Finance
Granite Construction Audit Finds Reported 2019 Loss Belonged in 2018
Fixed-price-contract woes are still plaguing some of the biggest publicly traded engineering and construction companies.
Granite Construction Inc. (GVA-NYSE) on July 27 said in a federal filing that an ongoing internal audit found losses reported in its annual report for 2019 should have been taken in 2018.
As a result, the company informed the U.S. Securities and Exchange Commission, those annual reports could no longer be relied on. Net income for 2018, once the audit review is finished, is likely to be lower than what was originally reported, the company said.
The changes will have no effect on Granite's cash or debt balances, the company reported. But Granite said it expects to find material weaknesses when its audit review is done, meaning it had deficiencies in its financial controls that concealed timely discovery and disclosure of potential losses.
Granite Construction Inc. reported 2019 third-quarter net income of $20.5 million for the period ended Sept. 30, down 60% from its year-ago figure of $55.7 million. The Watsonville, Calif., contractor cited a $69.3-million loss in its heavy civil operating group that the firm attributed to disputed projects.
A year ago, Granite was one of three publicly held contractors—along with SNC-Lavalin Group Inc. and Fluor Corp.—exiting fixed-price contracting as a business-growth strategy in the wake of megaproject risk imbalance, the companies said. KBR's CEO also announced recently in an investor address that the firm would exit fixed-price energy sector work.
In February, Granite delayed issuing its annual report for 2020 and began an investigation of prior-period reporting for its heavy civil operating group.
