Granite Q4, 2012 revenues up, net income down

| Published on March 4, 2013

Granite Construction‘s fourth-quarter 2012 and overall 2012 revenues at a glance, according to the company’s report released on Feb. 28:

  • Revenues for the year increased 4 percent to $2.1 billion.
  • Net income of $45.3 million in 2012 compared with $51.2 million in 2011.
  • Large Project Construction gross margins improved to 17.2 percent.
  • Balance Sheet remains strong with $433.4 million in cash and marketable securities.
  • Total contract backlog on Dec. 31, 2012 of $1.7 billion, which does not include approximately $1.0 billion related to Granite’s portions of the Tappan Zee Bridge project in New York and IH-35E project in Texas.
  • Acquisition of Kenny Construction Co. completed on Dec. 31, 2012.

Granite Construction Inc. on Feb. 28 reported a net income of $45.3 million for 2012, compared to $51.2 million the prior year. Diluted earnings per share (EPS) for the year was $1.15 compared to $1.31 in 2011.

For the fourth quarter of 2012, Granite reported a net income of $18 million, compared to $18.8 million for the fourth quarter of 2011. Diluted EPS for the quarter ended Dec. 31, 2012 was $0.46 compared to $0.48 in the prior year period.

“Our fourth quarter results highlight the strength of our Large Project portfolio, as well as the challenging market conditions our Construction and Construction Materials businesses continued to face in the West,” said James H. Roberts, president and CEO of Granite Construction, in a press release. “We remain focused on our strategic growth plan and are pleased with the progress we have made to diversify our business portfolio, grow the Large Projects segment, and optimize our overall asset base.”

Fiscal Year 2012 Highlights:

Total Company

  • Revenues for the year were $2.1 billion, compared with $2 billion recorded in 2011.
  • Gross profit margin was 11.3 percent compared with 12.3 percent in 2011 due to lower gross profit in both the Construction and Construction Materials segments, partially offset by an increase in margins in the Large Project segment.
  • SG&A expenses for the year were $185.1 million, compared with $162.3 million last year. The increase reflects $5.4 million associated with large project bid costs, $4.4 million associated with the acquisition of Kenny Construction, and $2 million related to earnings in the Company’s deferred compensation plan.
  • Gain on sales of property and equipment was $27.4 million in 2012, compared with $15.8 million in 2011. The increase is associated with an $18 million gain on the sale of a quarry investment.
  • Operating income was $80.8 million in 2012, compared with $99.3 million in 2011.
  • Total other income (expense) for the year was $0.2 million, compared with ($9.8) million in 2011. Other income for 2012 included a $7.4 million gain related to the sale of gold, a by-product of aggregate production, partially offset by a $2.8 million non-cash impairment loss on an investment in a solar-related business.
  • Net income attributable to non-controlling interests was $14.6 million, compared with $14.9 million the prior period.
  • Total contract backlog on Dec. 31, 2012, was $1.7 billion compared with $2 billion a year ago. 2012 backlog includes $357 million attributable to the Kenny acquisition and does not include Granite’s approximate $733 million portion of the Tappan Zee Bridge project in New York or the IH-35E highway reconstruction project in Texas, of which Granite’s portion is nearly $297 million.

Construction

  • Construction revenues for the year were $1 billion, in line with 2011.
  • Gross profit margin was 7.9 percent compared with 11.9 percent a year ago, reflecting challenging market conditions as well as increased costs to complete certain projects due to lower productivity than anticipated.

Large Project Construction

  • Large Project Construction revenue for the year increased 19 percent to $863.2 million, due largely to the progress on projects awarded in late 2010 and early 2011.
  • Gross profit margin was 17.2 percent compared with 14.4 percent in 2011, reflecting successful execution on several large projects across the country offset by a downward forecast adjustment on a project in Washington.

Construction Materials

  • Construction Materials revenue was $230.6 million compared with $220.6 million last year.
  • Gross profit in 2012 was $7.6 million, compared with $16.6 million in 2011. The decline in gross profit is primarily attributable to slow economic conditions at certain California locations.

Fourth Quarter 2012 Highlights

Total Company

  • Revenue for the quarter totaled $504.8 million compared with $539.5 million for the fourth quarter of 2011.
  • Gross profit margin for the fourth quarter of 2012 was 11.3 percent compared with 14.7 percent in 2011. The decrease is primarily due to lower gross profit in both the Construction and Construction Materials segments, partially offset by an increase in margins in the Large Project segment.
  • Selling, general, and administrative expenses for the fourth quarter increased $14.8 million to $57.3 million, reflecting $4.7 million in costs associated with the pursuit of large projects and $4.4 million in acquisition-related costs.
  • Operating income was $21.7 million, compared with $40.1 million in the prior year.
  • Net income attributable to noncontrolling interests was $0.4 million compared with $6 million in 2011.

Construction

  • Construction revenue for the fourth quarter 2012 was $235.3 million, compared with $259.2 million for the fourth quarter of 2011.
  • Gross profit margin was 7.7 percent, compared with 14.3 percent a year ago, reflecting competitive market conditions, wet weather in the West in November and December, and increased costs to complete certain projects due to lower productivity than anticipated.

Large Project Construction

  • Large Project Construction revenue was $214.6 million, compared with $211.6 million.
  • Gross profit margin for the quarter was 18.7 percent, compared with 16.4 percent for the same period last year. The increase reflects successful execution on several large projects across the country, partially offset by a downward forecast adjustment on a project Washington.

Construction Materials

  • Construction Materials revenue for the quarter was $54.9 million, compared with $55.5 million in the fourth quarter of 2011.
  • Gross loss on the sale of construction materials was $1.5 million, compared with gross profit of $5.9 million in the prior period. The fourth quarter of 2012 was impacted by slow economic conditions at certain California locations.

Outlook

“Overall, I am pleased with the direction of our company, led by the implementation of our well-developed strategic plan,” said Roberts in a written statement. “We are well prepared to capture the benefits of our acquisition of Kenny and intend to continue to pursue our growth plan through geographic and end market diversification in 2013.

“While we are optimistic that we will see some benefit from the residential building market towards the end of the year, we expect that our Construction and Construction Materials businesses will continue to face challenging market conditions throughout most of 2013,” he continued. “Our outlook for large projects, however, remains very positive. We anticipate strong backlog growth in our Large Projects segment in light of the strong pipeline of opportunities across the country. We have several large projects in various stages of completion in 2013 and will be starting work on the Tappan Zee and IH-35E projects, both of which should recognize profit in 2014.”

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