Watsonville, Calif.-based Granite Construction Inc. on Feb. 23 reported a net loss of $59.0 million for the full year 2010 ^[1], compared with net income of $73.5 million for the full year 2009. Loss per share for the year was $(1.56), compared with earnings per diluted share (EPS) of $1.90 in 2009.

For the fourth quarter of 2010, Granite reported a net loss of $50.0 million, compared with net income of $16.0 million for the fourth quarter of 2009.

Loss per share for the quarter ended Dec. 31, 2010 was $(1.32), compared with EPS of $0.41 earned in the prior year period. Included in the fourth quarter of 2010 were restructuring charges of $107.3 million associated with the company’s Enterprise Improvement Plan. The portion of restructuring charges attributable to noncontrolling interests was about $20.0 million.

“During the fourth quarter, we made solid progress towards reducing our cost structure and strengthening the business for the long-term,” Granite President and CEO James H. Roberts said in a written statement. “In addition to the necessary but difficult decision to reduce our workforce, we are focusing on optimizing our core business and have committed to divesting of our real estate investment business over the next three years.”

Roberts continued, “We are undoubtedly operating in one of the most difficult economic environments our company has faced in decades. Despite these challenges, we grew backlog in both of our key segments, maintained a solid balance sheet, and continued to position the company to recapture momentum in 2011.”

Full-year 2010 financial results

Total Company

• Revenue totaled $1.8 billion, compared with $2.0 billion in 2009.
• Gross profit margin was 10 percent compared with 18 percent in 2009 due primarily to lower margins in our beginning backlog of work, compared with a year ago. Also contributing to margin pressure was $156.7 million in revenue from projects that had not yet reached the profit recognition threshold, compared with $68.8 million a year ago.
• Operating loss for the year was $109.3 million, compared with operating income of $129.2 million in the prior year and includes restructuring charges of $109.3 million.
• SG&A expenses were $191.6 million, compared with $228.0 million for the same period last year driven by reductions in salaries and related expenses, incentive compensation, and discretionary spending.
• Amount attributable to noncontrolling interests was a loss of $3.5 million, compared with income of $26.7 million in 2009 due to $20.0 million associated with the impairment charges taken in the fourth quarter 2010.
• Total contract backlog at December 31, 2010 was $1.9 billion, compared with $1.4 billion at December 31, 2009.

Construction

• Construction revenue for the full year totaled $943.2 million, compared with $1.2 billion for the same period in 2009 due to a continued weak demand in the private-sector and increased competition for public-sector work.
• Gross profit margin for the full year was 10 percent, compared with 18 percent for the same period in 2009, driven by lower volumes and increased competition.

Large Project Construction

• Large Project Construction revenue for the full year totaled $584.4 million, compared with $603.5 million for the same period last year.
• Gross profit margin for the full year decreased to 12 percent, compared with 20 percent for the same period last year as several new projects generated revenue, but did not reach the profit recognition threshold in 2010.

Construction materials

• Construction materials revenue for the full year totaled $222.1 million compared with $205.9 million for the same period last year.
• Gross profit margin on the sale of construction materials was 5 percent in 2010, compared with 10 percent in 2009. The decrease is primarily attributable to an increase in fixed costs associated with two new materials processing facilities that came online in late 2009.

Fourth-quarter 2010 financial results

Total company

• Revenues for the quarter totaled $417.2 million, compared with $434.7 million in 2009.
• Gross profit margin decreased to 11 percent, down from 21 percent in 2009.
• Operating loss for the quarter was $98.5 million, compared with operating income of $35.6 million in the prior year. The fourth quarter 2010 includes restructuring charges of $107.3 million related to workforce reductions as well as real estate and fixed asset impairment charges.
• Selling, general, and administrative expenses decreased $16.7 million quarter over quarter to $39.8 million.
• Amount attributable to noncontrolling interests was a loss of $15.4 million, compared with income of $11.0 million in 2009 due to $20.0 million associated with the impairment charges taken in the fourth quarter 2010.

Construction

• Construction revenues for the quarter totaled $214.1 million, compared with $239.6 million for the same period in 2009.
• Gross profit margin for the fourth quarter was 12 percent compared with 20 percent for the same period last year. The decrease was affected by overall lower demand and lower margins due to the competitive environment.

Large project construction

• Large project construction revenues for the quarter totaled $154.8 million, compared with $147.5 million for the same period in 2009.
• Gross profit margin for the fourth quarter was 11 percent, compared with 26 percent for the same period last year, reflecting an increase in revenue on projects that have yet to reach the profit recognition threshold.

Construction materials

• Construction materials revenue for the quarter totaled $46.7 million, compared with $47.3 million for the same period in 2009.
• Gross profit on the sale of construction materials was 5 percent, compared with 8 percent for the same period in 2009.

Outlook

“The actions we are taking to reduce our cost structure are expected to lead to a substantial improvement in our bottom line results in 2011,” Roberts said. “In addition, we anticipate a positive impact to earnings from some large projects reaching the profit recognition threshold. While the pipeline of large project bidding opportunities remains full, our goal is to build high quality backlog that will provide the best return for our shareholders. The large project construction market offers a great deal of near-term growth potential for our business, and we are excited about the opportunities that this segment of our business will provide.”

Roberts said Granite’s construction segment is starting 2011 with a healthy backlog of work. However, he anticipates the competitive environment will remain very tough.

“We expect the demand for our services and construction materials from the private sector in the West will remain under pressure for the balance of the year,” Roberts said. “Funding for transportation infrastructure will continue to be a focus for us this year as we advocate for a multi-year highway bill that will provide the industry with much needed visibility. Despite these macro-economic challenges, we will continue to move forward with our strategy to operate our business as efficiently and effectively as possible.”