Granite Reports Third Quarter 2018 Results

Highlights

Third Quarter

  • Revenue up 10.3 percent year-over-year to $1.06 billion
  • Gross profit margin up more than 170 basis points year-over-year to 13.7 percent
  • Net income up 21.1 percent year-over year to $55.7 million
  • Adjusted net income1 up 46.6 percent year-over-year to $67.4 million
  • Adjusted EBITDA1 up 30.9 percent year-over-year to $112.7 million
  • Adjusted EBITDA1 margin 10.7 percent, compared to 9.0 percent last year

Year-To-Date

  • Revenue up 10.9 percent year-over-year to $2.43 billion
  • Gross profit margin up 180 basis points year-over-year to 11.6 percent
  • Net income down slightly year-over-year to $35.9 million
  • Adjusted net income1 up 118.1 percent year-over-year to $79.2 million
  • Adjusted EBITDA1 up 62.5 percent year-over-year to $172.9 million
  • Adjusted EBITDA1 margin 7.1 percent, compared to 4.9 percent last year

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE: GVA) today reported third quarter 2018 net income of $55.7 million, an increase of 21.1 percent from net income of $46.0 million in the third quarter of 2017. Earnings per diluted share (EPS) was $1.17, compared to $1.14 last year. Third quarter and year-to-date 2018 results include after-tax acquisition-related expenses of $11.7 million and $43.4 million, respectively2. Excluding the impact of these expenses, third quarter adjusted net income was $67.4 million1, with adjusted EPS of $1.421. For the first nine months of 2018, EPS was $0.84, compared to $0.90 in the prior-year period. Excluding the impact of after-tax acquisition-related expenses, year-to-date 2018 adjusted net income increased significantly to $79.2 million1, with adjusted EPS of $1.851 more than doubling from the prior year.

“In 2018, Granite has executed our strategy to develop a leadership position as America’s Infrastructure Company,” said Granite President and Chief Executive Officer James H. Roberts. “Acquisitions have helped us to deliver profitable geographic and end-market diversification, and this action highlights the significant opportunities we have to expand Granite’s platforms for growth in the new Transportation, Water, Specialty, and Materials segments.”

“Our focus has remained intent on improved profitability this year, and our teams, new and old, have delivered,” Roberts said. “Demand for projects across all segments of our business remains strong as we maintain our deliberate emphasis on improved pricing. Increased pricing is creating solid bottom-line improvement, while having an expected, near-term impact on project win rates, most notably transportation projects. Transportation demand continues to strengthen, fueling expected growth in project bookings and revenue that, coupled with our ongoing pricing discipline, will spur improved segment margin performance for quite some time.”

Roberts continued, “Our pricing strategy is sound, built upon both practical and strategic considerations, especially given the healthy balance of near- and long-term public- and private-market demand. This year’s highly focused work on pricing discipline illustrates the broad leverage our business can exert to create bottom-line results and steadily improving capital returns on the significant, long-term investments that underpin our business. Our focus remains on sustained pricing discipline to deliver consistent, balanced, risk-adjusted returns across end markets.”

Third Quarter and Year-To-Date 2018 Consolidated Results

  • Revenue increased 10.3 percent to $1.06 billion in the third quarter of 2018, compared with $957.1 million in the prior-year period. For the nine months ending September 30, 2018, revenue increased 10.9 percent to $2.43 billion, compared with $2.19 billion last year.
  • Consolidated gross profit increased 26.2 percent to $144.5 million, compared with $114.5 million last year. On a year-to-date basis, gross profit increased 31.2 percent to $281.1 million compared to $214.2 million last year.
  • Gross profit margin was 13.7 percent in the third quarter, compared with 12.0 percent in 2017. For the first nine months of 2018, gross profit margin was 11.6 percent compared with 9.8 percent last year.
  • Selling, general & administrative (SG&A) expenses during the quarter and on a year-to-date basis include the impact of higher acquisition-related overhead. SG&A expenses were $70.8 million, or 6.7 percent of revenue in the quarter, compared to $49.5 million, or 5.2 percent of revenue, last year. For the first nine months of 2018, SG&A expenses were $193.3 million, or 8.0 percent of revenue, compared to $162.7 million, or 7.4 percent of revenue, during the same prior-year period. The increase is attributable to acquisition-related costs.
  • Company effective tax rate in the third quarter was 12.8 percent, driven by a $7.6 million benefit3, a discrete item related to revaluation of deferred tax assets and liabilities.
  • Adjusted EBITDA increased 30.9 percent year-over-year to $112.7 million in the third quarter of 2018, from $86.1 million last year. On a year-to-date basis, adjusted EBITDA increased 62.5 percent year-over-year to $172.9 million, compared to $106.4 million in 2017.
  • Company backlog3 was $3.24 billion, down 23.5 percent year-over-year. Earlier in 2018 we received notification of certain project wins that are not yet included in our backlog. These three projects, in California, Utah, and Florida, total more than $825 million and are expected to enter our backlog late in 2018 and in 2019.
  • Our balance sheet remains strong with cash and marketable securities of $311.4 million as of September 30, 2018. Our capital structure is well positioned to support the execution of our strategic plan.

Third Quarter and Year-To-Date 2018 Segment Results

On October 9, the Company filed an 8-K with the Securities and Exchange Commission, which provides a quarterly and annual lookback and mapping of our new reportable segments. Third quarter 2018 results reflect the new reporting structure.

Transportation

  • Third quarter 2018 revenue decreased 2.2 percent to $610.8 million, compared to $624.7 million last year. Year-to-date 2018 revenue increased 3.5 percent to $1.47 billion, compared to $1.42 billion last year. Transportation revenue growth in 2018 reflects both increased bidding discipline and higher margin expectations.
  • Quarterly gross profit increased 8.3 percent to $71.0 million from $65.5 million last year, with gross profit margin of 11.6 percent, up more than 100 basis points from 10.5 percent last year. Year-to-date gross profit increased 15.4 percent to $138.4 million from $119.9 million last year, with a resulting gross profit margin of 9.4 percent up from 8.4 percent in 2017. Year-over-year profit improvement continues to reflect our efforts to raise prices in a healthy environment for most of our geographic markets.
  • Segment backlog decreased 29.6 percent year-over-year to $2.31 billion, driven by steady project burn rates in mild weather conditions during the quarter. Healthy and improving transportation market demand positions our teams with top- and bottom-line growth opportunities across geographies. We continue to patiently re-shape our project portfolio, pursuing revenue strategies in alignment with increased returns that balance project risk dynamics.

Water

  • Third quarter 2018 revenue increased 241.7 percent to $124.3 million compared to $36.4 million last year. Year-to-date 2018 revenue increased 113.9 percent to $216.0 million, compared to $100.9 million last year.
  • Quarterly gross profit increased to $24.1 million from $1.8 million last year, with gross profit margin of 19.4 percent up from 5.0 percent last year. Year-to-date gross profit increased to $41.1 million from $9.8 million last year, with gross profit margin of 19.0 percent, up from 9.7 percent in 2017. Year-over-year profit improvement is tied to solid execution on projects in the robust markets we are now addressing in the Water segment.
  • Segment backlog increased significantly year-over-year to $364.8 million, with the largest impact from recent acquisitions. The segment’s bidding environment remains healthy, mirroring steady to improving federal, state, and local water infrastructure funding.

Specialty

  • Third quarter 2018 revenue decreased 3.6 percent to $190.8 million, compared to $197.9 million last year. Year-to-date 2018 revenue increased 2.0 percent to $461.1 million, compared to $452.3 million last year. Drivers of the performance include continued strong demand for mining work both by legacy businesses and recent acquisitions, coupled with steady demand in power and tunnel projects.
  • Quarterly gross profit increased 1.1 percent to $28.1 million from $27.8 million last year, with gross profit margin of 14.7 percent up from 14.0 percent last year. Year-to-date gross profit increased 15.1 percent to $65.3 million from $56.7 million last year, with gross profit margin of 14.2 percent, up from 12.5 percent in 2017.
  • The gross profit and margin improvement was attributable primarily to strong market demand, solid execution, and consistent bidding discipline, which is producing improved margins on new work.
  • Segment backlog decreased 27.6 percent year-over-year to $564.7 million, based on steady project burn rates. The bidding environment in the Specialty segment remains healthy, supported by steady public- and private-market demand. This diverse, robust project and bidding environment, which includes tunnel, power, mining, site development, renewable energy and more, position our teams for backlog and revenue growth in this segment in 2019 and beyond.

Materials

  • Third quarter 2018 revenue increased 32.1 percent to $129.6 million, compared with $98.1 million last year. Year-to-date 2018 revenue increased 30.4 percent to $276.3 million, compared to $211.8 million last year.
  • Quarterly gross profit improved 9.9 percent to $21.3 million from $19.4 million last year, with gross profit margin of 16.4 percent down from 19.8 percent last year. Year-to-date gross profit increased 30.6 percent to $36.3 million from $27.8 million last year, with gross profit margin steady at 13.1 percent.
  • The quarterly and year-to-date revenue and profit growth was attributable primarily to improved external demand across most markets, while maintaining an expectation of overall mid-teen gross margins in the segment.

Outlook and Guidance

“Granite’s strategic growth plan is delivering strongly improved near-term results, while positioning our stakeholders to benefit from significant, long-term economic value creation,” said Roberts. “Significant voter support across the country for incremental infrastructure investment is spurring state and local governments and politicians to action. With more than 300 state and local measures on ballots on November 6, voters increasingly understand and support the sustained, increased infrastructure investments that are required to improve public safety, to create jobs, to drive economic expansion, and to improve Americans’ quality of life. For those of you in California, please vote No on Proposition 6 on Election Day.”

The Company’s expectations for 2018, including acquisitions, are:

  • Mid-teens consolidated revenue growth, which is subject to late-year seasonality
  • Adjusted EBITDA margin of 7.5 percent to 8.5 percent

Endnotes

(1) Adjusted net income, adjusted earnings per diluted 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.

(2) Acquisition-related expenses include acquisition and integration expenses, synergy costs, and acquired intangible amortization expenses. Please refer to the description and reconciliation of non-GAAP measures in the attached tables.

(3) For further information on income taxes, please refer to Note 16 of “NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS” in the Granite Construction Incorporated Form 10-Q for the quarterly period ended September 30, 2018, which is expected to be filed with the Securities and Exchange Commission on October 26, 2018.

(4) Granite contract backlog is comprised of unearned revenue and other awards. For further information, please refer to “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in the Granite Construction Incorporated Form 10-Q for the quarterly period ended September 30, 2018, which is expected to be filed with the Securities and Exchange Commission on October 26, 2018.

Conference Call

Granite will conduct a conference call today, October 26, 2018, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended September 30, 2018. The Company invites investors to listen to a live audio webcast on its Investor Relations website, https://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 2, 2018, by calling 1-877-344-7529, replay access code 10124962; international callers may dial 1-412-317-0088.

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, 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,
2018

  

December 31,
2017

  

September 30,
2017
ASSETS                      
Current assets                      
Cash and cash equivalents   $ 230,259     $ 233,711     $ 185,516
Short-term marketable securities     35,010       67,775       47,814
Receivables, net     618,070       479,791       627,081
Contract assets     213,989       —       —
Costs and estimated earnings in excess of billings     —       103,965       94,527
Inventories     90,789       62,497       62,059
Assets held for sale     62,988       —       —
Equity in construction joint ventures     273,993       247,826       242,358
Other current assets     32,185       36,513       26,612
Total current assets     1,557,283       1,232,078       1,285,967
Property and equipment, net     560,618       407,418       412,174
Long-term marketable securities     46,093       65,015       69,991
Investments in affiliates     84,840       38,469       39,946
Goodwill     244,696       53,799       53,799
Deferred income taxes, net     6,408       —       —
Other noncurrent assets     143,910       75,199       85,411
Total assets   $ 2,643,848     $ 1,871,978     $ 1,947,288
                       
LIABILITIES AND EQUITY                      
Current liabilities                      
Current maturities of long-term debt   $ 116,796     $ 46,048     $ 14,796
Accounts payable     316,917       237,673       286,913
Contract liabilities     117,759       —       —
Billings in excess of costs and estimated earnings     —       135,146       168,707
Accrued expenses and other current liabilities     296,033       236,407       246,775
Total current liabilities     847,505       655,274       717,191
Long-term debt     316,926       178,453       225,922
Deferred income taxes, net     5,589       1,361       5,932
Other long-term liabilities     67,429       44,085       46,435
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: 46,897,092 shares as of September 30, 2018, 39,871,314 shares as of December 31, 2017 and 39,850,587 shares as of September 30, 2017     469       399       399
Additional paid-in capital     572,046       160,376       157,734
Accumulated other comprehensive income     1,841       634       240
Retained earnings     786,936       783,699       756,183

Total Granite Construction Incorporated shareholders’ equity

     1,361,292       945,108       914,556
Non-controlling interests     45,107       47,697       37,252
Total equity     1,406,399       992,805       951,808
Total liabilities and equity   $ 2,643,848     $ 1,871,978     $ 1,947,288
                       
             

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,
    2018   2017   2018   2017
Revenue                                
Transportation   $ 610,847     $ 624,727     $ 1,472,703     $ 1,423,396  
Water     124,292       36,378       215,951       100,944  
Specialty     190,836       197,886       461,149       452,265  
Materials     129,616       98,135       276,286       211,834  
Total revenue     1,055,591       957,126       2,426,089       2,188,439  
Cost of revenue                                
Transportation     539,871       559,187       1,334,302       1,303,489  
Water     100,189       34,573       174,834       91,172  
Specialty     162,737       170,089       395,838       395,529  
Materials     108,303       78,747       239,972       184,023  
Total cost of revenue     911,100       842,596       2,144,946       1,974,213  
Gross profit     144,491       114,530       281,143       214,226  
Selling, general and administrative expenses     70,769       49,501       193,337       162,726  
Acquisition and integration expenses     9,334       —       44,030       —  
Gain on sales of property and equipment     (3,018 )     (1,753 )     (5,066 )     (2,830 )
Operating income     67,406       66,782       48,842       54,330  
Other (income) expense                                
Interest income     (1,533 )     (1,141

)

     (4,227 )     (3,356 )
Interest expense     4,452       2,660       10,090       8,097  
Equity in income of affiliates     (1,769 )     (2,732 )     (5,527 )     (4,907 )
Other income, net     (1,533 )     (1,309 )     (2,205 )     (2,821 )
Total other income     (383 )     (2,522 )     (1,869 )     (2,987 )
Income before provision for income taxes     67,789       69,304       50,711       57,317  
Provision for income taxes     8,692       21,249       7,357       16,841  
Net income     59,097       48,055       43,354       40,476  
Amount attributable to non-controlling interests     (3,425 )     (2,073 )     (7,490 )     (4,151 )
Net income attributable to Granite Construction Incorporated   $ 55,672     $ 45,982     $ 35,864     $ 36,325  
                                 
Net income per share attributable to common shareholders                                
Basic   $ 1.20     $ 1.15     $ 0.84     $ 0.91  
Diluted   $ 1.17     $ 1.14     $ 0.84     $ 0.90  
Weighted average shares of common stock                                
Basic     46,308       39,844       42,443       39,774  
Diluted     47,810       40,387       42,910       40,367  
Dividends per common share   $ 0.13     $ 0.13     $ 0.39     $ 0.39  
                                 
             

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)
             
Nine Months Ended September 30,   2018   2017
Operating activities                
Net income   $ 43,354     $ 40,476  

Adjustments to reconcile net income to net cash provided by operating activities:

                
Depreciation, depletion and amortization     77,816       48,522  
Gain on sales of property and equipment, net     (5,066 )     (2,830 )
Change in deferred income taxes     (2,207 )     —  
Stock-based compensation     12,620       13,580  
Equity in net loss from unconsolidated joint ventures     16,343       15,415  
Net income from affiliates     (5,526 )     (4,907 )
Changes in assets and liabilities:     (122,591 )     (45,642 )
Net cash provided by operating activities     14,743       64,614  
Investing activities                
Purchases of marketable securities     (9,952 )     (79,708 )
Maturities of marketable securities     60,000       90,000  
Purchases of property and equipment     (86,131 )     (56,808 )
Proceeds from sales of property and equipment     9,480       5,107  
Cash paid to purchase businesses, net of cash and restricted cash acquired     (55,027 )     —  
Other investing activities, net     317       2,321  
Net cash used in investing activities     (81,313 )     (39,088 )
Financing activities                
Proceeds from debt     143,250       —  
Debt principal repayments     (42,149 )     (3,750 )
Cash dividends paid     (16,328 )     (15,506 )
Repurchases of common stock     (6,369 )     (6,713 )
Distributions to non-controlling partners, net     (10,128 )     (3,500 )
Other financing activities, net     441       133  
Net cash provided by (used in) financing activities     68,717       (29,336 )
Net increase (decrease) in cash, cash equivalents and restricted cash     2,147       (3,810 )
Cash and cash equivalents at beginning of period     233,711       189,326  
Cash, cash equivalents and restricted cash of $5,599 at end of period   $ 235,858     $ 185,516  
                 
   
GRANITE CONSTRUCTION INCORPORATED  
Business Segment Information  
(Unaudited - dollars in thousands)  
                           
   

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

  
    2018   2017   2018   2017
Revenue                                
Transportation   $ 610,847     $ 624,727     $ 1,472,703     $ 1,423,396  
Water     124,292       36,378       215,951       100,944  
Specialty     190,836       197,886       461,149       452,265  
Materials     129,616       98,135       276,286       211,834  
Total revenue   $ 1,055,591     $ 957,126     $ 2,426,089     $ 2,188,439  
Gross profit                                
Transportation   $ 70,976     $ 65,540     $ 138,401     $ 119,907  
Water     24,103       1,805       41,117       9,772  
Specialty     28,099       27,797       65,311       56,736  
Materials     21,313       19,388       36,314       27,811  
Total gross profit   $ 144,491     $ 114,530     $ 281,143     $ 214,226  
Gross profit as a percent of revenue                                
Transportation     11.6 %     10.5 %     9.4 %     8.4 %
Water     19.4       5.0       19.0       9.7  
Specialty     14.7       14.0       14.2       12.5  
Materials     16.4       19.8       13.1       13.1  
Total gross profit as a percent of total revenue     13.7 %     12.0 %     11.6 %     9.8 %
                                 
     
GRANITE CONSTRUCTION INCORPORATED
Unearned Revenue / Contract Backlog by Segment(1)
(Unaudited - dollars in thousands)
                                                 
Unearned Revenue   September 30, 2018                                
Transportation   $ 2,311,712     75.5   %                                
Water     250,157     8.2                                    
Specialty     501,556     16.4                                    
Total   $ 3,063,425     100.0   %                                
                                                 
Other(2)   September 30, 2018                                
Transportation   $ —    

0.0

 

%

                                
Water     114,615     64.5                                    
Specialty     63,095     35.5                                    
Total   $ 177,710     100.0   %                                
                                                 
Contract Backlog(1)   September 30, 2018   June 30, 2018   September 30, 2017
Transportation   $ 2,311,712

 

 

 71.3

 

%

  

$

 2,637,055     72.2  

%

  

$

 3,283,055     77.5  

%
Water     364,772     11.3         398,886     10.9         171,939     4.1    
Specialty     564,651     17.4         615,981     16.9         779,750     18.4    
Total   $ 3,241,135     100.0   %   $ 3,651,922     100.0   %   $ 4,234,744     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.
                                                 

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 income attributable to Granite Construction Incorporated and adjusted diluted earnings per share to indicate the impact of non-recurring acquisition, integration and acquired intangible amortization expenses related to the acquisition of Layne Christensen Company and LiquiForce.

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   Nine Months Ended
    September 30,   September 30,
    2018   2017   2018   2017  
Net income attributable to Granite Construction Incorporated   $ 55,672     $ 45,982     $ 35,864     $ 36,325  
Depreciation, depletion and amortization expense(2)     34,269       17,374       77,816       48,522  
Provision for income taxes     8,692       21,249       7,357       16,841  
Interest expense, net of interest income     2,919       1,519       5,863       4,741  
EBITDA   $ 101,552    

$

 86,124     $ 126,900     $ 106,429  
EBITDA Margin(3)     9.6

%

     9.0 %     5.2 %     4.9 %
                                 
Acquisition and integration expenses and synergy costs(4)   $ 11,190     $ —     $ 46,037     $ —  
Adjusted EBITDA(1)   $ 112,742     $ 86,124     $ 172,937     $ 106,429  
Adjusted EBITDA margin(1)     10.7 %     9.0 %     7.1 %     4.9 %
                                 

(1)We define EBITDA as GAAP net income 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 synergy costs.

(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 $1.06 billion and $2.43 billion for three and nine months ended September 30, 2018, respectively, and $0.96 billion and $2.19 billion for the three and nine months ended September 30, 2017, respectively.

(4)Amount includes expenses related to external transaction costs, professional fees, internal travel, and synergy costs associated with the acquisition and integration of Layne Christensen Company and LiquiForce. Synergy costs include expenses incurred which will be eliminated as the integration of Layne and LiquiForce is completed.
                                 
           

GRANITE CONSTRUCTION INCORPORATED

Adjusted Net Income Reconciliation(1)

(Unaudited - in thousands, except per share data)
           
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2018   2017   2018   2017
Income before provision for income taxes   $ 67,789     $ 69,304     $ 50,711     $ 57,317
Acquisition and integration expenses and synergy costs(2)     11,190       —       46,037       —
Amortization expense on acquired intangible assets(3)     4,466       —       7,154       —
Adjusted income before provision for income taxes   $ 83,445     $ 69,304     $ 103,902     $ 57,317
                               
Provision for income taxes   $ 8,692     $ 21,249     $ 7,357     $ 16,841

Tax effect of the acquisition and integration expenses, synergy costs and acquired intangible amortization expenses (4)

     3,923       —       9,830       —
Adjusted provision for income taxes   $ 12,615     $ 21,249     $ 17,187     $ 16,841
                               
Net income attributable to Granite Construction Incorporated   $ 55,672     $ 45,982     $ 35,864     $ 36,325

After-tax acquisition and integration expenses, synergy costs and acquired intangible amortization expenses

     11,733       —       43,361       —
Adjusted net income attributable to Granite

Construction Incorporated(1)

   $ 67,405     $ 45,982     $ 79,225     $ 36,325
                               
Diluted net income per share attributable to common shareholders   $ 1.17     $ 1.14     $ 0.84     $ 0.90
After-tax acquisition and integration expenses, synergy costs and acquired intangible amortization expenses     0.25       —       1.01       —
Adjusted diluted net income per share attributable to

common shareholders(1)

   $ 1.42     $ 1.14     $ 1.85     $ 0.90
                               

(1) Amount includes expenses related to external transaction costs, professional fees, internal travel, and synergy costs associated with the acquisition and integration of Layne Christensen Company and LiquiForce. Synergy costs include expenses incurred which will be eliminated as the integration of Layne and LiquiForce is completed. Adjusted net income and diluted earnings per share exclude the impact of acquisition and integration expenses, synergy costs and acquired intangible amortization.

(2)Amortization expense on acquired intangible assets related to the Layne and LiquiForce acquisitions.

(3)The tax effect of the acquisition and integration expenses, synergy costs and acquired intangible amortization expenses was calculated using the Company’s estimated 2018 annual statutory tax rate.

(4)Net income attributable to Granite Construction Incorporated is presented net of non-controlling interests of $3.4 million and $7.5 million for three and nine months ended September 30, 2018, respectively, and $2.1 million and $4.2 million for the three and nine months ended September 30, 2017, respectively.

 

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

 

Source: Granite Construction Incorporated