Granite Construction reported net income of $15.3 million for the quarter ended Sept. 30, 2014, compared to revised net income of $13.0 million in the third quarter of 2013. Diluted earnings per share in the quarter were $0.38 compared to $0.33 in the prior-year period.
"We are encouraged with overall margin improvement in the business, driven by a continued rebound in our Construction Materials business," said James H. Roberts, president and CEO of Granite Construction.
"As we have discussed over the past few years, our materials business acts as a leading indicator of changes in the overall economic environment. This positive change is encouraging not only for our materials business, but it also reflects increased opportunities for our other business lines," Roberts said.
Revenue for the third quarter of 2014 decreased 2.7 percent to $719.8 million compared with $739.8 million last year. Gross profit margin in the third quarter was 9.3 percent compared with 7.6 percent in 2013, driven primarily by improved performance in the Large Project Construction and Construction Materials segments.
Third quarter 2014 profit performance was impacted by projects which have not reached profit recognition, coupled with outstanding claims and unsigned change orders. Selling, general and administrative expenses for the third quarter increased $1.9 million from 2013, to $47.4 million, driven by the timing of pre-bid costs and investment in our Continuous Improvement initiative.
Total company backlog was $3.0 billion at the end of the third quarter, up from $2.8 billion last year. This total does not include the recently announced successful bid on the Pennsylvania Rapid Bridge Replacement Project, which is expected to add about $360 million to backlog in the fourth quarter.
Construction segment revenue decreased 5.0 percent to $447.1 million, compared with $470.6 million last year. The decrease is attributable to lower volume in a number of Western markets, outstanding claims and unsigned change orders, and timing of new work in our power business.
Gross profit margin for the quarter increased slightly to 10.9 percent, driven by solid performance in its power and underground businesses, and offset by continued competitive markets in the West.
Construction Materials revenue increased 12.1 percent to $93.2 million, compared with $83.2 million last year. The revenue increase was attributable to improved volumes related to private sector activity and mixed trends in public markets.
Gross profit margin for the quarter was 13.1 percent, compared with 8.8 percent in 2013. Gross profit performance was driven by improved volumes and pricing, along with operational efficiencies.
"A new long-term highway bill is essential to ensure longer term funding can meet the increasing demand for critical infrastructure projects across the country,” Roberts said. “We recently experienced delays in project awards and lettings. The delays were an unanticipated headwind in 2014, and will result in a benefit to our business in 2015, highlighting how swiftly current federal funding uncertainty impacts the timing of public sector work."
Granite continues to expect improved gross profit in 2014 and consolidated EBITDA2 margin of 5 percent to 7 percent. Consolidated revenues for 2014 are expected to finish at the bottom of the previously announced $2.4 to $2.8 billion range.
"Across the country, our business units are extremely busy executing on our record backlog," Roberts said. "We are focused on leveraging this momentum as we look to finish strongly in 2014. This late-year activity, coupled with opportunities for resolution of outstanding issues, provides us with an opportunity for strong performance in the fourth quarter and in early 2015."