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Granite Reports Third Quarter 2018 Results

Granite Construction Incorporated (NYSE: GVA) today reported third quarter 2018 net income of $55.7 million, an increase of 21.1 percent from net income of $46.0 million in the third quarter of 2017. Earnings per diluted share (EPS) was $1.17, compared to $1.14 last year. Third quarter and year-to-date 2018 results include after-tax acquisition-related expenses of $11.7 million and $43.4 million, respectively2. Excluding the impact of these expenses, third quarter adjusted net income was $67.4 million1, with adjusted EPS of $1.421. For the first nine months of 2018, EPS was $0.84, compared to $0.90 in the prior-year period. Excluding the impact of after-tax acquisition-related expenses, year-to-date 2018 adjusted net income increased significantly to $79.2 million1, with adjusted EPS of $1.851 more than doubling from the prior year.

“In 2018, Granite has executed our strategy to develop a leadership position as America’s Infrastructure Company,” said Granite President and Chief Executive Officer James H. Roberts. “Acquisitions have helped us to deliver profitable geographic and end-market diversification, and this action highlights the significant opportunities we have to expand Granite’s platforms for growth in the new Transportation, Water, Specialty, and Materials segments.”

“Our focus has remained intent on improved profitability this year, and our teams, new and old, have delivered,” Roberts said. “Demand for projects across all segments of our business remains strong as we maintain our deliberate emphasis on improved pricing. Increased pricing is creating solid bottom-line improvement, while having an expected, near-term impact on project win rates, most notably transportation projects. Transportation demand continues to strengthen, fueling expected growth in project bookings and revenue that, coupled with our ongoing pricing discipline, will spur improved segment margin performance for quite some time.”

Roberts continued, “Our pricing strategy is sound, built upon both practical and strategic considerations, especially given the healthy balance of near- and long-term public- and private-market demand. This year’s highly focused work on pricing discipline illustrates the broad leverage our business can exert to create bottom-line results and steadily improving capital returns on the significant, long-term investments that underpin our business. Our focus remains on sustained pricing discipline to deliver consistent, balanced, risk-adjusted returns across end markets.”

Third Quarter and Year-To-Date 2018 Consolidated Results

  • Revenue increased 10.3 percent to $1.06 billion in the third quarter of 2018, compared with $957.1 million in the prior-year period. For the nine months ending September 30, 2018, revenue increased 10.9 percent to $2.43 billion, compared with $2.19 billion last year.
  • Consolidated gross profit increased 26.2 percent to $144.5 million, compared with $114.5 million last year. On a year-to-date basis, gross profit increased 31.2 percent to $281.1 million compared to $214.2 million last year.
  • Gross profit margin was 13.7 percent in the third quarter, compared with 12.0 percent in 2017. For the first nine months of 2018, gross profit margin was 11.6 percent compared with 9.8 percent last year.
  • Selling, general & administrative (SG&A) expenses during the quarter and on a year-to-date basis include the impact of higher acquisition-related overhead. SG&A expenses were $70.8 million, or 6.7 percent of revenue in the quarter, compared to $49.5 million, or 5.2 percent of revenue, last year. For the first nine months of 2018, SG&A expenses were $193.3 million, or 8.0 percent of revenue, compared to $162.7 million, or 7.4 percent of revenue, during the same prior-year period. The increase is attributable to acquisition-related costs.
  • Company effective tax rate in the third quarter was 12.8 percent, driven by a $7.6 million benefit3, a discrete item related to revaluation of deferred tax assets and liabilities.
  • Adjusted EBITDA increased 30.9 percent year-over-year to $112.7 million in the third quarter of 2018, from $86.1 million last year. On a year-to-date basis, adjusted EBITDA increased 62.5 percent year-over-year to $172.9 million, compared to $106.4 million in 2017.
  • Company backlog3 was $3.24 billion, down 23.5 percent year-over-year. Earlier in 2018 we received notification of certain project wins that are not yet included in our backlog. These three projects, in California, Utah, and Florida, total more than $825 million and are expected to enter our backlog late in 2018 and in 2019.
  • Our balance sheet remains strong with cash and marketable securities of $311.4 million as of September 30, 2018. Our capital structure is well positioned to support the execution of our strategic plan.

Third Quarter and Year-To-Date 2018 Segment Results

On October 9, the Company filed an 8-K with the Securities and Exchange Commission, which provides a quarterly and annual lookback and mapping of our new reportable segments. Third quarter 2018 results reflect the new reporting structure.

Transportation

  • Third quarter 2018 revenue decreased 2.2 percent to $610.8 million, compared to $624.7 million last year. Year-to-date 2018 revenue increased 3.5 percent to $1.47 billion, compared to $1.42 billion last year. Transportation revenue growth in 2018 reflects both increased bidding discipline and higher margin expectations.
  • Quarterly gross profit increased 8.3 percent to $71.0 million from $65.5 million last year, with gross profit margin of 11.6 percent, up more than 100 basis points from 10.5 percent last year. Year-to-date gross profit increased 15.4 percent to $138.4 million from $119.9 million last year, with a resulting gross profit margin of 9.4 percent up from 8.4 percent in 2017. Year-over-year profit improvement continues to reflect our efforts to raise prices in a healthy environment for most of our geographic markets.
  • Segment backlog decreased 29.6 percent year-over-year to $2.31 billion, driven by steady project burn rates in mild weather conditions during the quarter. Healthy and improving transportation market demand positions our teams with top- and bottom-line growth opportunities across geographies. We continue to patiently re-shape our project portfolio, pursuing revenue strategies in alignment with increased returns that balance project risk dynamics.

Water

  • Third quarter 2018 revenue increased 241.7 percent to $124.3 million compared to $36.4 million last year. Year-to-date 2018 revenue increased 113.9 percent to $216.0 million, compared to $100.9 million last year.
  • Quarterly gross profit increased to $24.1 million from $1.8 million last year, with gross profit margin of 19.4 percent up from 5.0 percent last year. Year-to-date gross profit increased to $41.1 million from $9.8 million last year, with gross profit margin of 19.0 percent, up from 9.7 percent in 2017. Year-over-year profit improvement is tied to solid execution on projects in the robust markets we are now addressing in the Water segment.
  • Segment backlog increased significantly year-over-year to $364.8 million, with the largest impact from recent acquisitions. The segment’s bidding environment remains healthy, mirroring steady to improving federal, state, and local water infrastructure funding.

Specialty

  • Third quarter 2018 revenue decreased 3.6 percent to $190.8 million, compared to $197.9 million last year. Year-to-date 2018 revenue increased 2.0 percent to $461.1 million, compared to $452.3 million last year. Drivers of the performance include continued strong demand for mining work both by legacy businesses and recent acquisitions, coupled with steady demand in power and tunnel projects.
  • Quarterly gross profit increased 1.1 percent to $28.1 million from $27.8 million last year, with gross profit margin of 14.7 percent up from 14.0 percent last year. Year-to-date gross profit increased 15.1 percent to $65.3 million from $56.7 million last year, with gross profit margin of 14.2 percent, up from 12.5 percent in 2017.
  • The gross profit and margin improvement was attributable primarily to strong market demand, solid execution, and consistent bidding discipline, which is producing improved margins on new work.
  • Segment backlog decreased 27.6 percent year-over-year to $564.7 million, based on steady project burn rates. The bidding environment in the Specialty segment remains healthy, supported by steady public- and private-market demand. This diverse, robust project and bidding environment, which includes tunnel, power, mining, site development, renewable energy and more, position our teams for backlog and revenue growth in this segment in 2019 and beyond.

Materials

  • Third quarter 2018 revenue increased 32.1 percent to $129.6 million, compared with $98.1 million last year. Year-to-date 2018 revenue increased 30.4 percent to $276.3 million, compared to $211.8 million last year.
  • Quarterly gross profit improved 9.9 percent to $21.3 million from $19.4 million last year, with gross profit margin of 16.4 percent down from 19.8 percent last year. Year-to-date gross profit increased 30.6 percent to $36.3 million from $27.8 million last year, with gross profit margin steady at 13.1 percent.
  • The quarterly and year-to-date revenue and profit growth was attributable primarily to improved external demand across most markets, while maintaining an expectation of overall mid-teen gross margins in the segment.

Outlook and Guidance

“Granite’s strategic growth plan is delivering strongly improved near-term results, while positioning our stakeholders to benefit from significant, long-term economic value creation,” said Roberts. “Significant voter support across the country for incremental infrastructure investment is spurring state and local governments and politicians to action. With more than 300 state and local measures on ballots on November 6, voters increasingly understand and support the sustained, increased infrastructure investments that are required to improve public safety, to create jobs, to drive economic expansion, and to improve Americans’ quality of life. For those of you in California, please vote No on Proposition 6 on Election Day.”

The Company’s expectations for 2018, including acquisitions, are:

  • Mid-teens consolidated revenue growth, which is subject to late-year seasonality
  • Adjusted EBITDA margin of 7.5 percent to 8.5 percent

Endnotes

(1) Adjusted net income, adjusted earnings per diluted 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. Please refer to the description and reconciliation of non-GAAP measures in the attached tables.

(3) For further information on income taxes, please refer to Note 16 of “NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS” in the Granite Construction Incorporated Form 10-Q for the quarterly period ended September 30, 2018, which is expected to be filed with the Securities and Exchange Commission on October 26, 2018.

(4) Granite contract backlog is comprised of unearned revenue and other awards. For further information, please refer to “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in the Granite Construction Incorporated Form 10-Q for the quarterly period ended September 30, 2018, which is expected to be filed with the Securities and Exchange Commission on October 26, 2018.

Conference Call

Granite will conduct a conference call today, October 26, 2018, at 8 a.m. Pacific Time/11 a.m. Eastern Time to discuss the results of the quarter ended September 30, 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 1-877-328-5503; international callers may dial 1-412-317-5472. A replay will be available after the live call through November 2, 2018, by calling 1-877-344-7529, replay access code 10124962; international callers may dial 1-412-317-0088.

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

CONDENSED CONSOLIDATED BALANCE SHEETS

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

September 30,
2018

December 31,
2017

September 30,
2017

ASSETS
Current assets
Cash and cash equivalents $ 230,259 $ 233,711 $ 185,516
Short-term marketable securities 35,010 67,775 47,814
Receivables, net 618,070 479,791 627,081
Contract assets 213,989
Costs and estimated earnings in excess of billings 103,965 94,527
Inventories 90,789 62,497 62,059
Assets held for sale 62,988
Equity in construction joint ventures 273,993 247,826 242,358
Other current assets 32,185 36,513 26,612
Total current assets 1,557,283 1,232,078 1,285,967
Property and equipment, net 560,618 407,418 412,174
Long-term marketable securities 46,093 65,015 69,991
Investments in affiliates 84,840 38,469 39,946
Goodwill 244,696 53,799 53,799
Deferred income taxes, net 6,408
Other noncurrent assets 143,910 75,199 85,411
Total assets $ 2,643,848 $ 1,871,978 $ 1,947,288
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 116,796 $ 46,048 $ 14,796
Accounts payable 316,917 237,673 286,913
Contract liabilities 117,759
Billings in excess of costs and estimated earnings 135,146 168,707
Accrued expenses and other current liabilities 296,033 236,407 246,775
Total current liabilities 847,505 655,274 717,191
Long-term debt 316,926 178,453 225,922
Deferred income taxes, net 5,589 1,361 5,932
Other long-term liabilities 67,429 44,085 46,435
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: 46,897,092 shares as of September 30, 2018, 39,871,314 shares as of December 31, 2017 and 39,850,587 shares as of September 30, 2017 469 399 399
Additional paid-in capital 572,046 160,376 157,734
Accumulated other comprehensive income 1,841 634 240
Retained earnings 786,936 783,699 756,183

Total Granite Construction Incorporated shareholders’ equity

1,361,292 945,108 914,556
Non-controlling interests 45,107 47,697 37,252
Total equity 1,406,399 992,805 951,808
Total liabilities and equity $ 2,643,848 $ 1,871,978 $ 1,947,288

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2018201720182017
Revenue
Transportation $ 610,847 $ 624,727 $ 1,472,703 $ 1,423,396
Water 124,292 36,378 215,951 100,944
Specialty 190,836 197,886 461,149 452,265
Materials 129,616 98,135 276,286 211,834
Total revenue 1,055,591 957,126 2,426,089 2,188,439
Cost of revenue
Transportation 539,871 559,187 1,334,302 1,303,489
Water 100,189 34,573 174,834 91,172
Specialty 162,737 170,089 395,838 395,529
Materials 108,303 78,747 239,972 184,023
Total cost of revenue 911,100 842,596 2,144,946 1,974,213
Gross profit 144,491 114,530 281,143 214,226
Selling, general and administrative expenses 70,769 49,501 193,337 162,726
Acquisition and integration expenses 9,334 44,030
Gain on sales of property and equipment (3,018 ) (1,753 ) (5,066 ) (2,830 )
Operating income 67,406 66,782 48,842 54,330
Other (income) expense
Interest income (1,533 ) (1,141

)

(4,227 ) (3,356 )
Interest expense 4,452 2,660 10,090 8,097
Equity in income of affiliates (1,769 ) (2,732 ) (5,527 ) (4,907 )
Other income, net (1,533 ) (1,309 ) (2,205 ) (2,821 )
Total other income (383 ) (2,522 ) (1,869 ) (2,987 )
Income before provision for income taxes 67,789 69,304 50,711 57,317
Provision for income taxes 8,692 21,249 7,357 16,841
Net income 59,097 48,055 43,354 40,476
Amount attributable to non-controlling interests (3,425 ) (2,073 ) (7,490 ) (4,151 )
Net income attributable to Granite Construction Incorporated $ 55,672 $ 45,982 $ 35,864 $ 36,325
Net income per share attributable to common shareholders
Basic $ 1.20 $ 1.15 $ 0.84 $ 0.91
Diluted $ 1.17 $ 1.14 $ 0.84 $ 0.90
Weighted average shares of common stock
Basic 46,308 39,844 42,443 39,774
Diluted 47,810 40,387 42,910 40,367
Dividends per common share $ 0.13 $ 0.13 $ 0.39 $ 0.39

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

Nine Months Ended September 30,20182017
Operating activities
Net income $ 43,354 $ 40,476

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization 77,816 48,522
Gain on sales of property and equipment, net (5,066 ) (2,830 )
Change in deferred income taxes (2,207 )
Stock-based compensation 12,620 13,580
Equity in net loss from unconsolidated joint ventures 16,343 15,415
Net income from affiliates (5,526 ) (4,907 )
Changes in assets and liabilities: (122,591 ) (45,642 )
Net cash provided by operating activities 14,743 64,614
Investing activities
Purchases of marketable securities (9,952 ) (79,708 )
Maturities of marketable securities 60,000 90,000
Purchases of property and equipment (86,131 ) (56,808 )
Proceeds from sales of property and equipment 9,480 5,107
Cash paid to purchase businesses, net of cash and restricted cash acquired (55,027 )
Other investing activities, net 317 2,321
Net cash used in investing activities (81,313 ) (39,088 )
Financing activities
Proceeds from debt 143,250
Debt principal repayments (42,149 ) (3,750 )
Cash dividends paid (16,328 ) (15,506 )
Repurchases of common stock (6,369 ) (6,713 )
Distributions to non-controlling partners, net (10,128 ) (3,500 )
Other financing activities, net 441 133
Net cash provided by (used in) financing activities 68,717 (29,336 )
Net increase (decrease) in cash, cash equivalents and restricted cash 2,147 (3,810 )
Cash and cash equivalents at beginning of period 233,711 189,326
Cash, cash equivalents and restricted cash of $5,599 at end of period $ 235,858 $ 185,516
GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - dollars in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2018201720182017
Revenue
Transportation $ 610,847 $ 624,727 $ 1,472,703 $ 1,423,396
Water 124,292 36,378 215,951 100,944
Specialty 190,836 197,886 461,149 452,265
Materials 129,616 98,135 276,286 211,834
Total revenue $ 1,055,591 $ 957,126 $ 2,426,089 $ 2,188,439
Gross profit
Transportation $ 70,976 $ 65,540 $ 138,401 $ 119,907
Water 24,103 1,805 41,117 9,772
Specialty 28,099 27,797 65,311 56,736
Materials 21,313 19,388 36,314 27,811
Total gross profit $ 144,491 $ 114,530 $ 281,143 $ 214,226
Gross profit as a percent of revenue
Transportation 11.6 % 10.5 % 9.4 % 8.4 %
Water 19.4 5.0 19.0 9.7
Specialty 14.7 14.0 14.2 12.5
Materials 16.4 19.8 13.1 13.1
Total gross profit as a percent of total revenue 13.7 % 12.0 % 11.6 % 9.8 %
GRANITE CONSTRUCTION INCORPORATED
Unearned Revenue / Contract Backlog by Segment(1)
(Unaudited - dollars in thousands)
Unearned RevenueSeptember 30, 2018
Transportation $ 2,311,712 75.5 %
Water 250,157 8.2
Specialty 501,556 16.4
Total $ 3,063,425 100.0 %
Other(2)September 30, 2018
Transportation $

0.0

%

Water 114,615 64.5
Specialty 63,095 35.5
Total $ 177,710 100.0 %
Contract Backlog(1)September 30, 2018June 30, 2018September 30, 2017
Transportation $ 2,311,712

71.3

%

$

2,637,055 72.2

%

$

3,283,055 77.5

%

Water 364,772 11.3 398,886 10.9 171,939 4.1
Specialty 564,651 17.4 615,981 16.9 779,750 18.4
Total $ 3,241,135 100.0 % $ 3,651,922 100.0 % $ 4,234,744 100.0 %

(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 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.

GRANITE CONSTRUCTION INCORPORATED
EBITDA(1)
(Unaudited - dollars in thousands)
Three Months EndedNine Months Ended
September 30,September 30,
2018201720182017
Net income attributable to Granite Construction Incorporated $ 55,672 $ 45,982 $ 35,864 $ 36,325
Depreciation, depletion and amortization expense(2) 34,269 17,374 77,816 48,522
Provision for income taxes 8,692 21,249 7,357 16,841
Interest expense, net of interest income 2,919 1,519 5,863 4,741
EBITDA $ 101,552

$

86,124 $ 126,900 $ 106,429
EBITDA Margin(3) 9.6

%

9.0 % 5.2 % 4.9 %
Acquisition and integration expenses and synergy costs(4) $ 11,190 $ $ 46,037 $
Adjusted EBITDA(1) $ 112,742 $ 86,124 $ 172,937 $ 106,429
Adjusted EBITDA margin(1) 10.7 % 9.0 % 7.1 % 4.9 %

(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 condensed consolidated statements of operations of Granite Construction Incorporated.

(3)Represents EBITDA divided by consolidated revenue of $1.06 billion and $2.43 billion for three and nine months ended September 30, 2018, respectively, and $0.96 billion and $2.19 billion for the three and nine months ended September 30, 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 EndedNine Months Ended
September 30,September 30,
2018201720182017
Income before provision for income taxes $ 67,789 $ 69,304 $ 50,711 $ 57,317
Acquisition and integration expenses and synergy costs(2) 11,190 46,037
Amortization expense on acquired intangible assets(3) 4,466 7,154
Adjusted income before provision for income taxes $ 83,445 $ 69,304 $ 103,902 $ 57,317
Provision for income taxes $ 8,692 $ 21,249 $ 7,357 $ 16,841

Tax effect of the acquisition and integration expenses, synergy costs and acquired intangible amortization expenses (4)

3,923 9,830
Adjusted provision for income taxes $ 12,615 $ 21,249 $ 17,187 $ 16,841
Net income attributable to Granite Construction Incorporated $ 55,672 $ 45,982 $ 35,864 $ 36,325

After-tax acquisition and integration expenses, synergy costs and acquired intangible amortization expenses

11,733 43,361
Adjusted net income attributable to Granite

Construction Incorporated(1)

$ 67,405 $ 45,982 $ 79,225 $ 36,325
Diluted net income per share attributable to common shareholders $ 1.17 $ 1.14 $ 0.84 $ 0.90
After-tax acquisition and integration expenses, synergy costs and acquired intangible amortization expenses 0.25 1.01
Adjusted diluted net income per share attributable to

common shareholders(1)

$ 1.42 $ 1.14 $ 1.85 $ 0.90

(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)Amortization expense on acquired intangible assets related to the Layne and LiquiForce acquisitions.

(3)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.

(4)Net income attributable to Granite Construction Incorporated is presented net of non-controlling interests of $3.4 million and $7.5 million for three and nine months ended September 30, 2018, respectively, and $2.1 million and $4.2 million for the three and nine months ended September 30, 2017, respectively.

Contacts:

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

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