What changed in this filing

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Item 1. Financial Statements

2023-07-28 compared with 2023-05-02 · 516 added, 1183 removed, 327 unchanged (84% of the section changed)

3 unchanged sentences

(Unaudited - in thousands, except share and per share data)

March 31, 2023

December 31, 2022

June 30, 2023 December 31, 2022

Current assets

Cash and cash equivalents ($ 112,340 and $ 102,547 related to consolidated construction joint ventures (“CCJVs”))

$ 199,751  

$ 293,991  

Cash and cash equivalents ($ 85,816 and $ 102,547 related to consolidated construction joint ventures (“CCJVs”))

$ 214,446 $ 293,991

Short-term marketable securities 24,981 39,374

39,754  

39,374  

Receivables, net ($ 65,446 and $ 39,281 related to CCJVs)

397,231  

463,987  

636,797 463,987

Contract assets ($ 72,912 and $ 80,306 related to CCJVs)

288,146  

241,916  

97,893  

86,809  

288,349 241,916

Inventories 92,151 86,809

Equity in construction joint ventures 188,093 183,808

182,063  

183,808  

Other current assets ($ 2,947 and $ 5,694 related to CCJVs)

41,397  

37,411  

46,376 37,411

Total current assets 1,491,193 1,347,296

1,246,235  

1,347,296  

Property and equipment, net ($ 7,772 and $ 7,834 related to CCJVs)

531,457  

509,210  

564,077 509,210

Long-term marketable securities 11,575 26,569

16,575  

26,569  

Investments in affiliates 86,611 80,725

83,335  

80,725  

73,703  

Goodwill 78,603 73,703

Right of use assets 53,509 49,079

43,886  

49,079  

Deferred income taxes, net 31,304 22,208

22,080  

22,208  

Other noncurrent assets 59,706 59,143

60,116  

59,143  

$ 2,077,387  

$ 2,167,933  

Total assets $ 2,376,578 $ 2,167,933

LIABILITIES AND EQUITY

1 unchanged sentence

Current maturities of long-term debt $ 1,466 $ 1,447

$ 1,456  

$ 1,447  

Accounts payable ($ 52,443 and $ 57,534 related to CCJVs)

295,125  

334,392  

382,458 334,392

Contract liabilities ($ 50,162 and $ 62,675 related to CCJVs)

160,245  

173,286  

173,288 173,286

Accrued expenses and other current liabilities ($ 7,336 and $ 8,451 related to CCJVs)

266,541  

288,469  

310,022 288,469

Total current liabilities 867,234 797,594

723,367  

797,594  

Long-term debt 458,692 286,934

287,000  

286,934  

Long-term lease liabilities 38,397 32,170

27,934  

32,170  

Deferred income taxes, net 4,571 1,891

Other long-term liabilities 66,234 64,199

64,997  

64,199  

Commitments and contingencies (see Note 17)

2 unchanged sentences

issued and outstanding:

43,880,224 shares as of March 31, 2023 and 43,743,907 shares as of December 31, 2022

43,918,798 shares as of June 30, 2023 and 43,743,907 shares as of December 31, 2022

Additional paid-in capital 470,511 470,407

471,782  

470,407  

Accumulated other comprehensive income 795 788

Retained earnings 429,797 481,384

452,583  

481,384  

Total Granite Construction Incorporated shareholders’

925,457  

953,016  

Total Granite Construction Incorporated shareholders’ equity 901,542 953,016

Non-controlling interests 39,908 32,129

46,954  

32,129  

972,411  

985,145  

Total equity 941,450 985,145

Total liabilities and equity $ 2,376,578 $ 2,167,933

$ 2,077,387  

$ 2,167,933  

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(Unaudited - in thousands, except per share data)

As Restated and Recast

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended

2023 As Restated and Recast 2023 As Restated and Recast

Construction $ 749,413 $ 713,221 $ 1,252,829 $ 1,291,487

Materials 149,139 136,026 205,791 211,646

Total revenue 898,552 849,247 1,458,620 1,503,133

Cost of revenue

Construction 670,259 632,969 1,136,970 1,152,756

Materials 125,207 118,712 186,205 192,719

Total cost of revenue 795,466 751,681 1,323,175 1,345,475

Gross profit 103,086 97,566 135,445 157,658

Selling, general and administrative expenses 64,563 60,121 137,685 130,241

1 unchanged sentence

Gain on sales of property and equipment, net ( 3,944 ) ( 8,915 ) ( 5,981 ) ( 9,513 )

Operating loss

Operating income (loss) 28,860 29,748 ( 14,389 ) 14,039

Other (income) expense

Loss on debt extinguishment 51,052 — 51,052 —

Interest income ( 3,232 ) ( 782 ) ( 6,994 ) ( 1,352 )

2 unchanged sentences

Other (income) expense, net ( 1,225 ) 3,261 ( 3,175 ) 4,569

Total other (income) expense, net

Loss before income taxes

Total other expense, net 43,682 1,502 35,674 4,536

Income (loss) before income taxes ( 14,822 ) 28,246 ( 50,063 ) 9,503

Provision for (benefit from) income taxes 9,024 8,668 ( 445 ) 15,020

Net income (loss) ( 23,846 ) 19,578 ( 49,618 ) ( 5,517 )

Amount attributable to non-controlling interests 6,846 ( 897 ) 9,595 ( 2,535 )

Net loss attributable to Granite Construction Incorporated

Net loss per share attributable to common shareholders (see Note 15):

Net income (loss) attributable to Granite Construction Incorporated $ ( 17,000 ) $ 18,681 $ ( 40,023 ) $ ( 8,052 )

Net income (loss) per share attributable to common shareholders (see Note 15):

Basic $ ( 0.39 ) $ 0.42 $ ( 0.91 ) $ ( 0.18 )

Diluted $ ( 0.39 ) $ 0.39 $ ( 0.91 ) $ ( 0.18 )

Weighted average shares outstanding:

Basic 43,892 44,534 43,829 45,128

Diluted 43,892 52,295 43,829 45,128

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(Unaudited - in thousands)

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended

2023 As Restated 2023 As Restated

Net income (loss) $ ( 23,846 ) $ 19,578 $ ( 49,618 ) $ ( 5,517 )

Other comprehensive income (loss), net of tax:

1 unchanged sentence

reclassification for net gains included in interest expense, net of tax 112 1,282 112 3,042

Net change $ ( 254 ) $ 905 $ ( 446 ) $ 5,101

Foreign currency translation adjustments, net 396 ( 90 ) 453 646

Other comprehensive income (loss), net of tax

Comprehensive loss, net of tax

Non-controlling interests in comprehensive income, net of tax

Comprehensive loss attributable to Granite Construction Incorporated, net of tax

Other comprehensive income, net of tax $ 142 $ 815 $ 7 $ 5,747

Comprehensive income (loss), net of tax $ ( 23,704 ) $ 20,393 $ ( 49,611 ) $ 230

Non-controlling interests in comprehensive (income) loss, net of tax 6,846 ( 897 ) 9,595 ( 2,535 )

Comprehensive income (loss) attributable to Granite Construction Incorporated, net of tax $ ( 16,858 ) $ 19,496 $ ( 40,016 ) $ ( 2,305 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - in thousands, except share data)

Outstanding Shares  

Common Stock  

Additional Paid-In Capital  

Accumulated Other Comprehensive Income (Loss)  

Retained Earnings  

Total Granite Shareholders’

Equity  

Non-controlling Interests  

Total Equity  

Balances at December 31, 2022

43,743,907  

$ 470,407  

$ 481,384  

$ 953,016  

$ 32,129  

$ 985,145  

( 23,023 )  

( 2,749 )  

Other comprehensive loss

( 135 )  

Outstanding Shares Common Stock Additional

Capital Accumulated Other

Comprehensive Income (Loss) Retained Earnings Total Granite

Shareholders’ Equity Non-controlling Interests Total Equity

Balances at March 31, 2023 43,880,224 $ 439 $ 471,782 $ 653 $ 452,583 $ 925,457 $ 46,954 $ 972,411

Net loss — — — — ( 17,000 ) ( 17,000 ) ( 6,846 ) ( 23,846 )

Other comprehensive income — — — 142 — 142 — 142

Repurchases of common stock (1) ( 6,342 ) ( 1 ) ( 243 ) — — ( 244 ) — ( 244 )

( 87,260 )  

( 3,523 )  

223,967  

Restricted stock units (“RSUs”) vested 37,394 1 ( 1 ) — — — — —

Dividends on common stock ($ 0.13 per share)

( 5,778 )  

( 5,704 )  

— — 76 — ( 5,786 ) ( 5,710 ) — ( 5,710 )

Capped call transactions — — ( 39,379 ) — — ( 39,379 ) — ( 39,379 )

Redemption of warrants — — ( 13,201 ) — — ( 13,201 ) — ( 13,201 )

Loss on debt extinguishment 1,390,500 14 49,321 — — 49,335 — 49,335

Exercise of bond hedge ( 1,390,516 ) ( 14 ) 14 — — — — —

Transactions with non-controlling interests — — — — — — ( 200 ) ( 200 )

17,574  

Stock-based compensation expense and other 7,538 — 2,142 — — 2,142 — 2,142

( 390 )  

Balances at March 31, 2023

43,880,224  

$ 471,782  

$ 452,583  

$ 925,457  

$ 46,954  

$ 972,411  

Balances at June 30, 2023 43,918,798 $ 439 $ 470,511 $ 795 $ 429,797 $ 901,542 $ 39,908 $ 941,450

Balances at March 31, 2022 (as restated) 45,364,137 $ 454 $ 515,262 $ 1,573 $ 388,756 $ 906,045 $ 35,844 $ 941,889

Net income (as restated) — — — — 18,681 18,681 897 19,578

Other comprehensive income — — — 815 — 815 — 815

Repurchases of common stock (1) ( 1,325,706 ) ( 13 ) ( 50,151 ) — — ( 50,164 ) — ( 50,164 )

RSUs vested 30,596 — — — — — — —

Dividends on common stock ($ 0.13 per share)

— — 75 — ( 5,846 ) ( 5,771 ) — ( 5,771 )

Transactions with non-controlling interests — — — — — — ( 3,425 ) ( 3,425 )

Stock-based compensation expense and other 9,442 — 1,973 — 76 2,049 — 2,049

Balances at June 30, 2022 (as restated) 44,078,469 $ 441 $ 467,159 $ 2,388 $ 401,667 $ 871,655 $ 33,316 $ 904,971

(1) This amount represents employee tax withholding for restricted stock units ("RSUs") vested under our equity incentive plans in 2022 and 2023 and stock repurchased in 2022 under the Board approved repurchase plan.

During the three months ended June 30, 2023 and 2022, there were 6,342 shares and 5,138 shares, respectively, withheld related to employee taxes for RSUs.

During the three months ended June 30, 2022, we also repurchased 1,320,568 shares under the share repurchase program.

The accompanying notes are an integral part of these condensed consolidated financial statements.

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - in thousands, except share data)

Outstanding Shares Common Stock Additional

Capital Accumulated Other

Comprehensive Income (Loss) Retained Earnings Total Granite

Shareholders’ Equity Non-controlling Interests Total Equity

Balances at December 31, 2022 43,743,907 $ 437 $ 470,407 $ 788 $ 481,384 $ 953,016 $ 32,129 $ 985,145

45,840,260  

$ 559,752  

$ ( 3,359 )  

$ 410,831  

$ 967,682  

$ 27,881  

$ 995,563  

Net loss — — — — ( 40,023 ) ( 40,023 ) ( 9,595 ) ( 49,618 )

Other comprehensive income — — — 7 — 7 — 7

Repurchases of common stock (1) ( 93,602 ) ( 1 ) ( 3,766 ) — — ( 3,767 ) — ( 3,767 )

RSUs vested 261,362 3 ( 3 ) — — — — —

Dividends on common stock ($ 0.13 per share per quarter)

— — 150 — ( 11,564 ) ( 11,414 ) — ( 11,414 )

Capped call transactions — — ( 39,379 ) — — ( 39,379 ) — ( 39,379 )

Redemption of warrants — — ( 13,201 ) — — ( 13,201 ) — ( 13,201 )

Loss on debt extinguishment 1,390,500 14 49,321 — — 49,335 — 49,335

Exercise of bond hedge ( 1,390,516 ) ( 14 ) 14 — — — — —

Transactions with non-controlling interests — — — — — — 17,374 17,374

Stock-based compensation expense and other 7,147 — 6,968 — — 6,968 — 6,968

Balances at June 30, 2023 43,918,798 $ 439 $ 470,511 $ 795 $ 429,797 $ 901,542 $ 39,908 $ 941,450

Balances at December 31, 2021 45,840,260 $ 458 $ 559,752 $ ( 3,359 ) $ 410,831 $ 967,682 $ 27,881 $ 995,563

Cumulative effect of newly adopted accounting standard — — ( 26,961 ) — 10,543 ( 16,418 ) — ( 16,418 )

( 26,961 )  

10,543  

( 16,418 )  

Balances at January 1, 2022 45,840,260 458 532,791 ( 3,359 ) 421,374 951,264 27,881 979,145

45,840,260  

532,791  

( 3,359 )  

421,374  

951,264  

27,881  

979,145  

Net income (loss) (as restated) — — — — ( 8,052 ) ( 8,052 ) 2,535 ( 5,517 )

( 26,733 )  

Other comprehensive income — — — 5,747 — 5,747 — 5,747

Repurchases of common stock (1) ( 1,991,586 ) ( 19 ) ( 70,357 ) — — ( 70,376 ) — ( 70,376 )

( 665,880 )  

( 20,206 )  

( 20,212 )  

190,170  

Dividends on common stock ($ 0.13 per share)

( 5,885 )  

( 5,816 )  

RSUs vested 220,766 2 ( 2 ) — — — — —

Dividends on common stock ($ 0.13 per share per quarter)

— — 144 — ( 11,731 ) ( 11,587 ) — ( 11,587 )

Transactions with non-controlling interests — — — — — — 2,900 2,900

Stock-based compensation expense and other 9,029 — 4,583 — 76 4,659 — 4,659

( 413 )  

Balances at March 31, 2022 (as restated)

45,364,137  

$ 515,262  

$ 1,573  

$ 388,756  

$ 906,045  

$ 35,844  

$ 941,889  

(1) This amount represents employee tax withholding for restricted stock units ("RSUs") vested under our equity incentive plans in 2022 and 2023 and stock repurchased in 2022 under the Board approved repurchase plan.

During the three months ended March 31, 2023 and 2022, there were 87,260 shares and 54,880 shares, respectively, withheld related to employee taxes for RSUs.

During the three months ended March 31, 2022, we also repurchased 611,000 shares under the share repurchase program.

Balances at June 30, 2022 (as restated) 44,078,469 $ 441 $ 467,159 $ 2,388 $ 401,667 $ 871,655 $ 33,316 $ 904,971

During the six months ended June 30, 2023 and 2022, there were 93,602 shares and 60,018 shares, respectively, withheld related to employee taxes for RSUs.

During the six months ended June 30, 2022, we also repurchased 1,931,568 shares under the share repurchase program.

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

( Unaudited - in thousands )

Three Months Ended March 31,

Six Months Ended June 30, 2023 As Restated

Operating activities

$ ( 25,772 )  

Net loss $ ( 49,618 ) $ ( 5,517 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation, depletion and amortization 41,528 32,328

19,733  

16,737  

Amortization related to long-term debt 988 1,423

Non-cash loss on debt extinguishment 51,052 —

Gain on sale of business — ( 6,234 )

Gain on sales of property and equipment, net ( 5,981 ) ( 9,513 )

( 2,037 )  

Deferred income taxes — 2,545

Stock-based compensation 6,702 4,376

Equity in net (income) loss from unconsolidated joint ventures

( 911 )  

Equity in net loss from unconsolidated joint ventures 4,005 17,228

Net income from affiliates ( 12,231 ) ( 6,165 )

( 5,187 )  

Other non-cash adjustments ( 7 ) ( 84 )

( 151 )  

Changes in assets and liabilities:

66,800  

85,957  

Receivables ( 171,469 ) ( 69,114 )

Contract assets, net ( 46,469 ) ( 71,282 )

( 59,307 )  

( 11,083 )  

Inventories ( 3,439 ) ( 18,618 )

Contributions to unconsolidated construction joint ventures ( 14,710 ) ( 33,563 )

( 3,350 )  

Distributions from unconsolidated construction joint ventures and affiliates 6,246 6,522

Other assets, net ( 6,464 ) 22,053

( 5,724 )  

Accounts payable 51,552 17,983

( 42,955 )  

Accrual for resolution of SEC investigation — 12,000

Accrued expenses and other liabilities, net 29,367 354

( 14,522 )  

Net cash used in operating activities ( 118,948 ) ( 103,278 )

$ ( 76,688 )  

Investing activities

1 unchanged sentence

Maturities of marketable securities 30,000 —

10,000  

Purchases of property and equipment ( 79,689 ) ( 73,216 )

( 40,461 )  

Proceeds from sales of property and equipment 10,564 15,289

1 unchanged sentence

Proceeds from the sale of business — 142,571

142,571  

Acquisition of business ( 26,933 ) —

Issuance of notes receivable — ( 4,560 )

1 unchanged sentence

Net cash provided by (used in) investing activities ( 64,378 ) 30,317

$ ( 24,336 )  

$ 89,396  

Financing activities

Proceeds from long-term debt 55,000 50,000

Debt principal repayments ( 249,589 ) ( 124,660 )

( 256 )  

Capped call transactions ( 53,035 ) —

Redemption of warrants ( 13,201 ) —

Proceeds from issuance of 3.75 % Convertible Notes

Debt issuance costs ( 9,806 ) —

Cash dividends paid ( 11,391 ) ( 11,857 )

( 5,687 )  

Repurchases of common stock ( 3,766 ) ( 70,374 )

( 3,523 )  

Contributions from non-controlling partners 22,400 6,327

17,600  

Distributions to non-controlling partners ( 6,850 ) ( 6,700 )

( 1,350 )  

Other financing activities, net 269 209

Net cash provided by (used in) financing activities 103,781 ( 157,055 )

$ 6,784  

Net decrease in cash, cash equivalents and restricted cash ( 79,545 ) ( 230,016 )

( 94,240 )  

Cash, cash equivalents and $ 0 and $ 1,512 in restricted cash at beginning of period

293,991  

413,655  

Cash, cash equivalents and $ 0 and $ 1,512 in restricted cash at end of period

$ 199,751  

$ 369,967  

293,991 413,655

Cash, cash equivalents and $ 0 in restricted cash at end of period

$ 214,446 $ 183,639

Supplementary Information

Right of use assets obtained in exchange for lease obligations $ 19,558 $ 8,167

$ 3,388  

$ 3,502  

Cash paid during the period for:

Operating lease liabilities $ 11,351 $ 11,667

$ 5,824  

$ 5,862  

$ 1,012  

$ 2,090  

Interest $ 5,531 $ 6,786

Income taxes $ 4,851 $ 1,553

Other non-cash operating activities:

Performance guarantees $ ( 6,513 ) $ ( 4,678 )

$ ( 6,513 )  

Deferred taxes related to capped call transactions $ 13,656 $ —

Non-cash investing and financing activities:

RSUs issued, net of forfeitures $ 10,981 $ 7,688

$ 9,552  

$ 6,606  

Dividends declared but not paid $ 5,709 $ 5,730

$ 5,704  

$ 5,897  

Contributions from non-controlling partners $ 1,822 $ 3,274

$ 1,324  

Accrued equipment purchases $ ( 4,330 ) $ ( 5,149 )

$ 3,693  

$ 5,511  

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation: 

The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,”

“us,”

“our,”

the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), are unaudited and should be read in conjunction with our Annual Report on Form 10 -K for the year ended 

December 31, 2022  (“Annual Report”).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have been condensed or omitted.

Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at 

March 31, 2023  and 

2022  and the results of our operations and cash flows for the periods presented.

December 31, 2022  condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements but does not include all disclosures required by U.S.

Seasonality: 

Our operations are typically affected more by weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability.

Therefore, the results of operations for the three months ended March 31, 2023  are not necessarily indicative of the results to be expected for the full year.

Subsequent Event:

Basis of Presentation:

The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), are unaudited and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have been condensed or omitted.

Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at June 30, 2023 and the results of our operations and cash flows for the periods presented.

The December 31, 2022 condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements but does not include all disclosures required by U.S.

Acquisition :

On April 24, 2023, we completed the purchase of Coast Mountain Resources (2020) Ltd.

(“CMR”) for approximately $ 27 million, subject to certain adjustments.

(“CMR”) for approximately $ 26.9 million in cash, subject to certain adjustments.

CMR is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land.

This acquisition is not expected to have a material impact on our results of operations.

CMR results are reported in the Materials segment.

This acquisition did not have a material impact on our financial statements.

In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 805, Business Combinations , the total purchase price and assumed liabilities were allocated based on their estimated fair values as of April 24, 2023.

The tangible assets acquired and liabilities assumed were approximately $ 29.2 million and $ 7.1 million, respectively, resulting in acquired goodwill of $ 4.8 million.

The tangible assets balance consists primarily of equipment, vehicles and the right-to-mine which are reported in Property and equipment, net.

The estimated allocation is subject to revision during the measurement period, which may result in adjustments to the values presented herein.

We expect to finalize these amounts within 12 months from the acquisition date.

Therefore, the results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year.

Recently Issued and Adopted Accounting Pronouncements

We closely monitor all Accounting Standards Updates issued by the Financial Accounting Standards Board and other authoritative guidance.

We closely monitor all Accounting Standards Updates issued by the FASB and other authoritative guidance.

There are currently no recently issued accounting pronouncements that are expected to have a material impact on our financial statements.

No new accounting pronouncements were adopted in the three months ended March 31, 2023 that had a material impact on our financial statements.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

 Restatement and Recast

No new accounting pronouncements were adopted in the six months ended June 30, 2023 that had a material impact on our financial statements.

Restatement and Recast

Restatement and Recast Background

first  quarter of 

2022  and was classified within discontinued operations in the Company's condensed consolidated financial statements during the 

first  and 

second  quarters of 

2022  and in Other costs, net and Provision for income taxes during the 

third  quarter of 

As a result, our previously issued unaudited quarterly financial information for each interim period within the 

nine  months ended 

September 30, 2022 require restatement. The restated financial information also includes adjustments to correct other immaterial errors in the 

three  quarters of 

2022,  including certain errors (primarily in revenue and cost of revenue, including the associated tax impact) that had previously been adjusted for as out of period corrections in the periods identified.

During the fourth quarter of 2021, we concluded that the assets and liabilities of our former Water and Mineral Services operating group (“WMS”) met the criteria for classification as held for sale and the results of operations were presented as discontinued operations.

As disclosed in our Annual Report, we identified errors during the preparation of the Annual Report related to deferred taxes and the calculation of income tax expense of $ 12.3 million in connection with the sale of Inliner, which was completed in the first quarter of 2022 and was classified within discontinued operations in our condensed consolidated financial statements during the first and second quarters of 2022 and in Other costs, net and Provision for income taxes during the third quarter of 2022.

As a result, our previously issued unaudited quarterly financial information for each interim period within the nine months ended September 30, 2022 require restatement.

The restated financial information also includes adjustments to correct other immaterial errors in the first three quarters of 2022, including certain errors (primarily in revenue and cost of revenue, as well as the associated tax impact) that had previously been adjusted for as out of period corrections in the periods identified.

This included:

our trenchless and pipe rehabilitation services business (“Inliner”);

our water supply, treatment, delivery and maintenance business (“Water Resources”);

and our mineral exploration drilling business (“Mineral Services”).

During the first quarter of 2022, we completed the sale of Inliner. In 

September 2022, 

we announced our decision to retain the Water Resources and Mineral Services businesses that were previously classified as held for sale and reported in discontinued operations.

In connection with the reclassification of the WMS businesses from discontinued operations to continuing operations, the condensed consolidated statement of operations for the period ended March 31, 2022, 

as previously reported, has been recast to include Inliner through the date of sale, as well as the ongoing operations of Water Resources and Mineral Services in continuing operations.

our trenchless and pipe rehabilitation services business (“Inliner”);

our water supply, treatment, delivery and maintenance business (“Water Resources”);

and our mineral exploration drilling business (“Mineral Services”).

During the first quarter of 2022, we completed the sale of Inliner.

In September 2022, we announced our decision to retain the Water Resources and Mineral Services businesses that were previously classified as held for sale and reported in discontinued operations.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2022, as previously reported, have been recast to include Inliner through the date of sale, as well as the ongoing operations of Water Resources and Mineral Services in continuing operations.

Description of Restatement and Recast Tables

We have presented below a reconciliation from the previously reported to the restated and recast amounts for the quarter ended 

March 31, 2022. 

The amounts labeled “As Previously Reported”

were derived from our Quarterly Report on Form 

10 -Q for the quarter ended March 31, 2022 filed on April 28, 2022.

The impacts to the condensed consolidated statements of shareholders’

equity and comprehensive income (loss) as a result of the restatement were due to the changes in net loss for the three months ended March 31, 2022.

In addition, there was no impact to net cash provided by (used in) investing and financing activities for the three months ended March 31, 2022 as a result of the restatement or recast.

The effects of the prior-period errors and the discontinued operations reclassification impacts on our condensed consolidated financial statements are as follows (in thousands, except per share data):

We have presented below a reconciliation from the previously reported to the restated and recast amounts for the three and six months ended June 30, 2022.

The amounts labeled “As Previously Reported” were derived from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed on July 28, 2022.

The impacts to the condensed consolidated statements of shareholders’ equity and comprehensive income (loss) as a result of the restatement were due to the changes in net loss for the three and six months ended June 30, 2022.

In addition, there was no impact to net cash provided by (used in) investing and financing activities for the six months ended June 30, 2022 as a result of the restatement or recast.

The effects of the prior-period errors and the discontinued operations reclassification impacts on our condensed consolidated financial statements are as follows (in thousands, except per share data):

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Three months ended March 31, 2022

As Previously Reported  

Restatement Impacts  

As Restated  

Discontinued Operations Reclassification Impacts  

As Restated and Recast  

$ 474,935  

$ 1,893  

$ 476,828  

$ 101,438  

$ 578,266  

72,651  

75,620  

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Three months ended June 30, 2022 As Previously Reported Restatement Impacts As Restated Discontinued Operations

Reclassification Impacts As Restated and Recast

Construction $ 632,260 $ ( 1,893 ) $ 630,367 $ 82,854 $ 713,221

Materials 136,026 — 136,026 — 136,026

Total revenue 768,286 ( 1,893 ) 766,393 82,854 849,247

547,586  

549,479  

104,407  

653,886  

Cost of revenue

426,743  

432,762  

87,025  

519,787  

71,068  

74,007  

Construction 571,094 ( 6,018 ) 565,076 67,893 632,969

Materials 118,712 — 118,712 — 118,712

Total cost of revenue 689,806 ( 6,018 ) 683,788 67,893 751,681

497,811  

503,830  

89,964  

593,794  

49,775  

( 4,126 )  

45,649  

14,443  

60,092  

Gross profit 78,480 4,125 82,605 14,961 97,566

Selling, general and administrative expenses 53,162 — 53,162 6,959 60,121

58,501  

11,619  

70,120  

Other costs, net 20,177 — 20,177 ( 3,565 ) 16,612

( 1,935 )  

Gain on sales of property and equipment, net ( 385 ) — ( 385 ) ( 8,530 ) ( 8,915 )

( 332 )  

( 266 )  

Operating loss

( 16,608 )  

( 4,126 )  

( 20,734 )  

Operating income 5,526 4,125 9,651 20,097 29,748

Other (income) expense

Interest income ( 782 ) — ( 782 ) — ( 782 )

( 623 )  

Interest expense 3,896 — 3,896 3 3,899

Equity in income (loss) of affiliates ( 541 ) — ( 541 ) ( 4,335 ) ( 4,876 )

( 1,595 )  

Other income, net 3,357 — 3,357 ( 96 ) 3,261

( 74 )  

Total other expense, net 5,930 — 5,930 ( 4,428 ) 1,502

( 1,606 )  

Loss from continuing operations before income taxes

( 21,248 )  

( 4,126 )  

( 25,374 )  

Provision for (benefit from) income taxes on continuing operations

( 5,331 )  

( 958 )  

( 6,289 )  

12,641  

Net loss from continuing operations

( 15,917 )  

( 3,168 )  

( 19,085 )  

( 6,010 )  

Income (loss) from continuing operations before income taxes ( 404 ) 4,125 3,721 24,525 28,246

Provision for income taxes on continuing operations 2,549 959 3,508 5,160 8,668

Net income (loss) from continuing operations ( 2,953 ) 3,166 213 19,365 19,578

Net income (loss) from discontinued operations 19,521 ( 156 ) 19,365 ( 19,365 ) —

( 12,106 )  

( 6,010 )  

( 9,821 )  

( 15,274 )  

( 25,095 )  

Net income 16,568 3,010 19,578 — 19,578

Amount attributable to non-controlling interests 583 ( 1,480 ) ( 897 ) — ( 897 )

( 3,118 )  

( 1,638 )  

Net income (loss) attributable to Granite Construction Incorporated from continuing operations ( 2,370 ) 1,686 ( 684 ) 19,365 18,681

Net income attributable to Granite Construction Incorporated from discontinued operations 19,521 ( 156 ) 19,365 ( 19,365 ) —

Net income attributable to Granite Construction Incorporated $ 17,151 $ 1,530 $ 18,681 $ — $ 18,681

Net income (loss) per share attributable to common shareholders

Basic continuing operations per share $ ( 0.05 ) $ 0.03 $ ( 0.02 ) $ 0.44 $ 0.42

Basic discontinued operations per share 0.44 ( 0.01 ) 0.43 ( 0.43 ) —

Basic earnings per share $ 0.39 $ 0.02 $ 0.41 $ 0.01 $ 0.42

Diluted continuing operations per share $ ( 0.05 ) $ 0.03 $ ( 0.02 ) $ 0.41 $ 0.39

Diluted discontinued operations per share 0.44 ( 0.01 ) 0.43 ( 0.43 ) —

Diluted earnings per share $ 0.39 $ 0.02 $ 0.41 $ ( 0.02 ) $ 0.39

Weighted average shares outstanding:

Basic 44,534 — 44,534 — 44,534

Diluted 44,534 — 44,534 — 52,295

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Six months ended June 30, 2022 As Previously Reported Restatement Impacts As Restated Discontinued Operations

Reclassification Impacts As Restated and Recast

Construction $ 1,107,195 $ — $ 1,107,195 $ 184,292 $ 1,291,487

Materials 208,677 — 208,677 2,969 211,646

Total revenue 1,315,872 — 1,315,872 187,261 1,503,133

Cost of revenue

Construction 997,837 — 997,837 154,919 1,152,756

Materials 189,780 — 189,780 2,939 192,719

Total cost of revenue 1,187,617 — 1,187,617 157,858 1,345,475

Gross profit 128,255 — 128,255 29,403 157,658

Selling, general and administrative expenses 111,663 — 111,663 18,578 130,241

Other costs, net 28,391 — 28,391 ( 5,500 ) 22,891

Gain on sales of property and equipment, net ( 717 ) — ( 717 ) ( 8,796 ) ( 9,513 )

Operating income ( 11,082 ) — ( 11,082 ) 25,121 14,039

Other (income) expense

Interest income ( 1,405 ) — ( 1,405 ) 53 ( 1,352 )

Interest expense 7,471 — 7,471 13 7,484

Equity in income (loss) of affiliates ( 235 ) — ( 235 ) ( 5,930 ) ( 6,165 )

Other income, net 4,739 — 4,739 ( 170 ) 4,569

Total other expense, net 10,570 — 10,570 ( 6,034 ) 4,536

Income (loss) from continuing operations before income taxes ( 21,652 ) — ( 21,652 ) 31,155 9,503

Provision for (benefit from) income taxes on continuing operations ( 2,782 ) — ( 2,782 ) 17,802 15,020

Net income (loss) from continuing operations ( 18,870 ) — ( 18,870 ) 13,353 ( 5,517 )

Net income from discontinued operations 25,617 ( 12,264 ) 13,353 ( 13,353 ) —

Net income (loss) 6,747 ( 12,264 ) ( 5,517 ) — ( 5,517 )

Amount attributable to non-controlling interests ( 2,535 ) — ( 2,535 ) — ( 2,535 )

Net (loss) attributable to Granite Construction Incorporated from continuing operations ( 21,405 ) — ( 21,405 ) 13,353 ( 8,052 )

( 19,035 )  

( 1,688 )  

( 20,723 )  

( 6,010 )  

Net income (loss) attributable to Granite Construction Incorporated from discontinued operations

( 12,106 )  

( 6,010 )  

Net loss attributable to Granite Construction Incorporated

$ ( 12,939 )  

$ ( 13,794 )  

$ ( 26,733 )  

Net income attributable to Granite Construction Incorporated from discontinued operations 25,617 ( 12,264 ) 13,353 ( 13,353 ) —

Net income (loss) attributable to Granite Construction Incorporated $ 4,212 $ ( 12,264 ) $ ( 8,052 ) $ — $ ( 8,052 )

Net income (loss) per share attributable to common shareholders

Basic continuing operations per share $ ( 0.47 ) $ — $ ( 0.47 ) $ 0.29 $ ( 0.18 )

$ ( 0.42 )  

$ ( 0.03 )  

$ ( 0.45 )  

$ ( 0.13 )  

Basic discontinued operations per share 0.57 ( 0.27 ) 0.30 ( 0.30 ) —

( 0.26 )  

( 0.13 )  

Basic loss per share

$ ( 0.29 )  

$ ( 0.58 )  

Basic earnings (loss) per share $ 0.10 $ ( 0.27 ) $ ( 0.17 ) $ ( 0.01 ) $ ( 0.18 )

Diluted continuing operations per share $ ( 0.47 ) $ — $ ( 0.47 ) $ 0.29 $ ( 0.18 )

$ ( 0.42 )  

$ ( 0.03 )  

$ ( 0.45 )  

$ ( 0.13 )  

Diluted discontinued operations per share 0.57 ( 0.27 ) 0.30 ( 0.30 ) —

( 0.26 )  

( 0.13 )  

Diluted loss per share

$ ( 0.29 )  

$ ( 0.58 )  

Diluted earnings (loss) per share $ 0.10 $ ( 0.27 ) $ ( 0.17 ) $ ( 0.01 ) $ ( 0.18 )

Weighted average shares outstanding:

45,730  

Basic 45,128 — 45,128 — 45,128

Diluted 45,128 — 45,128 — 45,128

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Three months ended March 31, 2022

As Previously Reported

Restatement Impacts

Six months ended June 30, 2022 As Previously Reported Restatement Impacts As Restated

Operating activities

$ ( 9,821 )  

$ ( 15,274 )  

Net income (loss) $ 6,747 $ ( 12,264 ) $ ( 5,517 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation, depletion and amortization 32,328 — 32,328

16,737  

Amortization related to long-term debt 1,423 — 1,423

Gain on sale of business ( 6,234 ) — ( 6,234 )

( 6,234 )  

Gain on sales of property and equipment, net ( 9,513 ) — ( 9,513 )

( 598 )  

Deferred income taxes 2,545 — 2,545

1 unchanged sentence

Equity in net loss from unconsolidated joint ventures 17,228 — 17,228

Net income from affiliates

( 1,289 )  

Net loss from affiliates ( 6,165 ) — ( 6,165 )

Other non-cash adjustments ( 84 ) — ( 84 )

( 299 )  

Changes in assets and liabilities:

85,957  

Receivables ( 69,114 ) — ( 69,114 )

Contract assets, net ( 71,282 ) — ( 71,282 )

( 72,632 )  

( 13,805 )  

Inventories ( 18,618 ) — ( 18,618 )

Contributions to unconsolidated construction joint ventures ( 33,563 ) — ( 33,563 )

( 12,840 )  

Distributions from unconsolidated construction joint ventures and affiliates 6,522 — 6,522

1 unchanged sentence

Accounts payable 17,983 — 17,983

( 44,028 )  

Accrual for expected resolution of SEC investigation 12,000 — 12,000

Accrued expenses and other liabilities, net ( 5,484 ) 5,838 354

( 2,280 )  

Net cash used in operating activities $ ( 103,278 ) $ — $ ( 103,278 )

$ ( 50,180 )  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Revisions in Estimates

Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project.

These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved.

These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved.

Changes in estimates of transaction price and costs to complete may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate.

1 unchanged sentence

When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period.

For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.

In our review of these changes for the 

three months ended March 31, 2023  and 2022 , we did 

not  identify any material amounts that should have been recorded in a prior period.

There were 

no  increases from revisions in estimates, which individually had an impact of $ 5.0  million or more on gross profit for the 

three months ended March 31, 2023  and 2022 . 

There were 

no  decreases from revisions in estimates, which individually had an impact of $ 5.0  million or more on gross profit for the 

three months ended March 31, 2022 . 

The projects with decreases from revisions in estimates during the three months ended March 31, 2023, which individually had an impact of $ 5.0 million or more on gross profit, are summarized as follows (dollars in millions, except per share data):

Three Months Ended March 31,

For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation.

Under this method, revisions in estimates are accounted for in their entirety in the period of change.

There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.

In our review of these changes for the three and six months ended June 30, 2023 and 2022, we did not identify any material amounts that should have been recorded in a prior period.

During the six months ended June 30, 2023, there was one project with an increase from revisions in estimates which had an impact to gross profit of $ 6.9 million and a reduction of net loss of $ 5.2 million, with $ 2.7 million of that amount attributable to non-controlling interests.

The revision decreased the net loss per diluted share by $ 0.06 .

The increase was due to decreases in estimated costs from mitigated risks.

There were no increases to revisions which individually had an impact of $ 5.0 million or more on gross profit during the three months ended June 30, 2023 or during the three and six months ended June 30, 2022.

The projects with decreases from revisions in estimates, which individually had an impact of $ 5.0 million or more on gross profit, are summarized as follows (dollars in millions, except per share data):

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Number of projects with downward estimate changes 1 3 2 5

Range of reduction in gross profit from each project, net $ 20.7 $ 5.9 - 7.6

$ 6.2 - 11.4  

Decrease to project profitability, net $ 20.7 $ 19.5 $ 38.0 $ 35.6

$ 17.6  

Decrease to net income/increase to net loss $ 15.8 $ 14.9 $ 29.0 $ 27.3

$ 13.1  

Amounts attributable to non-controlling interests $ 10.4 $ 3.0 $ 16.0 $ 3.0

1 unchanged sentence

Decrease to net income/increase to net loss per diluted share attributable to common shareholders $ 0.12 $ 0.23 $ 0.30 $ 0.54

$ 0.17  

The decreases during the 

three months ended March 31, 2023 were due to additional costs related to changes in project duration, increased labor and materials costs, lower productivity than originally anticipated and unfavorable weather. 

The decreases during the three and six months ended June 30, 2023 were due to additional costs related to changes in project duration and increased labor and materials costs.

The decreases during the three and six months ended June 30, 2022 were due to additional costs related to extended project duration, increased labor and materials costs, and disputed work being performed where there were ongoing legal claims.

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

Disaggregation of Revenue

We disaggregate our revenue based on our reportable segments (see Note 18 ) and operating groups as these are the formats that are regularly reviewed by management.

We disaggregate our revenue based on our reportable segments (see Note 18) and operating groups as these are the formats that are regularly reviewed by management.

Our reportable segments are:

Construction and Materials.

In alphabetical order, our operating groups are:

California, Central and Mountain. The following tables present our disaggregated revenue by operating group (in thousands):

Three Months Ended March 31,

$ 148,947  

$ 30,138  

$ 179,085  

171,002  

11,556  

182,558  

183,467  

14,958  

198,425  

$ 503,416  

$ 56,652  

$ 560,068  

2022 (As Restated and Recast)

$ 146,309  

$ 45,687  

$ 191,996  

219,894  

10,362  

230,256  

212,063  

19,571  

231,634  

$ 578,266  

$ 75,620  

$ 653,886  

In alphabetical order, our operating groups are:

California, Central and Mountain.

The following tables present our disaggregated revenue by operating group (in thousands):

Three Months Ended June 30,

2023 Construction Materials Total

California $ 232,902 $ 77,216 $ 310,118

Central 200,486 12,338 212,824

Mountain 316,025 59,585 375,610

Total $ 749,413 $ 149,139 $ 898,552

2022 (As Restated and Recast) Construction Materials Total

California $ 197,435 $ 71,572 $ 269,007

Central 211,605 13,901 225,506

Mountain 304,181 50,553 354,734

Total $ 713,221 $ 136,026 $ 849,247

Six Months Ended June 30,

2023 Construction Materials Total

California $ 381,849 $ 107,354 $ 489,203

Central 371,488 23,894 395,382

Mountain 499,492 74,543 574,035

Total $ 1,252,829 $ 205,791 $ 1,458,620

2022 (As Recast) Construction Materials Total

California $ 343,744 $ 117,259 $ 461,003

Central 431,499 24,263 455,762

Mountain 516,244 70,124 586,368

Total $ 1,291,487 $ 211,646 $ 1,503,133

Unearned Revenue

The following table presents our unearned revenue as of the respective periods:

(in thousands)

March 31, 2023

December 31, 2022

$ 1,011,489  

$ 945,971  

1,437,759  

1,444,983  

714,320  

486,524  

$ 3,163,568  

$ 2,877,478  

The following table presents our unearned revenue as of the respective periods:

(in thousands) June 30, 2023 December 31, 2022

California $ 1,266,122 $ 945,971

Central 1,336,341 1,444,983

Mountain 790,043 486,524

Total $ 3,392,506 $ 2,877,478

All unearned revenue is in the Construction segment.

Approximately $ 2.1  billion of the 

March 31, 2023  u nearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

Approximately $ 2.3 billion of the June 30, 2023 unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

Contract Assets and Liabilities

As a result of changes in contract transaction price related to performance obligations that were satisfied or partially satisfied prior to the end of the periods, we recognized revenue of $ 45.5 million and $ 89.7 million during the three and six months ended June 30, 2023 and $ 79.4 million and $ 114.6 million during the three and six months ended June 30, 2022, respectively.

The changes in contract transaction price for the three and six months ended June 30, 2023 and 2022 were from items such as executed or estimated change orders and unresolved contract modifications and claims.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Contract Assets and Liabilities

three months ended March 31, 2023  and 2022 , respectively. The changes in contract transaction price for the 

three months ended March 31, 2023  and 2022 were from items such as executed or estimated change orders and unresolved contract modifications and claims.

March 31, 2023  and 

December 31, 2022 , the aggregate claim recovery estimates included in contract asset and liability balances were $ 74.0  million and $ 75.8  million, respectively.

The components of the contract asset balances as of the respective dates were as follows:

(in thousands)

March 31, 2023

December 31, 2022

As of June 30, 2023 and December 31, 2022, the aggregate claim recovery estimates included in contract asset and liability balances were $ 70.3 million and $ 75.8 million, respectively.

The components of the contract asset balances as of the respective dates were as follows:

(in thousands) June 30, 2023 December 31, 2022

Costs in excess of billings and estimated earnings $ 127,848 $ 80,357

$ 125,918  

$ 80,357  

Contract retention 160,501 161,559

162,228  

161,559  

Total contract assets $ 288,349 $ 241,916

$ 288,146  

$ 241,916  

March 31, 2023  and 

December 31, 2022 , contract retention receivable from Brightline Trains Florida LLC represented 

10.0 % and 

11.7 %, respectively, of total contract assets.

No other contract retention receivable individually exceeded 10% of total contract assets at any of the presented dates.

As of June 30, 2023 and December 31, 2022, contract retention receivable from Brightline Trains Florida LLC represented 10.0 % and 11.7 %, respectively, of total contract assets.

No other contract retention receivable individually exceeded 10% of total contract assets at any of the presented dates.

The majority of the contract retention balance is expected to be collected within one year.

As work is performed, revenue is recognized and the corresponding contract liabilities are reduced.

We recognized revenue of $ 123.0  million and $ 166.6  million during the three months ended March 31, 2023 , and 2022 , respectively, that was included in the contract liability balances at 

December 31, 2022  and 2021 , respectively.

The components of the contract liability balances as of the respective dates were as follows:

(in thousands)

March 31, 2023

December 31, 2022

We recognized revenue of $ 48.1 million and $ 171.1 million during the three and six months ended June 30, 2023, respectively, and $ 44.1 million and $ 210.7 million during the three and six months ended June 30, 2022, respectively, that was included in the contract liability balances at December 31, 2022 and 2021, respectively.

The components of the contract liability balances as of the respective dates were as follows:

(in thousands) June 30, 2023 December 31, 2022

Billings in excess of costs and estimated earnings, net of retention $ 153,181 $ 152,294

$ 141,702  

$ 152,294  

Provisions for losses 20,107 20,992

18,543  

20,992  

Total contract liabilities $ 173,288 $ 173,286

$ 160,245  

$ 173,286  

 Receivables, net 

Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest.

The following table presents major categories of receivables:

(in thousands)

March 31, 2023

December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Contracts completed and in progress:

$ 190,635  

$ 220,809  

108,931  

120,348  

Billed $ 279,044 $ 220,809

Unbilled 200,418 120,348

Total contracts completed and in progress 479,462 341,157

299,566  

341,157  

Materials sales 84,919 52,182

31,955  

52,182  

66,807  

71,790  

Other 73,523 71,790

Total gross receivables 637,904 465,129

398,328  

465,129  

allowance for credit losses 1,107 1,142

Total net receivables $ 636,797 $ 463,987

$ 397,231  

$ 463,987  

Included in other receivables at 

March 31, 2023  and 

December 31, 2022  were items such as estimated recovery from back charge claims, notes receivable, insurance receivable, fuel tax refunds and income tax refunds. Other receivables at March 31, 2023  and December 31, 2022 also included $ 24.9  million of working capital contributions in the form of a loan to a partner in one of our unconsolidated joint ventures that bears interest at prime plus 

3.0 % per annum. 

None of our customers had a receivable balance in excess of 10 % of our total net receivables as of 

March 31, 2023  or 

December 31, 2022 .

Included in other receivables at June 30, 2023 and December 31, 2022 were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds.

Other receivables at June 30, 2023 and December 31, 2022 also included $ 24.9 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated joint ventures that bears interest at prime plus 3.0 % per annum.

None of our customers had a receivable balance in excess of 10 % of our total net receivables as of June 30, 2023 or December 31, 2022.

GRANITE CONSTRUCTION INCORPORATED

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Fair Value Measurement

The following tables summarize significant assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands):

The following tables summarize significant assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands):

Fair Value Measurement at Reporting Date Using

March 31, 2023

June 30, 2023 Level 1 Level 2 Level 3 Total

Cash equivalents

Money market funds $ 51,489 $ — $ — $ 51,489

$ 42,821  

Total assets $ 51,489 $ — $ — $ 51,489

Accrued and other current liabilities

2 unchanged sentences

Total liabilities $ — $ 1,470 $ — $ 1,470

$ 1,072  

December 31, 2022

1 unchanged sentence

Money market funds $ 99,806 $ — $ — $ 99,806

$ 99,806  

Other current assets

Commodity swaps — 121 — 121

$ 99,806  

$ 99,927  

Total assets $ 99,806 $ 121 $ — $ 99,927

Commodity Derivatives

As of March 31, 2023  and December 31, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $ 14.0  million and $ 7.0 million, respectively, all maturing by October 31, 2023.

The realized and unrealized losses associated with commodity swaps for the three months ended March 31, 2023  were immaterial.

The realized gain associated with commodity swaps for the three months ended March 31, 2022 was immaterial and the unrealized gain was $ 3.3 million.

During the three months ended March 31, 2023 , we entered into collar contracts to reduce our price exposure on diesel consumption.

The collars were not designated as hedges and will be treated as a mark-to-market derivative instruments through the 

September 

2024 maturity dates.

The financial statement impact for the three months ended March 31, 2023  was an unrealized loss of $ 0.9  million.

As of June 30, 2023 and December 31, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $ 8.0 million and $ 7.0 million, respectively, all maturing by October 31, 2023.

The realized and unrealized losses associated with commodity swaps for the three and six months ended June 30, 2023 were immaterial .

The financial statement impact for the three and six months ended June 30, 2022 was a realized gain of $ 2.4 million and $ 2.8 million, respectively.

In addition, for the three months ended June 30, 2022, the commodity swaps had an unrealized loss of $ 0.5 million, and for the six months ended June 30, 2022, the commodity swaps had an unrealized gain of $ 2.8 million.

In the first and second quarters of 2023, we entered into collar contracts to reduce our price exposure on diesel consumption.

The collars were not designated as hedges and will be treated as a mark-to-market derivative instruments through the December 2024 maturity dates.

The financial statement impact for the six months ended June 30, 2023 was an unrealized loss of $ 1.0 million.

The unrealized loss for the three months ended June 30, 2023 was immaterial .

The realized loss for the three and six months ended June 30, 2023 was immaterial .

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

Other Assets and Liabilities

The carrying values and estimated fair values of financial instruments that are not required to be recorded at fair value in the condensed consolidated balance sheets were as follows:

March 31, 2023

December 31, 2022

(in thousands)

Fair Value Hierarchy

Carrying Value

Held-to-maturity marketable securities (1)

$ 56,329  

$ 55,272  

$ 65,943  

$ 64,584  

The carrying values and estimated fair values of financial instruments that are not required to be recorded at fair value in the condensed consolidated balance sheets were as follows:

June 30, 2023 December 31, 2022

(in thousands) Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value

Held-to-maturity marketable securities (1) Level 1 $ 36,556 $ 35,458 $ 65,943 $ 64,584

Liabilities (including current maturities):

3.75 % Convertible Notes (2)

$ 230,000  

$ 311,880  

$ 230,000  

$ 281,365  

Credit Agreement - revolver (2)

$ 50,000  

$ 49,110  

$ 50,000  

$ 49,536  

( 1 ) All marketable securities as of March 31, 2023  and 

December 31, 2022  were classified as held-to-maturity and consisted of U.S. Government and agency obligations and corporate commercial paper maturing in two months to three years.

( 2 ) The fair value of our 2.75 % convertible senior notes due 2024 (the "2.75% Convertible Notes") is based on the median price of the notes in an active market.

Level 2 $ 373,750 $ 403,002 $ — $ —

2.75 % Convertible Notes (2)

Level 2 $ 31,338 $ 41,841 $ 230,000 $ 281,365

Credit Agreement - revolver (2) Level 3 $ 55,000 $ 54,344 $ 50,000 $ 49,536

(1) All marketable securities as of June 30, 2023 and December 31, 2022 were classified as held-to-maturity and consisted of U.S.

Government and agency obligations and corporate commercial paper maturing in two months to three years.

(2) The fair values of our 2.75 % convertible senior notes due 2024 (the " 2.75 % Convertible Notes") and the 3.75 % convertible senior notes due 2028 (the " 3.75 % Convertible Notes") are based on the median price of the notes in an active market.

The fair value of the Fourth Amended and Restated Credit Agreement (the "Credit Agreement") is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

See Note 14  for more information about the 2.75% Convertible Notes and the Credit Agreement.

During the three months ended March 31, 2023  and 2022 , we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

See Note 14 for more information about the 2.75 % Convertible Notes, 3.75 % Convertible Notes and the Credit Agreement.

During the six months ended June 30, 2023 and 2022, we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

Construction Joint Ventures

We participate in various construction joint ventures.

We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary.

We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE.

Based on our assessments during the 

three months ended March 31, 2023 , we determined no change was required for existing joint ventures.

Based on our assessments during the three and six months ended June 30, 2023, we determined no change was required for existing joint ventures.

Due to the joint and several nature of the performance obligations under the related owner contracts, if any of our partners fail to perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide a performance guarantee).

March 31, 2023 , there was $ 245.2  million of remaining contract value on unconsolidated and line item construction joint venture contracts of which $ 109.4  million represented our share and the remaining $ 135.8  million represented our partners’

At June 30, 2023, there was $ 202.4 million of remaining contract value on unconsolidated and line item construction joint venture contracts of which $ 96.4 million represented our share and the remaining $ 106.0 million represented our partners’ share.

We are not able to estimate amounts that may be required beyond the current remaining forecasted cost of the work to be performed.

These forecasted costs could be offset by billings to the customer or by proceeds from our partners’

corporate and/or other guarantees.

See Note 13  for disclosure of the performance guarantee amounts recorded in the condensed consolidated balance sheets.

Consolidated Construction Joint Ventures (“CCJVs”)

March 31, 2023 , we were engaged in 

eleven active CCJV projects with total contract values ranging from $ 6.1  million to $ 432.5  million for a combined total of $ 1.7  billion of which our share was $ 1.0 billion.

As of March 31, 2023 , our share of revenue remaining to be recognized on these CCJVs was $ 181.3  million and ranged from $ 0.9  million to $ 85.1  million by project.

Our proportionate share of the equity in these joint ventures was between 

50.0 % and 

During the 

three months ended March 31, 2023  and 2022 , total revenue from CCJVs was $ 61.3  million and $ 104.3  million, respectively.

During the 

three months ended March 31, 2023  and 2022 , CCJVs used $ 24.8  million and $ 7.6  million of operating cash flows, respectively. 

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

These forecasted costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.

See Note 13 for disclosure of the performance guarantee amounts recorded in the condensed consolidated balance sheets.

Consolidated Construction Joint Ventures (“CCJVs”)

At June 30, 2023, we were engaged in eleven active CCJV projects with total contract values ranging from $ 17.7 million to $ 430.8 million for a combined total of $ 1.8 billion of which our share was $ 1.0 billion.

As of June 30, 2023, our share of revenue remaining to be recognized on these CCJVs was $ 204.4 million and ranged from $ 0.5 million to $ 84.8 million by project.

Our proportionate share of the equity in these joint ventures was between 50.0 % and 70.0 %.

During the three and six months ended June 30, 2023 and 2022, total revenue from CCJVs was $ 70.8 million, $ 132.1 million, $ 122.7 million and $ 227.0 million, respectively.

During the six months ended June 30, 2023 and 2022, CCJVs used $ 48.3 million and $ 13.4 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

March 31, 2023 , we were engaged in seven  active unconsolidated joint venture projects with total contract values ranging from $ 12.3  million to $ 3.8  billion for a combined total of $ 7.9  billion of which our share was $ 2.3  billion.

As of June 30, 2023, we were engaged in seven active unconsolidated joint venture projects with total contract values ranging from $ 5.8 million to $ 3.8 billion for a combined total of $ 7.9 billion of which our share was $ 2.3 billion.

Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 23.0 % to 50.0 %.

March 31, 2023 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 72.4  million and ranged from $ 3.2  million to $ 34.4  million by project.

The following is summary financial information related to unconsolidated construction joint ventures:

(in thousands)

March 31, 2023

December 31, 2022

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

June 30, 2023, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 58.6 million and ranged from $ 1.6 million to $ 34.3 million by project.

The following is summary financial information related to unconsolidated construction joint ventures:

(in thousands) June 30, 2023 December 31, 2022

Cash, cash equivalents and marketable securities $ 110,275 $ 130,635

$ 110,403  

$ 130,635  

Other current assets (1) 694,959 681,221

689,945  

681,221  

Noncurrent assets 60,534 76,204

71,603  

76,204  

Less partners’

596,487  

604,741  

Granite’s interest (1),(2)

$ 275,464  

$ 283,319  

Less partners’ interest 593,218 604,741

Granite’s interest (1),(2) $ 272,550 $ 283,319

Current liabilities $ 209,643 $ 244,411

$ 236,063  

$ 244,411  

Less partners’

interest and adjustments (3)

128,166  

130,911  

Granite’s interest

$ 107,897  

$ 113,500  

Less partners’ interest and adjustments (3) 111,104 130,911

Granite’s interest $ 98,539 $ 113,500

Equity in construction joint ventures (4) $ 174,011 $ 169,819

$ 167,567  

$ 169,819  

( 1 ) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of 

March 31, 2023  and 

December 31, 2022  was $ 58.2  million and $ 64.7  million, respectively, related to performance guarantees (see Note 13 ).

( 2 ) Included in this balance as of March 31, 2023  and 

December 31, 2022  was $ 96.6  million and $ 104.3  million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 2.6  million and $ 2.7  million related to Granite’s share of estimated recovery of back charge claims as of 

March 31, 2023  and 

December 31, 2022 , respectively.

( 3 ) Partners’

interest and adjustments includes amounts to reconcile total net assets as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences.

( 4 ) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $ 14.5  million and $ 14.0  million as of 

March 31, 2023  and 

December 31, 2022 , respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

Three Months Ended March 31,

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 was $ 58.2 million and $ 64.7 million, respectively, related to performance guarantees (see Note 13).

(2) Included in this balance as of June 30, 2023 and December 31, 2022 was $ 98.1 million and $ 104.3 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 2.6 million and $ 2.7 million related to Granite’s share of estimated recovery of back charge claims as of June 30, 2023 and December 31, 2022, respectively.

(3) Partners’ interest and adjustments includes amounts to reconcile total net assets as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences.

(4) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $ 14.1 million and $ 14.0 million as of June 30, 2023 and December 31, 2022, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

$ 38,174  

$ 161,139  

Less partners’

interest and adjustments (1)

23,329  

111,484  

Granite’s interest

$ 14,845  

$ 49,655  

Total $ 25,211 $ 91,564 $ 63,385 $ 252,703

Less partners’ interest and adjustments (1) 15,691 68,374 39,020 179,858

Granite’s interest $ 9,520 $ 23,190 $ 24,365 $ 72,845

Cost of revenue

$ 44,371  

$ 157,921  

Less partners’

interest and adjustments (1)

30,404  

104,652  

Granite’s interest

13,967  

53,269  

Granite’s interest in gross profit (loss)

Total $ 40,564 $ 93,162 $ 84,935 $ 251,083

Less partners’ interest and adjustments (1) 25,912 56,897 56,316 161,549

Granite’s interest 14,652 36,265 28,619 89,534

Granite’s interest in gross loss $ ( 5,132 ) $ ( 13,075 ) $ ( 4,254 ) $ ( 16,689 )

Net Income (Loss)

$ ( 5,654 )  

$ 3,167  

Less partners’

interest and adjustments (1)

( 6,565 )  

Granite’s interest in net income (loss) (2)

( 1 ) Partners’

interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast and/or actual differences.

( 2 ) These joint venture net income/(loss) amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.

Total $ ( 14,574 ) $ ( 2,871 ) $ ( 20,228 ) $ 296

Less partners’ interest and adjustments (1) ( 9,658 ) 10,730 ( 16,223 ) 17,524

Granite’s interest in net loss (2) $ ( 4,916 ) $ ( 13,601 ) $ ( 4,005 ) $ ( 17,228 )

(1) Partners’ interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast and/or actual differences.

(2) These joint venture net loss amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

Investments in Affiliates

Our investments in affiliates balance consists of equity method investments in the following types of entities:

(in thousands)

March 31, 2023

December 31, 2022  

$ 61,919  

$ 58,579  

Our investments in affiliates balance consists of equity method investments in the following types of entities:

(in thousands) June 30, 2023 December 31, 2022

Foreign $ 64,698 $ 58,579

Real estate 7,460 8,517

Asphalt terminal 14,453 13,629

13,394  

13,629  

Total investments in affiliates $ 86,611 $ 80,725

$ 83,335  

$ 80,725  

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis:

(in thousands)

March 31, 2023

December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Current assets $ 201,508 $ 194,210

$ 197,485  

$ 194,210  

Noncurrent assets 175,336 172,560

176,039  

172,560  

$ 373,524  

$ 366,770  

Total assets 376,844 366,770

Current liabilities 97,837 106,780

$ 102,546  

$ 106,780  

Long-term liabilities (1) 59,950 59,356

62,881  

59,356  

Total liabilities 157,787 166,136

$ 165,427  

$ 166,136  

$ 208,097  

$ 200,634  

Granite’s share of net assets

$ 83,335  

$ 80,725  

( 1 ) This balance is primarily related to local bank debt for equipment purchases and debt associated with our real estate investments.

Of the $ 373.5  million of total affiliate assets as of March 31, 2023 , we had investments in 

two  real estate entities with total assets of $ 73.3  million, our foreign affiliates had total assets of $ 269.7  million and the asphalt terminal entity had total assets of $ 30.5  million. As of 

March 31, 2023  and 

December 31, 2022 , all of the investments in real estate affiliates were in residential real estate in Texas.

As of March 31, 2023 , our percent ownership in the real estate entities ranged from 10 % to 

We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from 25 % to 50 % as of March 31, 2023 .

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Net assets 219,057 200,634

Granite’s share of net assets $ 86,611 $ 80,725

(1) This balance is primarily related to local bank debt for equipment purchases and debt associated with our real estate investments.

Of the $ 376.8 million of total affiliate assets as of June 30, 2023, we had investments in two real estate entities with total assets of $ 67.0 million, our foreign affiliates had total assets of $ 276.9 million and the asphalt terminal entity had total assets of $ 32.9 million.

As of June 30, 2023 and December 31, 2022, all of the investments in real estate affiliates were in residential real estate in Texas.

As of June 30, 2023, our percent ownership in the real estate entities ranged from 10 % to 25 %.

We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from 25 % to 50 % as of June 30, 2023.

Property and Equipment, net

Balances of major classes of assets and total accumulated depreciation and depletion are included in property and equipment, net in the condensed consolidated balance sheets as follows:

(in thousands)

March 31, 2023

December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Equipment and vehicles $ 1,051,771 $ 994,602

$ 1,016,327  

$ 994,602  

Quarry property 232,117 219,843

226,682  

219,843  

Land and land improvements 108,288 105,733

107,816  

105,733  

Buildings and leasehold improvements 105,780 103,658

105,190  

103,658  

Office furniture and equipment 86,768 82,465

83,860  

82,465  

Property and equipment 1,584,724 1,506,301

1,539,875  

1,506,301  

accumulated depreciation and depletion 1,020,647 997,091

1,008,418  

997,091  

Property and equipment, net $ 564,077 $ 509,210

$ 531,457  

$ 509,210  

 Accrued Expenses and Other Current Liabilities

(in thousands)

March 31, 2023  

December 31, 2022  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Accrued Expenses and Other Current Liabilities

(in thousands) June 30, 2023 December 31, 2022

Accrued insurance $ 86,882 $ 78,427

$ 84,156  

$ 78,427  

Deficits in unconsolidated construction joint ventures 14,082 13,989

14,496  

13,989  

Payroll and related employee benefits 79,567 80,910

63,072  

80,910  

Performance guarantees 58,190 64,703

58,190  

64,703  

Short-term lease liabilities 17,483 18,662

17,552  

18,662  

29,075  

31,778  

$ 266,541  

$ 288,469  

The decrease in performance guarantees in the current year is due to receiving customer acceptance on two unconsolidated construction joint ventures during the three months ended March 31, 2023 .

Other includes dividends payable, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, 

none  of which were greater than 

5%  of total current liabilities at any of the presented dates.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Other 53,818 31,778

Total $ 310,022 $ 288,469

The decrease in performance guarantees in the current year is due to receiving customer acceptance on two unconsolidated construction joint ventures during the six months ended June 30, 2023.

Other includes dividends payable, warranty reserves, asset retirement obligations, remediation reserves, legal accruals and other miscellaneous accruals, none of which were greater than 5% of total current liabilities at any of the presented dates.

Long-Term Debt and Credit Arrangements

(in thousands)

March 31, 2023

December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

3.75 % Convertible Notes

$ 230,000  

$ 373,750 $ —

2.75 % Convertible Notes

31,338 230,000

Credit Agreement - revolver 55,000 50,000

50,000  

Other, net of debt issuance costs 70 8,381

$ 288,456  

$ 288,381  

Total debt $ 460,158 $ 288,381

Less current maturities 1,466 1,447

Total long-term debt $ 458,692 $ 286,934

$ 287,000  

$ 286,934  

I n June 2022, we entered into the Credit Agreement which matures on June 2, 2027.

The Credit Agreement is a $ 350.0 million senior secured, five -year revolving facility (the “Revolver”), including an accordion feature allowing us to increase borrowings up to the greater of (a) $ 200.0 million and (b) 100 % of twelve -month trailing consolidated EBITDA, subject to lender approval.

The Credit Agreement includes a $ 150.0 million sublimit for letters of credit ($ 75.0 million for financial letters of credit) and a $ 20.0 million sublimit for swingline loans.

March 31, 2023 , the total unused availability under the Credit Agreement was $ 269.5  million, resulting from $ 30.5  million in issued and outstanding letters of credit and $ 50.0 million drawn under the Revolver.

The letters of credit had expiration dates between April 2023  and 

December 2026 . As of March 31, 2023 , the applicable rate was 1.50 %  for loans under the Credit Agreement bearing interest based on the Secured Overnight Financing Rate ("SOFR") and 0.50 %  for loans bearing interest at the base rate.

Accordingly, the effective interest rates at 

March 31, 2023  for SOFR and base rate loans were 

6.41 %  and 8.50 % , respectively.

The Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default.

The financial covenants include a maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) of 

3.25  to 

1.00  and a minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of 

3.00  to 

As of March 31, 2023 , the Consolidated Leverage Ratio was 1.4 , which did not exceed the maximum of 3.25 .

Our Consolidated Interest Coverage Ratio was 15.7 , which was above the minimum of 3.00 .

As of March 31, 2023 and December 31, 2022, 

2.75%  Convertible Notes comprised our only convertible debt instrument.

2.75%  Convertible Notes were issued in 

November 2019 

in an aggregate principal amount of $ 230.0  million, with an interest rate of 

2.75 % and a maturity date of 

November 1, 2024, 

unless earlier converted, redeemed or repurchased.

2.75%  Convertible Notes are convertible at the option of the holders prior to 

May 1, 2024 

only during certain periods and upon the occurrence of certain events.

May 1, 2024, 

2.75%  Convertible Notes will be convertible at the option of the holders at any time until the 

second  scheduled trading day immediately preceding the maturity date.

The conversion rate applicable to the 

2.75%  Convertible Notes is 

31.7776  shares of Granite common stock per 

$1,000  principal amount of 

2.75%  Convertible Notes, which is equivalent to a conversion price of approximately $ 31.47  per share of Granite common stock.

Upon conversion, we will pay or deliver shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election.

In addition, upon the occurrence of a “make-whole fundamental change”

as defined in the indenture governing the 

2.75%  Convertible Notes, (the “Indenture”) we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 

2.75%  Convertible Notes in connection with such a make-whole fundamental change.

We have the option to redeem for cash all or any portion of the 

2.75%  Convertible Notes if the last reported sale price of our common stock is equal to or greater than 

130 % of the conversion price for a specified period of time.

Upon the occurrence of a “fundamental change”

as defined in the Indenture, holders 

require us to repurchase for cash all or any portion of their 

2.75%  Convertible Notes at a price equal to 

100 % of the principal amount plus any accrued and unpaid interest.

In addition, as described in the Indenture, certain events of default including, but 

not  limited to, bankruptcy, insolvency or reorganization, 

result in the 

2.75%  Convertible Notes becoming due and payable immediately.

During both the three months ended March 31, 2023  and 

2022 , we recorded $ 0.3 million 

of amortization related to debt issuance costs.

3.75 % Convertible Notes

On May 11, 2023, we issued $ 373.8 million aggregate principal amount of our 3.75 % Convertible Notes.

The 3.75 % Convertible Notes bear interest at a rate of 3.75 % per annum payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2023 and mature on May 15, 2028, unless earlier converted, redeemed or repurchased.

Prior to the close of business on the business day immediately preceding November 15, 2027, the 3.75 % Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods.

Thereafter, the 3.75 % Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate applicable to the 3.75 % Convertible Notes is 21.6807 shares of Granite common stock per $1,000 principal amount of the 3.75 % Convertible Notes, which is equivalent to an initial conversion price of approximately $ 46.12 per share of Granite common stock, subject to adjustment if certain events occur.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election.

In addition, upon the occurrence of a “fundamental change” as defined in the indenture governing the 3.75 % Convertible Notes, holders may require us to repurchase for cash all or any portion of their 3.75 % Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 3.75 % Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

If certain corporate events that constitute a “make-whole fundamental change” as set forth in the indenture governing the 3.75 % Convertible Notes occur prior to the maturity date of the 3.75 % Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 3.75 % Convertible Notes in connection with such event or notice of redemption.

We will not be able to redeem the 3.75 % Convertible Notes prior to May 20, 2026.

On or after May 20, 2026, we have the option to redeem for cash all or any portion of the 3.75 % Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the 3.75 % Convertible Notes to be redeemed, plus any accrued but unpaid interest to, but excluding, the redemption date.

In addition, as described in the indenture governing the 3.75 % Convertible Notes, certain

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

 Weighted Average Shares Outstanding and Net Loss Per Share

The following table presents a reconciliation of the weighted average shares of common stock used in calculating basic and diluted net loss per share as well as the calculation of basic and diluted net loss per share:

Three Months Ended March 31,

events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the 3.75 % Convertible Notes becoming due and payable immediately.

The net proceeds from the sale of the 3.75 % Convertible Notes were approximately $ 364.4 million, after deducting the initial purchasers’ discount.

We used approximately $ 53.0 million of the net proceeds from the offering to pay the cost of the Capped Call Transactions (as described below).

In addition, we used approximately $ 198.8 million of the net proceeds and issued 1,390,500 shares of Granite common stock in exchange for approximately $ 198.7 million aggregate principal amount of our 2.75 % Convertible Notes concurrent with the offering in separate and individually negotiated transactions.

We also received 1,390,516 shares from bond option counterparties for the exercise of our bond hedge, corresponding to the portion of the 2.75 % Convertible Notes that were exchanged, and used approximately $ 13.2 million of the net proceeds to pay the cost of terminating the portion of the existing warrant transactions that correspond to the 2.75 % Convertible Notes exchanged.

Capped Call Transactions

In May 2023, we entered into capped call transactions (the "Capped Call Transactions") in connection with the offering of the 3.75 % Convertible Notes.

The Capped Call Transactions are expected generally to reduce the potential dilution to Granite’s common stock upon conversion of the 3.75 % Convertible Notes and/or offset any cash payments Granite is required to make in excess of the principal amount of converted 3.75 % Convertible Notes, as the case may be.

If, however, the market price per share of Granite’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The cap price of the Capped Call Transactions will initially be $ 79.83 per share, which represents a premium of 125 % over the last reported sale price of Granite’s common stock of $ 35.48 per share on the New York Stock Exchange on May 8, 2023, and is subject to certain adjustments under the terms of the Capped Call Transactions.

2.75 % Convertible Notes

The 2.75 % Convertible Notes were issued in November 2019 in an aggregate principal amount of $ 230.0 million, with an interest rate of 2.75 % and a maturity date of November 1, 2024, unless earlier converted, redeemed or repurchased.

The 2.75 % Convertible Notes are convertible at the option of the holders prior to the close of business on the business day before May 1, 2024 only during certain periods and upon the occurrence of certain events.

After May 1, 2024, the 2.75 % Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The conversion rate applicable to the 2.75 % Convertible Notes is 31.7776 shares of Granite common stock per $1,000 principal amount of 2.75 % Convertible Notes, which is equivalent to a conversion price of approximately $ 31.47 per share of Granite common stock.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election.

In addition, upon the occurrence of a “make-whole fundamental change” as defined in the indenture governing the 2.75 % Convertible Notes prior to the maturity date of the 2.75 % Convertible Notes or if the Company delivers a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 2.75 % Convertible Notes in connection with such a make-whole fundamental change or notice of redemption.

We have the option to redeem for cash all or any portion of the 2.75 % Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the 2.75 % Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Upon the occurrence of a “fundamental change” as defined in the indenture governing the 2.75 % Convertible Notes, holders may require us to repurchase for cash all or any portion of their 2.75 % Convertible Notes at a price equal to 100 % of the principal amount of the 2.75 % Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In addition, as described in the indenture governing the 2.75 % Convertible Notes, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the 2.75 % Convertible Notes becoming due and payable immediately.

At June 30, 2023, $ 31.3 million remained outstanding of our 2.75 % Convertible Notes.

Credit Agreement

In June 2022, we entered into the Credit Agreement which matures on June 2, 2027.

The Credit Agreement is a $ 350.0 million senior secured, five-year revolving facility (the “Revolver”), including an accordion feature allowing us to increase

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

borrowings up to the greater of (a) $ 200.0 million and (b) 100 % of twelve-month trailing consolidated EBITDA, subject to lender approval.

The Credit Agreement includes a $ 150.0 million sublimit for letters of credit ($ 75.0 million for financial letters of credit) and a $ 20.0 million sublimit for swingline loans.

In May 2023, we entered into Amendment No.

1 to the Credit Agreement (the "Amendment").

The Amendment amended the Credit Agreement to, among other things, permit the Company to exchange its 2.75 % Convertible Notes for cash and shares of its common stock and to clarify that (i) the issuance of the 3.75 % Convertible Notes was permitted under the terms of the Credit Agreement and (ii) that a Swap Contract (as defined in the Credit Agreement) does not include any Permitted Call Spread Transaction (as defined in the Credit Agreement).

As of June 30, 2023, the total unused availability under the Credit Agreement was $ 275.9 million, resulting from $ 19.1 million in issued and outstanding letters of credit and $ 55.0 million drawn under the revolver.

The letters of credit had expiration dates between July 2023 and December 2026.

As of June 30, 2023, the applicable rate was 1.50 % for loans under the Credit Agreement bearing interest based on the Secured Overnight Financing Rate ("SOFR") and 0.50 % for loans bearing interest at the base rate.

Accordingly, the effective interest rates at June 30, 2023 for SOFR and base rate loans were 6.70 % and 8.75 %, respectively.

The Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default.

The financial covenants include a maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) and a minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement).

As of June 30, 2023, we were in compliance with the covenants in the Credit Agreement.

Debt Issuance Costs

During the three and six months ended June 30, 2023, we recorded $ 2.1 million and $ 2.4 million, respectively, of amortization related to debt issuance costs.

This included $ 1.7 million of accelerated amortization of debt issuance costs associated with the 2.75 % Convertible Notes that were repaid and are included in the loss on debt extinguishment.

We also capitalized $ 9.8 million in third party offering costs related to the issuance of the 3.75 % Convertible Notes.

These debt issuance costs will be amortized over the expected life of the 3.75 % Convertible Notes.

During the three and six months ended June 30, 2022, we recorded $ 0.4 million, and $ 0.7 million, respectively, of amortization related to debt issuance costs.

Weighted Average Shares Outstanding and Net Income (Loss) Per Share

The following table presents a reconciliation of the weighted average shares of common stock used in calculating basic and diluted net income (loss) per share as well as the calculation of basic and diluted net income (loss) per share:

Three Months Ended

June 30, Six Months Ended

As Restated As Restated

(in thousands, except per share amounts) 2023 2022 2023 2022

Numerator (basic and diluted)

Net loss attributable to common shareholders

$ ( 23,023 )  

Net income (loss) attributable to common shareholders $ ( 17,000 ) $ 18,681 $ ( 40,023 ) $ ( 8,052 )

Interest expense related to Convertible Notes — 1,468 — —

Net income (loss) attributable to common shareholders for diluted earnings per share $ ( 17,000 ) $ 20,149 $ ( 40,023 ) $ ( 8,052 )

Weighted average common shares outstanding, basic 43,892 44,534 43,829 45,128

43,764  

45,730  

Dilutive effect of RSUs — 452 — —

Dilutive effect of Convertible Notes — 7,309 — —

Weighted average common shares outstanding, diluted 43,892 52,295 43,829 45,128

43,764  

45,730  

Net loss per share, basic

$ ( 0.53 )  

Net loss per share, diluted

$ ( 0.53 )  

Due to the net losses for the 

three months ended March 31, 2023 and 2022 , RSUs representing 

583,000 and 534,000  shares, respectively, and the potential dilution from the 2.75 % Convertible Notes converting into 

7,309,000 shares of common stock for both periods have been excluded from the number of shares used in calculating diluted net loss per share, as their inclusion would have been antidilutive.

 Income Taxes

The following table presents the provision for (benefit from) income taxes for the respective periods:

Three Months Ended March 31,

As Restated and Recast  

Net income (loss) per share, basic $ ( 0.39 ) $ 0.42 $ ( 0.91 ) $ ( 0.18 )

Net income (loss) per share, diluted $ ( 0.39 ) $ 0.39 $ ( 0.91 ) $ ( 0.18 )

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Due to the net losses for the three and six months ended June 30, 2023 and six months ended June 30, 2022, RSUs representing 586,000 , 584,000 and 493,000 shares, respectively, and the potential dilution from the convertible notes converting into 10,095,000 , 10,095,000 and 7,309,000 shares of common stock for each period, respectively, have been excluded from the number of shares used in calculating diluted earnings per share, as their inclusion would have been antidilutive.

In connection with the issuance of the 3.75 % Convertible Notes, we entered into Capped Calls Transactions, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.

The following table presents the provision for (benefit from) income taxes for the respective periods:

Three Months Ended

June 30, Six Months Ended

As Restated and Recast As Restated and Recast

(dollars in thousands) 2023 2022 2023 2022

Provision for (benefit from) income taxes $ 9,024 $ 8,668 $ ( 445 ) $ 15,020

$ ( 9,469 )  

$ 6,352  

Effective tax rate ( 60.9 %) 30.7 % 0.9 % 158.1 %

26.9 %  

Our effective tax rate for the 

three months ended March 31, 2023  was higher than the same quarter in the prior year primarily due to non-deductible goodwill associated with the sale of Inliner in the first quarter of 2022.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

 Contingencies - Legal Proceedings

Our effective tax rate for the three and six months ended June 30, 2023 was lower than the prior year primarily due to a $ 49.3 million non-deductible expense associated with the refinancing of a portion of the Company's 2.75 % Convertible Notes in the second quarter of 2023.

See Note 14 for more information.

Contingencies - Legal Proceedings

Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets.

It is possible that future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record new accruals that we did 

not  originally believe to be probable or that could 

not  be reasonably estimated.

It is possible that future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated.

Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period.

In addition, disclosure is required when a material loss is probable but 

not  reasonably estimable, a material loss is reasonably possible but 

not  probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

The total liabilities recorded as of 

March 31, 2023  and 

December 31, 2022 related to legal proceedings were immaterial. The total range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

In addition, disclosure is required when a material loss is probable but not reasonably estimable, a material loss is reasonably possible but not probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

The total liabilities for legal proceedings are recorded in accrued expenses and other current liabilities on the condensed consolidated balance sheet (see Note 13).

The total range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

Ordinary Course Legal Proceedings

In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which often cannot be predicted with certainty.

For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note 

1 of our Annual Report. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved 

involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are 

not  probable to be incurred or cannot currently be reasonably estimated.

In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings 

be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

Salesforce Tower Matter

Our wholly-owned subsidiary, Layne Christensen Company ("Layne"), was a subcontractor on the foundation for the Salesforce Tower office building in San Francisco in 

2013  and 

 Certain anomalies were discovered in 

March 2014 

in the foundation’s structural concrete, which were remediated by the general contractor during 

 Layne assigned any insurance claims it 

have had under the project’s builder’s risk insurance policy to the general contractor.

2014,  the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages.

The claim was denied by the builder’s risk insurers.

The project owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy, which proceeding was then transferred by agreement to arbitration. On 

July 20, 2021, 

we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures undertaken by the general contractor of the Salesforce Tower and related damages.

February 3, 2022 ,  a lawsuit titled 

Steadfast Insurance Company ( “

Steadfast ”

), a subrogee of Clark/Hathaway Dinwiddie, a Joint Venture ( “

CHDJV ”

Layne Christensen Company ( “

Layne ”

) , was filed in the Superior Court of the State of California, County of San Francisco, seeking damages of approximately $ 70  million for costs incurred by Steadfast on behalf of CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. On 

February 4, 2022, 

CHDJV submitted an arbitration demand with the American Arbitration Association against Granite Construction Incorporated seeking to recover approximately $ 30  million for costs incurred by CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. CHDJV subsequently dismissed Granite and added Layne as a respondent to the arbitration.

May 6, 2022, 

CHDJV consolidated its claims with those of Steadfast and joined as a plaintiff in the Steadfast lawsuit, and on 

May 16, 2022, 

the arbitration was stayed. CHDJV has moved for summary adjudication on two potentially dispositive issues.

The hearing for these summary adjudication motions is scheduled for May 24, 2023.

Layne opposes these motions and believes it has multiple defenses and counterclaims to the claims at issue. Layne intends to vigorously defend against the claims and prosecute its counterclaims, but we cannot provide assurance that Layne will be successful in these efforts.

not  believe it is probable this matter will result in a material loss, however, if we are unsuccessful, we believe the range of reasonably possible loss upon final resolution of this matter could be up to approximately $ 100  million.

For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note 1 of our Annual Report.

We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated.

While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Salesforce Tower Matter

Our wholly-owned subsidiary, Layne Christensen Company ("Layne"), was a subcontractor on the foundation for the Salesforce Tower office building in San Francisco in 2013 and 2014.

Certain anomalies were discovered in March 2014 in the foundation’s structural concrete, which were remediated by the general contractor during 2015.

Layne assigned any insurance claims it may have had under the project’s builder’s risk insurance policy to the general contractor.

During 2014, the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages.

The claim was denied by the builder’s risk insurers.

On July 20, 2021, we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures undertaken by the general contractor of the Salesforce Tower and related damages.

On February 3, 2022, a lawsuit titled Steadfast Insurance Company (“Steadfast”), a subrogee of Clark/Hathaway Dinwiddie, a Joint Venture (“CHDJV”) v.

Layne Christensen Company (“Layne”) , was filed in the Superior Court of the State of California, County of San Francisco, seeking damages of approximately $ 70 million for costs incurred by Steadfast on behalf of CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower.

On February 4, 2022, CHDJV submitted an arbitration demand with the American Arbitration Association against Granite Construction Incorporated seeking to recover approximately $ 30 million for costs incurred by CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower.

CHDJV subsequently dismissed Granite and added Layne as a respondent to the arbitration.

On May 6, 2022, CHDJV consolidated its claims with those of Steadfast and joined as a plaintiff in the Steadfast lawsuit, and on May 16, 2022, the arbitration was stayed.

Both Layne and CHDJV have moved for summary adjudication on potentially dispositive issues.

The parties have agreed to attend a mediation on August 4, 2023, and, as a result, the hearing for the summary adjudication motions has been postponed to September 13, 2023.

Layne opposes the motions filed against it and believes it has multiple defenses and counterclaims to the plaintiffs' claims.

Layne intends to vigorously defend against plaintiffs' claims and prosecute its counterclaims, but we cannot provide assurance that Layne will be successful in these efforts.

As of June 30, 2023, we have determined that a loss related to this matter is probable, have estimated a range of loss and recorded a liability based on the low end of the range, as there were no facts and circumstances to support a different point in the range.

In the second quarter of 2023, we recorded a pre-tax charge of $ 12.0 million, net of estimated insurance recovery, which is reflected in other costs on the condensed consolidated statements of operations for the three and six months ended June 30, 2023.

Reportable Segment Information

Our reportable segments are the same as our operating segments and correspond with how our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews financial information to allocate resources and assess performance.

We identified our CODM as our Chief Executive Officer and our Chief Operating Officer.

2 unchanged sentences

Summarized segment information is as follows (in thousands):

Three months ended March 31,

Construction  

Materials  

Three months ended June 30, Construction Materials Total

Total revenue from reportable segments $ 749,413 $ 206,832 $ 956,245

$ 503,416  

$ 71,920  

$ 575,336  

Elimination of intersegment revenue — ( 57,693 ) ( 57,693 )

( 15,268 )  

Revenue from external customers $ 749,413 $ 149,139 $ 898,552

$ 503,416  

$ 56,652  

$ 560,068  

Gross profit (loss)

$ 36,705  

$ ( 4,346 )  

$ 32,359  

Gross profit $ 79,154 $ 23,932 $ 103,086

Depreciation, depletion and amortization $ 10,238 $ 7,090 $ 17,328

$ 9,755  

$ 6,122  

$ 15,877  

Segment assets as of period end

$ 430,045  

$ 390,741  

$ 820,786  

2022 (As Restated and Recast)

Total revenue from reportable segments $ 713,221 $ 180,444 $ 893,665

$ 578,266  

$ 95,304  

$ 673,570  

Elimination of intersegment revenue — ( 44,418 ) ( 44,418 )

( 19,684 )  

Revenue from external customers $ 713,221 $ 136,026 $ 849,247

$ 578,266  

$ 75,620  

$ 653,886  

$ 58,479  

$ 1,613  

$ 60,092  

Gross profit $ 80,252 $ 17,314 $ 97,566

Depreciation, depletion and amortization $ 5,595 $ 6,804 $ 12,399

$ 7,794  

$ 6,333  

$ 14,127  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Six Months Ended June 30, Construction Materials Total

Total revenue from reportable segments $ 1,252,829 $ 278,752 $ 1,531,581

Elimination of intersegment revenue — ( 72,961 ) ( 72,961 )

Revenue from external customers $ 1,252,829 $ 205,791 $ 1,458,620

Gross profit $ 115,859 $ 19,586 $ 135,445

Depreciation, depletion and amortization $ 19,993 $ 13,213 $ 33,206

Segment assets as of period end $ 443,112 $ 414,858 $ 857,970

$ 363,029  

$ 354,420  

$ 717,449  

A reconciliation of segment gross profit to consolidated loss before income taxes is as follows (in thousands):

As Restated and Recast  

Three Months Ended March 31,

2022 (As Recast)

Total revenue from reportable segments $ 1,291,487 $ 272,967 $ 1,564,454

Elimination of intersegment revenue — ( 61,321 ) ( 61,321 )

Revenue from external customers $ 1,291,487 $ 211,646 $ 1,503,133

Gross profit $ 138,731 $ 18,927 $ 157,658

Depreciation, depletion and amortization $ 13,389 $ 13,137 $ 26,526

Segment assets as of period end $ 369,160 $ 357,922 $ 727,082

A reconciliation of segment gross profit to consolidated income (loss) before income taxes is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

As Restated and Recast As Recast

(in thousands) 2023 2022 2023 2022

Total gross profit from reportable segments $ 103,086 $ 97,566 $ 135,445 $ 157,658

$ 32,359  

$ 60,092  

Selling, general and administrative expenses 64,563 60,121 137,685 130,241

73,122  

70,120  

Other costs, net 13,607 16,612 18,130 22,891

Gain on sales of property and equipment ( 3,944 ) ( 8,915 ) ( 5,981 ) ( 9,513 )

( 2,037 )  

Total other (income) expense, net 43,682 1,502 35,674 4,536

( 8,008 )  

Loss before income taxes

$ ( 35,241 )  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Annual Report") and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein.

Forward-Looking Disclosure

From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results and strategic actions, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,”

“outlook,”

“assumes,”

“believes,”

“expects,”

“estimates,”

“anticipates,”

“intends,”

“plans,”

“appears,”

“may,”

“will,”

“should,”

“could,”

“would,”

“continue,”

and the negatives thereof or other comparable terminology or by the context in which they are made.

In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results, and strategic actions. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under “Item 1A.

Risk Factors.”

Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason .

We deliver infrastructure solutions for public and private clients primarily in the United States.

We are one of the largest diversified infrastructure companies in the United States.

Within the public sector, we primarily concentrate on infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels, water well drilling and other infrastructure-related projects.

Within the private sector, we perform various services such as site preparation, mining services and infrastructure services for commercial and industrial sites, railways, residential development, energy development, as well as provide construction management professional services.

The five primary economic drivers of our business are (i) the overall health of the U.S.

economy including access to resources (labor, supplies and subcontractors);

(ii) federal, state and local public funding levels;

(iii) population growth resulting in public and private development;

(iv) the need to build, replace or repair aging infrastructure;

and (v) the pricing of certain commodity related products.

Changes in these drivers can either reduce our revenues and/or gross profit margins or provide opportunities for revenue growth and gross profit margin improvement.

Current Economic Environment and Outlook

Funding for our public work projects, which accounts for approximately 65% of our work, is dependent on federal, state, regional and local revenues.

At the federal level, the rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) is ongoing with states receiving and allocating funds to projects. The five-year IIJA provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in incremental funding. In October 2022, the U.S.

Department of Transportation announced that it released $59.9 billion in Fiscal Year 2023 apportionments directly to all 50 states, all of which is available for states to authorize following the passing of the Fiscal Year 2023 omnibus appropriations bill in December 2022.

We continue to believe that the increased multi-year spending commitment will improve the programming visibility for state and local governments. We are seeing projects funded by the IIJA for bid and believe there will be an increase in project lettings throughout 2023 and then more meaningfully in 2024 and beyond.

At state, regional and local levels, voter-approved state and local transportation measures continue to support infrastructure spending.

While each market is unique, we see a strong funding environment at the state and local levels currently and we expect that environment to improve with the impact of the IIJA.

In California, our top revenue-generating state, a significant part of the state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, which is a 10-year, $54.2 billion program without any sunset provisions.

Over the recent years, inflation, supply chain and labor constraints have had a significant impact on the global economy including the construction industry in the United States.

While it is impossible to fully eliminate the impact of these factors, we have applied proactive measures such as fixed forward purchase contracts of oil related inputs, energy surcharges, and adjustment of project schedules for constraints related to construction materials such as concrete.

While we actively work to mitigate the impacts of inflation, further price increases may adversely impact us in the future.

Our Committed and Awarded Projects (“CAP”) continues to be strong at $5.1 billion at the end of the first quarter of 2023. Our CAP is supported by a positive public funding environment and resilient private market which we believe will provide further opportunities in 2023 to continue to grow CAP.

Subsequent Event

On April 24, 2023, we completed the purchase of Coast Mountain Resources (2020) Ltd.

(“CMR”) for approximately $27 million, subject to certain adjustments.

CMR is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land. This acquisition is not expected to have a material impact on our results of operations.

Litigation Matter

As further discussed in Note 17 of “Notes to the Condensed Consolidated Financial Statements,”

our wholly owned subsidiary, Layne Christensen Company (“Layne”), has been sued for approximately $100 million relating to Layne’s work on the Salesforce Tower foundation.

Layne was a subcontractor on this project and potential liability for this project remained with Layne in connection with our acquisition of Layne in June 2018.

For additional information, see “Item 1A.

Risk Factors - In connection with acquisitions or divestitures, we may become subject to liabilities”

and “Item 1A.

Risk Factors - We are involved in lawsuits and legal proceedings in the ordinary course of our business and may in the future be subject to other litigation and legal proceedings, and, if any of these are resolved adversely against us, it could harm our business, financial condition and results of operations”

in our Annual Report.

Results of Operations

Our operations are typically affected more by inclement weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability.

Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year.

The following table presents a financial summary for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

As Restated and Recast

(in thousands)

Total revenue

Selling, general and administrative expenses

Operating loss

Amount attributable to non-controlling interests

Net loss attributable to Granite Construction Incorporated

Total Revenue by Segment

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

Construction Revenue

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

Construction revenue for the three months ended March 31, 2023 decreased by $74.9 million, or 12.9%, respectively, when compared to 2022.

This decrease was primarily driven by the wind down of several large projects in the Central operating group, as well as the sale of Inliner in the first quarter of 2022.

Revenue from the Mountain operating group decreased $28.6 million for the three months ended March 31, 2023 primarily due to the sale of Inliner which contributed $33.2 million in 2022 prior to its sale.

This decrease was partially offset by increased revenue driven by higher beginning CAP levels.

California operating group revenue increased $2.6 million during the three months ended March 31, 2023 despite the unfavorable weather conditions during the quarter, partly due to emergency work resulting from the weather.

During both the three months ended March 31, 2023 and 2022, approximately 65% of revenue earned in the Construction segment was from the public sector.

Materials Revenue 

Three Months Ended March 31,

(dollars in thousands)

Materials revenue for the three months ended March 31, 2023 decreased by $19.0 million, or 25.1%, when compared to 2022 driven by lower sales volumes in both asphalt and aggregates resulting from inclement weather during the first quarter of 2023.

Asphalt and aggregate sales volumes were down 39.4% and 20.6%, respectively, with the greatest decreases in the California operating group. 

Committed and Awarded Projects

CAP consists of two components:

(1) unearned revenue and (2) other awards.

Unearned revenue includes the revenue we expect to record in the future on executed contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts.

We generally include a project in unearned revenue at the time a contract is awarded, the contract has been executed and to the extent we believe funding is probable.

Contract options and task orders are included in unearned revenue when exercised or issued, respectively.

Certain government contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed.

Other awards include the general construction portion of construction management/general contractor (“CM/GC”) contracts and awarded contracts with unexercised contract options or unissued task orders.

The general construction portion of CM/GC contracts are included in other awards to the extent contract execution and funding is probable.

Contracts with unexercised contract options or unissued task orders are included in other awards to the extent option exercise or task order issuance is probable.

All CAP is in the Construction segment.

(dollars in thousands)

March 31, 2023

December 31, 2022

Unearned revenue

(dollars in thousands)

March 31, 2023

December 31, 2022

CAP of $5.1 billion at March 31, 2023 increased $618.8 million when compared to December 31, 2022. Significant additions to CAP during the three months ended March 31, 2023 included $132 million related to middle-mile broadband infrastructure projects in California, $126 million for the construction of buildings and infrastructure in Guam, an $85 million bridge project in Alaska, a $65 million highway project in Alaska, a $58 million highway project in Nevada, a $46 million reclamation project in Utah and a $29 million highway project in California.

Non-controlling partners’

share of CAP as of March 31, 2023 and December 31, 2022 was $109.6 million and $85.0 million, respectively.

At March 31, 2023, four contracts with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $103.0 million, or 2.0%, of total CAP.

The following table presents gross profit by reportable segment for the respective periods:

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

Percent of segment revenue

Total gross profit

Percent of total revenue

Construction gross profit for the three months ended March 31, 2023 decreased by $21.8 million, or 37.2%, when compared to 2022 primarily due to an increase in the negative net impact from revisions in estimates, mainly in our Central operating group.

For further discussion of projects with revisions in estimates which individually had an impact of $5.0 million or more on gross profit, see Note 4 of "Notes to the Condensed Consolidated Financial Statements." Increased depreciation expense during the three months ended March 31, 2023 also contributed to the decrease in gross profit.

As previously disclosed, our former Water and Mineral Services operating group (“WMS”) was classified as held for sale throughout the first quarter of 2022, and therefore no depreciation expense was recorded for WMS assets during that period.

Materials gross profit for the three months ended March 31, 2023 decreased by $6.0 million when compared to 2022.

The decrease in materials revenue was due to inclement weather in the first quarter of 2023 which lowered sales volumes and negatively impacted gross profit during the three months ended March 31, 2023.

Selling, General and Administrative Expenses

The following table presents the components of selling, general and administrative expenses for the respective periods:

Three Months Ended March 31,

(dollars in thousands)

Salaries and related expenses

Restricted stock unit amortization

Other selling expenses

Total selling

General and administrative

Salaries and related expenses

Restricted stock unit amortization

Other general and administrative expenses

Total general and administrative

Total selling, general and administrative

Percent of revenue

Selling Expenses

Selling expenses include the costs for estimating and bidding including offsetting customer reimbursements for portions of our selling/bid submission expenses (i.e., stipends), business development and materials facility permits.

Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses.

Selling expenses for the three months ended March 31, 2023 decreased by $1.1 million, or 5.4%, when compared to 2022, primarily due to the sale of Inliner on March 16, 2022.

General and Administrative Expenses

General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions.

Other general and administrative expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, incentive compensation, changes in the fair market value of our Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses.

Total general and administrative expenses for the three months ended March 31, 2023 increased by $4.1 million, or 8.1%, primarily due to increases in stock-based compensation expense and increases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is mostly offset in Other (income) expense, net, through our own company-owned life insurance policy.

These increases were partially offset by the sale of Inliner on March 16, 2022.

The following table presents the provision for (benefit from) income taxes for the respective periods:

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

Provision for (benefit from) income taxes

Effective tax rate

We calculate our income tax provision (benefit) at the end of each interim period by estimating our annual effective tax rate and applying that rate to our income or loss before tax. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs.

Our effective tax rate for the three months ended March 31, 2023 was higher than the prior year primarily due to non-deductible goodwill associated with the sale of Inliner in the first quarter of 2022.

Amount Attributable to Non-controlling Interests

The following table presents the amount attributable to non-controlling interests in consolidated subsidiaries for the respective periods:

Three Months Ended March 31,

(in thousands)

Amount attributable to non-controlling interests

The amount attributable to non-controlling interests represents the non-controlling owners’

share of the net income or loss of our consolidated construction joint ventures. The amounts for the three months ended March 31, 2023 increased $4.4 million primarily due to the negative impact from revisions in estimates on one project (see Note 4 of “Notes to the Condensed Consolidated Financial Statements”).

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity and cash generated from operations.

We may also from time-to-time issue and sell equity, debt or hybrid securities or engage in other capital markets transactions or sell one or more business units or assets.

Our material cash requirements include paying the costs and expenses associated with our operations, servicing outstanding indebtedness, making capital expenditures and paying dividends on our capital stock.

We may also from time to time prepay or repurchase outstanding indebtedness, repurchase shares of our common stock or acquire assets or businesses that are complementary to our operations.

We believe our primary sources of liquidity will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, cash dividend payments and other liquidity requirements associated with our existing operations for the next twelve months.

We also believe our primary sources of liquidity, access to debt and equity capital markets and cash expected to be generated from operations will be sufficient to meet our long-term requirements and plans.

However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.

As of March 31, 2023, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting primarily of U.S. Government and agency obligations and corporate commercial paper. As of March 31, 2023, the total unused availability under our Credit Agreement was $269.5 million, resulting from $30.5 million in issued and outstanding letters of credit and $50.0 million drawn under the Credit Agreement.

See Note 14 of “Notes to the Condensed Consolidated Financial Statements”.

As of March 31, 2023, we had $4.8 million of receivables and $28.8 million of contract retention receivable from Brightline Trains Florida LLC ("Brightline") (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”).

As of the date of this report, $1.9 million of the Brightline receivables have been collected and the remaining $2.9 million are past due.

Brightline has experienced delays in securing additional funding in the past, therefore the timing and probability of future payments may be affected and our liquidity impacted if Brightline faces additional funding difficulties.

In evaluating our liquidity position and needs, we also consider cash and cash equivalents held by our consolidated construction joint ventures (“CCJVs”).

The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, as of the respective dates:

(in thousands)

March 31, 2023

December 31, 2022

Cash and cash equivalents excluding CCJVs

CCJV cash and cash equivalents (1)

Total consolidated cash and cash equivalents

Short-term and long-term marketable securities (2)

Total cash, cash equivalents and marketable securities

(1) The volume and stage of completion of contracts from our CCJVs may cause fluctuations in joint venture cash and cash equivalents between periods.

The assets of each consolidated and unconsolidated construction joint venture relate solely to that joint venture.

The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.

(2) All marketable securities were classified as held-to-maturity and consisted of U.S.

and agency obligations and corporate commercial paper as of all periods presented.

Granite’s portion of CCJV cash and cash equivalents was $67.1 million and $62.5 million as of March 31, 2023 and December 31, 2022, respectively. Excluded from the table above is $34.4 million and $40.4 million as of March 31, 2023 and December 31, 2022, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents.

Capital Expenditures

Major capital expenditures are typically for aggregate and asphalt production facilities, aggregate reserves, construction equipment, buildings and leasehold improvements and investments in our information technology systems.

The timing and amount of such expenditures can vary based on the progress of planned capital projects, the type and size of construction projects, changes in business outlook and other factors.

During the 

three months ended March 31, 2023, we had capital expenditures of $

40.5 million, compared t

o $31.3 mi llion, during the

three months ended March 31, 2022.

The increase year over year is primarily due to acquisitions of materials reserves in 2023.

We currently anticipate 2023 capital expenditures to be between approximately $

100 million and $

120 million.

Three months ended March 31,

(in thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Operating activities

As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts. Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the work that we perform, including claim and back charge settlements.

Our working capital assets result from both public and private sector projects.

Customers in the private sector can be slower paying than those in the public sector;

however, private sector projects generally have higher gross profit as a percentage of revenue.

While we typically invoice our customers on a monthly basis, our contracts frequently provide for retention that is a specified percentage withheld from each payment by our customers until the contract is completed and the work accepted by the customer.

Cash used in operating activities of $76.7 million for the three months ended March 31, 2023 represents a $26.5 million increase in cash used when compared to the same period of 2022.

The change was primarily attributable to the timing of receipts and payments of working capital, which includes receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities.

Cash used in working capital increased by $33.6 million.

This was partially offset by a decrease in contributions, net of distributions, of $11.7 million to unconsolidated joint ventures and affiliates.

Investing activities

Cash used in investing activities of $24.3 million for the three months ended March 31, 2023 represents a $113.7 million increase in cash used when compared to the same period of 2022.

The change was primarily due to proceeds from the sale of the Inliner business in March 2022, as well as increased purchases of property and equipment in the current year, partially offset by decreased purchases and increased maturities of marketable securities in the current year.

Financing activities

Cash provided by financing activities of $6.8 million for the three months ended March 31, 2023 represents an $89.7 million increase in cash provided by financing activities when compared to the same period of 2022.

The change was primarily due to a $62.8 million decrease in debt principal repayments and a $16.7 million decrease in repurchases of common stock.

Contributions from non-controlling partners, net of distributions, increased $9.9 million in the current year.

We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheets at fair value using Level 2 inputs.

See Note 9 to “Notes to the Condensed Consolidated Financial Statements”

for further information.

The hedge option and warrant derivative transactions related to the 2.75% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds.

Surety Bonds and Real Estate Mortgages

We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts.

At March 31, 2023, approximatel y $2.6 billion of our $5.1 billion CAP was bonded.

Performance bonds do not have stated expiration dates;

rather, we are generally released from the bonds after the owner accepts the work performed under contract.

The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties.

Our investments in real estate affiliates are subject to mortgage indebtedness.

This indebtedness is non-recourse to Granite but is recourse to the real estate entities.

The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement and development.

Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. Our unconsolidated investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases and working capital.

This debt is non-recourse to Granite, but it is recourse to the affiliates.

The debt associated with our unconsolidated non-construction entities is included in Note 11 of “Notes to the Condensed Consolidated Financial Statements.”

Covenants and Events of Default

Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below.

Our failure to comply with these covenants would constitute an event of default under the Credit Agreement.

Additionally, the 2.75% Convertible Notes are governed by the terms and conditions of the indenture. Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 2.75% Convertible Notes indenture or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility;

(ii) termination of such facility;

(iii) the requirement that any letters of credit under such facility be cash collateralized;

(iv) acceleration of amounts owed under the Credit Agreement;

and/or (v) foreclosure on any lien securing the obligations under such facility.

A default under the 2.75% Convertible Notes indenture could result in acceleration of the maturity of the notes.

The most significant financial covenants under the terms of our Credit Agreement require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio.

As of March 31, 2023, the Consolidated Leverage Ratio was 1.4, which did not exceed the maximum of 3.25.

Our Consolidated Interest Coverage Ratio was 15.7, which exceeded the minimum of 3.00.

Share Repurchase Program

As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million of our common stock at management’s discretion (the “2022 authorization”). In March 2022, we repurchased 611,000 shares under this authorization.

There were no share repurchases in the three months ended March 31, 2023.

As of March 31, 2023, $231.5 million of the 2022 authorization remained available.

The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors.

Website Access

Our website address is www.graniteconstruction.com.

On our website we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).

The information on our website is not incorporated into, and is not part of, this report.

These reports, and any amendments to them, are also available at the website of the SEC, www.sec.gov.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in our exposure to market risk from what was previously disclosed in our Annual Report.

Income (loss) before income taxes $ ( 14,822 ) $ 28,246 $ ( 50,063 ) $ 9,503

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements