Granite Reports Fourth Quarter and Fiscal 2011 Results

  • Revenue increased 14 percent in 2011
  • Gross profit margin improved to 12 percent
  • SG&A expenses decreased 15 percent or $29 million in 2011
  • Cash position remains strong with $407 million in cash, cash equivalents and marketable securities
  • Backlog increased to $2.0 billion at year-end

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE: GVA) today reported a net income of $51 million for the full year 2011, compared to a net loss of $59 million the prior year. Diluted earnings per share (EPS) for the year was $1.31 compared to a loss per share of $(1.56) in 2010.

For the fourth quarter of 2011, Granite reported a net income of $19 million, compared to a net loss of $50 million for the fourth quarter of 2010. Diluted EPS for the quarter ended December 31, 2011 was $0.48 compared to a loss per share of $(1.32) in the prior year period. Included in the fourth quarter of 2010 were restructuring charges of $107 million associated with the Company’s Enterprise Improvement Plan.

“Our solid performance in 2011 is the result of our continued successful project execution, the tremendous efforts of our people to improve efficiencies throughout the company and the significant reductions we have made to our cost structure,” said
James H. Roberts, president and chief executive officer.

Fiscal 2011 Highlights:

Total Company

  • Revenue totaled $2.0 billion compared with $1.8 billion in 2010, driven by increases in both Construction and Large Project Construction revenue.
  • Gross profit margin was 12 percent compared with 10 percent in 2010.
  • SG&A expenses decreased $29 million to $162 million primarily due to a workforce reduction in 2010 and restructuring of administrative services.
  • Operating income was $99 million in 2011 compared with an operating loss of $109 million in 2010. Fiscal 2010 includes restructuring charges of approximately $109 million.
  • Total other (expense) income decreased $13 million from 2010 due primarily to previously deferred income and impairment charges on other investments.
  • Net income attributable to noncontrolling interests was $15 million compared with a net loss attributable to noncontrolling interests of $4 million in 2010.
  • Total contract backlog at December 31, 2011, was $2.0 billion compared with $1.9 billion a year ago.

Construction

  • Construction revenue increased 11 percent to $1.0 billion driven by a higher volume of work and mild weather in the fourth quarter.
  • Gross profit margin was 12 percent compared with 10 percent a year ago reflecting successful execution on projects and improved cost management.

Large Project Construction

  • Large Project Construction revenue increased 24 percent to $725 million aided by the progress on several large projects.
  • Gross profit margin was 14 percent compared with 12 percent in 2010 reflecting an increase in the volume of projects that reached the profit recognition threshold during the year.

Construction Materials

  • Construction Materials revenue was $221 million compared with $222 million last year.
  • Gross profit on the sale of construction materials was 8 percent compared with 5 percent in 2010 driven by production efficiencies.

Fourth Quarter 2011 Highlights

Total Company

  • Revenue totaled $540 million compared with $417 million in 2010, driven by increases in both Construction and Large Project Construction revenue.
  • Gross profit margin was 15 percent compared with 11 percent in 2010.
  • Selling, general and administrative expenses for the fourth quarter increased $3 million to $43 million due to higher incentive compensation related to higher earnings.
  • Operating income for the quarter was $40 million compared with an operating loss of $99 million in the prior year. The fourth quarter 2010 includes restructuring charges of $107 million related to workforce reductions as well as real estate and fixed asset impairment charges.
  • Net income attributable to noncontrolling interests was $6 million compared with net loss attributable to noncontrolling interest of $15 million in 2010. The results for 2010 include $20 million associated with impairment charges related to the implementation of the company’s Enterprise Improvement Plan.

Construction

  • Construction revenue for the quarter increased 21 percent to $259 million due to relatively mild weather throughout the quarter.
  • Gross profit margin for the fourth quarter was 14 percent compared with 12 percent a year ago reflecting successful execution on projects and improved cost management.

Large Project Construction

  • Large Project Construction revenue for the quarter increased 37 percent to $212 million reflecting progress on several large projects across the country.
  • Gross profit margin for the quarter was 16 percent compared with 11 percent for the same period last year. During the fourth quarter, projects which reached profit recognition include the Houston Metro Light Rail project and the State Route 520 project in the Northwest.

Construction Materials

  • Construction Materials revenue for the quarter increased 19 percent to $56 million reflecting drier weather in the fourth quarter of 2011 compared to the fourth quarter of 2010.
  • Gross profit margin on the sale of construction materials was 11 percent compared with 5 percent in 2010.

Outlook

“I am very pleased with the quality of our backlog and the opportunities to grow it even further in all segments of our business throughout 2012,” commented Roberts. “Despite operating in an extremely competitive bidding environment, our teams continue to meet the challenge by being strategic about the work we bid, intensely focused on execution, and responsive to market conditions. ”

“Going forward, we will continue to aggressively manage expenses and drive efficiencies. We will also leverage our capabilities and experience to drive opportunities to grow our business. Our efforts this past eighteen months have set the stage for long-term profitability,” said Roberts. “In addition, we have renewed our focus on growing the business and are excited about the future for Granite. Our strategy is centered on several key initiatives including growing both our large projects and vertically integrated businesses, as well as diversifying our business model, and continually optimizing our asset portfolio. We are building momentum around these initiatives and looking forward to executing on our plan not only this year, but over the years to come.”

Conference Call

Granite will conduct a conference call tomorrow, February 23, 2012 at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the quarter and year ended December 31, 2011. Access to a live audio webcast is available at http://investor.graniteconstruction.com. The live conference call may be accessed by calling (877) 643-7158. The conference ID for the live call is 47718778. The call will be recorded and will be available for replay approximately two hours after the live audio webcast through May 15, 2012 by calling (855) 859-2056. The conference ID for the replay is 47718778.

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 has been recognized by Ethisphere Institute as one of the World’s Most Ethical Companies for two straight years. 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 and quarterly reports on Form 10-Q.

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
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
         

December 31,

  2011   2010
         
ASSETS      

 

Current assets        
Cash and cash equivalents   $ 256,990   $ 252,022
Short-term marketable securities     70,408     109,447
Receivables, net     251,838     243,986
Costs and estimated earnings in excess of billings     37,703     10,519
Inventories     50,975     51,018
Real estate held for development and sale     67,037     75,716
Deferred income taxes     38,571     53,877
Equity in construction joint ventures     101,029     74,716
Other current assets     35,171     42,555
Total current assets     909,722     913,856
Property and equipment, net     447,140     473,607
Long-term marketable securities     79,250     34,259
Investments in affiliates     31,071     31,410
Other noncurrent assets     80,616     82,401
Total assets   $ 1,547,799   $ 1,535,533
         
LIABILITIES AND EQUITY        
Current liabilities        
Current maturities of long-term debt   $ 9,102   $ 8,359
Current maturities of non-recourse debt     23,071     29,760
Accounts payable     158,660     129,700
Billings in excess of costs and estimated earnings     90,845     120,185
Accrued expenses and other current liabilities     166,790     150,773
Total current liabilities     448,468     438,777
Long-term debt     208,501     217,014
Long-term non-recourse debt     9,912     25,337
Other long-term liabilities     49,221     47,996
Deferred income taxes     4,034     10,774
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 38,682,771 shares as of December 31, 2011 and 38,745,542 shares as of December 31, 2010     387     387
Additional paid-in capital     111,514     104,232
Retained earnings     687,296     656,412
Total Granite Construction Incorporated shareholders’ equity     799,197     761,031
Noncontrolling interests     28,466     34,604
Total equity     827,663     795,635
Total liabilities and equity   $ 1,547,799   $ 1,535,533
 
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
 
    Three Months Ended       Years Ended
    December 31,       December 31,
    2011   2010       2011   2010
Revenue                    
Construction   $ 259,221   $ 214,127       $ 1,043,614   $ 943,245
Large project construction   211,565   154,781       725,043   584,406
Construction materials   55,500   46,677       220,583   222,058
Real estate   13,262   1,643       20,291   13,256
Total revenue   539,548   417,228       2,009,531   1,762,965
Cost of revenue                    
Construction   222,197   187,831       919,108   847,536
Large project construction   176,970   137,108       620,935   517,099
Construction materials   49,613   44,151       203,942   210,040
Real estate   11,642   1,921       17,583   10,506
Total cost of revenue   460,422   371,011       1,761,568   1,585,181

Gross profit

  79,126   46,217       247,963   177,784
Selling, general and administrative expenses   42,536   39,766       162,302   191,593
Restructuring charges   670   107,297       2,181   109,279
Gain on sales of property and equipment   4,217   2,331       15,789   13,748
Operating income (loss)   40,137   (98,515)       99,269   (109,340)
Other (expense) income                    
Interest income   583   833       2,878   4,980
Interest expense   (2,709)   (2,446)       (10,362)   (9,740)
Equity in income of affiliates   750   933       2,193   756
Other (expense) income, net   (2,594)   1,114       (4,545)   6,968
Total other (expense) income   (3,970)   434       (9,836)   2,964
Income (loss) before provision for (benefit from) income taxes   36,167   (98,081)       89,433   (106,376)
Provision for (benefit from) income taxes   11,375   (32,695)       23,348   (43,928)
Net income (loss)   24,792   (65,386)       66,085   (62,448)
Amount attributable to noncontrolling interests   (6,038)   15,367       (14,924)   3,465
Net income (loss) attributable to Granite Construction Incorporated   $ 18,754   $ (50,019)       $ 51,161   $ (58,983)
                     
Net income (loss) per share attributable to common shareholders:                    
Basic (1)   $ 0.48   $ (1.32)       $ 1.32   $ (1.56)
Diluted (1)   $ 0.48   $ (1.32)       $ 1.31   $ (1.56)
Weighted average shares of common stock:                    
Basic   38,191   37,875       38,117   37,820
Diluted   38,607   37,875       38,473   37,820
Note:  
(1) Computed using the two-class method, except when in a net loss position
 
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
 
         
Years Ended December 31,    

2011

      2010  
Operating activities        
Net income (loss)   $ 66,085     $ (62,448 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Restructuring impairment charges     1,678       93,862  
Other impairment charges     5,067       821  
Depreciation, depletion and amortization     60,546       74,435  
Gain on sales of property and equipment     (15,789 )     (13,748 )
Change in deferred income tax     8,566       (39,289 )
Stock-based compensation     12,155       13,040  
Loss (gain) on company owned life insurance     18       (3,321 )
Equity in income of affiliates     (2,193 )     (756 )

Changes in assets and liabilities, net of the effects of consolidations

    (43,788 )     (33,278 )
Net cash provided by operating activities     92,345       29,318  
Investing activities        
Purchases of marketable securities     (155,122 )     (121,626 )
Maturities of marketable securities     110,875       74,000  
Proceeds from sale of marketable securities     33,268       15,000  
Purchase of company owned life insurance     (359 )     (8,195 )
Additions to property and equipment     (45,035 )     (37,004 )
Proceeds from sales of property and equipment     27,959       21,148  
Purchase of private preferred stock     (50 )     (6,400 )
Contributions to (distributions from) affiliates, net     1,458       (1,658 )
Issuance of notes receivable     (3,979 )     (1,313 )
Collection of notes receivable     1,599       3,126  
Other investing activities, net     1,658       2,487  

Net cash used in investing activities

    (27,728 )     (60,435 )
Financing activities        
Proceeds from long-term debt     2,122       1,918  
Long-term debt principal payments     (16,907 )     (19,829 )
Cash dividends paid     (20,117 )     (20,150 )
Purchase of common stock     (4,029 )     (3,641 )

Contributions from noncontrolling partners

    519       7,321  
Distributions to noncontrolling partners     (21,581 )     (21,498 )
Other financing activities, net     344       62  
Net cash used in financing activities     (59,649 )     (55,817 )
Increase (decrease) in cash and cash equivalents     4,968       (86,934 )
Cash and cash equivalents at beginning of period     252,022       338,956  
Cash and cash equivalents at end of period   $ 256,990     $ 252,022  
 
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
 
    Three Months Ended December 31,     Years Ended December 31,
    Construction  

Large Project
Construction

 

Construction
Materials

  Real Estate     Construction  

Large Project
Construction

 

Construction
Materials

  Real Estate
                                   
2011                                  
Revenue   $ 259,221     $ 211,565     $ 55,500     $ 13,262       $ 1,043,614     $ 725,043     $ 220,583     $ 20,291  
Gross profit     37,024       34,595       5,887       1,620         124,506       104,108       16,641       2,708  
Gross profit as a percent of revenue     14.3 %     16.4 %     10.6 %     12.2 %       11.9 %     14.4 %     7.5 %     13.3 %
                                   
2010                                  
Revenue   $ 214,127     $ 154,781     $ 46,677     $ 1,643       $ 943,245     $ 584,406     $ 222,058     $ 13,256  
Gross profit (loss)     26,296       17,673       2,526       (278 )       95,709       67,307       12,018       2,750  
Gross profit (loss) as a percent of revenue     12.3 %     11.4 %     5.4 %     -16.9 %       10.1 %     11.5 %     5.4 %     20.7 %
 
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
 
Contract Backlog by Segment   December 31, 2011   December 31, 2010
Construction   $ 513,624   25.4 %   $ 465,271   24.5 %
Large project construction     1,508,830   74.6 %     1,433,899   75.5 %
Total   $ 2,022,454   100.0 %   $ 1,899,170   100.0 %

 

Granite Construction Incorporated

Jacque Fourchy, 831-761-4741

Source: Granite Construction Incorporated