Granite Reports Full-Year and Fourth Quarter 2008 Results
For the fourth quarter of 2008, Granite reported net income of
"I am very pleased with our accomplishments this year," said William G. Dorey, Granite president and chief executive officer. "We have delivered strong business results and increased value to our shareholders by significantly improving bottom line performance on our large projects. Additionally, we continue to maintain a strong balance sheet, which provides us the financial strength and flexibility to successfully navigate through today’s challenging economic environment."
Full-Year 2008 Financial Results
-- Revenues were$2.7 billion , essentially flat compared to 2007. -- Gross profit as a percent of revenue for the year endedDecember 31, 2008 , increased to 18% compared with 15% last year, reflecting a significant improvement in gross profit from Granite East and a slight decrease in gross profit from Granite West. -- Construction materials gross profit as a percent of material sales was 12% in 2008 compared with 20% in 2007. The decrease was driven by weakness in the private sector market, a shift in demand for lower-valued products as well as inventory reserve adjustments. -- General and administrative expenses increased to$257.5 million or 10% of revenue compared with$246.2 million or 9% of revenue in 2007. -- Operating income increased to$216.7 million compared with$174.9 million in 2007, reflecting improved performance in Granite East. -- Contract backlog atDecember 31, 2008 was$1.7 billion compared with$2.1 billion a year ago. -- Other income for the year was$16.7 million compared with$23.5 million last year. -- Minority interest in consolidated subsidiaries increased to$43.3 million for the year compared with$20.9 million in 2007. The increase was primarily due to improved execution on Granite East consolidated joint venture projects and a$17.7 million claim settlement. -- AtDecember 31, 2008 , cash and short-term marketable securities totaled$499.2 million including approximately$121.0 million of cash and cash equivalents from the Company’s consolidated joint ventures.
Granite West
-- Granite West revenues totaled$2.0 billion compared with$1.9 billion for the prior year. -- Gross profit as a percent of revenue for the year was 18% compared with 19% last year. -- Operating income decreased to$205.4 million for the same period compared with$230.2 million in 2007.
Granite East
-- Granite East revenue totaled$695.0 million compared with$768.5 million for the prior year. -- Gross margin as a percent of revenue for the year was 17% compared with 3% last year. The increase reflected improved project performance, the settlement of a significant claim, and projects reaching the profit recognition threshold. -- Operating income totaled$93.6 million compared with$0.8 million in 2007.
Granite
-- GLC revenue was$9.0 million compared with$40.7 million in 2007, reflecting the variability in the timing of real estate sales transactions. -- Gross loss for the period was$1.5 million compared with a gross profit of$15.8 million last year. -- Operating loss was$4.1 million for the year compared with operating income of$12.0 million in 2007. The 2008 loss includes a$4.5 million impairment charge related to residential development projects inCalifornia .
Fourth Quarter 2008 Financial Results
-- Total revenues for the quarter were$627.3 million , essentially flat compared with 2007. -- Gross profit as a percent of revenue increased in the quarter to 19% from 16% in 2007. -- Operating income for the quarter was$58.4 million , compared with$37.7 million in the prior year, reflecting increases in Granite West and Granite East. -- Other income for the quarter was$6.8 million compared with$4.4 million last year, reflecting a$14.4 million pre-tax gain related to the sale of our remaining shares inTIC Holdings, Inc. partially offset by a$10.9 million loss on available-for-sale securities. -- General and administrative expenses decreased$3.9 million to $59.2 million or 9% of revenue compared with$63.1 million or 10% of revenue in 2007. The decrease reflects the Company’s ongoing initiative to reduce general and administrative expenses throughout the organization. -- Minority interest for the quarter increased$5.2 million to $12.3 million .
Granite West
-- Revenue for the quarter totaled$463.2 million compared with$445.8 million for the same period in 2007. -- Gross profit as a percent of revenue for the fourth quarter was 18% compared with 19% in 2007. -- Operating income increased$6.4 million for the quarter to$50.1 million compared with$43.7 million for the fourth quarter last year.
Granite East
-- Revenue for the quarter was$163.2 million compared with$183.1 million for the same period last year. -- Gross profit as a percent of revenue for the quarter increased to 20% compared with 10% in the same period last year. -- Operating income for the quarter increased to$25.8 million compared with$14.1 million for the fourth quarter 2007.
Granite
-- GLC revenue for the quarter was$0.9 million compared with$4.2 million for the same period last year. -- Gross profit as a percent of revenue for the period was 21% compared with a negative gross profit margin of 30% last year. -- Operating loss for the quarter was$0.3 million compared with a loss of$2.1 million in the fourth quarter of 2007.
Outlook
"Over the longer term, we are optimistic about the growing need for the services and materials we provide. While the current level of bidding activity in the West remains relatively healthy, we are experiencing a lot of competition for smaller-sized projects which we expect will continue through 2009," said Dorey.
"In the East, we are maintaining solid margins and benefiting from overall improved execution. We are selectively pursuing projects across our three Granite East regions and expect to build our backlog over the year.
"Additionally, while we are encouraged by the potential increase in infrastructure funding as a result of the federal stimulus bill, it is too early for us to know to what degree it will impact our business.
"As we look to 2009, our priority is to maximize profitability by operating as efficiently and effectively as possible. We remain focused on driving sustainable long term growth for our shareholders. With our strong balance sheet and diversified business strategy, we are positioned to take advantage of the opportunities our markets have to offer."
Conference Call
Granite will conduct a conference call tomorrow,
About Granite
Forward-Looking Statements
This press release contains statements that are not based on historical facts and which may be forward-looking in nature. Under the Private Securities Litigation Reform Act of 1995, a "safe harbor" may be provided to us for certain of these forward-looking statements. Words such as "outlook," "believes," "expects," "appears," "may," "will," "should," "anticipates" or the negative thereof or comparable terminology, are intended to identify these forward-looking statements. These forward-looking statements are estimates reflecting the best judgment of our senior management and are based on our current expectations and projections concerning future events, many of which are outside of our control, and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those risks described in this Report under "Item 1A. Risk Factors." Except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason. As a result, the reader is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.
GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In Thousands, Except Per Share Data) Three Months Ended Years Ended December 31, December 31, 2008 2007 2008 2007 (Unaudited) (Unaudited) (1)RevenueConstruction $ 556,659 $ 542,864 $ 2,312,116 $ 2,321,502Material sales 69,794 86,045 353,115 375,700Real estate 871 4,156 9,013 40,712Total revenue 627,324 633,065 2,674,244 2,737,914Cost of revenueConstruction 446,649 458,104 1,883,742 2,002,064Material sales 63,287 71,118 311,246 300,234Real estate 690 5,406 10,536 24,872Total cost of revenue 510,626 534,628 2,205,524 2,327,170Gross profit 116,698 98,437 468,720 410,744General and 59,188 63,069 257,532 246,202administrative expensesGain on sales of 939 2,290 5,503 10,343property and equipmentOperating income 58,449 37,658 216,691 174,885Other income (expense)Interest income 3,358 6,129 18,445 26,925Interest expense (3,130 ) (1,369 ) (16,001 ) (6,367 )Acquisition expense - (7,752 ) - (7,752 )Equity in income (loss) 378 846 (1,058 ) 5,205of affiliatesOther, net 6,157 6,555 15,353 5,498Total other income 6,763 4,409 16,739 23,509Income before provisionfor income taxes and 65,212 42,067 233,430 198,394minority interestProvision for 21,011 17,790 67,692 65,470income taxIncome before minority 44,201 24,277 165,738 132,924interestMinority interest inconsolidated (12,276 ) (7,109 ) (43,334 ) (20,859 )subsidiariesNet income $ 31,925 $ 17,168 $ 122,404 $ 112,065Net income pershare:Basic $ 0.85 $ 0.43 $ 3.25 $ 2.74Diluted $ 0.84 $ 0.42 $ 3.21 $ 2.71Weighted average sharesof common stock:Basic 37,434 40,275 37,606 40,866Diluted 38,013 40,802 38,106 41,389(1) Derived from Granite’s annual audited consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share data) December 31, December 31, 2008 2007 (Unaudited) (1)AssetsCurrent assetsCash and cash equivalents $ 460,843 $ 352,434Short-term marketable securities 38,320 77,758Accounts receivable, net 314,733 397,097Costs and estimated earnings in excess of billings 13,295 17,957Inventories, net 55,223 55,557Real estate held for development and sale 75,089 51,688Deferred income taxes 43,637 43,713Equity in construction joint ventures 44,681 34,340Other current assets 56,742 96,969Total current assets 1,102,563 1,127,513Property and equipment, net 517,678 502,901Long-term marketable securities 21,239 55,156Investment in affiliates 19,996 26,475Other noncurrent assets 81,979 74,373Total assets $ 1,743,455 $ 1,786,418Liabilities and Shareholders’ EquityCurrent liabilitiesCurrent maturities of long-term debt $ 39,692 $ 28,696Accounts payable 174,626 213,135Billings in excess of costs and estimated earnings 227,364 275,849Accrued expenses and other current liabilities 184,939 212,265Total current liabilities 626,621 729,945Long-term debt 250,687 268,417Other long-term liabilities 43,604 46,441Deferred income taxes 18,261 17,945Minority interest in consolidated subsidiaries 36,773 23,471Shareholders’ equityPreferred stock, $0.01 par value, authorized - -3,000,000 shares; none outstandingCommon stock,$0.01 par value, authorized150,000,000 shares in 2008 and in 2007;issued and outstanding 38,266,791 shares as of 383 395December 31, 2008 and 39,450,923 shares as ofDecember 31, 2007 Additional paid-in capital 85,035 79,007Retained earnings 682,237 619,699Accumulated other comprehensive (loss) income (146 ) 1,098Total shareholders’ equity 767,509 700,199Total liabilities and shareholders’ equity $ 1,743,455 $ 1,786,418 December 31, December 31,Financial Position 2008 2007Working capital $ 475,942 $ 397,568Current ratio 1.76 1.54Debt to total capitalization 0.27 0.30Total liabilities to equity ratio 1.27 1.55(1) Derived from Granite’s annual audited consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)Years Ended December 31, 2008 2007 (Unaudited) (1)Operating activitiesNet income $ 122,404 $ 112,065Adjustments to reconcile net income to net cashprovided by operating activities:Impairment of real estate held for development and 4,500 3,000saleInventory reserve adjustment 12,848 478Depreciation, depletion and amortization 87,311 82,157Provision for doubtful accounts 10,958 3,894Gain on sales of property and equipment (5,503 ) (10,343 )Change in deferred income taxes 1,190 (7,822 )Stock-based compensation 7,463 7,342Excess tax benefit on stock-based compensation (851 ) (3,659 )Minority interest in consolidated subsidiaries 43,334 20,859Acquisition expense - 7,752Equity in loss (income) of affiliates 1,058 (5,205 )Acquisition of minority interest (16,617 ) -Gain on sale of investment in affiliate (14,416 ) -Loss on sale of marketable securities 10,939 -Gain on early extinguishment of debt (1,150 ) -Changes in assets and liabilities, net of the effects (6,132 ) 24,270of acquisitionsNet cash provided by operating activities 257,336 234,788Investing activitiesPurchases of marketable securities (71,630 ) (152,954 )Maturities of marketable securities 108,090 195,313Purchase of company owned life insurance (8,000 ) -Proceeds from sale of marketable securities 22,499 -Release of funds for acquisition of minority interest 28,332 -Additions to property and equipment (94,135 ) (118,612 )Proceeds from sales of property and equipment 14,539 17,777Acquisition of business (14,022 ) (76,427 )Contributions to affiliates (8,053 ) (6,805 )Distributions from affiliates 3,895 -Acquisition of minority interest - (28,495 )Other investing activities, net 228 3,459Net cash used in investing activities (18,257 ) (166,744 )Financing activitiesProceeds from long-term debt 3,725 330,260Long-term debt principal payments (17,092 ) (139,598 )Repurchase of common stock (45,540 ) (98,014 )Cash dividends paid (20,055 ) (16,764 )Contributions from minority partners 5,026 33,287Distributions to minority partners (45,909 ) (33,813 )Acquisition of minority interest (11,716 ) -Excess tax benefit on stock-based compensation 851 3,659Other financing activities 40 480Net cash (used in) provided by financing activities (130,670 ) 79,497Increase in cash and cash equivalents 108,409 147,541Cash and cash equivalents at beginning of period 352,434 204,893Cash and cash equivalents at end of period $ 460,843 $ 352,434(1) Derived from Granite’s annual audited consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED Business Segment Information(Unaudited - In Thousands) Three Months Ended December 31, Year Ended December 31, Granite Granite Land Granite Granite West East Company Granite West Granite East Land Company2008Revenue $ 463,244 $ 163,209 $ 871 $ 1,970,196 $ 695,035 $ 9,013Grossprofit $ 81,202 $ 32,998 $ 181 $ 348,259 $ 120,866 $ (1,523 )(loss)Grossprofit(loss) as 17.5 % 20.2 % 20.8 % 17.7 % 17.4 % -16.9 %a percentofrevenueOperatingincome $ 50,115 $ 25,827 $ (348 ) $ 205,399 $ 93,622 $ (4,143 )(loss)Operatingincome(loss) as 10.8 % 15.8 % -40.0 % 10.4 % 13.5 % -46.0 %a percentofrevenue2007Revenue $ 445,782 $ 183,127 $ 4,156 $ 1,928,751 $ 768,451 $ 40,712Grossprofit $ 84,035 $ 17,346 $ (1,250 ) $ 370,429 $ 25,824 $ 15,840(loss)Grossprofit(loss) as 18.9 % 9.5 % -30.1 % 19.2 % 3.4 % 38.9 %a percentofrevenueOperatingincome $ 43,715 $ 14,125 $ (2,089 ) $ 230,191 $ 766 $ 12,031(loss)Operatingincome(loss) as 9.8 % 7.7 % -50.3 % 11.9 % 0.1 % 29.6 %a percentofrevenueGRANITE CONSTRUCTION INCORPORATED Contract Backlog(Unaudited - In Thousands)ContractBacklog December 31, 2008 September 30, 2008 December 31, 2007byDivisionGranite $ 788,872 46.4 % $ 915,472 50.3 % $ 854,142 41.0 %WestGranite 910,524 53.6 % 906,116 49.7 % 1,230,403 59.0 %EastTotal $ 1,699,396 100.0 % $ 1,821,588 100.0 % $ 2,084,545 100.0 %
Source:Granite Construction Incorporated
