UNITED STATES
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 1, 2004
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 Sections 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 October 29, 2004, 25,469,005 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 1, 2004
TABLE OF CONTENTS
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Condensed Consolidated Balance Sheets at |
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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 operating results, 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 contractual obligations, 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. Important factors that could prevent us from achieving the expectations expressed include, but are not limited to, our failure to:
• Manage and avoid delays or cost overruns in existing and future contracts
• Maintain relationships with key customers, partners and suppliers
• Successfully bid for, and enter into, new contracts on satisfactory terms
• Successfully manage and negotiate change orders and claims with respect to existing and future contracts
• 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 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
• Satisfy the restrictive covenants imposed by our indebtedness documents and surety facility
• Maintain access to sufficient working capital through our existing revolving credit facility or otherwise
• Maintain access to sufficient bonding capacity through our existing surety facility or otherwise
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 and reimbursement obligations to the government for funds previously received
• The outcome of legal proceedings
• Maintenance of government-compliant procurement and cost systems
• The economic well-being of our private and public customer bases and their 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 2, 2004.
I-2
WASHINGTON GROUP INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(UNAUDITED)
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Three months ended |
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Nine months ended |
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October 1, 2004 |
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October 3, 2003 |
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October 1, 2004 |
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October 3, 2003 |
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Revenue |
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$ |
715,314 |
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$ |
588,051 |
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$ |
2,153,962 |
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$ |
1,880,281 |
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Cost of revenue |
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(676,300 |
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(534,258 |
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(2,039,823 |
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(1,741,283 |
) |
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Gross profit |
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39,014 |
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53,793 |
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114,139 |
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138,998 |
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Equity in income of unconsolidated affiliates |
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2,583 |
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4,400 |
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20,382 |
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19,668 |
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General and administrative expenses |
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(12,684 |
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(14,211 |
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(42,438 |
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(37,347 |
) |
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Other operating income (expense) |
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— |
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(3,365 |
) |
— |
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1,240 |
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Operating income |
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28,913 |
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40,617 |
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92,083 |
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122,559 |
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Interest income |
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608 |
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426 |
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1,798 |
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1,257 |
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Interest expense |
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(3,492 |
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(6,909 |
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(11,508 |
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(20,303 |
) |
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Other income (expense), net |
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1,636 |
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(711 |
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367 |
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(1,391 |
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Income before reorganization items, income taxes and minority interests |
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27,665 |
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33,423 |
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82,740 |
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102,122 |
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Reorganization items (Note 8) |
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— |
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— |
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1,245 |
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(3,700 |
) |
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Income tax expense |
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(11,204 |
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(12,845 |
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(34,014 |
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(41,355 |
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Minority interests in income of consolidated subsidiaries |
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(4,204 |
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(7,819 |
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(11,368 |
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(17,240 |
) |
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Net income |
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$ |
12,257 |
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$ |
12,759 |
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$ |
38,603 |
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$ |
39,827 |
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Net income per share: |
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Basic |
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$ |
.48 |
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$ |
.51 |
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$ |
1.53 |
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$ |
1.59 |
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Diluted |
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$ |
.45 |
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$ |
.51 |
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$ |
1.41 |
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$ |
1.59 |
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Common shares outstanding: |
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Basic |
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25,312 |
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25,001 |
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25,221 |
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25,000 |
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Diluted |
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27,256 |
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25,243 |
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27,316 |
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25,109 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
I-3
WASHINGTON GROUP INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(UNAUDITED)
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October 1, 2004 |
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January 2, 2004 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
234,306 |
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$ |
238,835 |
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Accounts receivable, including retentions of $14,445 and $13,663, respectively |
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259,745 |
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248,456 |
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Unbilled receivables |
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253,177 |
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142,250 |
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Investments in and advances to construction joint ventures |
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31,718 |
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26,346 |
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Deferred income taxes |
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90,323 |
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89,320 |
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Other |
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41,753 |
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43,804 |
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Total current assets |
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