Granite Construction Inc (GVA) 2012 Q1 法說會逐字稿

Good day, and welcome to the Granite Construction first-quarter 2012 earnings results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions)As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host for today, a Ms. Jacque Fourchy, Director of Investor Relations. Please go ahead, ma'am.

Good morning, and welcome to our first-quarter earnings conference call. I'm here today with our President and CEO, Jim Roberts; and our Vice President and CFO, Laurel Krzeminski. Before we get started, I would like to remind you that this call will contain Forward-looking statements that should be considered in conjunction with the cautionary statements contained in our earnings release and in our 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 a discussion of specific risk factors.

With that, I will turn the call over to Jim.

Thank you, Jacque, and good morning, everyone. First and foremost today, I would like to emphasize how appreciative I am of our employees across the country for their hard work and commitment to Granite. They continue to meet the challenges that we and the industry are facing, and I could not be more proud of our team. It is thanks to them that this past quarter we were recognized for the third year in a row as one of the world's most ethical companies by Ethisphere Institute. This recognition means a lot to us. Not only does it underscore our core values, it is a testament to the way that we have done business for the past 90 years.

While we were fortunate to have good weather that allowed many of our business units to work throughout the quarter, it is important to remind our listeners that the construction season in the West does not typically get up and running until the second quarter. New projects, for instance, that are awarded in the fall are often not scheduled to start until April or May. Additionally, starting new projects early in the year carries risks and potential additional costs in the event we have to mitigate for weather-related issues. So mild weather can help us. There are some seasonal aspects inherent in the first quarter that are important to understand.

In general, we were pleased to see that the bidding environment continued to be very active throughout the quarter. Included in new awards through March 31 is the $230 million US 36 project in Colorado, of which our share is $115 million, as well as our $53 million highway project in southern California, and a $56 million streetcar project in Arizona, with our share of the project valued at $29 million. In terms of our existing backlog of work, the vast majority of our portfolio has performed well across the country. Starting in the east, the Queensboro Tunnel construction project is making significant headway, with two of the four tunnels complete. We are mining the third and fourth tunnels as we speak. With almost two-thirds of the project complete, the Western Wake Freeway project in North Carolina continues to meet all major milestones.

The Houston Metro light rail is making significant progress as well and is currently a little under 50% complete. The team is on schedule to complete two of the three main corridors by October of next year, with the downtown portion scheduled for completion in 2014. In the West, crews on the Mountain View Corridor project in Utah completed excavation for the main corridor and are scheduled to lay down over 200,000 tons of hot mix asphalt and 300,000 square yards of concrete paving this season. The project is currently 50% complete. Design work on our newest project, US 36 in Colorado, is underway, and construction is slated to begin this summer.

In line with our strategic theme to grow our large projects business, we are currently short-listed on five mega projects with contract values at or in excess of $1 billion each that are expected to bid later this year or early next year. These projects include the Tappan Zee and Goethals Bridge projects in New York, the Dallas Horseshoe, I-35 East, and Grand Parkway projects in Texas. In addition, we have been short-listed on the $250 million I-275 project in Tampa and the Garden Parkway East and West projects in North Carolina, both valued at approximately $300 million. We're also closely tracking several opportunities in the $100 million to $300 million range that could provide additional opportunities later this year.

Okay, now for a quick recap of where we are with the highway bill. As most of you know, we are currently operating under a ninth extension of the federal surface transportation bill, which expires on June 30. Today, House and Senate leaders begin conference committee negotiations on what we are hopeful will be a two-year highway bill that at a minimum maintains current funding levels. The most significant outstanding issues for the Conference Committee to revolve are the proposed inclusion of the Keystone Pipeline, and as always, funding sources for the bill. The fact that there appears to be recognition from all sides that the transportation bill needs to get done gives us some level of optimism that we will get a bill before the June 30 deadline. Quite honestly, I am disappointed that Congress is currently only considering a two-year bill. With that being said, two years is certainly better than what we have seen with these short-term extensions over the past three years. I look forward to the day when we have visionary leadership in Washington that will ultimately fully fund the development of our infrastructure over a long period of time. I'm optimistic that this will occur in the foreseeable future.

Before turning the call over to Laurel, I would like to address the recent news regarding the US 20 project in Oregon. As we stated in our press release last week, this has been an extremely challenging project for everyone involved. Although we were confident in our position regarding disputes with the Oregon Department of Transportation, lawsuits are costly and time-consuming, and we felt it was in our best interest to put this matter behind us. Resolving this issue was a positive for Granite, as it allows us to move forward with a full focus on growing our Company.

With that, I will turn the call over to Laurel, who will provide detail on our results by business segment and our outlook for 2012. Laurel?

Thank you, Jim, and good morning, everyone. Looking first at the total Company for the quarter, net loss per diluted share was $0.31, compared with the prior year's net loss per diluted share of $0.24. Revenues were $310 million, compared with $257 million in 2011. The gross profit margin for the quarter was 8%, compared with 12% in the first quarter of last year. Looking at the segment detail, construction segment revenue for the quarter increased 27% to $118 million, driven by a healthy volume of backlog acquired in 2011 and mild weather throughout the West. Gross profit margin was 7%, up slightly from a year ago. Large project construction revenues increased 19% to $164 million. Gross profit margin was 14%, compared with 23% a year ago. As a function of timing, first quarter 2011 gross profit included the impact of reaching the profit recognition threshold on the Queensboro Tunnel project.

Finally, revenues for the construction materials segment increased $2 million to $26 million in the first quarter of 2012. The gross loss on material sales was $6 million, compared with $7 million a year ago, reflecting ongoing weak demand for materials. Selling, general, and administrative expenses totaled $43 million, essentially unchanged from a year ago. We currently anticipate SG&A expenses for 2012 to be in the range of $170 million to $180 million. Our cash position remains solid. Cash and marketable securities totaled $367 million at the end of the first quarter, which includes [$69 million] associated with consolidated joint ventures, compared with $108 million last year. Planned capital expenditures for 2012 are expected to be approximately $50 million.

The tax rate in the first quarter of 2012 was 28.9%, compared with 41.9% in the first quarter of 2011. The first quarter of 2011 included a favorable tax settlement with the IRS, for which we did not have a similar benefit in 2012. Looking ahead, we expect our tax rate at year-end to be in the range of 27% to 31%. Turning to guidance, we currently expect revenue for the construction segment to be in the range of $1 billion to $1.1 billion, with a corresponding gross profit margin in the range of 9% to 11%. We expect revenues in the large project construction segment to be in the range of $1 billion to $1.1 billion, with a corresponding gross profit margin in the range of 12% to 14%. Construction materials revenue is expected to be in the range of $200 million to $220 million, with a corresponding gross profit margin in the range of 7% to 9%. Non-controlling interest for the total Company is expected to be approximately $15 million to $18 million for the year.

With that, I'll turn the call back to Jim.

Thank you, Laurel. I would now like to spend a few minutes on our strategic growth plan, which includes transforming and growing our vertically integrated business, growing the large projects business, diversifying our portfolio, and optimizing our asset base. I'm pleased with the progress we have made in each of these areas over the first quarter, particularly as it relates to our diversification efforts. We are seeking expansion opportunities in the federal, industrial, power, rail, and water markets through increased investment in business development. In addition, we are actively pursuing the acquisition market with dedicated resources charged with developing relationships with firms that will allow us to expand in the new geographic territories, as well as into new markets. The active engagement of our teams across the country in their day-to-day business, as well as execution of our strategic growth plan, is both exciting and opportunistic. This is especially true as we celebrate our 90th-year anniversary in 2012. We are proud of what we have accomplished and are looking forward to a vibrant future for many generations to come.

And with that, I will turn the call back to our moderator, and we will be happy to answer your questions.

Thank you. (Operator Instructions) Avi Fisher, BMO Capital Markets.

Jim or Laurel, could you quantify how much of the ODOT charge is included in guidance?

Let me see if I can put the ODOT situation in a bigger bundle than just that. I think the way to look at it is we settled -- you saw the press release last week. We settled with a $15 million payment to the Oregon Department of Transportation. We had embedded that into the projections for that job, so really, the guidance includes that as a lost job, but was mostly taken care of in previous forecasts. So what would have happened on the flip side is if we had not had to make a payment of that size, we could have had less than that amount fall to the bottom line. That will not occur this year. But the full $15 million is embedded into our guidance, and it is behind us, and we are very happy.

So I understand, it was embedded in guidance, but it's also almost been accrued? This isn't incremental?

Yes, what happens is that when we project a lost job from an accounting perspective, we immediately take the loss on the entire projected loss. We had known over the last several years that the US 20 job was going to be a loss job for the Company. And as we updated our forecasts, we would take the additional loss in each of those quarters that we updated the loss forecast.

Avi, there's no significant impact to our financials this year.

Got you. Okay. It would have been included a previous -- when you had previously reset the project?

Yes, it actually -- we reset it several times over the last several years. So it constantly was resetting and taking a loss in those quarters when we updated the forecast.

Regarding, obviously, the claims and benefits in large projects, are there any that you can call out that are expected to hit in 2012?

Any claims, Avi?

I guess profit recognition is what I meant. Apologize.

Yes. We have five jobs that we expect to reach profit recognition this year, Folsom Dam, the Leroy Selmon redecking project in Florida, Chisholm Trail, our Guam job, and the Miramar job, but we expect that to be in the second half of the year. So right now, we'll be issuing our 10-Q later today. You will see that we have large project revenue with no profit of $18 million this year. Last year at this time, we had $47 million in revenue with no profit on it yet.

Okay. And the expectation of this profit included in guidance, I presume?

Yes.

Okay. Finally, one quick question. I'm curious about what you're seeing in terms of material and labor costs. We're seeing in certain areas, diesel costs are coming down, but asphalt costs are growing. Seems like wage rates are holding flat. I wonder if you could talk a little bit about those?

Let me talk about diesel. Diesel has come down a little bit. And again, for us, we do forecast somewhat of a futures pricing on diesel, so I don't think whether it comes down slightly or goes up slightly that it has a significant impact on our Company. Asphalt, we do see that moving based on supply and demand. Again, majority of our asphalt is from a fixed price basis, so I don't see the ups or downs in the liquid asphalt market having a significant hit or bottom-line add this year, because the majority of it is firm-priced for us on a project basis, Avi. Labor overall, we're seeing a neighborhood of 3% increases in a lot of our labor collective-bargaining agreements, 2% to 3%. So there is a slight up tick in the labor market, but again, those are anticipated. They are negotiated, and they are embedded into the cost of doing our individual projects.

I appreciate the color. Thank you.

Joe Ritchie, Goldman Sachs.

Jim, maybe you can talk a little bit more about those large projects that you're tracking. You have been short-listed, you said, for five $1 billion plus projects. Tell us a little bit about the funding for those projects and your confidence that they will move forward by the end of this year, early next.

Again, we've been short-listed on a whole bunch of projects. The five mega ones that I mentioned that are the $1 billion plus-size projects, I think I mentioned the Tappan Zee Bridge and the Goethals Bridge in New York. The funding -- the intention there for the Tappan Zee Bridge is that it will be funded. I think they're going through some funding mechanisms now to make sure that it is funded. The Goethals Bridge is very possibly going to be a little bit of a public/private partnership procurement process, so there will be some private funding to move the Goethals Bridge forward. That's intended to bid at the end of this year. The other ones I mentioned were Grand parkway in Houston. That is a $1.5 billion design/build project. It is fully funded by Texas DOT. I think the other one I mentioned was I-35 East in Dallas. That's another $1.5 billion project that is fully funded by the Texas DOT. And the other one I mentioned was the Horseshoe project, the Pegasus Horseshoe project in Dallas. That's about a $700 million design/build project that is also fully funded by the Texas DOT. So out of those, the two New York jobs are the ones that still have some funding issues assigned to them. Tappan Zee, they're looking to try to get that fully funded prior to the bid, as I understand it, but the Goethals Bridge will take a private partnership funding effort.

That's really helpful color. Perhaps just shifting gears a little bit, on guidance, you guys gave a pretty wide guidance range for 2012. Take the lower and upper ends of each one of your expected ranges. So curiosity, what are the key swing factors that get you to either the lower or upper end of those ranges?

Really, the key factors are in the construction and the materials business. Again, those are turn businesses. Those are -- we're at the very beginning of the year. We're in the heavy bidding season. Typically, the heavy bidding season is in the second and third quarter, and then we typically build out a big portion of that work during the same calendar year. So that will just depend on how successful we are in the bidding environment over the next, I'd say, three to five months. And that's why we try to give a little wide range in the construction and materials business at this point in time. The materials business, on the other side, is the -- from the external sales side, we are starting to see a little uptick in the private market. And if that continues, we could get to the upper range if we see some private markets starting to break loose a little bit. There's a little bit of a light at the end of the tunnel today. We'll see where that goes over the next several months as well. The large project range really comes down to how well we build the work that we have under contract today. We know the work that is on our books that will affect our earnings. The question, obviously, is how we perform over the next six to nine months will determine whether we're in the low end of the range on large projects or on the upper end of the range.

Okay. Thanks. On the small projects specifically, I take a look at your guidance range for the year, what I think is interesting is that it's actually lower than what you guys were able to do last year. And obviously, the competitive environment has remained pretty fierce, but it surprises me that it seems like it's actually gotten slightly worse. If you could provide some color on that, that would be helpful.

I think one of the things that is important is that last year, the second half of the year, we performed very, very well in our construction segment. And as we go into the year, this year so far, we're seeing it very competitive. Again, the reason that the guidance is out there at that point right now is that it's still a lot of unknowns. So it will really depend on the success level we have over the next three or four months in the bidding.

We're not seeing it get better. We're not seeing it get worse.

Right.

It's pretty static.

Okay. All right. Thanks for taking my questions today.

Nick Coppola, Thompson Research Group.

I have a question for you on your large project revenue guidance. It implies a pretty big year-over-year increase. And obviously, it's kind of lumpy by nature. Are you assuming that you are going to win any of these big projects you were talking about, or is it more working off backlog that you have? And if -- what does the variance look like? I guess you could -- looking at five mega projects, you could win potentially none of them, or you could win several of them. It seems like there could be a pretty big swing factor there, if you have any thoughts about that?

Yes, Nick. I think the key ingredient on the large projects is that we are right in the middle of building a whole string of projects, and we're in the heart of building. I can list off 9 or 10 projects that we are undergoing today, including the QBT, the Houston light rail, the Western Wake in North Carolina, the Mountain View Corridor in Utah, the SR 520 in Washington, the Folsom Dam in Sacramento. US 36 will be going in Colorado, and the Selmon redeck job in Florida, and the Chisholm Trail job in Texas. All of these jobs are going to be in full swing and are in full swing this year, so that's where the revenue is coming from. It has not been -- we have not incorporated a great deal of revenue from the new projects. A lot of them we'll be bidding in the second half of the year. They will get going underway, and they really will not be impacting the revenue a great deal for the year.

Right. That makes sense. In the construction segment, can you talk a little bit about what margins look like on new awards? There was strong performance last year, but margin guidance implies lower year-over-year gross margin. What do new awards look like? Or have we turned a corner, or are we getting any closer to turning a corner?

I think that Jacque mentioned earlier that the construction segment is still under fierce competitive guidance. I think our guidance is where the new awards are coming in at today. The key ingredient for us will be to beat those estimates and try to increase that margin expectations. But it is a fiercely competitive environment in the small work today, and I don't see the current work that we're bidding changing very much at all.

Okay. Thanks for taking my questions.

Jack Kasprzak, BB&T.

With regard to the question of the guidance, Jim, isn't it usually the case that early in the year, it's maybe a little more competitive as yourselves and competitors are trying to get some backlog built and it's really more into the later, middle, or latter part of the year that will you get a better view of whether the competitive environment is different or not?

I would hope so. Jack, you've been covering Granite for a long time, and that historically has been the case, that people like to build backlog in the first half of the year. And we've been able to pick up some really good backlog in the second half of the year. I think that really depends on the overall amount of work out in the marketplace, and if we see the work bid when it's supposed to bid and not be delayed, that might happen in the second half of the year. I think that we are not planning on that right now. We are planning on it to be a fiercely competitive environment throughout the entire year. But you are right historically that we've been able to pick up some higher margin and some good backlog in the second half of the year.

Okay. One of the large projects I think has been mentioned in the past but was not mentioned today is the Dulles Metro project. Is that still on the list, or where does that stand?

It is still on the list. It should be bidding sometime at the end of the year. I just didn't put it on one of the mega jobs. I probably could have, because it is about a $1.5 billion job. So what I tried to do was put the ones on the list that I think had already been short-listed on. But we certainly are pursuing Dulles job as well.

I got you. Is Granite's participation in these various projects -- it's typically pretty high in terms of your percentage participation. Is that generally true here across the board?

They vary dramatically from job to job, depending on our position. In some cases, we're the sponsor, and in some cases, we're the minority partner. Typically, a good range on the average, I averaged them up the other day, is somewhere around 40% to 50%.

Okay.

On the average. When you look at them all up together, we're typically about 40% to 50% partner.

Okay.

Jack, to circle back on Dulles, we're waiting on the RFQ, but it's expected to bid in 2013. So it's not our --

I got you. So it's 2013 now.

It's been on 2012 for a long time. It continues to get delayed a little bit. It should be early 2013, assuming no other delays get named on it.

I got you. Okay. That makes sense. California, still seeing some relatively good flow of opportunities there? It's obviously at the center of competition, but in terms of the flow of projects, I think it's been pretty good. Your construction backlog has been performing well. Is that still the case?

It is. California has a lot of work to bid between now and October. The key for us is to get our share, and so yes, I think it's very active. It is very competitive, though, as you said. Both there is a lot of work to bid in California, both in the construction market and in the large projects market.

Okay. Great. That does it for me. Thanks.

(Operator Instructions)

John Rogers, D.A.

Most of my questions relative to margins have been asked, but in terms of the materials business, are you expecting and need the private sector? You mentioned it a little bit, but is that really what -- to get margins back to what they've been historically?

John, I think the answer to that is yes. If we track the private market sector new permits and starts relative to raw materials business, there is a direct linkage.

Okay.

And we need the private market to really have that construction materials business get back to the expectations that we have for margins.

All right. And Jim, specifically, the housing sector?

Housing sector drives it, although I would say the commercial does help, because it usually follows the residential. But we do look at housing starts as really the precursor to bringing the materials back online.

Okay. And then you mentioned a little bit in your opening comments about acquisitions and being out there. Can you give us a sense how close you are to doing something?

We're active in a lot of respects in most of those sectors. We're out developing relationships with firms, not only from an acquisitions standpoint, just from a partnership standpoint. To get into these sectors, our business development team has been very, very busy. From an acquisition standpoint, we're actively pursuing acquisitions today, and I hope that there's a chance that we could perform an acquisition in 2012, and if not, certainly we are hopeful in 2013.

Okay. In terms of some of the private-market sectors that you mentioned, is there an opportunity that we could see some announcements on project awards or some [type] of significant size this year?

We're pursuing a lot of them on the industrial side. I think there's a -- you probably don't see them. They don't come to the forefront in the size of a large project. But we're now doing work for Conoco Phillips up on the north slope. We're working for Tesoro up in the Seattle market. They are construction jobs. They're not large project jobs, but they are the nice-size jobs, and we have made some really good inroads into the power market with some smaller work. But they just don't come out to individual projects, because they're not slated as large projects.

Okay. But are there larger project opportunities this year that you bid on, or --?

I think they're negotiated, and most of them are under the $75 million range. So they would probably fall in the construction segment, John.

Okay. Great. Thank you.

Brian Rafn, Morgan Dempsey.

If you look back -- a strategic question for you, Jim. If you go back 10 years, 15 years, the branch business, the turn business, which you guys now call construction, was with the private sector, 60% to 70%, 75% of the business. You had a nice housing run from 1991 to 2006. If you look forward going forward, with all the infrastructure demands what we say the large project or the heavy civil, do you see more of a balance toward the larger project business in that the branch business may have had its day in the sun and it is going to be a little more even? Or do you see a resurrection at some point of the old turn business coming back?

First of all, Brian, I'm wondering why you're asking me about 15 years plus ago, and I'm assuming that's because I'm the old guy on the call here that's been around that long.

Yes.

Yes, there you go. I don't think that necessarily we're looking at the branch vertically integrated business as really seeing its day. I think it will come back. Our strategic plan that we've laid out for the Company going forward shows growth in that part of the business. But I think that what we have done is suggested that we are also going to grow in different sectors as well. And that's why I laid out the water, the industrial, the power segments, and the federal is because I think that as we grow the Company, we want to diversify our overall portfolio. But I do think that our vertically integrated business will come back. I think that we are seeing some slight signs of private market resurrection today. I think that for the overall economy to come back, that private market has to come back, and that will help fuel the future growth of our vertically integrated business. So I think the day will come. I just think we need to be patient on that part of our business and diversify in the meantime.

Yes, okay. In some of that incremental, you mentioned light at the end of the tunnel a little bit. Is that modest resurrection in that turn business, is it resurrection in the private side, or would it be smaller state and local highway jobs?

I would say the private side. I think there's -- when I said light at the end of the tunnel, what I was focusing on there was the private side. I think the public side has its issues, plus and minus. I think the local entities are going to need to find out their own funding mechanisms and really redo their budgetary constraints relative to transportation. And I think the states are starting to do that already and have already brought back and are focusing on transportation, along with the feds. But I think that the private sector is starting. There's just the slight signs out there that we are seeing some permits starting to come back in the housing market, which obviously drives our materials business.

Yes, okay. Okay. If you looked at, and I think the question was asked, episodically, you've seen a front loading in the first quarter. Some of the regionals build backlog. You guys stand back a little and cherry-pick a little more and build backlog later toward the year. Could you give us a sense, was the pressure and the rapid buildup in some of the backlog in 2012 any worse than it was in 2011 or 2010, or it has been about the same?

If you're talking about how our backlog is performing well relative to previous years --?

No, (multiple speakers) overall competitive structure. Not what maybe Granite has done, but we'll just say 2012, that fever pitch that a lot of the regionals will go out and build backlog very quick and are a little less price sensitive. Is that any worse in 2012 than it was perhaps competitively in 2011?

I think every market is different, but overall, I would suggest it's very similar to what we've seen in the last two years.

Okay. Okay. On the highway bill, is the ISTEA at 21 -- is that six-year bill -- is that you think historically gone by the wayside or -- and we're going to see a shorter two-, three-year bill type going forward? Or you actually see perhaps with some austerity in Washington that we might get back to the old six-year bills?

Let me rephrase it a little bit, because I'm pretty passionate about this subject, Brian, and that's why I brought it up in my script. I think what we're at with the Conference Committee, which is beginning today, the House brings in a 90-day bill to get us to September 30, and then the Senate brings in a two-year bill -- and thank to you Barbara Boxer for doing that on the Senate side. So the best we're going get now is a two-year bill.

Okay.

And I think that that is not good in the long run for the infrastructure improvements to our country. I think we have to get back to a long-term bill. Otherwise, we are not going to be able to plan as the individual states and the municipalities need to plan for long-term growth, for capacity, and for maintenance. So I think we have a short-term issue relative to getting a two-year bill passed. I hope we do get a two-year bill passed. I think we have to get down to a long-term, visionary bill that allows us long-term vision and significant growth in the investment.

Okay. The $1 billion project you talked about, Tappan Zee, Goethals Bridge, I-35, Garden Park, Pegasus, the Horseshoe, are those all design/build?

Let me see here. I'm looking at them right now to make sure that I answer that correctly. I think they are. I'm not sure about Goethals, if that is a design/build, although I think it probably is. It's a [BPP]. Garden Parkway is. I-35 East, let me see here. I'm not sure if that one is. The Horseshoe project is a design/build. So most of them are design/builds, yes, and I'm not positive on a couple of them. But yes, I think in general, design/build on Tappan Zee, design/build on Grand Parkway, design/build on the Horseshoe. I-35 East and Goethals, I'm not sure.

Yes, okay. If you look on the large -- I'm just curious coming from an engineering standpoint. On the large project, the old heavy civil, are you seeing a different or bidding out a different mix of projects? In other words, if you might have done more bridges and highways in the past, and now you may be looking at dams or canals or subways. Are you doing any -- in addition to going into water, industrial, and power, are you doing any mix of type of project different on the transit side?

I think that's a great question, because evolutionary in our history, Granite has built our Company around certain types of civil projects. There was a day when we started in California and built the California aqua duct system as a big part of the growth of our Company. Then we got into the water system relative to dams, and we've started some large dam project throughout the Western US. Today, as I look what we're seeing here, you look at Tappan Zee and Goethals as being two really updating huge structures that are no longer really meeting the needs of capacity and certainly maintenance, and then you're looking at capacity issues on the other projects. So today, we're seeing transportation projects that are really looking at capacity issues, and I'm hoping that the day comes back to where we are also building big water projects, because I think that's going to be a huge market going forward.

Okay.

But it does change over a period of time. And, Brian, by the way, all five of these jobs that I mentioned, as I looked into them in a little more detail, they all are design/build.

Okay. Okay. Fair enough. I've also asked in the past, are you continuing to use the mobility of crews around the country in 2012? Is that an ongoing evolution versus what you might have done in 2011 or 2010?

We are continuing to try to have our people mobilize and move all over the country. They are doing more than we have in the past. It is still difficult. As we mentioned, mobilizing people with the housing market the way it is today, if they own homes, is very difficult. But, yes, we are -- our crews are moving. Our project managers, our project engineers are moving throughout the US to the projects that we have procured, and I think that's a real positive for us to be able to build all types of work in all parts of the country.

Yes, I'll just give you one more. I've asked in the past on vertically integrating east of the Mississippi River with quarries and asphalt. Obviously, land is not, because it's more and more constrained versus where you are out West. Is it a pricing issue on that, or is it contingent on a rebound in the turn business in the private sector, versus doing a deal out East?

I think, Brian, for us, for doing a deal out East, it's just finding the right opportunity. We'd love to have a vertically integrated business in the East. We just have to have the right opportunity come our way, and we would seriously look at it.

Okay. Keep it up. Thanks. Appreciate it.

Joe Ritchie, Goldman Sachs.

Thanks. I had two quick follow-up questions. First, Laurel, I know it may be too early to tell at this point, but do we have a sense for looking out into 2013 whether there's certain projects that are going to hit the profit-recognition threshold in that period, or is it still too early?

Obviously, potentially new ones that we get this year. We can get back to you on that. Yes.

Okay. I can follow up after the call. That's fine. The last question I had was this quarter, you guys had mentioned that there was somewhat of a favorable impact to weather. Do you guys try to quantify that at all?

We really don't. I think that certainly the weather was -- actually, January and February were good, March was wet here in the West. But we don't try to quantify it, because as I mentioned in the script, Joe, a lot of times we just don't start the work. We don't plan to start the work. And therefore, even if it's good weather, we don't start the work. It's very difficult to quantify. I think the key ingredient is we did get more work done. You saw that from our revenues in the first quarter. So that's probably the best way to quantify how much the weather impacted us.

All right. Thanks very much.

Avi Fisher, BMO Capital.

Thanks for taking my quick follow-up. I apologize if this was asked. I didn't hear it. In your 16% or median revenue guidance -- I'm sorry, in the revenue guidance for materials, which at the [median] is down 5%, can you talk a little bit about the price versus volume mix? Because it looks like prices are going up in the California aggregates market. Thank you.

Yes, Avi, I think that's a good observation. I think that we see some slight uptick in the prices. Not a dramatic uptick, but in the 2% to 3% range. Again, for us, it is so early in the year for us to be able to forecast and give guidance on the volume. You've got a pretty wide spread there. I think we were at the top end of that range last year. I think we gave similar guidance at this point in time last year. Really, it will depend on how successful we are in the bids going forward. Remember, our construction business, our materials business, we provide a lot of materials to the third-party contractors, and depending on how successful those bids are in the first and second quarter will dictate our volume going forward. Slight uptick in pricing, pretty good market overall. We need the private sector to come back to really get that thing moving.

Did anything happen last year? There wasn't too much private-sector activity last year that would have explained why volume would be down year-over-year.

Again, I think it's pretty much where we thought it was last year at this time. And in the fourth quarter, we did see an uptick in some private sector. That's why I said there is a little bit of light at the end of the tunnel. We're a little cautious right now, because that is something that we hope takes place, but we're not sure that that private sector really is going to have the momentum going forward for the rest of the year. I think in the next quarter, we'll give you a much stronger guidance.

Is it appropriate to say that caution is an overriding part of your guidance?

I think any time in the first quarter, we want to be cautious. And we have a little wider window there, because especially in the construction and the materials business, there's so much what will be determined in the next three or four months with -- in the bidding environment, that we just don't want to be over-optimistic or to the point where we misguide you. Keeping the wide range is very appropriate right now.

Understood. Quick follow-up on the materials gross profit range of 7% to 9%. Are you where you want to be, excluding the bigger market and the volumes, are you where you want to be in the capacity utilization and getting the right number of labor out on at the aggregates facilities?

Can you restate that? I'm not sure I understood that, Avi.

On your margin guidance on materials, are you where you want to be in terms of capacity utilization and asset utilization on materials, given -- holding volume flat?

Absolutely not. I think that we have a significant additional capacity and utilization opportunities in our materials business. Remember, we built that business when we were in a much stronger materials segment or timing. And, no, we're under capacity, under utilization. Our crews are doing an excellent job trying to optimize their cost basis during these depressed times, but we have a significant amount of capacity utilization opportunity going forward.

Okay. Appreciate the follow-up. Thank you.

Thank you. This concludes the Q&A portion of today's conference call. At this time, I would like to turn the call back to Mr. Roberts for closing comments.

Yes, thank you very much. As always, we appreciate your questions, everybody, and we appreciate, again, all the hard work that our employees are doing. They're doing a wonderful job during these very, very difficult times. We appreciate everybody's interest in Granite, and if you have any additional questions, please do not hesitate to call us. Thank you, everyone.

Ladies and gentlemen, thank you for your participation in the Granite Construction first-quarter 2012 earnings conference call. This does conclude the program, and you may now disconnect. Thank you, and have a wonderful day.