Granite Construction Inc (GVA) 2010 Q2 法說會逐字稿

Good morning. My name is Anisa and I will be your conference Operator today. At this time, I would like to welcome everyone to the second quarter 2010 earnings conference call. (Operator Instructions) Thank you. Ms. Fourchy, you may now begin your conference.

Good morning and thank you for joining our call. I am here today with Bill Dorey, President and Chief Executive Officer; Jim Roberts, Executive Vice President and Chief Operating Officer; and Laurel Krzeminski, Vice President and Interim Chief Financial Officer.

I would like to remind you that this conference call will contain forward-looking statements that should be considered in conjunction with the cautionary statements contained in our earnings release and in the Company's most recent SEC filings. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Granite assumes no obligation to update any of these forward-looking statements or other information. Please see our filings with the SEC including our most recent annual report on form 10-K for discussion of specific risk factors.

With that, I will turn the call over to Bill Dorey, Granite's President and CEO. Bill?

Thank you, Jacque and good morning, everyone.

Before we get started I would like to welcome Laurel to our executive team as our interim CFO. Laurel's been our Controller since early 2008 and she is doing a terrific job for us in this new role and we are very fortunate to have someone with her capabilities leading our financial team. We have begun a search for a permanent CFO and am pleased to acknowledge that Laurel is a strong candidate. We hope to name a permanent CFO by year end.

Okay, moving to the agenda for today's call, as usual I will you with a provide a brief overview of our second quarter results and an update on our current business environment. Laurel will provide further detail on our results by business segment as well as an update on our 2010 guidance.

For the total Company, our second quarter net loss per diluted share was $0.18 compared with the prior year's net income per diluted share of $0.46. Revenues were $454 million compared with $461 million in 2009. The gross profit margin percentage for the quarter was 11%, compared with 18% in the second quarter of last year. Despite strong financial result in the month of June 2010, we got off to a slow start this quarter for several reasons. First, competition remains intense in many of our markets, particularly the sunbelt states, which depend on a normal housing development market to drive demand for our construction services and materials. Second, our construction season did not get started in much of the country until late May 2010 and not until mid-June in the northwest due to a winter that seemingly would not end. While we are encouraged by the amount of work out to bid and the shorter bid list for projects in the west compared with this time this year, we hesitate to be too optimistic, given the short-term nature of the stimulus funding and the lack of any anticipated substantial recovery in residential land develop-- development and homebuilding.

Our large project outlook, however, is quite different. We are encouraged by the number of opportunities to bid large projects across the country. The following is a snapshot of some of the larger work we will be bidding over the next several months. A $400 million design build project in the Pacific Northwest. A $130 million highway project in Utah. A $200 million light rail project in Oregon. A $500 million highway project in North Carolina. A $200 million transit project in California. In total our large project pipeline includes more than $9 billion in projects that are currently scheduled to bid over the next 12 months.

During the second quarter, we submitted proposes on two large design build projects in Guam in excess of $150 million each with another to follow this week. These projects involve the type of work we commonly perform such as earth work, utilities, overwater construction, asphalt and concrete paving, airport runways and drainage. We expect to learn whether we have been successful on these projects in the next 60 to 90 days. Based on reports from the Navy Engineering Facilities Command, we expect to have opportunities to bid on at least $700 million in Guam-related projects during 2011.

With regard to the Federal Highway Bill, there's been little movement over the past quarter. While most -- most in Congress acknowledge the unquestionable need for a large, long-term highway bill, there seems to be little political will to increase the gas tax in order to pay for it. Our industry is continuing to work with Congress to deliver a solution toward this pressing issue.

As a separate piece of legislation, on Friday, the House passed the Department of Tran-- the House passed the Department of Transportation Housing and Urban Development Fiscal Year 2011 Funding Bill that, if enacted, would appropriate $45 billion to the federal highway program. A 10% increase over fiscal 2010. While it is not a long-term solution, it is a positive step towards increasing funding in 2011.

In California, the new fiscal year is underway without a state budget, as legislators attempt to bridge a $19 billion gap. This was not unexpected and unfortunately has become the norm. The transit budget is funded through 2011. However, to properly fund Caltrans program in -- excuse me -- the transit budget is funded through 2010. However, to properly fund the Caltrans program in 2011, the state must sell additional proposition 1-B bonds. According to the State Treasurer's office, bond sales will not occur until California legislature has approved a 2011 budget.

Looking ahead, given the fiscal challenges at the state and local levels, and the expected slow turnaround in the private market, we do not expect overall market conditions in the west to improve this year. We do, however, expect to grow our large project backlog and more importantly grow large project gross margin as several large projects are expected to reach profit recognition in 2011. Most notably, the Queens Bored Tunnel in the Houston Metro project.

I will now turn the call over to Laurel, who will review the second quarter results.

Thank you, Bill, and good morning, everyone.

Construction segment revenue for the quarter decreased 14% to $238 million from $277 million a year ago. The gross profit margin percent was 10% compared with 19% last year. The second quarter 2009 was positively impacted by profitability associated with our work on the border fence from which we had essentially zero contribution in the second quarter of 2010. Construction segment backlog at the end of the second quarter was $594 million, compared with $688 million last year.

Large project construction revenue for the quarter increased 21% to $153 million, compared with $126 million a year ago. Gross profit margin decline to 14% compared with 18% a year ago as this segment is generating a greater proportion of revenue from projects that have not yet reached the profit recognition threshold. Total contract backlog for the large project construction segment is $957 million, compared with $845 million last year.

Not include in the June 30, 2010 total Company backlog is approximately $210 million associated with projects greater than $20 million, which were awarded in July 2010. These projects include the first phase of the Mountain View Corridor Project in Utah, the San Bruno Caltran project in California, and a highway project in New Mexico. In addition, our backlog does not reflect approximately $350 million from our share of the Houston Metro Light Rail Project.

Finally, revenues for the construction materials segment increased 7% to $61 million in the quarter, compared with $57 million a year ago. The gross profit on material sales was $4 million, compare with $10 million a year ago, reflecting an increase in fixed costs associated with two new facilities in California without a corresponding increase in overall sales.

Selling general and administrative expenses decrease 9% to $51 million in the second quarter of 2010 compared with $56 million a year ago. As reflected in the quarter, we continue to focus considerable effort on optimizing our cost structure and permanently lowering expenses across the Company. Our immediate goal is to reduce SG&A by 10% this year compare with 2009. To accomplish this, we have taken several actions, including organizational changes, a reduction in force, cuts to discretionary spending, and salary cuts affecting our executive team. These efforts are part of a long-term objective to reduce our cost structure over the next several years.

Granite's financial position and liquidity remain strong. Our cash and short-term investments were $282 million at the end of the second quarter, which include $106 million associated with consolidated joint ventures. I am please to announce that during the quarter we successfully refinanced our $150 million credit facility, extending our maturity from June 2011 out to June 2013. I want to acknowledge our Treasurer, Jigisha Desai, and her team for their excellent work on this credit facility renewal.

Our tax rate for the second quarter was unusually high at 248.5%, compared with 26.5% in 2009. As a result of updating our estimate of the annual tax rate to 6%, a year-to-date tax provision [true-up] was recorded in the second quarter.

As we note in this morning's news release, we have updated our guidance for each of our segments. For the construction segment, we now expect revenue to be in the range of $950 million to $1.15 billion with a corresponding gross profit margin in the range of 11% to 12%. Large-project construction segment revenues are expected to be in the range of $650 million to $750 million with a corresponding gross profit margin in the range of 10% to 11%. Construction materials revenue is expected to be in the range of $175 million to $225 million with a corresponding gross profit margin in the range of 9% to 10%. Non-controlling interest for the total Company is expected to be approximately $19 million for the year.

With that, I will turn the call back to Bill.

Thanks, Laurel.

Before we take your questions, I'd like to take a moment and thank our dedicated employees and our shareholders and analysts and investors I've gotten to know over the years. This is my last conference call as CEO at Granite. I will be handing over the leadership to Jim Roberts on September 1, 2010. It has been a privilege and an honor to be a member of the granite family for the past 42 years, and I treasure the friendship -- friendships I've made. I've tried to provide our investors and analysts with an honest and straightforward account of our Company, the markets, and our prospects. And I've always believed that the analyst who followed our company have worked hard to understand our business and have treated us fairly and respectfully. I'm extremely confident in the management team that will succeed me and I firmly believe they will take Granite to the next level. Thanks to all of you for helping me along the way and making the experience exciting and memorable and fun.

Bill, on behalf of everyone at Granite, I want to pass along our heartfelt thanks to you for your leadership over many, many years. Working side by side with you for the last 10 years here in the corporate office has been an honor and a tremendous mentoring and learning environment and opportunity for me, so thank you for that personally, Bill.

To the investment community -- you have my commitment that the management team at granite is dedicate to continue to provide the same honest and straightforward account of our business as Bill has been providing you for the last -- oh, decade or so. And we will continue to develop the relationships with you going forward similar to what has been happening in the past. Bill, we all wish you the very best in your retirement and will miss you very, very much.

With that, I will turn the call back to the moderator and will be happy to answer your questions.

(Operator Instructions). Your first question comes from the line of Bob Labick with CJS Securities.

Hello?

Hi, Bob.

Hi, Bob.

Hi, good morning. First just want to stay congratulations to you, Bill, on the retirement. We've really enjoyed working with you and we'll miss it.

Thank you. Appreciate that.

Sure. First question is more of a clarification -- on Guam, you said you've bid on a couple of projects and have a number of projects to bid on next year. Could you clarify if the $150 million on each of the projects is Granite's portion, or if that's the total project? And how much is Granite's portion?

That is not, that is not granite's portion. We have a joint venture with -- on that whole program with Hensel Phelps and Traylor Brothers, and it depends on the nature of the project as to what Granite's portion would be. But let's-- for simplicity's sake let's say that we have a 50% interest or thereabouts on all three of those first projects, and it remains to be seen what our portion would be on the $700 million that I mentioned in 2011. However, my guess is that we would have at least 50% on all of that work.

Or more. Yes.

Or more. Yes.

Okay. Great. And what is the -- I know you were short-listed -- but could you just remind us what the bidding environment is like for that, and what your thoughts are on prospects of winning one or more than one of these bids?

Well, we don't know, Bob, because these are the first jobs that have bid on that program, so we're waiting to hear how we do. I think that will give us an indication of what that bidding environment is likely to be. We're hopeful, and there's a lot of work out there and there should be enough for most of the companies that have been short-listed, at least that's our belief. So, we're hopeful we'll get some, we'll get our share.

Okay, great. And then other growth projects and initiatives you've put out include creating your own solar field on one of your own quarries. Has that started? Or could you update us on that? And is it -- how does that overall field look for growth in the next several years?

We have not started construction of that project yet. We have consciously slowed that project down a little bit with a concern over CapEx spending. It's not something we have to do on a particular timeframe. However, our plan now is to have that built and in place by mid-year next year. So that -- but that's one.

The real -- I think the real opportunity here is in projects we're building for others, or projects we're building for others on our own property. We have some of those as well, and we expect to have a fair amount of that under construction next year. I'm hesitant to try to put an amount on that, but if you pushed me -- Jim is laughing at me here -- but if you pushed me, I would suggest that we hope to have a couple hundred million dollars of that kind of work under construction in 2011.

And actually, Bob, this is Jim. I can add to that a little bit. We actually have some smaller projects that were beginning to build in the third quarter as well, and none of the big ones that we have been aiming at for some of the DOE work -- some of the actual private development work will start at the end of this year. So we're excited about that as well.

Okay. That's great. Thank you very much.

Your next question comes from the line of Joe Ritchie with Goldman Sachs.

Good morning, everyone.

Good morning.

And congratulations, Bill, best of luck in your new endeavors. The first question I really have is regarding your -- the business that you're doing in your large construction division and profit recognition into 2011. Can you talk a little bit about the impact that some of those projects could have on your earnings estimates for 2011?

Well, not from the margin perspective, Joe -- this is Jacque. But approximately 30% or so of our revenue that we expect to do in the large project business is being carried at zero margin this year.

Okay.

Right, Joe, and in addition to that, I think the comment was made by Bill earlier that we would expect the Queens Bored Tunnel and the Houston light rail job, as well as the first phase Mountain View Corridor to kick in from a profit recognition next year, and that's why we believe that that would really be a nice boost to our large project business next year.

Okay. Great. And I guess in terms of how you recognize that profit on the 30% of the work that you're booking this year at zero margin, does it all come through to, does 25% of your fee come through at one time? Or do you take it in a little bit more gradual in 2011?

Yes, what will happen, Joe, is that once it reaches that 25% recognition, you get the complete margin calculation for that 25% at one time. So that's why it is going to be a big boost in next year's business.

So it's a -- think of it as a catch-up. We'll catch up at that point. And all that pent-up margin that we have not been recognizing is recognized in that particular quarter.

And that field, Joe, excludes the remaining portion of Houston Metro project.

Right it's just -- . Right. Just strictly the amount that's been booked today, and it's about $220 million to

Okay, great. And then just real quickly, I guess, on Houston -- I think you were out to bid on the Houston Metro project for the second phase of that project. Can you give us an update on where we are there?

Well, really, the project to date is still working off of the expected program. That has about a $1.3 billion total project, and that is the part of the project we're still working on getting the complete funding and finishing up the contracts on.

But in your backlog today is about $220 million or so, is that correct?

That's correct.

And there's potentially an additional phase on that project that you will book, is that right? Or am I not thinking about that right?

Yes, what's on our books today is our portion of the $220 million, and then there's still -- that project is expected, Joe, to get up to about $1.3 billion at its conclusion when we get all of the funding in place and all of the contracts in place.

Got it, got it, that makes sense. And I guess one last question -- you mentioned that June was much stronger than the prior two months. Can you try to give us a sense for what that actually means in terms of how awards were trending in June versus April and May, and obviously we have seen a nice pickup into July. Just trying to get a sense for how much better June was than April and May.

Well, we -- I think we gave you some data with regard to awards after July -- after June in our press release.

I think what I was referring to in the opening remarks with regard to June was referring to the revenues we did in June and the associated margin that came with it. And as I suggested, we really did very little work in April and May as a product of, frankly, just the weather. And so we were sitting on pins and needles here hoping that we would recover in June and get our season going, and in fact it did. And we posted pretty good results in June. So if that's an indication of how we'll do through the balance of the season, that's a good sign.

And actually, Joe, June this year was actually bigger than June last year, which we were very excited about.

Revenue-wise.

Revenue-wise, right.

Okay. Great, thank you very much.

Your next question come from the line of Vance Edelson with Morgan Stanley.

Hi, thanks. I guess following up on the last question, it sounds like better weather contributed quite a bit to the improvement in June and July. As we look forward to the Fall, could you give us a sense for how much of a seasonal slowdown you would expect based on normal weather patterns as we move further through the year?

Well, we've got a good backlog for the moment -- for the remainder of the year, and it's really going to be dependent on what Mother Nature does. But we'll work through the remainder of the construction season in almost every one of our markets, very heavily, and typically we work through about the middle of October, and then Mother Nature takes over in a lot of our northern areas. So, really, it will be kind of a call whatever Mother Nature tells us after about mid-October.

Okay, that's helpful. And could you elaborate on how much of an impact the stimulus is having? What the pattern has been the past year, and where you think we stand in the overall process right now and its impact on Granite?

Yes, Vance. I'll take that one. We think a lot of the stimulus work is out to bid, it's definitely winding down. That we have seen a lot more work, we have a lot more work today than we did a year ago. But like Bill said in his script, it's short-lived. So, we have-- we think we have the work we're going to have for most of the year, but at this point, beyond that, we don't know.

Okay.

But we do think that in 2010, the ARRA money has been a pretty good boost to our business, and we're happy with what it's been able to do. We didn't see as much of it in 2009 as we had hoped, but probably the first half of this year is when we've seen the bigger impact in terms of backlog.

For number's sake, we have approximately 150 projects, AR related projects, Vance. Just under $90 million in revenue.

Okay. That's very helpful.

Through June.

Got it. And as long as the home building and the smaller projects remain weak but you have the several larger projects in the pipeline, could you just comment on the ability to move resources over? How capable are you of doing that? And how does that process work out?

Yes, Vance, that's exactly what we have been working on. I think we mentioned even -- I don't know if we mention it in the last call or not -- we've moved a group of people from California to New York to work on the Queens Bored Tunnel and other some projects there. We are trying to relocate our resources to wherever the work is. In some cases, in a lot of cases, it does work. In some cases it doesn't, depending on the individual's personal situation. But I think the entire Company is geared up to be more nomadic than we have been in the last decade.

Okay, and maybe just one related follow-up. Could you give us a feel for the nature of the costs being eliminated as you move heads from one area to another? You're also trying to cut costs. How much of it is actually reducing your size or reducing your capabilities going forward versus being more just unnecessary excess that perhaps simply shouldn't have been there in the first place?

Well, I would -- Vance, I would hope that that latter part is probably the answer. We are trying not to minimize our operational opportunities in any marketplace, period. We are trying to become more efficient, and therefore not only are we just eliminating some headcount, we're also redoing some of our structure. And it's not our intent to exit any of our markets. In fact, it's our intent to be more competitive so we can actually increase our market share on those markets.

Okay, that makes sense. All right, I appreciate the color. Thanks.

Thank you.

Your next question comes from the line of John Rogers with DA Davidson.

Hi, good morning and -- .

Hi, John.

Bill, all the best.

Thank you.

Couple of things -- first of all, just on the large project business that has been pushed out, or profits that have been pushed out into 2011. If you're generating margins this year in that 10% to 11% range, does that imply in a -- if a third of the business is at break even -- so are we giving up 300 or 400 basis points in profits that will show up in 2011 or about -- what, about $25 million? Is that the right way to think about that?

I think it is. Whether you're absolutely precise on the numbers, I wouldn't want to speculate, but you're right. We're giving up a certain amount of -- .

Or deferring.

Yes. We're giving up a certain amount of margin, and depending on what you expect the overall margin to be -- I mean, you can do the math.

Yes.

3% of that is simply being moved forward. I mean, I think it's our hope that these jobs, frankly, that we're carrying into next year will be pretty good work for us. If we can get those jobs moving very well, it could have a pretty sizable impact on our large project performance in 2011, and I think we think that's a good chance that will occur.

Okay. And on the smaller project side of the business and the construction materials, could you talk a little bit about the market in terms of -- I realize that we need a better housing market to see a lot more work, and better state governments, but is it your sense that margins there are impaired for a couple of years because of this environment, and it will take a while to rebuild it? Or -- and you have to see competitors drop out of the market? Or is it a question -- just we get to see a little bit better commercial construction market edge should snap back quickly? Or how do you think about that, based on your experience?

Well, number one, we're not dropping out of the market. So let's clear that one up. But I do think that this market has been impaired for some time. And the reason it's been impaired is there's no buyers for the product, and the builders, the Toll Brothers, the Lennar's, the Kaufman & Broad's, all these guys are sitting on the sidelines now because they can't build product and sell it, until that inventory is somehow worked through. And that inventory is going to be worked through through foreclosures and the various ways that it changes hands and becomes the property of a new owner that will keep it up and so on. And this takes time.

And until that process is worked through or at least worked through further than it has, we don't see the builders entering the market. Until the builders enter the market, they -- that capacity-- that demand for service won't be there. And what that has done, John, as I think you have heard us all talk about it in the past is that it has released all that capacity that typically would be servicing that market into the public works market. And the public works market, being under some pressure itself, due to the lack of jobs in the economy and the taxes that follow those -- that joblessness, has really impacted the overall market for us. And that's what is driving, frankly, the poor performance that we're experiencing in those sunbelt states that had depended on that housing market for support for so long.

Okay, so when do we see that changing? Not in 2010. Don't know about 2011. I expect that we'll begin to see some change in 2011. But we are, frankly, we have the gloves off, we're out in the streets, we're duking it out with our competitors, and the work in the west, and we're working very hard to build a larger and more profitable, large project business until that market comes back.

Okay. And one follow-up, then, to that. Are there opportunities for you to buy other assets in that business, maybe another region or expand your presence, geographically?

There probably are opportunities. The question is, are the opportunities priced in such a way that it creates value? And we have not seen much of that yet.

Okay. Thank you.

Your next question comes from the line of Rich Wesolowski with Sidoti & Company.

Thanks, good morning.

Hi, Rich.

Earlier this year, there was an expectation of $600 million in first half awards from a combination of the Houston Metro, the World Trade Center, and the Mountain View Corridor. Would you mind reviewing how much and what you would consider highly probable awards are left to book from those three jobs?

Mountain View Corridor was awarded in July, Laurel?

Yes.

In July.

That was just the first phase.

Yes. That's the first phase. Our share of that is $40 million.

$40 million, $50 million.

So that will be -- that was part of, Rich, the awards we highlighted in our press release. Houston Metro has not changed at this point. We have to look forward -- we can look forward to the balance of that award, which is in excess of $300 million.

Right.

And what was the other one?

World Trade Center.

The World Trade Center has been awarded, has it not?

Yes. Yes.

So I guess that $600 million included the other phase of the Mountain View before they cut it in half or whatever the portion is?

Correct, yes.

Okay

Actually, the $600 million included the entire Mountain View Corridor, then they decided to break it into two phases. And so the second phase we're working on, and we would hope to have that awarded by the end of the year, as well as the remainder of the Houston light rail job as well.

Okay, and on the Houston -- I was confused by an earlier comment -- have you booked $220 million of your portion into your backlog or is that the total amount of work let so far by the authority?

That's the total amount actually contracted with the authority to date. It's not our portion.

Our portion is about $60 million or $70 million, Rich.

Okay. And that's what's in your backlog?

The vast majority of Houston is yet to book. So that's sort of a big deal. And then the balance of the Mountain View Corridor is yet to book. Those are the two jobs we've talked about most. It's sort of out there that we know are coming our way, hopefully sometime this year.

Okay, Bill, and then on the broader quote of $9 billion in large projects to bid during the next year, if I recall a statement on that pipeline about this time last year was $4 billion or $5 billion. Is that right? Are you in fact seeing double the size of the large project bidded opportunities? And if that is right, can you venture an explanation as to what is driving the increase?

The jobs are bigger. Our geography has expanded. I mean, clearly it includes Guam and things like that at this point. Our scope is larger. We've-- I think we've talked about this with you all, that we're focusing on more government contracting, some power-related opportunities, and more rail in the mix than our traditional work.

Okay. And then lastly, would you make a comment on the general performance of your ongoing large project portfolio?

It's pretty good. It's -- if there's a highlight out there in our marketplace, that's it. We have turned that business around, I give all the credit in the world to Mike and his team for having done that. They have done a nice job of getting control of that work. We're not doing as much of it as we did, as you probably have noticed, but the work we are doing is -- I hesitate to say it's all performing well, but the vast majority of it is performing quite well. And we think that carry-forward work will have more margin on it in 2011 than in 2010 without adjusting for the threshold, the kick in of the work that reaches the threshold. So that work is pretty good, Rich.

Great. And lastly, I just echo the congrats on your retirement and best wishes for the future.

Thank you.

Thanks, again.

Your next question comes from the line of Richard Paget with Morgan Joseph.

Good morning, everyone.

Hi, Richard.

Wonder if we could just talk a little bit more about the competitive environment, and maybe I'll frame this with the downward revision of margin expectations. Has the competition kind of leveled off, or is it getting increasingly competitive? Or is it just -- you took down your margin expectations for the year just based on what happened in the first half, and the competition isn't going to further erode new work in terms of the margins going forward?

Richard, this is Jim. I think the number of bidders has reduced, so that's a positive sign. We've seen -- boy, last year at this time, or -- we had in the neighborhood of at least a dozen bidders on most of the smaller work in the west. We're probably seeing today somewhere in the neighborhood of five to eight bidders, so that's a good sign. I believe -- and I think most of our markets in the west have seen kind of a bottoming out of the expectations of where margins are going to be.

And so I don't think that there's necessarily an increase in margin expectations over the last quarter or two, but our hit rate is going up because there's less bidders. So what we're looking forward to is the margins to come back over the next six months or maybe twelve or eighteen months depending on how quickly that rebounds, and that will really determine, be determined based on the amount of work out to bid, and if the competition can get filled up with work. But it's a little better in terms of numbers of bidders. I would say that the margins are still below expectations, and it's going to be there probably for the remainder of the Summer.

Okay, and that shakeout of other bidders, is that just some of the new guys coming in are busy? Or they realize they couldn't really execute on the work, and have left the market? Or what's your take on --?

I think it's a combination of both. I think that what happened last year was a lot of these smaller players came out of the private sector, as Bill mentioned, took some cheap work, they're out building it now and they're probably realizing that what they bid that work at was too cheap in order to help make any money for their company. And I also think that some of them have just exited the public sector and are going back into probably reducing the size of their businesses and getting prepared for a resurgence in the private sector in the next year or two. But mostly those smaller private sector people are the ones that we are seeing falling out of the public market.

Okay, and then just a clarification on the tax rate, that 6% expectation is for the full year, which would suggest some rather large tax credits in the second half. Am I reading that right?

No. It's based on our projected tax rate at the end of the year of 6%.

So, we shouldn't have any tax credits in the second half.

Yes. It's not based on -- it's just based on our projected pretax income. And then a significant impact as well as the minority interests relative to the pretax income.

Okay, okay. All right. Well, Bill, good luck in retirement, and that's all I have, thanks.

Thank you.

Thanks, Richard.

Your next question comes from the line of Kathryn Thompson with Thompson Research.

Hi. Thank you for taking my questions today. First, on your construction materials segment, could you comment on volume and pricing trends in the quarter? And how this has trended since the quarter end?

Kathryn, I'll try to address that. I think Bill may have some answers here, too. Actually, the volume was up a little bit, which was encouraging. In fact, the feedback I'm getting from our field leaders is that they are encouraged about the materials business coming out of the second quarter and going into the third quarter. So, volume-wise, it's exciting to see some of that turn around.

Pricing-wise, pretty static. I went back through a little detail on it and noticed that pricing overall came down a little bit, and that was mostly due to a range of the products that we're selling. We're still -- it looks like we're selling more of the lower-cost products. But the pricing overall by product basis is pretty much the same, maybe a little bit less than last year, and the bright side is that there is backlog in the materials business and our businesses have been picking up over the last month.

When you say that volume was up a little bit, I mean, are you talking about mid-single digit type increases? Is that just for the quarter?

That was for the quarter last year, and what they're projecting is the same kind of increases going into the third quarter as well.

Would that momentum improve-- I mean, I would have assumed that would have improved along with your other construction business from -- throughout the quarter, and June being a better month for you versus the previous months. Is that a correct assumption on my part?

Yes, I think it is. I think also it's kind of a mix, Kathryn, of the type of work that we're actually able to be successful on, and we have been successful on the materials-related work, and there's been a lot of the ARRA money has been focused on materials-type projects. So in the short term, there's been a little kick up in the materials businesses because of that, and we're hoping that that continues, but I think it will continue through this year.

But along with the volumes, as happened last quarter, you had a pretty sharp dropoff in your materials segment margins, and a lot of it was a function of lower volumes. I assume that's the case in this quarter. Could you confirm that? And also with improved volumes, would you expect an improvement in material segment margins going to Q3?

Yes, I think that what we mentioned -- and I think Bill mentioned it briefly in the script, was that we also had some new projects that we brought online this year. Both our large plant in central California, our large aggregate and asphalt plant, and our large asphalt plant down in Ventura County. And both of those have some heavy depreciation costs associated with them, and that's the main reason for the margin reduction, even with the increase in volume, they -- it was not enough to offset the heavy depreciation load on those two large plants.

And when does that effect -- is there any light at the end of the tunnel in terms of that overall effect on margins?

Well, I think that what needs to happen is that those individual projects, as long as the -- as well as the materials business, needs to even take another uptick to offset those fixed costs. And those fixed costs, those depreciated costs, will be on our books for quite some time. So we just need to have the volume to offset it.

Okay.

And Kathryn, the margin, or the guidance, for construction materials does imply improved margin in the--.

Sure, sure. Yes.

Right.

Also, just understanding that -- and I know you have given guidance once again for your construction business backlogs. And been watching some of your Caltrans work, and that you have been more successful in winning Caltrans projects, but still at the same point in time, you talk about having lower margin projects still in your backlogs. How long will it take to work through these backlogs? And as the year has progressed, understanding that you have overall fewer bidders for projects, are you seeing any light at the end of the tunnel in terms of those margins on those particular Caltrans projects?

Most of the construction work -- and we'll go to the construction segment, Kathryn -- most of that work is typically burned off in twelve months, or maybe a little bit longer, but on average, it's no more than twelve months. So that backlog will be burned off by next year this time.

As we go into the third and fourth quarter, I'd like to say that margins would look better. I think every market is so different geographically right now, that I think it would be very difficult to tell you that margins would increase. I think that for us, the key ingredient is to continue to bid. As Bill said, we have taken our gloves off, and I think that we're trying to regain our market share, and I'm just not going to predict that the margins are going to go up this year. Hopefully maybe for next year we can see some increased margins on that business, but that's yet to be determined as well.

Okay. Are you seeing any non-highway stimulus work? In other words, like, port work? Any other type of transit-type work?

Yes, the -- for instance the Queens Bored Tunnel, Kathryn, that has some stimulus money in it. There's several projects like that that we're dealing in in our pipeline that include stimulus money.

Houston -- my understanding is that Houston Metro had some stimulus money in it to help take it over the top.

And we have some other transit projects that we're bidding that are on the bid list for the third quarter that have stimulus money in it as well.

So, maybe I could add a little perspective to these markets. This is not the first recession that I've been through in my career. Although I must say that it's certainly the broadest from the standpoint of geography and depth and length and so forth. But what my experience tells me is that a couple of things happen that change the climate and improve it, and the first is that demand ticks up at some point. And that demand, in this instance, is going to be driven by one of two things. The first is an improvement or a resurgence in the private development market. The builders begin to ask for new lots and begin to build new homes and so forth. And the homes, of course, create demand for our construction materials, and the lots create demand for our construction services. So that will happen at some point.

The second is that during this period, just like what you see with Granite, is these businesses get smaller, and our business in the west has gotten smaller, not because we wanted it to, but it just is. And our competitors are facing the same situation. And the challenge for us -- I think it was, a question was asked earlier today -- the challenge for us is to maintain capacity so that when the market does tick up, we're in a position to take advantage of it.

But what I -- my experience has -- what I've experienced in my career is that most of our competitors, particularly the smaller ones, just don't have that luxury. And so they -- when they get smaller, they do lose capacity. And when the market ticks up, it creates a supply and demand equation that creates a pretty good market. And it doesn't have to recover all the way back to where it was. It just simply has to change slightly and create that market demand that exceeds capacity.

I think the other thing that could potentially change this equation would be some change in the attitude towards public funding. Whether it's a highway bill or -- I mean, that's obviously the one that's most visible. But in the states that are grappling with how to fund transportation, if they solve that problem in any way and create public funds for transportation that are new, that will change that equation as well.

Thank you very much for that. That's all the questions I have for now. Thank you.

Thank you, Kathryn.

Your next question comes from the line of Jack Kasprzak with BB&T Capital Markets.

Thanks, good morning, everyone.

Hi, Jack.

Let me add my best wishes, Bill, for your retirement.

Thank you, sir.

Appreciated working with you over the years.

Thank you, sir.

First question is, do you guys have a, the number on percent of revenue in the quarter that was less than 25% -- dollar of revenue in the quarter less than 25% complete?

Yes, hang on, I can get this in the Q, which by the way, will be filed later today, Jack We'll grab it. Go ahead and go to your next question.

Would you guys, given the changes in the market -- I know that various companies have thrown around values of aggregates reserves. If you guys were to value your own reserves, would you care to take a stab at that?

No. Value is in the eye of the beholder, I suppose. And I suppose it changes depending on what kind of business climate you're in. In the long pull, I think we have great value in those reserves. Those reserves today are an integral part of our vertically integrated business model, but as a standalone seller of material into the marketplace, they're not creating huge amounts of value for us today. But it's a long term play for us, it's been an important part of our business model for a long time. And it will become very important to us in the future as well.

Okay. Thanks for that. And your comment, Bill, on the capacity in the market, and smaller competitors usually end up cutting capacity. Are you there referring to their people? Which is, I guess, obviously harder to bring back versus, say, equipment when the market does turns up?

People.

Yes.

Jeff, this is Laurel. In response to your question about the deferred profit.

Yes.

About 14% of revenue has profit deferred, both in the quarter and the year to date.

Okay. Great. That's all I have.

Laurel, is that expected to remain about 14% for the balance of the year as well, or do we know?

No. Don't know that.

I would expect that to -- I'm going to speculate here a little bit -- .

It's likely going to go up (inaudible).

Yes. Yes. It's going to be at least that for the year.

The new awards, obviously, that come in in the second half won't reach recognition, most likely, either. So -- that will add to it.

Got it. Okay, thanks, again.

Thanks, Jeff.

Your next question come from the line of Avram Fisher with BMO Capital Market.

Thank you for taking my questions. I guess the first question -- have you provided an update at all on the old DOT US 20? And if not, can you give a little bit of color on it? The Oregon DOT put out a release at the end of June -- .

Yes.

-- about some issues there.

Want to do that, Jim?

Well, it's in the Q, which will come out today. And I'd really -- it is really in an engineering phase today, Avi. We're trying to figure out what some problems that are out there relative to some movement, some subterranean movement, so how to fix them. And I think you'll see in the Q, a little more definitive understanding between us and ODOT, and the engineering firms are kind of all sitting back trying to figure out a fix to some of this movement. And that's really in a think-tank mode today, trying to figure out how to fix it.

Is this something that could -- I mean, you -- as I recall, you had reserved $20 million to $30 million when you had the first issues with the project. You didn't use those up because you renegotiated. Could those be used if there are losses or overruns on this sort of phase?

Well, I -- let me clarify the $20 million. It was not a reserve. It was what our latest, our projection was -- .

Right. Okay.

-- as to the -- .

Forecast.

-- forecast for the project. And I don't think there's such a wide understanding of what the next steps are. I think it would be really -- .

Premature.

-- premature to discuss anything relative to that job. And our -- the owners and our engineers and ourselves are really just trying to figure out what the next steps are before we even worry about entitlements or anything else. We have to find a fix first.

Got you. Okay. Sounds like a real conundrum.

It's an interesting project, to say the least, Avi.

They say projects that are interesting just get more interesting.

There you go.

It sounds like -- and I know some people have asked about this -- but just directly, it sounds like you're guiding for margins in your materials business in the second half to really perk up. Is that accurate?

Well, think about -- I mean, the way our business works, the first quarter typically we don't sell a lot of materials due to weather. The second quarter we got a slow start. So I think inevitable there's going to be a tick up in the materials business in the third quarter, and really it'll depend on the fourth quarter, how that M business ends up. But we have a lot of demand for our materials, and that's because -- a lot of it has to do with our slow start this year. So, we're going full bore right now in July, August, and September and then, as I think I mentioned in one of the questions before, Mother Nature will determine how well that business ends up in the fourth quarter.

And is it really just a -- is it really just the benefit of your lien, so you have a lot of leverage if there's upside? On the margin front?

Well, I think -- I would say that certainly we're trying to lower our cost structure and be more competitive, and also I think that we've seen up -- some pickup in the volume as well. So I would probably attribute it to a lower cost structure than we've had in the past and more volume.

Got you. In terms of the tax rate, what's the -- what should we think about for next year? Back to the 15% to 20% range? Or -- ?

That'd be a good thing, yes. We're not providing that yet, Avi, but yes, hopefully it will be.

Or should we look at something in the historical average? Or -- ?

We're hoping it goes way up, Avi.

Got you. I see. G&A, which I guess is the inverse, you hope it goes down a little more. What's the what number to think about now? Is it a $45 million to $50 million on a sustainable basis?

(Inaudible).

On the -- just on a dollar value?

(Inaudible) okay.

I think we gave you some guidance, Avi, in the press release -- .

But for -- right, for 2010, it will be down 10% versus 2009, which means it'll -- sounds like it will be in the $45 million to $50 million range for the back half of the year. Is that something you can keep it at that level?

Well, if we get it down to 10% -- down 10% compared with a year ago, we will keep it there or lower it.

Okay.

Right. Avi, I think that our intention is that we're on a very focused cost structure initiative today, and we're on a, basically, a two-year program to have a significant cost reduction, as Bill mentioned, in 2010, and really looking at additional cost reductions for 2011. And we're really focusing on right sizing that overhead relative to the size of the revenue. Now, what we're also trying to do is grow our revenue. So it will be a, kind of a balancing act for 2011 and beyond, but we are working at structure changes, more efficiencies, we're investing into our IT system this year. In fact, we're doing a tremendous upgrade to our IT system this year -- all that is built on the premise that we're going to be lowering our G&A as a product of our revenue, quite substantial over the next couple of years.

Got you. When I think about your efforts to really ramp up the large project business, and really move -- shift -- revenues, it seems like, will shift in that direction -- and I think about the industry in general -- there aren't many companies that do both big and small. And I'm trying to wonder, does anything change in terms of if you ramp your big business significantly? Does anything change on how you do the small business?

That's a really good question. In fact, that is something we talk about internally, Avi, that we believe that our intent and our focus is to not have a negative position on our construction business by enhancing the large project business. And in today's environment, we've been able to do that because of the reduction in the construction segment, just in the overall size of the marketplace. Our plan is to build our large projects business and simultaneously be ready to build our construction business when the market comes back. And I think it's a reasonable question. Can you do both? And part of our structure re-org is to allow us to do both. So that is our intent.

All right. I appreciate the color on that, Bill. Likewise, good luck, and if Don Nelson has a bad year, hope to see you on the bench.

I am going to have to gain some weight if I do that.

Your next question comes from the line of Todd Vencil with Davenport Company.

Hi, guys, thanks for taking the question. And as we get started, Bill and Jim and Laurel, congratulations to all you guys.

Thank you.

Just some clean up stuff. You mentioned, I think, 150 projects, $90 million in revenue related to the stimulus? Are those the right numbers?

Actually, Todd, it's $70 million. It's because there's a portion of the Queens Bored Tunnel in there that's not ours. So if we look at just the work that's ours, it's about $70 million and 150 projects. That's through June.

Through June, year to date?

Right.

Okay, great. And on those, the two new plants that you mentioned where the D&A was sort of hitting the margins in the materials business, when did those plants come online and when did the D&A begin to hit?

First of the year. I think both of them -- maybe a little bit in the fourth quarter, but the majority of it was in the first of the year, Todd.

Okay. What's the quarterly run rate on the D&A from those two plants? What's the delta from adding those two?

Wow -- .

I don't think we have that in front of us, Todd. Let me circle back with you after the call.

Okay. Not a big deal. We're in the clean up phase of the Q&A now anyway.

This, this is, I guess, a substantive question, though, although pretty easily knocked out. You guys have obviously announced a handful of projects just in the past few weeks that you've won. You have talked about some of the reasons that you think that occurred in terms of the competition. Have you guys changed the way you're bidding those at all? I mean, is that reflective of any change in your bid strategy?

Well, Todd, I think the ones that we announced were large projects.

Yes.

And we're really disciplined on the large project side depending on the complexity and the risk associated with them. We have come down on some of the less risky work in large project in terms of expectations, but when we get into a large project environment and there's risk associated with it, we certainly bid that kind of work with some expected returns that are pretty significant.

So that work, I would suggest to you, is, has pretty good margins on it. The smaller work is where we've really done our market adjustment. And that's stuff that you probably didn't see in the announcement, but the day-to-day type stuff, that's where the real competitive environment is.

Got it.

Yes, I want to highlight something that we mentioned in our script, and I think we've mentioned it at least once here in this Q&A, and I think it's important from the standpoint of watching the markets, and that is that we do have fewer bidders on work today, particularly on the smaller work, than we had a year ago. And we internally collect the bid results, we post them on our intranet, and our employees look at them every day. I certainly know Jim and I do. A couple of times a week, we'll pull them up and look at them. We're bidding anywhere from, 10 to 20 jobs every day that get posted.

And a year ago, it was not unusual to see 12, 15 bidders on a lot of work. And today, those bid lists, in some instances, are down to under five. And that's pretty significant. I'm not sure I can explain why, but it is true, and I think it's a -- it's part of the process. It's part of that shaking out of the market that typically occurs. So I think that's a pretty good sign from the standpoint that something has changed for the good in the last 12 months.

And maybe one last thing, from the standpoint of the cost reduction that Jim mentioned. This has been very painful for us, no doubt for most companies that have been going through this. But this is a good thing for us. It's an opportunity for us to do some things that arguably we should have done a year ago, or five years ago. To really, I think, set our business up for the future, and we're doing it. And I believe that over the next few years you all will see that difference and it will help us in the long run.

Got it. Well, thanks for that and congratulations, again.

Thanks, Todd.

Your next question comes from the line of Brian Rafn with Morgan Dempsey.

I'd just like to say, Bill, with Bill Barton retiring and you retiring, you make me feel old.

You have a ways to go.

Okay. Let me ask from the standpoint of -- you guys seeing any dropoff? You talked about some of the private sector, private work guys leaving the public market. Are you seeing any more competitive migration from road builders beginning to break into the design build work? Because you've mentioned in the past there's about a half dozen that can do it. Are you getting any more pressure competitively in the bigger project work?

Yes, I think so. There's competition everywhere, guys. And as the smaller work gets tougher, everybody is looking for a safe harbor, and we are, too. And so there's been migration into areas that are perceived to be, I'll use the word easier. I'm not sure I would characterize it as easier, but if it is perceived to be, then there's migration there. And it's -- there's a whole host of areas that contractors are moving -- trying to move into and certainly that's one of them.

Yes, I think that that's one of the reasons why you've probably seen our pipeline go from that $5 billion number to $9 billion number, is that we're really aiming for even larger projects today. And those larger projects continue to diminish the amount of people that can qualify for them. There are more regional contractors looking at design build, let's say, in the $100 million or less numbers. But we're starting to see, and thankfully, some very, very large projects out, which really does get back into that handful of contractors in the US that can pursue the $500 million and greater. And so that's one of the reasons why our pipeline is at a larger number today.

Okay. As you see in you're bidding on some of those very large design build projects, are you at all fracturing up any more of the joint ventures with more joint venture partners? Or is it still, two or three partners?

Well, there's still one or two partners, or three partners, on a project, so that still is in play. The larger the actual size of the project, the more partners you tend to bring in to spread the risk, and so -- but I have not seen us bring in more than two other partners on any of our jobs yet.

Okay, are you seeing any competitive pressures from any of the owners trying to transfer risk on bid day, things are tough, to make you accept more risk than maybe you didn't price into the contracts?

That is an evolutionary process, very interesting. When design build first hit the streets, let's say 15 years ago, the contracts were not as onerous as they really evolved into over the last three to four to five years. And so, yes, the owners are starting to put more risk onto the contractors, and the important part for us, and the -- really the business in general, is to price that risk into the bids. And we have a very complex system today, a very strong risk matrix that we go through for every single job. We also have dedicated team of legal staff that reviews every bid to understand how onerous they are, and they certainly do try to pass that risk onto the bidders, and our job has been to really make sure that the owner pays for whatever risk is in the bid. But I continue to see that change.

Okay. Let me ask you, as you guys are rebuilding -- not necessarily new greenfield projects, but on the demolition phase, are you guys -- maybe it's an anecdotal question -- are you seeing any more stress to the infrastructure on projects where you're rebuilding bridges or dams or highways, that things have been allowed to deteriorate more? We certainly have it here in Milwaukee, with bridges with things falling off, and we had one major closure with the Brookfield interchange. Are you seeing that across the country at all?

Everywhere. I will tell you that this country is in dire condition with regard to its infrastructure. Infrastructure has been -- was built 50 years ago or longer. The federal highway system was started in 1954, a lot of that work took place over the next 20 years or so. Those facilities are aging and they're in dire need of repair, and we are not funding that properly. I think our representatives in Congress, both at the federal level and at the state levels, know that. But there seems to be an unwillingness to address the funding required to really face up to this issue.

That will have to occur, and so from a long-term standpoint, we're here to fix that. Not only to maintain the old system but I think, equally as important, build the system of the future. Which will look different than the one that we currently have, as fuel naturally increases, behavior changes, the demand for public transportation increases and so on, a lot of stuff is going to have to get built. And as -- if we collectively, as a country, and particularly the industry, can influence our legislators, I do think there's a chance to really change the landscape with regard to public funding. And when that happens, it will be an important event, I think, for our country and certainly it'll be an important event for our industry.

Sure, sure. Relative to the whole SG&A headcount reduction, you've talked certainly, and I have asked in the past about bench strength. Would there be any mission-critical job descriptions that you absolutely would not cut, given your ability to reflate capacity?

Revenue-producing assets, primarily people assets, we have to have that. Revenue is our biggest issue right now, and so people in our system that are producing revenue are critical.

Actually, in addition to that, the focus on Project Management, people that are capable of going out into the field and physically run projects, that is probably the number one role in our Company today that we need to maintain and build on.

Okay, okay. Let me ask -- relative to the ability -- and it was, the question was kind of put off before -- given certainly the malaise in the markets, is there any ability, once pricing comes in, to maybe vertically integrate your business east of the Mississippi River with the, certainly the quarries and some of the materials side that you have out west?

That's been in our vision for the last decade. Timing has just not been right yet. Certainly the vertically integrated model has been good, very good for the Company up until the last couple of years. And certainly part of our vision is to take that into a bigger geographic spread. But the timing has to be right, and those kind of investments need to be rewarded appropriately. And so we've slowed down on that process the last couple of years, but certainly that's in the long run.

Okay. Are you seeing anything geographically relative to state funding in states that have a better budget surplus like the Dakotas or Indiana, that are running state surpluses?

Well, I don't know if they're running surpluses but there are some states that have -- are in a better position than others. Unfortunately, California isn't one of them. But the state of Washington, for example, passed a $0.05 gas tax here a year or so ago. That's helping them. I learned a very interesting statistic in Alaska here a couple weeks ago. For every $0.18 that Alaska sends to Washington, they get six times that back in the form of a gasoline tax redistribution.

So there are some states that are in a better position than others. We've tried to position our Company, for the most part, in what I characterize as sunbelt states where people are moving, because ultimately it is population growth that drives demand for our business. Certainly it ebbs and flows, as you might imagine, as building comes and goes. But people need things that we build, and population will drive that. And that's what we've tried to do, is put ourselves in front of population growth.

Okay, and then just one final. What is kind of the CapEx budget through the balance of 2010? You guys certainly have a business that requires you to buy bulldozers and steamrollers and a lot of heavy equipment. Is that being reduced going into 2010 here? Or give us a sense of where that budget is.

Well, it was reduced from last couple of years. I think we have said publicly that it is about a $50 million CapEx budget. And we'll spend probably that amount for the entire year. A good deal that has been spent already in the first half of the year, but we will meet, probably, our budget expectations.

Okay, thanks. All again, all the best, Bill.

Thank you.

Your next question comes from the line of Chase Jacobson with Stern Agee.

Hi, Chase.

Hello.

Chase, your line is open.

While we're waiting, we have a 10:00. Okay, we have a few more minutes.

Moderator, let's go to the next person in the queue, please.

Okay. Your next question will come from the line of Kalpesh Patel with Jefferies and Company.

Hello, everyone.

Hi, Kal.

Good morning.

Quick question, Bill, you mentioned in your opening comments about four or five very large projects. Have you bid all these projects? And when are you expecting, or when is Granite expecting the decision for these awards?

We have not bid those projects. The only two that we have bid were the two that I mentioned in Guam, with a third one to follow this week. And we expect to hear on that Guam work in 60 to 90 days. We've not bid the other projects, however, they are, will be bidding over the next several months.

Okay, and so the third project in Guam, is that also greater than $150 million?

I'd rather not speculate on that at this point.

Okay. And I also wanted to talk a little bit about Guam some more. With the final environmental impact statement out now, and there seems to be some delays or stretching out of the work, what's Granite's view on what's going on out there? Is it just a more realistic construction schedule now? Is that the final conclusion there?

Well, I'm not sure. We heard some of that as well. We got short-listed to bid on that work, and within a couple of weeks, we began to get task orders, and they haven't really slowed down. So, we have not seen the slowdown of that work at this point. It may occur, but at this point, it certainly appears to us as if they're getting their infrastructure in place to make the move and follow up with vertical building work.

Yes, Kal, the -- a lot of the news that's been out has been centered around the relocation itself moving slower than originally anticipated. But the MAC, the multiple awarded contracts, are coming out, and a lot of that early work that's required is very Granite-type work. And that's all coming out as planned.

And actually they were actually telling us that once the awards are made, that they expect us to move very quickly.

Got you. Now was there additional money or work that was going to come after the final environmental impact statement in signature by the Navy?

I assume so. I don't know -- I'm not sure what that triggers or doesn't trigger, but as I suggested, we are seeing a list of work that they expect to bid. A lot of which we would be interested in.

Yes. This first phase is a $4 billion phase over the next three, four years. And so, they have been laying it out pretty much as planned, and that's why Bill mentioned the other $700 million next year, and that was as planned. So we are seeing them move forward as they told us they were going to.

Got you. And my last question is about the Build America bonds program. Do you guys see -- or have you seen progress on the extension for this program?

I do not know. Jim, do you know?

No. No. I haven't followed it.

Okay. All right, good luck, Bill. Thank you.

Thank you.

Thanks, Kal.

Your next question comes from the line of Michael Corelli with Barry Vogel & Associates.

Hi, good morning.

Good morning.

Just a quick question -- I know you have done some share repurchase in the past, and I know your balance sheet is in good condition. And although there's a lot of uncertainty in the market right now, your stock is trading not too far away from book value. Have you thought about reactivating the share repurchase at all?

Well, our share repurchase is authorized, so we wouldn't need to do anything if we chose to take shares out of the market. But it's not something that we're going to speculate on in a, on a call like this.

Okay. And could you just give me an estimate for DD&A for this year? And that's all I have. Thanks.

Michael, I'll have to get back to you with that (inaudible). I don't have it in front of me.

Okay, thank you.

Thank you, Michael.

Your next question --

(Inaudible).

I'm sorry.

We'll need to wrap up the call. Unfortunately we do have an employee call right now. If anybody still has questions in the queue, please feel free to contact me after the call.

Bill?

We appreciate you all joining us -- sorry to cut you off like that, but we, as Jacque said, we do have a webinar with our employees to talk to them about our results as well, and answer questions from them. But we appreciate your interest in the Company. We will be around for most of the morning, so if you have other questions, please feel free to give us a call. Thanks for your interest in Granite.

Thank you for your participation. This does conclude today's conference call. You may now disconnect.