What changed in this filing

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Item 1. Financial Statements

2024-10-31 compared with 2024-08-01 · 262 added, 224 removed, 564 unchanged (46% of the section changed)

3 unchanged sentences

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets:

38 unchanged sentences

issued and outstanding:

43,686,508 shares as of June 30, 2024 and 43,944,118 shares as of December 31, 2023

43,704,841 shares as of September 30, 2024 and 43,944,118 shares as of December 31, 2023

Additional paid-in capital 437,343 474,134

9 unchanged sentences

(Unaudited - in thousands, except per share data)

Three Months Ended June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

10 unchanged sentences

Gain on sales of property and equipment, net ( 1,542 ) ( 1,812 ) ( 4,347 ) ( 7,793 )

Operating income (loss) 85,821 28,860 42,521 ( 14,389 )

Operating income 104,298 73,818 146,819 59,429

Other (income) expense:

Loss on debt extinguishment 27,824 51,052 27,824 51,052

(Gain) loss on debt extinguishment ( 272 ) — 27,552 51,052

Interest income ( 7,513 ) ( 4,293 ) ( 17,815 ) ( 11,287 )

2 unchanged sentences

Other (income) expense, net ( 874 ) 462 ( 1,350 ) ( 2,713 )

Total other expense, net 26,271 43,682 21,939 35,674

Income (loss) before income taxes 59,550 ( 14,822 ) 20,582 ( 50,063 )

Provision for (benefit from) income taxes 20,693 9,024 11,167 ( 445 )

Net income (loss) 38,857 ( 23,846 ) 9,415 ( 49,618 )

Total other (income) expense, net ( 5,148 ) ( 6,101 ) 16,791 29,573

Income before income taxes 109,446 79,919 130,028 29,856

Provision for income taxes 25,469 22,423 36,636 21,978

Net income 83,977 57,496 93,392 7,878

Amount attributable to non-controlling interests ( 5,026 ) 128 ( 8,529 ) 9,723

Net income (loss) attributable to Granite Construction Incorporated $ 36,895 $ ( 17,000 ) $ 5,912 $ ( 40,023 )

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

Net income attributable to Granite Construction Incorporated $ 78,951 $ 57,624 $ 84,863 $ 17,601

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

Basic $ 1.81 $ 1.31 $ 1.93 $ 0.40

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 June 30,

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

2024 2023 2024 2023

Net income (loss) $ 38,857 $ ( 23,846 ) $ 9,415 $ ( 49,618 )

Net income $ 83,977 $ 57,496 $ 93,392 $ 7,878

Other comprehensive income (loss), net of tax

Net unrealized loss on cash flow hedges, net of tax $ ( 735 ) $ ( 366 ) $ ( 146 ) $ ( 558 )

Net unrealized gain (loss) on cash flow hedges, net of tax $ ( 547 ) $ 883 $ ( 693 ) $ 325

reclassification for net gains (losses) included in interest expense, net of tax 436 ( 362 ) 518 ( 250 )

2 unchanged sentences

Other comprehensive income (loss), net of tax $ 167 $ 99 $ ( 444 ) $ 106

Comprehensive income (loss), net of tax $ 37,837 $ ( 23,704 ) $ 8,804 $ ( 49,611 )

Comprehensive income, net of tax $ 84,144 $ 57,595 $ 92,948 $ 7,984

Non-controlling interests in comprehensive (income) loss, net of tax ( 5,026 ) 128 ( 8,529 ) 9,723

Comprehensive income (loss) attributable to Granite Construction Incorporated, net of tax $ 35,875 $ ( 16,858 ) $ 5,301 $ ( 40,016 )

Comprehensive income attributable to Granite Construction Incorporated, net of tax $ 79,118 $ 57,723 $ 84,419 $ 17,707

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

3 unchanged sentences

Outstanding Shares Common Stock Additional

Capital Accumulated Other

Comprehensive Income (Loss) Retained Earnings Total Granite

Capital Accumulated Other Comprehensive Income Retained Earnings Total Granite

Shareholders’ Equity Non-controlling Interests Total Equity

Balances at March 31, 2024 44,149,644 $ 441 $ 479,679 $ 1,290 $ 465,048 $ 946,458 $ 58,147 $ 1,004,605

Balances at June 30, 2024

43,686,508 $ 437 $ 435,271 $ 270 $ 495,679 $ 931,657 $ 55,758 $ 987,415

Net income — — — — 78,951 78,951 5,026 83,977

Other comprehensive loss — — — ( 1,020 ) — ( 1,020 ) — ( 1,020 )

Other comprehensive income — — — 167 — 167 — 167

Repurchases of common stock (1) ( 3,546 ) — ( 241 ) — — ( 241 ) — ( 241 )

1 unchanged sentence

Dividends on common stock ($0.13 per share) — — 73 — ( 5,753 ) ( 5,680 ) — ( 5,680 )

Capped call transactions — — ( 34,189 ) — — ( 34,189 ) — ( 34,189 )

Redemption of warrants — — 466 — — 466 — 466

Exercise of bond hedge ( 260,883 ) ( 3 ) 3 — — — — —

Common stock issued in debt redemption 11,665 0 (0)

Transactions with non-controlling interests — — — — — — 1,801 1,801

Stock-based compensation expense and other ( 50 ) — 2,240 — — 2,240 — 2,240

Balances at September 30, 2024

43,704,841 $ 437 $ 437,343 $ 437 $ 568,877 $ 1,007,094 $ 62,585 $ 1,069,679

Balances at June 30, 2023

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 )

43,918,798 $ 439 $ 470,511 $ 795 $ 429,797 $ 901,542 $ 39,908 $ 941,450

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

Other comprehensive income — — — 99 — 99 — 99

2 unchanged sentences

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

(1) This amount represents employee tax withholding for restricted stock units ("RSUs") vested under our equity incentive plans in 2024 and 2023 and stock repurchased in 2024 under the Board approved repurchase plan.

During the three months ended June 30, 2024 and 2023, there were 6,133 shares and 6,342 shares, respectively, withheld related to employee taxes for RSUs.

During the three months ended June 30, 2024, we also repurchased 225,000 shares under the share repurchase program.

Balances at September 30, 2023

43,926,576 $ 439 $ 472,379 $ 894 $ 481,636 $ 955,348 $ 51,229 $ 1,006,577

(1) This amount represents employee tax withholding for RSUs vested under our equity incentive plans.

Outstanding Shares Common Stock Additional

Capital Accumulated Other

Comprehensive Income (Loss) Retained Earnings Total Granite

Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Granite

Shareholders’ Equity Non-controlling Interests Total Equity

Balances at December 31, 2023

43,944,118 $ 439 $ 474,134 $ 881 $ 501,844 $ 977,298 $ 49,668 $ 1,026,966

Net income — — — — 84,863 84,863 8,529 93,392

5 unchanged sentences

Redemption of warrants — — 466 — — 466 — 466

Common stock issued in debt redemption 11,665 0 (0)

Exercise of bond hedge ( 260,883 ) ( 3 ) 3 — — — — —

1 unchanged sentence

Stock-based compensation expense and other 4,350 — 17,585 — — 17,585 — 17,585

Balances at June 30, 2024 43,686,508 $ 437 $ 435,271 $ 270 $ 495,679 $ 931,657 $ 55,758 $ 987,415

Balances at September 30, 2024

43,704,841 $ 437 $ 437,343 $ 437 $ 568,877 $ 1,007,094 $ 62,585 $ 1,069,679

Balances at December 31, 2022

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

43,743,907 $ 437 $ 470,407 $ 788 $ 481,384 $ 953,016 $ 32,129 $ 985,145

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

Other comprehensive income — — — 106 — 106 — 106

4 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

During the six months ended June 30, 2024 and 2023, there were 141,567 shares and 93,602 shares, respectively, withheld related to employee taxes for RSUs.

During the six months ended June 30, 2024, we also repurchased 225,000 shares under the share repurchase program.

Balances at September 30, 2023

43,926,576 $ 439 $ 472,379 $ 894 $ 481,636 $ 955,348 $ 51,229 $ 1,006,577

(1) This amount represents employee tax withholding for RSUs vested under our equity incentive plans in 2024 and 2023 and stock repurchased in 2024 under the Board approved repurchase plan.

During the nine months ended September 30, 2024 and 2023, there were 145,113 shares and 96,936 shares, respectively, withheld related to employee taxes for RSUs.

During the nine months ended September 30, 2024, we also repurchased 225,000 shares under the share repurchase program.

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

2 unchanged sentences

( Unaudited - in thousands )

Six Months Ended June 30, 2024 2023

Nine Months Ended September 30, 2024 2023

Operating activities:

Net income (loss) $ 9,415 $ ( 49,618 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net income $ 93,392 $ 7,878

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization 92,283 65,298

2 unchanged sentences

Gain on sales of property and equipment, net ( 4,347 ) ( 7,793 )

Deferred income taxes — 1,542

Stock-based compensation 17,325 8,630

11 unchanged sentences

Accrued expenses and other liabilities, net 50,036 76,915

Net cash provided by (used in) operating activities $ 22,084 $ ( 118,948 )

Net cash provided by operating activities $ 283,549 $ 34,198

Investing activities:

Purchases of marketable securities ( 6,977 ) ( 9,740 )

Maturities of marketable securities 31,500 40,000

1 unchanged sentence

Proceeds from sales of property and equipment 6,739 14,613

Acquisitions of businesses, net of cash acquired (See Note 3) ( 122,448 ) ( 26,933 )

Cash paid for purchase price adjustments on business acquisition (See Note 3) ( 13,183 ) —

Proceeds from company owned life insurance — 1,545

Return of investment in affiliates 1,429 —

Cash paid for purchase price adjustments on business acquisition (See Note 3) ( 13,183 ) —

Acquisition of business — ( 26,933 )

Collection of notes receivable — 208

14 unchanged sentences

Net cash provided by (used in) financing activities $ ( 27,819 ) $ 53,205

Net decrease in cash and cash equivalents ( 50,917 ) ( 79,545 )

Net increase (decrease) in cash and cash equivalents 44,623 ( 1,867 )

Cash and cash equivalents at beginning of period 417,663 293,991

19 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, 2024 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, 2024 and the results of our operations and cash flows for the periods presented.

The December 31, 2023 condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements but does not include all disclosures required by U.S.

11 unchanged sentences

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.

During the three and six months ended June 30, 2024, we repurchased 225,000 shares under this authorization at an average price of $59.32 per share for $13.3 million.

During the nine months ended September 30, 2024, we repurchased 225,000 shares under this authorization.

The share repurchases are included in Repurchases of common stock on the Condensed Consolidated Statements of Shareholders’ Equity and within Financing activities on the Condensed Consolidated Statement of Cash Flows.

As of June 30, 2024, $218.2 million of the authorization remained available.

As of September 30, 2024, $218.2 million of the authorization remained available.

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, 2024 are not necessarily indicative of the results to be expected for the full year.

Subsequent Event:

On July 31, 2024, we agreed, subject to customary closing conditions, to acquire Dickerson & Bowen, Inc.

with the transaction expected to close in the third quarter.

Dickerson & Bowen is an aggregates, asphalt, and highway construction company serving central and southern Mississippi.

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

Therefore, the results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year.

Recently Issued and Adopted Accounting Pronouncements

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

No new accounting pronouncements were recently issued or adopted in the six months ended June 30, 2024 that had or are expected to have a material impact on our financial statements.

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

which changed its name to Granite Infrastructure Canada, Ltd.

("Granite Canada") on May 13, 2024.

Granite Canada is a construction aggregate producer based in British

No new accounting pronouncements were recently issued or adopted in the nine months ended September 30, 2024 that had or are expected to have a material impact on our financial statements.

Dickerson & Bowen, Inc.

On August 9, 2024, we completed the acquisition of Dickerson & Bowen, Inc.

("D&B") for an estimated purchase price of $124.2 million in cash, subject to customary closing adjustments.

D&B is an aggregates, asphalt and highway construction company serving central and southern Mississippi which expands our footprint in that region.

The buyer of D&B, Granite Southeast Company ("Granite Southeast"), is a wholly-owned subsidiary of Granite and D&B's results have been included in the Construction and Materials segments since the acquisition date.

D&B’s customers are in both the public and private

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Columbia, Canada operating on Malahat First Nation land.

Granite Canada results are reported in the Materials segment.

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

On November 30, 2023 (“acquisition date”), we completed the acquisition of LRC/MSG for $ 278.0 million, subject to customary closing adjustments, plus an estimated amount related to tax make-whole agreements with the seller.

We have accounted for this transaction in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations (“ASC 805”).

Preliminary Purchase Price Allocation

In accordance with ASC 805, the total purchase price and assumed liabilities were allocated to the net tangible and identifiable intangible assets based on their estimated fair values as of August 9, 2024.

These estimates are subject to revision, which may result in adjustments to the values presented below.

There are certain provisional estimates that are subject to finalization.

As we continue to integrate the acquired business, we may obtain additional information which may result in revisions to preliminary valuation assumptions, estimates and the resulting fair values presented herein.

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

Based on our preliminary purchase price allocation, the net tangible and intangible assets acquired were $31.7 million and $27.7 million, respectively, resulting in acquired goodwill of $64.8 million, none of which is tax deductible.

Of the acquired goodwill, $44.0 million is in the Materials segment and $20.8 million is in the Construction segment.

The factors that contributed to the recognition of goodwill from the acquisition include strengthening and expanding our vertically integrated southeast home market.

The most significant assets acquired were $38.1 million of property and equipment and $18.2 million of customer relationships.

Pro Forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of operations of Granite and D&B as though the companies had been combined as of January 1, 2023.

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2023, nor does it intend to be a projection of future results.

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

(unaudited, in thousands, except per share amounts)

2024 2023 2024 2023

Revenue $ 1,285,341 $ 1,150,402 $ 3,085,489 $ 2,657,316

Net income attributable to Granite Construction Incorporated

$ 80,657 $ 63,352 $ 93,770 $ 28,535

Basic net income per share attributable to common shareholders $ 1.85 $ 1.44 $ 2.14 $ 0.65

Diluted net income per share attributable to common shareholders $ 1.54 $ 1.18 $ 1.78 $ 0.64

These amounts have been calculated after applying Granite’s accounting policies and adjusting the results of D&B to reflect the additional depreciation and amortization that would have been recorded assuming the fair value adjustments to property and equipment and intangible assets had been applied starting on January 1, 2023.

Acquisition and integration expenses related to D&B that were incurred during the nine months ended September 30, 2024 are reflected in the nine months ended September 30, 2023 due to the assumed timing of the transaction.

The statutory tax rate of 26% was used for both 2024 and 2023 for the pro forma adjustments.

During the nine months ended September 30, 2024, we incurred $2.3 million of acquisition and integration expenses associated with the D&B acquisition which were primarily related to professional services.

On November 30, 2023, Granite Southeast completed the acquisition of LRC/MSG for $ 278.0 million, subject to customary closing adjustments, plus an estimated amount related to tax make-whole agreements with the seller.

We purchased all of the outstanding equity interests in LRC/MSG and the purchase price was funded by a $ 150.0 million senior secured term loan, a draw of $ 100 million under our existing revolver and the remainder from cash on hand.

Both the senior secured term loan and the draw under the revolver were fully repaid during the the six months ended June 30, 2024.

Both the senior secured term loan and the draw under the revolver were fully repaid during the first half of 2024.

The acquired businesses are longstanding asphalt paving and asphalt and aggregates producers and suppliers.

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

The buyer of LRC/MSG, Granite Southeast, is a wholly-owned subsidiary of Granite Construction Incorporated, and its results have been included in the Construction and Materials segments since the acquisition date.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

LRC/MSG's results have been included in the Construction and Materials segments since the acquisition date.

LRC/MSG’s customers are in both the public and private sectors.

We have accounted for this transaction in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations (“ASC 805”).

Revenue attributable to LRC/MSG for the three and six months ended June 30, 2024 was $ 45.5 million and $ 59.5 million, respectively.

Gross profit (loss) attributable to LRC/MSG for the three and six months ended June 30, 2024 was a profit of $ 7.9 million and a loss of $ 0.7 million, respectively.

Preliminary Purchase Price Allocation

Revenue attributable to LRC/MSG for the three and nine months ended September 30, 2024 was $ 45.5 million and $ 105.0 million, respectively.

Gross profit attributable to LRC/MSG for the three and nine months ended September 30, 2024 was $ 5.7 million and $ 5.0 million, respectively.

Purchase Price Allocation

These estimates are subject to revision, which may result in adjustments to the values presented below.

We recorded a $22.0 million provisional estimate related to tax make-whole agreements with the seller at the time of the acquisition.

1 unchanged sentence

Our obligation was $7.1 million, which was paid in June 2024.

During the six months ended June 30, 2024, we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date.

During the nine months ended September 30, 2024, we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date.

These adjustments included a $ 4.6 million net increase from net working capital adjustments and a $2.2 million net decrease in the value of the net tangible and identifiable intangible assets acquired, offset by a $14.9 million decrease in the estimated obligation associated with the tax make-whole agreements noted above.

The impact of these adjustments was a decrease in goodwill of $8.1 million.

We paid $ 13.2 million during the six months ended June 30, 2024 associated with the acquisition of LRC/MSG, which includes $6.1 million for working capital adjustments and $7.1 million for the tax make-whole obligation.

As we continue to integrate the acquired business, we may obtain additional information on the acquired identifiable intangible assets which, if significant, may require revisions to preliminary valuation assumptions, estimates and resulting fair values.

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

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table presents the preliminary purchase price allocation:

We paid $ 13.2 million during the nine months ended September 30, 2024 associated with the acquisition of LRC/MSG, which includes $6.1 million for working capital adjustments and $7.1 million for the tax make-whole obligation.

There were no material measurement period adjustments during the three months ended September 30, 2024.

As of September 30, 2024, we have finalized the purchase price accounting.

The following table presents the purchase price allocation:

(in thousands)

17 unchanged sentences

Goodwill 72,744

Estimated purchase price $ 293,416

Purchase price $ 293,416

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Coast Mountain Resources

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

which changed its name to Granite Infrastructure Canada, Ltd.

("Granite Canada") on May 13, 2024.

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

Granite Canada results are reported in the Materials segment.

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

Revisions in Estimates

7 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, 2024 and 2023, we did not identify any material amounts that should have been recorded in a prior period.

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, 2024 or 2023.

During the six months ended June 30, 2024, there was one project with an increase from revisions in estimates which had an impact to gross profit of $6.1 million and an increase in net income of $4.7 million, none of which was attributable to non-controlling interests.

The revision increased the net income per diluted share attributable to common shareholders by $0.11.

The increase was due to changes in the estimated transaction price related to unresolved contract modifications resulting from revisions to project work plans, permitting and schedule.

In our review of these changes for the three and nine months ended September 30, 2024 and 2023, 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,

2024 2023 2024 2023

Number of projects with upward estimate changes 2 1 2 1

Range of increase in gross profit from each project, net $ 5.4 - 5.7

$ 8.6 $ 5.2 - 6.2

Increase to project profitability, net $ 11.1 $ 8.6 $ 11.4 $ 8.1

Increase to net income $ 8.5 $ 6.5 $ 8.7 $ 6.1

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

Increase to net income attributable to Granite Construction Incorporated $ 8.5 $ 6.5 $ 8.7 $ 2.8

Increase to net income per diluted share attributable to common shareholders $ 0.16 $ 0.12 $ 0.17 $ 0.06

The increases during the three months ended September 30, 2024 and September 30, 2023 were due to changes in the estimated amount of probable recovery on outstanding claims.

In the three months ended September 30, 2024, decreases in estimated costs from mitigated risks also contributed to the increase.

The increases during the nine months ended September 30, 2024 were due to changes in the estimated amount of probable recovery on outstanding claims and changes in the estimated transaction price related to unresolved contract modifications resulting from revisions to project work plans, permitting and scheduling.

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

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.

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,

2024 2023 2024 2023

1 unchanged sentence

Range of reduction in gross profit from each project, net $ —

$ 8.4 $ 5.3 - 22.0

Decrease to project profitability, net $ — $ 8.4 $ 44.2 $ 51.1

Decrease to net income/increase to net loss $ 11.9 $ 15.8 $ 23.2 $ 29.0

Decrease to net income $ — $ 6.3 $ 33.8 $ 38.3

Amounts attributable to non-controlling interests $ — $ 4.2 $ 5.4 $ 20.2

Decrease to net income/increase to net loss attributable to Granite Construction Incorporated $ 9.2 $ 5.4 $ 19.9 $ 13.0

Decrease to net income/increase to net loss per diluted share

attributable to common shareholders $ 0.17 $ 0.12 $ 0.45 $ 0.30

The decreases during the three and six months ended June 30, 2024 were due to additional costs related to changes in project duration, lower productivity than originally anticipated and increased labor and materials costs.

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.

Decrease to net income attributable to Granite Construction Incorporated $ — $ 2.1 $ 28.5 $ 18.1

Decrease to net income per diluted share attributable to common shareholders $ — $ 0.04 $ 0.54 $ 0.41

The decreases during the nine months ended September 30, 2024 were due to additional costs related to changes in project duration, lower productivity than originally anticipated and increased labor and materials costs.

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 cost.

Disaggregation of Revenue

2 unchanged sentences

As a result of the reorganization, we will no longer disclose financial information by operating group and we have updated our presentation of disaggregated revenue.

The prior year disaggregation of revenue amounts have been recast to conform with current period presentation.

The prior year disaggregation of revenue amounts have been recast to conform with the current period presentation.

Revenue is disaggregated by reportable segment (see Note 18) and customer type, which we believe best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

4 unchanged sentences

Based on the nature of the Materials business, it is not meaningful to disaggregate revenue by customer type.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table presents our revenue disaggregated by reportable segment and by customer type for the Construction segment:

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

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

(in thousands) 2024 2023 2024 2023

5 unchanged sentences

Total revenue $ 1,275,510 $ 1,116,820 $ 3,030,271 $ 2,575,440

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Unearned Revenue

The following table presents our unearned revenue disaggregated by customer type as of the respective periods:

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Public $ 3,071,044 $ 2,892,255

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All unearned revenue is in the Construction segment.

Approximately $ 2.7 billion of the June 30, 2024 unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

Approximately $ 2.7 billion of the September 30, 2024 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 $ 93.1 million and $ 177.4 million during the three and six months ended June 30, 2024 and $ 45.5 million and $ 89.7 million during the three and six months ended June 30, 2023.

The changes in contract transaction price for the three and six months ended June 30, 2024 and 2023 were from items such as executed or estimated change orders and unresolved contract modifications and claims.

As of June 30, 2024 and December 31, 2023, the aggregate claim recovery estimates included in contract asset and liability balances were $ 70.4 million and $ 77.9 million, respectively.

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 $ 43.3 million and $ 220.7 million during the three and nine months ended September 30, 2024 and $ 41.6 million and $ 131.3 million during the three and nine months ended September 30, 2023.

The changes in contract transaction price for the three and nine months ended September 30, 2024 and 2023 were from items such as executed or estimated change orders and unresolved contract modifications and claims.

As of September 30, 2024 and December 31, 2023, the aggregate claim recovery estimates included in contract asset and liability balances were $ 88.0 million and $ 77.9 million, respectively.

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

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Costs in excess of billings and estimated earnings $ 143,739 $ 100,106

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Total contract assets $ 321,653 $ 262,987

As of June 30, 2024 and December 31, 2023, contract retention receivable from Brightline Trains Florida LLC represented 9.4 % and 11.1 %, respectively, of total contract assets.

As of September 30, 2024 and December 31, 2023, contract retention receivable from Brightline Trains Florida LLC represented 9.1 % and 11.1 %, 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 $ 55.0 million and $ 253.3 million during the three and six months ended June 30, 2024, respectively, and $ 48.1 million and $ 171.1 million during the three and six months ended June 30, 2023, respectively, that was included in the contract liability balances at December 31, 2023 and 2022, respectively.

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We recognized revenue of $ 16.7 million and $ 270.0 million during the three and nine months ended September 30, 2024, respectively, and $ 17.5 million and $ 188.6 million during the three and nine months ended September 30, 2023, respectively, that was included in the contract liability balances at December 31, 2023 and 2022, respectively.

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

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Billings in excess of costs and estimated earnings, net of retention $ 279,566 $ 227,913

1 unchanged sentence

Total contract liabilities $ 292,641 $ 243,848

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Receivables, net

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The following table presents major categories of receivables:

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Contracts completed and in progress:

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Total net receivables $ 733,018 $ 598,705

Included in other receivables at June 30, 2024 and December 31, 2023 were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds.

Other receivables at June 30, 2024 and December 31, 2023 also included $ 25.0 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated construction joint ventures, plus accrued interest.

None of our customers had a receivable balance in excess of 10 % of our total net receivables as of June 30, 2024 or December 31, 2023.

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Included in other receivables at September 30, 2024 and December 31, 2023 were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds.

Other receivables at September 30, 2024 and December 31, 2023 also included $ 25.0 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated construction joint ventures, plus accrued interest.

None of our customers had a receivable balance in excess of 10 % of our total net receivables as of September 30, 2024 or December 31, 2023.

Fair Value Measurement

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Fair Value Measurement at Reporting Date Using

June 30, 2024 Level 1 Level 2 Level 3 Total

September 30, 2024 Level 1 Level 2 Level 3 Total

Cash equivalents:

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Accrued and other current liabilities:

Heating oil swaps $ — $ 121 $ — $ 121

Crude oil swaps $ — $ 363 $ — $ 363

Heating oil swaps — 801 — 801

Diesel collars — 267 — 267

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Total liabilities $ — $ 1,081 $ — $ 1,081

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Interest Rate Swap

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The collars and swaps were not designated as hedges and will be treated as mark-to-market derivative instruments through their maturity dates.

The financial statement impact of the collar contracts and commodity swaps for the three and six months ended June 30, 2024 and 2023 was immaterial .

In April 2024 and December 2022, we entered into commodity swaps designed as a cash flow hedge for crude oil with a notional amount of $ 9.2 million and $ 7.0 million, respectively, and maturity dates of October 31, 2024 and October 31, 2023, respectively.

The financial statement impact of these swaps during the three and six months ended June 30, 2024 and 2023 was immaterial .

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The financial statement impact of the collar contracts and commodity swaps for the three and nine months ended September 30, 2024 and 2023 was immaterial .

In April 2024 and December 2022, we entered into commodity swaps designated as cash flow hedges to reduce our price exposure on crude oil with a notional amount of $ 1.8 million and $ 7.0 million, respectively, and maturity dates of October 31, 2024 and October 31, 2023, respectively.

The financial statement impact of these swaps during the three and nine months ended September 30, 2024 and 2023 was immaterial .

Other Assets and Liabilities

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands) Fair Value Hierarchy Carrying Value Fair

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

Government and agency obligations as of June 30, 2024 and December 31, 2023.

(2) The fair values of our 2.75 % convertible senior notes due 2024 (the " 2.75 % Convertible Notes"), our 3.25 % convertible senior notes due 2030 (the " 3.25 % Convertible Notes") and our 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.

Government and agency obligations as of September 30, 2024 and December 31, 2023.

(2) The fair values of our our 3.25 % convertible senior notes due 2030 (the " 3.25 % Convertible Notes"), our 3.75 % convertible senior notes due 2028 (the " 3.75 % Convertible Notes") and our 2.75 % convertible senior notes due 2024 (the " 2.75 % Convertible Notes") are based on the median price of the notes in an active market.

The fair value of 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, 3.25 % Convertible Notes, 3.75 % Convertible Notes and the Credit Agreement.

During the six months ended June 30, 2024 and 2023, we had no material nonfinancial asset and liability fair value adjustments.

See Note 14 for more information about our convertible notes and the Credit Agreement.

During the nine months ended September 30, 2024 and 2023, we had no material nonfinancial asset or liability fair value adjustments.

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, 2024, we determined no change was required for existing joint ventures.

Based on our assessments during the three and nine months ended September 30, 2024, 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).

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

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

These forecasted costs could be offset by billings to the customer or

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by proceeds from our partners’ corporate and/or other guarantees.

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

Consolidated Construction Joint Ventures (“CCJVs”)

As of June 30, 2024, we were engaged in ten active CCJV projects.

As of September 30, 2024, we were engaged in ten active CCJV projects.

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, 2024 and 2023, total revenue from CCJVs was $ 92.2 million, $ 163.8 million, $ 70.8 million, and $ 132.1 million, respectively.

During the six months ended June 30, 2024 and 2023, CCJVs provided $ 8.6 million of operating cash flows and used $ 48.3 million of operating cash flows, respectively.

As of June 30, 2024, our share of revenue remaining to be recognized on these CCJVs was $ 348.0 million and ranged from $ 2.6 million to $ 105.3 million by project.

During the three and nine months ended September 30, 2024 and 2023, total revenue from CCJVs was $ 101.3 million, $ 265.1 million, $ 91.2 million, and $ 223.3 million, respectively.

During the nine months ended September 30, 2024 and 2023, CCJVs provided $ 33.0 million and used $ 36.8 million of operating cash flows, respectively.

As of September 30, 2024, our share of revenue remaining to be recognized on these CCJVs was $ 375.8 million and ranged from $ 1.3 million to $ 140.1 million by project.

Unconsolidated Construction Joint Ventures

As of June 30, 2024, we were engaged in five active unconsolidated construction joint venture projects.

As of September 30, 2024, we were engaged in five active unconsolidated construction joint venture projects.

Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 30.0 % to 50.0 %.

As of June 30, 2024, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 34.6 million and ranged from $ 0.9 million to $ 25.9 million by project.

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As of September 30, 2024, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 31.4 million and ranged from $ 0.7 million to $ 24.6 million by project.

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

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Cash, cash equivalents and marketable securities $ 113,587 $ 117,962

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Equity in construction joint ventures (4) $ 139,586 $ 156,311

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 was $ 57.8 million related to performance guarantees (see Note 13).

(2) Included in this balance as of June 30, 2024 and December 31, 2023 was $ 68.4 million and $66.6 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 1.7 million related to Granite’s share of estimated recovery of back charge claims as of June 30, 2024 and December 31, 2023, respectively.

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 was $ 57.8 million related to performance guarantees (see Note 13).

(2) Included in this balance as of September 30, 2024 and December 31, 2023 was $ 68.4 million and $66.6 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 1.7 million related to Granite’s share of estimated recovery of back charge claims as of September 30, 2024 and December 31, 2023, 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 $ 6.6 million and $ 14.9 million as of June 30, 2024 and December 31, 2023, 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 $ 4.5 million and $ 14.9 million as of September 30, 2024 and December 31, 2023, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

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Granite’s interest $ 9,706 $ 7,536 $ 27,427 $ 36,155

Granite’s interest in gross loss $ ( 2,047 ) $ ( 5,132 ) $ ( 298 ) $ ( 4,254 )

Granite’s interest in gross profit (loss) $ ( 1,916 ) $ 8,468 $ ( 2,214 ) $ 4,214

Net Income (Loss):

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(2) These joint venture net income 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.

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Investments in Affiliates

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

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Foreign $ 72,790 $ 68,407

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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, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Current assets $ 205,698 $ 204,897

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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 $ 334.5 million of total affiliate assets as of June 30, 2024, we had investments in two real estate entities with total assets of $ 41.7 million, our foreign affiliates had total assets of $ 254.5 million and the asphalt terminal entity had total assets of $ 38.3 million.

As of June 30, 2024 and December 31, 2023, all of the investments in real estate affiliates were in residential real estate in Texas.

As of June 30, 2024, 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, 2024.

Our percent ownership in the asphalt terminal entity was 50 % as of June 30, 2024.

Of the $ 337.6 million of total affiliate assets as of September 30, 2024, we had investments in two real estate entities with total assets of $ 34.1 million, our foreign affiliates had total assets of $ 262.1 million and the asphalt terminal entity had total assets of $ 41.4 million.

As of September 30, 2024 and December 31, 2023, all of the investments in real estate affiliates were in residential real estate in Texas.

As of September 30, 2024, 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

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affiliates ranged from 25 % to 50 % as of September 30, 2024.

Our percent ownership in the asphalt terminal entity was 50 % as of September 30, 2024.

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, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Equipment and vehicles $ 1,203,487 $ 1,140,195

6 unchanged sentences

Property and equipment, net $ 719,678 $ 662,864

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Accrued Expenses and Other Current Liabilities

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Accrued insurance $ 89,252 $ 81,936

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Total $ 361,110 $ 337,740

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.

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

At December 31, 2023, the "other" balance above included the estimated LRC/MSG tax make-whole liability (see Note 3) which was finalized and paid in June 2024.

Long-Term Debt and Credit Arrangements

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

3.25 % Convertible Notes

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

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

The Credit Agreement includes a $ 150.0 million sublimit for letters of credit ($ 75.0

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

In May 2023, we entered into Amendment No.

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Amendment No.

1 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).

1 amended the Credit Agreement to, among other things, permit us to exchange our 2.75 % Convertible Notes for cash and shares of our 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).

In November 2023, we entered into Amendment No.

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The Term Loan was scheduled to mature on June 2, 2027 and amortize 5 % per year, payable in quarterly installments beginning in the first quarter of 2024.

At March 31, 2024 there was $ 148.1 million outstanding on the Term Loan which was fully repaid with the net proceeds from our 3.25 % Convertible Notes during the three months ended June 30, 2024.

The Term Loan was fully repaid with the net proceeds from our 3.25 % Convertible Notes in the second quarter of 2024.

We may borrow on the Revolver, at our option, at either (a) the Secured Overnight Financing Rate (“SOFR”) term rate plus a credit adjustment spread plus applicable margin ranging from 1.0 % to 2.0 %, or (b) a base rate plus an applicable margin ranging from zero to 1.0 %.

The applicable margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly.

As of June 30, 2024, the total unused availability under the Credit Agreement was $ 333.4 million, resulting from $ 16.6 million in issued and outstanding letters of credit and nothing drawn under the Revolver.

The letters of credit had expiration dates between July 2024 and December 2027.

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As of September 30, 2024, the total unused availability under the Credit Agreement was $ 333.5 million, resulting from $ 16.5 million in issued and outstanding letters of credit and nothing drawn under the Revolver.

The letters of credit had expiration dates between November 2024 and December 2027.

3.25% Convertible Notes

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Thereafter, the 3.25 % Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding their maturity date.

The 3.25 % Convertible Notes have an initial conversion rate of 12.8398 shares of Granite’s common stock per $1,000 principal amount of the 3.25 % Convertible Notes, which is equivalent to an initial conversion price of approximately $77.88 per share of Granite’s common stock, subject to adjustment if certain events occur.

The 3.25 % Convertible Notes have an initial conversion rate of 12.8398 shares of our common stock per $1,000 principal amount of the 3.25 % Convertible Notes, which is equivalent to an initial conversion price of approximately $77.88 per share of our common stock, subject to adjustment if certain events occur.

Upon conversion, we will settle the principal amount of the 3.25 % Convertible Notes in cash, and any conversion premium in excess of the principal amount in cash, or a combination of cash and shares of common stock, at our election.

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We used approximately $46.0 million of the net proceeds from the 3.25 % Convertible Notes offering to pay the cost of entering into capped call transactions in connection with the 3.25 % Convertible Notes.

In addition, we paid approximately $57.6 million of the net proceeds from the 3.25 % Convertible Notes offering to repurchase approximately $30.2 million in aggregate principal amount of our 2.75% Convertible Notes in separate and individually negotiated transactions entered into concurrently with the pricing of the offering;

In addition, we paid approximately $57.6 million of the net proceeds from the 3.25 % Convertible Notes offering to

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repurchase approximately $30.2 million in aggregate principal amount of our 2.75% Convertible Notes in separate and individually negotiated transactions entered into concurrently with the pricing of the offering;

repaid amounts outstanding under our Term Loan of $148.1 million;

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In June 2024, we entered into privately negotiated capped call transactions in connection with the offering of the 3.25 % Convertible Notes (the "2024 capped call transactions").

The 2024 capped call transactions are expected generally to reduce the potential dilution to Granite’s common stock upon any conversion of the 3.25 % Convertible Notes and/or offset any cash payments Granite is required to make in excess of the principal amount of converted 3.25 % Convertible Notes, as the case may be.

If, however, the market price per share of Granite’s common stock, as measured under the terms of the 2024 capped call transactions, exceeds the cap price $119.82 of the 2024 capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the 2024 capped call transactions.

The 2024 capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 3.25 % Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 3.25 % Convertible Notes, as the case may be.

If, however, the market price per share of our common stock, as measured under the terms of the 2024 capped call transactions, exceeds the cap price of $119.82 of the 2024 capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the 2024 capped call transactions.

3.75 % Convertible Notes

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

The 3.75 % Convertible Notes bear interest at a rate of 3.75 % per annum payable semiannually in arrears on May 15 and November 15

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of each year, beginning on November 15, 2023 and mature on May 15, 2028, unless earlier converted, redeemed or repurchased.

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

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

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

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

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

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

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

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

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In connection with the Exchange Transaction, we entered into partial unwind agreements (the "Unwind Agreements") with certain financial institutions to unwind a portion of the convertible note hedge and warrant transactions entered into in connection with the offering of the 2.75 % Convertible Notes.

Pursuant to the Unwind Agreements, we received 1,390,516 shares of our common stock (and cash in lieu of any fractional shares) in respect of the unwind of the portion of the existing convertible note hedge transactions that correspond to the 2.75 % Convertible Notes that were exchanged in the Exchange Transaction described above and paid $ 13.2 million in cash in respect of the unwind of the portion of the existing warrant transactions that correspond to the 2.75 % Convertible Notes that were exchanged in the Exchange Transaction described above.

Pursuant to the Unwind Agreements, we received 1,390,516 shares of our common stock (and cash in lieu of any fractional shares) in

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respect of the unwind of the portion of the existing convertible note hedge transactions that correspond to the 2.75 % Convertible Notes that were exchanged in the Exchange Transaction described above and paid $ 13.2 million in cash in respect of the unwind of the portion of the existing warrant transactions that correspond to the 2.75 % Convertible Notes that were exchanged in the Exchange Transaction described above.

2023 Capped Call Transactions

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

The 2023 capped call transactions are expected generally to reduce the potential dilution to Granite’s common stock upon conversion of the 3.75 % Convertible Notes and/or offset any cash payments Granite is required to make in excess of the principal amount of converted 3.75 % Convertible Notes, as the case may be.

If, however, the market price per share of Granite’s common stock, as measured under the terms of the 2023 capped call transactions, exceeds the cap price $79.83 of the 2023 capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the 2023 capped call transactions.

The 2023 capped call transactions are expected generally to reduce the potential dilution to our common stock upon conversion of the 3.75 % Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 3.75 % Convertible Notes, as the case may be.

If, however, the market price per share of our common stock, as measured under the terms of the 2023 capped call transactions, exceeds the cap price of $79.83 of the 2023 capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the 2023 capped call transactions.

2.75 % Convertible Notes

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

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In June 2024, we called the 2.75 % Convertible Notes for redemption and will redeem all outstanding aggregate principal amount of the 2.75 % Convertible Notes on August 19, 2024.

The redemption price per $1,000 principal amount of the 2.75 % Convertible Notes is equal to $1,000 plus accrued and unpaid interest, if any, to, but excluding the redemption date.

The 2.75 % Convertible Notes may be converted, at the election of the holder of such notes, at any time before the close of business on August 15, 2024.

The conversion rate for the 2.75 % Convertible Notes is 31.7915 shares of Granite common stock per $1,000 principal amount of notes (which includes 0.0139 additional shares to which converting holders are entitled).

With respect any 2.75 % Convertible Note that is properly surrendered for conversion from and after the date of the redemption notice until the close of business on August 15, 2024, we have elected to settle such conversion by delivering cash of $1,000 per $1,000 principal amount of the 2.75 % Convertible Notes and shares of our common stock in respect of the remainder of our conversion obligation in excess of the cash payment.

The indenture governing the 2.75 % Convertible Notes contains customary events of default.

In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding 2.75 % Convertible Notes will become due and payable immediately without further action or notice.

If any other event of default occurs and is continuing, then the trustee or the holders of at least 25 % in aggregate principal amount of the 2.75 % Convertible Notes then outstanding may declare the notes due and payable immediately.

At June 30, 2024, $ 0.4 million remained outstanding of our 2.75 % Convertible Notes.

In June 2024, we called the 2.75 % Convertible Notes for redemption.

As of September 30, 2024, no 2.75% Convertible Notes remained outstanding.

Covenants and Events of Default

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Our failure to comply with these covenants would constitute an event of default under the Credit Agreement.

Additionally, the 2.75 % Convertible Notes, 3.25 % Convertible Notes and 3.75 % Convertible Notes are governed by the terms and conditions of their respective indentures.

Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75 % Convertible Notes, our 3.25 % Convertible Notes, our 3.75 % Convertible Notes or our Credit Agreement would constitute an event of default under the 2.75 % Convertible Notes indenture, the 3.25 % Convertible Notes indenture, the 3.75 % Convertible Notes indenture or the Credit Agreement.

Additionally, the 3.25 % Convertible Notes and 3.75 % Convertible Notes are governed by the terms and conditions of their respective indentures.

Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 3.25 % Convertible Notes, our 3.75 % Convertible Notes or our Credit Agreement would constitute an event of default under the 3.25 % Convertible Notes indenture, the 3.75 % Convertible Notes indenture or the Credit Agreement.

A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility;

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

A default under the 2.75 % Convertible Notes indenture, the 3.25 % Convertible Notes indenture or the 3.75 % Convertible Notes indenture could result in acceleration of the maturity of the notes.

A default under the 3.25 % 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 June 30, 2024, we were in compliance with all covenants contained in the Credit Agreement.

As of September 30, 2024, we were in compliance with all covenants contained in the Credit Agreement.

We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.

Debt Issuance Costs

During the three and six months ended June 30, 2024, we recorded $ 1.5 million and $ 2.1 million, respectively, of amortization related to debt issuance costs.

During the three and nine months ended September 30, 2024, we recorded $ 0.9 million and $ 3.0 million, respectively, of amortization related to debt issuance costs.

We also capitalized $10.3 million in third party offering costs related to the issuance of the 3.25 % Convertible Notes.

These debt issuance costs will be amortized over the expected life of the 3.25 % Convertible Notes.

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.

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.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

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

Three Months Ended June 30, Six Months Ended

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 September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2024 2023 2024 2023

Net income (loss) attributable to common shareholders for basic earnings per share $ 36,895 $ ( 17,000 ) $ 5,912 $ ( 40,023 )

Net income attributable to common shareholders for basic earnings per share $ 78,951 $ 57,624 $ 84,863 $ 17,601

Interest expense related to Convertible Notes (1) 3,064 3,209 9,196 —

Net income (loss) attributable to common shareholders for diluted earnings per share $ 39,969 $ ( 17,000 ) $ 5,912 $ ( 40,023 )

Net income attributable to common shareholders for diluted earnings per share $ 82,015 $ 60,833 $ 94,059 $ 17,601

Weighted average common shares outstanding, basic 43,696 43,924 43,914 43,861

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Weighted average common shares outstanding, diluted 52,366 53,612 52,585 44,447

Net income (loss) per share, basic $ 0.84 $ ( 0.39 ) $ 0.13 $ ( 0.91 )

Net income (loss) per share, diluted $ 0.76 $ ( 0.39 ) $ 0.13 $ ( 0.91 )

Net income per share, basic $ 1.81 $ 1.31 $ 1.93 $ 0.40

Net income per share, diluted $ 1.57 $ 1.13 $ 1.79 $ 0.40

(1) The dilutive effect of the convertible notes was determined using the if-converted method.

As the 2.75 % Convertible Notes and 3.75 % Convertible Notes will be convertible into cash, shares of our common stock or a combination thereof, at our election, the 2.75 % Convertible Notes and 3.75 % Convertible Notes are assumed to be converted into common stock at the beginning of the reporting period, and the resulting shares are included in the denominator of the calculation.

As the 3.75 % Convertible Notes will be convertible into cash, shares of our common stock or a combination thereof, at our election, the 3.75 % Convertible Notes are assumed to be converted into common stock at the beginning of the reporting period, and the resulting shares are included in the denominator of the calculation.

In addition, interest charges, net of any income tax effects are added back to the numerator of the calculation.

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As such, the 3.25 % Convertible Notes only have an impact on diluted earnings per share when the average share price of our common stock exceeds the conversion price.

For the three months ended June 30, 2024, an immaterial amount of interest expense related to the 2.75 % Convertible Notes and the potential dilution from those notes converting into 35,000 shares of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive.

For the six months ended June 30, 2024, $6.6 million of interest expense related to 2.75 % Convertible Notes and 3.75 % Convertible Notes combined and the potential dilution from those convertible notes converting into 8,138,000 shares of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive.

Due to net losses for the three and six months ended June 30, 2023, both the unvested RSUs representing 586,000 and 584,000 shares, respectively, and the potential dilution from the 2.75 % Convertible Notes and 3.75 % Convertible Notes converting into 10,095,000 shares of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive.

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 9.1 million shares of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive.

In connection with the issuance of the 3.25 % Convertible Notes and 3.75 % Convertible Notes, we entered into the 2024 capped call transactions and 2023 capped call transactions, respectively, 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

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

Three Months Ended June 30, Six Months Ended

The following table presents the provision for income taxes for the respective periods:

Three Months Ended September 30, Nine Months Ended

September 30,

(dollars in thousands) 2024 2023 2024 2023

Provision for (benefit from) income taxes $ 20,693 $ 9,024 $ 11,167 $ ( 445 )

Provision for income taxes $ 25,469 $ 22,423 $ 36,636 $ 21,978

Effective tax rate 23.3 % 28.1 % 28.2 % 73.6 %

Our effective tax rate for the three and six months ended June 30, 2024 is higher than the prior year primarily due to non-deductible debt extinguishment costs and the related year over year variance in these costs.

Our effective tax rate for the three months ended September 30, 2024 is lower than the prior year due to tax expense recognized in the third quarter of 2023 associated with recording a non-deductible goodwill impairment and valuation allowances on certain foreign net operating losses.

Our effective rate for the nine months ended September 30, 2024 is lower than the prior year primarily due to incurring less nondeductible debt extinguishment costs in 2024 than 2023 as well as the tax expense associated with the goodwill impairment and valuation allowances recorded in the third quarter of 2023.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Contingencies - Legal Proceedings

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

The total liabilities recorded in our condensed consolidated balance sheets for legal proceedings and government inquiries were immaterial as of June 30, 2024 and December 31, 2023.

The total liabilities recorded in our condensed consolidated balance sheets for legal proceedings and government inquiries were immaterial as of September 30, 2024 and December 31, 2023.

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

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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 $ 1,080,705 $ 297,398 $ 1,378,103

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

Six Months Ended June 30, Construction Materials Total

Nine Months Ended September 30, Construction Materials Total

Total revenue from reportable segments $ 2,593,872 $ 625,570 $ 3,219,442

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

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

Three Months Ended June 30, Six Months Ended

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

Three Months Ended September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

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Gain on sales of property and equipment, net ( 1,542 ) ( 1,812 ) ( 4,347 ) ( 7,793 )

Total other expense, net 26,271 43,682 21,939 35,674

Income (loss) before income taxes $ 59,550 $ ( 14,822 ) $ 20,582 $ ( 50,063 )

Total other (income) expense, net ( 5,148 ) ( 6,101 ) 16,791 29,573

Income before income taxes $ 109,446 $ 79,919 $ 130,028 $ 29,856

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