Granite Reports Third-Quarter 2010 Fiscal Results and Initiates Enterprise Improvement Plan to Position Company for 2011
-- Revenue in Q310 was $671 million vs. $720 million a year ago
-- SG&A expenses decreased $14 million during the quarter compared with a
year ago
-- Total company backlog in line with a year ago; $667 million in new
awards in Q310
-- Financial position remains strong, with $388 million in cash, cash
equivalents and marketable securities
"During the quarter, the Construction segment continued to feel the impact of lower demand for our services in the West, funding delays due to budget uncertainties and highly competitive market conditions. We did, however, see a slight pickup in demand for our construction materials as work that had been delayed due to weather in the first half of the year carried over into the third quarter," said
"I am also pleased to say that we are making steady progress in our effort to reduce costs and strengthen the business to achieve long-term profitable growth," Roberts continued. "As a part of the Enterprise Improvement Plan that we announced last month, we completed a comprehensive review of our business and associated cost structure. As a result of this rigorous evaluation, we have identified certain fixed assets and real estate investments that are now slated for closure or divestiture. In addition, we made the very difficult decision to reduce our salaried workforce by approximately 13 percent. While these actions will have a near-term impact on our business, they are an important part of our plan to increase our profitability and competitiveness and deliver significant improvement in our long-term financial performance."
Third-Quarter 2010 Financial Results
-- Revenue totaled $670.9 million compared with $720.3 million in 2009.
-- Gross profit margin was 11 percent compared with 15 percent in 2009,
driven primarily by lower margins in the Construction segment as well as
the impact of Large Projects that have yet to reach the profit
recognition threshold.
-- Operating income for the quarter was $32.2 million compared with $46.3
million in the prior year.
-- SG&A expenses for the third quarter were $47.2 million compared with
$61.0 million for the same period last year, driven by ongoing efforts
to reduce the company's overall cost structure.
-- Net income attributable to non-controlling interests was $4.6 million
compared with $5.9 million in 2009.
-- Total contract backlog at September 30, 2010 , was $1.6 billion ,
essentially flat compared with the backlog at September 30, 2009 .
-- New awards during the quarter include a $125.9 million auxiliary
spillway control structure in California , a $77.7 million rail project
in California and $47.7 million for our share of a freeway
reconstruction project in Utah .
-- The effective tax rate for the third quarter was a negative 22.8 percent
due to the adjustment of the year-to-date tax rate to 135.4 percent. The
unusually high year-to-date rate is due primarily to the ratio of
non-controlling interest of $11.9 million to pre-tax loss of $8.3
million . Non-controlling interest is generally not subject to income
taxes on a stand-alone basis and is deducted from income before
provision for income taxes in arriving at our effective tax rate.
Construction
-- Construction revenue for the quarter totaled $410.0 million compared
with $466.6 million for the same period in 2009, reflecting reductions
in available work out to bid as well as a highly competitive bidding
environment.
-- Gross profit margin for the third quarter was 11 percent compared with
16 percent for the same period in 2009, driven by a competitive bidding
environment and lower margins in backlog as compared with a year ago.
-- Large Project Construction revenue for the quarter totaled $170.0
million compared with $181.2 million for the same period last year.
-- Gross profit margin for the quarter decreased to 11 percent compared
with 14 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 revenue for the quarter totaled $88.1 million
compared with $71.5 million for the same period last year, as wet
weather in the first part of the year led to increased demand for
construction materials in the third quarter of 2010.
-- Gross profit on the sale of construction materials was $12.1 million in
2010 compared with $8.4 million in 2009. The increase in gross profit is
due primarily to higher sales volume for construction materials as a
result of weather in the first half of 2010 that shifted demand into the
third quarter.
Recent Company Actions
Granite announced on
Additionally, as part of the Enterprise Improvement Plan, the company is planning an orderly divesture of certain fixed assets as well as its real estate investment business. This decision is consistent with the Company's business strategy to focus on its core competencies and enhance operating efficiencies.
The combination of these actions is estimated to result in a pre-tax charge of approximately
Full-Year 2010 Guidance
Market conditions remain very challenging, as funding uncertainties coupled with the competitive climate continue to have an impact on revenue and gross margins for the Construction and
Revenue for the
Conference Call
Granite will conduct a conference call today,
About Granite
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) September 30, December 31, September 30, 2010 2009 2009 ASSETS Current assets Cash and cash equivalents $ 257,854 $ 338,956 $ 371,434 Short-term marketable securities 80,962 42,448 27,798 Receivables, net 375,914 280,252 382,572 Costs and estimated earnings in 34,448 10,619 38,011 excess of billings Inventories 45,224 45,800 51,972 Real estate held for development 151,638 139,449 135,306 and sale Deferred income taxes 31,035 31,034 43,356 Equity in construction joint 80,496 67,693 58,450 ventures Other current assets 42,409 50,467 41,185 Total current assets 1,099,980 1,006,718 1,150,084 Property and equipment, net 491,363 520,778 530,661 Long-term marketable securities 49,502 76,937 62,612 Investments in affiliates 32,515 24,644 21,309 Other noncurrent assets 78,611 80,498 80,233 Total assets $ 1,751,971 $ 1,709,575 $ 1,844,899 LIABILITIES AND EQUITY Current liabilities Current maturities of long-term $ 8,444 $ 15,017 $ 15,017 debt Current maturities of non-recourse 39,157 43,961 53,177 debt Accounts payable 206,993 131,251 211,670 Billings in excess of costs and 157,233 156,041 187,205 estimated earnings Accrued expenses and other current 173,547 159,843 209,806 liabilities Total current liabilities 585,374 506,113 676,875 Long-term debt 216,870 225,203 225,219 Long-term non-recourse debt 16,420 19,485 8,363 Other long-term liabilities 48,764 48,998 48,884 Deferred income taxes 27,883 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 38,769,787 shares as of September 388 386 387 30, 2010, 38,635,021 shares as of December 31, 2009 and 38,669,447 shares as of September 30, 2009 Additional paid-in capital 101,567 94,633 92,356 Retained earnings 711,497 735,632 724,621 Total Granite Construction 813,452 830,651 817,364 Incorporated shareholders' equity Noncontrolling interests 43,208 51,905 50,277 Total equity 856,660 882,556 867,641 Total liabilities and equity $ 1,751,971 $ 1,709,575 $ 1,844,899
GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2010 2009 2010 2009 Revenue Construction $ 409,989 $ 466,605 $ 729,118 $ 912,110 Large project 169,972 181,171 429,625 456,001 construction Construction 88,128 71,527 175,381 158,688 materials Real estate 2,761 981 11,613 1,932 Total revenue 670,850 720,284 1,345,737 1,528,731 Cost of revenue Construction 365,323 393,970 659,705 751,498 Large project 151,656 155,950 379,991 374,605 construction Construction 75,991 63,176 165,889 141,068 materials Real 1,725 1,531 8,585 3,272 estate Total cost of revenue 594,695 614,627 1,214,170 1,270,443 Gross profit 76,155 105,657 131,567 258,288 Selling, general and administrative 47,160 60,950 153,809 171,624 expenses Gain on sales of 3,165 1,549 11,417 6,878 property and equipment Operating income 32,160 46,256 (10,825 ) 93,542 (loss) Other income Interest 2,110 744 4,147 3,914 income Interest (547 ) (4,245 ) (7,294 ) (10,586 ) expense Equity in income 529 4,021 (177 ) 4,360 (loss) of affiliates Other income, 1,023 3,062 5,854 8,278 net Total other income 3,115 3,582 2,530 5,966 Income (loss) before (benefit from) 35,275 49,838 (8,295 ) 99,508 provision for income taxes (Benefit from) provision for income (8,026 ) 13,300 (11,233 ) 26,316 taxes Net 43,301 36,538 2,938 73,192 income Amount attributable to noncontrolling (4,620 ) (5,940 ) (11,902 ) (15,725 ) interests Net income (loss) attributable to $ 38,681 $ 30,598 $ (8,964 ) $ 57,467Granite Construction Incorporated Net income (loss) per share attributable to common shareholders: Basic $ 1.00 $ 0.79 $ (0.24 ) $ 1.49 (1) Diluted $ 0.99 $ 0.79 $ (0.24 ) $ 1.49 (1) Weighted average shares of common stock: Basic 37,865 37,595 37,802 37,552 Diluted 38,071 37,709 37,802 37,670 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) Nine Months Ended September 30, 2010 2009 Operating activities Net income $ 2,938 $ 73,192 Adjustments to reconcile net income to net cash provided by operating activities: Impairment of real estate held for development and 107 1,686 sale Depreciation, depletion and amortization 54,169 59,048 Provision for (recovery of) doubtful accounts 136 (3,844 ) Gain on sales of property and equipment (11,417 ) (6,878 ) Stock-based compensation 10,241 7,869 Gain on company owned life insurance (2,655 ) (2,013 ) Equity in loss (income) of affiliates 177 (4,360 ) Changes in assets and liabilities, net of the (43,130 ) (66,447 ) effects of consolidations Net cash provided by operating 10,566 58,253 activities Investing activities Purchases of marketable securities (78,355 ) (61,974 ) Maturities of marketable securities 60,900 32,610 Proceeds from company owned life insurance 2,078 - Additions to property and equipment (30,182 ) (75,773 ) Proceeds from sales of property and equipment 17,225 10,089 Purchase of private preferred stock (6,400 ) - Contributions to affiliates, net (1,233 ) (4,969 ) Issuance of notes receivable (1,314 ) (4,270 ) Collection of notes receivable 2,799 385 Other investing activities, net 77 65 Net cash used in investing (34,405 ) (103,837 ) activities Financing activities Proceeds from long-term debt 619 8,384 Long-term debt principal payments (18,472 ) (18,139 ) Cash dividends paid (15,110 ) (15,031 ) Purchase of common stock (3,374 ) (2,840 ) Distributions to noncontrolling partners, net (20,940 ) (16,251 ) Other financing activities 14 52 Net cash used in financing (57,263 ) (43,825 ) activities Decrease in cash and cash equivalents (81,102 ) (89,409 ) Cash and cash equivalents at beginning of period 338,956 460,843 Cash and cash equivalents at end of period $ 257,854 $ 371,434
GRANITE CONSTRUCTION INCORPORATED Business Segment Information (Unaudited - in thousands) Three Months Ended September 30, Nine Months Ended September 30, Large Construction Real Large Construction Real Construction Project Materials Estate Construction Project Materials Estate Construction Construction 2010 Revenue $ 409,989 $ 169,972 $ 88,128 $ 2,761 $ 729,118 $ 429,625 $ 175,381 $ 11,613 Gross $ 44,666 $ 18,316 $ 12,137 $ 1,036 $ 69,413 $ 49,634 $ 9,492 $ 3,028 profit Gross profit as 10.9 % 10.8 % 13.8 % 37.5 % 9.5 % 11.6 % 5.4 % 26.1 % a percent of revenue 2009 Revenue $ 466,605 $ 181,171 $ 71,527 $ 981 $ 912,110 $ 456,001 $ 158,688 $ 1,932 Gross profit $ 72,635 $ 25,221 $ 8,351 $ (550 ) $ 160,612 $ 81,396 $ 17,620 $ (1,340 ) (loss) Gross profit (loss) as 15.6 % 13.9 % 11.7 % -56.1 % 17.6 % 17.8 % 11.1 % -69.4 % a percent of revenue
GRANITE CONSTRUCTION INCORPORATED Contract Backlog by Segment (Unaudited - in thousands) September 30, 2010 June 30, 2010 September 30, 2009 Construction $ 497,089 30.3 % $ 594,214 38.3 % $ 439,226 27.2 % Large Project 1,141,453 69.7 % 957,080 61.7 % 1,173,042 72.8 % Construction Total $ 1,638,542 100.0 % $ 1,551,294 100.0 % $ 1,612,268 100.0 %
Source: Granite Construction Incorporated 