Granite Construction Incorporated Reports Second Quarter 2007 Results
WATSONVILLE, Calif.,
William G. Dorey, president and chief executive officer, said, "I am very pleased with our financial results this quarter. Our branch business in the west achieved record gross margin results driven by excellent execution on a strong backlog of work. With regard to the large projects in our Granite East division, I am particularly encouraged by the profit potential of our backlog and the overall financial improvement we are beginning to see from this business."
Operating Results - Quarter and Year-To-Date
For the second quarter of 2007, total revenue decreased 5.1% to
For the six-month period ended
General and Administrative expenses for the quarter totaled
Results by Segment
The following results by segment are presented reflecting changes to the Company's segment reporting structure. As of the quarter ended
Granite East revenue for the quarter totaled
For the six-month period ended
Granite West revenue for the quarter totaled
For the six-month period ended
Outlook
The Company's outlook for Granite West in 2007 remains positive. However, there has been an increase in competition for public sector projects in
The Company believes Granite East should achieve breakeven operating results in 2007. This guidance reflects our current forecasts of large projects in the newly realigned Granite East business. As outlined below, the Granite East business includes the former HCD projects, less three projects that were reassigned to Granite West. The gross profit associated with the three reassigned projects for the three and six month periods ended
Reporting Segment Profiles
Granite West is comprised of decentralized branch offices in the western
All of the Company's revenue from the sale of construction materials is from Granite West. Each of the branch locations under Granite West operate facilities that process aggregates into construction materials for internal use or for sales to third parties. These activities are vertically integrated into the Granite West construction business, providing a source of profits and a competitive advantage to our construction business.
Granite East operates in the eastern portion of the
Projects Affecting New Segment Reporting Structure
Three projects from the Company's legacy Heavy Construction Division were
reassigned to the new Granite West division. The following table shows the
impact to Granite West and Granite East revenue and gross profit relating to
these three projects:
Three Months Ended Six Months Ended
Granite West June 30, June 30,
(in thousands) 2007 2006 2007 2006
Branch Division
revenue $511,862 $471,297 $793,304 $722,395
Reassigned
projects revenue 30,585 14,261 47,237 22,994
Granite West
Division revenue 542,447 485,558 840,541 745,389
Branch Division
gross profit 106,394 86,886 157,146 130,495
Reassigned
projects gross
profit 3,015 -- 4,593 --
Granite West
Division gross
profit 109,409 86,886 161,739 130,495
Three Months Ended Six Months Ended
Granite East June 30, June 30,
(in thousands) 2007 2006 2007 2006
Heavy Construction
Division revenue $248,613 $307,091 $449,914 $551,931
Reassigned
projects revenue (30,585) (14,261) (47,237) (22,994)
Granite East
Division revenue 218,028 292,830 402,677 528,937
Heavy Construction
Division gross
profit (loss) 17,426 (11,242) 10,995 (14,200)
Reassigned
projects gross
profit (3,015) -- (4,593) --
Granite East
Division gross
profit (loss) 14,411 (11,242) 6,402 (14,200)
The backlog related to the three projects reassigned was
Financial Results
The financial information in this announcement reflects the Company's preliminary results subject to completion of the quarterly review. The final quarterly financial results will appear in Granite's Form 10-Q, which will be filed on or before
Conference Call
Granite will conduct a conference call tomorrow,
About Granite
Forward-Looking Statements
This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represents our management's beliefs and assumptions concerning future events such as statements related to the existence of bidding opportunities and economic conditions on the Company's future results. Additionally, forward-looking statements include statements that can be identified by the use of forward- looking terminology such as "believes," "expects," "appears," "may," "will," "should," "look for," or "anticipates," or the negative thereof or comparable terminology, or by discussions of strategy.
All such forward-looking statements are subject to risks and uncertainties that could cause actual results of operations and financial condition and other events, as well as the timing thereof, to differ materially from those expressed or implied in such forward-looking statements. Specific risk factors include, without limitation, changes in the composition of applicable federal and state legislation appropriation committees; federal and state appropriation changes for infrastructure spending; the general state of the economy; job productivity; accuracy of project estimates; weather conditions; competition and pricing pressures; and state referendums and initiatives. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. You should also understand that many important factors in addition to those discussed, referred to or incorporated by reference in this press release, could cause our results to differ materially from those expressed in the forward-looking statements. In light of these risks and uncertainties, it is important to be aware that the forward-looking events discussed in this release may not occur. We undertake no obligation to revise or update publicly any forward-looking statements to conform the statement to actual results or changes in the Company's expectations.
For further information regarding risks and uncertainties associated with Granite's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operation" and "Risk Factors" sections of Granite's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Granite's investor relations department at (831) 724-1011 or at Granite's website at www.graniteconstruction.com.
GRANITE CONSTRUCTION INCORPORATED
COMPARATIVE FINANCIAL SUMMARY
(Unaudited - In Thousands, Except Per Share Data)
Three Months Ended
June 30, Variance
2007 2006 Amount Percent
Revenue
Construction $660,384 $669,837 $(9,453) (1.4)
Material sales $100,091 $108,551 $(8,460) (7.8)
Real estate $10,401 $33,649 $(23,248) (69.1)
Total revenue $770,876 $812,037 $(41,161) (5.1)
Cost of revenue
Construction $557,926 $621,843 $63,917 10.3
Material sales $78,878 $80,674 $1,796 2.2
Real estate $6,438 $16,410 $9,972 60.8
Total cost of revenue $643,242 $718,927 $75,685 10.5
Gross profit $127,634 $93,110 $34,524 37.1
Gross profit as a
percent of revenue 16.6% 11.5% 5.1% --
General and
administrative expenses $65,130 $48,935 $(16,195) (33.1)
G&A expenses as a
percent of revenue 8.4% 6.0% (2.4%) --
Gain on sales of property
and equipment $4,346 $4,049 $297 7.3
Other income (expense)
Interest income $6,439 $4,944 $1,495 30.2
Interest expense $(2,028) $(1,391) ($637) (45.8)
Equity in (loss) income
of affiliates $(29) $828 $(857) ****
Other, net $(433) $3,314 $(3,747) ****
Total other income $3,949 $7,695 $(3,746) (48.7)
Income before provision
for income taxes and
minority interest $70,799 $55,919 $14,880 26.6
Minority interest $(4,799) $(5,585) $786 14.1
Net income $43,846 $33,289 $10,557 31.7
Net income per share:
Basic $1.07 $0.81 $0.26 32.1
Diluted $1.05 $0.80 $0.25 31.3
Weighted average shares
of common stock:
Basic 41,096 40,896 200 0.5
Diluted 41,631 41,466 165 0.4
Six Months Ended
June 30, Variance
2007 2006 Amount Percent
Revenue
Construction $1,077,016 $1,104,145 $(27,129) (2.5)
Material sales $166,202 $170,181 $(3,979) (2.3)
Real estate $15,318 $33,679 $(18,361) (54.5)
Total revenue $1,258,536 $1,308,005 $(49,469) (3.8)
Cost of revenue
Construction $942,080 $1,025,378 $83,298 8.1
Material sales $132,986 $132,447 $(539) (0.4)
Real estate $7,800 $16,835 $9,035 53.7
Total cost of revenue $1,082,866 $1,174,660 $91,794 7.8
Gross profit $175,670 $133,345 $42,325 31.7
Gross profit as a
percent of revenue 14.0% 10.2% 3.8% --
General and
administrative expenses $119,467 $97,191 $(22,276) (22.9)
G&A expenses as a
percent of revenue 9.5% 7.4% (2.1%) --
Gain on sales of
property and equipment $5,059 $8,287 $(3,228) (39.0)
Other income (expense)
Interest income $13,282 $9,677 $3,605 37.3
Interest expense $(3,114) $(2,786) $(328) (11.8)
Equity in (loss)
income of affiliates $322 $751 $(429) (57.1)
Other, net $(666) $2,708 $(3,374) ****
Total other income $9,824 $10,350 $(526) (5.1)
Income before provision
for income taxes and
minority interest $71,086 $54,791 $16,295 29.7
Minority interest $(7,246) $(6,652) $(594) (8.9)
Net income $41,597 $31,867 $9,730 30.5
Net income per share:
Basic $1.01 $0.78 $0.23 29.5
Diluted $1.00 $0.77 $0.23 29.9
Weighted average shares
of common stock:
Basic 41,044 40,818 226 0.6
Diluted 41,560 41,378 182 0.4
**** Represents percentages greater than 100%
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands, except share and per share data)
June 30, December 31,
2007 2006
Assets
Current assets
Cash and cash equivalents $246,278 $204,893
Short-term marketable securities 98,199 141,037
Accounts receivable, net 489,435 492,229
Costs and estimated earnings in
excess of billings 39,710 15,797
Inventories 53,320 41,529
Real estate held for sale 54,722 55,888
Deferred income taxes 36,015 36,776
Equity in construction joint
ventures 32,400 31,912
Other current assets 57,811 63,144
Total current assets 1,107,890 1,083,205
Property and equipment, net 490,328 429,966
Long-term marketable securities 61,582 48,948
Investment in affiliates 24,816 21,471
Other assets 72,490 49,248
Total assets $1,757,106 $1,632,838
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $35,040 $28,660
Accounts payable 268,054 257,612
Billings in excess of costs and
estimated earnings 242,469 287,843
Accrued expenses and other current
liabilities 223,311 189,328
Total current liabilities 768,874 763,443
Long-term debt 139,715 78,576
Other long-term liabilities 67,378 58,419
Deferred income taxes 19,478 22,324
Minority interest in consolidated
subsidiaries 30,675 15,532
Shareholders' 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
41,947,610 shares in
2007 and 41,833,559 shares in 2006 419 418
Additional paid-in capital 81,293 78,620
Retained earnings 645,448 612,875
Accumulated other comprehensive income 3,826 2,631
Total shareholders' equity 730,986 694,544
Total liabilities and
shareholders' equity $1,757,106 $1,632,838
June 30, December 31,
Financial Position 2007 2006
Working capital $339,016 $319,762
Current ratio 1.44 1.42
Debt to total capitalization 0.19 0.13
Total liabilities to equity ratio 1.40 1.35
GRANITE CONSTRUCTION INCORPORATED
REVENUE AND BACKLOG ANALYSIS
(Unaudited - Dollars In Thousands)
BY MARKET SECTOR
Revenue
Three Months Ended June 30, Variance
2007 2006 Amount Percent
Public Sector $545,784 $554,059 $(8,275) (1.5)
Private Sector 114,600 115,778 (1,178) (1.0)
Aggregate sales 100,091 108,551 (8,460) (7.8)
Real Estate 10,401 33,649 (23,248) (69.1)
$770,876 $812,037 $(41,161) (5.1)
Backlog
June 30, Variance
2007 2006 Amount Percent
Public Sector $2,315,479 $2,175,021 $140,458 6.5
Private Sector 187,622 317,845 (130,223) (41.0)
$2,503,101 $2,492,866 $10,235 0.4
BY GEOGRAPHIC AREA
Revenue
Three Months Ended June 30, Variance
2007 2006 Amount Percent
California $321,054 $333,215 $(12,161) (3.6)
West (Excl. CA) 246,296 246,901 (605) (0.2)
Midwest 26,594 19,162 7,432 38.8
Northeast 57,270 75,575 (18,305) (24.2)
Southeast 79,688 70,985 8,703 12.3
South 39,974 66,199 (26,225) (39.6)
$770,876 $812,037 $(41,161) (5.1)
Backlog
June 30, Variance
2007 2006 Amount Percent
California $436,591 $655,071 $(218,480) (33.4)
West (Excl. CA) 581,023 723,387 (142,364) (19.7)
Midwest 380,190 17,134 363,056 ****
Northeast 173,562 312,105 (138,543) (44.4)
Southeast 743,054 463,437 279,617 60.3
South 188,681 321,732 (133,051) (41.4)
$2,503,101 $2,492,866 $10,235 0.4
**** Represents percentages greater than 100%
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