-----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, EyY3tS+IDi4wC3t7iIo7ZJKv++vPXTCGwzdohgDnKmtZ1hAKGp6MUP+jXxEzUafB eA/WU9ZUbDUM3D53IASZEA== 0000950149-97-001078.txt : 19970520 0000950149-97-001078.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950149-97-001078 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 1934 Act SEC FILE NUMBER: 001-12911 FILM NUMBER: 97608084 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 QUARTERLY REPORT 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 MARCH 31, 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 May 9, 1997. Class Outstanding ----------------------------- ----------------- Common Stock, $0.01 par value 18,276,066 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 March 31, 1997 and December 31, 1996......................................................4 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 1997 and 1996..........................................5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996..........................................6 Notes to the Condensed Consolidated Financial Statements................................................7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................11-15 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) ================================================================================
MARCH 31, December 31, 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 8,343 $ 38,663 Short-term investments 24,201 33,567 Accounts receivable 115,365 124,124 Costs and estimated earnings in excess of billings 26,370 29,494 Inventories 14,306 13,493 Deferred income taxes 13,060 13,060 Equity in joint ventures 20,841 5,371 Other current assets 3,805 6,033 -------------------------------------- Total current assets 226,291 263,805 - --------------------------------------------------------------------------------------------------------------------------------- Property and equipment 190,789 178,515 - --------------------------------------------------------------------------------------------------------------------------------- Other assets 32,279 30,725 - --------------------------------------------------------------------------------------------------------------------------------- $ 449,359 $ 473,045 ================================================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 10,185 $ 10,186 Accounts payable 58,805 64,058 Billings in excess of costs and estimated earnings 41,198 45,352 Accrued expenses and other current liabilities 40,652 51,667 -------------------------------------- Total current liabilities 150,840 171,263 - ----------------------------------------------------------------------------------------------------------------------------------- Long-term debt 43,174 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 18,277,552 shares; 1996- issued 18,166,011 shares, outstanding 18,125,653 shares 184 182 Additional paid-in capital 40,026 36,901 Retained earnings 198,616 201,663 -------------------------------------- 238,826 238,746 Unearned compensation (8,056) (5,141) -------------------------------------- 230,770 233,605 - ----------------------------------------------------------------------------------------------------------------------------------- $ 449,359 $ 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 MARCH 31, 1997 1996 - -------------------------------------------------------------------------------------------------------------- Revenue $ 146,821 $ 153,749 Cost of revenue 130,971 139,107 ----------------------------------- GROSS PROFIT 15,850 14,642 General and administrative expenses 16,643 15,485 ----------------------------------- OPERATING LOSS (793) (843) - -------------------------------------------------------------------------------------------------------------- Other income (expense) Interest income 1,480 1,954 Interest expense (1,433) (941) Gain on sales of property and equipment 620 413 Other, net 511 7 ----------------------------------- 1,178 1,433 - -------------------------------------------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES 385 590 Provision for income taxes 142 224 - -------------------------------------------------------------------------------------------------------------- NET INCOME $ 243 $ 366 ============================================================================================================== Net income per share $ 0.01 $ 0.02 Weighted average shares of common stock 18,184 17,966 Dividends per share $ 0.18 $ 0.19 ==============================================================================================================
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) ================================================================================
THREE MONTHS ENDED MARCH 31, 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $ 243 $ 366 Add (deduct) noncash items included in net income: Depreciation, depletion and amortization 9,386 8,947 Gain on sales of property and equipment (620) (413) Decrease in unearned compensation 583 492 Cash provided by (used in): Accounts and notes receivable 8,328 30,798 Inventories (813) (2,539) Equity in joint ventures (15,470) (1,857) Other assets 2,228 594 Accounts payable (5,253) (15,674) Billings in excess of costs and estimated earnings, net (880) (16,975) Accrued expenses (13,217) (10,815) ---------------------------------- Net cash used by operating activities (15,485) (7,076) - --------------------------------------------------------------------------------------------------------------------------- Investing Activities Additions to property and equipment (21,558) (18,004) Proceeds from sales of property and equipment 740 645 Additions to notes receivable (92) (74) Repayments of notes receivable 456 143 Additions to investments and other assets (1,859) (178) Purchases of short-term investments (3,794) (9,382) Maturities of short-term investments 13,160 28,042 ---------------------------------- Net cash provided (used) by investing activities (12,947) 1,192 - --------------------------------------------------------------------------------------------------------------------------- Financing Activities Repayments of long-term debt (429) (648) Employee stock options exercised 93 247 Stock purchased and redistributed (464) (526) Dividends paid (1,088) (894) ---------------------------------- Net cash used by financing activities (1,888) (1,821) - --------------------------------------------------------------------------------------------------------------------------- Decrease in cash and cash equivalents (30,320) (7,705) Cash and cash equivalents at beginning of period 38,663 22,410 ---------------------------------- Cash and cash equivalents at end of period $ 8,343 $ 14,705 =========================================================================================================================== Supplementary Information Cash paid during the period for: Cash interest $ 1,435 $ 941 Income taxes 32 265 ===========================================================================================================================
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 March 31, 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 three months ended March 31, 1997 are not necessarily indicative of the results to be expected for the full year. 2. SHORT-TERM INVESTMENTS:
------------------------------------------ ----------------------------------------------- Held-To-Maturity Held-To-Maturity March 31, 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 $ 4,003 $ - $ - $ 4,003 $ 2,993 $ - $ - $ 2,993 Commercial Paper - - - - 3,977 - - 3,977 Municipal Bonds 6,006 1 (1) 6,006 6,011 6 - 6,017 Foreign Banker's Acceptances 3,494 - - 3,494 7,420 1 - 7,421 Domestic Banker's Acceptances 2,944 - (3) 2,941 - - - - ------- ------- ----- -------- ------- ----- ------- -------- 16,447 1 (4) 16,444 20,401 7 - 20,408 ------- -------- ----- -------- ------- ----- ------- -------- Available-For-Sale Available-For-Sale March 31, 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 2,987 - (13) 2,974 9,146 3 (14) 9,135 Municipal Bonds 3,970 14 - 3,984 4,020 23 - 4,043 Foreign Banker's Acceptances 797 - (2) 795 - - - - ------- ------- ------- ------- --------- ------ --------- ------- 7,754 14 (15) 7,753 13,166 26 (14) 13,178 ------- ------- ------- ------- --------- ------ --------- ------- Total Short-Term Investments $24,201 $ 15 $ (19) $24,197 $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 quarter ended March 31, 1997. At March 31, 1997, scheduled maturities of investments are as follows (unaudited): - ------------------------------------------------------------------------------------- Held-To- Available- Maturity For-Sale Total - -------------------------------------------- ---------- --------- -------- Within one year $16,447 $6,747 $23,194 After one year through five years - 1,007 1,007 - -------------------------------------------- ---------- ------ ------- $16,447 $7,754 $24,201 ====================================================================================
For the three months ended March 31, 1997 and 1996, purchases and maturities of short-term investments were as follows:
--------------------------------------------- ---------------------------------------------- Three Months Ended Three Months Ended March 31, 1997 March 31, 1996 (Unaudited) (Unaudited) Held-To- Available Held-To- Available Maturity For Sale Total Maturity For Sale Total -------------- ------------------ -------- --------------------------------------------- Purchases $ 1,010 $ 2,784 $ 3,794 $ 7,177 $ 2,205 $ 9,382 Maturities 11,000 2,160 13,160 23,000 5,042 28,042 -------- ------- -------- --------- -------- ----------- Net change $ (9,990) $ 624 $ (9,366) $ (15,823) $ (2,837) $ (18,660) ======== ======= ======== ========= ======== ===========
3. ACCOUNTS RECEIVABLE:
MARCH 31, DECEMBER 31, 1997 1996 --------------------------- Construction contracts (UNAUDITED) Completed and in progress $ 57,077 $ 59,764 Retentions 43,038 47,956 -------- -------- 100,115 107,720 Construction material sales 11,698 12,651 Other 4,244 4,446 -------- -------- 116,057 124,817 Less allowance for doubtful accounts 692 693 -------- -------- $115,365 $124,124 ======== ========
8 9 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:
- -------------------------------------------------------------------------------------------------------------------- MARCH 31, December 31, 1997 1996 - -------------------------------------------------------------------------------------------------------------------- (UNAUDITED) Assets Total $167,256 $96,760 Less other venturers' interest 122,484 69,175 - -------------------------------------------------------------------------------------------------------------- Company's interest 44,772 27,585 - -------------------------------------------------------------------------------------------------------------- Liabilities Total 89,929 75,408 Less other venturers' interest 65,998 53,194 - -------------------------------------------------------------------------------------------------------------- Company's interest 23,931 22,214 - -------------------------------------------------------------------------------------------------------------- $ 20,841 $ 5,371 ==============================================================================================================
6. PROPERTY AND EQUIPMENT:
MARCH 31, DECEMBER 31, 1997 1996 -------------------------- (UNAUDITED) Land $ 15,918 $ 15,328 Quarry property 35,650 34,408 Buildings and leasehold improvements 12,973 12,973 Equipment and vehicles 405,570 388,697 Office furniture and equipment 5,604 5,485 --------- -------- 475,715 456,891 Less accumulated depreciation, depletion and amortization 284,926 278,376 --------- -------- $ 190,789 $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:
MARCH 31, December 31, 1997 1996 ------------ ------------ (UNAUDITED) Payroll and related employee benefits $12,177 $21,627 Accrued insurance 17,064 19,997 Other 11,411 10,043 ------- ------- $40,652 $51,667 ======= =======
8. STOCKHOLDERS' EQUITY: Under the terms of the Company's 1990 Omnibus Stock and Incentive Plan, 165,768 shares of restricted common stock were issued and 91,212 shares vested during the three months ended March 31, 1997. Unearned compensation is amortized over the restriction periods. Compensation expense related to restricted shares was $583 and $492 for the three months ended March 31, 1997 and 1996, respectively. The Company purchased, during the three months ended March 31, 1997, in satisfaction of certain officer's income tax liabilities related to the maturation of restricted stock issues, 22,019 shares which were redistributed along with the balance of treasury stock as new shares of restricted common stock. During the three months ended March 31, 1997, employee stock options for 8,150 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. RECLASSIFICATIONS: Certain prior year financial statement items have been reclassified to conform to the current year's presentation. 13. SUBSEQUENT EVENTS: On March 13, 1997, the Board of Directors declared a cash dividend of $0.06 plus a one-time special cash dividend of $0.12 per share of common stock to stockholders of record as of March 31, 1997 payable on April 18, 1997. On May 1, 1997, the Company purchased 20%, or 154,276 shares of the outstanding stock of TIC Holdings, Inc. ("TIC") for $12,096,781. The acquisition gives the Company a total 30% ownership of TIC. The transaction was financed under the Company's revolving line of credit with interest at 6.275% payable quarterly and principal payable semiannually over five years beginning December 1998. The investment will be accounted for using the equity method of accounting from the date of acquiring the additional 20% of ownership. Previously, the investment in TIC was recorded at cost. 10 11 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 March 31, 1997 was $146.8 million, a decrease of $6.9 million, or 4.5%, from last year. The decrease is primarily attributable to the completion of the San Joaquin Hills Toll Road in late 1996 and unusually wet weather in Texas. For the three months ended March 31, 1997, revenue from public sector contracts decreased $6.8 million to $102.8 million, or 70.0% of total revenue, from $109.6 million, or 71.3% of total revenue in 1996. Revenue in the Company's primary geographical area, California, increased to $84.2 million, or 57.4% of total revenue, from $79.8 million, or 51.9% of total revenue as compared to the same period last year. REVENUE BY MARKET SECTOR THREE MONTHS ENDED MARCH 31, (IN MILLIONS)
1997 1996 $ % $ % ----- ----- ----- ----- Public 102.8 70.0% 109.6 71.3% Private 26.0 17.7% 28.6 18.6% Materials 18.0 12.3% 15.5 10.1% --------------------------------------- 146.8 100.0% 153.7 100.0% =======================================
Backlog at March 31, 1997 was $934.1 million, a $309.8 million increase over March 31, 1996 and a $336.5 million increase from December 31, 1996. Major awards for the quarter include Granite's $303.1 million portion of the I-15 rebuild joint venture in Utah, a $16.8 million interchange in Arizona and an $11.0 million highway contract in Salt Lake City, Utah. The backlog at March 31, 1997 does not include three contracts awarded in April and May of 1997: a $27.9 million light rail project in Utah, an $18.8 million interchange in Nevada and an $11.8 million interchange project in California. 11 12 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 149.0 640.1 Q3 194.9 594.9 Q4 128.2 550.2 1995 - ---- Q1 199.5 644.4 Q2 302.9 720.6 Q3 143.1 557.2 Q4 289.2 590.1 1996 - ---- Q1 188.0 624.3 Q2 259.9 635.8 Q3 382.5 715.7 Q4 106.2 597.9 1997 - ---- Q1 483.0 934.1
13 The public sector backlog increased to 92.6% of total backlog from 88.1% at December 31, 1996 and 84.8% at March 31, 1996 reflecting the award during the first quarter of 1997 of the joint venture for the I-15 Corridor Reconstruction Project in Salt Lake City, Utah, for which the Company booked its 23% share, or $303.1 million. Work on this contract is expected to begin in late spring of 1997 with 25% completion for profit recognition not anticipated until the latter half of 1998. BACKLOG BY MARKET SECTOR (IN MILLIONS)
MARCH 31, 1997 DECEMBER 31, 1996 $ % $ % ----- ----- ----- ----- Public 864.6 92.6% 526.5 88.1% Private 69.5 7.4% 71.4 11.9% --------------------------------------- 934.1 100.0% 597.9 100.0% =======================================
Gross profit for the quarter ended March 31, 1997 was $15.9 million, or 10.8% of revenue, as compared to $14.6 million, or 9.5% of revenue, for the first quarter of 1996. Gross profit in the quarter was positively impacted by Branch Division profits on flood-related work and other new and continuing projects during the quarter, offsetting a decline in 1997 gross profit of the Heavy Construction Division resulting from the completion of the San Joaquin Hills Toll Road, which carried a higher than average gross profit margin, in late 1996. General and administrative expenses for the three months ended March 31, 1997 were $16.6 million, or 11.3% of revenue, an increase of $1.2 million, or 7.5%, over the same period last year and an increase as a percent of revenue from 10.1% last year. Expenses for the first quarter of 1997 were impacted by the shifting of some operating costs to general and administrative costs as the Company has increased activity in estimating and bidding new work. The net income for the quarter ended March 31, 1997, was $0.2 million, or $0.01 per share, a decrease of $0.2 million or $0.01 per share from the net income of $0.4 million, or $0.2 per share for the same period in 1996. 12 14 SEASONALITY OF BUSINESS REVENUE AND NET INCOME BY QUARTER (IN MILLIONS)
NET REVENUES 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
15 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. President Clinton and the Republican congressional leadership have thrown transportation industry participants a curve ball with respect to the recently announced budget agreement. The agreement announced in early May would limit highway spending to no more than $22 billion per year over the next five years. This amount is significantly below the $26 billion level that can be supported by the Highway Trust Fund or even the amount of gas tax revenue that annually is deposited into the Highway Trust Fund. This funding level is also lower than the $26 to $27 billion funding levels that 59 senators and more than 230 members of the House of Representatives are on record supporting in the various highway program reauthorization bills proposed to date. Furthermore, under this budget proposal, the balance in the Highway Trust Fund would be allowed to grow annually to offset spending in other areas of the budget, thus masking the true size of the federal deficit and allowing for achievement of a balanced budget, at least on paper. In our opinion, the apparent $2 billion per year increase in federal highway program funding is inadequate to resolve equity issues between donee and donor states as well as address the critical need for repair and replacement of the national highway system, which should be considered a national economic priority. Looking at the state funding picture, the debate continues in California over how to pay for the unanticipated increase in cost to retrofit the San Francisco-Oakland Bay Bridge. Granite anticipates bidding these retrofit projects in joint venture but at the same time is supporting efforts to keep money from being siphoned out of the highway account for funding the retrofit effort. We continue to see the evidence of an upturn in the private marketplace in California. We believe part of the early success of our Branch Division in the public sector is due to the reduced participation in the bidding process by those mostly smaller contractors that work predominately in the private sector. Moreover, we are encouraged by the nature and level of inquiries by private developers to discuss opportunities for the Company to perform site development work in California and the west. As of yet, however, it has not translated into increased backlog in our private market sector. As we discussed recently in our Form 10-K, we are somewhat concerned by the potential shortage of skilled labor, particularly in areas like Salt Lake City, Utah, which we are addressing with increased investment in craft and technical training. Also, there is some concern that the Federal Reserve Board is contemplating additional increases in the discount rate, which would lead to higher interest rates and possibly put a damper on residential site development projects. 13 16 At the same time, the level of bidding activity within both divisions is very high and the size and scope of some of these projects, particularly for the Heavy Construction Division, are quite large. Examples include a $140 million lock and dam in Arkansas, a $235 million tunnel project in New Jersey, a $100 million sewage treatment project in Atlanta and a $252 million cut and cover highway in Boston. We are pursuing all of these projects in joint venture, as well as the $1 billion Foothill Corridor Toll Road in Orange County, California. As we have stated most recently in the 10-K, the impact of these projects, if we are successful, would not impact Granite's earnings until 1998 and beyond due to their size and the time it takes to reach the 25% threshold of completion for profit recognition. We have completed our 30% investment in TIC Holdings, Inc., effective May 1, 1997, with a tender offer for 20% of outstanding stock of employee shareholders and will include our 30% portion of TIC earnings under the equity method of accounting beginning the second quarter of 1997. Meanwhile, we are off to a very good start for the year, booking record new awards in the first quarter, leading to a record backlog, which gives us a more than ample springboard to grow our business going forward. 14 17 LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------------------------------------------------------------------- DOLLARS IN THOUSANDS 1997 1996 - ------------------------------------------------------------------------------------------------------- Cash and cash equivalents, March 31 $ 8,343 $ 14,705 Net cash provided (used) by: Operating activities (15,485) (7,076) Investing activities (12,947) 1,192 Financing activities (1,888) (1,821) Capital expenditures 21,558 18,004 Working capital 75,451 63,796 - ------------------------------------------------------------------------------------------------------
Cash used by operating activities of $15.5 million for the three months ended March 31, 1997 represents an $8.4 million decrease from the 1996 amount for the same period. The decrease primarily reflects the undistributed earnings of construction joint ventures. Changes in cash provided from operations reflect seasonal variations based on the amount and progress of work being performed. Cash provided by investing activities in 1997 decreased $14.1 million primarily reflecting a $3.6 million increase in cash used to purchase property and equipment and a $9.3 million decrease in net maturities of short-term investments. Cash used in financing activities for the three months ended March 31, 1997 remained consistent with the same period in 1996. On May 1, 1997, the Company purchased 20%, or 154,276 shares, of the outstanding stock of TIC Holdings, Inc. for $12,096,781. The acquisition gives the Company a total 30% ownership of TIC. The transaction was financed under the Company's revolving line of credit with interest at 6.275% payable quarterly and principal payable semiannually over five years beginning December 1998. The investment will be accounted for using the equity method of accounting from the date of acquiring the additional 20% ownership. Previously, the investment in TIC was recorded at cost. The Company's current borrowing capacity under its revolving line of credit is $50 million of which $25.9 million was available on March 31, 1997. The Company believes that its current cash balances combined with cash flows from operations and cash available under its revolving credit agreements, as renegotiated during 1997, will be sufficient to meet its operating needs, anticipated capital expenditure plans and other financial commitments at least through 1997. 15 18 PART II. OTHER INFORMATION 16 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 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 20 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: May 12, 1997 William E. Barton Vice President and Chief Financial Officer 18 21 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE 11 Computation of Net Income per Common and Common Equivalent Share........................................................................... 20
19 EX-11 2 COMPUTATION OF EARNINGS 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 MARCH 31, 1997 1996 - ---------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding 18,129 17,897 Computation of incremental outstanding shares: Net effect of dilutive stock options based on treasury stock method 55 69 - --------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding, as adjusted 18,184 17,966 ========================================================================================================= Net income $ 243 $ 366 ========================================================================================================= Net income per common and common equivalent share $ 0.01 $ 0.02 =========================================================================================================
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, MARCH 31, 1997. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 8,343 24,201 116,057 692 14,306 226,291 475,715 284,926 449,359 150,840 43,174 0 0 184 230,586 449,359 146,821 146,821 130,971 147,614 0 0 1,433 385 142 243 0 0 0 243 0.01 0.01
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