Granite Announces Record Earnings for 2007

WATSONVILLE, Calif., Feb. 13 /PRNewswire-FirstCall/ -- GraniteConstruction Incorporated (NYSE: GVA) today announced a record net income forthe fiscal year 2007 of $112.1 million or $2.71 per diluted share, comparedwith $80.5 million, or $1.94 per diluted share, for the same period last year.Operating income for 2007 nearly doubled to $174.9 million, compared with$88.6 million a year ago, primarily as a result of the Company’s improvedexecution on large projects. Total revenues for 2007 decreased 8% to $2.74billion, compared with $2.97 billion for 2006, largely driven by lowerrevenues from the Company’s Granite East division as well as lower revenuesfrom the sale of construction materials to third-parties.

"Today we are reporting the highest net income in our Company’s 85-yearhistory," said William G. Dorey, President and Chief Executive Officer. "Thisis a significant milestone for our Company and I am extremely proud of ourentire team for what they have been able to achieve this year. Thanks to a lotof dedicated and hard-working people, our Granite East business is clearly onthe road to improved profitability. Equally impressive is the success thisyear of our branch business in the West. Once again, our Granite West businessproved its resiliency in an uncertain economic environment and posted anotherterrific year."

For the fourth quarter 2007, total revenue was $633.1 million, comparedwith $719.9 million for the fourth quarter of 2006. Operating income for thequarter was $37.7 million, compared with an operating loss of $4.4 million forthe same period last year. Fourth quarter 2006 operating results werenegatively affected by large write-downs on the SR-22 project in SouthernCalifornia and the US-20 project in Oregon as well as an $18.0 milliongoodwill impairment charge related to our Granite Northeast operation in NewYork. Net income for the fourth quarter 2007 was $17.2 million, or $0.42 perdiluted share, compared with $2.9 million, or $0.07 per diluted share, for thefourth quarter last year. Fourth quarter 2007 net income includes a one-timecharge of $7.8 million, or $0.19 per diluted share, related to the Company’spurchase of the minority shares of Wilder Construction Company.

Other income for the quarter ended December 31, 2007 was positivelyimpacted primarily by a gain of approximately $3.5 million from the sale ofgold, which is a by-product of one of our aggregate mining operations and heldfor sale.

Total company backlog at December 31, 2007 decreased $172.0 million to$2.08 billion from $2.26 billion at December 31, 2006, primarily driven by ahighly competitive public works bidding environment in several locations inthe West, in addition to a reduction in residential constructionopportunities. New awards for the fourth quarter 2007 included a $24.3 millionhighway reconstruction project in California.

General and Administrative expenses for the year totaled $246.2 million or9.0% of revenue compared with $204.3 million or 6.9% of revenue in 2006. Theincrease in G&A expenses is due primarily to costs incurred to support ouracquisitions, growth strategy and higher variable compensation resulting fromimproved profitability.

"While G&A has increased considerably in 2007, we believe that theincreased investment will provide the infrastructure and oversight necessaryto maximize the profitability of our work and execute our long-term growthstrategy," said Dorey.

Minority interest for the year ended December 31, 2007 of $20.9 millionrepresents the minority owners’ share of the income of the Company’sconsolidated subsidiaries, primarily Wilder Construction Company, certain realestate development entities and various consolidated construction jointventures. In 2006, the Company recognized a net minority interest benefit ofapproximately $6.2 million due to losses on certain joint venture constructionprojects.

During the fourth quarter ended December 31, 2007, the Companysuccessfully completed a $200.0 million private placement of 6.11% SeniorNotes due December 12, 2019. In addition, the Company purchased and retired2,470,430 shares of its common stock during the fourth quarter at a total costof approximately $92.7 million, representing an average cost of $37.54 pershare.

Results by Segment

Granite East revenue for the quarter decreased 16% to $183.1 millioncompared with $218.1 million for the same period last year. Granite Eastbacklog decreased $10.5 million to $1.23 billion compared with $1.24 billionlast year. Gross profit as a percent of revenue for the quarter ended December31, 2007 was 9.5% compared with a negative 14.5% in the prior period.Operating income for Granite East in the quarter was $14.1 million comparedwith an operating loss of $57.1 million (including the $18.0 million goodwillimpairment charge) for the same period in 2006, reflecting improved executionand performance compared with a year ago.

For the year ended December 31, 2007, Granite East revenue totaled $768.5million compared with $1.01 billion for the same period last year. Grossprofit as a percent of revenue for the year ended December 31, 2007 was 3.4%compared with a negative 7.2% last year. Operating income for Granite Easttotaled $0.8 million for the year compared with an operating loss of $122.9million for the same period in 2006.

Granite West revenue for the quarter totaled $445.8 million compared with$501.4 million for the same period in 2006. Backlog for Granite West decreased$161.5 million to $854.1 million compared with $1.02 billion a year ago,primarily reflecting the economic slowdown that has led to a more competitivemarketplace in the West. Gross profit as a percent of revenue for the quarterended December 31, 2007 was 18.9% compared to 17.5% last year. Granite Westoperating income decreased $21.7 million for the quarter to $43.7 millioncompared with $65.4 million for the fourth quarter last year.

For the year ended December 31, 2007, Granite West revenue increased by$0.8 million to $1.93 billion. Gross profit as a percent of revenue for theyear ended December 31, 2007 increased to 19.2% compared with 18.2% last year.Operating income for Granite West decreased to $230.2 million for the sameperiod compared with $250.6 million in 2006.

Granite Land Company revenue for the quarter increased $3.8 million to$4.2 million compared with $0.4 million for the same period last year.Operating loss for Granite Land Company in the quarter was $2.0 millioncompared to a loss of $0.3 million in the fourth quarter of 2006. Fourthquarter 2007 operating income was negatively impacted by a $3.0 millionimpairment write-down on an investment property in Central California. Ouroverall portfolio of $51.7 million in real estate held for development andsale remains strong with a geographic and product diversification that shouldcontinue to contribute to long term shareholder value

For the year ended December 31, 2007, Granite Land Company revenue was$40.7 million compared with $35.0 million for the same period in 2006.Operating income decreased $5.9 million for the year to $12.0 million comparedwith $17.9 million for the same period last year.

Outlook

"The diversity and resiliency of our business model will prove to beextremely valuable in 2008 as we confront the economic challenges facing us inthe West and capitalize on the opportunities to increase profitability in theEast.

"We are very pleased to see earnings improvement from our Granite Eastbusiness and we expect that to continue through 2008. Driven by a strongbacklog of work and better execution, we are currently forecasting GraniteEast to achieve low double digit gross margins in 2008. We have targetedseveral projects in each of our three Granite East regions that we will pursuein 2008; however, we will remain very selective with regard to the projects wewill bid. Our strategy for this business has not changed. We will continue tofocus on our home markets and expect to maintain a Granite East business withrevenues which allow us the best opportunity to maximize profitability andsuccessfully execute at the project level.

"We anticipate 2008 to be a challenging year for Granite West due to thecontinued downturn in the housing market, which is expected to negativelyimpact several of our branches, particularly in the Central Valley ofCalifornia and Nevada. The bidding environment in these markets is likely toremain very competitive for at least the first half of 2008. By contrast, someof our branches are poised to have a solid year, driven by a strong backlog,healthy markets and steady demand for our construction materials. Overall, weanticipate that Granite West will perform well in 2008 given the expectedmarket conditions; however, we do not expect the business to perform near thelevel it has over the past several years. Our focus this year will be ontargeting those opportunities where we have a competitive advantage. The longterm outlook for Granite West remains extremely positive. We arewell-positioned in our markets with our construction businesses, aggregatereserves, key plant facilities, and most importantly, teams of experienced anddedicated people," said Dorey.

Financial Results

The 2007 and 2006 financial information in this announcement reflects theCompany’s organizational and strategic realignment and are preliminary subjectto completion of the annual audit. The final annual financial results willappear in Granite’s Form 10-K, which will be filed on or before March 1, 2008.

Conference Call

Granite will conduct a conference call tomorrow, February 14, 2008, at11:00 a.m. ET/ 8:00 a.m. PT to discuss the results for the quarter. Access toa live audio webcast is available 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 is32410353. The conference call will be recorded and available for replay fromapproximately two hours after the live call through March 1, 2008 by calling(800) 642-1687 or (706) 645-9291. The conference ID for the recording is32410353.

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 5th straight year, Granite wasnamed to FORTUNE’S List of 100 Best Companies to Work For. For moreinformation about Granite, please visit their website athttp://www.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 http://www.graniteconstruction.com.

                      GRANITE CONSTRUCTION INCORPORATED                        COMPARATIVE FINANCIAL SUMMARY              (Unaudited - In Thousands, Except Per Share Data)                                  Three Months Ended                                     December 31,                Variance                                  2007         2006          Amount   Percent    Revenue      Construction              $542,864      $612,925      $(70,061)  (11.4)      Material sales             $86,045      $106,603      $(20,558)  (19.3)      Real estate                 $4,156          $399        $3,757    ****        Total revenue           $633,065      $719,927      $(86,862)  (12.1)    Cost of revenue      Construction              $458,104      $580,917      $122,813    21.1      Material sales             $71,118       $82,423       $11,305    13.7      Real estate                 $5,406          $144       $(5,262)   ****        Total cost of revenue   $534,628      $663,484      $128,856    19.4    Gross profit                 $98,437       $56,443       $41,994    74.4      Gross profit as a percent       of revenue                  15.5%          7.8%          7.7%       -    General and administrative     expenses                    $63,069       $48,530      $(14,539)  (30.0)      G&A expenses as a percent       of revenue                  10.0%          6.7%         (3.3%)      -    Reversal of legal judgment         -       $(4,800)      $(4,800) (100.0)    Impairment of goodwill             -       $18,011       $18,011   100.0    Gain on sales of property     and equipment                $2,290          $891        $1,399    ****    Other income (expense)      Interest income             $6,129        $7,380       $(1,251)  (17.0)      Interest expense           $(1,369)        $(387)        ($982)   ****      Acquisition expense        $(7,752)            -       ($7,752)      -      Equity in income of       affiliates                   $846          $636          $210    33.0      Other, net                  $6,555          $(96)       $6,651    ****        Total other income        $4,409        $7,533       $(3,124)  (41.5)    Income before provision for     income taxes and     minority interest           $42,067        $3,126       $38,941    ****    Minority interest            $(7,109)        $(599)      $(6,510)   ****    Net income                   $17,168        $2,917       $14,251    ****    Net income per share:      Basic                        $0.43         $0.07         $0.36    ****      Diluted                      $0.42         $0.07         $0.35    ****    Weighted average shares     of common stock:      Basic                       40,275        40,935          (660)   (1.6)      Diluted                     40,802        41,581          (779)   (1.9)                                     Year Ended                                     December 31,                Variance                                  2007         2006          Amount   Percent    Revenue      Construction            $2,321,502    $2,524,454     $(202,952)   (8.0)      Material sales            $375,700      $410,159      $(34,459)   (8.4)      Real estate                $40,712       $34,991        $5,721    16.3        Total revenue         $2,737,914    $2,969,604     $(231,690)   (7.8)    Cost of revenue      Construction            $2,002,064    $2,343,134      $341,070    14.6      Material sales            $300,234      $313,329       $13,095     4.2      Real estate                $24,872       $17,421       $(7,451)  (42.8)        Total cost of         revenue              $2,327,170    $2,673,884      $346,714    13.0    Gross profit                $410,744      $295,720      $115,024    38.9      Gross profit as a       percent of revenue          15.0%         10.0%          5.0%       -    General and administrative     expenses                   $246,202      $204,281      $(41,921)  (20.5)      G&A expenses as a       percent of revenue           9.0%          6.9%         (2.1%)      -    Reversal of legal judgment         -       $(4,800)      $(4,800) (100.0)    Impairment of goodwill             -       $18,011       $18,011   100.0    Gain on sales of property     and equipment               $10,343       $10,408          $(65)   (0.6)    Other income (expense)      Interest income            $26,925       $24,112        $2,813    11.7      Interest expense           $(6,367)      $(4,492)      $(1,875)  (41.7)      Acquisition expense        $(7,752)            -       $(7,752)      -      Equity in income of       affiliates                 $5,205        $2,157        $3,048    ****      Other, net                  $5,498        $2,604        $2,894    ****        Total other income       $23,509       $24,381         $(872)   (3.6)    Income before provision for     income taxes and     minority interest          $198,394      $113,017       $85,377    75.5    Minority interest           $(20,859)       $6,170      $(27,029)   ****    Net income                  $112,065       $80,509       $31,556    39.2    Net income per share:      Basic                        $2.74         $1.97         $0.77    39.1      Diluted                      $2.71         $1.94         $0.77    39.7    Weighted average shares of     common stock:      Basic                       40,866        40,874            (8)      -      Diluted                     41,389        41,471           (82)   (0.2)    **** Represents percentages greater than 100%                      GRANITE CONSTRUCTION INCORPORATED                    CONDENSED CONSOLIDATED BALANCE SHEETS         (Unaudited - In thousands, except share and per share data)                                               December 31,       December 31,                                                   2007               2006                                      Assets    Current assets      Cash and cash equivalents                  $352,434           $204,893      Short-term marketable securities             77,758            141,037      Accounts receivable, net                    397,097            492,229      Costs and estimated earnings in       excess of billings                          17,957             15,797      Inventories                                  55,557             41,529      Real estate held for development and sale    51,688             55,888      Deferred income taxes                        43,713             36,776      Equity in construction joint ventures        34,340             31,912      Other current assets                         96,969             63,144        Total current assets                    1,127,513          1,083,205    Property and equipment, net                   502,901            429,966    Long-term marketable securities                55,156             48,948    Investment in affiliates                       26,475             21,471    Other assets                                   74,373             49,248          Total assets                         $1,786,418         $1,632,838                       Liabilities and Shareholders’ Equity    Current liabilities      Current maturities of long-term debt        $28,696            $28,660      Accounts payable                            213,135            257,612      Billings in excess of costs and       estimated earnings                         275,849            287,843      Accrued expenses and other current       liabilities                                212,265            189,328        Total current liabilities                 729,945            763,443    Long-term debt                                268,417             78,576    Other long-term liabilities                    46,441             58,419    Deferred income taxes                          17,945             22,324    Minority interest in consolidated     subsidiaries                                  23,471             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 in 2007 and in 2006;       issued and outstanding 39,450,923 shares       in 2007 and 41,833,559 shares in 2006          395                418      Additional paid-in capital                   79,007             78,620      Retained earnings                           619,699            612,875      Accumulated other comprehensive income        1,098              2,631        Total shareholders’ equity                700,199            694,544          Total liabilities and           shareholders’ equity                $1,786,418         $1,632,838                                                December 31,      December 31,    Financial Position                             2007               2006      Working capital                            $397,568           $319,762      Current ratio                                  1.54               1.42      Debt to total capitalization                   0.30               0.13      Total liabilities to equity ratio              1.55               1.35                      GRANITE CONSTRUCTION INCORPORATED                         REVENUE AND BACKLOG ANALYSIS                      (Unaudited - Dollars In Thousands)                               BY MARKET SECTOR                                                     Revenue                                Year Ended December 31,          Variance                                  2007           2006        Amount   Percent      Public Sector           $1,906,705     $2,026,001    $(119,296)   (5.9)      Private Sector             414,797        498,453      (83,656)  (16.8)      Material sales             375,700        410,159      (34,459)   (8.4)      Other                       40,712         34,991        5,721    16.3                              $2,737,914     $2,969,604    $(231,690)   (7.8)                                                     Backlog                                     December 31,                Variance                                  2007         2006          Amount   Percent      Public Sector           $1,964,262     $2,067,550    $(103,288)   (5.0)      Private Sector             120,283        189,037      (68,754)  (36.4)      Material sales                   -              -            -       -      Other                            -              -            -       -                              $2,084,545     $2,256,587    $(172,042)   (7.6)                              BY GEOGRAPHIC AREA                                                     Revenue                                Year Ended December 31,          Variance                                  2007           2006        Amount   Percent      California              $1,107,023    $1,299,022     $(191,999)  (14.8)      West (Excl. CA)            894,968       868,424        26,544     3.1      Midwest                     93,896        43,480        50,416    ****      Northeast                  196,653       259,463       (62,810)  (24.2)      Southeast                  299,135       281,568        17,567     6.2      South                      146,239       217,647       (71,408)  (32.8)                              $2,737,914    $2,969,604     $(231,690)   (7.8)                                                     Backlog                                     December 31,                Variance                                  2007         2006          Amount   Percent      California                $430,775      $559,769     $(128,994)  (23.0)      West (Excl. CA)            434,165       516,614       (82,449)  (16.0)      Midwest                    328,971       422,941       (93,970)  (22.2)      Northeast                  133,052       219,835       (86,783)  (39.5)      Southeast                  613,372       322,619       290,753    90.1      South                      144,210       214,809       (70,599)  (32.9)                              $2,084,545    $2,256,587     $(172,042)   (7.6)     **** Represents percentages greater than 100%

SOURCE Granite Construction Incorporated