GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Granite Construction Inc. Reports Operating Results (10-Q)

August 03, 2012 | About:
10qk

10qk

18 followers
Granite Construction Inc. (GVA) filed Quarterly Report for the period ended 2012-06-30.

Granite Construction Inc. has a market cap of $1.02 billion; its shares were traded at around $24.495 with a P/E ratio of 21.4 and P/S ratio of 0.5. The dividend yield of Granite Construction Inc. stocks is 2%.

Highlight of Business Operations:

Our typical construction project begins with the preparation and submission of a bid to a customer. If selected as the successful bidder, we generally enter into a contract with the customer that provides for payment upon completion of specified work or units of work as identified in the contract. We usually invoice our customers on a monthly basis. Our contracts frequently call for retention that is a specified percentage withheld from each payment until the contract is completed and the work accepted by the customer. Additionally, we defer recognition of profit on projects until they reach at least 25% completion (see “Gross Profit” section below) and our profit recognition is based on estimates that change over time. Our revenue, gross margin and cash flows can differ significantly from period to period due to a variety of factors including the projects stage of completion, the mix of early and late stage projects, our estimates of contract costs and the payment terms of our contracts. The timing differences between our cash inflows and outflows require us to maintain adequate levels of working capital.

Revenue decreased by $15.5 million, or 5.9%, for the three months ended June 30, 2012 and increased by $9.8 million, or 2.8%, for the six months ended June 30, 2012 compared to the same periods in 2011. The decrease during the quarter was primarily due to less public sector construction revenue in the Northwest and East offset by improved private sector revenue in the Northwest from increased success in new markets, such as power and industrial. The increase during the six months ended June 30, 2012 was due to improved private sector revenue in the Northwest and increased construction activity in our California public sector primarily due to entering the year with greater backlog.

Revenue for the three and six months ended June 30, 2012 increased by $5.2 million, or 9.0%, and $7.1 million, or 8.6%, respectively, compared to the same periods in 2011. Despite the increases in revenue, the construction materials business continues to be impacted by the weakness in the commercial and residential development markets.

Construction gross profit for the three and six months ended June 30, 2012 decreased $5.4 million and $2.4 million, respectively, compared to the same periods in 2011. Construction gross profit as a percent of revenue for the three months ended June 30, 2012 decreased to 7.3% from 9.0% in 2011 and decreased to 7.3% for the six months ended June 30, 2012 from 8.2% in 2011. The decreases were primarily due to increased competition and challenging market conditions primarily in California. In addition, the decreases during the three and six months ended June 30, 2012 were partially due to net decreases of $1.6 million and $0.8 million from revisions in estimates, respectively, compared to net increases of $1.4 million and $2.9 million, respectively, for the same periods in 2011 (see Note 2 of “Notes to the Condensed Consolidated Financial Statements”).

Large Project Construction gross profit for the three and six months ended June 30, 2012 increased $15.6 million and $6.5 million, respectively, compared to the same periods in 2011. The increases were due to progress made on projects in the East and Northwest. Large Project Construction gross profit as a percent of revenue for the three months ended June 30, 2012 increased to 12.3% from 7.8% in 2011 and decreased to 12.9% for the six months ended June 30, 2012 from 14.6% in 2011. During the three and six months ended June 30, 2012, $16.8 million and $26.7 million, respectively, of revenue was recognized on projects that have not yet reached our profit recognition threshold compared to $74.4 million and $121.6 million, respectively, during the same periods in 2011. The increase during the three months ended June 30, 2012 was also due to a net increase of $9.3 million from revisions in estimates compared to a net decrease of $0.3 million during the same period in 2011. The increase during the six months ended June 30, 2012 was also due to a net increase of $13.7 million from revisions in estimates compared to a net increase of $5.2 million during the same period in 2011 (see Note 2 of “Notes to the Condensed Consolidated Financial Statements”). The increase in gross margin during the six months ended June 30, 2012 from revisions in estimates was partially offset by a decrease from the recognition of deferred profit on a project that reached the profit recognition threshold in the same period of 2011. Our wholly owned subsidiaries, Granite Construction Company (“GCCO”) and Granite Northwest, Inc., are members of a joint venture known as Yaquina River Constructors (“YRC”) which was under contract with the Oregon Department of Transportation (“ODOT”) to construct a new road alignment of U.S. Highway 20 near Eddyville, Oregon. In addition to previous geologic landslide issues, unanticipated ground movement was observed at several hillsides beginning in 2010. YRC and ODOT were in dispute regarding their respective responsibilities under the terms of the contract relative to the project revisions necessary on account of the unanticipated ground movement. In May 2012, ODOT and YRC reached a settlement that ended YRC s responsibility to perform any further work following limited final activities, which have been completed; released both parties from claims against the other, including from ODOT s Notice of Default, which was rescinded and withdrawn; and contained terms calling for YRC to make certain payments to ODOT and for ODOT to release certain earned amounts to YRC. The settlement did not have a material impact on the Company s financial position or results of operations.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Email Hide