WATSONVILLE, California-—Granite Construction Incorporated provided a business update and third quarter 2020 preliminary select financial information.
“I am pleased today to discuss some highlights of Granite’s recent performance, but first, I want to thank the board of directors for their confidence in my ability to lead Granite through the near-term challenges we are facing as we work to implement our long-term strategic vision,” said Kyle T. Larkin, president at Granite. “While we can all acknowledge that 2020 has been a difficult year on many fronts, our people will lead the company through these tough times. Despite the COVID-19 pandemic and California wildfires, our work levels remain steady with minimal project impact, and our business continues to adapt. As of September 30, 2020, total company committed and awarded projects (CAP) (1) stood at $4.2 billion, and Granite’s liquidity has improved over the course of the year. We are focused on completing our restated financials and filing with the SEC so we can once again direct all of our efforts on being the best builders and materials producers in the industry.
“Most importantly, our top concern remains the safety of our employees and our continued commitment to providing our employees with a safe and healthy work environment in this especially tumultuous year.”
Liquidity & Financial Flexibility Remains Healthy
The company had $549.6 million of available liquidity, inclusive of $393.7 million of cash and marketable securities as of Sept. 30, 2020, compared to $232.6 million of cash and marketable securities as of Sept. 30, 2019. Debt was $413.9 million as of Sept. 30, 2020 compared to $403.1 million as of Sept. 30, 2019. The company did not make any borrowings during the quarter on its credit facility and continues to focus on strategic cash management. Additionally, the company is working with its lenders to amend its credit facility to extend the filing deadline to Feb. 28, 2021 for its audited financial statements on Form 10-K for the year-ended Dec. 31, 2019, and for the company’s Form 10-Qs for the first three quarters of 2020. The company expects to enter into this amendment on or before November 15, 2020.
The company ended the third quarter of 2020 with CAP of $4.2 billion, which includes over $1 billion of best-value procurement work. Our CAP balance is modestly higher from second quarter 2020 levels with increased best-value procurement work offsetting lower heavy civil operating group backlog, which is consistent with our procurement strategy shared in the second half of 2019. While project lettings vary by state, there is an overall recognition at the federal, state and local levels of the benefits infrastructure projects provide towards economic activity.
Audit/Compliance Committee Investigation Substantially Complete & Form 10-Q Filing Delay
In February of 2020, Granite’s audit/compliance committee, assisted by independent counsel, began an investigation of prior-period reporting for the heavy civil operating group, and the extent to which these matters affect the effectiveness of Granite’s internal control over financial reporting. The company previously reported on Form 8-K the audit/compliance committee’s determination that prior period financial statements could not be relied upon for the years ended Dec. 31, 2017 and 2018 and for the first three quarters in 2019.
The investigation is substantially complete and the company is evaluating the impact of the investigation on its prior period financial statements and implementing appropriate remediation actions. The company will not file its quarterly report on Form 10-Q for the third quarter of 2020 by Nov. 9, 2020. Further, Granite will file a Form 12b-25 Notification of Late Filing with the U.S. Securities and Exchange Commission with regard to its third quarter 2020 Quarterly Report on Form 10-Q.