-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GCREDUG9IR941YmWm74Dg38wKGf849in5ye7UcTCMGvXK7S8rPaS+bNf+XCtW5jN wEPtg6I2VjCvLKHQ3DZMnA== 0000008137-97-000021.txt : 19971117 0000008137-97-000021.hdr.sgml : 19971117 ACCESSION NUMBER: 0000008137-97-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATKINSON GUY F CO OF CALIFORNIA CENTRAL INDEX KEY: 0000008137 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 941649018 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03062 FILM NUMBER: 97720187 BUSINESS ADDRESS: STREET 1: 1001 BAYHILL DR STREET 2: P O BOX 593 CITY: SAN BRUNO STATE: CA ZIP: 94066 BUSINESS PHONE: 4158761000 MAIL ADDRESS: STREET 1: P O BO 593 STREET 2: S SAN FRANCISCO 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ____________ to ____________ Commission File number 0-3062 GUY F. ATKINSON COMPANY OF CALIFORNIA (Exact name of registrant as specified in its charter) STATE OF DELAWARE 94-1649018 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 1001 Bayhill Drive, San Bruno, California 94066 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (650) 876-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Common stock as of November 14, 1997 Issued and outstanding - 8,987,467 shares Page 1 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements Page 3-4 Consolidated Balance Sheets 5 Consolidated Statements of Operations 6 Consolidated Statements of Cash Flows 7-8 Notes to Consolidated Financial Statements Page 2 GUY F. ATKINSON COMPANY OF CALIFORNIA CONSOLIDATED BALANCE SHEETS (in thousands of dollars except share and per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------------ September 30, December 31, 1997 1996 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Current Assets: Cash and cash equivalents $ 35,148 $ 7,854 Accounts receivable 126,815 118,964 Costs and estimated earnings in excess of billings 3,973 12,511 Inventories and unamortized costs on contracts 73,479 56,601 Investments in joint ventures 35,712 34,076 Deferred income taxes - 225 Other current assets 4,199 3,986 - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets 279,326 234,217 - ------------------------------------------------------------------------------------------------------------------------------------ Property, plant and equipment At cost: Land 2,403 2,528 Buildings 8,170 10,232 Construction equipment 24,911 32,928 Other equipment 8,653 8,314 - ------------------------------------------------------------------------------------------------------------------------------------ 44,137 54,002 Less accumulated depreciation 31,738 25,341 - ------------------------------------------------------------------------------------------------------------------------------------ Total property, plant and equipment, net 12,399 28,661 - ------------------------------------------------------------------------------------------------------------------------------------ Other assets 1,287 2,345 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $ 293,012 $ 265,223 - ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes Page 3
GUY F. ATKINSON COMPANY OF CALIFORNIA CONSOLIDATED BALANCE SHEETS (in thousands of dollars except share and per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------------ September 30, December 31, 1997 1996 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable, including current portion of long-term debt $ 102,591 $ 33,402 Accounts payable 77,352 81,981 Billings in excess of costs and estimated earnings 28,408 21,422 Accrued federal & foreign income taxes 9,422 8,096 Other accrued expenses 32,932 21,953 Due to joint ventures 728 588 - ------------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 251,433 167,442 - ------------------------------------------------------------------------------------------------------------------------------------ Non-current liabilities Long-term debt, less current portion 826 1,210 Deferred income taxes 108 109 Postretirement health care and postemployment benefit obligations 7,178 7,178 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 259,545 175,939 - ------------------------------------------------------------------------------------------------------------------------------------ Stockholders' Equity Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued or outstanding Common stock, par value $0.01; 20,000,000 shares authorized; 8,987,467 outstanding at September 30, 1997 and at December 31, 1996 1,896 1,896 Paid-in capital 13,262 13,262 Accumulated translation adjustment (4,578) (4,526) Additional pension liability (35) (35) Retained earnings 22,922 78,687 - ------------------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 33,467 89,284 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 293,012 $ 265,223 - ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes
Page 4 GUY F. ATKINSON COMPANY OF CALIFORNIA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands of dollars except share and per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------------ Quarters ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Revenue $95,306 $126,011 $326,721 $353,910 Cost of revenue 90,679 115,067 337,790 321,414 - ------------------------------------------------------------------------------------------------------------------------------------ Gross margin 4,627 10,944 (11,069) 32,496 Restructuring charges - - 6,906 - General and administrative expenses 9,837 10,318 31,744 30,309 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from operations (5,210) 626 (49,719) 2,187 Other income (expense) Interest income 378 102 698 1,659 Interest expense (1,710) (582) (3,712) (891) Miscellaneous 26 773 (1,032) 1,020 - ------------------------------------------------------------------------------------------------------------------------------------ Total other income (expense) (1,306) 293 (4,046) 1,788 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) before income taxes (6,516) 919 (53,765) 3,975 Provision for income taxes 81 (82) 2,000 1,873 - ------------------------------------------------------------------------------------------------------------------------------------ Net income (loss) $(6,597) $ 1,001 $(55,765) $ 2,102 - ------------------------------------------------------------------------------------------------------------------------------------ Net income (loss) per share of common stock $ (0.73) $ 0.11 $ 6.20) $ 0.23 - ------------------------------------------------------------------------------------------------------------------------------------ Average number of shares of common stock equivalents utilized in net income (loss) per share calculation 8,987,000 9,458,000 8,987,000 9,374,000 - ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes
Page 5 GUY F. ATKINSON COMPANY OF CALIFORNIA CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands of dollars except share and per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------------ Nine Months Ended September 30, 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Operating activities Net income (loss) $(55,765) $ 2,102 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Restructuring charges 6,906 - Depreciation and amortization 9,048 9,221 (Gain) on dispositions of property, plant and equipment (1,040) (3,271) Changes in operating assets and liabilities: Accounts receivable (8,015) (43,375) Inventories and unamortized costs on contracts (17,065) (255) Investments in joint ventures (1,518) (10,091) Other current assets 8 (1,290) Accounts payable and accrued expenses 1,617 (19,094) Accrued income taxes 1,348 2,456 Billings in excess of costs and estimated earnings, net 15,538 (1,723) Other, net (191) 95 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash (used in) operating activities (49,129) (65,225) - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Property, plant and equipment expenditures (763) (8,534) Proceeds from dispositions of property, plant and equipment 6,975 9,078 Increase in other assets, net 1,058 16 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by investing activities 7,270 560 - ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Short-term borrowings 69,182 28,300 Long-term debt repayments (378) (465) Common stock issuance related to stock option awards - 577 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 68,804 28,412 - ------------------------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash 349 (54) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents $ 27,294 $(36,307) - ------------------------------------------------------------------------------------------------------------------------------------ Supplementary information: Cash paid during the year for: Interest $ 2,614 $ 3,016 Federal, foreign and state income taxes 345 (378) - ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes
Page 6 GUY F. ATKINSON COMPANY OF CALIFORNIA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands of dollars except share and per share amounts) - -------------------------------------------------------------------------------- 1. PETITION FOR RELIEF UNDER CHAPTER 11 On August 10, 1997, the company, together with its two principal operating subsidiaries, Guy F. Atkinson Company and Guy F. Atkinson Holdings, Ltd., filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. These petitions were filed in the United States Bankruptcy Court for the Northern District of California, and were assigned case numbers 97-33694-TC, 97-33695-TC, and 97-33696-TC. Under Chapter 11, enforcement of certain secured and unsecured claims against the company that were in existence prior to the filing of the petitions has been stayed while the company and its subsidiaries continue to operate their businesses as debtors-in-possession pursuant to the U.S. Bankruptcy Code. The company's $55,000 syndicated credit facility matured on June 30, 1997. Prior to maturity, the company had drawn down the full amount of the facility in the sum of $52,530 in borrowings and $2,470 in letters of credit. Such amount remains outstanding. In addition, with the authorization of the United States Bankruptcy Court, the company secured a $60,000 revolving line of credit from its bonding companies. The United States Bankruptcy Court has approved the company's continued use of the banks' and bonding companies' collateral and cash collateral, in the normal course of business. The right to continued use of collateral and line of credit terminates on the earliest of: (i) The effective date of any confirmed Chapter 11 plan (ii) The conversion of the case to a Chapter 7 case (iii) A sale, merger, or business combination of the company (iv) January 30, 1998 Without the continued use of collateral and availability of the line of credit, the company cannot continue as a going concern. The right to continued use of collateral and availability of the line of credit is presently scheduled to expire no later than January 30, 1998. Although the company would expect to file, at the appropriate time, a motion to extend that date, there can be no assurance that the Bankruptcy Court would grant such a motion, and no assurance as to the terms and conditions under which the Bankruptcy Court would do so. 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS The accompanying financial statements have been prepared on a going concern basis, under the assumption that assets will be realized, and liabilities discharged, in the normal course of business. Management cannot predict whether or when the company will emerge from bankruptcy. Accordingly, substantial doubt exists as to the company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the realization of settlement or liquidation values for its assets. Subject to the foregoing, the information contained herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods. Page 7 GUY F. ATKINSON COMPANY OF CALIFORNIA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands of dollars except share and per share amounts) - -------------------------------------------------------------------------------- 3. NEWLY ISSUED ACCOUNTING STANDARDS During 1997, the Financial Accounting Standards Board has issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," No. 129, "Disclosure of Information about Capital Structure," No. 130, "Reporting Comprehensive Income," and No. 131 "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 128 establishes standards for computing and presenting earnings per share (EPS), replacing the presentation of primary EPS with a presentation of basic EPS. SFAS No. 129 consolidates the existing disclosure requirements regarding an entity's capital structure. SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components within the financial statements. Comprehensive income is the change in equity of a business enterprise during a period resulting from transactions and other events and circumstances from nonowner sources. SFAS No. 131 establishes standards for the reporting of information about operating segments in interim financial reports, as well as disclosures concerning products and services, geographic areas and major customers. SFAS Nos. 128, 129, 130 and 131 are effective for financial statements issued for periods ending after December 15, 1997, and accordingly management has not determined the impact on the company's financial statements for the quarter ended September 30, 1997. 4. INVENTORIES AND UNAMORTIZED COSTS ON CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------------------ The major classifications of inventory are as follows: September 30, 1997 December 31, 1996 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Construction materials, parts and supplies $ 1,809 $ 1,728 Unamortized costs on contracts 71,670 54,873 - ------------------------------------------------------------------------------------------------------------------------------------ $73,479 $56,601 - ------------------------------------------------------------------------------------------------------------------------------------
5. STOCK OPTIONS AND WARRANTS At September 30, 1997, the company had options outstanding with respect to 1,161,044 shares of common stock at exercise prices ranging from $6.55 to $13.38 per share. The right to exercise these options vests progressively over a four year period commencing with the date of issue and expiring ten years from the date of issue. In addition, there were stock warrants outstanding for 387,500 shares of common stock with an exercise price of $7.00 expiring in 1998. 6. EARNINGS PER SHARE Net primary earnings per share of common stock and common stock equivalents are calculated using the weighted average number of common shares outstanding, plus the net additional number of shares which would be issuable upon the exercise of stock options and warrants, assuming that the company used the proceeds received to repurchase outstanding shares at market prices. Page 8 GUY F. ATKINSON COMPANY OF CALIFORNIA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands of dollars except share and per share amounts) - -------------------------------------------------------------------------------- 7. RESTRUCTURING During the second quarter of 1997, the company recorded restructuring charges of $6,906 in connection with the phasing out of the company's divisional structure, and its restructuring as a single operational entity. This restructuring will result in the elimination of certain offices and the consolidation of certain facilities and support functions, together with a saving of ongoing costs associated with the eliminated offices, facilities and functions. The restructuring charge is made up as follows: Consolidation of offices and facilities $3,267 Reductions in staffing levels 2,056 Abandonment of non-productive assets 1,583 ------ $6,906 8. LITIGATION AND CONTINGENCIES On March 7, 1995, a complaint asserting breach of contract and other wrongdoing in connection with the company's sale of its manufacturing subsidiary, Lake Center Industries, Inc., was filed against the company and its financial advisor by an unsuccessful bidder for Lake Center. The plaintiffs allege they have suffered actual damages of $290 in connection with preparing their bid, and also seek to recover $7,000 on a theory of unjust enrichment, together with an additional $10,000 in punitive damages. The company will vigorously defend this suit, which it believes to be without merit. This suit is presently subject to the automatic stay of the United States Bankruptcy Court, and will not proceed until the stay is lifted or the conclusion of the company's Chapter 11 case. The amount of any award to plaintiff would be a general unsecured prepetition obligation of the company subject to the outcome of the company's Chapter 11 case. Page 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On August 10, 1997, the company, together with its two principal operating subsidiaries, Guy F. Atkinson Company and Guy F. Atkinson Holdings, Ltd., filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. These petitions were filed in the United States Bankruptcy Court for the Northern District of California, and were assigned case numbers 97-33694-TC, 97- 33695-TC, and 97-33696-TC. Under Chapter 11, enforcement of certain secured and unsecured claims against the company that were in existence prior to the filing of the petitions have been stayed while the company and its subsidiaries continue to operate their businesses as debtors-in-possession pursuant to the U.S. Bankruptcy Code. The company's financial statements for the quarter ended September 30, 1997, have been prepared on a going concern basis, under the assumption that assets will be realized, and liabilities discharged, in the normal course of business. Management cannot predict whether or when the company will emerge from bankruptcy. Accordingly, substantial doubt exists as to the company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the realization of settlement or liquidation values for its assets. RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 1997 VS. QUARTER ENDED SEPTEMBER 30, 1996 (in thousands of dollars except share and per share amounts) REVENUE: The company's revenue of $95,306 in the third quarter of 1997 decreased by 24 percent from the corresponding $126,011 in the third quarter of 1996. This decrease in revenue was primarily attributable to a decrease in international construction work, which generated no revenues in the third quarter of 1997, compared with $30,800 in the corresponding period of 1996. The backlog of uncompleted contracts amounted to $658,692 at September 30, 1997, representing an increase of 10 percent over the September 30, 1996 backlog of $598,732. New contract awards for the nine month period of 1997 were $376,072, an increase of 21 percent over the $310,972 of new contract awards during the same period in 1996. The effect of the company's Chapter 11 filing on backlog is uncertain. In particular, backlog at September 30, 1997 includes $452,790 representing the company's share of the backlog of uncompleted contracts in which the company is a joint venture participant. In order to maintain its percentage share in these joint ventures, the company is required to contribute capital to joint ventures where necessary to fund joint venture contract obligations. The company is presently in default with respect to its capital contributions to several joint ventures, and is unable to make such contributions without additional financing. If the company fails to maintain its percentage share in these joint ventures, its backlog will be substantially reduced. GROSS MARGIN: The company's gross margin was $4,627 in the third quarter of 1997, compared with $10,944 in the corresponding period of 1996. Gross margin in the third quarter of 1997 included no contribution from international work, while the 1996 gross margin included a contribution of $3,071. Additionally, the 1996 period included a gross margin contribution of $1,342 from a cogeneration power project which completed in the second quarter of 1997, while the 1997 period was negatively impacted by $1,239 of costs related to the resolution of construction disputes and the collection of accounts receivable, as noted in the liquidity discussion. Page 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expenses of $9,837 in 1997 were 5 percent lower than the corresponding figure of $10,318 in 1996. The 1997 period included $1,493 of bankruptcy-related expenses, without which, general and administrative expenses would have been 19% lower than in 1996. The reduction of expenses in the third quarter of 1997 was attributable to the company's restructuring and cost reduction program implemented in the second quarter of 1997. INTEREST INCOME: Interest income increased to $378 in 1997 from $102 in 1996, as a consequence of higher average cash balances during 1997. INTEREST EXPENSE: Interest expense increased to $1,710 in the third quarter of 1997 from $582 in the corresponding 1996 period. This increase was due to the significantly higher level of borrowings during the 1997 period compared with 1996. MISCELLANEOUS: Net miscellaneous income amounted to $26 in 1997, compared with $773 in 1996. The 1996 expense included a gain of $530 from the collection of an account receivable which had previously been written-off as unrecoverable. INCOME TAXES AND NET INCOME: The company's loss before taxes amounted to $6,516 in the third quarter of 1997, compared with income before taxes of $919 in the third quarter of 1996. Income tax expense was $81 in 1997 compared with a benefit of $82 in 1996. Income tax expense in 1997 was primarily state and foreign taxes, while the 1996 benefit was attributable to the recovery of income taxes expensesd in prior periods. The company recorded a net loss of $6,597 for the third quarter of 1997, compared with net income of $1,001 in the corresponding period of 1996. NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30, 1996 REVENUE: Revenue of $326,721 for the nine month period of 1997 decreased by 8 percent from the corresponding $353,910 in 1996. A decrease in revenue in 1997 of $54,251 related to reduced international construction work was partially offset by higher revenues in 1997 from domestic projects. GROSS MARGIN: The company's gross margin was $(11,069) in the nine month period of 1997, compared with $32,496 in the same period for 1996. Gross margin in 1997 included $2,978 from international construction projects, compared with $8,494 in 1996. Additionally, 1997 gross margins were negatively impacted by charges totaling $32,900 as noted below: Page 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED A reduction in the carrying value of construction equipment which is in the process of being sold. The charge is to adjust the book value of the equipment to the estimated net sale proceeds. The write-off of an investment in a joint venture formed to construct a newsprint de-inking facility. This facility has been shut down by the owner due to unfavorable market conditions, and recovery of the investment is considered unlikely. Cost overruns on four construction projects which the company does not expect to recover through additional change orders or asserted claims. Provisions for anticipated losses on two construction projects for which change orders have been presented and included in claims against the owner. RESTRUCTURING CHARGES: During the second quarter of 1997, the company recorded restructuring charges of $6,906 in connection with the phasing out of the company's divisional structure, and its restructuring as a single operational entity. This restructuring will result in the elimination of certain offices and the consolidation of certain facilities and support functions, together with a saving of ongoing costs associated with the eliminated offices, facilities and functions. The restructuring charge is made up as follows: Consolidation of offices and facilities $3,267 Reductions in staffing levels 2,056 Abandonment of non-productive assets 1,583 ------- $6,906 ------- GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expenses of $31,744 in 1997 were 5 percent higher than the corresponding figure of $30,309 in 1996. The expense for 1997 included $1,493 of bankruptcy- related expenses, without which, general and administrative expenses would have been comparable to 1996. INTEREST INCOME: Interest income decreased to $698 in 1997 from $1,659 in 1996. Interest income in 1996 included $1,060 earned on an interest-bearing account receivable. INTEREST EXPENSE: Interest expense increased to $3,712 in the nine-month period of 1997 from $891 in the corresponding 1996 period. This increase was due to the substantially higher level of borrowings during the 1997 period compared with 1996. MISCELLANEOUS: Net miscellaneous expense amounted to $1,032 in 1997, compared with net miscellaneous income of $1,020 in 1996. The expense for 1997 included $2,659 related to the write-off of the company's remaining investment in a geothermal property, offset by $2,000 in credits for estimated reductions in environmental loss reserves, while the 1996 income included $530 from the collection of an account receivable previously written-off as unrecoverable, together with a gain of $620 from the disposition of surplus property. Page 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED INCOME TAXES AND NET INCOME: The company's loss before taxes amounted to $53,765 in the nine month period of 1997, compared with income before taxes of $3,975 in the corresponding period of 1996. Income tax expense was $2,000 in 1997 compared with $1,873 in 1996. Income tax expense in both periods was primarily attributable to foreign income taxes. The company recorded a net loss of $55,765 for the nine month period of 1997, compared with net income of $2,102 in the corresponding period of 1996. LIQUIDITY AND CAPITAL RESOURCES The company's liquidity position has deteriorated significantly in 1997 due to its inability to collect certain accounts receivable on a timely basis, combined with protracted negotiations concerning the resolution of certain change orders and claims, whereby the company is seeking to recover additional costs for which it is not contractually responsible. Specifically, the company has an account receivable of approximately $40,000 relating to a contract to construct the first phase of a continuing care retirement facility in Southern California. This facility was completed in June of 1996, and day-to-day operation of the facility is being performed under the supervision of a court-appointed trustee-in-bankruptcy. As one of the secured creditors, the company has taken an active role in proposing a plan of reorganization for the facility. While there can be no assurance as to the outcome of this matter, based on discussions with potential buyers of the facility, the company believes it will ultimately be successful in recovering the full amount of its receivable, although timing of collection is uncertain. In addition, the company has accounts receivable of approximately $14,600, and a substantial balance of unamortized costs relating to a completed contract to construct a pulp mill in Indonesia. The unamortized costs represent additional costs resulting from schedule delays, contract acceleration and other contract changes beyond the company's control, for which it is seeking reimbursement. The accounts receivable represent agreed amounts owing for the performance of contract work together with approved change orders. The amount collected in respect of the accounts receivable, and the timing of collection will depend upon the progress of negotiations with the owner of the facility and other responsible parties. Also, the company has accounts receivable, including retentions, of approximately $8,200, together with a substantial balance of unamortized costs relating to an ongoing contract to construct a power plant on an existing lock and dam on the Ohio River. The amount collected in respect of the accounts receivable, and the timing of collection will depend upon the progress of negotiations with the owner of the facility. Operating activities utilized cash of $49,129 in the nine month period of 1997, compared with $65,225 during the corresponding period of 1996. Cash utilization by operating activities in 1997 was primarily the result of the net loss for the period, while utilization in 1996 was attributable to the increased balances of accounts receivable. Investing activities generated cash of $7,270 in 1997, compared with $560 in 1996. During 1997, the company has selectively disposed of surplus properties and equipment that are no longer required to be used in its business. Page 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED The company's combined net cash deficiency from operations and investing activities amounted to $41,859 in 1997, compared with $64,665 in 1996. During 1997, the company financed its deficiency with additional short-term borrowings of $69,182, with the excess being added to operating cash balances. During 1996, the deficiency was financed by a reduction in cash balances of $36,307, combined with additional short-term borrowings of $28,300. The company's current financing facilities include: o A $55,000 syndicated credit facility, with interest at prime plus 3/4% per annum, which matured on June 30, 1997 and has not been renewed. Prior to maturity, the company had drawn down the full amount of the facility in the sum of $52,530 in borrowings and $2,470 in letters of credit. Such amounts remain outstanding. The company has been notified by its banks that, by reason of the maturity of the credit facility, it is in default under the terms of the Credit Agreement, and all amounts outstanding are subject to a default rate of interest, currently equivalent to 11.25% per annum, which default rate is subject to allowance by the Court. o A $60,000 debtor-in-possession credit facility from the company's sureties, with interest at prime plus 3/4% per annum, approved by the United States Bankruptcy Court. The purpose of this facility is to provide financing to ensure the completion of the company's bonded construction projects The United States Bankruptcy Court has approved the company's continued use of the banks' and bonding companies' collateral and cash collateral, in the normal course of business. The right to continued use of collateral and line of credit terminates on the earliest of: o The effective date of a confirmed Chapter 11 plan o The conversion of the case to a Chapter 7 case o A sale, merger, or business combination of the company o January 30, 1998 The company believes that the availability of cash collateral and the debtor-in-possession credit facility described above will provide the company with sufficient cash for operations, including its ongoing construction projects, through January 30, 1998. The company also believes that, in order to continue its operations, including ongoing construction projects, beyond the end of January, 1998, it will require the extension of the above arrangements. There can be no assurance, however, that such arrangements will be extended upon terms acceptable to the company, or at all. The ability of the company to continue to operate its business also requires the ability to bid on or make proposals for new construction work, which, in turn, requires the continuing availability of surety bonds. The company is presently unable to obtain surety bonds for new projects other than joint ventures, and there can be no assurance that the company will be able to obtain the issuance of surety bonds to the extent required in order to continue to operate its business. The company has retained Salomon Brothers, Inc. to advise on various strategic and financial alternatives, including a possible sale of the company, a merger, or financing arrangements to recapitalize the company. CERTAIN INFORMATION CONTAINED HEREIN, MAY BE CONSIDERED FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING THE RISK THAT Page 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED ACTUAL COSTS INCURRED IN CONNECTION WITH THE COMPANY'S FIXED PRICE CONTRACTS MAY EXCEED BUDGETED COSTS OR MAY EXCEED THE CONTRACT PRICE; THAT THE COMPANY MAY BE UNABLE TO RECOVER FOR CLAIMS IN RESPECT OF COST OVERRUNS; CREDIT RISK THAT MAY BE INCURRED BY THE COMPANY RELATED TO ITS PROJECTS; THAT PAYMENT OF AMOUNTS DUE TO THE COMPANY MAY BE SUBSTANTIALLY DELAYED DUE TO EVENTS BEYOND THE COMPANY'S CONTROL; THAT THE COMPANY MAY BE UNABLE TO OBTAIN AN ADEQUATE AMOUNT OF NEW CONSTRUCTION PROJECTS; THAT THE COMPANY MAY BE UNABLE TO OBTAIN SURETY BONDS FOR NEW PROJECTS; AND OTHER RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S SEC REPORTS, INCLUDING ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE MADE. THE COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS. Page 15 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) A report on Form 8-K was filed on August 14, 1997, reporting the Company's press release dated August 11, 1997, which announced commencement of Chapter 11 case by the Company. Page 16 GUY F. ATKINSON COMPANY OF CALIFORNIA AND CONSOLIDATED SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GUY F. ATKINSON COMPANY OF CALIFORNIA By: /s/ Herbert D. Montgomery Herbert D. Montgomery Senior Vice President, Chief Financial Officer and Treasurer Date: November 14, 1997 Page 17 EX-27 2
5 1,000 9-MOS DEC-31-1997 SEP-30-1997 35,148 0 126,815 0 73,479 279,326 44,137 31,728 293,012 251,433 826 0 0 1,896 31,571 293,012 0 326,721 0 337,790 38,650 0 3,712 (53,765) 2,000 (55,765) 0 0 0 (55,765) (6.20) 0
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