Granite Reports Third Quarter 2016 Results

  • Net income of $37.1 million, up 20.6 percent year-over-year
  • Revenue increased to $803.9 million, up 7.0 percent year-over-year
  • Gross profit margin of 13.4 percent, up 60 basis points year-over-year
  • Contract backlog at all-time high of $3.8 billion, up 21.9 percent year-over-year
  • Construction segment revenue increased 8.8 percent; gross profit margin of 15.4 percent, up more than 120 basis points year-over-year
  • Large Project Construction segment revenue increased 14.9 percent; gross profit margin of 9.4 percent, down more than 50 basis points year-over-year
  • Construction Materials segment revenue decreased 16.2 percent; gross profit margin of 14.0 percent, up more than 100 basis points year-over-year

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income of $37.1 million for the quarter ended September 30, 2016, compared to net income of $30.8 million in the third quarter of 2015. Earnings per diluted share in the quarter were $0.92, compared to $0.77 in the prior-year period.

“Granite teams continued to perform well in the heart of the construction season, with particular strength from our Construction segment fueling third quarter improvement from last year,” said James H. Roberts, President and Chief Executive Officer of Granite Construction Incorporated. “We continue to benefit across the business with steady demand from private and public markets, pushing total backlog to an all-time high of $3.8 billion, and driving Construction segment backlog up more than 27 percent from last year to $1.1 billion,” Roberts continued.

“Across our businesses, execution at a high level has been a critical component of steady revenue and profit improvement. Our Large Project teams continue to focus on efficient project starts, improved design management, and opportunities for improved performance on our nearly $2.7 billion portfolio of large projects,” Roberts said. “And the Construction Materials segment continues to perform well, reflected in continued, improved margin performance. Total production volume in the quarter and year-to-date remained in line with last year, though materials demand shifted to increased internal consumption. As a result, much of the revenue and profit benefit of vertical integration has been captured by our Construction segment.”

Third Quarter and First Nine Months 2016 Results

Total Company

  • Third quarter consolidated revenue increased 7.0 percent to $803.9 million compared with $751.4 million in the third quarter of 2015. In the first nine months of 2016, consolidated revenue increased 6.2 percent from last year to $1.8 billion.
  • Gross profit in the third quarter increased 12.1 percent to $107.7 million compared with $96.1 million last year. On a year-to-date basis, gross profit increased 10.5 percent to $220.1 million.
  • Gross profit margin in the quarter was 13.4 percent compared with 12.8 percent in 2015. For the first nine months of 2016, gross profit margin of 11.9 percent reflects a more than 40 basis-point improvement from last year.
  • Total Company backlog was $3.8 billion, up 21.9 percent year-over-year. Construction segment backlog increased 27.2 percent year-over-year to $1.1 billion, with Large Project Construction backlog of nearly $2.7 billion, up 19.8 percent.
  • Third quarter selling, general and administrative (SG&A) expenses increased 19.7 percent to $54.2 million. For the first nine months of 2016, SG&A totaled $159.0 million, up 10.6 percent year-over-year, with the increase primarily related to salary and compensation expenses.
  • Cash and marketable securities totaled $258.0 million, as of September 30, 2016. Driven by specific project needs and a shift in equipment purchase timing to support efficient project starts and execution on record backlog, capital expenditures totaled $67.9 million in the first nine months of 2016, an increase of $41.7 million year-over-year.

Third Quarter Segment Results

Construction

  • Construction revenue in the third quarter increased 8.8 percent to $464.6 million, compared with $427.0 million last year.
  • Gross profit in the third quarter increased 18.3 percent to $71.5 million compared to $60.5 million last year.
  • Gross profit margin of 15.4 percent, up from 14.2 percent a year ago, was driven by strong performance throughout the West and solid private, non-residential demand.

Large Project Construction

  • Large Project Construction revenue in the third quarter increased 14.9 percent to $249.3 million, compared with $217.1 million last year.
  • Gross profit in the third quarter increased 8.6 percent to $23.5 million compared to $21.7 million last year.
  • Gross profit margin was 9.4 percent compared with 10.0 percent in 2015. We continue to address impacts from design, weather, project execution, and owner-related issues.

Construction Materials

  • Construction Materials revenue in the third quarter decreased 16.2 percent to $89.9 million, compared with $107.3 million last year, driven primarily by a shift to greater internal consumption of materials.
  • Third quarter gross profit declined 9.6 percent to $12.6 million compared to $14.0 million last year.
  • Gross profit margin increased to 14.0 percent, up more than 100 basis points from last year. Operational performance remains strong, with solid levels of committed volume reflecting steady demand.

Outlook and Guidance

“In all areas of our business, our teams are persistent in their focus on Continuous Improvement, capturing near-term opportunities, and investing strategically for long-term growth,” said Roberts. “We continue to anticipate increased infrastructure investment in 2017 and beyond, including tangible benefits from the five-year Fixing America’s Surface Transportation (“FAST”) Act, passed last December, as well as increased state and local spending.

“Granite teams continue to deliver on their commitments for growth and improved execution. We remain in an excellent position to close the year safely and strongly, and to prepare efficiently for growth in 2017 and beyond,” Roberts said.

The Company’s current expectations for 2016 remain:

  • Mid-single digit consolidated revenue growth
  • Consolidated EBITDA margin1 of 6% to 8%

Conference Call

Granite will conduct a conference call today, October 28, 2016, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended September 30, 2016. 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 November 4, 2016 by calling 1-877-344-7529, replay access code 10094621; 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 seven 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.

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

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)
                   
      September 30,     December 31,     September 30,
      2016     2015     2015
ASSETS                  
Current assets                  
Cash and cash equivalents     $ 150,225       $ 252,836       $ 221,785  
Short-term marketable securities       54,863         25,043         17,607  
Receivables, net       512,752         340,822         456,688  
Costs and estimated earnings in excess of billings       80,032         59,070         56,971  
Inventories       61,015         55,553         60,289  
Equity in construction joint ventures       263,180         224,689         219,652  
Other current assets       28,047         26,985         30,351  
Total current assets       1,150,114         984,998         1,063,343  
Property and equipment, net       407,327         385,129         385,036  
Long-term marketable securities       52,908         80,652         70,646  
Investments in affiliates       34,356         33,182         33,077  
Goodwill       53,799         53,799         53,799  
Deferred income taxes, net       5,223         4,329         17,626  
Other noncurrent assets       81,540         84,789         73,022  
Total assets     $ 1,785,267       $ 1,626,878       $ 1,696,549  
                   
LIABILITIES AND EQUITY                  
Current liabilities                  
Current maturities of long-term debt     $ 14,795       $ 14,800       $ 22  
Accounts payable       223,612         157,571         196,885  
Billings in excess of costs and estimated earnings       116,151         92,515         122,409  
Accrued expenses and other current liabilities       237,534         200,935         229,923  
Total current liabilities       592,092         465,821         549,239  
Long-term debt       240,715         244,323        

269,594

  
Other long-term liabilities       46,270         46,613        

41,211

  
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: 39,601,569 shares as of September 30, 2016, 39,412,877 shares as of December 31, 2015 and 39,380,053 shares as of September 30, 2015       396         394         394  
Additional paid-in capital       148,485         140,912         139,071  
Accumulated other comprehensive loss       (1,524 )       (1,500 )       (1,097 )
Retained earnings       723,789         699,431         675,927  
Total Granite Construction Incorporated shareholders’ equity       871,146         839,237         814,295  
Non-controlling interests       35,044         30,884         22,210  
Total equity       906,190         870,121         836,505  
Total liabilities and equity     $ 1,785,267       $ 1,626,878       $ 1,696,549  
                               
 
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
             
      Three Months Ended September 30,     Nine Months Ended September 30,
      2016     2015     2016     2015
Revenue                        
Construction     $ 464,624       $ 427,018       $ 1,005,457       $ 921,143  
Large Project Construction       249,345         217,084         642,116         590,282  
Construction Materials       89,936         107,274         200,363         229,442  
Total revenue       803,905         751,376         1,847,936         1,740,867  
Cost of revenue                        
Construction       393,094         366,547         857,938         801,193  
Large Project Construction       225,826         195,430         591,438         536,613  
Construction Materials       77,311         93,316         178,440         203,849  
Total cost of revenue       696,231         655,293         1,627,816         1,541,655  
Gross profit       107,674         96,083         220,120         199,212  
Selling, general and administrative expenses       54,194         45,262         159,032         143,811  

Gain on sales of property and equipment, net

       (398 )       (804 )       (2,364 )       (2,090 )
Operating income       53,878         51,625         63,452         57,491  
Other (income) expense                        
Interest income       (790 )       (591 )       (2,424 )       (1,561 )
Interest expense       3,034         3,485         9,270         10,966  
Equity in income of affiliates       (2,424 )       (1,155 )       (4,583 )       (1,762 )
Other (income) expense, net       (732 )       27         (5,287 )       (1,409 )
Total other (income) expense       (912 )       1,766         (3,024 )       6,234  
Income before provision for income taxes       54,790         49,859         66,476         51,257  
Provision for income taxes       16,703         17,679         20,442         18,148  
Net income       38,087         32,180         46,034         33,109  
Amount attributable to non-controlling interests       (982 )       (1,421 )       (5,987 )       (1,297 )
Net income attributable to Granite Construction Incorporated     $ 37,105       $ 30,759       $ 40,047       $ 31,812  
                         
Net income per share attributable to common shareholders:                        
Basic     $ 0.94       $ 0.78       $ 1.01       $ 0.81  
Diluted     $ 0.92       $ 0.77       $ 1.00       $ 0.80  
Weighted average shares of common stock                        
Basic       39,599         39,378         39,539         39,317  
Diluted       40,313         39,897         40,205         39,863  
                                         
 
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
             
Nine Months Ended September 30,     2016     2015
Operating activities            
Net income     $ 46,034       $ 33,109  
Adjustments to reconcile net income to net cash used in operating activities:            
Depreciation, depletion and amortization       46,637         48,517  
Gain on sales of property and equipment, net       (2,364 )       (2,090 )
Change in deferred income taxes       (87 )       14,967  
Stock-based compensation       11,013         6,962  
Equity in net income from unconsolidated joint ventures       (15,903 )       (29,465 )
Gain on real estate entity       (2,452 )       —  
Net income from affiliates       (4,583 )       (1,762 )
Changes in assets and liabilities:       (98,595 )       (78,367 )
Net cash used in operating activities       (20,300 )       (8,129 )
Investing activities            
Purchases of marketable securities       (84,758 )       (54,961 )
Maturities of marketable securities       30,000         26,700  
Proceeds from called marketable securities       50,000         45,000  
Purchases of property and equipment       (67,889 )       (26,144 )
Proceeds from sales of property and equipment       5,790         3,439  
Distributions from affiliates       2,233         305  
Collection of notes receivable       3,880         542  
Other investing activities, net       (33 )       (249 )
Net cash used in investing activities       (60,777 )       (5,368 )
Financing activities            
Long-term debt principal repayments       (3,750 )       (306 )
Cash dividends paid       (15,415 )       (15,326 )
Repurchases of common stock       (4,946 )       (3,325 )
Contributions from (distributions to) non-controlling partners, net       1,522         (1,740 )

Other financing activities

       1,055         18  
Net cash used in financing activities       (21,534 )       (20,679 )
Decrease in cash and cash equivalents       (102,611 )       (34,176 )
Cash and cash equivalents at beginning of period       252,836         255,961  
Cash and cash equivalents at end of period     $ 150,225       $ 221,785  
                     
 
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
             
      Three Months Ended September 30,     Nine Months Ended September 30,
            Large Project     Construction           Large Project     Construction
      Construction     Construction     Materials     Construction     Construction     Materials
                                     
2016                                    
Revenue     $ 464,624       $ 249,345       $ 89,936       $ 1,005,457       $ 642,116       $ 200,363  
Gross profit       71,530         23,519         12,625         147,519         50,678         21,923  
Gross profit as a percent of revenue       15.4 %       9.4 %       14.0 %       14.7 %       7.9 %       10.9 %
                                     
2015                                    
Revenue     $ 427,018       $ 217,084       $ 107,274       $ 921,143       $ 590,282       $ 229,442  
Gross profit       60,471         21,654         13,958         119,950         53,669         25,593  
Gross profit as a percent of revenue       14.2 %       10.0 %       13.0 %       13.0 %       9.1 %       11.2 %
                                     
 
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
                   
Contract Backlog by Segment     September 30, 2016     June 30, 2016     September 30, 2015
                                     
Construction     $ 1,102,147     29.3 %     $ 1,144,965     30.5 %     $ 866,567     28.1 %
Large Project Construction       2,662,399     70.7 %       2,606,019     69.5 %       2,222,085     71.9 %
Total     $ 3,764,546     100.0 %     $ 3,750,984     100.0 %     $ 3,088,652     100.0 %
                                                 
 
GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
             
      Three Months Ended September 30,     Nine Months Ended September 30,
      2016     2015     2016     2015
Net income attributable to Granite Construction Incorporated     $ 37,105       $ 30,759       $ 40,047       $ 31,812  
Depreciation, depletion and amortization expense(2)       17,135         17,186         46,637         48,517  
Provision for income taxes       16,703         17,679         20,442         18,148  
Interest expense, net of interest income       2,244         2,894         6,846         9,405  
EBITDA     $ 73,187       $ 68,518       $ 113,972       $ 107,882  
Consolidated EBITDA Margin(3)       9.1 %       9.1 %       6.2 %       6.2 %
                         
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 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 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 $803,905 and $1,847,936 for three and nine months ended September 30, 2016, respectively and $751,376 and $1,740,867 for the three and nine months ended September 30, 2015, respectively.
 

 

Granite Construction Incorporated
Ron Botoff, 831-728-7532

 

Source: Granite Construction Incorporated