Granite Reports Fiscal Year 2018 Results

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.--(BUSINESS WIRE)-- 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 disclosed Transportation 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 in 2019 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.zkyk.net.

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.

Investors
Ron Botoff, 831-728-7532
or
Media
Jacque
Fourchy, 831-761-4741

Source: Granite Construction Incorporated