Granite Reports Third-Quarter 2009 Financial Results
-- Net income in Q309 was $30.6 million vs. $51.7 million a year ago
-- Revenue decreased 20% in Q309 to $720.3 million
-- Backlog in Granite East increased 17% year over year
-- Financial position remains strong with $399.2 million in cash and
short-term marketable securities
"In the midst of a challenging economic environment, we remain focused on project execution and acquiring quality backlog," said William G. Dorey, Granite president and chief executive officer. "In that regard, I am pleased to report approximately
"In the West, the current bidding environment for small projects is one of the toughest we have experienced, marked by an oversupply of contractors as well as public funding challenges. While this is having an impact on our short-term performance, we are pursuing a full pipeline of larger projects that have the potential to deliver strong margins. With a solid balance sheet and experienced teams, Granite is well-positioned to successfully compete for these larger project opportunities.
"Additionally, as we announced last month we are currently implementing a new organizational structure at Granite that will strengthen our business by leveraging resources and gaining efficiencies throughout the company. Our goal is to create a more scalable structure that aligns with current business trends while positioning Granite for long-term profitable growth."
Third-quarter 2009 Financial Results
-- Total revenue for the quarter ended September 30, 2009 was $720.3
million compared with $897.8 million in 2008.
-- Gross profit as a percentage of revenue for the quarter was 15 percent
compared with 16 percent in 2008 driven by the competitive bidding
environment in the West offset by improved operating results in the
East.
-- Gross profit on the sale of construction materials was $7.0 million in
2009 compared with $15.4 million in 2008 primarily as a result of lower
sales volume.
-- General and administrative expenses decreased $11.4 million to $60.5
million compared with $71.9 million in 2008. The decrease was primarily
related to a reduction in bad debt expense of approximately $8.0 million
and lower incentive compensation and salaries expense.
-- Operating income for the quarter was $46.3 million compared with $74.4
million in the prior year.
-- During the third quarter 2009, the company's real estate investment
segment recorded a $0.7 million pre-tax impairment charge related to
residential property located in Oregon .
-- Net income attributable to noncontrolling interests in joint ventures
increased from $0.6 million in 2008 to $5.9 million in 2009. The
increase is associated with a large project that had not reached the
profit recognition threshold in the third quarter 2008 and the effect of
changes in estimates related to certain joint venture projects.
-- At September 30, 2009 , cash and short-term marketable securities totaled
$399.2 million , including $121.1 million of cash and cash equivalents
associated with the company's consolidated joint ventures.
-- Total contract backlog at September 30, 2009 , was $1.6 billion compared
with $1.8 billion at September 30, 2008 .
Granite West
-- Revenue for the third quarter totaled $564.1 million compared with
$749.5 million for the same period in 2008 reflecting intense
competition for public works projects, reduced public sector funding and
lower demand for construction materials.
-- Gross profit as a percentage of revenue for the quarter decreased to 15
percent compared with 18 percent in 2008. The margin compression was
primarily a product of lower gross margins on both public sector
construction projects and construction materials sales.
-- Operating income for the quarter decreased $37.3 million to $56.3
million compared with $93.6 million for the third quarter of last year.
Granite East
-- Revenue for the third quarter totaled $155.2 million compared with
$146.9 million for the same period in 2008.
-- Gross profit as a percentage of revenue for the quarter was 13 percent
compared with 7 percent in the same period last year driven primarily by
a high quality project portfolio and improved project execution.
-- Operating income for the quarter increased $8.3 million to $12.1 million
compared with $3.8 million for the third quarter of 2008.
Outlook
The company now expects Granite West revenue in 2009 to be between
As part of its evolution to become a more efficient and effective organization, Granite announced the reduction of approximately 160 salaried positions across the country. Pre-tax charges associated with Granite's reorganization are estimated to be approximately
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 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 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) September 30, December 31, September 30, 2009 2008 2008 ASSETS Current assets Cash and cash equivalents $ 371,434 $ 460,843 $ 281,046 Short-term marketable securities 27,798 38,320 101,112 Accounts receivable, net 382,572 314,733 480,315 Costs and estimated earnings in 38,011 13,295 34,759 excess of billings Inventories, net 51,972 55,223 61,342 Real estate held for development 135,306 75,089 52,165 and sale Deferred income taxes 43,356 43,637 46,233 Equity in construction joint 58,450 44,681 45,219 ventures Other current assets 41,185 56,742 65,182 Total current assets 1,150,084 1,102,563 1,167,373 Property and equipment, net 530,661 517,678 522,733 Long-term marketable securities 62,612 21,239 30,209 Investment in affiliates 21,309 19,996 27,518 Other noncurrent assets 80,233 81,979 73,696 Total assets $ 1,844,899 $ 1,743,455 $ 1,821,529 LIABILITIES AND EQUITY Current liabilities Current maturities of long-term $ 68,194 $ 39,692 $ 34,886 debt Accounts payable 211,670 174,626 234,126 Billings in excess of costs and 187,205 227,364 251,402 estimated earnings Accrued expenses and other current 209,806 184,939 227,611 liabilities Total current liabilities 676,875 626,621 748,025 Long-term debt 233,582 250,687 246,487 Other long-term liabilities 48,884 43,604 46,178 Deferred income taxes 17,917 18,261 18,733 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 2009 and in 2008; issued and outstanding 38,669,447 shares as 387 383 383 ofSeptember 30, 2009 , 38,266,791 shares as ofDecember 31, 2008 and 38,264,058 shares as of September 30, 2008 Additional paid-in capital 92,356 85,035 83,041 Retained earnings 724,621 682,237 655,287 Accumulated other comprehensive - (146 ) (3,334 ) loss Total Granite Construction Inc. 817,364 767,509 735,377 shareholders' equity Noncontrolling interests 50,277 36,773 26,729 Total equity 867,641 804,282 762,106 Total liabilities and equity $ 1,844,899 $ 1,743,455 $ 1,821,529 September 30, December 31, September 30, FINANCIAL POSITION 2009 2008 2008 Working capital $ 473,209 $ 475,942 $ 419,348 Current ratio 1.70 1.76 1.56 Debt toGranite Construction Inc. shareholders' equity 0.27 0.27 0.28 capitalization Total liabilities to Granite Construction Inc. shareholders' 1.20 1.22 1.44 equity ratio
GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Revenue Construction $ 647,776 $ 771,941 $ 1,368,111 $ 1,755,457 Construction materials 71,527 124,478 158,688 283,321 Real estate 981 1,369 1,932 8,142 Total revenue 720,284 897,788 1,528,731 2,046,920 Cost of revenue Construction 549,053 643,531 1,123,038 1,437,093 Construction materials 64,528 109,068 145,991 247,959 Real estate 1,531 887 3,272 9,846 Total cost of revenue 615,112 753,486 1,272,301 1,694,898 Gross profit 105,172 144,302 256,430 352,022 General and 60,465 71,933 169,766 198,344 administrative expenses Gain on sales of 1,549 2,008 6,878 4,564 property and equipment Operating income 46,256 74,377 93,542 158,242 Other income (expense) Interest income 744 5,439 3,914 15,087 Interest expense (4,245 ) (5,303 ) (10,586 ) (12,871 ) Equity in income 4,021 (1,257 ) 4,360 (1,436 ) (loss) of affiliates Other income, net 3,062 549 8,278 9,196 Total other income 3,582 (572 ) 5,966 9,976 (expense) Income before provision 49,838 73,805 99,508 168,218 for income taxes Provision for income 13,300 21,473 26,316 46,681 taxes Net income 36,538 52,332 73,192 121,537 Amount attributable to noncontrolling (5,940 ) (594 ) (15,725 ) (31,058 ) interests Net income attributable to Granite Construction $ 30,598 $ 51,738 $ 57,467 $ 90,479 Inc. Net income per share attributable to common shareholders: Basic (1) $ 0.79 $ 1.35 $ 1.49 $ 2.35 Diluted (1) $ 0.79 $ 1.35 $ 1.49 $ 2.35 Weighted average shares of common stock: Basic 37,595 37,430 37,552 37,664 Diluted 37,709 37,557 37,670 37,760 Note: (1) Computed using the two-class method as required by the accounting standards adopted onJanuary 1, 2009 .
GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - in thousands) Nine Months Ended September 30, 2009 2008 Operating activities Net income $ 73,192 $ 121,537 Adjustments to reconcile net income to net cash provided by operating activities: Impairment of real estate held for development and 1,686 4,500 sale Depreciation, depletion and amortization 59,048 64,036 (Recovery of) provision for doubtful accounts, net (3,844 ) 8,914 Gain on sales of property and equipment (6,878 ) (4,564 ) Change in deferred income taxes (518 ) 1,116 Stock-based compensation 7,869 5,135 Excess tax benefit on stock-based compensation (670 ) (743 ) Gain from trading securities (431 ) - Equity in (income) loss of affiliates (4,360 ) 1,436 Acquisition of noncontrolling interest - (16,616 ) Changes in assets and liabilities, net of the (67,511 ) (79,854 ) effects of acquisition and consolidations Net cash provided by operating activities 57,583 104,897 Investing activities Purchases of marketable securities (61,974 ) (68,732 ) Maturities of marketable securities 32,610 64,090 Release of funds for acquisition of noncontrolling - 28,332 interest Additions to property and equipment (75,773 ) (76,098 ) Proceeds from sales of property and equipment 10,089 12,253 Acquisition of businesses - (14,022 ) Contributions to affiliates (4,969 ) (5,345 ) Issuance of notes receivable (4,270 ) - Other investing activities 450 626 Net cash used in investing activities (103,837 ) (58,896 ) Financing activities Proceeds from long-term debt 8,384 2,660 Long-term debt principal payments (18,139 ) (15,748 ) Cash dividends paid (15,031 ) (15,081 ) Purchase of common stock (2,840 ) (45,489 ) Contributions from noncontrolling partners 239 4,955 Distributions to noncontrolling partners (16,490 ) (37,713 ) Acquisition of noncontrolling interest - (11,716 ) Excess tax benefit on stock-based compensation 670 743 Other financing 52 - Net cash used in financing activities (43,155 ) (117,389 ) Decrease in cash and cash equivalents (89,409 ) (71,388 ) Cash and cash equivalents at beginning of period 460,843 352,434 Cash and cash equivalents at end of period $ 371,434 $ 281,046
GRANITE CONSTRUCTION INCORPORATED Business Segment Information (Unaudited - in thousands) Three Months Ended September 30, Nine Months Ended September 30, Granite Granite Land Granite Granite West East Company Granite West Granite East Land Company 2009 Revenue $ 564,089 $ 155,214 $ 981 $ 1,109,442 $ 417,357 $ 1,932 Gross profit $ 85,499 $ 20,223 $ (550 ) $ 181,320 $ 76,450 $ (1,340 ) (loss) Gross profit (loss) as 15.2 % 13.0 % -56.1 % 16.3 % 18.3 % -69.4 % a percent of revenue Operating income $ 56,299 $ 12,052 $ (1,221 ) $ 98,073 $ 55,136 $ (4,159 ) (loss) Operating income (loss) as 10.0 % 7.8 % -124.5 % 8.8 % 13.2 % -215.3 % a percent of revenue 2008 Revenue $ 749,487 $ 146,932 $ 1,369 $ 1,506,952 $ 531,826 $ 8,142 Gross profit $ 133,904 $ 9,916 $ 482 $ 266,457 $ 87,269 $ (1,704 ) (loss) Gross profit (loss) as 17.9 % 6.7 % 35.2 % 17.7 % 16.4 % -20.9 % a percent of revenue Operating income $ 93,570 $ 3,819 $ (191 ) $ 154,684 $ 67,196 $ (3,795 ) (loss) Operating income (loss) as 12.5 % 2.6 % -14.0 % 10.3 % 12.6 % -46.6 % a percent of revenueGRANITE CONSTRUCTION INCORPORATED Contract Backlog (Unaudited - in thousands) Contract Backlog by September 30, 2009 June 30, 2009 September 30, 2008 Segment Granite $ 553,728 34.3 % $ 824,676 53.8 % $ 915,472 50.3 % West Granite 1,058,540 65.7 % 707,567 46.2 % 906,116 49.7 % East Total $ 1,612,268 100.0 % $ 1,532,243 100.0 % $ 1,821,588 100.0 %
Source: Granite Construction Incorporated 