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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-10-31 · 112 added, 143 removed, 170 unchanged (60% of the section changed)

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

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

We are one of the largest diversified construction and construction materials companies in the United States.

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

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

During the first quarter of 2024, we reorganized our operational structure to more closely align with our two reportable segments, Construction and Materials.

Previously, leaders within our three operating groups of California, Central and Mountain managed both Construction and Materials operations within each group.

This change will allow us to better leverage our expertise within each reportable segment with leadership having direct oversight of their respective segment operations.

As a result of the reorganization, we will no longer disclose financial information by operating group.

There were no material impacts to our unaudited condensed consolidated financial statements and no changes to our reportable segments.

Current Economic Environment and Outlook

Funding for our public work projects, which accounts for approximately 70% of our work, is dependent on federal, state, regional and local revenues.

At the federal level, the rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) is ongoing with states receiving and allocating funds to projects.

The five-year IIJA provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in incremental funding.

In October 2022, the U.S.

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

We continue to believe that the increased multi-year spending commitment will improve the programming visibility for state and local governments.

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

Funding for our public work projects, which account for approximately 80% of our portfolio, is dependent on federal, state, regional and local revenues.

At the federal level, the continued rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) has increased federal highway, bridge and transit funding to its highest level in more than six decades with $550 billion in incremental funding over five years.

We believe that the increased multi-year spending commitment has improved the programming visibility for state and local governments and drove an increase in project lettings starting in 2023 that will continue in 2024 and beyond.

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

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

In California, our top revenue-generating state, a

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

While each market is unique, we see a strong funding environment at the state and local levels aided by the IIJA.

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

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

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

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

Our Committed and Awarded Projects (“CAP”) 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.

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

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

Our Committed and Awarded Projects (“CAP”) balance continues to be strong with $5.5 billion at the end of the first quarter of 2024.

Our CAP is supported by a positive public funding environment and resilient private market which we believe will provide further opportunities for continued CAP growth.

As previously disclosed, we completed two acquisitions during 2023.

The results of operations of these businesses are included in our consolidated financial statements from the dates of acquisition, therefore current quarter results relating to these businesses are not comparable to the first quarter of 2023.

On April 24, 2023, we acquired Coast Mountain Resources (2020) Ltd.

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

CMR results are reported in the Materials segment.

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

Litigation Matter

As further discussed in Note 17 of “Notes to the Condensed Consolidated Financial Statements,” our wholly owned subsidiary, Layne Christensen Company (“Layne”), 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.

On November 30, 2023, we acquired Lehman-Roberts Company and Memphis Stone & Gravel Company (collectively, "LRC/MSG").

LRC/MSG operates strategically located asphalt plants and sand and gravel mines serving the greater Memphis area and northern Mississippi.

See Note 3 of “Notes to the Condensed Consolidated Financial Statements” for further information.

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 nine months ended September 30, 2023 and 2022:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2023 As Restated 2023 As Restated

The following table presents a financial summary for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands) 2024 2023

Total revenue $ 672,275 $ 560,068

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Other costs, net $ 11,010 $ 4,523

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

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

Operating loss $ (43,300) $ (43,249)

Total other income, net $ (4,332) $ (8,008)

Amount attributable to non-controlling interests $ (1,541) $ 2,749

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

Net loss attributable to Granite Construction Incorporated $ (30,983) $ (23,023)

Total Revenue by Segment

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

(dollars in thousands) 2023 As Restated 2023 As Restated

Three Months Ended March 31,

(dollars in thousands) 2024 2023

Construction $ 595,213 88.5 % $ 503,416 89.9 %

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Construction Revenue

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 %

Central 222,144 23.5 222,082 26.2 593,632 27.0 653,581 30.6

Mountain 406,310 43.0 362,317 42.8 905,802 41.2 878,561 41.0

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 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 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2024 2023

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

Central 11,357 6.6 9,348 5.8 35,251 9.4 33,634 9.0

Mountain 75,898 44.4 67,018 41.5 150,441 39.9 137,180 36.8

Public $ 419,816 70.5 % $ 333,091 66.2 %

Private 175,397 29.5 170,325 33.8

Total 595,213 100.0 % 503,416 100.0 %

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.

Construction revenue for the three months ended March 31, 2024 increased by $91.8 million, or 18.2%, when compared to 2023.

This increase was led by operations in California, Utah and the Midwest driven by more favorable weather conditions in 2024 and higher levels of CAP going into the current quarter.

CAP of $5.5 billion at December 31, 2023 was $1.1 billion, or 24% higher than December 31, 2022.

Additionally, our acquired businesses contributed $5.9 million of construction revenue during the three months ended March 31, 2024.

Materials Revenue

Materials revenue for the three months ended March 31, 2024 was $77.1 million, an increase of $20.4 million, or 36.0%, when compared to the three months ended March 31, 2023.

This increase was driven by revenue from acquired businesses of $10.3 million, higher asphalt and aggregate sales prices and increased sales volumes as a result of more favorable weather conditions.

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

(dollars in thousands) March 31, 2024 December 31, 2023

Unearned revenue $ 3,606,704 65.6 % $ 3,596,676 64.9 %

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Total $ 5,499,129 100.0 % $ 5,545,754 100.0 %

(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 %

Central 1,811,426 32.4 1,599,538 29.4 1,661,613 37.0

Mountain 1,427,803 25.6 1,492,439 27.4 1,076,363 24.0

(dollars in thousands) March 31, 2024 December 31, 2023

Customer type:

Public $ 4,397,792 80.0 % $ 4,368,904 78.8 %

Private 1,101,337 20.0 1,176,850 21.2

Total $ 5,499,129 100.0 % $ 5,545,754 100.0 %

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

September 30, Nine Months Ended

September 30,

(dollars in thousands) 2023 As Restated 2023 As Restated

CAP was $5.5 billion at both March 31, 2024 and December 31, 2023.

Significant additions to CAP during the three months ended March 31, 2024 included a $51 million road widening project in Arizona, $50 million for three highway projects in California and a $31 million highway improvement project in Washington, all of which are for customers in the public sector.

Non-controlling partners’ share of CAP as of March 31, 2024 and December 31, 2023 was $219.4 million and $243.8 million, respectively.

At March 31, 2024, five contracts with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $201.4 million, or 3.7%, of total CAP.

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

Three Months Ended March 31,

Construction $ 56,828 $ 36,705

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Percent of total revenue 8.1 % 5.8 %

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.

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.

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.

Construction gross profit for the three months ended March 31, 2024 increased by $20 million, or 54.8%, when compared to 2023 primarily due to higher revenue and less negative net impacts from revisions in estimates in the current period.

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." This gross profit improvements was somewhat offset by a gross loss from acquired businesses of $4.8 million, including purchase accounting related depreciation and intangible asset amortization of $2.5 million.

See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further information about acquisitions.

Materials gross loss for the three months ended March 31, 2024 decreased by $1.8 million, when compared to 2023.

The decreased loss was primarily due to higher sales prices but was partially offset by losses from acquired businesses during the quarter.

Acquired businesses recognized a gross loss of $3.4 million, of which $1.7 million was due to purchase accounting related depreciation and intangible asset amortization.

Selling, General and Administrative Expenses

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(dollars in thousands) 2024 2023

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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 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.

Selling expenses for the three months ended March 31, 2024 were relatively flat when compared to 2023.

General and Administrative Expenses

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

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

Total general and administrative expenses for the three 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 general and administrative expenses include travel and

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

Total general and administrative expenses for the three months ended March 31, 2024 increased by $13.9 million, or 25.6% when compared to the same period in 2023, primarily due to a $7.0 million increase in stock-based compensation due to improved financial performance as well as $4.5 million of general and administrative expenses from acquired businesses, including $1.0 million of purchase accounting related depreciation and intangible asset amortization.

Other Costs, net

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

Other costs, net $ 11,010 $ 4,523

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 $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.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

As Restated As Restated

During the three months ended March 31, 2024, Other costs, net increased $6.5 million compared to prior year.

These increases were primarily due to higher costs in the current year associated with the defense of a former Company officer in his ongoing civil litigation with the Securities and Exchange Commission.

Other Income, net

Three Months Ended March 31,

(in thousands) 2024 2023

Interest income $ (6,702) $ (3,762)

Interest expense 8,083 2,891

Equity in income of affiliates, net (3,970) (5,187)

Other income, net (1,743) (1,950)

Total other income, net $ (4,332) $ (8,008)

During the three months ended March 31, 2024, total other income, net decreased $3.7 million compared to prior year.

This decrease was primarily due to an increase of $5.2 million in interest expense as a result of increased borrowings in 2024.

See Note 14 of "Notes to the Condensed Consolidated Financial Statements" for more information.

This was partially offset by an increase in interest income of $2.9 million mainly from higher interest rates and higher cash balances.

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

Three Months Ended March 31,

(dollars in thousands) 2024 2023

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

Benefit from income taxes $ (9,526) $ (9,469)

Effective tax rate 24.4 % 26.9 %

We calculate our income tax provision (benefit) at the end of each interim period by estimating our annual effective tax rate and applying that rate to our income or loss before tax.

We calculate our income tax provision (benefit) at the end of each interim period by estimating our annual effective tax rate, applying that rate to our income or loss before tax and adjusting for discrete items not included in our estimate of the annual effective tax rate.

The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

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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 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”).

During the three months ended March 31, 2023, we had one consolidated construction joint venture with a negative impact from revisions in estimates, which did not recur in 2024 (see Note 4 of “Notes to the Condensed Consolidated Financial Statements”).

Liquidity and Capital Resources

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

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

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

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.

See Note 14 of the "Notes to the Condensed Consolidated Financial Statements" for information on our Credit Agreement, 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 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.

As of March 31, 2024, 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.

As of March 31, 2024, the total unused availability under our Credit Agreement was $333.3 million, resulting from $16.7 million in issued and outstanding letters of credit and nothing drawn the Revolver.

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

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.

As of March 31, 2024, we had $1.2 million of receivables and $29.1 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, all $1.2 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;

We expect to achieve final completion in the second quarter of 2024;

however, timing cannot be assured.

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

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

(in thousands) March 31, 2024 December 31, 2023

Cash and cash equivalents excluding CCJVs $ 184,631 $ 297,439

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Total consolidated cash and cash equivalents 321,752 417,663

Short-term and long-term marketable securities (2) 37,028 65,943

Short-term marketable securities (2) 15,500 35,863

Total cash, cash equivalents and marketable securities $ 337,252 $ 453,526

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

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.

Government and agency obligations as of March 31, 2024 and December 31, 2023.

Granite’s portion of CCJV cash and cash equivalents was $83.5 million and $73.1 million as of March 31, 2024 and December 31, 2023, respectively.

Excluded from the table above is $39.3 million and $34.2 million as of March 31, 2024 and December 31, 2023, 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 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,

During the three months ended March 31, 2024, we had capital expenditures of $27.9 million, compared t o $40.5 million , during the three months ended March 31, 2023.

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

We currently anticipate 2024 capital expenditures to be approximately $130 million to $150 million, including approximately $50 million in planned strategic materials investments in land, reserves and an aggregate plant.

This range also includes approximately $20 million related to a project-specific tunnel boring machine.

Three Months Ended March 31,

(in thousands) 2024 2023

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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 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.

Cash provided by operating activities of $24.1 million for the three months ended March 31, 2024 represents a $100.8 million increase in cash provided by operating activities when compared to the same period of 2023.

The change was primarily attributable to an $80.0 million increase in cash provided by working capital, which includes receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities.

Additionally, distributions, net of contributions, from unconsolidated construction joint ventures and affiliates increased $6.8 million when compared to the same period of 2023.

Investing activities

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.

Cash used in investing activities of $10.8 million for the three months ended March 31, 2024 represents a $13.6 million decrease in cash used in investing activities when compared to the same period of 2023.

The change was primarily due to $12.6 million less property and equipment purchases compared to the same period 2023 and increased cash provided by marketable securities activity of $10.0 million, partially offset by an outflow of $6.1 million for net working capital adjustments associated with the acquisition of LRC/MSG (see Note 3 of “Notes to the Condensed Consolidated Financial Statements”).

Financing activities

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.

Also, net cash inflows related to our convertible bond transactions in the current year generated $98.8 million in cash.

The year over year increase in cash provided by financing activities was also due to $66.8 million less cash used for repurchases of common stock and higher contributions from non-controlling partners, net of distributions, of $21.1 million.

These increases were partially offset by a $100.0 million decrease in cash provided by our revolving credit facility.

See Note 14 of the “Notes to the Condensed Consolidated Financial Statements” for further information about our long-term debt transactions and our credit facility.

Cash used in financing activities of $109.2 million for the three months ended March 31, 2024 represents a $116.0 million increase in cash used in financing activities when compared to the same period of 2023.

The change was primarily due to repayment of the balance drawn on our revolving credit facility, which had $100 million outstanding as of December 31, 2023.

See Note 14 of the “Notes to the Condensed Consolidated Financial Statements” for further information about our credit facility.

The year over year increase in cash used in financing activities was also due to a decrease in contributions from non-controlling partners, net of distributions, of $10.2 million.

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

See Note 9 to “Notes to the Condensed Consolidated Financial Statements” for further information.

The hedge option and warrant derivative transactions related to the 2.75% Convertible Notes 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 September 30, 2023, approximately $3.5 billion of our $5.6 billion CAP was bonded.

At March 31, 2024, approximately $3.2 billion of our $5.5 billion CAP was bonded.

Performance bonds do not have stated expiration dates;

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(iv) acceleration of amounts owed under the Credit Agreement;

and/or (v) foreclosure on any lien securing the obligations under such facility.

and/or (v) foreclosure on any collateral securing the obligations under such facility.

A default under the 2.75% Convertible Notes indenture or the 3.75% Convertible Notes indenture could result in acceleration of the maturity of the notes.

The most significant financial covenants under the terms of our Credit Agreement require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio.

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

As of March 31, 2024, 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 nine months ended September 30, 2023 and $231.5 million remained available as of September 30, 2023.

There were no share repurchases under the 2022 authorization in the three months ended March 31, 2024 and $231.5 million remained available as of March 31, 2024.

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