Granite Construction Incorporated Reports Fourth Quarter and Full Year 2006 Results
WATSONVILLE, Calif.,
The Company reported net income for the quarter of
The following table reconciles GAAP net income to net income on a pro forma non-GAAP basis (in thousands):
Three months ended Years ended
December 31, December 31,
2006 2005 2006 2005
GAAP net income $628 $35,812 $78,220 $83,150
Goodwill impairment
charge 18,011 -- 18,011 --
Tax benefit of goodwill
impairment charge (7,006) -- (7,006) --
Non-GAAP net income $11,633 $35,812 $89,225 $83,150
Non-GAAP diluted
earnings per share 0.28 0.86 2.15 2.02
"I am very pleased to report that 2006 was another record-breaking year for the Branch Division," said William G. Dorey, President and Chief Executive Officer. "I am extremely proud of what our team was able to accomplish this year in both our construction and aggregate materials businesses. Thanks to mild weather in the West, we were able to work late into the season and have a strong finish to the year. More importantly, we are successfully capitalizing on what we consider to be one of the best construction markets in our history."
"Unfortunately, our fourth quarter and full-year 2006 financial results for HCD were considerably below our expectations. As outlined in our operational realignment announcement made today, we are implementing key strategic changes in our operating structure that will allow us to more effectively and profitably manage our large, complex projects. We are committed to doubling our efforts in all aspects of this business so that we can successfully capture the profit potential on this work."
He added, "As our financial results reflect, we are writing down the
Operating Results -- Quarter and Year-To-Date
Total gross profit as a percent of revenue for the fourth quarter 2006 decreased to 7.2% compared with 15.6% for the same period last year.
Other income for the quarter ended
Total gross profit as a percent of revenue for the year ended
Results by Segment
Branch Division revenue for the quarter totaled
For the year ended
HCD revenue for the quarter totaled
The two largest downward forecast adjustments affecting the fourth quarter were on the State Route 22 Design-Build project in
For the year ended
Business Outlook
The outlook for the Branch Division in 2007 is extremely positive. Driven by healthy funding levels and strong local economies, the branches continue to experience one of the best public sector construction markets they have witnessed in many years. Pricing for construction materials is expected to be healthy in 2007 as demand for aggregates from both the public and private sector remains strong.
The Company is currently forecasting HCD to break even in 2007 followed by a return to acceptable operating margins as the existing backlog is worked off and the benefits of the organizational realignment are realized.
Financial Results
The financial information in this announcement reflects the Company's preliminary results subject to completion of the annual audit. Audited financial results will appear in Granite's Form 10-K, which will be filed on or before
Use of Non-GAAP Financials
In addition, to supplement the GAAP financial information, we have provided non-GAAP net income and earnings per share information that exclude the
Conference Call
Granite will conduct a conference call today at
Company Description
Granite, a member of the S&P 400 Midcap Index, the Domini 400 Social Index and the Russell 2000, is one of the nation's largest diversified heavy civil contractors and construction materials producers. Granite Construction serves public and private sector clients through its offices nationwide. For the 4th straight year, Granite was named to FORTUNE'S List of 100 Best Companies to Work For. For more information about the company, please visit their website at www.graniteconstruction.com.
This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represents our management's beliefs and assumptions concerning future events such as statements related to the existence of bidding opportunities and economic conditions on the Company's future results. Additionally, forward-looking statements include statements that can be identified by the use of forward- looking terminology such as "believes," "expects," "appears," "may," "will," "should," "look for," or "anticipates," or the negative thereof or comparable terminology, or by discussions of strategy. All such forward-looking statements are subject to risks and uncertainties that could cause actual results of operations and financial condition and other events, as well as the timing thereof, to differ materially from those expressed or implied in such forward-looking statements. Specific risk factors include, without limitation, changes in the composition of applicable federal and state legislation appropriation committees; federal and state appropriation changes for infrastructure spending; the general state of the economy; job productivity; accuracy of project estimates; weather conditions; competition and pricing pressures; and state referendums and initiatives. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. You should also understand that many important factors in addition to those discussed, referred to or incorporated by reference in this press release, could cause our results to differ materially from those expressed in the forward-looking statements. In light of these risks and uncertainties, it is important to be aware that the forward-looking events discussed in this release may not occur. We undertake no obligation to revise or update publicly any forward-looking statements to conform the statement to actual results or changes in the Company's expectations.
For further information regarding risks and uncertainties associated with Granite's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operation" and "Risk Factors" sections of Granite's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Granite's investor relations department at (831) 724-1011 or at Granite's website at http://www.graniteconstruction.com.
GRANITE CONSTRUCTION INCORPORATED
COMPARATIVE FINANCIAL SUMMARY
(Unaudited - In Thousands, Except Per Share Data)
Three Months Ended
December 31, Variance
Operations 2006 2005 Amount Percent
Revenue
Construction $608,624 $583,831 $24,793 4.2
Material sales $106,603 $95,721 $10,882 11.4
Total revenue $715,227 $679,552 $35,675 5.2
Cost of revenue
Construction $581,661 $501,690 $(79,971) (15.9)
Material sales $82,423 $71,838 $(10,585) (14.7)
Total cost of
revenue $664,084 $573,528 $(90,556) (15.8)
Gross profit $51,143 $106,024 $(54,881) (51.8)
Gross profit as a
percent of
revenue 7.2% 15.6% (8.4%) --
General and
administrative
expenses $48,530 $53,767 $5,237 9.7
G&A expenses as a
percent of
revenue 6.8% 7.9% 1.1% --
Provision for legal
judgment $(4,800) -- $4,800 --
Impairment of
goodwill $18,011 -- $(18,011) --
Gain on sales of
property and
equipment $891 $3,579 $(2,688) (75.1)
Other income (expense)
Interest income $7,380 $4,753 $2,627 55.3
Interest expense $(387) $(1,531) $1,144 74.7
Equity in income
of affiliates $636 $1,489 $(853) (57.3)
Other, net $(96) $1,806 $(1,902) ****
Total other
income $7,533 $6,517 $1,016 15.6
Income (loss) before
provision for
(benefit from)
income taxes and
minority interest $(2,174) $62,353 $(64,527) ****
Minority interest $951 $(8,447) $9,398 ****
Net income $628 $35,812 $(35,184) (98.2)
Net income per share:
Basic $0.02 $0.88 $(0.86) (97.7)
Diluted $0.02 $0.86 $(0.84) (97.7)
Weighted average
shares of common
stock:
Basic 40,935 40,676 259 0.6
Diluted 41,581 41,417 164 0.4
Year Ended
December 31, Variance
Operations 2006 2005 Amount Percent
Revenue
Construction $2,554,745 $2,307,062 $247,683 10.7
Material sales $410,159 $334,290 $75,869 22.7
Total revenue $2,964,904 $2,641,352 $323,552 12.2
Cost of revenue
Construction $2,361,155 $2,060,680 $(300,475) (14.6)
Material sales $313,329 $261,300 $(52,029) (19.9)
Total cost of
revenue $2,674,484 $2,321,980 $(352,504) (15.2)
Gross profit $290,420 $319,372 $(28,952) (9.1)
Gross profit as
a percent of
revenue 9.8% 12.1% (2.3%) --
General and
administrative
expenses $204,281 $183,392 $(20,889) (11.4)
G&A expenses
as a percent
of revenue 6.9% 6.9% -- --
Provision for
legal judgment $(4,800) $9,300 $14,100 ****
Impairment of
goodwill $18,011 -- $(18,011) --
Gain on sales of
property and
equipment $10,408 $8,235 $2,173 26.4
Other income
(expense)
Interest income $24,112 $11,573 $12,539 ****
Interest expense $(4,492) $(6,932) $2,440 35.2
Equity in income
of affiliates $2,157 $1,497 $660 44.1
Other, net $2,604 $1,258 $1,346 ****
Total other
income $24,381 $7,396 $16,985 ****
Income (loss)
before provision
for (benefit from)
income taxes and
minority interest $107,717 $142,311 $(34,594) (24.3)
Minority interest $7,720 $(17,748) $25,468 ****
Net income $78,220 $83,150 $(4,930) (5.9)
Net income per share:
Basic $1.91 $2.05 $(0.14) (6.8)
Diluted $1.89 $2.02 $(0.13) (6.4)
Weighted average
shares of common
stock:
Basic 40,874 40,614 260 0.6
Diluted 41,471 41,249 222 0.5
**** Represents percentages greater than 100%
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands, except share and per share data)
December 31, December 31,
2006 2005
Assets
Current assets
Cash and cash equivalents $204,893 $199,881
Short-term marketable securities 141,037 68,540
Accounts receivable, net 492,229 476,453
Costs and estimated earnings in
excess of billings 15,797 43,660
Inventories 41,529 33,161
Real estate held for sale 55,888 46,889
Deferred income taxes 38,237 22,996
Equity in construction joint
ventures 31,912 27,408
Other current assets 63,144 57,960
Total current assets 1,084,666 976,948
Property and equipment, net 429,966 397,111
Long-term marketable securities 48,948 32,960
Investment in affiliates 21,471 15,855
Other assets 50,798 49,356
Total assets $1,635,849 $1,472,230
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term
debt $28,660 $26,888
Accounts payable 257,612 232,807
Billings in excess of costs and
estimated earnings 292,543 208,883
Accrued expenses and other current
liabilities 189,928 140,569
Total current liabilities 768,743 609,147
Long-term debt 78,576 124,415
Other long-term liabilities 58,419 46,556
Deferred income taxes 22,324 37,325
Minority interest in consolidated
subsidiaries 15,532 33,227
Shareholders' 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 in 2006 and 100,000,000
shares in 2005;
issued and outstanding
41,833,559 shares in
2006 and 41,682,010 shares in
2005 418 417
Additional paid-in capital 78,620 80,619
Retained earnings 610,586 549,101
Accumulated other comprehensive
income 2,631 1,602
Unearned compensation -- (10,179)
Total shareholders' equity 692,255 621,560
Total liabilities and
shareholders' equity $1,635,849 $1,472,230
December 31, December 31,
Financial Position 2006 2005
Working capital $315,923 $367,801
Current ratio 1.41 1.60
Debt to total capitalization 0.13 0.20
Total liabilities to equity ratio 1.36 1.37
GRANITE CONSTRUCTION INCORPORATED
REVENUE AND BACKLOG ANALYSIS
(Unaudited - Dollars In Thousands)
BY MARKET SECTOR
Revenue
Year Ended December 31, Variance
2006 2005 Amount Percent
Public Sector $2,021,301 $1,808,026 $213,275 11.8
Private Sector 533,444 499,036 34,408 6.9
Aggregate sales 410,159 334,290 75,869 22.7
$2,964,904 $2,641,352 $323,552 12.2
Backlog
December 31, Variance
2006 2005 Amount Percent
Public Sector $2,066,950 $2,083,824 $(16,874) (0.8)
Private Sector 189,037 247,716 (58,679) (23.7)
$2,255,987 $2,331,540 $(75,553) (3.2)
BY GEOGRAPHIC AREA
Revenue
Year Ended December 31, Variance
2006 2005 Amount Percent
California $1,294,323 $1,028,041 $266,282 25.9
West (Excl. CA) 866,092 788,682 77,410 9.8
Midwest 58,726 92,931 (34,205) (36.8)
Northeast 281,552 324,477 (42,925) (13.2)
Southeast 244,233 176,088 68,145 38.7
South 219,978 231,133 (11,155) (4.8)
$2,964,904 $2,641,352 $323,552 12.2
Backlog
December 31, Variance
2006 2005 Amount Percent
California $559,169 $598,914 $(39,745) (6.6)
West (Excl. CA) 516,614 585,269 (68,655) (11.7)
Midwest 443,909 76,464 367,445 ****
Northeast 248,605 491,944 (243,339) (49.5)
Southeast 272,881 224,549 48,332 21.5
South 214,809 354,400 (139,591) (39.4)
$2,255,987 $2,331,540 $(75,553) (3.2)
**** Represents percentages greater than 100%
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