Good morning, everyone. My name is Bill Powell. I'm Chairman of the Board and the Director of Granite Construction, Incorporated. Welcome to Granite's 2015 annual shareholders meeting. I now call the meeting to order. Today's meeting will include a report of the Secretary, address the five proposals on the ballot, and present the election results. Mr. Jim Roberts, our President and CEO, will then review the company's business and answer questions from shareholders and bona fide proxy holders. To allow time for all shareholders and proxy holders who may wish to speak during the Q&A period, we have adopted certain ground rules. You will find these procedures on the back of today's agenda. Mr. Richard Watts has been appointed Secretary of the Meeting to present the proposals to be voted upon and record the minutes. Mr. Watts is Senior Vice President, General Counsel, and Secretary of the Company.
I'd like to introduce Mr. Andrew M. Wilcox, representing Broadridge Financial Solutions, who has been appointed the Inspector of Elections for the meeting. He has signed his customary oath of inspector, and it will be made a part of the minutes of this meeting. If any shareholders or proxy holders have not registered their presence, please go to the registration desk right outside in the lobby to do so at this time. The Inspector of Elections will determine the number of shares present at the meeting. While Mr. Wilcox is determining the number of shares of common stock present at this meeting, I will introduce a number of persons here. Present today are members of the Board of Directors of the Company: Mr. Claes Bjork, Mr. James Bradford, Mr. Gary Cusumano, Mr. William Dorey, Mr. David Kelsey, Ms. Rebecca McDonald, Mr. James Roberts, and Mr. Gaddi Vasquez.
Also present is Mr. John Eilers of PricewaterhouseCoopers LLP, Granite's independent registered public accounting firm. I will now call upon Mr. Watts, Secretary of the Meeting, for his report.
Thank you, Mr. Powell. Mr. Chairman, a notice of meeting, or a notice regarding the availability of proxy materials, was mailed to shareholders beginning April 24, 2015, and is available on Granite's website. The notices and a list of registered shareholders of the Company at the close of business on April 10, 2015, which is the record date of this meeting, are available for examination by any shareholder present and by any proxy representing a shareholder. Only holders of common stock on the record date are entitled to vote at this meeting. I'm advised by the Inspector of Elections that the holders of no less than 37 million shares, or 95% of the stock eligible to vote, are present at the meeting in person and by proxies filed at or before the meeting.
Therefore, a majority of the outstanding common stock is present or represented here today, and a quorum is present. The meeting is authorized to transact business. It's now 10:38 A.M., June 4, 2015, and the polls are now open for items of business. They will remain open until all items of business have been presented and discussed. If you are already voted by proxy, you do not need a ballot to vote at this meeting unless you wish to change your vote. If you do need a ballot, please raise your hand at this time. We will collect entirely all the ballots after the proposals have been presented. At this time, I will turn the business items in the agenda to be voted upon today.
The first order of business is the election of directors who will hold office for the ensuing three-year term and until their successors are elected and qualified. The Board of Directors consists of nine directors. Today, we will elect two who will hold office until 2018. The Nominating and Corporate Governance Committee, in accordance with its charter, has recommended to the Board of Directors, and the Board of Directors has nominated the following nominees to be directors of the Company to serve for the ensuing three-year term and until their successors are duly elected and qualified: Mr. David H. Kelsey and Mr. James W. Bradford, Jr. Since there have been no further nominations as provided for in Article 2, Section 7 of the bylaws, nominations are now closed. Ballots have been distributed to those who requested them.
Please indicate your votes on the nominees for the directors in the space opposite the name of the director or the directors you wish to vote for. If your voting has a proxy for a particular shareholder, please write in the shareholder's name and sign your name as proxy. I will announce the results of the voting after the ballots are collected and tallied. The next item of business is to consider the proposal to approve on an advisory basis the compensation of the named executive officers. Information regarding the compensation of the named executive officers has been presented in our proxy statement, and the proposal is described on page 42 of the proxy statement. Please indicate your vote on the proposal to approve on an advisory basis the compensation of the Granite Construction Incorporated named executive officers as disclosed in the proxy.
The next order of business is to consider the proposal to approve the Granite Construction Incorporated Annual Incentive Plan. A summary of the amendment has been presented on page 43 of our proxy statement. Please indicate your vote for the proposal to approve or amend the Granite Construction Incorporated Annual Incentive Plan. Next order of business is to consider the proposal to approve Granite Construction Incorporated Long-Term Incentive Plan. A summary of the amendment has been presented on page 46 of the proxy.
Please indicate your vote for the proposal to approve or amend the Granite Construction Incorporated Long-Term Incentive Plan. The next item of business is to ratify the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2015. Please indicate your vote for ratification of the appointment of PricewaterhouseCoopers to audit the Company for the 2015 fiscal year.
Okay, so for those of you who have completed ballots at this meeting, please sign them and pass your ballots to the outside of the aisles for collection. I'd ask now that the Inspector of Elections now collect and tally the ballots. Okay, it is now 10:40 A.M., June 4, 2015, and the polls are now closed for all items of business. We will now hear the report regarding the preliminary results of the elections. Mr. Chairman, based on the preliminary report, all proposals have received more than the required votes, including Mr. Kelsey's and Bradford's election as directors of the Company to hold office for a three-year term and until their successors are elected and qualified. Mr. Chairman, that concludes the report of the preliminary voting results.
The final results will be available for all shareholders in a Form 8-K, which will be filed with the SEC no later than June 10, 2015. I will now turn the meeting back over to Mr. Powell.
Thank you, Mr. Watts. The final matter before us today is to conclude the meeting. All those in favor of concluding the meeting, signify by saying, "Aye.
Aye.
All those opposed to concluding the meeting, signify by saying, "No." The meeting is now concluded. Mr. Roberts will now review the Company's business. After his presentation, Mr. Roberts and I will be glad to answer your questions about the Company and its business. Mr. Roberts.
Thank you, Bill. I thought I'd do a little bit of a different approach today to talk a little bit about Granite, and I'd focus a little more on the foundation of who we are and what makes up Granite, some of the things behind the scenes that you don't see. At the very end, I'll touch briefly on some of the financials and some of the things that we have discussed on our other quarterly calls. As always, you will see some forward-looking statements today that are subject to various risks and uncertainties that could cause actual results to differ from those statements. Always beware of forward-looking statements in any kind of a discussion about a company's business. Our core values. This is really the basis of the way our company operates. We have nine core values.
Over the years, we had eight core values for generations in our Company, and two years ago, we added a core value of safety. Now, you'd think that would be something that the Company would focus on, and it has been something we've been focusing on for years and years and years, but we decided to add safety as a core value. The reason we added it as a core value is because for our employees, safety is not something we do in addition to our work. It's how we perform our work. That's a big difference. A lot of companies and a lot of people will talk about safety being a priority. For us, it is not just a priority. It's part of who we are.
The reason that it's so important to us is because we have a belief in Granite that we can work every single year without a single incident in our Company. Have we gotten there yet? No. But you can see by this chart that we monitor the performance of our safety in our Company relative to what we call an OSHA Recordable Safety Incident Rate. It's formula based on 200,000 hours of work in the field, so many incidents per 200,000 man-hours. You can see where it's gone in the last 15 years, from an incident rate of 6.5 down to 0.5. The lower, the closer you're getting to zero. Our job is to make sure that nobody gets hurt at Granite, period. We're getting closer and closer every single year. We operate at about 10 million hours of work in the field annually.
You can imagine the amount of exposure we have with our employees in the field. Core value. Not just a priority, a core value. Also, very proud of the fact that we have, once again, six years in a row, been chosen as one of the world's most ethical companies by the Ethisphere Institute. Big deal. It's the core of who we are. It's how we operate, it's how we treat each other, it's how we treat our customers, our subcontractors, and our vendors. And I'm proud to say that we are the only heavy civil construction company in the United States to be on this list. Something that we endeavor very, very hard to stay on this list for a long time. Sustainability. 2010, we built a sustainability plan to allow and focus our business on sustaining itself over generations and generations in front of us.
We have seven pillars to our Sustainability Plan. We also set goals every single year for every one of those items, every one of those pillars. We monitor. We have a report card in your Sustainability Plan, which was available out front, and I encourage you to read our Sustainability Plan. We monitor and we actually tell ourselves and tell our investors how well we performed every year in every one of these pillars. Now, there are years when we don't progress and we don't meet our goal, but we actually show on our report card how close we got and why we didn't make it. If we didn't make it, or if we did make it, how far along we got above the goal. But we monitor it every year and we update our goals every single year. We have aspirational goals for every one of these seven pillars.
An aspirational goal for safety would be zero incidents in any given year. Another core foundation. 2010, we built it. 2012, we revised it. 2014, we totally rebuilt our Sustainability Plan. This is going to keep us alive and focused going forward for many, many years and generations ahead. So just real quickly, before I close out, a couple of things about our overall execution. 2014, a $2.3 billion company gross profit about $250 million, net income about $25 million. What this does for us is it allows us to develop a balance sheet. A balance sheet is really the report card of your financials of how well you're doing at any certain point in time, like your checkbook. We have a very, very healthy balance sheet.
That balance sheet allows us to provide opportunities to grow the Company, to expand in areas that we think are important, to maintain our capital expenditures so that we can keep growing the Company and doing the things that we want to do. Our backlog. Backlog is the amount of work we have under contract that is yet to be built. We've reached record levels in 2014 and 2015, getting very close to that $3 billion level right now. With that, it allows you to focus on executing that backlog. That is really the final step in procuring backlog is you've got to go build it, and you've got to go build it within the budgets and the quality and the safety format of which you set out to build those projects to begin with. We have invested and are continuing to invest more and more in business development.
We believe there's an opportunity for this Company to grow immensely as we go and reach more customers, different kinds of customers, with different relationships with those customers, with the ability to not just sit out there and be available to bid their work, but to look at them and have them look at us and say, "We want to build your work, and we want you to build our work." Therefore, the negotiations, the relationships are huge for us as we go forward. We start developing a wider clientele of customers. It's a very stable market today, although competitive, much more stable than it was four or five years ago. Very competitive. There's rational bidding environments. We're starting to see the overall construction environment stabilize from what we saw was a significant downturn five to six years ago. Now, we have some headwinds, no doubt about it.
We have a federal highway bill that has now had over 30 continuing resolutions over the last six years. We have a federal highway bill that expired on May 31st, is in a two-month continuing resolution right now till July 31st, and we are working very hard, and Granite is one of the leaders in the industry, to try to get a long-term federal highway bill put in place before the end of the year. We want a highway bill that is five to six years long, has some form of indexing which increases the annual spend every given year. There are some financing mechanisms that are very important for our industry, and Granite is taking one of the leads in making sure that we get a highway bill by the end of the year. It's an uphill battle.
I could talk to you a lot about the funding difficulties in our industry, but there's a lot of uphill battles in Washington, D.C. today, and funding these kinds of investments in our infrastructure is certainly one of those battles. Continuous improvement. We made a very strong effort in Granite several years ago to tell ourselves and to focus on doing things differently. We need to make changes, but when you make changes, you need to make sure that they stick, that they have thought behind them. So we developed Lean Six Sigma techniques. We hired people from outside Granite, and since then, we have actually trained 17 Black Belts in Granite. We have 3 deployment champions in Granite, and we are tackling projects and process improvements from anything from administrative processing of our payroll and our accounts payables all the way to making our asphalt plants operate more efficiently.
We do it with a very methodical, data-driven process so that it sticks. When you're done, it sticks and it stays as a part of your Company as you go forward, and then you replicate it in other parts of the business at the same time. Very valuable for us because for us, there's huge opportunities to become more efficient as we move forward, and those efficiencies allow you to grow as the Company moves down the road. Final slide here, real quickly. Looking ahead, we've had a very good first quarter. We have provided guidance to the street that we will grow our Company in the mid-single-digit revenue range with an EBITDA of about 6%-8% of our revenue. That's growth from where we were last year.
We've been telling our investors that we have a methodical growth plan out in front of us, and that's our intention in 2015, and we continue to expect that to happen in 2016 as well. With that, I will say thank you for your time. I will say thank you for being an investor in Granite, and I would be absolutely happy, both Bill and I to handle any questions you may have. Mr. Powell?
Does that identify yourself and wait for the microphone? Are there any questions from the audience? Yes.
Good morning. My name is Tom Murray. I'm from Napa. I'm a shareholder of record with Schwab Company. CEMEX, a Mexican company, has made big inroads in the American market. Do you buy Granite from CEMEX, or do you sell, or are you a competition? Is that correct?
The answer to that, Tom, is yes, yes, and yes. Even more so than that, they are our strategic partner in certain locations as well. We actually sit in their facilities. They have asphalt plants in their aggregate facilities. We buy asphalt from them. They buy aggregates from us. We buy aggregates from them. They're a good player in the United States.
How does Granite fit in or view the Pacific Free Trade Agreement that's now being developed?
Well, I will say this. I'm not familiar with how it would affect Granite, but we can certainly look into it. I do not have an answer for that.
Thank you. Other questions? Back in the back?
There's one back here first, then we'll be right there too.
Yes. David Spradling, long-term shareholder. As part of your $2.9 billion backlog, and congratulations on that, is there one project that's particularly challenging and/or rewarding that you might like to tell us about?
Well, I will tell you that when you look at our projects, they're all different in nature. And I think what you normally focus on as a challenging or something pretty exciting are the big, big ones. And when you look at our business today, we've got what we call mega jobs now. The industry has migrated from what we used to say was a $100 million job was a big job to a $500 million job to a $1 billion job, and now we have some jobs that are in excess of $1 billion. So those are the first ones that you're always focusing on. A couple of examples, the Tappan Zee Bridge in New York, 17,000-foot long new structure going from Rockland over to Westchester. That's certainly one we focus on heavily. It's one of the biggest jobs in the history of the United States.
Certainly a huge job for New York. We've got a big, big $2 billion-plus job down in Orlando. The I-4 Ultimate, redoing the downtown highway system through Orlando. Another big job that we focused on. We're just finishing up. I would say one of the funnest jobs I've seen, and one of the jobs that I think has actually been the most unique to go build for our teams is the Folsom Dam, a new spillway up in Sacramento that we just finished. It was an excellent project for us. Definitely a different type of a project than a bridge or a downtown expansion of a freeway system working for the Corps of Engineers. We've got projects all over the country. They're exciting. I think everybody has their favorite. Everybody has their own favorite.
But certainly, we spend more energy focusing on the big ones because they're so complex, and the environment has changed so much today from what we used to see. You bet. You're welcome.
Another question?
Sybil Francis Kimberg , Stockholder. I miss not hearing about all the different places around the country and in other areas where you're building. You haven't touched on where you're building anywhere outside the United States at this point?
Yes. So it's a good point. We used to have a very robust set of slides that we talk about all of our projects. We've shortened our overall presentation time. I'd be happy to walk you through a whole bunch of them because believe me, I do it for our employees all over the country as well. It's fun to watch what we build. We build exciting projects. We are basically all over the United States today. There is no state that we don't try to work in. We work in probably 30 states at a time. We are over in Guam doing work with the relocation of the troops from Okinawa to Guam. We're physically up in Canada now. We're up in Toronto doing a very sizable tunnel project. We're up in Newfoundland doing some power distribution work, transmission distribution work up there.
So we're covering the whole U.S. with a part of our vision is to move up into Canada, move out to the U.S. protectorates, and cover the entire United States.
Yes, we are out in Carmel Valley. Yes. We are right down the street. In fact, some of our management is heading out there this afternoon to oversee and help our management out there. It is a job, and actually, I will tell you this. I live right next door to that facility. So what we're doing out in Carmel Valley, in a very environmentally sensitive area, is we're removing an old dam from the '20s and allowing the Carmel River to flow freely into the ocean to allow more of an environmental-friendly program for the fish, everything else there. It is an old dam that was not kept up properly, had some seismic issues, safety issues.
So we're tearing it down, and we're relocating one creek and relocating the Carmel River. We'll complete that project at the end of this year and then do some replanting of the entire river system, and it'll take a couple of years for the entire replanting to engage itself, and then we'll have a whole new river.
Yes. Thank you. Other questions? Seeing none, I'd like to thank all of you for your attendance today. Mr. Roberts, thank you for your presentation, and the meeting is adjourned.
Thank you, Mr. Powell.