Granite Construction Incorporated Reports Second Quarter 2007 Results

WATSONVILLE, Calif., July 25 /PRNewswire-FirstCall/ -- GraniteConstruction Incorporated (NYSE: GVA) today announced its financial resultsfor the second quarter ended June 30, 2007. The Company reported net incomefor the quarter of $43.8 million, or $1.05 per diluted share. This compareswith net income of $33.3 million, or $0.80 per diluted share for the sameperiod last year. For the six-month period ended June 30, 2007, net incomewas $41.6 million or $1.00 per share on a diluted basis compared with $31.9million or $0.77 per share for the same period in 2006.

William G. Dorey, president and chief executive officer, said, "I am verypleased with our financial results this quarter. Our branch business in thewest achieved record gross margin results driven by excellent execution on astrong backlog of work. With regard to the large projects in our Granite Eastdivision, I am particularly encouraged by the profit potential of our backlogand the overall financial improvement we are beginning to see from thisbusiness."

Operating Results - Quarter and Year-To-Date

For the second quarter of 2007, total revenue decreased 5.1% to $770.9million compared with $812.0 million a year ago. Total gross profit as apercent of revenue increased to 16.6% compared with 11.5% for the same periodlast year. Operating income increased to $66.9 million compared with $48.2million for the second quarter of 2006.

For the six-month period ended June 30, 2007, revenue totaled $1.26billion compared with $1.31 billion for the same period last year. Totalgross profit as a percent of revenue increased to 14.0% compared with 10.2%last year. Operating income increased to $61.3 million compared with $44.4million for the same period in 2006.

Total Company backlog at June 30, 2007 remained flat at $2.5 billioncompared to a year ago. New awards for the second quarter 2007 included theaward of a $92.6 million highway project in Florida and a $37.3 millionhighway project in Texas. Also included in backlog at June 30, 2007 isapproximately $47.6 million related to our 20% share of a joint ventureproject at the World Trade Center in New York.

General and Administrative expenses for the quarter totaled $65.1 millionor 8.4% of revenue compared with $48.9 million or 6.0% of revenue in 2006. The$16.2 million increase is due primarily to increased personnel and relatedexpenses to support our growth strategy, particularly in Granite West.Variable compensation increased due to higher income and greater participationin our incentive compensation plans in the 2007 periods.

Results by Segment

The following results by segment are presented reflecting changes to theCompany’s segment reporting structure. As of the quarter ended June 30, 2007,financial performance of our two largest operating units will be reportedunder two new segments; Granite West and Granite East. These new reportablesegments conform to the Company’s organizational and strategic realignmentthat was announced in February 2007. The Company formerly reported resultsunder the Branch Division and Heavy Construction Division (HCD). Prior periodresults have been reclassified to conform to the new organizational structure.

Granite East revenue for the quarter totaled $218.0 million versus $292.8million for the same period last year. Granite East backlog increased to $1.52billion compared to $1.25 billion last year. Gross margin as a percent ofrevenue was 6.6% compared with a negative 3.8% in the prior period. Operatingincome for Granite East totaled $7.1 million compared with an operating lossof $18.9 million for the same period in 2006. This improved performance wasdue primarily to a net positive impact from significant project forecastadjustments in the quarter compared to a net negative impact in the sameperiod last year.

For the six-month period ended June 30, 2007, Granite East revenue totaled$402.7 million compared with $528.9 million for the same period last year.Gross margin as a percent of revenue for the six months ended June 30, 2007was 1.6% compared with a negative 2.7% last year. Operating loss for GraniteEast totaled $10.2 million for the six-month period compared with an operatingloss of $31.0 million for the same period in 2006.

Granite West revenue for the quarter totaled $542.4 million, an increaseof $56.9 million, or 11.7%, over the same period in 2007. Backlog for GraniteWest decreased to $986.3 million compared with $1.24 billion a year ago.Gross profit as a percent of revenue increased for the second quarter 2007 to20.2% compared with 17.9% for the second quarter 2006 due to an increase inprofitability on our construction work. Granite West operating incomeincreased $14.2 million for the quarter to $75.7 million compared with $61.5million for the second quarter last year.

For the six-month period ended June 30, 2007, Granite West revenue totaled$840.5 million compared with $745.4 million for the same period last year.Gross profit as a percent of revenue for the six months ended June 30, 2007increased to 19.2% compared with 17.5% last year. Operating income forGranite West increased to $96.7 million for the same period compared with$80.3 million in 2006.

Outlook

The Company’s outlook for Granite West in 2007 remains positive. However,there has been an increase in competition for public sector projects inCalifornia which may affect Granite West’s ability to meet or exceed lastyear’s record operating performance. While the Company did not anticipate thatthe projects funded by the ballot measures approved by California voters lastNovember would have a significant impact on bottom line results in 2007, thedelay in project lettings, coupled with the slowdown in the private sectormarket, is creating a more competitive public sector bidding environment inCalifornia than was experienced last year.

The Company believes Granite East should achieve breakeven operatingresults in 2007. This guidance reflects our current forecasts of largeprojects in the newly realigned Granite East business. As outlined below, theGranite East business includes the former HCD projects, less three projectsthat were reassigned to Granite West. The gross profit associated with thethree reassigned projects for the three and six month periods ended June 30,2007 was $3.0 and $4.6 million, respectively.

Reporting Segment Profiles

Granite West is comprised of decentralized branch offices in the westernUnited States that perform various heavy civil construction projects with alarge portion of the work focused on new construction and improvement ofstreets, roads, highways and bridges as well as site preparation for housingand commercial development. Although most Granite West projects are startedand completed within a year, the division also has the capability ofconstructing larger projects. Each of the 13 Granite West branch locations arealigned under one of three operating groups: Northwest, Northern Californiaand Southwest.

All of the Company’s revenue from the sale of construction materials isfrom Granite West. Each of the branch locations under Granite West operatefacilities that process aggregates into construction materials for internaluse or for sales to third parties. These activities are vertically integratedinto the Granite West construction business, providing a source of profits anda competitive advantage to our construction business.

Granite East operates in the eastern portion of the United States with afocus on large, complex infrastructure projects including major highways,large dams, mass transit facilities, bridges, pipelines, canals, tunnels,waterway locks and dams, and airport infrastructure. Granite East operates outof three regional offices: the Central Region, based in Lewisville, Texas; theSoutheast Region, based in Tampa, Florida; and the Northeast Region, based inTarrytown, New York. Granite East construction contracts are typically greaterthan two years.

Projects Affecting New Segment Reporting Structure

    Three projects from the Company’s legacy Heavy Construction Division werereassigned to the new Granite West division. The following table shows theimpact to Granite West and Granite East revenue and gross profit relating tothese three projects:                                  Three Months Ended         Six Months Ended            Granite West                 June 30,                June 30,            (in thousands)           2007        2006        2007        2006            Branch Division             revenue             $511,862    $471,297    $793,304    $722,395            Reassigned             projects revenue      30,585      14,261      47,237      22,994            Granite West             Division revenue     542,447     485,558     840,541     745,389            Branch Division             gross profit         106,394      86,886     157,146     130,495            Reassigned             projects gross             profit                 3,015          --       4,593          --            Granite West             Division gross             profit               109,409      86,886     161,739     130,495                                   Three Months Ended       Six Months Ended             Granite East                June 30,                June 30,            (in thousands)           2007        2006        2007        2006            Heavy Construction             Division revenue    $248,613    $307,091    $449,914    $551,931            Reassigned             projects revenue     (30,585)    (14,261)    (47,237)    (22,994)            Granite East             Division revenue     218,028     292,830     402,677     528,937            Heavy Construction             Division gross             profit (loss)         17,426     (11,242)     10,995     (14,200)            Reassigned             projects gross             profit                (3,015)         --      (4,593)         --            Granite East             Division gross             profit (loss)         14,411     (11,242)      6,402     (14,200)

The backlog related to the three projects reassigned was $199.1 million,$195.5 and $264.9 million at June 30, 2007, March 31, 2007 and June 30, 2006,respectively.

Financial Results

The financial information in this announcement reflects the Company’spreliminary results subject to completion of the quarterly review. The finalquarterly financial results will appear in Granite’s Form 10-Q, which will befiled on or before August 9, 2007.

Conference Call

Granite will conduct a conference call tomorrow, July 26, 2007, at 11:00a.m. ET/ 8:00 a.m. PT to discuss the results for the quarter. Access to alive audio webcast and presentation slides is available atwww.graniteconstruction.com/investor-relations. The live conference call maybe accessed by calling (877) 864-2735 in the U.S. and Canada and (706) 634-7039 for international listeners. The conference ID for the call is 6841772.The conference call will be recorded and available for replay fromapproximately two hours after the live call through August 9, 2007 by calling(800) 642-1687 or (706) 645-9291. The conference ID for the recording is6841772.

About Granite

Granite Construction Incorporated is a member of the S&P 400 Midcap Index,the Domini 400 Social Index and the Russell 2000. Granite ConstructionCompany, a wholly owned subsidiary, is one of the nation’s largest diversifiedheavy civil contractors and construction materials producers. GraniteConstruction Company serves public and private sector clients through itsoffices and subsidiaries nationwide. For the 4th straight year, Granite wasnamed to FORTUNE’S List of 100 Best Companies to Work For. For moreinformation about Granite, please visit their website atwww.graniteconstruction.com.

Forward-Looking Statements

This press release contains forward-looking statements, within the meaningof Section 27A of the Securities Act of 1933, as amended, and Section 21E ofthe Securities Exchange Act of 1934, as amended, which represents ourmanagement’s beliefs and assumptions concerning future events such asstatements related to the existence of bidding opportunities and economicconditions on the Company’s future results. Additionally, forward-lookingstatements include statements that can be identified by the use of forward-looking terminology such as "believes," "expects," "appears," "may," "will,""should," "look for," or "anticipates," or the negative thereof or comparableterminology, or by discussions of strategy.

All such forward-looking statements are subject to risks and uncertaintiesthat could cause actual results of operations and financial condition andother events, as well as the timing thereof, to differ materially from thoseexpressed or implied in such forward-looking statements. Specific risk factorsinclude, without limitation, changes in the composition of applicable federaland state legislation appropriation committees; federal and stateappropriation changes for infrastructure spending; the general state of theeconomy; job productivity; accuracy of project estimates; weather conditions;competition and pricing pressures; and state referendums and initiatives. Youshould not place undue reliance on these forward-looking statements, whichspeak only as of the date of this news release. You should also understandthat many important factors in addition to those discussed, referred to orincorporated by reference in this press release, could cause our results todiffer materially from those expressed in the forward-looking statements. Inlight of these risks and uncertainties, it is important to be aware that theforward-looking events discussed in this release may not occur. We undertakeno obligation to revise or update publicly any forward-looking statements toconform the statement to actual results or changes in the Company’sexpectations.

For further information regarding risks and uncertainties associated withGranite’s business, please refer to the "Management’s Discussion and Analysisof Financial Condition and Results of Operation" and "Risk Factors" sectionsof Granite’s SEC filings, including, but not limited to, its annual report onForm 10-K and quarterly reports on Form 10-Q, copies of which may be obtainedby contacting Granite’s investor relations department at (831) 724-1011 or atGranite’s website at www.graniteconstruction.com.

                        GRANITE CONSTRUCTION INCORPORATED                          COMPARATIVE FINANCIAL SUMMARY                (Unaudited - In Thousands, Except Per Share Data)                                Three Months Ended                                     June 30,                Variance                                 2007        2006      Amount      Percent    Revenue     Construction              $660,384    $669,837     $(9,453)      (1.4)     Material sales            $100,091    $108,551     $(8,460)      (7.8)     Real estate                $10,401     $33,649    $(23,248)     (69.1)      Total revenue            $770,876    $812,037    $(41,161)      (5.1)    Cost of revenue     Construction              $557,926    $621,843     $63,917       10.3     Material sales             $78,878     $80,674      $1,796        2.2     Real estate                 $6,438     $16,410      $9,972       60.8      Total cost of revenue    $643,242    $718,927     $75,685       10.5    Gross profit               $127,634     $93,110     $34,524       37.1     Gross profit as a      percent of revenue          16.6%       11.5%        5.1%         --    General and     administrative expenses    $65,130     $48,935    $(16,195)     (33.1)     G&A expenses as a      percent of revenue           8.4%        6.0%      (2.4%)         --    Gain on sales of property     and equipment               $4,346      $4,049        $297        7.3    Other income (expense)     Interest income             $6,439      $4,944      $1,495       30.2     Interest expense           $(2,028)    $(1,391)      ($637)     (45.8)     Equity in (loss) income      of affiliates                $(29)       $828       $(857)      ****     Other, net                   $(433)     $3,314     $(3,747)      ****      Total other income         $3,949      $7,695     $(3,746)     (48.7)    Income before provision     for income taxes and     minority interest          $70,799     $55,919     $14,880       26.6    Minority interest           $(4,799)    $(5,585)       $786       14.1    Net income                  $43,846     $33,289     $10,557       31.7    Net income per share:     Basic                        $1.07       $0.81       $0.26       32.1     Diluted                      $1.05       $0.80       $0.25       31.3    Weighted average shares     of common stock:     Basic                       41,096      40,896         200        0.5     Diluted                     41,631      41,466         165        0.4                                 Six Months Ended                                     June 30,                Variance                                 2007        2006      Amount       Percent    Revenue     Construction            $1,077,016  $1,104,145    $(27,129)      (2.5)     Material sales            $166,202    $170,181     $(3,979)      (2.3)     Real estate                $15,318     $33,679    $(18,361)     (54.5)      Total revenue          $1,258,536  $1,308,005    $(49,469)      (3.8)    Cost of revenue     Construction              $942,080  $1,025,378     $83,298        8.1     Material sales            $132,986    $132,447       $(539)      (0.4)     Real estate                 $7,800     $16,835      $9,035       53.7      Total cost of revenue  $1,082,866  $1,174,660     $91,794        7.8    Gross profit               $175,670    $133,345     $42,325       31.7     Gross profit as a      percent of revenue          14.0%       10.2%        3.8%         --    General and     administrative expenses   $119,467     $97,191    $(22,276)     (22.9)     G&A expenses as a     percent of revenue            9.5%        7.4%      (2.1%)         --    Gain on sales of     property and equipment      $5,059      $8,287     $(3,228)     (39.0)    Other income (expense)     Interest income            $13,282      $9,677      $3,605       37.3     Interest expense           $(3,114)    $(2,786)      $(328)     (11.8)     Equity in (loss)     income of affiliates          $322        $751       $(429)     (57.1)     Other, net                   $(666)     $2,708     $(3,374)      ****      Total other income         $9,824     $10,350       $(526)      (5.1)    Income before provision     for income taxes and     minority interest          $71,086     $54,791     $16,295       29.7    Minority interest           $(7,246)    $(6,652)      $(594)      (8.9)    Net income                  $41,597     $31,867      $9,730       30.5    Net income per share:     Basic                        $1.01       $0.78       $0.23       29.5     Diluted                      $1.00       $0.77       $0.23       29.9    Weighted average shares     of common stock:     Basic                       41,044      40,818         226        0.6     Diluted                     41,560      41,378         182        0.4    **** Represents percentages greater than 100%                        GRANITE CONSTRUCTION INCORPORATED                      CONDENSED CONSOLIDATED BALANCE SHEETS           (Unaudited - In thousands, except share and per share data)                                                   June 30,      December 31,                                                    2007           2006                                      Assets    Current assets       Cash and cash equivalents                  $246,278           $204,893       Short-term marketable securities             98,199            141,037       Accounts receivable, net                    489,435            492,229       Costs and estimated earnings in        excess of billings                          39,710             15,797       Inventories                                  53,320             41,529       Real estate held for sale                    54,722             55,888       Deferred income taxes                        36,015             36,776       Equity in construction joint        ventures                                    32,400             31,912       Other current assets                         57,811             63,144           Total current assets                  1,107,890          1,083,205    Property and equipment, net                    490,328            429,966    Long-term marketable securities                 61,582             48,948    Investment in affiliates                        24,816             21,471    Other assets                                    72,490             49,248                 Total assets                   $1,757,106         $1,632,838                       Liabilities and Shareholders’ Equity    Current liabilities       Current maturities of long-term debt        $35,040           $28,660       Accounts payable                            268,054           257,612       Billings in excess of costs and        estimated earnings                         242,469           287,843       Accrued expenses and other current        liabilities                                223,311           189,328           Total current liabilities               768,874           763,443    Long-term debt                                 139,715            78,576    Other long-term liabilities                     67,378            58,419    Deferred income taxes                           19,478            22,324    Minority interest in consolidated     subsidiaries                                   30,675            15,532    Shareholders’ equity       Preferred stock, $0.01 par value,        authorized 3,000,000 shares; none        outstanding                                     --                --       Common stock, $0.01 par value,        authorized 150,000,000 shares;        issued and outstanding        41,947,610 shares in        2007 and 41,833,559 shares in 2006             419               418       Additional paid-in capital                   81,293            78,620       Retained earnings                           645,448           612,875       Accumulated other comprehensive income        3,826             2,631           Total shareholders’ equity              730,986           694,544                 Total liabilities and                  shareholders’ equity          $1,757,106        $1,632,838                                                  June 30,        December 31,    Financial Position                              2007               2006       Working capital                            $339,016          $319,762       Current ratio                                  1.44              1.42       Debt to total capitalization                   0.19              0.13       Total liabilities to equity ratio              1.40              1.35                         GRANITE CONSTRUCTION INCORPORATED                           REVENUE AND BACKLOG ANALYSIS                        (Unaudited - Dollars In Thousands)                                 BY MARKET SECTOR                                                 Revenue                                 Three Months Ended June 30,       Variance                                     2007          2006        Amount  Percent      Public Sector                $545,784      $554,059      $(8,275)  (1.5)      Private Sector                114,600       115,778       (1,178)  (1.0)      Aggregate sales               100,091       108,551       (8,460)  (7.8)      Real Estate                    10,401        33,649      (23,248) (69.1)                                   $770,876      $812,037     $(41,161)  (5.1)                                                 Backlog                                       June 30,                  Variance                                 2007            2006          Amount  Percent      Public Sector           $2,315,479      $2,175,021      $140,458    6.5      Private Sector             187,622         317,845      (130,223) (41.0)                              $2,503,101      $2,492,866       $10,235    0.4                                BY GEOGRAPHIC AREA                                                    Revenue                                     Three Months Ended June 30,    Variance                                            2007      2006     Amount  Percent      California                          $321,054  $333,215  $(12,161)  (3.6)      West (Excl. CA)                      246,296   246,901      (605)  (0.2)      Midwest                               26,594    19,162     7,432   38.8      Northeast                             57,270    75,575   (18,305) (24.2)      Southeast                             79,688    70,985     8,703   12.3      South                                 39,974    66,199   (26,225) (39.6)                                          $770,876  $812,037  $(41,161)  (5.1)                                                 Backlog                                            June 30,             Variance                                        2007        2006      Amount   Percent       California                      $436,591    $655,071  $(218,480) (33.4)       West (Excl. CA)                  581,023     723,387   (142,364) (19.7)       Midwest                          380,190      17,134    363,056   ****       Northeast                        173,562     312,105   (138,543) (44.4)       Southeast                        743,054     463,437    279,617   60.3       South                            188,681     321,732   (133,051) (41.4)                                     $2,503,101  $2,492,866    $10,235    0.4     **** Represents percentages greater than 100%

SOURCE Granite Construction Incorporated