Granite Reports Second-Quarter 2012 Financial Results

Granite Construction Incorporated (NYSE: GVA) today reported second quarter 2012 net income of $1.9 million, or $0.05 per diluted share compared with $4.9 million, or $0.13 per diluted share, for the second quarter of 2011.

The second quarter 2012 reflects a $4.6 million increase in operating income driven by excellent execution on large projects. In addition, other expenses increased by $6.5 million which includes an impairment loss on an investment in a manufacturer of solar power systems.

“Operating results in the quarter continue to demonstrate Granite’s ability to successfully navigate through one of the toughest construction markets our company, and our industry, has faced in recent times,” said Granite President and Chief Executive Officer James H. Roberts. “We are facing these challenging conditions head on with a keen focus on maintaining a high level of discipline when it comes to costs, bidding and execution.”

“Looking ahead, while we anticipate the Construction and Construction Materials markets in the West will remain challenging, I am encouraged by the strategic initiatives we are employing to both diversify and grow our business,” Roberts added. “In addition to a full pipeline of bidding opportunities, we expect our Large Projects to reach a number of key milestones and continue to perform very well for the balance of the year. In addition, we expect to see local and state governments put more work out to bid over the coming months given the recent passage of a two-year federal highway bill.”

Second-quarter 2012 Financial Results

Total Company
  • Revenue totaled $539.6 million compared with $484.7 million in 2011, driven largely by an increase in Large Project Construction segment revenue.
  • Gross profit margin was 9.6 percent compared with 9.3 percent in 2011.
  • Selling, general and administrative expenses for the second quarter were $40.8 million compared with $38.8 million.
  • Operating income for the quarter was $14.1 million compared with $9.4 million in the prior year.
  • Other (expense) income includes $2.8 million attributable to a non-cash impairment loss on an investment.
  • Net income attributable to noncontrolling interests in joint ventures was $2.5 million compared with $1.2 million in 2011.
  • Total contract backlog at June 30, 2012, was $2.0 billion compared with $2.1 billion a year ago.

Construction
  • Construction revenue for the quarter decreased 5.9 percent to $245.1 million.
  • Gross profit margin for the second quarter was 7.3 percent compared with 9.0 percent a year ago primarily reflecting two project write-downs and the continued pressure on margins due to intense competition.

Large Project Construction
  • Large Project Construction revenue for the quarter increased 40.9 percent to $228.8 million reflecting progress on projects that are well underway across the country.
  • Gross profit margin for the quarter was 12.3 percent compared with 7.8 percent for the same period last year as a result of successful project execution and proportionately less revenue from projects that had yet to recognize gross profit.

Construction Materials
  • Construction Materials revenue for the quarter totaled $63.3 million compared with $58.1 million for the same period last year.
  • Gross profit margin on the sale of Construction Materials was 7.9 percent compared with 14.6 percent in 2011 reflecting ongoing weakness in the commercial and residential markets.

Outlook

Based on its year-to-date results and outlook for the remainder of the year, the company is making the following adjustments to its fiscal year 2012 guidance:

For the Construction segment, the company is reaffirming revenue guidance of $1.0 billion to $1.1 billion and reducing its gross profit margin guidance to between 8.0 percent and 9.0 percent due to the impact of a highly competitive environment throughout the West.

The company is also reaffirming its revenue guidance for the Large Project Construction segment of $1.0 billion to $1.1 billion. The company is increasing its gross profit margin guidance to between 14.5 percent and 15.5 percent reflecting ongoing expected successful execution.

As a result of the ongoing weakness in its vertically integrated markets, the company is lowering its revenue and gross profit margin guidance for the Construction Materials segment. Revenue is now expected to be $190.0 million to $210.0 million with a corresponding gross profit margin between 6.0 percent and 7.0 percent.

The company reaffirmed that it expects net income attributable to non-controlling interest in joint ventures to be in the range of $15.0 million to $18.0 million.

Conference Call

Granite will conduct a conference call tomorrow, August 3, 2012 at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the quarter ended June 30, 2012. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call may be accessed by calling (877) 643-7158. The conference ID for the live call is 99956501. The call will be recorded and will be available for replay approximately two hours after the live audio webcast through August 10, 2012 by calling (855) 859-2056. The conference ID for the replay is also 99956501.

About Granite

Granite is one of the nation’s leading infrastructure contractors and is member of the S&P 400 Midcap Index, the FTSE KLD 400 Social Index and the Russell 2000 Index. Through its wholly owned subsidiary, Granite is one of the nation’s largest diversified heavy civil contractors and construction materials producers serving public- and private-sector clients nationwide. In addition, Granite has one of the oldest and most robust ethics and compliance programs in the industry. The Company was recognized by the Ethisphere Institute as one of the World’s Most Ethical Companies for the third year in a row. For more information, please visit 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 under “Item 1A. Risk Factors.”

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)
             
  June 30,   December 31,   June 30,
    2012   2011   2011
 
ASSETS
Current assets
Cash and cash equivalents $ 237,951 $ 256,990 $ 190,069
Short-term marketable securities 43,260 70,408 78,255
Receivables, net 272,562 251,838 283,944
Costs and estimated earnings in excess of billings 69,688 37,703 51,739
Inventories 67,503 50,975 64,727
Real estate held for development and sale 57,367 67,037 78,725
Deferred income taxes 38,571 38,571 52,714
Equity in construction joint ventures 107,821 101,029 87,653
Other current assets     20,436     35,171     34,779
Total current assets 915,159 909,722 922,605
Property and equipment, net 439,664 447,140 464,616
Long-term marketable securities 45,800 79,250 49,580
Investments in affiliates 28,521 31,071 32,932
Other noncurrent assets     78,503     80,616     82,214
Total assets   $ 1,507,647   $ 1,547,799   $ 1,551,947
 
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 9,102 $ 9,102 $ 8,351
Current maturities of non-recourse debt 16,328 23,071 16,454
Accounts payable 186,290 158,660 179,664
Billings in excess of costs and estimated earnings 75,629 90,845 122,014
Accrued expenses and other current liabilities     155,322     166,790     156,727
Total current liabilities 442,671 448,468 483,210
Long-term debt 200,168 208,501 208,519
Long-term non-recourse debt 4,641 9,912 28,907
Other long-term liabilities 47,393 49,221 46,460
Deferred income taxes 3,644 4,034 10,983
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 38,684,540 shares as of June 30, 2012, 38,682,771 shares as of December 31, 2011 and 38,667,457 shares as of June 30, 2011
387 387 387
Additional paid-in capital 112,815 111,514 105,287
Retained earnings     667,278     687,296     642,228
Total Granite Construction Incorporated shareholders’ equity 780,480 799,197 747,902
Noncontrolling interests     28,650     28,466     25,966
Total equity     809,130     827,663     773,868
Total liabilities and equity   $ 1,507,647   $ 1,547,799   $ 1,551,947
 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
                     
 

Three Months Ended June 30,
     

Six Months Ended June 30,
      2012       2011           2012       2011  
Revenue            
Construction $ 245,113 $ 260,600 $ 363,059 $ 353,292
Large project construction 228,799 162,338 392,727 300,158
Construction materials 63,349 58,114 88,972 81,912
Real estate     2,354       3,622           5,017       6,043  
Total revenue     539,615       484,674           849,775       741,405  
Cost of revenue
Construction 227,152 237,211 336,518 324,350
Large project construction 200,560 149,680 342,239 256,202
Construction materials 58,349 49,644 89,922 80,712
Real estate     1,638       3,183           4,244       5,197  
Total cost of revenue     487,699       439,718           772,923       666,461  
Gross profit 51,916 44,956 76,852 74,944
Selling, general and administrative expenses 40,806 38,793 83,994 82,165
Gain on sales of property and equipment     2,954       3,270           4,871       5,974  
Operating income (loss) 14,064 9,433 (2,271 ) (1,247 )
Other income (expense)
Interest income 611 575 1,655 1,819
Interest expense (2,827 ) (879 ) (6,009 ) (4,235 )
Equity in loss of affiliates (484 ) (181 ) (1,101 ) (438 )
Other (expense) income, net     (5,018 )     (688 )         1,853       (118 )
Total other expense     (7,718 )     (1,173 )         (3,602 )     (2,972 )
Income (loss) before provision for (benefit from) income taxes 6,346 8,260 (5,873 ) (4,219 )
Provision for (benefit from) income taxes     1,859       2,087           (1,673 )     (3,136 )
Net income (loss) 4,487 6,173 (4,200 ) (1,083 )
Amount attributable to noncontrolling interests     (2,538 )     (1,227 )         (5,624 )     (2,978 )
Net income (loss) attributable to Granite Construction Incorporated   $ 1,949     $ 4,946         $ (9,824 )   $ (4,061 )
 
Net income (loss) per share attributable to common shareholders:
Basic $ 0.05 $ 0.13 $ (0.26 ) $ (0.11 )
Diluted $ 0.05 $ 0.13 $ (0.26 ) $ (0.11 )
Weighted average shares of common stock:
Basic 38,471 38,140 38,368 38,052
Diluted     39,151       38,479           38,368       38,052  
 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
         
Six Months Ended June 30,     2012       2011  
Operating activities    
Net loss $ (4,200 ) $ (1,083 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization 29,573 30,464

Non-cash restructuring, net
(1,888 ) 661

Other non-cash impairment charges
2,752 -
Gain on sales of property and equipment (4,871 ) (5,974 )
Stock-based compensation 6,492 5,913
Changes in assets and liabilities, net of the effects of consolidations     (62,482 )     (46,717 )
Net cash used in operating activities     (34,624 )     (16,736 )
Investing activities
Purchases of marketable securities (39,945 ) (65,287 )
Maturities of marketable securities 65,100 58,375
Proceeds from sale of marketable securities 35,000 19,268
Additions to property and equipment (19,855 ) (27,542 )
Proceeds from sales of property and equipment 6,078 10,266
Other investing activities, net     (978 )     120  
Net cash provided by (used in) investing activities     45,400       (4,800 )
Financing activities
Long-term debt principal payments (10,834 ) (16,151 )
Cash dividends paid (10,050 ) (10,061 )
Purchase of common stock (4,054 ) (3,662 )
Distributions to noncontrolling partners, net (5,440 ) (11,616 )
Other financing activities, net     563       1,073  
Net cash used in financing activities     (29,815 )     (40,417 )
Decrease in cash and cash equivalents (19,039 ) (61,953 )
Cash and cash equivalents at beginning of period     256,990       252,022  
Cash and cash equivalents at end of period   $ 237,951     $ 190,069  
 

               
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
                               
Three Months Ended June 30, Six Months Ended June 30,
  Construction  

Large ProjectConstruction
 

ConstructionMaterials
  Real Estate Construction  

Large ProjectConstruction
 

ConstructionMaterials
  Real Estate
 
2012
Revenue $ 245,113 $ 228,799 $ 63,349 $ 2,354 $ 363,059 $ 392,727 $ 88,972 $ 5,017
Gross profit (loss) 17,961 28,239 5,000 716 26,541 50,488 (950 ) 773
Gross profit (loss) as a percent of revenue 7.3 % 12.3 % 7.9 % 30.4 % 7.3 % 12.9 % (1.1 )% 15.4 %
 
2011
Revenue $ 260,600 $ 162,338 $ 58,114 $ 3,622 $ 353,292 $ 300,158 $ 81,912 $ 6,043
Gross profit 23,389 12,658 8,470 439 28,942 43,956 1,200 846
Gross profit as a percent of revenue     9.0 %     7.8 %     14.6 %     12.1 %       8.2 %     14.6 %     1.5 %     14.0 %
 

GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
                         
Contract Backlog by Segment   June 30, 2012   March 31, 2012   June 30, 2011
           
Construction $ 697,535 35.8 % $ 622,240 29.9 % $ 800,434 38.0 %
Large Project Construction     1,252,828   64.2 %     1,460,674   70.1 %     1,306,961   62.0 %
Total   $ 1,950,363   100.0 %   $ 2,082,914   100.0 %   $ 2,107,395   100.0 %

Copyright Business Wire 2010

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