Granite Construction Incorporated

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Granite Reports Second Quarter 2014 Results
  • Second quarter 2014 revenues increase to $585.9 million, up 6.5 percent year-over-year
  • Margin improvement across all segments drives second quarter 2014 gross profit increase to $82.4 million, up from $49.6 million in 2013
  • Second quarter 2014 gross profit margin of 14.1 percent – up more than 500 basis points year-over-year
  • Total contract backlog $2.6 billion

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE:GVA) today reported net income of $13.6 million for the quarter ended June 30, 2014, compared to revised1 net income of $1.4 million in the second quarter of 2013. Diluted earnings per share in the quarter were $0.34 compared to $0.04 in the prior-year period.

“We are encouraged by the steady growth we have experienced thus far in 2014 as our teams are successfully leveraging opportunities and recent positive trends in all parts of our business,” said James H. Roberts, President and CEO of Granite Construction Incorporated. “Our opportunities to win new business and improve execution on our current work remain a top priority and focus going forward.”

Second Quarter 2014 Results

Total Company

  • Revenue for the second quarter of 2014 increased 6.5 percent to $585.9 million compared with $550.3 million last year.
  • Gross profit margin in the second quarter was 14.1 percent compared with 9.0 percent in 2013, driven primarily by improved performance in the Large Project Construction and Construction Materials segments.
  • Profit performance was driven by projects reaching profit recognition, dispute resolution, and overall improved project execution in both the Construction and Large Project Construction segments, combined with improved volumes and efficiency gains in the Construction Materials segment.
  • Second quarter 2014 profit performance continued to be offset by the ramp of projects which have not reached profit recognition.
  • Selling, general and administrative expenses for the second quarter of 2014 increased $4.3 million, to $51.1 million, related primarily to the timing of pre-bid costs, coupled with increased Continuous Improvement investment.
  • Net income attributable to non-controlling interests was $8.6 million for the second quarter of 2014, compared with $0.4 million in 2013.
  • Total company backlog was $2.6 billion at the end of the second quarter of 2014, down from $2.8 billion last year. This total does not include Granite’s nearly $700-million portion of the successful bid on the I-4 Ultimate project in Florida, which is expected to be added to backlog in the third quarter.
  • Balance sheet remains strong with $258.6 million in cash and marketable securities.

Construction

  • Though Construction backlog increased more than 20 percent to $975.0 million year-over-year, revenue decreased 12.8 percent to $269.2 million, compared with $308.6 million last year. The decrease is attributable to project timing, a change in the mix of power projects from 2013, and weaker-than-anticipated public market activity in the Northwest.
  • Gross profit margin for the quarter was 9.2 percent, compared with 7.8 percent in 2013, driven by improved performance across certain markets in the West.

Large Project Construction

  • Large Project Construction revenue increased 34.6 percent to $244.3 million, compared with $181.6 million last year. The increase was a result of job progression in the quarter.
  • Gross profit margin for the quarter was 20.8 percent, compared with 11.9 percent in 2013. The improvement was driven by project profit recognition, dispute resolution, and improved project execution.

Construction Materials

  • Construction Materials revenue increased 20.2 percent to $72.3 million, compared with $60.2 million last year. The revenue increase was attributable to improved volumes related to private sector activity and mixed trends in public markets.
  • Gross profit margin for the quarter was 9.4 percent, compared with 6.6 percent in 2013. Gross profit performance was driven by improved volumes and operational efficiencies.

Outlook and Guidance

“With a strong backlog of work and robust bidding activity, the outlook for continued growth remains positive,” Roberts continued. “We look to execute on the momentum we built in the first half of the year.”

“As expected, Construction Materials segment results are improving, and Large Project segment performance is on track to drive strong results in the second half of 2014,” Roberts said.

The Company’s current expectations for 2014 remain:

Consolidated revenues from $2.4 to $2.8 billion

Gross Profit significantly improved from 2013

Consolidated EBITDA2 margin of 5 percent to 7 percent

     

(1)

   

Please refer to the description of fiscal year 2013 revisions in the Granite Construction Incorporated Quarterly Report on Form 10-Q.

(2)

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

Conference Call

Granite will conduct a conference call today, Friday, August 1, 2014, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended June 30, 2014. Access to a live audio webcast is available at http://investor.graniteconstruction.com/index.cfm. The live conference call may be accessed by calling (877) 643-7158; international callers may dial (914) 495-8565. The conference ID for the live call is 77717739. The call will be recorded and available for replay approximately two hours after the live audio webcast through August 9, 2014 by calling (855) 859-2056. The conference ID for the replay is also 77717739; international callers may dial (404) 537-3406.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE:GVA) is one of the nation’s leading 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 five years in a row. For more information, visit www.graniteconstruction.com. 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, 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.

 
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
                   
    June 30,     December 31,     June 30,
2014 2013 2013
                  As Revised
ASSETS
Current assets
Cash and cash equivalents $ 146,458 $ 229,121 $ 247,833
Short-term marketable securities 27,898 49,968 21,271
Receivables, net 363,614 313,598 336,418
Costs and estimated earnings in excess of billings 76,228 33,306 62,426
Inventories 79,501 62,474 68,905
Real estate held for development and sale 11,761 12,478 50,696
Deferred income taxes 55,874 55,874 36,687
Equity in construction joint ventures 185,859 162,673 148,727
Other current assets       30,727       30,711       36,203
Total current assets 977,920 950,203 1,009,166
Property and equipment, net 426,700 436,859 470,893
Long-term marketable securities 84,234 67,234 55,225
Investments in affiliates 33,936 32,480 31,421
Goodwill 53,799 53,799 53,598
Other noncurrent assets       76,797       76,580       80,365
Total assets     $ 1,653,386     $ 1,617,155     $ 1,700,668
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 21 $ 21 $ 20
Current maturities of non-recourse debt 1,226 1,226 2,147
Accounts payable 210,777 160,706 188,124
Billings in excess of costs and estimated earnings 125,957 138,375 144,462
Accrued expenses and other current liabilities       187,348       197,242       200,758
Total current liabilities 525,329 497,570 535,511
Long-term debt 270,127 270,127 270,148
Long-term non-recourse debt 6,129 6,741 7,354
Other long-term liabilities 48,455 48,580 46,817
Deferred income taxes 9,803 7,793 8,055
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 39,131,647 shares as of June 30, 2014, 38,917,728 shares as of December 31, 2013 and 38,852,463 shares as of June 30, 2013 391 389 389
Additional paid-in capital 130,181 126,449 121,368
Retained earnings       637,905       655,102       681,311
Total Granite Construction Incorporated shareholders’ equity 768,477 781,940 803,068
Non-controlling interests       25,066       4,404       29,715
Total equity       793,543       786,344       832,783
Total liabilities and equity     $ 1,653,386     $ 1,617,155     $ 1,700,668
 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
 
    Three Months Ended     Six Months Ended
June 30,     June 30,
    2013     2013
      2014     As Revised     2014     As Revised
Revenue
Construction $ 269,220 $ 308,602 $ 426,261 $ 485,720
Large Project Construction 244,328 181,557 431,663 353,271
Construction Materials 72,322 60,185 107,771 89,936
Real Estate       —         4         22         125  
Total revenue       585,870         550,348         965,717         929,052  
Cost of revenue
Construction 244,393 284,532 392,289 448,451
Large Project Construction 193,536 159,986 365,080 308,979
Construction Materials 65,524 56,231 104,526 91,957
Real Estate       2         3         —         13  
Total cost of revenue       503,455         500,752         861,895         849,400  
Gross profit 82,415 49,596 103,822 79,652
Selling, general and administrative expenses 51,098 46,789 100,346 103,950
Gain on sales of property and equipment       2,993         3,306         3,886         4,394  
Operating income (loss) 34,310 6,113 7,362 (19,904 )
Other income (expense)
Interest income 413 380 893 508
Interest expense (4,339 ) (3,700 ) (7,937 ) (7,345 )
Equity in income of affiliates 410 698 1,202 275
Other income (expense), net       1,697         (495 )       1,645         608  
Total other expense       (1,819 )       (3,117 )       (4,197 )       (5,954 )
Income (loss) before provision for (benefit from) income taxes 32,491 2,996 3,165 (25,858 )
Provision for (benefit from) income taxes       10,284         1,214         2,220         (7,813 )
Net income (loss) 22,207 1,782 945 (18,045 )
Amount attributable to non-controlling interests       (8,566 )       (363 )       (7,858 )       (2,518 )
Net income (loss) attributable to Granite Construction Incorporated     $ 13,641       $ 1,419       $ (6,913 )     $ (20,563 )
 
Net income (loss) per share attributable to common shareholders:
Basic $ 0.35 $ 0.04 $ (0.18 ) $ (0.53 )
Diluted $ 0.34 $ 0.04 $ (0.18 ) $ (0.53 )
Weighted average shares of common stock:
Basic 39,115 38,829 39,033 38,720
Diluted       39,807         39,769         39,033         38,720  
 

GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
             
        2013
Six Months Ended June 30,     2014     As Revised
Operating activities
Net income (loss) $ 945 $ (18,045 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on restructuring, net - (497 )
Depreciation, depletion and amortization 31,878 34,362
Gain on sales of property and equipment (3,886 ) (4,394 )
Change in deferred income taxes 1,613 -
Stock-based compensation 6,585 8,101
Equity in net income from unconsolidated joint ventures (25,724 ) (31,201 )
Contributions to unconsolidated construction joint ventures (13,797 ) (16,209 )
Distributions from unconsolidated construction joint ventures 16,528 42,486
Changes in assets and liabilities       (86,530 )       (66,251 )
Net cash used in operating activities       (72,388 )       (51,648 )
Investing activities
Purchases of marketable securities (34,991 ) (14,975 )
Maturities of marketable securities 25,000 43,000
Proceeds from sale of marketable securities 15,000 5,000
Purchases of property and equipment (20,091 ) (19,422 )
Proceeds from sales of property and equipment 5,838 8,481
Other investing activities, net - (4,621 )
Other investing activities, net       47         163  
Net cash (used in) provided by investing activities       (9,197 )       17,626  
Financing activities
Long-term debt principal payments (613 ) (10,594 )
Cash dividends paid (10,142 ) (10,078 )
Purchase of common stock (4,369 ) (5,022 )
Contributions from non-controlling partners 13,442 6,001
Distributions to noncontrolling partners (686 ) (21,142 )
Other financing activities, net       1,290         700  
Net cash used in financing activities       (1,078 )       (40,135 )
Decrease in cash and cash equivalents (82,663 ) (74,157 )
Cash and cash equivalents at beginning of period       229,121         321,990  
Cash and cash equivalents at end of period     $ 146,458       $ 247,833  
 

GRANITE CONSTRUCTION INCORPORATED
BUSINESS SEGMENT INFORMATION
(Unaudited - dollars in thousands)
 
    Three Months Ended June 30,     Six Months Ended June 30,
    Large Project     Construction         Large Project     Construction    
  Construction     Construction     Materials     Real Estate Construction     Construction     Materials     Real Estate
 
2014
Revenue $ 269,220 $ 244,328 $ 72,322 $ - $ 426,261 $ 431,663 $ 107,771 $ 22
Gross profit (loss) 24,827 50,792 6,798 (2 ) 33,972 66,583 3,245 22
Gross profit (loss) as a percent of revenue 9.2 % 20.8 % 9.4 % n/a 8.0 % 15.4 % 3.0 % 100.0 %
 
2013 As Revised
Revenue $ 308,602 $ 181,557 $ 60,185 $ 4 $ 485,720 $ 353,271 $ 89,936 $ 125
Gross profit (loss) 24,070 21,571 3,954 1 37,269 44,292 (2,021 ) 112
Gross profit (loss) as a percent of revenue 7.8 % 11.9 % 6.6 % 25.0 % 7.7 % 12.5 % (2.2 )% 89.6 %
                                                                                 
 

GRANITE CONSTRUCTION INCORPORATED
CONTRACT BACKLOG BY SEGMENT
(Unaudited - dollars in thousands)
 
Contract Backlog by Segment     June 30, 2014     March 31, 2014     June 30, 2013
                       
Construction $ 974,986 38.1 % $ 786,458 30.6 % $ 807,686 28.9 %
Large Project Construction       1,586,879     61.9 %       1,783,254     69.4 %       1,990,201     71.1 %
 
Total     $ 2,561,865     100.0 %     $ 2,569,712     100.0 %     $ 2,797,887     100.0 %
 

GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
 
   

Three Months

   

Six Months

Ended June 30,

   

Ended June 30,

      2014
Net income (loss) attributable to Granite Construction Incorporated $ 13,641 $ (6,913 )
Depreciation, depletion and amortization expense(2) 16,046 31,878
Provision for income taxes 10,284 2,220
Interest expense, net of interest income       3,926         7,044  
EBITDA(1)     $ 43,897       $ 34,229  
Consolidated EBITDA Margin       7.5 %       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 general and administrative expenses in the condensed consolidated statements of operations of Granite Construction Incorporated.

Granite Construction Incorporated

Ron Botoff, 831-728-7532

Source: Granite Construction Incorporated

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