Granite Construction Incorporated Reports Third Quarter 2007 Results

WATSONVILLE, Calif., Oct. 24 /PRNewswire-FirstCall/ -- GraniteConstruction Incorporated (NYSE: GVA) today reported financial results for thethird quarter ended September 30, 2007. The Company reported net income forthe quarter of $53.3 million, or $1.28 per diluted share. This compares withnet income of $45.7 million, or $1.10 per diluted share for the same periodlast year.

"Granite delivered another strong quarter," Granite President and ChiefExecutive Officer William G. Dorey said. "Overall, operating income increased$27.4 million quarter over quarter in spite of a challenging competitivebidding environment in the West. In the quarter, our Granite West business wasable to capitalize on its healthy backlog of work and deliver impressive grossmargins while Granite East posted another consecutive quarter of improvedperformance."

Operating Results -- Quarter and Year-To-Date

For the third quarter of 2007, total revenue decreased 10% to $846.3million compared with $941.7 million a year ago. Total gross profit as apercent of revenue increased to 16.1% compared with 11.2% for the same periodlast year. Operating income increased to $76.0 million compared with $48.6million for the third quarter of 2006.

For the nine-month period ended September 30, 2007, revenue totaled $2.1billion compared with $2.2 billion for the same period last year. Total grossprofit as a percent of revenue increased to 14.8% compared with 10.6% lastyear. Operating income increased to $137.2 million compared with $93.0 millionfor the same period in 2006.

Total Company backlog at September 30, 2007 was $2.3 billion compared with$2.1 billion a year ago. New awards for the third quarter 2007 included a$59.6 million portion of a $138.0 million highway reconstruction project inCalifornia and $43.9 million highway project also in California. General andAdministrative expenses for the quarter totaled $63.7 million or 7.5% ofrevenue compared with $58.6 million or 6.2% of revenue in 2006. The $5.1million increase is due primarily to the recent acquisition in the PacificNorthwest.

Results by Segment

Granite East revenue for the quarter decreased 30% to $182.6 millioncompared with $259.6 million for the same period last year. Granite Eastbacklog increased 40% to $1.4 billion compared with $1.0 billion last year.Gross margin as a percent of revenue was 1.1% compared with a negative 10.4%in the prior period. The operating loss for Granite East in the quarter was$3.2 million compared with an operating loss of $35.2 million for the sameperiod in 2006, reflecting improved performance from its current backlog ofwork compared with a year ago.

For the nine-month period ended September 30, 2007, Granite East revenuetotaled $585.3 million compared with $788.5 million for the same period lastyear. Gross margin as a percent of revenue for the nine months ended September30, 2007 was 1.4% compared with a negative 5.2% last year. Operating loss forGranite East totaled $13.4 million for the nine-month period compared with anoperating loss of $66.2 million for the same period in 2006.

Granite West revenue for the quarter totaled $642.4 million compared with$681.2 million for the same period in 2007. Backlog for Granite West decreased15.2% to $950.8 million compared with $1.1 billion a year ago, reflecting thecurrent competitive marketplace in the West. Gross profit as a percent ofrevenue was flat for the quarter at 19.4%. Granite West operating incomedecreased $15.0 million for the quarter to $89.8 million compared with $104.8million for the third quarter last year.

For the nine-month period ended September 30, 2007 Granite West revenuetotaled $1.5 billion compared with $1.4 billion for the same period last year.Gross profit as a percent of revenue for the nine months ended September 30,2007 increased to 19.3% compared with 18.4% last year. Operating income forGranite West slightly increased to $186.5 million for the same period comparedwith $185.2 million in 2006.

Granite Land Company revenue for the quarter increased $20.3 million to$21.2 million compared with $0.9 million for the same period last year.Operating income for Granite Land Company increased to $8.2 million (includingour minority partner’s share of approximately $4.5 million) compared with anoperating loss of $0.3 million in the third quarter of 2006 reflecting thesale of three development projects in the quarter.

Outlook

"Our outlook for the remainder of the year is positive. Granite West is ontrack to have another great year and Granite East will show significantimprovement over 2006. For the total Company, we are currently expecting 2007earnings per share in the range of $2.55 - $2.75. As always, our ability toachieve these forecasted results is contingent on a number of factors,including the amount of work we are able to complete in the fourth quarter,which can vary significantly due to the onset of winter weather conditions."

"Our longer term outlook is also positive, driven by both a record levelof public transportation funding in California, the Company’s largest revenue-producing state, as well as improving results from our large projectsbusiness. Demand for our construction materials is also expected to remainhealthy over the long term. We foresee bidding opportunities for largeprojects to continue to be robust, which will help support our strategy inGranite East of bidding new work selectively with considerably higher levelsof profitability," Dorey said.

Share Repurchase Program

Granite is issuing a separate news release today announcing that its Boardof Directors has authorized the repurchase of up to $200.0 million of commonstock in addition to a 30% increase in the quarterly dividend.

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 quarterly review. The final quarterly financial resultswill appear in Granite’s Form 10-Q, which will be filed on or before November9, 2007.

Conference Call

Granite will conduct a conference call tomorrow, October 25, 2007, 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 is20484318. The conference call will be recorded and available for replay fromapproximately two hours after the live call through November 8, 2007 bycalling (800) 642-1687 or (706) 645-9291. The conference ID for the recordingis 20484318.

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 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 offorward-looking terminology such as "believes," "expects," "appears," "may,""will," "should," "look for," or "anticipates," or the negative thereof orcomparable terminology, or by discussions of strategy. All suchforward-looking statements are subject to risks and uncertainties that couldcause actual results of operations and financial condition and other events,as well as the timing thereof, to differ materially from those expressed orimplied in such forward-looking statements. Specific risk factors include,without limitation, changes in the composition of applicable federal and statelegislation appropriation committees; federal and state appropriation changesfor infrastructure spending; the general state of the economy; jobproductivity; accuracy of project estimates; weather conditions; competitionand pricing pressures; and state referendums and initiatives. You should notplace undue reliance on these forward-looking statements, which speak only asof the date of this news release. You should also understand that manyimportant factors in addition to those discussed, referred to or incorporatedby reference in this press release, could cause our results to differmaterially from those expressed in the forward-looking statements. In light ofthese 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.

Granite is today issuing a separate news release announcing a new sharerepurchase program and increased quarterly dividend and investors are advisedto read that separate release with respect to those matters.

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                              September 30,               Variance                           2007          2006       Amount       Percent    Revenue      Construction        $701,622     $807,384   $(105,762)       (13.1)      Material sales      $123,453     $133,375     $(9,922)        (7.4)      Real estate          $21,238         $913      $20,325         ****        Total revenue     $846,313     $941,672    $(95,359)       (10.1)    Cost of revenue      Construction        $601,880     $736,839     $134,959         18.3      Material sales       $96,130      $98,459       $2,329          2.4      Real estate          $11,666         $442    $(11,224)         ****        Total cost         of revenue       $709,676     $835,740     $126,064         15.1    Gross profit          $136,637     $105,932      $30,705         29.0      Gross profit       as a percent of       revenue               16.1%        11.2%         4.9%            -    General and     administrative     expenses              $63,666      $58,560      $(5,106)        (8.7)      G&A expenses as       a percent of       revenue                7.5%         6.2%        (1.3%)           -    Gain on sales of     property and     equipment              $2,994       $1,230       $1,764         ****    Other income     (expense)      Interest income       $7,514       $7,055         $459          6.5      Interest expense     $(1,884)     $(1,319)       $(565)       (42.8)      Equity in income       of affiliates        $4,037         $770       $3,267         ****      Other, net             $(391)         $(8)       $(383)        ****        Total other         income             $9,276       $6,498       $2,778         42.8    Income before     provision for income     taxes and minority     interest              $85,241      $55,100      $30,141         54.7    Minority interest      $(6,504)     $13,421     $(19,925)        ****    Net income             $53,300      $45,725       $7,575         16.6    Net income per share:      Basic                  $1.30        $1.12        $0.18         16.1      Diluted                $1.28        $1.10        $0.18         16.4    Weighted average     shares of common     stock:      Basic                 41,106       40,923          183          0.4      Diluted               41,640       41,546           94          0.2                             Nine Months Ended                              September 30,               Variance                            2007         2006      Amount         Percent    Revenue      Construction       $1,778,638   $1,911,529   $(132,891)       (7.0)      Material sales       $289,655     $303,556    $(13,901)       (4.6)      Real estate           $36,556      $34,592      $1,964         5.7        Total revenue    $2,104,849   $2,249,677   $(144,828)       (6.4)    Cost of revenue      Construction       $1,543,960   $1,762,217    $218,257        12.4      Material sales       $229,116     $230,906      $1,790         0.8      Real estate           $19,466      $17,277     $(2,189)      (12.7)        Total cost         of revenue      $1,792,542   $2,010,400    $217,858        10.8    Gross profit           $312,307     $239,277     $73,030        30.5       Gross profit        as a percent        of revenue            14.8%        10.6%        4.2%           -    General and     administrative     expenses              $183,133     $155,751    $(27,382)      (17.6)      G&A expenses       as a percent       of revenue              8.7%         6.9%       (1.8%)          -    Gain on sales of     property and     equipment               $8,053       $9,517     $(1,464)      (15.4)    Other income (expense)      Interest income       $20,796      $16,732      $4,064        24.3      Interest expense      $(4,998)     $(4,105)      $(893)      (21.8)      Equity in income       of affiliates         $4,359       $1,521      $2,838        ****      Other, net            $(1,057)      $2,700     $(3,757)       ****        Total other         income             $19,100      $16,848      $2,252        13.4    Income before     provision for     income taxes and     minority interest     $156,327     $109,891     $46,436        42.3    Minority interest      $(13,750)      $6,769    $(20,519)       ****    Net income              $94,897      $77,592     $17,305        22.3    Net income per share:      Basic                   $2.31        $1.90       $0.41        21.6      Diluted                 $2.28        $1.87       $0.41        21.9    Weighted average     shares of common stock:      Basic                  41,065       40,853         212         0.5      Diluted                41,587       41,434         153         0.4                        GRANITE CONSTRUCTION INCORPORATED                      CONDENSED CONSOLIDATED BALANCE SHEETS           (Unaudited - In thousands, except share and per share data)                                               September 30,      December 31,                                                   2007               2006                                      Assets    Current assets       Cash and cash equivalents                 $265,605           $204,893       Short-term marketable securities           106,675            141,037       Accounts receivable, net                   536,519            492,229       Costs and estimated earnings in        excess of billings                         24,489             15,797       Inventories                                 50,438             41,529       Real estate held for sale                   57,296             55,888       Deferred income taxes                       36,041             36,776       Equity in construction joint        ventures                                   36,851             31,912       Other current assets                        43,370             63,144           Total current assets                 1,157,284          1,083,205    Property and equipment, net                   487,000            429,966    Long-term marketable securities                61,308             48,948    Investment in affiliates                       23,256             21,471    Other assets                                   78,119             49,248                 Total assets                  $1,806,967         $1,632,838                       Liabilities and Shareholders’ Equity    Current liabilities       Current maturities of long-term debt       $26,589           $28,660       Accounts payable                           261,379           257,612       Billings in excess of costs and        estimated earnings                        274,209           287,843       Accrued expenses and other current        liabilities                               209,894           189,328           Total current liabilities              772,071           763,443    Long-term debt                                140,410            78,576    Other long-term liabilities                    65,111            58,419    Deferred income taxes                          19,788            22,324    Minority interest in consolidated     subsidiaries                                  28,148            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        41,916,706 shares in        2007 and 41,833,559 shares in        2006                                          419               418       Additional paid-in capital                  82,678            78,620       Retained earnings                          694,557           612,875       Accumulated other comprehensive        income                                      3,785             2,631           Total shareholders’ equity             781,439           694,544                 Total liabilities and                  shareholders’ equity         $1,806,967        $1,632,838                                               September 30,      December 31,    Financial Position                             2007               2006       Working capital                           $385,213          $319,762       Current ratio                                 1.50              1.42       Debt to total capitalization                  0.18              0.13       Total liabilities to equity ratio             1.31              1.35                         GRANITE CONSTRUCTION INCORPORATED                            REVENUE AND BACKLOG ANALYSIS                         (Unaudited - Dollars In Thousands)                                  BY MARKET SECTOR                                                 Revenue                           Three Months Ended September 30,    Variance                                 2007          2006         Amount   Percent      Public Sector            $578,356      $635,010     $(56,654)   (8.9)      Private Sector            123,266       172,374      (49,108)  (28.5)      Aggregate sales           123,453       133,375       (9,922)   (7.4)      Real Estate                21,238           913       20,325    ****                               $846,313      $941,672     $(95,359)  (10.1)                                BY MARKET SECTOR                                              Backlog                                   September 30,               Variance                                 2007          2006         Amount  Percent      Public Sector          $2,169,060     $1,872,944     $296,116   15.8      Private Sector            167,461        247,116      (79,655) (32.2)                             $2,336,521     $2,120,060     $216,461   10.2                                BY GEOGRAPHIC AREA                                               Revenue                       Three Months Ended September 30,       Variance                                2007      2006             Amount  Percent      California             $334,854   $407,047         $(72,193)  (17.7)      West (Excl. CA)         325,392    310,737           14,655     4.7      Midwest                  29,620     13,596           16,024    ****      Northeast                52,542     73,519          (20,977)  (28.5)      Southeast                65,371     77,813          (12,442)  (16.0)      South                    38,534     58,960          (20,426)  (34.6)                             $846,313   $941,672         $(95,359)  (10.1)                                BY GEOGRAPHIC AREA                              Backlog                             September 30,               Variance                           2007        2006          Amount    Percent      California         $455,014    $610,308      $(155,294)  (25.4)      West (Excl. CA)     518,755     609,422        (90,667)  (14.9)      Midwest             350,496       3,805        346,691    ****      Northeast           166,453     243,968        (77,515)  (31.8)      Southeast           679,635     399,096        280,539    70.3      South               166,168     253,461        (87,293)  (34.4)                       $2,336,521  $2,120,060       $216,461    10.2     **** Represents percentages greater than 100%

SOURCE Granite Construction Incorporated