Exhibit 99.1
GRANITE CONSTRUCTION INCORPORATED ANNOUNCES THIRD QUARTER 2006 RESULTS
WATSONVILLE, Calif., Oct. 25 /PRNewswire-FirstCall/ -- Granite Construction
Incorporated (NYSE: GVA) today announced its results for the third quarter ended
September 30, 2006. The Company reported net income for the quarter of $45.7
million, or $1.10 per diluted share. This compares with net income of $40.7
million, or $0.98 per diluted share for the same period last year. For the
nine-month period ended September 30, 2006, net income was $77.6 million or
$1.87 per diluted share compared with $47.3 million or $1.15 per diluted share
for the same period in 2005.
President and Chief Executive Officer, William G. Dorey said, "Results for
the quarter were driven by another record performance from our Branch Division.
The division's solid execution in its construction business in addition to
strong demand for construction-related materials were key factors in our third
quarter performance. Unfortunately, our overall results were negatively impacted
by a significant loss from our Heavy Construction Division (HCD).
"While we are excited about the success in the Branch Division and the
record levels of profitability that we are seeing in that business, we are
clearly disappointed with the extent of the losses in HCD. While we continue to
see potential in our large project work, the ongoing losses in HCD are
unacceptable. We are firmly focused on positioning this business to win and will
continue to implement the changes necessary to create long-term value for
shareholders."
Operating Results -- Quarter and Year-To-Date
For the third quarter of 2006, total revenue increased 9.0% to $941.7
million compared with $864.2 million a year ago. Total gross profit as a percent
of revenue for the third quarter 2006 decreased to 11.2% compared with 12.7% for
the same period last year.
Other income for the quarter ended September 30, 2006 was positively
impacted primarily by interest income which increased $4.4 million to $7.1
million as a result of higher average yield on a higher level of interest
bearing investments.
As a result of the effect of consolidated joint venture losses in HCD, the
tax rate recorded for the third quarter ended September 30, 2006 was 41.4%
compared with 29.7% a year ago.
For the nine-month period ended September 30, 2006, revenue for the Company
totaled $2.2 billion compared with $2.0 billion for the same period last year.
Total gross profit as a percent of revenue for the nine months ended September
30, 2006 decreased slightly to 10.6% compared with 10.9% last year. Operating
income for the nine month period increased to $93.0 million compared with $79.1
million for the same period in 2005. Total company backlog at September 30, 2006
decreased to $2.1 billion compared with $2.4 billion a year ago.
Results by Segment
HCD revenue for the quarter totaled $286.7 million versus $291.2 million for
the same period last year. HCD backlog decreased to $1.2 billion compared with
$1.7 billion for the same period last year. Gross margin as a percent of revenue
was a loss of 9.4% compared with a profit of 3.6% in the prior period. This
decrease reflects a net reduction in gross profit of approximately $39.9 million
resulting from changes in estimates of project profitability compared with a net
reduction of $10.0 million in the third quarter last year. Largely as a product
of these estimate changes in the third quarter 2006, operating loss for HCD
totaled $35.2 million compared with operating income of $1.4 million for the
same period in 2005.
For the nine-month period ended September 30, 2006, HCD revenue totaled
$838.6 million compared with $769.4 million for the same period last year. Gross
margin as a percent of revenue for the nine months ended September 30, 2006 was
a loss of 4.9% compared with a profit of 4.2% last year. Operating loss for HCD
totaled $66.2 million for the same period compared with operating income of $8.1
million in 2005.
Branch Division revenue for the quarter totaled $654.1 million, an increase
of $83.2 million or 15% over the same period in 2005. Backlog for the Branch
Division increased to $884.9 million compared with $674.3 million for the third
quarter 2005. Gross profit as a percent of revenue increased for the third
quarter 2006 to 20.3% compared with 16.8% for the third quarter 2005 due to
record-levels of profitability on our construction work and the sales of our
construction materials. Branch Division operating income increased $32.4 million
for the quarter to $104.8 million compared with $72.4 million for the third
quarter last year.
For the nine-month period ended September 30, 2006, Branch Division revenue
totaled $1.4 billion compared with $1.2 billion for the same period last year.
Gross profit as a percent of revenue for the nine months ended September 30,
2006 increased to 19.1% compared with 14.9% last year. Operating income for the
division increased to $185.1 million for the same period compared with $101.8
million in 2005.
Business Outlook
The Company's earnings guidance for 2006 is in the range of $2.25 to $2.45
per diluted share. The ability to achieve these forecasted results is contingent
on a number of factors, including the amount of work the Company is able to
complete in the fourth quarter, which can vary significantly due to the onset of
winter weather conditions as well as certain HCD projects reaching the Company's
profit recognition threshold.
The preliminary outlook for the Branch Division in 2007 is extremely
positive, driven by a record backlog of work going into the year as well as
strong margin performance. The public sector market in the West is expected to
remain very strong. In particular, the upcoming November election in California
includes two initiatives that would help to provide long-term funding for
transportation-related projects in the Company's largest revenue- producing
state. Pricing for construction materials is also expected to remain robust
through 2007. Although the Company is anticipating less demand for its
construction services from the private/residential sector, the Company is
optimistic about the opportunities in the non-residential, commercial and
industrial sectors. The non-residential opportunities, coupled with record
levels of public sector funding, may potentially more than offset the decline in
private/residential opportunities.
Revenue and backlog for HCD will likely decrease in 2007 as the Company
continues to focus on execution of the existing backlog as well as operational
improvements. The Company foresees bidding opportunities for large project work
to continue to be robust in 2007 which should help support HCD's strategy of
bidding new work selectively with considerably higher levels of profitability.
Third Quarter Conference Call Information
As previously announced, the Company will host a conference call on
Thursday, October 26, 2006, at 11:00 a.m. Eastern time. Investors and other
interested parties may access the call live by dialing (877) 864-2735 in the
U.S. and Canada. For international listeners, dial (706) 634-7039. The
conference ID number for the call is 1649271. A live Webcast will also be
available via the Internet at www.graniteconstruction.com.
The conference call will be recorded and available for replay approximately
two hours after the call through November 3, 2006. In the U.S. and Canada, dial
(800) 642-1687 or (706) 645-9291. The pass code required for the recording is
1649271. An audio archive of the call will also be available on the Company's
website.
Granite, a member of the S&P 400 Midcap Index, the Domini 400 Social Index
and the Russell 2000, is one of the nation's largest diversified heavy civil
contractors and construction materials producers. Granite Construction serves
public and private sector clients through its offices nationwide. For more
information about the company, please visit their website at
www.graniteconstruction.com.
This press release contains forward-looking statements, 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 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. Granite undertakes 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 "Quantitative and Qualitative
Disclosures About Market Risk" 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
September 30, Variance
---------------------------- ----------------------------
2006 2005 Amount Percent
------------ ------------ ------------ ------------
Revenue
Construction $ 808,297 $ 756,390 $ 51,907 6.9
Material sales $ 133,375 $ 107,772 $ 25,603 23.8
Total revenue $ 941,672 $ 864,162 $ 77,510 9.0
Cost of revenue
Construction $ 737,281 $ 670,178 $ (67,103) (10.0)
Material sales $ 98,459 $ 84,283 $ (14,176) (16.8)
Total cost of revenue $ 835,740 $ 754,461 $ (81,279) (10.8)
Gross profit $ 105,932 $ 109,701 $ (3,769) (3.4)
Gross profit as a percent of revenue 11.2% 12.7% (1.5)% -
General and administrative expenses $ 58,560 $ 50,149 $ (8,411) (16.8)
G&A expenses as a percent of revenue 6.2% 5.8% (0.4)% -
Provision for legal judgment $ 0 $ 0 $ 0 -
Gain on sales of property and equipment $ 1,230 $ 2,441 $ (1,211) (49.6)
Other income (expense)
Interest income $ 7,055 $ 2,693 $ 4,362 ****
Interest expense $ (1,319) $ (1,734) $ 415 23.9
Equity in income of affiliates $ 770 $ 85 $ 685 ****
Other, net $ (8) $ 176 $ (184) ****
Total other income $ 6,498 $ 1,220 $ 5,278 ****
Income before provision for
income taxes and minority interest $ 55,100 $ 63,213 $ (8,113) (12.8)
Minority interest $ 13,421 $ (3,771) $ 17,192 ****
Net income $ 45,725 $ 40,651 $ 5,074 12.5
Net income per share:
Basic $ 1.12 $ 1.00 $ 0.12 12.0
Diluted $ 1.10 $ 0.98 $ 0.12 12.2
Weighted average shares of common stock:
Basic 40,923 40,656 267 0.7
Diluted 41,546 41,340 206 0.5
Nine Months Ended
September 30, Variance
---------------------------- ----------------------------
2006 2005 Amount Percent
------------ ------------ ------------ ------------
Revenue
Construction $ 1,946,121 $ 1,723,231 $ 222,890 12.9
Material sales $ 303,556 $ 238,569 $ 64,987 27.2
Total revenue $ 2,249,677 $ 1,961,800 $ 287,877 14.7
Cost of revenue
Construction $ 1,779,494 $ 1,558,990 $ (220,504) (14.1)
Material sales $ 230,906 $ 189,462 $ (41,444) (21.9)
Total cost of revenue $ 2,010,400 $ 1,748,452 $ (261,948) (15.0)
Gross profit $ 239,277 $ 213,348 $ 25,929 12.2
Gross profit as a percent of revenue 10.6% 10.9% (0.3)% -
General and administrative expenses $ 155,751 $ 129,625 $ (26,126) (20.2)
G&A expenses as a percent of revenue 6.9% 6.6% (0.3)% -
Provision for legal judgment $ 0 $ 9,300 $ 9,300 100.0
Gain on sales of property and equipment $ 9,517 $ 4,656 $ 4,861 ****
Other income (expense)
Interest income $ 16,732 $ 6,820 $ 9,912 ****
Interest expense $ (4,105) $ (5,401) $ 1,296 24.0
Equity in income of affiliates $ 1,521 $ 8 $ 1,513 ****
Other, net $ 2,700 $ (548) $ 3,248 ****
Total other income $ 16,848 $ 879 $ 15,969 ****
Income before provision for
income taxes and minority interest $ 109,891 $ 79,958 $ 29,933 37.4
Minority interest $ 6,769 $ (9,301) $ 16,070 ****
Net income $ 77,592 $ 47,338 $ 30,254 63.9
Net income per share:
Basic $ 1.90 $ 1.17 $ 0.73 62.4
Diluted $ 1.87 $ 1.15 $ 0.72 62.6
Weighted average shares of common stock:
Basic 40,853 40,594 259 0.6
Diluted 41,434 41,192 242 0.6
**** 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
--------------------------- ----------------------------
2006 2005 Amount Percent
------------ ------------ ------------ ------------
Public Sector $ 635,010 $ 605,724 $ 29,286 4.8
Private Sector 172,374 148,489 23,885 16.1
Aggregate sales 133,375 107,772 25,603 23.8
Other 913 2,177 (1,264) (58.1)
$ 941,672 $ 864,162 $ 77,510 9.0
Backlog
----------------------------------------------------------
September 30, Variance
--------------------------- ----------------------------
2006 2005 Amount Percent
------------ ------------ ------------ ------------
Public Sector $ 1,872,944 $ 2,115,240 $ (242,296) (11.5)
Private Sector 247,116 278,504 (31,388) (11.3)
$ 2,120,060 $ 2,393,744 $ (273,684) (11.4)
BY GEOGRAPHIC AREA
Revenue
----------------------------------------------------------
Three Months Ended
September 30, Variance
--------------------------- ----------------------------
2006 2005 Amount Percent
------------ ------------ ------------ ------------
California $ 407,047 $ 341,334 $ 65,713 19.3
West (Excl. CA) 310,737 300,176 10,561 3.5
Midwest 13,596 23,637 (10,041) (42.5)
Northeast 73,519 85,200 (11,681) (13.7)
South 136,773 113,815 22,958 20.2
$ 941,672 $ 864,162 $ 77,510 9.0
Backlog
----------------------------------------------------------
September 30, Variance
--------------------------- ----------------------------
2006 2005 Amount Percent
------------ ------------ ------------ ------------
California $ 610,308 $ 567,155 $ 43,153 7.6
West (Excl. CA) 609,422 468,261 141,161 30.1
Midwest 3,805 62,204 (58,399) (93.9)
Northeast 243,968 555,825 (311,857) (56.1)
South 652,557 740,299 (87,742) (11.9)
$ 2,120,060 $ 2,393,744 $ (273,684) (11.4)
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands, except share and per share data)
September 30, December 31,
2006 2005
------------- -------------
Assets
Current assets
Cash and cash equivalents $ 202,382 $ 199,881
Short-term marketable securities 140,869 68,540
Accounts receivable, net 634,548 476,453
Costs and estimated earnings in excess
of billings 31,199 43,660
Inventories 42,020 33,161
Real estate held for sale 50,141 46,889
Deferred income taxes 22,475 22,996
Equity in construction joint ventures 37,969 27,408
Other current assets 32,988 57,960
Total current assets 1,194,591 976,948
Property and equipment, net 422,212 397,111
Long-term marketable securities 45,759 32,960
Investment in affiliates 20,564 15,855
Other assets 63,656 49,356
Total assets $ 1,746,782 $ 1,472,230
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 27,673 $ 26,888
Accounts payable 322,537 232,807
Billings in excess of costs and
estimated earnings 327,272 208,883
Accrued expenses and other current
liabilities 183,968 140,569
Total current liabilities 861,450 609,147
Long-term debt 90,151 124,415
Other long-term liabilities 56,335 46,556
Deferred income taxes 37,325 37,325
Minority interest in consolidated subsidiaries 11,840 33,227
Shareholders' 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
41,845,981 shares in 2006 and 41,682,010
shares in 2005 418 417
Additional paid-in capital 72,742 80,619
Retained earnings 614,141 549,101
Accumulated other comprehensive income 2,380 1,602
Unearned compensation - (10,179)
Total shareholders' equity 689,681 621,560
Total liabilities and
shareholders' equity $ 1,746,782 $ 1,472,230
September 30, December 31,
2006 2005
------------- -------------
Financial Position
Working capital $ 333,141 $ 367,801
Current ratio 1.39 1.60
Debt to total capitalization 0.15 0.20
Total liabilities to equity ratio 1.53 1.37
SOURCE Granite Construction Incorporated
-0- 10/25/2006
/CONTACT: Jacque Underdown, Director of Investor Relations of Granite
Construction Incorporated, +1-831-761-4741/
/Web site: http://www.graniteconstruction.com/