GVA Granite Construction Inc

• Revenue increased to $762.9 million, up 26.2 percent year-over-year
• Record Company backlog of $4.1 billion, up 8.4 percent year-over-year
• Construction segment and Construction Materials segment gross profit margins at 14.6 percent
• Large Project Construction segment gross profit at breakeven
• Net income of $14.1 million flat to 2016

Granite Construction Incorporated (NYSE:GVA) today reported net income of $14.1 million for the quarter ended June 30, 2017, compared to net income of $14.2 million in the second quarter of 2016. Earnings per diluted share in the quarter was $0.35, flat compared to the prior-year period.

"This is a very exciting time for our business. Our growth expectations for 2017 and 2018 have increased, and our outlook continues to improve across our business," said James H. Roberts, President and Chief Executive Officer of Granite Construction Incorporated.

"Our businesses continue to win new work across the portfolio, with broad project wins driving Company backlog above $4 billion for the first time in our Company's 95-year history. For the fifth consecutive quarter, Construction segment backlog finished above the $1-billion mark," Roberts continued.

"We are particularly pleased with consistently strong margin performance in the Construction segment and improving margins in the Construction Materials segment. We expect strong growth in both segments in the second half of 2017 and through 2018.

"Granite teams recovered well from challenging winter and spring weather, with solid safety performance across the business in alignment with operations that accelerated through the end of the second quarter. We also continued acceleration to completion on a number of under-performing, mature projects in our Large Project Construction segment portfolio. This will allow our teams to complete these projects in 2017 and 2018, but, as we saw in the first quarter, it created an increased near-term drag on our results," Roberts said.

Second Quarter 2017 Results

Total Company

• Second quarter consolidated revenue increased 26.2 percent to $762.9 million compared with $604.6 million in the second quarter of 2016. On a year-to-date basis, consolidated revenue increased 17.9 percent to $1.23 billion in the first half of 2017.
• Gross profit increased 1.9 percent to $74.6 million compared with $73.2 million last year. On a year-to-date basis, gross profit decreased 11.3 percent to $99.7 million in the first half of 2017.
• Gross profit margin was 9.8 percent compared with 12.1 percent in 2016. For the first half of 2017, gross profit margin was 8.1 percent compared with 10.8 percent last year.
• Total Company backlog was $4.06 billion, up 8.4 percent year-over-year. Construction segment backlog increased 10.6 percent year-over-year to $1.27 billion. Large Project Construction segment backlog increased 7.4 percent from last year to $2.80 billion.
• Second quarter selling, general and administrative (SG&A) expenses increased to $51.4 million, compared to $48.7 million last year. For the first half of 2017, SG&A expenses were $113.2 million, compared to $104.8 million last year.
• Our balance sheet remains strong with cash and marketable securities of $285.9 million, as of June 30, 2017, an increase of $47.0 million from June 30, 2016.

Second Quarter Segment Results

Construction

• Construction revenue increased 29.6 percent to $429.3 million, compared with $331.3 million last year.
• Gross profit increased 27.4 percent to $62.5 million compared to $49.1 million last year.
• Gross profit margin of 14.6 percent was down slightly from 14.8 percent a year ago.
• Despite continued wet weather through early-April, operations recovered and accelerated through the second quarter.

Large Project Construction

• Large Project Construction revenue increased 29.0 percent to $254.5 million, compared with $197.3 million last year.
• Gross profit decreased to $0.5 million compared to $13.7 million last year, as project write-downs totaled $23.8 million compared to $14.6 million in the second quarter of 2016. In addition, there were no project write-ups in this year’s quarter compared to $9.8 million in the second quarter of 2016.
• Gross profit margin was 0.2 percent compared with 6.9 percent in 2016.
• In the second quarter, accelerated activity on certain mature projects represented a significant amount of segment revenue as it did in the first quarter. We continue to negotiate resolutions for design, weather, project execution, and owner-related issues, while we focus on closing out several of our challenging projects in late-2017 and through 2018.
• Three new projects were added to segment backlog in the quarter. In alignment with increased project selectivity, these projects join an evolving project portfolio -- Granite's leadership role on projects is growing, as we focus on project selection, partner selection, project duration, and owner dynamics, all with an eye on significantly higher return expectations.

Construction Materials

• Construction Materials revenue was $79.2 million compared to last year at $75.9 million.
• Second quarter gross profit expanded to $11.6 million compared to $10.5 million last year.
• Gross profit margin of 14.6 percent increased from 13.8 percent a year ago.
• The gross profit and margin improvement was attributable to steady demand across geographies in the West.

Outlook and Guidance

"Market conditions are changing across geographies and across end markets, and our business leaders have been tasked with raising their expectations in response to improved demand. We see significant expansion in our markets, and it is incumbent upon us as a leader in our industry, to raise our expectations for returns in all three segments of our business," said Roberts. "Our outlook for growth continues to improve. As we enter the heart of our construction season, Granite teams are focused on solid safety performance and consistent execution of record backlog. We are extremely well positioned to benefit from steady private-market demand, as well as a significant uptick in key public transportation markets that is beginning this year and should continue for the foreseeable future."

The Company’s expectations for 2017 are:

• Mid- to high-teens consolidated revenue growth
• Consolidated EBITDA margin1 of 6.0% to 6.5%

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

Conference Call

Granite will conduct a conference call today, August 1, 2017, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended June 30, 2017. The Company invites investors to listen to a live audio webcast on its Investor Relations website, http://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 August 8, 2017, by calling 1-877-344-7529, replay access code 10110574; 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 eight 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

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands, except share and per share data)                

June 30,

  December 31,   June 30,     2017   2016   2016 ASSETS

 

Current assets

 

Cash and cash equivalents $ 178,068 $ 189,326 $ 161,218 Short-term marketable securities 47,821 64,884 34,959 Receivables, net 484,245 419,345 431,127 Costs and estimated earnings in excess of billings 99,883 73,102 86,025 Inventories 65,495 55,245 64,711 Equity in construction joint ventures 230,448 247,182 245,509 Other current assets   43,597     39,908     31,949   Total current assets 1,149,557 1,088,992 1,055,498 Property and equipment, net 414,079 406,650 409,860 Long-term marketable securities 59,990 62,895 42,653 Investments in affiliates 37,170 35,668 34,517 Goodwill 53,799 53,799 53,799 Deferred income taxes, net —

—

5,407 Other noncurrent assets   88,550     85,449     84,095   Total assets   $ 1,803,145     $ 1,733,453     $ 1,685,829  

 

LIABILITIES AND EQUITY

 

Current liabilities

 

Current maturities of long-term debt $ 14,796 $ 14,796 $ 14,795 Accounts payable 252,527 199,029 210,923 Billings in excess of costs and estimated earnings 114,180 97,522 90,484 Accrued expenses and other current liabilities   231,048     218,587     212,986   Total current liabilities 612,551 529,934 529,188 Long-term debt 227,114 229,498 241,907 Deferred income taxes, net 5,420 5,441

—

Other long-term liabilities 47,983 45,989 45,719 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: 39,837,295 shares as of June 30, 2017, 39,621,140 shares as of December 31, 2016 and 39,597,469 shares as of June 30, 2016 398 396 396 Additional paid-in capital 155,476 150,337 145,156 Accumulated other comprehensive income (loss) 71 (371 ) (1,811 ) Retained earnings   715,451     735,626     692,740   Total Granite Construction Incorporated shareholders’ equity 871,396 885,988 836,481 Non-controlling interests   38,681     36,603     32,534   Total equity   910,077     922,591     869,015   Total liabilities and equity   $ 1,803,145     $ 1,733,453     $ 1,685,829       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,     2017   2016   2017   2016 Revenue         Construction $ 429,269 $ 331,346 $ 656,118 $ 540,833 Large Project Construction 254,463 197,322 461,496 392,771 Construction Materials   79,181     75,911     113,699     110,427   Total revenue   762,913     604,579     1,231,313     1,044,031   Cost of revenue Construction 366,765 282,290 565,665 464,844 Large Project Construction 253,968 183,668 458,446 365,612 Construction Materials   67,610     65,420     107,506     101,129   Total cost of revenue   688,343     531,378     1,131,617     931,585   Gross profit 74,570 73,201 99,696 112,446 Selling, general and administrative expenses 51,388 48,705 113,225 104,838 Gain on sales of property and equipment   (807 )   (1,366 )   (1,077 )   (1,966 ) Operating income (loss)   23,989     25,862     (12,452 )   9,574   Other (income) expense Interest income (1,164 ) (798 ) (2,215 ) (1,634 ) Interest expense 2,694 3,187 5,437 6,236 Equity in income of affiliates (1,259 ) (717 ) (2,175 ) (2,159 ) Other income, net   (642 )   (3,183 )   (1,512 )   (4,555 ) Total other income   (371 )   (1,511 )   (465 )   (2,112 ) Income (loss) before provision for (benefit from) income taxes 24,360 27,373 (11,987 ) 11,686 Provision for (benefit from) income taxes   8,088     8,847     (4,408 )   2,923   Net income (loss) 16,272 18,526 (7,579 ) 8,763 Amount attributable to non-controlling interests   (2,139 )   (4,327 )   (2,078 )   (5,005 ) Net income (loss) attributable to Granite Construction Incorporated   $ 14,133     $ 14,199     $ (9,657 )   $ 3,758     Net income (loss) per share attributable to common shareholders: Basic $ 0.35 $ 0.36 $ (0.24 ) $ 0.10 Diluted $ 0.35 $ 0.35 $ (0.24 ) $ 0.09 Weighted average shares of common stock Basic 39,827 39,584 39,738 39,509 Diluted   40,393     40,302     39,738     40,140       GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - in thousands)           Six Months Ended June 30,   2017   2016 Operating activities     Net (loss) income $ (7,579 ) $ 8,763 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 31,148 29,502 Gain on sales of property and equipment (1,077 ) (1,966 ) Stock-based compensation 11,224 8,563 Equity in net loss (income) from unconsolidated joint ventures 8,249 (5,688 ) Gain on real estate entity — (2,452 ) Changes in assets and liabilities:   (19,279 )   (89,835 ) Net cash provided by (used in) operating activities   22,686     (53,113 ) Investing activities Purchases of marketable securities (49,816 ) (29,894 ) Maturities of marketable securities 70,000 20,000 Proceeds from called marketable securities — 35,000 Purchases of property and equipment (37,518 ) (48,837 ) Proceeds from sales of property and equipment 2,585 2,510 Other investing activities, net   23     (128 ) Net cash used in investing activities   (14,726 )   (21,349 ) Financing activities Long-term debt principal repayments (2,500 ) (2,500 ) Cash dividends paid (10,327 ) (10,267 ) Repurchases of common stock (6,568 ) (4,845 ) Other financing activities, net   177     456   Net cash used in financing activities   (19,218 )   (17,156 ) Decrease in cash and cash equivalents (11,258 ) (91,618 ) Cash and cash equivalents at beginning of period   189,326     252,836   Cash and cash equivalents at end of period   $ 178,068     $ 161,218       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   Construction   Construction   Materials   2017 Revenue $ 429,269 $ 254,463 $ 79,181 $ 656,118 $ 461,496 $ 113,699 Gross profit 62,504 495 11,571 90,453 3,050 6,193 Gross profit as a percent of revenue 14.6 % 0.2 % 14.6 % 13.8 % 0.7 % 5.4 %   2016 Revenue $ 331,346 $ 197,322 $ 75,911 $ 540,833 $ 392,771 $ 110,427 Gross profit 49,056 13,654 10,491 75,989 27,159 9,298 Gross profit as a percent of revenue   14.8 %   6.9 %   13.8 %   14.1 %   6.9 %   8.4 %     GRANITE CONSTRUCTION INCORPORATED Contract Backlog by Segment (Unaudited - dollars in thousands)                           Contract Backlog by Segment   June 30, 2017   March 31, 2017   June 30, 2016                   Construction $ 1,266,504 31.2 % $ 1,175,474 34.2 % $ 1,144,965 30.5 % Large Project Construction   2,797,894     68.8 %   2,259,721     65.8 %   2,606,019     69.5 % Total   $ 4,064,398     100.0 %   $ 3,435,195     100.0 %   $ 3,750,984     100.0 %     GRANITE CONSTRUCTION INCORPORATED EBITDA(1) (Unaudited - dollars in thousands)   Three Months Ended June 30,   Six Months Ended June 30,   2017   2016   2017   2016 Net income (loss) attributable to Granite Construction Incorporated $ 14,133   $ 14,199   $ (9,657 )   $ 3,758 Depreciation, depletion and amortization expense(2) 16,499 15,766 31,148 29,502 Provision for (benefit from) income taxes 8,088 8,847 (4,408 ) 2,923 Interest expense, net of interest income 1,530     2,389     3,222     4,602   EBITDA $ 40,250     $ 41,201     $ 20,305     $ 40,785   Consolidated EBITDA Margin(3) 5.3 %   6.8 %   1.6 %   3.9 %   Note:

(1)We define EBITDA as GAAP net income 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 securities 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 $762,913 and $1,231,313 for three and six months ended June 30, 2017, respectively, and $604,579 and $1,044,031 for the three and six months ended June 30, 2016, respectively.

 

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Granite Construction IncorporatedRon Botoff, 831-728-7532