Granite Construction Incorporated Reports Fourth Quarter and Full Year 2006 Results
WATSONVILLE, Calif.,
The Company reported net income for the quarter of
The following table reconciles GAAP net income to net income on a proforma non-GAAP basis (in thousands):
Three months ended Years ended December 31, December 31, 2006 2005 2006 2005 GAAP net income $628 $35,812 $78,220 $83,150 Goodwill impairment charge 18,011 -- 18,011 -- Tax benefit of goodwill impairment charge (7,006) -- (7,006) -- Non-GAAP net income $11,633 $35,812 $89,225 $83,150 Non-GAAP diluted earnings per share 0.28 0.86 2.15 2.02
"I am very pleased to report that 2006 was another record-breaking yearfor the Branch Division," said William G. Dorey, President and Chief ExecutiveOfficer. "I am extremely proud of what our team was able to accomplish thisyear in both our construction and aggregate materials businesses. Thanks tomild weather in the West, we were able to work late into the season and have astrong finish to the year. More importantly, we are successfully capitalizingon what we consider to be one of the best construction markets in ourhistory."
"Unfortunately, our fourth quarter and full-year 2006 financial resultsfor HCD were considerably below our expectations. As outlined in ouroperational realignment announcement made today, we are implementing keystrategic changes in our operating structure that will allow us to moreeffectively and profitably manage our large, complex projects. We arecommitted to doubling our efforts in all aspects of this business so that wecan successfully capture the profit potential on this work."
He added, "As our financial results reflect, we are writing down the
Operating Results -- Quarter and Year-To-Date
Total gross profit as a percent of revenue for the fourth quarter 2006decreased to 7.2% compared with 15.6% for the same period last year.
Other income for the quarter ended
Total gross profit as a percent of revenue for the year ended
Results by Segment
Branch Division revenue for the quarter totaled
For the year ended
HCD revenue for the quarter totaled
The two largest downward forecast adjustments affecting the fourth quarterwere on the State Route 22 Design-Build project in
For the year ended
Business Outlook
The outlook for the Branch Division in 2007 is extremely positive. Drivenby healthy funding levels and strong local economies, the branches continue toexperience one of the best public sector construction markets they havewitnessed in many years. Pricing for construction materials is expected to behealthy in 2007 as demand for aggregates from both the public and privatesector remains strong.
The Company is currently forecasting HCD to break even in 2007 followed bya return to acceptable operating margins as the existing backlog is worked offand the benefits of the organizational realignment are realized.
Financial Results
The financial information in this announcement reflects the Company’spreliminary results subject to completion of the annual audit. Auditedfinancial results will appear in Granite’s Form 10-K, which will be filed onor before
Use of Non-GAAP Financials
In addition, to supplement the GAAP financial information, we haveprovided non-GAAP net income and earnings per share information that excludethe
Conference Call
Granite will conduct a conference call today at
Company Description
Granite, a member of the S&P 400 Midcap Index, the Domini 400 Social Indexand the Russell 2000, is one of the nation’s largest diversified heavy civilcontractors and construction materials producers. Granite Construction servespublic and private sector clients through its offices nationwide. For the 4thstraight year, Granite was named to FORTUNE’S List of 100 Best Companies toWork For. For more information about the company, please visit their websiteat www.graniteconstruction.com.
This press release contains forward-looking statements, within the meaningof Section 27A of the Securities Act of 1933, as amended, and Section 21E ofthe Securities Exchange Act of 1934, as amended, which represents ourmanagement’s beliefs and assumptions concerning future events such asstatements related to the existence of bidding opportunities and economicconditions on the Company’s future results. Additionally, forward-lookingstatements 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 comparableterminology, or by discussions of strategy. All such forward-lookingstatements are subject to risks and uncertainties that could cause actualresults of operations and financial condition and other events, as well as thetiming thereof, to differ materially from those expressed or implied in suchforward-looking statements. Specific risk factors include, without limitation,changes in the composition of applicable federal and state legislationappropriation committees; federal and state appropriation changes forinfrastructure spending; the general state of the economy; job productivity;accuracy of project estimates; weather conditions; competition and pricingpressures; and state referendums and initiatives. You should not place unduereliance on these forward-looking statements, which speak only as of the dateof this news release. You should also understand that many important factorsin addition to those discussed, referred to or incorporated by reference inthis press release, could cause our results to differ materially from thoseexpressed in the forward-looking statements. In light of these risks anduncertainties, it is important to be aware that the forward-looking eventsdiscussed in this release may not occur. We undertake no obligation to reviseor update publicly any forward-looking statements to conform the statement toactual results or changes in the Company’s expectations.
For further information regarding risks and uncertainties associated withGranite’s business, please refer to the "Management’s Discussion and Analysisof Financial Condition and Results of Operation" and "Risk Factors" sectionsof Granite’s SEC filings, including, but not limited to, its annual report onForm 10-K and quarterly reports on Form 10-Q, copies of which may be obtainedby contacting Granite’s investor relations department at (831) 724-1011 or atGranite’s website at http://www.graniteconstruction.com.
GRANITE CONSTRUCTION INCORPORATED COMPARATIVE FINANCIAL SUMMARY (Unaudited - In Thousands, Except Per Share Data) Three Months Ended December 31, Variance Operations 2006 2005 Amount Percent Revenue Construction $608,624 $583,831 $24,793 4.2 Material sales $106,603 $95,721 $10,882 11.4 Total revenue $715,227 $679,552 $35,675 5.2 Cost of revenue Construction $581,661 $501,690 $(79,971) (15.9) Material sales $82,423 $71,838 $(10,585) (14.7) Total cost of revenue $664,084 $573,528 $(90,556) (15.8) Gross profit $51,143 $106,024 $(54,881) (51.8) Gross profit as a percent of revenue 7.2% 15.6% (8.4%) -- General and administrative expenses $48,530 $53,767 $5,237 9.7 G&A expenses as a percent of revenue 6.8% 7.9% 1.1% -- Provision for legal judgment $(4,800) -- $4,800 -- Impairment of goodwill $18,011 -- $(18,011) -- Gain on sales of property and equipment $891 $3,579 $(2,688) (75.1) Other income (expense) Interest income $7,380 $4,753 $2,627 55.3 Interest expense $(387) $(1,531) $1,144 74.7 Equity in income of affiliates $636 $1,489 $(853) (57.3) Other, net $(96) $1,806 $(1,902) **** Total other income $7,533 $6,517 $1,016 15.6 Income (loss) before provision for (benefit from) income taxes and minority interest $(2,174) $62,353 $(64,527) **** Minority interest $951 $(8,447) $9,398 **** Net income $628 $35,812 $(35,184) (98.2) Net income per share: Basic $0.02 $0.88 $(0.86) (97.7) Diluted $0.02 $0.86 $(0.84) (97.7) Weighted average shares of common stock: Basic 40,935 40,676 259 0.6 Diluted 41,581 41,417 164 0.4 Year Ended December 31, Variance Operations 2006 2005 Amount Percent Revenue Construction $2,554,745 $2,307,062 $247,683 10.7 Material sales $410,159 $334,290 $75,869 22.7 Total revenue $2,964,904 $2,641,352 $323,552 12.2 Cost of revenue Construction $2,361,155 $2,060,680 $(300,475) (14.6) Material sales $313,329 $261,300 $(52,029) (19.9) Total cost of revenue $2,674,484 $2,321,980 $(352,504) (15.2) Gross profit $290,420 $319,372 $(28,952) (9.1) Gross profit as a percent of revenue 9.8% 12.1% (2.3%) -- General and administrative expenses $204,281 $183,392 $(20,889) (11.4) G&A expenses as a percent of revenue 6.9% 6.9% -- -- Provision for legal judgment $(4,800) $9,300 $14,100 **** Impairment of goodwill $18,011 -- $(18,011) -- Gain on sales of property and equipment $10,408 $8,235 $2,173 26.4 Other income (expense) Interest income $24,112 $11,573 $12,539 **** Interest expense $(4,492) $(6,932) $2,440 35.2 Equity in income of affiliates $2,157 $1,497 $660 44.1 Other, net $2,604 $1,258 $1,346 **** Total other income $24,381 $7,396 $16,985 **** Income (loss) before provision for (benefit from) income taxes and minority interest $107,717 $142,311 $(34,594) (24.3) Minority interest $7,720 $(17,748) $25,468 **** Net income $78,220 $83,150 $(4,930) (5.9) Net income per share: Basic $1.91 $2.05 $(0.14) (6.8) Diluted $1.89 $2.02 $(0.13) (6.4) Weighted average shares of common stock: Basic 40,874 40,614 260 0.6 Diluted 41,471 41,249 222 0.5 **** Represents percentages greater than 100% GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - In thousands, except share and per share data) December 31, December 31, 2006 2005 Assets Current assets Cash and cash equivalents $204,893 $199,881 Short-term marketable securities 141,037 68,540 Accounts receivable, net 492,229 476,453 Costs and estimated earnings in excess of billings 15,797 43,660 Inventories 41,529 33,161 Real estate held for sale 55,888 46,889 Deferred income taxes 38,237 22,996 Equity in construction joint ventures 31,912 27,408 Other current assets 63,144 57,960 Total current assets 1,084,666 976,948 Property and equipment, net 429,966 397,111 Long-term marketable securities 48,948 32,960 Investment in affiliates 21,471 15,855 Other assets 50,798 49,356 Total assets $1,635,849 $1,472,230 Liabilities and Shareholders’ Equity Current liabilities Current maturities of long-term debt $28,660 $26,888 Accounts payable 257,612 232,807Billings in excess of costs and estimated earnings 292,543 208,883 Accrued expenses and other current liabilities 189,928 140,569 Total current liabilities 768,743 609,147 Long-term debt 78,576 124,415 Other long-term liabilities 58,419 46,556 Deferred income taxes 22,324 37,325 Minority interest in consolidated subsidiaries 15,532 33,227 Shareholders’ 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 2006 and 100,000,000 shares in 2005; issued and outstanding 41,833,559 shares in 2006 and 41,682,010 shares in 2005 418 417 Additional paid-in capital 78,620 80,619 Retained earnings 610,586 549,101 Accumulated other comprehensive income 2,631 1,602 Unearned compensation -- (10,179) Total shareholders’ equity 692,255 621,560 Total liabilities and shareholders’ equity $1,635,849 $1,472,230 December 31, December 31, Financial Position 2006 2005 Working capital $315,923 $367,801 Current ratio 1.41 1.60 Debt to total capitalization 0.13 0.20 Total liabilities to equity ratio 1.36 1.37 GRANITE CONSTRUCTION INCORPORATED REVENUE AND BACKLOG ANALYSIS (Unaudited - Dollars In Thousands) BY MARKET SECTOR Revenue Year Ended December 31, Variance 2006 2005 Amount Percent Public Sector $2,021,301 $1,808,026 $213,275 11.8 Private Sector 533,444 499,036 34,408 6.9 Aggregate sales 410,159 334,290 75,869 22.7 $2,964,904 $2,641,352 $323,552 12.2 Backlog December 31, Variance 2006 2005 Amount Percent Public Sector $2,066,950 $2,083,824 $(16,874) (0.8) Private Sector 189,037 247,716 (58,679) (23.7) $2,255,987 $2,331,540 $(75,553) (3.2) BY GEOGRAPHIC AREA Revenue Year Ended December 31, Variance 2006 2005 Amount Percent California $1,294,323 $1,028,041 $266,282 25.9 West (Excl. CA) 866,092 788,682 77,410 9.8 Midwest 58,726 92,931 (34,205) (36.8) Northeast 281,552 324,477 (42,925) (13.2) Southeast 244,233 176,088 68,145 38.7 South 219,978 231,133 (11,155) (4.8) $2,964,904 $2,641,352 $323,552 12.2 Backlog December 31, Variance 2006 2005 Amount Percent California $559,169 $598,914 $(39,745) (6.6) West (Excl. CA) 516,614 585,269 (68,655) (11.7) Midwest 443,909 76,464 367,445 **** Northeast 248,605 491,944 (243,339) (49.5) Southeast 272,881 224,549 48,332 21.5 South 214,809 354,400 (139,591) (39.4) $2,255,987 $2,331,540 $(75,553) (3.2) **** Represents percentages greater than 100%
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