Granite Reports Full Year and Fourth Quarter 2010 Results

  • SG&A expenses for the full year decreased 16% to $191.6 million
  • Total company backlog increased $497.2 million to $1.9 billion
  • Financial position remains strong with $395.7 million in cash, cash equivalents and marketable securities

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported a net loss of $59.0 million for the full year 2010, compared with net income of $73.5 million for the full year 2009. Loss per share for the year was $(1.56), compared with earnings per diluted share (EPS) of $1.90 in 2009.

For the fourth quarter of 2010, Granite reported a net loss of $50.0 million, compared with net income of $16.0 million for the fourth quarter of 2009. Loss per share for the quarter ended December 31, 2010 was $(1.32), compared with EPS of $0.41 earned in the prior year period. Included in the fourth quarter of 2010 were restructuring charges of $107.3 million associated with the Company’s Enterprise Improvement Plan. The portion of restructuring charges attributable to noncontrolling interests was approximately $20.0 million.

“During the fourth quarter, we made solid progress towards reducing our cost structure and strengthening the business for the long-term,” said
James H. Roberts, Granite President and Chief Executive Officer. “In addition to the necessary but difficult decision to reduce our workforce, we are focusing on optimizing our core business and have committed to divesting of our real estate investment business over the next three years.”

Roberts continued, “We are undoubtedly operating in one of the most difficult economic environments our company has faced in decades. Despite these challenges, we grew backlog in both of our key segments, maintained a solid balance sheet, and continued to position the Company to recapture momentum in 2011.”

Full Year 2010 Financial Results

Total Company

  • Revenue totaled $1.8 billion, compared with $2.0 billion in 2009.
  • Gross profit margin was 10 percent compared with 18 percent in 2009 due primarily to lower margins in our beginning backlog of work, compared with a year ago. Also contributing to margin pressure was $156.7 million in revenue from projects that had not yet reached the profit recognition threshold, compared with $68.8 million a year ago.
  • Operating loss for the year was $109.3 million, compared with operating income of $129.2 million in the prior year and includes restructuring charges of $109.3 million.
  • SG&A expenses were $191.6 million, compared with $228.0 million for the same period last year driven by reductions in salaries and related expenses, incentive compensation, and discretionary spending.
  • Amount attributable to noncontrolling interests was a loss of $3.5 million, compared with income of $26.7 million in 2009 due to $20.0 million associated with the impairment charges taken in the fourth quarter 2010.
  • Total contract backlog at December 31, 2010 was $1.9 billion, compared with $1.4 billion at December 31, 2009.

Construction

  • Construction revenue for the full year totaled $943.2 million, compared with $1.2 billion for the same period in 2009 due to a continued weak demand in the private-sector and increased competition for public-sector work.
  • Gross profit margin for the full year was 10 percent, compared with 18 percent for the same period in 2009, driven by lower volumes and increased competition.

Large Project Construction

  • Large Project Construction revenue for the full year totaled $584.4 million, compared with $603.5 million for the same period last year.
  • Gross profit margin for the full year decreased to 12 percent, compared with 20 percent for the same period last year as several new projects generated revenue, but did not reach the profit recognition threshold in 2010.

Construction Materials

  • Construction Materials revenue for the full year totaled $222.1 million compared with $205.9 million for the same period last year.
  • Gross profit margin on the sale of construction materials was 5 percent in 2010, compared with 10 percent in 2009. The decrease is primarily attributable to an increase in fixed costs associated with two new materials processing facilities that came online in late 2009.

Fourth Quarter 2010 Financial Results

Total Company

  • Revenues for the quarter totaled $417.2 million, compared with $434.7 million in 2009.
  • Gross profit margin decreased to 11 percent, down from 21 percent in 2009.
  • Operating loss for the quarter was $98.5 million, compared with operating income of $35.6 million in the prior year. The fourth quarter 2010 includes restructuring charges of $107.3 million related to workforce reductions as well as real estate and fixed asset impairment charges.
  • Selling, general and administrative expenses decreased $16.7 million quarter over quarter to $39.8 million.
  • Amount attributable to noncontrolling interests was a loss of $15.4 million, compared with income of $11.0 million in 2009 due to $20.0 million associated with the impairment charges taken in the fourth quarter 2010.

Construction

  • Construction revenues for the quarter totaled $214.1 million, compared with $239.6 million for the same period in 2009.
  • Gross profit margin for the fourth quarter was 12 percent compared with 20 percent for the same period last year. The decrease was affected by overall lower demand and lower margins due to the competitive environment.

Large Project Construction

  • Large Project Construction revenues for the quarter totaled $154.8 million, compared with $147.5 million for the same period in 2009.
  • Gross profit margin for the fourth quarter was 11 percent, compared with 26 percent for the same period last year, reflecting an increase in revenue on projects that have yet to reach the profit recognition threshold.

Construction Materials

  • Construction Materials revenue for the quarter totaled $46.7 million, compared with $47.3 million for the same period in 2009.
  • Gross profit on the sale of construction materials was 5 percent, compared with 8 percent for the same period in 2009.

Outlook

“The actions we are taking to reduce our cost structure are expected to lead to a substantial improvement in our bottom line results in 2011. In addition, we anticipate a positive impact to earnings from some large projects reaching the profit recognition threshold. While the pipeline of large project bidding opportunities remains full, our goal is to build high quality backlog that will provide the best return for our shareholders. The large project construction market offers a great deal of near-term growth potential for our business and we are excited about the opportunities that this segment of our business will provide.

“Our Construction segment is starting 2011 with a healthy backlog of work; however, we anticipate the competitive environment will remain very tough. Additionally, we expect the demand for our services and construction materials from the private-sector in the west will remain under pressure for the balance of the year.

“Funding for transportation infrastructure will continue to be a focus for us this year as we advocate for a multi-year highway bill that will provide the industry with much needed visibility. Despite these macro-economic challenges, we will continue to move forward with our strategy to operate our business as efficiently and effectively as possible,” said Roberts.

Conference Call

Granite will conduct a conference call tomorrow, February 24, 2011, at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the fofdfsdfsdfasdfurth quarter and year ended December 31, 2010. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call may be accessed by calling (877) 693-6483, or (706) 758-5304 for international listeners. The conference ID for the call is 41332342. The call will be recorded and will be available for replay from approximately two hours after the live audio webcast through March 10, 2011, by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 41332342.

About Granite

Granite Construction Incorporated is a member of the S&P 400 Midcap Index, the FTSE KLD 400 Social Index and the Russell 2000 Index. Granite Construction Company, a wholly owned subsidiary, is one of the nation’s largest diversified heavy civil contractors and construction materials producers. Granite Construction Company serves public- and private-sector clients through its offices and subsidiaries nationwide. For more information about Granite, please visit its website at www.graniteconstruction.com.

Forward-looking Statements

This news 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 Granite for certain of these forward-looking statements. Words such as outlook, believes, expects, appears, may, will, should, anticipates and the negatives thereof or comparable terminology are intended to identify these forward-looking statements. These forward-looking statements are estimates reflecting the best judgment of Granite’s senior management and are based on its current expectations and projections concerning future events, many of which are outside of Granite’s 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 Granite’s Annual Report under “Item 1A. Risk Factors.” Except as required by law, Granite undertakes 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
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
             
        December 31,   December 31,
          2010     2009
             
ASSETS          
             
Current assets          
  Cash and cash equivalents     $ 252,022   $ 338,956
  Short-term marketable securities       109,447     42,448
  Receivables, net       243,986     280,252
  Costs and estimated earnings in excess of billings   10,519     10,619
  Inventories       51,018     45,800
  Real estate held for development and sale     75,716     139,449
  Deferred income taxes       53,877     31,034
  Equity in construction joint ventures       74,716     67,693
  Other current assets       42,555     50,467
             
  Total current assets       913,856     1,006,718
             
Property and equipment, net       473,607     520,778
             
Long-term marketable securities       34,259     76,937
             
Investments in affiliates       31,410     24,644
             
Other noncurrent assets       82,401     80,498
             
  Total assets     $ 1,535,533   $ 1,709,575
             
LIABILITIES AND EQUITY          
             
Current liabilities          
  Current maturities of long-term debt   $ 8,359   $ 15,017
  Current maturities of non-recourse debt     29,760     43,961
  Accounts payable       129,700     131,251
  Billings in excess of costs and estimated earnings   120,185     156,041
  Accrued expenses and other current liabilities     150,773     159,843
             
  Total current liabilities       438,777     506,113
             
Long-term debt       217,014     225,203
             
Long-term non-recourse debt       25,337     19,485
             
Other long-term liabilities       47,996     48,998
             
Deferred income taxes       10,774     27,220
             
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 2010 and 2009;
issued and outstanding 38,745,542 shares as of December 31, 2010 and 38,635,021 shares
as of December 31, 2009

   387     386
  Additional paid-in capital       104,232     94,633
  Retained earnings       656,412     735,632
             
  Total Granite Construction Incorporated shareholders' equity   761,031     830,651
             
  Noncontrolling interests       34,604     51,905
             
  Total equity       795,635     882,556
             
  Total liabilities and equity     $ 1,535,533   $ 1,709,575
                             
                             
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
                             
              Three Months Ended     Years Ended
              December 31,     December 31,
                2010       2009         2010       2009  
                             
  Revenue                        
    Construction       $ 214,127     $ 239,633       $ 943,245     $ 1,151,743  
    Large project construction     154,781       147,516         584,406       603,517  
    Construction materials     46,677       47,257         222,058       205,945  
    Real estate           1,643       342         13,256       2,274  
    Total revenue         417,228       434,748         1,762,965       1,963,479  
  Cost of revenue                      
    Construction         187,831       190,758         847,536       942,256  
    Large project construction     137,108       108,812         517,099       483,417  
    Construction materials     44,151       43,637         210,040       184,705  
    Real estate           1,921       320         10,506       3,592  
    Total cost of revenue     371,011       343,527         1,585,181       1,613,970  
                             
  Gross profit           46,217       91,221         177,784       349,509  
                             
  Selling, general and administrative expenses     39,766       56,422         191,593       228,046  
  Restructuring charges       107,297       9,453         109,279       9,453  
  Gain on sales of property and equipment     2,331       10,291         13,748       17,169  
                             
  Operating (loss) income       (98,515 )     35,637         (109,340 )     129,179  
                             
  Other income (expense)                    
    Interest income         833       1,135         4,980       5,049  
    Interest expense         (2,446 )     (5,170 )       (9,740 )     (15,756 )
    Equity in income of affiliates     933       3,336         756       7,696  
    Other income, net       1,114       4,405         6,968       12,683  
    Total other income       434       3,706         2,964       9,672  
                             
  (Loss) income before (benefit from) provision for income taxes     (98,081 )     39,343         (106,376 )     138,851  
                             
  (Benefit from) provision for income taxes     (32,695 )     12,334         (43,928 )     38,650  
                             
  Net (loss) income         (65,386 )     27,009         (62,448 )     100,201  
                             
  Amount attributable to noncontrolling interests     15,367       (10,976 )       3,465       (26,701 )
                             
  Net (loss) income attributable to Granite Construction Incorporated   $ (50,019 )   $ 16,033       $ (58,983 )   $ 73,500  
                             
  Net (loss) income per share attributable to common shareholders:              
    Basic (1)         $ (1.32 )   $ 0.41       $ (1.56 )   $ 1.91  
    Diluted (1)         $ (1.32 )   $ 0.41       $ (1.56 )   $ 1.90  
  Weighted average shares of common stock:                  
    Basic           37,875       37,608         37,820       37,566  
    Diluted           37,875       37,723         37,820       37,683  
                             
  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,     2010       2009  
Operating activities          
  Net (loss) income     $ (62,448 )   $ 100,201  
  Adjustments to reconcile net (loss) income to net cash provided by operating activities:  
    Restructuring impairment charges     93,862       1,449  
    Other impairment charges     821       4,110  
    Inventory written down     2,846       3,097  
    Depreciation, depletion and amortization     74,435       80,195  
    Provision for (recovery of) doubtful accounts     368       (4,404 )
    Gain on sales of property and equipment     (13,748 )     (17,169 )
    Change in deferred income taxes     (39,289 )     21,107  
    Stock-based compensation     13,040       10,765  
    Loss (gain) from marketable securities     680       (485 )
    Gain on company owned life insurance     (3,321 )     (2,551 )
    Equity in income of affiliates     (756 )     (7,696 )
  Changes in assets and liabilities, net of the effects of consolidations   (37,172 )     (124,318 )
    Net cash provided by operating activities   29,318       64,301  
Investing activities          
  Purchases of marketable securities     (121,626 )     (99,011 )
  Maturities of marketable securities     74,000       36,970  
 

Proceeds from sale of marketable securities

     15,000       7,966  
  Purchase of company owned life insurance     (8,195 )     (8,000 )
  Proceeds from company owned life insurance     2,078       -  
  Additions to property and equipment     (37,004 )     (87,645 )
  Proceeds from sales of property and equipment     21,148       23,020  
  Purchase of private preferred stock     (6,400 )     -  
  Contributions to affiliates, net     (1,658 )     (4,969 )
  Issuance of notes receivable     (1,313 )     (11,314 )
  Collection of notes receivable     3,126       13,104  
  Other investing activities     409       -  
    Net cash used in investing activities   (60,435 )     (129,879 )
Financing activities          
  Proceeds from long-term debt     1,918       10,750  
  Long-term debt principal payments     (19,829 )     (18,856 )
  Cash dividends paid     (20,150 )     (20,057 )
  Purchase of common stock     (3,641 )     (3,431 )
  Contributions from noncontrolling partners     7,321       420  
  Distributions to noncontrolling partners     (21,498 )     (26,019 )
  Other financing activities, net     62       884  
    Net cash used in financing activities   (55,817 )     (56,309 )
                   
Decrease in cash and cash equivalents     (86,934 )     (121,887 )
                   

Cash and cash equivalents at beginning of year

     338,956       460,843  
                   

Cash and cash equivalents at end of year

   $ 252,022     $ 338,956  
                                                 
                                                 
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - 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
                                                 
  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 %
                                                 
  2009                                              
  Revenue           $ 239,633     $ 147,516     $ 47,257     $ 342         $ 1,151,743     $ 603,517     $ 205,945     $ 2,274  
  Gross profit (loss)         $ 48,875     $ 38,704     $ 3,620     $ 22         $ 209,487     $ 120,100     $ 21,240     $ (1,318 )
  Gross profit (loss) as a percent of revenue       20.4 %     26.2 %     7.7 %     6.4 %         18.2 %     19.9 %     10.3 %     -58.0 %
                                   
                                   
                                   
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - in thousands)
                                   
        December 31, 2010         December 31, 2009
                                   
  Construction     $ 465,271       24.5 %         $ 359,359       25.6 %
  Large Project Construction     1,433,899       75.5 %           1,042,629       74.4 %
                                   
  Total     $ 1,899,170       100.0 %         $ 1,401,988       100.0 %

 

 

Source: Granite Construction Incorporated