November 9, 2010

Granite Reports Third-Quarter 2010 Fiscal Results and Initiates Enterprise Improvement Plan to Position Company for 2011

Revenue in Q310 was $671 million vs. $720 million a year ago
SG&A expenses decreased $14 million during the quarter compared with a year ago
Total company backlog in line with a year ago; $667 million in new awards in Q310
Financial position remains strong, with $388 million in cash, cash equivalents and marketable securities

WATSONVILLE, Calif.--(BUSINESS WIRE)-- Granite Construction Incorporated (NYSE: GVA) today reported a net income of $38.7 million, or $0.99 per diluted share, for the third quarter of 2010 compared with net income of $30.6 million, or $0.79 per diluted share, for the third quarter of 2009. A tax benefit contributed $8.0 million to net income in the third quarter of 2010.

"During the quarter, the Construction segment continued to feel the impact of lower demand for our services in the West, funding delays due to budget uncertainties and highly competitive market conditions. We did, however, see a slight pickup in demand for our construction materials as work that had been delayed due to weather in the first half of the year carried over into the third quarter," said James H. Roberts, president and chief executive officer. "The Large Project Construction segment is executing well on its new portfolio of work, which includes the $126 million Folsom Dam project awarded in the third quarter as well as the $306 million SR 520 Eastside project in Washington, which will be booked into backlog in the fourth quarter.

"I am also pleased to say that we are making steady progress in our effort to reduce costs and strengthen the business to achieve long-term profitable growth," Roberts continued. "As a part of the Enterprise Improvement Plan that we announced last month, we completed a comprehensive review of our business and associated cost structure. As a result of this rigorous evaluation, we have identified certain fixed assets and real estate investments that are now slated for closure or divestiture. In addition, we made the very difficult decision to reduce our salaried workforce by approximately 13 percent. While these actions will have a near-term impact on our business, they are an important part of our plan to increase our profitability and competitiveness and deliver significant improvement in our long-term financial performance."

Third-Quarter 2010 Financial Results

Total Company

Revenue totaled $670.9 million compared with $720.3 million in 2009.
Gross profit margin was 11 percent compared with 15 percent in 2009, driven primarily by lower margins in the Construction segment as well as the impact of Large Projects that have yet to reach the profit recognition threshold.
Operating income for the quarter was $32.2 million compared with $46.3 million in the prior year.
SG&A expenses for the third quarter were $47.2 million compared with $61.0 million for the same period last year, driven by ongoing efforts to reduce the company's overall cost structure.
Net income attributable to non-controlling interests was $4.6 million compared with $5.9 million in 2009.
Total contract backlog at September 30, 2010, was $1.6 billion, essentially flat compared with the backlog at September 30, 2009.
New awards during the quarter include a $125.9 million auxiliary spillway control structure in California, a $77.7 million rail project in California and $47.7 million for our share of a freeway reconstruction project in Utah.
The effective tax rate for the third quarter was a negative 22.8 percent due to the adjustment of the year-to-date tax rate to 135.4 percent. The unusually high year-to-date rate is due primarily to the ratio of non-controlling interest of $11.9 million to pre-tax loss of $8.3 million. Non-controlling interest is generally not subject to income taxes on a stand-alone basis and is deducted from income before provision for income taxes in arriving at our effective tax rate.

Construction

Construction revenue for the quarter totaled $410.0 million compared with $466.6 million for the same period in 2009, reflecting reductions in available work out to bid as well as a highly competitive bidding environment.
Gross profit margin for the third quarter was 11 percent compared with 16 percent for the same period in 2009, driven by a competitive bidding environment and lower margins in backlog as compared with a year ago.

Large Project Construction

Large Project Construction revenue for the quarter totaled $170.0 million compared with $181.2 million for the same period last year.
Gross profit margin for the quarter decreased to 11 percent compared with 14 percent for the same period last year, reflecting an increase in revenue on projects that have yet to reach the profit recognition threshold.

Construction Materials

Construction Materials revenue for the quarter totaled $88.1 million compared with $71.5 million for the same period last year, as wet weather in the first part of the year led to increased demand for construction materials in the third quarter of 2010.
Gross profit on the sale of construction materials was $12.1 million in 2010 compared with $8.4 million in 2009. The increase in gross profit is due primarily to higher sales volume for construction materials as a result of weather in the first half of 2010 that shifted demand into the third quarter.

Recent Company Actions

Granite announced on October 25, 2010, the decision to cut its workforce by approximately 220 employees as a result of efforts to reduce its cost structure, enhance operating efficiencies and strengthen the business to achieve long-term profitable growth. Estimated savings resulting from the reductions and other operational improvements are expected to benefit 2011 pre-tax income by approximately $36 million to $40 million.

Additionally, as part of the Enterprise Improvement Plan, the company is planning an orderly divesture of certain fixed assets as well as its real estate investment business. This decision is consistent with the Company's business strategy to focus on its core competencies and enhance operating efficiencies.

The combination of these actions is estimated to result in a pre-tax charge of approximately $99 million to $145 million, nearly all of which will be recognized in the fourth quarter of fiscal 2010. Of the total, approximately $89 million to $133 million is related primarily to impairments on real estate and fixed assets. The balance is associated with severance-related costs.

Full-Year 2010 Guidance

Market conditions remain very challenging, as funding uncertainties coupled with the competitive climate continue to have an impact on revenue and gross margins for the Construction and Construction Materials segments. As a result, Granite now expects revenue for the Construction segment to be between $925 million and $1.125 billion, with a corresponding gross profit margin between 9 and 10 percent. Revenue for the Construction Materials segment is expected to be between $200 million and $250 million, with a corresponding gross profit margin between 6 and 7 percent.

Revenue for the Large Project Construction segment is now expected to be between $600 million and $650 million. Correspondingly, the company is raising the gross profit margin range for the segment to between 12 and 13 percent. Net income attributable to non-controlling interests is expected to be approximately $20 million for the year, excluding the impact of restructuring charges.

Conference Call

Granite will conduct a conference call today, November 9, 2010, at 8 a.m. Pacific time/11 a.m. eastern time to discuss the results of the quarter ended September 30, 2010. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call may be accessed by calling (877) 693-6483, or (706) 758-5304 for international listeners. The conference ID for the call is 19705545. The call will be recorded and will be available for replay from approximately two hours after the live audio webcast through November 23, 2010, by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 19705545.

About Granite

Granite Construction Incorporated is a member of the S&P 400 Midcap Index, the FTSE KLD 400 Social Index and the Russell 2000 Index. Granite Construction Company, a wholly owned subsidiary, is one of the nation's largest diversified heavy civil contractors and construction materials producers. Granite Construction Company serves public- and private-sector clients through its offices and subsidiaries nationwide. For more information about Granite, please visit its website at www.graniteconstruction.com.

Forward-looking Statements

This news release contains statements that are not based on historical facts and which may be forward-looking in nature. Under the Private Securities Litigation Reform Act of 1995, a "safe harbor" may be provided to Granite for certain of these forward-looking statements. Words such as outlook, believes, expects, appears, may, will, should, anticipates and the negatives thereof or comparable terminology are intended to identify these forward-looking statements. These forward-looking statements are estimates reflecting the best judgment of Granite's senior management and are based on its current expectations and projections concerning future events, many of which are outside of Granite's control and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those risks described in Granite's Annual Report under "Item 1A. Risk Factors." Except as required by law, Granite undertakes no obligation to revise or update any forward-looking statements for any reason. As a result, the reader is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.


GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)

		September 30,		December 31,		September 30,
			2010		2009		2009

ASSETS

Current assets
	Cash and cash equivalents	$	257,854	$	338,956	$	371,434
	Short-term marketable securities		80,962		42,448		27,798
	Receivables, net		375,914		280,252		382,572
	Costs and estimated earnings in excess of billings		34,448		10,619		38,011
	Inventories		45,224		45,800		51,972
	Real estate held for development and sale		151,638		139,449		135,306
	Deferred income taxes		31,035		31,034		43,356
	Equity in construction joint ventures		80,496		67,693		58,450
	Other current assets		42,409		50,467		41,185

	Total current assets		1,099,980		1,006,718		1,150,084

Property and equipment, net			491,363		520,778		530,661

Long-term marketable securities			49,502		76,937		62,612

Investments in affiliates			32,515		24,644		21,309

Other noncurrent assets			78,611		80,498		80,233

	Total assets	$	1,751,971	$	1,709,575	$	1,844,899

LIABILITIES AND EQUITY

Current liabilities
	Current maturities of long-term debt	$	8,444	$	15,017	$	15,017
	Current maturities of non-recourse debt		39,157		43,961		53,177
	Accounts payable		206,993		131,251		211,670
	Billings in excess of costs and estimated earnings		157,233		156,041		187,205
	Accrued expenses and other current liabilities		173,547		159,843		209,806

	Total current liabilities		585,374		506,113		676,875

Long-term debt			216,870		225,203		225,219

Long-term non-recourse debt			16,420		19,485		8,363

Other long-term liabilities			48,764		48,998		48,884

Deferred income taxes			27,883		27,220		17,917
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 38,769,787 shares as of September 30, 2010, 38,635,021 shares as of December 31, 2009 and 38,669,447 shares as of September 30, 2009		388		386		387
	Additional paid-in capital		101,567		94,633		92,356
	Retained earnings		711,497		735,632		724,621

	Total Granite Construction Incorporated shareholders' equity		813,452		830,651		817,364

	Noncontrolling interests		43,208		51,905		50,277

	Total equity		856,660		882,556		867,641

	Total liabilities and equity	$	1,751,971	$	1,709,575	$	1,844,899


GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
				2010			2009			2010			2009

	Revenue
		Construction	$	409,989		$	466,605		$	729,118		$	912,110
		Large project construction		169,972			181,171			429,625			456,001
		Construction materials		88,128			71,527			175,381			158,688
		Real estate		2,761			981			11,613			1,932
		Total revenue		670,850			720,284			1,345,737			1,528,731
	Cost of revenue
		Construction		365,323			393,970			659,705			751,498
		Large project construction		151,656			155,950			379,991			374,605
		Construction materials		75,991			63,176			165,889			141,068
		Real estate		1,725			1,531			8,585			3,272
		Total cost of revenue		594,695			614,627			1,214,170			1,270,443

	Gross profit			76,155			105,657			131,567			258,288

	Selling, general and administrative expenses			47,160			60,950			153,809			171,624
	Gain on sales of property and equipment			3,165			1,549			11,417			6,878

	Operating income (loss)			32,160			46,256			(10,825	)		93,542

	Other income
		Interest income		2,110			744			4,147			3,914
		Interest expense		(547	)		(4,245	)		(7,294	)		(10,586	)
		Equity in income (loss) of affiliates		529			4,021			(177	)		4,360
		Other income, net		1,023			3,062			5,854			8,278
		Total other income		3,115			3,582			2,530			5,966

	Income (loss) before (benefit from) provision for income taxes			35,275			49,838			(8,295	)		99,508

	(Benefit from) provision for income taxes			(8,026	)		13,300			(11,233	)		26,316

	Net income			43,301			36,538			2,938			73,192

	Amount attributable to noncontrolling interests			(4,620	)		(5,940	)		(11,902	)		(15,725	)

	Net income (loss) attributable to Granite Construction Incorporated		$	38,681		$	30,598		$	(8,964	)	$	57,467

	Net income (loss) per share attributable to common shareholders:
		Basic (1)	$	1.00		$	0.79		$	(0.24	)	$	1.49
		Diluted (1)	$	0.99		$	0.79		$	(0.24	)	$	1.49
	Weighted average shares of common stock:
		Basic		37,865			37,595			37,802			37,552
		Diluted		38,071			37,709			37,802			37,670

	Note:
		(1) Computed using the two-class method, except when in a net loss position


GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)


Nine Months Ended September 30,					2010			2009
Operating activities
	Net income			$	2,938		$	73,192
	Adjustments to reconcile net income to net cash provided by operating activities:
		Impairment of real estate held for development and sale			107			1,686
		Depreciation, depletion and amortization			54,169			59,048
		Provision for (recovery of) doubtful accounts			136			(3,844	)
		Gain on sales of property and equipment			(11,417	)		(6,878	)
		Stock-based compensation			10,241			7,869
		Gain on company owned life insurance			(2,655	)		(2,013	)
		Equity in loss (income) of affiliates			177			(4,360	)
	Changes in assets and liabilities, net of the effects of consolidations				(43,130	)		(66,447	)
			Net cash provided by operating activities		10,566			58,253
Investing activities
	Purchases of marketable securities				(78,355	)		(61,974	)
	Maturities of marketable securities				60,900			32,610
	Proceeds from company owned life insurance				2,078			-
	Additions to property and equipment				(30,182	)		(75,773	)
	Proceeds from sales of property and equipment				17,225			10,089
	Purchase of private preferred stock				(6,400	)		-
	Contributions to affiliates, net				(1,233	)		(4,969	)
	Issuance of notes receivable				(1,314	)		(4,270	)
	Collection of notes receivable				2,799			385
	Other investing activities, net				77			65
			Net cash used in investing activities		(34,405	)		(103,837	)
Financing activities
	Proceeds from long-term debt				619			8,384
	Long-term debt principal payments				(18,472	)		(18,139	)
	Cash dividends paid				(15,110	)		(15,031	)
	Purchase of common stock				(3,374	)		(2,840	)
	Distributions to noncontrolling partners, net				(20,940	)		(16,251	)
	Other financing activities				14			52
			Net cash used in financing activities		(57,263	)		(43,825	)

Decrease in cash and cash equivalents					(81,102	)		(89,409	)

Cash and cash equivalents at beginning of period					338,956			460,843

Cash and cash equivalents at end of period				$	257,854		$	371,434


GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - in thousands)

		Three Months Ended September 30,													Nine Months Ended September 30,
			Construction			Large Project Construction			Construction Materials			Real Estate				Construction			Large Project Construction			Construction Materials			Real Estate

	2010
	Revenue		$	409,989		$	169,972		$	88,128		$	2,761			$	729,118		$	429,625		$	175,381		$	11,613
	Gross profit		$	44,666		$	18,316		$	12,137		$	1,036			$	69,413		$	49,634		$	9,492		$	3,028
	Gross profit as a percent of revenue			10.9	%		10.8	%		13.8	%		37.5	%			9.5	%		11.6	%		5.4	%		26.1	%

	2009
	Revenue		$	466,605		$	181,171		$	71,527		$	981			$	912,110		$	456,001		$	158,688		$	1,932
	Gross profit (loss)		$	72,635		$	25,221		$	8,351		$	(550	)		$	160,612		$	81,396		$	17,620		$	(1,340	)
	Gross profit (loss) as a percent of revenue			15.6	%		13.9	%		11.7	%		-56.1	%			17.6	%		17.8	%		11.1	%		-69.4	%


GRANITE CONSTRUCTION INCORPORATED
Contract Backlog by Segment
(Unaudited - in thousands)

		September 30, 2010				June 30, 2010				September 30, 2009

	Construction	$	497,089	30.3	%	$	594,214	38.3	%	$	439,226	27.2	%
	Large Project Construction		1,141,453	69.7	%		957,080	61.7	%		1,173,042	72.8	%

	Total	$	1,638,542	100.0	%	$	1,551,294	100.0	%	$	1,612,268	100.0	%

Granite Construction Incorporated
Jacque Fourchy, 831-761-4741

Source: Granite Construction Incorporated

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