Granite Construction Incorporated (NYSE:GVA) Q4 2014 Earnings Conference Call - Final Transcript
Feb 27, 2015 • 11:00 am ET
James H. Roberts
on improved project execution is a critical focus area for us as we work to execute our nearly $3 billion of backlog. Continuous improvement investment continues to drive change, uncovering opportunities and is now beginning to deliver results. Our emphasis on the process is helping us be better and more efficient in what we do every single day.
The second key factor was large projects profit recognition and job progression. This remains a constant focus for us. As expected in the fourth quarter we recognized profit on the IH-35E project in Texas, phase II of the US 36 project in Colorado and the I-40/440 project in North Carolina. While, the profit performance validates the expectations we have both at the beginning and end of the year job progression, particularly driven by award delays and weather was slower than anticipated overall in the quarter and in the year.
Weather was the third factor I discussed. On the back of record drought and excellent construction conditions across California in most of 2014 the rain began within days of our November call. And instead of upside opportunity it created significant revenue headwind in the fourth quarter. This revenue and the related profits were not lost but instead now have been shifted to 2015.
Weather to-date in 2015 across much of the west has been better than last year. However the extreme winter weather that has blanketed many of you in the Northeast, Southeast and Midwest has impacted progress on some our work. While climate conditions certainly create through cost headwinds, we are focused on recapturing as much of this missed opportunity as early as possible in 2015.
The final fourth quarter results driver I talked about in November was our large amount of unresolved claims and changed orders. Importantly while we made progress in the fourth quarter in this area, the majority of near-term opportunities remain unresolved. We are working diligently to resolve the remainder of these significant outstanding issues as early as possible in 2015.
We are ratcheting up our focus in this area to ensure Granite and its shareholders are properly paid for the work we are requested to perform. We will continue to focus on maximizing recovery on these projects. Among our larger list we had five large unresolved disputes entering the fourth quarter and we resolved one of these items in the fourth quarter.
Our expectations for recovery on the remaining disputes have not changed. So, despite the negative top and bottom line fourth quarter impact we're encouraged that this is a significant area of revenue and profit opportunity for the company in 2015. Before I transition to the topic of Federal Transportation funding I want to spend just a few minutes highlighting the overall market outlook and competitive environment across some of our businesses.
I start with our Federal Division, where we welcome a solid industry veteran, Matthew Tyler to lead the team. We are pleased to add Matt's broad understanding of federal customers and the strategies necessary