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 securities

56,088

70,408

Receivables, net

325,529

251,838

Costs and estimated earnings in excess of billings

34,116

37,703

Inventories

59,785

50,975

Real estate held for development and sale

50,223

67,037

Deferred income taxes

36,687

38,571

Equity in construction joint ventures

105,805

101,029

Other current assets

31,834

35,171

Total current assets

1,022,057

909,722

Property and equipment, net

481,478

447,140

Long-term marketable securities

55,342

79,250

Investments in affiliates

30,799

31,071

Goodwill

55,419

9,900

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 debt

10,707

23,071

Accounts payable

202,541

158,660

Billings in excess of costs and estimated earnings

139,692

90,845

Accrued expenses and other current liabilities

169,979

166,790

Total current liabilities

531,272

448,468

Long-term debt

270,148

208,501

Long-term non-recourse debt

922

9,912

Other long-term liabilities

47,124

49,221

Deferred income taxes

8,163

4,034

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, 2011

387

387

Additional paid-in capital

117,422

111,514

Retained earnings

712,144

687,296

Total Granite Construction Incorporated shareholders' equity

829,953

799,197

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 construction

214,572

211,565

863,217

725,043

Construction materials

54,888

55,500

230,642

220,583

Real estate

18

13,262

5,072

20,291

Total revenue

504,781

539,548

2,083,037

2,009,531

Cost of revenue

Construction

217,155

222,197

906,143

919,108

Large project construction

174,456

176,970

714,799

620,935

Construction materials

56,349

49,613

223,070

203,942

Real estate

13

11,642

4,266

17,583

Total cost of revenue

447,973

460,422

1,848,278

1,761,568

Gross profit

56,808

79,126

234,759

247,963

Selling, general and administrative expenses

57,298

42,536

185,099

162,302

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 income

21,664

40,137

80,835

99,269

Other income (expense)

Interest income

486

583

2,626

2,878

Interest expense

(2,033

)

(2,709

)

(10,603

)

(10,362

)

Equity in income of affiliates

1,608

750

1,988

2,193

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 taxes

24,041

36,167

81,029

89,433

Provision for income taxes

5,667

11,375

21,109

23,348

Net income

18,374

24,792

59,920

66,085

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:

Basic

38,534

38,191

38,447

38,117

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

3,238

5,067

Depreciation, depletion and amortization

56,101

60,546