Granite Reports Fourth Quarter and Fiscal Year 2015 Results

Net Income

  • Fourth quarter diluted earnings per share $0.72 – up 67.4 percent year-over-year
  • 2015 diluted earnings per share $1.52 – up 137.5 percent year-over-year

Gross Profit1

  • Fourth quarter gross profit $102.0 million – up 38.4 percent year-over-year
  • Fourth quarter gross profit margin 16.2 percent – up 369 basis points year-over-year
  • 2015 gross profit $303.4 million – up 25.2 percent year-over-year
  • 2015 gross profit margin 12.8 percent – up 214 basis points year-over year

Revenues

  • Fourth quarter revenues $630.2 million – up 6.8 percent year-over-year
  • 2015 revenues $2.4 billion – up 4.2 percent year-over year

Company

  • Backlog increases 7.0 percent year-over-year to $2.9 billion
  • 2015 EBITDA2$172.1 million – up 37.0 percent year-over-year

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income of $60.5 million for the year ended December 31, 2015, compared with net income of $25.3 million in the prior year. Diluted earnings per share (EPS) for the year was $1.52 compared to $0.64 per share in 2014.

Granite reported net income of $28.7 million for the quarter ended December 31, 2015, compared with net income of $17.0 million in the fourth quarter of 2014. Diluted EPS in the quarter was $0.72 compared to $0.43 per share in the prior-year period.

“Granite teams across the country performed solidly in the fourth quarter and throughout 2015. Our relentless focus on safety, execution, and growth is driving improved financial results,” said James H. Roberts, President and Chief Executive Officer of Granite Construction Incorporated.

“The formula for our growing success emphasizes efficient execution on Company backlog of more than $2.9 billion. We are investing in our people as they capture profitable diversification opportunities, and we are creating a culture of continuous improvement that enables us to perform our business more effectively every day,” Roberts said.

Fiscal Year 2015 Results

Total Company

  • Revenues for 2015 were approximately $2.4 billion, up 4.2 percent from 2014.
  • Gross profit increased 25.2 percent year-over-year to $303.4 million, driven by significantly improved performance in the Construction and Construction Materials segments.
  • Gross profit margin was 12.8 percent compared with 10.6 percent in 2014.
  • Selling, general and administrative (SG&A) expenses1 were $207.3 million, compared with $195.8 million last year. The increase is attributable primarily to personnel-related costs.
  • Backlog increased 7.0 percent year-over-year to $2.9 billion, compared with $2.7 billion a year ago.
  • 2015 EBITDA increased 37.0 percent year-over-year to $172.1 million, with resulting EBITDA margin of 7.3 percent, up more than 170 basis points from 2014.
  • $358.5 million in cash and marketable securities, as of December 31, 2015.

Construction

  • Construction revenue in 2015 was approximately $1.3 billion, up 6.4 percent from nearly $1.2 billion in 2014, driven by improved performance in certain Western markets and Kenny.
  • Gross profit margin was 15.1 percent compared with 9.7 percent a year ago. Improved safety, execution, and market diversification drove the year-over-year growth.

Large Project Construction

  • Large Project Construction revenue decreased 1.5 percent to $812.7 million from $825.0 million in 2014, as Granite teams recovered from early-year weather and project delays.
  • Gross profit margin was 9.8 percent compared with13.0 percent in 2014 primarily reflecting the timing of overall project portfolio progression coupled with execution issues on certain projects.

Construction Materials

  • Construction Materials revenue increased to $295.6 million compared with $263.8 million last year. The 12.1 percent increase was driven by improved volumes and aggregate price increases.
  • Gross profit margin in 2015 was 11.2 percent, compared with 7.4 percent in 2014. Profit growth was driven by improved volumes, pricing, and production efficiency.

Fourth Quarter 2015 Results

Total Company

  • Revenues increased 6.8 percent to $630.2 million compared with $589.8 million in the fourth quarter of 2014.
  • Gross profit increased 38.4 percent year-over-year to $102.0 million, driven by significantly improved performance in the Construction and Construction Materials segments.
  • Gross profit margin was 16.2 percent compared with 12.5 percent in 2014.
  • Selling, general and administrative expenses1 increased $11.4 million from 2014, to $61.4 million, attributable primarily to personnel-related costs.

Construction

  • Construction segment revenue increased 9.1 percent to $341.5 million, compared with $313.1 million in the fourth quarter of 2014. The increase was driven by improved performance in certain Western markets and Kenny.
  • Gross profit margin increased 927 basis points year-over-year to 20.0 percent, driven by improved safety, execution, and diversification.

Large Project Construction

  • Large Project Construction segment revenue increased 4.0 percent to $222.4 million, compared with $213.9 million in the fourth quarter of 2014, due to project progression enabled, in part, by mild weather conditions.
  • Gross profit margin was 11.6 percent, a decrease of 559 basis points from 2014, primarily reflecting the timing of overall project portfolio progression. Fourth quarter 2014 segment results included initial profit recognition and dispute resolution that was not repeated in 2015.

Construction Materials

  • Construction Materials revenue increased 5.5 percent to $66.2 million, compared with $62.8 million in the fourth quarter of 2014. Revenue growth was attributable primarily to increased volume, with modest impact from pricing.
  • Gross profit margin for the quarter was 12.0 percent, compared with 5.4 percent in 2014. Increased gross profit performance was driven by improved volume, pricing, and production efficiency.

Outlook

“The FAST Act, the first long-term highway bill passed by Congress in more than a decade, finally provides the transportation industry with more substantive, long-term funding solutions for our country’s infrastructure investment needs,” Roberts continued. “Passage of the federal Highway Bill was critically important, but it is only a starting point. Now we are intently focused on legislators at the state and local level across the country.

In California, the Governor and legislature are working to address very real near- and long-term funding shortfalls against the estimated more than $130 billion needed in the next decade for state and local highway and road projects. We will continue to work hard to educate and to influence our elected officials in California and other Granite states to do their part and deliver appropriate levels of infrastructure funding and investment,” Roberts continued.

“While the FAST Act is expected to provide a positive impact on our results late in 2016, and incremental growth in 2017, the 2016 outlook for growth is balanced against existing public funding headwinds at state and local levels. Stakeholders across the transportation industry all agree that substantive, near-term, incremental infrastructure investment is a critical component of future prosperity and quality of life throughout our great country,” Roberts said.

      (1) Gross profit and selling, general and administrative expenses are approximately $6.1 million and $8.1 million lower than the amounts previously reported for the quarter and year ended December, 31 2014, respectively, due to reclassifications of (i) incentive compensation, and (ii) sales personnel payroll and related expenses.
      (2) Please refer to a description and reconciliation in the attached EBITDA Reconciliation table.
         

Conference Call

Granite will conduct a conference call today, Thursday, February 25, 2016, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended December 31, 2015. 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 March 3, 2016, by calling 1-877-344-7529, replay access code 10080736; international callers may dial 1-412-317-0088.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE:GVA) is recognized as one of the largest diversified construction companies and construction materials producers in the U.S. Granite is an award-winning firm in safety, quality and environmental stewardship, and has been named one of the World's Most Ethical Companies for six 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,       2015     2014
ASSETS              
Current assets              
Cash and cash equivalents       $ 252,836     $ 255,961
Short-term marketable securities         25,043       25,504
Receivables, net         340,822       310,934
Costs and estimated earnings in excess of billings         59,070       36,411
Inventories         55,553       68,920
Real estate held for development and sale         500       11,609
Equity in construction joint ventures         224,689       184,575
Other current assets         26,709       23,033
Total current assets         985,222       916,947
Property and equipment, net         385,129       409,653
Long-term marketable securities         80,652       76,563
Investments in affiliates         33,182       32,361
Goodwill         53,799       53,799
Deferred income taxes, net         4,329       32,785
Other noncurrent assets         85,547       77,940
Total assets       $ 1,627,860     $ 1,600,048
LIABILITIES AND EQUITY              
Current liabilities              
Current maturities of long-term debt       $ 15,024     $ 21
Current maturities of non-recourse debt         —       1,226
Accounts payable         157,571       151,935
Billings in excess of costs and estimated earnings         92,515       108,992
Accrued expenses and other current liabilities         200,935       200,652
Total current liabilities         466,045       462,826
Long-term debt         245,081       270,105
Long-term non-recourse debt         —       5,516
Other long-term liabilities         46,613       44,495
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 39,412,877 shares as of December 31, 2015 and 39,186,386 shares as of December 31, 2014         394       392
Additional paid-in capital         139,412       134,177
Retained earnings         699,431       659,816
Total Granite Construction Incorporated shareholders’ equity         839,237       794,385
Non-controlling interests         30,884       22,721
Total equity         870,121       817,106
Total liabilities and equity       $ 1,627,860     $ 1,600,048
                   

 

                                       
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
                                       
(Unaudited - in thousands, except per share data)
                                       
        Three Months Ended        
        December 31,     Years ended December 31,  
        2015       2014           2015       2014  
Revenue                                      
Construction       $ 341,532       $ 313,089           $ 1,262,675       $ 1,186,445  
Large project construction         222,438         213,934             812,720         825,044  
Construction materials         66,192         62,766             295,634         263,781  
Total revenue         630,162         589,789             2,371,029         2,275,270  
Cost of revenue                                      
Construction         273,373         279,611             1,072,485         1,071,408  
Large project construction         196,534         177,058             732,708         717,382  
Construction materials         58,246         59,394             262,478         244,233  
Total cost of revenue         528,153         516,063             2,067,671         2,033,023  
Gross profit(1)         102,009         73,726             303,358         242,247  
Selling, general and administrative expenses(1)      

 

 61,395         50,022             207,339         195,762  
Restructuring and impairment gains         (6,007 )       (2,643 )           (6,003 )       (2,643 )
Gain on sales of property and equipment         (6,196 )       (9,081 )           (8,286 )       (15,972 )
Operating income         52,817         35,428             110,308         65,100  
Other expense (income)                                      
Interest income         (574 )       (529 )           (2,135 )       (1,872 )
Interest expense         3,291         3,733             14,257         14,159  
Equity in (income) loss of affiliates         (1,448 )       1,409             (3,210 )       (901 )
Other income, net         (622 )       (1,433 )           (2,031 )       (1,883 )
Total other expense         647         3,180             6,881         9,503  
Income before provision for income taxes         52,170         32,248             103,427         55,597  
Provision for income taxes         17,031         11,420             35,179         19,721  
Net income         35,139         20,828             68,248         35,876  
Amount attributable to non-controlling interests         (6,466 )       (3,849 )           (7,763 )       (10,530 )

Net income attributable to Granite Construction Incorporated

       $ 28,673       $ 16,979           $ 60,485       $ 25,346  
                                       
Net income per share attributable to common shareholders:                                      
Basic       $ 0.73       $ 0.43           $ 1.54       $ 0.65  
Diluted       $ 0.72       $ 0.43           $ 1.52       $ 0.64  
Weighted average shares of common stock:                                      
Basic         39,393         39,163             39,337         39,096  
Diluted         39,894         39,809             39,868         39,795  
 
Note:  

(1)Gross profit and selling, general and administrative expenses are approximately $6.1 million and $8.1 million lower than the amounts previously reported for the quarter and year ended December, 31 2014, respectively, due to reclassifications of (i) incentive compensation, and (ii) sales personnel payroll and related expenses.
 

 

               
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
               
(Unaudited - in thousands)
               
Years Ended December 31,       2015     2014  
Operating activities              
Net income       $ 68,248       $ 35,876  
Adjustments to reconcile net income to net cash provided by operating activities:              
Non-cash restructuring and impairment gains         (1,044 )       (2,643 )
Depreciation, depletion and amortization         64,309         68,252  
Gain on sales of property and equipment         (8,286 )       (15,972 )
Change in deferred income tax         28,258         14,907  
Stock-based compensation         8,763         11,160  
Equity in net income from unconsolidated joint ventures         (43,374 )       (49,168 )
Changes in assets and liabilities         (49,896 )       (19,270 )
Net cash provided by operating activities         66,978         43,142  
Investing activities              
Purchases of marketable securities         (104,971 )       (64,975 )
Maturities of marketable securities         29,260         45,000  
Proceeds from called marketable securities         75,000         35,000  
Purchases of property and equipment         (44,179 )       (43,428 )
Proceeds from sales of property and equipment         13,148         28,614  
Other investing activities, net         1,035         569  
Net cash (used in) provided by investing activities         (30,707 )       780  
Financing activities              
Proceeds from long-term debt         30,000         —  
Debt principal payments         (46,763 )       (1,226 )
Cash dividends paid         (20,445 )       (20,319 )
Purchase of common stock         (3,777 )       (5,124 )
Contributions from non-controlling partners         7,462         15,835  

Distributions to non-controlling partners

         (6,992 )       (8,066 )
Other financing activities, net         1,119         1,818  
Net cash used in financing activities         (39,396 )       (17,082 )
(Decrease) increase in cash and cash equivalents         (3,125 )       26,840  
Cash and cash equivalents at beginning of year         255,961         229,121  
Cash and cash equivalents at end of year       $ 252,836       $ 255,961  
               

 

                                   
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
                                           
2015                                          
Revenue       $ 341,532       222,438       66,192         $ 1,262,675       $ 812,720       $ 295,634  
Gross profit(1)         68,159       25,904       7,946           190,190         80,012         33,156  
                                                             
Gross profit as a percent of revenue         20.0 %     11.6 %     12.0 %         15.1 %       9.8 %       11.2 %
                                           
2014                                          
Revenue       $ 313,089       213,934       62,766         $ 1,186,445       $ 825,044       $ 263,781  
Gross profit(1)         33,478       36,876       3,372           115,037         107,662         19,548  
                                                             
Gross profit as a percent of revenue         10.7 %     17.2 %     5.4 %         9.7 %       13.0 %       7.4 %
                                           
                                           
(1)Gross profit is approximately $6.1 million and $8.1 million lower than the amounts previously reported for the quarter and year ended December, 31 2014, respectively, due to reclassifications of (i) incentive compensation, and (ii) sales personnel payroll and related expenses.
 

 

                           
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
 
Contract Backlog by              
Segment       December 31, 2015     December 31, 2014
                           
Construction       $ 860,657     29.6 %     $ 712,967     26.2 %
                                   
Large project construction         2,047,781     70.4 %       2,005,906     73.8 %
                           
Total       $ 2,908,438     100.0 %     $ 2,718,873     100.0 %
                                   

 

                               
GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
                               
        Three Months Ended          
        December 31,         Years Ended December 31,
        2015       2014           2015       2014  
Net income attributable to Granite Construction Incorporated       $ 28,673       $ 16,979           $ 60,485       $ 25,346  
Depreciation, depletion and amortization expense(2)         15,792         18,284             64,309         68,252  
Provision for income taxes         17,031         11,420             35,179         19,721  
Interest expense, net of interest income         2,717         3,204             12,122         12,287  
EBITDA       $ 64,213       $ 49,887           $ 172,095       $ 125,606  
Consolidated EBITDA Margin(3)         10.2 %       8.5 %           7.3 %       5.5 %
                               
Note:
(1) We define EBITDA as GAAP net income (loss) attributable to Granite Construction Incorporated, adjusted for interest, taxes, depreciation, depletion and amortization. We believe this non-GAAP financial measure and the associated margin are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. However, the reader is cautioned that any non-GAAP financial measures provided by the Company are provided in addition to, and not as alternatives for, the Company's reported results prepared in accordance with GAAP. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures provided by the Company may not be comparable to similar measures provided by other companies.
 
(2) Amount includes the sum of depreciation, depletion and amortization which are classified as Cost of Revenue and 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 $630,162 and $2,371,029 for three and twelve months ended December 31, 2015, respectively and $589,789 and $2,275,270 for the three and twelve months ended December 31, 2014, respectively.

 

Granite Construction Incorporated
Ron Botoff, 831-728-7532

Source: Granite Construction Incorporated