Exhibit 99.1
Granite Construction Reports Third Quarter 2004 Earnings
WATSONVILLE, Calif., Nov. 3 /PRNewswire-FirstCall/ — Granite Construction Incorporated (NYSE: GVA) announced results today for the third quarter and year-to-date 2004. The Company reported net income of $32.8 million, or $0.80 per diluted share for the third quarter ended September 30, 2004. This compares with net income of $25.8 million or $0.63 per diluted share for the same period last year.
Total revenue for the quarter increased 20.6% to $699.8 million compared with $580.2 million a year ago. Total backlog at September 30, 2004 totaled $2.32 billion compared with $1.90 billion at September 30, 2003. $30.2 million of total Company revenue for the quarter ended September 30, 2004 and $305.1 million of backlog at September 30, 2004 results from consolidating certain construction joint ventures (prospectively beginning on January 1, 2004) as required by new accounting rules*.
Commenting on the Company’s results, Granite President and Chief Executive Officer, William G. Dorey stated, “I am pleased with our overall third quarter results. We achieved strong levels of revenue and backlog despite reduced funding for the California Department of Transportation (Caltrans), traditionally our largest customer, and the ongoing delays of funding a long-term federal highway bill. Our Branch Division demonstrated its ability to capitalize on the available market opportunities and our Heavy Construction Division was awarded three large projects in the quarter.”
Results by Segment
Branch Division operating income for the quarter increased 17.9% to $56.6 million compared with $48.0 million a year ago. Quarterly revenue for the division totaled $462.7 million, an increase of $65.9 million or 16.6% over the same period in 2003. Backlog increased 25.8% in the third quarter 2004 to $606.8 million compared with $482.3 million for the third quarter 2003. Branch Division gross profit as a percent of revenue was 16.7% for the third quarter 2004 compared with 17.2% for the third quarter 2003. Operating income as a percent of revenue in the quarter was 12.2% compared with 12.1% last year.
HCD operating income for the quarter was $9.9 million (which includes $2.7 million from newly consolidated construction joint ventures*) compared with $4.9 million for the third quarter 2003. HCD revenue for the quarter totaled $237.1 million versus $183.3 million for the same period last year and includes $30.2 million in the 2004 quarter from newly consolidated joint ventures*. Backlog was $1.41 billion at September 30, 2004, excluding the partners’ share of consolidated joint venture backlog of $305.1 million, and was $1.42 billion at September 30, 2003. HCD gross profit as a percent of revenue increased in the quarter to 7.9% compared with 7.3% for the quarter ended September 30, 2003. Primarily as a result of the increase in HCD gross margin, operating income as a percent of revenue in the quarter was 4.2% compared with 2.7% last year.
Business Outlook
The Company continues to expect Branch Division operating income to be in line with its 2003 performance. Although posting improved quarterly results, HCD is not performing at expected levels. The Company is no longer forecasting a large HCD project to reach 25% complete this year and now expects to recognize the associated profit for that project when it reaches 25% complete in early 2005. As a result of this timing issue, coupled with margin deterioration experienced on several large HCD projects earlier this year, operating income for the division in 2004 is now expected to be lower than in 2003. The Company’s earnings guidance for 2004 is in the range of $1.15 to $1.20 per diluted share. It is important to note that the amount of work the Company is able to complete in the fourth quarter can vary significantly due to weather.
Looking ahead, the continued contribution of the private sector, as well as local agency work and construction materials business will all play a key role in the Branch Division’s performance in 2005. In particular, there continues to be a healthy demand for construction materials driven by residential, commercial and industrial markets in the West. However, the Company has yet to see a significant increase in state projects in California, its largest market. The amount of Caltrans work available will rely in large part on several state and federal transportation funding issues that may or may not be resolved in 2005. The Company’s outlook for an improved performance from HCD is based on an increase in gross margins on its projects going forward.
Year-to-Date Results
For the nine month period ended September 30, 2004, total revenue increased 18.0% to $1.60 billion compared with $1.35 billion a year ago. Total company revenue for the nine months ended September 30, 2004 includes $78.9 million resulting from consolidating certain construction joint ventures as required by new accounting rules*.
Net income for the nine-month period ended September 30, 2004 was $37.5 million, or $0.91 per diluted share compared with net income of $46.6 million or $1.14 per diluted share for the same period last year. (First quarter 2003 results include $18.4 million in pre-tax income related to the sale of the State Route 91 Toll Road Franchise by the California Private Transportation Corporation, of which Granite is a 22.2% limited partner.) Total gross profit as a percent of revenue for the nine months ended September 30, 2004 decreased to 10.4% compared with 12.4% for the same period in 2003.
Third Quarter Conference Call Information:
Granite will host a conference call at 8:00 a.m. Pacific Time, 11:00 a.m. Eastern Time on Thursday, November 4, 2004 which will be live on the internet, and can be accessed at www.graniteconstruction.com or by calling 719-457-2662. A replay of the call can be accessed on the Company’s website or by calling 888-203-1112 for domestic U.S. and Canada or 719-457-0820 for international callers, access code 904044. The replay will be available beginning at 11:00 a.m. Pacific Time on November 4, 2004 through 5:00 p.m. Pacific Time on November 12, 2004.
Granite Construction Incorporated is a member of the S&P 400 Index and is the parent company of Granite Construction Company, one of the nation’s largest heavy civil contractors and construction materials producers. Granite Construction Company serves both public and private sector clients through its offices nationwide. For more information about Granite, please visit its website at www.graniteconstruction.com.
| | *Note: | The Company has determined that certain of the construction joint ventures in which it participates are variable interest entities as defined by FIN No. 46 “Consolidation of Variable Interest Entities” issued by the Financial Accounting Standards Board. Accordingly, the Company has consolidated those joint ventures where it has determined that the Company is the primary beneficiary prospectively beginning on January 1, 2004. There was no material effect on the Company’s net income as a result of these consolidations for the three or nine months ended September 30, 2004. |
This press release contains forward-looking statements, such as statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of Granite that are based on current expectations, estimates, forecasts, and projects as well as the beliefs and assumptions of Granite’s management. Words such as “outlook,” “believes,” “expects,” “appears,” “may,” “will,” “should,” “or “anticipates,” or the negative thereof or comparable terminology, are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore actual results may differ materially and adversely from those expressed in any 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. Granite undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
GRANITE CONSTRUCTION INCORPORATED
COMPARATIVE FINANCIAL SUMMARY
(Unaudited - In Thousands, Except Per Share Data)
| Three Months Ended
September 30, | Variance |
| Operations | 2004 | 2003 | Amount | Percent |
| | | | | | | | | | |
| Revenue | | $699,825 | | $580,200 | | $119,625 | | 20.6 | |
| Gross profit | | $95,348 | | $82,059 | | $13,289 | | 16.2 | |
| Gross profit as a percent of | |
| revenue | | 13.6 | % | 14.1 | % | (0.5 | %) | — | |
| General and administrative | |
| expenses | | $44,007 | | $42,533 | | $(1,474 | ) | (3.5 | ) |
| G&A expenses as a percent of | |
| revenue | | 6.3 | % | 7.3 | % | 1.0 | % | — | |
| Gain on sales of property and | |
| equipment | | $2,638 | | $3,018 | | $(380 | ) | (12.6 | ) |
| Other income (expense) | |
| Interest income | | $1,353 | | $1,145 | | $208 | | 18.2 | |
| Interest expense | | $(1,813 | ) | $(1,939 | ) | $126 | | 6.5 | |
| Equity in income (loss) of | |
| affiliates | | $3 | | $(37 | ) | $40 | | **** | |
| Other, net | | $59 | | $86 | | $(27 | ) | (31.4 | ) |
| Total other income | |
| (loss) | | $(398 | ) | $(745 | ) | $347 | | 46.6 | |
| Income before provision for | |
| income taxes and | |
| minority interest | | $53,581 | | $41,799 | | $11,782 | | 28.2 | |
| Minority interest | | $(3,892 | ) | $(834 | ) | $(3,058 | ) | **** | |
| Net income | | $32,785 | | $25,834 | | $6,951 | | 26.9 | |
| Net income per share: | |
| Basic | | $0.81 | | $0.64 | | $0.17 | | 26.6 | |
| Diluted | | $0.80 | | $0.63 | | $0.17 | | 27.0 | |
| Weighted average shares of common stock: | |
| Basic | | 40,433 | | 40,217 | | 216 | | 0.5 | |
| Diluted | | 41,083 | | 40,908 | | 175 | | 0.4 | |
| Sept. 30,
2004 | Dec. 31,
2003 | Variance |
| Financial Position | Amount | Percent |
| | | | | | | | | | |
| Working capital | | $324,257 | | $269,947 | | $54,310 | | 20.1 | |
| Current ratio | | 1.62 | | 1.77 | | (0.15 | ) | (8.5 | ) |
| Long-term | |
| debt | | $125,850 | | $126,708 | | $(858 | ) | (0.7 | ) |
| Total liabilities | |
| to equity ratio | | 1.41 | | 1.10 | | 0.31 | | 28.2 | |
| Stockholders’ | |
| equity | | $532,190 | | $504,891 | | $27,299 | | 5.4 | |
| Total assets | | $1,284,543 | | $1,060,410 | | $224,133 | | 21.1 | |
| Book value per | |
| common share | | $12.79 | | $12.16 | | $0.63 | | 5.2 | |
| Backlog | | $2,317,974 | | $1,985,788 | | $332,186 | | 16.7 | |
| Nine Months Ended
September 30, | Variance |
| Operations | 2004 | 2003 | Amount | Percent |
| | | | | | | | | | |
| Revenue | | $1,595,597 | | $1,351,765 | | $243,832 | | 18.0 | |
| Gross profit | | $165,776 | | $168,259 | | $(2,483 | ) | (1.5 | ) |
| Gross profit as a percent | |
| of revenue | | 10.4 | % | 12.4 | % | (2.0 | %) | — | |
| General and administrative | |
| expenses | | $116,465 | | $115,478 | | $(987 | ) | (0.9 | ) |
| G&A expenses as a percent | |
| of revenue | | 7.3 | % | 8.5 | % | 1.2 | % | — | |
| Gain on sales of property | |
| and equipment | | $17,077 | | $3,546 | | $13,531 | | **** | |
| Other income (expense) | |
| Interest income | | $4,068 | | $4,633 | | $(565 | ) | (12.2 | ) |
| Interest expense | | $(5,412 | ) | $(6,577 | ) | $1,165 | | 17.7 | |
| Equity in income (loss) of | |
| affiliates | | $2,876 | | $18,088 | | $(15,212 | ) | (84.1 | ) |
| Other, net | | $154 | | $2,364 | | $(2,210 | ) | (93.5 | ) |
| Total other income | |
| (loss) | | $1,686 | | $18,508 | | $(16,822 | ) | (90.9 | ) |
| Income before provision for | |
| income taxes and | |
| minority interest | | $68,074 | | $74,835 | | $(6,761 | ) | (9.0 | ) |
| Minority interest | | $(8,833 | ) | $(1,099 | ) | $(7,734 | ) | **** | |
| Net income | | $37,482 | | $46,646 | | $(9,164 | ) | (19.6 | ) |
| Net income per share: | |
| Basic | | $0.93 | | $1.16 | | $(0.23 | ) | (19.8 | ) |
| Diluted | | $0.91 | | $1.14 | | $(0.23 | ) | (20.2 | ) |
| Weighted average shares of common stock: | |
| Basic | | 40,372 | | 40,160 | | 212 | | 0.5 | |
| Diluted | | 40,974 | | 40,741 | | 233 | | 0.6 | |
| September 30, | Variance |
| Financial Position | 2004 | 2003 | Amount | Percent |
| | | | | | | | | | |
| Working capital | | $324,257 | | $238,158 | | $86,099 | | 36.2 | |
| Current ratio | | 1.62 | | 1.59 | | 0.03 | | 1.9 | |
| Long-term debt | | $125,850 | | $127,473 | | $(1,623 | ) | (1.3 | ) |
| Total liabilities | |
| to equity ratio | | 1.41 | | 1.22 | | 0.19 | | 15.6 | |
| Stockholders’ equity | | $532,190 | | $493,024 | | $39,166 | | 7.9 | |
| Total assets | | $1,284,543 | | $1,094,794 | | $189,749 | | 17.3 | |
| Book value per | |
| common share | | $12.79 | | $11.87 | | $0.92 | | 7.8 | |
| Backlog | | $2,317,974 | | $1,900,115 | | $417,859 | | 22.0 | |
| **** | Represents percentages greater than 100% |
GRANITE CONSTRUCTION INCORPORATED
REVENUE AND BACKLOG ANALYSIS
(Unaudited - Dollars In Thousands)
BY MARKET SECTOR
| Revenue
Three Months Ended
September 30, | Variance |
| 2004 | 2003 | Amount | Percent |
| Contracts | | | | | | | | | |
| Federal | | $48,333 | | $20,535 | | $27,798 | | **** | |
| State | | 214,576 | | 241,433 | | (26,857 | ) | (11.1 | ) |
| Local | | 246,309 | | 159,976 | | 86,333 | | 54.0 | |
| Total public sector | | 509,218 | | 421,944 | | 87,274 | | 20.7 | |
| Private sector | | 99,582 | | 74,725 | | 24,857 | | 33.3 | |
| Aggregate sales | | 91,025 | | 83,531 | | 7,494 | | 9.0 | |
| | | $699,825 | | $580,200 | | $119,625 | | 20.6 | |
BY GEOGRAPHIC AREA
| Revenue
Three Months Ended
September 30, | Variance |
| 2004 | 2003 | Amount | Percent |
| | | | | | | | | | |
| California | | $255,906 | | $218,247 | | $37,659 | | 17.3 | |
| West (Excl. CA) | | 239,041 | | 205,412 | | 33,629 | | 16.4 | |
| Midwest | | 23,546 | | 20,313 | | 3,233 | | 15.9 | |
| Northeast | | 88,362 | | 38,825 | | 49,537 | | **** | |
| South | | 92,970 | | 97,403 | | (4,433 | ) | (4.6 | ) |
| | | $699,825 | | $580,200 | | $119,625 | | 20.6 | |
BY MARKET SECTOR
| Backlog
September 30, | Variance |
| 2004 | 2003 | Amount | Percent |
| Contracts | | | | | | | | | |
| Federal | | $76,581 | | $81,616 | | $(5,035 | ) | (6.2 | ) |
| State | | 773,633 | | 790,556 | | (16,923 | ) | (2.1 | ) |
| Local | | 1,236,939 | | 850,163 | | 386,776 | | 45.5 | |
| Total public sector | | 2,087,153 | | 1,722,335 | | 364,818 | | 21.2 | |
| Private sector | | 230,821 | | 177,780 | | 53,041 | | 29.8 | |
| Aggregate sales | | — | | — | | — | | — | |
| | | $2,317,974 | | $1,900,115 | | $417,859 | | 22.0 | |
BY GEOGRAPHIC AREA
| Backlog
September 30, | Variance |
| 2004 | 2003 | Amount | Percent |
| | | | | | | | | | |
| California | | $674,622 | | $311,264 | | $363,358 | | **** | |
| West (Excl. CA) | | 377,770 | | 310,053 | | 67,717 | | 21.8 | |
| Midwest | | 144,973 | | 44,703 | | 100,270 | | **** | |
| Northeast | | 599,593 | | 561,494 | | 38,099 | | 6.8 | |
| South | | 521,016 | | 672,601 | | (151,585 | ) | (22.5 | ) |
| | | $2,317,974 | | $1,900,115 | | $417,859 | | 22.0 | |
| **** | Represents percentages greater than 100% |
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands, except share and per share data)
| September 30,
2004 | December 31,
2003 |
| Assets | | | | | |
| Current assets | |
| Cash and cash equivalents | | $185,276 | | $69,919 | |
| Short-term marketable securities | | 46,688 | | 90,869 | |
| Accounts receivable, net | | 434,390 | | 288,210 | |
| Costs and estimated earnings in | |
| excess of billings | | 61,023 | | 31,189 | |
| Inventories | | 33,254 | | 29,878 | |
| Deferred income taxes | | 22,152 | | 22,421 | |
| Equity in construction joint | |
| ventures | | 21,068 | | 42,250 | |
| Other current assets | | 41,757 | | 43,915 | |
| Total current assets | | 845,608 | | 618,651 | |
| Property and equipment, net | | 351,847 | | 344,734 | |
| Long-term marketable securities | | 27,515 | | 41,197 | |
| Investment in affiliates | | 13,044 | | 18,295 | |
| Other assets | | 46,529 | | 37,533 | |
| | | $1,284,543 | | $1,060,410 | |
| Liabilities and Stockholders’ Equity | |
| Current liabilities | |
| Current maturities of long-term | |
| debt | | $10,287 | | $8,182 | |
| Accounts payable | | 219,890 | | 135,468 | |
| Billings in excess of costs and | |
| estimated earnings | | 145,159 | | 99,337 | |
| Accrued expenses and other current | |
| liabilities | | 146,015 | | 105,717 | |
| Total current liabilities | | 521,351 | | 348,704 | |
| Long-term debt | | 125,850 | | 126,708 | |
| Other long-term liabilities | | 29,745 | | 24,938 | |
| Deferred income taxes | | 45,775 | | 44,297 | |
| Minority interest in consolidated | |
| subsidiaries | | 29,632 | | 10,872 | |
| Stockholders’ equity | |
| Preferred stock, $0.01 par value, | |
| authorized 3,000,000 shares; | |
| none outstanding | | — | | — | |
| Common stock, $0.01 par value, | |
| authorized 100,000,000 | |
| shares; issued and outstanding | |
| 41,615,957 shares in | |
| 2004 and 41,528,317 | |
| shares in 2003 | | 416 | | 415 | |
| Additional paid-in capital | | 76,106 | | 73,651 | |
| Retained earnings | | 467,271 | | 442,272 | |
| Accumulated other comprehensive | |
| income | | 619 | | 76 | |
| | | 544,412 | | 516,414 | |
| Unearned compensation | | (12,222 | ) | (11,523 | ) |
| | | 532,190 | | 504,891 | |
| | | $1,284,543 | | $1,060,410 | |
SOURCE Granite Construction
-0- 11/03/2004
/CONTACT: Jacque Underdown, +1-831-761-4741, for Granite Construction Incorporated/
/Web site: http://www.graniteconstruction.com/
(GVA)
CO: Granite Construction
ST: California
IN: CST
SU: ERN ERP CCA
