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July 29, 2009

Granite Reports Second-Quarter 2009 Financial Results

  • Granite East operating results increased 26% to $14.7 million
  • Strong balance sheet; Cash and short-term marketable securities totaled $381 million at quarter-end

WATSONVILLE, Calif., Jul 29, 2009 (BUSINESS WIRE) -- Granite Construction Incorporated (NYSE: GVA) today reported net income of $17.9 million for the second quarter of 2009 compared with $25.6 million for the second quarter of 2008. Diluted earnings per share for the second quarter of 2009 were $0.46 compared with $0.67 for the second quarter of 2008.

"As expected, our second quarter results reflect a very competitive bidding environment in the West," said William G. Dorey, Granite president and chief executive officer. "That said, we are pleased with the way our business model is performing in these challenging times. Granite East continues to deliver strong operating results and is well-positioned to grow its backlog this year. Across the company we continue to focus on productivity, managing costs and executing on our backlog."

Second-quarter 2009 Financial Results

Total Company

  • Total revenue for the quarter ended June 30, 2009 was $461.1 million compared with $694.3 million in 2008. The decrease reflects a $169.2 million reduction in Granite West revenue and $58.5 million reduction in Granite East revenue.
  • Gross profit as a percentage of revenue for the quarter was 18 percent compared with 16 percent in 2008 reflecting improved margins from Granite East.
  • Gross profit on the sale of construction materials was $8.0 million in 2009 compared with $17.5 million in 2008. The company's third-party construction materials business continues to be affected by lower sales volume.
  • General and administrative expenses decreased $10.1 million to $55.7 million or 12 percent of revenue compared with $65.8 million or 10 percent of revenue in 2008 reflecting decreases in salaries and incentive compensation.
  • Operating income for the quarter was $30.4 million compared with $45.4 million in the prior year due to the competitive bidding environment in the West offset by improved operating results in the East.
  • During the second quarter 2009, the company's real estate investment segment recorded a $1.0 million pretax impairment charge related to a residential property located in Oregon.
  • Other income for the quarter was $0.5 million compared with $1.2 million in 2008 due to lower investment interest income.
  • Net income attributable to noncontrolling interest in joint ventures decreased from $8.0 million in 2008 to $4.7 million in 2009 due to the completion of certain large projects.
  • At June 30, 2009, cash and short-term marketable securities totaled $381.0 million, including $120.9 million of cash and cash equivalents from the company's consolidated joint ventures.
  • Total contract backlog at June 30, 2009, was $1.5 billion compared with $2.1 billion at June 30, 2008. Not included in second quarter 2009 backlog is approximately $500.0 million associated with three projects the company expects to book in the third quarter of 2009.

Granite West

  • Revenue for the second quarter totaled $348.3 million compared with $517.5 million for the same period in 2008. The decrease reflects a highly competitive bidding environment and lower demand for construction materials.
  • Gross profit as a percentage of revenue for the quarter remained flat at 18 percent.
  • Operating income for the quarter decreased $21.9 million to $34.9 million compared with $56.8 million for the second quarter of last year.

Granite East

  • Revenue for the second quarter totaled $112.2 million compared with $170.8 million for the same period in 2008 reflecting several large projects nearing completion.
  • Gross profit as a percentage of revenue for the quarter was 19 percent compared with 11 percent in the same period last year.
  • Operating income for the quarter increased to $14.7 million compared with $11.7 million for the second quarter of 2008.

Outlook

"In the West, we expect the bidding environment to remain competitive for at least the next several quarters," said Dorey. "We also anticipate our third-party construction materials business will continue to be affected by lower demand. As a result, we are forecasting Granite West revenue in 2009 to be between $1.5 billion and $1.7 billion with a corresponding gross profit margin percentage between 14 percent and 16 percent.

The outlook for Granite East is very positive as we continue to execute well and add quality projects to our backlog. Although we continue to expect strong bottom line performance this year, delayed project awards caused us to lower our revenue forecast for the segment. We now expect Granite East revenue in 2009 to be in the range of $600.0 million and $675.0 million with an improved gross profit margin percentage between 15 percent and 17 percent. We expect net income attributable to noncontrolling interest in joint ventures for the total company to be approximately $30.0 million for the year."

Conference Call

Granite will conduct a conference call tomorrow, July 30, 2009, at 8:00 a.m. PT/11:00 a.m. ET to discuss the results of the second quarter ended June 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) 865-1220 in the United States and (706) 634-4451 for international listeners. The conference ID for the call is 14073730. The call will be recorded and available for replay from approximately two hours after the live audio webcast through August 30, 2009 by calling (706) 645-9291. The conference ID for the recording is 14073730.

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)
June 30, December 31, June 30,
2009 2008 2008
ASSETS
Current assets
Cash and cash equivalents $ 356,168 $ 460,843 $ 286,648
Short-term marketable securities 24,878 38,320 88,230
Accounts receivable, net 281,432 314,733 418,657
Costs and estimated earnings in excess of billings 50,891 13,295 51,047
Inventories, net 68,755 55,223 63,930
Real estate held for development and sale 131,169 75,089 50,308
Deferred income taxes 43,314 43,637 44,887
Equity in construction joint ventures 50,215 44,681 42,844
Other current assets 46,719 56,742 66,297
Total current assets 1,053,541 1,102,563 1,112,848
Property and equipment, net 529,805 517,678 526,383
Long-term marketable securities 53,328 21,239 29,706
Investment in affiliates 17,310 19,996 30,502
Other noncurrent assets 80,300 81,979 73,455
Total assets $ 1,734,284 $ 1,743,455 $ 1,772,894
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 64,848 $ 39,692 $ 35,039
Accounts payable 177,025 174,626 237,561
Billings in excess of costs and estimated earnings 184,665 227,364 226,213
Accrued expenses and other current liabilities 168,217 184,939 211,907
Total current liabilities 594,755 626,621 710,720
Long-term debt 233,675 250,687 246,493
Other long-term liabilities 46,686 43,604 46,956
Deferred income taxes 17,917 18,261 18,228
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 38,673,034 shares as of June 30, 2009, 38,266,791 shares as of December 31, 2008 and 38,274,588 shares as of June 30, 2008
387 383 383
Additional paid-in capital 89,142 85,035 81,358
Retained earnings 699,050 682,237 608,525
Accumulated other comprehensive loss - (146 ) (941 )
Total Granite Construction Inc. shareholders' equity 788,579 767,509 689,325
Noncontrolling interest 52,672 36,773 61,172
Total equity 841,251 804,282 750,497
Total liabilities and equity $ 1,734,284 $ 1,743,455 $ 1,772,894
June 30, December 31, June 30,
FINANCIAL POSITION 2009 2008 2008
Working capital $ 458,786 $ 475,942 $ 402,128
Current ratio 1.77 1.76 1.57
Debt to Granite Construction Inc. shareholders' equity capitalization 0.27 0.27 0.29
Total liabilities to Granite Construction Inc. shareholders' equity ratio 1.13 1.22 1.48
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Revenue
Construction $ 403,226 $ 580,943 $ 720,335 $ 983,516
Material sales 57,315 107,289 87,161 158,843
Real estate 534 6,100 951 6,773
Total revenue 461,075 694,332 808,447 1,149,132
Cost of revenue
Construction 327,016 486,716 573,985 793,562
Material sales 49,280 89,835 81,463 138,891
Real estate 1,534 8,755 1,741 8,959
Total cost of revenue 377,830 585,306 657,189 941,412
Gross profit 83,245 109,026 151,258 207,720
General and administrative expenses 55,669 65,760 109,301 126,411
Gain on sales of property and equipment 2,808 2,155 5,329 2,556
Operating income 30,384 45,421 47,286 83,865
Other income (expense)
Interest income 1,109 3,593 3,170 9,648
Interest expense (2,853 ) (3,058 ) (6,341 ) (7,568 )
Equity in income (loss) of affiliates 783 528 339 (179 )
Other income, net 1,431 184 5,216 8,647
Total other income 470 1,247 2,384 10,548
Income before provision for income taxes 30,854 46,668 49,670 94,413
Provision for income taxes 8,187 13,081 13,016 25,208
Net income 22,667 33,587 36,654 69,205
Amount attributable to noncontrolling interest (4,718 ) (7,969 ) (9,785 ) (30,464 )
Net income attributable to Granite Construction Inc. $ 17,949 $ 25,618 $ 26,869 $ 38,741
Net income per share attributable to common shareholders:

Basic (1)

$ 0.46 $ 0.67 $ 0.70 $ 1.00

Diluted (1)

$ 0.46 $ 0.67 $ 0.70 $ 1.00
Weighted average shares of common stock:
Basic 37,584 37,426 37,530 37,782
Diluted 37,699 37,552 37,650 37,862
Note:
(1) Computed using the two-class method as required by FSP EITF 03-6-1 adopted on January 1, 2009.
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Six Months Ended June 30, 2009 2008
Operating activities
Net income $ 36,654 $ 69,205
Adjustments to reconcile net income to net cash used in operating activities:
Impairment of real estate held for development and sale 1,036 4,500
Depreciation, depletion and amortization 39,670 42,428
(Recovery of) provision for doubtful accounts, net (3,386 ) 1,383
Gain on sales of property and equipment (5,329 ) (2,556 )
Change in deferred income taxes (113 ) 419
Stock-based compensation 4,561 3,427
Excess tax benefit on stock-based compensation (400 ) (746 )
Gain from trading securities (187 ) -
Equity in (income) loss of affiliates (339 ) 179
Acquisition of noncontrolling interest - (16,616 )
Changes in assets and liabilities, net of the effects of acquisition and consolidations (78,602 ) (57,827 )
Net cash (used in) provided by operating activities (6,435 ) 43,796
Investing activities
Purchases of marketable securities (39,043 ) (28,620 )
Maturities of marketable securities 27,610 40,250
Release of funds for acquisition of noncontrolling interest - 28,332
Additions to property and equipment (55,659 ) (62,528 )
Proceeds from sales of property and equipment 7,416 8,115
Acquisition of businesses - (14,022 )
Contributions to affiliates (4,971 ) (4,420 )
Other investing activities 439 676
Net cash used in investing activities (64,208 ) (32,217 )
Financing activities
Proceeds from long-term debt 4,911 2,103
Long-term debt principal payments (17,475 ) (15,032 )
Cash dividends paid (10,003 ) (10,103 )
Purchase of common stock (2,821 ) (45,468 )
Contributions from noncontrolling partners 203 4,744
Distributions to noncontrolling partners (9,283 ) (2,639 )
Acquisition of noncontrolling interest - (11,716 )
Excess tax benefit on stock-based compensation 400 746
Other financing 36 -
Net cash used in financing activities (34,032 ) (77,365 )
Decrease in cash and cash equivalents (104,675 ) (65,786 )
Cash and cash equivalents at beginning of period 460,843 352,434
Cash and cash equivalents at end of period $ 356,168 $ 286,648
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - in thousands)
Three Months Ended June 30, Six Months Ended June 30,
Granite West Granite East

Granite Land
Company

Granite West Granite East

Granite Land
Company

2009
Revenue $ 348,304 $ 112,237 $ 534 $ 545,353 $ 262,143 $ 951
Gross profit (loss) $ 62,882 $ 21,363 $ (1,000 ) $ 95,821 $ 56,227 $ (790 )
Gross profit (loss) as a percent of revenue

18.1%

19.0%

-187.3%

17.6%

21.4%

-83.1%

Operating income (loss) $ 34,909 $ 14,688 $ (2,240 ) $ 41,774 $ 43,084 $ (2,938 )
Operating income (loss) as a percent of revenue

10.0%

13.1%

-419.5%

7.7%

16.4%

-308.9%

2008
Revenue $ 517,463 $ 170,769 $ 6,100 $ 757,465 $ 384,894 $ 6,773
Gross profit (loss) $ 92,924 $ 18,757 $ (2,655 ) $ 132,553 $ 77,353 $ (2,186 )
Gross profit (loss) as a percent of revenue

18.0%

11.0%

-43.5%

17.5%

20.1%

-32.3%

Operating income (loss) $ 56,801 $ 11,691 $ (3,154 ) $ 61,114 $ 63,377 $ (3,604 )
Operating income (loss) as a percent of revenue

11.0%

6.8%

-51.7%

8.1%

16.5%

-53.2%

GRANITE CONSTRUCTION INCORPORATED
Contract Backlog
(Unaudited - in thousands)

Contract Backlog by Segment

June 30, 2009 March 31, 2009 June 30, 2008
Granite West $ 824,676 53.8 % $ 743,219 47.3 % $ 1,188,948 55.5 %
Granite East 707,567 46.2 % 826,855 52.7 % 952,700 44.5 %
Total $ 1,532,243 100.0 % $ 1,570,074 100.0 % $ 2,141,648 100.0 %

SOURCE: Granite Construction Incorporated 

Granite Construction Incorporated
Jacque Fourchy, 831-761-4714 (Investor)

Copyright Business Wire 2009


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