-----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, AEfs1IF0KwY1KozeOd8J+DehaMU/5t7MbRfCdY5S6hStgIkErG02qr2kKG7s3+br KMGcmA1G+UVM+1eGcyNRcQ== 0000950149-01-500747.txt : 20010516 0000950149-01-500747.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950149-01-500747 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1638018 BUSINESS ADDRESS: STREET 1: 585 WEST BEACH ST CITY: WATSONVILLE STATE: CA ZIP: 95076 BUSINESS PHONE: 8317241011 MAIL ADDRESS: STREET 1: 585 WEST BEACH ST CITY: WATSONVILLE STATE: CA ZIP: 95076 10-Q 1 f72786e10-q.txt QUARTER REPORT 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, 2001 ( ) 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: 585 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 10, 2001. Class Outstanding ----------------------------- ----------------- Common Stock, $0.01 par value 41,097,073 shares 2 GRANITE CONSTRUCTION INCORPORATED INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000.............................................. 4 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2001 and 2000........................................ 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000.................................. 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
2 3 PART I. FINANCIAL INFORMATION 3 4 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
=============================================================================================================== MARCH 31, December 31, 2001 2000 - ------------------------------------------------------------------------------- ---------- ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 43,023 $ 57,759 Short-term investments 31,609 42,972 Accounts receivable 179,798 221,374 Costs and estimated earnings in excess of billings 23,799 19,473 Inventories 19,768 16,747 Deferred income taxes 15,956 15,857 Equity in construction joint ventures 24,787 25,151 Other current assets 18,196 12,295 --------- --------- Total current assets 356,936 411,628 - ------------------------------------------------------------------------------- --------- --------- Property and equipment 257,512 249,077 - ------------------------------------------------------------------------------- --------- --------- Investments in affiliates 45,252 40,052 - ------------------------------------------------------------------------------- --------- --------- Other assets 7,307 10,385 - ------------------------------------------------------------------------------- --------- --------- $ 667,007 $ 711,142 =============================================================================== ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 1,002 $ 1,130 Accounts payable 74,700 90,111 Billings in excess of costs and estimated earnings 49,606 57,412 Accrued expenses and other current liabilities 61,226 82,924 --------- --------- Total current liabilities 186,534 231,577 - ------------------------------------------------------------------------------- --------- --------- Long-term debt 63,977 63,891 - ------------------------------------------------------------------------------- --------- --------- Other long-term liabilities 9,235 6,370 - ------------------------------------------------------------------------------- --------- --------- Deferred income taxes 31,540 31,540 - ------------------------------------------------------------------------------- --------- --------- Commitments and contingencies - ------------------------------------------------------------------------------- --------- --------- Stockholders' equity Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding - - Common stock, $0.01 par value, authorized 100,000,000 shares; issued and outstanding 41,098,188 shares in 2001 and 40,881,908 in 2000 411 409 Additional paid-in capital 61,975 56,381 Retained earnings 328,451 330,172 Accumulated other comprehensive loss (157) - --------- --------- 390,680 386,962 Unearned compensation (14,959) (9,198) --------- --------- 375,721 377,764 - ------------------------------------------------------------------------------- --------- --------- $ 667,007 $ 711,142 =============================================================================== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements 4 5 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
========================================================================================= Three Months Ended March 31, 2001 2000 ---------- ---------- Revenue: Construction $ 197,947 $ 193,349 Material sales 29,668 23,081 ---------- ---------- Total revenue 227,615 216,430 ---------- ---------- Cost of revenue: Construction 178,634 168,448 Material sales 26,725 21,607 ---------- ---------- Total cost of revenue 205,359 190,055 ---------- ---------- GROSS PROFIT 22,256 26,375 General and administrative expenses 24,444 22,859 ---------- ---------- OPERATING INCOME (LOSS) (2,188) 3,516 - -------------------------------------------------------- ---------- ---------- Other income (expense) Interest income 2,831 3,177 Interest expense (1,562) (1,712) Gain on sales of property and equipment 4,291 981 Other, net (844) (232) ---------- ---------- 4,716 2,214 - -------------------------------------------------------- ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES 2,528 5,730 Provision for income taxes 961 3,506 ---------- ---------- NET INCOME $ 1,567 $ 2,224 ======================================================== ========== ========== Net income per share Basic $ 0.04 $ 0.06 Diluted $ 0.04 $ 0.06 Weighted average shares of common stock Basic 39,707 39,338 Diluted 40,476 40,092 Dividends per share $ 0.08 $ 0.11 ======================================================== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED - IN THOUSANDS)
===================================================================================================================== THREE MONTHS ENDED MARCH 31, 2001 2000 - ------------------------------------------------------------------------------------ ---------- ---------- Operating Activities Net income $ 1,567 $ 2,224 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation, depletion and amortization 11,349 10,688 Gain on sales of property and equipment (4,291) (981) Increase in deferred income tax (99) - Amortization of unearned compensation 1,313 1,300 Equity in (gain) loss of affiliates and other 1,597 812 Changes in assets and liabilities: Accounts and notes receivable 40,297 49,526 Inventories (4,321) (4,477) Equity in construction joint ventures 364 (3,226) Other assets (773) (296) Accounts payable (15,411) (21,182) Billings in excess of costs and estimated earnings, net (10,832) (17,876) Accrued expenses (17,553) (16,702) ---------- ---------- Net cash provided (used) by operating activities 3,207 (190) - ------------------------------------------------------------------------------------ ---------- ---------- Investing Activities Purchases of short-term investments (27,529) (19,837) Maturities of short-term investments 38,735 30,276 Additions to property and equipment (23,336) (17,782) Proceeds from sales of property and equipment 2,934 1,452 Investment in affiliates (6,035) (13,477) Development and sale of land and other investing activities 1,563 2,728 ---------- ---------- Net cash used by investing activities (13,668) (16,640) - ------------------------------------------------------------------------------------ ---------- ---------- Financing Activities Repayments of long-term debt (42) (40) Employee stock options exercised - 371 Repurchase of common stock (1,508) (830) Dividends paid (2,725) (1,890) ---------- ---------- Net cash used by financing activities (4,275) (2,389) - ------------------------------------------------------------------------------------ ---------- ---------- Decrease in cash and cash equivalents (14,736) (19,219) Cash and cash equivalents at beginning of period 57,759 61,832 ---------- ---------- Cash and cash equivalents at end of period $ 43,023 $ 42,613 ==================================================================================== ========== ========== Supplementary Information Cash paid during the period for: Interest $ 1,854 $ 2,017 Income taxes 1,283 4,154 Noncash investing and financing activity: Restricted stock issued for services $ 7,074 $ 6,912 Dividends accrued but not paid 3,288 4,366 Undisbursed escrow funds available 7,286 - ==================================================================================== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 7 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except 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, 2001 and the results of operations and cash flows for the periods presented. The December 31, 2000 condensed consolidated balance sheet data was derived from audited consolidated 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, 2001 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:
- ----------------------------------------------------------------------------------------- MARCH 31, December 31, 2001 2000 (UNAUDITED) - -------------------------------------------------------- ---------- ---------- Land $ 37,391 $ 38,113 Quarry property 44,294 45,080 Buildings and leasehold improvements 38,478 38,753 Equipment and vehicles 528,435 508,976 Office furniture and equipment 8,631 8,597 ---------- ---------- 657,229 639,519 Less accumulated depreciation, depletion and amortization 399,717 390,442 ======================================================== ========== ========== $ 257,512 $ 249,077 ======================================================== ========== ==========
7 8 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Share Data) 4. EARNINGS PER SHARE:
- -------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2001 2000 - -------------------------------------------- --------- --------- NUMERATOR -- BASIC AND DILUTED EARNINGS PER SHARE Net income $ 1,567 $ 2,224 ============================================ ========= ========= DENOMINATOR -- BASIC EARNINGS PER SHARE Common stock outstanding 40,861 40,566 Less restricted stock outstanding 1,154 1,228 --------- --------- TOTAL 39,707 39,338 --------- --------- Basic earnings per share $ 0.04 $ 0.06 ============================================ ========= ========= DENOMINATOR -- DILUTED EARNINGS PER SHARE Denominator -- Basic Earnings per Share 39,707 39,338 Effect of Dilutive Securities: Common stock options 16 12 Warrants 189 130 Restricted stock 564 612 --------- --------- TOTAL 40,476 40,092 --------- --------- Diluted earnings per share $ 0.04 $ 0.06 ============================================ ========= =========
5. COMPREHENSIVE INCOME: The components of comprehensive income, net of tax, are as follows (in thousands):
Net income for the three months ended March 31, 2001 $ 1,567 Other comprehensive income (loss): Changes in net unrealized losses on investments (157) ---------- TOTAL COMPREHENSIVE INCOME $ 1,410 ==========
6. COMMITMENTS AND CONTINGENCIES: DISCLOSURE OF SIGNIFICANT ESTIMATES - LITIGATION: The Company is a party to a number of legal proceedings and believes that the nature and number of these proceedings are typical for a construction firm of its size and scope and that none of these proceedings is material to the Company's financial position. The Company's litigation typically involves claims regarding public liability or contract related issues. 7. RECLASSIFICATIONS: Certain prior year financial statement items have been reclassified to conform to the current year's presentation. 8 9 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Share Data) 8. STOCK SPLIT: On February 21, 2001, the Company announced a three for two stock split in the form of a 50% stock dividend payable April 13, 2001. All references in the financial statements to number of shares and per share amounts of the Company's common stock have been retroactively restated to reflect the increased number of shares outstanding. 9. INVESTMENT IN WILDER CONSTRUCTION: On February 23, 2001, the Company purchased an additional 450,000 shares of Wilder Construction Company ("Wilder") common stock for a purchase price of approximately $4.6 million. The Company currently holds a 46% minority interest in Wilder. At March 31, 2001 the Company held 1,949,746 shares of Wilder stock. 10. 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). Information about Profit and Assets:
- --------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, HCD BRANCH TOTAL ---------- ---------- ---------- 2001 Revenues from external customers $ 77,711 $ 149,904 $ 227,615 Intersegment revenue transfer (1,733) 1,733 - ---------- ---------- ---------- Net revenue 75,978 151,637 227,615 Depreciation and amortization 2,165 7,934 10,099 Operating profit (loss) (99) 5,879 5,780 Property and equipment 36,604 203,411 240,015 ---------- ---------- ---------- 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 ---------- ---------- ----------
9 10 Granite Construction Incorporated NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Share Data) 10. BUSINESS SEGMENT INFORMATION, CONT.: Reconciliation of Segment Profit to the Company's Consolidated Totals:
- ------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2001 2000 ---------- ---------- Profit: Total profit for reportable segments $ 5,780 $ 10,098 Other income 4,716 2,214 Unallocated other corporate expenses (7,968) (6,582) ========== ========== Income before provision for income taxes $ 2,528 $ 5,730 ========== ==========
11. SUBSEQUENT EVENT: On May 14, 2001 the Company received $75 million under a senior credit facility with a group of institutional holders. The borrowing is due in nine equal annual installments beginning in 2005 and bears interest at 6.96% per annum. The funds will be used for general corporate purposes. 10 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
Three Months Ended March 31, 2001 2000 CHANGE % - ----------------------------------- -------- -------- -------- -------- (In Millions) Revenue: Branch Division ................ $ 151.6 $ 129.9 $ 21.7 16.7 Heavy Construction Division .... 76.0 86.5 (10.5) (12.1) ======== ======== ======== ======== $ 227.6 $ 216.4 $ 11.2 5.2 ======== ======== ======== ========
Revenue and Backlog: Revenue for the first quarter of 2001 increased 5.2% to $227.6 million from $216.4 million in the first quarter of 2000. The increased revenue reflects strong Branch Division volume partially offset by decreased volume in the Company's Heavy Construction Division ("HCD"). Branch Division revenue in the first quarter 2001 reflects increases in both construction and materials sales revenue - primarily in California. The decreased HCD revenue reflects the large percentage of contracts -- particularly design/build contracts -- awarded in the last six months that are in their start-up phase. Design/build projects experience a longer lead time and therefore a slower start than a typical bid/build project. 11 12 Revenue from private sector contracts decreased to 21.9% of total revenue in the first quarter of 2001 from 26.0% in the 2000 quarter. The decrease is primarily due to the completion of two large private HCD projects during 2000. --------------------------------------------------------------------------- BACKLOG BY MARKET SECTOR (IN MILLIONS) ---------------------------------------------------------------------------
MARCH 31, DECEMBER 31, MARCH 31, ---------- ------------ ---------- 2001 2000 2000 ---------- ---------- ---------- Contracts Federal $ 67.4 $ 75.9 $ 48.4 State 905.4 649.2 454.4 Local 305.4 313.5 113.7 ---------- ---------- ---------- Total public sector 1,278.2 1,038.6 616.5 Private sector 75.7 81.9 161.5 ---------- ---------- ---------- $ 1,353.9 $ 1,120.5 $ 778.0 ========== ========== ==========
The Company's backlog at March 31, 2001 was $1,353.9 million, up $575.9 million, or 74.0% from March 31, 2000 and also increased $233.4 million, or 20.8% from December 31, 2000. New awards for the quarter totaled $461.0 million and included an $86.4 million interstate reconstruction project in California, a $73.3 million bridge reconstruction project in Florida and a $65.9 million interchange reconstruction project in North Carolina. Gross Profit: Gross profit as a percent of revenue decreased to 9.8% in the first quarter of 2001 from 12.2% in the first quarter of 2000. The decreased gross profit margin was primarily due to lower margins in the Heavy Construction Division which had higher revenue from projects that were less than 25% complete in the 2001 quarter, partially offset by higher Branch division construction and materials sales margins. The Company recognizes revenue only to the extent of cost incurred until a project reaches 25% complete. Total Company revenue recognized for projects less than 25% complete was approximately $29.9 million and $19.1 million for the three months ended March 31, 2001 and 2000, respectively. Cost of revenue consists of direct costs on contracts; including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, maintenance and repairs). The Company has experienced upward pressure on costs associated with labor markets and energy, fuel and oil prices; however, the Company's gross profit margins were not materially impacted by such changes during the first three months of 2001. 12 13 General and Administrative Expenses: General and administrative expenses for the three months ended March 31, 2001 and 2000, respectively, comprised the following (in millions):
THREE MONTHS ENDED MARCH 31, --------------------------- IN MILLIONS 2001 2000 ---------- ---------- Salaries and related expenses $ 13.6 $ 11.9 Incentive compensation, discretionary profit sharing and pension 2.5 2.9 Other general and administrative expenses 8.3 8.1 ---------- ---------- Total $ 24.4 $ 22.9 ========== ========== Percent of revenue 10.7% 10.6% ========== ==========
Salaries and related expenses increased for the three months ended March 31, 2001 over 2000 due primarily to increased staffing to support the Company's current and expected growth. Incentive compensation and discretionary profit sharing and pension costs decreased primarily as a function of the Company's decreased gross profit margin. Other general and administrative expenses include various costs to support the Company's operations, none of which exceeds 10% of total general and administrative expenses. Operating Income: The Heavy Construction Division's contribution to operating income decreased in the first quarter of 2001 compared to first quarter of 2000 due primarily to lower revenue and gross profit margin as discussed in the "Revenue and Backlog" and "Gross Profit" sections above. The Branch Division's contribution to operating income increased in the first quarter of 2001 over the comparable 2000 period, reflecting increases in construction and materials sales revenue and gross profit margins discussed in the "Revenue and Backlog" and "Gross Profit" sections above. Other Income (Expenses): Other income increased $2.5 million to $4.7 million for the three months ended March 31, 2001 over the same period in 2000. The increase was due primarily to a $1.8 million gain recorded on the sale of equipment and a $2.2 million gain from the sale of developed property in Texas. Provision for Income Taxes: The Company's effective tax rate decreased to 38.0% for the three months ended March 31, 2001 compared to the same period last year. The decrease reflects the absence of additional tax expense recognized in the first quarter of 2000 related to the Company reaching an agreement with TIC to divest its investment over a three and one-half year period. 13 14 OUTLOOK The Company continues to experience a sizeable increase in new awards. New awards for the first quarter ended March 31, 2001 totaled $461 million, compared to $201.1 million in the same period last year. As a result of this large increase, the Company's backlog at March 31, 2001 totaled a record $1.4 billion, an increase of 74 percent over the backlog at March 31, 2000. The Company believes this is a quality backlog that will provide opportunities for modest growth this year and into 2002. However, several significant HCD contracts may or may not reach 25% complete by December 31, 2001, at which time Granite begins to recognize gross profit. If not reached, it could effect our ability to achieve our modest growth goal. The bulk of these new awards continue to come from the Company's public sector marketplace. Fueled by record level expenditures from federal, state and local sources, the Company expects that its public sector market will remain very strong as the year unfolds. As we have noted in the past, the public marketplace that the Company is currently experiencing allows it to be very selective in its bidding, looking at those projects where it may optimize its profit margin through its competitive advantages in terms of resources and expertise. There are two energy-related events, however, that could pose a short-term threat to public sector transportation funding. At the federal level, the prospect of much higher gasoline prices this summer has sparked renewed interest in the Congress to temporarily repeal the 18.4-cent federal gasoline tax that funds the Federal Highway Trust Fund. A similar bill to repeal the tax failed to pass last summer, but it is impossible to determine at this point in time what chances the new bill has of becoming law and what the financial ramifications of the measure could be. The second issue revolves around the electricity crunch in California. The state has been drawing down its budget surplus to buy power for two cash-strapped utilities. The Governor has said that the state may have to borrow money from various internal accounts, including the highway fund, to continue to purchase power in the future. Under the confines of Proposition 2, this money would by constitution have to be paid back within one year, with interest. Perhaps the most serious threat to transportation funding, however, involves the Governor's $6.8 billion Congestion Relief Plan, passed last year. This plan diverts the sales tax on gasoline from the general fund into the transportation fund for a five-year period, and acts to supplement revenue going into the state's normal transportation building program, which is funded from a gasoline tax. At the present time, there is some consideration being made in Sacramento to redirect this money back into the general fund to augment the state's power purchasing ability. However, there is no way to assess the probability that such a redirection of funds will happen at this time. The other major area of uncertainty pertaining to our business relates to the overall health of the economy and what impact that may have on our private sector business. We remain cautiously optimistic that at least for this year, that segment of our business will mirror last year in terms of level of activity. 14 15 As we noted most recently in the Company's Form 10-K, our Heavy Construction Division is targeting over $7 billion in design-build opportunities over the next 12 to 18 months on top of the traditional highway and bridge projects it annually bids in Texas, Florida and other states. Design-build is a growing trend, and the Company has emerged as a leader in this new form of project delivery. We are very pleased at this writing with the early successes we are seeing in our Branch Division business. Our Branches are off to a very good start in both their construction and their aggregate plants business, which bodes well for the Company as a whole, as the Branches make up about 75 percent of our total business. In summary, the Company's outlook for the short-term is for modest growth in 2001, barring any negative impacts from funding issues or energy-related issues, given the quality of the backlog we have and the potential for the Branch Division to have a successful year. 15 16 LIQUIDITY AND CAPITAL RESOURCES
(IN MILLIONS) THREE MONTHS ENDED MARCH 31, 2001 2000 ---------- ---------- Cash and cash equivalents $ 43.0 $ 42.6 Net cash provided (used) by: Operating activities 3.2 (0.2) Investing activities (13.7) (16.6) Financing activities (4.3) (2.4) Capital expenditures 23.3 17.8 ---------- ----------
Cash provided by operating activities of $3.2 million for the three months ended March 31, 2001 represents a $3.4 million increase from the 2000 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. As is typical in the Company's first quarter, accounts receivable, accounts payable, billings in excess of costs, net, and accrued expenses are substantially lower than at December 31, 2000 due to lower first quarter volume. Cash used by investing activities for the three month period in 2001 reflected an increase in the proceeds from the sales of property and equipment and to a decrease in cash paid to purchase Wilder common shares from $13.1 million in the first quarter of 2000 to $4.6 million in the first quarter of 2001. Cash used by financing activities in 2001 increased $1.9 million over 2000 due to an increase in shares repurchased and in dividends paid. The Company has budgeted $58.3 million for capital expenditures in 2001, 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. The Company currently has access to funds under its revolving credit agreement which allow it to borrow up to $75.0 million, of which $63.2 million was available at March 31, 2001. SUBSEQUENT EVENT: On May 14, 2001 the Company received $75 million under a senior credit facility with a group of institutional holders. The borrowing is due in nine equal annual installments beginning in 2005 and bears interest at 6.96% per annum. The funds will be used for general corporate purposes. 16 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, 2000. 17 18 PART II. OTHER INFORMATION 18 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 20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits None b) Reports on Form 8-K None 20 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, 2001 By: /s/ William E. Barton ------------------------------------------------- William E. Barton Senior Vice President and Chief Financial Officer 21 -----END PRIVACY-ENHANCED MESSAGE-----