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):February 20, 2019

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):

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

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

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

☐ 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 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  ☐

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.  ☐

Item 2.02. Results of Operations and Financial Condition.

On February 20, 2019, Granite Construction Incorporated (the “Company”) issued a press release with respect to its earnings for the quarter and year ended December 31, 2018, a copy of which is attached as Exhibit 99.1 and incorporated herein by reference.

The press release referred to above contains financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Specifically, management believes that non-GAAP financial measures such as EBITDA and 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. We are also providing additional non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss) attributable to Granite Construction Incorporated and adjusted diluted earnings (loss) per share to indicate the impact of acquisition, integration and acquired intangible amortization expenses related to the acquisition of Layne Christensen Company and LiquiForce.

Management believes that these additional non-GAAP financial measures facilitate comparisons between securities analysts, institutional investors and other interested parties. 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 herein, including the exhibit 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 – February 20, 2019

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/ Jigisha Desai
	Jigisha Desai
	Senior Vice President and Chief Financial Officer

Date: February 20, 2019

3

EX-99.1

Exhibit 99.1

Granite Reports Fiscal Year 2018 Results

Fiscal Year 2018 Financial Highlights

• Revenue up 11.0 percent year-over-year to $3.32 billion

• Gross profit increased 23.6 percent year-over-year to $389.2 million

• Gross profit margin up 119 basis points year-over-year to 11.7 percent

• Net income totaled $42.4 million, compared to $69.1 million in 2017

• Adjusted net income¹ increased 48.8 percent year-over-year to $102.8 million

• Adjusted EBITDA¹ increased 39.0 percent year-over-year to $236.5 million

• Adjusted EBITDA margin¹ increased 144 basis points to 7.1 percent.

WATSONVILLE, Calif.(February 20, 2019) - Granite Construction Incorporated (NYSE: GVA) today reported fourth quarter 2018 net income of $6.5 million, with earnings per diluted share (EPS) of $0.14. Net income in 2018 totaled $42.4 million, with diluted EPS of $0.96. Fourth quarter and fiscal year 2018 results include after-tax acquisition-related expenses of $17.0 million and $60.4 million, respectively². Excluding the impact of these expenses, fourth quarter adjusted net income was $23.6 million¹, with adjusted diluted EPS of $0.50¹, and 2018 adjusted net income increased 48.8 percent year-over-year to $102.8 million¹, with adjusted diluted EPS of $2.34¹.

“Granite’s teams delivered record safety performance in 2018, adding to the foundation that supports the continued growth of our leadership position as America’s Infrastructure Company,” said Granite President and Chief Executive Officer James H. Roberts. “Our intentional emphasis on bidding and pricing discipline produced higher bid-day margins and contributed to more than 140 basis points of adjusted EBITDA margin¹ improvement over 2017. In alignment with our strategic plan, our 2018 acquisitions provide geographic and end-market diversification, generate strong margin contribution, and set the stage for exciting growth opportunities in our Transportation, Water, Specialty, and Materials segments as we enter 2019.”

“This quarter’s results include the effects of erratic, wet weather in the West, and reflect negative forecast adjustments on legacy unconsolidated large projects attributable to increased visibility into costs as these projects near completion,” Roberts said. “As we begin 2019, only one of our three challenged legacy projects is less than 90 percent complete. We believe that our strategic portfolio shift to lower-risk, higher-margin work, coupled with our focus on more negotiated work, will result in steady improvement in Transportation segment performance throughout 2019.”

Roberts continued, “The defeat of the Proposition 6 ballot measure in last November’s election in California highlights the significant opportunities for growth in our Transportation segment. This result preserved the 10-year, $52.4 billion Senate Bill 1, the Road Repair and Accountability Act of 2017 (“SB 1”). SB 1 is one of more than two dozen state and local transportation and infrastructure measures passed since 2015 that will drive Granite’s growth and profitability for years to come. Strong demand trends also are evidence of growth opportunities for our growing Specialty segment, including tunnel, mining, power, and site development. Our Water segment backlog increased significantly year-over-year, and the segment’s bidding environment remains healthy against a backdrop of steadily improving public and municipal water infrastructure funding. We do not see the dynamics of this robust market slowing down for the foreseeable future.”  

Fiscal Year 2018 Consolidated Results

• For the year ended December 31, 2018, revenue increased 11.0 percent to $3.32 billion, compared with $2.99 billion last year.

• Gross profit increased 23.6 percent to $389.2 million in 2018, compared to $314.9 million last year, with resulting gross profit margin of 11.7 percent, compared with 10.5 percent last year.

• Selling, general & administrative (SG&A) expenses in 2018 include the impact of overhead costs attributable to the recently acquired businesses. SG&A expenses were $272.8 million, or 8.2 percent of revenue, compared to $220.4 million, or 7.4 percent of revenue, last year. The increase is attributable to the acquired businesses.

• Company effective tax rate in 2018 was 16.2 percent, driven by a decrease in the tax rate due to the impact of Tax Reform enacted in December 2017. The rate also includes impacts from adjustments to the Tax Reform provisional amounts recorded in 2017, which was partially offset by one-time nondeductible acquisition and integration expenses incurred in 2018.In 2019, the Company’s tax rate is expected to normalize to a low- to mid-20s percentage range.

• Net income in 2018 totaled $42.4 million, with diluted EPS of $0.96. Fiscal year 2018 results include after-tax acquisition-related expenses of $60.4 million². Excluding the impact of these expenses, 2018 adjusted net income increased 48.8 percent year-over-year to $102.8 million¹, with adjusted diluted EPS of $2.34¹.

• Adjusted EBITDA¹ increased 39.0 percent to $236.5 million in 2018, compared to $170.2 million last year.

• Company backlog³ was $3.69 billion, down 0.8 percent year-over-year. This figure excludes approximately $700 million of previously disclosed Construction Manager/General Contractor (CMGC) projects, which will enter backlog as task orders are approved.

• During the fourth quarter, Granite invested $10.0 million to repurchase approximately 252,000 GVA shares at an average price of $39.64 per share, in accordance with our $200.0 million stock repurchase authorization.

• Our balance sheet remains strong with cash and marketable securities of $338.9 million as of December 31, 2018. Our capital structure is well positioned to support the implementation of our strategic plan for growth both organically and through future acquisitions.

Fourth Quarter and Fiscal Year 2018 Segment Results

Transportation

• Fourth quarter 2018 revenue decreased 3.8 percent to $504.0 million, compared to $524.0 million last year. Revenue increased 1.5 percent to $1.98 billion in 2018, compared to $1.95 billion last year. Increased bidding discipline and higher margin expectations fueled Transportation segment improvement in 2018. These actions largely offset both a California procurement slowdown that began mid-year related to Proposition 6, as well as late-2018 weather impacts. Fourth quarter 2018 project and production delays tied to wet weather in the West and this year’s extreme winter weather in the Midwest are expected to begin correcting as weather improves.

• Quarterly gross profit increased 2.8 percent to $51.6 million from $50.2 million last year, with gross profit margin of 10.2 percent, up from 9.6 percent last year. Gross profit increased 11.7 percent to $190.0 million in 2018, compared to $170.1 million last year, with a resulting gross profit margin of 9.6 percent up from 8.7 percent in 2017. Year-over-year profit improvement continues to reflect our efforts to increase returns in the healthy environment that exists across most of our geographic markets.

• Segment backlog decreased 1.9 percent year-over-year to$2.82 billion, driven by steady project burn rates. This figure does not include approximately $700 million of previously disclosedTransportation CMGC projects, which will enter backlog as task orders are approved. Entering 2019 with strong backlog and strategic bookings positions our teams with excellent opportunities to grow revenue and profitability across geographies in2019 and beyond.

Water

• Fourth quarter revenue increased 273.4 percent to $122.3 million compared to $32.8 million in the fourth quarter of 2017. Revenue increased 153.0 percent to $338.3 million in 2018, compared to $133.7 million last year, with the increase driven by acquisitions.

• Quarterly gross profit increased to $18.5 million from $2.5 million last year, with gross profit margin of 15.1 percent up from 7.6 percent last year. Gross profit increased to $59.6 million in 2018, compared to $12.3 million last year, with gross profit margin of 17.6 percent, up from 9.2 percent in 2017. Year-over-year profit improvement was the result of solid execution on a broad array of projects in the segment, an area of significant investment and growth in 2018.

• Recent acquisitions contributed to a significant backlog increase year-over-year to $328.9 million. The segment’s bidding environment remains robust, against a backdrop of steadily increasing public and municipal water infrastructure funding.

Specialty

• Fourth quarter 2018 revenue increased 1.2 percent to $165.5 million, compared to $163.6 million last year. Revenue increased 1.8 percent to $626.6 million in 2018, compared to $615.8 million last year. Steady demand in the mining sector, continued progress on tunnel projects, and site development drove the increase, even after allowing for late-2018 weather impacts.

• Quarterly gross profit decreased 16.7 percent to $25.6 million from $30.7 million last year, with gross profit margin of 15.5 percent down from 18.8 percent last year. Gross profit increased 3.9 percent to $90.9 million in 2018, compared to $87.4 million last year, with gross profit margin of 14.5 percent, up from 14.2 percent in 2017.

• Segment backlog finished 2018 at $545.6 million. We continue to target growth while emphasizing bidding discipline in these diverse growth markets. Demand dynamics vary by market, but steadily increasing public- and private-market demand continue to support growth opportunities in tunnel, mining, site development, and power (transmission and distribution) projects.

Materials

• Fourth quarter 2018 revenue increased 24.2 percent to $100.5 million, compared with $80.9 million last year. Revenue increased 28.7 percent to $376.8 million in 2018, compared to $292.8 million last year. Revenue growth was driven by steady external demand related to stepped-up sales efforts. Results also include the mid-2018 addition of Liner Products, an acquired Layne Christensen Company subsidiary, which represents about 10 percent of segment revenue.

• Quarterly gross profit decreased 28.4 percent to $12.4 million from $17.3 million last year, with gross profit margin of 12.3 percent down from 21.3 percent last year. Gross profit increased 8.0 percent to $48.7 million in 2018, compared to $45.1 million last year, with gross profit margin of 12.9 percent down from 15.4 percent last year.

• Segment performance was driven by improved external market demand throughout.Late-2018 weather impacts slowed segment performance, as internal and external sales were delayed due to ongoing wet weather in the West. With committed materials volumes well above last year’s level, sales and business performance will accelerate and begin correcting as weather improves.

Outlook and Guidance

“Our hard work in 2018 has Granite well prepared for a great 2019. With strong demand, healthy backlog, and near-record committed materials volumes, we are enthusiastically poised for a strong start to the year once Mother Nature allows,” Roberts said. As America’s Infrastructure Company, Granite is extremely well positioned to produce excellent top- and bottom-line growth not only in 2019 but well beyond, delivering exceptional value for our key stakeholders,” Roberts said.

“We also are increasingly optimistic that infrastructure investment is an opportunity for political agreement that will produce significant, incremental, and long-term funding solutions for America’s crumbling infrastructure. We believe logic will ultimately prevail in Washington D.C. in 2019. Our optimistic outlook for 2019 and beyond excludes the potential enactment of a federal infrastructure bill, which if passed, would further enhance long-term stability in the overall market, while driving growth most likely beginning in late 2020,” Roberts concluded.

The Company’s expectations for 2019 are:

• Low-teens consolidated revenue growth

• Adjusted EBITDA margin¹ of 8.5 percent to 9.5 percent

Endnotes

(1)  Adjusted net income, adjusted diluted earnings per share, earnings before interest, taxes, depreciation, and amortization (EBITDA), 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)  Acquisition-related expenses include acquisition and integration expenses, synergy costs, and acquired intangible amortization expenses.

(3)  Granite contract backlog is comprised of unearned revenue and other awards.

Conference Call

Granite will conduct a conference call today, February 20, 2019, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended December 31, 2018. The Company invites investors to listen to a live audio webcast on its Investor Relations website, https://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 1-888-220-8451; international callers may dial 1-786-789-4776. A replay will be available after the live call through February 27, 2019, by calling 1-888-203-1112, replay access code 5007380; international callers may dial 1-719-457-0820.

About Granite

Through its offices and subsidiaries nationwide, Granite Construction Incorporated (NYSE: GVA) is a full-suite provider in the transportation, water infrastructure and mineral exploration markets. Granite, America’s Infrastructure Company, 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 nine 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 www.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

CONSOLIDATED BALANCE SHEETS

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

December 31,	2018			2017
ASSETS
Current assets
Cash and cash equivalents	$	272,804		$	233,711
Short-term marketable securities		30,002			67,775
Receivables, net		473,246			479,791
Contract assets		219,754			—
Costs and estimated earnings in excess of billings		—			103,965
Inventories		88,623			62,497
Equity in construction joint ventures		282,229			247,826
Other current assets		48,731			36,513
Total current assets		1,415,389			1,232,078
Property and equipment, net		549,688			407,418
Long-term marketable securities		36,098			65,015
Investments in affiliates		84,354			38,469
Goodwill		259,471			53,799
Other noncurrent assets		131,601			75,199
Total assets	$	2,476,601		$	1,871,978
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	47,286		$	46,048
Accounts payable		251,481			237,673
Contract liabilities		105,449			—
Billings in excess of costs and estimated earnings		—			135,146
Accrued expenses and other current liabilities		273,626			236,407
Total current liabilities		677,842			655,274
Long-term debt		335,119			178,453
Deferred income taxes, net		4,317			1,361
Other long-term liabilities		61,689			44,085
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: 46,665,889 shares as of December 31, 2018, and 39,871,314 shares as of December 31, 2017		467			399
Additional paid-in capital		564,559			160,376
Accumulated other comprehensive (loss) income		(749	)		634
Retained earnings		787,356			783,699
Total Granite Construction Incorporated shareholders’ equity		1,351,633			945,108
Non-controlling interests		46,001			47,697
Total equity		1,397,634			992,805
Total liabilities and equity	$	2,476,601		$	1,871,978

GRANITE CONSTRUCTION INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share data)

	Three Months Ended December 31,						Years Ended December 31,
	2018			2017			2018			2017
Revenue
Transportation	$	504,040		$	524,024		$	1,976,743		$	1,947,420
Water		122,299			32,755			338,250			133,699
Specialty		165,470			163,553			626,619			615,818
Materials		100,516			80,942			376,802			292,776
Total revenue		892,325			801,274			3,318,414			2,989,713
Cost of revenue
Transportation		452,396			473,796			1,786,698			1,777,285
Water		103,842			30,257			278,676			121,429
Specialty		139,893			132,843			535,731			528,372
Materials		88,145			63,671			328,117			247,694
Total cost of revenue		784,276			700,567			2,929,222			2,674,780
Gross profit		108,049			100,707			389,192			314,933
Selling, general and administrative expenses		79,439			57,674			272,776			220,400
Acquisition and integration expenses		16,015			—			60,045			—
Gain on sales of property and equipment		(2,606	)		(1,352	)		(7,672	)		(4,182	)
Operating income		15,201			44,385			64,043			98,715
Other (income) expense
Interest income		(1,855	)		(1,386	)		(6,082	)		(4,742	)
Interest expense		4,481			2,703			14,571			10,800
Equity in income of affiliates		(1,408	)		(2,200	)		(6,935	)		(7,107	)
Other expense (income), net		539			(1,878	)		(1,666	)		(4,699	)
Total other expense (income)		1,757			(2,761	)		(112	)		(5,748	)
Income before provision for income taxes		13,444			47,146			64,155			104,463
Provision for income taxes		3,057			11,821			10,414			28,662
Net income		10,387			35,325			53,741			75,801
Amount attributable to non-controlling interests		(3,841	)		(2,552	)		(11,331	)		(6,703	)
Net income attributable to Granite Construction Incorporated	$	6,546		$	32,773		$	42,410		$	69,098
Net income per share attributable to common    shareholders
Basic	$	0.14		$	0.82		$	0.97		$	1.74
Diluted	$	0.14		$	0.81		$	0.96		$	1.71
Weighted average shares of common stock
Basic		46,888			39,857			43,564			39,795
Diluted		47,333			40,387			44,025			40,372
Dividends per common share	$	0.13		$	0.13		$	0.52		$	0.52

GRANITE CONSTRUCTION INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

Years Ended December 31,	2018			2017
Operating activities
Net income	$	53,741		$	75,801
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		111,544			66,345
Gain on sales of property, equipment and business, net		(4,910	)		(4,182	)
Change in deferred income taxes		20,010			(4,824	)
Stock-based compensation		14,784			15,764
Equity in net loss from unconsolidated joint ventures		22,688			14,634
Net income from affiliates		(6,935	)		(7,107	)
Other non-cash adjustments		4,916			—
Changes in assets and liabilities		(129,448	)		(10,236	)
Net cash provided by operating activities		86,390			146,195
Investing activities
Purchases of marketable securities		(9,952	)		(124,543	)
Maturities of marketable securities		75,000			120,000
Purchases of property and equipment		(111,101	)		(67,695	)
Proceeds from sales of property and equipment		16,238			10,202
Cash paid to purchase businesses, net of cash and restricted cash acquired		(55,027	)		—
Proceeds from the sale of a business		47,812			—
Other investing activities, net		(2,568	)		2,850
Net cash used in investing activities		(39,598	)		(59,186	)
Financing activities
Proceeds from debt		203,250			25,000
Debt principal repayments		(153,924	)		(45,000	)
Cash dividends paid		(22,424	)		(20,687	)
Repurchases of common stock		(16,557	)		(6,977	)
Contributions from non-controlling partners		200			11,500
Distributions to non-controlling partners		(13,275	)		(7,109	)
Other financing activities, net		856			649
Net cash used in financing activities		(1,874	)		(42,624	)
Net increase in cash, cash equivalents and restricted cash		44,918			44,385
Cash and cash equivalents and restricted cash of $0 at beginning of each period		233,711			189,326
Cash, cash equivalents and restricted cash of $5,825 and $0 at end of period	$	278,629		$	233,711

GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)
	Three Months Ended December 31,						Years Ended December 31,
	2018			2017			2018			2017
Revenue
Transportation	$	504,040		$	524,024		$	1,976,743		$	1,947,420
Water		122,299			32,755			338,250			133,699
Specialty		165,470			163,553			626,619			615,818
Materials		100,516			80,942			376,802			292,776
Total revenue	$	892,325		$	801,274		$	3,318,414		$	2,989,713
Gross profit
Transportation	$	51,644		$	50,228		$	190,045		$	170,135
Water		18,457			2,498			59,574			12,270
Specialty		25,577			30,710			90,888			87,446
Materials		12,371			17,271			48,685			45,082
Total gross profit	$	108,049		$	100,707		$	389,192		$	314,933
Gross profit as a percent of revenue
Transportation		10.2	%		9.6	%		9.6	%		8.7	%
Water		15.1			7.6			17.6			9.2
Specialty		15.5			18.8			14.5			14.2
Materials		12.3			21.3			12.9			15.4
Total gross profit as a percent of total revenue		12.1	%		12.6	%		11.7	%		10.5	%

GRANITE CONSTRUCTION INCORPORATED
Unearned Revenue / Contract Backlog by Segment(1)
(Unaudited - dollars in thousands)
Unearned Revenue	December 31, 2018
Transportation	$	2,185,309	75.9	%
Water		218,708	7.6
Specialty		474,016	16.5
Total	$	2,878,033	100.0	%
Other(2)	December 31, 2018
Transportation	$	629,815	77.6	%
Water		110,175	13.6
Specialty		71,598	8.8
Total	$	811,588	100.0	%
Contract Backlog(1)	December 31, 2018				December 31, 2017
Transportation	$	2,815,124	76.3	%	$	2,868,542	77.2	%
Water		328,883	8.9			145,812	3.9
Specialty		545,614	14.8			703,803	18.9
Total	$	3,689,621	100.0	%	$	3,718,157	100.0	%

⁽¹⁾Contract Backlog is calculated by adding Unearned Revenue and Other Awards.

⁽²⁾Other awards include unissued task orders and unexercised contract options to the extent their issuance or exercise is probable as well as contract awards to the extent we believe contract execution and funding is probable.

Non-GAAP Financial Information

The tables below contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Specifically, management believes that non-GAAP financial measures such as EBITDA and 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. We are also providing additional non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income attributable to Granite Construction Incorporated and adjusted diluted earnings per share to indicate the impact of non-recurring acquisition, integration, acquired intangible amortization expenses and synergy costs related to the acquisition of Layne Christensen Company and LiquiForce.

Management believes that these additional non-GAAP financial measures facilitate comparisons between securities analysts, institutional investors and other interested parties. 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.

GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
	Three Months Ended						Years Ended
	December 31,						December 31,
	2018			2017			2018			2017
Net income attributable to Granite Construction Incorporated	$	6,546		$	32,773		$	42,410		$	69,098
Depreciation, depletion and amortization expense(2)		33,728			17,823			111,544			66,345
Provision for income taxes		3,057			11,821			10,414			28,662
Interest expense, net of interest income		2,626			1,317			8,489			6,058
EBITDA	$	45,957		$	63,734		$	172,857		$	170,163
EBITDA margin(3)		5.2	%		8.0	%		5.2	%		5.7	%
Acquisition and integration expenses and synergy costs(4)	$	17,586		$	—		$	63,623		$	—
Adjusted EBITDA(1)	$	63,543		$	63,734		$	236,480		$	170,163
Adjusted EBITDA margin(1)		7.1	%		8.0	%		7.1	%		5.7	%

⁽¹⁾We define EBITDA as GAAP net income attributable to Granite Construction Incorporated, adjusted for net interest expense, taxes, depreciation, depletion and amortization. Adjusted EBITDA and adjusted EBITDA margin exclude the impact of acquisition and integration expenses and synergy costs.

⁽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 consolidated statements of operations of Granite Construction Incorporated.

⁽³⁾Represents EBITDA divided by consolidated revenue of $892.3 million and $3.32 billion for three months and year ended December 31, 2018, respectively, and $801.3 million and $2.99 billion for the three months and year ended December 31, 2017, respectively.

⁽⁴⁾Amount includes expenses related to external transaction costs, professional fees, internal travel, and synergy costs associated with the acquisition and integration of Layne Christensen Company and LiquiForce. Synergy costs include expenses incurred which will be eliminated as the integration of Layne and LiquiForce is completed.

GRANITE CONSTRUCTION INCORPORATED

Adjusted Net Income Reconciliation⁽¹⁾

(Unaudited - in thousands, except per share data)

	Three Months Ended				Years ended
	December 31,				December 31,
	2018		2017		2018		2017
Income before provision for income taxes	$	13,444	$	47,146	$	64,155	$	104,463
Acquisition and integration expenses and synergy costs		17,816		—		63,853		—
Amortization expense on acquired intangible assets		5,233		—		12,387		—
Adjusted income before provision for income taxes (1)	$	36,493	$	47,146	$	140,395	$	104,463
Provision for income taxes	$	3,057	$	11,821	$	10,414	$	28,662
Tax effect of the acquisition and integration expenses, synergy costs and acquired intangible amortization expenses (2)		6,004		—		15,834		—
Adjusted provision for income taxes	$	9,061	$	11,821	$	26,248	$	28,662
Net income attributable to Granite Construction Incorporated	$	6,546	$	32,773	$	42,410	$	69,098
After-tax acquisition and integration expenses, synergy costs and acquired intangible amortization expenses		17,045		—		60,406		—
Adjusted net income attributable to Granite Construction Incorporated	$	23,591	$	32,773	$	102,816	$	69,098
Diluted net income per share attributable to common shareholders	$	0.14	$	0.81	$	0.96	$	1.71
After-tax acquisition and integration expenses, synergy costs and acquired intangible amortization expenses		0.36		—		1.38		—
Adjusted diluted net income per share attributable to common shareholders(1)	$	0.50	$	0.81	$	2.34	$	1.71

⁽¹⁾ Amount includes expenses related to external transaction costs, professional fees, internal travel, and synergy costs associated with the acquisition and integration of Layne Christensen Company and LiquiForce. Synergy costs include expenses incurred which will be eliminated as the integration of Layne and LiquiForce is completed. Adjusted net income and diluted earnings per share exclude the impact of acquisition and integration expenses, synergy costs and acquired intangible amortization.

⁽²⁾The tax effect of the acquisition and integration expenses, synergy costs and acquired intangible amortization expenses was calculated using the Company’s estimated 2018 annual statutory tax rate.

Contact:

Investors

Ron Botoff, 831-728-7532

or

Media

Jacque Fourchy, 831-761-4741

Source: Granite Construction Incorporated