Granite Construction Earnings 2019-09-30

GVA 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
KBR	3,489	5,318	3,524	5,370	558	201	433	4,093	10%	9.5	4%
AJRD	3,448	2,549	2,028	1,913	383	171	337	3,570	20%	10.6	7%
KTOS	2,426	1,174	599	672	183	14	38	2,573	27%	67.4	1%
GRAM	2,217	7,430	4,940	0	0	0	0	2,217			0%
GVA	2,121	2,558	1,351	3,357	241	-59	118	2,385	7%	20.2	-2%
ATRO	1,378	767	292	813	192	176	259	1,483	24%	5.7	23%
ROAD	740	509	183	762	113	42	82	733	15%	9.0	8%
GLDD	704	869	618	701	162	29	84	901	23%	10.8	3%
DCO	521	680	407	677	138	20	52	746	20%	14.5	3%
WLDN	422	341	194	354	107	6	20	485	30%	24.0	2%

gva20190821_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ___________ to ___________

	Commission File Number: 1-12911

GRANITE CONSTRUCTION INCORPORATED

State of Incorporation:	I.R.S. Employer Identification Number:
Delaware	77-0239383

Address of principal executive offices:

585 W. Beach Street

Watsonville, California 95076

(831) 724-1011

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	GVA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of October 22, 2019.

Class		Outstanding
Common Stock, $0.01 par value		46,741,311

Table of Contents

Index

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of September 30, 2019, December 31, 2018 and September 30, 2018
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2019 and 2018
		Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018
		Notes to the Condensed Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	Item 4.	Controls and Procedures
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 1A.	Risk Factors
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 4.	Mine Safety Disclosures
	Item 6.	Exhibits
SIGNATURES
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32
EXHIBIT 95
EXHIBIT 101.INS
EXHIBIT 101.SCH
EXHIBIT 101.CAL
EXHIBIT 101.DEF
EXHIBIT 101.LAB
EXHIBIT 101.PRE

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - in thousands, except share and per share data)

	*September 30, 2019*			*December 31, 2018*			*September 30, 2018*
ASSETS
Current assets
Cash and cash equivalents ($77,870, $131,965 and $125,165 related to consolidated construction joint ventures (“CCJVs”))	$	184,673		$	272,804		$	230,259
Short-term marketable securities		37,918			30,002			35,010
Receivables, net ($29,108, $21,237 and $26,142 related to CCJVs)		700,387			473,246			618,070
Contract assets ($39,717, $19,699 and $20,968 related to CCJVs)		233,925			219,754			213,989
Inventories		95,442			88,623			90,789
Equity in construction joint ventures		209,765			282,229			273,993
Other current assets ($10,765, $11,744 and $11,361 related to CCJVs)		42,698			48,731			95,173
Total current assets		1,504,808			1,415,389			1,557,283
Property and equipment, net ($27,752, $34,761 and $36,061 related to CCJVs)		542,796			549,688			560,618
Long-term marketable securities		10,000			36,098			46,093
Investments in affiliates		84,914			84,354			84,840
Goodwill		264,112			259,471			244,696
Right of use assets		70,472			—			—
Deferred income taxes, net		38,443			2,918			6,408
Other noncurrent assets		118,228			128,683			143,910
Total assets	$	2,633,773		$	2,476,601		$	2,643,848

LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	8,263		$	47,286		$	116,796
Accounts payable ($50,625, $37,086 and $33,426 related to CCJVs)		399,528			251,481			316,917
Contract liabilities ($21,378, $60,288 and $67,139 related to CCJVs)		106,010			105,449			117,759
Accrued expenses and other current liabilities ($4,193, $2,046 and $1,975 related to CCJVs)		342,040			273,626			296,033
Total current liabilities		855,841			677,842			847,505
Long-term debt		394,841			335,119			316,926
Lease liabilities		56,740			—			—
Deferred income taxes, net		4,652			4,317			5,589
Other long-term liabilities		58,433			61,689			67,429
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: 46,741,263 shares as of September 30, 2019, 46,665,889 shares as of December 31, 2018 and 46,897,092 shares as of September 30, 2018		468			467			469
Additional paid-in capital		567,033			564,559			572,046
Accumulated other comprehensive (loss) income		(3,282	)		(749	)		1,841
Retained earnings		656,487			787,356			786,936
Total Granite Construction Incorporated shareholders’ equity		1,220,706			1,351,633			1,361,292
Non-controlling interests		42,560			46,001			45,107
Total equity		1,263,266			1,397,634			1,406,399
Total liabilities and equity	$	2,633,773		$	2,476,601		$	2,643,848

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

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,*
	*2019*			*2018*			*2019*			*2018*
Revenue
Transportation	$	598,646		$	610,847		$	1,340,834		$	1,472,703
Water		135,908			124,292			347,994			215,951
Specialty		224,457			190,836			540,234			461,149
Materials		129,099			129,616			268,389			276,286
Total revenue		1,088,110			1,055,591			2,497,451			2,426,089
Cost of revenue
Transportation		585,013			539,871			1,405,830			1,334,302
Water		120,878			100,189			313,582			174,834
Specialty		186,158			162,737			464,858			395,838
Materials		104,629			108,303			233,675			239,972
Total cost of revenue		996,678			911,100			2,417,945			2,144,946
Gross profit		91,432			144,491			79,506			281,143
Selling, general and administrative expenses		73,424			70,769			224,577			193,337
Acquisition and integration expenses		2,744			9,334			15,244			44,030
Gain on sales of property and equipment		(7,101	)		(3,018	)		(13,936	)		(5,066	)
Operating income (loss)		22,365			67,406			(146,379	)		48,842
Other (income) expense
Interest income		(1,713	)		(1,533	)		(6,257	)		(4,227	)
Interest expense		4,839			4,452			13,011			10,090
Equity in income of affiliates		(6,275	)		(1,769	)		(10,159	)		(5,527	)
Other expense (income), net		127			(1,533	)		(2,394	)		(2,205	)
Total other income		(3,022	)		(383	)		(5,799	)		(1,869	)
Income (loss) before provision for (benefit from) income taxes		25,387			67,789			(140,580	)		50,711
Provision for (benefit from) income taxes		3,474			8,692			(37,451	)		7,357
Net income (loss)		21,913			59,097			(103,129	)		43,354
Amount attributable to non-controlling interests		(1,425	)		(3,425	)		(8,793	)		(7,490	)
Net income (loss) attributable to Granite Construction Incorporated	$	20,488		$	55,672		$	(111,922	)	$	35,864

Net income (loss) per share attributable to common shareholders
Basic	$	0.44		$	1.20		$	(2.39	)	$	0.84
Diluted	$	0.43		$	1.17		$	(2.39	)	$	0.84
Weighted average shares of common stock
Basic		46,788			46,308			46,771			42,443
Diluted		47,170			47,810			46,771			42,910

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited - in thousands)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2019*			*2018*			*2019*			*2018*
Net income (loss)	$	21,913		$	59,097		$	(103,129	)	$	43,354
Other comprehensive income (loss), net of tax:
Net unrealized (loss) gain on derivatives	$	(720	)	$	2,289		$	(3,496	)	$	1,555
Less: reclassification for net gains included in interest expense		(46	)		(1,719	)		(336	)		(157	)
Net change	$	(766	)	$	570		$	(3,832	)	$	1,398
Foreign currency translation adjustments, net		932			249			1,299			(189	)
Other comprehensive income (loss)	$	166		$	819		$	(2,533	)	$	1,209
Comprehensive income (loss)	$	22,079		$	59,916		$	(105,662	)	$	44,563
Non-controlling interests in comprehensive income (loss)		(1,425	)		(3,425	)		(8,793	)		(7,490	)
Comprehensive income (loss) attributable to Granite Construction Incorporated	$	20,654		$	56,491		$	(114,455	)	$	37,073

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - in thousands, except share data)

	*Outstanding Shares*			*Common Stock*			*Additional Paid-In Capital*			*Accumulated Other Comprehensive (Loss) Income*			*Retained Earnings*			*Total Granite Shareholders’ Equity*			*Non-controlling Interests*			*Total Equity*
Balances at June 30, 2019		46,838,199		$	468		$	568,264		$	(3,448	)	$	642,124		$	1,207,408		$	50,160		$	1,257,568
Net income		—			—			—			—			20,488			20,488			1,425			21,913
Other comprehensive income		—			—			—			166			—			166			—			166
Purchases of common stock¹		(101,475	)		(1	)		(2,967	)		—			—			(2,968	)		—			(2,968	)
Restricted stock units (“RSUs”) vested		4,555			1			—			—			—			1			—			1
Dividends on common stock ($0.13 per share)		—			—			—			—			(6,076	)		(6,076	)		—			(6,076	)
Transactions with non-controlling interests		—			—			—			—			—			—			(9,025	)		(9,025	)
Employee Stock Purchase Plan (“ESPP”), amortized RSUs and other		(16	)		—			1,736			—			(49	)		1,687			—			1,687
Balances at September 30, 2019		46,741,263		$	468		$	567,033		$	(3,282	)	$	656,487		$	1,220,706		$	42,560		$	1,263,266

Balances at June 30, 2018	45,688,582		$	457	$	516,680		$	1,022	$	737,417		$	1,255,576		$	45,410		$	1,300,986
Net income	—			—		—			—		55,672			55,672			3,425			59,097
Other comprehensive income	—			—		—			819		—			819			—			819
Purchases of common stock¹	(3,767	)		—		(204	)		—		—			(204	)		—			(204	)
RSUs vested	8,768			—		—			—		—			—			—			—
Dividends on common stock ($0.13 per share)	—			—		—			—		(6,096	)		(6,096	)		—			(6,096	)
Issuance of Convertible Notes	1,199,869			12		53,086			—		—			53,098			—			53,098
Transactions with non-controlling interests	—			—		—			—		—			—			(3,728	)		(3,728	)
ESPP, amortized RSUs and other	3,640			—		2,484			—		(57	)		2,429			—			2,429
Balances at September 30, 2018	46,897,092		$	469	$	572,046		$	1,841	$	786,936		$	1,361,292		$	45,107		$	1,406,399

Balances at December 31, 2018	46,665,889		$	467		$	564,559		$	(749	)	$	787,356		$	1,351,633		$	46,001		$	1,397,634
Net (loss) income	—			—			—			—			(111,922	)		(111,922	)		8,793			(103,129	)
Other comprehensive loss	—			—			—			(2,533	)		—			(2,533	)		—			(2,533	)
Purchases of common stock¹	(189,566	)		(2	)		(6,914	)		—			—			(6,916	)		—			(6,916	)
RSUs vested	255,948			3			—			—			—			3			—			3
Dividends on common stock ($0.39 per share)	—			—			—			—			(18,251	)		(18,251	)		—			(18,251	)
Effect of adopting ASU Topic 842 (see Note 2)	—			—			—			—			(539	)		(539	)		—			(539	)
Transactions with non-controlling interests	—			—			—			—			—			—			(12,234	)		(12,234	)
ESPP, amortized RSUs and other	8,992			—			9,388			—			(157	)		9,231			—			9,231
Balances at September 30, 2019	46,741,263		$	468		$	567,033		$	(3,282	)	$	656,487		$	1,220,706		$	42,560		$	1,263,266

Balances at December 31, 2017	39,871,314		$	399		$	160,376		$	634	$	783,699		$	945,108		$	47,697		$	992,805
Net income	—			—			—			—		35,864			35,864			7,490			43,354
Other comprehensive income	—			—			—			1,209		—			1,209			—			1,209
Purchases of common stock¹	(108,199	)		(1	)		(6,368	)		—		—			(6,369	)		—			(6,369	)
RSUs vested	299,089			3			—			—		—			3			—			3
Dividends on common stock ($0.39 per share)	—			—			—			—		(17,242	)		(17,242	)		—			(17,242	)
Effect of adopting Accounting Standards Codification Topic 606	—			—			—			—		(15,201	)		(15,201	)		—			(15,201	)
Issuance of common stock for Layne acquisition	5,624,021			56			321,019			—		—			321,075			48			321,123
Issuance of Convertible Notes	1,199,869			12			53,086								53,098			—			53,098
Premium on 8.0% Convertible Notes	—			—			30,702			—		—			30,702			—			30,702
Transactions with non-controlling interests	—			—			—			—		—			—			(10,128	)		(10,128	)
ESPP, amortized RSUs and other	10,998			—			13,231			2		(184	)		13,045			—			13,045
Balances at September 30, 2018	46,897,092		$	469		$	572,046		$	1,841	$	786,936		$	1,361,292		$	45,107		$	1,406,399

¹Represents shares purchased in connection with employee tax withholding for RSUs vested under our 2012 Equity Incentive Plan. Amounts are comprised primarily of amortized restricted stock units.

The accompanying notes are an integral part of these condensed consolidated financial statements

Table of Contents

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

Nine Months Ended September 30,	*2019*			*2018*
Operating activities
Net (loss) income	$	(103,129	)	$	43,354
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation, depletion and amortization		92,700			77,816
Gain on sales of property and equipment, net		(13,936	)		(5,066	)
Change in deferred income taxes		(37,338	)		(2,207	)
Stock-based compensation		8,924			12,621
Equity in net loss from unconsolidated joint ventures		173,008			16,343
Net income from affiliates		(10,159	)		(5,527	)
Other non-cash adjustments		4,630			—
Changes in assets and liabilities, net of the effects of acquisitions:
Receivables		(224,475	)		(154,996	)
Contract assets, net		(13,276	)		355
Inventories		(6,178	)		(4,283	)
Contributions to unconsolidated construction joint ventures		(57,280	)		(89,000	)
Distributions from unconsolidated construction joint ventures and affiliates

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	47	$2,121

10-Q	2019-10-25	Quarter: 2019-09-30
10-Q	2019-08-06	Quarter: 2019-06-30
10-Q	2019-04-26	Quarter: 2019-03-31
10-K	2019-02-22	Annual: 2018-12-31
10-Q	2018-10-29	Quarter: 2018-09-30
10-Q	2018-08-08	Quarter: 2018-06-30
10-Q	2018-05-01	Quarter: 2018-03-31
10-K	2018-02-16	Annual: 2017-12-31
10-Q	2017-10-27	Quarter: 2017-09-30
10-Q	2017-08-01	Quarter: 2017-06-30
10-Q	2017-05-02	Quarter: 2017-03-31
10-K	2017-02-17	Annual: 2016-12-31
10-Q	2016-10-28	Quarter: 2016-09-30
10-Q	2016-07-29	Quarter: 2016-06-30
10-Q	2016-04-29	Quarter: 2016-03-31
10-K	2016-02-25	Annual: 2015-12-31
10-Q	2015-11-02	Quarter: 2015-09-30
10-Q	2015-07-30	Quarter: 2015-06-30
10-Q	2015-05-05	Quarter: 2015-03-31
10-K	2015-02-27	Annual: 2014-12-31
10-Q	2014-11-03	Quarter: 2014-09-30
10-Q	2014-08-01	Quarter: 2014-06-30
10-Q	2014-04-30	Quarter: 2014-03-31
10-K	2014-03-03	Annual: 2013-12-31
10-Q	2013-11-04	Quarter: 2013-09-30
10-Q	2013-08-02	Quarter: 2013-06-30
10-Q	2013-05-09	Quarter: 2013-03-31
10-K	2013-03-01	Annual: 2012-12-31
10-Q	2012-11-07	Quarter: 2012-09-30
10-Q	2012-08-03	Quarter: 2012-06-30
10-Q	2012-05-08	Quarter: 2012-03-31
10-K	2012-02-23	Annual: 2011-12-31
10-Q	2011-11-03	Quarter: 2011-09-30
10-Q	2011-08-04	Quarter: 2011-06-30
10-Q	2011-05-05	Quarter: 2011-03-31
10-K	2011-02-24	Annual: 2010-12-31
10-Q	2010-11-09	Quarter: 2010-09-30
10-Q	2010-08-02	Quarter: 2010-06-30
10-Q	2010-05-04	Quarter: 2010-03-31
10-K	2010-02-26	Annual: 2009-12-31

8-K	2019-10-29	Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2019-10-29	Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K	2019-10-25	Earnings, Exhibits
8-K	2019-10-25	Officers
8-K	2019-08-02	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-07-30	Regulation FD
8-K	2019-07-29	Earnings, Exhibits
8-K	2019-06-30	Earnings, Exhibits
8-K	2019-06-06	Officers, Shareholder Vote
8-K	2019-04-26	Earnings, Exhibits
8-K	2019-02-20	Earnings, Exhibits
8-K	2018-10-09	Earnings
8-K	2018-09-30	Earnings, Exhibits
8-K	2018-08-08	Earnings, Exhibits
8-K	2018-06-25	Officers, Regulation FD, Exhibits
8-K	2018-06-14	Enter Agreement, M&A, Officers, Regulation FD, Exhibits
8-K	2018-06-06	Officers, Shareholder Vote
8-K	2018-05-31	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-04-30	Earnings, Exhibits
8-K	2018-04-23	Officers, Regulation FD, Exhibits
8-K	2018-04-18	Enter Agreement
8-K	2018-04-09	Regulation FD, Exhibits
8-K	2018-02-23	Enter Agreement, Off-BS Arrangement
8-K	2018-02-16	Earnings, Exhibits
8-K	2018-02-13	Enter Agreement, Regulation FD, Exhibits

EX-31.1	ex_156050.htm
EX-31.2	ex_156051.htm
EX-32	ex_156052.htm
EX-95	ex_160552.htm