Granite Reports First Quarter 2019 Results

  • Revenue increased to $619.8 million, up 10.0 percent year-over-year
  • Gross profit totaled $40.5 million, with gross profit margin of 6.5 percent
  • Committed and Awarded Projects1 increased to $4.5 billion
  • Severe winter and spring weather negatively impacted operations
  • Strong overall market conditions; reaffirm 2019 guidance

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE: GVA) today reported a net loss of $34.6 million for the quarter ended March 31, 2019, compared to a net loss of $11.4 million in the first quarter of 2018. Loss per diluted share in the quarter was $(0.74), compared to $(0.29) in the prior-year period. First quarter 2019 and 2018 results include after-tax, acquisition-related expenses of $8.1 million and $6.4 million, respectively2. Excluding the impact of these expenses, first quarter 2019 and 2018 adjusted net loss was $(26.4) million3 and $(5.0) million3, respectively, with adjusted loss per diluted share of $(0.57)3 and $(0.13)3, respectively.

“Unusually cold and wet weather across the U.S. in 2019 negatively impacted Granite’s first quarter operations, but it has not dampened demand,” said James H. Roberts, President and Chief Executive Officer of Granite Construction Incorporated. “Public- and private-market demand remains strong across Granite’s end markets. The Company’s continued focus on bidding discipline and end-market diversification resulted in improved positioning for 2019. Committed and Awarded Projects (‘CAP’), which includes backlog1 and Construction Manager/General Contractor (‘CMGC’) and alternative procurement projects, now totals $4.5 billion.”

“These projects comprise an increasingly strategic portfolio of ‘stored energy’ for the Company,” Roberts continued. “Across the enterprise, project demand points to significant opportunities for both near- and mid-term growth opportunities for all segments of our business. We continue our focus on bidding strategies, balancing pricing and project win rates, and positioning our teams to expand Granite’s platforms for growth in the Transportation, Water, Specialty, and Materials segments.”

First Quarter 2019 Consolidated Results

  • Revenue increased to $619.8 million, compared with $563.4 million last year.
  • Gross profit decreased to $40.5 million, compared with $56.3 million last year.
  • Selling, general & administrative (“SG&A”) expenses were $81.2 million, compared to $61.3 million last year. The increase is attributable primarily to businesses acquired by Granite in 2018, coupled with increases attributable to weather delays that moved operations employees from projects to office assignments.
  • Company effective tax rate in the first quarter was 22.8 percent.
  • Net loss was $(34.6) million, compared to net loss of $(11.4) million last year.
  • Adjusted net loss3 was $(26.4) million, compared to adjusted net loss of $(5.0) million last year.
  • Adjusted EBITDA3 totaled $(9.4) million in 2019, compared to $9.3 million last year.
  • CAP, which is comprised of unearned revenue, other awards, as well as an estimated $884.0 million of CMGC and alternative procurement projects in the Transportation segment, totaled $4.5 billion.
  • Our balance sheet remains strong with cash and marketable securities of $266.3 million as of March 31, 2019. Our capital structure is well positioned to support the execution of our strategic plan for growth both organically and through future acquisitions.

First Quarter 2019 Segment Results

Transportation

  • Revenue decreased to $338.2 million, compared to $359.1 million last year.
  • Quarterly gross profit decreased to $21.3 million from $31.5 million last year, with gross profit margin of 6.3 percent compared to 8.8 percent last year. Unusually cold and wet weather in California accounted for the year-over-year revenue and gross profit decline.
  • Segment CAP totaled nearly $3.7 billion.

Water

  • Revenue increased to $99.3 million compared to $40.0 million last year.
  • Quarterly gross profit decreased to $8.1 million from $11.6 million last year, with gross profit margin of 8.2 percent, down from 28.9 percent last year. The year-over-year gross profit decline is attributable to emergency work performed in 2018 that was not repeated in 2019.
  • Segment CAP totaled $317.8 million.

Specialty

  • Revenue increased to $140.7 million, compared to $118.5 million last year.
  • Gross profit decreased to $14.9 million from $15.7 million last year, with gross profit margin of 10.6 percent down from 13.3 percent last year.
  • Segment CAP totaled $490.2 million.

Materials

  • Revenue was $41.6 million, compared with $45.7 million last year.
  • Gross loss increased to $(3.8) million, compared to $(2.5) million last year, due to inclement weather that kept most plants idle during the quarter.

Outlook and Guidance

“2019 will be a strong year of growth and strategic execution for Granite, despite the extreme winter and spring weather that impacted our results in the first quarter,” Roberts said. “Historically strong Committed and Awarded Projects and booking trends, along with healthy funding and demand, continue to fuel our confidence that we will deliver on our previously stated 2019 growth and earnings expectations.”

The Company’s expectations for 2019 (including 2018 acquisitions) remain at:

  • Low-teens consolidated revenue growth, which is subject to late-year seasonality.
  • Adjusted EBITDA margin of 8.5 percent to 9.5 percent.

Endnotes

  1. Committed and Awarded Projects (“CAP”) is comprised of unearned revenue and other awards (previously “backlog”), as well as Construction Manager/General Contractor (“CMGC”) and alternative procurement projects.
  2. Acquisition-related expenses include acquisition, integration, acquired intangible amortization expenses, acquisition-related depreciation and synergy costs.
  3. Adjusted net income, adjusted diluted loss per share, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA, and adjusted EBITDA margin are non-GAAP measures. Please refer to the description and reconciliation of non-GAAP measures in the attached tables.

Conference Call

Granite will conduct a conference call today, April 26, 2019, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended March 31, 2019. The Company invites investors to listen to a live audio webcast with slides on its Investor Relations website, http://investor.graniteconstruction.com. The live call is available by calling 1-800-458-4148; international callers may dial 1-786-789-4772. An archive of the webcast will be available on the website approximately one hour after the call. A replay will be available after the live call through May 3, 2019, by calling 1-888-203-1112, replay access code 6383916; international callers may dial 1-719-457-0820.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE: GVA) is a full-suite provider in the transportation, water infrastructure and mineral exploration markets. Granite, America’s Infrastructure Company, is an award-winning firm in safety, quality and environmental stewardship, and has been honored as one of the World’s Most Ethical Companies by Ethisphere Institute for nine consecutive years. Granite is listed on the New York Stock Exchange and is part of the S&P MidCap 400 Index, the MSCI KLD 400 Social Index and the Russell 2000 Index. For more information, visit www.graniteconstruction.com.

Forward-looking Statements

Any statements contained in this news release that are not based on historical facts, including statements regarding future events, occurrences, circumstances, activities, performance, growth, demand, strategic plans, outcomes, guidance, backlog, Committed and Awarded Projects (CAP), and results, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,” “outlook,” “assumes,” “believes,” “expects,” “estimates,” “anticipates,” “intends,” “plans,” “appears,” “may,” “will,” “should,” “could,” “would,” “continue,” and the negatives thereof or other comparable terminology or by the context in which they are made. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, activities, performance, growth, demand, strategic plans, outcomes, guidance, backlog, CAP, and results. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those described in greater detail in our filings with the Securities and Exchange Commission, particularly those specifically described in our Annual Report on Form 10-K and quarterly reports on Form 10-Q.

Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this news release and, except as required by law; we undertake no obligation to revise or update any forward-looking statements for any reason.

                   

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - in thousands, except share and per share data)
                   
     

March 31,
2019

    

December 31,
2018

    

March 31,
2018
ASSETS                        
Current assets                        
Cash and cash equivalents     $ 200,263     $ 272,804     $ 193,581
Short-term marketable securities       36,049       30,002       39,961
Receivables, net       368,215       473,246       330,192
Contract assets       260,250       219,754       178,663
Inventories       96,862       88,623       71,295
Equity in construction joint ventures       300,489       282,229       254,816
Other current assets       54,590       48,731       43,125
Total current assets       1,316,718       1,415,389       1,111,633
Property and equipment, net       552,504       549,688       409,708
Long-term marketable securities       30,000       36,098       67,305
Investments in affiliates       81,034       84,354       38,682
Goodwill       259,695       259,471       53,799
Right of use assets       71,480       —       —
Other noncurrent assets       128,349       131,601       78,100
Total assets       2,439,780       2,476,601       1,759,227
                         
LIABILITIES AND EQUITY                        
Current liabilities                        
Current maturities of long-term debt     $ 47,281     $ 47,286     $ 47,298
Accounts payable       216,966       251,481       226,253
Contract liabilities       90,752       105,449       71,030
Accrued expenses and other current liabilities       265,102       273,626       233,637
Total current liabilities       620,101       677,842       578,218
Long-term debt       333,290       335,119       176,011
Lease liabilities       60,237       —       —
Other long-term liabilities       64,219       66,006       40,104
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: 46,812,366 shares as of March 31, 2019, 46,665,889 shares as of December 31, 2018 and 40,047,187 shares as of March 31, 2018       468       467       400
Additional paid-in capital       566,497       564,559       162,038
Accumulated other comprehensive (loss) income       (626

)

     (749 )     1,197
Retained earnings       746,100       787,356       751,801
Total Granite Construction Incorporated shareholders’ equity       1,312,439       1,351,633       915,436
Non-controlling interests       49,494       46,001       49,458
Total equity       1,361,933       1,397,634       964,894
Total liabilities and equity     $ 2,439,780     $ 2,476,601     $ 1,759,227
                         
             

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share data)
             
Three Months Ended March 31,   2019     2018  
Revenue                
Transportation   $ 338,210     $ 359,145  
Water     99,255       40,041  
Specialty     140,693       118,471  
Materials     41,643       45,722  
Total revenue     619,801       563,379  
Cost of revenue                
Transportation     316,960       327,683  
Water     91,136       28,477  
Specialty     125,826       102,735  
Materials     45,401       48,201  
Total cost of revenue     579,323       507,096  
Gross profit     40,478       56,283  
Selling, general and administrative expenses     81,155       61,252  
Acquisition and integration expenses     3,323       8,409  
Gain on sales of property and equipment     (1,900 )     (543 )
Operating loss     (42,100 )     (12,835 )
Other (income) expense                
Interest income     (2,816 )     (1,521 )
Interest expense     4,014       2,435  
Equity in income of affiliates     (1,290 )     (224 )
Other (income) expense, net     (1,762 )     268  
Total other (income) expense     (1,854 )     958  
Loss before benefit from income taxes     (40,246 )     (13,793 )
Benefit from income taxes     (9,165 )     (4,131 )
Net loss     (31,081 )     (9,662 )
Amount attributable to non-controlling interests     (3,493 )     (1,761 )
Net loss attributable to Granite Construction Incorporated   $ (34,574 )   $ (11,423 )
                 
Net loss per share attributable to common

Shareholders

                
Basic   $ (0.74 )   $ (0.29 )
Diluted   $ (0.74 )   $ (0.29 )
Weighted average shares of common stock                
Basic     46,699       39,908  
Diluted     46,699       39,908  
Dividends per common share   $ 0.13     $ 0.13  
                 
             

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)
             
Three Months Ended March 31,   2019     2018  
Operating activities                
Net loss   $ (31,081 )   $ (9,662 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation, depletion and amortization     28,846       15,511  
Gain on sales of property and equipment, net     (1,900 )     (543 )
Stock-based compensation     5,748       7,772  
Equity in net income from unconsolidated joint ventures     (455 )     (2,637 )
Changes in assets and liabilities     (37,522 )     (48,061 )
Net cash used in operating activities     (36,364 )     (37,620 )
Investing activities                
Purchases of marketable securities     —       (9,952 )
Maturities of marketable securities     —       35,000  
Purchases of property and equipment     (28,744 )     (15,967 )
Proceeds from sales of property and equipment     4,687       675  
Other investing activities, net     (286 )     345  
Net cash (used in) provided by investing activities     (24,343 )     10,101  
Financing activities                
Proceeds from debt     20,000       —  
Debt principal repayments     (21,902 )     (1,250 )
Cash dividends paid     (6,067 )     (5,183 )
Repurchases of common stock     (3,867 )     (6,119 )
Other financing activities, net     2       (59 )
Net cash used in financing activities     (11,834 )     (12,611 )
Net decrease in cash, cash equivalents and restricted cash     (72,541 )     (40,130 )
Cash and cash equivalents and restricted cash of $5,825 and $0 at beginning of each period     278,629       233,711  
Cash, cash equivalents and restricted cash of $5,825 and $0 at end of period   $ 206,088     $ 193,581  
                 
   
GRANITE CONSTRUCTION INCORPORATED  
Business Segment Information  
(Unaudited - dollars in thousands)  
                 
Three Months Ended March 31,   2019     2018  
Revenue                
Transportation   $ 338,210     $ 359,145  
Water     99,255       40,041  
Specialty     140,693       118,471  
Materials     41,643       45,722  
Total revenue   $ 619,801     $ 563,379  
Gross profit (loss)                
Transportation   $ 21,250     $ 31,462  
Water     8,119       11,564  
Specialty     14,867       15,736  
Materials     (3,758 )     (2,479 )
Total gross profit   $ 40,478     $ 56,283  
Gross profit (loss) as a percent of revenue                
Transportation     6.3 %     8.8 %
Water     8.2       28.9  
Specialty     10.6       13.3  
Materials     (9.0 )     (5.4 )
Total gross profit as a percent of total revenue     6.5 %     10.0 %
                 
     
GRANITE CONSTRUCTION INCORPORATED    
Committed and Awarded Projects    
(Unaudited - dollars in thousands)    
                                                 
Unearned Revenue   March 31, 2019       December 31, 2018       March 31, 2018    
Transportation   $ 2,187,300     76.4  

%

  

$

 2,185,309     75.9   %   $ 2,773,521     80.4   %
Water     220,303     7.7         218,708     7.6         84,680     2.5    
Specialty     456,008     15.9         474,016     16.5         590,380     17.1    
Total   $ 2,863,611     100.0   %   $ 2,878,033     100.0   %   $ 3,448,581     100.0   %
                                                 
Other(1)   March 31, 2019       December 31, 2018       March 31, 2018    
Transportation   $ 595,952     81.9   %   $ 629,815     77.6   %   $ 30,463     22.2   %
Water     97,479     13.4         110,175     13.6         56,037     40.9    
Specialty     34,223     4.7         71,598     8.8         50,586     36.9    
Total   $ 727,654     100.0   %   $ 811,588     100.0   %   $ 137,086     100.0   %
                                                 
Contract Backlog(2)   March 31, 2019       December 31, 2018       March 31, 2018    
Transportation   $ 2,783,252     77.5   %   $ 2,815,124     76.3   %   $ 2,803,984     78.2   %
Water     317,782     8.8         328,883     8.9         140,717     3.9    
Specialty     490,231     13.7         545,614     14.8         640,966     17.9    
Total   $ 3,591,265     100.0   %   $ 3,689,621     100.0   %   $ 3,585,667     100.0   %
                                                 
Alternative Procurement Work(3)   March 31, 2019       December 31, 2018       March 31, 2018    
Transportation   $ 884,000     100.0   %   $ 700,000     100.0   %   $ —     —   %
Water     —     —         —     —         —     —    
Specialty     —     —         —     —         —     —    
Total   $ 884,000     100.0   %   $ 700,000     100.0   %   $ —     —   %
                                                 
Committed and Awarded Projects   March 31, 2019       December 31, 2018       March 31, 2018    
Transportation   $ 3,667,252     81.9   %   $ 3,515,124     80.1   %   $ 2,803,984     78.2   %
Water     317,782     7.1         328,883     7.5         140,717     3.9    
Specialty     490,231     11.0         545,614     12.4         640,966     17.9    
Total   $ 4,475,265     100.0   %   $ 4,389,621     100.0   %   $ 3,585,667     100.0   %
                                                 

(1)Contract Backlog is calculated by adding Unearned Revenue and Other Awards.

(2)Other awards include unissued task orders and unexercised contract options to the extent their issuance or exercise is probable as well as contract awards to the extent we believe contract execution and funding is probable.

(3)Alternative Procurement Work represents Construction Manager/General Contractor projects that will enter backlog as task orders are issued in 2019 and over the next few years.
                                                 

Non-GAAP Financial Information

The tables below contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Specifically, management believes that non-GAAP financial measures such as EBITDA and EBITDA margin are useful in evaluating operating performance and are regularly used by securities analysts, institutional investors and other interested parties, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. We are also providing additional non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net loss attributable to Granite Construction Incorporated and adjusted diluted loss per share to indicate the impact of non-recurring acquisition, integration, acquired intangible amortization expenses, acquisition related depreciation and synergy costs (collectively referred to as “transaction costs”) related to the acquisition of Layne Christensen Company and LiquiForce. Acquisition and integration costs include external transaction costs, professional fees and internal travel. Synergy costs include expenses incurred which will be eliminated as the integration of Layne and LiquiForce is completed.

Management believes that these additional non-GAAP financial measures facilitate comparisons between securities analysts, institutional investors and other interested parties. However, the reader is cautioned that any non-GAAP financial measures provided by the Company are provided in addition to, and not as alternatives for, the Company's reported results prepared in accordance with GAAP. Items that may have a significant impact on the Company's financial position, results of operations and cash flows must be considered when assessing the Company's actual financial condition and performance regardless of whether these items are included in non-GAAP financial measures. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures provided by the Company may not be comparable to similar measures provided by other companies.

   
GRANITE CONSTRUCTION INCORPORATED  
EBITDA(1)  
(Unaudited - dollars in thousands)  
                 
Three Months Ended March 31,   2019     2018  
Net loss attributable to Granite Construction Incorporated   $ (34,574 )   $ (11,423 )
Depreciation, depletion and amortization expense(2)     28,846       15,511  
Benefit from income taxes     (9,165 )     (4,131 )
Interest expense, net of interest income     1,198       914  
EBITDA   $ (13,695 )   $ 871  
EBITDA margin(3)     (2.2

%)

     0.2 %
                 
Transaction costs   $ 4,324     $ 8,409  
Adjusted EBITDA(1)   $ (9,371 )   $ 9,280  
Adjusted EBITDA margin(1)     (1.5 %)     1.6 %
                 

(1)We define EBITDA as GAAP net loss attributable to Granite Construction Incorporated, adjusted for net interest expense, taxes, depreciation, depletion and amortization. Adjusted EBITDA and adjusted EBITDA margin exclude the impact of acquisition and integration expenses and synergies.

(2)Amount includes the sum of depreciation, depletion and amortization which are classified as cost of revenue and selling, general and administrative expenses in the condensed consolidated statements of operations of Granite Construction Incorporated.

(3)Represents EBITDA divided by consolidated revenue of $619.8 million and $563.4 million for the three months ended March 31, 2019 and 2018, respectively.
                 
             

GRANITE CONSTRUCTION INCORPORATED

Adjusted Net Income Reconciliation

(Unaudited - in thousands, except per share data)
             
Three Months Ended March 31,   2019     2018  
Loss before benefit from income taxes   $ (40,246 )   $ (13,793 )
Transaction costs     11,002       8,409  

Adjusted loss before benefit from income taxes

   $ (29,244 )   $ (5,384 )
                 
Benefit from income taxes   $ (9,165 )   $ (4,131 )
Tax effect of the transaction costs(1)     2,861       1,997  

Adjusted benefit from income taxes

   $ (6,304 )   $ (2,134 )
                 

Net loss attributable to Granite Construction Incorporated

   $ (34,574 )   $ (11,423 )
After-tax transaction costs     8,141       6,412  

Adjusted net loss attributable to Granite Construction Incorporated

   $ (26,433 )   $ (5,011 )
                 

Diluted net loss per share attributable to common shareholders

   $ (0.74 )   $ (0.29 )
After-tax transaction costs     0.17       0.16  

Adjusted diluted net loss per share attributable to common shareholders

   $ (0.57 )   $ (0.13 )
                 

(1)The tax effect of transaction costs was calculated using the Company’s estimated 2019 annual statutory tax rate.

 

Investors
Ron Botoff, 831-728-7532
or
Media
Jacque Fourchy, 831-761-4741

 

Source: Granite Construction Incorporated