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Granite Reports Fourth Quarter and Fiscal Year 2020 Results

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Granite Construction Incorporated (NYSE: GVA) today announced results for the fourth quarter and year ended December 31, 2020.

Fiscal Year 2020 Results

Fiscal year 2020 net loss totaled ($145.1) million, or ($3.18) per diluted share, compared to a net loss of ($60.2) million, or ($1.29) per diluted share, in the prior year. Adjusted net income(1) for fiscal year 2020 totaled $60.0 million, or $1.30 per diluted share, compared to an adjusted net loss of ($27.2) million, or ($0.58) per diluted share, in the prior year. Adjusted net income (loss) excludes transaction costs(2), amortization of debt discount, non-recurring legal and accounting investigation costs and non-cash impairment charges.

  • Revenue increased 3.4% in 2020 to $3.6 billion, compared to $3.4 billion in the prior year.
  • Gross profit increased 55.5% in 2020 to $344.8 million, compared to $221.7 million in the prior year.
  • Selling, general & administrative (“SG&A”) expenses in 2020 were $353.3 million or 9.9% of revenue, compared to $308.0 million or 8.9% of revenue in the prior year. The increase was primarily attributable to $35.6 million of non-recurring legal and accounting investigation fees.
  • Adjusted EBITDA (1) increased to $189.7 million in 2020, compared to $71.7 million in the prior year.
  • Committed and Award Projects (“CAP”) (3) totaled $4.3 billion, down 2.3% year-over-year. The year-over-year decrease in CAP reflects backlog burn of the Heavy Civil Operating Group Old Risk Portfolio(4) partially offset by successful pursuits of best-value procurement work.(5)
  • Operating cash flow increased $157.0 million in 2020 to a Granite record $268.5 million, compared to $111.4 million in the prior year.
  • Balance sheet remains strong with cash and marketable securities increasing $146.3 million in 2020 to $441.3 million, compared to $295.1 million in the prior year, while debt decreased $25.6 million to $338.8 million compared to $364.4 million in the prior year.

“Fiscal year 2020 was one of the most challenging years in Granite’s history as we navigated the pandemic and the Audit/Compliance Committee’s internal investigation,” said Kyle Larkin, Granite President. “Despite these challenges, our teams performed well, particularly in our vertically integrated businesses. Our continued focus on enhancing profit and cash flow produced record operating cash flow in 2020. Looking ahead, we remain committed to positioning our balance sheet and CAP for future growth and success. While we continue to manage risk in the Heavy Civil Operating Group, I am confident that we have established the appropriate parameters to not only execute on existing projects, but also rebuild the portfolio by prioritizing projects with an appropriate risk profile as we leverage federal, state and local infrastructure funding opportunities.”

Fourth Quarter 2020 Results

Results for the fourth quarter of 2020 were net income of $8.0 million, or $0.17 per diluted share compared to a net loss of ($19.4) million, or ($0.42) per diluted share, in the prior year. Adjusted net income(1) for the fourth quarter of 2020, which excludes transaction costs(2), amortization of debt discount and non-recurring legal and accounting investigation costs, was $18.8 million, or $0.41 per diluted share compared to an adjusted net loss of ($12.5) million, or ($0.27) per diluted share, in the prior year.

  • Revenue increased 6.8% in the fourth quarter of 2020 to $945.6 million compared to $885.6 million in the fourth quarter of 2019.
  • Gross profit increased to $106.6 million in the fourth quarter of 2020 compared to $51.2 million in the fourth quarter of 2019.
  • SG&A expenses in the fourth quarter of 2020 were $100.8 million or 10.7% of revenue, compared to $83.4 million or 9.4% of revenue in the fourth quarter of 2019. The increase was primarily attributable to non-recurring legal and accounting investigation fees.
  • Adjusted EBITDA (1) increased to $56.6 million in the fourth quarter of 2020 compared to $8.5 million in the fourth quarter of 2019.

(1) Adjusted net income (loss), adjusted diluted income (loss) per share, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP measures. Please refer to the description and reconciliation of non-GAAP measures in the attached tables.
(2) Transaction costs include acquisition, integration, acquired intangible amortization expenses, acquisition-related depreciation and synergy costs.
(3) CAP is comprised of contract backlog (unearned revenue and other awards), as well as awarded construction management/general contractor, construction manager at-risk, and progressive design build projects not yet included in contract backlog.
(4) The Heavy Civil Operating Group Old Risk Portfolio include projects with risk criteria that do not align with Granite’s new project selection criteria for the Heavy Civil Operating Group.
(5) Best value procurement work includes construction management/general contractor, construction management at-risk, and progressive design build projects.

Fourth Quarter and Fiscal Year 2020 Segment Results (Unaudited - dollars in thousands)

Transportation Segment

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Revenue

 

$

507,988

 

 

$

484,572

 

 

$

23,416

 

 

 

4.8

%

 

$

2,017,989

 

 

$

1,892,149

 

 

$

125,840

 

 

 

6.7

%

Gross profit

 

 

22,860

 

 

 

23,985

 

 

 

(1,125

)

 

 

(4.7

)%

 

 

133,748

 

 

 

55,001

 

 

 

78,747

 

 

 

143.2

%

Gross profit as a percent of revenue

 

 

4.5

%

 

 

4.9

%

 

 

 

 

 

 

 

 

 

 

6.6

%

 

 

2.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2020

 

 

2019

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed and Awarded Projects

 

$

3,192,588

 

 

$

3,458,632

 

 

$

(266,044

)

 

 

(7.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the fourth quarter of 2020, Transportation segment revenue increased year-over-year primarily driven by growth in California operations. Quarterly segment gross profit margin of 4.5% reflects progress working through the Heavy Civil Operating Group Old Risk Portfolio which offset the exceptional performance of the vertically-integrated businesses. In the fourth quarter, the Heavy Civil Operating Group Old Risk Portfolio recognized $107.1 million of revenue and a gross loss of ($22.4) million compared to revenue of $135.6 million and a gross loss of ($25.4) million for the fourth quarter of 2019.

For the year ended December 31, 2020, revenue and gross profit increases were driven by strength in the Company’s vertically-integrated businesses, which was partially offset by burn of the Heavy Civil Operating Group Old Risk Portfolio. In fiscal year 2020, the Heavy Civil Operating Group Old Risk Portfolio reported $458.6 million of revenue and a gross loss of ($102.9) million compared to revenue of $609.0 million and a gross loss of ($154.6) million for the year ended December 31, 2019.

Segment CAP decreased $0.3 billion year-over-year to $3.2 billion as Granite burned through its backlog of the Heavy Civil Operating Group Old Risk Portfolio.

Water Segment

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Revenue

 

$

122,337

 

 

$

123,174

 

 

$

(837

)

 

 

(0.7

)%

 

$

440,317

 

 

$

468,730

 

 

$

(28,413

)

 

 

(6.1

)%

Gross profit

 

 

19,758

 

 

 

(1,319

)

 

 

21,077

 

 

 

(1,598.0

)%

 

 

54,241

 

 

 

29,766

 

 

 

24,475

 

 

 

82.2

%

Gross profit as a percent of revenue

 

 

16.2

%

 

 

(1.1

)%

 

 

 

 

 

 

 

 

 

 

12.3

%

 

 

6.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2020

 

 

2019

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed and Awarded Projects

 

$

311,741

 

 

$

226,023

 

 

$

85,718

 

 

 

37.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the fourth quarter of 2020, Water segment revenue was flat and gross profit increased year-over-year primarily due to the absence of significant project write downs experienced in the fourth quarter of 2019.

For the year ended December 31, 2020, Water segment revenue decreased due to project delays and limited crew availability attributable to COVID-19. Segment gross profit increased year-over-year due to the absence of significant project write downs experienced in 2019.

Segment CAP increased $85.7 million year-over-year to $311.7 million, primarily reflecting the addition of five trenchless sewer contracts in the third quarter of 2020 totaling $148 million.

Specialty Segment

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Revenue

 

$

210,304

 

 

$

189,040

 

 

$

21,264

 

 

 

11.2

%

 

$

723,391

 

 

$

727,537

 

 

$

(4,146

)

 

 

(0.6

)%

Gross profit

 

 

44,327

 

 

 

13,090

 

 

 

31,237

 

 

 

238.6

%

 

 

92,180

 

 

 

86,729

 

 

 

5,451

 

 

 

6.3

%

Gross profit as a percent of revenue

 

 

21.1

%

 

 

6.9

%

 

 

 

 

 

 

 

 

 

 

12.7

%

 

 

11.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2020

 

 

2019

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed and Awarded Projects

 

$

776,888

 

 

$

696,570

 

 

$

80,318

 

 

 

11.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the fourth quarter of 2020, Specialty segment revenue increased year-over-year driven by strong site development and renewable energy projects in both private and public markets. Segment reported gross profit for the quarter increased year-over-year, reflecting increased activity in the California operations and improved project execution compared to the fourth quarter of 2019.

For the fiscal year 2020, Specialty segment revenue decreased primarily due to COVID-19 headwinds. Segment gross profit for the fiscal year increased driven by strong project execution, partially offset by a write down related to disputed cost overruns on a tunneling project.

Specialty segment CAP increased $80.3 million year-over-year to $776.9 million, a record high, reflecting the results of the Company's relationships with private and public customers.

Materials Segment

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Revenue

 

$

104,943

 

 

$

88,801

 

 

$

16,142

 

 

 

18.2

%

 

$

380,762

 

 

$

357,190

 

 

$

23,572

 

 

 

6.6

%

Gross profit

 

 

19,704

 

 

 

15,468

 

 

 

4,236

 

 

 

27.4

%

 

 

64,619

 

 

 

50,182

 

 

 

14,437

 

 

 

28.8

%

Gross profit as a percent of revenue

 

 

18.8

%

 

 

17.4

%

 

 

 

 

 

 

 

 

 

 

17.0

%

 

 

14.0

%

 

 

 

 

 

 

 

 

For the fourth quarter of 2020, Materials segment revenue and gross profit increased year-over-year compared to the prior year quarter reflecting strong sales volumes due in part to favorable weather in the West.

For the year ended December 31, 2020, Materials segment revenue and gross profit increased compared to 2019 largely due to increased sales volumes and operational efficiencies.

Outlook and Guidance

The Company’s expectations for 2021 are:

  • Low- to mid-single digit revenue growth
  • Adjusted EBITDA margin in the range of 5.5% to 7.5%

Conference Call

Granite will conduct a conference call today, March 30, 2021, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results for the quarter and fiscal year ended December 31, 2020. The Company invites investors to listen to a live audio webcast on its Investor Relations website, investor.graniteconstruction.com. The live call is available by calling 1-866-807-9684; international callers may dial 1-412-317-5415. An archive of the webcast will be available on the website approximately one hour after the call. A replay will be available after the live call through April 6, 2021, by calling 1-877-344-7529, replay access code 10153446; international callers may dial 1-412-317-0088.

About Granite

Granite is America’s Infrastructure Company™. Incorporated since 1922, Granite (NYSE:GVA) is one of the largest diversified construction and construction materials companies in the United States as well as a full-suite provider in the transportation, water infrastructure and mineral exploration markets. Granite’s Code of Conduct and strong Core Values guide the Company and its employees to uphold the highest ethical standards. Granite is an industry leader in safety and an award-winning firm in quality and sustainability. For more information, visit the Granite website, and connect with Granite on LinkedIn, Twitter, Facebook and Instagram.

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, growth, demand, strategic plans, outcomes, outlook, guidance, backlog, Committed and Awarded Projects (“CAP”), 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, growth, demand, strategic plans, outcomes, outlook, guidance, backlog, CAP, 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

CONSOLIDATED BALANCE SHEETS

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

December 31,

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

436,136

 

 

$

262,273

 

Short-term marketable securities

 

 

—

 

 

 

27,799

 

Receivables, net

 

 

540,812

 

 

 

547,417

 

Contract assets

 

 

164,939

 

 

 

211,441

 

Inventories

 

 

82,362

 

 

 

88,885

 

Equity in construction joint ventures

 

 

188,798

 

 

 

193,110

 

Other current assets

 

 

42,199

 

 

 

46,016

 

Total current assets

 

 

1,455,246

 

 

 

1,376,941

 

Property and equipment, net

 

 

527,016

 

 

 

542,297

 

Long-term marketable securities

 

 

5,200

 

 

 

5,000

 

Investments in affiliates

 

 

75,287

 

 

 

84,176

 

Goodwill

 

 

116,777

 

 

 

264,279

 

Right of use assets

 

 

62,256

 

 

 

72,534

 

Deferred income taxes, net

 

 

41,839

 

 

 

50,158

 

Other noncurrent assets

 

 

96,375

 

 

 

106,703

 

Total assets

 

$

2,379,996

 

 

$

2,502,088

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

8,278

 

 

$

8,244

 

Accounts payable

 

 

359,160

 

 

 

400,775

 

Contract liabilities

 

 

171,321

 

 

 

95,737

 

Accrued expenses and other current liabilities

 

 

404,497

 

 

 

337,300

 

Total current liabilities

 

 

943,256

 

 

 

842,056

 

Long-term debt

 

 

330,522

 

 

 

356,108

 

Lease liabilities

 

 

46,769

 

 

 

58,618

 

Deferred income taxes, net

 

 

3,155

 

 

 

3,754

 

Other long-term liabilities

 

 

64,684

 

 

 

63,136

 

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: 45,668,541 shares as of December 31, 2020, 45,503,805 shares as of December 31, 2019

 

 

457

 

 

 

456

 

Additional paid-in capital

 

 

555,407

 

 

 

549,307

 

Accumulated other comprehensive loss

 

 

(5,035

)

 

 

(2,645

)

Retained earnings

 

 

424,835

 

 

 

594,353

 

Total Granite Construction Incorporated shareholders’ equity

 

 

975,664

 

 

 

1,141,471

 

Non-controlling interests

 

 

15,946

 

 

 

36,945

 

Total equity

 

 

991,610

 

 

 

1,178,416

 

Total liabilities and equity

 

$

2,379,996

 

 

$

2,502,088

 

GRANITE CONSTRUCTION INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share data)

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation

 

$

507,988

 

 

$

484,572

 

 

$

2,017,989

 

 

$

1,892,149

 

Water

 

 

122,337

 

 

 

123,174

 

 

 

440,317

 

 

 

468,730

 

Specialty

 

 

210,304

 

 

 

189,040

 

 

 

723,391

 

 

 

727,537

 

Materials

 

 

104,943

 

 

 

88,801

 

 

 

380,762

 

 

 

357,190

 

Total revenue

 

 

945,572

 

 

 

885,587

 

 

 

3,562,459

 

 

 

3,445,606

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation

 

 

485,128

 

 

 

460,587

 

 

 

1,884,241

 

 

 

1,837,148

 

Water

 

 

102,579

 

 

 

124,493

 

 

 

386,076

 

 

 

438,964

 

Specialty

 

 

165,977

 

 

 

175,950

 

 

 

631,211

 

 

 

640,808

 

Materials

 

 

85,239

 

 

 

73,333

 

 

 

316,143

 

 

 

307,008

 

Total cost of revenue

 

 

838,923

 

 

 

834,363

 

 

 

3,217,671

 

 

 

3,223,928

 

Gross profit

 

 

106,649

 

 

 

51,224

 

 

 

344,788

 

 

 

221,678

 

Selling, general and administrative expenses

 

 

100,752

 

 

 

83,404

 

 

 

353,320

 

 

 

307,981

 

Acquisition and integration expenses

 

 

(20

)

 

 

1,530

 

 

 

53

 

 

 

15,299

 

Non-cash impairment charges

 

 

—

 

 

 

—

 

 

 

156,690

 

 

 

—

 

Gain on sales of property and equipment

 

 

(2,060

)

 

 

(4,767

)

 

 

(6,930

)

 

 

(18,703

)

Operating income (loss)

 

 

7,977

 

 

 

(28,943

)

 

 

(158,345

)

 

 

(82,899

)

Other expense (income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(283

)

 

 

(1,176

)

 

 

(3,096

)

 

 

(7,433

)

Interest expense

 

 

6,298

 

 

 

5,363

 

 

 

24,200

 

 

 

18,374

 

Equity in income of affiliates, net

 

 

(4,368

)

 

 

(1,295

)

 

 

(8,783

)

 

 

(11,454

)

Other income, net

 

 

(4,295

)

 

 

(2,914

)

 

 

(4,203

)

 

 

(5,308

)

Total other (income) expense

 

 

(2,648

)

 

 

(22

)

 

 

8,118

 

 

 

(5,821

)

Income (loss) before provision for (benefit from) income taxes

 

 

10,625

 

 

 

(28,921

)

 

 

(166,463

)

 

 

(77,078

)

Provision for (benefit from) income taxes

 

 

4,938

 

 

 

(8,860

)

 

 

(282

)

 

 

(20,376

)

Net income (loss)

 

 

5,687

 

 

 

(20,061

)

 

 

(166,181

)

 

 

(56,702

)

Amount attributable to non-controlling interests

 

 

2,323

 

 

 

681

 

 

 

21,064

 

 

 

(3,489

)

Net income (loss) attributable to Granite Construction Incorporated

 

$

8,010

 

 

$

(19,380

)

 

$

(145,117

)

 

$

(60,191

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

 

$

(0.42

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Granite Construction Incorporated

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WATSONVILLE

About GVA

since 1922, granite has continued a long-standing commitment to our clients at the private, local, state, and federal level, providing award-winning infrastructure and heavy civil construction services in mining, earthwork, water/sewer, power, tunneling, rail, highway and bridge construction. granite continues to be an industry pioneer in alternative project delivery (design-build, cmar/cmgc, best value) establishing true partnerships with both the owner and designer to guarantee a cohesive project team. granite constructs approximately $800 million of apdm projects annually, and has completed over $12 billion in alternative procurement projects in the last decade. headquartered in watsonville, ca, granite construction, inc is publicly traded on the new york stock exchange (nyse: gva). disclaimer regarding official "granite"​ job postings: all open positions available with granite construction inc., and its subsidiary companies, are available to apply on www.graniteconstruction.com/car