Granite(GVA)2025-02-14 01:42Revenue Sources - Approximately 75% of the Construction Segment revenue in 2024 was derived from contracts funded by government agencies[56] - Approximately 75% of the company's construction revenue for the year ended December 31, 2024, was funded by federal, state, and local government agencies[93] - A significant portion of the company's revenue is derived from project-based work, making cash flows and financial results unpredictable due to the timing of new contracts and terminations[14] Contractual Risks - The percentage of fixed unit price contracts in unearned revenue was 59.1% and 63.5% at December 31, 2024 and 2023, respectively[60] - The percentage of fixed price contracts in unearned revenue was 33.2% and 30.5% at December 31, 2024 and 2023, respectively[61] - Fixed price contracts expose the company to risks of increased project costs due to inflation and inefficiencies, potentially impacting profitability[93] - The company faces risks related to the modification, delay, or termination of U.S. federal government contracts, which could materially affect its financial condition and results of operations[14] - The company may experience revenue declines if anticipated project volumes are not assigned or if contracts are canceled, as many contracts are open to competitive bidding[97] Financial Position and Performance - The company faces risks from unfavorable economic conditions, including inflation and high interest rates, which could adversely affect its financial position and results of operations[93] - Economic factors, including inflation and rising interest rates, could adversely affect the company's financial position and results of operations[100] - The company may incur significant out-of-pocket expenditures if it acquires liabilities that are not adequately covered by insurance or indemnity agreements[106] - The company is required to make contributions to certain multi-employer pension plans, which could lead to material cash contributions in the future[112] - The company has significant debt obligations, including 373.75 million in 3.25% Convertible Notes due thereafter[235] Operational Risks - The company’s operations are significantly affected by weather conditions, particularly in the first and fourth quarters, which can lead to variability in revenues and profitability[79] - Weather conditions significantly affect the company's ability to perform work, leading to variability in quarterly revenues and profitability[100] - Public health events, such as pandemics, could disrupt the company's operations and negatively impact its financial condition[100] - Strikes or work stoppages could significantly impact the company's operations and results in the future[108] Compliance and Regulatory Risks - The company is subject to various government regulations, including environmental, health and safety, and anti-corruption laws, which may impose additional costs on operations[58] - Noncompliance with environmental regulations could result in substantial penalties or termination of government contracts[114] - The company is subject to strict regulatory requirements for government contracts, which could lead to suspension or debarment from contracting[112] - The company may be exposed to liabilities under the Foreign Corrupt Practices Act (FCPA), which could adversely affect its financial position[115] Joint Ventures and Partnerships - The company participates in joint ventures for large, complex projects, sharing expertise and resources with partners[68] - The company faces risks related to joint ventures, including potential liabilities if partners fail to perform under contracts[110] Equipment and Asset Management - The company purchased 71.9 million of construction equipment and vehicles in 2024 and 2023, respectively[78] - As of December 31, 2024, the company owned 2,645 heavy construction equipment and 4,725 trucks and vehicles, an increase from 2,457 and 4,686 in 2023[78] - The company continually monitors and adjusts its fleet size to align with existing and expected future work[78] - The company’s equipment count includes 189 pieces of heavy construction equipment and 206 vehicles from the D&B acquisition[78] Financial Management and Investments - The company has a cash and cash equivalents balance of 738.7 million as of December 31, 2024, up from $475.6 million in 2023[235] - The company maintains an investment portfolio targeted to an average maturity of no more than one year from the date of purchase[230] - The company’s investment policy limits credit exposure to any one issue, issuer, or type of instrument[230] Market and Competitive Environment - The company has a competitive marketplace with multiple competitors, which may lead to decreased profit margins and new awards[93] - The company's stock price has historically been volatile, influenced by market factors and operational results[125] - Delaware law and the company's charter may impede takeovers, potentially reducing increases in the market price of common stock[125] Risk Management and Mitigation - The company maintains insurance coverage consistent with industry practice, including general and excess liability, property, and workers' compensation[75] - The company has a co-surety structure involving three sureties to mitigate risks associated with obtaining surety bonds[76] - The company has implemented proactive measures to mitigate the impact of inflation and supply chain constraints, including fixed forward purchase contracts and energy surcharges[77] - The company faces physical, transition, and regulatory risks related to climate change that could materially impact its business and financial condition[128] - The company is committed to advancing its sustainability strategy, but achieving its commitments is subject to various risks and uncertainties[128] Internal Controls and Governance - The company identified material weaknesses in internal control over financial reporting in previous years, which have now been remediated[116] - Future identification of material weaknesses could lead to inaccurate financial reporting and loss of investor confidence, potentially decreasing the market price of common stock[116] - The company may incur significant expenses related to litigation or regulatory investigations due to past financial statement restatements[118] - Cybersecurity incidents, including ransomware and unauthorized access, could result in business interruptions and remediation costs, adversely affecting financial position[120] - The company has developed pilot programs for generative artificial intelligence tools, including a knowledge retention tool and a risk detection tool, which may present risks if misused[120] Debt and Financing - The company may borrow on the Revolver at a margin ranging from 1.0% to 2.0% based on its Consolidated Leverage Ratio, with nothing drawn on the Revolver as of December 31, 2024[234] - The company’s 3.25% and 3.75% Convertible Notes may dilute existing stockholders' ownership interests upon conversion[123] - The capped call transactions related to the Convertible Notes may affect the value of common stock and could lead to dilution if market prices exceed cap prices[124]