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
- 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.
Large Project 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 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 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.
“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.