Granite Reports Fourth Quarter and Fiscal Year 2016 Results

2016 Financial and Operational Highlights

  • Backlog increased 19.8 percent year-over-year to a year-end record $3.5 billion
  • Revenues $2.5 billion – up 6.1 percent year-over year
  • Gross profit $301.4 million – up $1.5 million year-over-year
  • Gross profit margin 12.0 percent compared to 12.6 percent last year
  • Diluted earnings per share $1.42 compared to $1.52 last year

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income of $57.1 million for the year ended December 31, 2016 compared with net income of $60.5 million in the prior year. Diluted earnings per share (EPS) for the year was $1.42 compared to $1.52 per share in 2015.

Granite reported net income of $16.2 million for the quarter ended December 31, 2016, compared with net income of $28.7 million in the fourth quarter of 2015. Diluted EPS in the quarter was $0.40 compared to $0.72 per share in the prior-year period.

“Momentum to rebuild America's infrastructure is growing, an encouraging sign for our Company, our industry, and our country. Today, Granite's business stands in its best position in many years,” said James H. Roberts, President and Chief Executive Officer of Granite Construction Incorporated. “Despite fourth quarter results that were negatively impacted by particular weakness in the Large Project Construction segment, overall operational performance remained strong. The Construction segment remains the largest, most profitable portion of our business, producing near-record gross margins and a record segment backlog level in 2016.

“Today, public-funding trends are poised to improve. So as the momentum across the country grows, our outlook continues to improve. We continue to challenge our leaders to take their teams to even higher levels of expectation and success. We are confident in the investments we are making in our business, beginning with our people. Granite employees' focus, drive, and execution produced solid 2016 results and record Company year-end backlog of nearly $3.5 billion, and it is expected to produce much-improved results, beginning in 2017,” Roberts said.

Fiscal Year 2016 Results

Total Company

  • Revenues for 2016 were $2.51 billion, up 6.1 percent from 2015.
  • Gross profit increased 0.5 percent year-over-year to $301.4 million, driven by improved performance in the Construction segment.
  • Gross profit margin was 12.0 percent compared with 12.6 percent in 2015.
  • Selling, general and administrative (SG&A) expenseswere $219.3 million, compared with $203.8 million last year. The increase is attributable primarily to personnel-related costs, including increased business development and selling expenses.
  • Backlog ended at a year-end record $3.48 billion, up 19.8 percent from $2.91 billion in 2015.
  • 2016 EBITDA1 was $160.8 million, with resulting EBITDA margin of 6.4 percent.
  • $317.1 million in cash and marketable securities, as of December 31, 2016.

Construction

  • Construction revenue in 2016 was $1.37 billion, up 8.1 percent from $1.26 billion in 2015, driven by improved performance in certain Western markets supported by steady private, non-residential construction demand.
  • Gross profit margin increased nearly 50 basis points year-over-year to 15.3 percent, as improved safety, execution, and market diversification drove the year-over-year growth.
  • Construction backlog ended at a year-end record $1.03 billion, up 19.7 percent year-over-year.

Large Project Construction

  • Large Project Construction revenue increased 9.3 percent to $888.2 million from $812.7 million in 2015, as Granite teams advanced work on our coast-to-coast project portfolio.
  • Gross profit margin was 7.2 percent compared with 9.8 percent in 2015 primarily reflecting execution issues on certain projects nearing completion in 2017 and 2018, as well as the prolonged impact of time in resolving disputes with owners and designers.
  • Large project backlog totaled $2.45 billion, up 19.8 percent year-over-year, with the balance of 2016 bookings expected to provide profit improvement beginning in 2017.

Construction Materials

  • Overall 2016 materials consumption was nearly identical to 2015, with demand shifting to increased internal (Construction segment) use in 2016. As a result, Construction Materials revenue (external sales) decreased 11.6 percent to $261.2 million compared with $295.6 million last year.
  • Gross profit margin in 2016 was 10.7 percent, compared with 11.1 percent in 2015, as overall public-market demand remained flat. Although weather slowed production in the fourth quarter, bidding activity and pricing remained steady through the end of 2016, which resulted in growing committed volumes for 2017.

Fourth Quarter 2016 Results

Total Company

  • Revenues increased 5.8 percent to $666.7 million compared with $630.2 million in the fourth quarter of 2015.
  • Gross profit decreased 19.3 percent year-over-year to $81.3 million, driven primarily by the underperformance of certain large projects, as well as by weather impacts across much of the West in December.
  • Gross profit margin was 12.2 percent compared with 16.0 percent in 2015.
  • SG&A expenses decreased $0.7 million from 2015, to $59.3 million.

Construction

  • Construction segment revenue increased 5.3 percent to $359.7 million, compared with $341.5 million in the fourth quarter of 2015. While impacted by wet weather in the West, revenue growth was driven by steady private, non-residential demand and continued diversification.
  • Gross profit margin, down from nearly 20 percent last year, remained a healthy 17.2 percent, with weather headwinds largely countered by improved safety and solid execution.

Large Project Construction

  • Large Project Construction segment revenue increased 10.6 percent to $246.1 million, compared with $222.4 million in the fourth quarter of 2015, based on execution on our broad project portfolio.
  • Gross profit margin was 5.5 percent, down from 11.6 percent last year, reflecting significant underperformance at three projects aligned to the prolonged impact of time in resolving disputes with owners and designers.

Construction Materials

  • Construction Materials revenue decreased 8.0 percent to $60.9 million, compared with $66.2 million in the fourth quarter of 2015, driven primarily by a shift to greater internal consumption of materials coupled with weather impacts in December pushing sales into 2017.
  • Gross profit margin for the quarter was 10.0 percent, compared with 11.0 percent in 2015. Operational performance remains solid, as we target continued improvement in pricing and production efficiency.

Outlook

“Last November, voters across the country approved more than $200 billion of long-term infrastructure investment in the form of local measures, with the majority of this in California and Washington State,” Roberts continued. “In California, state officials continue to make progress toward legislation on a long-term transportation bill. We are maintaining our focus on the Governor and California legislators to deliver much overdue investment beginning in 2017,” Roberts said.

“Still, much of the focus remains at the federal level where the FAST Act, the long-term highway bill passed by Congress in December 2015, has yet to provide any incremental spending. Congress continues to fund government spending by continuing resolution. We still believe the FAST Act is critical for planning at state and local levels. However, until federal spending increases, the 2017 outlook for public-market growth is limited.

“Our broad asset base and coast-to-coast project portfolio, coupled with ongoing efficiency investment in Continuous Improvement has prepared us well. Granite teams are ready to deliver both on the President's commitment to rebuilding our country's infrastructure, as well as on solid growth in our markets across the country. These investments are creating efficiencies and leverage that, combined with year-end record backlog of $3.5 billion, will provide Granite teams with an opportunity to grow at a rate faster than we have seen in recent years,” Roberts said.

The Company’s current expectations for 2017 are:

  • Low-double digit consolidated revenue growth
  • Consolidated EBITDA margin1 of 6.5% to 7.5%

(1) Please refer to a description and reconciliation in the attached EBITDA Reconciliation table.

Conference Call

Granite will conduct a conference call today, Friday, February 17, 2017, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended December 31, 2016. Access to a live audio webcast is available on its Investor Relations website, 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 February 24, 2017, by calling 1-877-344-7529, replay access code 10101265; 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.

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

CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
 
      December 31,     December 31,
      2016     2015
ASSETS            
Current assets            
Cash and cash equivalents     $ 189,326       $ 252,836  
Short-term marketable securities       64,884         25,043  
Receivables, net       419,345         340,822  
Costs and estimated earnings in excess of billings       73,102         59,070  
Inventories       55,245         55,553  
Equity in construction joint ventures       247,182         224,689  
Other current assets       39,908         26,985  
Total current assets       1,088,992         984,998  
Property and equipment, net       406,650         385,129  
Long-term marketable securities       62,895         80,652  
Investments in affiliates       35,668         33,182  
Goodwill       53,799         53,799  
Deferred income taxes, net       —         4,329  
Other noncurrent assets       85,449         84,789  
Total assets     $ 1,733,453       $ 1,626,878  
LIABILITIES AND EQUITY            
Current liabilities            
Current maturities of long-term debt     $ 14,796       $ 14,800  
Accounts payable       199,029         157,571  
Billings in excess of costs and estimated earnings       97,522         92,515  
Accrued expenses and other current liabilities       218,587         200,935  
Total current liabilities       529,934         465,821  
Long-term debt       229,498         244,323  
Deferred income taxes       5,441         —  
Other long-term liabilities       45,989         46,613  
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

39,621,140 shares as of December 31, 2016 and 39,412,877 shares as of December 31, 2015

       396         394  
Additional paid-in capital       150,337         140,912  
Accumulated other comprehensive loss       (371 )       (1,500 )
Retained earnings       735,626         699,431  
Total Granite Construction Incorporated shareholders’ equity       885,988         839,237  
Non-controlling interests       36,603         30,884  
Total equity       922,591         870,121  
Total liabilities and equity    

$

1,733,453

      

$

1,626,878

  
 
 
GRANITE CONSTRUCTION INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
 
     

Three Months Ended

    Years Ended December 31,
     

December 31,

      
      2016     2015     2016     2015
Revenue                        
Construction     $   359,741       $   341,533       $ 1,365,198       $ 1,262,675  
Large Project Construction     246,077       222,438       888,193       812,720  
Construction Materials     60,863       66,191       261,226       295,634  
Total revenue     666,681       630,162       2,514,617       2,371,029  
Cost of revenue                        
Construction     298,045       273,976       1,155,983       1,075,169  
Large Project Construction     232,618       196,640       824,056       733,253  
Construction Materials     54,768       58,922       233,208       262,771  
Total cost of revenue     585,431       529,538       2,213,247       2,071,193  
Gross profit     81,250       100,624       301,370       299,836  
SG&A expenses     59,342       60,010       219,299       203,817  
Restructuring and impairment gains     (1,000 )     (6,007 )     (1,925 )     (6,003 )
Gain on sales of property and equipment     (5,994 )     (6,196 )     (8,358 )     (8,286 )
Operating income     28,902       52,817       92,354       110,308  
Other (income) expense                        
Interest income     (801 )     (574 )     (3,225 )     (2,135 )
Interest expense     3,096       3,291       12,366       14,257  
Equity in income of affiliates     (2,594 )     (1,448 )     (7,177 )     (3,210 )
Other income, net     (685 )     (622 )     (5,972 )     (2,031 )
Total other (income) expense     (984 )     647       (4,008 )     6,881  
Income before provision for income taxes     29,886       52,170       96,362       103,427  
Provision for income taxes     10,622       17,031       30,162       35,179  
Net income     19,264       35,139       66,200       68,248  
Amount attributable to non-controlling interests     (3,091 )     (6,466 )     (9,078 )     (7,763 )
Net income attributable to Granite Construction Incorporated     $   16,173       $   28,673       $ 57,122       $ 60,485  
                         
Net income per share attributable to common shareholders:                        
Basic     $   0.41       $   0.73       $ 1.44       $ 1.54  
Diluted     $   0.40       $   0.72       $ 1.42       $ 1.52  
Weighted average shares of common stock:                        
Basic     39,610       39,393       39,557       39,337  
Diluted     40,306       39,894       40,225       39,868  
 
 
GRANITE CONSTRUCTION INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
 
Years Ended December 31,     2016     2015
Operating activities            
Net income     $       66,200       $       68,248  
Adjustments to reconcile net income to net cash provided by operating activities:            
Non-cash restructuring and impairment gains     (1,000 )     (1,044 )
Depreciation, depletion and amortization     64,375       64,309  
Gain on sales of property and equipment     (8,358 )     (8,286 )
Change in deferred income taxes     9,842       28,258  
Stock-based compensation     13,383       8,763  
Equity in net income from unconsolidated joint ventures     (15,614 )     (43,374 )
Gain on real estate entity     (2,452 )     —  
Net income from affiliates     (7,177 )     (3,210 )
Changes in assets and liabilities:     (46,053 )     (46,686 )
Net cash provided by operating activities     73,146       66,978  
Investing activities            
Purchases of marketable securities     (129,685 )     (104,971 )
Maturities of marketable securities     50,000       29,260  
Proceeds from called marketable securities     55,000       75,000  
Purchases of property and equipment     (90,970 )     (44,179 )
Proceeds from sales of property and equipment     12,946       13,148  
Distributions from affiliates     2,233       305  
Collection of notes receivable     4,331       943  
Other investing activities, net     (245 )     (213 )
Net cash used in investing activities     (96,390 )     (30,707 )
Financing activities            
Proceeds from long-term debt     30,000       30,000  
Debt principal payments     (45,025 )     (46,763 )
Cash dividends paid     (20,563 )     (20,445 )
Purchases of common stock     (5,227 )     (3,777 )
Contributions from non-controlling partners     5,250       7,462  
Distributions to non-controlling partners     (5,258 )     (6,992 )
Other financing activities     557       1,119  
Net cash used in financing activities     (40,266 )     (39,396 )
Decrease in cash and cash equivalents     (63,510 )     (3,125 )
Cash and cash equivalents at beginning of year     252,836       255,961  
Cash and cash equivalents at end of year     $       189,326       $       252,836  
 
 
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
 
      Three Months Ended December 31,     Years Ended December 31,
            Large Project     Construction           Large Project     Construction
      Construction     Construction     Materials     Construction     Construction     Materials
                                     
2016                                    
Revenue     $ 359,741       $ 246,077       $ 60,863       $ 1,365,198       $ 888,193       $ 261,226  
Gross profit     61,696       13,459       6,095       209,215       64,137       28,018  
Gross profit as a percent of revenue     17.2 %     5.5 %     10.0 %     15.3 %     7.2 %     10.7 %
                                     
2015                                    
Revenue     $ 341,533       $ 222,438       $ 66,191       $ 1,262,675       $ 812,720       $ 295,634  
Gross profit     67,557       25,798       7,269       187,506       79,467       32,863  
Gross profit as a percent of revenue     19.8 %     11.6 %     11.0 %     14.8 %     9.8 %     11.1 %
 
 
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
 
Contract Backlog by Segment     December 31, 2016     December 31, 2015
                         
Construction     $ 1,030,487     29.6 %     $ 860,657     29.6 %
Large Project Construction     2,453,918     70.4 %     2,047,781     70.4 %
                         
Total     $ 3,484,405     100 %     $ 2,908,438     100 %
 
 
GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
 
      Three Months Ended    

Years Ended
      December 31,    

December 31,
      2016     2015     2016     2015
Net income attributable to Granite Construction Incorporated     $ 16,173       $ 28,673       $ 57,122       $ 60,485
Depreciation, depletion and amortization expense(2)     17,738       15,792       64,375       64,309
Provision for income taxes     10,622       17,031       30,162       35,179
Interest expense, net of interest income     2,295       2,717       9,141       12,122
EBITDA     $ 46,828       $ 64,213       $ 160,800       $ 172,095
Consolidated EBITDA Margin(3)     7.0%     10.2%     6.4%     7.3%
 
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 Selling, General and Administrative expenses in the consolidated statements of operations of Granite Construction Incorporated.
 

(3)Represents EBITDA divided by consolidated revenue. Consolidated revenue was $666,681 and $2,514,617 for three and twelve months ended December 31, 2016, respectively, and $630,162 and $2,371,029 for the three and twelve months ended December 31, 2015, respectively.
 

 

Granite Construction Incorporated
Ron Botoff, 831-728-7532

 

Source: Granite Construction Incorporated