SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ________ to ________
Commission file number 0-3062
GUY F. ATKINSON COMPANY OF CALIFORNIA
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
(State or other jurisdiction of 94-1649018
incorporation or organization) (IRS Employer Identification No.)
1001 Bayhill Drive, San Bruno, California 94066
(Address of principal executive offices) (zip code)
Registrants' telephone number, including area code - (415) 876-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Common stock as of November 9, 1995
Issued and outstanding - 8,951,154 shares
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets September 30, December 31,
(thousands of dollars) 1995 1994
(unaudited)
ASSETS
Current Assets:
Cash and short-term investments $ 51,073 $ 78,441
Accounts receivable 59,325 33,150
Costs and estimated earnings in excess
of billings 4,537 4,338
Inventories and unamortized costs on
contracts in progress 18,798 20,062
Investments in joint ventures 37,551 40,503
Deferred income taxes 12 23
Other current assets 3,337 3,163
Total current assets 174,633 179,680
Property, plant and equipment, at cost 53,855 51,896
Less accumulated depreciation 26,569 34,345
27,286 17,551
Deferred income taxes 92 88
Other assets 3,287 2,395
$205,298 $199,714
LIABILITIES
Current Liabilities:
Notes payable, including current
portion of long-term obligations $ 859 $ 662
Accounts payable 52,402 43,998
Billings in excess of costs and
estimated earnings 35,348 16,920
Accrued expenses 20,740 24,240
Accrued federal & foreign income taxes 4,389 6,953
Due to joint ventures 178 103
Total current liabilities 113,916 92,876
Long-term obligations, less current portion 2,140 2,199
Postemployment benefit obligations and
postretirement health care obligations 7,651 7,651
Total liabilities 123,707 102,726
STOCKHOLDERS' EQUITY
Capital stock 1,895 1,894
Paid-in capital 13,075 13,185
Accumulated translation adjustment (3,997) (5,249)
Unearned compensation (390) (736)
Retained earnings 71,008 87,894
81,591 96,988
$205,298 $ 199,714
See accompanying notes
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND SUBSIDIARY COMPANIES
Consolidated Statements of Operations (unaudited)
(thousands of dollars except
per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenue $ 91,364 $109,942 $267,536 $360,542
Cost of revenue 80,546 108,034 242,516 345,749
Gross margin 10,818 1,908 25,020 14,793
General and administrative expense 9,736 7,789 27,423 25,456
Income (loss) from operations 1,082 (5,881) (2,403) (10,663)
Other income (expense), net:
Interest expense (172) (741) (430) (2,494)
Miscellaneous, net 599 (978) 3,815 78
Total other income (expense), net 427 (1,719) 3,385 (2,416)
Income (loss) from continuing operations
before taxes and the cumulative
effect of changes in accounting 1,509 (7,600) 982 (13,079)
Provision (benefit) for income taxes
(based on estimated annual
effective tax rates) 294 100 33 (586)
Income (loss) from continuing operations
before the cumulative effect of
changes in accounting 1,215 (7,700) 949 (12,493)
Discontinued operations:
Income from discontinued operations,
Net of income taxes - 396 - 3,437
Gain on disposal of discontinued
business unit - 2,611 - 2,611
- 3,007 - 6,048
Income (loss) before the cumulative
effect of changes in accounting 1,215 (4,693) 949 (6,445)
Cumulative effect of changes in accounting:
Postemployment benefit costs - - - (739)
Net income (loss) $ 1,215 $ (4,693) $ 949 $ (7,184)
See accompanying notes
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND SUBSIDIARY COMPANIES
Consolidated Statements of Operations (unaudited), continued
(thousands of dollars except
per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Income (loss) per share of common stock
from continuing operations before
the cumulative effect of
changes in accounting $ 0.13 $ (0.87) $ 0.10 $ (1.41)
Income per share of common stock
from discontinued operations - 0.34 - 0.68
Income (loss) per share of common stock
before the cumulative effect of
changes in accounting 0.13 (0.53) 0.10 (0.73)
Cumulative effect of changes in
accounting per share - - - (0.08)
Net income (loss) per share $ 0.13 $ (0.53) $ 0.10 $ (0.81)
Average number of shares and
common stock equivalents utilized
in net income per share calculations 9,231 8,877 9,157 8,877
See accompanying notes
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows (unaudited)
(thousands of dollars) Nine Months Ended September 30,
1995 1994
Operating activities:
Net income (loss) $ 949 $ (7,184)
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
(Income) from discontinued operations - (3,437)
(Gain) on disposition of discontinued business unit - (2,611)
Depreciation, depletion and amortization 2,642 1,619
Deferred income taxes 1 (871)
Net (gain) on dispositions of property, plant
and equipment (2,954) (708)
Cumulative effect of changes in accounting - 739
Changes in operating assets and liabilities:
Accounts receivable (26,230) 4,110
Inventories and unamortized costs 1,203 5,384
Investments in joint ventures 3,006 (5,393)
Other current assets (187) (1,327)
Accounts payable and accrued expenses 5,335 8,647
Accrued income taxes (2,474) 1,324
Billings in excess of costs and estimated
earnings, net 18,228 3,281
Other, net (87) (116)
Net cash provided by (used in) operating activities
from continuing operations (568) 3,457
Net cash (used in) operating activities
from discontinued operations - ( 11,031)
Net cash (used in) operating activities (568) (7,574)
Investing activities:
Property, plant and equipment expenditures (16,211) (1,178)
Proceeds from dispositions of property, plant
and equipment 6,932 1,516
(Increase) in other assets, net (894) (607)
Net proceeds from disposition of discontinued business unit - 7,802
Net investing activities of discontinued operations - (197)
Net cash provided by (used in) investing activities ( 10,173) 7,336
Financing activities:
Cash dividends paid (17,835) -
Short-term borrowing - 1,778
Long-term borrowing (repayments), net 138 (430)
Net cash provided by (used in) financing activities ( 17,697) 1,348
Effect of exchange rate changes on cash 1,070 (390)
Net increase (decrease) in cash and short-term
investments $(27,368) $ 720
Supplementary information:
Cash paid during the period for:
Interest $ 451 $ 4,030
Federal, foreign and state income taxes 3,675 1,741
Common stock contributed to pension plan - 969
See accompanying notes
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Financial Statements
(all dollar amounts are in thousands)
1. The information furnished reflects all adjustments which are, in the opinion
of management, necessary to a fair statement of results for the interim
periods.
2. During 1994, the company sold its principal manufacturing subsidiary, Lake
Center Industries, Inc., its pipe distribution business, Comco Pipe & Supply
Company, and its oil and gas investments. The results of operations of these
divested businesses are shown separately in the income statement for 1994 as
"Discontinued operations, net of income taxes".
The summarized results of discontinued operations were as follows:
Quarter Ended Nine Months Ended
September 30, 1994 September 30,1994
Revenue $ 45,302 $137,179
Income from discontinued operations
before taxes 1,009 5,889
Provision for income taxes 613 2,452
Income from discontinued operations $ 396 $ 3,437
Income per share of common
stock from discontinued operations $ 0.05 $ 0.39
Gain on disposal of producing oil
and gas properties before taxes $ 4,740 $ 4,740
Provision for income taxes 2,129 2,129
Gain on disposal of producing oil
and gas properties $ 2,611 $ 2,611
Gain on disposal of producing oil
and gas properties per share of
common stock $ 0.29 $ 0.29
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Financial Statements
(all dollar amounts are in thousands)
3. The major classifications of inventory are as follows:
September 30, December 31,
1995 1994
Construction materials,
parts and supplies $ 2,501 $ 3,724
Unamortized costs on
contracts in progress 16,297 16,338
$18,798 $20,062
4. In 1994, the company recorded an accounting charge of $739 for
postemployment benefits upon the adoption of Statement of
Financial Accounting Standards No. 112.
5. On March 31, 1995, the company paid a special cash dividend of
$2.00 per share to shareholders of record on March 15, 1995.
6. The company has 40,000 shares of restricted stock outstanding
pursuant to the provisions of the Guy F. Atkinson Company of
California Executive Stock Plan. Restrictions on the shares are
progressively removed based on achievement of earnings per share
performance goals.
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Financial Statements
(all dollar amounts are in thousands)
6. (continued)
In the event that performance goals are not achieved, the
restricted shares are progressively subject to forfeiture. The
market value of the outstanding restricted shares has been
recorded as unearned stock grant compensation, a separate
component of stockholders' equity. The unearned compensation
will be charged to general and administrative expense as the
performance goals are met. At September 30, 1995 no such
amounts have been charged.
At September 30, 1995, the company had options outstanding with
respect to 705,902 shares of common stock at exercise prices
ranging from $6.55 to $11.95 per share. The right to exercise
these options vests progressively over a four year period
commencing with the date of issue and expiring ten years from
the date of issue. In addition, there were stock warrants
outstanding for 387,500 shares of common stock with an exercise
price of $7.00 expiring in 1998.
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Financial Statements
(all dollar amounts are in thousands)
7. Net primary earnings per share of common and common stock
equivalents are calculated using the weighted average number of
common shares outstanding, excluding restricted shares for which
performance goals have not been met, plus the net additional
number of shares which would be issuable upon the exercise of
stock options and warrants, assuming that the company used the
proceeds received to repurchase outstanding shares at market
prices.
8. On March 7, 1995, a complaint asserting breach of contract and
other wrongdoing in connection with the company's sale of its
manufacturing subsidiary, Lake Center Industries, Inc., was filed
against the company and its financial advisor by an unsuccessful
bidder for Lake Center. The plaintiffs allege they have suffered
actual damages of $290 in connection with preparing their bid and
also seek to recover $7,000 on a theory of unjust enrichment,
together with an additional $10,000 in punitive damages. The
company will vigorously defend this suit, which it believes to be
without merit and further believes that the outcome will not have
a material adverse effect on its financial condition.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations (all dollar amounts are in thousands unless
otherwise stated)
Quarter ended September 30, 1995 vs. quarter ended September 30, 1994
Revenue: The company's revenue of $91 million in the third
quarter of 1995 was 17% lower than the corresponding figure of $110
million in the third quarter of 1994. This reduction in revenue was
attributable to the completion of certain industrial construction
projects in 1994, while new contract awards (amounting to $427 million
in the first three quarters of 1995) are only beginning to make a
contribution to revenue. The backlog of uncompleted contracts amounted
to $471 million at September 30, 1995, representing an increase of 91%
over the restated September 30, 1994 backlog of $246 million. The
restatement of September 30, 1994 backlog is in respect of a $293
million contract award which was removed from backlog due to its
unlikely prospects of proceeding.
Gross margin: The company's gross margin of $10,818 increased
almost sixfold in the third quarter of 1995 over the corresponding
$1,908 in 1994. Gross margin in 1994 was adversely impacted by a
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
contract dispute settlement and cost overruns, together amounting to
$3,700. The improvement in 1995 gross margins reflect a more profitable
mix of construction contracts in 1995.
General and administrative expense: General and administrative
expenses of $9,736 were 25% higher than the corresponding figure of
$7,789 in 1994. This was due to the company's increased bidding
activities together with ongoing business development efforts in both
the construction and water and wastewater treatment businesses.
Corporate expense continues to run at a lower rate in 1995 than in 1994
due to cost reduction efforts implemented in the fourth quarter of 1994.
Other income (expense): Interest expense decreased to $172 the
third quarter of 1995, from $741 in the third quarter of 1994, primarily
due to the company having retired all of its short-term debt in the
fourth quarter of 1994. Miscellaneous income of $599 in 1995 is
primarily interest income on short-term investments. Miscellaneous
expense of $978 in 1994 resulted from the write-down of an investment
together with losses on foreign exchange.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Income taxes and net income: The company had income from
continuing operations before taxes and the cumulative effect of changes
in accounting of $1,509 in 1995 compared to a loss of $7,600 in 1994.
Income taxes gave rise to an expense of $294 in 1995 compared to an
expense of $100 in 1994. The 1995 tax expense was attributable to state
and foreign income taxes. The 1994 tax expense was attributable to
state and foreign income taxes in conjunction with U.S. tax losses for
which no net tax benefit was available.
In 1994, discontinued operations, including related disposition
gains net of income taxes, provided income of $3,007.
Net income for the third quarter of 1995 was $1,215, compared to a
net loss of $4,693 for the corresponding period of 1994.
Nine months ended September 30, 1995 vs. nine months ended September 30,
1994
Revenue: The company's revenue of $268 million was 26% lower
than the corresponding figure of $361 million in 1994, for the same
reasons outlined in the previous discussion of revenue for the quarter
ended September 30, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Gross margin: The company's gross margin of $25,020 increased by
69% in the nine month period of 1995 over the corresponding figure of
$14,793 in 1994. The percentage of gross margin to revenue improved in
1995 compared to 1994 reflecting the company's increased focus on higher
margin construction projects from new work booked in 1995.
General and administrative expense: General and administrative
expense of $27,423 in 1995 increased by 8% over the corresponding figure
of $25,456 in 1994, for the reasons outlined in the discussion of
general and administrative expense for the quarter ended September 30,
1995.
Other income (expense): Interest expense declined to $430 in
1995 from $2,494 in 1994 due to the absence of short-term debt on the
company's balance sheet in 1995. Miscellaneous income of $3,815 in 1995
was attributable to gains from the disposition of surplus assets of
$1,900 and interest income of $2,990, less foreign exchange losses and
other miscellaneous expenses of $1,075. In 1994, miscellaneous income
of $78 was derived from gains on asset sales offset by foreign exchange
losses and the write-down of an investment.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Income taxes and net income: The company had income from
continuing operations before taxes and the cumulative effect of changes
in accounting of $982 in 1995 compared to a loss of $13,079 in 1994.
Income taxes resulted in an expense of $33 in 1995 compared to a benefit
of $586 in 1994. The 1995 tax expense is lower than the statutory rates
due to the availability of net operating losses in the United States,
while the 1994 tax benefit was due to the allocation of income taxes to
discontinued operations.
In 1994, discontinued operations including related disposition
gains provided income of $6,048, while the adoption of Statement of
Financial Accounting Standards No. 112 resulted in an accounting charge
of $739.
Net income for the nine month period of 1995 was $949 compared to
a loss of $7,184 in the corresponding period of 1994.
Liquidity and Capital Resources
The company's operating activities used cash of $568 in the nine
month period of 1995 compared with $7,547 in 1994, which includes
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
$11,031 from discontinued operations. Net investing activities in 1995
used $10,173 of cash, which, together with a special $2.00 per share
dividend payment (amounting to $17,835) resulted in a net decrease in
cash and short-term investments of $27,368. In 1994, the cash shortfall
from operating activities of $7,574 was funded by investing activities
and borrowing.
On September 29, 1995, the company secured a two year $40 million
syndicated line of credit. The availability of this line of credit is
reduced by any letters of credit outstanding. At September 30, 1995,
the company had no outstanding borrowings and $6,793 in outstanding
letters of credit.
The company believes that its cash and short-term investments,
together with its lines of credit and funds generated from operations
will be adequate to cover foreseeable future requirements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Valeo (French parent company) and Valeo Engine Cooling, Inc.
filed on March 7, 1995, a complaint in the New York State Supreme
Court asserting breach of contract and other wrongdoing in
connection with the company's sale of its manufacturing subsidiary,
Lake Center Industries, Inc., against the company and its financial
advisor, Dillon Read & Co. Valeo was an unsuccessful bidder for
Lake Center. The plaintiffs allege they have suffered actual
damages of $290 in connection with preparing their bid and also
seek to recover $7,000 on a theory of unjust enrichment,
unspecified damages for lost profits, and an additional $10,000 in
punitive damages. The company will vigorously defend this suit,
which it believes to be without merit and further believes that the
outcome will not have a material adverse effect on its financial
condition.
GUY F. ATKINSON COMPANY OF CALIFORNIA
AND CONSOLIDATED SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant had duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GUY F. ATKINSON COMPANY OF CALIFORNIA
S/ Herbert D. Montgomery
Senior Vice President,
Chief Financial Officer
and Treasurer
November 9, 1995