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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-23 · 100 added, 176 removed, 220 unchanged (56% 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 construction and construction materials companies in the United States.

We are one of the largest diversified, vertically integrated civil contractors and construction materials producers in the United States.

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

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

We own and lease aggregate reserves and own processing plants that are vertically integrated into our construction operations and we also produce construction materials for sale to third parties.

We have vertically integrated operations across Alaska, Arizona, California, Mississippi, Nevada, Oregon, Tennessee, Utah and Washington in addition to regional civil construction home markets in Illinois, Florida and Texas.

Our Construction segment also operates national businesses within the Tunnel division, the Rail division, the Federal division, which performs civil construction across the continental United States and Guam, the Industrial & Energy division, which primarily focuses on commercial solar construction projects, and the Layne division, which performs water well drilling, rehabilitation services and mineral exploration services.

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

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It also provides construction of various complex projects including infrastructure / site development, mining, public safety, tunnel, solar, battery storage and other power-related projects.

The Materials segment focuses on production of aggregates, asphalt concrete, liquid asphalt and recycled materials production

for internal use in our construction projects and for sale to third parties.

The Materials segment focuses on production of aggregates, asphalt concrete, liquid asphalt and recycled materials production for internal use in our construction projects and for sale to third parties.

See Note 21 of “Notes to the Consolidated Financial Statements” for additional information about our reportable segments.

In addition to reportable segments, we also review our business by operating groups.

In alphabetical order, our operating groups are as follows:

• California, which is comprised of vertically integrated businesses in home markets across the state;

• Central, which includes the vertically integrated Arizona region and regional civil construction businesses in Illinois, Florida and Texas.

The Central group also includes the Federal division which performs civil construction across the continental United States and Guam, and the Tunnel division;

• Mountain, which is comprised of vertically integrated regional businesses in Alaska, Washington, Oregon, Utah and Nevada.

The Mountain Group also includes national businesses in the Industrial & Energy division, which primarily focuses on commercial solar construction projects, Water Resources, which performs water well drilling and rehabilitation services and Mineral Services, which performs mineral exploration services for mining clients.

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 former operating groups of California, Central and Mountain managed both Construction and Materials operations within each group.

This change allows 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 consolidated financial statements and no changes to our reportable segments.

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

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However, even these can be temporarily at risk as federal, state and local governments take actions to balance their budgets.

Conversely, increased levels of public funding as well as an expanding or robust economy will generally increase demand for our services and provide opportunities for revenue growth and margin improvement.

Critical Accounting Estimates

Conversely, increased levels of public funding as well as an expanding or robust economy will generally increase demand for our services and products and provide opportunities for revenue growth and margin improvement.

Critical Accounting Estimate

The financial statements included in “Item 8.

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however, actual amounts could differ from those estimates.

The following are our most critical accounting estimates that involve management judgment and can have significant effects on our reported results of operations.

We consider revenue recognition a critical accounting estimate.

It involves significant management judgment and can significantly affect our reported results of operations.

Revenue Recognition

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The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the forecasted revenue and cost to complete each project.

Cost estimates for all of our significant projects use a detailed “bottom up” approach.

Cost estimates for all of our significant projects use a detailed “bottom up”

There are a number of factors that can contribute to changes in estimates of contract cost and profitability.

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However, Note 3 of “Notes to the Consolidated Financial Statements” presents the impact material revisions in estimates had on the periods covered by this report.

Goodwill and Acquired Intangible Assets

Goodwill represents the excess of amounts paid over the fair value of net assets acquired from an acquisition.

In order to determine the amount of goodwill resulting from an acquisition, we perform an assessment to determine the value of the acquired company’s tangible and identifiable intangible assets and liabilities.

In our assessment, we determine whether identifiable intangible assets exist, which typically include customer relationships, backlog and trademarks/trade names.

The determination of fair values of assets acquired and liabilities assumed requires us to make estimates and use valuation techniques when a market value is not readily available.

We test goodwill for impairment annually, as of November 1, for each reporting unit and more frequently when events occur or circumstances change which suggest that goodwill should be evaluated.

Examples of such events or circumstances include, but are not limited to, the following:

• a significant adverse change in the business climate;

• a significant adverse change in legal factors or an adverse action or assessment by a regulator;

• a more likely than not expectation that a segment or a significant portion thereof will be sold;

• the testing for recoverability of a significant asset group within the segment.

Goodwill is evaluated for impairment either by assessing qualitative factors or by performing a quantitative assessment.

Qualitative factors, such as overall financial performance, industry or market considerations, or other relevant events, are assessed to determine if it is more likely than not that the fair value of the reporting units is less than their carrying amounts.

During a quantitative impairment test, we calculate the estimated fair value of the reporting unit in which the goodwill is recorded using the discounted cash flows and market multiple methods, and compare that amount to the carrying value of that reporting unit.

In the event the fair value of the reporting unit is determined to be less than the carrying value, goodwill is impaired, and an impairment loss is recognized equal to the excess, limited to the total amount of goodwill allocated to the reporting unit.

The impairment evaluation process includes, among other things, making assumptions about variables such as the determination of appropriate discount rates, the amount and timing of expected future cash flows, revenue and margin growth rates, and appropriate benchmark companies, which are subject to a high degree of judgment.

There are inherent uncertainties related to each of the above listed assumptions, and our judgment in applying them.

Changes in the assumptions used in our goodwill and intangible assets valuations could result in impairment charges that could be material to our consolidated financial statements in any given period.

Note 1 of “Notes to the Consolidated Financial Statements” includes further information about our long-lived assets and goodwill including the impact of impairments on the periods covered by this report, which are not material.

We have not materially changed our estimation methodology during the periods presented.

Current Economic Environment and Outlook

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

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.

The increased multi-year spending commitment has improved the programming visibility for state and local governments and has driven an increase in project lettings that started in 2023, continued in 2024 and we believe will carry into 2025 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 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.

In California, our top revenue-generating state, despite overall budgetary concerns, a significant part of the state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, a 10-year, $54.2 billion program, which may only be used for transportation-related purposes, without any sunset provisions.

Over the last several 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, where practicable, 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 oil price inflation, further price increases may adversely impact us in the future.

Our Committed and Awarded Projects (“CAP”) continues to be strong with $5.5 billion at the end of the fourth quarter of 2023.

Our Committed and Awarded Projects (“CAP”) balance continues to be strong at $5.3 billion at the end of the fourth 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 in 2025.

Strategic Actions

On March 16, 2022, we sold our trenchless and pipe rehabilitation services business (“Inliner”) for a purchase price of $159.7 million, subject to certain adjustments.

As a result of the sale and post-closing adjustments, we received cash proceeds of $140.6 million and recognized a gain of $1.8 million.

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

(“CMR”) for $26.6 million.

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

This acquisition did not have a material impact on our results of operations.

On November 30, 2023 (“acquisition date”), we completed the acquisition of Lehman-Roberts Company and Memphis Stone & Gravel Company (collectively, "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 our new $150.0 million senior secured term loan, as described further in Note 14 of "Notes to the Consolidated Financial Statements,” a draw of $100 million under our existing revolver and cash on hand.

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

On August 9, 2024, we acquired Dickerson & Bowen, Inc.

D&B is an aggregates, asphalt, and highway construction company serving central and southern Mississippi.

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.

LRC/MSG has exclusive rights to an estimated 57 million tons of proven and probable reserves and 24 million tons of measured and indicated reserves.

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.

The results of operations of these businesses are included in our consolidated financial statements from the dates of acquisition which impacts comparability to the applicable prior periods.

See Note 1 and Note 2 of “Notes to the Consolidated Financial Statements” for further information.

Results of Operations

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

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

Years Ended December 31, 2024 2023 2022

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(dollars in thousands)

California $ 1,029,410 34.4 % $ 811,623 28.9 % $ 822,448 26.7 %

Central 765,560 25.6 851,779 30.4 1,058,448 34.4

Mountain 1,197,284 40.0 1,140,533 40.7 1,195,294 38.9

Public $ 2,531,379 74.1 % $ 2,064,078 69.0 % $ 1,891,338 67.5 %

Private 883,846 25.9 928,176 31.0 912,597 32.5

Total $ 3,415,225 100.0 % $ 2,992,254 100.0 % $ 2,803,935 100.0 %

Construction revenue in 2023 increased by $188.3 million, or 6.7%, compared to 2022.

California operating group revenue increased $217.8 million despite 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 $56.8 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 $86.2 million primarily due to the wind down of several large projects and a decrease in the estimated amount of probable recovery on an outstanding claim.

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

During both 2023 and 2022, approximately 70% of revenue earned in the Construction segment was from the public sector.

Construction revenue in 2024 increased by $423.0 million, or 14.1%, compared to 2023, primarily due to a higher level of CAP to start the year, more favorable weather conditions early in 2024 and increased revenue from acquired businesses of $114.7 million due to the timing of the acquisition of LRC/MSG in 2023 and the acquisition of D&B in 2024.

Materials Revenue

Years Ended December 31, 2023 2022 2021

(dollars in thousands)

California $ 258,725 50.0 % $ 273,314 54.9 % $ 242,552 57.0 %

Central 55,125 10.7 46,531 9.4 33,270 7.8

Mountain 203,034 39.3 177,476 35.7 149,853 35.2

Total $ 516,884 100.0 % $ 497,321 100.0 % $ 425,675 100.0 %

Materials revenue in 2023 increased by $19.6 million, or 3.9%, when compared to 2022, driven primarily by sales from facilities and businesses acquired in 2023.

This contributed $16.5 million of revenue during the current year.

The remaining increase of $3.1 million, is due to higher asphalt and aggregate sales prices in our legacy facilities that overcame decreases in asphalt and aggregate sales volumes.

Inclement weather during the first half of 2023 negatively impacted 2023 sales volumes.

Materials revenue in 2024 increased by $75.5 million, or 14.6%, when compared to 2023, driven primarily by increases in revenue from newly acquired businesses of $66.9 million, in addition to higher asphalt and aggregate sales prices.

Committed and Awarded Projects

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

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

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

All CAP is in the Construction segment.

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(dollars in thousands)

California $ 2,436,521 43.9 % $ 1,747,163 39.0 %

Central 1,707,862 30.8 1,661,613 37.0

Mountain 1,401,371 25.3 1,076,363 24.0

Public $ 4,120,821 77.8 % $ 4,368,904 78.8 %

Private 1,175,246 22.2 1,176,850 21.2

Total $ 5,296,067 100.0 % $ 5,545,754 100.0 %

CAP of $5.5 billion at December 31, 2023 was $1.1 billion, or 24% higher than 2022 primarily due to higher award volume throughout 2023, specifically in our California and Mountain operating groups which increased $689.4 million and $325.0 million, respectively, between December 31, 2022 and 2023.

The most significant new addition to CAP during the fourth quarter of 2023 was $344.5 million related to a private rail facility project in California.

CAP of $5.3 billion at December 31, 2024 was $0.2 billion, or 5% lower than December 31, 2023 due to higher revenue in 2024 and lower additions to CAP in 2024.

Bidding activity remained robust in 2024, and several significant project awards are expected to be added to CAP during the first half of 2025.

The most significant additions to CAP during 2024 included $196 million for six highway projects in California, $180 million for a pumping station project in Nevada, $158 million of Federal work in Guam and $114 million for a bridge project in Michigan.

Non-controlling partners’ share of CAP as of December 31, 2024 and 2023 was $331.1 million and $243.8 million, respectively.

At December 31, 2023 and 2022, six and five contracts with remaining CAP of $10.0 million or more per project had total forecasted losses with remaining revenue of $188.9 million, or 3.4% of total CAP, and $134.2 million, of 3.0% of total CAP, respectively.

At December 31, 2024 and 2023, one and six contracts with remaining CAP of $10.0 million or more per project had total forecasted losses with remaining revenue of $64.4 million, or 1.2% of total CAP, and $188.9 million, or 3.4% of total CAP, respectively.

Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue.

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Percent of total revenue 14.3 % 11.3 % 11.2 %

Construction gross profit for the year ended December 31, 2023 increased by $21.2 million, or 7.0%, when compared to 2022, primarily driven by strong performance in the vertically integrated Mountain operating group, partially offset by a decrease in the estimated amount of probable recovery on an outstanding claim in our Central operating group, as well as the impact of other downward revisions in estimates (see Note 3 of “Notes to the Consolidated Financial Statements”).

Materials gross profit for the year ended December 31, 2023 increased by $5.7 million, or 8.7%, when compared to 2022 and gross profit margin increased to 13.8% in the current year from 13.2% in the prior year.

These improvements were primarily due to price increases as well as normalized fuel and energy costs in 2023.

Our newly acquired operations produced a gross loss of $3.6 million, including the impact of purchase accounting primarily related to LRC/MSG.

Construction gross profit for the year ended December 31, 2024 increased by $165.9 million, or 51.1%, when compared to 2023, primarily due to higher revenue and improved project execution across our project portfolio resulting in net increases from revisions in estimates in the current period compared to net decreases in the prior 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 3 of "Notes to the Consolidated Financial Statements." Additionally, gross profit from acquired businesses increased by $11.5 million for the year ended December 31, 2024, including $8.1 million of purchase accounting related depreciation and intangible asset amortization.

Materials gross profit for the year ended December 31, 2024 increased by $10.4 million, or 14.5%, when compared to 2023 and gross profit margin remained consistent at 13.8%.

The improvement in gross profit was primarily due to the results of acquired businesses as well as higher revenue.

Materials gross profit from acquired businesses increased by $7.8 million

for the year ended December 31, 2024, including $4.1 million of purchase accounting related depreciation and intangible asset amortization.

Selling, General and Administrative Expenses

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Stock-based compensation 17,826 9,753 6,361

Other selling expenses 5,964 8,627 4,632

Total selling 71,960 72,141 76,965

General and administrative

Salaries and related expenses 98,622 103,161 111,149

Incentive compensation 23,580 12,108 8,908

Stock-based compensation 8,158 5,084 3,792

Other general and administrative expenses 92,146 80,116 102,201

Total general and administrative 222,506 200,469 226,050

Total selling, general and administrative $ 294,466 $ 272,610 $ 303,015

Other selling, general and administrative expenses 112,407 98,110 88,743

Total selling, general and administrative expenses $ 334,162 $ 294,466 $ 272,610

Percent of revenue 8.3 % 8.4 % 8.3 %

Selling Expenses

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

Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities.

Selling, general and administrative ("SG&A") expenses include the costs for estimating and bidding, including offsetting customer reimbursements for portions of our selling/bid submission expenses (i.e., stipends), business development, materials facility permits, and costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions.

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

SG&A expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities.

As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses.

Selling expenses for 2023 decreased $0.2 million compared to 2022.

Increased selling incentive and stock-based compensation resulting from improved financial performance was offset by a decrease in other selling expenses.

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, changes in the fair market value of our Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses.

Total general and administrative expenses for 2023 increased by $22.0 million, or 11.0%, compared to 2022, primarily due to an increase in incentive compensation due to improved financial performance.

The increase 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.

These increases were partially offset by the elimination of general and administrative expenses related to Inliner which was sold in the first quarter of 2022.

SG&A expenses for 2024 increased $39.7 million compared to 2023, primarily due to a $17.0 million increase in SG&A expenses from acquired businesses, including $6.3 million of purchase accounting related depreciation and intangible asset amortization.

The remaining increase was due to higher stock-based compensation and incentive compensation due to improved financial performance, as well as higher salaries and related expenses due to increased labor costs.

Other Costs, net

The following table presents other costs for the respective periods:

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

Years Ended December 31, 2024 2023 2022

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Other costs, net $ 39,936 $ 50,217 $ 24,120

Other costs for the year ended December 31, 2023 increased by $26.1 million when compared to 2022 primarily due to the settlement of the Salesforce Tower matter in October 2023.

See Note 20 of "Notes to the Consolidated Financial Statements" for information related to legal matters.

Also included in 2023 are costs and non-cash impairment charges associated with the wind down of our international Mineral Services operations.

See Note 1 of "Notes to the Consolidated Financial Statements" for more information.

Other costs for the year ended December 31, 2024 decreased by $10.3 million when compared to 2023 primarily due to a $20.0 million litigation charge in the prior year that did not recur in the current year, partially offset by an increase in 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.

Gain on Sales of Property and Equipment, net

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Gain on sales of property and equipment, net $ (8,764) $ (28,346) $ (12,617)

Gain on sales of property and equipment, net for the year ended December 31, 2023 increased by $15.7 million when compared to 2022 primarily due to the sale of a property in Texas in 2023.

The sale was part of our ongoing asset optimization plan.

Gain on sales of property and equipment, net for the year ended December 31, 2024 decreased by $19.6 million when compared to 2023 primarily due to the sale of a property in Texas in 2023.

Other (Income) Expense

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Total other (income) expense, net $ 11,171 $ 20,208 $ (6,436)

We incurred a $51.1 million loss on debt extinguishment in the second quarter of 2023 related to the refinancing of a portion of our 2.75% Convertible Notes.

We issued 1,390,500 shares of Granite common stock and paid $198.8 million in cash in separate and individually negotiated transactions in exchange for $198.7 million aggregate principal amount of our 2.75% Convertible Notes concurrent with the offering of the 3.75% Convertible Notes.

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.

Interest income for 2023 increased by $11.0 million when compared to 2022 primarily due to higher interest rates on our investments.

Interest expense for 2023 increased by $5.8 million when compared to 2022 as a result of increased borrowings in 2023.

Equity in income of affiliates increased by $12.2 million when compared to 2022 due to overall increases in net income of our affiliates driven by increases in sales and margins.

Other income, net increased by $7.1 million primarily due to increases in the fair market value of our company-owned life insurance policy.

During 2024, we repurchased approximately $ 30.2 million in aggregate principal amount of our 2.75% Convertible Notes and incurred a $27.6 million loss on debt extinguishment, which was $23.5 million less than the 2023 extinguishment charge.

During 2024, interest expense, net of interest income, increased $3.9 million, as a result of increased borrowings, partially offset by higher interest income due to higher cash balances.

Equity in income of affiliates, net decreased by $8.8 million when compared to 2023 primarily due to lower net income of our affiliates.

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

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Effective tax rate 28.4 % 50.6 % 14.1 %

Our effective tax rate increased from 14.1% to 50.6% when compared to 2022 due to increases in our provision for income taxes relative to lower income before income taxes.

Provision for income taxes in the current year was higher than last year due to $49.3 million of non-deductible expense related to the refinancing of a portion of our 2.75% Convertible Notes in the second quarter of 2023.

See Note 14 of “Notes to the Consolidated Financial Statements.” In the prior year, provision for income taxes was lower due to the benefit associated with the reversal of deferred tax liabilities related to our Water Resources and Minerals businesses no longer being held for sale, and the benefit from the release of valuation allowances related to utilization of capital loss carryforwards net of the tax expense from non-deductible goodwill associated with the sale of Inliner.

The decrease in year-over-year income before income taxes was primarily due to the loss in the current year related to debt extinguishment.

Our effective tax rate decreased from 50.6% to 28.4% when compared to 2023 primarily due to a decrease in nondeductible debt extinguishment costs along with a favorable adjustment for non-controlling interest in the current year.

Amount Attributable to Non-controlling Interests

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Amount attributable to non-controlling interests $ (14,097) $ 14,012 $ 4,445

The amount attributable to non-controlling interests represents the non-controlling owners’ share of the net loss of our consolidated construction joint ventures.

The change during 2023 was primarily due to increased losses due to downward revisions in estimates from an existing joint venture, partially offset by increased profits from new joint ventures.

(see Note 3 of “Notes to the Consolidated Financial Statements”).

The amount attributable to non-controlling interests represents the non-controlling owners’ share of the net (income) loss of our consolidated construction joint ventures.

The increase during 2024 was primarily due to the impact of less negative revisions in estimates related to consolidated construction joint ventures (see Note 3 of “Notes to the Consolidated Financial Statements”).

Prior Years Comparison (2023 to 2022)

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

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

See Note 14 of the "Notes to the Consolidated Financial Statements" for information on our long-term debt.

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

We may also from time to time prepay or repurchase outstanding indebtedness and acquire assets or businesses that are complementary to our operations.

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

See Note 2 and Note 17 of the "Notes to the Consolidated Financial Statements" for information on our acquisitions and share repurchases, respectively.

Our primary contractual obligations are as follows and are further discussed in the referenced “Notes to the Consolidated Financial Statements:”

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In addition to the obligations referenced above, as of December 31, 2024 we had $16.4 million of purchase commitments for equipment and other goods and services not directly connected with our construction contracts, which are individually greater than $50,000 and have an expected fulfillment date after December 31, 2024.

Of this, approximately $16.1 million and $2.5 million will be paid in 2024 and 2025, respectively.

Of this, approximately $15.0 million, $1.0 million and $0.4 million will be paid in 2025, 2026 and 2027, respectively.

There are no material purchase commitments in the periods thereafter.

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

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

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

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

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Government and agency obligations.

In June 2022, we entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) maturing June 2, 2027.

The Credit Agreement is a $350.0 million senior secured, five-year revolving facility (the “Revolver”).

In November 2023, we entered into Amendment No.

2 (the "Amendment") to the Credit Agreement which provided for a

$150 million senior secured term loan (the “Term Loan”).

As of December 31, 2023, the total unused availability under our Credit Agreement was $230.7 million, resulting from $19.3 million in issued and outstanding letters of credit and $100.0 million drawn on the Revolver.

See Note 14 of “Notes to the Consolidated Financial Statements” for further discussion regarding the Revolver.

As of December 31, 2023, we had $2.0 million of receivables and $29.1 million of contract retention receivables from Brightline Trains Florida LLC ("Brightline") (see Note 6 of “Notes to the Consolidated Financial Statements”).

As of the date of this report, $1.9 million of the receivables outstanding at year-end have been collected.

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 first half of 2024;

however, timing cannot be assured.

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

As of December 31, 2024, the total unused availability under our Credit Agreement was $333.7 million, resulting from $16.3 million in issued and outstanding letters of credit and nothing drawn on the Revolver.

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

As of December 31, 2024, we had $1.3 million of receivables and $29.2 million of contract retention receivables from Brightline Trains Florida LLC ("Brightline") (see Note 6 of “Notes to the Consolidated Financial Statements”), all of which has been collected as of the date of this report.

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

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Total consolidated cash and cash equivalents 578,330 417,663

Short-term and long-term marketable securities (2) 35,863 65,943

Short-term marketable securities (2) 7,311 35,863

Total cash, cash equivalents and marketable securities $ 585,641 $ 453,526

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

and agency obligations as of all periods presented.

Government and agency obligations as of all periods presented.

Granite’s portion of CCJV cash and cash equivalents was $106.0 million and $73.1 million as of December 31, 2024 and 2023, respectively.

Excluded from the table above is $34.2 million and $40.4 million as of December 31, 2023 and 2022, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents.

Excluded from the table above is $28.7 million and $34.2 million as of December 31, 2024 and 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 year ended December 31, 2023, we had capital expenditures of $140.4 million, compared to $121.6 million during 2022, an increase of $18.8 million.

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

We currently anticipate 2024 capital expenditures to be between approximately $130 million and $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.

During the year ended December 31, 2024, we had capital expenditures of $136.4 million, compared to $140.4 million during 2023, a decrease of $4.0 million.

We currently anticipate 2025 capital expenditures to be between approximately $140 million and $160 million, including approximately $50 million in planned strategic materials investments.

Years Ended December 31, 2024 2023 2022

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Operating activities

As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including seasonal cycles, project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts.

Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the work that we perform, including claim and back charge settlements.

As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts.

Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the construction work we perform, including claim and back charge settlements.

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

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

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

While we typically invoice our customers on a monthly basis, our construction 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 $456.3 million during 2024 represents a $272.6 million increase in cash provided by operating activities when compared to 2023.

The change was primarily due to a $73.6 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 from, net of contributions to, unconsolidated joint ventures and affiliates increased $42.6 million from 2022.

The change was primarily attributable to a $132.8 million increase in net income after adjusting for non-cash items and a $121.7 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 from, net of contributions to, unconsolidated construction joint ventures and affiliates increased $18.1 million from 2023.

Investing activities

Cash used in investing activities of $359.3 million during 2023 represents a $348.3 million increase in cash used in investing activities when compared to 2022.

The change was primarily due to the acquisition of LRC/MSG which resulted in a $294.0 million cash outflow during 2023.

In addition, net cash used in investing activities in 2022 included $140.6 million of proceeds from the sale of the Inliner business in March 2022.

These changes were partially offset by decreased purchases of marketable securities in the current year.

Cash used in investing activities of $228.6 million during 2024 represents a $130.7 million decrease in cash used in investing activities when compared to 2023.

The change was primarily due to a $159.7 million decrease in cash used related to business acquisitions (see Note 3 of "Notes to the Consolidated Financial Statements"), partially offset by a $24.3 million decrease in proceeds from sales of property and equipment.

Financing activities

Cash provided by financing activities of $299.3 million during 2023 represents a $463.6 million increase in cash provided by financing activities when compared to 2022.

The change was primarily due to a $150.0 million increase in cash provided by our Revolver and Term Loan.

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

In addition, net cash inflows related to our convertible bond transactions in 2023 generated $98.8 million in cash.

Cash used in financing activities of $67.1 million during 2024 represents a $366.4 million increase in cash used in financing activities when compared to 2023.

The change was primarily due to a $290.3 million decrease in proceeds from debt issuances, net of debt repayments and related charges.

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

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 $24.5 million.

The year over year increase in cash used in financing activities was also due to $46.5 million increase in repurchases of common stock as well as a decrease in contributions from non-controlling partners, net of distributions, of $30.7 million.

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

See Note 8 to “Notes to the Consolidated Financial Statements” for further information.

The hedge option and warrant derivative transactions related to the 2.75% Convertible Notes and the Capped Call transactions related to the 3.75% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds.

The capped call transactions related to the 3.75 % Convertible Notes and 3.25 % Convertible Notes were recorded to equity on our consolidated balance sheets based on the cash proceeds.

See Note 14 to “Notes to the Consolidated Financial Statements” for further information.

Surety Bonds and Real Estate Mortgages

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

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 December 31, 2024, approximately $3.2 billion of our $5.3 billion CAP was bonded.

Performance bonds do not have stated expiration dates;

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

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

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

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

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

Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt.

rather, we are generally released from the bonds when the obligations of the underlying contract have been fulfilled.

The ability to maintain bonding capacity requires that we maintain cash and working capital balances satisfactory to our sureties.

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

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

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

Modification of these terms may include changes in loan-to-value ratios requiring the real estate venture to repay portions of the debt.

Our unconsolidated investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases and working capital.

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

The debt associated with our unconsolidated non-construction entities is included in Note 9 of “Notes to the Consolidated Financial Statements.”

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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 2.75% 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 3.75% Convertible Note indenture or the Credit Agreement.

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

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

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 December 31, 2024, we were in compliance with the covenants in the Credit Agreement.

Share Purchase Program

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”).

We did not purchase shares under the share purchase program in 2023.

As of December 31, 2023, $231.5 million of the 2022 authorization remained available.

During the year ended December 31, 2024, we repurchased 524,800 shares under the 2022 authorization and $189.5 million remained available under the 2022 authorization as of December 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-K

Item 7. Management’s Discussion and Analysis