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 March 31, 1996 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 May 10, 1996 Issued and outstanding - 8,974,467 shares PART I - FINANCIAL INFORMATION Item 1. Financial Statements Guy F. Atkinson Company of California Consolidated Balance Sheets (in thousands of dollars except share and per share amounts) March 31, December 31, 1996 1995 (unaudited) ASSETS Current assets Cash and short-term investments $7,382 $39,804 Accounts receivable 102,033 76,196 Costs and estimated earnings in excess of billings 9,014 28,751 Inventories and unamortized costs on contracts 21,435 20,987 Investments in joint ventures 32,396 32,272 Other current assets 5,847 5,244 - ---------------------------------------------------------------------------- Total current assets 178,107 203,254 - ---------------------------------------------------------------------------- Property, plant and equipment At cost: Land 2,575 2,683 Buildings 10,331 11,203 Construction equipment 33,779 36,036 Other equipment 8,043 7,478 - ---------------------------------------------------------------------------- 54,728 57,400 Less accumulated depreciation 26,311 28,163 - ---------------------------------------------------------------------------- Total property, plant and equipment, net 28,417 29,237 - ---------------------------------------------------------------------------- Other assets 2,377 2,353 - ---------------------------------------------------------------------------- Total assets $208,901 $234,844 ============================================================================ See accompanying notes Page 1 Guy F. Atkinson Company of California Consolidated Balance Sheets (in thousands of dollars except share and per share amounts) March 31, December 31, 1996 1995 (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable, including current portion of long- term debt $5,793 $844 Accounts payable 65,890 86,671 Billings in excess of costs and estimated earnings 14,025 20,300 Accrued federal and foreign income taxes 4,133 5,020 Other accrued expenses 25,533 28,145 Deferred income taxes 249 248 Due to joint ventures 460 730 - ---------------------------------------------------------------------------- Total current liabilities 116,083 141,958 - ---------------------------------------------------------------------------- Non-current liabilities Long-term debt, less current portion 1,841 1,917 Deferred income taxes 88 88 Postretirement healthcare and postemployment benefit obligations 7,423 7,423 - ---------------------------------------------------------------------------- Total liabilities 125,435 151,386 - ---------------------------------------------------------------------------- Stockholders' Equity Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued or outstanding Common stock, par value $0.01; 20,000,000 shares authorized; 8,962,767 issued and outstanding at March 31, 1996 and 8,951,154 at December 31, 1995 1,895 1,895 Paid-in capital 13,059 13,085 Accumulated translation adjustment (4,329) (4,446) Unearned compensation - (400) Additional pension liability (344) (344) Retained earnings 73,185 73,668 - ---------------------------------------------------------------------------- Total stockholders' equity 83,466 83,458 - ---------------------------------------------------------------------------- Total liabilities and stockholders' equity $208,901 $234,844 ============================================================================ See accompanying notes Page 2 Guy F. Atkinson Company of California Consolidated Statements of Income (in thousands of dollars except share and per share amounts) Quarters ended March 31, 1996 1995 (unaudited) Revenue $99,185 $89,738 Cost of revenue 90,560 82,800 - ---------------------------------------------------------------------------- Gross margin 8,625 6,938 General and administrative expenses 9,878 8,805 - ---------------------------------------------------------------------------- (Loss) from operations (1,253) (1,867) Other income (expense) Interest income 854 1,046 Interest expense (157) (201) Miscellaneous 622 84 - ---------------------------------------------------------------------------- Total other income (expense) 1,319 929 - ---------------------------------------------------------------------------- Income (loss) before income taxes 66 (938) Provision for income taxes 549 49 - ---------------------------------------------------------------------------- Net (loss) ($483) ($987) ============================================================================ Net (loss) per share of common stock ($0.05) ($0.11) ============================================================================ Average number of shares of common stock and common stock equivalents utilized in net (loss) per share calculation 8,958,000 8,917,000 ============================================================================ See accompanying notes Page 3 Guy F. Atkinson Company of California Consolidated Statement of Cash Flows (in thousands of dollars except share and per share amounts) Quarters ended March 31, 1996 1995 (unaudited) Operating activities Net (loss) ($483) ($987) Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,461 491 Deferred income taxes - 11 (Gain) on dispositions of property, plant and equipment (1,850) (765) Changes in operating assets and liabilities: Accounts receivable (25,782) (11,092) Inventories and unamortized costs on contracts (443) (3,962) Investments in joint ventures (383) 4,029 Other current assets (602) 147 Accounts payable and accrued expenses (23,436) 9,605 Accrued income taxes (887) (1,552) Billings in excess of costs and estimated earnings, net 13,446 15,240 Other, net 206 6 - ---------------------------------------------------------------------------- Net cash provided by (used in) operating activities (37,753) 11,171 - ---------------------------------------------------------------------------- Cash flows from investing activities: Property, plant and equipment expenditures (2,687) (767) Proceeds from dispositions of property, plant and equipment 2,909 725 Increase (decrease) in other assets, net (24) 634 - ---------------------------------------------------------------------------- Net cash provided by investing activities 198 592 - ---------------------------------------------------------------------------- Cash flows from financing activities: Short-term borrowings 5,000 - Long-term debt repayments (127) (141) Common stock issuance related to stock option awards 374 - Cash dividends paid - (17,835) - ---------------------------------------------------------------------------- Net cash provided by (used in) financing activities 5,247 (17,976) - ---------------------------------------------------------------------------- Effect of exchange rate changes on cash (114) 60 - ---------------------------------------------------------------------------- Net (decrease) in cash and short-term investments ($32,422) ($6,153) ============================================================================ Supplementary information: Cash paid during the year for: Interest $160 $273 Federal, foreign and state income taxes 168 2,547 ============================================================================ See accompanying notes Page 4 Guy F. Atkinson Company of California Notes to Consolidated Financial Statements (in thousands of dollars except share and per share amounts) Financial Statement Content The information contained herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods. Inventories and Unamortized Costs on Contracts March 31, December 31, The major classifications of inventory are as 1996 1995 follows: (unaudited) Construction materials, parts and supplies $2,605 $2,812 Unamortized costs on contracts 18,830 18,175 - ---------------------------------------------------------------------------- $21,435 $20,987 ============================================================================ Stock Options and Warrants At March 31, 1996, the company had options outstanding with respect to 947,358 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. Earnings Per Share Net primary earnings per share of common and common stock equivalents are calculated using the weighted average number of common shares outstanding, plus the net additional number of shares which would be issuable upon the execise of stock options and warrants, assuming that the company used the proceeds received to repurchase outstanding shares at market prices. Litigation and Contingencies 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 plantiffs 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. Page 5 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) Revenue: The company's revenue of $99,185 increased by 11% in the first quarter of 1996 compared with $89,738 in the first quarter of 1995. The increase in revenue was attributable to the substantial volume of new contract awards in 1995 that is now starting to make a significant contribution to revenue. The backlog of uncompleted contracts amounted to $615,293 at March 31, 1996, representing an increase of 45% over the March 31, 1995 backlog of $424,883. Gross margin: The company's gross margin of $8,625 increased by 24% in the first quarter of 1996 over the corresponding $6,938 in 1995. The percentage of gross margin to revenue increased to 8.7% in 1996 from 7.7% in 1995, reflecting a more profitable mix of construction contracts in 1996, as the company continues to focus on higher margin construction opportunities. General and administrative expense: General and administrative expenses of $9,878 in 1996 were 12% higher than the corresponding figure of $8,805 in 1995 due to ongoing business development activities in both the construction and water and wastewater treatment businesses, combined with increased international market development. Page 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued Interest income: Interest income in the first quarter of 1996 declined to $854 from $1,046 in the corresponding period of 1995 due to reduced cash and short-term investment balances in 1996. Interest expense: Interest expense of $157 in the first quarter of 1996, was essentially unchanged from the $201 in the first quarter of 1995. Miscellaneous: Miscellaneous income of $622 in 1996 was primarily attributable to gains on property dispositions. Income taxes and net income: The company recorded income before taxes of $66 in 1996, compared with a loss of $938 in 1995. Income taxes gave rise to an expense of $549 in 1996 compared with $49 in 1995. In each year, income tax expense was attributable to state and foreign income taxes, with higher foreign taxes accounting for the increase in 1996 over 1995. The net loss for the first quarter of 1996 amounted to $483, compared with a net loss of $987 in 1995. Page 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued Liquidity and Capital Resources The company's operating activities utilized cash of $37,753 in the first quarter of 1996, compared with $11,171 of cash generated in the first quarter of 1995. The negative operating cash flow in 1996 is due to the start-up cash requirements of new construction projects commencing in the first quarter of 1996, as well as the ongoing cash requirements of existing construction projects which are expected to return cash to the company in the latter part of 1996. The company has a two-year $40 million syndicated line of credit which expires on June 30, 1997. The availability of this line of credit is reduced by any letters of credit which may be outstanding under the lines. At March 31, 1996, the company had $5,000 in outstanding borrowings and $6,548 in outstanding letters of credit. The company believes that its cash and short-term investments, together with lines of credit and funds generated from operations and other sources will be adequate to cover foreseeable future requirements. Page 8 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of the company (the "Annual Meeting") was held on April 18, 1996. The only matter submitted to the shareholders was the election of directors. The table below sets forth the total number of votes for and withheld as to each of the eight candidates for director, all of whom were elected at the Annual Meeting. Broker Nominee For Withheld Against Abstain Non-Votes Jack J. Agresti 6,462,721 72,194 N/A N/A N/A Duane E. Atkinson 6,523,944 10,971 N/A N/A N/A Ray N. Atkinson 6,516,472 18,443 N/A N/A N/A William E. Burch 6,516,875 18 040 N/A N/A N/A J. Phillip Frazier 6,516,875 18,040 N/A N/A N/A Donald R. Kayser 6,516,875 18,040 N/A N/A N/A Ross J. Turner 6,516,875 18,040 N/A N/A N/A John F. Whitsett 6,516,875 18,040 N/A N/A N/A Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description 27.1 Financial Data Schedule (b) No reports on Form 8-K were filed during the period. Page 9 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 May 14, 1996