-----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, Wb6xsgQQXKtWLUFq43p7jqUQn9L43C3gR7l6h3DjJsCUMUmtpS+q+FVxqwR8UJKK /sIrKvo9QexhwZw+84Nn8g== 0000950149-97-002093.txt : 19971117 0000950149-97-002093.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950149-97-002093 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRANITE CONSTRUCTION INC CENTRAL INDEX KEY: 0000861459 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 770239383 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12911 FILM NUMBER: 97719453 BUSINESS ADDRESS: STREET 1: 585 WEST BEACH ST CITY: WATSONVILLE STATE: CA ZIP: 95076 BUSINESS PHONE: 4087241011 MAIL ADDRESS: STREET 1: 585 WEST BEACH ST CITY: WATSONVILLE STATE: CA ZIP: 95076 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED 9/30/97 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, 1997 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 7, 1997. Class Outstanding - ----------------------------- ----------------- Common Stock, $0.01 par value 18,265,375 shares This report on Form 10-Q, including all exhibits, contains 20 pages. The exhibit index is located on page 19 of this report. 2 GRANITE CONSTRUCTION INCORPORATED INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996..............................................4 Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 1997 and 1996.......................5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1997 and 1996..............................6 Notes to the Condensed Consolidated Financial Statements...........................................7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................12-15 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...............................17 Exhibit Index..................................................19
2 3 PART I. FINANCIAL INFORMATION 3 4 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Data)
September 30, December 31, 1997 1996 --------- --------- (Unaudited) Assets Current assets Cash and cash equivalents $ 39,979 $ 38,663 Short-term investments 18,154 33,567 Accounts receivable 189,742 124,124 Costs and estimated earnings in excess of billings 21,834 29,494 Inventories 13,793 13,493 Deferred income taxes 13,060 13,060 Equity in joint ventures 20,164 5,371 Other current assets 10,735 6,033 --------- --------- Total current assets 327,461 263,805 --------- --------- Property and equipment 193,529 178,515 --------- --------- Other assets 43,879 30,725 --------- --------- $ 564,869 $ 473,045 ========= ========= Liabilities and Stockholders' Equity Current liabilities Current maturities of long-term debt $ 11,176 $ 10,186 Accounts payable 75,816 64,058 Billings in excess of costs and estimated earnings 66,050 45,352 Accrued expenses and other current liabilities 65,396 51,667 --------- --------- Total current liabilities 218,438 171,263 --------- --------- Long-term debt 70,114 43,602 --------- --------- Deferred income taxes 24,575 24,575 --------- --------- 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; 1997- issued and outstanding 18,268,725 shares; 1996- issued 18,161,611 shares, outstanding 18,121,253 shares 184 182 Additional paid-in capital 39,829 36,901 Retained earnings 218,382 201,663 --------- --------- 258,395 238,746 Unearned compensation (6,653) (5,141) --------- --------- 251,742 233,605 --------- --------- $ 564,869 $ 473,045 ========= =========
The accompanying notes are an integral part of these financial statements 4 5 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 --------- --------- --------- --------- Revenue $ 328,988 $ 302,646 $ 718,385 $ 704,894 Cost of revenue 290,106 261,830 632,663 620,218 --------- --------- --------- --------- Gross profit 38,882 40,816 85,722 84,676 --------- --------- --------- --------- General and administrative expenses 19,517 17,221 54,633 49,486 --------- --------- --------- --------- Operating profit 19,365 23,595 31,089 35,190 --------- --------- --------- --------- Other income (expense) Interest income 2,863 1,698 5,551 5,070 Interest expense (1,929) (1,156) (5,124) (2,934) Gain on sales of property and equipment 263 306 2,567 2,466 Other, net 1,106 (163) 1,157 (195) --------- --------- --------- --------- 2,303 685 4,151 4,407 --------- --------- --------- --------- Income before provision for income taxes 21,668 24,280 35,240 39,597 Provision for income taxes 8,017 9,227 13,039 15,047 --------- --------- --------- --------- Net income $ 13,651 $ 15,053 $ 22,201 $ 24,550 ========= ========= ========= ========= Net income per share $ 0.74 $ 0.83 $ 1.21 $ 1.36 Weighted average shares of common stock 18,347 18,069 18,291 18,033 Dividends per share $ 0.06 $ 0.06 $ 0.30 $ 0.31 ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements 5 6 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited- In Thousands, Except Per Share Data)
- --------------------------------------------------------------------------------------- Nine Months Ended September 30, 1997 1996 - --------------------------------------------------------------------------------------- Operating Activities Net income $ 22,201 $ 24,550 Add (deduct) noncash items included in net income: Depreciation, depletion and amortization 28,723 27,883 Gain on sales of property and equipment (2,567) (2,466) Decrease in unearned compensation 1,729 1,475 Cash provided by (used in): Accounts and notes receivable (66,973) (38,152) Inventories (300) (3,658) Equity in joint ventures and affiliates (3,559) (14,179) Other assets 1,113 (1,920) Accounts payable 11,758 12,848 Billings in excess of costs and estimated earnings, net 18,008 10,036 Accrued expenses 13,634 17,661 -------- -------- Net cash provided by operating activities 23,767 34,078 -------- -------- Investing Activities Additions to property and equipment (44,337) (38,965) Proceeds from sales of property and equipment 3,968 7,298 Additions to notes receivable (121) (639) Repayments of notes receivable 947 535 Investment in TIC Holdings, Inc. (12,222) -- Additions to investments and other assets (7,816) (1,038) Purchases of short-term investments (24,095) (30,439) Maturities of short-term investments 39,508 52,649 -------- -------- Net cash used by investing activities (44,168) (10,599) -------- -------- Financing Activities Additions to long-term debt 32,969 7,000 Repayments of long-term debt (5,467) (9,058) Employee stock options exercised 153 615 Stock purchased and redistributed (464) (526) Dividends paid (5,474) (5,479) -------- -------- Net cash provided (used) by financing activities 21,717 (7,448) -------- -------- Increase in cash and cash equivalents 1,316 16,031 Cash and cash equivalents at beginning of period 38,663 22,410 -------- -------- Cash and cash equivalents at end of period $ 39,979 $ 38,441 ======== ======== Supplementary Information Cash paid during the period for: Interest $ 5,124 $ 2,934 Income taxes 312 2,950 ======== ========
The accompanying notes are an integral part of these financial statements. 6 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, 1997 and the results of operations and cash flows for the periods presented. The December 31, 1996 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, 1997 are not necessarily indicative of the results to be expected for the full year. RECLASSIFICATION: Certain financial statement items have been reclassified to conform to the current year's format. 2. SHORT-TERM INVESTMENTS:
Held-To-Maturity Held-To-Maturity September 30, 1997 December 31, 1996 (Unaudited) Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair Value Gains Losses Value Value Gains Losses Value ------- ------- ------- ------- ------- ------- ------- ------- U.S. Government and Agency Obligations $ 999 $ 1 $ -- $ 1,000 $ 2,993 $ -- $ -- $ 2,993 Commercial Paper -- -- -- -- 3,977 -- -- 3,977 Municipal Bonds 5,029 -- (3) 5,026 6,011 6 -- 6,017 Foreign Banker's Acceptances 1,982 -- -- 1,982 7,420 1 -- 7,421 ------- ------- ------- ------- ------- ------- ------- ------- 8,010 1 (3) 8,008 20,401 7 -- 20,408 ------- ------- ------- ------- ------- ------- ------- -------
Available-For-Sale Available-For-Sale September 30, 1997 December 31, 1996 (Unaudited) Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair Value Gains Losses Value Value Gains Losses Value ------- ------- ------- ------- ------- ------- ------- ------- U.S. Government and Agency Obligations 6,432 -- (7) 6,425 9,146 3 (14) 9,135 Municipal Bonds 2,914 5 -- 2,919 4,020 23 -- 4,043 Foreign Banker's Acceptances 798 -- -- 798 -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- 10,144 5 (7) 10,142 13,166 26 (14) 13,178 ------- ------- ------- ------- ------- ------- ------- ------- Total Short-Term Investments $ 18,154 $ 6 $ (10) $18,150 $ 33,567 $ 33 $ (14) $33,586 ======== ======= ======== ======= ======== ======= ======= =======
7 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, 1997. At September 30, 1997, scheduled maturities of are as follows (unaudited):
Held-To- Available- Maturity For-Sale Total -------- ------- -------- Within one year $8,010 $ 5,797 $ 13,807 After one year through five years - 4,347 4,347 -------- ------- -------- $8,010 $10,144 $ 18,154 ======== ======= ========
For the nine months ended September 30, 1997 and 1996, purchases and maturities of short-term investments were as follows:
Nine Months Ended Nine Months Ended September 30, 1997 September 30, 1996 (Unaudited) (Unaudited) Held-To- Available Held-To- Available Maturity For Sale Total Maturity For Sale Total -------- -------- -------- -------- -------- -------- Purchases $ 10,109 $ 13,986 $ 24,095 $ 21,122 $ 9,317 $ 30,439 Maturities 28,536 10,972 39,508 40,300 12,349 52,649 -------- -------- -------- -------- -------- -------- Net change $(18,427) $ 3,014 $(15,413) $(19,178) $ (3,032) $(22,210) ======== ======== ======== ======== ======== ========
3. ACCOUNTS RECEIVABLE:
SEPTEMBER 30, December 31, 1997 1996 ------------ ------------ (UNAUDITED) Construction contracts Completed and in progress $114,924 $ 59,764 Retentions 48,193 47,956 -------- -------- 163,117 107,720 Construction material sales 23,527 12,651 Other 4,159 4,446 -------- -------- 190,803 124,817 Less allowance for doubtful accounts 1,061 693 -------- -------- $189,742 $124,124 ======== ========
8 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:
September 30, December 31, 1997 1996 -------- -------- (Unaudited) Assets Total $295,148 $ 96,760 Less Other Venturers' Interest 221,671 69,175 -------- -------- Company's Interest 73,477 27,585 -------- -------- Liabilities Total 217,662 75,408 Less Other Venturers' Interest 164,349 53,194 -------- -------- Company's Interest 53,313 22,214 -------- -------- $ 20,164 $ 5,371 ======== ========
6. PROPERTY AND EQUIPMENT:
September 30, December 31, 1997 1996 -------- -------- (Unaudited) Land $ 18,718 $ 15,328 Quarry property 34,236 34,408 Buildings and leasehold improvements 17,175 12,973 Equipment and vehicles 415,025 388,697 Office furniture and equipment 5,704 5,485 -------- -------- 490,858 456,891 Less accumulated depreciation, depletion and amortization 297,329 278,376 -------- -------- $193,529 $178,515 ======== ========
9 10 GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) 7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
September 30, December 31, 1997 1996 ------- ------- (Unaudited) Payroll and related employee benefits $21,872 $21,627 Accrued insurance 20,944 19,997 Income taxes payable 13,092 -- Other 9,488 10,043 ------- ------- $65,396 $51,667 ======= =======
8. STOCKHOLDERS' EQUITY: Under the terms of the Company's 1990 Omnibus Stock and Incentive Plan, 166,178 shares of restricted common stock were issued, 99,385 shares vested and 9,914 shares were forfeited during the nine months ended September 30, 1997. Unearned compensation is amortized over the restriction periods. Compensation expense related to restricted shares was $570 and $491 for the three months ended and was $1,729 and $1,475 for the nine months ended September 30, 1997 and 1996, respectively. During 1997, the Company purchased in satisfaction of certain officer's income tax liabilities related to the maturation of restricted stock issues, 24,342 shares which were redistributed along with the balance of treasury stock as new shares of restricted common stock. During the nine months ended September 30, 1997, employee stock options for 13,400 shares at $11.33 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. NEW ACCOUNTING PRINCIPLES: The FASB issued SFAS No. 128 Earnings Per Share in February 1997 effective for periods ending after December 15, 1997. SFAS No. 128 was issued to simplify the computation of Earnings Per Share (EPS) and to make the U.S. standard more compatible with the EPS standards of other countries. Prior period EPS will be restated after the effective date of this statement. The adoption of SFAS No. 128 should have no effect on earnings per share as the Company does not have a complex capital structure. 10 11 GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) 12. NEW ACCOUNTING PRINCIPLES, CONTINUED: In June 1997, the FASB issued SFAS No. 130 Reporting Comprehensive Income. SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. To date, the only potential impact of adopting SFAS No. 130, which is effective for the Company in 1998, relates to reporting unrealized holding gains and losses on available-for-sale securities. Such unrealized gains and losses have historically been immaterial and have not affected equity. Therefore, the Company anticipates no material impact from adopting SFAS No. 130. In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 requires publicly-held companies to report financial and other information about key revenue-producing segments of the entity for which such information is available and is utilized by the chief operation decision maker. Specific information to be reported for individual segments includes profit or loss, certain revenue and expense items and total assets. A reconciliation of segment financial information to amounts reported in the financial statements would be provided. SFAS No. 131 is effective for the Company in 1998 and the impact of adoption has not been determined. 11 12 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contains forward-looking statements which are made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, 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; competition and pricing pressures; state referendums and initiatives; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. RESULTS OF OPERATIONS Revenue for the quarter ended September 30, 1997 was $329.0 million, bringing the nine month total to $718.4 million, an increase of $26.3 million, or 8.7%, and $13.5 million, or 1.9%, respectively, over the same periods last year. Revenue by Market Sector Nine Months Ended September 30, (In Millions)
1997 1996 $ % $ % Public 499.4 69.6% 503.6 71.5% Private 124.6 17.3% 132.7 18.8% Materials 94.4 13.1% 68.6 9.7% ----- ----- ----- ------ 718.4 100.0% 704.9 100.0% ===== ===== ===== ======
For the nine months ended September 30, 1997, revenue from public sector contracts decreased $4.2 million to $499.4 million, or 69.6% of total revenue, from $503.6 million, or 71.5% of total revenue in 1996. Revenue from private sector contracts of $124.5 million, or 17.3% of total revenue, decreased 6.2% from the nine months ended September 30, 1996 level of $132.7 million, or 18.8% of total revenue. Revenue in the Company's primary geographical area, California, decreased to $371.6 million, or 51.7% of total revenue, from $375.6 million, or 53.3% of total revenue, last year. Backlog at September 30, 1997 was $1,050.0 million, a $334.3 million increase from September 30, 1996 and a $452.1 million increase from December 31, 1996. New awards for the quarter totaled $369.7 million and include a $75.7 million interchange near Tampa, Florida and Granite's $72.4 million portion of a joint venture to construct a highway and tunnel project in Atlantic City, New Jersey. Awards and Backlog End of Period (In Millions)
Awards Backlog ------ ------- 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 148.9 640.1 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 Q4 106.1 597.9 1997 Q1 483.0 934.1 Q2 317.7 1,009.2 Q3 369.7 1,050.0
12 13 The public sector backlog increased to 93.3% of total backlog from 88.1% at December 31, 1996 and 88.7% at September 30, 1996 primarily reflecting the award during the first quarter of 1997 to the Wasatch Constructors Joint Venture, of which the Company has a 23% participation, for the I-15 Corridor Reconstruction Project in Salt Lake City, Utah. Work on this contract began during the second quarter of 1997 with 25% completion for profit recognition not anticipated until the last quarter of 1998. Private sector backlog decreased $1.3 million from December 31, 1996 and $10.9 million from September 30, 1996.
Backlog by Market Sector (In Millions) September 30, 1997 December 31, 1996 $ % $ % Public 979.9 93.3% 526.5 88.1% Private 70.1 6.7% 71.4 11.9% ------- ------ ----- ------ 1,050.0 100.0% 597.9 100.0% ======= ====== ===== ======
Gross profit for the quarter ended September 30, 1997 was $38.9 million, or 11.8% of revenue, as compared to $40.8 million, or 13.5% of revenue, for 1996. The nine month gross profit increased $1.0 million to $85.7 million, or 11.9% of revenue versus $84.7 million or 12.0% in 1996. The increase in the nine month gross profit reflects similar margins on higher revenue and the settlement of claims for revenue on work completed in prior years. The level of profit for both the quarter and the nine months as compared to 1996 reflects the absence of the San Joaquin Hills Toll Road Project completed in late 1996 which carried a higher than average gross profit margin. General and administrative expenses for the three months ended September 30, 1997 increased $2.3 million to $19.5 million, or 5.9% of revenue, as compared to 5.7% of revenue for the same quarter of 1996. For the nine months, general and administrative expenses increased $5.1 million to $54.6 million and as a percent of revenue to 7.6% versus 7.0% last year. The increases reflect an increased level of business development and estimating activities with new offices in Florida, Maryland and Nevada and a change in the timing of bad debt collections versus write-offs. Other income increased $1.6 million for the quarter and decreased $0.3 million for the nine months ended September 30, 1997. The increase for the quarter primarily reflects the Company's equity in joint ventures and affiliates. Net income for the quarter ended September 30, 1997 was $13.7 million, or $0.74 per share, a decrease of $1.4 million or $0.09 per share from the quarter ended September 30, 1996 net income of $15.1 million, or $0.83 per share. For the nine months, net income was $22.2 million, or $1.21 per share, a $2.4 million, or $0.15 per share decrease from the prior year net income of $24.6 million, or $1.36 per share. Seasonality of Business Revenue and Net Income by Quarter (In Millions)
Net Revenue Income ------- ------ 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 Q4 223.9 2.7 1997 Q1 146.8 0.2 Q2 242.6 8.3 Q3 329.0 13.7
13 14 OUTLOOK This "Outlook" section contains forward-looking statements which are made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, 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; competition and pricing pressures; state referendums and initiatives; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. A stopgap measure toward reauthorization of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) was achieved recently when Congress passed a six-month extension of ISTEA. The President is expected to sign the bill, which makes $9.8 billion available to be spent on federal transportation programs until May 1, 1998. The bill also provides $5.5 billion in new funding to be distributed to states in accordance with each state's share of the 1997 obligation limitation. States would receive funding equal to 50%, but no more than 75%, of what they spent in fiscal year 1997. Congress will still have to pass a long-term federal transportation bill, but the near-term risk of states withholding projects from bidding because of funding concerns has been abated for the moment. Our most immediate concern now shifts to California and the Professional Engineers in California Government, a public employee union that is advocating the so-called Competitive Bidding Initiative. Specifically, this initiative would make it nearly impossible for Caltrans and local public agencies to "contract out" design work to private sector engineering firms. Putting virtually all design and engineering project development work in the hands of state employees will create a significant bottleneck, affecting between $4 billion and $6 billion of public projects annually and prompting state and local projects to be delayed by at least 18 months, according to the Taxpayers Fed Up With More State Bureaucracy, a coalition of business, engineers, architects and taxpayers. The measure will be on the June, 1998 ballot in California, and the Company will be working vigorously to defeat it. We believe given the level of backlog and the health of our "turn" business that we are on track to provide the opportunity to meet our expectations for revenue and earnings growth next year. One very large project, the I-15 rebuild, is expected to reach the 25% complete threshold in the fourth quarter of 1998, giving us further comfort in reaching our financial goals for next year. Given the continued strength of the private sector and strong levels of public sector work, our Branch Division anticipates market conditions next year will be similar to 1997. Our Heavy Construction Division has some very exciting bidding opportunities upcoming in 1998, including the Bay Area toll bridge retrofit projects, the Alameda Corridor project in the Los Angeles Basin and numerous highway projects across the country. 14 15 Granite's 30% investment (completed in May 1997) and strategic alliance with TIC Holdings, Inc. ("TIC") has gotten off to a good start, symbolized by the award of a $108 million sewage treatment plant in Atlanta to a joint venture comprised of Western Summit (a wholly-owned subsidiary of TIC), TIC and Granite Construction Company (15% participation). This project has successfully combined each partner's individual skills and financial resources. Granite and TIC continue to work together identifying, marketing and bidding projects of common interest. LIQUIDITY AND CAPITAL RESOURCES
(DOLLARS IN THOUSANDS) Nine Months Ended September 30, 1997 1996 --------- -------- Cash and cash equivalents, September 30 $ 39,979 $ 38,441 Net cash provided (used) by: Operating activities 23,767 34,078 Investing activities (44,168) (10,599) Financing activities 21,717 (7,448) Capital expenditures 44,337 38,965 Working capital 109,023 89,044 --------- ---------
Cash provided by operating activities during the nine months ended September 30, 1997, of $23.8 million represents an $10.3 million decrease from the 1996 amount for the same period. The change relates to an increase in accounts receivable and accounts payable, of $29.9 million, offset primarily by a decrease in equity in construction joint ventures and affiliates of $10.6 million. Changes in cash provided by operating activities primarily reflect normal seasonal variations in the cash flow on contracts and payables. Investing activities in 1997 used $33.6 million more cash than during the nine months ended September 30, 1996. Purchases of property, plants and equipment increased $5.4 million from 1996. The Company also used cash to purchase a $12.2 million additional investment in TIC Holdings, Inc., bringing the total investment to 30%. Other investing activities include a decrease in net maturities of short-term investments of $6.8 million. Financing activities in 1997 provided $29.2 million of cash in excess of the 1996 activity primarily reflecting an increase of $26.0 million in additions to long-term debt. Debt was used to pay for the $12.2 million investment in TIC Holdings, Inc. and to fund operations. At September 30, 1997, the Company's borrowing capacity under its revolving line of credit is $75 million of which $26.4 million is available. The Company anticipates the cash generated internally and amounts available under its existing credit facilities will be sufficient to meet its operating needs, anticipated capital expenditure plans and other financial commitments at least through 1997. 15 16 PART II. OTHER INFORMATION 16 17 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 17 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GRANITE CONSTRUCTION INCORPORATED By: /s/ William E. Barton ------------------------------------------ Date: November 11, 1997 William E. Barton ----------------- Vice President and Chief Financial Officer 18 19 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE - ------ ----------- ---- 11 Computation of Net Income per Common and Common Equivalent Share...........................................................20
19 EX-11 2 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11 GRANITE CONSTRUCTION INCORPORATED COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE (In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Weighted average common shares outstanding 18,292 18,008 18,238 17,962 Computation of incremental outstanding shares: Net effect of dilutive stock options based on treasury stock method 55 61 53 71 ------- ------- ------- ------- Weighted average common shares outstanding, as adjusted 18,347 18,069 18,291 18,033 ======= ======= ======= ======= Net income $13,651 $15,053 $22,201 $24,550 ======= ======= ======= ======= Net income per common and common equivalent share $ 0.74 $ 0.83 $ 1.21 $ 1.36 ======= ======= ======= =======
20 EX-27 3 FINANCIAL DATA SCHEDULE
5 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, 1997. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 39,979 18,154 190,803 1,061 13,793 327,461 490,858 297,329 564,869 218,438 70,114 0 0 184 251,558 564,869 718,385 718,385 632,663 687,296 0 0 5,124 35,240 13,039 22,201 0 0 0 22,201 1.21 1.21
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