Granite Construction Incorporated Management Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 1.13 | About: Granite Construction, (GVA)

Granite Construction Incorporated (NYSE:GVA)

Q2 2013 Earnings Call

August 01, 2013 11:00 am ET

Executives

Jacque Fourchy

James H. Roberts - Chief Executive Officer, President, Director, Member of Executive Committee and Member of Strategic Planning Committee

Laurel J. Krzeminski - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Analysts

Jerry Revich - Goldman Sachs Group Inc., Research Division

John B. Rogers - D.A. Davidson & Co., Research Division

Nicholas A. Coppola - Thompson Research Group, LLC

John F. Kasprzak - BB&T Capital Markets, Research Division

Sameer Rathod - Macquarie Research

Operator

Good day, ladies and gentlemen, and welcome to the Granite Construction Incorporated Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Jacque Fourchy, Vice President of Investor Relations and Corporate Communications. Please begin.

Jacque Fourchy

Good morning, and thank you for joining our second quarter call. I'm here with our President and CEO, Jim Roberts; and our Senior Vice President and CFO, Laurel Krzeminski.

As a reminder, any forward-looking statements that are made this morning are subject to risks and uncertainties that could cause actual results to differ materially from these statements and which are further described in our most recent SEC filings. Granite assumes no obligation to update any of these forward-looking statements or other information.

Before I turn it over to Jim, on a personal note, I would like to share with you that today is my last day in Investor Relations at Granite. Although I am staying with the company, I am handing over the reins, the IR reins, to Ron Botoff [ph], and moving into a part-time communications role, which will allow me to spend more time with my children.

I am grateful for the opportunity to have worked and gotten to know so many of you over the past 15 years. It has really been a great ride, and I will always cherish the relationships that I have built, both inside and outside the company. Thank you. Jim?

James H. Roberts

Thank you, Jacque, and good morning, everyone. I would like to begin today with an update on Granite's strategic initiatives. Importantly, I will discuss how our strategy relates to today's market conditions, and what this means for Granite's near- and long-term performance. Then I will hand things over to Laurel for a review of the second quarter.

Granite's strategic plan starts with our ongoing efforts to transform and grow our vertically integrated business. Over the past 2 years, we responded to extraordinarily challenging economic and competitive environments in key markets by managing costs and by leveraging the wealth of experience of our teams to optimize margins in a very poor market. Notably, the performance of the vertically integrated business remains geographically linked to our fixed facilities with each market location being quite unique. In most of our locations, the private market is not yet driving any significant demand, although, as mentioned last quarter, we are beginning to see some signs of light at the end of the tunnel. The number of bidders remains high on nearly every job, which continues to create pricing pressure. This quarter's performance in the Construction and Construction Materials segments reflects the ongoing challenging competitive environment.

Please consider a few of the key strategic tactics we employ in our vertically integrated business. We remain focused on transforming into a more asset-light business. We remain focused on maintaining and instituting cost controls, balanced with a long-term view on investment, as well as near-term growth opportunities. We remain focused on opportunities to enter and expand into new geographic markets, an important component of our overall diversification plan. We view it as critical that overhead is driven lower relative to the size of the company, and there does remain room for improvement here.

The second element of our strategic plan is to grow the Large Projects business. We have, and we will continue to do so. The second quarter results are a reflection of timing on projects that have wound down, coupled with those that are just getting started, including the Tappan Zee Bridge project in New York, the IH-35E project in Texas, and the I-440 project in North Carolina. I am very proud to say that our Large Project teams continue to execute at a very high level, and the vast majority of our portfolio is performing very well. We continue to expect average gross margins in the mid-teens over the long term for the Large Projects business.

Federal funding, as well as innovative financing, continues to be a significant driver for our Large Projects business. Last week, I had the opportunity to appear before the U.S. Senate Environment and Public Works committee on the importance of the Transportation Infrastructure Finance and Innovation Act, better known as TIFIA, and the need for increased investment in highway and public transportation. As I noted in my testimony, project approvals must come faster, or the potential of MAP-21 increased TIFIA financing may go unrealized. Recently, we have seen delays in the timing of projects being bid, as well as the execution of contract documents due to financing, which delays the ultimate construction. The injection of up to $40 billion into the transportation construction market over the next 2 years is a very important potential source of infrastructure investment, considering the significant transportation infrastructure needs and the uncertainty of federal, state and local infrastructure spending.

Let me emphasize some highlights and the profile of our Large Project segment. We remain focused on execution and driving synergies across Granite's teams and geographies whenever possible. The pipeline of large projects continues to be very robust, with more than $10 billion of large projects to bid in the next 12 months. We remain focused on bidding the right jobs with the right partners at the right margin profile. We are excited about the opportunities that our backlog of new projects provides. Of our new projects, only the US 36 project will reach proper recognition in 2013. All other recently awarded projects are expected to hit the recognition threshold in 2014. Our current expectations are that approximately $100 million to $150 million of our 2013 Large Projects revenue will not recognize profit until 2014.

The third element of our strategic plan is to grow through diversification. At the end of last year, we purchased Kenny Construction Company. We already are seeing the benefits of market and geographic diversification through the Kenny portfolio, especially in the power delivery and water and waste water infrastructure markets. We are working cooperatively across the larger company to help grow the business. The integration of Kenny continues to progress well, as the fit of the company's cultures and businesses has exceeded our expectations. The Underground division was low bidder on a $150 million of new contracts with the City of Chicago in the second quarter.

The Power division recently was awarded work in Canada. We continue to tender for work from coast to coast, and the Power division already has teamed with our businesses in the West to procure work in Arizona, Washington, Oregon and California. Additionally, Power division opportunities are anticipated in Utah, Wyoming, Idaho and Nevada. The synergies provided by Granite's Western footprint are proving to be invaluable when evaluating opportunities for expansion.

The Tunnel division is pursuing work jointly with our Large Projects teams in the Northeast, as well as pursuing work on their own. We are also performing work in the federal markets through our newly formed Federal division.

So, as you can see, we are fully focused on diversifying our portfolio of work through a variety of efforts.

The final element of our strategic plan is to optimize our business. We seek opportunities to optimize our portfolio of assets through bidding the right kind of work, along with divestment of assets which are underutilized. In addition, we are focused on optimizing the way we run our business every single day. We remain in the very early stages of our process improvement program, through the implementation of Six Sigma techniques. Eventually, we expect process improvement to touch all parts of our business and create significant efficiencies in both our field operations, as well as our administrative procedures.

In the short term, revenues and margins remain challenged, some by market conditions and some just by timing. Record backlog of $2.8 billion is a tremendous credit, to both our diversification effort, as well as to our Construction and Large Project teams. We are very well positioned to capitalize on this backlog in 2014 and beyond. We will continue to bid, win and build important large infrastructure projects, and we will do it profitably. The opportunities in wins in new markets, driven by successful Kenny integration, buoy our confidence that growth through diversification already is working for Granite. Though early in development, process improvement is beginning to provide our teams with exciting opportunities to more efficiently operate and grow the company, while encouraging innovation from within.

With that, I will turn the call over to Laurel. Laurel?

Laurel J. Krzeminski

Thank you, Jim, and good morning, everyone. Revenues in the second quarter were $550 million, up about 2% from last year. Earnings per diluted share were $0.07 in the second quarter compared with $0.05 last year. Gross profit margin for the quarter was 9.3%, down about 30 basis points from last year.

Total contract backlog at the end of the second quarter was $2.8 billion compared with about $2 billion last year. This includes both Granite's nearly $300 million share of the IH-35E project in Texas and our $130 million I-440 project in North Carolina.

Looking at the segment detail. Construction segment revenues were $309 million compared with $245 million last year. Gross margins of 8.2%, about 90 basis points higher than last year, remain impacted by the pervasive competitive pressure that Jim mentioned.

Large Project Construction segment second quarter revenues were $181 million compared with $229 million last year. Corresponding gross margins of 12.2% were in line with last year. We had only one large project reach the profit recognition threshold this quarter, the US 36 project in Colorado.

We are managing through a couple of challenging projects, 1 in Washington and 1 in Texas. I want to remind you that our accounting procedures provide for additional cost to be recognized, when known, with future claims and change order revenue recognized when signed contract changes are in place. This continues to drive some profit volatility in the Large Project business, especially from quarter to quarter. Large Project revenues and profitability vary widely on a quarterly basis, depending on the stages of project progression and the timing of profit recognition. As Jim said, we continue to expect Large Project average gross margin in the mid-teens over the long term.

Revenues for the Construction Materials segment decreased 5% to $60 million. Materials gross margin in the second quarter of 6.6%, reflects a decline of about 130 basis points from last year. And materials market remains competitive, aligned with our Construction business, and we simply haven't seen a significant impact in our geographies from the private market, which we believe will mark the beginning of longer-term improvement.

Selling, general and administrative expenses in the second quarter totaled $46 million compared with $41 million a year ago, as nearly all of the increase was associated with Kenny. Granite continues to have a strong balance sheet. Cash and marketable securities totaled $324 million at the end of the second quarter. This includes $64 million associated with consolidated joint ventures compared with $68 million last year.

In the second quarter, as is typical for our business, we continued to use cash, as seasonal business and large projects began ramping up. We expect this will turn in the second half of the year.

As we outlined in our press release, we affirmed our guidance for 2013 with 2 adjustments. While this provides a short-term snapshot of Granite, we are very pleased to continue driving long-term growth with our strategic plan.

With that, I will turn the call back to Jim.

James H. Roberts

Thank you very much, Laurel. As we mentioned in last quarter's call, 2013 will be a year of transition, growth, market positioning, process improvement and preparation for 2014 and the future. We are building a business that is ready to reach the next level of excellence. We remain on target with our strategic plan. Across more than 90 years, Granite has managed through periods of economic weakness and challenging competitive environments. Over the past 2 years, our team has done a very fine job managing these challenges and positioning the company for growth.

We are not where we want to be quite yet. But consider this. Private market recovery still has not taken a hold in our key markets in the West. Even modest recovery will drive significantly improved performance in our vertically integrated business.

Our record Large Project backlog of nearly $2 billion will drive significant growth next year, both in revenue and earnings, and we will continue to grow this part of our business. And Granite's financial strength, combined with our core competencies, continue to provide new and expanded growth opportunities.

With that, we will open it up for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Jerry Revich of Goldman Sachs.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Jim, since you're just fresh from Washington, I wonder if you'd just step us through how much of a contribution do you expect the TIFIA program to make to total infrastructure spending in 2014, and how do you see that playing out in 2015, based on contracts that you're evaluating or other insights you might have into the program.

James H. Roberts

Sure, Jerry. So, TIFIA, if you remember, in MAP-21, it was kind of the hidden gem of MAP-21, which increased the allocation on an annualized basis in 2013 to sell $150 million, and in 2014 to $1 billion. And when you add up that $1.75 billion, it equates, from a leverage position, to about another $40 billion into the industry. There's a good and a bad with it. The good is that, that money has been set aside, assuming that entities that are applying for TIFIA loans can get through the process, and the most important part of the process is projects that have creditworthiness. The good part is that there are a tremendous amount of letter of interest in the highway DOT, and the DOT already, being analyzed to determine if they will meet the creditworthiness and the requirements. The problem is that it has been very slow coming. Over the last year, we've only had one project that has actually passed through the TIFIA process and actually has been approved. There are a significant amount of projects in the TIFIA program, and Secretary Fox, last week, made it very clear in his testimony that they were going to increase their staff to be able to expedite the processing of these loans. And he estimated 6 or 7 more just in the next 12 months, which is a significant increase from where we are today. So I think it is absolutely heading in the right direction. They needed to increase staff, they needed to have Barbara Boxer, who led the EPW committee, made it very clear that she expects those loans to be processed and put into place. And as we increase this to the $1.75 billion over the next 2 years, Jerry, this is a significant increase in the overall amount of opportunity in the business. So I think the projects that we have, I-35, Tappan Zee. I know the Senator from New York was at the hearing and she was very focused on Tappan Zee, they've asked for a significant TIFIA loan as well. So it is starting to happen. It was a little slow, but I personally believe, from what I heard, the gates are starting to open and that is going to get more of these loans on the street in the next 12 months.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Okay. And can you talk about the cadence of orders over the course of the quarter and into July? Obviously, a lot of discussion about weather on other companies' calls here. I wonder if you saw any impact in your business and how the overall cadence played out during the quarter.

James H. Roberts

Yes. Jerry, the weather, I'm not going to put weather in our program. But most of our businesses that would be affected by weather are in the West, and the weather was actually just fine. But I will say this. It did seem that we got a little bit of a slow start this year, just from getting work started. We had a good June, so we had a good last month in the quarter and the first couple of months were a little slow. So from a cadence standpoint, we started to see it picking up towards the end of the second quarter.

Operator

And the next question is from John Rogers of D.A. Davidson.

John B. Rogers - D.A. Davidson & Co., Research Division

I was wondering if you could go through, a little bit more, in terms of the impact of Kenny on the quarter, both in terms of revenue, and did it add to margins in the period?

James H. Roberts

Yes, sure. A couple of things. One of the main drivers of the increase in our Construction revenue is due to Kenny. And I will say that because a majority of their work outside of, I would call it the tunnel business, falls into the Construction segment. And they have been meeting their budgets and have been doing as we anticipated. Laurel, you want to maybe focus a little more on the actual bottom line numbers, if you have it, for Kenny? We don't break it out by segment, but they are, through the first half of the year, operating as planned, John.

Laurel J. Krzeminski

Yes. They had about $50 million of what we would call Construction revenue, and then about $20 million of the large projects. We hadn't expected Kenny to deliver any significant gross profit or bottom line to the company because of the amortized intangibles, particularly that acquired backlog. And so we're on track with that, as expected.

James H. Roberts

Yes. We had a slight increase on the Granite Construction side of revenue, and then the remainder was due to the Kenny business.

Laurel J. Krzeminski

Right.

John B. Rogers - D.A. Davidson & Co., Research Division

Okay. And, Jim, are you thinking about considering any additional acquisitions at this point?

James H. Roberts

Well, absolutely. That's part of our diversification plan, both from an end market and from our vertically integrated business, John. As we have suggested over the last year, actually last probably 18 months, we are actively pursuing expanding our geographic presence with a vertically integrated business. And we do believe there are additional markets that we want to diversify into. We've made it very clear, water, wastewater infrastructure, rail, the federal business is doing very well, as well as the power business. So we are absolutely looking at additional acquisitions.

John B. Rogers - D.A. Davidson & Co., Research Division

Okay. And then, lastly, if I could. Just in terms of the large project hitting the profit thresholds, can you give us a sense of what the schedule's like for the second half of the year? And then with the problem projects, are there any significant timing issues to beware of in terms of settlement negotiations or anything else that could cause margins to change appreciably there?

James H. Roberts

Yes. So the second half of the year, John, large projects. We're starting, as I mentioned, we're starting Tappan Zee, we're starting IH-35E, we're starting I-440, US 36 is kicking off and starting to gear up, and so most of our projects are just starting to gear up. Most of the newly awarded, so I think you'll see the ramp-up. They were delayed a little bit in the start, as I mentioned in my script. So that's why you see us make some guidance adjustments on the Large Project revenue. But I think they'll all be progressing quite well through the end of the year. And I don't think, again, that they started quite as early as we had originally anticipated during the year. Secondly, on the other projects, the one that Laura mentioned...

John B. Rogers - D.A. Davidson & Co., Research Division

Jim, just on those large projects that you just mentioned. None of those hit the 25% threshold this year. Is that correct?

Laurel J. Krzeminski

No. US 36 did.

James H. Roberts

Yes, the US 36 project in Colorado hit it in the second quarter.

Laurel J. Krzeminski

And that's it for the rest of the year.

James H. Roberts

The bigger jobs will not meet the proper recognition in 2013, John. Now, the second half of the question, John, was the project in Washington and Texas. So as Laurel mentioned, and specifically, how we recognize those projects that do have some issues that we are working through with the owners, specifically up in Washington, and we are not at a settlement discussion yet, but we could be. And if we have a dispute that does get settled, we would take that settlement at that point in time. So yes, we believe there is something out there we're working on with them. There are very good agencies, in both cases, that we're working with. And we believe that, at some point in time, there will be an adjustment.

John B. Rogers - D.A. Davidson & Co., Research Division

Okay, okay. And I'm sorry, just on those large projects that are with no significant threshold milestones in the second half of the year then -- I mean, we're probably looking at margins, roughly, where we are now, through the rest of the year?

James H. Roberts

Yes. I think that our guidance -- we kept our guidance...

John B. Rogers - D.A. Davidson & Co., Research Division

You kept your guidance in '14. Yes?

James H. Roberts

Right. We kept our guidance still in alignment with what we had in the first quarter, John. We just dropped the revenue down a little bit because there's some late starts that will push a bigger portion of those into 2014.

John B. Rogers - D.A. Davidson & Co., Research Division

Okay, okay. But it seems like you'd be at the lower end of that if you don't have milestone benefits.

James H. Roberts

Well, it depends. Again, you think about some of these disputes and things. When the timing of those occur could change that ultimate margin play-out as well.

Laurel J. Krzeminski

Yes. And it also includes the progression on the existing projects that we have going on right now.

James H. Roberts

Which are good projects, and how they close out will make a determination on a couple of points there, possibly, as well, John.

Operator

The next question is from Nick Coppola of Thompson Research Group.

Nicholas A. Coppola - Thompson Research Group, LLC

Wondered if you could add some color on benefit and timing of private dollars coming back. I heard your comments in your opening remarks, and obviously res and non-res are region-specific. But more generally, it seems like things are starting to move in the right direction. What are your thoughts around that and when do you start to see improvement in your vertically integrated business?

James H. Roberts

Yes, okay, Nick. I think that's kind of what I was hoping to work on a little bit in the script, was that we have seen some signs of light. What I mean by that, on the private sector, is that we're starting to see developers come in to work with our teams to get pricing on larger developments. We're starting to see engineering firms start building plans for development. We're starting to see permits increase for development. Those are all the beginning signs of that private sector coming back. We haven't seen that previously. In 2012 and earlier, it was pretty much dead at arrival on that kind of the signs of lights at the end of the tunnel. What we haven't seen is a significant amount of that hitting the street yet. Now I say that, and there has been a little bit, and that's part of the -- third-party material sales, for us, is the first thing that will be affected when that residential projects actually hit the street. So our best estimate, and it's consistent with what we said, Nick, over the last couple of quarters is, at the end of 2013, we think that those projects will now be out on the street and starting to see it in our business model. So again, end of 2013 and then 2014 being ramped up.

Nicholas A. Coppola - Thompson Research Group, LLC

Okay, that makes sense. And then, can you talk about any specific large projects that are being bid, say, in the back half or early next year?

James H. Roberts

Well, I mean, I can give you...

Nicholas A. Coppola - Thompson Research Group, LLC

Opportunities that looks like...

James H. Roberts

They're all the way -- I'll give you a couple of examples. California High-Speed Rail, back out on the street, packages 2 and 3. And those are big, and they'll be on the street at the end of this year, beginning of next year. Probably a couple of billion, we're looking at a very large job, a couple of billion dollar job in Florida, the I-4 Ultimate job. We're looking at I-85 in South Carolina, U.S. 95 in Las Vegas, I-73 in North Carolina, the Johnson Gateway project in Kansas. There's 2 more large projects in North Carolina, the Garden Parkway jobs, there's the I-69, the fifth section of I-69 in Indiana. There are some large metro jobs down in L.A. that we're bidding this year. A large project, the Capitol Street Corridor bridge in Washington. SH 183 in Texas, Dallas. I mean, it's endless.

Nicholas A. Coppola - Thompson Research Group, LLC

That's great color. It shows all the opportunity out there.

James H. Roberts

It is, it is. It's not falling down. Our job on our Large Project business is to pick and choose the right jobs, as I said, at the right margin with the right partners and the right owners. And so we have the ability, today, to be quite choosy and to really get the right projects on our books, and that's what we're working on.

Operator

[Operator Instructions] And I do show we have a question from Jack Kasprzak of BB&T Capital Markets.

John F. Kasprzak - BB&T Capital Markets, Research Division

But I do want to ask about Construction Materials. And you mentioned, weather was not a factor, which makes sense given your geographic exposure sales. But sales are down there a little bit. I mean, is this just a function of the ongoing difficulty in the private market?

James H. Roberts

Yes. Two things happened, and I mentioned it briefly, Jack. It seems like we started off slow in the first half of the year, and then June started ramping up a little bit. So it is got momentum today. And I would say that, for us, our California markets are still seeing some weakness in third-party sales and materials business in general. But, as I mentioned, I think towards the end of the year, we see it starting to turn a little bit. So we had a little bit of slowness in the first half, we're starting to see the private sector, like I mentioned, with the development plans and engineering plans coming into play. But I will say this. Actually, the overall average pricing is up. So it isn't a pricing issue. What it really is, is getting the private sector back in gear, and we have actually seen price increasing, so far, this year.

John F. Kasprzak - BB&T Capital Markets, Research Division

And given your comments about what you're seeing with developers and maybe sort of indications of interest, if that's the way to say it, I mean -- and the second half is usually seasonally better for you guys anyway. I mean, that business should, presumably, given those factors, see a bit of a ramp or improvement and set the stage for an even better '14. I know we're not giving '14 guidance but, I mean, is that trend a fair assessment?

James H. Roberts

I think it is. I think that's what we've been saying for the last 2 or 3 quarters, Jack. But, really, you're going to see what we believe is the private sector starting to impact, positively, our business at the tail end of 2013.

John F. Kasprzak - BB&T Capital Markets, Research Division

Okay, that's given enough time to get projects going. And, SG&A, I mean it's bounced around a bit, I guess, is fair to say. I mean, is the Q2 rate, should we see anything terribly different in the back half of the year? What kind of movement should we expect there, if any?

James H. Roberts

Yes. I think that when we gave the guidance there, we left our guidance where it was. We're seeing SG&A playing out pretty much as we anticipated at the beginning of the year, within that area of -- the guidance that we gave out last quarter which is the same as this quarter, Jack. We don't see a big difference.

Laurel J. Krzeminski

Yes. We're accelerating our integration of Kenny a little bit and so we'll have costs that will be in this year associated with that, as well as some of the acquired intangibles. Although that's not a significant cost, but...

James H. Roberts

And that's in our guidance.

Laurel J. Krzeminski

Right.

John F. Kasprzak - BB&T Capital Markets, Research Division

Okay. And if you already touched on this, I apologize, because I was a touch late on the call. But on Kenny, do you think that's a push on earnings this year and accretive next year or what's the update there?

James H. Roberts

That's correct, Jack. I think that very little has changed. They're operating as expected, doing very well, overall. Probably a push on earnings and then, with some of the amortization issues falling off for next year, we do believe that it will be accretive next year.

Operator

The next question is from Sameer Rathod of Macquarie.

Sameer Rathod - Macquarie Research

A couple of quick questions. First, of the $10 billion that you say you're bidding on for the next 12 months, what portion of that would be Granite shares? Just given with the joint ventures and what have you?

James H. Roberts

I would, Sameer, I would just say, on average, at least 50%. Some of them were 100% and some of them were down at 30%. So it really just depends on the mix that we're successful on. And, for example, I was just mentioning the 3 big jobs that are coming to play for the second half of this year, Tappan Zee, IH-35 and I-440, where we have partnerships in Tappan Zee and IH-35, but we are 100% the sole contractor in the I-440 job in North Carolina. So it just depends on the mix. But if you used about half, 50% on average or a little higher than that, you'd probably be in the ballpark.

Sameer Rathod - Macquarie Research

Right, right. Okay. And then my next question is -- last quarter, I think you guys said you got 3% to 5% pricing on the aggregate. Is that kind of carried over into this quarter or could you comment on the pricing this quarter?

James H. Roberts

Yes, Sameer, I think pricing is actually pretty strong. I would carry that forward to saying that we're seeing those increase in pricing stick. What we are seeing is the volumes, that's the bigger issue. And it really is not due to a pricing issue, it's more the market itself. So pricing is staying fairly strong.

Operator

The next question is from Jerry Revich of Goldman Sachs.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Just, Jim, on the magnitude of products that are out there, you were stepping through a pretty exhaustive list earlier. I'm wondering if you could just aggregate all that for us, as you've done in the past. And what's the range of the dollar value of projects that you're evaluating or bidding on?

James H. Roberts

Okay. So kind of interesting. I mentioned that it's about $10 billion that we're pursuing in the next 12 months. Now that does fluctuate depending on orders, new stuff comes on board, some stuff may slip. But it's about $10 billion, and that will move around. About half of it, let's say, 50% of it would be our value and I gave you a short list compared to the exhaustive list that I actually have. It's endless, the list, because it just keeps fluctuating and adding. So I gave you about 10 projects that we know that we're pursuing, but there's at least a list twice as long as that, that I could add to that. And we're certainly willing to talk about all sorts of projects. If somebody wanted to call us, then we can go through a lot more than that. But I'd say $10 billion in the next 12 months is about right, Jerry.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Okay. And in terms of your historical win rate, you mentioned the Granite content that's half of that. How would you encourage us to think about the win rate?

James H. Roberts

Well, I think the win rate fluctuates annually. I will tell you that we've had years where we've actually gotten 0, we've had years where we've gotten 50%. I would just continue to use 1 in 3, 1 out of 4 as being a reasonable win rate. And I think that as we bid these larger projects, that -- first of all, they do short list them. So they do a statement of qualifications, and they do take, typically, 4 to 5 bidders when they short list them. And our anticipation would be to get our share of the work. So that's 1 out of 4 to 1 out of 3, for us, is in alignment with what we think we need to be. Again, it will fluctuate quarter-to-quarter, it will fluctuate year-to-year. But on average, just like large project margins, we believe we should get 1 out of 3 to 1 out of 4 of the projects that we did.

Jerry Revich - Goldman Sachs Group Inc., Research Division

And given how strong that bid environment is, I'm just wondering what's driving the reduction in the high end of the range for large projects this year. Are they just taking longer to play out and reach a final investment decision or what's the driver there?

James H. Roberts

You're referring to revenue, Jerry?

Jerry Revich - Goldman Sachs Group Inc., Research Division

Yes.

James H. Roberts

Yes, exactly. Some of those projects started a little later. I mentioned some of the financing -- I mentioned during the TIFIA discussion that some projects were delayed in awards and start-ups. The TIFIA program has been a little slow coming into play, although I'm a strong advocate of it, and I want to make sure that people understand it. We think that's a great opportunity, in MAP-21, to create more opportunities. But it's been a little slow coming. That's when Secretary Fox said they were going to add staff and speed up the awards of TIFIA loans. So that slowed our progression on some of our large projects, down a little bit for the year. And other jobs are ramping down, and it's kind of a little bit of a lull during the ramp-down and the ramp-up, and that's why we guided to a little lower revenue for the year because of a little bit of a change over there in the start-up of the new jobs.

Operator

[Operator Instructions] There are no further questions at this time. I'd like to turn the call back over for closing remarks.

James H. Roberts

Okay, well, thank you very much, everybody, for your questions. I want to close by thanking our employees across the country. And I know I say this every time, but they absolutely are the primary reason we have been successful in the past. And they are the key to our future as well. Laurel, Jacque, myself, Ron will all be available all day if any of you have any further questions. We appreciate your interest in Granite and thank you very much.

Operator

Ladies and gentlemen, this concludes today's program. You may now disconnect. Good day.

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