Granite Reports Second Quarter 2017 Results

  • Revenue increased to $762.9 million, up 26.2 percent year-over-year
  • Record Company backlog of $4.1 billion, up 8.4 percent year-over-year
  • Construction segment and Construction Materials segment gross profit margins at 14.6 percent
  • Large Project Construction segment gross profit at breakeven
  • Net income of $14.1 million flat to 2016

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income of $14.1 million for the quarter ended June 30, 2017, compared to net income of $14.2 million in the second quarter of 2016. Earnings per diluted share in the quarter was $0.35, flat compared to the prior-year period.

"This is a very exciting time for our business. Our growth expectations for 2017 and 2018 have increased, and our outlook continues to improve across our business," said James H. Roberts, President and Chief Executive Officer of Granite Construction Incorporated.

"Our businesses continue to win new work across the portfolio, with broad project wins driving Company backlog above $4 billion for the first time in our Company's 95-year history. For the fifth consecutive quarter, Construction segment backlog finished above the $1-billion mark," Roberts continued.

"We are particularly pleased with consistently strong margin performance in the Construction segment and improving margins in the Construction Materials segment. We expect strong growth in both segments in the second half of 2017 and through 2018.

"Granite teams recovered well from challenging winter and spring weather, with solid safety performance across the business in alignment with operations that accelerated through the end of the second quarter. We also continued acceleration to completion on a number of under-performing, mature projects in our Large Project Construction segment portfolio. This will allow our teams to complete these projects in 2017 and 2018, but, as we saw in the first quarter, it created an increased near-term drag on our results," Roberts said.

Second Quarter 2017 Results

Total Company

  • Second quarter consolidated revenue increased 26.2 percent to $762.9 million compared with $604.6 million in the second quarter of 2016. On a year-to-date basis, consolidated revenue increased 17.9 percent to $1.23 billion in the first half of 2017.
  • Gross profit increased 1.9 percent to $74.6 million compared with $73.2 million last year. On a year-to-date basis, gross profit decreased 11.3 percent to $99.7 million in the first half of 2017.
  • Gross profit margin was 9.8 percent compared with 12.1 percent in 2016. For the first half of 2017, gross profit margin was 8.1 percent compared with 10.8 percent last year.
  • Total Company backlog was $4.06 billion, up 8.4 percent year-over-year. Construction segment backlog increased 10.6 percent year-over-year to $1.27 billion. Large Project Construction segment backlog increased 7.4 percent from last year to $2.80 billion.
  • Second quarter selling, general and administrative (SG&A) expenses increased to $51.4 million, compared to $48.7 million last year. For the first half of 2017, SG&A expenses were $113.2 million, compared to $104.8 million last year.
  • Our balance sheet remains strong with cash and marketable securities of $285.9 million, as of June 30, 2017, an increase of $47.0 million from June 30, 2016.

Second Quarter Segment Results

Construction

  • Construction revenue increased 29.6 percent to $429.3 million, compared with $331.3 million last year.
  • Gross profit increased 27.4 percent to $62.5 million compared to $49.1 million last year.
  • Gross profit margin of 14.6 percent was down slightly from 14.8 percent a year ago.
  • Despite continued wet weather through early-April, operations recovered and accelerated through the second quarter.

Large Project Construction

  • Large Project Construction revenue increased 29.0 percent to $254.5 million, compared with $197.3 million last year.
  • Gross profit decreased to $0.5 million compared to $13.7 million last year, as project write-downs totaled $23.8 million compared to $14.6 million in the second quarter of 2016. In addition, there were no project write-ups in this year’s quarter compared to $9.8 million in the second quarter of 2016.
  • Gross profit margin was 0.2 percent compared with 6.9 percent in 2016.
  • In the second quarter, accelerated activity on certain mature projects represented a significant amount of segment revenue as it did in the first quarter. We continue to negotiate resolutions for design, weather, project execution, and owner-related issues, while we focus on closing out several of our challenging projects in late-2017 and through 2018.
  • Three new projects were added to segment backlog in the quarter. In alignment with increased project selectivity, these projects join an evolving project portfolio -- Granite's leadership role on projects is growing, as we focus on project selection, partner selection, project duration, and owner dynamics, all with an eye on significantly higher return expectations.

Construction Materials

  • Construction Materials revenue was $79.2 million compared to last year at $75.9 million.
  • Second quarter gross profit expanded to $11.6 million compared to $10.5 million last year.
  • Gross profit margin of 14.6 percent increased from 13.8 percent a year ago.
  • The gross profit and margin improvement was attributable to steady demand across geographies in the West.

Outlook and Guidance

"Market conditions are changing across geographies and across end markets, and our business leaders have been tasked with raising their expectations in response to improved demand. We see significant expansion in our markets, and it is incumbent upon us as a leader in our industry, to raise our expectations for returns in all three segments of our business," said Roberts. "Our outlook for growth continues to improve. As we enter the heart of our construction season, Granite teams are focused on solid safety performance and consistent execution of record backlog. We are extremely well positioned to benefit from steady private-market demand, as well as a significant uptick in key public transportation markets that is beginning this year and should continue for the foreseeable future."

The Company’s expectations for 2017 are:

  • Mid- to high-teens consolidated revenue growth
  • Consolidated EBITDA margin1 of 6.0% to 6.5%

1 Please refer to the description and non-GAAP reconciliation in the attached tables.

Conference Call

Granite will conduct a conference call today, August 1, 2017, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended June 30, 2017. The Company invites investors to listen to a live audio webcast on its Investor Relations website, http://investor.graniteconstruction.com. An archive of the webcast will be available on the website approximately one hour after the call. The live call also is available by calling 1-877-328-5503; international callers may dial 1-412-317-5472. A replay will be available after the live call through August 8, 2017, by calling 1-877-344-7529, replay access code 10110574; international callers may dial 1-412-317-0088.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE:GVA) is one of the nation’s largest infrastructure contractors and construction materials producers. 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 eight 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 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,
    2017   2016   2016
ASSETS          

 
Current assets          

 
Cash and cash equivalents   $ 178,068     $ 189,326     $ 161,218  
Short-term marketable securities   47,821     64,884     34,959  
Receivables, net   484,245     419,345     431,127  
Costs and estimated earnings in excess of billings   99,883     73,102     86,025  
Inventories   65,495     55,245     64,711  
Equity in construction joint ventures   230,448     247,182     245,509  
Other current assets   43,597     39,908     31,949  
Total current assets   1,149,557     1,088,992     1,055,498  
Property and equipment, net   414,079     406,650     409,860  
Long-term marketable securities   59,990     62,895     42,653  
Investments in affiliates   37,170     35,668     34,517  
Goodwill   53,799     53,799     53,799  
Deferred income taxes, net   —    

—

     5,407  
Other noncurrent assets   88,550     85,449     84,095  
Total assets   $ 1,803,145     $ 1,733,453     $ 1,685,829  
           

 
LIABILITIES AND EQUITY          

 
Current liabilities          

 
Current maturities of long-term debt   $ 14,796     $ 14,796     $ 14,795  
Accounts payable   252,527     199,029     210,923  
Billings in excess of costs and estimated earnings   114,180     97,522     90,484  
Accrued expenses and other current liabilities   231,048     218,587     212,986  
Total current liabilities   612,551     529,934     529,188  
Long-term debt   227,114     229,498     241,907  
Deferred income taxes, net   5,420     5,441    

—

  
Other long-term liabilities   47,983     45,989     45,719  
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: 39,837,295 shares as of June 30, 2017, 39,621,140 shares as of December 31, 2016 and 39,597,469 shares as of June 30, 2016   398     396     396  
Additional paid-in capital   155,476     150,337     145,156  
Accumulated other comprehensive income (loss)   71     (371 )   (1,811 )
Retained earnings   715,451     735,626     692,740  
Total Granite Construction Incorporated shareholders’ equity   871,396     885,988     836,481  
Non-controlling interests   38,681     36,603     32,534  
Total equity   910,077     922,591     869,015  
Total liabilities and equity   $ 1,803,145     $ 1,733,453     $ 1,685,829  
                         
 
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2017   2016   2017   2016
Revenue                
Construction   $ 429,269     $ 331,346     $ 656,118     $ 540,833  
Large Project Construction   254,463     197,322     461,496     392,771  
Construction Materials   79,181     75,911     113,699     110,427  
Total revenue   762,913     604,579     1,231,313     1,044,031  
Cost of revenue                
Construction   366,765     282,290     565,665     464,844  
Large Project Construction   253,968     183,668     458,446     365,612  
Construction Materials   67,610     65,420     107,506     101,129  
Total cost of revenue   688,343     531,378     1,131,617     931,585  
Gross profit   74,570     73,201     99,696     112,446  
Selling, general and administrative expenses   51,388     48,705     113,225     104,838  
Gain on sales of property and equipment   (807 )   (1,366 )   (1,077 )   (1,966 )
Operating income (loss)   23,989     25,862     (12,452 )   9,574  
Other (income) expense                
Interest income   (1,164 )   (798 )   (2,215 )   (1,634 )
Interest expense   2,694     3,187     5,437     6,236  
Equity in income of affiliates   (1,259 )   (717 )   (2,175 )   (2,159 )
Other income, net   (642 )   (3,183 )   (1,512 )   (4,555 )
Total other income   (371 )   (1,511 )   (465 )   (2,112 )
Income (loss) before provision for (benefit from) income taxes   24,360     27,373     (11,987 )   11,686  
Provision for (benefit from) income taxes   8,088     8,847     (4,408 )   2,923  
Net income (loss)   16,272     18,526     (7,579 )   8,763  
Amount attributable to non-controlling interests   (2,139 )   (4,327 )   (2,078 )   (5,005 )
Net income (loss) attributable to Granite Construction Incorporated   $ 14,133     $ 14,199     $ (9,657 )   $ 3,758  
                 
Net income (loss) per share attributable to common shareholders:                
Basic   $ 0.35     $ 0.36     $ (0.24 )   $ 0.10  
Diluted   $ 0.35     $ 0.35     $ (0.24 )   $ 0.09  
Weighted average shares of common stock                
Basic   39,827     39,584     39,738     39,509  
Diluted   40,393     40,302     39,738     40,140  
                         
 
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
         
Six Months Ended June 30,   2017   2016
Operating activities        
Net (loss) income   $ (7,579 )   $ 8,763  
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:        
Depreciation, depletion and amortization   31,148     29,502  
Gain on sales of property and equipment   (1,077 )   (1,966 )
Stock-based compensation   11,224     8,563  
Equity in net loss (income) from unconsolidated joint ventures   8,249     (5,688 )
Gain on real estate entity   —     (2,452 )
Changes in assets and liabilities:   (19,279 )   (89,835 )
Net cash provided by (used in) operating activities   22,686     (53,113 )
Investing activities        
Purchases of marketable securities   (49,816 )   (29,894 )
Maturities of marketable securities   70,000     20,000  
Proceeds from called marketable securities   —     35,000  
Purchases of property and equipment   (37,518 )   (48,837 )
Proceeds from sales of property and equipment   2,585     2,510  
Other investing activities, net   23     (128 )
Net cash used in investing activities   (14,726 )   (21,349 )
Financing activities        
Long-term debt principal repayments   (2,500 )   (2,500 )
Cash dividends paid   (10,327 )   (10,267 )
Repurchases of common stock   (6,568 )   (4,845 )
Other financing activities, net   177     456  
Net cash used in financing activities   (19,218 )   (17,156 )
Decrease in cash and cash equivalents   (11,258 )   (91,618 )
Cash and cash equivalents at beginning of period   189,326     252,836  
Cash and cash equivalents at end of period   $ 178,068     $ 161,218  
                 
 
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   Construction   Construction   Materials
                         
2017                        
Revenue   $ 429,269     $ 254,463     $ 79,181     $ 656,118     $ 461,496     $ 113,699  
Gross profit   62,504     495     11,571     90,453     3,050     6,193  
Gross profit as a percent of revenue   14.6 %   0.2 %   14.6 %   13.8 %   0.7 %   5.4 %
                         
2016                        
Revenue   $ 331,346     $ 197,322     $ 75,911     $ 540,833     $ 392,771     $ 110,427  
Gross profit   49,056     13,654     10,491     75,989     27,159     9,298  
Gross profit as a percent of revenue   14.8 %   6.9 %   13.8 %   14.1 %   6.9 %   8.4 %
                                     
 
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
                         
Contract Backlog by Segment   June 30, 2017   March 31, 2017   June 30, 2016
                         
Construction   $ 1,266,504     31.2 %   $ 1,175,474     34.2 %   $ 1,144,965     30.5 %
Large Project Construction   2,797,894     68.8 %   2,259,721     65.8 %   2,606,019     69.5 %
Total   $ 4,064,398     100.0 %   $ 3,435,195     100.0 %   $ 3,750,984     100.0 %
                                           
 
GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
  Three Months Ended June 30,   Six Months Ended June 30,
  2017   2016   2017   2016
Net income (loss) attributable to Granite Construction Incorporated $ 14,133     $ 14,199     $ (9,657 )   $ 3,758  
Depreciation, depletion and amortization expense(2) 16,499     15,766     31,148     29,502  
Provision for (benefit from) income taxes 8,088     8,847     (4,408 )   2,923  
Interest expense, net of interest income 1,530     2,389     3,222     4,602  
EBITDA $ 40,250     $ 41,201     $ 20,305     $ 40,785  
Consolidated EBITDA Margin(3) 5.3 %   6.8 %   1.6 %   3.9 %
               
Note:              

(1)We define EBITDA as GAAP net income 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 securities 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 Selling, General and Administrative expenses in the condensed consolidated statements of operations of Granite Construction Incorporated.
 

(3)Represents EBITDA divided by consolidated revenue. Consolidated revenue was $762,913 and $1,231,313 for three and six months ended June 30, 2017, respectively, and $604,579 and $1,044,031 for the three and six months ended June 30, 2016, respectively.
 

 

Granite Construction Incorporated
Ron Botoff, 831-728-7532

Source: Granite Construction Incorporated