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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended
October 3, 2003
Commission File Number 1-12054
WASHINGTON GROUP INTERNATIONAL, INC.
A Delaware Corporation
IRS Employer Identification No. 33-0565601
720 PARK BOULEVARD, BOISE, IDAHO 83712
208 / 386-5000
The registrant 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 such shorter period that the registrant was required to file such reports) and has been subject to such filing requirements for the past 90 days.
ý Yes o No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
ý Yes o No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
ý Yes o No
At November 7, 2003, 25,016,667 shares of the registrant’s $.01 par value common stock were outstanding.
WASHINGTON GROUP INTERNATIONAL, INC.
Quarterly Report on Form 10-Q for the
Quarterly Period Ended October 3, 2003
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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NOTE REGARDING FORWARD-LOOKING INFORMATION
This report contains forward-looking statements. You can identify forward-looking statements by the use of terminology such as “may,” “will,” “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” “could,” “should,” “potential” or “continue,” or the negative or other variations thereof, as well as other statements regarding matters that are not historical fact. These forward-looking statements include, among others, statements concerning:
• Our business strategy and competitive advantages
• Our expectations as to potential revenues from designated markets or customers
• Our expectations as to profits, cash flows, return on invested capital and net income
• Our expectations as to new work and backlog
• The markets for our services and products
• Our anticipated capital expenditures and funding requirements
Forward-looking statements are only predictions. The forward-looking statements in this report are subject to risks and uncertainties, including, among others, the risks and uncertainties identified in this report and other operational, business, industry, market, legal and regulatory developments, which could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. The most important factors that could prevent us from achieving the expectations expressed include, but are not limited to, our failure to:
• Satisfy the restrictive covenants imposed by our indebtedness
• Maintain our revolving credit facility to provide sufficient working capital
• Maintain relationships with key customers, partners, sureties and suppliers
• Manage and avoid delays or cost overruns on existing and future contracts
• Successfully bid for, and enter into, new contracts on satisfactory terms
• Successfully negotiate claims and change orders
• Manage and maintain our operations and financial performance and the operations and financial performance of our current and future operating subsidiaries and joint ventures
• Respond to competitors in our existing and planned markets
• Respond effectively to regulatory, legislative and judicial developments, including any legal or regulatory proceedings, affecting our existing contracts, including contracts concerning environmental remediation and restoration
• Obtain and maintain any required governmental authorizations, franchises and permits, all in a timely manner, at reasonable costs and on satisfactory terms and conditions
• Realize anticipated reductions in overhead and other costs
I-1
Some other factors that may affect our businesses, financial position or results of operations include:
• Accidents and conditions, including industrial accidents, labor disputes, geological conditions, environmental hazards, weather and other natural phenomena
• Special risks of international operations, including uncertain political and economic environments, acts of terrorism or war, potential incompatibilities with foreign joint venture partners, foreign currency fluctuations and controls, civil disturbances and labor issues
• Special risks of contracts with the government, including the failure of applicable governing authorities to take necessary actions to secure or maintain funding for particular projects with us, the unilateral termination of contracts by the government, reimbursement obligations to the government for funds previously received and other regulatory risks
• Maintenance of government-compliant cost systems
• The economic well-being of our private and public customer base and its ability and intentions to invest capital in engineering and construction activities
For a description of additional risk factors that may affect our businesses, financial position or results of operations, see “Business - Risk Factors” in Part I, Item 1 of our annual report on Form 10-K for the fiscal year ended January 3, 2003.
I-2
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
WASHINGTON GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(UNAUDITED)
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Successor Company |
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Predecessor Company |
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Three
months |
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Three
months |
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Nine
months |
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Eight
months |
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One month |
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Revenue |
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$ |
588,051 |
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$ |
903,733 |
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$ |
1,880,281 |
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$ |
2,471,270 |
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$ |
349,912 |
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Cost of revenue |
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(534,258 |
) |
(858,018 |
) |
(1,741,283 |
) |
(2,356,440 |
) |
(338,792 |
) |
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Gross profit |
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53,793 |
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45,715 |
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138,998 |
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114,830 |
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11,120 |
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Equity in net earnings of unconsolidated affiliates |
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4,400 |
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1,482 |
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19,668 |
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9,548 |
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3,109 |
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General and administrative expenses |
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(14,211 |
) |
(11,103 |
) |
(37,347 |
) |
(30,708 |
) |
(4,180 |
) |
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Restructuring charges |
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— |
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— |
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— |
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— |
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(625 |
) |
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Other operating income (expense), net |
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(3,365 |
) |
— |
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1,240 |
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— |
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— |
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Operating income |
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40,617 |
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36,094 |
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122,559 |
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93,670 |
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9,424 |
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Investment income |
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426 |
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228 |
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1,257 |
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400 |
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400 |
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Interest expense (a) |
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(6,909 |
) |
(7,346 |
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(20,303 |
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(19,345 |
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(1,193 |
) |
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Other income (expense), net |
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(711 |
) |
(83 |
) |
(1,391 |
) |
2,692 |
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(563 |
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Income before reorganization items, income taxes, minority interests and extraordinary item |
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33,423 |
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28,893 |
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102,122 |
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77,417 |
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8,068 |
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Reorganization items (Note 8) |
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— |
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(3,543 |
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(3,700 |
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(3,543 |
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(72,057 |
) |
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Income tax (expense) benefit |
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(12,845 |
) |
(11,485 |
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(41,355 |
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(32,800 |
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20,078 |
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Minority interests in income of consolidated subsidiaries |
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(7,819 |
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(4,593 |
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(17,240 |
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(13,049 |
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(1,132 |
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Income (loss) before extraordinary item |
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12,759 |
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9,272 |
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39,827 |
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28,025 |
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(45,043 |
) |
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Extraordinary item - gain on debt discharge, net of tax of $343,539 (Note 8) |
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— |
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— |
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— |
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— |
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567,193 |
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Net income |
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$ |
12,759 |
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$ |
9,272 |
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$ |
39,827 |
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$ |
28,025 |
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$ |
522,150 |
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Net income per share |
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Basic and diluted |
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$ |
.51 |
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$ |
.37 |
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$ |
1.59 |
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$ |
1.12 |
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(b) |
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Common shares used |
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Basic |
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25,001 |
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25,000 |
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25,000 |
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25,000 |
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(b) |
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Diluted |
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25,243 |
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25,000 |
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25,109 |
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25,000 |
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(b) |
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The accompanying notes are an integral part of the consolidated financial statements.