Granite Construction Inc (GVA) 2002 Q3 法說會逐字稿

Good day, everyone and welcome to the Granite Construction third quarter 2002 update conference call. Today's call is being recorded. At this time I'd like to turn the call over to Mr. Michael Lawson, Director of Corporate Communication.

Thank you very much. Good afternoon, everyone, welcome to our third quarter call. Joining me is Chairman, President, Chief Executive Officer, David Watts, Executive Vice President and Chief Operating Officer, Bill Dorie, Senior Vice President and Chief Financial Officer, Bill Barton. Senior Vice President and Manager of our branch division, Mark Boitano and live from New York, Gary Higdome, Manager and Vice President of Heavy Construction Division. Before we begin as always we like to remind people that on this conference call an attempt to give you some information between the lines in terms of the quantitative and qualitative state of our business and expectations going forward we will be making forward-looking statements. These statements relate to the existence of bidding opportunities and economic conditions and the company's future results you will be able to be alerted to these by statements that include words like believes, expects, may, should, anticipates or the negative thereof or comparable terminology or discussions of strategy. These forward-looking statements are subject to certain risks and uncertainties and a complete list of these can be found in either Granite's form 10-K or quarterly 10-Q. With that I'm happy to turn the call over now to our Chairman and CEO, Mr. Dave Watts.

Thank you, Mike. First of all a warm welcome to everybody on the call. Our agenda for the day is to discuss Q3, its results, how that projects into the full year and an outlook going forward into next year. Some trends that we see in our business that may affect us both revenue and cost-wise, we'll wrap up just a view of where we see things and then certainly open it up for your questions. The participants have been introduced will help me with their areas of expertise, and with that we'll just get going right into the quarter. The quarter, as we expected, the branch division is feeling the effects of the weaker market that we have been talking about most of the year. This was somewhat helped out by some really excellent results from Wilder, which as you know are now included above -- in the operating income line. The heavy construction division contributed well, but not as strongly as we originally hoped earlier in the year. Overall, however, operating income exceeded the same period last year by 24%, but we gave all of that back in lower non-operating income and including the minority interest which we take out for our other shareholders in Wilder. To produce a net income of about 4% off from the equivalent 2001 results or about 2 cents a share. Bill Barton will now give us a little more detailed analysis of the quarter and what's in between the numbers that you've already received. Bill.

Thank you, Dave and good afternoon to everybody. My focus is, again, going to be on the third quarter. I do want to remind you this is the second period in which we have taken our 55% interest, controlling interest in Wilder and it's going to be consolidated into our branch division segment operating results at 100%, and that the minority interests, as want to be done under the accounting rules, is shown as a reduction from consolidated net income. Since the third quarter 2001, last year does not include Wilder in the operating results.

At that time as far as other income I will break out Wilder while comparing branch results to give you insight as to what the impact of that addition has been. As Dave has said, we have revenue has increased for both to -- APB revenue increased to 153 million. Certainly the branch revenue has increased, but as you take into account Wilder, which represents 77.5 million, the branch division is down. Approximately 21 million. You take that into consideration down slightly in total, there's not much change. If you look at some of the market segments, private reman weak. Without Wilder it's down approximately 15 million and if you want to look to compare to the total company, that means it's down about 18% versus 10% if Wilder was included. If you compare it to the branch division only, then the branch division is down private revenue for the quarter about 30%. As you look to the geographic component which was part of the press release, what stands out is the west has increased about 65 billion. If you adjust for Wilder, you can see it's slightly down from previous periods. So Wilder has had a significant impact on the west component. If we look at backlog and we wanted to compare it branch and APB and without Wilder, Wilder's backlog was 97.6 million. Then the branch is down year-over-year about 6%. If you want to look at it sequentially the branch division is down about 8% from September compared to June of this year. As we move on down to gross profit, gross profit is up 25% or 15 million, it's associated with essentially construction part of our business, primarily from APB. The margins have increased 1.2 % to 13.2% and jobs less than 25% coma pairs favorably to a year ago with a positive for the quarter. For those who are keeping track of this, the unrecognized earnings due to 25% completion -- less than 25% is equal to 38 million 054 for 2002 third quarter compared to 200 171 million 124 reduction about 33 million dollars. Next turning to G&A, G&A is at 40 million, up 25 -- almost 26% or 8.3 million dollars. It reflects several things, one being Wilder, which is about 6.4 million of it, the northern California acquisition, then you can look for another couple million associated with both salaries and wages and associated burdens, which is really reflects the growth in support of operations, current and expected growth.

Turning to operating income, which is one that I will give you the numbers to. Looking for again the comparison being quarter to quarter for the branch, it's going to be 42,778 versus 45,720, down 13.6%. If you want to take Wilder out of the equation, the branch results for the third quarter 2002 will be 36 million, 36.1 million or down 13.4 million or 27.1%. APB is 6.3730 for this quarter. 2002 versus a negative 7.462 a year ago. Which is a swing of 14.2 million. Turning to other income. Interest income as you can see is down about $2 million. Believe it or not it's a result of lower interest rates substantially lower from a year ago. Gain on sale down a couple million dollars. Last year we did have a couple sales associated with properties in Nevada as well as in California. If you look to other nets, which is down about $3 million, the one thing that stands out is the fact we no longer have Wilder and other income and the fact is that TIC, which we have included last year, we no longer own 20%, which is the threshold for recognition of income, but own about 15%. That also dropped out. Those are the two major things that affected other net.

Moving down to net income and really focusing on effective tax rate, as a result of certain recent initiatives and analysis, there's been significant changes that have impacted the effective tax rate, one is permanent difference has increased. There's been additional state and federal tax credits and the effect was to lower the effective tax rate for Granite to 36%. As you combine that with Wilder 37 1/2% tax rate, it results in a effective tax rate of 36.2%, which we believe will hold at least through the end of 2003. If you were interested in what the impact on earnings per share of about 2 cents per share. And as you look at the 2002 third quarter, the 35.4% reflects the catch-up for the nine months of 2002. Now to finish up my discussion from a financial standpoint, one of the other questions that we normally do obtain is about Cap Ex. And so on looking at 2002, year to date we have Cap Ex of 43.8 million with accumulated depreciation of 40 million. Our budget, our expected expenditures this year is 16 million, down from 70 million we had anticipated we would spend and I think it reflects just current circumstances we no longer needed to spend the additional money. Looking to '03, we anticipate that the budget next year will be flat to the 60 million and if you were looking attack lated depreciation, I should suggest that for the year, 2002, it will be 53 million and should increase to 55 million in 2003. With that, I'll turn it back to Dave.

Thank you, Bill. I'd like to move our discussion to the particular divisions and the outlook for the full year and the trends that are affecting the individual division's business and with that our operating management's going to assist me. First of all in the branch division I'd like to call on Mark Boitano to discuss the division for which he's responsible. Mark.

Thanks, Dave. Good afternoon, everyone. My goal here this afternoon is to give you a brief look at the branch outlook and some of the things that are taking place in our division as we speak. And as Bill has mentioned, and he's provided you with a lot of numbers, and the bottom line of those numbers show that the branch business has continued to soften. We mention this last quarter as well as early on in the year that our business would be off last year's record why performance.

It's become apparent in almost all of the geographic areas that we operate in and as a result our operating income for the year will be 80% of where we were at the end of last year, I think since the branch businesses is quicker to feel the effects of these economic downturns, it's my belief that we'll be just as quick to see and be able to react when the economy rebounds. I think this sort of begs the question. Are --. [ lost audio ] [ stand by, reconnecting to call ] This month and particularly in December on the Texas market. That -- we are currently bidding. As far as the rest of the work, we did have some wet, long periods up in Minneapolis, down in Texas, down in Florida that did impact us throughout the year, so that did soften some of our projections for the year, but certainly moves it into next year. And there was one or two projects that did not make the 25% that we looked for -- especially during the third quarter. Due to a number of factors, the work moving on a little slower, permits slowing us down, doesn't negatively impact the job in terms of necessarily cost, but just shifts, dollars into a later quarter.

As far as long-term outlook, we still remain very optimistic in terms of both funding and the amount of projects that are out there. Again last quarter I mentioned the heavy division's flexibility in that we can truly follow the big projects around the country and we see projects that pop up, and we know we can go target them, especially me larger projects where competitors are limited because of project size. We remain optimistic and haven't seen quite the negative impact on the economic downturn on several of these huge projects because they've been in the pipeline for some time and are simply coming on here in the next year or two. So with that, Dave, that concludes my comments on the heavy division.

Okay, thank you, Mark. Bill Dorie, can you kind of sum up the operating picture and there are any trends going on with some of our major cost areas.

Yeah. I would like to do that. Maybe just to follow up. My perspective on the Halmar acquisition we talked about this at every conference call the last several times now. We have clearly showed ourselves that we can get work in that marketplace and we believe we can get work with really strong margins. And the test for us now, the one we have to pass in order, I think, to really stop talking about this on these conference calls, is we have to show we can make those budgets, and we haven't done that, but I am very optimistic that we will do that and be able to prove not only to investment community but to ourselves and the folks inside the company that we can do that and we can do that. This business and this venture into New York will prove to be, I think, one of the best that we've done. So that potential is clearly there. If I look at both operating division from a trend standpoint, clearly our branch business has been a steady Eddie business for us really the past five or six years. It's been a business that we've, I think, come to grow, to clearly depend on to perform. I think looking into next year our expectation is that it will continue to perform, probably won't perform at the record level that we saw in 2001, but our early forecasts are leading us to believe that we'll see performance maybe similar to what we experienced in 2002. Led once again -- I think as Mark said, by our materials business. It has proven to be really the steadiest part of our business and continues to become more and more important to us year after year and even though it is beginning to soften a little bit, it is clearly just changed dramatically, probably changed for good, frankly, from the standpoint of just being a bigger and more solid part of our business. This is being driven by the environmental issues surrounding permitting new reserves, some of it being driven by the large national companies coming into the west and consolidating some of those reserves. We are clearly the beneficiary of that and we look forward to that going forward. The general economy we work in, as Mark said, it's one that we are affected by. When it's good, we thrive and when it's awful,, it affects us. It's off a little bit, not to the degree we are laying awake losing sleep over the, but we wish it were better.

When we move to the heavy construction division, I think as Gary illustrated in his comments, we are very optimistic if we look for something that could sort of change our performance level, there's probably more opportunity right now in HCD than any place in our business because we've grown the size of that business, literally doubled it in the last couple years and yet have not to date delivered on the income that we think we will relative to the size of the business. We just frankly haven't lined the stars up yet. I think our experience in Granite Halmar didn't help us looking back at year 2002. But the prospect of lining those stars up going forward is very good. I see lots of opportunity, and those of you who I have had the opportunity to talk to recently have heard me say we're being invited to into projects clearly we would never have been invited into, these projects are huge. The opportunities are very, very strong for us to participate in some bigger projects, projects that I think could really just change the company and take to us a whole other level in our heavy construction division. That's our challenge to line those stars up, to keep our branch business proogs at pretty much the level it has been and take advantage of these opportunities in HCD one other trend that is really changing I inning, one we haven't talked about very much lately, the labor pool, the prospect of staffing our work and building our business and the scarceity of people. That problem has to some degree subsided because the general economy has softened. We find people from other companies, competitors that are beating our doors down now wanting to entertain coming to work for us where a year or two ago we were having trouble hanging onto some of the people we had because the market was so hot. For us, that's a good thing. We believe we can continue to build our business even in a down economy. We have done it before and we'll need the people to do it, so we are excited about the prospect of bringing new talent on board. That problem has diminished a little bit, Dave, as you know.

Thank you, Bill. Just to amplify on our press release on our guidance, we talked about that for the year. With our earnings at 94 cents for the nine months, we are still only projecting this range of 1.04 to 1.14. We do have a healthy respect for the volatility of the fourth quarter, which is so heavily influenced by winter weather when it can be very wet in many parts of our operations. We have also come off from some of our earlier guidance because the weakness that the branch division is feeling is very much there, and as the year closes, we are not optimistic for its fourth quarter and for various reasons, which Gary and Bill have alluded to, heavy construction division is off to a little slower start on some of its projects and we'll have lower revenues than we originally estimated. That's the basis even though the 94 cents istant liesingly close to what we're projecting for the full year, we still think we'll stay with our story.

Looking ahead at 2003, as you know at this time of year we don't get very specific with you as to how we see the year. In a qualitative sense, we see the market conditions the branches are feeling now is likely to persist as long as the economy remains slow to get any traction. Your guess is as good as mine as to when the economy will start to pick up in any significant way. The heavy construction division on the other hand has a significant opportunity to improve on its 2002 results. We believe that the bleeding of Halmar is behind us and we have a strong backlog which should deliver good margins. We can't be any more definitive at this time for '03. Again it's the branch division turn business which we'll have to improve with the overall economy before we can really start to see earnings growth again. It's the large project backlog right now that's healthy and will help us make up for this lower turn business volume and earnings. And in this economy, we are certainly sensitive to the fact there may be some good acquisition candidates available and we will continue to build our business by making those acquisitions if they make good sense in the long term. Being heavily dependent on the public sector, we would like to keep you up-to-date on the politics of transportation and infrastructure funding. Yesterday's election, we have some results, some are not yet clear, but generally speaking it was disappointing particularly with the defeat in Washington state of the major highway funding measure. I think the eastern part of the state probably thought the western part of the state was going to get too much of the money. We knew it was going to be a tough issue and indeed it went down to defeat. Seattle monorail is too close to call right now according to the watchers of that election. In California, we had five counties trying to pass half-cent sales tax measures, only one of the five passed, and they need a 2/3 majority, which is very difficult to get. Fortunately the one that passed is a very meaningful to us in Riverside County where we have a lot of our southern California operations. Locally in the San Francisco Bay area, voters approved the modernization of a major water system. Mike Lawson, any word on the BART retrofit?

It appears to be going down in defeat. Also requires a 2/3. I think somewhere in the low 60s.

Yeah.

Again these 2/3 majority is very difficult to obtain. Little further south, from San Francisco, little north of us right here in Santa Clara, the voters did agree to dedicate the half cent sales tax last year of those fzs to highway and street improvements. That should mean a lot for our branch there. A state school bond, a major school bond passed, so while that doesn't affect us directly, it improves the overall construction market. And in reno, we had mixed results on oi reFrench project, city council members that were in favor of the trench were elected. The advisory vote by the public was against the trench. So overall we don't know where that's going to go, we are optimistic that project will stay intact. Looking at the changes in the Congress, I don't think we see any effect whatsoever on the reauthorization that will be required next year for T-21. That is a bipartisan issue. We don't think it's impacted by the balance of Congress either in the House or Senate. It tends to get support from a wide variety of political ideologies and we will continue to push for a very solid reauthorization. It's our belief that the public is driving more. We are starting to see some preliminary results of our investigation into this, that the miles driven is increasing and therefore gas tax receipts are increasing, both federally and in a lot of states. Our industry will be very vigilant in tracking that apalso vigilant to make sure the various governments spend those moneys on transportation. We think that the transportation departments and the various states and federal government should be seeing increased revenues and we want to be sure that's where the money is going. In the short term, we are pretty cautious, as you can tell. For the rest of this year and into next year. However, in the longer term we are very optimistic about our business. The demand for investment in transportation infrastructure is very much there. The public wants it, and the policy-makers are listening to them. Are funding these needed improvements. So in the basic health of our business and the drivers influencing our business are very strong. With that, I will open up for your questions and our team will do its best to answer your questions.

Thank you, sir. Today's question and answer session will be conducted electronically. If you'd like to signal to ask the question, press the digits star one on your touch tone telephone. Star one for a question. If you're using a speaker phone, please make sure your mouth button is disengaged. We'll pause for just a moment so everyone has a chance to signal. Our first question will come from Arnold Ersner with CJS Securities.

Good morning. Two quick questions I have. On TIC, now that it's a 15% minority interest, where do you account for it, what line item?

Shows up in assets and investments in an affiliate. Balance sheet entry only. And only time we will be benefiting from any earnings from it is when we sell additional shares, which we will do over the next several years.

My second question, you mentioned a large job that didn't reach 25% completion. Can you be a little more specific what caused the delay and quantify the impact of that delay on results?

Gary, want to talk about that? That's the Stillwell job?

Yeah. Just we were probably a little optimistic in terms of it hitting in one quarter and missed it by a month or two.

Sounds like in your press release it won't reach it by the end of the fourth quarter.

It won't. But it will clearly make it into the first quarter of the following year, Arnie. We think now it will be in tow 21 or 22% by the end of the year.

Can you quantify the impact that's having on this fiscal year?

Probably going to be about 4 1/2 cents.

Okay. And final question I have is in the middle of your press release on the first page, you're talking about competitive pressures being worse than we have seen. Can you expand a little more on that.

Can you do that, Mark?

Yeah. Just in terms of the private side market slewing down and I think we mentioned this before, those folks have a tendency to my great into the public works mark. We are seeing competitors in areas we haven't seen them in quite a few years. So that speaks to that type of an issue.

Is it fair to say there's still volume but ayou're not willing to bid because you can't get the margin you require in your business?

I think we're seeing longer bid lists, Arnie. When things are good, we bid against generally three to five bidders. We are seeing that bid list up into the 8 and 10 and in some instances and more. Just makes it tougher to get work with the odds are we'll get fewer jobs and given enough timing your bid margins go down in an effort to try to get the work.

I might add to that that we do try to show some discipline when it comes to the margin side of our business so that we are not just building volume. At this stage of the game we are not just willing to follow the market downward.

There's certainly an impact in the public sector side, California, the CalTrans is putting less work out to bid. There has been shifting out of the highway account, probably close to $2 billion to help in the short term California balance its overall budget by prop 2. That money is to be paid back in future years with interest. Next year will be interesting.

Thank you.

Next we do have a question with John Rogers with Davidson.

Hi, John.

Bill, I'm sorry I missed your comments just on revenue for the branches in HCD in the quarter.

You're looking for the quarter.

Yes.

Okay. I'll go ahead and repeat it then. For the quarter, ATD's revenue was 153, 153 million. Branch including wirld is 430 million. 431 million to round it and Wilder's component was 77.5 million.

Thank you very much. And then the order question I had in terms of what you're book now on the HCD, you indicated you're seeing more business and more opportunities there. What about the margins in that business, are they under pressure or as you move up in the job size, are they looking more attractive?

Want to take that, Gary.

I don't see the same pressure maybe on some of our -- what we call Rick and Reed type projects in the 40 to 80 million range. There's probably the competitive pressure that both Bill and Mark alluded to. On the larger projects, again, we still only see two to four bidders and not quite the pressure in terms of our competition. There are higher risk jobs, higher profile, more demanding and we like to believe that our competition recognizes the work in the same way that we do in terms of this overall risk and exposure .

Okay. Thank you.

Maybe add to that. There's clearly a difference in the competitive environment. At least from my point of view currently between the branch business that mark and his people are pursuing, versus the work that HCD is pursuing. I think Gary is right when he identifies that difference. We are seeing longer bid lists and more competition relative to our branch work. But my observation is that it hasn't changed a lot v haven't seen that same change recently in our heavy division. Number one, there seems to be just a whole host of these larger projects, a continual list that never seems to get any smaller and frankly relative to the contractors who are in a position financially or with the capabilities to pursue these from a coast-to-coast standpoint. That list actually is going down and so a competitive environment in HCD, it's a lot better, and that is just one of thee things that's fueling our optimism relative to what we can do in that environment given the opportunities that are in front of us.

Bill, are you seeing that in the jobs you are winning or do you expect it to happen?

I think we are seeing that now, and in we are and Gary's absolutely right, we are attempting to exercise discipline on bid day, and I think we do a very good job of that and part of it's because it's good business and part of it's because the risks associated with these larger jobs, better have it right on bid day or you're going to have to live with it for a while. Thecul occur here is try not 20 make a mistake on bid day that we'll have to look at over a several year period. We never make a mistake or never get anything wrong, that would be unfair to say. Generally speaking over the course of this business we have not made those big mistakes and part of it is because of the discipline that we exercise on bid day.

Okay. Thank you.

We'll take our next question from Jack Casper with DB&T Capital Markets.

Good afternoon, everyone.

Hi, Jack.

The guidance for the branches for the year are down 20% for operating income, I assume?

Correct.

Is that including Wilder? So it would be down more or less?

Wilder would be down only because it hasn't been in the base. We'ring about the existing branch business.

Excluding.

So Wilder would be a bit of an addition in the last half of the year, so the actually reported branch operating income would be down a little bit less than that?

Because of that adjustment.

Okay. I was wondering if Mark could gives color want types of projects the branches are seeing less frequently. Where is the softness in terms of segments?

Well, if you understand the type of business that we have, we bid jobs that are -- that vary in size from a few hundred thousand dollars to 20 and $30 million. So they are all over the board from utility jobs to highway and in-town road reconstructs, new highway construction. The full gamut. Site work on commercial work. Subdivision work. So naturally the private side development is off as we have talked about. That's commercial, industrial and subdivision-type jobs. So there's some softening there. But as the funding goes in the public works market, it would affect all the sizes of the infrastructure side of our business. South could impact a million dollar road reconstruction of a particular county or could impact 15 or $20 million segment of highway work. It's really scattered across the board, and it would be very difficult to pinpoint it to one particular area.

Okay. The subdivision work in particular, how is that trending. Any specific thoughts there?

In the general sense, while there's still some strength in the homebuilding market, they're working as we see it, they are still working off the inventory of lots that have been available to them. So the potential for our type of work, which is the initial site development segment has slowed down, but the home builders are still working off lots that were in inventory prior to probably the last six to ten months.

Okay. Turning to HCD, the revenue was up slightly from the second quarter, yet the operating income was down about $4 million. What was causing the decline in margin, and is it this timing issue you guys alluded to or just less profitable projects. I would have thought there were enough projects in the cue that we built up over time that would make that maybe a steadier flow in terms of results at this point in time?

I can do it too.

There's several things. Clearly our business in New York continues and will continue through the end of this year tomorrow pact us negatively as we continue to work that backlog off that's revenue that doesn't have a whole lot, if any, margin, associated with it. So we're still trying to sort of shed ourselves of that burden. We did have some of our jobs, just generally speaking, I'd guess, segment of our backlog did not perform quite as well as we had hoped. I don't want to paint a picture that this work is bad or anything, it's not. It's just that we anticipate a 12% margin, gross margin on this work and over the course of the quarter we end up writing it down to 11 1/2 on average, it impacts the income that's associated with that revenue. We handle all of that, is we approach the end of the quarter, we took a look at our backlog and we did write some of our backlog down a little bit. We wrote some of it up a little bit as well. The net result of that was that the gross margin deteriorated slightly, probably less than 1%, but it impacted the results. Gary, does that sound?

That's an accurate portrayal.

Thank you very much.

Our next question comes from Trip Rodgers with UBS Warburg.

Thank you. Good afternoon. Just trying to get a feel with how things progressed during the quarter. It seems like the second quarter, we did the second quarter conference call and the branch side things were down just slightly, and hadn't really felt it too much in the branch side yet. Looking at the numbers, things must have absolutely fallen off a cliff and later in the quarter and looking at your aggregate sales, it didn't seem like it was in that area. I mean, give me your comments on the margins. It just seemed like your margins really took a big hit late in the quarter. Am I --

They did, trip. Truthfully we got our September report not long after Bill and I made our trip out to New York, frankly, and we were very disappointed with our September results relative to our construction in the branches and did impact our third quarter.

We say that the margins, are they half of what they were at the beginning of the quarter?

I'm not sure I can respond to that absolutely, but they weren't very good. Now whether that's -- you know, just to put a little color to that, we get a month from time to time that it's perplexing and kind of our overall outcome and you wonder if that's a trend that's going to persist or whether it's one of those things that happens from time to time, I'm not sure we know. I think that clearly we are reacting a little bit to those results. We were disappointed with them. We hope it's not a trend.

I take it you've gotten the October results?

No, we have not.

Okay. With the Reno project, you mentioned there's some uncertainty there. Can you talk about your feelings of likelihood of that being canceled or how much money you've put into that job already?

You know, I'll just speak for myself and Gary you can chime in here. I'd be surprised for that job gets canceled. There's funding sources that are coming from other places besides the city of reno for this project the city of reno is benefiting from other revenue sources. The project has started. We have started to collect money on the project. We will continue to work on the project over the next several months. They will continue to pay us. My sense is that it's going to be very hard from a practical standpoint for the city to terminate that project. That's not to say they won't do, but fiscally it would be very hard for them to do it. It would cost them money to do it and they'll get nothing for it. It makes no sense at all.

It's a very political environment, and as Bill mentioned, it's a very, very costly step to take. Outside of the contract with Granite and certainly we're protected in terms of a termination, so we are protected in that regard. However, the cost for other considerations is very, very steep for the city.

Okay.

Gary, if I can add, it's Mike Lawson. As Dave mentioned, both the pro-tlempblg candidate for mayor was elected yesterday along with the two pro-trench city council members. So that's what they were really afraid of. I think the mayor was always expected to win, but thought the two anti-trench council members could get elected and thought they could put an advisory vote before the voters saying do we want to go forward with this project. I think they mentioned there was an advisory vote on the ballot this time that the county supervisors put on asking the voters should we tell the city council to go forward with this project and 2/3 of them said no, we shouldn't, so it was a little bit of mixed message. Talking to the people there politically, they're not concerned about the county supervisor's sprfzory vote. The crux of it was getting the pro mayoral and city council members elected and they feel the project is on track to go forward.

Jumping over to Halmar, you talked about how some of the lower margins may have an impact. Was there any impact from the jobs troublesome in the first half of the year, jobs and such?

No.

Can you tell us what the backlog of Halmar originated jobs are, just prior to your acquisition was?

I'm sorry.

Their backlog of jobs that were -- that originated prior to the acquisition?

We were talking second quarter conference call, about 80 million that had not been completed at that time.

We expect, Trip, to carry 40 or 50 million or so into next year. There will be little, if any, margin associated with that carry forward work. Our mission is just to finish it and get onto some of the stuff that has margin in it. Does that answer the question.

Yes, that does. Thanks a lot.

Due to time constraints, our last question for the afternoon comes from Steve Dosline with Bear Stearns.

Hi. Good afternoon, everybody. I don't know if I missed this or you guys even released it yet. The cost of revenues broken out between construction and material sales, have you released that yet?

So I could answer that question.

The revenue and margin on the plants, right?

Right.

Anyway, for 2002, the revenue was 75.287 million. For 164 and 177. The margin, I'll just go right to the bottom line, 14,878 in 2002 versus 15 million 964 in 2001.

Okay. And the construction portion --

The construction portion is -- contracts, the total for the quarter is 508 million. And 452 million a year ago.

Okay. I guess just the cost of the construction. How you break it out in the 10-Q?

It will be broken out in the 10-Q.

Going toward the aggregate or moving toward the aggregate division, one of your competitors had a pretty substantial decrease in their sales 6% decrease while you guys had a 17% increase. I'm just wondering what you're doing right or if you could gives a little color on that.

Probably a little hard to -- kind of what part of the country --

Yeah, I guess -- they have some of the same operations as you, but just generally.

I mean, it's just hard to theorize.

Okay.

Where their materials are going versus -- keep in mind we do sell half of what we make to ourselves and the rest to the public marketplace. I assume whatever you're referring to is totally obligated just to the public market, they don't have an internal use for their own materials, so the mix might be a little bit different.

Okay, all right. Perfect. Thank you.

This concludes today's question and answer session. I'd now like to turn the conference back over to Mr. Michael Lawson for any additional or closing remarks.

Thanks. Again, I'll be here, Bill Barton will be here, happy to answer any follow-up questions you have. Appreciate your interest and time on the call and look forward to speaking to you. Thanks again.

This does conclude today's conference call. You may disconnect. We do appreciate your participation.