Granite Construction today reported a net loss of $41.0 million, or $1.09 per diluted share, for the first quarter of 2010 compared with net income of $8.9 million, or $0.23 per diluted share, for the first quarter of 2009.
Below is a snapshot of the results, followed by a more detailed report:
- Revenue down 36 percent from a year ago
- Net loss of $41 million compared with net income of $8.9 million
- Backlog increased $177 million to $1.6 billion from year-end
- Balance sheet remains strong, with $299 million in cash and short-term marketable securities
“As we previously announced, throughout the quarter we continued to experience a challenging and competitive market environment in addition to extremely poor weather across the country,” said Granite President and Chief Executive Officer William G. Dorey in a press release from the company. “Although the first quarter is typically our weakest due to the seasonal nature of our business, this was one of the wettest first quarters we have experienced in quite some time.”
First-quarter 2010 financial results
Revenue totaled $220.7 million compared with $347.4 million in 2009, driven by weakness in demand and the impact of weather. First-quarter 2009 included approximately $46.0 million in revenue associated with work performed on the border fence project in the Southwest and $17.3 million related to a favorable settlement on a project in the East.
- Gross profit margin was 3 percent, down from 20 percent in 2009, driven primarily by a decline in revenue, no meaningful contract claim settlements and increased competition.
- Operating loss for the quarter was $45.1 million compared with operating income of $16.9 million in the prior year.
- Selling, general and administrative expenses for the first quarter were $55.3 million compared with $54.4 million for the same period last year. The first quarter of 2010 did not contain a bad-debt recovery compared with the first quarter of 2009, which included recovery of $2.9 million related to an account reserved in the prior year. First quarter 2010 expenses were also impacted by:
- $0.7 million increase in selling expenses, partially offset by a $2.1 million decrease in variable compensation expense
- $0.6 million related to severance costs associated with the Company’s restructuring
- Net income attributable to non-controlling interests in joint ventures was $3.2 million compared with $5.1 million in 2009.
- Total contract backlog at March 31, 2010, was $1.6 billion compared with $1.4 billion at December 31, 2009, and $1.6 billion at March 31, 2009.
- Construction revenue for the quarter totaled $81.2 million compared with $168.0 million for the same period in 2009. The decrease was affected by overall lower demand, weather and the lack of border fence work as compared to the prior year.
- Gross profit margin for the first quarter was 2 percent compared with 21 percent a year ago, partially due to the decline in revenue as well as profitability associated with border fence work.
Large-project construction revenue for the quarter totaled $106.3 million compared with $149.1 million for the same period last year. The decrease is attributable primarily to less revenue generated from projects nearing completion and new projects getting under way. First quarter 2009 revenue also included $17.3 million related to a favorable settlement on a project in the East.
- Gross profit margin for the quarter decreased to 9 percent compared with 23 percent for the same period last year. First-quarter 2009 margin also included $17.3 million related to the project settlement.
- Construction materials revenue for the quarter totaled $26.2 million compared with $29.8 million for the same period last year.
- Gross loss on the sale of construction materials was $7.1 million in 2010 compared with $0.3 million in 2009. The decline reflects lower sales volume during the quarter and the effects of fixed costs associated with our materials-processing facilities.
“We expect 2010 to be a challenging year for our business,” said Dorey. “Competition for the available work remains tough, and we expect gross margins on smaller projects to remain under pressure for the balance of the year. In addition, we now expect the Houston Metro Light Rail and the Queens Bored Tunnel projects to reach our profit recognition threshold in 2011, not 2010 as previously anticipated.
“Despite the challenging market conditions, we have a substantial number of bidding opportunities, and we expect backlog to increase throughout 2010,” Dorey continued. “Longer-term, we expect to see the demand for our construction services and materials improve as the private development market begins to see signs of a recovery.
“For the full-year 2010, we expect Construction segment revenue to be $1.05 billion to $1.25 billion with a corresponding gross profit margin between 11.5 percent and 13 percent. Large Project Construction segment revenue is expected to be $725 million to $825 million with a corresponding gross profit margin of between 10 percent and 12 percent. Construction Materials segment revenue is expected to be $200 million to $250 million with corresponding gross profit margin between 12 percent and 13 percent. In addition, net income attributable to non-controlling interest in joint ventures for the total company is expected to be $20 million to $25 million,” said Dorey.
Granite will conduct a conference call tomorrow, May 4, 2010, at 8 a.m. Pacific time/11 a.m. eastern time to discuss the results of the quarter ended March 31, 2010. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relati
ons. The live conference call may be accessed by calling 877-693-6483, or 706-758-5304 for international listeners. The conference ID for the call is 67074808. The call will be recorded and will be available for replay from approximately two hours after the live audio webcast through May 18, 2010, by calling 800-642-1687 or 706-645-9291. The conference ID for the recording is 67074808.
To view the balance sheets for the first-quarter results, click here.