What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-07-28 · 223 added, 233 removed, 610 unchanged (43% of the section changed)

3 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current assets

38 unchanged sentences

issued and outstanding:

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

43,926,576 shares as of September 30, 2023 and 43,743,907 shares as of December 31, 2022

Additional paid-in capital 472,379 470,407

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 As Restated and Recast 2023 As Restated and Recast

September 30, Nine Months Ended

September 30,

2023 As Restated 2023 As Restated

Construction $ 945,698 $ 847,371 $ 2,198,527 $ 2,138,858

9 unchanged sentences

Gain on sales of property and equipment, net ( 1,812 ) ( 949 ) ( 7,793 ) ( 10,462 )

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

Operating income 73,818 54,699 59,429 68,738

Other (income) expense

4 unchanged sentences

Other (income) expense, net 462 77 ( 2,713 ) 4,646

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

Total other (income) expense, net ( 6,101 ) ( 2,789 ) 29,573 1,747

Income before income taxes 79,919 57,488 29,856 66,991

Provision for (benefit from) income taxes 22,423 ( 7,710 ) 21,978 7,310

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

Net income 57,496 65,198 7,878 59,681

Amount attributable to non-controlling interests 128 4,104 9,723 1,569

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):

Net income attributable to Granite Construction Incorporated $ 57,624 $ 69,302 $ 17,601 $ 61,250

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

Basic $ 1.31 $ 1.58 $ 0.40 $ 1.37

5 unchanged sentences

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited - in thousands)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 As Restated 2023 As Restated

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

Net income $ 57,496 $ 65,198 $ 7,878 $ 59,681

Other comprehensive income (loss), net of tax

Net unrealized gain (loss) on cash flow hedges, net of tax $ 883 $ ( 1,906 ) $ 325 $ 153

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

reclassification for net gains (losses) included in interest expense, net of tax ( 362 ) — ( 250 ) 3,042

Net change $ 521 $ ( 1,906 ) $ 75 $ 3,195

Foreign currency translation adjustments, net ( 422 ) 53 31 699

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 )

Other comprehensive income (loss), net of tax $ 99 $ ( 1,853 ) $ 106 $ 3,894

Comprehensive income, net of tax $ 57,595 $ 63,345 $ 7,984 $ 63,575

Non-controlling interests in comprehensive income, net of tax 128 4,104 9,723 1,569

Comprehensive income attributable to Granite Construction Incorporated, net of tax $ 57,723 $ 67,449 $ 17,707 $ 65,144

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

6 unchanged sentences

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 )

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

Net income — — — — 57,624 57,624 ( 128 ) 57,496

Other comprehensive income — — — 99 — 99 — 99

3 unchanged sentences

— — 76 — ( 5,785 ) ( 5,709 ) — ( 5,709 )

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 — — — — — — 11,449 11,449

Stock-based compensation expense and other ( 54 ) — 1,926 — — 1,926 — 1,926

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

Balances at September 30, 2023 43,926,576 $ 439 $ 472,379 $ 894 $ 481,636 $ 955,348 $ 51,229 $ 1,006,577

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

Net income (as restated) — — — — 69,302 69,302 ( 4,104 ) 65,198

Other comprehensive income — — — 815 — 815 — 815

Other comprehensive loss — — — ( 1,853 ) — ( 1,853 ) — ( 1,853 )

Repurchases of common stock (1) ( 378,790 ) ( 4 ) ( 346 ) — — ( 350 ) — ( 350 )

4 unchanged sentences

Stock-based compensation expense and other ( 15 ) — 1,775 — ( 76 ) 1,699 — 1,699

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.

Balances at September 30, 2022 (as restated) 43,723,658 $ 437 $ 468,662 $ 535 $ 465,134 $ 934,768 $ 35,621 $ 970,389

(1) During the three months ended September 30, 2023 and 2022, there were 3,334 shares and 9,641 shares, respectively, withheld related to employee taxes for restricted stock units ("RSUs") vested under our equity incentive plans.

During the three months ended September 30, 2022, we also repurchased 366,785 shares under the Board approved share repurchase program.

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

7 unchanged sentences

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

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

Net income — — — — 17,601 17,601 ( 9,723 ) 7,878

Other comprehensive income — — — 106 — 106 — 106

5 unchanged sentences

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

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

Common stock issued in debt extinguishment 1,390,500 14 49,321 — — 49,335 — 49,335

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

1 unchanged sentence

Stock-based compensation expense and other 7,093 — 8,894 — — 8,894 — 8,894

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

Balances at September 30, 2023 43,926,576 $ 439 $ 472,379 $ 894 $ 481,636 $ 955,348 $ 51,229 $ 1,006,577

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

1 unchanged sentence

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

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

Net income (as restated) — — — — 61,250 61,250 ( 1,569 ) 59,681

Other comprehensive income — — — 3,894 — 3,894 — 3,894

5 unchanged sentences

Stock-based compensation expense and other 9,014 — 6,358 — — 6,358 — 6,358

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.

Balances at September 30, 2022 (as restated) 43,723,658 $ 437 $ 468,662 $ 535 $ 465,134 $ 934,768 $ 35,621 $ 970,389

(1) During the nine months ended September 30, 2023 and 2022, there were 96,936 shares and 69,659 shares, respectively, withheld related to employee taxes for RSUs vested under our equity incentive plans.

During the nine months ended September 30, 2022, we also repurchased 2,298,353 shares under the Board approved share repurchase program.

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

2 unchanged sentences

( Unaudited - in thousands )

Six Months Ended June 30, 2023 As Restated

Nine Months Ended September 30, 2023 As Restated

Operating activities

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

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

Net income $ 7,878 $ 59,681

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

Depreciation, depletion and amortization 65,298 61,714

5 unchanged sentences

Stock-based compensation 8,630 6,151

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

Equity in net (income) loss from unconsolidated joint ventures ( 4,535 ) 25,066

Net income from affiliates ( 19,378 ) ( 9,656 )

8 unchanged sentences

Accounts payable 144,721 60,973

Accrual for resolution of SEC investigation — 12,000

Accrued expenses and other liabilities, net 76,915 14,264

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

Net cash provided by (used in) operating activities $ 34,198 $ ( 14,631 )

Investing activities

48 unchanged sentences

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.

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

10 unchanged sentences

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

Impairment charges:

During the third quarter of 2023, we made the decision to wind down our international Mineral Services operations.

We perform goodwill impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill.

In response to this change in the business, we performed an interim goodwill impairment test on the Mountain Group Construction reporting unit, which resulted in a non-cash impairment charge.

We also assessed the long-lived tangible assets and amortizable intangible assets associated with these Mineral Services operations.

We recorded a total of $ 4.5 million of non-cash impairment charges during the three and nine months ended September 30, 2023 related to the wind down of international Mineral Services operations, which are included in other costs on our condensed consolidated statement of operations.

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

Therefore, the results of operations for the three and nine months ended September 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 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 six months ended June 30, 2023 that had a material impact on our financial statements.

Restatement and Recast

Restatement and Recast Background

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.

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.

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 three and six months ended

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 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):

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

In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement , which requires that a joint venture apply a new basis of accounting upon formation.

As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value.

This ASU is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025.

We plan to adopt this ASU in the first quarter of 2025 but do not expect the adoption to have a material impact on our consolidated financial statements.

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

Restatement Background

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 in Other costs, net and Provision for income taxes in our condensed consolidated financial statements.

As a result, our previously issued unaudited quarterly financial information

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

for each interim period within the nine months ended September 30, 2022 require restatement.

Description of Restatement Tables

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

The amounts labeled “As Previously Reported” were derived from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 filed on October 27, 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 income for the three and nine months ended September 30, 2022.

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

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

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

Three months ended September 30, 2022 As Previously Reported Restatement Impacts As Restated

Construction $ 848,267 $ ( 896 ) $ 847,371

13 unchanged sentences

Interest expense 2,519 — 2,519

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

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

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

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 ) —

Equity in income of affiliates ( 3,491 ) — ( 3,491 )

Other expense, net 77 — 77

Total other (income), net ( 2,789 ) — ( 2,789 )

Income before income taxes 62,800 ( 5,312 ) 57,488

Benefit from income taxes ( 6,489 ) ( 1,221 ) ( 7,710 )

Net income 69,289 ( 4,091 ) 65,198

Amount attributable to non-controlling interests 4,104 — 4,104

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 $ 73,393 $ ( 4,091 ) $ 69,302

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 ) —

Net income per share attributable to common shareholders

Basic earnings per share $ 1.67 $ ( 0.09 ) $ 1.58

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 $ 1.44 $ ( 0.08 ) $ 1.36

4 unchanged sentences

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

Nine months ended September 30, 2022 As Previously Reported Restatement Impacts As Restated

Construction $ 2,141,009 $ ( 2,151 ) $ 2,138,858

13 unchanged sentences

Interest expense 10,003 — 10,003

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

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

Equity in income of affiliates ( 9,656 ) — ( 9,656 )

Other expense, net 4,646 — 4,646

Total other expense, net 1,747 — 1,747

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 )

Income before income taxes 75,259 ( 8,268 ) 66,991

Provision for (benefit from) income taxes ( 777 ) 8,087 7,310

Net income 76,036 ( 16,355 ) 59,681

Amount attributable to non-controlling interests 1,569 — 1,569

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

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 )

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

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 )

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

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

Net income attributable to Granite Construction Incorporated $ 77,605 $ ( 16,355 ) $ 61,250

Net income per share attributable to common shareholders

Basic earnings per share $ 1.73 $ ( 0.36 ) $ 1.37

Diluted earnings per share $ 1.56 $ ( 0.31 ) $ 1.25

Weighted average shares outstanding:

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

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

Nine months ended September 30, 2022 As Previously Reported Restatement Impacts As Restated

Operating activities

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

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

Net income $ 76,036 $ ( 16,355 ) $ 59,681

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

Depreciation, depletion and amortization 61,714 — 61,714

5 unchanged sentences

Equity in net loss from unconsolidated joint ventures 23,585 1,481 25,066

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

Net income from affiliates ( 9,656 ) — ( 9,656 )

Other non-cash adjustments 38 — 38

7 unchanged sentences

Accounts payable 60,973 — 60,973

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

Accrued expenses and other liabilities, net 3,221 11,043 14,264

11 unchanged sentences

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.

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

The projects with increases 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

September 30, Nine Months Ended

September 30,

As Restated As Restated

2023 2022 2023 2022

Number of projects with upward estimate changes 1 1 1 —

Increase to project profitability, net $ 8.6 $ 6.6 $ 8.1 $ —

Increase to net income/decrease to net loss $ 6.5 $ 5.1 $ 6.1 $ —

Amounts attributable to non-controlling interests $ — $ — $ 3.3 $ —

Increase to net income/decrease to net loss attributable to Granite Construction Incorporated $ 6.5 $ 5.1 $ 2.8 $ —

Increase to net income/decrease to net loss per diluted share attributable to common shareholders $ 0.12 $ 0.10 $ 0.06 $ —

The increases during the three months ended September 30, 2023 and September 30, 2022 were due to changes in the estimated amount of probable recovery on outstanding claims.

The increase during the nine months ended September 30, 2023 was due to decreases in estimated costs from mitigated risks.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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,

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

6 unchanged sentences

Decrease to net income/increase to net loss per diluted share attributable to common shareholders $ 0.04 $ 0.08 $ 0.41 $ 0.70

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.

The decreases during the three and nine months ended September 30, 2023 were due to additional costs related to changes in project durations, lower productivity than originally anticipated and increased labor and materials costs.

The decreases during the three and nine months ended September 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

7 unchanged sentences

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

Three Months Ended June 30,

Three Months Ended September 30,

2023 Construction Materials Total

3 unchanged sentences

Total $ 945,698 $ 171,122 $ 1,116,820

2022 (As Restated and Recast) Construction Materials Total

2022 (As Restated) Construction Materials Total

California $ 262,972 $ 85,173 $ 348,145

2 unchanged sentences

Total $ 847,371 $ 161,539 $ 1,008,910

Six Months Ended June 30,

Nine Months Ended September 30,

2023 Construction Materials Total

3 unchanged sentences

Total $ 2,198,527 $ 376,913 $ 2,575,440

2022 (As Recast) Construction Materials Total

2022 (As Restated) Construction Materials Total

California $ 606,716 $ 202,371 $ 809,087

4 unchanged sentences

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

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

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

California $ 1,423,845 $ 945,971

3 unchanged sentences

All unearned revenue is in the Construction segment.

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.

Approximately $ 2.5 billion of the September 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.

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 $ 41.6 million and $ 131.3 million during the three and nine months ended September 30, 2023 and $ 35.8 million and $ 150.4 million during the three and nine months ended September 30, 2022, respectively.

The changes in contract transaction price for the three and nine months ended

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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.

September 30, 2023 and 2022 were from items such as executed or estimated change orders and unresolved contract modifications and claims.

As of September 30, 2023 and December 31, 2022, the aggregate claim recovery estimates included in contract asset and liability balances were $ 71.6 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

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

Costs in excess of billings and estimated earnings $ 130,570 $ 80,357

1 unchanged sentence

Total contract assets $ 282,280 $ 241,916

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.

As of September 30, 2023 and December 31, 2022, contract retention receivable from Brightline Trains Florida LLC represented 10.3 % 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.

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

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.

We recognized revenue of $ 17.5 million and $ 188.6 million during the three and nine months ended September 30, 2023, respectively, and $ 10.7 million and $ 221.4 million during the three and nine months ended September 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

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

Billings in excess of costs and estimated earnings, net of retention $ 205,288 $ 152,294

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The following table presents major categories of receivables:

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

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

Contracts completed and in progress:

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Total net receivables $ 743,091 $ 463,987

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.

Included in other receivables at September 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 September 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 September 30, 2023 or December 31, 2022.

GRANITE CONSTRUCTION INCORPORATED

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Fair Value Measurement at Reporting Date Using

June 30, 2023 Level 1 Level 2 Level 3 Total

September 30, 2023 Level 1 Level 2 Level 3 Total

Cash equivalents

Money market funds $ 61,321 $ — $ — $ 61,321

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

Accrued and other current liabilities

Other current assets

Diesel collars $ — $ 335 $ — $ 335

Commodity swaps — 223 — 223

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

Total assets $ 61,321 $ 558 $ — $ 61,879

December 31, 2022

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Commodity Derivatives

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 .

As of September 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 $ 1.6 million and $ 7.0 million, respectively, all maturing by October 31, 2023.

The realized and unrealized gains associated with commodity swaps for the three and nine months ended September 30, 2023 were immaterial .

The financial statement impact for the three and nine months ended September 30, 2022 was a realized gain of $ 1.2 million and $ 4.0 million, respectively.

In addition, for the three months ended September 30, 2022, the commodity swaps had an unrealized loss of $ 2.6 million, and for the nine months ended September 30, 2022, the commodity swaps had an immaterial unrealized gain.

In the first three 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 their maturity dates.

The financial statement impact for the three months ended September 30, 2023 was an unrealized gain of $ 1.3 million.

The unrealized gain for the nine months ended September 30, 2023 and the realized gain for the three and nine months ended September 30, 2023 were immaterial .

GRANITE CONSTRUCTION INCORPORATED

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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

September 30, 2023 December 31, 2022

(in thousands) Fair Value Hierarchy Carrying Value Fair

Value Carrying Value Fair

Held-to-maturity marketable securities (1) Level 1 $ 37,028 $ 36,150 $ 65,943 $ 64,584

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Credit Agreement - Revolver (2) Level 3 $ — $ — $ 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.

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

Government and agency obligations maturing in two months to two 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.

The fair value of the Fourth Amended and Restated Credit Agreement, as amended (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, 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.

During the nine months ended September 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

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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 and six months ended June 30, 2023, we determined no change was required for existing joint ventures.

Based on our assessments during the three and nine months ended September 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).

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.

At September 30, 2023, there was $ 204.4 million of remaining contract value on unconsolidated and line item construction joint venture contracts of which $ 96.7 million represented our share and the remaining $ 107.7 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.

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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.

At September 30, 2023, we were engaged in ten active CCJV projects with total contract values ranging from $ 46.3 million to $ 428.5 million for a combined total of $ 2.0 billion of which our share was $ 1.2 billion.

As of September 30, 2023, our share of revenue remaining to be recognized on these CCJVs was $ 395.3 million and ranged from $ 1.9 million to $ 148.6 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.

During the three and nine months ended September 30, 2023, total revenue from CCJVs was $ 91.2 million and $ 223.3 million, respectively.

During the three and nine months ended September 30, 2022, total revenue from CCJVs was $ 117.5 million and $ 344.5 million, respectively.

During the nine months ended September 30, 2023 and 2022, CCJVs used $ 36.8 million and provided $ 4.7 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

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.

As of September 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 %.

As of September 30, 2023, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 57.9 million and ranged from $ 1.5 million to $ 33.7 million by project.

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

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

Cash, cash equivalents and marketable securities $ 158,768 $ 130,635

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Noncurrent assets 53,703 76,204

Less partners’ interest 593,218 604,741

partners’ interest 617,934 604,741

Granite’s interest (1),(2) $ 279,204 $ 283,319

Current liabilities $ 206,414 $ 244,411

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

partners’ interest and adjustments (3) 119,875 130,911

Granite’s interest $ 86,539 $ 113,500

Equity in construction joint ventures (4) $ 192,665 $ 169,819

(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.

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of September 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 September 30, 2023 and December 31, 2022 was $ 85.9 million and $ 104.3 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 0.9 million and $ 2.7 million related to Granite’s share of estimated recovery of back charge claims as of September 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.

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

As Restated As Restated

(in thousands) 2023 2022 2023 2022

Total $ ( 18,391 ) $ 69,355 $ 44,994 $ 322,058

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

partners’ interest and adjustments (1) ( 34,395 ) 44,000 4,625 223,858

Granite’s interest $ 16,004 $ 25,355 $ 40,369 $ 98,200

1 unchanged sentence

Total $ ( 10,607 ) $ 81,694 $ 74,328 $ 332,777

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

partners’ interest and adjustments (1) ( 18,143 ) 48,401 38,173 209,950

Granite’s interest $ 7,536 $ 33,293 $ 36,155 $ 122,827

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

Granite’s interest in gross profit (loss) $ 8,468 $ ( 7,938 ) $ 4,214 $ ( 24,627 )

Net Income (Loss)

Total $ ( 7,514 ) $ ( 11,945 ) $ ( 27,742 ) $ ( 11,649 )

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 )

partners’ interest and adjustments (1) ( 16,054 ) ( 4,106 ) ( 32,277 ) 13,418

Granite’s interest in net income (loss) (2) $ 8,540 $ ( 7,839 ) $ 4,535 $ ( 25,067 )

(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.

(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.

GRANITE CONSTRUCTION INCORPORATED

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

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

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

Foreign $ 66,969 $ 58,579

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

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

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

Current assets $ 207,838 $ 194,210

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(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.

Of the $ 371.0 million of total affiliate assets as of September 30, 2023, we had investments in two real estate entities with total assets of $ 59.2 million, our foreign affiliates had total assets of $ 270.3 million and the asphalt terminal entity had total assets of $ 41.5 million.

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

As of September 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 September 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) June 30, 2023 December 31, 2022

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

Equipment and vehicles $ 1,065,882 $ 994,602

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Accrued Expenses and Other Current Liabilities

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

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

Accrued insurance $ 85,937 $ 78,427

5 unchanged sentences

Total $ 355,987 $ 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) June 30, 2023 December 31, 2022

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

3.75 % Convertible Notes

5 unchanged sentences

Total debt $ 405,260 $ 288,381

Less current maturities 1,466 1,447

current maturities 1,475 1,447

Total long-term debt $ 403,785 $ 286,934

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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

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

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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.

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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.

At September 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

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

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.

letters of credit) and a $ 20.0 million sublimit for swingline loans.

In May 2023, we entered into Amendment No.

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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.

As of September 30, 2023, the total unused availability under the Credit Agreement was $ 330.8 million, resulting from $ 19.2 million in issued and outstanding letters of credit and nothing drawn under the Revolver.

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

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.

As of September 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.

During the three and nine months ended September 30, 2023, we recorded $ 0.6 million and $ 3.0 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 for the nine months ended September 30, 2023.

We also capitalized $ 10.0 million in third party offering costs related to the issuance of the 3.75 % Convertible Notes for the nine months ended September 30, 2023.

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:

During the three and nine months ended September 30, 2022, we recorded $ 0.3 million and $ 1.0 million, respectively, of amortization related to debt issuance costs.

Weighted Average Shares Outstanding and Net Income Per Share

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

As Restated As Restated

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

Numerator (basic and diluted)

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

Net income attributable to common shareholders for basic earnings per share $ 57,624 $ 69,302 $ 17,601 $ 61,250

Interest expense related to Convertible Notes 3,209 1,473 — 4,418

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

Net income attributable to common shareholders for diluted earnings per share $ 60,833 $ 70,775 $ 17,601 $ 65,668

Weighted average common shares outstanding, basic 43,924 43,973 43,861 44,739

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Weighted average common shares outstanding, diluted 53,612 51,863 44,447 52,613

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 )

Net income per share, basic $ 1.31 $ 1.58 $ 0.40 $ 1.37

Net income per share, diluted $ 1.13 $ 1.36 $ 0.40 $ 1.25

For the nine months ended September 30, 2023, interest expense related to convertible notes of $ 6.9 million and the potential dilution from the convertible notes converting into 9,099 shares of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been antidilutive.

In connection with the issuance of the 3.75 % Convertible Notes in May 2023, 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.

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

September 30, Nine Months Ended

September 30,

As Restated As Restated

(dollars in thousands) 2023 2022 2023 2022

1 unchanged sentence

Effective tax rate 28.1 % ( 13.4 %) 73.6 % 10.9 %

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.

Our effective tax rate for the three months ended September 30, 2023 is higher than the prior year due to the tax benefit recognized in the prior year associated with the reversal of deferred tax liabilities related to the Water Resources and Mineral Services businesses no longer being held for sale and the release of valuation allowances related to the utilization of capital loss carryforwards.

Our effective tax rate for the nine months ended September 30, 2023 was higher 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, combined with the tax benefits recognized in the prior year for the items noted above, partially offset by non-deductible goodwill associated with the sale of Inliner.

See Note 14 for more information regarding the convertible notes.

Contingencies - Legal Proceedings

27 unchanged sentences

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.

The parties attended mediation on August 4, 2023, and, on October 11, 2023, entered into a settlement agreement to resolve the matters in the Steadfast lawsuit and arbitration.

Pursuant to the terms of the settlement agreement, Steadfast and CHDJV agreed to release the Company and Layne from any and all claims, rights, causes of action, liabilities, actions, suits, damages or demands of any kind whatsoever, that arose out of or are based upon or related to the facts alleged in the Steadfast lawsuit and arbitration.

The settlement agreement contained no admission of liability, wrongdoing or responsibility by any of the parties.

The settlement agreement provides for the dismissal of the Steadfast lawsuit and the arbitration following payment of the settlement amount, which is required by December 8, 2023.

We have recorded a pre-tax charge of $ 20.0 million, net of estimated insurance recovery, which is reflected in other costs on the condensed consolidated statements of operations for the nine months ended September 30, 2023.

Reportable Segment Information

4 unchanged sentences

Summarized segment information is as follows (in thousands):

Three months ended June 30, Construction Materials Total

Three months ended September 30, Construction Materials Total

Total revenue from reportable segments $ 945,698 $ 245,060 $ 1,190,758

3 unchanged sentences

Depreciation, depletion and amortization $ 11,239 $ 7,431 $ 18,670

2022 (As Restated and Recast)

2022 (As Restated)

Total revenue from reportable segments $ 847,371 $ 233,261 $ 1,080,632

5 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Six Months Ended June 30, Construction Materials Total

Nine Months Ended September 30, Construction Materials Total

Total revenue from reportable segments $ 2,198,527 $ 523,813 $ 2,722,340

4 unchanged sentences

Segment assets as of period end $ 449,354 $ 421,766 $ 871,120

2022 (As Recast)

2022 (As Restated)

Total revenue from reportable segments $ 2,138,858 $ 506,228 $ 2,645,086

4 unchanged sentences

Segment assets as of period end $ 434,604 $ 351,520 $ 786,124

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

A reconciliation of segment gross profit to consolidated income before income taxes is as follows:

Three Months Ended

June 30, Six Months Ended

As Restated and Recast As Recast

September 30, Nine Months Ended

September 30,

As Restated As Restated

(in thousands) 2023 2022 2023 2022

2 unchanged sentences

Other costs, net 19,843 ( 490 ) 37,973 22,401

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

Gain on sales of property and equipment, net ( 1,812 ) ( 949 ) ( 7,793 ) ( 10,462 )

Total other (income) expense, net ( 6,101 ) ( 2,789 ) 29,573 1,747

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

Income before income taxes $ 79,919 $ 57,488 $ 29,856 $ 66,991

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