WATSONVILLE, Calif.--(BUSINESS WIRE)--October 29, 2008--Granite Construction Incorporated (NYSE:GVA) today announced net income for the third quarter ended September 30, 2008 of $51.7 million or $1.36 per diluted share, compared with net income of $53.3 million, or $1.28 per diluted share for the same period last year. Gross profit as a percent of revenue for the three months ended September 30, 2008 was 16.1%, flat compared to a year ago. Operating income for the quarter was $74.4 million, compared with $76.0 million a year ago. Total revenues for the quarter were $897.8 million compared with $846.3 million a year ago.

“Our team has delivered another impressive quarter,” said President and Chief Executive Officer William G. Dorey. “I am very pleased with how our business is performing in the face of the current economic environment. Our results this year reflect the experience and determination of our workforce and the value of our business model. The diversity of our customer base, project portfolio and geographic markets is enabling us to successfully confront today’s challenging market conditions.”

General and administrative expenses for the quarter totaled $71.9 million or 8.0% of revenue compared with $63.7 million or 7.5% of revenue in 2007. The Company continues to focus on reducing general and administrative expenses and is instituting several programs, including controlling discretionary spending, headcount reductions and a process improvement initiative. These efforts are expected to improve efficiency and effectiveness throughout the organization. The Company expects to see a reduction in general and administrative expenses on an absolute dollar basis in 2009.

Total Company backlog at September 30, 2008 was $1.8 billion compared with $2.3 billion a year ago. Since September 30, 2008, Granite West has been awarded approximately $100.0 million in new projects. Also not included in September 30, 2008 backlog are three large projects in Granite East and one in Granite West totaling approximately $500.0 million that are pending award by the project owner.

Minority interest for the quarter ended September 30, 2008 was $0.6 million compared with $6.5 million in the third quarter of 2007. The $5.9 million decrease primarily reflects continued progression and the effect of changes in estimates related to certain joint venture projects.

For the nine-month period ended September 30, 2008, total company revenues were $2.0 billion, essentially flat compared to the prior year. Gross profit as a percent of revenue for the nine months ended September 30, 2008 increased to 17.2% compared with 14.8% last year. Operating income for the total company increased to $158.2 million compared with $137.2 million in 2007.

At September 30, 2008, cash and marketable securities totaled $412.4 million and includes approximately $135.0 million of cash and cash equivalents from the Company’s consolidated joint ventures. Historically, the Company has operated under a conservative investment policy and has recently elected to invest even more conservatively in light of current market conditions. Given the Company’s strong cash position and approximately $145.6 million available under the existing credit facility, the Company does not anticipate the need to borrow funds in the current environment.

Revenue for the quarter totaled $749.5 million compared with $642.4 million for the same period in 2007. Gross profit as a percent of revenue for the quarter ended September 30, 2008 was 17.8% compared with 19.4% last year. Operating income increased $3.6 million for the quarter to $93.4 million compared with $89.8 million for the third quarter last year. The increase in operating income for the quarter reflects improved project forecasts and higher than estimated productivity.

For the nine-month period ended September 30, 2008, Granite West revenues totaled $1.5 billion, essentially flat compared to the prior year. Gross profit as a percent of revenue for the nine months ended September 30, 2008 was 17.7% compared with 19.3% last year. Operating income for Granite West decreased to $155.3 million for the same period compared with $186.5 million in 2007. Year to date operating results for the segment were affected by a highly competitive bidding environment for construction services and lower demand for higher-margin construction materials.

Revenue for the quarter was $146.9 million compared with $182.6 million for the same period last year. Gross profit as a percent of revenue for the quarter ended September 30, 2008 increased to 6.6% compared with 1.1% in the same period last year. Operating income for the quarter increased to $3.7 million compared with an operating loss of $3.2 million for the same period in 2007.

For the nine-month period ended September 30, 2008, Granite East revenue totaled $531.8 million compared with $585.3 million for the same period last year. Gross margin as a percent of revenue for the nine months ended September 30, 2008 was 16.5% compared with 1.4% last year. Operating income for Granite East totaled $67.8 million for the nine-month period compared with an operating loss of $13.4 million for the same period in 2007. The significant year over year gross margin improvement and increase in operating income is largely due to improved performance on several large projects.

GLC revenue for the quarter was $1.4 million compared with $21.2 million for the same period last year. Gross profit as a percent of revenue for the period was 35.2% compared with 45.1% last year. Operating loss for the quarter was $0.2 million compared with operating income of $8.2 million in the third quarter of 2007.

For the nine-month period ended September 30, 2008, GLC revenue was $8.1 million compared with $36.6 million in 2007. Gross loss as a percent of revenue for the period was 20.9% compared with a gross profit of 46.8% last year. Operating loss was $3.8 million for the nine-month period compared with operating income of $14.1 million for the same period in 2007. The 2008 operating loss reflects a $4.5 million pre-tax impairment charge in the second quarter. The 2007 results were positively affected by the sale of certain real estate development projects in the first and third quarter last year.

Our expectations for 2008 have improved. We now expect Granite West revenue for the year to be in the range of $1.95 to $2.05 billion with a corresponding gross profit margin percentage between 17.0% and 18.0%. Granite East 2008 revenue is now expected to be in the range of $650.0 to $700.0 million with a corresponding gross profit margin percentage between 17.0% and 18.0%. Minority interest for the company is expected to be between $38.0 and $43.0 million for the year. Our longer term expectation for Granite East gross profit as a percent of revenue continues to be in the mid-teens.

Granite will conduct a conference call tomorrow, October 30, 2008, at 11:00 a.m. ET/ 8:00 a.m. PT to discuss the results for the third quarter ended September 30, 2008. Access to a live audio webcast is available at www.graniteconstruction.com/investor-relations. The live conference call 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 is 65146265. The conference call will be recorded and available for replay from approximately two hours after the live call through November 15, 2008 by calling (800) 642-1687 or (706) 645-9291. The conference ID for the recording is 65146265.

Granite Construction Incorporated is a member of the S&P 400 Midcap Index, the Domini 400 Social Index and the Russell 2000. 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 the 5^th straight year, Granite was named to FORTUNE’S List of 100 Best Companies to Work For. For more information about Granite, please visit their website at www.graniteconstruction.com.

This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represents our management’s beliefs and assumptions concerning future events such as statements related to the existence of bidding opportunities and economic conditions on the Company's future results. In addition, statements in this press release that are not historical are “forward-looking statements” as in the Private Securities Litigation Reform Act of 1995. Additionally, forward-looking statements 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 comparable terminology, or by discussions of strategy.

All such forward-looking statements are subject to risks and uncertainties that could cause actual results of operations and financial condition and other events, as well as the timing thereof, to differ materially from those expressed or implied in such forward-looking statements. Specific risk factors include, without limitation, changes in the composition of applicable federal and state legislation appropriation committees; federal and state appropriation changes for infrastructure spending; the general state of the economy; job productivity; accuracy of project estimates; weather conditions; competition and pricing pressures; and state referendums and initiatives. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. You should also understand that many important factors in addition to those discussed, referred to or incorporated by reference in this press release, could cause our results to differ materially from those expressed in the forward-looking statements. In light of these risks and uncertainties, it is important to be aware that the forward-looking events discussed in this release may not occur. We undertake no obligation to revise or update publicly any forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

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



GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In Thousands, Except Per Share Data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2008			2007			2008			2007

Revenue
Construction	$	771,941		$	701,622		$	1,755,457		$	1,778,638
Material sales		124,478			123,453			283,321			289,655
Real estate		1,369			21,238			8,142			36,556
Total revenue		897,788			846,313			2,046,920			2,104,849
Cost of revenue
Construction		643,531			601,880			1,437,093			1,543,960
Material sales		109,068			96,130			247,959			229,116
Real estate		887			11,666			9,846			19,466
Total cost of revenue		753,486			709,676			1,694,898			1,792,542

Gross profit		144,302			136,637			352,022			312,307

General and administrative expenses		71,933			63,666			198,344			183,133
Gain on sales of property and equipment		2,008			2,994			4,564			8,053

Operating income		74,377			75,965			158,242			137,227

Other income (expense)
Interest income		5,439			7,514			15,087			20,796
Interest expense		(5,303	)		(1,884	)		(12,871	)		(4,998	)
Equity in (loss) income of affiliates		(1,257	)		4,037			(1,436	)		4,359
Other, net		549			(391	)		9,196			(1,057	)
Total other (expense) income		(572	)		9,276			9,976			19,100

Income before provision for income taxes and minority interest		73,805			85,241			168,218			156,327

Provision for income tax		21,473			25,437			46,681			47,680

Income before minority interest		52,332			59,804			121,537			108,647

Minority interest in consolidated subsidiaries		(594	)		(6,504	)		(31,058	)		(13,750	)

Net income	$	51,738		$	53,300		$	90,479		$	94,897

Net income per share:
Basic	$	1.38		$	1.30		$	2.40		$	2.31
Diluted	$	1.36		$	1.28		$	2.37		$	2.28
Weighted average shares of common stock:
Basic		37,430			41,106			37,664			41,065
Diluted		37,975			41,640			38,138			41,587



GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands, Except Per Share Data)

	September 30,			December 31,
		2008			2007

Assets

Current assets
Cash and cash equivalents	$	281,046		$	352,434
Short-term marketable securities		101,112			77,758
Accounts receivable, net		480,315			397,097
Costs and estimated earnings in excess of billings		34,759			17,957
Inventories, net		61,342			55,557
Real estate held for sale		52,165			51,688
Deferred income taxes		46,233			43,713
Equity in construction joint ventures		45,219			34,340
Other current assets		65,182			96,969
Total current assets		1,167,373			1,127,513
Property and equipment, net		522,733			502,901
Long-term marketable securities		30,209			55,156
Investment in affiliates		27,518			26,475
Other assets		73,696			74,373
Total assets	$	1,821,529		$	1,786,418

Liabilities and Shareholders' Equity

Current liabilities
Current maturities of long-term debt	$	34,886		$	28,696
Accounts payable		234,126			213,135
Billings in excess of costs and estimated earnings		251,402			275,849
Accrued expenses and other current liabilities		227,611			212,265
Total current liabilities		748,025			729,945
Long-term debt		246,487			268,417
Other long-term debt		46,178			46,441
Deferred income taxes		18,733			17,945
Minority interest in consolidated subsidiaries		26,729			23,471
Shareholders' equity:
Common stock, $0.01 par value, authorized 150,000,000 shares in 2008 and 2007; issued and outstanding 38,264,058 shares in 2008 and 39,450,923 shares in 2007		383			395
Additional paid-in capital		83,041			79,007
Retained earnings		655,287			619,699
Accumulated other comprehensive (loss) income		(3,334	)		1,098
Total shareholders' equity		735,377			700,199
Total liabilities and shareholders' equity	$	1,821,529		$	1,786,418


	September 30,			December 31,
Financial Position		2008			2007

Working capital	$	419,348		$	397,568
Current ratio		1.56			1.54
Debt to total capitalization		0.28			0.30
Total liabilities to equity ratio		1.48			1.55



GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In Thousands)


Nine Months Ended September 30,		2008			2007
Operating activities
Net income	$	90,479		$	94,897
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of real estate held for development and sale		4,500			-
Depreciation, depletion and amortization		64,036			60,621
Provision for doubtful accounts		8,914			1,119
Gain on sales of property and equipment		(4,564	)		(8,053	)
Change in deferred income taxes		1,116			(11	)
Stock-based compensation		5,135			4,600
Excess tax benefit on stock-based compensation		(743	)		(3,042	)
Minority interest in consolidated subsidiaries		31,058			13,750
Equity in loss (income) of affiliates		1,436			(4,359	)
Acquisition of minority interest		(16,616	)		-
Changes in assets and liabilities, net of the effects of acquisitions		(79,854	)		(21,955	)
Net cash provided by operating activities		104,897			137,567
Investing activities
Purchases of marketable securities		(68,732	)		(126,464	)
Maturities of marketable securities		64,090			140,225
Release of funds for acquisition of minority interest		28,332			-
Additions to property and equipment		(76,098	)		(82,744	)
Proceeds from sales of property and equipment		12,253			12,765
Acquisition of businesses		(14,022	)		(76,313	)
Contributions to affiliates		(5,345	)		(3,772	)
Other investing activities		626			3,459
Net cash used in investing activities		(58,896	)		(132,844	)
Financing activities
Proceeds from long-term debt		2,660			111,634
Long-term debt principal payments		(15,748	)		(49,376	)
Cash dividends paid		(15,081	)		(12,572	)
Purchase of common stock		(45,489	)		(5,083	)
Contributions from minority partners		4,955			30,436
Distributions to minority partners		(37,713	)		(22,458	)
Acquisition of minority interest		(11,716	)		-
Excess tax benefit on stock-based compensation		743			3,042
Other financing, net		-			366
Net cash (used in) provided by financing activities		(117,389	)		55,989

(Decrease) Increase in cash and cash equivalents		(71,388	)		60,712

Cash and cash equivalents at beginning of period		352,434			204,893

Cash and cash equivalents at end of period	$	281,046		$	265,605



GRANITE CONSTRUCTION INCORPORATED
Business Segment Information
(Unaudited - In Thousands)

	Three Months Ended September 30,									Nine Months Ended September 30,
	Granite West			Granite East			Granite Land Company			Granite West			Granite East			Granite Land Company

2008
Revenue	$	749,487		$	146,932		$	1,369		$	1,506,952		$	531,826		$	8,142
Gross profit (loss)	$	133,738		$	9,750		$	482		$	267,057		$	87,868		$	(1,704	)
Gross profit (loss) as a percent of revenue		17.8	%		6.6	%		35.2	%		17.7	%		16.5	%		-20.9	%
Operating income (loss)	$	93,404		$	3,653		$	(191	)	$	155,284		$	67,795		$	(3,795	)
Operating income (loss) as a percent of revenue		12.5	%		2.5	%		-14.0	%		10.3	%		12.7	%		-46.6	%

2007
Revenue	$	642,428		$	182,647		$	21,238		$	1,482,969		$	585,324		$	36,556
Gross profit	$	124,656		$	2,075		$	9,571		$	286,394		$	8,478		$	17,090
Gross profit as a percent of revenue		19.4	%		1.1	%		45.1	%		19.3	%		1.4	%		46.8	%
Operating income (loss)	$	89,755		$	(3,174	)	$	8,241		$	186,476		$	(13,359	)	$	14,120
Operating income (loss) as a percent of revenue		14.0	%		-1.7	%		38.8	%		12.6	%		-2.3	%		38.6	%


GRANITE CONSTRUCTION INCORPORATED
Backlog
(Unaudited - In Thousands)

Backlog by Division	September 30, 2008						June 30, 2008						September 30, 2007

Granite West	$	915,472			50.3	%	$	1,188,948			55.5	%	$	950,833			40.7	%
Granite East		906,116			49.7	%		952,700			44.5	%		1,385,688			59.3	%

Total	$	1,821,588			100.0	%	$	2,141,648			100.0	%	$	2,336,521			100.0	%