Granite(GVA) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements for Q2 2021 show a net income of $54.5 million and total assets of $2.48 billion Condensed Consolidated Balance Sheets Total assets reached $2.48 billion as of June 30, 2021, with liabilities at $1.49 billion and equity at $988.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2021 | December 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | :--- | | Total current assets | $1,566,434 | $1,455,246 | $1,423,942 | | Total assets | $2,478,898 | $2,379,996 | $2,508,654 | | Total current liabilities | $1,048,285 | $943,256 | $889,600 | | Total liabilities | $1,490,656 | $1,388,386 | $1,417,894 | | Total equity | $988,242 | $991,610 | $1,090,760 | Condensed Consolidated Statements of Operations Q2 2021 revenue grew to $964.2 million, with gross profit at $116.9 million and net income of $54.5 million, or $1.14 diluted EPS Q2 and Six Months Ended June 30, 2021 vs 2020 (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $964,172 | $915,771 | $1,634,085 | $1,551,698 | | Gross Profit | $116,946 | $88,343 | $180,264 | $112,142 | | Operating Income (Loss) | $68,560 | $(2,149) | $(17,131) | $(80,521) | | Net Income (Loss) Attributable to Granite | $54,461 | $3,405 | $(11,734) | $(61,965) | | Diluted EPS | $1.14 | $0.07 | $(0.26) | $(1.36) | Condensed Consolidated Statements of Cash Flows H1 2021 saw net cash used in operating activities of $31.0 million, a shift from $12.5 million provided in H1 2020 Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(31,004) | $12,483 | | Net cash provided by (used in) investing activities | $1,661 | $(21,407) | | Net cash (used in) provided by financing activities | $(13,612) | $31,250 | | Net (decrease) increase in cash | $(42,955) | $22,326 | Notes to the Condensed Consolidated Financial Statements Notes detail a $66.0 million legal settlement charge, reduced project estimate revisions, and $3.45 billion in unearned revenue - Other costs for the six months ended June 30, 2021, included $66.0 million in net settlement charges related to legal proceedings[34] - Downward revisions in estimates on projects reduced gross profit by $11.4 million in H1 2021, a substantial improvement from the $69.8 million reduction in H1 2020[37] - As of June 30, 2021, the company had $3.45 billion in unearned revenue, with approximately $2.5 billion expected to be recognized within the next twelve months[41] - The company entered into a settlement agreement for securities litigation for a total of $129 million, expecting $63 million to be covered by insurance proceeds, resulting in a pre-tax charge of approximately $66 million in Q1 2021[88][91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2021 revenue and gross profit growth, $4.4 billion in CAP, and liquidity management Current Economic Environment and Outlook Business returned to pre-pandemic levels, with optimism for future public infrastructure funding, including the Bipartisan Infrastructure Framework - The business has largely returned to pre-pandemic levels of activity, with most pandemic restrictions removed across its footprint[103] - Management is optimistic about the roughly $1.2 trillion Bipartisan Infrastructure Framework, proposing $579 billion in new spending for roads, bridges, and other infrastructure, expecting improved project visibility starting in mid-to-late 2022[106] Results of Operations Q2 2021 revenue increased 5.3% to $964.2 million, with gross profit margin improving to 12.1% due to asset sales gains Revenue by Segment - Q2 2021 vs Q2 2020 (in thousands) | Segment | Q2 2021 Revenue | Q2 2020 Revenue | % Change | | :--- | :--- | :--- | :--- | | Transportation | $525,235 | $535,101 | (1.8%) | | Water | $113,432 | $109,724 | 3.4% | | Specialty | $200,271 | $174,914 | 14.5% | | Materials | $125,234 | $96,032 | 30.4% | | Total | $964,172 | $915,771 | 5.3% | Gross Profit by Segment - Q2 2021 vs Q2 2020 (in thousands) | Segment | Q2 2021 Gross Profit | Q2 2020 Gross Profit | % Change | | :--- | :--- | :--- | :--- | | Transportation | $59,517 | $31,197 | 90.8% | | Water | $10,563 | $12,579 | (16.0%) | | Specialty | $24,369 | $25,280 | (3.6%) | | Materials | $22,497 | $19,287 | 16.6% | | Total | $116,946 | $88,343 | 32.4% | - A sale-leaseback of two properties in California resulted in a $29.7 million gain, significantly increasing the total gain on sales of property and equipment for Q2 and H1 2021[70][135] Committed and Awarded Projects Total CAP reached $4.45 billion in Q2 2021, driven by a 56.9% increase in Water CAP to $531.9 million Committed and Awarded Projects (CAP) by Segment (in thousands) | Segment | June 30, 2021 | March 31, 2021 | June 30, 2020 | | :--- | :--- | :--- | :--- | | Transportation | $2,894,115 | $3,028,893 | $3,251,646 | | Water | $531,858 | $339,030 | $232,133 | | Specialty | $1,019,318 | $1,083,971 | $681,255 | | Total | $4,445,291 | $4,451,894 | $4,165,034 | - Water CAP increased by $192.8 million (56.9%) from Q1 2021, primarily due to a new $160.5 million dam project award in Texas[123] Liquidity and Capital Resources The company maintains strong liquidity with $404.0 million in cash and equivalents, despite $31.0 million cash used in H1 2021 operations Liquidity Position (in thousands) | Component | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total consolidated cash and cash equivalents | $393,181 | $436,136 | | Marketable securities | $10,850 | $5,200 | | Total cash, cash equivalents and marketable securities | $404,031 | $441,336 | - As of June 30, 2021, the company had $226.6 million in unused availability under its revolving credit facility[72][138] - Capital expenditures were $46.4 million for the first six months of 2021, with a full-year forecast of $100.2 million[149] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure have occurred since the 2020 Annual Report on Form 10-K - There has been no material change in the company's exposure to market risk since the 2020 Annual Report on Form 10-K[158] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2021, due to material weaknesses, with remediation ongoing - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were not effective as of June 30, 2021, due to previously disclosed material weaknesses[159] - A remediation plan is underway, which includes implementing new oversight, training, and internal controls related to cost forecasting, as well as making personnel and organizational changes[160][166] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section incorporates by reference detailed legal proceedings from Note 16 of the financial statements - The report incorporates the legal proceedings information from Note 16 of the financial statements by reference[163] Item 1A. Risk Factors No material changes to risk factors have been reported since the 2020 Annual Report on Form 10-K - There have been no material changes in the risk factors from those disclosed in the 2020 Annual Report on Form 10-K[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2021, the company repurchased 4,982 shares for employee tax withholding, with $157.2 million remaining in the repurchase program - The company repurchased 4,982 shares in Q2 2021 solely for employee tax withholding on vested RSUs[165][167] - No shares were purchased under the publicly announced share repurchase plan during the quarter. The remaining authorization under the plan is $157.2 million[156][168]