Granite Reports Full Year and Fourth Quarter 2010 Results

Granite Reports Full Year and Fourth Quarter 2010 Results

  • SG&A expenses for the full year decreased 16% to $191.6 million
  • Total company backlog increased $497.2 million to $1.9 billion
  • Financial position remains strong with $395.7 million in cash, cash equivalents and marketable securities

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported a net loss of $59.0 million for the full year 2010, compared with net income of $73.5 million for the full year 2009. Loss per share for the year was $(1.56), compared with earnings per diluted share (EPS) of $1.90 in 2009.

For the fourth quarter of 2010, Granite reported a net loss of $50.0 million, compared with net income of $16.0 million for the fourth quarter of 2009. Loss per share for the quarter ended December 31, 2010 was $(1.32), compared with EPS of $0.41 earned in the prior year period. Included in the fourth quarter of 2010 were restructuring charges of $107.3 million associated with the Company’s Enterprise Improvement Plan. The portion of restructuring charges attributable to noncontrolling interests was approximately $20.0 million.

“During the fourth quarter, we made solid progress towards reducing our cost structure and strengthening the business for the long-term,” said
James H. Roberts, Granite President and Chief Executive Officer. “In addition to the necessary but difficult decision to reduce our workforce, we are focusing on optimizing our core business and have committed to divesting of our real estate investment business over the next three years.”

Roberts continued, “We are undoubtedly operating in one of the most difficult economic environments our company has faced in decades. Despite these challenges, we grew backlog in both of our key segments, maintained a solid balance sheet, and continued to position the Company to recapture momentum in 2011.”

Full Year 2010 Financial Results

Total Company

  • Revenue totaled $1.8 billion, compared with $2.0 billion in 2009.
  • Gross profit margin was 10 percent compared with 18 percent in 2009 due primarily to lower margins in our beginning backlog of work, compared with a year ago. Also contributing to margin pressure was $156.7 million in revenue from projects that had not yet reached the profit recognition threshold, compared with $68.8 million a year ago.
  • Operating loss for the year was $109.3 million, compared with operating income of $129.2 million in the prior year and includes restructuring charges of $109.3 million.
  • SG&A expenses were $191.6 million, compared with $228.0 million for the same period last year driven by reductions in salaries and related expenses, incentive compensation, and discretionary spending.
  • Amount attributable to noncontrolling interests was a loss of $3.5 million, compared with income of $26.7 million in 2009 due to $20.0 million associated with the impairment charges taken in the fourth quarter 2010.
  • Total contract backlog at December 31, 2010 was $1.9 billion, compared with $1.4 billion at December 31, 2009.

Construction

  • Construction revenue for the full year totaled $943.2 million, compared with $1.2 billion for the same period in 2009 due to a continued weak demand in the private-sector and increased competition for public-sector work.
  • Gross profit margin for the full year was 10 percent, compared with 18 percent for the same period in 2009, driven by lower volumes and increased competition.

Large Project Construction

  • Large Project Construction revenue for the full year totaled $584.4 million, compared with $603.5 million for the same period last year.
  • Gross profit margin for the full year decreased to 12 percent, compared with 20 percent for the same period last year as several new projects generated revenue, but did not reach the profit recognition threshold in 2010.

Construction Materials

  • Construction Materials revenue for the full year totaled $222.1 million compared with $205.9 million for the same period last year.
  • Gross profit margin on the sale of construction materials was 5 percent in 2010, compared with 10 percent in 2009. The decrease is primarily attributable to an increase in fixed costs associated with two new materials processing facilities that came online in late 2009.

Fourth Quarter 2010 Financial Results

Total Company

  • Revenues for the quarter totaled $417.2 million, compared with $434.7 million in 2009.
  • Gross profit margin decreased to 11 percent, down from 21 percent in 2009.
  • Operating loss for the quarter was $98.5 million, compared with operating income of $35.6 million in the prior year. The fourth quarter 2010 includes restructuring charges of $107.3 million related to workforce reductions as well as real estate and fixed asset impairment charges.
  • Selling, general and administrative expenses decreased $16.7 million quarter over quarter to $39.8 million.
  • Amount attributable to noncontrolling interests was a loss of $15.4 million, compared with income of $11.0 million in 2009 due to $20.0 million associated with the impairment charges taken in the fourth quarter 2010.

Construction

  • Construction revenues for the quarter totaled $214.1 million, compared with $239.6 million for the same period in 2009.
  • Gross profit margin for the fourth quarter was 12 percent compared with 20 percent for the same period last year. The decrease was affected by overall lower demand and lower margins due to the competitive environment.

Large Project Construction

  • Large Project Construction revenues for the quarter totaled $154.8 million, compared with $147.5 million for the same period in 2009.
  • Gross profit margin for the fourth quarter was 11 percent, compared with 26 percent for the same period last year, reflecting an increase in revenue on projects that have yet to reach the profit recognition threshold.

Construction Materials

  • Construction Materials revenue for the quarter totaled $46.7 million, compared with $47.3 million for the same period in 2009.
  • Gross profit on the sale of construction materials was 5 percent, compared with 8 percent for the same period in 2009.

Outlook

“The actions we are taking to reduce our cost structure are expected to lead to a substantial improvement in our bottom line results in 2011. In addition, we anticipate a positive impact to earnings from some large projects reaching the profit recognition threshold. While the pipeline of large project bidding opportunities remains full, our goal is to build high quality backlog that will provide the best return for our shareholders. The large project construction market offers a great deal of near-term growth potential for our business and we are excited about the opportunities that this segment of our business will provide.

“Our Construction segment is starting 2011 with a healthy backlog of work; however, we anticipate the competitive environment will remain very tough. Additionally, we expect the demand for our services and construction materials from the private-sector in the west will remain under pressure for the balance of the year.

“Funding for transportation infrastructure will continue to be a focus for us this year as we advocate for a multi-year highway bill that will provide the industry with much needed visibility. Despite these macro-economic challenges, we will continue to move forward with our strategy to operate our business as efficiently and effectively as possible,” said Roberts.

Conference Call

Granite will conduct a conference call tomorrow, February 24, 2011, at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the fofdfsdfsdfasdfurth quarter and year ended December 31, 2010. Access to a live audio webcast is available at www.zkyk.net/investor-relations. The live conference call may be accessed by calling (877) 693-6483, or (706) 758-5304 for international listeners. The conference ID for the call is 41332342. The call will be recorded and will be available for replay from approximately two hours after the live audio webcast through March 10, 2011, by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 41332342.

About Granite

Granite Construction Incorporated is a member of the S&P 400 Midcap Index, the FTSE KLD 400 Social Index and the Russell 2000 Index. 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 website at www.zkyk.net.

Forward-looking Statements

This news 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 of 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
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
December 31, December 31,
2010 2009
ASSETS
Current assets
Cash and cash equivalents $ 252,022 $ 338,956
Short-term marketable securities 109,447 42,448
Receivables, net 243,986 280,252
Costs and estimated earnings in excess of billings 10,519 10,619
Inventories 51,018 45,800
Real estate held for development and sale 75,716 139,449
Deferred income taxes 53,877 31,034
Equity in construction joint ventures 74,716 67,693
Other current assets 42,555 50,467
Total current assets 913,856 1,006,718
Property and equipment, net 473,607 520,778
Long-term marketable securities 34,259 76,937
Investments in affiliates 31,410 24,644
Other noncurrent assets 82,401 80,498
Total assets $ 1,535,533 $ 1,709,575
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 8,359 $ 15,017
Current maturities of non-recourse debt 29,760 43,961
Accounts payable 129,700 131,251
Billings in excess of costs and estimated earnings 120,185 156,041
Accrued expenses and other current liabilities 150,773 159,843
Total current liabilities 438,777 506,113
Long-term debt 217,014 225,203
Long-term non-recourse debt 25,337 19,485
Other long-term liabilities 47,996 48,998
Deferred income taxes 10,774 27,220
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 2010 and 2009;
issued and outstanding 38,745,542 shares as of December 31, 2010 and 38,635,021 shares
as of December 31, 2009

 387 386
Additional paid-in capital 104,232 94,633
Retained earnings 656,412 735,632
Total Granite Construction Incorporated shareholders' equity 761,031 830,651
Noncontrolling interests 34,604 51,905
Total equity 795,635 882,556
Total liabilities and equity $ 1,535,533 $ 1,709,575
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
2010 2009 2010 2009
Revenue
Construction $ 214,127 $ 239,633 $ 943,245 $ 1,151,743
Large project construction 154,781 147,516 584,406 603,517
Construction materials 46,677 47,257 222,058 205,945
Real estate 1,643 342 13,256 2,274
Total revenue 417,228 434,748 1,762,965 1,963,479
Cost of revenue
Construction 187,831 190,758 847,536 942,256
Large project construction 137,108 108,812 517,099 483,417
Construction materials 44,151 43,637 210,040 184,705
Real estate 1,921 320 10,506 3,592
Total cost of revenue 371,011 343,527 1,585,181 1,613,970
Gross profit 46,217 91,221 177,784 349,509
Selling, general and administrative expenses 39,766 56,422 191,593 228,046
Restructuring charges 107,297 9,453 109,279 9,453
Gain on sales of property and equipment 2,331 10,291 13,748 17,169
Operating (loss) income (98,515 ) 35,637 (109,340 ) 129,179
Other income (expense)
Interest income 833 1,135 4,980 5,049
Interest expense (2,446 ) (5,170 ) (9,740 ) (15,756 )
Equity in income of affiliates 933 3,336 756 7,696
Other income, net 1,114 4,405 6,968 12,683
Total other income 434 3,706 2,964 9,672
(Loss) income before (benefit from) provision for income taxes (98,081 ) 39,343 (106,376 ) 138,851
(Benefit from) provision for income taxes (32,695 ) 12,334 (43,928 ) 38,650
Net (loss) income (65,386 ) 27,009 (62,448 ) 100,201
Amount attributable to noncontrolling interests 15,367 (10,976 ) 3,465 (26,701 )
Net (loss) income attributable to Granite Construction Incorporated $ (50,019 ) $ 16,033 $ (58,983 ) $ 73,500
Net (loss) income per share attributable to common shareholders:
Basic (1) $ (1.32 ) $ 0.41 $ (1.56 ) $ 1.91
Diluted (1) $ (1.32 ) $ 0.41 $ (1.56 ) $ 1.90
Weighted average shares of common stock:
Basic 37,875 37,608 37,820 37,566
Diluted 37,875 37,723 37,820 37,683
Note:
(1) Computed using the two-class method, except when in a net loss position
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Years Ended December 31, 2010 2009
Operating activities
Net (loss) income $ (62,448 ) $ 100,201
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Restructuring impairment charges 93,862 1,449
Other impairment charges 821 4,110
Inventory written down 2,846 3,097
Depreciation, depletion and amortization 74,435 80,195
Provision for (recovery of) doubtful accounts 368 (4,404 )
Gain on sales of property and equipment (13,748 ) (17,169 )
Change in deferred income taxes (39,289 ) 21,107
Stock-based compensation 13,040 10,765
Loss (gain) from marketable securities 680 (485 )
Gain on company owned life insurance (3,321 ) (2,551 )
Equity in income of affiliates (756 ) (7,696 )
Changes in assets and liabilities, net of the effects of consolidations (37,172 ) (124,318 )
Net cash provided by operating activities 29,318 64,301
Investing activities
Purchases of marketable securities (121,626 ) (99,011 )
Maturities of marketable securities 74,000 36,970

Proceeds from sale of marketable securities

 15,000 7,966
Purchase of company owned life insurance (8,195 ) (8,000 )
Proceeds from company owned life insurance 2,078 -
Additions to property and equipment (37,004 ) (87,645 )
Proceeds from sales of property and equipment 21,148 23,020
Purchase of private preferred stock (6,400 ) -
Contributions to affiliates, net (1,658 ) (4,969 )
Issuance of notes receivable (1,313 ) (11,314 )
Collection of notes receivable 3,126 13,104
Other investing activities 409 -
Net cash used in investing activities (60,435 ) (129,879 )
Financing activities
Proceeds from long-term debt 1,918 10,750
Long-term debt principal payments (19,829 ) (18,856 )
Cash dividends paid (20,150 ) (20,057 )
Purchase of common stock (3,641 ) (3,431 )
Contributions from noncontrolling partners 7,321 420
Distributions to noncontrolling partners (21,498 ) (26,019 )
Other financing activities, net 62 884
Net cash used in financing activities (55,817 ) (56,309 )
Decrease in cash and cash equivalents (86,934 ) (121,887 )

Cash and cash equivalents at beginning of year

 338,956 460,843

Cash and cash equivalents at end of year

 $ 252,022 $ 338,956
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - in thousands)
Three Months Ended December 31, Years Ended December 31,
Construction Large Project Construction Construction Materials Real Estate Construction Large Project Construction Construction Materials Real Estate
2010
Revenue $ 214,127 $ 154,781 $ 46,677 $ 1,643 $ 943,245 $ 584,406 $ 222,058 $ 13,256
Gross profit (loss) $ 26,296 $ 17,673 $ 2,526 $ (278 ) $ 95,709 $ 67,307 $ 12,018 $ 2,750
Gross profit (loss) as a percent of revenue 12.3 % 11.4 % 5.4 % -16.9 % 10.1 % 11.5 % 5.4 % 20.7 %
2009
Revenue $ 239,633 $ 147,516 $ 47,257 $ 342 $ 1,151,743 $ 603,517 $ 205,945 $ 2,274
Gross profit (loss) $ 48,875 $ 38,704 $ 3,620 $ 22 $ 209,487 $ 120,100 $ 21,240 $ (1,318 )
Gross profit (loss) as a percent of revenue 20.4 % 26.2 % 7.7 % 6.4 % 18.2 % 19.9 % 10.3 % -58.0 %
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - in thousands)
December 31, 2010 December 31, 2009
Construction $ 465,271 24.5 % $ 359,359 25.6 %
Large Project Construction 1,433,899 75.5 % 1,042,629 74.4 %
Total $ 1,899,170 100.0 % $ 1,401,988 100.0 %

Source: Granite Construction Incorporated