What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-31 compared with 2023-07-28 · 106 added, 86 removed, 207 unchanged (48% of the section changed)

30 unchanged sentences

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.

We are seeing projects funded by the IIJA for bid and believe project lettings will continue to be elevated for the remainder of 2023 and in 2024 as IIJA funds are utilized.

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

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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”) continue to be strong at $5.4 billion at the end of the second 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.

Our Committed and Awarded Projects (“CAP”) continue to be strong at $5.6 billion at the end of the third quarter of 2023.

Our CAP is supported by a positive public funding environment and private market which we believe will provide further opportunities to continue to grow CAP.

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

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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.

During 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.

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, legal proceedings and indemnity claims in the ordinary course of our business and may in the future be subject to other litigation, legal proceedings and claims, 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.

As further discussed in Note 17 of “Notes to the Condensed Consolidated Financial Statements,” our wholly owned subsidiary, Layne Christensen Company (“Layne”), was sued relating to its work on the Salesforce Tower foundation.

On October 11, 2023, the parties to the lawsuit and related arbitration proceeding entered into a settlement agreement to fully and finally resolve the matter.

During the nine months ended September 30, 2023, we 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.

Results of Operations

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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 and six months ended June 30, 2023 and 2022:

The following table presents a financial summary for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 As Restated and Recast 2023 As Restated and Recast

September 30, Nine Months Ended

September 30,

(in thousands) 2023 As Restated 2023 As Restated

Total revenue $ 1,116,820 $ 1,008,910 $ 2,575,440 $ 2,512,043

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Selling, general and administrative expenses $ 74,794 $ 61,795 $ 212,479 $ 192,036

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

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

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

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

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

Total Revenue by Segment

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

(dollars in thousands) 2023 As Restated and Recast 2023 As Recast

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2023 As Restated 2023 As Restated

Construction $ 945,698 84.7 % $ 847,371 84.0 % $ 2,198,527 85.4 % $ 2,138,858 85.1 %

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Construction Revenue

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

(dollars in thousands) 2023 As Restated and Recast 2023 As Recast

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2023 As Restated 2023 As Restated

California $ 317,244 33.5 % $ 262,972 31.0 % $ 699,093 31.8 % $ 606,716 28.4 %

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Total $ 945,698 100.0 % $ 847,371 100.0 % $ 2,198,527 100.0 % $ 2,138,858 100.0 %

Construction revenue for the three months ended June 30, 2023 increased by $36.2 million, or 5.1%, when compared to 2022.

Construction revenue for the three months ended September 30, 2023 increased by $98.3 million, or 11.6%, when compared to 2022.

Construction revenue from the California and Mountain operating groups increased $54.3 million and $44.0 million, respectively, which were driven by higher levels of CAP going into the quarter.

The Central operating group's construction revenue decreased by $11.1 million primarily due to the wind down of several large projects.

Construction revenue for the six months ended June 30, 2023 decreased by $38.7 million, or 3.0%, when compared to the six months ended June 30, 2022.

This decrease was primarily driven by a $60.0 million decrease in the Central operating group due to the wind down of several large projects.

Revenue from the Mountain operating group decreased $16.8 million mainly 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 $38.1 million despite the unfavorable weather conditions during the first half of the year, partly due to emergency work resulting from the weather as well as higher CAP levels to start the year.

During both the three and six months ended June 30, 2023 and 2022, approximately 65% of revenue earned in the Construction segment was from the public sector.

The Central operating group's construction revenue was consistent with prior year.

This was the result of increased revenue from new work in Texas, Arizona and Illinois, which offset the wind down of several large projects.

Construction revenue for the nine months ended September 30, 2023 increased by $59.7 million, or 2.8%, when compared to the nine months ended September 30, 2022.

California operating group revenue increased $92.4 million despite the unfavorable weather conditions during the first half of the year, partly due to elevated work volume achieved once weather conditions improved as well as higher CAP levels to start the year.

Mountain operating group revenue increased $27.2 million, which includes Inliner in the prior year that contributed $33.2 million prior to its sale in April 2022.

The increase in revenue is primarily due to new work in Alaska, Nevada and the Pacific Northwest.

Central operating group revenue decreased $59.9 million primarily due to the wind down of several large projects.

This decrease was partially offset by increased revenue from new work in Texas, Arizona and Illinois.

During both the three and nine months ended September 30, 2023 and 2022, approximately 70% of revenue earned in the Construction segment was from the public sector.

Materials Revenue

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

(dollars in thousands) 2023 2022 2023 As Recast

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2023 2022 2023 2022

California $ 83,867 49.0 % $ 85,173 52.7 % $ 191,221 50.7 % $ 202,371 54.2 %

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Total $ 171,122 100.0 % $ 161,539 100.0 % $ 376,913 100.0 % $ 373,185 100.0 %

Materials revenue for the three months ended June 30, 2023 increased $13.1 million, or 9.6%, when compared to the same period in 2022 driven by higher asphalt and aggregate sales prices and increased aggregate sales volume.

Aggregate sales volume was up 9.2% during the three months ended June 30, 2023.

Materials revenue for the six months ended June 30, 2023 decreased $5.9 million, or 2.8%, when compared to the six months ended June 30, 2022, driven primarily by lower sales volumes in both asphalt and aggregates resulting from inclement weather during the first quarter of 2023, partially offset by increased sales prices.

Asphalt and aggregate sales volumes were down 12.6% and 4.8%, respectively, in the six months ended June 30, 2023, with the greatest decreases in the California operating group.

Materials revenue for the three and nine months ended September 30, 2023 increased by $9.6 million and $3.7 million, or 5.9% and 1.0%, when compared to the same periods in 2022 driven primarily by higher asphalt and aggregate sales prices.

Committed and Awarded Projects

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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.

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.

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All CAP is in the Construction segment.

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

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

Unearned revenue $ 3,964,749 71.0 % $ 3,392,506 62.4 % $ 2,877,478 64.2 %

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Total $ 5,584,523 100.0 % $ 5,437,588 100.0 % $ 4,485,139 100.0 %

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

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

California $ 2,345,294 42.0 % $ 2,345,611 43.2 % $ 1,747,163 39.0 %

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Total $ 5,584,523 100.0 % $ 5,437,588 100.0 % $ 4,485,139 100.0 %

CAP of $5.4 billion at June 30, 2023 increased $333.6 million and $952.4 million when compared to March 31, 2023 and December 31, 2022, respectively.

Significant additions to CAP during the three months ended June 30, 2023 included a $173 million weir widening project in California, a $72 million highway project in California, a $48 million flood control project in Texas, a $45 million railway project in California and a $38 million highway project in Alaska.

Non-controlling partners’ share of CAP as of June 30, 2023, March 31, 2023 and December 31, 2022 was $129.6 million, $109.6 million and $85.0 million, respectively.

At June 30, 2023, three contracts with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $86.2 million, or 1.6%, of total CAP.

CAP of $5.6 billion at September 30, 2023 increased $146.9 million and $1.1 billion when compared to June 30, 2023 and December 31, 2022, respectively.

Significant additions to CAP during the three months ended September 30, 2023 included a $205 million tunnel project in Ohio, $156 million for two highway projects in Texas, a $45 million highway project in Utah, and a $24 million highway project in California.

Non-controlling partners’ share of CAP as of September 30, 2023, June 30, 2023 and December 31, 2022 was $277.5 million, $129.6 million and $85.0 million, respectively.

At September 30, 2023, four contracts with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $94.4 million, or 1.7%, of total CAP.

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

Three Months Ended

June 30, Six Months Ended

(dollars in thousands) 2023 As Restated and Recast 2023 As Recast

September 30, Nine Months Ended

September 30,

(dollars in thousands) 2023 As Restated 2023 As Restated

Construction $ 137,162 $ 93,017 $ 253,021 $ 231,748

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Percent of total revenue 14.9 % 11.4 % 11.7 % 10.9 %

Construction gross profit for the three and six months ended June 30, 2023 decreased by $1.1 million and $22.9 million, or 1.4% and 16.5%, respectively, when compared to 2022.

The decrease for the six months ended June 30, 2023 was 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 and six months ended June 30, 2023 also contributed to the decrease in gross profit.

Construction gross profit for the three and nine months ended September 30, 2023 increased by $44.1 million and $21.3 million, or 47.5% and 9.2%, respectively, when compared to 2022 primarily due to higher revenue.

In the three month period, a reduction in the negative net impact from revisions in estimates, mainly in our Central operating group, also contributed to the gross profit improvement.

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 September 30, 2022 also contributed to the favorable variance in gross profit during the three months ended September 30, 2023 when compared to the prior year.

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

Materials gross profit for the three and six months ended June 30, 2023 increased by $6.6 million and $0.7 million, respectively, when compared to 2022.

Higher sales prices were the primary driver of the gross profit improvement for the three months ended June 30, 2023.

Cost of revenue during the three months ended September 30, 2022 included $6.9 million of depreciation that would have

been recognized in prior quarters if the unsold businesses had been continually classified as held and used from the beginning of the year.

Materials gross profit for the three and nine months ended September 30, 2023 increased by $7.4 million and $8.1 million, respectively, when compared to 2022.

Higher sales prices for aggregates and asphalt were the primary driver of the gross profit improvement for the three and nine months ended September 30, 2023.

Additionally, in 2023, oil and energy costs have normalized compared to the significant inflation in 2022 which negatively impacted materials gross profit margin in the prior year.

Selling, General and Administrative Expenses

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

(dollars in thousands) 2023 As Recast 2023 As Recast

September 30, Nine Months Ended

September 30,

(dollars in thousands) 2023 2022 2023 2022

Salaries and related expenses $ 13,939 $ 12,720 $ 44,195 $ 44,348

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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 and six months ended June 30, 2023 decreased by $1.8 million and $2.9 million, or 10.3% and 7.7%, when compared to 2022, primarily due to reduced prebid costs in the current year.

Selling expenses for the three months ended September 30, 2023 increased by $1.7 million, or 10.6%, when compared to 2022, primarily due to increased selling salaries and related expenses, including incentive compensation due to improved financial performance.

Selling expenses for the nine months ended September 30, 2023 decreased $1.2 million, or 2.3%, when compared to 2022, primarily due to reduced prebid costs in the current year and the sale of Inliner on March 16, 2022, partially offset by an increase in incentive compensation.

General and Administrative Expenses

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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 and six months ended June 30, 2023 increased by $6.3 million and $10.3 million, or 14.8% and 11.2%, primarily due to increases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is mostly offset in Other (income) expense, net, through investments held within our own company-owned life insurance policy, as well as increases in stock-based compensation expense.

The increases for the six months ended June 30, 2023 were partially offset by the sale of Inliner on March 16, 2022.

Total general and administrative expenses for the three and nine months ended September 30, 2023 increased by $11.3 million and $21.7 million, or 24.6% and 15.6%, respectively, primarily due to an increase in incentive compensation due to improved financial performance.

The increase in the nine months ended September 30, 2023 was also attributable to stock-based compensation 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 investments held within our own company-owned life insurance policy.

The increases for the nine months ended September 30, 2023 were partially offset by the sale of Inliner in the first quarter of 2022.

Other Costs, net

The following table presents other costs, net for the respective periods:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022 2023 2022

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

During the three and nine months ended September 30, 2023, Other costs, net increased $20.3 million and $15.6 million, respectively, compared to prior year.

These increases were primarily due to the settlement of the Salesforce Tower matter (see Note 17 of “Notes to the Condensed Consolidated Financial Statements”) and non-cash impairment charges associated with the wind down of our international Mineral Services operations (see Note 1 of “Notes to the Condensed Consolidated Financial Statements”) in the current year.

Also included in Other costs, net for the three and nine months ended September 30, 2023 and 2022 are non-recurring legal fees related to lawsuits, with the third quarter of last year also reflecting a $5 million settlement payment we received in connection with the shareholder derivative lawsuit.

Loss on Debt Extinguishment

In the second quarter of 2023, we issued 1,390,500 shares of Granite common stock and paid approximately $198.8 million in cash in exchange for approximately $198.7 million aggregate principal amount of our 2.75% Convertible Notes (the "Exchange Transaction") concurrent with the offering of the 3.75% Convertible Notes.

In the second quarter of 2023, we issued 1,390,500 shares of Granite common stock and paid $198.8 million in cash in exchange for $198.7 million aggregate principal amount of our 2.75% Convertible Notes (the "Exchange Transaction") concurrent with the offering of the 3.75% Convertible Notes.

As a result of the Exchange Transaction, we incurred a $51.1 million loss on debt extinguishment.

Included in the loss on debt extinguishment is a $1.7

million charge for the acceleration of the amortization of debt issuance costs associated with the 2.75% Convertible Notes that were redeemed early.

Included in the loss on debt extinguishment is a $1.7 million charge for the acceleration of the amortization of debt issuance costs associated with the 2.75% Convertible Notes that were redeemed early.

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

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Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 As Restated 2023 2022

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022 2023 2022

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

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 and six months ended June 30, 2023 increased $7.7 million and $12.1 million, respectively, primarily due to the impact from revisions in estimates (see Note 4 of “Notes to the Condensed Consolidated Financial Statements”).

The amounts for the three and nine months ended September 30, 2023 decreased $4.0 million and increased $8.2 million, respectively, primarily due to the impact from revisions in estimates (see Note 4 of “Notes to the Condensed Consolidated Financial Statements”).

Liquidity and Capital Resources

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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.

See Note 14 of the "Notes to the Condensed Consolidated Financial Statements" for further information on the issuance of our 3.75% Convertible Notes during the second quarter of 2023.

See Note 14 of the "Notes to the Condensed Consolidated Financial Statements" for information on our 3.75% Convertible Notes and our 2.75% Convertible Notes.

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.

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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 June 30, 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 June 30, 2023, the total unused availability under our 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 Credit Agreement.

As of September 30, 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.

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

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

As of June 30, 2023, we had $2.0 million of receivables and $29.0 million of contract retention receivables 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 $0.1 million are current.

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.

As of September 30, 2023, we had $1.9 million of receivables and $29.0 million of contract retention receivables from Brightline Trains Florida LLC ("Brightline") (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”).

As of the date of this report, $1.8 million of the receivables are past due.

Our project with Brightline is nearing completion and final payment, including the retention receivable, will be due to us no later than 40 days after all conditions of final completion are satisfied.

We expect to achieve final completion in the fourth quarter of 2023;

however, timing cannot be assured.

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 future 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) June 30, 2023 December 31, 2022

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

Cash and cash equivalents excluding CCJVs $ 173,471 $ 191,444

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(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 $52.1 million and $62.5 million as of June 30, 2023 and December 31, 2022, respectively.

Excluded from the table above is $32.9 million and $40.4 million as of June 30, 2023 and December 31, 2022, respectively, of Granite’s portion of unconsolidated construction joint venture cash and cash equivalents.

Government and agency obligations as of September 30, 2023 and December 31, 2022.

Granite’s portion of CCJV cash and cash equivalents was $71.0 million and $62.5 million as of September 30, 2023 and December 31, 2022, respectively.

Excluded from the table above is $44.4 million and $40.4 million as of September 30, 2023 and December 31, 2022, respectively, of Granite’s portion of unconsolidated construction joint venture cash and cash equivalents.

Capital Expenditures

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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 six months ended June 30, 2023, we had capital expenditures of $79.7 million, compared t o $73.2 mi llion, during the six months ended June 30, 2022.

We currently anticipate 2023 capital expenditures to be between approximately $100 million and $120 million.

Six Months Ended June 30,

During the nine months ended September 30, 2023, we had capital expenditures of $109.0 million, compared t o $97.8 mi llion, during the nine months ended September 30, 2022.

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

We currently anticipate 2023 capital expenditures to be approximately $120 million.

Nine Months Ended September 30,

(in thousands) 2023 2022

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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 $118.9 million for the six months ended June 30, 2023 represents a $15.7 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 $28.3 million.

This was partially offset by a decrease in contributions, net of distributions, of $18.6 million to unconsolidated joint ventures and affiliates.

Cash provided by operating activities of $34.2 million for the nine months ended September 30, 2023 represents a $48.8 million increase in cash provided by operating activities when compared to the same period of 2022.

The change was primarily attributable to net cash contributions to unconsolidated joint ventures and 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.

Contributions, net of distributions, to unconsolidated joint ventures and affiliates decreased $27.3 million and cash used in working capital decreased by $24.8 million.

Investing activities

Cash used in investing activities of $64.4 million for the six months ended June 30, 2023 represents a $94.7 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, partially offset by changes in marketable securities activity and the acquisition of CMR in the current year.

Cash used in investing activities of $89.3 million for the nine months ended September 30, 2023 represents a $103.1 million increase in cash used in investing activities when compared to the same period of 2022.

The change was primarily due to proceeds of $142.6 million from the sale of the Inliner business in March 2022, partially offset by decreased cash used for marketable securities activity of $75.1 million, and $26.9 million used for the acquisition of CMR in the current year.

Financing activities

Cash provided by financing activities of $103.8 million for the six months ended June 30, 2023 represents a $260.8 million increase in cash provided by financing activities when compared to the same period of 2022.

Cash provided by financing activities of $53.2 million for the nine months ended September 30, 2023 represents a $211.0 million increase in cash provided by financing activities when compared to the same period of 2022.

The change was primarily due to the prepayment in the prior year of our term loan of $123.8 million, which did not recur this year.

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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 and the Capped Call

transactions related to the 3.75% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds.

The hedge option and warrant derivative transactions related to the 2.75% Convertible Notes and the Capped Call transactions related to the 3.75% 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 June 30, 2023, approximately $3.1 billion of our $5.4 billion CAP was bonded.

At September 30, 2023, approximately $3.5 billion of our $5.6 billion CAP was bonded.

Performance bonds do not have stated expiration dates;

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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 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.

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”).

There were no share repurchases under the 2022 authorization in the six months ended June 30, 2023 and $231.5 million of the 2022 authorization remained available as of June 30, 2023.

There were no share repurchases under the 2022 authorization in the nine months ended September 30, 2023 and $231.5 million remained available as of September 30, 2023.

The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors.

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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 2. Management’s Discussion and Analysis