Granite Reports Fourth Quarter and Fiscal 2013 Results

  • 2013 revenues increased 8.8 percent to nearly $2.3 billion
  • Fourth quarter 2013 revenues increased 18.5 percent to $598.1 million
  • Balance Sheet remains strong with $346.3 million in cash and marketable securities
  • Total contract backlog at December 31, 2013, of $2.5 billion
  • Company completes 2010 Enterprise Improvement Plan (EIP); total restructuring and impairment charges of $52.1 million in fourth quarter1

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE: GVA) today reported a net loss of $36.4 million for the year ended December 31, 2013, compared with net income of $45.3 million in the prior year. Diluted earnings per share (EPS) for the year was a loss of $0.94 compared to $1.15 in 2012.

Granite reported a net loss of $28.9 million for the quarter ended December 31, 2013, compared to net income of $18.0 million in the fourth quarter of 2012. Diluted EPS in the quarter was a loss of $0.74 compared to $0.46 in the prior-year period.

Fourth quarter and full-year 2013 results include the impact of the 2010 EIP charges. Excluding the impact of these charges, Granite’s diluted EPS was $0.02 and a loss of $0.17 respectively, for the fourth quarter and year ended December 31, 2013.

“Our teams finished the year with a continued focus on improving execution across all of our businesses. Our backlog entering 2014 is excellent, and the bidding pipeline is as large and robust as we have ever seen,” said James H. Roberts, President and CEO of Granite Construction Incorporated. “Our business leaders are tasked with managing operations in varied cyclical environments, and we are focused on driving the improvements necessary to generate the returns we expect for our shareholders.”

Fiscal Year 2013 Highlights:

Total Company

  • Revenues for the year increased 8.8 percent to $2.3 billion, compared with $2.1 billion in 2012.
  • Gross profit margin was 8.2 percent compared with 11.3 percent in 2012 due primarily to decreased gross profit in the Large Project segment, which offset an increase in Construction segment margins.
  • Selling, general and administrative (SG&A) expenses for the year were $199.9 million, compared with $185.1 million last year. The increase reflects the addition of Kenny. SG&A expenses as a percentage of revenue were 8.8% in 2013, down slightly from 8.9% in 2012.
  • Total contract backlog at December 31, 2013, was $2.5 billion compared with $1.7 billion a year ago. The increase in contract backlog in 2013 reflects the addition of the Tappan Zee Bridge project in New York, the IH-35E highway reconstruction project in Texas, the I-40/440 project in North Carolina, as well as an overall increase in Construction segment backlog.

Construction

  • Construction revenues in 2013 increased 27.1% to nearly $1.3 billion, up from nearly $1.0 billion in 2012, driven primarily by the addition of Kenny, improved performance in some Western markets, and partially offset by a revenue decline in California.
  • Gross profit margin was 8.5 percent compared with 7.9 percent a year ago. Kenny accounted for the majority of the increase.

Large Project Construction

  • Large Project Construction revenue for the year decreased 9.9 percent to $777.8 million from $863.2 million in 2012, driven primarily by the timing of new projects.
  • Gross profit margin was 9.2 percent compared with 17.2 percent in 2012 primarily reflecting negative revisions in estimates on a project in Washington State, and by timing of overall project portfolio progression.

Construction Materials

  • Construction Materials revenue in 2013 was $237.8 million compared with $230.6 million last year. The 3.1 percent increase is due primarily to improved volume from 2012.
  • Gross profit margin in 2013 was 2.9 percent, compared with 3.3 percent in 2012, reflecting product mix and varied market conditions across the West.

Fourth Quarter 2013 Highlights

Total Company

  • Revenue for the fourth quarter of 2013 increased 18.5 percent to $598.1 million compared with $504.8 million last year.
  • Gross profit margin in the fourth quarter was 8.3 percent compared with 11.3 percent in 2012, as decreased gross profit in the Large Project Construction and Construction segments more than offset an increase in Construction Materials segment gross profit.
  • SG&A expenses for the fourth quarter of 2013 decreased about $6.9 million to $50.5 million reflecting a decrease in pre-bid costs, incentive compensation, and as a result of non-recurring fourth quarter 2012 Kenny-related acquisition costs.
  • Operating loss was $48.4 million in the quarter, compared to operating income of $21.7 million in the fourth quarter of 2012. Fourth quarter 2013 operating income includes the impact of $52.2 million in restructuring and impairment charges related to the EIP.

Construction

  • Construction revenue for the fourth quarter 2013 increased 25.3 percent to $294.9 million, compared with $235.3 million last year.
  • Gross profit margin was 6.2 percent, compared with 7.7 percent a year ago as weaker performance in certain Western markets outweighed a positive impact from Kenny.

Large Project Construction

  • Large Project Construction revenue in the fourth quarter of 2013 increased 11.2 percent to $238.5 million, compared with $214.6 million last year.
  • Gross profit margin for the quarter was 12.4 percent, compared with 18.7 percent in 2012. The decrease reflects timing of overall project portfolio progression.

Construction Materials

  • Construction Materials revenue in the fourth quarter of 2013 increased 17.8 percent to $64.6 million, compared with $54.9 million last year.
  • Gross profit margin was 2.6 percent, compared with a loss of 2.7 percent in 2012, as a result of overall improved performance.

Outlook

“Trends in company backlog, project funding and financing, and private construction all have improved since last year, and diversification opportunities in power, tunnel, and underground also are providing Granite with solid footing for growth. Our more than $2.5 billion of backlog at the end of 2013 reflects a diverse, healthy portfolio of projects, which we will look to grow further in 2014,” Roberts said. “This year, we expect to bid on more than $13 billion of large projects, and, beyond 2014, we are tracking an additional $20 billion in large projects. Funding and financing stability is critical to improve progress on important infrastructure investment, at federal, state and local levels.

“Many of our traditional Western markets continue to operate in a highly competitive environment. We continue to recover in these markets, but at a slower pace than anticipated over the past couple years. In regions showing signs of broad economic improvement, signs of private construction recovery are evident. Our Construction and Construction Materials businesses are expected to perform substantially better in 2014 than 2013, in line with overall economic improvement in the states we serve,” said Roberts.

1 The Company completed its 2010 Enterprise Improvement Plan in the fourth quarter of 2013, which resulted in $52.1 million of restructuring and impairment charges related to assets in the Real Estate and Construction Materials segments. Please refer to the description and non-GAAP reconciliation of these charges in the attached table. For additional information, please refer to, Note 11 of “Notes to the Consolidated Financial Statements” and “Restructuring and Impairment Charges (Gains), Net” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Granite Construction Incorporated 10-K, which is expected to be filed with the Securities and Exchange Commission in early March.

Conference Call

Granite will conduct a conference call today, February 27, 2013, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended December 30, 2013. Access to a live audio webcast is available at http://investor.graniteconstruction.com/index.cfm. The live conference call may be accessed by calling (877) 643-7158; international callers may dial (914) 495-8565. The conference ID for the live call is 66604841. The call will be recorded and available for replay approximately two hours after the live audio webcast through March 6, 2014 by calling (855) 859-2056. The conference ID for the replay is also 66604841; international callers may dial (404) 537-3406.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE: GVA) is one of the nation’s largest infrastructure contractors and construction materials producers. Incorporated in 1922, Granite serves public- and private-sector clients on projects both small and large. Granite’s project teams represent some of the best in the industry serving owners in the transportation, power, federal, tunneling, underground, and industrial/mining and water resources markets. In 2013, the Company was recognized by the Ethisphere Institute as one of the World’s Most Ethical Companies for the fourth year in a row. For more information please visit www.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,   2013   2012
ASSETS        
Current assets        
Cash and cash equivalents   $ 229,121   $ 321,990
Short-term marketable securities     49,968     56,088
Receivables, net     313,598     325,529
Costs and estimated earnings in excess of billings     33,306     34,116
Inventories     62,474     59,785
Real estate held for development and sale     12,478     50,223
Deferred income taxes     55,874     36,687
Equity in construction joint ventures     162,673     105,805
Other current assets     30,711     31,834
Total current assets     950,203     1,022,057
Property and equipment, net     436,859     481,478
Long-term marketable securities     67,234     55,342
Investments in affiliates     32,480     30,799
Goodwill     53,799     55,419
Other noncurrent assets     76,580     84,392
Total assets   $ 1,617,155   $ 1,729,487
LIABILITIES AND EQUITY        
Current liabilities        
Current maturities of long-term debt   $ 21   $ 8,353
Current maturities of non-recourse debt     1,226     10,707
Accounts payable     160,706     202,541
Billings in excess of costs and estimated earnings     138,375     139,692
Accrued expenses and other current liabilities     197,242     169,979
Total current liabilities     497,570     531,272
Long-term debt     270,127     270,148
Long-term non-recourse debt     6,741     922
Other long-term liabilities     48,580     47,124
Deferred income taxes     7,793     8,163
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 38,917,728 shares as of December 31, 2013 and 38,730,665 shares as of December 31, 2012     389     387
Additional paid-in capital     126,449     117,422
Retained earnings     655,102     712,144
Total Granite Construction Incorporated shareholders’ equity     781,940     829,953
Non-controlling interests     4,404     41,905
Total equity     786,344     871,858
Total liabilities and equity   $ 1,617,155   $ 1,729,487
             

 

GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
                 
   

Three Months Ended December 31,

  

Years Ended December 31,
    2013   2012   2013   2012
Revenue                
Construction   $ 294,910     $ 235,303     $ 1,251,197     $ 984,106  
Large project construction     238,544       214,572       777,811       863,217  
Construction materials     64,645       54,888       237,752       230,642  
Real estate     —       18       141       5,072  
Total revenue     598,099       504,781       2,266,901       2,083,037  
Cost of revenue                
Construction     276,523       217,155       1,144,823       906,143  
Large project construction     208,865       174,456       706,003       714,799  
Construction materials     62,960       56,349       230,799       223,070  
Real estate     —       13       13       4,266  
Total cost of revenue     548,348       447,973       2,081,638       1,848,278  
Gross Profit     49,751       56,808       185,263       234,759  
Selling, general and administrative expenses     50,447       57,298       199,946       185,099  
Restructuring and impairment charges (gains), net     52,162       (1,200 )     52,139       (3,728 )
Gain on sales of property and equipment     4,477       20,954       12,130       27,447  
Operating (loss) income     (48,381 )     21,664       (54,692 )     80,835  
Other (expense) income                
Interest income     675       486       1,785       2,626  
Interest expense     (3,306 )     (2,033 )     (14,386 )     (10,603 )
Equity in income of affiliates     1,031       1,608       1,304       1,988  
Other income, net     330       2,316       1,960       6,183  
Total other (expense) income     (1,270 )     2,377       (9,337 )     194  
(Loss) income before (benefit from) provision for income taxes     (49,651 )     24,041       (64,029 )     81,029  
(Benefit from) provision for income taxes     (16,396 )     5,667       (19,263 )     21,109  
Net (loss) income     (33,255 )     18,374       (44,766 )     59,920  
Amount attributable to non-controlling interests     4,357       (387 )     8,343       (14,637 )
Net (loss) income attributable to Granite Construction Incorporated   $ (28,898 )   $ 17,987     $ (36,423 )   $ 45,283  
                 
Net (loss) income per share attributable to common shareholders:            
Basic(1)   $ (0.74 )   $ 0.46     $ (0.94 )   $ 1.17  
Diluted(1)   $ (0.74 )   $ 0.46     $ (0.94 )   $ 1.15  
Weighted average shares of common stock:                
Basic     38,894       38,534       38,803       38,447  
Diluted     38,894       39,207       38,803       39,076  
                 
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,   2013   2012
Operating activities        
Net (loss) income   $ (44,766 )   $ 59,920  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Non-cash restructuring and impairment charges, net     44,734       145  
Depreciation, depletion and amortization     72,899       56,101  
Gain on sales of property and equipment     (12,130 )     (27,447 )
Change in deferred income tax     (19,557 )     6,013  
Stock-based compensation     13,443       11,475  
Equity in net income from unconsolidated joint ventures     (72,764 )     (101,747 )
Changes in assets and liabilities, net of the effects of acquisition in 2012     23,521       87,330  
Net cash provided by operating activities     5,380       91,790  
Investing activities        
Purchases of marketable securities     (74,924 )     (124,596 )
Maturities of marketable securities     63,650       90,100  
Proceeds from sale of marketable securities     5,000       75,000  
Purchases of property and equipment     (43,682 )     (37,622 )
Proceeds from sales of property and equipment     25,759       34,392  
Acquisition of Kenny, net of cash acquired     (8,382 )     (79,640 )
Other investing activities, net     931       (188 )
Net cash used in investing activities     (31,648 )     (42,554 )
Financing activities        
Proceeds from long-term debt     —       70,495  
Long-term debt principal payments     (12,148 )     (11,751 )
Cash dividends paid     (20,210 )     (20,117 )
Purchase of common stock     (5,896 )     (4,853 )
Contributions from non-controlling partners     5,117       107  
Distributions to noncontrolling partners     (34,600 )     (16,095 )
Other financing activities, net     1,136       (2,022 )
Net cash (used in) provided by financing activities     (66,601 )     15,764  
(Decrease) increase in cash and cash equivalents     (92,869 )     65,000  
Cash and cash equivalents at beginning of period     321,990       256,990  
Cash and cash equivalents at end of period   $ 229,121     $ 321,990  
                 

 

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
                                 
2013                                
Revenue   $ 294,910     $ 238,544     $ 64,645     $ —     $ 1,251,197     $ 777,811     $ 237,752     $ 141  
Gross profit     18,387       29,679       1,685       —       106,374       71,808       6,953       128  
Gross profit as a percent of revenue     6.2 %     12.4 %     2.6 %     — %     8.5 %     9.2 %     2.9 %     90.8 %
                                 
2012                                
Revenue   $ 235,303     $ 214,572     $ 54,888     $ 18     $ 984,106     $ 863,217     $ 230,642     $ 5,072  
Gross profit (loss)     18,148       40,116       (1,461 )     5       77,963       148,418       7,572       806  
Gross profit (loss) as a percent of revenue     7.7 %     18.7 %     (2.7 )%     27.8 %     7.9 %     17.2 %     3.3 %     15.9 %
                                                                 

 

GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
                 
Contract Backlog by Segment   December 31, 2013   December 31, 2012
                 
Construction   $ 681,415   27.0 %   $ 632,420   37.0 %
Large project construction     1,845,336   73.0 %     1,076,341   63.0 %
                 
Total   $ 2,526,751   100.0 %   $ 1,708,761   100.0 %
                 

 

GRANITE CONSTRUCTION INCORPORATED
Non-GAAP Information(1)
(Unaudited - dollars in thousands)
         
    Q4 2013   YTD 2013
Net Loss attributable to Granite Construction Incorporated   $ (28,898 )   $ (36,423 )
Restructuring and impairment charges        
Real Estate     31,113       31,090  
Construction Materials     21,049       21,049  
Total restructuring and impairment charges     52,162       52,139  

Amount attributable to non-controlling interests (Real Estate Impairments)

     (3,919 )     (3,919 )
Benefit from impairment taxes     (18,452 )     (18,452 )
         
Non-GAAP adjustment for impairment     29,791       29,768  
         
Non-GAAP net income (loss) before restructuring and impairment charges   $ 893     $ (6,655 )
         
EPS        
GAAP Net loss per share attributable to common shareholders:        
Basic   $ (0.74 )   $ (0.94 )
Diluted   $ (0.74 )   $ (0.94 )
         
Non-GAAP impact - Restructuring and impairment charges:        
Basic   $ (0.77 )   $ (0.77 )
Diluted   $ (0.74 )   $ (0.77 )
         
Non-GAAP EPS - Excluding restructuring and impairment charges:        
Basic   $ 0.02     $ (0.17 )
Diluted   $ 0.02     $ (0.17 )
         
Weighted average shares of common stock:        
Basic     38,894       38,803  
Diluted     40,119       38,803  
         
Note:        
(1) The table on this page contains the non-GAAP financial measure of diluted earnings per share excluding restructuring and impairment charges associated with the 2010 Enterprise Improvement Plan. Management believes that diluted earnings per share excluding these charges provides a useful measure in evaluating the Company's ability to generate earnings from operations and that providing such measure will allow investors to more readily compare the earnings (loss) referred to in the press release to the earnings (losses) experienced by the Company in past and future periods. Management believes that excluding these charges is particularly useful where the amounts of such charges are not consistent in the periods presented. However, the reader is cautioned that any non-GAAP financial measures provided by the Company are provided in addition to, and not as alternatives for, the Company's reported results prepared in accordance with GAAP. Items that may have a significant impact on the Company's financial position, results of operations and cash flows must be considered when assessing the Company's actual financial condition and performance regardless of whether these items are included in non-GAAP financial measures. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures provided by the Company may not be comparable to similar measures provided by other companies.

 

Granite Construction Incorporated
Ron Botoff, 831-728-7532

 

Source: Granite Construction Incorporated