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Acquisitions | 9 Months Ended
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Sep. 30, 2024
Business Combinations [Abstract] |
Acquisitions | Acquisitions Dickerson & Bowen, Inc. On August 9, 2024, we completed the acquisition of Dickerson & Bowen, Inc. ("D&B") for an estimated purchase price of $124.2 million in cash, subject to customary closing adjustments. D&B is an aggregates, asphalt and highway construction company serving central and southern Mississippi which expands our footprint in that region. The buyer of D&B, Granite Southeast Company ("Granite Southeast"), is a wholly-owned subsidiary of Granite and D&B's results have been included in the Construction and Materials segments since the acquisition date. D&B’s customers are in both the public and private sectors. We have accounted for this transaction in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations (“ASC 805”). Preliminary Purchase Price Allocation In accordance with ASC 805, the total purchase price and assumed liabilities were allocated to the net tangible and identifiable intangible assets based on their estimated fair values as of August 9, 2024. These estimates are subject to revision, which may result in adjustments to the values presented below. There are certain provisional estimates that are subject to finalization. As we continue to integrate the acquired business, we may obtain additional information which may result in revisions to preliminary valuation assumptions, estimates and the resulting fair values presented herein. We expect to finalize these amounts within 12 months from the acquisition date. Based on our preliminary purchase price allocation, the net tangible and intangible assets acquired were $31.7 million and $27.7 million, respectively, resulting in acquired goodwill of $64.8 million, none of which is tax deductible. Of the acquired goodwill, $44.0 million is in the Materials segment and $20.8 million is in the Construction segment. The factors that contributed to the recognition of goodwill from the acquisition include strengthening and expanding our vertically integrated southeast home market. The most significant assets acquired were $38.1 million of property and equipment and $18.2 million of customer relationships. Pro Forma Financial Information The unaudited pro forma financial information in the table below summarizes the combined results of operations of Granite and D&B as though the companies had been combined as of January 1, 2023. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2023, nor does it intend to be a projection of future results.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(unaudited, in thousands, except per share amounts) | 2024 |  | 2023 |  | 2024 |  | 2023
Revenue | $ | 1,285,341 |  |  | $ | 1,150,402 |  |  | $ | 3,085,489 |  |  | $ | 2,657,316 |
Net income attributable to Granite Construction Incorporated | $ | 80,657 |  |  | $ | 63,352 |  |  | $ | 93,770 |  |  | $ | 28,535 |
Basic net income per share attributable to common shareholders | $ | 1.85 |  |  | $ | 1.44 |  |  | $ | 2.14 |  |  | $ | 0.65 |
Diluted net income per share attributable to common shareholders | $ | 1.54 |  |  | $ | 1.18 |  |  | $ | 1.78 |  |  | $ | 0.64 |
These amounts have been calculated after applying Granite’s accounting policies and adjusting the results of D&B to reflect the additional depreciation and amortization that would have been recorded assuming the fair value adjustments to property and equipment and intangible assets had been applied starting on January 1, 2023. Acquisition and integration expenses related to D&B that were incurred during the nine months ended September 30, 2024 are reflected in the nine months ended September 30, 2023 due to the assumed timing of the transaction. The statutory tax rate of 26% was used for both 2024 and 2023 for the pro forma adjustments. During the nine months ended September 30, 2024, we incurred $2.3 million of acquisition and integration expenses associated with the D&B acquisition which were primarily related to professional services. LRC/MSG On November 30, 2023, Granite Southeast completed the acquisition of LRC/MSG for $278.0 million, subject to customary closing adjustments, plus an estimated amount related to tax make-whole agreements with the seller. We purchased all of the outstanding equity interests in LRC/MSG and the purchase price was funded by a $150.0 million senior secured term loan, a draw of $100 million under our existing revolver and the remainder from cash on hand. Both the senior secured term loan and the draw under the revolver were fully repaid during the first half of 2024. The acquired businesses are longstanding asphalt paving and asphalt and aggregates producers and suppliers. LRC/MSG operates strategically located asphalt plants and sand and gravel mines serving the greater Memphis area and northern Mississippi. LRC/MSG's results have been included in the Construction and Materials segments since the acquisition date. LRC/MSG’s customers are in both the public and private sectors. Revenue attributable to LRC/MSG for the three and nine months ended September 30, 2024 was $45.5 million and $105.0 million, respectively. Gross profit attributable to LRC/MSG for the three and nine months ended September 30, 2024 was $5.7 million and $5.0 million, respectively. Purchase Price Allocation In accordance with ASC 805, the total purchase price and assumed liabilities were allocated to the net tangible and identifiable intangible assets based on their estimated fair values as of the acquisition date, as presented in the table below. We recorded a $22.0 million provisional estimate related to tax make-whole agreements with the seller at the time of the acquisition. In the second quarter of 2024, the former owners of LRC/MSG determined their personal tax burden related to the sale of the businesses which allowed us to finalize our tax make-whole obligation. Our obligation was $7.1 million, which was paid in June 2024. During the nine months ended September 30, 2024, we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments included a $4.6 million net increase from net working capital adjustments and a $2.2 million net decrease in the value of the net tangible and identifiable intangible assets acquired, offset by a $14.9 million decrease in the estimated obligation associated with the tax make-whole agreements noted above. The impact of these adjustments was a decrease in goodwill of $8.1 million. We paid $13.2 million during the nine months ended September 30, 2024 associated with the acquisition of LRC/MSG, which includes $6.1 million for working capital adjustments and $7.1 million for the tax make-whole obligation. There were no material measurement period adjustments during the three months ended September 30, 2024. As of September 30, 2024, we have finalized the purchase price accounting. The following table presents the purchase price allocation:
(in thousands) |
Assets: |
Cash and cash equivalents | $ | 12,798 |
Receivables | 18,373 |
Contract assets | 3,388 |
Inventories | 13,738 |
Other current assets | 1,032 |
Property and equipment | 86,329 |
Right of use assets | 15,539 |
Other noncurrent assets | 3,718 |
Total tangible assets | 154,915 |
Identifiable intangible assets | 107,460 |
Liabilities: |
Accounts payable | 6,806 |
Contract liabilities | 3,213 |
Accrued expenses and other current liabilities | 10,166 |
Long-term lease liabilities | 15,558 |
Other long-term liabilities | 5,960 |
Total liabilities assumed | 41,703 |
Total tangible and identifiable intangible net assets acquired | 220,672 |
Goodwill | 72,744 |
Purchase price | $ | 293,416 |
Coast Mountain Resources On April 24, 2023, we acquired Coast Mountain Resources (2020) Ltd. which changed its name to Granite Infrastructure Canada, Ltd. ("Granite Canada") on May 13, 2024. Granite Canada is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land. Granite Canada results are reported in the Materials segment. This acquisition did not have a material impact on our financial statements.

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