Granite Reports Fourth Quarter and Fiscal 2012 Results

Granite Reports Fourth Quarter and Fiscal 2012 Results

  • Revenues for the year increased 4 percent to $2.1 billion
  • Net income of $45.3 million in 2012 compared with $51.2 million in 2011
  • Large Project Construction gross margins improved to 17.2 percent
  • Balance Sheet remains strong with $433.4 million in cash and marketable securities
  • Total contract backlog at December 31, 2012 of $1.7 billion, which does not include approximately $1.0 billion related to Granite's portions of the Tappan Zee Bridge project in New York and IH-35E project in Texas
  • Acquisition of Kenny Construction Company completed on December 31, 2012

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYS: GVA) today reported a net income of $45.3 million for 2012, compared to $51.2 million the prior year. Diluted earnings per share (EPS) for the year was $1.15 compared to $1.31 in 2011.


For the fourth quarter of 2012, Granite reported a net income of $18.0 million, compared to $18.8 million for the fourth quarter of 2011. Diluted EPS for the quarter ended December 31, 2012 was $0.46 compared to $0.48 in the prior year period.

"Our fourth quarter results highlight the strength of our Large Project portfolio as well as the challenging market conditions our Construction and Construction Materials businesses continued to face in the West," said James H. Roberts, President and CEO of Granite Construction Incorporated. "We remain focused on our strategic growth plan and are pleased with the progress we have made to diversify our business portfolio, grow the Large Projects segment and optimize our overall asset base."

Fiscal Year 2012 Highlights:

Total Company

  • Revenues for the year were $2.1 billion, compared with $2.0 billion recorded in 2011.
  • Gross profit margin was 11.3 percent compared with 12.3 percent in 2011 due to lower gross profit in both the Construction and Construction Materials segments partially offset by an increase in margins in the Large Project segment.
  • SG&A expenses for the year were $185.1 million, compared with $162.3 million last year. The increase reflects $5.4 million associated with large project bid costs, $4.4 million associated with the acquisition of Kenny Construction and $2.0 million related to earnings in the Company's deferred compensation plan.
  • Gain on sales of property and equipment was $27.4 million in 2012, compared with $15.8 million in 2011. The increase is associated with an $18.0 million gain on the sale of a quarry investment.
  • Operating income was $80.8 million in 2012, compared with $99.3 million in 2011.
  • Total other income (expense) for the year was $0.2 million, compared with $(9.8) million in 2011. Other income for 2012 included a $7.4 million gain related to the sale of gold, a by-product of aggregate production, partially offset by a $2.8 million non-cash impairment loss on an investment in a solar-related business.
  • Net income attributable to non-controlling interests was $14.6 million, compared with $14.9 million the prior period.
  • Total contract backlog at December 31, 2012, was $1.7 billion compared with $2.0 billion a year ago. 2012 backlog includes $357 million attributable to the Kenny acquisition and does not include Granite's approximate $733 million portion of the Tappan Zee Bridge project in New York or the IH-35E highway reconstruction project in Texas of which Granite's portion is approximately $297 million.

Construction

  • Construction revenues for the year were $1.0 billion, in line with 2011.
  • Gross profit margin was 7.9 percent compared with 11.9 percent a year ago reflecting challenging market conditions, as well as increased costs to complete certain projects due to lower productivity than anticipated.

Large Project Construction

  • Large Project Construction revenue for the year increased 19 percent to $863.2 million due largely to the progress on projects awarded in late 2010 and early 2011.
  • Gross profit margin was 17.2 percent compared with 14.4 percent in 2011 reflecting successful execution on several large projects across the country offset by a downward forecast adjustment on a project in Washington.

Construction Materials

  • Construction Materials revenue was $230.6 million compared with $220.6 million last year.
  • Gross profit in 2012 was $7.6 million, compared with $16.6 million in 2011. The decline in gross profit is primarily attributable to slow economic conditions at certain California locations.

Fourth Quarter 2012 Highlights

Total Company

  • Revenue for the quarter totaled $504.8 million compared with $539.5 million for the fourth quarter of 2011.
  • Gross profit margin for the fourth quarter of 2012 was 11.3 percent compared with 14.7 percent in 2011. The decrease is primarily due to lower gross profit in both the Construction and Construction Materials segments partially offset by an increase in margins in the Large Project segment.
  • Selling, general and administrative expenses for the fourth quarter increased $14.8 million to $57.3 million reflecting $4.7 million in costs associated with the pursuit of large projects and $4.4 million in acquisition-related costs.
  • Operating income was $21.7 million, compared with $40.1 million in the prior year.
  • Net income attributable to noncontrolling interests was $0.4 million compared with $6.0 million in 2011.

Construction

  • Construction revenue for the fourth quarter 2012 was $235.3 million, compared with $259.2 million for the fourth quarter of 2011.
  • Gross profit margin was 7.7 percent, compared with 14.3 percent a year ago reflecting competitive market conditions, wet weather in the West in November and December, and increased costs to complete certain projects due to lower productivity than anticipated.

Large Project Construction

  • Large Project Construction revenue was $214.6 million, compared with $211.6 million.
  • Gross profit margin for the quarter was 18.7 percent, compared with 16.4 percent for the same period last year. The increase reflects successful execution on several large projects across the country, partially offset by a downward forecast adjustment on a project Washington.

Construction Materials

  • Construction Materials revenue for the quarter was $54.9 million, compared with $55.5 million in the fourth quarter of 2011.
  • Gross loss on the sale of construction materials was $1.5 million, compared with gross profit of $5.9 million in the prior period. The fourth quarter of 2012 was impacted by slow economic conditions at certain California locations.

Outlook

"Overall, I am pleased with the direction of our company, led by the implementation of our well-developed strategic plan. We are well prepared to capture the benefits of our acquisition of Kenny and intend to continue to pursue our growth plan through geographic and end market diversification in 2013," said Roberts.

"While we are optimistic that we will see some benefit from the residential building market towards the end of the year, we expect that our Construction and Construction Materials businesses will continue to face challenging market conditions throughout most of 2013. Our outlook for Large Projects, however, remains very positive. We anticipate strong backlog growth in our Large Projects segment in light of the strong pipeline of opportunities across the country. We have several large projects in various stages of completion in 2013 and will be starting work on the Tappan Zee and IH-35E projects, both of which should recognize profit in 2014."

Conference Call

Granite will conduct a conference call today, February 28, 2013 at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the results of the quarter and year ended December 31, 2012. Access to a live audio webcast is available at www.graniteconstruction.com. The live conference call may be accessed by calling (877) 643-7158. The conference ID for the live call is 99198804. The call will be recorded and will be available for replay approximately two hours after the live audio webcast through March 7, 2013 by calling (855) 859-2056. The conference ID for the replay is 99198804.

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 subsidiaries, 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 has been recognized by Ethisphere Institute as one of the World's Most Ethical Companies for three straight years. 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 and quarterly reports on Form 10-Q.

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
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
     
December 31, 2012 2011
ASSETS  
Current assets
Cash and cash equivalents$321,990$256,990
Short-term marketable securities56,08870,408
Receivables, net325,529251,838
Costs and estimated earnings in excess of billings34,11637,703
Inventories59,78550,975
Real estate held for development and sale50,22367,037
Deferred income taxes36,68738,571
Equity in construction joint ventures105,805101,029
Other current assets  31,834  35,171
Total current assets1,022,057909,722
Property and equipment, net481,478447,140
Long-term marketable securities55,34279,250
Investments in affiliates30,79931,071
Goodwill55,4199,900
Other noncurrent assets  84,392  70,716
Total assets $1,729,487 $1,547,799
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt$8,353$9,102
Current maturities of non-recourse debt10,70723,071
Accounts payable202,541158,660
Billings in excess of costs and estimated earnings139,69290,845
Accrued expenses and other current liabilities  169,979  166,790
Total current liabilities531,272448,468
Long-term debt270,148208,501
Long-term non-recourse debt9229,912
Other long-term liabilities47,12449,221
Deferred income taxes8,1634,034
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 38,730,665 shares as of December 31, 2012 and 38,682,771 shares as of December 31, 2011387387
Additional paid-in capital117,422111,514
Retained earnings  712,144  687,296
Total Granite Construction Incorporated shareholders' equity829,953799,197
Noncontrolling interests  41,905  28,466
Total equity  871,858  827,663
Total liabilities and equity $1,729,487 $1,547,799

         
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
         
 Three Months Ended

December 31,

 Years Ended

December 31,

  2012 2011 2012 2011
Revenue  
Construction$235,303$259,221$984,106$1,043,614
Large project construction214,572211,565863,217725,043
Construction materials54,88855,500230,642220,583
Real estate  18   13,262   5,072   20,291 
Total revenue  504,781   539,548   2,083,037   2,009,531 
Cost of revenue
Construction217,155222,197906,143919,108
Large project construction174,456176,970714,799620,935
Construction materials56,34949,613223,070203,942
Real estate  13   11,642   4,266   17,583 
Total cost of revenue  447,973   460,422   1,848,278   1,761,568 
Gross profit56,80879,126234,759247,963
Selling, general and administrative expenses57,29842,536185,099162,302
Restructuring (gains) charges, net(1,200)670(3,728)2,181
Gain on sales of property and equipment  20,954   4,217   27,447   15,789 
Operating income21,66440,13780,83599,269
Other income (expense)
Interest income4865832,6262,878
Interest expense(2,033)(2,709)(10,603)(10,362)
Equity in income of affiliates1,6087501,9882,193
Other income (expense), net  2,316   (2,594)  6,183   (4,545)
Total other income (expense)  2,377   (3,970)  194   (9,836)
Income before provision for income taxes24,04136,16781,02989,433
Provision for income taxes  5,667   11,375   21,109   23,348 
Net income18,37424,79259,92066,085
Amount attributable to noncontrolling interests  (387)  (6,038)  (14,637)  (14,924)
Net income attributable to Granite Construction Incorporated $17,987  $18,754  $45,283  $51,161 
 
Net income per share attributable to common shareholders:
Basic$0.46$0.48$1.17$1.32
Diluted$0.46$0.48$1.15$1.31
Weighted average shares of common stock:
Basic38,53438,19138,44738,117
Diluted  39,207   38,607   39,076   38,473 

 
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
     
Years Ended December 31, 2012 2011
Operating activities  
Net income$59,920$66,085
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash restructuring, net(3,093)1,678

Other non-cash impairment charges

3,2385,067
Depreciation, depletion and amortization56,10160,546
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