UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
ý
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended March 31, 2010
OR
|
¨
|
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the
transition period from ___________ to ___________
Commission
File Number: 1-12911
GRANITE
CONSTRUCTION INCORPORATED
|
State
of Incorporation:
|
I.R.S.
Employer Identification Number:
|
|
Delaware
|
77-0239383
|
Address
of principal executive offices:
585 W.
Beach Street
Watsonville,
California 95076
(831)
724-1011
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
ýYes oNo
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). ¨Yes ¨No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated
filer ý
|
Accelerated
filer ¨
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ¨ Yes ý No
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of April 26, 2010.
|
Class
|
Outstanding
|
|
|
Common
Stock, $0.01 par value
|
38,802,826 shares
|
Index
PART I.
FINANCIAL INFORMATION
Item
1. FINANCIAL
STATEMENTS (unaudited)
|
GRANITE
CONSTRUCTION INCORPORATED
|
||||||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||||||
|
(Unaudited
- in thousands, except share and per share data)
|
||||||||||||
|
March
31,
|
December
31,
|
March
31,
|
||||||||||
|
2010
|
2009
|
2009
|
||||||||||
|
ASSETS
|
||||||||||||
|
Current
assets
|
||||||||||||
|
Cash
and cash equivalents
|
$ | 222,095 | $ | 338,956 | $ | 390,483 | ||||||
|
Short-term
marketable securities
|
76,963 | 42,448 | 22,276 | |||||||||
|
Receivables,
net
|
197,658 | 280,252 | 233,867 | |||||||||
|
Costs
and estimated earnings in excess of billings
|
33,445 | 10,619 | 54,400 | |||||||||
|
Inventories
|
49,483 | 45,800 | 59,254 | |||||||||
|
Real
estate held for development and sale
|
137,183 | 139,449 | 79,409 | |||||||||
|
Deferred
income taxes
|
31,150 | 31,034 | 43,484 | |||||||||
|
Equity
in construction joint ventures
|
71,693 | 67,693 | 44,423 | |||||||||
|
Other
current assets
|
56,033 | 50,467 | 52,488 | |||||||||
|
Total
current assets
|
875,703 | 1,006,718 | 980,084 | |||||||||
|
Property
and equipment, net
|
519,909 | 520,778 | 526,734 | |||||||||
|
Long-term
marketable securities
|
90,440 | 76,937 | 46,387 | |||||||||
|
Investments
in affiliates
|
30,823 | 24,644 | 21,768 | |||||||||
|
Other
noncurrent assets
|
80,371 | 80,498 | 79,534 | |||||||||
|
Total
assets
|
$ | 1,597,246 | $ | 1,709,575 | $ | 1,654,507 | ||||||
|
LIABILITIES AND
EQUITY
|
||||||||||||
|
Current
liabilities
|
||||||||||||
|
Current
maturities of long-term debt
|
$ | 8,350 | $ | 15,017 | $ | 15,355 | ||||||
|
Current
maturities of non-recourse debt
|
40,565 | 43,961 | 18,863 | |||||||||
|
Accounts
payable
|
100,102 | 131,251 | 141,783 | |||||||||
|
Billings
in excess of costs and estimated earnings
|
142,935 | 156,041 | 190,540 | |||||||||
|
Accrued
expenses and other current liabilities
|
156,374 | 159,843 | 159,323 | |||||||||
|
Total
current liabilities
|
448,326 | 506,113 | 525,864 | |||||||||
|
Long-term
debt
|
225,203 | 225,203 | 233,553 | |||||||||
| Long-term non-recourse debt | 16,895 | 19,485 | 17,798 | |||||||||
|
Other
long-term liabilities
|
52,471 | 48,998 | 45,836 | |||||||||
|
Deferred
income taxes
|
27,217 | 27,220 | 17,917 | |||||||||
| Commitments and contingencies | ||||||||||||
|
Equity
|
||||||||||||
|
Preferred
stock, $0.01 par value, authorized 3,000,000 shares, none
outstanding
|
- | - | - | |||||||||
|
Common
stock, $0.01 par value, authorized 150,000,000 shares; issued and
outstanding 38,801,232 shares as of March 31, 2010, 38,635,021
shares as of December 31, 2009 and 38,679,123 shares as
of March 31, 2009
|
388 | 386 | 387 | |||||||||
|
Additional
paid-in capital
|
93,688 | 94,633 | 88,158 | |||||||||
|
Retained
earnings
|
689,634 | 735,632 | 686,129 | |||||||||
|
Total
Granite Construction Incorporated shareholders’ equity
|
783,710 | 830,651 | 774,674 | |||||||||
|
Noncontrolling
interests
|
43,424 | 51,905 | 38,865 | |||||||||
|
Total
equity
|
827,134 | 882,556 | 813,539 | |||||||||
|
Total
liabilities and equity
|
$ | 1,597,246 | $ | 1,709,575 | $ | 1,654,507 | ||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
GRANITE
CONSTRUCTION INCORPORATED
|
||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
||||||||
|
(Unaudited
- in thousands, except per share data)
|
||||||||
| Three Months Ended March 31, |
2010
|
2009
|
||||||
|
Revenue
|
||||||||
|
Construction
|
$ | 81,186 | $ | 168,049 | ||||
|
Large project
construction
|
106,325 | 149,060 | ||||||
|
Construction
materials
|
26,164 | 29,846 | ||||||
|
Real
estate
|
7,008 | 417 | ||||||
|
Total revenue
|
220,683 | 347,372 | ||||||
|
Cost
of revenue
|
||||||||
|
Construction
|
79,340 | 132,873 | ||||||
|
Large
project construction
|
96,842 | 115,396 | ||||||
|
Construction
materials
|
33,289 | 30,160 | ||||||
|
Real
estate
|
5,498 | 207 | ||||||
|
Total cost of revenue
|
214,969 | 278,636 | ||||||
|
Gross
profit
|
5,714 | 68,736 | ||||||
|
Selling,
general and administrative expenses
|
55,292 | 54,355 | ||||||
|
Gain
on sales of property and equipment
|
4,452 | 2,521 | ||||||
|
Operating
(loss) income
|
(45,126 | ) | 16,902 | |||||
|
Other income
(expense)
|
||||||||
|
Interest
income
|
939 | 2,061 | ||||||
|
Interest
expense
|
(3,734 | ) | (3,488 | ) | ||||
|
Equity
in loss
of affiliates
|
(319 | ) | (444 | ) | ||||
|
Other
income, net
|
2,897 | 3,785 | ||||||
|
Total other (expense) income
|
(217 | ) | 1,914 | |||||
|
(Loss)
income before (benefit from) provision for income taxes
|
(45,343 | ) | 18,816 | |||||
|
(Benefit
from) provision for income taxes
|
(7,613 | ) | 4,829 | |||||
|
Net
(loss) income
|
(37,730 | ) | 13,987 | |||||
|
Amount attributable
to noncontrolling interests
|
(3,224 | ) | (5,067 | ) | ||||
|
Net
(loss) income attributable to Granite Construction
Incorporated
|
$ | (40,954 | ) | $ | 8,920 | |||
|
Net
(loss) income per share attributable to common
shareholders (see Note
12)
|
||||||||
|
Basic
|
$ | (1.09 | ) | $ | 0.23 | |||
|
Diluted
|
$ | (1.09 | ) | $ | 0.23 | |||
|
Weighted
average shares of common stock
|
||||||||
|
Basic
|
37,688 | 37,476 | ||||||
|
Diluted
|
37,688 | 37,600 | ||||||
|
Dividends
per common share
|
$ | 0.13 | $ | 0.13 | ||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
GRANITE
CONSTRUCTION INCORPORATED
|
||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
|
(Unaudited - in
thousands)
|
||||||||
|
Three
Months Ended March 31,
|
2010
|
2009
|
||||||
|
Operating
activities
|
||||||||
|
Net
(loss) income
|
$ | (37,730 | ) | $ | 13,987 | |||
|
Adjustments
to reconcile net (loss) income to net cash used
in operating
activities:
|
||||||||
|
Depreciation,
depletion and amortization
|
18,662 | 20,623 | ||||||
|
Provision
for (recovery of) doubtful accounts
|
508 | (2,723 | ) | |||||
|
Gain
on sales of property and equipment
|
(4,452 | ) | (2,521 | ) | ||||
|
Stock-based
compensation
|
3,158 | 2,777 | ||||||
|
Gain
on company owned life insurance
|
(1,748 | ) | - | |||||
|
Changes
in assets and liabilities, net of the effects of
consolidations:
|
||||||||
|
Receivables
|
80,800 | 87,722 | ||||||
|
Inventories
|
(3,683 | ) | (4,031 | ) | ||||
|
Real
estate held for development and sale
|
(1,687 | ) | (4,383 | ) | ||||
|
Equity
in construction joint ventures
|
(4,631 | ) | 258 | |||||
|
Other
assets, net
|
(4,932 | ) | 5,201 | |||||
|
Accounts
payable
|
(31,469 | ) | (32,843 | ) | ||||
|
Accrued
expenses and other current liabilities, net
|
(1,218 | ) | (20,120 | ) | ||||
|
Billings
in excess of costs and estimated earnings, net
|
(35,932 | ) | (77,929 | ) | ||||
|
Net
cash used in
operating activities
|
(24,354 | ) | (13,982 | ) | ||||
|
Investing
activities
|
||||||||
|
Purchases
of marketable securities
|
(47,511 | ) | (29,258 | ) | ||||
|
Maturities
of marketable securities
|
- | 15,610 | ||||||
|
Additions
to property and equipment
|
(14,712 | ) | (29,601 | ) | ||||
|
Proceeds
from sales of property and equipment
|
5,674 | 3,741 | ||||||
|
Purchase
of private preferred stock
|
(6,400 | ) | - | |||||
|
Contributions
to affiliates
|
(165 | ) | (2,219 | ) | ||||
|
Other
investing activities, net
|
(288 | ) | 148 | |||||
|
Net
cash used in
investing activities
|
(63,402 | ) | (41,579 | ) | ||||
|
Financing
activities
|
||||||||
|
Proceeds
from long-term debt
|
53 | 2,435 | ||||||
|
Long-term
debt principal payments
|
(8,739 | ) | (7,282 | ) | ||||
|
Cash
dividends paid
|
(5,023 | ) | (4,975 | ) | ||||
|
Purchase
of common stock
|
(3,296 | ) | (2,017 | ) | ||||
|
Distributions
to noncontrolling partners
|
(12,142 | ) | (3,153 | ) | ||||
|
Other
financing activities
|
42 | 193 | ||||||
|
Net
cash used
in financing activities
|
(29,105 | ) | (14,799 | ) | ||||
|
Decrease in
cash and cash equivalents
|
(116,861 | ) | (70,360 | ) | ||||
|
Cash
and cash equivalents at beginning of period
|
338,956 | 460,843 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 222,095 | $ | 390,483 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
GRANITE
CONSTRUCTION INCORPORATED
|
||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
|
||||||||
|
(Unaudited - in
thousands)
|
||||||||
|
Three
Months Ended March 31,
|
2010
|
2009
|
||||||
|
Supplementary
Information
|
||||||||
|
Cash
paid during the period for:
|
||||||||
|
Interest
|
$ | 1,576 | $ | 963 | ||||
|
Income
taxes
|
66 | 2,687 | ||||||
|
Non-cash
investing and financing activities:
|
||||||||
|
Restricted
stock issued for services, net
|
$ | 6,734 | $ | 18,675 | ||||
|
Accrued
cash dividends
|
5,044 | 5,028 | ||||||
|
Debt
payments from sale of assets
|
4,075 | - | ||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
6
GRANITE
CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
|
1.
|
Basis
of Presentation
|
The
condensed consolidated financial statements included herein have been prepared
by Granite Construction Incorporated (“we,” “us,” “our”, “Company” or
“Granite”) without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”) and should be read in conjunction
with our Annual Report on Form 10-K for the year ended December
31, 2009. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) have
been condensed or omitted, although we believe the disclosures which are made
are adequate to make the information presented not misleading. Further, the
condensed consolidated financial statements reflect, in the opinion of
management, all normal recurring adjustments necessary to present fairly our
financial position at March 31, 2010 and 2009 and the results of our operations
and cash flows for the periods presented. In preparing these financial
statements, we have evaluated events and transactions for potential recognition
or disclosure through the date the financial statements were issued. The
December 31, 2009 condensed consolidated balance sheet data was derived
from audited consolidated financial statements, but does not include all
disclosures required by U.S. GAAP.
We
prepared the accompanying condensed consolidated financial statements on the
same basis as our annual consolidated financial statements, except for the
change in our reportable business segments described in Note 15, “Business
Segment Information” and the following adoption of new accounting
standards:
·
clarification
of fair value disclosure requirements for assets and liabilities measured on a
recurring basis (see Note 5), and
·
new
consolidation requirements applicable to our construction and real estate
joint ventures that are considered
variable interest entities (“VIEs”), including:
|
i)
|
determination of
a VIE’s primary beneficiary using a qualitative analysis (see Notes 7
and 8);
|
|
ii)
|
ongoing
evaluation of a VIE’s primary beneficiary;
and
|
|
iii)
|
disclosures
about a company’s involvement with a VIE including
separate presentation
on
the condensed consolidated balance sheets of a
consolidated VIE’s non-recourse debt (see
Note 8).
|
Interim results are
subject to significant seasonal variations and the results of operations for the
three months ended March 31, 2010 are not necessarily indicative of the results
to be expected for the full year.
Reclassifications of
certain costs between cost of revenue and selling, general and administrative
expense have been made to prior years condensed consolidated financial
statements and footnote disclosures to conform to current year presentation.
These reclassifications did not have a significant affect on our previously
reported net operating results.
|
2.
|
Recently
Issued Accounting
Pronouncement
|
In January 2010, the
Financial Accounting Standards Board issued an accounting standard update
(“ASU”) regarding assets and liabilities measured at fair value using
significant unobservable inputs (Level 3 fair value measurements). This ASU
requires separate disclosures about
purchases, sales, issuances and settlements and will be effective
for us in 2011. We do not expect the adoption of this ASU to have a material
effect on our consolidated financial statements.
7
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
3.
|
Revisions
in Estimates
|
Our
profit recognition related to construction contracts is based on estimates of
costs to complete each project. These estimates can vary in the normal
course of business as projects progress and uncertainties are resolved. We
do not recognize revenue on contract change orders or claims until we have a
signed agreement; however, we do recognize costs as incurred and revisions to
estimated total costs as soon as the obligation to perform is determined.
Approved change orders and claims, as well as changes in related estimates of
costs to complete, are considered revisions in estimates. We use the cumulative
catch-up method applicable to construction contract accounting to account
for revisions in estimates. Under this option, revisions in estimates are
accounted for in their entirety in the period of
change. As of March 31, 2010, we had no revisions in estimates
that are reasonably certain to affect future periods.
The impact of revisions in estimates for each of our
construction segments is presented in the following
tables.
Construction
There
were no revisions in estimates, either increases or decreases, that
individually affected gross profit by $1.0 million or more during the
three months ended March 31, 2010.
The net
effect on project profitability from revisions in estimates
that individually affected gross profit by $1.0 million or more for
the three months ended March 31, 2009 was $10.3
million. Six
projects had upward estimate changes due to the resolution of certain
project uncertainties, higher productivity than originally estimated and
settlement of outstanding issues with contract owners. The net range of
increase in gross profit from each of these projects was $1.0 million to $3.3
million. There were no revisions in estimates that individually decreased gross
profit by $1.0 million or more.
There
were no amounts attributable to noncontrolling interests included in
revisions in estimates during the three months ended March 31, 2010 or
2009.
8
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Large
Project Construction
The net
effect on project profitability from revisions in estimates,
both increases and decreases, that individually affected gross profit
by $1.0 million or more was $(2.8) million and $21.5 million,
including amounts attributable to noncontrolling interests of $0.7 million
and $1.3 million, for the three months ended March 31, 2010
and 2009, respectively. These projects are summarized as
follows:
Increases
|
Three
Months Ended March 31,
|
|||||||
|
(dollars
in millions)
|
2010
|
2009
|
|||||
|
Number
of projects with upward estimate changes
|
1
|
4
|
|||||
|
Range
of increase in gross profit from each project,
net
|
$
|
3.2
|
$
|
1.1
- 17.3
|
|||
|
Effect
on project profitability
|
$
|
3.2
|
$
|
21.5
|
|||
The
increase during the three months ended March 31, 2010 was due to
production at a higher rate than anticipated. The 2009 increase
included a negotiated claims settlement with the owner on a project in
Pennsylvania for approximately $17.3 million.
Decreases
|
Three
Months Ended March 31,
|
|||||||
|
(dollars
in millions)
|
2010
|
2009
|
|||||
|
Number
of projects with downward estimate changes
|
3
|
-
|
|||||
|
Range
of reduction in gross profit from each project,
net
|
$
|
1.1
- 2.9
|
$
|
-
|
|||
|
Effect
on project profitability
|
$
|
(6.0
|
)
|
$
|
-
|
|
|
The
decreases during the three months ended March 31, 2010 were related to
design issues as well as job
level productivity due to site conditions different than anticipated.
There were no revisions in estimates that individually decreased gross profit by
$1.0 million or more in 2009.
9
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
4.
|
Marketable
Securities
|
The
carrying amounts of marketable securities were as follows (in
thousands):
|
March 31,
2010
|
Held-to-Maturity
|
Trading
|
Total
|
|||||||||
|
U.S.
Government and agency obligations
|
$ | 16,471 | $ | - | $ | 16,471 | ||||||
| Commercial paper | 34,979 | - | 34,979 | |||||||||
|
Municipal
bonds
|
|
20,975
|
|
-
|
|
20,975
|
||||||
|
Mutual
funds
|
-
|
4,538
|
4,538
|
|||||||||
|
Total
short-term marketable securities
|
72,425
|
4,538
|
76,963
|
|||||||||
|
U.S.
Government and agency obligations
|
84,760
|
-
|
84,760
|
|||||||||
|
Municipal
bonds
|
5,680
|
-
|
5,680
|
|||||||||
|
Total
long-term marketable securities
|
90,440
|
-
|
90,440
|
|||||||||
|
Total
marketable securities
|
$
|
162,865
|
$
|
4,538
|
$
|
167,403
|
||||||
|
December
31, 2009
|
||||||||||||
|
U.S.
Government and agency obligations
|
$
|
14,508
|
$
|
-
|
$
|
14,508
|
||||||
| Commercial paper | 4,993 | - | 4,993 | |||||||||
|
Municipal
bonds
|
21,019
|
-
|
21,019
|
|||||||||
|
Mutual
funds
|
-
|
1,928
|
1,928
|
|||||||||
|
Total
short-term marketable securities
|
40,520
|
1,928
|
42,448
|
|||||||||
|
U.S.
Government and agency obligations
|
71,254
|
-
|
71,254
|
|||||||||
|
Municipal
bonds
|
5,683
|
-
|
5,683
|
|||||||||
|
Total
long-term marketable securities
|
76,937
|
-
|
76,937
|
|||||||||
|
Total
marketable securities
|
$
|
117,457
|
$
|
1,928
|
$
|
119,385
|
||||||
|
March 31,
2009
|
||||||||||||
|
U.S.
Government and agency obligations
|
$
|
10,846
|
$
|
-
|
$
|
10,846 | ||||||
|
Municipal
bonds
|
11,430
|
-
|
11,430 | |||||||||
|
Total
short-term marketable securities
|
22,276
|
-
|
|
22,276 | ||||||||
|
U.S.
Government and agency obligations
|
29,361
|
-
|
29,361 | |||||||||
|
Municipal
bonds
|
17,026
|
-
|
17,026 | |||||||||
|
Total
long-term marketable securities
|
46,387
|
-
|
46,387 | |||||||||
|
Total
marketable securities
|
$
|
68,663
|
$
|
-
|
$
|
68,663 | ||||||
Scheduled
maturities of held-to-maturity investments were as follows (in
thousands):
| March 31, 2010 | ||||
|
Due
within one year
|
$
|
72,425
|
||
|
Due
in one to five years
|
90,440
|
|||
|
Total
|
$
|
162,865
|
10
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
5.
|
Fair
Value Measurement
|
Effective
in 2010, we adopted a new accounting standard that requires each
class of assets
and liabilities measured at fair value on a recurring basis to be reported
separately as summarized
in the following tables:
| March 31, 2010 |
Fair
Value Measurement at Reporting Date Using
|
|||||||||||
|
(in
thousands)
|
Level
11
|
Level
22
|
Level
33
|
Total
|
||||||||
| Cash equivalents | ||||||||||||
|
Money
market funds
|
$
|
184,754
|
$
|
-
|
$
|
-
|
$
|
184,754
|
||||
| Trading securities | ||||||||||||
|
Debt securities - mutual
funds
|
$ |
4,538
|
$ | - | $ | - | $ |
4,538
|
||||
|
Total
|
$ |
189,292
|
$ | - | $ | - | $ |
189,292
|
||||
|
December
31, 2009
|
||||||||||||
|
(in
thousands)
|
||||||||||||
| Cash equivalents | ||||||||||||
|
Money
market funds
|
$ | 337,817 | $ | - | $ | - | $ | 337,817 | ||||
| Trading securities | ||||||||||||
|
Debt securities - mutual
funds
|
$ | 1,928 | $ | - | $ | - | $ | 1,928 | ||||
|
Total
|
$ | 339,745 | $ | - | $ | - | $ | 339,745 | ||||
|
March
31, 2009
|
|
|
|
|
||||||||
|
(in
thousands)
|
||||||||||||
| Cash equivalents | ||||||||||||
|
Money
market funds
|
$ | 385,460 | $ | - | $ | - | $ | 385,460 | ||||
|
Total
|
$ | 385,460 | $ | - | $ | - | $ | 385,460 | ||||
1Quoted prices in active markets for identical assets or
liabilities.
2Observable inputs other
than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.
3Unobservable inputs that
are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities.
As of
June 30, 2009, we adopted a new standard that requires quarterly fair value
disclosures for financial instruments in addition to the annual disclosure. We
believe the carrying values of receivables, other current assets, and other
current liabilities approximate their fair values. The fair value of the senior
notes payable was based on borrowing rates available to us for bank loans with
similar terms, average maturities, and credit risk. The carrying amount and
estimated fair value of senior notes payable were:
|
March
31,
|
December
31,
|
|||||||
|
(in
thousands)
|
2010
|
2009
|
||||||
|
Carrying
amount
|
||||||||
|
Senior
notes payable (including current maturities)
|
$
|
233,333
|
$
|
240,000
|
||||
|
Fair
value
|
||||||||
|
Senior
notes payable (including current maturities)
|
$
|
248,809
|
$
|
249,159
|
||||
11
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
6.
|
Receivables,
net
|
| March 31, |
December
31,
|
March 31, | ||||||||
|
(in
thousands)
|
2010
|
2009
|
2009 | |||||||
|
Construction
contracts:
|
||||||||||
|
Completed
and in progress
|
$
|
75,021
|
$
|
121,083
|
$ | 99,940 | ||||
|
Retentions
|
91,799
|
96,887
|
106,456 | |||||||
|
Total
construction contracts
|
166,820
|
217,970
|
206,396 | |||||||
|
Construction
material sales
|
19,074
|
22,817
|
19,012 | |||||||
|
Other
|
15,340
|
43,382
|
15,421 | |||||||
|
Total
gross receivables
|
201,234
|
284,169
|
240,829 | |||||||
|
Less:
allowance for doubtful accounts
|
(3,576
|
)
|
(3,917
|
) |
|
(6,962 | ) | |||
|
Total
net receivables
|
$
|
197,658
|
$
|
280,252
|
$ | 233,867 | ||||
Included
in other receivables at March 31, 2010 and 2009 were items such as notes
receivable, interest receivable, fuel tax refunds and income tax refunds none of
which individually exceeded 10% of total net receivables at either
date. Other receivables at December 31, 2009 included $22.9 million
for income tax receivables.
|
7.
|
Construction
and Line Item Joint
Ventures
|
We
participate in various construction joint venture partnerships. We also
participate in various “line item” joint venture agreements under which each
partner is responsible for performing certain discrete items of the total scope
of contracted work.
Our
agreements with our joint venture partners for both construction joint ventures
and line item joint ventures provide that each party will assume and pay for any
losses it is responsible for under the joint venture
agreement. Circumstances that could lead to a loss under our joint venture
arrangements beyond our stated ownership interest include a partner’s inability
to contribute additional funds to the venture in the event the project incurs a
loss, or additional costs that we could incur should a partner fail to provide
the services and resources toward project completion that had been committed to
in the joint venture agreement. Due to the joint and several liability
under our joint venture arrangements, if one of our joint venture partners
fails to perform, we and the remaining joint venture partners would be
responsible for performance of the outstanding work.
At March
31, 2010 we had approximately $2.0 billion of construction work to be
completed on unconsolidated construction joint venture contracts of
which $670.2 million is our portion and the remaining $1.3 billion
represents our partners’ proportionate share. We are not able to estimate
other amounts that may be required beyond the remaining cost of the work to be
performed. These costs could be offset by billings to the customer or by
proceeds from performance bonds.
12
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Construction
Joint Ventures
Generally,
each construction joint venture is formed to complete a specific contract and is
jointly controlled by the joint venture partners. The joint venture agreements
typically provide that our interests in any profits and assets, and our
respective share in any losses and liabilities resulting from the performance of
the contract are limited to our stated percentage interest in the project. We
have no significant commitments beyond completion of the contracts. Under our
contractual arrangements, we provide capital to these joint ventures in return
for an ownership interest. In addition, partners dedicate resources to the
ventures necessary to complete the contracts and are reimbursed for their
cost. The operational risks of each construction joint venture are passed along
to the joint venture partners. As we absorb our share of these risks, our
investment in each venture is exposed to potential losses.
We have determined that
certain of these joint ventures are VIEs as defined by Accounting
Standards Codification (“ASC”) Topic 810 and related
standards. To ascertain if we
are required to consolidate the VIE, we determine whether we are the VIE’s
primary beneficiary. As discussed in Note 1, effective in 2010, we adopted
a new accounting standard that changes the method used to determine the primary
beneficiary of a VIE. This new standard requires:
|
·
|
determination
of a VIE’s primary beneficiary using a qualitative approach based
on:
|
|
i)
|
the
power to direct the activities that most significantly impact the economic
performance of the VIE; and
|
|
ii)
|
the
obligation to absorb losses or right to receive benefits of the VIE that
could be significant.
|
|
·
|
ongoing
evaluation of a VIE’s primary beneficiary;
and
|
|
·
|
disclosures
about a company’s involvement with a VIE including
separate presentation on
the
condensed consolidated
balance sheets of a
consolidated VIE’s non-recourse debt.
|
Prior to the adoption of
this accounting standard, determination of the VIE’s primary beneficiary
was based on a quantitative analysis and was reconsidered only upon the
occurrence of specific triggering events.
Based on
the provisions of the new accounting standard, the factors we consider in
determining whether we are a VIE’s primary beneficiary include the decision
making authority of each partner, which partner manages the day-to-day
operations of the project and the amount of our equity investment in relation to
that of our partners. The adoption of the new accounting standard resulted in
the consolidation of one construction joint venture in our condensed
consolidated financial statements as of March 31, 2010 that was previously
reported on a pro rata basis. This consolidation resulted
in increases of $2.4 million in assets, $1.7 million in
liabilities and $0.8 million in noncontrolling interests in our
condensed consolidated financial statements. Additionally, we determined that we
should continue to report the pro rata results of one joint venture where
decision making responsibility is shared between the venture
partners.
13
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Consolidated
Construction Joint Ventures
The
carrying amounts and classification of assets and liabilities of
construction joint ventures we are required to consolidate are included in our
condensed consolidated financial statements as follows:
| March 31, | December 31, | March 31, | ||||||||
|
(in
thousands)
|
2010 | 2009 | 2009 | |||||||
| Cash and cash equivalents | $ | 99,268 | $ | 122,438 | $ | 120,743 | ||||
| Other current assets | 11,953 | 3,220 | 11,042 | |||||||
|
Total
current assets
|
$ |
111,221
|
$ | 125,658 | $ | 131,785 | ||||
|
Noncurrent
assets
|
948
|
1,443 | 4,483 | |||||||
|
Total
assets1
|
$ |
112,169
|
$ | 127,101 | $ | 136,268 | ||||
| Accounts payable | $ | 20,506 | $ | 23,057 | $ | 31,595 | ||||
| Billings in excess of costs and estimated earnings | 64,779 | 69,354 | 70,195 | |||||||
| Accrued expenses and other current liabilities | 11,475 | 11,834 | 11,221 | |||||||
|
Total
current liabilities
|
$ |
96,760
|
$ | 104,245 | $ | 113,011 | ||||
|
Noncurrent
liabilities
|
4
|
3 | 30 | |||||||
|
Total
liabilities1
|
$ |
94,764
|
$ | 104,248 | $ | 113,041 | ||||
1The
assets and
liabilities
of the joint ventures are
used
only for the particular joint venture’s
operations.
At March
31, 2010, our consolidated construction joint ventures were engaged
in three active projects with total contract values ranging
from $4.0 million to $467.8 million and our proportionate share of the
equity in these joint ventures ranged from 45.0% to 57.3%.
14
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unconsolidated
Construction Joint Ventures
We
account for our share of construction joint ventures that we are not
required to consolidate on a pro rata basis in the condensed consolidated
statements of income and as a single line item on the condensed
consolidated balance sheets. These unconsolidated joint
ventures were engaged in eight active construction projects with
total contract values ranging from $0.3 million to $974.7 million. Our
proportionate share of the equity in these unconsolidated joint ventures ranged
from 20.0% to 42.5%.
Following
is summary financial information for the respective periods:
| March 31, | December 31, | March 31, | ||||||||
|
(in
thousands)
|
2010
|
2009
|
2009 | |||||||
|
Assets:
|
||||||||||
|
Total
|
$
|
353,203
|
$
|
337,959
|
$ | 264,663 | ||||
|
Less
partners’ interest
|
218,680
|
219,777
|
186,784 | |||||||
|
Granite’s
interest
|
134,523
|
118,182
|
77,879 | |||||||
|
Liabilities:
|
||||||||||
|
Total
|
193,350
|
168,114
|
148,344 | |||||||
|
Less
partners’ interest
|
130,520
|
117,625
|
114,888 | |||||||
|
Granite’s
interest
|
62,830
|
50,489
|
33,456 | |||||||
|
Equity
in construction joint ventures
|
$
|
71,693
|
$
|
67,693
|
$ | 44,423 | ||||
|
Three
Months Ended March 31,
|
|||||||
|
(in
thousands)
|
2010
|
2009
|
|||||
|
Revenue:
|
|||||||
|
Total
|
$
|
121,806
|
$
|
101,200
|
|||
|
Less
partners’ interest
|
87,760
|
80,696
|
|||||
|
Granite’s
interest
|
34,046
|
20,504
|
|||||
|
Cost
of revenue:
|
|||||||
|
Total
|
109,175
|
91,832
|
|||||
|
Less
partners’ interest
|
74,487
|
71,648
|
|||||
|
Granite’s
interest
|
34,688
|
20,184
|
|||||
|
Granite’s
interest in gross (loss) profit
|
$
|
(642
|
) |
$
|
320
|
||
Line
Item Joint Ventures
The
revenue for each line item joint venture partner’s discrete items of work is
defined in the contract with the project owner and each venture partner bears
the profitability risk associated with its own work. There is not a single set
of books and records for a line item joint venture. Each partner accounts for
its items of work individually as it would for any self-performed contract. We
account for our portion of these contracts as project revenues and costs in
our accounting system and include receivables and payables associated with our
work in our condensed consolidated financial statements.
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
8.
|
Real
Estate Entities and Investments in
Affiliates
|
We are
participants in various real estate entities through our Granite Land
Company (“GLC”)
subsidiary. Generally, each entity is formed to accomplish a specific
real estate development project. The agreements with our partners in
these real estate entities define each partner’s management
role and financial responsibility in the project. If one of our
partners is unable to fulfill its management role or make its required financial
contribution, we may assume full management or financial responsibility for the
project. For entities that are accounted for under the equity method, this may
result in their consolidation in our consolidated financial statements. The
amount of our exposure is limited to our equity investment in the real estate
joint venture.
We have
determined
that substantially all of our real estate ventures meet the criteria of a
VIE as defined in ASC Topic 810. To ascertain
if we are required to consolidate the VIE, we determine whether we are
the VIE’s primary beneficiary.
As
discussed in Note 1, effective in 2010 we adopted a new accounting
standard that provides a new approach for determining a VIE’s primary
beneficiary and specifies how often it should be evaluated. The adoption of
the new accounting standard did not have a material effect on our consolidation
of real estate entities. The new standard also requires continual evaluation of
the primary beneficiary. Prior to
the adoption of the new accounting standard, we
reconsidered each VIE’s primary beneficiary only upon specific
triggering events, which included the decision to make additional capital
contributions beyond what had been previously forecast.
During
the year ended December 31, 2009, we contributed $0.6 million on behalf of a
partner in one of our real estate entities beyond what had previously been
forecast. This additional capital contribution caused us to reconsider our
financial interest in the entity, and we determined we had become
its primary beneficiary. Consequently, we consolidated this entity into our
consolidated financial statements resulting in an increase of $44.5 million
in current assets, primarily real estate held for development and sale, a
decrease in investments in affiliates of $7.9 million, an increase of $21.5
million in liabilities, primarily current maturities of long-term debt, and an
increase of $15.1 million in noncontrolling interest at the time of
consolidation.
Substantially all the
assets of these real estate entities in which we are participants
through our GLC subsidiary are classified as real estate held for sale or
use. All outstanding debt of these entities is non-recourse to Granite. However,
there is recourse to our real estate affiliates that incurred the debt. Our real
estate affiliates include a limited partnership or limited liability company of
which we are a limited partner or member.
GLC routinely assists its
real estate entities in securing debt financing from various sources. The
amount of financial support to be provided by GLC to consolidated VIEs was
increased by $9.3 million in 2010 and by $8.8 million in 2009 as
a result of changes in the entities’ business plans. These amounts represent
additional financial support in the form of current or future cash contributions
to the consolidated entities, beyond what GLC had previously committed to
provide. As of March 31, 2010, we had contributed $8.1 million of the
total increased commitment of $18.1 million to the consolidated entities.
The carrying amounts of all real estate
development assets are evaluated for recoverability in accordance with ASC Topic
360. Based on our evaluation, we have determined that no
impairment occurred during the quarters ended March 31, 2010 or
2009.
16
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Consolidated
Real Estate Entities
The
carrying amounts and classification of assets and liabilities of real
estate entities we are required to consolidate are included in our condensed
consolidated financial statements as follows:
| March 31, | December 31, | March 31, | ||||||||
|
(in thousands)
|
2010 | 2009 | 2009 | |||||||
|
Other
current assets
|
$ |
4,565
|
$ | 5,477 | $ | 5,577 | ||||
| Real estate held for development and sale | 137,183 | 139,449 | 79,409 | |||||||
|
Total
current assets
|
141,748 | 144,926 | 84,986 | |||||||
| Property and equipment, net | 15,090 | 14,905 | 19,300 | |||||||
|
Other
noncurrent assets
|
2,822
|
11,989 | 15,090 | |||||||
|
Total
assets
|
$ |
159,660
|
$ | 171,820 | $ | 119,376 | ||||
|
Current
maturities of non-recourse debt
|
$ |
40,565
|
$ | 43,961 | $ | 18,863 | ||||
| Other current liabilities | 5,402 | 5,845 | 6,851 | |||||||
|
Total
current liabilities
|
45,967 | 49,806 | 25,714 | |||||||
| Long-term non-recourse debt | 16,895 | 19,485 | 17,798 | |||||||
|
Other
noncurrent liabilities
|
571
|
553 | 477 | |||||||
|
Total
liabilities
|
$ |
63,433
|
$ | 69,844 | $ | 43,989 | ||||
For our consolidated real estate
entities, substantially all of the real estate held for development and
sale as well as property and equipment are pledged as collateral
for the obligations of the real estate entities. All outstanding debt of the
real estate entities is recourse only to the real estate affiliate that
incurred the debt, the limited partnership or limited liability company, of
which we are a limited partner. Our proportionate share of the results of
these entities varies depending on the ultimate profitability of the
entities.
17
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Included
in current assets on our condensed consolidated balance sheets is real
estate held for development and sale. The breakdown by type and location
of our real estate held for development and sale is summarized
below:
|
March
31,
|
December
31,
|
March
31,
|
|||||||||
|
(in
thousands)
|
2010
|
2009
|
2009
|
||||||||
|
Residential1
|
$
|
123,661 |
$
|
121,101
|
$
|
69,427 | |||||
|
Commercial
|
13,522 |
18,348
|
9,982 | ||||||||
|
Total
|
$
|
137,183 |
$
|
139,449
|
$
|
79,409 | |||||
|
Washington1
|
$
|
82,597 |
$
|
80,703
|
$
|
31,731 | |||||
|
California
|
16,327 |
20,848
|
11,571 | ||||||||
|
Texas
|
8,765 |
8,618
|
8,153 | ||||||||
|
Oregon
|
29,494 |
29,280
|
27,954 | ||||||||
|
Total
|
$
|
137,183 |
$
|
139,449
|
$
|
79,409 | |||||
1The balances at March 31,
2010 and December 31, 2009 include $48.1 million and $46.7 million,
respectively, related to one entity that was consolidated during
the second quarter of 2009.
Investments in
Affiliates
We
account for our share of unconsolidated real estate entities in which we have
determined we are not the primary beneficiary in other income (expense) in the
condensed consolidated statements of income and as a single line item on our
condensed consolidated balance sheets as Investments in Affiliates.
At March 31, 2010, these entities
were engaged in real estate development projects with total assets ranging from
approximately $6.4 million to $48.7 million. Our proportionate share
of the operating results of these entities varies depending on the ultimate
profitability of the entities. At March 31, 2010, we had
approximately $13.5 million recorded on our condensed consolidated
balance sheet related to our investment in these unconsolidated real estate
entities.
Additionally,
we have investments in non-real estate affiliates that are accounted
for using the equity method. The most significant of these investments is a 50%
interest in a limited liability company which owns and operates an asphalt
terminal in Nevada. Our investment accounted for under the cost method is a 3.6%
interest in a corporation that designs and manufactures power
generation and equipment systems.
18
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our
investments in affiliates balance consists of the following:
| March 31, | December 31, | March 31, | ||||||||||
|
(in
thousands)
|
2010
|
2009
|
2009
|
|||||||||
|
Equity
method investments in real estate affiliates
|
$
|
13,479
|
$
|
13,325
|
$ |
18,540
|
||||||
|
Equity
method investments in other affiliates
|
10,944
|
11,319
|
3,228
|
|||||||||
|
Total
equity method investments
|
|
24,423
|
|
24,644
|
|
21,768
|
||||||
| Cost method investments | 6,400 | - | - | |||||||||
|
Total investments
in affiliates
|
$ | 30,823 | $ | 24,644 | $ | 21,768 |
The
breakdown by type and location of our interests in real estate ventures is
summarized below:
|
March
31,
|
December
31,
|
March
31,
|
||||||||||
|
(in
thousands)
|
2010
|
2009
|
2009
|
|||||||||
|
Residential
|
$ | 8,868 | $ | 8,759 | $ | 13,917 | ||||||
|
Commercial
|
4,611 | 4,566 | 4,623 | |||||||||
|
Total
|
$ | 13,479 | $ | 13,325 | $ | 18,540 | ||||||
|
Texas
|
$ | 13,479 | $ | 13,325 | $ | 13,366 | ||||||
|
Washington
|
- | - | 5,174 | |||||||||
|
Total
|
$ | 13,479 | $ | 13,325 | $ | 18,540 | ||||||
The following table
provides summarized balance sheet information for our affiliates on a
combined 100% basis, which primarily relates to our real estate affiliates
accounted for under the equity method:
|
March
31,
|
December
31,
|
March
31,
|
||||||||||
|
(in
thousands)
|
2010
|
2009
|
2009
|
|||||||||
|
Total
assets
|
$
|
160,356
|
$
|
169,325
|
$
|
194,117
|
||||||
|
Net
assets
|
83,310
|
84,939
|
90,439
|
|||||||||
|
Granite’s
share of net assets
|
24,423
|
24,644
|
21,768
|
|||||||||
|
9.
|
Property
and Equipment, net
|
Balances
of major classes of assets and allowances for depreciation
and depletion are included in property and equipment, net on our
condensed consolidated balance sheets as follows:
|
March
31,
|
December
31,
|
March
31,
|
||||||||||
|
(in
thousands)
|
2010
|
2009
|
2009
|
|||||||||
|
Land
and land improvements
|
$ | 134,386 | $ | 126,162 | $ | 121,662 | ||||||
|
Quarry
property
|
161,754 | 160,618 | 142,744 | |||||||||
|
Buildings
and leasehold improvements
|
97,155 | 96,725 | 97,507 | |||||||||
|
Equipment
and vehicles
|
816,322 | 829,195 | 856,041 | |||||||||
|
Office
furniture and equipment
|
41,574 | 38,096 | 35,662 | |||||||||
|
Property
and equipment
|
1,251,191 | 1,250,796 | 1,253,616 | |||||||||
|
Less:
accumulated depreciation and depletion
|
731,282 | 730,018 | 726,882 | |||||||||
|
Property
and equipment, net
|
$ | 519,909 | $ | 520,778 | $ | 526,734 | ||||||
19
GRANITE
CONSTRUCTION INCORPORATED
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
10.
|
Intangible
Assets
|
The
balances of the following intangible assets are included in other noncurrent
assets on our condensed consolidated balance sheets at carrying
value:
Indefinite-lived
Intangible Assets:
|
March
31,
|
December
31,
|
March
31,
|
||||||||||
|
(in
thousands)
|
2010
|
2009
|
2009
|
|||||||||
|
Goodwill1
|
$ | 9,900 | $ | 9,900 | $ | 9,900 | ||||||
|
Use
rights and other
|
1,319 | 1,319 | 2,954 | |||||||||
|
Total
unamortized intangible assets
|
$ | 11,219 | $ | 11,219 | $ | 12,854 | ||||||
1Goodwill for all
periods presented primarily relates to our Construction segment.
Amortized Intangible
Assets:
| March 31, 2010 |
Accumulated
|
|||||||||||
|
(in
thousands)
|
Gross
Value
|
Amortization
|
Net
Value
|
|||||||||
|
Permits
|
$ | 33,582 | $ | (5,568 | ) | $ | 28,014 | |||||