8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 1, 2017

GRANITE CONSTRUCTION INCORPORATED

(Exact Name of Registrant as Specified in Charter)

Delaware (State or Other Jurisdiction of Incorporation) 1-12911 (Commission File Number) 77-0239383 (IRS Employer Identification No.)

585 West Beach Street

Watsonville, California 95076

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (831) 724-1011

__________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

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. o

Item 2.02. Results of Operations and Financial Condition.

On August 1, 2017, Granite Construction Incorporated (the “Company”) issued a press release with respect to its earnings for the quarter ended June 30, 2017, a copy of which is attached as Exhibit 99.1 and incorporated herein by reference.

The press release referred to above contains non-GAAP financial measures of EBITDA and Consolidated EBITDA Margin. Management believes the non-GAAP measures of EBITDA and Consolidated EBITDA Margin are useful in evaluating operating performance and are regularly used by securities analysts, institutional investors and other interested parties, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. 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. Items that may have a significant impact on the Company's financial position, results of operations and cash flows must be considered when assessing the Company's actual financial condition and performance regardless of whether these items are included in non-GAAP financial measures. 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.

The information set forth is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition” and shall not be deemed “filed” for purpose of Section 18 of the Securities Exchange Act of 1934, nor shall the information, including the Exhibit, be deemed incorporated by reference in any filing of the Company, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits. The following exhibits are attached hereto and furnished herewith:

Exhibit Number	Description
99.1	Press Release of the Company, dated: August 1, 2017

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GRANITE CONSTRUCTION INCORPORATED
By:	/s/ Laurel J. Krzeminski
	Laurel J. Krzeminski
	Executive Vice President and Chief Financial Officer

Date: August 1, 2017

3

EX-99.1

Exhibit 99.1

Granite Reports Second Quarter 2017 Results

• 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

WATSONVILLE, Calif.(August 1, 2017) - 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, 2017		December 31, 2016			June 30, 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,
	Construction			Large Project Construction			Construction Materials			Construction			Large Project 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.

CONTACT:

Granite Construction Incorporated

Ron Botoff, 831-728-7532