Granite(GVA) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company reported a 5.3% revenue increase to $669.9 million, a net loss of $66.2 million, and total assets of $2.37 billion for Q1 2021, with results impacted by a $66.0 million legal settlement charge Condensed Consolidated Balance Sheets | (In thousands) | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :--- | :--- | :--- | :--- | | Total current assets | $1,450,741 | $1,455,246 | $1,301,064 | | Total assets | $2,373,684 | $2,379,996 | $2,384,375 | | Total current liabilities | $1,000,135 | $943,256 | $809,562 | | Total liabilities | $1,442,489 | $1,388,386 | $1,284,571 | | Total equity | $931,195 | $991,610 | $1,099,804 | - Cash and cash equivalents increased to $452.9 million as of March 31, 2021, up from $242.6 million a year prior, strengthening the company's liquidity position[8] - Total equity decreased to $931.2 million from $1.10 billion year-over-year, primarily due to a reduction in retained earnings from net losses[8] Condensed Consolidated Statements of Operations | (In thousands, except per share data) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total revenue | $669,913 | $635,927 | | Gross profit | $63,318 | $23,799 | | Operating loss | $(85,691) | $(78,372) | | Net loss attributable to Granite | $(66,195) | $(65,370) | | Diluted net loss per share | $(1.45) | $(1.44) | - Gross profit significantly improved to $63.3 million in Q1 2021 from $23.8 million in Q1 2020, despite a modest 5.3% revenue increase, driven by better project performance and fewer negative estimate revisions[10] - The company recorded 'Other costs' of $75.8 million in Q1 2021, a sharp increase from $5.2 million in Q1 2020, primarily due to a $66.0 million net charge for a legal settlement[10][32] Condensed Consolidated Statements of Cash Flows | (In thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $38,087 | $(20,125) | | Net cash (used in) provided by investing activities | $(16,303) | $5,902 | | Net cash used in financing activities | $(4,992) | $(6,400) | | Net increase (decrease) in cash | $16,792 | $(20,623) | - Operating cash flow showed a significant positive swing to $38.1 million provided by operations in Q1 2021, compared to $20.1 million used in Q1 2020, mainly due to improved working capital management[19][140] Notes to the Condensed Consolidated Financial Statements - In Q1 2021, the company recorded $66.0 million in net settlement charges and $7.3 million in investigation fees, categorized under 'Other costs'[27][31][32] - Downward revisions in project estimates negatively impacted gross profit by $5.3 million on one project in Q1 2021, a significant improvement from a $28.5 million negative impact across two projects in Q1 2020[35] - On April 29, 2021, the company entered into a settlement agreement for two securities class action lawsuits for a total of $129 million, resulting in a pre-tax charge of approximately $66 million in Q1 2021 after expected insurance coverage[83][84][87] - The SEC has issued subpoenas for documents related to the company's internal investigation into prior-period reporting for the Heavy Civil operating group, and the company is cooperating[90] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5.3% revenue increase, improved gross margins, a growing backlog, strong liquidity sufficient for a major legal settlement, and an ongoing strategic review of its Heavy Civil group Current Economic Environment and Outlook - The company's operations are categorized as 'Essential Critical Infrastructure,' allowing most projects to continue during the COVID-19 pandemic, though some disruptions occurred[98] - Public works funding, supporting about 75% of the company's portfolio, is expected to be bolstered by federal initiatives like the FAST Act extension and the American Rescue Plan Act of 2021[100] - The company is undergoing a strategic review of its Heavy Civil operating group to reduce exposure to large, complex projects with high-risk profiles[103] Results of Operations | Segment | Q1 2021 Revenue ($M) | Q1 2020 Revenue ($M) | % Change | | :--- | :--- | :--- | :--- | | Transportation | $351.0 | $350.9 | 0.0% | | Water | $99.8 | $101.7 | (1.9%) | | Specialty | $155.7 | $133.0 | 17.0% | | Materials | $63.5 | $50.3 | 26.1% | | Total | $669.9 | $635.9 | 5.3% | | Segment | Q1 2021 Gross Profit ($M) | Q1 2021 Margin | Q1 2020 Gross Profit ($M) | Q1 2020 Margin | | :--- | :--- | :--- | :--- | :--- | | Transportation | $35.9 | 10.2% | $25.4 | 7.2% | | Water | $8.6 | 8.6% | $9.3 | 9.2% | | Specialty | $17.3 | 11.1% | $(10.7) | (8.1%) | | Materials | $1.6 | 2.5% | $(0.2) | (0.4%) | | Total | $63.3 | 9.5% | $23.8 | 3.7% | - Total contract backlog increased to $3.47 billion at March 31, 2021, up from $3.31 billion at year-end 2020 but down from $3.64 billion a year prior[115][121] Liquidity and Capital Resources - The company believes its liquidity, including $464.2 million in cash and marketable securities, is sufficient to meet operating requirements for the next twelve months, including the litigation settlement payment[133][134] - Operating activities provided $38.1 million in cash for Q1 2021, a significant improvement from the $20.1 million used in Q1 2020, primarily due to better working capital management[138][140] - The company anticipates capital expenditures for the full year 2021 to be between $105.0 million and $115.0 million[144] - As of March 31, 2021, the company was in compliance with its major financial covenants, with a Consolidated Leverage Ratio of 1.94 (below the maximum of 3.00)[150] Quantitative and Qualitative Disclosures About Market Risk The company reported no significant changes in its exposure to market risk compared to its 2020 Annual Report on Form 10-K - There has been no significant change in the company's exposure to market risk from what was disclosed in the 2020 Annual Report on Form 10-K[153] Controls and Procedures Disclosure controls were deemed ineffective due to previously disclosed material weaknesses, though management asserts the financial statements are fairly stated and a remediation plan is underway - Management concluded that disclosure controls and procedures were not effective as of the end of the period due to material weaknesses previously disclosed in the 2020 Annual Report on Form 10-K[154] - Despite the material weaknesses, management performed additional analysis and concluded that the financial statements in the Form 10-Q are fairly stated in all material respects[154] - The company has begun implementing a remediation plan, which includes personnel actions, changes in leadership, and enhanced oversight and training programs[155][156] PART II. OTHER INFORMATION Legal Proceedings This section references Note 16, which details a $129 million securities lawsuit settlement, a derivative lawsuit, and an ongoing SEC investigation - The report incorporates by reference the legal proceedings detailed in Note 16 of the financial statements[159] Risk Factors The company states there have been no material changes to the risk factors disclosed in its 2020 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020[160] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 57,618 shares for $2.3 million solely for employee tax withholding, with $157.2 million remaining under its public repurchase program | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | 291 | $33.94 | | Feb 2021 | 3,204 | $32.17 | | Mar 2021 | 54,123 | $40.39 | | Total Q1 2021 | 57,618 | $39.90 | - All shares purchased during the quarter were in connection with employee tax withholding for vested restricted stock units (RSUs), not open market repurchases under the formal buyback plan[163] - As of March 31, 2021, $157.2 million remained available for repurchase under the Board-authorized $200.0 million share repurchase program[151][163] Mine Safety Disclosures Information regarding mine safety violations and other regulatory matters is included in Exhibit 95 of this quarterly report - Information concerning mine safety violations is included in Exhibit 95 to this Form 10-Q[165] Exhibits This section lists exhibits filed with the Form 10-Q, including a credit agreement amendment, officer certifications, and mine safety disclosures - Key exhibits filed include Amendment No. 6 to the Credit Agreement, CEO and CFO certifications, and Mine Safety Disclosures[166]