Granite Reports First-Quarter 2010 Financial Results
-- Revenue down 36 percent from a year ago
-- Net loss of $41 million compared with net income of $8.9 million
-- Backlog increased $177 million to $1.6 billion from year-end
-- Balance sheet remains strong, with $299 million in cash and short-term
marketable securities
"As we previously announced, throughout the quarter we continued to experience a challenging and competitive market environment in addition to extremely poor weather across the country," said Granite President and Chief Executive Officer
First-quarter 2010 Financial Results
-- Revenue totaled $220.7 million compared with $347.4 million in 2009,
driven by weakness in demand and the impact of weather. First-quarter
2009 included approximately $46.0 million in revenue associated with
work performed on the border fence project in the Southwest and $17.3
million related to a favorable settlement on a project in the East.
-- Gross profit margin was 3 percent, down from 20 percent in 2009, driven
primarily by a decline in revenue, no meaningful contract claim
settlements and increased competition.
-- Operating loss for the quarter was $45.1 million compared with operating
income of $16.9 million in the prior year.
-- Selling, general and administrative expenses for the first quarter were
$55.3 million compared with $54.4 million for the same period last year.
The first quarter of 2010 did not contain a bad-debt recovery compared
with the first quarter of 2009, which included recovery of $2.9 million
related to an account reserved in the prior year. First quarter 2010
expenses were also impacted by:
o $0.7 million increase in selling expenses, partially offset by a $2.1
million decrease in variable compensation expense
o $0.6 million related to severance costs associated with the Company's
restructuring
-- Net income attributable to non-controlling interests in joint ventures
was $3.2 million compared with $5.1 million in 2009.
-- Total contract backlog at March 31, 2010 , was $1.6 billion compared with
$1.4 billion at December 31, 2009 , and $1.6 billion at March 31, 2009 .
Construction
-- Construction revenue for the quarter totaled $81.2 million compared with
$168.0 million for the same period in 2009. The decrease was affected by
overall lower demand, weather and the lack of border fence work as
compared to the prior year.
-- Gross profit margin for the first quarter was 2 percent compared with 21
percent a year ago, partially due to the decline in revenue as well as
profitability associated with border fence work.
-- Large Project Construction revenue for the quarter totaled $106.3
million compared with $149.1 million for the same period last year. The
decrease is attributable primarily to less revenue generated from
projects nearing completion and new projects getting under way. First
quarter 2009 revenue also included $17.3 million related to a favorable
settlement on a project in the East.
-- Gross profit margin for the quarter decreased to 9 percent compared with
23 percent for the same period last year. First-quarter 2009 margin also
included $17.3 million related to the project settlement.
-- Construction Materials revenue for the quarter totaled $26.2 million
compared with $29.8 million for the same period last year.
-- Gross loss on the sale of construction materials was $7.1 million in
2010 compared with $0.3 million in 2009. The decline reflects lower
sales volume during the quarter and the effects of fixed costs
associated with our materials-processing facilities.
Outlook
"We expect 2010 to be a challenging year for our business," said Dorey. "Competition for the available work remains tough, and we expect gross margins on smaller projects to remain under pressure for the balance of the year. In addition, we now expect the Houston Metro Light Rail and the Queens Bored Tunnel projects to reach our profit recognition threshold in 2011, not 2010 as previously anticipated.
"Despite the challenging market conditions, we have a substantial number of bidding opportunities, and we expect backlog to increase throughout 2010. Longer-term, we expect to see the demand for our construction services and materials improve as the private development market begins to see signs of a recovery.
"For the full-year 2010, we expect Construction segment revenue to be
Conference Call
Granite will conduct a conference call tomorrow,
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) March 31, December 31, March 31, 2010 2009 2009 ASSETS Current assets Cash and cash equivalents $ 222,095 $ 338,956 $ 390,483 Short-term marketable securities 76,963 42,448 22,276 Receivables, net 197,658 280,252 233,867 Costs and estimated earnings in excess 33,445 10,619 54,400 of billings Inventories 49,483 45,800 59,254 Real estate held for development and 137,183 139,449 79,409 sale Deferred income taxes 31,150 31,034 43,484 Equity in construction joint ventures 71,693 67,693 44,423 Other current assets 56,033 50,467 52,488 Total current assets 875,703 1,006,718 980,084 Property and equipment, net 519,909 520,778 526,734 Long-term marketable securities 90,440 76,937 46,387 Investments in affiliates 30,823 24,644 21,768 Other noncurrent assets 80,371 80,498 79,534 Total assets $ 1,597,246 $ 1,709,575 $ 1,654,507 LIABILITIES AND EQUITY Current liabilities Current maturities of long-term debt $ 8,350 $ 15,017 $ 15,355 Current maturities of non-recourse debt 40,565 43,961 18,863 Accounts payable 100,102 131,251 141,783 Billings in excess of costs and 142,935 156,041 190,540 estimated earnings Accrued expenses and other current 156,374 159,843 159,323 liabilities Total current liabilities 448,326 506,113 525,864 Long-term debt 225,203 225,203 233,553 Long-term non-recourse debt 16,895 19,485 17,798 Other long-term liabilities 52,471 48,998 45,836 Deferred income taxes 27,217 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 38,801,232 shares as ofMarch 31, 2010 , 38,635,021 shares as ofDecember 31, 2009 and 38,679,123 shares as of March 31, 2009 388 386 387 Additional paid-in capital 93,688 94,633 88,158 Retained earnings 689,634 735,632 686,129 Total Granite Construction Incorporated 783,710 830,651 774,674 shareholders' equity Noncontrolling interests 43,424 51,905 38,865 Total equity 827,134 882,556 813,539 Total liabilities and equity $ 1,597,246 $ 1,709,575 $ 1,654,507
GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - in thousands, except per share data) Three Months Ended March 31, 2010 2009 Revenue Construction $ 81,186 $ 168,049 Large project construction 106,325 149,060 Construction materials 26,164 29,846 Real estate 7,008 417 Total revenue 220,683 347,372 Cost of revenue Construction 79,340 132,873 Large project construction 96,842 115,396 Construction materials 33,289 30,160 Real estate 5,498 207 Total cost of revenue 214,969 278,636 Gross profit 5,714 68,736 Selling, general and administrative expenses 55,292 54,355 Gain on sales of property and equipment 4,452 2,521 Operating (loss) income (45,126 ) 16,902 Other income (expense) Interest income 939 2,061 Interest expense (3,734 ) (3,488 ) Equity in loss of affiliates (319 ) (444 ) Other income, net 2,897 3,785 Total other (expense) income (217 ) 1,914 (Loss) income before (benefit from) provision for (45,343 ) 18,816 income taxes (Benefit from) provision for income taxes (7,613 ) 4,829 Net (loss) income (37,730 ) 13,987 Amount attributable to noncontrolling interests (3,224 ) (5,067 ) Net (loss) income attributable to Granite Construction $ (40,954 ) $ 8,920 Incorporated Net (loss) income per share attributable to common shareholders: Basic (1) $ (1.09 ) $ 0.23 Diluted (1) $ (1.09 ) $ 0.23 Weighted average shares of common stock: Basic 37,688 37,476 Diluted 37,688 37,600 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) Three Months Ended March 31, 2010 2009 Operating activities Net (loss) income $ (37,730 ) $ 13,987 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation, depletion and amortization 18,662 20,623 Provision for (recovery of) doubtful accounts 508 (2,723 ) Gain on sales of property and equipment (4,452 ) (2,521 ) Stock-based compensation 3,158 2,777 Gain on company owned life insurance (1,748 ) - Changes in assets and liabilities, net of the effects (2,752 ) (46,125 ) of consolidations Net cash used in operating activities (24,354 ) (13,982 ) Investing activities Purchases of marketable securities (47,511 ) (29,258 ) Maturities of marketable securities - 15,610 Additions to property and equipment (14,712 ) (29,601 ) Proceeds from sales of property and equipment 5,674 3,741 Purchase of private preferred stock (6,400 ) - Contributions to affiliates (165 ) (2,219 ) Other investing activities, net (288 ) 148 Net cash used in investing activities (63,402 ) (41,579 ) Financing activities Proceeds from long-term debt 53 2,435 Long-term debt principal payments (8,739 ) (7,282 ) Cash dividends paid (5,023 ) (4,975 ) Purchase of common stock (3,296 ) (2,017 ) Distributions to noncontrolling partners (12,142 ) (3,153 ) Other financing activities 42 193 Net cash used in financing activities (29,105 ) (14,799 ) Decrease in cash and cash equivalents (116,861 ) (70,360 ) Cash and cash equivalents at beginning of period 338,956 460,843 Cash and cash equivalents at end of period $ 222,095 $ 390,483
GRANITE CONSTRUCTION INCORPORATED Business Segment Information (Unaudited - in thousands) Three Months Ended March ConstructionLarge Project Construction Real Estate 31, Construction Materials 2010 Revenue $ 81,186 $ 106,325 $ 26,164 $ 7,008 Gross profit (loss) $ 1,846 $ 9,483 $ (7,125 ) $ 1,510 Gross profit (loss) as a 2.3 % 8.9 % -27.2 % 21.5 % percent of revenue 2009 Revenue $ 168,049 $ 149,060 $ 29,846 $ 417 Gross profit (loss) $ 35,176 $ 33,664 $ (314 ) $ 210 Gross profit (loss) as a 20.9 % 22.6 % -1.1 % 50.4 % percent of revenue
GRANITE CONSTRUCTION INCORPORATED Contract Backlog by Segment (1) (Unaudited - in thousands) Period Construction Large Project Construction Total ended December $ 641,546 37.8 % $ 1,057,850 62.2 % $ 1,699,396 100.0 % 31, 2008 March 31, 587,076 37.4 % 982,998 62.6 % 1,570,074 100.0 % 2009 June 30, 687,696 44.9 % 844,547 55.1 % 1,532,243 100.0 % 2009 September 439,225 27.2 % 1,173,043 72.8 % 1,612,268 100.0 % 30, 2009 December 359,360 25.6 % 1,042,628 74.4 % 1,401,988 100.0 % 31, 2009 March 31, 487,751 30.9 % 1,091,251 69.1 % 1,579,002 100.0 % 2010 Note: (1) For investors who may want to consider the effects of the realignment on segment contract backlog, Granite is providing contract backlog for ourConstruction and Large Project Construction segments beginning with year ended 2008 and as of each quarter thereafter.
Source: Granite Construction Incorporated 