Granite Reports Third Quarter 2008 Financial Results
October 29, 2008
Granite Reports Third Quarter 2008 Financial Results
WATSONVILLE, Calif., Oct 29, 2008 (BUSINESS WIRE) -- Granite Construction Incorporated (NYSE:GVA) today announced net income for the third quarter ended September 30, 2008 of $51.7 million or $1.36 per diluted share, compared with net income of $53.3 million, or $1.28 per diluted share for the same period last year. Gross profit as a percent of revenue for the three months ended September 30, 2008 was 16.1%, flat compared to a year ago. Operating income for the quarter was $74.4 million, compared with $76.0 million a year ago. Total revenues for the quarter were $897.8 million compared with $846.3 million a year ago.
"Our team has delivered another impressive quarter," said President and Chief Executive Officer William G. Dorey. "I am very pleased with how our business is performing in the face of the current economic environment. Our results this year reflect the experience and determination of our workforce and the value of our business model. The diversity of our customer base, project portfolio and geographic markets is enabling us to successfully confront today’s challenging market conditions."
General and administrative expenses for the quarter totaled $71.9 million or 8.0% of revenue compared with $63.7 million or 7.5% of revenue in 2007. The Company continues to focus on reducing general and administrative expenses and is instituting several programs, including controlling discretionary spending, headcount reductions and a process improvement initiative. These efforts are expected to improve efficiency and effectiveness throughout the organization. The Company expects to see a reduction in general and administrative expenses on an absolute dollar basis in 2009.
Total Company backlog at September 30, 2008 was $1.8 billion compared with $2.3 billion a year ago. Since September 30, 2008, Granite West has been awarded approximately $100.0 million in new projects. Also not included in September 30, 2008 backlog are three large projects in Granite East and one in Granite West totaling approximately $500.0 million that are pending award by the project owner.
Minority interest for the quarter ended September 30, 2008 was $0.6 million compared with $6.5 million in the third quarter of 2007. The $5.9 million decrease primarily reflects continued progression and the effect of changes in estimates related to certain joint venture projects.
For the nine-month period ended September 30, 2008, total company revenues were $2.0 billion, essentially flat compared to the prior year. Gross profit as a percent of revenue for the nine months ended September 30, 2008 increased to 17.2% compared with 14.8% last year. Operating income for the total company increased to $158.2 million compared with $137.2 million in 2007.
At September 30, 2008, cash and marketable securities totaled $412.4 million and includes approximately $135.0 million of cash and cash equivalents from the Company’s consolidated joint ventures. Historically, the Company has operated under a conservative investment policy and has recently elected to invest even more conservatively in light of current market conditions. Given the Company’s strong cash position and approximately $145.6 million available under the existing credit facility, the Company does not anticipate the need to borrow funds in the current environment.
Operating Results by Segment
Granite West
Revenue for the quarter totaled $749.5 million compared with $642.4 million for the same period in 2007. Gross profit as a percent of revenue for the quarter ended September 30, 2008 was 17.8% compared with 19.4% last year. Operating income increased $3.6 million for the quarter to $93.4 million compared with $89.8 million for the third quarter last year. The increase in operating income for the quarter reflects improved project forecasts and higher than estimated productivity.
For the nine-month period ended September 30, 2008, Granite West revenues totaled $1.5 billion, essentially flat compared to the prior year. Gross profit as a percent of revenue for the nine months ended September 30, 2008 was 17.7% compared with 19.3% last year. Operating income for Granite West decreased to $155.3 million for the same period compared with $186.5 million in 2007. Year to date operating results for the segment were affected by a highly competitive bidding environment for construction services and lower demand for higher-margin construction materials.
Granite East
Revenue for the quarter was $146.9 million compared with $182.6 million for the same period last year. Gross profit as a percent of revenue for the quarter ended September 30, 2008 increased to 6.6% compared with 1.1% in the same period last year. Operating income for the quarter increased to $3.7 million compared with an operating loss of $3.2 million for the same period in 2007.
For the nine-month period ended September 30, 2008, Granite East revenue totaled $531.8 million compared with $585.3 million for the same period last year. Gross margin as a percent of revenue for the nine months ended September 30, 2008 was 16.5% compared with 1.4% last year. Operating income for Granite East totaled $67.8 million for the nine-month period compared with an operating loss of $13.4 million for the same period in 2007. The significant year over year gross margin improvement and increase in operating income is largely due to improved performance on several large projects.
Granite Land Company ("GLC")
GLC revenue for the quarter was $1.4 million compared with $21.2 million for the same period last year. Gross profit as a percent of revenue for the period was 35.2% compared with 45.1% last year. Operating loss for the quarter was $0.2 million compared with operating income of $8.2 million in the third quarter of 2007.
For the nine-month period ended September 30, 2008, GLC revenue was $8.1 million compared with $36.6 million in 2007. Gross loss as a percent of revenue for the period was 20.9% compared with a gross profit of 46.8% last year. Operating loss was $3.8 million for the nine-month period compared with operating income of $14.1 million for the same period in 2007. The 2008 operating loss reflects a $4.5 million pre-tax impairment charge in the second quarter. The 2007 results were positively affected by the sale of certain real estate development projects in the first and third quarter last year.
Outlook
Our expectations for 2008 have improved. We now expect Granite West revenue for the year to be in the range of $1.95 to $2.05 billion with a corresponding gross profit margin percentage between 17.0% and 18.0%. Granite East 2008 revenue is now expected to be in the range of $650.0 to $700.0 million with a corresponding gross profit margin percentage between 17.0% and 18.0%. Minority interest for the company is expected to be between $38.0 and $43.0 million for the year. Our longer term expectation for Granite East gross profit as a percent of revenue continues to be in the mid-teens.
Conference Call
Granite will conduct a conference call tomorrow, October 30, 2008, at 11:00 a.m. ET/ 8:00 a.m. PT to discuss the results for the third quarter ended September 30, 2008. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call may be accessed by calling (877) 864-2735 in the U.S. and Canada and (706) 634-7039 for international listeners. The conference ID for the call is 65146265. The conference call will be recorded and available for replay from approximately two hours after the live call through November 15, 2008 by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 65146265.
About Granite
Granite Construction Incorporated is a member of the S&P 400 Midcap Index, the Domini 400 Social Index and the Russell 2000. 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 the 5th straight year, Granite was named to FORTUNE’S List of 100 Best Companies to Work For. For more information about Granite, please visit their website at www.graniteconstruction.com.
Forward-Looking Statements
This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represents our management’s beliefs and assumptions concerning future events such as statements related to the existence of bidding opportunities and economic conditions on the Company’s future results. In addition, statements in this press release that are not historical are "forward-looking statements" as in the Private Securities Litigation Reform Act of 1995. Additionally, forward-looking statements include statements that can be identified by the use of forward-looking terminology such as "believes," "expects," "appears," "may," "will," "should," "look for," or "anticipates," or the negative thereof or comparable terminology, or by discussions of strategy.
All such forward-looking statements are subject to risks and uncertainties that could cause actual results of operations and financial condition and other events, as well as the timing thereof, to differ materially from those expressed or implied in such forward-looking statements. Specific risk factors include, without limitation, changes in the composition of applicable federal and state legislation appropriation committees; federal and state appropriation changes for infrastructure spending; the general state of the economy; job productivity; accuracy of project estimates; weather conditions; competition and pricing pressures; and state referendums and initiatives. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. You should also understand that many important factors in addition to those discussed, referred to or incorporated by reference in this press release, could cause our results to differ materially from those expressed in the forward-looking statements. In light of these risks and uncertainties, it is important to be aware that the forward-looking events discussed in this release may not occur. We undertake no obligation to revise or update publicly any forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.
For further information regarding risks and uncertainties, please refer to the "Management’s Discussion and Analysis of Financial Condition and Results of Operation" and "Risk Factors" sections of Granite’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Granite’s investor relations department at (831) 724-1011 or at Granite’s website at www.graniteconstruction.com.
GRANITE CONSTRUCTION INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited - In Thousands, Except Per Share Data) Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007RevenueConstruction $ 771,941 $ 701,622 $ 1,755,457 $ 1,778,638Material sales 124,478 123,453 283,321 289,655Real estate 1,369 21,238 8,142 36,556Total revenue 897,788 846,313 2,046,920 2,104,849Cost of revenueConstruction 643,531 601,880 1,437,093 1,543,960Material sales 109,068 96,130 247,959 229,116Real estate 887 11,666 9,846 19,466Total cost of revenue 753,486 709,676 1,694,898 1,792,542Gross profit 144,302 136,637 352,022 312,307General and administrative expenses 71,933 63,666 198,344 183,133Gain on sales of property and equipment 2,008 2,994 4,564 8,053Operating income 74,377 75,965 158,242 137,227Other income (expense)Interest income 5,439 7,514 15,087 20,796Interest expense (5,303 ) (1,884 ) (12,871 ) (4,998 )Equity in (loss) income of affiliates (1,257 ) 4,037 (1,436 ) 4,359Other, net 549 (391 ) 9,196 (1,057 )Total other (expense) income (572 ) 9,276 9,976 19,100Income before provision for income taxes and minority interest 73,805 85,241 168,218 156,327Provision for income tax 21,473 25,437 46,681 47,680Income before minority interest 52,332 59,804 121,537 108,647Minority interest in consolidated subsidiaries (594 ) (6,504 ) (31,058 ) (13,750 )Net income $ 51,738 $ 53,300 $ 90,479 $ 94,897Net income per share:Basic $ 1.38 $ 1.30 $ 2.40 $ 2.31Diluted $ 1.36 $ 1.28 $ 2.37 $ 2.28Weighted average shares of common stock:Basic 37,430 41,106 37,664 41,065Diluted 37,975 41,640 38,138 41,587
GRANITE CONSTRUCTION INCORPORATEDCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited - In Thousands, Except Per Share Data) September 30, December 31, 2008 2007AssetsCurrent assetsCash and cash equivalents $ 281,046 $ 352,434Short-term marketable securities 101,112 77,758Accounts receivable, net 480,315 397,097Costs and estimated earnings in excess of billings 34,759 17,957Inventories, net 61,342 55,557Real estate held for sale 52,165 51,688Deferred income taxes 46,233 43,713Equity in construction joint ventures 45,219 34,340Other current assets 65,182 96,969Total current assets 1,167,373 1,127,513Property and equipment, net 522,733 502,901Long-term marketable securities 30,209 55,156Investment in affiliates 27,518 26,475Other assets 73,696 74,373Total assets $ 1,821,529 $ 1,786,418Liabilities and Shareholders’ EquityCurrent liabilitiesCurrent maturities of long-term debt $ 34,886 $ 28,696Accounts payable 234,126 213,135Billings in excess of costs and estimated earnings 251,402 275,849Accrued expenses and other current liabilities 227,611 212,265Total current liabilities 748,025 729,945Long-term debt 246,487 268,417Other long-term debt 46,178 46,441Deferred income taxes 18,733 17,945Minority interest in consolidated subsidiaries 26,729 23,471Shareholders’ equity:Common stock, $0.01 par value, authorized 150,000,000 shares in 383 3952008 and 2007; issued and outstanding 38,264,058 shares in 2008and 39,450,923 shares in 2007Additional paid-in capital 83,041 79,007Retained earnings 655,287 619,699Accumulated other comprehensive (loss) income (3,334 ) 1,098Total shareholders’ equity 735,377 700,199Total liabilities and shareholders’ equity $ 1,821,529 $ 1,786,418 September 30, December 31,Financial Position 2008 2007Working capital $ 419,348 $ 397,568Current ratio 1.56 1.54Debt to total capitalization 0.28 0.30Total liabilities to equity ratio 1.48 1.55
GRANITE CONSTRUCTION INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited - In Thousands)Nine Months Ended September 30, 2008 2007Operating activitiesNet income $ 90,479 $ 94,897Adjustments to reconcile net income to net cash provided byoperating activities:Impairment of real estate held for development and sale 4,500 -Depreciation, depletion and amortization 64,036 60,621Provision for doubtful accounts 8,914 1,119Gain on sales of property and equipment (4,564 ) (8,053 )Change in deferred income taxes 1,116 (11 )Stock-based compensation 5,135 4,600Excess tax benefit on stock-based compensation (743 ) (3,042 )Minority interest in consolidated subsidiaries 31,058 13,750Equity in loss (income) of affiliates 1,436 (4,359 )Acquisition of minority interest (16,616 ) -Changes in assets and liabilities, net of the effects of acquisitions (79,854 ) (21,955 )Net cash provided by operating activities 104,897 137,567Investing activitiesPurchases of marketable securities (68,732 ) (126,464 )Maturities of marketable securities 64,090 140,225Release of funds for acquisition of minority interest 28,332 -Additions to property and equipment (76,098 ) (82,744 )Proceeds from sales of property and equipment 12,253 12,765Acquisition of businesses (14,022 ) (76,313 )Contributions to affiliates (5,345 ) (3,772 )Other investing activities 626 3,459Net cash used in investing activities (58,896 ) (132,844 )Financing activitiesProceeds from long-term debt 2,660 111,634Long-term debt principal payments (15,748 ) (49,376 )Cash dividends paid (15,081 ) (12,572 )Purchase of common stock (45,489 ) (5,083 )Contributions from minority partners 4,955 30,436Distributions to minority partners (37,713 ) (22,458 )Acquisition of minority interest (11,716 ) -Excess tax benefit on stock-based compensation 743 3,042Other financing, net - 366Net cash (used in) provided by financing activities (117,389 ) 55,989(Decrease) Increase in cash and cash equivalents (71,388 ) 60,712Cash and cash equivalents at beginning of period 352,434 204,893Cash and cash equivalents at end of period $ 281,046 $ 265,605
GRANITE CONSTRUCTION INCORPORATEDBusiness Segment Information(Unaudited - In Thousands) Three Months Ended September 30, Nine Months Ended September 30, Granite West Granite East Granite Land Company Granite West Granite East Granite Land Company2008Revenue $ 749,487 $ 146,932 $ 1,369 $ 1,506,952 $ 531,826 $ 8,142Gross profit (loss) $ 133,738 $ 9,750 $ 482 $ 267,057 $ 87,868 $ (1,704 )Gross profit (loss) as a percent of revenue 17.8 % 6.6 % 35.2 % 17.7 % 16.5 % -20.9 %Operating income (loss) $ 93,404 $ 3,653 $ (191 ) $ 155,284 $ 67,795 $ (3,795 )Operating income (loss) as a percent of revenue 12.5 % 2.5 % -14.0 % 10.3 % 12.7 % -46.6 %2007Revenue $ 642,428 $ 182,647 $ 21,238 $ 1,482,969 $ 585,324 $ 36,556Gross profit $ 124,656 $ 2,075 $ 9,571 $ 286,394 $ 8,478 $ 17,090Gross profit as a percent of revenue 19.4 % 1.1 % 45.1 % 19.3 % 1.4 % 46.8 %Operating income (loss) $ 89,755 $ (3,174 ) $ 8,241 $ 186,476 $ (13,359 ) $ 14,120Operating income (loss) as a percent of revenue 14.0 % -1.7 % 38.8 % 12.6 % -2.3 % 38.6 %GRANITE CONSTRUCTION INCORPORATEDBacklog(Unaudited - In Thousands)Backlog by Division September 30, 2008 June 30, 2008 September 30, 2007Granite West $ 915,472 50.3 % $ 1,188,948 55.5 % $ 950,833 40.7 %Granite East 906,116 49.7 % 952,700 44.5 % 1,385,688 59.3 %Total $ 1,821,588 100.0 % $ 2,141,648 100.0 % $ 2,336,521 100.0 %
SOURCE: Granite Construction Incorporated
Granite Construction Incorporated Jacque Fourchy, 831-761-4714 (Investors)
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