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--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 | Quote | Chart | News | PowerRating) 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 387 383 383
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
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 1.20 1.22 1.44
ratio
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 (67,511 ) (79,854 )
and consolidations
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
Company Company
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 %
SOURCE: Granite Construction Incorporated
Granite Construction Incorporated Jacque Fourchy, 831-761-4714 (Investor)
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