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Granite Construction Incorporated (NYSE:GVA)

Q1 2014 Earnings Call

April 30, 2014 11:00 am ET

Executives

Ronald Botoff

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

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

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

Nicholas A. Coppola - Thompson Research Group, LLC

Jerry Revich - Goldman Sachs Group Inc., Research Division

Sameer Rathod - Macquarie Research

Cory Mitchell - D.A. Davidson & Co., Research Division

Steven Fisher

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Michael Fomook

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

Operator

Good morning, my name is Dan, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Investor Relations First Quarter 2014 Earnings Conference Call. [Operator Instructions]

Thank you. It is now my pleasure to turn the floor over to your host, Mr. Ron Botoff, Granite Construction Director of Investor Relations. Sir, the floor is yours.

Ronald Botoff

;

Thank you. Good morning. Welcome to the Granite Construction Incorporated First Quarter 2014 Earnings Conference Call. I'm here today with our President and CEO, Jim Roberts; and our Senior Vice President and CFO, Laurel Krzeminski.

Let me begin today with an overview of the company's Safe Harbor language. Some of the discussion today may include forward-looking statements. Actual results could differ materially from the statements made today, so please refer to Granite's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.

A reconciliation of non-GAAP results was included as part of our first quarter earnings press release. Certain non-GAAP measures may be discussed during the call and from time to time by the company's executives. For more information, please visit our Investor Relations website at investor.graniteconstruction.com. Thank you.

Now I would like to turn the call over to Granite Construction Incorporated Chief Executive Officer, Jim Roberts.

James H. Roberts

Thank you, Ron, and good morning, everyone. This morning, I would like to provide you with a quick update on the execution of our strategic plan and then a view of our forward-looking business environment.

Laurel will review first quarter results as she will discuss our outlook for 2014, and then, as always, we will both be happy to answer your questions.

Before I get going today, I just wanted to take a moment to express how proud I am that, for the fifth consecutive year, the Granite team was recognized by the Ethisphere Institute as a 2014 World's Most Ethical Company. This is an exceptional accomplishment. Congratulations to all the Granite employees who are living our Code of Conduct.

When we last spoke with you in late February, we highlighted the fact that Granite's most significant opportunities center on our ability to execute our strategic plan. This has not changed. Our teams are focused on winning business and building profitable work to drive growth across the enterprise. Our traditional and our new end markets will continue to create opportunities to broaden our reach. Strong backlog and a healthy bidding environment continue to drive opportunities in Large Projects. And we are focused on implementing continuous improvement throughout our business to drive down cost and improve efficiency.

As we enter the 2014 building season, I am pleased to say that our plan remains on track. In order for us to maximize returns on continuous improvement investments, we are laser-focused on, first, driving results through improved execution on our existing healthy book of backlog across both our Construction and Large Project Construction segments. We created a center of excellence to focus on reducing waste through lean efforts, reducing cost by standardizing processes and reducing variability to further improve the quality of our work. In doing so, we have laid the groundwork necessary for implementation. And I am pleased that Joe Mazzulo, Senior Vice President of Business Processes, has joined our team. I am very confident that Joe and his team are ready to grow and implement process excellence across all of our businesses. This commitment to driving incremental change through improved processes and improved execution is creating exciting opportunities that foster a continuous improvement culture of Granite. While we are confident that our continuous improvement program eventually will touch all parts of the company, we already have identified some opportunities to create bottom line savings this year that produce immediate recurring returns for the business. You can look forward to regular updates on the progress we make toward everyday excellence.

The bid season, across the country is in full swing. While win rates and backlog in our vertically integrated businesses are healthy and in line with historical norms, we have seen more private work bidding, which is a positive offset to this lower public sector in certain markets. I have said for some time that market recovery would require contribution from the private market, and that it could show up first in results in our Construction Materials segment. It remains too soon to say if we have finally reached an inflection point, but we are encouraged by improved first quarter performance in this part of our business.

We continue to execute on the Tappan Zee Bridge in New York, the IH-35E in Texas and the I-40/440 in North Carolina. These projects contributed substantial revenue in the first quarter. But since each remains less than 25% complete, they have not reached our profit recognition threshold, and therefore, are not yet contributing profit. We continue to expect these projects will reach proper recognition threshold later in the year. And we continue to work with the owner in the State of Washington on our clients for potential significant cost recovery on that project. And I highlight all of these factors as they are timing issues for Granite, and we expect we'll contribute to the results as the year progresses. We expect to bid on more than $12 billion of Large Projects in the next 12 months, but about half of the value of the work representing potential Granite backlog.

As you may know, the Granite team was announced last week as a successful bidder on the $2.3 billion I-4 Ultimate project in Florida. Our 30% portion of the project is nearly $700 million and will show up as additional backlog in the near future.

In addition, we have several other Large Projects, which we already have bid and are simply awaiting results. These projects total close to $2 billion, with our share in excess of $600 million. As you can see, the markets for alternative procurement Large Projects remain strong. Opportunities in power, tunnel and underground remain quite strong as well. However, the continued inaction by Congress to address our country's infrastructure needs has reached a critical juncture. We have spoken often about the positive aspects of MAP-21, the current Federal Highway Bill and of the expansion of TIFIA that has helped spur significant Large Project bidding opportunities.

The MAP-21 at its core remains a short-term static funding mechanism. This method simply does not allow State Departments of Transportation to practically plan beyond 1 to 2 fiscal years. And now the health of our industry, our infrastructure, and our economy certainly is at greater risk as we head down the path toward potential transportation trust fund insolvency later this summer.

Congress must act now and act decisively to adequately fund America's infrastructure. Without this investment, it could quickly erase the early signs of recovery that we are finally experiencing. As we have said for some time now, funding stability and financing alternatives are critical to driving progress on infrastructure investment at the federal, the state and the local levels.

While federal funding issues could create potential headwinds, we are pleased with the opportunities we have to drive incremental growth across all of our end markets in 2014. Private market recovery remains a key driver of improved performance. These factors and the opportunities we have to optimize our business make me confident that we will grow and produce significantly improved results in 2014. With that, I will turn the call over to Laurel.

Laurel J. Krzeminski

Thank you, Jim, and good morning, everyone. First quarter 2014 revenues were $380 million, in line with last year. Diluted earnings per share in the quarter, a loss of $0.53 compared to a loss of $0.57 in 2013.

Please note, first quarter 2014 results include the impact of a discrete tax charge of $1.6 million related to tax law changes in the State of New York. The impact of this discrete tax charge was $0.04 per share. For reference, we've included a reconciliation of the impact in this morning's earnings press release.

Gross profit margin decreased more than 200 basis points year-over-year in the first quarter to 5.6%. Profit performance was driven primarily by project timing in the Large Project segment portfolio, coupled with a decrease in Construction segment gross profit and improved Construction Materials segment performance.

Total contract backlog at the end of March was $2.6 billion, up 7% from last year when we booked the Tappan Zee Bridge project. Construction segment backlog, up more than 6% year-over-year to nearly $790 million continues to trend positively across end markets.

And of course, our Large Projects backlog of $1.8 billion, up more than 7% at the end of March, does not yet include our Large Project win in Florida last week. We will book our 30% share of the $2.3 billion project into backlog once the final contract is approved and notice to proceed is issued.

This project win is an exciting testament to execution of our strategic plan to methodically grow and evolve the Large Projects business. We're extremely pleased with the opportunity to execute and the outlook in this market.

Looking at the segment detail. Construction segment revenues in the first quarter of 2014 decreased 11.3% to $157 million compared with last year. Gross margin declined about 160 basis points to 5.8%. The revenue decrease was attributable to a change in mix of power projects to the Large Project segment. In addition, revenue opportunities were lost due to weather impacts in certain markets, particularly Chicago. This revenue impact also influenced margins, largely driven by timing in our power portfolio.

Large Project segment revenues increased 9.1% in the quarter to $187 million, and segment margin of 8.4% reflects a decline of 480 basis points year-over-year. As expected, profit recognition was impacted by timing of project progression and the mix of projects in our portfolio. In fact, more than $65 million of Large Project segment revenue in the first quarter was related to projects that have not yet met the 25% complete threshold, and are not yet contributing profit. This is up from only $10 million last year.

Revenues for the Construction Materials segment increased 19.2% to $35 million in the first quarter of 2014. Volume growth, some market-related and some project-driven, spurred improved performance in the first quarter as operating loss declined to $3.6 million and operating margin improved 1,000 basis points. Please note, despite mild winter conditions in certain western geographies, we completed planned equipment and plant repairs in the first quarter as scheduled in preparation for a busy upcoming construction season.

The first quarter 2014 SG&A decrease of nearly 15% versus last year at $49.2 million was driven primarily by lower pre-bid cost [indiscernible] and more variable portion of SG&A, and notably, primarily, a timing issue. Last year's SG&A also included Kenny Construction integration-related costs that are non-recurring.

The balance sheet remains strong, as cash and marketable securities totaled nearly $313 million at the end of March.

Now let's discuss our outlook for 2014. We want to thank many of you listening today who spent time over the past year, discussing which metrics provide you with a better understanding of our business. In 2014, we currently expect consolidated revenue of between $2.4 billion to $2.8 billion. We expect significant improvement in gross profit versus last year across the enterprise. That said, and as previously communicated, timing across our portfolio of work and across segments remains weighted toward the second half of the year. And this year, we expect consolidated adjusted EBITDA margin of 5% to 7%.

We also provided a reconciliation of our first quarter EBITDA calculation in the tables of the earnings press release. We will provide updates to our outlook on a regular basis. And as we gain better line of sight on results, we expect to be able to communicate potential adjustments to ranges and fine-tuning of our business assumptions for the year.

Last quarter, we provided you with a few of the assumptions we built into our plan for 2014. We continue to expect SG&A to increase in 2014, but we expect it will remain in line with to slightly down as a percentage of revenue from the past couple of years. We continue to expect CapEx spending in line with recent years at about 2% of consolidated revenues. And we continue to expect tax rate for the year in the high 20s to low 30% range, excluding the impact of the discrete tax charge in the first quarter of 2014.

Now before we open it up for your questions, let me turn the call back to Jim.

James H. Roberts

Thank you very much, Laurel. As we move forward with our plans in 2014, we are focused on meeting or exceeding our budgets on all of our work, enhancing both our Materials business production bottom line and to growing the culture of continuous improvement. We are using our current black belts and training more black belts to focus on specific projects to create immediate and long-term value for the company. Some specific projects include streamlining our procure-to-pay process, increasing the efficiencies of our sourcing and national purchasing, all the way down to running our projects and plants more efficiently. The change inside our company coupled with a resurging economy, record backlog and a strong desire to grow the top and bottom line is driving positive expectations and results for 2014 and beyond.

And with that, both Laurel and I will be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Alex Rygiel of FBR Capital Markets.

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

First, a couple of questions. I remember a quarter or 2 ago, you're talking about some price increases on the material side. Have they held? And what's the demand side look like today on the Materials business?

James H. Roberts

You bet, Alex. Yes, we did implement price increasing at the beginning of the year. And I mentioned it at that time, about 3% to 5%. It does -- it is holding. Volumes are up, which is a really good sign. And the one way that we look at our Materials business a little differently than our Construction and Large Projects business is that we do not have as much of a forward-looking environment there because there's not as much backlog. But I will say this, that our Materials business has booked a lot of sales already for the year, which means that we're starting off very strong. Now my hope, that it continues that way. We do backlog asphalt, we do backlog [indiscernible] sales in advance. And so far, the backlog is up from previous years.

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

That's great. And on the handful of large projects that you have not yet met your profit threshold on, in the last 2 or 3 months, has that date of meeting that threshold changed at all, either moved forward or backward?

James H. Roberts

Well, it's -- the answer is probably no overall. We do expect them to all reach proper recognition in the second half of the year. And some are progressing faster than others. And I think it's -- at this point in time, early in the year, just to leave it in the second half of the year is probably the best answer to date, Alex.

Operator

Our next question comes from the line of Jack Kasprzak of BB&T Capital Markets.

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

With regard -- well, I guess, can you update us on the Washington project, recovery potential, timing? And is there anything in the guidance for that potential?

James H. Roberts

Okay. So we -- if -- to follow up on where we have been over the last year, Jack, remember -- do you remember we went to the DRB in -- last summer. We took it to a claim environment in the fall. We gave the State of Washington, basically, through the end of March to respond to our claim. They did respond. And where we're at today is in a negotiated settlement discussions. That project does intend to be completed by the end of the summer. I would hope that we would have a negotiated settlement with the owner before that time, that would be our intention, and hopefully, the owner's intention as well. And as we do probability wait some claims in our guidance. And again, we used that in a very broad discussion when we provide guidance.

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

Okay, that's very helpful. And just so I understand if -- so it sounds like it's a scenario where you can negotiate a claim before the project is complete. And if that's so, would you book that? Or would you wait till the project's complete?

James H. Roberts

We will book it when we have -- we'll call it an executed agreement. So we do book -- we would book it in advance of the close of the project, if we did come to an agreement.

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

Okay, great. Now the talk about the Highway Bill is appreciated. Do you think there's any chance that the negotiations, if that's the word, around a new Highway Bill, if that gets hung up or delayed, pushed out, does that have the potential that disrupts some of this very robust Large Project opportunity that you've been saying and still have?

James H. Roberts

Okay. So that's an interesting question because the catalyst, Jack, for most of these mega jobs has been this 3P environment, which would be public private partnerships and finding alternative financing. I don't think a delay in the Highway Bill would have an immediate effect on Large Projects as they have not had a total execution of the TIFIA funds that are available -- or the TIFIA financing that's available through the bill. In fact, they have quite a bit still available. They've used about $1.4 billion or, I should say, have request for $1.4 billion of the $1.75 billion of overall TIFIA monies. So I don't think it's going to have a big impact on Large Projects if it gets delayed, let's say, 3, 4 months or something like that. Now if you go into next year and there is no bill and they haven't expanded TIFIA, then I would say by this time next year, it could be a problem.

Operator

Our next question comes from the line of Nick Coppola of Thompson Research Group.

Nicholas A. Coppola - Thompson Research Group, LLC

How should we think about the impact of weather in the quarter? And it's really not an exact science. And I heard you guys mention particularly Chicago being a market that was impacted. But any guide post or a way to think about how big of an impact weather had on the quarter?

James H. Roberts

Well, I think that as we stated, it had 2 levels of impacts. It slowed down progress on projects in the East, obviously. And it had a pretty significant impact in our Construction segment in Chicago. But in the West, it really didn't have an impact. The weather was good. And I think, as Laurel mentioned, what we do typically in the first quarter, mostly January and February, as we do plan for downtimes, we actually plan for bad weather. And repair our plants and our equipment and things to get ready for the busy year. So really, just on the eastern side of the U.S. was the only impact for weather.

Nicholas A. Coppola - Thompson Research Group, LLC

Okay, that makes sense. And then, you talked about improvement in private work first showing up in third-party sales in Construction Materials. And it looks like we've seen that this quarter. Can you give us kind of a refresh on how you think about that progression, and what your thoughts are on this little recovery for vertically integrated? Is this really just more about players who are encroaching on the public space going back to private markets? And any more color would be helpful.

James H. Roberts

You bet, Nick. Yes, I think that the private sector, as we've always said, is kind of the key catalyst to the BI business really resurging again. And I say this cautiously that I do see it happening as we had hoped. We -- our construction business itself has a larger share of its work with private sector than we have had in years before, which is a good sign. And as I've mentioned earlier, the Materials business, although it's not as easy to look at it forward speaking because you don't book backlog for years in advance, as I mentioned, the backlog in Materials that we have booked already for the year is stronger than I've seen in many years. So all signs are really pointing towards a recovery and the private sector is driving a lot of that. Now on the other side, as I look at the bid results everyday, Nick, it's kind of interesting. You talk about private, smaller companies moving back to the private sector. I absolutely see that in some markets. In other markets, I don't see it. So it is somewhat market-specific. But there are markets now where there's 3 or 4 bidders, and there's markets only where there were 10 bidders 2 years ago. But then I turn the page, and I go a state or 2 away and I see 10 bidders still. So each market has its own level of recovery.

Nicholas A. Coppola - Thompson Research Group, LLC

Okay, that's helpful. And then, I guess, kind of building on that. How have bookings looked in Construction kind of through the month of April?

James H. Roberts

Well, again, we haven't given any discussions about April. But I will say this, that it is trending nicely.

Operator

[Operator Instructions] Our next question comes from line of Jerry Revich of Goldman Sachs.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Jim, can you update us on how you're thinking about the cadence of orders this year? I think you previously outlined a back half weighted order expectations for this year. Is that still the case? And just update us on timing, if you would.

James H. Roberts

Yes, Jerry. It absolutely is going as planned relative to our Large Projects recognition thresholds being met. As I mentioned, we have a series of large projects that we just started last year that were ramping up in the first quarter. Again, quite a bit more revenue in the first quarter in Large Projects not meeting the recognition threshold than in previous years, as Laurel mentioned, which means that they're on track. And in the second half of the year, they should hit the recognition threshold and provide the gross profits to the bottom line of the company. And that's pretty consistent with what we've been talking about for the last 2 quarters.

Jerry Revich - Goldman Sachs Group Inc., Research Division

And sorry, Jim, I didn't phrase my question well. What about orders -- I think you had expected orders to accelerate in the back half of '14 just based on when projects, bids were expected to be awarded. Do you still expect orders this year to be heavy in the back half of the year?

James H. Roberts

Are you talking about Large Projects, Jerry, that are out to bid?

Jerry Revich - Goldman Sachs Group Inc., Research Division

Large Projects, yes.

James H. Roberts

I think that it is still a very strong bidding environment. And I also mentioned that with some help here, we've got several jobs outstanding right now as well. So I think you're going to see a more consistent and, I'll call it, order-taking, on the Large Project side of our business throughout the entire year with -- it could wait the second half of the year, but I think you're going to see projects and orders taken consistently throughout the entire year.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Okay. And you mentioned in the bidding environment that it varies quite a bit by state. But I'm wondering if you could just help us understand overall view what's the margin profile like on jobs that you're bidding on today versus a year ago? How close to your longer-term margin targets do you think you can get to based on the bidding environment today across the U.S.?

James H. Roberts

You bet, Jerry. So again, we got to reiterate what our expectations are in all of our segments. And Large Projects is mid-teens and has been mid-teens for over -- for many years, and we believe that the work that we're booking today and the work that we're bidding today will maintain in the mid-teen range. The Construction segment is more of a high single-digit, low double-digit environment. I think, over this year, next year, I think you're going to see us meeting those expectations. And the Materials business, I have always said that it should be in the mid-teens. I don't see it getting there for several more years. But I think it will be moving up into the high single-digit, low double-digit range this year, which is a good movement for that. It's not where it needs to be, it's not where our long-term expectations are, but I do see the Materials business moving nicely up.

Operator

Our next question comes from Sameer Rathod of Macquarie.

Sameer Rathod - Macquarie Research

I had a question in terms of -- I think you mentioned that you have roughly $12 billion worth of work that you're looking to bid over the next 12 months. I think, a quarter ago, that was $13 billion. Obviously, you won I-4 Ultimate, so that's $2.4 billion. So is that difference, I guess, the increase x I-4, is that just projects that were further out as we're rolling forward? Or are those new opportunities that you've identified in the last quarter?

James H. Roberts

It's more of a roll-forward than anything. And what I did there was just take a picture of the next 12 months from the point of this call forward. So some of them are in the same discussion a quarter ago and a quarter before that. Some get pushed out, Sameer, and some get brought in that we didn't even think about probably 6 months ago. So it's a moving list. But I will say this, that it's a very healthy moving list. And I will also say that we are turning down projects to bid because what we're really focused on is a higher hit rate in the Large Projects business. We believe that if we're going to continue to bid this work, which we enjoy, and we think is a really nice segment for our business, that our win rate needs to be high enough because the cost to bid this work is pretty expensive. So keeping in that range today is really healthy. With a healthy hit rate will provide a lot of backlog opportunities.

Sameer Rathod - Macquarie Research

Right. So I think, in the past, you said about your hit rate has been 1/3. Is that right?

James H. Roberts

Yes. I'd say about 1 out of 4 -- or 1 out of 3 to 1 out of 4 is where it needs to be in the Large Projects segment because of the cost of the bidding.

Sameer Rathod - Macquarie Research

Right, right. And then, I think -- can you remind us what you think your share of that $12 billion is? Is it still roughly 50%?

James H. Roberts

Yes, I would say anywhere from 40% to 50%. Somewhere in that range. It really depends on which jobs. Because some jobs, we sponsor, Sameer. Some jobs, we take a minority role. And at end of the day, the mix will really depend on the work you win, what the overall percentage at the end of the day is.

Operator

Our next question comes from the line of Cory Mitchell of D.A. Davidson.

Cory Mitchell - D.A. Davidson & Co., Research Division

Can you just give us some more detail on the opportunities for Granite in the power market over the next couple of years?

James H. Roberts

You bet. In fact, it's absolutely really exciting. So the power market, again, I want to remind you that we're in -- focusing on the transmission and distribution environment with -- in the power sector. And we've expanded that business dramatically over the last year, and looking at some larger work that we have not been looking at when we were previously just the Kenny organization. So we're looking at large transmission jobs that not only include construction management and materials management, but we're also looking across the country today for a large transmission, distribution projects that include the construction itself. In fact, we're bidding a really nice one this week in the California market, a very large one that -- with Kenny as the prime on that. So what you're going to see across the country is really an expansion of the size of the projects that we're bidding under the Kenny power division. And I noted in the discussion earlier, Cory, that some of the work that was previously in the Construction segment is now showing up on our Large Project segment because the jobs are exceeding the threshold for construction, which is really the synergy that we wanted in that business was to see us bidding larger projects with a stronger balance sheet coming from Granite will allow that organization, which has done an exceptional job by the way. That division has really performed at a high level. So we're moving towards larger projects, more complicated projects, and well, a host of owners that we deal with across the country, private utilities and some public entities as well. So again, I could go on, the list is long, but they're all across the country, Cory.

Operator

Our next question comes from the line of Steven Fisher of UBS.

Steven Fisher

Just curious, by what month or part in the year do you guys typically get enough confidence to say that a given Construction season is going to be a good one with growth, the one that's flat or one that will be down? And then would you consider this year to be kind of a delayed construction start or on schedule?

James H. Roberts

Okay. So the Construction business is definitely more of a turn business than Large Projects, Steve. So I would say, by the end of the second quarter, you've got a pretty good handle on how you're going to progress through the year in the Construction business because note that although a lot of it turns quickly in 1 month or 2, you do need that backlog in place by the end of the second quarter that, really, will be able to execute on it for the remainder of the year. You might get a surge in the third quarter of work that you obtain and build in the third quarter, but that would really just add to the overall business. And I would say this: I think the Construction business is starting off real nicely this year. Our backlog is stronger than it's been in recent time. And I think that, coupled with the Construction Materials business, which, in our line of work, they do kind of go hand in hand. I think it's going to be a strong year.

Steven Fisher

Great. And then, are you seeing any particular changes in the competitive dynamics from the non-U.S. players in the Larger Projects side at this point?

James H. Roberts

So the international infusion in the Large Projects kind of continues to fluctuate job to job. I would say, Steve, that where I do see a little more infusion from the international companies is in the concessionaire finance projects. There are larger companies, typically. Their models have seen private financing outside of the U.S., prior to the U.S. doing it. So yes, I do see them on the real large jobs that have a financing mechanism, having a stronger role.

Operator

Our next question comes from the line of Michael Dudas of Sterne Agee.

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Two questions. First, the I-4 win. Just looking at it, would that be a 2015, 25% complete?

James H. Roberts

,

It's a little premature to determine what the percentage or completion of when that one's going to hit. It is a longer-phased job. So it would probably be on the bubble in 2015.

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Excellent. My follow-up is, I wonder if you could share your thoughts on light rail opportunities across the U.S., especially some in California? Are we getting better, stabilizing, getting things pushed out relative to those opportunities?

James H. Roberts

Well, interesting you asked that because we're waiting results on 1 light rail job right now in Southern California. And we're bidding another one in Southern California. And I think across the board, light rail is actually picking up. So I think that, that's a real nice market for us going forward.

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Is it regional? Like, you mentioned California. Or are there are other opportunities in some of your more important states?

James H. Roberts

Well, they are regional. I mean, they're typically funded. There's typically have some federal funding backing, but they usually have a regional consortium of opportunities available. We've got the Purple Line in Maryland, which is a big job that we're bidding as well, several billion. So they are regional by nature with federal backing.

Operator

[Operator Instructions] Our next question comes from the line of Michael Fomook of Wolverine Asset Management.

Michael Fomook

There's been some, I guess, additional press lately about the economic rationale of the Tappan Zee, which just lends one to think that there'll be maybe heightened scrutiny in cost there. So I just wondered if you could talk about whether you think there's just in line or maybe abnormal downside risk to you, if others cost overruns or change orders or things like that?

James H. Roberts

Michael, so relative to Tappan Zee, it's on target. There were some scheduling issues with some of the weather there in the winter. But the project has a updated schedule. It's on target; it's on budget. It's on schedule.

Operator

Our next question comes from the line of John Rogers of D.A. Davidson.

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

Jim, I just wanted to follow up. In terms of the transportation bill and where we are on that, I mean, is it -- what are you hearing at the state level, particularly as you get into the June fiscal years, your plans?

James H. Roberts

Yes. That's interesting. They're all obviously different, John. But one thing I can tell you is almost, majority of the state budgets are much healthier today. They have been in the past. They are nervous that they don't know what to do with their planning because of a lack of a federal bill. But I haven't seen a state yet stop their planned bidding environment due to the Feds. Now if we don't get something going or a continuing resolution, lets just say, by the end of the summer or some plan to make sure that the Highway Trust Fund is solvent, then I think you're going to probably see in September a problem. But I haven't seen any of the states that we work in talk about any slowdown of their businesses yet.

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

Okay. So they wouldn't change their -- in other words, their spring, early summer bidding plan?

James H. Roberts

No. Most of those is -- is -- most of the states have done a much better job recently of not putting anything out to bid unless they actually have the funding in place. And so all of them have kind of changed that environment, where if they have something on their bid list today, it's because it has funding.

Operator

And ladies and gentlemen, this does end our Q&A session. And I would now like to turn the call back over to our hosts.

James H. Roberts

Okay, everybody. Well, thank you for your questions. And as always, I want to thank all of the Granite employees for their commitment to the company and their tremendous work ethic as we certainly do enter the busy time of the year. And we hope to see many of you on the call today over the next couple of weeks as we travel across the East Coast. And of course, Laurel, Ron and I are available for follow-up today and at any point in time if you have any further questions. So thank you, all, for your time.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect. Have a great rest of your day.

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