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November 2, 2011

Granite Announces Third-Quarter 2011 Results

  • Revenue increased 9 percent compared to a year ago
  • Operating income increased $28.2 million to $60.4 million
  • Gross profit margin improved to 13 percent from 11 percent in 2010
  • SG&A decreased $8.0 million to $39.1 million

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income attributable to common shareholders of $36.5 million, or $0.93 per diluted share, for the third quarter of 2011 compared with $38.7 million, or $0.99 per diluted share, the prior year. Third quarter of 2010 included a tax benefit of $8.0 million versus a tax provision of $15.1 million for the third quarter of 2011.

"Overall, our business continues to operate well in the face of a very challenging environment," said James H. Roberts, Granite's president and chief executive officer. "We are successfully lowering our cost structure, holding margins in a very competitive market and executing well on our backlog of work."

"I am extremely proud of our employees," Roberts continued. "It is with their tireless work ethic that we have been able to offset some of the economic challenges facing our industry. Not only have we reduced overhead, we have lowered our costs to produce, streamlined our operations and continue to seek opportunities to do more. I am confident that with the healthy pipeline of project bidding opportunities in front of us, we are well-positioned to leverage our capabilities and emerge from this downturn with a more diversified portfolio of work that will strengthen and grow the business over the long-term."

Third-quarter 2011 Financial Results

Total Company

  • Revenue totaled $728.6 million compared with $670.9 million in 2010, driven by increases in both Construction and Large Project Construction revenue.
  • Gross profit margin was 13 percent compared with 11 percent in 2010.
  • Selling, general and administrative expenses for the third quarter decreased $8.0 million to $39.1 million primarily due to the 2010 workforce reduction as well as other ongoing efforts to reduce the company's cost structure.
  • Operating income for the quarter was $60.4 million compared with $32.2 million in the prior year driven largely by an increase in gross profit and a decrease in selling, general and administrative expenses.
  • Other income (expense) decreased $6.0 million from 2010 due primarily to tax related benefits in the prior year.
  • Net income attributable to non-controlling interests in joint ventures was $5.9 million compared with $4.6 million in 2010.
  • Total contract backlog at September 30, 2011, was $1.8 billion compared with $1.6 billion a year ago. New awards for the quarter include a $64 million bridge project in Florida, Granite's 49 percent share of a $90 million project in Guam and Granite's 25 percent share of a $97 million airport runway project in California.
  • Due to a change in mix of the company's consolidated versus unconsolidated joint venture projects, cash and marketable securities at September 30, 2011 was $330.0 million compared with $388.3 million at September 30, 2010.

Construction

  • Construction revenue for the quarter increased 5 percent to $431.1 million due to a higher volume of work completed in the quarter compared to a year ago.
  • Gross profit margin for the third quarter was 14 percent compared with 11 percent a year ago reflecting successful execution on projects and improved cost management.

Large Project Construction

  • Large Project Construction revenue for the quarter increased 26 percent to $213.3 million reflecting progress on several large projects across the country.
  • Gross profit margin for the quarter was 12 percent compared with 11 percent for the same period last year. During the quarter, the World Trade Center project in New York and the Mountain View Corridor project in Utah reached the profit recognition threshold.

Construction Materials

  • Construction Materials revenue for the quarter totaled $83.2 million compared with $88.1 million for the same period last year as the demand for construction materials remains weak throughout most of our markets in the West.
  • Gross profit on the sale of construction materials was 12 percent compared with 14 percent in 2010.

Outlook

Based on the year-to-date performance, the company is updating its guidance for the year. Construction segment revenues are now expected to be $1 billion to $1.1 billion and gross margin of 10.5 percent to 11.5 percent. Revenue for the Large Project Construction segment is expected to be $650 million to $700 million with a gross margin range of 15.5 percent and 16.5 percent. Revenue for the Construction Materials segment is expected to be $190 million to $210 million and gross margin between 7.5 percent and 8.5 percent. Net income attributable to non-controlling interests is expected to be $13 million to $15 million for the year.

Conference Call

Granite will conduct a conference call tomorrow, November 3, 2011 at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the quarter ended September 30, 2011. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call may be accessed by calling (877) 643-7158. The conference ID for the live call is 18220474. The call will be recorded and will be available for replay approximately two hours after the live audio webcast through November 24, 2011 by calling (855) 859-2056. The conference ID for the replay is also 18220474.

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 was recently recognized by the Ethisphere Institute as one of the World's Most Ethical Companies for the second 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,
      2011     2010     2010
 
ASSETS
Current assets
Cash and cash equivalents $ 193,099 $ 252,022 $ 257,854
Short-term marketable securities 77,389 109,447 80,962
Receivables, net 357,807 243,986 375,914
Costs and estimated earnings in excess of billings 45,884 10,519 34,448
Inventories 57,987 51,018 45,224
Real estate held for development and sale 79,173 75,716 151,638
Deferred income taxes 52,714 53,877 31,035
Equity in construction joint ventures 97,415 74,716 80,496
Other current assets     29,526     42,555     42,409
Total current assets 990,994 913,856 1,099,980
Property and equipment, net 453,822 473,607 491,363
Long-term marketable securities 59,509 34,259 49,502
Investments in affiliates 33,435 31,410 32,515
Other noncurrent assets     80,709     82,401     78,611
Total assets   $ 1,618,469   $ 1,535,533   $ 1,751,971
 
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 8,351 $ 8,359 $ 8,444
Current maturities of non-recourse debt 16,690 29,760 39,157
Accounts payable 216,600 129,700 206,993
Billings in excess of costs and estimated earnings 89,505 120,185 157,233
Accrued expenses and other current liabilities     185,624     150,773     173,547
Total current liabilities 516,770 438,777 585,374
Long-term debt 208,519 217,014 216,870
Long-term non-recourse debt 27,755 25,337 16,420
Other long-term liabilities 46,985 47,996 48,764
Deferred income taxes 10,330 10,774 27,883
 
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 38,664,403 shares as of September 30, 2011, 38,745,542 shares as of December 31, 2010 and 38,769,787 shares as of September 30, 2010 387 387 388
Additional paid-in capital 108,096 104,232 101,567
Retained earnings     673,626     656,412     711,497
Total Granite Construction Incorporated shareholders' equity 782,109 761,031 813,452
Noncontrolling interests     26,001     34,604     43,208
Total equity     808,110     795,635     856,660
Total liabilities and equity   $ 1,618,469   $ 1,535,533   $ 1,751,971
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
                 
 

Three Months Ended September
30,

 

Nine Months Ended September
30,

      2011       2010       2011       2010  
Revenue    
Construction $ 431,101 $ 409,989 $ 784,393 $ 729,118
Large project construction 213,320 169,972 513,478 429,625
Construction materials 83,171 88,128 165,083 175,381
Real estate     986       2,761       7,029       11,613  
Total revenue     728,578       670,850       1,469,983       1,345,737  
Cost of revenue
Construction 372,561 365,323 696,911 659,705
Large project construction 187,763 151,656 443,965 379,991
Construction materials 73,617 75,991 154,329 165,889
Real estate     744       1,725       5,941       8,585  
Total cost of revenue     634,685       594,695       1,301,146       1,214,170  
Gross profit 93,893 76,155 168,837 131,567
Selling, general and administrative expenses 39,112 47,160 121,277 153,809
Gain on sales of property and equipment     5,598       3,165       11,572       11,417  
Operating income (loss) 60,379 32,160 59,132 (10,825 )
Other (expense) income
Interest income 476 2,110 2,295 4,147
Interest expense (3,418 ) (547 ) (7,653 ) (7,294 )
Equity in income (loss) of affiliates 1,881 529 1,443 (177 )
Other (expense) income, net     (1,833 )     1,023       (1,951 )     5,854  
Total other (expense) income     (2,894 )     3,115       (5,866 )     2,530  
Income (loss) before provision for (benefit from) income taxes 57,485 35,275 53,266 (8,295 )
Provision for (benefit from) income taxes     15,109       (8,026 )     11,973       (11,233 )
Net income 42,376 43,301 41,293 2,938
Amount attributable to noncontrolling interests     (5,908 )     (4,620 )     (8,886 )     (11,902 )
Net income (loss) attributable to Granite Construction Incorporated   $ 36,468     $ 38,681     $ 32,407     $ (8,964 )
 
Net income (loss) per share attributable to common shareholders:
Basic (1) $ 0.94 $ 1.00 $ 0.84 $ (0.24 )
Diluted (1) $ 0.93 $ 0.99 $ 0.83 $ (0.24 )
Weighted average shares of common stock:
Basic 38,172 37,865 38,092 37,802
Diluted     38,598       38,071       38,428       37,802  
 
Note:
(1) Computed using the two-class method, except when in a net loss position
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
         
   
Nine Months Ended September 30,     2011       2010  
Operating activities
Net income $ 41,293 $ 2,938
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 45,691 54,169
Gain on sales of property and equipment (11,572 ) (11,417 )
Stock-based compensation 8,994 10,241
Loss (gain) on company owned life insurance 639 (2,655 )
Changes in assets and liabilities, net of the effects of consolidations     (83,027 )     (42,710 )
Net cash provided by operating activities     2,018       10,566  
Investing activities
Purchases of marketable securities (115,146 ) (78,355 )
Maturities of marketable securities 85,875 50,900
Proceeds from sale of marketable securities 33,268 10,000
Additions to property and equipment (34,748 ) (30,182 )
Proceeds from sales of property and equipment 20,071 17,225
Purchase of private preferred stock (50 ) (6,400 )
Other investing activities, net     2,363       2,407  
Net cash used in investing activities     (8,367 )     (34,405 )
Financing activities
Long-term debt principal payments (17,293 ) (18,472 )
Cash dividends paid (15,090 ) (15,110 )
Purchase of common stock (3,840 ) (3,374 )
Distributions to noncontrolling partners, net (17,489 ) (20,940 )
Other financing activities     1,138       633  
Net cash used in financing activities     (52,574 )     (57,263 )
Decrease in cash and cash equivalents (58,923 ) (81,102 )
Cash and cash equivalents at beginning of period     252,022       338,956  
Cash and cash equivalents at end of period   $ 193,099     $ 257,854  
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
           
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 %
 
2010
Revenue $ 409,989 $ 169,972 $ 88,128 $ 2,761 $ 729,118 $ 429,625 $ 175,381 $ 11,613
Gross profit 44,666 18,316 12,137 1,036 69,413 49,634 9,492 3,028
Gross profit as a percent of revenue 10.9 % 10.8 % 13.8 % 37.5 % 9.5 % 11.6 % 5.4 % 26.1 %
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
                         
Contract Backlog by Segment   September 30, 2011   June 30, 2011   September 30, 2010
           
Construction $ 562,705 30.5 % $ 800,434 38.0 % $ 497,089 30.3 %
Large project construction     1,280,945   69.5 %     1,306,961   62.0 %     1,141,453   69.7 %
 
Total   $ 1,843,650   100.0 %   $ 2,107,395   100.0 %   $ 1,638,542   100.0 %

Granite Construction Incorporated
Jacque Fourchy, 831-761-4741

Source: Granite Construction Incorporated

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