Granite Reports Second Quarter 2014 Results

Aug 1, 2014

Second quarter 2014 revenues increase to $585.9 million, up 6.5 percent year-over-year
Margin improvement across all segments drives second quarter 2014 gross profit increase to $82.4 million, up from $49.6 million in 2013
Second quarter 2014 gross profit margin of 14.1 percent – up more than 500 basis points year-over-year
Total contract backlog $2.6 billion

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income of $13.6 million for the quarter ended June 30, 2014, compared to revised¹ net income of $1.4 million in the second quarter of 2013. Diluted earnings per share in the quarter were $0.34 compared to $0.04 in the prior-year period.

“We are encouraged by the steady growth we have experienced thus far in 2014 as our teams are successfully leveraging opportunities and recent positive trends in all parts of our business,” said James H. Roberts, President and CEO of Granite Construction Incorporated. “Our opportunities to win new business and improve execution on our current work remain a top priority and focus going forward.”

Second Quarter 2014 Results

Total Company

Revenue for the second quarter of 2014 increased 6.5 percent to $585.9 million compared with $550.3 million last year.
Gross profit margin in the second quarter was 14.1 percent compared with 9.0 percent in 2013, driven primarily by improved performance in the Large Project Construction and Construction Materials segments.
Profit performance was driven by projects reaching profit recognition, dispute resolution, and overall improved project execution in both the Construction and Large Project Construction segments, combined with improved volumes and efficiency gains in the Construction Materials segment.
Second quarter 2014 profit performance continued to be offset by the ramp of projects which have not reached profit recognition.
Selling, general and administrative expenses for the second quarter of 2014 increased $4.3 million, to $51.1 million, related primarily to the timing of pre-bid costs, coupled with increased Continuous Improvement investment.
Net income attributable to non-controlling interests was $8.6 million for the second quarter of 2014, compared with $0.4 million in 2013.
Total company backlog was $2.6 billion at the end of the second quarter of 2014, down from $2.8 billion last year. This total does not include Granite’s nearly $700-million portion of the successful bid on the I-4 Ultimate project in Florida, which is expected to be added to backlog in the third quarter.
Balance sheet remains strong with $258.6 million in cash and marketable securities.

Construction

Though Construction backlog increased more than 20 percent to $975.0 million year-over-year, revenue decreased 12.8 percent to $269.2 million, compared with $308.6 million last year. The decrease is attributable to project timing, a change in the mix of power projects from 2013, and weaker-than-anticipated public market activity in the Northwest.
Gross profit margin for the quarter was 9.2 percent, compared with 7.8 percent in 2013, driven by improved performance across certain markets in the West.

Large Project Construction

Large Project Construction revenue increased 34.6 percent to $244.3 million, compared with $181.6 million last year. The increase was a result of job progression in the quarter.
Gross profit margin for the quarter was 20.8 percent, compared with 11.9 percent in 2013. The improvement was driven by project profit recognition, dispute resolution, and improved project execution.

Construction Materials

Construction Materials revenue increased 20.2 percent to $72.3 million, compared with $60.2 million last year. The revenue increase was attributable to improved volumes related to private sector activity and mixed trends in public markets.
Gross profit margin for the quarter was 9.4 percent, compared with 6.6 percent in 2013. Gross profit performance was driven by improved volumes and operational efficiencies.

Outlook and Guidance

“With a strong backlog of work and robust bidding activity, the outlook for continued growth remains positive,” Roberts continued. “We look to execute on the momentum we built in the first half of the year.”

“As expected, Construction Materials segment results are improving, and Large Project segment performance is on track to drive strong results in the second half of 2014,” Roberts said.

The Company’s current expectations for 2014 remain:

Consolidated revenues from $2.4 to $2.8 billion

Gross Profit significantly improved from 2013

Consolidated EBITDA² margin of 5 percent to 7 percent

			(1)			Please refer to the description of fiscal year 2013 revisions in the Granite Construction Incorporated Quarterly Report on Form 10-Q.
			(2)			Please refer to the description and non-GAAP reconciliation in the attached tables.

Conference Call

Granite will conduct a conference call today, Friday, August 1, 2014, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended June 30, 2014. Access to a live audio webcast is available at http://investor.graniteconstruction.com/index.cfm. The live conference call may be accessed by calling (877) 643-7158; international callers may dial (914) 495-8565. The conference ID for the live call is 77717739. The call will be recorded and available for replay approximately two hours after the live audio webcast through August 9, 2014 by calling (855) 859-2056. The conference ID for the replay is also 77717739; international callers may dial (404) 537-3406.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE:GVA) is one of the nation’s leading infrastructure contractors and construction materials producers. Recognized as one of the top 25 largest construction companies in the U.S., Granite specializes in complex infrastructure projects, including transportation, industrial and federal contracting, and is a proven leader in alternative procurement project delivery. Granite 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 five years in a row. For more information, visit www.graniteconstruction.com. 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, please visit our investor relations website at investor.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, outcomes 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, outcomes 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)

	June 30,		December 31,		June 30,
	2014		2013		2013
					As Revised
ASSETS
Current assets
Cash and cash equivalents	$	146,458	$	229,121	$	247,833
Short-term marketable securities		27,898		49,968		21,271
Receivables, net		363,614		313,598		336,418
Costs and estimated earnings in excess of billings		76,228		33,306		62,426
Inventories		79,501		62,474		68,905
Real estate held for development and sale		11,761		12,478		50,696
Deferred income taxes		55,874		55,874		36,687
Equity in construction joint ventures		185,859		162,673		148,727
Other current assets		30,727		30,711		36,203
Total current assets		977,920		950,203		1,009,166
Property and equipment, net		426,700		436,859		470,893
Long-term marketable securities		84,234		67,234		55,225
Investments in affiliates		33,936		32,480		31,421
Goodwill		53,799		53,799		53,598
Other noncurrent assets		76,797		76,580		80,365
Total assets	$	1,653,386	$	1,617,155	$	1,700,668
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	21	$	21	$	20
Current maturities of non-recourse debt		1,226		1,226		2,147
Accounts payable		210,777		160,706		188,124
Billings in excess of costs and estimated earnings		125,957		138,375		144,462
Accrued expenses and other current liabilities		187,348		197,242		200,758
Total current liabilities		525,329		497,570		535,511
Long-term debt		270,127		270,127		270,148
Long-term non-recourse debt		6,129		6,741		7,354
Other long-term liabilities		48,455		48,580		46,817
Deferred income taxes		9,803		7,793		8,055
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 39,131,647 shares as of June 30, 2014, 38,917,728 shares as of December 31, 2013 and 38,852,463 shares as of June 30, 2013		391		389		389
Additional paid-in capital		130,181		126,449		121,368
Retained earnings		637,905		655,102		681,311
Total Granite Construction Incorporated shareholders’ equity		768,477		781,940		803,068
Non-controlling interests		25,066		4,404		29,715
Total equity		793,543		786,344		832,783
Total liabilities and equity	$	1,653,386	$	1,617,155	$	1,700,668

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
				2013						2013
	2014			As Revised			2014			As Revised
Revenue
Construction	$	269,220		$	308,602		$	426,261		$	485,720
Large Project Construction		244,328			181,557			431,663			353,271
Construction Materials		72,322			60,185			107,771			89,936
Real Estate		—			4			22			125
Total revenue		585,870			550,348			965,717			929,052
Cost of revenue
Construction		244,393			284,532			392,289			448,451
Large Project Construction		193,536			159,986			365,080			308,979
Construction Materials		65,524			56,231			104,526			91,957
Real Estate		2			3			—			13
Total cost of revenue		503,455			500,752			861,895			849,400
Gross profit		82,415			49,596			103,822			79,652
Selling, general and administrative expenses		51,098			46,789			100,346			103,950
Gain on sales of property and equipment		2,993			3,306			3,886			4,394
Operating income (loss)		34,310			6,113			7,362			(19,904	)
Other income (expense)
Interest income		413			380			893			508
Interest expense		(4,339	)		(3,700	)		(7,937	)		(7,345	)
Equity in income of affiliates		410			698			1,202			275
Other income (expense), net		1,697			(495	)		1,645			608
Total other expense		(1,819	)		(3,117	)		(4,197	)		(5,954	)
Income (loss) before provision for (benefit from) income taxes		32,491			2,996			3,165			(25,858	)
Provision for (benefit from) income taxes		10,284			1,214			2,220			(7,813	)
Net income (loss)		22,207			1,782			945			(18,045	)
Amount attributable to non-controlling interests		(8,566	)		(363	)		(7,858	)		(2,518	)
Net income (loss) attributable to Granite Construction Incorporated	$	13,641		$	1,419		$	(6,913	)	$	(20,563	)

Net income (loss) per share attributable to common shareholders:
Basic	$	0.35		$	0.04		$	(0.18	)	$	(0.53	)
Diluted	$	0.34		$	0.04		$	(0.18	)	$	(0.53	)
Weighted average shares of common stock:
Basic		39,115			38,829			39,033			38,720
Diluted		39,807			39,769			39,033			38,720

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)

				2013
Six Months Ended June 30,	2014			As Revised
Operating activities
Net income (loss)	$	945		$	(18,045	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on restructuring, net		-			(497	)
Depreciation, depletion and amortization		31,878			34,362
Gain on sales of property and equipment		(3,886	)		(4,394	)
Change in deferred income taxes		1,613			-
Stock-based compensation		6,585			8,101
Equity in net income from unconsolidated joint ventures		(25,724	)		(31,201	)
Contributions to unconsolidated construction joint ventures		(13,797	)		(16,209	)
Distributions from unconsolidated construction joint ventures		16,528			42,486
Changes in assets and liabilities		(86,530	)		(66,251	)
Net cash used in operating activities		(72,388	)		(51,648	)
Investing activities
Purchases of marketable securities		(34,991	)		(14,975	)
Maturities of marketable securities		25,000			43,000
Proceeds from sale of marketable securities		15,000			5,000
Purchases of property and equipment		(20,091	)		(19,422	)
Proceeds from sales of property and equipment		5,838			8,481
Other investing activities, net		-			(4,621	)
Other investing activities, net		47			163
Net cash (used in) provided by investing activities		(9,197	)		17,626
Financing activities
Long-term debt principal payments		(613	)		(10,594	)
Cash dividends paid		(10,142	)		(10,078	)
Purchase of common stock		(4,369	)		(5,022	)
Contributions from non-controlling partners		13,442			6,001
Distributions to noncontrolling partners		(686	)		(21,142	)
Other financing activities, net		1,290			700
Net cash used in financing activities		(1,078	)		(40,135	)
Decrease in cash and cash equivalents		(82,663	)		(74,157	)
Cash and cash equivalents at beginning of period		229,121			321,990
Cash and cash equivalents at end of period	$	146,458		$	247,833

GRANITE CONSTRUCTION INCORPORATED
BUSINESS SEGMENT INFORMATION
(Unaudited - dollars in thousands)

	Three Months Ended June 30,												Six Months Ended June 30,
				Large Project			Construction									Large Project			Construction
	Construction			Construction			Materials			Real Estate			Construction			Construction			Materials			Real Estate

2014
Revenue	$	269,220		$	244,328		$	72,322		$	-		$	426,261		$	431,663		$	107,771		$	22
Gross profit (loss)		24,827			50,792			6,798			(2	)		33,972			66,583			3,245			22
Gross profit (loss) as a percent of revenue		9.2	%		20.8	%		9.4	%		n/a			8.0	%		15.4	%		3.0	%		100.0	%

2013 As Revised
Revenue	$	308,602		$	181,557		$	60,185		$	4		$	485,720		$	353,271		$	89,936		$	125
Gross profit (loss)		24,070			21,571			3,954			1			37,269			44,292			(2,021	)		112
Gross profit (loss) as a percent of revenue		7.8	%		11.9	%		6.6	%		25.0	%		7.7	%		12.5	%		(2.2	)%		89.6	%

GRANITE CONSTRUCTION INCORPORATED
CONTRACT BACKLOG BY SEGMENT
(Unaudited - dollars in thousands)

Contract Backlog by Segment	June 30, 2014				March 31, 2014				June 30, 2013

Construction	$	974,986	38.1	%	$	786,458	30.6	%	$	807,686	28.9	%
Large Project Construction		1,586,879	61.9	%		1,783,254	69.4	%		1,990,201	71.1	%

Total	$	2,561,865	100.0	%	$	2,569,712	100.0	%	$	2,797,887	100.0	%

GRANITE CONSTRUCTION INCORPORATED
EBITDA⁽¹⁾
(Unaudited - dollars in thousands)

	Three Months			Six Months
	Ended June 30,			Ended June 30,
	2014
Net income (loss) attributable to Granite Construction Incorporated	$	13,641		$	(6,913	)
Depreciation, depletion and amortization expense⁽²⁾		16,046			31,878
Provision for income taxes		10,284			2,220
Interest expense, net of interest income		3,926			7,044
EBITDA⁽¹⁾	$	43,897		$	34,229
Consolidated EBITDA Margin		7.5	%		3.5	%

Note:
⁽¹⁾We define EBITDA as GAAP net income (loss) attributable to Granite Construction Incorporated, adjusted for interest, taxes, depreciation, depletion and amortization. We believe this non-GAAP financial measure and the associated margin are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. 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. 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.

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

Granite Construction Incorporated
Ron Botoff, 831-728-7532

Source: Granite Construction Incorporated

Goodbye For Now