-----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, COQ2np75Xctd29B2RtLOlaiug0p+oy1xJbeRKbF9roGbaKIBT+gbTQBAzvZaX0bH 3htSyj1/uwKc4odn9oo+Xw== 0000950149-97-001585.txt : 19970818 0000950149-97-001585.hdr.sgml : 19970818 ACCESSION NUMBER: 0000950149-97-001585 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970815 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: 97664284 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 PERIOD ENDING JUNE 30,1997 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 JUNE 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 August 8, 1997. Class Outstanding ----------------------------- ----------------- Common Stock, $0.01 par value 18,265,725 shares This report on Form 10-Q, including all exhibits, contains 21 pages. The exhibit index is located on page 20 of this report. 2 GRANITE CONSTRUCTION INCORPORATED INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996.......................................4 Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 1997 and 1996.....................5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 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....................................17 Item 5. Other Information....................................none Item 6. Exhibits and Reports on Form 8-K.......................18 Exhibit Index..........................................20
2 3 PART I. FINANCIAL INFORMATION 3 4 GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
========================================================================================================== JUNE 30, December 31, 1997 1996 - --------------------------------------------------------------------------------------------------------- (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 32,267 $ 38,663 Short-term investments 11,806 33,567 Accounts receivable 158,934 124,124 Costs and estimated earnings in excess of billings 24,455 29,494 Inventories 14,726 13,493 Deferred income taxes 13,060 13,060 Equity in joint ventures 21,521 5,371 Other current assets 4,945 6,033 ------------------------- Total current assets 281,714 263,805 - --------------------------------------------------------------------------------------------------------- Property and equipment 196,810 178,515 - --------------------------------------------------------------------------------------------------------- Other assets 47,488 30,725 - --------------------------------------------------------------------------------------------------------- $ 526,012 $ 473,045 ========================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 11,176 $ 10,186 Accounts payable 84,205 64,058 Billings in excess of costs and estimated earnings 48,915 45,352 Accrued expenses and other current liabilities 48,452 51,667 ------------------------- Total current liabilities 192,748 171,263 - --------------------------------------------------------------------------------------------------------- Long-term debt 70,133 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 18,268,048 shares; 1996- issued 18,166,011 shares, outstanding 18,125,653 shares 184 182 Additional paid-in capital 39,769 36,901 Retained earnings 205,826 201,663 ------------------------- 245,779 238,746 Unearned compensation (7,223) (5,141) ------------------------- 238,556 233,605 - --------------------------------------------------------------------------------------------------------- $ 526,012 $ 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 SIX MONTHS ENDED JUNE 30, JUNE 30, 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------- Revenue $ 242,576 $ 248,499 $ 389,397 $ 402,248 Cost of revenue 211,586 219,281 342,557 358,388 ------------------------------------------------------ GROSS PROFIT 30,990 29,218 46,840 43,860 General and administrative expenses 18,473 16,780 35,116 32,265 ------------------------------------------------------ OPERATING PROFIT 12,517 12,438 11,724 11,595 - ---------------------------------------------------------------------------------------------- Other income (expense) Interest income 1,208 1,418 2,688 3,372 Interest expense (1,762) (837) (3,195) (1,778) Gain on sales of property and equipment 1,684 1,747 2,304 2,160 Other, net (460) (39) 51 (32) ------------------------------------------------------ 670 2,289 1,848 3,722 - ---------------------------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES 13,187 14,727 13,572 15,317 Provision for income taxes 4,880 5,596 5,022 5,820 - ---------------------------------------------------------------------------------------------- NET INCOME $ 8,307 $ 9,131 $ 8,550 $ 9,497 ============================================================================================== Net income per share $ 0.46 $ 0.51 $ 0.47 $ 0.53 Weighted average shares of common stock 18,186 18,052 18,264 18,017 Dividends per share $ 0.06 $ 0.06 $ 0.24 $ 0.25 ==============================================================================================
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)
================================================================================================ SIX MONTHS ENDED JUNE 30, 1997 1996 - ------------------------------------------------------------------------------------------------ Operating Activities Net income $ 8,550 $ 9,497 Add (deduct) noncash items included in net income: Depreciation, depletion and amortization 19,197 18,273 Gain on sales of property and equipment (2,304) (2,160) Decrease in unearned compensation 1,159 984 Cash provided by (used in): Accounts and notes receivable (35,577) (23,858) Inventories (1,233) (3,110) Equity in joint ventures (16,150) (6,970) Other assets 1,088 226 Accounts payable 20,147 1,231 Billings in excess of costs and estimated earnings, net 8,871 (3,574) Accrued expenses (3,223) 6,129 -------------------- Net cash provided (used) by operating activities 525 (3,332) - ------------------------------------------------------------------------------------------------ Investing Activities Additions to property and equipment (37,762) (31,779) Proceeds from sales of property and equipment 3,032 1,258 Additions to notes receivable (117) (114) Repayments of notes receivable 772 226 Investment in TIC Holdings, Inc. (12,178) -- Additions to investments and other assets (5,200) (84) Purchases of short-term investments (13,521) (16,871) Maturities of short-term investments 35,282 47,661 -------------------- Net cash provided (used) by investing activities (29,692) 297 - ------------------------------------------------------------------------------------------------ Financing Activities Additions to long-term debt 32,969 7,000 Repayments of long-term debt (5,448) (8,391) Employee stock options exercised 93 598 Stock purchased and redistributed (464) (526) Dividends paid (4,379) (4,392) -------------------- Net cash provided (used) by financing activities 22,771 (5,711) - ------------------------------------------------------------------------------------------------ Decrease in cash and cash equivalents (6,396) (8,746) Cash and cash equivalents at beginning of period 38,663 22,410 -------------------- Cash and cash equivalents at end of period $ 32,267 $ 13,664 ================================================================================================ Supplementary Information Cash paid during the period for: Interest $ 3,195 $ 1,778 Income taxes 257 346 ================================================================================================
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 June 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 six months ended June 30, 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 June 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 $ -- $-- $ -- $ -- $ 2,993 $ -- $ -- $ 2,993 Commercial Paper -- -- -- -- 3,977 -- -- 3,977 Municipal Bonds 2,000 -- -- 2,000 6,011 6 -- 6,017 Foreign Banker's Acceptances -- -- -- -- 7,420 1 -- 7,421 - -------------------------------------------------------------------------------------------------------------------------- 2,000 -- -- 2,000 20,401 7 -- 20,408 ========================================================================== =============================================
Available-For-Sale Available-For-Sale June 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 5,039 -- -- 5,039 9,146 3 (14) 9,135 Municipal Bonds 3,970 12 -- 3,982 4,020 23 -- 4,043 Foreign Banker's Acceptances 797 -- (1) 796 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- 9,806 12 (1) 9,817 13,166 26 (14) 13,178 ========================================================================================================================== Total Short-Term Investments $11,806 $ 12 $ (1) $11,817 $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 six months ended June 30, 1997. At June 30, 1997, scheduled maturities of investments are as follows (unaudited):
- ------------------------------------------------------------------------------------------ Held-To- Available- Maturity For-Sale Total - ------------------------------------------------------------------------------------------ Within one year $2,000 $5,767 $ 7,767 After one year through five years -- 4,039 4,039 - ------------------------------------------------------------------------------------------ $2,000 $9,806 $11,806 ==========================================================================================
For the six months ended June 30, 1997 and 1996, purchases and maturities of short-term investments were as follows:
--------------------------------------- --------------------------------------- Six Months Ended Six Months Ended June 30, 1997 June 30, 1996 (Unaudited) (Unaudited) Held-To- Available Held-To- Available Maturity For Sale Total Maturity For Sale Total --------------------------------------- --------------------------------------- Purchases $3,098 $10,423 $ 13,521 $ 9,542 $ 7,329 $ 16,871 Maturities 27,535 7,747 35,282 36,300 11,361 47,661 --------------------------------------- --------------------------------------- Net change $(24,437) $ 2,676 $(21,761) $ (26,758) $(4,032) $ (30,790) ======================================= ======================================
3. ACCOUNTS RECEIVABLE:
JUNE 30, December 31, 1997 1996 ---------------------------------- (UNAUDITED) Construction contracts Completed and in progress $ 91,417 $ 59,764 Retentions 42,851 47,956 ---------------------------------- 134,268 107,720 Construction material sales 20,742 12,651 Other 4,621 4,446 ---------------------------------- 159,631 124,817 Less allowance for doubtful accounts 697 693 ---------------------------------- $158,934 $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:
- -------------------------------------------------------------------------------- JUNE 30, December 31, 1997 1996 - -------------------------------------------------------------------------------- (UNAUDITED) Assets Total $212,339 $96,760 Less other venturers' interest 157,530 69,175 - -------------------------------------------------------------------------------- Company's interest 54,809 27,585 - -------------------------------------------------------------------------------- Liabilities Total 131,577 75,408 Less other venturers' interest 98,289 53,194 - -------------------------------------------------------------------------------- Company's interest 33,288 22,214 - -------------------------------------------------------------------------------- $ 21,521 $ 5,371 ================================================================================
6. PROPERTY AND EQUIPMENT:
JUNE 30, December 31, 1997 1996 ------------------------------------- (UNAUDITED) Land $ 15,883 $ 15,328 Quarry property 35,650 34,408 Buildings and leasehold improvements 17,171 12,973 Equipment and vehicles 412,868 388,697 Office furniture and equipment 5,687 5,485 ------------------------------------- 487,259 456,891 Less accumulated depreciation, depletion and amortization 290,449 278,376 ------------------------------------- $196,810 $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:
JUNE 30, December 31, 1997 1996 ------------------------------ (UNAUDITED) Payroll and related employee benefits $16,172 $21,627 Accrued insurance 17,905 19,997 Income taxes payable 5,022 - Other 9,353 10,043 ------------------------------ $48,452 $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, 91,212 shares vested and 9,914 shares were forfeited during the six months ended June 30, 1997. Unearned compensation is amortized over the restriction periods. Compensation expense related to restricted shares was $576 and $492 for the three months ended and was $1,159 and $984 for the six months ended June 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, 22,019 shares which were redistributed along with the balance of treasury stock as new shares of restricted common stock. During the six months ended June 30, 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. EQUITY INVESTMENT: 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 is 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. 10 11 GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------- 13. 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. 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 June 30, 1997 was $242.6 million, bringing the six month total to $389.4 million, a decrease of $5.9 million, or 2.4%, and $12.8 million, or 3.2%, respectively, over the same periods last year. [REVENUE BY MARKET SECTOR PIE CHART] REVENUE BY MARKET SECTOR SIX MONTHS ENDED JUNE 30, (IN MILLIONS)
1997 1996 $ % $ % ---- ---- ---- ---- Public 264.5 67.9% 287.0 71.4% Private 73.6 18.9% 73.6 18.3% Materials 51.3 13.2% 41.6 10.3% ----------------------------------------------------- 389.4 100.0% 402.2 100.0% =====================================================
For the six months ended June 30, 1997, revenue from public sector contracts decreased $22.5 million to $264.5 million, or 67.9% of total revenue, from $287.0 million, or 71.4% of total revenue in 1996. Revenue from private sector contracts of $73.6 million, or 18.9% of total revenue, was unchanged from the six months ended June 30, 1996 level of $73.6 million, or 18.3% of total revenue. Revenue in the Company's primary geographical area, California, decreased to $206.8 million, or 53.1% of total revenue, from $216.6 million, or 53.8% of total revenue, last year. [AWARDS & BACKLOG GRAPH] 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 Q2 317.7 1,009.2
Backlog at June 30, 1997 was $1,009.2 million, a $373.4 million increase from June 30, 1996 and a $411.3 million increase from December 31, 1996. New awards for the quarter totaled $317.7 million and include a $27.9 million light rail project in Utah, an $18.8 million interchange reconstruction project in Nevada and a $17.4 million airport project in Sacramento, California. Awards for the quarter do not include a $75.7 million Florida highway contract awarded in August 1997. 12 13 [BACKLOG BY MARKET SECTOR PIE GRAPH] BACKLOG BY MARKET SECTOR (IN MILLIONS)
JUNE 30, 1997 DECEMBER 31, 1996 $ % $ % ---- ---- ---- ---- Public 946.0 93.7% 526.5 88.1% Private 63.2 6.3% 71.4 11.9% ------------------------------------------------------- 1,009.2 100.0% 597.9 100.0% =======================================================
The public sector backlog increased to 93.7% of total backlog from 88.1% at December 31, 1996 and 84.4% at June 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, which has contributed $305.5 million to the Company's public sector backlog. Work on this contract began during the second quarter of 1997 with 25% completion for profit recognition not anticipated until the latter half of 1998. Private sector backlog decreased $8.2 million from December 31, 1996 and $35.7 million from June 30, 1996. Gross profit for the quarter ended June 30, 1997 was $31.0 million, or 12.8% of revenue, as compared to $29.2 million, or 11.8% of revenue, for 1996. The six month gross profit increased $2.9 million to $46.8 million, or 12.0% of revenue versus $43.9 million or 10.9% in 1996. The change in gross profit reflects overall strong margins in both operating divisions and the settlement of claims for revenue on work completed in prior years offset by lower gross profits due to the completion of the San Joaquin Hills Toll Road in late 1996 which carried a higher than average gross profit margin and which has yet to be replaced by gross profits on the new major projects in the Company's backlog. General and administrative expenses for the three months ended June 30, 1997 increased $1.7 million to $18.5 million, or 7.6% of revenue, as compared to 6.8% of revenue for the same quarter of 1996. For the six months, general and administrative expenses increased $2.8 million to $35.1 million and as a percent of revenue to 9.0% versus 8.0% last year. The increases reflect an increased level of business development and estimating activities with new offices in Florida, Maryland and Nevada opening during the quarter and a change in the timing of bad debt collections versus write-offs. Other income decreased $1.6 million for the quarter and $1.9 million for the six months ended June 30, 1997 primarily reflecting the Company's equity in the interest expense of a partnership that began expensing interest in the fourth quarter of 1996. Net income for the quarter ended June 30, 1997 was $8.3 million, or $0.46 per share, a decrease of $0.8 million or $0.05 per share from the quarter ended June 30, 1996 net income of $9.1 million, or $0.51 per share. For the six months, net income was $8.6 million, or $0.47 per share, a $0.9 million, or $0.06 per share decrease from the prior year net income of $9.5 million, or $0.53 per share. [SEASONALITY OF BUSINESS GRAPH] 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 204.2 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
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. President Clinton and the G.O.P. controlled Congress have completed their budget agreement by appropriating approximately $23 billion for highway spending for the 1998 fiscal year. It was signed into law August 5, 1997. This amount is $3 billion higher than the previous year. Also on a positive note, the 4.3 cents gas tax used for the general fund has been transferred to the Highway Trust Fund. However, that money will not be spent, but will increase the fund surplus and, we believe, put pressure on Congress to appropriate transportation funds at higher levels. As said in previous filings, the balance in the Highway Trust Fund, would continue 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 $3 billion increase is a step in the right direction but the 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 forward, Representative Schuster, Chairman of the House Transportation and Infrastructure Committee, is planning to introduce into the House a bill to authorize highway spending over the next three years starting at the $23 billion level and escalating to $32 billion in the third year or to an amount that fully utilizes the Highway Trust Fund. If that doesn't work, he will break the proposal down into one year increments. In the Senate, Senator John Warner is planning to introduce a similar transportation bill that would cover a six year period and funded "at an appropriate level." The state funding picture is also starting to become clearer as the California's legislative leaders and Governor Wilson reached agreement on a $2.54 billion plan to build a new eastern span on the San Francisco-Oakland Bay Bridge and perform seismic upgrades on other state toll bridges. The agreement found a balance by increasing tolls $1 to a total of $2 on five Bay Area bridges for a minimum of eight years and providing $875 million in state transportation funds plus $650 million from a bond measure approved by state voters in March 1996. The good news is that the state transportation funds have not been decimated and will be available to fund these and other needed transportation projects. Granite anticipates bidding some of these retrofit projects in joint venture beginning in the fall. Although not translated into increased private sector backlog, the strong economy both nationally and in the West which includes California, our largest marketplace, has provided substantial opportunities in the private market sector. We believe part of the success of our Branch Division in the public sector is due to the reduced participation in the public sector bidding process by those mostly smaller contractors that work predominately in the private sector. Additionally, in California, which generated 50% of Granite's second quarter revenue, economists believe that the economy ($1 trillion in value) will continue to achieve Gross State Products in excess of the national average into the next century, supporting our optimism in this important region. 14 15 Bidding activity within both divisions continues to be very strong and the size and scope of some of these projects, particularly for the Heavy Construction Division, are substantial. Granite has been able to translate the bidding opportunities into a record backlog just breaking the $1 billion level. With the prospects available on our bid list, we have the chance to increase backlog significantly and when combined with our "turn" business (work started and completed during the year), it will provide the opportunity for revenue growth and Granite's expected associated profitability. Based on our success to date in capturing new work, the large number of prospects both public and private, and our geographic diversity throughout the continental U.S., we believe our near-term business has significant opportunities to allow the Company to prosper. LIQUIDITY AND CAPITAL RESOURCES
- ---------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Six Months Ended June 30, 1997 1996 - ---------------------------------------------------------------------------- Cash and cash equivalents, June 30 $ 32,267 $ 13,664 Net cash provided (used) by: Operating activities 525 (3,332) Investing activities (29,692) 297 Financing activities 22,771 (5,711) Capital expenditures 37,762 31,779 Working capital 88,966 69,048 - ----------------------------------------------------------------------------
Cash provided by operating activities during the six months ended June 30, 1997, of $0.5 million represents a $3.9 million increase from the 1996 amount for the same period. The change relates to an increase in accounts payable, net of the increase to accounts receivable, of $7.2 million, and an increase in cash provided from the performance of contracts of $12.4 million, offset primarily by an increase in the undistributed earnings of construction joint ventures of $9.2 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 $30.0 million more cash than during the six months ended June 30, 1996. Purchases of property, plants and equipment increased $6.0 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% (see Note 12, Equity Investment, of Notes to the Condensed Consolidated Financial Statements). Other investing activities include a decrease in net maturities of short-term investments of $9.0 million. Financing activities in 1997 provided $28.5 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. The Company renegotiated its revolving credit agreement during the quarter ended June 30, 1997. At June 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 At the Company's Annual Meeting of Shareholders on May 19, 1997, the following members were elected to the Board of Directors:
AFFIRMATIVE NEGATIVE VOTES WITHHELD VOTES VOTES ABSTAINED NONVOTE ----------- ------- --------- -------------- Richard M. Brooks 13,686,640 -- 215,568 4,353,524 Raymond E. Miles 13,686,640 -- 215,568 4,353,524
The following proposal was approved at the Company's Annual Meeting:
AFFIRMATIVE NEGATIVE VOTES WITHHELD VOTES VOTES ABSTAINED NONVOTE ----------- ------- --------- -------------- To ratify the appointment of Coopers & Lybrand, L.L.P. as the independent accountants of the Company for the fiscal year ending December 31, 1997 13,686,640 215,568 -- 4,353,524
17 18 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 18 19 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: August 12, 1997 --------------------------------------- William E. Barton Vice President and Chief Financial Officer 19 20 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE - ------ ----------- ---- 11 Computation of Net Income per Common and Common Equivalent Share..................................................21
20 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 SIX MONTHS ENDED JUNE 30, JUNE 30, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------- Weighted average common shares outstanding 18,134 17,985 18,210 17,941 Computation of incremental outstanding shares: Net effect of dilutive stock options based on treasury stock method 52 67 54 76 - ----------------------------------------------------------------------------------------------- Weighted average common shares outstanding, as adjusted 18,186 18,052 18,264 18,017 ============================================================================================== Net income $ 8,307 $ 9,131 $ 8,550 $ 9,497 ============================================================================================== Net income per common and common equivalent share $ 0.46 $ 0.51 $ 0.47 $ 0.53 ==============================================================================================
21 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, JUNE 30, 1997. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 32,267 11,806 159,631 697 14,726 281,714 487,259 290,449 526,012 192,748 70,133 0 0 184 238,372 526,012 389,397 389,397 342,557 377,673 0 0 3,195 13,572 5,022 8,550 0 0 0 8,550 0.47 0.47
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