Granite Reports Third-Quarter 2013 Results

  • Strong backlog trends continue; company backlog of $2.8 billion, up more than $1 billion year-over-year
  • Execution and market improvement drive nearly 200 basis points of margin increase in Construction segment
  • Large Project Construction segment margin impacted by negative forecast change and timing of project portfolio progression
  • Company to announce completion of 2010 Enterprise Improvement Plan restructuring actions in fourth quarter

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE: GVA) today reported net income attributable to common shareholders of $11.0 million, or $0.28 per diluted share, for the third quarter of 2013 compared with $37.1 million, or $0.94 per diluted share, for the third quarter of 2012.

“Improved execution in the third quarter in our Construction segment drove solid year-over-year margin growth,” said James H. Roberts, Granite President and Chief Executive Officer. “Large project results reflect fewer projects in the mature, profit-generating stage than last year. In addition, this quarter and throughout 2013, we have dealt with the ongoing negative impact from a large highway project in the state of Washington. The project is about 80 percent complete, and is expected to finish in mid-2014. The talented, senior team in place is committed to completing the project expeditiously and efficiently for the owner. We are pursuing our rights for a significant cost recovery on this project.

“Backlog trends across our business remained strong during the quarter, and remain at record levels,” Roberts said. “A healthier backlog, opportunities in our Construction segment, and overall improved execution in the business provide the foundation for a much improved 2014. In addition, the Large Project Construction segment is well positioned for profit recognition in late-2014, as well as 2015, as we build momentum on several projects, including the Tappan Zee Bridge in New York, IH-35E in Texas, and I-40/440 in North Carolina. We also continue to develop revenue synergies with the Kenny acquisition, reflected this quarter by a milestone power division win.”

Third-quarter 2013 Financial Results

Total Company

  • Revenues for the quarter totaled $741.6 million, compared with $728.5 million in 2012.
  • Gross profit was $54.4 million in the third quarter of 2013, compared with $101.1 million last year, with corresponding gross profit margins of 7.3 percent and 13.9 percent for the respective periods.
  • Selling, general and administrative expenses for the third quarter were $46.6 million, compared with $41.3 million in 2012. Kenny Construction Company (“Kenny”), acquired by Granite on December 31, 2012, accounted for nearly all of the increase.
  • Operating income for the quarter was $10.6 million compared with $61.4 million in the prior year.
  • Total contract backlog at September 30, 2013, was $2.8 billion compared with $1.6 billion at September 30, 2012.
  • Cash and marketable securities totaled $299.4 million at September 30, 2013, compared to $372.3 million for the same period last year due to less cash generated from operating activities, higher net contributions to unconsolidated subsidiaries, the acquisition of Kenny, and working capital changes.

Construction

  • Construction revenues were $470.6 million in the third quarter of 2013, compared with $385.7 million a year ago. Kenny and certain Western markets drove the increase, more than offsetting revenue weakness in California in the quarter.
  • Gross profit in the third quarter of 2013 was $49.6 million, compared with $33.3 million last year, with corresponding gross profit margins of 10.5 percent and 8.6 percent for the respective periods. The improvement was driven by overall improved project execution, improved market conditions, and the addition of Kenny.

Large Project Construction

  • Large Project Construction revenues in the third quarter were $187.8 million compared with $255.9 million in the same period last year, reflecting the timing of new projects.
  • The segment reported a loss of $2.5 million in the third quarter of 2013, compared with gross profit of $57.8 million last year. Third quarter 2012 gross profit included $35.9 million in positive forecast changes related to a greater number of projects in the mature, profit-generating stage. The gross profit decline in the third quarter of 2013 was driven by a significant negative forecast change on a large project in Washington State and by timing of overall project portfolio progression. The Company is pursuing claims for significant cost recovery on the project in Washington. The Company recognizes revenue on project claims only when an agreement is executed with the customer.

Construction Materials

  • Construction Materials revenues in the third quarter totaled $83.2 million compared with $86.8 million for the same period last year.
  • Gross profit in the third quarter of 2013 was $7.3 million, compared with $10.0 million last year, with corresponding gross profit margins of 8.8 percent and 11.5 percent for the respective periods. Aggregates pricing improved in the quarter, though volumes reflected continued weak demand in certain Western markets.

Outlook

“We are finalizing restructuring actions related to our 2010 Enterprise Improvement Plan,” Roberts said. “As part of the Plan, we previously identified select real estate holdings and underperforming Construction Materials segment assets for possible closure or divestiture. Any actions taken will generate anticipated restructuring charges and future cost savings. We plan to communicate these actions in the fourth quarter.

“We expect breakeven net income to a small loss in the fourth quarter of 2013, before the impact of anticipated restructuring charges,” Roberts said. “The Company's guidance for 2013 is as follows: Construction segment revenues are expected to total $1.2 billion to $1.3 billion, with a corresponding gross profit margin of 8.5 percent to 9.5 percent. Large Project Construction segment revenues are expected to be in the range of $750 million to $800 million, with a corresponding gross profit margin of 8.5 percent to 9.5 percent. Construction Materials revenues are expected to be $220 million to $230 million, with a corresponding gross profit margin of 2 percent to 3 percent. Selling, general and administrative expenses are expected to be $205 million to $210 million for the year.”

Roberts concluded, “Improvement in our Construction segment was highlighted by increased gross profit in the third quarter, and backlog growth in the segment points to growth in 2014. The Large Project Construction segment is pursuing and expects significant cost recovery on a challenging project, and backlog remains at record levels. Kenny is operating as planned, and is expected to be accretive in 2014. Overall, we are implementing our plan, and we are well positioned for 2014 and beyond.”

Conference Call

Granite will conduct a conference call today, November 4, 2013, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended September 30, 2013. Access to a live audio webcast is available at http://investor.graniteconstruction.com/index.cfm. The live conference call may be accessed by calling (877) 643-7158; international callers may dial (914) 495-8565. The conference ID for the live call is 90428653. The call will be recorded and available for replay approximately two hours after the live audio webcast through November 11, 2013 by calling (855) 859-2056. The conference ID for the replay is also 90428653; international callers may dial (404) 537-3406.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE: GVA) is one of the nation’s largest infrastructure contractors and construction materials producers. Incorporated in 1922, Granite serves public- and private-sector clients on projects both small and large. Granite’s project teams represent some of the best in the industry serving owners in the transportation, power, federal, tunneling, underground, and industrial/mining and water resources markets. In 2013, the Company was recognized by the Ethisphere Institute as one of the World’s Most Ethical Companies for the fourth year in a row. For more information please visit www.graniteconstruction.com.

Forward-looking Statements

Any statements contained in this news release that are not based on historical facts, including statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,” “outlook,” “assumes,” “believes,” “expects,” “estimates,” “anticipates,” “intends,” “plans,” “appears,” “may,” “will,” “should,” “could,” “would,” “continue,” and the negatives thereof or other comparable terminology or by the context in which they are made. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, activities, performance, outcomes and results. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those described in greater detail in our filings with the Securities and Exchange Commission, particularly those specifically described in our Annual Report on Form 10-K and quarterly reports on Form 10-Q.

Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this news release and, except as required by law; we undertake no obligation to revise or update any forward-looking statements for any reason.

 
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
 
      September 30,     December 31,     September 30,
      2013     2012     2012
ASSETS                  
Current assets                  
Cash and cash equivalents     $ 212,463     $ 321,990     $ 287,322
Short-term marketable securities       22,892       56,088       47,185
Receivables, net       422,609       325,529       363,455
Costs and estimated earnings in excess of billings       40,837       34,116       49,548
Inventories       61,667       59,785       63,999
Real estate held for development and sale       50,250       50,223       57,964
Deferred income taxes       36,687       36,687       38,571
Equity in construction joint ventures       161,063       105,805       97,890
Other current assets       33,204       31,834       13,974
Total current assets       1,041,672       1,022,057       1,019,908
Property and equipment, net       456,524       481,478       432,293
Long-term marketable securities       64,014       55,342       37,802
Investments in affiliates       31,338       30,799       30,257
Goodwill       53,799       55,419       9,900
Other noncurrent assets       78,655       84,392       68,475
Total assets     $ 1,726,002     $ 1,729,487     $ 1,598,635
LIABILITIES AND EQUITY                  
Current liabilities                  
Current maturities of long-term debt     $ 20     $ 8,353     $ 8,352
Current maturities of non-recourse debt       2,147       10,707       16,712
Accounts payable       199,480       202,541       209,683
Billings in excess of costs and estimated earnings       144,706       139,692       91,348
Accrued expenses and other current liabilities       219,169       169,979       167,166
Total current liabilities       565,522       531,272       493,261
Long-term debt       270,148       270,148       200,168
Long-term non-recourse debt       7,048       922       4,375
Other long-term liabilities       46,474       47,124       47,913
Deferred income taxes       7,988       8,163       3,644
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 38,878,194 shares as of September 30, 2013, 38,730,665 shares as of December 31, 2012 and 38,706,966 shares as of September 30, 2012

       388       387       387
Additional paid-in capital       123,681       117,422       114,917
Retained earnings       688,440       712,144       699,277
Total Granite Construction Incorporated shareholders’ equity       812,509       829,953       814,581
Noncontrolling interests       16,313       41,905       34,693
Total equity       828,822       871,858       849,274
Total liabilities and equity     $ 1,726,002     $ 1,729,487     $ 1,598,635
                         

 

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,
      2013     2012     2013     2012
Revenue                        
Construction     $   470,567       $   385,744       $ 956,287       $ 748,803  
Large Project Construction         187,820           255,918         540,906         648,645  
Construction Materials         83,172           86,782         173,107         175,754  
Real Estate         16           38         141         5,055  
Total revenue         741,575           728,482         1,670,441         1,578,257  
Cost of revenue                        
Construction         420,932           352,471         868,300         688,989  
Large Project Construction         190,363           198,104         498,639         540,343  
Construction Materials         75,884           76,798         167,839         166,720  
Real Estate         —           10         13         4,254  
Total cost of revenue         687,179           627,383         1,534,791         1,400,306  
Gross profit         54,396           101,099         135,650         177,951  
Selling, general and administrative expenses         46,586           41,280         150,698         127,801  
Loss (gain) on restructuring         474           —         (23 )       (2,527 )
Gain on sales of property and equipment         3,259           1,622         7,653         6,493  
Operating income (loss)         10,595           61,441         (7,372 )       59,170  
Other (expense) income                        
Interest income         602           485         1,110         2,140  
Interest expense         (3,736 )         (2,561 )       (11,081 )       (8,570 )
Equity in (loss) income of affiliates         (2 )         1,481         273         380  
Other income, net         1,022           2,013         1,630         3,866  
Total other (expense) income         (2,114 )         1,418         (8,068 )       (2,184 )

Income (loss) before provision for (benefit from) income taxes

         8,481           62,859         (15,440 )       56,986  
Provision for (benefit from) income taxes         4,026           17,113         (3,235 )       15,440  
Net income (loss)         4,455           45,746         (12,205 )       41,546  
Amount attributable to noncontrolling interests         6,542           (8,625 )       3,938         (14,249 )

Net income (loss) attributable to Granite Construction Incorporated

     $   10,997       $   37,121       $ (8,267 )     $ 27,297  
                         
Net income (loss) per share attributable to common shareholders:                  
Basic     $   0.28       $   0.96       $ (0.21 )     $ 0.71  
Diluted     $   0.28       $   0.94       $ (0.21 )     $ 0.70  
Weighted average shares of common stock:                        
Basic         38,876           38,518         38,773         38,418  
Diluted         39,759           39,141         38,773         39,013  
                                             

 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
 
Nine Months Ended September 30,     2013     2012
Operating activities            
Net (loss) income     $ (12,205 )     $ 41,546  
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:      
Depreciation, depletion and amortization       54,788         43,651  
Non-cash restructuring, net       (23 )       (1,782 )
Other non-cash impairment charges       —         3,101  
Gain on sales of property and equipment       (7,653 )       (6,493 )
Stock-based compensation       10,645         8,910  
Changes in assets and liabilities       (110,067 )       (68,770 )
Net cash (used in) provided by operating activities       (64,515 )       20,163  
Investing activities            
Purchases of marketable securities       (34,957 )       (59,936 )
Maturities of marketable securities       57,000         70,100  
Proceeds from sale of marketable securities       5,000         55,000  
Additions to property and equipment       (30,467 )       (25,971 )
Proceeds from sales of property and equipment       18,431         8,368  
Payment of Kenny post-closing adjustments       (8,382 )       —  
Other investing activities, net       1,088         1,165  
Net cash provided by investing activities       7,713         48,726  
Financing activities            
Long-term debt principal payments       (10,900 )       (11,584 )
Cash dividends paid       (15,150 )       (15,078 )
Purchase of common stock       (5,457 )       (4,521 )
Contributions from noncontrolling partners       6,007         —  
Distributions from noncontrolling partners       (28,015 )       (8,022 )
Other financing activities       790         648  
Net cash used in financing activities       (52,725 )       (38,557 )
(Decrease) increase in cash and cash equivalents       (109,527 )       30,332  
Cash and cash equivalents at beginning of period       321,990         256,990  
Cash and cash equivalents at end of period     $ 212,463       $ 287,322  
                     

 

GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
                                                 
      Three Months Ended September 30,     Nine Months Ended September 30,
            Large Project     Construction                 Large Project     Construction      
      Construction     Construction     Materials     Real Estate     Construction     Construction     Materials     Real Estate
                                                 
2013                                                
Revenue     $ 470,567       $ 187,820       $ 83,172       $ 16       $ 956,287       $ 540,906       $ 173,107       $ 141  
Gross profit (loss)       49,635         (2,543 )       7,288         16         87,987         42,267         5,268         128  
Gross profit (loss) as a percent of revenue       10.5 %       (1.4 )%       8.8 %       100.0 %       9.2 %       7.8 %       3.0 %       90.8 %
                                                 
2012                                                
Revenue     $ 385,744       $ 255,918       $ 86,782       $ 38       $ 748,803       $ 648,645       $ 175,754       $ 5,055  
Gross profit       33,273         57,814         9,984         28         59,814         108,302         9,034         801  
Gross profit as a percent of revenue       8.6 %       22.6 %       11.5 %       73.7 %       8.0 %       16.7 %       5.1 %       15.8 %
                                                                                 
                                                                                 

 

GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
 
Contract Backlog by Segment     September 30, 2013     June 30, 2013     September 30, 2012
                                     
Construction     $ 705,839     25.6 %     $ 807,686     28.9 %     $ 530,291     33.3 %
Large Project Construction       2,049,003     74.4 %       1,989,156     71.1 %       1,061,143     66.7 %
                                     
Total     $ 2,754,842     100.0 %     $ 2,796,842     100.0 %     $ 1,591,434     100.0 %

 

Granite Construction Incorporated
Ron Botoff, 831-728-7532

 

Source: Granite Construction Incorporated