Granite Reports Second-Quarter 2010 Financial Results

  • Total revenue essentially flat compared with a year ago
  • Net loss for the second quarter of $6.7 million
  • SG&A expenses decreased $5.0 million in the quarter compared with a year ago
  • Total contract backlog $1.6 billion; Approximately $210 million in new projects awarded since June 30, 2010
  • $150 million credit facility renewed until June 2013

 

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported a net loss of $6.7 million, or $0.18 per diluted share, for the second quarter of 2010 compared with net income of $17.9 million, or $0.46 per diluted share, for the second quarter of 2009.

“Our 2010 construction season is in full swing despite a slow start in the second quarter,” said,
William G. Dorey, Granite President and Chief Executive Officer. “Although we were unable to build as much work as we would have liked in April and May, our June results were encouraging. However, as expected, gross margins are considerably lower as we build projects bid in this highly competitive environment.”

Mr. Dorey continued, “Large Project Construction segment results for the second quarter include the initial work on the Queens Bored Tunnel and
Houston Metro projects. Both of these projects are not expected to reach the profit recognition threshold until 2011. The profit associated with these two projects should lead to Large Project earnings growth next year.”

Second-quarter 2010 Financial Results

Total Company

  • Revenue totaled $454.2 million compared with $461.1 million in 2009.
  • Gross profit margin was 11 percent, down from 18 percent in 2009, driven primarily by the lack of private-sector work and too much capacity for the available work in the marketplace.
  • Operating income for the quarter was $2.1 million compared with $30.4 million in the prior year.
  • Selling, general and administrative expenses for the second quarter were $51.4 million compared with $56.3 million for the same period last year, driven by a continuing effort to reduce the Company’s overall cost structure.
  • Net income attributable to noncontrolling interests was $4.1 million compared with $4.7 million in 2009.
  • Total contract backlog at June 30, 2010 was $1.6 billion, essentially flat compared with backlog at June 30, 2009. Second quarter 2010 backlog does not include approximately $210 million associated with three projects awarded to date in the third quarter of 2010.
  • The tax rate for the second quarter was 248.5 percent compared with 26.5 percent in 2009. This unusually high rate for the quarter is due to adjusting the year-to-date tax rate to the current estimate of 6 percent for fiscal 2010.

Construction

  • Construction revenue for the quarter totaled $237.9 million compared with $277.5 million for the same period in 2009.
  • Gross profit margin for the second quarter was 10 percent compared with 19 percent a year ago. The decrease is due to the lack of profitability associated with border fence work in 2010 as compared with 2009, as well as lower margin backlog due to the competitive markets and a slow start to the construction season in the West.

Large Project Construction

  • Large Project Construction revenue for the quarter totaled $153.3 million compared with $125.8 million for the same period last year.
  • Gross profit margin for the quarter decreased to 14 percent compared with 18 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 $61.1 million compared with $57.3 million for the same period last year.
  • Gross profit on the sale of construction materials was $4.5 million in 2010 compared with $9.6 million in 2009. The decline reflects an increase in fixed costs related to new plants that came on line in late 2009 without a corresponding increase in sales.

Outlook

“This year is proving to be very challenging, particularly in the West,” said Dorey. “Although the public works bidding activity in the Construction segment has been strong, the competitive climate is driving margins associated with that work substantially lower than in previous years. Based on our current outlook, we are updating our guidance for each of our segments. Revenue for the Construction segment is now expected to be between $950.0 million and $1.15 billion with a corresponding gross profit margin between 11 percent and 12 percent. Revenue for the Large Project Construction segment is expected to be between $650.0 million and $750.0 million with a corresponding gross profit margin between 10 and 11 percent. Construction Materials segment revenue is expected to be between $175.0 million and $225.0 million with a corresponding gross profit margin between 9 and 10 percent. Net income attributable to noncontrolling interests is expected to be approximately $19.0 million for the year. The tax rate for 2010 is currently forecasted to be 6 percent.

“Additionally, we continue to focus considerable effort on optimizing our cost structure and lowering expenses across the Company. In 2010, our goal is to reduce SG&A by 10 percent compared with 2009 through reductions in headcount, discretionary spending and lower compensation expense,” said Dorey.

Conference Call

Granite will conduct a conference call today, August 2, 2010, at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the quarter ended June 30, 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 86369247. The call will be recorded and will be available for replay from approximately two hours after the live audio webcast through August 13, 2010, by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 86369247.

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 Web site 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
             
    June 30,   December 31,   June 30,
    2010   2009   2009
             
ASSETS            
             
Current assets            
Cash and cash equivalents   $ 208,450   $ 338,956   $ 356,168
Short-term marketable securities     73,566     42,448     24,878
Receivables, net     295,779     280,252     281,432
Costs and estimated earnings in excess of billings     56,665     10,619     50,891
Inventories     48,529     45,800     68,755
Real estate held for development and sale     148,897     139,449     131,169
Deferred income taxes     31,870     31,034     43,314
Equity in construction joint ventures     72,571     67,693     50,215
Other current assets     39,031     50,467     46,719
             
Total current assets     975,358     1,006,718     1,053,541
             
Property and equipment, net     501,258     520,778     529,805
             
Long-term marketable securities     68,291     76,937     53,328
             
Investments in affiliates     31,210     24,644     17,310
             
Other noncurrent assets     79,060     80,498     80,300
             
Total assets   $ 1,655,177   $ 1,709,575   $ 1,734,284
             
LIABILITIES AND EQUITY            
             
Current liabilities            
Current maturities of long-term debt   $ 8,538   $ 15,017   $ 15,348
Current maturities of non-recourse debt     39,657     43,961     49,500
Accounts payable     173,637     131,251     177,025
Billings in excess of costs and estimated earnings     144,935     156,041     184,665
Accrued expenses and other current liabilities     161,632     159,843     168,217
             
Total current liabilities     528,399     506,113     594,755
             
Long-term debt     216,870     225,203     225,220
             
Long-term non-recourse debt     16,615     19,485     8,455
             
Other long-term liabilities     49,197     48,998     46,686
             
Deferred income taxes     27,905     27,220     17,917
             
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 38,788,581 shares as of June 30, 2010, 38,635,021 shares as of December 31, 2009 and 38,673,034 shares as of June 30, 2009

     388     386     387
Additional paid-in capital     98,142     94,633     89,142
Retained earnings     677,873     735,632     699,050
             
Total Granite Construction Incorporated shareholders' equity     776,403     830,651     788,579
             
Noncontrolling interests     39,788     51,905     52,672
             
Total equity     816,191     882,556     841,251
             
Total liabilities and equity   $ 1,655,177   $ 1,709,575   $ 1,734,284
                   

 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2010   2009   2010   2009
                 
Revenue                
Construction   $ 237,943     $ 277,456     $ 319,129     $ 445,505  
Large project construction     153,328       125,770       259,653       274,830  
Construction materials     61,089       57,315       87,253       87,161  
Real estate     1,844       534       8,852       951  
Total revenue     454,204       461,075       674,887       808,447  
Cost of revenue                
Construction     215,042       224,655       294,382       357,528  
Large project construction     131,493       103,259       228,335       218,655  
Construction materials     56,609       47,732       89,898       77,892  
Real estate     1,362       1,534       6,860       1,741  
Total cost of revenue     404,506       377,180       619,475       655,816  
                 
Gross profit     49,698       83,895       55,412       152,631  
                 
Selling, general and administrative expenses     51,357       56,319       106,649       110,674  
Gain on sales of property and equipment     3,800       2,808       8,252       5,329  
                 
Operating income (loss)     2,141       30,384       (42,985 )     47,286  
                 
Other income (expense)                
Interest income     1,098       1,109       2,037       3,170  
Interest expense     (3,013 )     (2,853 )     (6,747 )     (6,341 )
Equity in (loss) income of affiliates     (387 )     783       (706 )     339  
Other income, net     1,934       1,431       4,831       5,216  
Total other (expense) income     (368 )     470       (585 )     2,384  
                 
Income (loss) before provision for (benefit from) income taxes     1,773       30,854       (43,570 )     49,670  
                 
Provision for (benefit from) income taxes     4,406       8,187       (3,207 )     13,016  
                 
Net (loss) income     (2,633 )     22,667       (40,363 )     36,654  
                 
Amount attributable to noncontrolling interests     (4,058 )     (4,718 )     (7,282 )     (9,785 )
                 
Net (loss) income attributable to Granite Construction Incorporated   $ (6,691 )   $ 17,949     $ (47,645 )   $ 26,869  
                 
Net (loss) income per share attributable to common shareholders:            
Basic (1)   $ (0.18 )   $ 0.46     $ (1.26 )   $ 0.70  
Diluted (1)   $ (0.18 )   $ 0.46     $ (1.26 )   $ 0.70  
Weighted average shares of common stock:                
Basic     37,850       37,584       37,770       37,530  

Diluted

     37,850       37,699       37,770       37,650  
                 
Note:
  (1) Computed using the two-class method, except when in a net loss position
   

 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
         
         
Six Months Ended June 30,   2010   2009
Operating activities        
Net (loss) income   $ (40,363 )   $ 36,654  
Adjustments to reconcile net (loss) income to net cash used in operating activities:        
Impairment of real estate held for development and sale     107       1,036  
Depreciation, depletion and amortization     35,839       39,670  
Provision for (recovery of) doubtful accounts     406       (3,386 )
Gain on sales of property and equipment     (8,252 )     (5,329 )
Stock-based compensation     6,885       4,561  
Gain on company owned life insurance     (1,748 )     -  
Changes in assets and liabilities, net of the effects of consolidations     (31,792 )     (79,241 )
Net cash used in operating activities     (38,918 )     (6,035 )
Investing activities        
Purchases of marketable securities     (60,073 )     (39,043 )
Maturities of marketable securities     34,900       27,610  
Proceeds from company owned life insurance     2,078       -  
Additions to property and equipment     (21,809 )     (55,659 )
Proceeds from sales of property and equipment     11,936       7,416  
Purchase of private preferred stock     (6,400 )     -  
Contributions to affiliates     (1,014 )     (4,971 )
Issuance of notes receivable     (1,242 )     -  
Collection of notes receivable     1,720       374  
Other investing activities     (333 )     65  
Net cash used in investing activities     (40,237 )     (64,208 )
Financing activities        
Proceeds from long-term debt     95       4,911  
Long-term debt principal payments     (18,155 )     (17,475 )
Cash dividends paid     (10,067 )     (10,003 )
Purchase of common stock     (3,434 )     (2,821 )
Distributions to noncontrolling partners, net     (19,797 )     (9,080 )
Other financing activities     7       36  
Net cash used in financing activities     (51,351 )     (34,432 )
         
Decrease in cash and cash equivalents     (130,506 )     (104,675 )
         
Cash and cash equivalents at beginning of period     338,956       460,843  
         
Cash and cash equivalents at end of period   $ 208,450     $ 356,168  
                 

 

GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - in thousands)
                                     
 

 

Three Months Ended June 30,

 

    

Six Months Ended June 30,
        Large Project   Construction  

 

Real Estate

           Large Project   Construction  

 

Real Estate
    Construction   Construction   Materials         Construction   Construction   Materials  
                                     
2010                                    
Revenue   $ 237,943     $ 153,328     $ 61,089     $ 1,844         $ 319,129     $ 259,653     $ 87,253     $ 8,852  
Gross profit (loss)   $ 22,901     $ 21,835     $ 4,480     $ 482         $ 24,747     $ 31,318     $ (2,645 )   $ 1,992  
Gross profit (loss) as a percent of revenue     9.6 %     14.2 %     7.3 %     26.1 %         7.8 %     12.1 %     -3.0 %     22.5 %
                                     
2009                                    
Revenue   $ 277,456     $ 125,770     $ 57,315     $ 534         $ 445,505     $ 274,830     $ 87,161     $ 951  
Gross profit (loss)   $ 52,801     $ 22,511     $ 9,583     $ (1,000 )       $ 87,977     $ 56,175     $ 9,269     $ (790 )
Gross profit (loss) as a percent of revenue     19.0 %     17.9 %     16.7 %     -187.3 %         19.7 %     20.4 %     10.6 %     -83.1 %
                                     
GRANITE CONSTRUCTION INCORPORATED

Contract Backlog by Segment
(Unaudited - in thousands)
                                 

 

 June 30, 2010     March 31, 2010     June 30, 2009
                                 
  Construction   $ 594,214   38.3 %     $ 487,751   30.9 %     $ 687,696   44.9 %
  Large project construction   957,080   61.7 %       1,091,251   69.1 %       844,547   55.1 %
                                 
  Total     $ 1,551,294   100.0 %     $ 1,579,002   100.0 %     $ 1,532,243   100.0 %

 

 

Source: Granite Construction Incorporated