Competition is stiff, building is down and stimulus money has yet to have a big impact on revenues, said Bill Dorey, president and chief executive officer of Granite Construction, who announced the company's second quarter earnings on Thursday.



"During the quarter our business in the West continued to be challenged by a highly competitive bidding environment," Dorey told investors and analysts on a webcast conference call. While stimulus money is beginning to move through the projects, "there remains a great deal of unused capacity in the industry."



Private and residential development is down and the company is focusing on large projects.



Watsonville-based Granite Construction is one of the nation's largest diversified heavy civil contractors and construction materials producers. The company reported a net income of $17.9 million compared with $25.6 million a year ago in the same quarter. Earnings per share were 46 cents compared to 67 cents. Total revenue for the quarter was $461.1 million compared with $694.3 million in 2008.



The decrease reflects a $169.2 million reduction in Granite West revenue and $58.5 million reduction in Granite East revenue. The company's construction materials business continues to feel the impact of lowered demand in private and public markets.



"We're casting a pretty wide net out there," Dorey said, noting that other companies are clearly feeling the strain as well. "There will be some casualties in the industry. We are really watching our balance sheet. I do think there will be some shakeout before this is over."



The company celebrated several coups in the quarter, including a green light on the Houston Rapid Transit Joint Venture team, which is working on a $121 million project, a $20.4 million project in Utah and the award of the Queens Board Tunnel project in New York, which will mean about $280 million in revenues. Wednesday, the company announced it has also been awarded a joint $446.5 million contract to build a freeway segment in North Carolina.



"Unlike in the West, the competitive landscape in the East seems to be remaining relatively stable," Dorey said.



While the troubled California landscape included a delayed budget that has had an impact on transportation projects, Dorey said that he was encouraged by recent federal events. A 60 percent increase is being recommended for transportation spending. While that is being considered, an interim plan is under way to ensure transportation projects.



The growing competition was not a surprise, Dorey said.



"Probably the best guidance we could give you for Granite West Division is that we don't expect it to get a whole lot better in 2010, and I'm not sure I can provide any more guidance than that."



At the end of the second quarter, the company backlog of projects was valued at $1.53 million compared to $2.14 million a year ago.