Granite Announces Third-Quarter 2012 Results

Granite Construction Incorporated (NYSE: GVA) today reported net income attributable to common shareholders of $37.1 million, or $0.94 per diluted share, for the third quarter of 2012 compared with $36.5 million, or $0.93 per diluted share, the prior year.

“Granite’s third quarter results reflect a continuation of the strong performance and momentum we have been seeing from our Large Project segment offset by ongoing competitive headwinds in the Construction and Construction Materials segments,” said James H. Roberts, Granite’s president and chief executive officer. “We continue to follow a well-developed plan to strengthen and grow our business, which includes diversifying and leveraging our core capabilities in the federal, water and power markets. We remain focused on maintaining a solid balance sheet and healthy liquidity while continuing to take the actions necessary to position the company to deliver long-term profitable growth.”

Third-quarter 2012 Financial Results

Total Company
  • Revenue totaled $728.5 million compared with $728.6 million in 2011 reflecting a decrease in Construction segment revenue offset by increases in Large Project segment revenue.
  • Gross profit margin for the third quarter was 13.9 percent compared with 12.9 percent a year ago.
  • Selling, general and administrative expenses for the third quarter increased $2.2 million to $41.3 million primarily due to changes in the fair market value of a liability related to the Company’s non-qualified deferred compensation plan.
  • Operating income for the quarter was $61.4 million compared with $60.4 million in the prior year.
  • Other income (expense) for the quarter was $1.4 million, an increase of $4.3 million which includes a gain in the value of the investment portfolio associated with the Company’s non-qualified deferred compensation plan of which there is an offsetting charge in SG&A expenses.
  • Net income attributable to non-controlling interests in joint ventures was $8.6 million compared with $5.9 million in 2011.
  • Total contract backlog at September 30, 2012, was $1.6 billion compared with $1.8 billion a year ago. New awards for the quarter include a $27.6 million highway project and a $24.2 million private-sector solar project, both in California. Backlog at September 30, 2012 does not include any Large Project awards during the quarter.
  • Cash and marketable securities at September 30, 2012 was $372.3 million compared with $330.0 million at September 30, 2011.

Construction
  • Construction revenue for the quarter decreased to $385.7 million compared with $431.1 million in 2011 as a result of the competitive public-sector bidding environment.
  • Gross profit margin for the third quarter was 8.6 percent compared with 13.6 percent a year ago. The results reflect challenging market conditions, as well as increased cost to complete certain projects.

Large Project
  • Large Project Construction revenue for the quarter increased to $255.9 million compared with $213.3 million, reflecting progress on several Large Projects across the country.
  • Gross profit margin for the quarter was 22.6 percent compared with 12 percent for the same period last year. The increase is primarily due to lower than anticipated costs on several Large Projects, as well as the resolution of various outstanding issues with contract owners.

Construction Materials
  • Construction Materials revenue for the quarter totaled $86.8 million, compared with $83.2 million for the same period last year.
  • Gross profit on the sale of construction materials was 11.5 percent which is in line with the same period in 2011.

Outlook

Based on its year-to-date performance, the company is updating its guidance for the Large Project segment and now expects revenue to be between $900.0 and $950.0 million with gross margin of 16 to 17 percent. The Company is also updating its revenue guidance for the Construction segment and now expects revenue to be $1.0 to $1.05 billion. Gross margin guidance is still expected to be between 8 and 9 percent. The Company is also updating its revenue guidance for the Construction Materials segment and now expects revenue to be $210 to $220 million with gross margins of 6 to 7 percent.

Net income attributable to non-controlling interests is now expected to be approximately $18 million for the year.

Conference Call

Granite will conduct a conference call today, November 7, 2012 at 8 a.m. Pacific time/11 a.m. Eastern Time to discuss the results of the quarter ended September 30, 2012. Access to a live audio webcast is available at http://investor.graniteconstruction.com/index.cfm . The live conference call may be accessed by calling (877) 643-7158. The conference ID for the live call is 55054260. The call will be recorded and will be available for replay approximately two hours after the live audio webcast through November 14, 2012 by calling (855) 859-2056. The conference ID for the replay is also 55054260.

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 has been 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” and Quarterly Reports on Form 10-Q under “Part II, 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)
                 
  September 30,     December 31,     September 30,
    2012     2011     2011
ASSETS
Current assets
Cash and cash equivalents $ 287,322 $ 256,990 $ 193,099
Short-term marketable securities 47,185 70,408 77,389
Receivables, net 363,455 251,838 357,807
Costs and estimated earnings in excess of billings 49,548 37,703 45,884
Inventories 63,999 50,975 57,987
Real estate held for development and sale 57,964 67,037 79,173
Deferred income taxes 38,571 38,571 52,714
Equity in construction joint ventures 97,890 101,029 97,415
Other current assets     13,974       35,171       29,526
Total current assets 1,019,908 909,722 990,994
Property and equipment, net 432,293 447,140 453,822
Long-term marketable securities 37,802 79,250 59,509
Investments in affiliates 30,257 31,071 33,435
Other noncurrent assets     78,375       80,616       80,709
Total assets   $ 1,598,635     $ 1,547,799     $ 1,618,469
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 8,352 $ 9,102 $ 8,351
Current maturities of non-recourse debt 16,712 23,071 16,690
Accounts payable 209,683 158,660 216,600
Billings in excess of costs and estimated earnings 91,348 90,845 89,505
Accrued expenses and other current liabilities     167,166       166,790       185,624
Total current liabilities 493,261 448,468 516,770
Long-term debt 200,168 208,501 208,519
Long-term non-recourse debt 4,375 9,912 27,755
Other long-term liabilities 47,913 49,221 46,985
Deferred income taxes 3,644 4,034 10,330
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 38,706,966 shares as of September 30, 2012, 38,682,771 shares as of December 31, 2011 and 38,664,403 shares as of September 30, 2011 387 387 387
Additional paid-in capital 114,917 111,514 108,096
Retained earnings     699,277       687,296       673,626
Total Granite Construction Incorporated shareholders’ equity 814,581 799,197 782,109
Noncontrolling interests     34,693       28,466       26,001
Total equity     849,274       827,663       808,110
Total liabilities and equity   $ 1,598,635     $ 1,547,799     $ 1,618,469
 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands, except per share data)
                         
  Three Months Ended September 30,       Nine Months Ended September 30,
    2012     2011       2012     2011
Revenue                
Construction $ 385,744 $ 431,101 $ 748,803 $ 784,393
Large project construction 255,918 213,320 648,645 513,478
Construction materials 86,782 83,171 175,754 165,083
Real estate     38         986           5,055         7,029  
Total revenue     728,482         728,578           1,578,257         1,469,983  
Cost of revenue
Construction 352,471 372,561 688,989 696,911
Large project construction 198,104 187,763 540,343 443,965
Construction materials 76,798 73,617 166,720 154,329
Real estate     10         744           4,254         5,941  
Total cost of revenue     627,383         634,685           1,400,306         1,301,146  
Gross profit 101,099 93,893 177,951 168,837
Selling, general and administrative expenses 41,280 39,112 125,274 121,277
Gain on sales of property and equipment     1,622         5,598           6,493         11,572  
Operating income 61,441 60,379 59,170 59,132
Other income (expense)
Interest income 485 476 2,140 2,295
Interest expense (2,561 ) (3,418 ) (8,570 ) (7,653 )
Equity in income of affiliates 1,481 1,881 380 1,443
Other income (expense), net     2,013         (1,833 )         3,866         (1,951 )
Total other income (expense)     1,418         (2,894 )         (2,184 )       (5,866 )
Income before provision for income taxes 62,859 57,485 56,986 53,266
Provision for income taxes     17,113         15,109           15,440         11,973  
Net income 45,746 42,376 41,546 41,293
Amount attributable to noncontrolling interests     (8,625 )       (5,908 )         (14,249 )       (8,886 )
Net income attributable to Granite Construction Incorporated   $ 37,121       $ 36,468         $ 27,297       $ 32,407  
 
Net income per share attributable to common shareholders:
Basic $ 0.96 $ 0.94 $ 0.71 $ 0.84
Diluted $ 0.94 $ 0.93 $ 0.70 $ 0.83
Weighted average shares of common stock:
Basic 38,518 38,172 38,418 38,092
Diluted     39,141         38,598           39,013         38,428  
 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
           
Nine Months Ended September 30,   2012     2011
Operating activities      
Net income $ 41,546 $ 41,293
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 43,651 45,691
Non-cash restructuring, net (1,782 ) 1,031
Other non-cash impairment charges 3,101 -
Gain on sales of property and equipment (6,493 ) (11,572 )
Stock-based compensation 8,910 8,994
(Gain) loss on company owned life insurance (1,829 ) 639

Changes in assets and liabilities
    (66,941 )       (84,058 )
Net cash provided by operating activities     20,163         2,018  
Investing activities
Purchases of marketable securities (59,936 ) (115,146 )
Maturities of marketable securities 70,100 85,875
Proceeds from sale of marketable securities 55,000 33,268
Additions to property and equipment (25,971 ) (34,748 )
Proceeds from sales of property and equipment 8,368 20,071
Other investing activities, net     1,165         2,313  
Net cash provided by (used in) investing activities     48,726         (8,367 )
Financing activities
Long-term debt principal payments (11,584 ) (17,293 )
Cash dividends paid (15,078 ) (15,090 )
Purchase of common stock (4,521 ) (3,840 )
Distributions to noncontrolling partners, net (8,022 ) (17,489 )
Other financing activities     648         1,138  
Net cash used in financing activities     (38,557 )       (52,574 )
Increase (decrease) in cash and cash equivalents 30,332 (58,923 )
Cash and cash equivalents at beginning of period     256,990         252,022  
Cash and cash equivalents at end of period   $ 287,322       $ 193,099  
 

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

Large Project Construction
 

Construction Materials
  Real Estate     Construction  

Large Project Construction
 

Construction Materials
  Real Estate
           
2012
Revenue $ 385,744 $ 255,918 $ 86,782 $ 38 $ 748,803 $ 648,645 $ 175,754 $ 5,055
Gross profit 33,273 57,814 9,984 28 59,814 108,302 9,034 801
Gross profit as a percent of revenue 8.6 % 22.6 % 11.5 % 73.7 % 8.0 % 16.7 % 5.1 % 15.8 %
 
2011
Revenue $ 431,101 $ 213,320 $ 83,171 $ 986 $ 784,393 $ 513,478 $ 165,083 $ 7,029
Gross profit 58,540 25,557 9,554 242 87,482 69,513 10,754 1,088
Gross profit as a percent of revenue     13.6 %     12.0 %     11.5 %     24.5 %       11.2 %     13.5 %     6.5 %     15.5 %
 
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
                             
Contract Backlog by Segment   September 30, 2012     June 30, 2012     September 30, 2011
               
Construction $ 530,291 33.3 % $ 697,535 35.8 % $ 562,705 30.5 %
Large Project Construction     1,061,143   66.7 %       1,252,828   64.2 %       1,280,945   69.5 %
 
Total   $ 1,591,434   100.0 %     $ 1,950,363   100.0 %     $ 1,843,650   100.0 %

Copyright Business Wire 2010

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