EX-99.1 2 v081957_ex99-1.htm Unassociated Document

AQW188A KQ 16:38 Granite Construction Incorporated Reports Second Quarter
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[STK] GVA
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TO BUSINESS EDITOR:

Granite Construction Incorporated Reports Second Quarter 2007 Results

WATSONVILLE, Calif., July 25 /PRNewswire-FirstCall/ -- Granite Construction Incorporated (NYSE: GVA) today announced its financial results for the second quarter ended June 30, 2007. The Company reported net income for the quarter of $43.8 million, or $1.05 per diluted share. This compares with net income of $33.3 million, or $0.80 per diluted share for the same period last year. For the six-month period ended June 30, 2007, net income was $41.6 million or $1.00 per share on a diluted basis compared with $31.9 million or $0.77 per share for the same period in 2006.
 
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 $770.9 million compared with $812.0 million a year ago. Total gross profit as a percent of revenue increased to 16.6% compared with 11.5% for the same period last year. Operating income increased to $66.9 million compared with $48.2 million for the second quarter of 2006.
 
For the six-month period ended June 30, 2007, revenue totaled $1.26 billion compared with $1.31 billion for the same period last year. Total gross profit as a percent of revenue increased to 14.0% compared with 10.2% last year. Operating income increased to $61.3 million compared with $44.4 million for the same period in 2006.
 
Total Company backlog at June 30, 2007 remained flat at $2.5 billion compared to a year ago. New awards for the second quarter 2007 included the award of a $92.6 million highway project in Florida and a $37.3 million highway project in Texas. Also included in backlog at June 30, 2007 is approximately $47.6 million related to our 20% share of a joint venture project at the World Trade Center in New York.
 
General and Administrative expenses for the quarter totaled $65.1 million or 8.4% of revenue compared with $48.9 million or 6.0% of revenue in 2006. The $16.2 million increase is due primarily to increased personnel and related expenses to support our growth strategy, particularly in Granite West. Variable compensation increased due to higher income and greater participation in our incentive compensation plans in the 2007 periods.
 
 
Results by Segment
 
The following results by segment are presented reflecting changes to the Company's segment reporting structure. As of the quarter ended June 30, 2007, financial performance of our two largest operating units will be reported under two new segments; Granite West and Granite East. These new reportable segments conform to the Company's organizational and strategic realignment that was announced in February 2007. The Company formerly reported results under the Branch Division and Heavy Construction Division (HCD). Prior period results have been reclassified to conform to the new organizational structure.
 
Granite East revenue for the quarter totaled $218.0 million versus $292.8 million for the same period last year. Granite East backlog increased to $1.52 billion compared to $1.25 billion last year. Gross margin as a percent of revenue was 6.6% compared with a negative 3.8% in the prior period. Operating income for Granite East totaled $7.1 million compared with an operating loss of $18.9 million for the same period in 2006. This improved performance was due primarily to a net positive impact from significant project forecast adjustments in the quarter compared to a net negative impact in the same period last year.
 
For the six-month period ended June 30, 2007, Granite East revenue totaled $402.7 million compared with $528.9 million for the same period last year. Gross margin as a percent of revenue for the six months ended June 30, 2007 was 1.6% compared with a negative 2.7% last year. Operating loss for Granite East totaled $10.2 million for the six-month period compared with an operating loss of $31.0 million for the same period in 2006.
 
Granite West revenue for the quarter totaled $542.4 million, an increase of $56.9 million, or 11.7%, over the same period in 2007. Backlog for Granite West decreased to $986.3 million compared with $1.24 billion a year ago. Gross profit as a percent of revenue increased for the second quarter 2007 to 20.2% compared with 17.9% for the second quarter 2006 due to an increase in profitability on our construction work. Granite West operating income increased $14.2 million for the quarter to $75.7 million compared with $61.5 million for the second quarter last year.
 
For the six-month period ended June 30, 2007, Granite West revenue totaled $840.5 million compared with $745.4 million for the same period last year. Gross profit as a percent of revenue for the six months ended June 30, 2007 increased to 19.2% compared with 17.5% last year. Operating income for Granite West increased to $96.7 million for the same period compared with $80.3 million in 2006.

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 California which may affect Granite West's ability to meet or exceed last year's record operating performance. While the Company did not anticipate that the projects funded by the ballot measures approved by California voters last November would have a significant impact on bottom line results in 2007, the delay in project lettings, coupled with the slowdown in the private sector market, is creating a more competitive public sector bidding environment in California than was experienced last year.
 
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 June 30, 2007 was $3.0 and $4.6 million, respectively.

Reporting Segment Profiles
 
Granite West is comprised of decentralized branch offices in the western United States that perform various heavy civil construction projects with a large portion of the work focused on new construction and improvement of streets, roads, highways and bridges as well as site preparation for housing and commercial development. Although most Granite West projects are started and completed within a year, the division also has the capability of constructing larger projects. Each of the 13 Granite West branch locations are aligned under one of three operating groups: Northwest, Northern California and Southwest.
 
 
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 United States with a focus on large, complex infrastructure projects including major highways, large dams, mass transit facilities, bridges, pipelines, canals, tunnels, waterway locks and dams, and airport infrastructure. Granite East operates out of three regional offices: the Central Region, based in Lewisville, Texas; the Southeast Region, based in Tampa, Florida; and the Northeast Region, based in Tarrytown, New York. Granite East construction contracts are typically greater than two years.

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 $199.1 million, $195.5 and $264.9 million at June 30, 2007, March 31, 2007 and June 30, 2006, respectively.

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 August 9, 2007.

Conference Call
 
Granite will conduct a conference call tomorrow, July 26, 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 and presentation slides is available at 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 6841772. The conference call will be recorded and available for replay from approximately two hours after the live call through August 9, 2007 by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 6841772.

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 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.
 
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
)
Aggregate sales
    
-
   
-
   
-
   
-
 
Real Estate
    
-
   
-
   
-
   
-
 
   
$
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%
 

SOURCE Granite Construction Incorporated
-0- 07/25/2007
/CONTACT: Investors, Jacque Underdown of Granite Construction Incorporated, +1-831-761-4741/
/First Call Analyst: /
/FCMN Contact: jacque.underdown@gcinc.com /
/Web site: http://www.graniteconstruction.com/
(GVA)

CO: Granite Construction Incorporated
ST: California
IN: CST
SU: ERN