Granite Construction Incorporated Reports First Quarter 2007 Results

WATSONVILLE, Calif., April 25 /PRNewswire-FirstCall/ -- GraniteConstruction Incorporated (NYSE: GVA) today announced a net loss of $2.2million, or $0.05 per diluted share for the first quarter ended March 31,2007. This compares with a net loss of $1.4 million or $0.03 per share forthe same period last year.

William G. Dorey, president and chief executive officer, said, "Thebranches are off to a good start this year. A profitable backlog, mildweather in the quarter and exceptional execution by our team fueled the branchresults in the quarter. Conversely, our Heavy Construction Division ("HCD")results reflect the fact that we have underperforming projects to completebefore we are able to fully realize the benefits of both our recentorganizational realignment as well as the newer, more profitable work in ourbacklog."

Total Company Operating Results

The operating loss for the quarter was $5.6 million compared with $3.8million for the first quarter ended March 31, 2006. Revenue for the firstquarter 2007 totaled $487.7 million compared with $496.0 million a year ago.Total gross profit as a percent of revenue increased from 8.1% to 9.9%.Backlog at March 31, 2007 was essentially flat at $2.5 billion compared to ayear ago.

General and Administrative expenses for the quarter totaled $54.3 millionor 11.1% of revenue compared with $48.3 million or 9.7% of revenue for 2006.The increase reflects costs to support the continued growth of our business inthe West.

Operating Results by Division

Branch Division operating income for the quarter increased slightly to$19.4 million compared with $18.8 million a year ago. Revenue for thedivision totaled $281.4 million, an increase of $30.3 million or 12.1% overthe same period in 2006. Backlog decreased 13.4% to $760.2 million comparedwith $877.5 million at March 31, 2006. Branch Division gross profit as apercent of revenue increased to 18.0% compared with 17.4% for the firstquarter 2006.

HCD operating loss for the quarter was $15.7 million compared with a lossof $12.1 million in the first quarter 2006. The loss primarily reflects therecognition of increases in the estimated costs to complete four largeprojects. HCD revenue for the quarter totaled $201.3 million versus $244.8million for the same period last year. Backlog increased to $1.74 billion atMarch 31, 2007 compared with $1.67 billion at March 31, 2006. HCD incurred aloss at the gross margin level of 3.2% of revenue compared with a loss of 1.2%of revenue for the first quarter 2006.

Outlook

"Our branches started the year with excellent results and our outlook forthe year remains positive. While it is still too early in our constructionseason to predict how the Branch Division will fare compared to last year’sfinancial results, we are optimistic that 2007 will be another excellent yearfor our business in the West. The public funding pipeline in most of ourmarkets is very healthy. As was expected, some of our markets are beginningto see an increase in competition for public sector work as a result of theslowdown in the residential market. In this type of market, our strategy isto be patient and cautious in our bidding strategy so that we do not commitour capacity to lower margin work if we believe better opportunities are goingto be available later in the year. In addition, we are excited about theopportunities ahead, particularly in California as a result of thetransportation-related Propositions passed last year. While some of thoseprojects may impact our backlog in late 2007, they are not expected tosignificantly affect the division’s bottom line results until 2008," Doreysaid.

"Our 2007 outlook for our HCD business remains guarded, particularly inlight of the losses we incurred in the first quarter, as well as our ongoingnegotiations with the Oregon Department of Transportation to terminate ourcontract on the US 20 project. As we have noted, most of the underperformingprojects that have plagued us will be completed this year. In many cases,those projects are being replaced with projects that were bid moreconservatively, with higher gross margins. Although there is the potentialthat operating income in HCD could be breakeven in 2007, our expectation isthat our large project business will post increasingly positive returns in2008 and beyond."

Subsequent Events

In a press release dated April 11, 2007, Granite announced that it hadformally requested that the Oregon Department of Transportation ("ODOT")terminate its contract to build the US 20 Pioneer Mountain to EddyvilleDesign-Build project. The $130 million contract was awarded in July 2005 toYaquina River Constructors ("YRC"), a joint venture of Granite and itsmajority-owned subsidiary, Wilder Construction Company. While clearing andexcavating the site, numerous and massive landslides throughout the seven-mileproject site were discovered. The costs and time associated with these slidesis currently estimated to be approximately $61 million and would add two yearsto the duration of the project. Because of the uncertainty surrounding theultimate resolution of these issues and the ongoing termination discussions,Granite has not recorded any adjustments to the project forecast during thequarter ended March 31, 2007. Should the Company reach agreement with ODOT toterminate the contract, Granite will adjust the forecast to reflect theestimated cost associated with the settlement, which is currently notdeterminable. If ODOT elects not to terminate the contract, Granite wouldreflect additional costs associated with the geotechnical and/or other changeswhen they are definitive and quantifiable. These costs could be significant.Granite would pursue additional compensation related to these issues fromODOT, but would not recognize any revenue until a change order was signed inaccordance with our policy.

The results for the quarter ended March 31, 2007 do not include results ofoperations from the Company’s acquisition in April 2007 of the Superior Groupof Companies ("Superior"). Superior’s results will be included from the dateof acquisition in the second quarter ending June 30, 2007.

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 May 10, 2007.

Conference Call

Granite will conduct a conference call tomorrow, April 26, 2007, at 11:00a.m. ET/ 8:00 a.m. PT to discuss the results for the quarter. The conferencecall will be webcast live and can be accessed athttp://www.graniteconstruction.com/investor-relations. The live conferencecall may be 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 is5564265. The conference call will be recorded and available for replay fromapproximately two hours after the live call through May 17, 2007 by calling(800) 642-1687 or (706) 645-9291. The conference ID for the recording is5564265.

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 nationwide. For more information about Granite, please visit theirwebsite at www.graniteconstruction.com.

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-lookingstatements are subject to risks and uncertainties that could cause actualresults of operations and financial condition and other events, as well as thetiming thereof, to differ materially from those expressed or implied in suchforward-looking statements. Specific risk factors include, without limitation,changes in the composition of applicable federal and state legislationappropriation committees; federal and state appropriation changes forinfrastructure spending; the general state of the economy; job productivity;accuracy of project estimates; weather conditions; competition and pricingpressures; and state referendums and initiatives. You should not place unduereliance on these forward-looking statements, which speak only as of the dateof this news release. You should also understand that many important factorsin addition to those discussed, referred to or incorporated by reference inthis press release, could cause our results to differ materially from thoseexpressed in the forward-looking statements. In light of these risks anduncertainties, it is important to be aware that the forward-looking eventsdiscussed in this release may not occur. We undertake no obligation to reviseor update publicly any forward-looking statements to conform the statement toactual results or changes in the Company’s expectations.

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                                 March 31,                 Variance    Operations              2007          2006        Amount       Percent    Revenue      Construction        $421,549     $434,338     $(12,789)        (2.9)      Material sales       $66,111      $61,630       $4,481          7.3        Total revenue     $487,660     $495,968      $(8,308)        (1.7)    Cost of revenue      Construction        $385,516     $403,960      $18,444          4.6      Material sales       $54,108      $51,773      $(2,335)        (4.5)        Total cost of         revenue          $439,624     $455,733      $16,109          3.5    Gross profit           $48,036      $40,235       $7,801         19.4      Gross profit as a       percent of revenue     9.9%         8.1%         1.8%           --    General and     administrative     expenses              $54,337      $48,256      $(6,081)       (12.6)      G&A expenses as a       percent of revenue    11.1%         9.7%        (1.4%)          --    Gain on sales of     property and equipment   $713       $4,238      $(3,525)       (83.2)    Other income (expense)      Interest income       $6,843       $4,733       $2,110         44.6      Interest expense     $(1,086)     $(1,395)        $309         22.2      Equity in income       (loss) of       affiliates             $351         $(77)        $428         ****      Other, net             $(233)       $(606)        $373         61.6        Total other income  $5,875       $2,655       $3,220         ****    Income (loss) before     provision for     (benefit from)        income taxes and         minority interest    $287      $(1,128)      $1,415         ****    Minority interest      $(2,447)     $(1,067)     $(1,380)        ****    Net loss               $(2,249)     $(1,422)       $(827)       (58.2)    Net loss per share:      Basic                 $(0.05)      $(0.03)      $(0.02)       (66.7)      Diluted               $(0.05)      $(0.03)      $(0.02)       (66.7)    Weighted average shares     of common stock:      Basic                 40,992       40,739          253          0.6      Diluted               40,992       40,739          253          0.6    **** Represents percentages greater than 100%                        GRANITE CONSTRUCTION INCORPORATED                      CONDENSED CONSOLIDATED BALANCE SHEETS           (Unaudited - In thousands, except share and per share data)                                                    March 31,     December 31,                                                      2007           2006                           Assets    Current assets      Cash and cash equivalents                     $207,647       $204,893      Short-term marketable securities                93,313        141,037      Accounts receivable, net                       413,267        492,229      Costs and estimated earnings in       excess of billings                             25,666         15,797      Inventories                                     47,337         41,529      Real estate held for sale                       58,192         55,888      Deferred income taxes                           36,552         36,776      Equity in construction joint ventures           37,422         31,912      Other current assets                            65,930         63,144        Total current assets                         985,326      1,083,205    Property and equipment, net                      444,570        429,966    Long-term marketable securities                   49,882         48,948    Investment in affiliates                          23,585         21,471    Other assets                                      43,341         49,248         Total assets                             $1,546,704     $1,632,838            Liabilities and Shareholders’ Equity    Current liabilities      Current maturities of long-term debt           $29,962        $28,660      Accounts payable                               214,395        257,612      Billings in excess of costs and       estimated earnings                            270,641        287,843      Accrued expenses and other       current liabilities                           170,042        189,328         Total current liabilities                   685,040        763,443    Long-term debt                                    70,530         78,576    Other long-term liabilities                       64,315         58,419    Deferred income taxes                             19,798         22,324    Minority interest in consolidated subsidiaries    18,227         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 41,942,130 shares in       2007 and 41,833,559 shares in 2006                420            418      Additional paid-in capital                      79,596         78,620      Retained earnings                              605,797        612,875      Accumulated other comprehensive income           2,981          2,631         Total shareholders’ equity                  688,794        694,544            Total liabilities and             shareholders’ equity                 $1,546,704     $1,632,838                                                     March 31,    December 31,    Financial Position                                 2007           2006       Working capital                              $300,286       $319,762       Current ratio                                    1.44           1.42       Debt to total capitalization                     0.13           0.13       Total liabilities to equity ratio                1.25           1.35                         GRANITE CONSTRUCTION INCORPORATED                           REVENUE AND BACKLOG ANALYSIS                        (Unaudited - Dollars In Thousands)                                 BY MARKET SECTOR                                                    Revenue                               Three Months Ended March 31,      Variance                                    2007          2006        Amount  Percent      Public Sector               $338,829      $352,961     $(14,132)  (4.0)      Private Sector                77,803        81,347       (3,544)  (4.4)      Aggregate sales               66,111        61,630        4,481    7.3      Other                          4,917            30        4,887   ****                                  $487,660      $495,968      $(8,308)  (1.7)                                                    Backlog                                         March 31,               Variance                                    2007         2006         Amount  Percent      Public Sector             $2,311,722    $2,219,442      $92,280    4.2      Private Sector               186,748       327,293     (140,545) (42.9)                                $2,498,470    $2,546,735     $(48,265)  (1.9)                                BY GEOGRAPHIC AREA                                                    Revenue                               Three Months Ended March 31,      Variance                                    2007          2006        Amount  Percent      California                  $191,107      $212,871     $(21,764) (10.2)      West (Excl. CA)              124,274       103,928       20,346   19.6      Midwest                       18,289        12,910        5,379   41.7      Northeast                     46,556        69,442      (22,886) (33.0)      Southeast                     70,965        47,730       23,235   48.7      South                         36,469        49,087      (12,618) (25.7)                                  $487,660      $495,968      $(8,308)  (1.7)                                                    Backlog                                         March 31,               Variance                                    2007          2006       Amount   Percent      California                  $506,628      $671,689    $(165,061) (24.6)      West (Excl. CA)              497,223       629,501     (132,278) (21.0)      Midwest                      425,836        65,111      360,725   ****      Northeast                    683,323       428,112      255,211   59.6      Southeast                    204,324       452,019     (247,695) (54.8)      South                        181,136       300,303     (119,167) (39.7)                                $2,498,470    $2,546,735     $(48,265)  (1.9)     **** Represents percentages greater than 100%

SOURCE Granite Construction Incorporated