FOR IMMEDIATE RELEASE Investor Contact: Jacque Underdown
(831) 761-4741
Granite Construction Incorporated Reports Third Quarter 2007 Results
WATSONVILLE, California, (October 24, 2007) -- Granite Construction
Incorporated (NYSE: GVA) today reported financial results for the third quarter
ended September 30, 2007. The Company reported net income for the quarter of
$53.3 million, or $1.28 per diluted share. This compares with net income of
$45.7 million, or $1.10 per diluted share for the same period last year.
"Granite delivered another strong quarter," Granite President and Chief
Executive Officer William G. Dorey said. "Overall, operating income increased
$27.4 million quarter over quarter in spite of a challenging competitive bidding
environment in the West. In the quarter, our Granite West business was able to
capitalize on its healthy backlog of work and deliver impressive gross margins
while Granite East posted another consecutive quarter of improved performance."
Operating Results -- Quarter and Year-To-Date
For the third quarter of 2007, total revenue decreased 10% to $846.3 million
compared with $941.7 million a year ago. Total gross profit as a percent of
revenue increased to 16.1% compared with 11.2% for the same period last year.
Operating income increased to $76.0 million compared with $48.6 million for the
third quarter of 2006.
For the nine-month period ended September 30, 2007, revenue totaled $2.1
billion compared with $2.2 billion for the same period last year. Total gross
profit as a percent of revenue increased to 14.8% compared with 10.6% last year.
Operating income increased to $137.2 million compared with $93.0 million for the
same period in 2006.
Total Company backlog at September 30, 2007 was $2.3 billion compared with
$2.1 billion a year ago. New awards for the third quarter 2007 included a $59.6
million portion of a $138.0 million highway reconstruction project in California
and $43.9 million highway project also in California. General and Administrative
expenses for the quarter totaled $63.7 million or 7.5% of revenue compared with
$58.6 million or 6.2% of revenue in 2006. The $5.1 million increase is due
primarily to the recent acquisition in the Pacific Northwest.
Results by Segment
Granite East revenue for the quarter decreased 30% to $182.6 million
compared with $259.6 million for the same period last year. Granite East backlog
increased 40% to $1.4 billion compared with $1.0 billion last year. Gross margin
as a percent of revenue was 1.1% compared with a negative 10.4% in the prior
period. The operating loss for Granite East in the quarter was $3.2 million
compared with an operating loss of $35.2 million for the same period in 2006,
reflecting improved performance from its current backlog of work compared with a
year ago.
For the nine-month period ended September 30, 2007, Granite East revenue
totaled $585.3 million compared with $788.5 million for the same period last
year. Gross margin as a percent of revenue for the nine months ended September
30, 2007 was 1.4% compared with a negative 5.2% last year. Operating loss for
Granite East totaled $13.4 million for the nine-month period compared with an
operating loss of $66.2 million for the same period in 2006.
Granite West revenue for the quarter totaled $642.4 million compared with
$681.2 million for the same period in 2007. Backlog for Granite West decreased
15.2% to $950.8 million compared with $1.1 billion a year ago, reflecting the
current competitive marketplace in the West. Gross profit as a percent of
revenue was flat for the quarter at 19.4%. Granite West operating income
decreased $15.0 million for the quarter to $89.8 million compared with $104.8
million for the third quarter last year.
For the nine-month period ended September 30, 2007 Granite West revenue
totaled $1.5 billion compared with $1.4 billion for the same period last year.
Gross profit as a percent of revenue for the nine months ended September 30,
2007 increased to 19.3% compared with 18.4% last year. Operating income for
Granite West slightly increased to $186.5 million for the same period compared
with $185.2 million in 2006.
Granite Land Company revenue for the quarter increased $20.3 million to
$21.2 million compared with $0.9 million for the same period last year.
Operating income for Granite Land Company increased to $8.2 million (including
our minority partner's share of approximately $4.5 million) compared with an
operating loss of $0.3 million in the third quarter of 2006 reflecting the sale
of three development projects in the quarter.
Outlook
"Our outlook for the remainder of the year is positive. Granite West is on
track to have another great year and Granite East will show significant
improvement over 2006. For the total Company, we are currently expecting 2007
earnings per share in the range of $2.55 - $2.75. As always, our ability to
achieve these forecasted results is contingent on a number of factors, including
the amount of work we are able to complete in the fourth quarter, which can vary
significantly due to the onset of winter weather conditions."
"Our longer term outlook is also positive, driven by both a record level of
public transportation funding in California, the Company's largest revenue-
producing state, as well as improving results from our large projects business.
Demand for our construction materials is also expected to remain healthy over
the long term. We foresee bidding opportunities for large projects to continue
to be robust, which will help support our strategy in Granite East of bidding
new work selectively with considerably higher levels of profitability," Dorey
said.
Share Repurchase Program
Granite is issuing a separate news release today announcing that its Board
of Directors has authorized the repurchase of up to $200.0 million of common
stock in addition to a 30% increase in the quarterly dividend.
Financial Results
The 2007 and 2006 financial information in this announcement reflects the
Company's organizational and strategic realignment and are preliminary 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 November 9,
2007.
Conference Call
Granite will conduct a conference call tomorrow, October 25, 2007, at 11:00
a.m. ET/ 8:00 a.m. PT to discuss the results for the quarter. Access to a live
audio webcast is available at
http://www.graniteconstruction.com/investor-relations. The live conference call
may be accessed by calling (877) 864-2735 in the U.S. and Canada and (706)
634-7039 for international listeners. The conference ID for the call is
20484318. The conference call will be recorded and available for replay from
approximately two hours after the live call through November 8, 2007 by calling
(800) 642-1687 or (706) 645-9291. The conference ID for the recording is
20484318.
GRANITE CONSTRUCTION INCORPORATED
COMPARATIVE FINANCIAL SUMMARY
(Unaudited - In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, Variance September 30, Variance
2007 2006 Amount Percent 2007 2006 Amount Percent
Revenue
Construction $701,622 $807,384 $(105,762) (13.1) $1,778,638 $1,911,529 $(132,891) (7.0)
Material sales $123,453 $133,375 $(9,922) (7.4) $289,655 $303,556 $(13,901) (4.6)
Real estate $21,238 $913 $20,325 **** $36,556 $34,592 $1,964 5.7
Total revenue $846,313 $941,672 $(95,359) (10.1) $2,104,849 $2,249,677 $(144,828) (6.4)
Cost of revenue
Construction $601,880 $736,839 $134,959 18.3 $1,543,960 $1,762,217 $218,257 12.4
Material sales $96,130 $98,459 $2,329 2.4 $229,116 $230,906 $1,790 0.8
Real estate $11,666 $442 $(11,224) **** $19,466 $17,277 $(2,189) (12.7)
Total cost
of revenue $709,676 $835,740 $126,064 15.1 $1,792,542 $2,010,400 $217,858 10.8
Gross profit $136,637 $105,932 $30,705 29.0 $312,307 $239,277 $73,030 30.5
Gross profit
as a percent of
revenue 16.1% 11.2% 4.9% - 14.8% 10.6% 4.2% -
General and
administrative
expenses $63,666 $58,560 $(5,106) (8.7) $183,133 $155,751 $(27,382) (17.6)
G&A expenses as
a percent of
revenue 7.5% 6.2% (1.3%) - 8.7% 6.9% (1.8%) -
Gain on sales of
property and
equipment $2,994 $1,230 $1,764 **** $8,053 $9,517 $(1,464) (15.4)
Other income
(expense)
Interest income $7,514 $7,055 $459 6.5 $20,796 $16,732 $4,064 24.3
Interest expense $(1,884) $(1,319) $(565) (42.8) $(4,998) $(4,105) $(893) (21.8)
Equity in income
of affiliates $4,037 $770 $3,267 **** $4,359 $1,521 $2,838 ****
Other, net $(391) $(8) $(383) **** $(1,057) $2,700 $(3,757) ****
Total other
income $9,276 $6,498 $2,778 42.8 $19,100 $16,848 $2,252 13.4
Income before
provision for income
taxes and minority
interest $85,241 $55,100 $30,141 54.7 $156,327 $109,891 $46,436 42.3
Minority interest $(6,504) $13,421 $(19,925) **** $(13,750) $6,769 $(20,519) ****
Net income $53,300 $45,725 $7,575 16.6 $94,897 $77,592 $17,305 22.3
Net income per share:
Basic $1.30 $1.12 $0.18 16.1 $2.31 $1.90 $0.41 21.6
Diluted $1.28 $1.10 $0.18 16.4 $2.28 $1.87 $0.41 21.9
Weighted average shares of common stock:
Basic 41,106 40,923 183 0.4 41,065 40,853 212 0.5
Diluted 41,640 41,546 94 0.2 41,587 41,434 153 0.4
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands, except share and per share data)
September 30, December 31,
2007 2006
Assets
Current assets
Cash and cash equivalents $265,605 $204,893
Short-term marketable securities 106,675 141,037
Accounts receivable, net 536,519 492,229
Costs and estimated earnings in
excess of billings 24,489 15,797
Inventories 50,438 41,529
Real estate held for sale 57,296 55,888
Deferred income taxes 36,041 36,776
Equity in construction joint
ventures 36,851 31,912
Other current assets 43,370 63,144
Total current assets 1,157,284 1,083,205
Property and equipment, net 487,000 429,966
Long-term marketable securities 61,308 48,948
Investment in affiliates 23,256 21,471
Other assets 78,119 49,248
Total assets $1,806,967 $1,632,838
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $26,589 $28,660
Accounts payable 261,379 257,612
Billings in excess of costs and
estimated earnings 274,209 287,843
Accrued expenses and other current
liabilities 209,894 189,328
Total current liabilities 772,071 763,443
Long-term debt 140,410 78,576
Other long-term liabilities 65,111 58,419
Deferred income taxes 19,788 22,324
Minority interest in consolidated
subsidiaries 28,148 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
41,916,706 shares in
2007 and 41,833,559 shares in
2006 419 418
Additional paid-in capital 82,678 78,620
Retained earnings 694,557 612,875
Accumulated other comprehensive
income 3,785 2,631
Total shareholders' equity 781,439 694,544
Total liabilities and
shareholders' equity $1,806,967 $1,632,838
September 30, December 31,
Financial Position 2007 2006
Working capital $385,213 $319,762
Current ratio 1.50 1.42
Debt to total capitalization 0.18 0.13
Total liabilities to equity ratio 1.31 1.35
GRANITE CONSTRUCTION INCORPORATED
REVENUE AND BACKLOG ANALYSIS
(Unaudited - Dollars In Thousands)
BY MARKET SECTOR
Revenue Backlog
Three Months Ended September 30, Variance September 30, Variance
2007 2006 Amount Percent 2007 2006 Amount Percent
Public Sector $578,356 $635,010 $(56,654) (8.9) $2,169,060 $1,872,944 $296,116 15.8
Private Sector 123,266 172,374 (49,108) (28.5) 167,461 247,116 (79,655) (32.2)
Aggregate Sales 123,453 133,375 (9,922) (7.4) **** **** **** ****
Real Estate 21,238 913 20,325 **** **** **** **** ****
$846,313 $941,672 $(95,359) (10.1) $2,336,521 $2,120,060 $216,461 10.2
BY GEOGRAPHIC AREA
Revenue Backlog
Three Months Ended
September 30, Variance September 30, Variance
2007 2006 Amount Percent 2007 2006 Amount Percent
California $334,854 $407,047 $(72,193) (17.7) $455,014 $610,308 $(155,294) (25.4)
West (Excl. CA) 325,392 310,737 14,655 4.7 518,755 609,422 (90,667) (14.9)
Midwest 29,620 13,596 16,024 **** 350,496 3,805 346,691 ****
Northeast 52,542 73,519 (20,977) (28.5) 166,453 243,968 (77,515) (31.8)
Southeast 65,371 77,813 (12,442) (16.0) 679,635 399,096 280,539 70.3
South 38,534 58,960 (20,426) (34.6) 166,168 253,461 (87,293) (34.4)
$846,313 $941,672 $(95,359) (10.1) $2,336,521 $2,120,060 $216,461 10.2
**** Represents percentages greater than 100%
About Granite
Granite Construction Incorporated is a member of the S&P 400 Midcap Index,
the Domini 400 Social Index and the Russell 2000. Granite Construction Company,
a wholly owned subsidiary, is one of the nation's largest diversified heavy
civil contractors and construction materials producers. Granite Construction
Company serves public and private sector clients through its offices and
subsidiaries nationwide. For the 4th straight year, Granite was named to
FORTUNE'S List of 100 Best Companies to Work For. For more information about
Granite, please visit their website at http://www.graniteconstruction.com.
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.
Granite is today issuing a separate news release announcing a new share
repurchase program and increased quarterly dividend and investors are advised to
read that separate release with respect to those matters.
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 http://www.graniteconstruction.com.