- Net income in Q309 was $30.6 million vs. $51.7 million a year ago
- Revenue decreased 20% in Q309 to $720.3 million
- Backlog in Granite East increased 17% year over year
- Financial position remains strong with $399.2 million in cash and short-term marketable securities
Granite Construction Incorporated (NYSE: GVA) today reported net income of $30.6 million for the third quarter of 2009 compared with $51.7 million for the third quarter of 2008. Diluted earnings per share for the third quarter of 2009 were $0.79 compared with $1.35 for the third quarter of 2008.
“In the midst of a challenging economic environment, we remain focused on project execution and acquiring quality backlog,” said William G. Dorey, Granite president and chief executive officer. “In that regard, I am pleased to report approximately $730.0 million in new awards in the third quarter.
“In the West, the current bidding environment for small projects is one of the toughest we have experienced, marked by an oversupply of contractors as well as public funding challenges. While this is having an impact on our short-term performance, we are pursuing a full pipeline of larger projects that have the potential to deliver strong margins. With a solid balance sheet and experienced teams, Granite is well-positioned to successfully compete for these larger project opportunities.
“Additionally, as we announced last month we are currently implementing a new organizational structure at Granite that will strengthen our business by leveraging resources and gaining efficiencies throughout the company. Our goal is to create a more scalable structure that aligns with current business trends while positioning Granite for long-term profitable growth.”
Third-quarter 2009 Financial Results
Total Company
- Total revenue for the quarter ended September 30, 2009 was $720.3 million compared with $897.8 million in 2008.
- Gross profit as a percentage of revenue for the quarter was 15 percent compared with 16 percent in 2008 driven by the competitive bidding environment in the West offset by improved operating results in the East.
- Gross profit on the sale of construction materials was $7.0 million in 2009 compared with $15.4 million in 2008 primarily as a result of lower sales volume.
- General and administrative expenses decreased $11.4 million to $60.5 million compared with $71.9 million in 2008. The decrease was primarily related to a reduction in bad debt expense of approximately $8.0 million and lower incentive compensation and salaries expense.
- Operating income for the quarter was $46.3 million compared with $74.4 million in the prior year.
- During the third quarter 2009, the company''s real estate investment segment recorded a $0.7 million pre-tax impairment charge related to residential property located in Oregon.
- Net income attributable to noncontrolling interests in joint ventures increased from $0.6 million in 2008 to $5.9 million in 2009. The increase is associated with a large project that had not reached the profit recognition threshold in the third quarter 2008 and the effect of changes in estimates related to certain joint venture projects.
- At September 30, 2009, cash and short-term marketable securities totaled $399.2 million, including $121.1 million of cash and cash equivalents associated with the company''s consolidated joint ventures.
- Total contract backlog at September 30, 2009, was $1.6 billion compared with $1.8 billion at September 30, 2008.
Granite West
- Revenue for the third quarter totaled $564.1 million compared with $749.5 million for the same period in 2008 reflecting intense competition for public works projects, reduced public sector funding and lower demand for construction materials.
- Gross profit as a percentage of revenue for the quarter decreased to 15 percent compared with 18 percent in 2008. The margin compression was primarily a product of lower gross margins on both public sector construction projects and construction materials sales.
- Operating income for the quarter decreased $37.3 million to $56.3 million compared with $93.6 million for the third quarter of last year.
Granite East
- Revenue for the third quarter totaled $155.2 million compared with $146.9 million for the same period in 2008.
- Gross profit as a percentage of revenue for the quarter was 13 percent compared with 7 percent in the same period last year driven primarily by a high quality project portfolio and improved project execution.
- Operating income for the quarter increased $8.3 million to $12.1 million compared with $3.8 million for the third quarter of 2008.
Outlook
The company now expects Granite West revenue in 2009 to be between $1.4 billion and $1.5 billion with an improved gross profit margin percentage between 15.5 percent and 16.5 percent. Additionally, the company expects Granite East revenue in 2009 to be in the range of $600.0 million and $650.0 million with gross profit margin percentage between 16.5 and 17.5 percent. Net income attributable to noncontrolling interests in joint ventures is now expected to be approximately $26.0 million for the year.
As part of its evolution to become a more efficient and effective organization, Granite announced the reduction of approximately 160 salaried positions across the country. Pre-tax charges associated with Granite''s reorganization are estimated to be approximately $6.0 million and will be recognized primarily in the fourth quarter of 2009. The company estimates annualized pre-tax savings associated with personnel-related costs to be approximately $11.0 million.
Conference Call
Granite will conduct a conference call tomorrow, October 29, 2009, at 8:00 a.m. PT/11:00 a.m. ET to discuss the results of the third quarter ended September 30, 2009. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call may be accessed by calling (877) 693-6483 and (706) 758-5304 for international listeners. The conference ID for the call is 35941051. The call will be recorded and available for replay from approximately two hours after the live audio webcast through November 13, 2009 by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 35941051.
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 more information about Granite, please visit its Web site at www.graniteconstruction.com.
Forward-looking Statements
This press release contains statements that are not based on historical facts and which may be forward-looking in nature. Under the Private Securities Litigation Reform Act of 1995, a “safe harbor” may be provided to Granite for certain of these forward-looking statements. Words such as outlook, believes, expects, appears, may, will, should, anticipates, and the negatives thereof or comparable terminology are intended to identify these forward-looking statements. These forward-looking statements are estimates reflecting the best judgment of Granite''s senior management and are based on its current expectations and projections concerning future events, many of which are outside Granite''s control and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those risks described in Granite''s Annual Report under “Item 1A. Risk Factors.” Except as required by law, Granite undertakes no obligation to revise or update any forward-looking statements for any reason. As a result, the reader is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.
| GRANITE CONSTRUCTION INCORPORATED | ||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (Unaudited - in thousands, except share and per share data) | ||||||||||||
September 30, | December 31, | September 30, | ||||||||||
| 2009 | 2008 | 2008 | ||||||||||
| ASSETS | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 371,434 | $ | 460,843 | $ | 281,046 | ||||||
| Short-term marketable securities | 27,798 | 38,320 | 101,112 | |||||||||
| Accounts receivable, net | 382,572 | 314,733 | 480,315 | |||||||||
| Costs and estimated earnings in excess of billings | 38,011 | 13,295 | 34,759 | |||||||||
| Inventories, net | 51,972 | 55,223 | 61,342 | |||||||||
| Real estate held for development and sale | 135,306 | 75,089 | 52,165 | |||||||||
| Deferred income taxes | 43,356 | 43,637 | 46,233 | |||||||||
| Equity in construction joint ventures | 58,450 | 44,681 | 45,219 | |||||||||
| Other current assets | 41,185 | 56,742 | 65,182 | |||||||||
| Total current assets | 1,150,084 | 1,102,563 | 1,167,373 | |||||||||
| Property and equipment, net | 530,661 | 517,678 | 522,733 | |||||||||
| Long-term marketable securities | 62,612 | 21,239 | 30,209 | |||||||||
| Investment in affiliates | 21,309 | 19,996 | 27,518 | |||||||||
| Other noncurrent assets | 80,233 | 81,979 | 73,696 | |||||||||
| Total assets | $ | 1,844,899 | $ | 1,743,455 | $ | 1,821,529 | ||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities | ||||||||||||
| Current maturities of long-term debt | $ | 68,194 | $ | 39,692 | $ | 34,886 | ||||||
| Accounts payable | 211,670 | 174,626 | 234,126 | |||||||||
| Billings in excess of costs and estimated earnings | 187,205 | 227,364 | 251,402 | |||||||||
| Accrued expenses and other current liabilities | 209,806 | 184,939 | 227,611 | |||||||||
| Total current liabilities | 676,875 | 626,621 | 748,025 | |||||||||
| Long-term debt | 233,582 | 250,687 | 246,487 | |||||||||
| Other long-term liabilities | 48,884 | 43,604 | 46,178 | |||||||||
| Deferred income taxes | 17,917 | 18,261 | 18,733 | |||||||||
| 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 2009 and in 2008; issued and outstanding 38,669,447 shares as of September 30, 2009, 38,266,791 shares as of December 31, 2008 and 38,264,058 shares as of September 30, 2008 | 387 | 383 | 383 | |||||||||
| Additional paid-in capital | 92,356 | 85,035 | 83,041 | |||||||||
| Retained earnings | 724,621 | 682,237 | 655,287 | |||||||||
| Accumulated other comprehensive loss | - | (146 | ) | (3,334 | ) | |||||||
| Total Granite Construction Inc. shareholders'' equity | 817,364 | 767,509 | 735,377 | |||||||||
| Noncontrolling interests | 50,277 | 36,773 | 26,729 | |||||||||
| Total equity | 867,641 | 804,282 | 762,106 | |||||||||
| Total liabilities and equity | $ | 1,844,899 | $ | 1,743,455 | $ | 1,821,529 | ||||||
| September 30, | December 31, | September 30, | ||||||||||
| FINANCIAL POSITION | 2009 | 2008 | 2008 | |||||||||
| Working capital | $ | 473,209 | $ | 475,942 | $ | 419,348 | ||||||
| Current ratio | 1.70 | 1.76 | 1.56 | |||||||||
| Debt to Granite Construction Inc. shareholders'' equity capitalization | 0.27 | 0.27 | 0.28 | |||||||||
| Total liabilities to Granite Construction Inc. shareholders'' equity ratio | 1.20 | 1.22 | 1.44 | |||||||||
| GRANITE CONSTRUCTION INCORPORATED | ||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
| (Unaudited - in thousands, except per share data) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||
| Revenue | ||||||||||||||||||
| Construction | $ | 647,776 | $ | 771,941 | $ | 1,368,111 | $ | 1,755,457 | ||||||||||
| Construction materials | 71,527 | 124,478 | 158,688 | 283,321 | ||||||||||||||
| Real estate | 981 | 1,369 | 1,932 | 8,142 | ||||||||||||||
| Total revenue | 720,284 | 897,788 | 1,528,731 | 2,046,920 | ||||||||||||||
| Cost of revenue | ||||||||||||||||||
| Construction | 549,053 | 643,531 | 1,123,038 | 1,437,093 | ||||||||||||||
| Construction materials | 64,528 | 109,068 | 145,991 | 247,959 | ||||||||||||||
| Real estate | 1,531 | 887 | 3,272 | 9,846 | ||||||||||||||
| Total cost of revenue | 615,112 | 753,486 | 1,272,301 | 1,694,898 | ||||||||||||||
| Gross profit | 105,172 | 144,302 | 256,430 | 352,022 | ||||||||||||||
| General and administrative expenses | 60,465 | 71,933 | 169,766 | 198,344 | ||||||||||||||
| Gain on sales of property and equipment | 1,549 | 2,008 | 6,878 | 4,564 | ||||||||||||||
| Operating income | 46,256 | 74,377 | 93,542 | 158,242 | ||||||||||||||
| Other income (expense) | ||||||||||||||||||
| Interest income | 744 | 5,439 | 3,914 | 15,087 | ||||||||||||||
| Interest expense | (4,245 | ) | (5,303 | ) | (10,586 | ) | (12,871 | ) | ||||||||||
| Equity in income (loss) of affiliates | 4,021 | (1,257 | ) | 4,360 | (1,436 | ) | ||||||||||||
| Other income, net | 3,062 | 549 | 8,278 | 9,196 | ||||||||||||||
| Total other income (expense) | 3,582 | (572 | ) | 5,966 | 9,976 | |||||||||||||
| Income before provision for income taxes | 49,838 | 73,805 | 99,508 | 168,218 | ||||||||||||||
| Provision for income taxes | 13,300 | 21,473 | 26,316 | 46,681 | ||||||||||||||
| Net income | 36,538 | 52,332 | 73,192 | 121,537 | ||||||||||||||
| Amount attributable to noncontrolling interests | (5,940 | ) | (594 | ) | (15,725 | ) | (31,058 | ) | ||||||||||
| Net income attributable to Granite Construction Inc. | $ | 30,598 | $ | 51,738 | $ | 57,467 | $ | 90,479 | ||||||||||
| Net income per share attributable to common shareholders: | ||||||||||||||||||
Basic (1) | $ | 0.79 | $ | 1.35 | $ | 1.49 | $ | 2.35 | ||||||||||
Diluted (1) | $ | 0.79 | $ | 1.35 | $ | 1.49 | $ | 2.35 | ||||||||||
| Weighted average shares of common stock: | ||||||||||||||||||
| Basic | 37,595 | 37,430 | 37,552 | 37,664 | ||||||||||||||
| Diluted | 37,709 | 37,557 | 37,670 | 37,760 | ||||||||||||||
| Note: | ||||||||||||||||||
(1) Computed using the two-class method as required by the accounting standards adopted on January 1, 2009. | ||||||||||||||||||
| GRANITE CONSTRUCTION INCORPORATED | |||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (Unaudited - in thousands) | |||||||||||
| Nine Months Ended September 30, | 2009 | 2008 | |||||||||
| Operating activities | |||||||||||
| Net income | $ | 73,192 | $ | 121,537 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Impairment of real estate held for development and sale | 1,686 | 4,500 | |||||||||
| Depreciation, depletion and amortization | 59,048 | 64,036 | |||||||||
| (Recovery of) provision for doubtful accounts, net | (3,844 | ) | 8,914 | ||||||||
| Gain on sales of property and equipment | (6,878 | ) | (4,564 | ) | |||||||
| Change in deferred income taxes | (518 | ) | 1,116 | ||||||||
| Stock-based compensation | 7,869 | 5,135 | |||||||||
| Excess tax benefit on stock-based compensation | (670 | ) | (743 | ) | |||||||
| Gain from trading securities | (431 | ) | - | ||||||||
| Equity in (income) loss of affiliates | (4,360 | ) | 1,436 | ||||||||
| Acquisition of noncontrolling interest | - | (16,616 | ) | ||||||||
| Changes in assets and liabilities, net of the effects of acquisition and consolidations | (67,511 | ) | (79,854 | ) | |||||||
Net cash provided by operating activities | 57,583 | 104,897 | |||||||||
| Investing activities | |||||||||||
| Purchases of marketable securities | (61,974 | ) | (68,732 | ) | |||||||
| Maturities of marketable securities | 32,610 | 64,090 | |||||||||
| Release of funds for acquisition of noncontrolling interest | - | 28,332 | |||||||||
| Additions to property and equipment | (75,773 | ) | (76,098 | ) | |||||||
| Proceeds from sales of property and equipment | 10,089 | 12,253 | |||||||||
| Acquisition of businesses | - | (14,022 | ) | ||||||||
| Contributions to affiliates | (4,969 | ) | (5,345 | ) | |||||||
| Issuance of notes receivable | (4,270 | ) | - | ||||||||
| Other investing activities | 450 | 626 | |||||||||
Net cash used in investing activities | (103,837 | ) | (58,896 | ) | |||||||
| Financing activities | |||||||||||
| Proceeds from long-term debt | 8,384 | 2,660 | |||||||||
| Long-term debt principal payments | (18,139 | ) | (15,748 | ) | |||||||
| Cash dividends paid | (15,031 | ) | (15,081 | ) | |||||||
| Purchase of common stock | (2,840 | ) | (45,489 | ) | |||||||
| Contributions from noncontrolling partners | 239 | 4,955 | |||||||||
| Distributions to noncontrolling partners | (16,490 | ) | (37,713 | ) | |||||||
| Acquisition of noncontrolling interest | - | (11,716 | ) | ||||||||
| Excess tax benefit on stock-based compensation | 670 | 743 | |||||||||
| Other financing | 52 | - | |||||||||
Net cash used in financing activities | (43,155 | ) | (117,389 | ) | |||||||
| Decrease in cash and cash equivalents | (89,409 | ) | (71,388 | ) | |||||||
| Cash and cash equivalents at beginning of period | 460,843 | 352,434 | |||||||||
| Cash and cash equivalents at end of period | $ | 371,434 | $ | 281,046 | |||||||
| GRANITE CONSTRUCTION INCORPORATED | |||||||||||||||||||||||||
| Business Segment Information | |||||||||||||||||||||||||
| (Unaudited - in thousands) | |||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
| Granite West | Granite East | Granite Land | Granite West | Granite East | Granite Land | ||||||||||||||||||||
| 2009 | |||||||||||||||||||||||||
| Revenue | $ | 564,089 | $ | 155,214 | $ | 981 | $ | 1,109,442 | $ | 417,357 | $ | 1,932 | |||||||||||||
| Gross profit (loss) | $ | 85,499 | $ | 20,223 | $ | (550 | ) | $ | 181,320 | $ | 76,450 | $ | (1,340 | ) | |||||||||||
| Gross profit (loss) as a percent of revenue | 15.2 | % | 13.0 | % | -56.1 | % | 16.3 | % | 18.3 | % | -69.4 | % | |||||||||||||
| Operating income (loss) | $ | 56,299 | $ | 12,052 | $ | (1,221 | ) | $ | 98,073 | $ | 55,136 | $ | (4,159 | ) | |||||||||||
| Operating income (loss) as a percent of revenue | 10.0 | % | 7.8 | % | -124.5 | % | 8.8 | % | 13.2 | % | -215.3 | % | |||||||||||||
| 2008 | |||||||||||||||||||||||||
| Revenue | $ | 749,487 | $ | 146,932 | $ | 1,369 | $ | 1,506,952 | $ | 531,826 | $ | 8,142 | |||||||||||||
| Gross profit (loss) | $ | 133,904 | $ | 9,916 | $ | 482 | $ | 266,457 | $ | 87,269 | $ | (1,704 | ) | ||||||||||||
| Gross profit (loss) as a percent of revenue | 17.9 | % | 6.7 | % | 35.2 | % | 17.7 | % | 16.4 | % | -20.9 | % | |||||||||||||
| Operating income (loss) | $ | 93,570 | $ | 3,819 | $ | (191 | ) | $ | 154,684 | $ | 67,196 | $ | (3,795 | ) | |||||||||||
| Operating income (loss) as a percent of revenue | 12.5 | % | 2.6 | % | -14.0 | % | 10.3 | % | 12.6 | % | -46.6 | % | |||||||||||||
| GRANITE CONSTRUCTION INCORPORATED | |||||||||||||||||||||||||
| Contract Backlog | |||||||||||||||||||||||||
| (Unaudited - in thousands) | |||||||||||||||||||||||||
| Contract Backlog by Segment | September 30, 2009 | June 30, 2009 | September 30, 2008 | ||||||||||||||||||||||
| Granite West | $ | 553,728 | 34.3 | % | $ | 824,676 | 53.8 | % | $ | 915,472 | 50.3 | % | |||||||||||||
| Granite East | 1,058,540 | 65.7 | % | 707,567 | 46.2 | % | 906,116 | 49.7 | % | ||||||||||||||||
| Total | $ | 1,612,268 | 100.0 | % | $ | 1,532,243 | 100.0 | % | $ | 1,821,588 | 100.0 | % | |||||||||||||
Contacts:
Granite Construction Incorporated
Jacque Fourchy, 831-761-4714
(Investor)