Granite Announces Third-Quarter 2011 Results

• Operating income increased $28.2 million to $60.4 million
• Gross profit margin improved to 13 percent from 11 percent in 2010
• SG&A decreased $8.0 million to $39.1 million

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income attributable to common shareholders of $36.5 million, or $0.93 per diluted share, for the third quarter of 2011 compared with $38.7 million, or $0.99 per diluted share, the prior year. Third quarter of 2010 included a tax benefit of $8.0 million versus a tax provision of $15.1 million for the third quarter of 2011.

"Overall, our business continues to operate well in the face of a very challenging environment," said
James H. Roberts, Granite's president and chief executive officer. "We are successfully lowering our cost structure, holding margins in a very competitive market and executing well on our backlog of work."

"I am extremely proud of our employees," Roberts continued. "It is with their tireless work ethic that we have been able to offset some of the economic challenges facing our industry. Not only have we reduced overhead, we have lowered our costs to produce, streamlined our operations and continue to seek opportunities to do more. I am confident that with the healthy pipeline of project bidding opportunities in front of us, we are well-positioned to leverage our capabilities and emerge from this downturn with a more diversified portfolio of work that will strengthen and grow the business over the long-term."

Third-quarter 2011 Financial Results

Total Company

• Revenue totaled $728.6 million compared with $670.9 million in 2010, driven by increases in both Construction and Large Project Construction revenue.
• Gross profit margin was 13 percent compared with 11 percent in 2010.
• Selling, general and administrative expenses for the third quarter decreased $8.0 million to $39.1 million primarily due to the 2010 workforce reduction as well as other ongoing efforts to reduce the company's cost structure.
• Operating income for the quarter was $60.4 million compared with $32.2 million in the prior year driven largely by an increase in gross profit and a decrease in selling, general and administrative expenses.
• Other income (expense) decreased $6.0 million from 2010 due primarily to tax related benefits in the prior year.
• Net income attributable to non-controlling interests in joint ventures was $5.9 million compared with $4.6 million in 2010.
• Total contract backlog at September 30, 2011, was $1.8 billion compared with $1.6 billion a year ago. New awards for the quarter include a $64 million bridge project in Florida, Granite's 49 percent share of a $90 million project in Guam and Granite's 25 percent share of a $97 million airport runway project in California.
• Due to a change in mix of the company's consolidated versus unconsolidated joint venture projects, cash and marketable securities at September 30, 2011 was $330.0 million compared with $388.3 million at September 30, 2010.

Construction

• Construction revenue for the quarter increased 5 percent to $431.1 million due to a higher volume of work completed in the quarter compared to a year ago.
• Gross profit margin for the third quarter was 14 percent compared with 11 percent a year ago reflecting successful execution on projects and improved cost management.

Large Project Construction

• Large Project Construction revenue for the quarter increased 26 percent to $213.3 million reflecting progress on several large projects across the country.
• Gross profit margin for the quarter was 12 percent compared with 11 percent for the same period last year. During the quarter, the World Trade Center project in New York and the Mountain View Corridor project in Utah reached the profit recognition threshold.

Construction Materials

• Construction Materials revenue for the quarter totaled $83.2 million compared with $88.1 million for the same period last year as the demand for construction materials remains weak throughout most of our markets in the West.
• Gross profit on the sale of construction materials was 12 percent compared with 14 percent in 2010.

Outlook

Based on the year-to-date performance, the company is updating its guidance for the year. Construction segment revenues are now expected to be $1 billion to $1.1 billion and gross margin of 10.5 percent to 11.5 percent. Revenue for the Large Project Construction segment is expected to be $650 million to $700 million with a gross margin range of 15.5 percent and 16.5 percent. Revenue for the Construction Materials segment is expected to be $190 million to $210 million and gross margin between 7.5 percent and 8.5 percent. Net income attributable to non-controlling interests is expected to be $13 million to $15 million for the year.

Conference Call

Granite will conduct a conference call tomorrow, November 3, 2011 at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the quarter ended September 30, 2011. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call may be accessed by calling (877) 643-7158. The conference ID for the live call is 18220474. The call will be recorded and will be available for replay approximately two hours after the live audio webcast through November 24, 2011 by calling (855) 859-2056. The conference ID for the replay is also 18220474.

About Granite

Granite is one of the nation's leading infrastructure contractors and is member of the S&P 400 Midcap Index, the FTSE KLD 400 Social Index and the Russell 2000 Index. Through its wholly owned subsidiary, Granite is one of the nation's largest diversified heavy civil contractors and construction materials producers serving public- and private-sector clients nationwide. In addition, Granite has one of the oldest and most robust ethics and compliance programs in the industry. The Company was recently recognized by the Ethisphere Institute as one of the World's Most Ethical Companies for the second year in a row. For more information, please visit graniteconstruction.com.

Forward-looking Statements

Any statements contained in this news release that are not based on historical facts, including statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as "future," "outlook," "assumes," "believes," "expects," "estimates," "anticipates," "intends," "plans," "appears," "may," "will," "should," "could," "would," "continue," and the negatives thereof or other comparable terminology or by the context in which they are made. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, activities, performance, outcomes and results. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those described in greater detail in our filings with the Securities and Exchange Commission, particularly those specifically described in our Annual Report on Form 10-K under "Item 1A. Risk Factors" and Quarterly Reports on Form 10-Q under "Part II, Item 1A. Risk Factors."

Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this news release and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
		September 30,			December 31,			September 30,
			2011			2010			2010
ASSETS
Current assets
Cash and cash equivalents		$	193,099		$	252,022		$	257,854
Short-term marketable securities			77,389			109,447			80,962
Receivables, net			357,807			243,986			375,914
Costs and estimated earnings in excess of billings			45,884			10,519			34,448
Inventories			57,987			51,018			45,224
Real estate held for development and sale			79,173			75,716			151,638
Deferred income taxes			52,714			53,877			31,035
Equity in construction joint ventures			97,415			74,716			80,496
Other current assets			29,526			42,555			42,409
Total current assets			990,994			913,856			1,099,980
Property and equipment, net			453,822			473,607			491,363
Long-term marketable securities			59,509			34,259			49,502
Investments in affiliates			33,435			31,410			32,515
Other noncurrent assets			80,709			82,401			78,611
Total assets		$	1,618,469		$	1,535,533		$	1,751,971
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt		$	8,351		$	8,359		$	8,444
Current maturities of non-recourse debt			16,690			29,760			39,157
Accounts payable			216,600			129,700			206,993
Billings in excess of costs and estimated earnings			89,505			120,185			157,233
Accrued expenses and other current liabilities			185,624			150,773			173,547
Total current liabilities			516,770			438,777			585,374
Long-term debt			208,519			217,014			216,870
Long-term non-recourse debt			27,755			25,337			16,420
Other long-term liabilities			46,985			47,996			48,764
Deferred income taxes			10,330			10,774			27,883
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding			-			-			-
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding 38,664,403 shares as of September 30, 2011, 38,745,542 shares as of December 31, 2010 and 38,769,787 shares as of September 30, 2010			387			387			388
Additional paid-in capital			108,096			104,232			101,567
Retained earnings			673,626			656,412			711,497
Total Granite Construction Incorporated shareholders' equity			782,109			761,031			813,452
Noncontrolling interests			26,001			34,604			43,208
Total equity			808,110			795,635			856,660
Total liabilities and equity		$	1,618,469		$	1,535,533		$	1,751,971

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
		Three Months Ended September 30,								Nine Months Ended September 30,
			2011				2010				2011				2010
Revenue
Construction		$	431,101			$	409,989			$	784,393			$	729,118
Large project construction			213,320				169,972				513,478				429,625
Construction materials			83,171				88,128				165,083				175,381
Real estate			986				2,761				7,029				11,613
Total revenue			728,578				670,850				1,469,983				1,345,737
Cost of revenue
Construction			372,561				365,323				696,911				659,705
Large project construction			187,763				151,656				443,965				379,991
Construction materials			73,617				75,991				154,329				165,889
Real estate			744				1,725				5,941				8,585
Total cost of revenue			634,685				594,695				1,301,146				1,214,170
Gross profit			93,893				76,155				168,837				131,567
Selling, general and administrative expenses			39,112				47,160				121,277				153,809
Gain on sales of property and equipment			5,598				3,165				11,572				11,417
Operating income (loss)			60,379				32,160				59,132				(10,825	)
Other (expense) income
Interest income			476				2,110				2,295				4,147
Interest expense			(3,418	)			(547	)			(7,653	)			(7,294	)
Equity in income (loss) of affiliates			1,881				529				1,443				(177	)
Other (expense) income, net			(1,833	)			1,023				(1,951	)			5,854
Total other (expense) income			(2,894	)			3,115				(5,866	)			2,530
Income (loss) before provision for (benefit from) income taxes			57,485				35,275				53,266				(8,295	)
Provision for (benefit from) income taxes			15,109				(8,026	)			11,973				(11,233	)
Net income			42,376				43,301				41,293				2,938
Amount attributable to noncontrolling interests			(5,908	)			(4,620	)			(8,886	)			(11,902	)
Net income (loss) attributable to Granite Construction Incorporated		$	36,468			$	38,681			$	32,407			$	(8,964	)
Net income (loss) per share attributable to common shareholders:
Basic (1)		$	0.94			$	1.00			$	0.84			$	(0.24	)
Diluted (1)		$	0.93			$	0.99			$	0.83			$	(0.24	)
Weighted average shares of common stock:
Basic			38,172				37,865				38,092				37,802
Diluted			38,598				38,071				38,428				37,802
Note:
(1) Computed using the two-class method, except when in a net loss position

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Nine Months Ended September 30,			2011				2010
Operating activities
Net income		$	41,293			$	2,938
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization			45,691				54,169
Gain on sales of property and equipment			(11,572	)			(11,417	)
Stock-based compensation			8,994				10,241
Loss (gain) on company owned life insurance			639				(2,655	)
Changes in assets and liabilities, net of the effects of consolidations			(83,027	)			(42,710	)
Net cash provided by operating activities			2,018				10,566
Investing activities
Purchases of marketable securities			(115,146	)			(78,355	)
Maturities of marketable securities			85,875				50,900
Proceeds from sale of marketable securities			33,268				10,000
Additions to property and equipment			(34,748	)			(30,182	)
Proceeds from sales of property and equipment			20,071				17,225
Purchase of private preferred stock			(50	)			(6,400	)
Other investing activities, net			2,363				2,407
Net cash used in investing activities			(8,367	)			(34,405	)
Financing activities
Long-term debt principal payments			(17,293	)			(18,472	)
Cash dividends paid			(15,090	)			(15,110	)
Purchase of common stock			(3,840	)			(3,374	)
Distributions to noncontrolling partners, net			(17,489	)			(20,940	)
Other financing activities			1,138				633
Net cash used in financing activities			(52,574	)			(57,263	)
Decrease in cash and cash equivalents			(58,923	)			(81,102	)
Cash and cash equivalents at beginning of period			252,022				338,956
Cash and cash equivalents at end of period		$	193,099			$	257,854

GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
		Three Months Ended September 30,																Nine Months Ended September 30,
		Construction				Large Project Construction				Construction Materials				Real Estate				Construction				Large Project Construction				Construction Materials				Real Estate
2011
Revenue		$	431,101			$	213,320			$	83,171			$	986			$	784,393			$	513,478			$	165,083			$	7,029
Gross profit			58,540				25,557				9,554				242				87,482				69,513				10,754				1,088
Gross profit as a percent of revenue			13.6	%			12.0	%			11.5	%			24.5	%			11.2	%			13.5	%			6.5	%			15.5	%
2010
Revenue		$	409,989			$	169,972			$	88,128			$	2,761			$	729,118			$	429,625			$	175,381			$	11,613
Gross profit			44,666				18,316				12,137				1,036				69,413				49,634				9,492				3,028
Gross profit as a percent of revenue			10.9	%			10.8	%			13.8	%			37.5	%			9.5	%			11.6	%			5.4	%			26.1	%

GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
Contract Backlog by Segment		September 30, 2011						June 30, 2011						September 30, 2010
Construction		$	562,705		30.5	%		$	800,434		38.0	%		$	497,089		30.3	%
Large project construction			1,280,945		69.5	%			1,306,961		62.0	%			1,141,453		69.7	%
Total		$	1,843,650		100.0	%		$	2,107,395		100.0	%		$	1,638,542		100.0	%

 

Granite Construction Incorporated

Jacque Fourchy, 831-761-4741

 

Source: Granite Construction Incorporated

 

 

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