Granite reports Q4 and fiscal 2011 results

|  February 23, 2012 |

Granite Construction Inc. has reported a net income of $51 million for the full year 2011, compared to a net loss of $59 million the prior year. Diluted earnings per share (EPS) for the year was $1.31 compared to a loss per share of $(1.56) in 2010.

For the fourth quarter of 2011, Granite reported a net income of $19 million, compared to a net loss of $50 million for the fourth quarter of 2010. Diluted EPS for the quarter ended Dec. 31, 2011 was $0.48 compared to a loss per share of $(1.32) in the prior year period. Included in the fourth quarter of 2010 were restructuring charges of $107 million associated with the company’s Enterprise Improvement Plan.

“Our solid performance in 2011 is the result of our continued successful project execution, the tremendous efforts of our people to improve efficiencies throughout the company and the significant reductions we have made to our cost structure,” said James H. Roberts, Granite president and chief executive officer, in a press release announcing the results.

Fiscal 2011 Highlights:

Total Company

  • Revenue totaled $2.0 billion compared with $1.8 billion in 2010, driven by increases in both Construction and Large Project Construction revenue.
  • Gross profit margin was 12 percent compared with 10 percent in 2010.
  • SG&A expenses decreased $29 million to $162 million primarily due to a workforce reduction in 2010 and restructuring of administrative services.
  • Operating income was $99 million in 2011 compared with an operating loss of $109 million in 2010. Fiscal 2010 includes restructuring charges of approximately $109 million.
  • Total other (expense) income decreased $13 million from 2010 due primarily to previously deferred income and impairment charges on other investments.
  • Net income attributable to noncontrolling interests was $15 million compared with a net loss attributable to noncontrolling interests of $4 million in 2010.
  • Total contract backlog at December 31, 2011, was $2.0 billion compared with $1.9 billion a year ago.

Construction

  • Construction revenue increased 11 percent to $1.0 billion driven by a higher volume of work and mild weather in the fourth quarter.
  • Gross profit margin was 12 percent compared with 10 percent a year ago reflecting successful execution on projects and improved cost management.

Large Project Construction

  • Large Project Construction revenue increased 24 percent to $725 million aided by the progress on several large projects.
  • Gross profit margin was 14 percent compared with 12 percent in 2010 reflecting an increase in the volume of projects that reached the profit recognition threshold during the year.

Construction Materials

  • Construction Materials revenue was $221 million compared with $222 million last year.
  • Gross profit on the sale of construction materials was 8 percent compared with 5 percent in 2010 driven by production efficiencies.

Fourth Quarter 2011 Highlights

Total Company

  • Revenue totaled $540 million compared with $417 million in 2010, driven by increases in both Construction and Large Project Construction revenue.
  • Gross profit margin was 15 percent compared with 11 percent in 2010.
  • Selling, general and administrative expenses for the fourth quarter increased $3 million to $43 million due to higher incentive compensation related to higher earnings.
  • Operating income for the quarter was $40 million compared with an operating loss of $99 million in the prior year. The fourth quarter 2010 includes restructuring charges of $107 million related to workforce reductions as well as real estate and fixed asset impairment charges.
  • Net income attributable to noncontrolling interests was $6 million compared with net loss attributable to noncontrolling interest of $15 million in 2010. The results for 2010 include $20 million associated with impairment charges related to the implementation of the company’s Enterprise Improvement Plan.

Construction

  • Construction revenue for the quarter increased 21 percent to $259 million due to relatively mild weather throughout the quarter.
  • Gross profit margin for the fourth quarter was 14 percent compared with 12 percent a year ago reflecting successful execution on projects and improved cost management.

Large Project Construction

  • Large Project Construction revenue for the quarter increased 37 percent to $212 million reflecting progress on several large projects across the country.
  • Gross profit margin for the quarter was 16 percent compared with 11 percent for the same period last year. During the fourth quarter, projects which reached profit recognition include the Houston Metro Light Rail project and the State Route 520 project in the Northwest.

Construction Materials

  • Construction Materials revenue for the quarter increased 19 percent to $56 million reflecting drier weather in the fourth quarter of 2011 compared to the fourth quarter of 2010.
  • Gross profit margin on the sale of construction materials was 11 percent compared with 5 percent in 2010.

Outlook

“I am very pleased with the quality of our backlog and the opportunities to grow it even further in all segments of our business throughout 2012,” commented Roberts in the press release. “Despite operating in an extremely competitive bidding environment, our teams continue to meet the challenge by being strategic about the work we bid, intensely focused on execution, and responsive to market conditions. ”

“Going forward, we will continue to aggressively manage expenses and drive efficiencies. We will also leverage our capabilities and experience to drive opportunities to grow our business. Our efforts this past eighteen months have set the stage for long-term profitability,” said Roberts. “In addition, we have renewed our focus on growing the business and are excited about the future for Granite. Our strategy is centered on several key initiatives including growing both our large projects and vertically integrated businesses, as well as diversifying our business model, and continually optimizing our asset portfolio. We are building momentum around these initiatives and looking forward to executing on our plan not only this year, but over the years to come.”

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