31, 1999, primarily due to the
absence of HCD awards described above.
Gross Profit: For the quarter ended March 31, 2000, gross profit
reached $26.4 million, or 12.2% of revenue, as compared to $23.3 million, or
10.9% of revenue, for 1999. The increased gross profit margin is largely
attributable to the successful execution of HCD projects, partially offset by
decreased Branch Division margins for both construction and material sales. The
lower Branch Division margins were primarily due to wetter weather conditions in
the West which decreased the efficiency of resource utilization.
To a lesser extent, the gross profit margin in the first quarter 2000
was positively impacted by a lower level of revenue from projects that did not
meet the Company's 25% completion threshold for profit recognition compared to
the corresponding 1999 quarter. The Company recognizes revenue only to the
extent of cost incurred until a project reaches 25% complete. Project to date
revenue recognized for projects less than 25% complete was approximately $34.1
million and $53.3 million at March 31, 2000 and 1999, respectively.
Cost of revenue consists of direct costs on contracts; including
labor and materials, amounts payable to subcontractors, direct overhead costs,
equipment expense (primarily depreciation, maintenance and repairs) and
insurance costs. The Company has experienced some upward pressure on costs
associated with labor markets and oil prices, however, the Company's gross
profit margins were not significantly impacted by such changes during the first
quarter of 2000.
12
<PAGE> 13
General and Administrative Expenses: General and administrative
expenses for the three months ended March 31, 2000 and 1999, respectively
comprised the following (in millions):
<TABLE>
<CAPTION>
IN MILLIONS 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Salaries and related expenses $ 11.9 $ 10.9
Incentive compensation,
discretionary profit sharing and pension 2.9 2.4
Other general and administrative expenses 8.1 6.3
- -------------------------------------------------------------------------------
Total $ 22.9 $ 19.6
- -------------------------------------------------------------------------------
Percent of revenue 10.6% 9.1%
===============================================================================
</TABLE>
Salaries and related expenses increased in 2000 over 1999 due
primarily to increased staffing to support the Company's current and expected
growth. Incentive compensation and discretionary profit sharing and pension
costs increased slightly as a function of the Company's increased gross profit
margin. Other general and administrative expenses include various costs to
support its operations, none of which exceeds 10% of total general and
administrative expenses. The increase in other general and administrative
expenses in 2000 primarily reflects increases in costs to support the Company's
growth.
Operating Income: The Heavy Construction Division's contribution to
operating income in 2000 increased over the 1999 contribution due to both
increases in volume of work and the profit margins the Division was able to
achieve as described above. The Branch Division's decreased contribution to
operating income reflects decreases in revenue and gross margins as described
above and increases in salaries and other costs to support expected growth.
Other Income (Expenses): Other income increased $1.9 million to $2.2
million in the quarter ended March 31, 2000 over the same period in 1999. The
increase is primarily the result of slightly higher interest income, increased
gain on the sale of property and equipment, and decreases in loss recorded from
the Company's equity method investments.
Provision for Income Taxes: The Company's effective tax rate was
61.2% in first quarter 2000 compared to 38.5% in 1999. The increase reflects
additional tax expense related to the Company reaching an agreement with TIC to
divest its 30% investment over a three and one-half year period. The Company
expects its effective tax rate for the remainder of 2000 to approximate 38.5%.
13
<PAGE> 14
OUTLOOK
Looking ahead, the Company anticipates a high level of bidding
activity for the year and is optimistic that both the Branch and Heavy
Construction Divisions will be able to capitalize on today's healthy
construction market and transportation-related funding levels. While little has
changed from what was discussed in our most recently filed Form 10-K, we would
like to provide some updates to key issues that may have an impact on our
business going forward.
On the California front, Governor Gray Davis recently introduced his
$5.2 billion four-year Traffic Congestion Relief plan. The plan is intended to
"get California moving again" by way of new road construction and transit
projects in some of the most congested areas of the state. Of the approximate
$10.0 to $15.0 billion budget surplus in California, Davis' plan proposes using
$3.0 billion of the surplus over the next four years, in addition to a $2.2
billion bond measure on the November ballot. While this plan is a step in the
right direction, it is merely a down payment on the estimated $110.0 billion
needed statewide for infrastructure improvements over the long term. Moreover,
the contracting out initiative in California continues to gain support,
receiving recently the endorsement of the state's Building and Construction
Trades Council. Successful passage of the initiative in November would help
break the almost $3 billion logjam of transportation projects that cannot be
designed in-house by state engineers.
In the Outlook section of our 1999 Form 10-K, we discussed the fact
that the Company has witnessed some upward pressure on costs associated with
labor markets and oil prices. However, we do not anticipate these costs to have
a significant impact on the Company's 2000 year-end financial results.
Looking at our private sector markets, commercial and residential
site development work continues to be strong, especially in California and
Arizona. As we have commented in the past, a strong private market begets a
strong public sector market as it absorbs capacity from the latter, potentially
leading to decreased competition and higher margins. Although Granite has not
been negatively impacted to date, private development work is interest rate
sensitive and any significant increase in rates could quell future development
projects which then could lead to decreased bidding opportunities for site
development and increased competition in the public sector.
The U.S. Commerce Department reported that spending on construction
projects nationwide increased by 1.4% in March, 2.0% in February and 1.2% in
January, which provides further evidence of a healthy construction market. The
department's first quarter figures released May 1, 2000 report a 7.0% increase
over 1999's level for actual construction. This increase included a 9.0%
increase in highway work for the quarter. Looking ahead, the U.S. Commerce
Department's 2000 outlook is calling for an optimistic 4.0% increase in total
construction, in line with the current rate of inflation.
The level of bidding activity within both divisions continues to be
very high with the size and scope of some of these projects, particularly for
the Heavy Construction Division, being quite large.
14
<PAGE> 15
In the private sector, especially in California, the Branch Division continues
to experience a strong market, driven in our opinion, by a shortage of housing
throughout the state. In the public sector, both divisions are witnessing an
increase in projects being let by a number of state departments of
transportation which are likely the result of the Transportation Equity Act for
the 21st Century (TEA-21). As we discussed in our Form 10-K, these projects
include various highway, transit/rail and design-build projects totaling in
excess of $3.5 billion. The Company's Heavy Construction Division is very upbeat
about both the type and amount of work to bid in the coming year and will
continue to maintain their disciplined bidding philosophy going forward.
In conclusion, the Company continues to focus on its strategic growth
plans for both divisions through its increased emphasis on mergers and
acquisitions, and by bidding in major construction markets where we do not
already have a presence.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(IN MILLIONS)
MARCH 31, 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 42.6 $ 30.8
Net cash provided (used) by:
Operating activities (0.2) (2.0)
Investing activities (16.6) (11.0)
Financing activities (2.4) (18.7)
Capital expenditures 17.8 27.6
- -------------------------------------------------------------------------------
</TABLE>
Cash used by operating activities of $0.2 million for the three
months ended March 31, 2000 represents a $1.8 million decrease from the 1999
amount for the same period. Changes in cash from operating activities primarily
reflects seasonal variations based on the amount and progress of work being
performed.
Cash used by investing activities in 2000 increased $5.6 million due
to the acquisition of Wilder Construction in which the Company has a 30% equity
investment offset by a decrease in property and equipment purchases.
Cash used by financing activities in 2000 decreased $16.3 million
from 1999 because the Company repurchased a portion of its shares in 1999.
The Company has budgeted $58.0 million for capital expenditures in
2000, which includes amounts for construction equipment, aggregate and asphalt
plants, buildings, leasehold improvements and the purchase of land and aggregate
reserves. The Company anticipates that cash generated internally and amounts
available under its existing credit facilities will be sufficient to meet its
capital and other requirements, including contributions to employee benefit
plans, for the foreseeable future.
15
<PAGE> 16
The Company believes it has adequate capital resources to fund its
operations at least through 2000. The Company currently has access to funds
under its revolving credit agreement which allow it to borrow up to $75.0
million, of which $62.4 million was available at March 31, 2000.
IMPACT OF YEAR 2000 ISSUE
The Company has not incurred material costs in first quarter 2000
associated with its efforts to become year 2000 compliant. Furthermore, based on
our assessment to date, we believe that any future costs associated with our
year 2000 compliance efforts will not be material.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "SFAS 133", Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 establishes methods of
accounting and reporting for derivative instruments and hedging activities
related to those instruments as well as other hedging activities, and is
effective for fiscal quarters of fiscal years beginning after June 15, 2000, as
amended by SFAS 137. The Company believes that adoption of this pronouncement
will have no material impact on the Company's financial position and results of
operations.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's exposure to market risk since
December 31, 1999.
17
<PAGE> 18
PART II. OTHER INFORMATION
18
<PAGE> 19
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
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
None
20
<PAGE> 21
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
Date: May 15, 2000 By: /s/ William E. Barton
-------------------- ------------------------------------------
William E. Barton
Senior Vice President and Chief
Financial Officer
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
27 Financial Data Schedule............................. 23
</TABLE>
22
<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, MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 42,613
<SECURITIES> 35,806
<RECEIVABLES> 163,425
<ALLOWANCES> 1,489
<INVENTORY> 17,300
<CURRENT-ASSETS> 330,172
<PP&E> 616,699
<DEPRECIATION> 367,055
<TOTAL-ASSETS> 626,615
<CURRENT-LIABILITIES> 207,010
<BONDS> 64,813
0
0
<COMMON> 273
<OTHER-SE> 326,196
<TOTAL-LIABILITY-AND-EQUITY> 626,615
<SALES> 216,430
<TOTAL-REVENUES> 216,430
<CGS> 190,055
<TOTAL-COSTS> 212,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,712
<INCOME-PRETAX> 5,730
<INCOME-TAX> 3,506
<INCOME-CONTINUING> 2,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,224
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
