Granite Construction Incorporated (NYSE:GVA) today reported net income
of $46.0 million for the quarter ended September 30, 2017, compared to
net income of $37.2 million in the third quarter of 2016. Earnings per
diluted share in the quarter was $1.14, up from $0.92 in the prior-year
period.
"Our teams continue to execute safely on record backlog and our outlook
remains extremely strong," said James H. Roberts, President and Chief
Executive Officer of Granite Construction Incorporated.
Third Quarter and Year-to-Date 2017 Results
Total Company
Third Quarter Segment Results
Construction
Large Project Construction
Construction Materials
Outlook and Guidance
The Company's expectations for 2017 remain:
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.
Revenue increased to $957.1 million, up 19.1 percent year-over-year
Net income of $46.0 million, up 23.6 percent year-over-year
Construction segment gross profit margin at 15.8 percent
Construction Materials segment gross profit margin at 17.1 percent
Large Project Construction segment gross profit margin at 2.3
percent
Record Company backlog of $4.23 billion, up 12.5 percent
year-over-year
"Broad bookings again resulted in record Company backlog of $4.23
billion. For the sixth consecutive quarter, Construction segment backlog
finished at more than $1 billion, and Large Project Construction segment
backlog finished above $3 billion for the first time. Two Large Project
Construction segment project awards in the third quarter highlight our
efforts to reshape the portfolio with smaller, Granite-sponsored jobs,"
Roberts continued.
"Our Construction segment produced strong top-line growth and
consistently strong margin performance in the quarter," Roberts said.
"Improved external demand helped drive considerably better margin
performance in our Construction Materials segment. Continued
acceleration on a number of under-performing, mature projects in our
Large Project Construction segment created a drag on our results in the
third quarter and on our year-to-date results.
"Overall, we continue to expect solid, improving performance across our
business in 2018 and beyond. In addition, efforts to streamline overhead
are paying off. As a result, we have produced high-teens revenue growth
through the first nine months of 2017, while selling, general and
administrative (SG&A) expenses have increased only about two percent. We
continue to target benefits from the continued balance of strong growth
and disciplined cost control," Roberts said.
Third quarter consolidated revenue increased 19.1 percent to $957.1
million compared with $803.9 million in the third quarter of 2016. On
a year-to-date basis, consolidated revenue increased 18.4 percent to
$2.19 billion.
Third quarter consolidated gross profit increased 6.4 percent to
$114.5 million compared with $107.7 million last year. On a
year-to-date basis, gross profit decreased 2.7 percent to $214.2
million, as our operations continue to overcome the drag from poor
first quarter weather.
Third quarter consolidated gross profit margin was 12.0 percent
compared with 13.4 percent in 2016. For the first nine months of 2017,
gross profit margin was 9.8 percent compared with 11.9 percent last
year.
Total Company backlog was $4.23 billion, up 12.5 percent
year-over-year. Construction segment backlog increased 3.0 percent
year-over-year to $1.13 billion. Large Project Construction segment
backlog increased 16.4 percent from last year to $3.10 billion.
Third quarter SG&A expenses decreased to $49.5 million, a decrease of
8.7 percent from $54.2 million last year. For the first nine months of
2017, SG&A expenses were $162.7 million, an increase of 2.3 percent
from $159.0 million last year, but down 120 basis points as a
percentage of revenue.
Our balance sheet remains strong with cash and marketable securities
of $303.3 million, as of September 30, 2017, an increase of $45.3
million from September 30, 2016.
Construction revenue increased 24.6 percent to $579.1 million,
compared with $464.6 million last year.
Gross profit increased 27.7 percent to $91.3 million, compared to
$71.5 million last year.
Gross profit margin of 15.8 percent increased from 15.4 percent a year
ago.
Solid execution on record backlog drove the strong revenue and profit
increases in the third quarter. Steady bookings across geographies
contributed to segment backlog increasing 3.0 percent year-over-year
to $1.13 billion.
Large Project Construction revenue increased 12.2 percent to $279.8
million, compared with $249.3 million last year.
Gross profit decreased to $6.4 million compared to $23.5 million last
year, with the decline attributable primarily to project write-downs.
Gross profit margin was 2.3 percent compared with 9.4 percent in 2016.
Accelerated activity on certain underperforming mature projects
represented a significant amount of segment revenue. We continue to
pursue resolutions for design, weather, and owner-related issues,
while we close out several of these projects in late-2017 and through
2018.
Segment backlog increased 16.4 percent from last year to a record of
$3.10 billion, reflecting the addition of two Granite-sponsored
projects in the quarter. We continue to emphasize increased project
selectivity and significantly higher return expectations that properly
balance project risk dynamics.
Construction Materials revenue increased 9.1 percent to $98.1 million,
compared with $89.9 million last year.
Third quarter gross profit increased 33.0 percent to $16.8 million,
compared to $12.6 million last year.
Gross profit margin of 17.1 percent increased from 14.0 percent a year
ago.
The gross profit and margin improvement was attributable primarily to
improved external demand across geographies in the West.
"Steady private market demand combined with improving public funding
trends continue to provide our business with growth opportunities,
across geographies and end markets," said Roberts. "We believe that we
are in the early stages of this investment cycle, with much of the
public market visibility tied to actions taken over the last few years
at state and local levels to increase infrastructure investment. Today,
we continue to challenge our leaders in Washington, D.C. to follow the
example of their predecessors' visionary action more than 60 years ago
to invest in American infrastructure that we still rely on every single
day. American workers and families once again are ready to rally behind
a bold federal infrastructure vision backed by a significant funding
commitment."
Granite will conduct a conference call today, October 27, 2017, at 8
a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the
quarter ended September 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 November 3, 2017, by
calling 1-877-344-7529, replay access code 10113152; international
callers may dial 1-412-317-0088.
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.
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)
September 30,
December 31,
September 30,
2017
2016
2016
ASSETS
Current assets
Cash and cash equivalents
$
185,516
$
189,326
$
150,225
Short-term marketable securities
47,814
64,884
54,863
Receivables, net
627,081
419,345
512,752
Costs and estimated earnings in excess of billings
94,527
73,102
80,032
Inventories
62,059
55,245
61,015
Equity in construction joint ventures
242,358
247,182
263,180
Other current assets
26,612
39,908
28,047
Total current assets
1,285,967
1,088,992
1,150,114
Property and equipment, net
412,174
406,650
407,327
Long-term marketable securities
69,991
62,895
52,908
Investments in affiliates
39,946
35,668
34,356
Goodwill
53,799
53,799
53,799
Deferred income taxes, net
—
—
5,223
Other noncurrent assets
85,411
85,449
81,540
Total assets
$
1,947,288
$
1,733,453
$
1,785,267
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
$
14,796
$
14,796
$
14,795
Accounts payable
286,913
199,029
223,612
Billings in excess of costs and estimated earnings
168,707
97,522
116,151
Accrued expenses and other current liabilities
246,775
218,587
237,534
Total current liabilities
717,191
529,934
592,092
Long-term debt
225,922
229,498
240,715
Deferred income taxes, net
5,932
5,441
—
Other long-term liabilities
46,435
45,989
46,270
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: 39,850,587 shares as of September 30, 2017,
39,621,140 shares as of December 31, 2016 and 39,601,569 shares as
of September 30, 2016
399
396
396
Additional paid-in capital
157,734
150,337
147,583
Accumulated other comprehensive income (loss)
240
(371
)
(1,524
)
Retained earnings
756,183
735,626
724,691
Total Granite Construction Incorporated shareholders' equity
914,556
885,988
871,146
Non-controlling interests
37,252
36,603
35,044
Total equity
951,808
922,591
906,190
Total liabilities and equity
$
1,947,288
$
1,733,453
$
1,785,267
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
Revenue
Construction
$
579,146
$
464,624
$
1,235,264
$
1,005,457
Large Project Construction
279,845
249,345
741,341
642,116
Construction Materials
98,135
89,936
211,834
200,363
Total revenue
957,126
803,905
2,188,439
1,847,936
Cost of revenue
Construction
487,798
393,094
1,053,463
857,938
Large Project Construction
273,460
225,826
731,906
591,438
Construction Materials
81,338
77,311
188,844
178,440
Total cost of revenue
842,596
696,231
1,974,213
1,627,816
Gross profit
114,530
107,674
214,226
220,120
Selling, general and administrative expenses
49,501
54,194
162,726
159,032
Gain on sales of property and equipment
(1,753
)
(398
)
(2,830
)
(2,364
)
Operating income
66,782
53,878
54,330
63,452
Other (income) expense
Interest income
(1,141
)
(790
)
(3,356
)
(2,424
)
Interest expense
2,660
3,034
8,097
9,270
Equity in income of affiliates
(2,732
)
(2,424
)
(4,907
)
(4,583
)
Other income, net
(1,309
)
(732
)
(2,821
)
(5,287
)
Total other income
(2,522
)
(912
)
(2,987
)
(3,024
)
Income before provision for income taxes
69,304
54,790
57,317
66,476
Provision for income taxes
21,249
16,617
16,841
19,540
Net income
48,055
38,173
40,476
46,936
Amount attributable to non-controlling interests
(2,073
)
(982
)
(4,151
)
(5,987
)
Net income attributable to Granite Construction Incorporated
$
45,982
$
37,191
$
36,325
$
40,949
Net income per share attributable to common shareholders:
Basic
$
1.15
$
0.94
$
0.91
$
1.04
Diluted
$
1.14
$
0.92
$
0.90
$
1.02
Weighted average shares of common stock
Basic
39,844
39,599
39,774
39,539
Diluted
40,387
40,313
40,367
40,205
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Nine Months Ended September 30,
2017
2016
Operating activities
Net income
$
40,476
$
46,936
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation, depletion and amortization
48,522
46,637
Gain on sales of property and equipment, net
(2,830
)
(2,364
)
Stock-based compensation
13,580
11,013
Equity in net loss (income) from unconsolidated joint ventures
15,415
(15,903
)
Gain on real estate entity
—
(2,452
)
Net income from affiliates
(4,907
)
(4,583
)
Changes in assets and liabilities:
(45,642
)
(98,682
)
Net cash provided by (used in) operating activities
64,614
(19,398
)
Investing activities
Purchases of marketable securities
(79,708
)
(84,758
)
Maturities of marketable securities
90,000
30,000
Proceeds from called marketable securities
—
50,000
Purchases of property and equipment
(56,808
)
(67,889
)
Proceeds from sales of property and equipment
5,107
5,790
Distributions from affiliates
—
2,233
Other investing activities, net
2,321
3,847
Net cash used in investing activities
(39,088
)
(60,777
)
Financing activities
Long-term debt principal repayments
(3,750
)
(3,750
)
Cash dividends paid
(15,506
)
(15,415
)
Repurchases of common stock
(6,713
)
(4,946
)
(Distributions to) contributions from non-controlling partners, net
(3,500
)
1,522
Other financing activities, net
133
153
Net cash used in financing activities
(29,336
)
(22,436
)
Decrease in cash and cash equivalents
(3,810
)
(102,611
)
Cash and cash equivalents at beginning of period
189,326
252,836
Cash and cash equivalents at end of period
$
185,516
$
150,225
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Large Project
Construction
Large Project
Construction
Construction
Construction
Materials
Construction
Construction
Materials
2017
Revenue
$
579,146
$
279,845
$
98,135
$
1,235,264
$
741,341
$
211,834
Gross profit
91,348
6,385
16,797
181,801
9,435
22,990
Gross profit as a percent of revenue
15.8
%
2.3
%
17.1
%
14.7
%
1.3
%
10.9
%
2016
Revenue
$
464,624
$
249,345
$
89,936
$
1,005,457
$
642,116
$
200,363
Gross profit
71,530
23,519
12,625
147,519
50,678
21,923
Gross profit as a percent of revenue
15.4
%
9.4
%
14.0
%
14.7
%
7.9
%
10.9
%
GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - dollars in thousands)
Contract Backlog by Segment
September 30, 2017
June 30, 2017
September 30, 2016
Construction
$
1,134,887
26.8
%
$
1,266,504
31.2
%
$
1,102,147
29.3
%
Large Project Construction
3,099,857
73.2
%
2,797,894
68.8
%
2,662,399
70.7
%
Total
$
4,234,744
100.0
%
$
4,064,398
100.0
%
$
3,764,546
100.0
%
GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
Net income attributable to Granite Construction Incorporated
$
45,982
$
37,191
$
36,325
$
40,949
Depreciation, depletion and amortization expense(2)
17,374
17,135
48,522
46,637
Provision for income taxes
21,249
16,617
16,841
19,540
Interest expense, net of interest income
1,519
2,244
4,741
6,846
EBITDA
$
86,124
$
73,187
$
106,429
$
113,972
Consolidated EBITDA Margin(3)
9.0
%
9.1
%
4.9
%
6.2
%
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 $957,126 and $2,188,439 for three and nine months ended
September 30, 2017, respectively, and $803,905 and $1,847,936 for
the three and nine months ended September 30, 2016, respectively.
