Granite Reports Second Quarter 2015 Results

  • Total Company revenues were $569.2 million
  • Total Company gross profit totaled $65.8 million
  • Construction segment gross profit margin improved nearly 390 basis points year-over-year to 13.1 percent
  • Construction Materials segment gross profit margin improved more than 410 basis points year-over-year to 13.5 percent; best performance since 2009
  • Large Project segment slowed by weather and project startup delays
  • Total Company contract backlog increased 17.1 percent year-over-year to $3.0 billion; highest in Company history

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income of $9.6 million for the quarter ended June 30, 2015, compared to net income of $13.6 million in the second quarter of 2014. Earnings per share in the quarter were $0.24, compared to $0.34 in the prior-year period.

“Our Construction and Construction Materials businesses delivered improved results in the second quarter and across the first half of 2015, reflecting successful operational changes, coupled with an economic environment improved from recent years,” said James H. Roberts, President and CEO of Granite Construction Incorporated.

“Positive economic and business trends contributed to our most solid first-half overall financial performance since the economic downturn impacted the industry in 2009. We are well positioned to continue reaping benefits from modest economic growth and continued execution improvements in the second half of 2015 and beyond.” Roberts said.

Second Quarter and First Half 2015 Results

Total Company

  • Revenue for the second quarter of 2015 totaled $569.2 million compared with $585.9 million last year, a 2.8 percent decrease. On a year-to-date basis, consolidated revenue increased 2.5 percent to $989.5 million from the first half of 2014.
  • Gross profit margin in the second quarter was 11.6 percent compared with 14.1 percent in 2014. For the first half of 2015, gross profit margin of 10.7 percent was in line with last year.
  • SG&A expenses for the second quarter of 2015 decreased 3.9 percent to $49.1 million, as selling expenses declined from last year. For the first half of 2015, SG&A totaled $101.3 million, up slightly year-over-year.

Construction

  • Construction revenue in the second quarter of 2015 increased 13.5 percent to $305.6 million, compared with $269.2 million last year.
  • Gross profit margin was 13.1 percent, compared with 9.2 percent a year ago, driven by improved project execution and an improving bidding environment.

Large Project Construction

  • Large Project Construction revenue in the second quarter of 2015 decreased 25.1 percent to $182.9 million, compared with $244.3 million last year.
  • Gross profit margin was 8.1 percent, compared with 20.8 percent in 2014. Last year's second quarter performance included significant initial profit recognition and dispute resolution income. In the second quarter of 2015, the business was impacted by severe wet weather and slow startup of new projects.

Construction Materials

  • Construction Materials revenue in the second quarter of 2015 increased 11.6 percent to $80.7 million, compared with $72.3 million last year.
  • Gross profit margin was 13.5 percent, compared to 9.4 percent last year. The improvement was driven by operational efficiencies, along with stronger volume and pricing across geographies.

 

Outlook and Guidance

“I am particularly encouraged by the continued improvement we see in our Construction and Construction Materials businesses, which reported respective 61 percent year-over-year gross profit increases in the second quarter. We continue to benefit from modest economic improvement, and we remain keenly focused on opportunities to leverage pent-up demand as the funding environment evolves,” Roberts said.

“The market for Large Projects remains robust and healthy. Certainly, weather and some preliminary design hurdles contributed to what was a challenging start to the year for this part of our business. But with a project portfolio currently weighted toward new- and early-stage projects, we are working to accelerate activity where possible to make up time.

“Despite infrastructure investment remaining stalled at the federal level, states and municipalities across the country have committed to funding some of the long overdue investments in state and local infrastructure programs. Nearly a dozen states have enacted new, user-based transportation funding since 2013. Now is the time for the federal government to follow suit and to pass a long-term highway bill that will provide the critical investment needed in America's transportation system. Unfortunately, politics continues to impede progress at the federal level,” said Roberts.

The Company’s current expectations for 2015 remain:

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

Conference Call

Granite will conduct a conference call today, July 30, 2015, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended June 30, 2015. Access to a live audio webcast is available at http://investor.graniteconstruction.com/index.cfm. The live conference call may be accessed by calling 1-866-807-9684; international callers may dial 1-412-317-5415. The call will be available for replay approximately two hours after the live audio webcast through August 7, 2015 by calling 1-877-344-7529. The conference ID for the replay is also 10068614; 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. Recognized as one of the top 25 largest construction companies in the U.S., 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 six years in a row. For more information, visit www.graniteconstruction.com. Granite is listed on the New York Stock Exchange under the ticker symbol GVA and is part of the S&P MidCap 400 Index, the MSCI KLD 400 Social Index and the Russell 2000 Index. For more information, please visit our investor relations website at investor.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.

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

             
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
             
    June 30,  

December 31,

   June 30,
    2015   2014   2014
ASSETS            
Current assets            
Cash and cash equivalents   $ 188,147   $ 255,961   $ 146,458
Short-term marketable securities     17,560     25,504     27,898
Receivables, net     362,336     310,934     363,614
Costs and estimated earnings in excess of billings     60,093     36,411     76,228
Inventories     71,022     68,920     79,501
Real estate held for development and sale     11,609     11,609     11,761
Deferred income taxes     53,231     53,231     55,874
Equity in construction joint ventures     209,016     184,575     185,859
Other current assets     22,395     23,033     30,727
Total current assets     995,409     970,178     977,920
Property and equipment, net     391,989     409,653     426,700
Long-term marketable securities     70,508     76,563     84,234
Investments in affiliates     32,655     32,361     33,936
Goodwill     53,799     53,799     53,799
Other noncurrent assets     75,332     77,940     76,797
Total assets   $ 1,619,692   $ 1,620,494   $ 1,653,386
LIABILITIES AND EQUITY            
Current liabilities            
Current maturities of long-term debt   $ 22   $ 21   $ 21
Current maturities of non-recourse debt     6,128     1,226     1,226
Accounts payable     170,474     151,935     210,777
Billings in excess of costs and estimated earnings     106,086     108,992     125,957
Accrued expenses and other current liabilities     195,131     200,652     187,348
Total current liabilities     477,841     462,826     525,329
Long-term debt     270,105     270,105     270,127
Long-term non-recourse debt     —     5,516     6,129
Other long-term liabilities     42,851     44,495     48,455
Deferred income taxes     20,615     20,446     9,803
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 39,372,298 shares as of June 30, 2015, 39,186,386 shares as of December 31, 2014 and 39,131,647 shares as of June 30, 2014     394     392     391
Additional paid-in capital     136,214     134,177     130,181
Retained earnings     650,357     659,816     637,905
Total Granite Construction Incorporated shareholders’ equity     786,965     794,385     768,477
Non-controlling interests     21,315     22,721     25,066
Total equity     808,280     817,106     793,543
Total liabilities and equity   $ 1,619,692   $ 1,620,494   $ 1,653,386

 

             
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2015   2014   2015   2014
Revenue                
Construction   $ 305,605     $ 269,220     $ 494,125     $ 426,261  
Large Project Construction     182,893       244,328       373,198       431,663  
Construction Materials     80,744       72,322       122,168       107,793  
Total revenue     569,242       585,870       989,491       965,717  
Cost of revenue                
Construction     265,543       244,393       432,388       392,289  
Large Project Construction     168,120       193,536       340,654       365,080  
Construction Materials     69,811       65,526       110,572       104,526  
Total cost of revenue     503,474       503,455       883,614       861,895  
Gross profit     65,768       82,415       105,877       103,822  
Selling, general and administrative expenses     49,094       51,098       101,297       100,346  
Gain on sales of property and equipment     (475 )     (2,993 )     (1,286 )     (3,886 )
Operating income     17,149       34,310       5,866       7,362  
Other (income) expense                
Interest income     (528 )     (413 )     (970 )     (893 )
Interest expense     3,985       4,339       7,481       7,937  
Equity in income of affiliates     (670 )     (410 )     (607 )     (1,202 )
Other income, net     (152 )     (1,697 )     (1,436 )     (1,645 )
Total other expense     2,635       1,819       4,468       4,197  
Income before provision for income taxes     14,514       32,491       1,398       3,165  
Provision for income taxes     4,975       10,284       469       2,220  
Net income     9,539       22,207       929       945  
Amount attributable to non-controlling interests     74       (8,566 )     124       (7,858 )
Net income (loss) attributable to Granite Construction Incorporated   $ 9,613     $ 13,641     $ 1,053     $ (6,913 )
                 
Net income (loss) per share attributable to common shareholders:        
Basic   $ 0.24     $ 0.35     $ 0.03     $ (0.18 )
Diluted   $ 0.24     $ 0.34     $ 0.03     $ (0.18 )
Weighted average shares of common stock:            
Basic     39,358       39,115       39,287       39,033  
Diluted     39,881       39,807       39,848       39,033  

 

         
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
         
Six Months Ended June 30,   2015   2014
Operating activities        
Net income   $ 929     $ 945  

Adjustments to reconcile net income to net cash used in operating activities:

        
Depreciation, depletion and amortization     31,331       31,878  
Gain on sales of property and equipment     (1,286 )     (3,886 )
Change in deferred income taxes     (14 )     1,613  
Stock-based compensation     4,992       6,585  
Equity in net income from unconsolidated joint ventures     (18,547 )     (25,724 )
Changes in assets and liabilities     (74,068 )     (83,799 )
Net cash used in operating activities     (56,663 )     (72,388 )
Investing activities        
Purchases of marketable securities     (29,974 )     (34,991 )
Maturities of marketable securities     16,700       25,000  
Proceeds from called marketable securities     30,000       15,000  
Purchases of property and equipment     (16,152 )     (20,091 )
Proceeds from sales of property and equipment     2,062       5,838  
Other investing activities, net     912       47  

Net cash provided by (used in) investing activities

     3,548       (9,197 )
Financing activities        
Cash dividends paid     (10,208 )     (10,142 )
Purchase of common stock     (3,291 )     (4,369 )

(Distributions to) contributions from non-controlling partners, net

     (1,215 )     12,756  
Other financing activities, net     15       677  
Net cash used in financing activities     (14,699 )     (1,078 )
Decrease in cash and cash equivalents     (67,814 )     (82,663 )
Cash and cash equivalents at beginning of period     255,961       229,121  
Cash and cash equivalents at end of period   $ 188,147     $ 146,458  

 

                         
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
                         
    Three Months Ended June 30,   Six Months Ended June 30,
    Construction  

Large
Project
Construction

  

Construction
Materials

   Construction  

Large
Project
Construction

  

Construction
Materials
                         
2015                        
Revenue   $ 305,605     $ 182,893     $ 80,744     $ 494,125     $ 373,198     $ 122,168  
Gross profit     40,062       14,773       10,933       61,737       32,544       11,596  
Gross profit as a percent of revenue     13.1 %     8.1 %     13.5 %     12.5 %     8.7 %     9.5 %
                         
2014                        
Revenue   $ 269,220     $ 244,328     $ 72,322     $ 426,261     $ 431,663     $ 107,793  

Gross profit

     24,827       50,792       6,796       33,972       66,583       3,267  

Gross profit as a percent of revenue

     9.2 %     20.8 %     9.4 %     8.0 %     15.4 %     3.0 %

 

                         
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
                         

Contract Backlog by Segment

   June 30, 2015   March 31, 2015   June 30, 2014
                         
Construction   $ 831,067   27.7 %   $ 749,261   25.5 %   $ 974,986   38.1 %
Large Project Construction     2,169,736   72.3 %     2,187,888   74.5 %     1,586,879   61.9 %
                         
Total   $ 3,000,803   100.0 %   $ 2,937,149   100.0 %   $ 2,561,865   100.0 %

 

                 
GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2015   2014   2015   2014
Net income (loss) attributable to Granite Construction Incorporated   $ 9,613     $ 13,641     $ 1,053     $ (6,913 )
Depreciation, depletion and amortization expense(2)     15,704       16,046       31,331       31,878  
Provision for income taxes     4,975       10,284       469       2,220  
Interest expense, net of interest income     3,457       3,926       6,511       7,044  
EBITDA(1)   $ 33,749     $ 43,897     $ 39,364     $ 34,229  
Consolidated EBITDA Margin(3)     5.9 %     7.5 %     4.0 %     3.5 %
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 $569,242 and $989,491 for three and six months ended June 30, 2015, respectively and $585,870 and $965,717 for the three and six months ended June 30, 2014, respectively.

 

Granite Construction Incorporated
Ron Botoff, 831-728-7532

 

Source: Granite Construction Incorporated