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Item 9A. Controls and Procedures

2022-02-28 compared with 2021-03-30 · 1011 added, 1184 removed, 1741 unchanged (56% of the section changed)

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Evaluation of Disclosure Controls and Procedures  

Our management, with the participation of our principal executive and principal financial officers, have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.

Based on that evaluation, our principal executive and principal financial officers have concluded that, as of December 31, 2020, due to the existence of the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Exchange Act, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2021, the end of the period covered by this report.

Management ’

s Report on Internal Control Over Financial Reporting

Our management, including our principal executive and principal financial officers, is responsible for establishing and maintaining adequate internal control over financial reporting as described in Exchange Act Rules 13a-15(f) and 15d-15(f).

Our management, including our principal executive and principal financial officers, is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

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and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Our management, under the supervision and with the participation of our principal executive and principal financial officers, has conducted an evaluation of the effectiveness of our internal control over financial reporting, using the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”).

Based on this evaluation, management determined, based upon the existence of the material weaknesses described below, that we did not maintain effective internal control over financial reporting as of December 31, 2020.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In our Annual Report on Form 10-K for the year ended December 31, 2019, we disclosed the identification of control deficiencies that constituted material weaknesses, either individually or in the aggregate and these material weaknesses have not been remediated as of December 31, 2020.

We identified that we did not maintain an effective control environment.

Specifically, certain members of management did not sufficiently promote, monitor or enforce adherence to the Company’s Code of Conduct and accounting policies and procedures.

In addition, certain of these members of management applied pressure on individuals charged with operational finance responsibilities in the Heavy Civil operating group, which resulted in management directives to produce forecasts of revenues and costs that were overly optimistic and not in compliance with the Company’s standard operating procedures.

These actions reflected an inappropriate tone at the top and violated our Code of Conduct and accounting policies and procedures and contributed to our ineffective control environment.

The ineffective control environment further contributed to the failure in the Heavy Civil operating group’s project forecasting controls.

We did not maintain and follow internal policies and procedures in project forecasting in the Heavy Civil operating group, which led to the failure to timely record adjustments to quarterly forecasts (such as adjustments for estimates of costs, project risks and variable consideration, such as potential claims).

These material weaknesses resulted in misstatements that were corrected in the restatement included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Additionally, the material weaknesses described above could result in a misstatement of substantially all account balances or disclosures that would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021.

PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2021.

The report is included in “Item 15.

Their report is included in “Item 15.

Exhibits and Financial Statement Schedules”

under the heading “Report of Independent Registered Public Accounting Firm.”

Remediation of Prior Year Material Weaknesses

As disclosed in our Annual Reports on Form 10-K for the years ended December 31, 2019 and 2020, we identified control deficiencies that constituted material weaknesses, either individually or in the aggregate, and since 2020, Company management, with the assistance of outside consultants, has reviewed and revised our internal control over financial reporting in response to the material weaknesses.

The actions we took to remediate the material weaknesses included the following:

we implemented oversight, training and communication programs to reinforce:

(1) our ethical standards and Code of Conduct across the Company, which emphasized, among other things, the purpose and availability of the anonymous whistleblower hotline, (2) the responsibilities and obligations of public company officers, (3) our cost forecasting processes and policies, including proper and contemporaneous documentation to support cost forecast adjustments, (4) the principles and requirements of each cost forecasting control and (5) reporting communication protocols for internal audit reports;

we implemented additional internal controls related to cost forecasts including reviews from individuals who are independent of the operating group; and

we took appropriate personnel actions, including separations, dismissals and changes in leadership and/or responsibilities and implemented other organizational changes, including changes in reporting structures.

Management has concluded that the material weaknesses described in our Annual Reports on Form 10-K for the years ended December 31, 2019 and 2020 have been remediated because the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that the controls operated effectively.

Changes in Internal Control Over Financial Reporting

Other than the ongoing remediation efforts described below, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended December 31, 2020.  

Remediation Plan and Status

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, beginning in 2020, Company management, with the assistance of outside consultants began reviewing and revising our internal control over financial reporting in response to the Audit Committee’s independent Investigation. Management is committed to implementing changes to our internal control over financial reporting to ensure that the control deficiencies that contributed to the material weaknesses are remediated.

We are currently evaluating the impact of the material weaknesses and have taken or are in the process of taking the following actions:

We have taken appropriate personnel actions, including separations, dismissals and changes in leadership and/or responsibilities and have implemented other organizational changes, including changes in reporting structures.

We have implemented or are in the process of implementing additional ongoing oversight, training and communication programs to reinforce:

(1) our ethical standards and Code of Conduct across the Company, which will emphasize, among other things, the purpose and availability of the anonymous whistleblower hotline, (2) the responsibilities and obligations of public company officers, (3) our cost forecasting processes and policies, including proper and contemporaneous documentation to support cost forecast adjustments, (4) the principles and requirements of each cost forecasting control and (5) reporting communication protocols for internal audit reports.

We are developing and implementing additional internal controls related to cost forecasts with an emphasis on reviews from individuals who are independent of the operating group.

While we believe that these actions will remediate the material weaknesses, we have not completed all the corrective processes, procedures and related evaluation or remediation that we believe are necessary.

As we continue to evaluate and work to remediate the material weaknesses, we may take additional measures to address the control deficiencies.

Until the remediation steps set forth above, including the efforts to implement the necessary control activities we identify, are fully implemented and concluded to be operating effectively, the material weaknesses described above will not be considered fully remediated.

There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended December 31, 2021.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Certain information required by Part III is omitted from this report.

We will file our definitive proxy statement for our Annual Meeting of Shareholders to be held on June 2, 2021 (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report, and certain information included therein is incorporated herein by reference.

We will file our definitive proxy statement for our 2022 Annual Meeting of Shareholders (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report, and certain information included therein is incorporated herein by reference.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

For information regarding our Directors and compliance with Section 16(a) of the Securities Exchange Act of 1934, we direct you to the sections entitled “Proposal 1 - Election and Ratification of Directors”

and “Delinquent Section 16(a) Reports,”

respectively, in the Proxy Statement.

For information regarding our Directors, we direct you to the section entitled “Proposal 1 - Election and Ratification of Directors” in the Proxy Statement.

For information regarding our Audit/Compliance Committee and our Audit/Compliance Committee’s financial expert, we direct you to the section entitled “Information about the Board of Directors and Corporate Governance - Committees of the Board - Audit/Compliance Committee”

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Shareholders’

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F-8  to F-34

Quarterly Financial Data (unaudited)

Financial Statement Schedules.

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Agreement and Plan of Merger by and among Granite Construction Incorporated, Layne Christensen Company and Lowercase Merger Sub Incorporated, dated as of February 13, 2018 [Exhibit 2.1 to the Company’s Form 8-K filed on February 14, 2018]

Certificate of Incorporation of Granite Construction Incorporated, as amended [Exhibit 3.1.b to the Company’s Form 10-Q for quarter ended June 30, 2006]

Certificate of Incorporation of Granite Construction Incorporated, as amended [Exhibit 3.1.b to the Company’s Form 10-Q for the quarter ended June 30, 2006]

Amended Bylaws of Granite Construction Incorporated [Exhibit 3.1 to the Company’s Form 8-K filed on November 15, 2011]

Indenture (including Form of Note) with respect to Granite Construction Incorporated’s 2.75% Convertible Senior Notes due 2024, dated November 1, 2019, by and between Granite Construction Incorporated and Wilmington Trust, National Association, as trustee [Exhibit 4.1 to the Company’s Form 8-K filed on November 1, 2019]

Description of Common Stock 

[Exhibit 4.2 to the Company’s Form 10-K for the year ended December 31, 2019]

Key Management Deferred Compensation Plan II, as amended and restated [Exhibit 10.1 to the Company’s Form 10-Q for quarter ended March 31, 2010]

Form of Amended and Restated Director and Officer Indemnification Agreement [Exhibit 10.10 to the Company’s Form 10-K for year ended December 31, 2002]

Executive Retention and Severance Plan II effective as of March 9, 2011 [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2011]

Description of Common Stock [Exhibit 4.2 to the Company’s Form 10-K for the year ended December 31, 2019]

Key Management Deferred Compensation Plan II, as amended and restated [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2010]

Form of Amended and Restated Director and Officer Indemnification Agreement [Exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 2002]

Granite Construction Incorporated Annual Incentive Plan effective January 1, 2010, as amended [Exhibit 10.22 to the Company’s Form 10-K for the year ended December 31, 2011]

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Granite Construction Incorporated 2012 Equity Incentive Plan [Exhibit 10.1 to the Company’s Form 8-K filed on May 25, 2012]

Form of Non-Employee Director Restricted Stock Unit Agreement effective May 22, 2012 [Exhibit 10.2 to the Company’s Form 8-K filed on May 25, 2012]

Granite Construction Incorporated NEO LTIP Awards Form of Restricted Stock Unit Agreement (Vesting on Date of Grant) [Exhibit 10.30 to the Company's Form 10-K for the year ended December 31, 2012]

Granite Construction Incorporated Form of Restricted Stock Unit Agreement (3 Year Vesting Schedule) [Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 2012]

Form of Non-Employee Director Restricted Stock Unit Agreement effective May 22, 2012 (2012 Equity Incentive Plan) [Exhibit 10.2 to the Company’s Form 8-K filed on May 25, 2012]

Granite Construction Incorporated NEO LTIP Awards Form of Restricted Stock Unit Agreement (Vesting on Date of Grant) (2012 Equity Incentive Plan) [Exhibit 10.30 to the Company's Form 10-K for the year ended December 31, 2012]

Granite Construction Incorporated Form of Restricted Stock Unit Agreement (3 Year Vesting Schedule) (2012 Equity Incentive Plan) [Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 2012]

Third Amended and Restated Credit Agreement, dated May 31, 2018 by and among Granite Construction Incorporated, Granite Construction Company, GILC Incorporated, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender, and L/C Issuer [Exhibit 10.1 to the Company’s Form 8-K filed on June 5, 2018]

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Amendment No.

3 to Third Amended and Restated Credit Agreement, dated March 26, 2020, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 25, 2021]

Executive Retention and Severance Plan III and Participation Agreement [Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 30, 2020]

Long-Term Incentive Plan [Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on March 30, 2020]

LTIP Award Agreement [Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on March 30, 2020]

3 to Third Amended and Restated Credit Agreement, dated March 26, 2020, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2020]

Executive Retention and Severance Plan III and Participation Agreement [Exhibit 10.1 to the Company's Form 8-K filed on March 30, 2020]

Long Term Incentive Plan, effective January 1, 2020 [Exhibit 10.2 to the Company's Form 8-K filed on March 30, 2020]

LTIP Award Agreement (2020 Long Term Incentive Plan) [Exhibit 10.3 to the Company's Form 8-K filed on March 30, 2020]

Amendment No.

4 to Third Amended and Restated Credit Agreement, dated June 19, 2020, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 25, 2021]

4 to Third Amended and Restated Credit Agreement, dated June 19, 2020, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended June 30, 2020]

Retirement and Transition Agreement dated October 20, 2020 by and between the Company and Mr.

Roberts [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 23, 2020]

Roberts [Exhibit 10.1 to the Company’s Form 8-K filed on October 23, 2020]

Amendment No.

5 to Third Amended and Restated Credit Agreement, dated November 12, 2020, by and among the Company and certain subsidiaries of the Company, each as borrowers, the guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent

Amendment No.

6 to Third Amended and Restated Credit Agreement, dated February 19, 2021, by and among the Company and certain subsidiaries of the Company, each as borrowers, the guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2021]

Stipulation and Agreement of Settlement, dated as of April 29, 2021 [Exhibit 10.1 to the Company’s Form 8-K filed on April 30, 2021]

Granite Construction Incorporated 2021 Equity Incentive Plan [Exhibit 10.2 to the Company’s Form 8-K filed on June 4, 2021]

Form of Non-Employee Director Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.3 to the Company’s Form 8-K filed on June 4, 2021]

Form of Employee Service Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.4 to the Company’s Form 8-K filed on June 4, 2021]

Form of Employee TSR Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.5 to the Company’s Form 8-K filed on June 4, 2021]

Separation and Transition Agreement, dated November 14, 2021 by and between the Company and Ms.

Desai [Exhibit 10.1 to the Company’s Form 8-K filed on November 15, 2021]

Exhibit Description

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Inline XBRL Taxonomy Extension Presentation Linkbase 

The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, formatted in Inline XBRL (included within the Exhibit 101 attachments).

*  Incorporated by reference

The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL (included within the Exhibit 101 attachments).

Incorporated by reference

Compensatory plan or management contract

†  Filed herewith

†† 

Filed herewith

††

Furnished herewith

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Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

March 30, 2021

(Principal Financial Officer)

February 25, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated and on the dates indicated.

/s/ Claes G.

March 30, 2021

Bjork, Chairman of the Board and Director

March 30, 2021

Larkin, President (Principal Executive Officer)

/s/ Michael F.

February 25, 2022

McNally, Chairman of the Board and Director

February 25, 2022

Larkin, President, Chief Executive Officer and Director (Principal Executive Officer)

/s/ Elizabeth L.

March 30, 2021

Curtis, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

March 30, 2021

February 25, 2022

Curtis, Executive Vice President and Chief Financial Officer (Principal Financial Officer)

February 25, 2022

Woolsey, Chief Accounting Officer (Principal Accounting Officer)

February 25, 2022

Caldera, Director

February 25, 2022

Campbell, Director

March 30, 2021

February 25, 2022

Darnell, Director

/s/ Patricia D.

March 30, 2021

February 25, 2022

Galloway, Director

February 25, 2022

Kelsey, Director

February 25, 2022

Krusi, Director

/s/ Jeffrey J.

March 30, 2021

February 25, 2022

Lyash, Director

March 30, 2021

Krusi, Director

March 30, 2021

Kelsey, Director

/s/ Celeste B.

March 30, 2021

February 25, 2022

Mastin, Director

/s/ Michael F.

March 30, 2021

McNally, Director

February 25, 2022

Mullen, Director

Vasquez 

March 30, 2021

February 25, 2022

Vasquez, Director

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Granite Construction Incorporated and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive loss, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have audited the accompanying consolidated balance sheets of Granite Construction Incorporated and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income (loss), of shareholders’

equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date related to (i) an ineffective control environment due to an inappropriate tone at the top and violations of the Company’s Code of Conduct and accounting policies and procedures, as certain members of management did not sufficiently promote, monitor or enforce adherence to the Company’s Code of Conduct and accounting policies and procedures, and certain of these members applied pressure on individuals charged with operational finance responsibilities in the Heavy Civil operating group, which contributed to (ii) failure in the Heavy Civil operating group’s project forecasting controls, as personnel did not maintain and follow internal policies and procedures in project forecasting, which led to the failure to timely record adjustments to quarterly forecasts. 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses referred to above are described in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Changes in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue from contracts with customers in 2018.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management’s report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition - Estimates of the Revenue and Costs to Complete for Multi-Year Fixed Price Contracts in the Transportation, Water and Specialty Segments, including revisions in estimates

As described in Notes 1, 3, and 4 to the consolidated financial statements, the revenue for the Transportation, Water and Specialty segments for the year ended December 31, 2020 was $2,018 million, $440 million, and $723 million, respectively, a portion of which related to multi-year fixed price contracts inclusive of unconsolidated joint venture projects.

Revenue in the Transportation, Water and Specialty segments is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., cost to cost) method.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimates of the Forecasted Revenue and Costs to Complete for Multi-Year Fixed Price Contracts in the Construction Segment, and Revisions in those Estimate s

As described in Notes 1, 3, and 4 to the consolidated financial statements, the revenue for the Construction segment for the year ended December 31, 2021 was $2,602 million, a portion of which related to multi-year fixed price contracts inclusive of unconsolidated joint venture projects.

Revenue in the Construction segment is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., cost to cost) method.

Under the cost to cost method, costs incurred to-date are generally the best depiction of transfer of control.

The accuracy of the Company’s revenue and profit recognition in a given period depends on the accuracy of management’s estimates of the forecasted revenue and costs to complete each project.

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

Cost estimates for all significant projects use a detailed bottom up approach in which there are a number of factors that can contribute to changes in estimates of contract cost and profitability.

The most significant of these include:

changes in costs of labor and/or materials;

subcontractor costs, availability and/or performance issues;

extended overhead and other costs due to owner, weather and other delays;

changes in productivity expectations;

changes from original design on design-build projects;

the ability to fully and promptly recover on affirmative claims and back charges for additional contract costs;

a change in the availability and proximity of equipment and materials;

complexity in original design;

length of time to complete the project;

the availability and skill level of workers in the geographic location of the project;

site conditions that differ from those assumed in the original bid;

costs associated with scope changes;

and the customer’s ability to properly administer the contract.

Provisions for losses are recognized at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.

For the year ended December 31, 2020, revisions in estimates, which had an impact of $5 million or more on gross profit on the individual project, resulted in a decrease to project profitability of $143.4 million, of which the vast majority related to multi-year fixed price contracts.

The estimates of transaction price and costs to complete can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. 

When the Company experiences significant changes in estimates, management undergoes a process that includes reviewing the nature of the changes to ensure that no material amounts should have been recorded in a prior period rather than as a revision in estimate for the current period. Management uses the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change.

The principal considerations for our determination that performing procedures relating to estimates of the revenue and costs to complete for multi-year fixed price contracts in the Transportation, Water and Specialty segments, including revisions in estimates, is a critical audit matter are (i) the significant judgment by management in forecasting project revenue and costs to complete;

(ii) as described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting”

section, material weaknesses were identified related to this matter;

and (iii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the estimates of the forecasted revenue and costs to complete, including the assessment of management’s judgment related to the assumptions of changes in costs of labor and/or materials, subcontractor costs, availability and/or performance issues, the ability to fully and promptly recover on affirmative claims and back charges for additional contract costs, and 

management’s determination that revisions in estimates were accounted for in their entirety in the period of change. 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, evaluating and testing management’s process for determining the estimate of forecasted revenue and costs to complete for a sample of projects, which included evaluating the reasonableness of significant assumptions, changes in costs of labor and/or materials, subcontractor costs, availability and/or performance issues, the ability to fully and promptly recover on affirmative claims and back charges for additional contract costs and determining that revisions in estimates were accounted for in the correct period.

Evaluating the reasonableness of significant assumptions used involved assessing management’s ability to reasonably estimate the forecasted revenue and costs to complete by (i) evaluating management’s methodologies;

(ii) assessing the consistency of management’s approach over the life of the contract;

and (iii) evaluating the timely identification of circumstances that may warrant a modification to estimated forecasted revenue and costs to complete.  

Interim Goodwill Impairment Assessments –

Water and Mineral Services Group Water and Water and Mineral Services Group Materials Reporting Units

As described in Notes 1 and 12 to the consolidated financial statements, the Company’s consolidated goodwill balance was $117 million as of December 31, 2020, for which a portion relates to the Water and Mineral Services Group (“WMS”) Water and WMS Materials reporting units.

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

Potential impairment is identified by comparing the estimated fair value of a reporting unit to its net book value, including goodwill.

Fair value is estimated using discounted cash flow and market multiple methods.

Judgments inherent in these methods include the amount and timing of expected future cash flows, the determination of the discount rates, revenue and margin growth rates, and benchmark companies.

Management performed an interim impairment test as of March 31, 2020 on the WMS Materials reporting unit, due to an adverse change in the business climate, which resulted in a $14.8 million impairment charge.

Management performed a second interim impairment test as of September 30, 2020 on the WMS Water and WMS Materials reporting units, due to continued impact from an adverse change in the business climate, which resulted in impairment charges of $117.9 million and $14.4 million associated with the WMS Water and WMS Materials reporting units, respectively.

The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the WMS Water and WMS Materials reporting units is a critical audit matter are (i) the significant judgment by management when estimating the fair value of the reporting units;

(ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the discount rates, revenue and margin growth rates, and benchmark companies;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

For the year ended December 31, 2021, revisions in estimates, which had an impact of $5 million or more on gross profit on the individual project, resulted in a net decrease to project profitability of $71 million.

When the Company experiences significant revisions in estimates, management undergoes a process that includes reviewing the nature of the changes to ensure that no material amounts should have been recorded in a prior period rather than as a revision in estimate for the current period.

Management generally uses the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation.

Under this method, revisions in estimates are accounted for in their entirety in the period of change.

The principal considerations for our determination that performing procedures relating to estimates of the forecasted revenue and costs to complete for multi-year fixed price contracts in the Construction segment, and revisions in those estimates, is a critical audit matter are (i) the significant judgment by management in forecasting project revenue and costs to complete;

and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the estimates of forecasted revenue and costs to complete for multi-year fixed price contracts in the Construction segment, and revisions in those estimates.

As disclosed by management, a material weakness previously existed during the year related to this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s interim goodwill impairment assessment, including controls over the valuation of the Company’s WMS Water and WMS Materials reporting units.

These procedures also included, among others, (i) testing management’s process for estimating the fair value of the reporting units;

(ii) evaluating the appropriateness of the discounted cash flow and market multiple methods;

(iii) testing the completeness and accuracy of the underlying data used in the models for both valuation approaches;

and (iv) evaluating the significant assumptions used by management related to the discount rates, revenue and margin growth rates, and benchmark companies.

Evaluating management’s assumptions related to the discount rates, revenue and margin growth rates, and benchmark companies involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units;

(ii) the consistency with external market data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow and market multiple methods and the discount rates significant assumption.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over estimates of forecasted revenue and costs to complete for multi-year fixed price contracts in the Construction segment, and revisions in those estimates.

These procedures also included, among others, for a sample of contracts, evaluating and testing management’s process for determining the estimates of forecasted revenue and costs to complete, which included (i) assessing management’s ability to reasonably estimate the forecasted revenue and costs to complete by evaluating management’s methodologies and assessing the consistency of management’s approach over the life of the contract, and (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated forecasted revenue and costs to complete.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

March 30, 2021

Houston, Texas

February 25, 2022

We have served as the Company’s auditor since 1982.

2 unchanged sentences

(dollars in thousands, except share and per share data)

December 31,  

Current assets

2 unchanged sentences

$ 425,292  

Short-term marketable securities

27,799  

Receivables, net ($ 49,534 and $ 56,147 related to CCJVs)

12 unchanged sentences

37,767  

Current assets held-for-sale

392,641  

171,263  

Total current assets

5 unchanged sentences

Long-term marketable securities

15,600  

Investments in affiliates

12 unchanged sentences

68,847  

Noncurrent assets held-for-sale

252,104  

$ 2,494,927  

$ 2,379,996  

LIABILITIES AND EQUITY

12 unchanged sentences

381,747  

Current liabilities held-for-sale

83,408  

68,959  

Total current liabilities

11 unchanged sentences

62,420  

Commitments and contingencies (Note 20)

Long-term liabilities held-for-sale

10,350  

Commitments and contingencies (see Note 20)

Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding

1 unchanged sentence

issued and outstanding:

45,668,541 shares as of December 31, 2020, 45,503,805 shares as of December 31, 2019

45,840,260 shares as of December 31, 2021 and 45,668,541 shares as of December 31, 2020

Additional paid-in capital

22 unchanged sentences

Years Ended December 31,

Transportation

$ 2,017,989  

$ 1,892,149  

$ 1,946,750  

440,317  

468,730  

345,861  

723,391  

727,537  

625,666  

380,762  

357,190  

368,754  

Total revenue

3,562,459  

3,445,606  

3,287,031  

Cost of revenue

Transportation

1,884,241  

1,837,148  

1,809,664  

386,076  

438,964  

286,727  

631,211  

640,808  

535,731  

316,143  

307,008  

320,069  

Total cost of revenue

3,217,671  

3,223,928  

2,952,191  

344,788  

221,678  

334,840  

Selling, general and administrative expenses

353,320  

307,981  

272,776  

Acquisition and integration expenses

15,299  

61,520  

Non-cash impairment charges (see Notes 10 and 12)

156,690  

Gain on sales of property and equipment

( 6,930 )  

( 18,703 )  

Operating (loss) income

( 158,345 )  

( 82,899 )  

Other expense (income)

Other costs (see Note 1)

Gain on sales of property and equipment, net (see Note 11)

Operating income (loss)

Other (income) expense

Interest income

( 3,096 )  

( 7,433 )  

Interest expense

24,200  

18,374  

14,571  

Equity in income of affiliates, net

( 8,783 )  

( 11,454 )  

Other income, net

( 4,203 )  

( 5,308 )  

Total other expense (income)

( 5,821 )  

(Loss) income before benefit from income taxes

( 166,463 )  

( 77,078 )  

Benefit from income taxes

( 282 )  

( 20,376 )  

Net (loss) income

( 166,181 )  

( 56,702 )  

11,536  

Amount attributable to non-controlling interests

21,064  

( 3,489 )  

Net (loss) income attributable to Granite Construction Incorporated

$ ( 145,117 )  

$ ( 60,191 )  

Net (loss) income per share attributable to common shareholders (See Note 18)

$ ( 3.18 )  

$ ( 1.29 )  

$ 0.01  

$ ( 3.18 )  

$ ( 1.29 )  

$ 0.01  

Weighted average shares of common stock

45,614  

46,559  

43,564  

45,614  

46,559  

44,025  

Total other (income) expense, net

Income (loss) from continuing operations before provision for (benefit from) income taxes

Provision for (benefit from) income taxes on continuing operations

Net income (loss) from continuing operations

Net income (loss) from discontinued operations

Net income (loss)

Amount attributable to non-controlling interests from continuing operations

Net income (loss) attributable to Granite Construction Incorporated from continuing operations

Net income (loss) attributable to Granite Construction Incorporated from discontinued operations

Net income (loss) attributable to Granite Construction Incorporated

Net income (loss) per share attributable to common shareholders (see Note 18):

Basic continuing operations per share

Basic discontinued operations per share

Basic earnings per share

Diluted continuing operations per share

Diluted discontinued operations per share

Diluted earnings per share

Weighted average shares outstanding:

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

GRANITE CONSTRUCTION INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Years Ended December 31,  

Net (loss) income

$ ( 166,181 )  

$ ( 56,702 )  

$ 11,536  

Other comprehensive loss, net of tax:

Net unrealized loss on derivatives

$ ( 4,155 )  

$ ( 2,963 )  

reclassification for net losses (gains) included in interest expense

( 323 )  

$ ( 2,339 )  

$ ( 3,286 )  

Years Ended December 31,

Net income (loss)

Other comprehensive income (loss), net of tax:

Net unrealized gain (loss) on derivatives

reclassification for net (gains) losses included in interest expense

Foreign currency translation adjustments, net

( 51 )  

Other comprehensive loss

$ ( 2,390 )  

$ ( 1,896 )  

Comprehensive (loss) income

$ ( 168,571 )  

$ ( 58,598 )  

$ 10,153  

Non-controlling interests in comprehensive income (loss)

21,064  

( 3,489 )  

Comprehensive loss attributable to Granite Construction Incorporated

$ ( 147,507 )  

$ ( 62,087 )  

Other comprehensive income (loss)

Comprehensive income (loss)

Non-controlling interests in comprehensive income

Comprehensive income (loss) attributable to Granite Construction Incorporated

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

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(in thousands, except share data)

Comprehensive

(Loss) Income

Total Granite

Shareholders ’

Non-controlling

Outstanding Shares

Additional Paid-In Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Total Granite Shareholders’

Non-controlling Interests

Balances at December 31, 2018

6 unchanged sentences

$ 1,289,354  

Net income (loss)

( 60,191 )  

Other comprehensive loss

1 unchanged sentence

( 1,896 )  

Restricted stock units (“RSU”s) vested

262,859  

Amortized RSUs

Stock-based compensation expense

10,213  

9 unchanged sentences

( 32,821 )  

( 32,834 )  

Dividends on common stock ($ 0.52 per share)

4 unchanged sentences

( 539 )  

Issuance of common stock for Layne acquisition

5,624,021  

321,019  

321,075  

321,123  

Issuance of common stock for 8.0% Convertible Notes (See Note 14)

1,202,134  

53,011  

53,023  

Premium on 8.0% Convertible Notes (See Note 14)

Sale of common stock warrant, net

10,444  

13 unchanged sentences

1,178,416  

Net (loss) income

( 145,117 )  

Other comprehensive loss

( 21,064 )  

( 1,896 )  

262,859  

Amortized RSUs

Other comprehensive loss

( 2,390 )  

1 unchanged sentence

191,171  

Stock-based compensation expense

Common stock purchased for employee tax withholding for vested RSUs

2 unchanged sentences

( 885 )  

Shares repurchased and retired

( 1,360,000 )  

( 13 )  

( 32,821 )  

( 32,834 )  

Dividends on common stock ($ 0.52 per share)

4 unchanged sentences

( 366 )  

Sale of common stock warrant, net

10,444  

Transactions with non-controlling interests, net

1 unchanged sentence

( 301 )  

( 204 )  

Balances at December 31, 2020

6 unchanged sentences

991,610  

( 145,117 )  

Net income (loss)

10,096  

Other comprehensive loss

10,096  

( 7,682 )  

Other comprehensive income

235,234  

Amortized RSUs

Stock-based compensation expense

Common stock purchased for employee tax withholding for vested RSUs

5 unchanged sentences

( 23,826 )  

Effect of adopting ASC Topic 326

( 366 )  

Transactions with non-controlling interests, net

1 unchanged sentence

19,617  

( 274 )  

Balances at December 31, 2021

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Operating activities

Net (loss) income

$ ( 166,181 )  

Net income (loss)

$ 2,414  

$ ( 166,181 )  

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

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

Depreciation, depletion and amortization

2 unchanged sentences

121,993  

Amortization related to the 2.75% Convertible Notes (See Note 14)  

Gain on sales of property and equipment, net

Amortization related to the 2.75 % Convertible Notes (see Note 14)

Gain on sales of property and equipment, net (see Note 11)

( 66,439 )  

2 unchanged sentences

16,600  

12,110  

Stock-based compensation

10,213  

14,784  

Equity in net loss from unconsolidated joint ventures

1 unchanged sentence

120,632  

44,689  

Net income from affiliates

1 unchanged sentence

( 8,783 )  

Non-cash impairment charges

Non-cash impairment charges (see Note 2)

156,690  

Other non-cash adjustments

Changes in assets and liabilities, net of the effect of an acquisition in 2019 and 2018:

Changes in assets and liabilities:

( 11,317 )  

2 unchanged sentences

123,670  

11,384  

Contributions to unconsolidated construction joint ventures

5 unchanged sentences

19,064  

Other assets, net

Deposit for legal settlement (see Note 20)

( 129,000 )  

Other assets, net

( 11,969 )  

3 unchanged sentences

140,027  

Accrued expenses and other current liabilities, net

Accrual for legal settlement (see Note 20)

129,000  

Accrued expenses and other liabilities, net

( 882 )  

49,805  

Net cash provided by operating activities

5 unchanged sentences

( 10,000 )  

Maturities of marketable securities

( 9,996 )  

Maturities of marketable securities

10,000  

5 unchanged sentences

( 93,253 )  

Proceeds from sales of property and equipment

Proceeds from sales of property and equipment (see Note 11)

94,802  

2 unchanged sentences

Cash paid to purchase business

( 6,227 )  

Proceeds from the sale of an investment and business, respectively  

Proceeds from the sale of a business

Issuance of notes receivable, net of collection

( 11,470 )  

7 unchanged sentences

105,574  

203,250  

Proceeds from issuance of 2.75% Convertible Notes, net

Proceeds from issuance of 2.75% Convertible Notes

230,000  

Proceeds from issuance of warrants, net

Proceeds from issuance of warrants

11,500  

Purchase of Hedge Option, net

( 37,375 )  

Debt principal repayments

9 unchanged sentences

20,126  

11,875  

Distributions to non-controlling partners

2 unchanged sentences

Debt issuance costs

( 6,507 )  

Other financing activities, net

5 unchanged sentences

169,540  

44,918  

Cash, cash equivalents and $ 1,512 , $ 5,835 and $ 5,825 in restricted cash at beginning of period

6 unchanged sentences

$ 268,108  

Cash, cash equivalents and $ 1,512 , $ 1,512 and $ 5,835 in restricted cash included in current assets held-for-sale at end of period

( 18,008 )  

( 12,356 )  

Cash and cash equivalents of continuing operations at end of period

$ 395,647  

$ 425,292  

$ 252,345  

Supplementary Information

2 unchanged sentences

$ 10,000  

$ 25,360  

Cash paid for operating lease liabilities

1 unchanged sentence

$ 21,654  

$ 18,660  

Cash paid during the period for:

4 unchanged sentences

$ 2,805  

$ 11,898  

Other non-cash operating activities:

6 unchanged sentences

$ 8,299  

Accrued cash dividends

Common stock issued in acquisition

$ 4,449  

Common stock issued in conversion of 8.0% Convertible Notes

$ 8,596  

Premium on 8.0% Convertible Notes

Dividends declared but not paid

$ 5,959  

$ 5,937  

$ 5,915  

Contributions from non-controlling partners

$ 9,006  

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

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Description of Business :

Granite Construction Incorporated is one of the largest diversified infrastructure companies in the United States, engaged in heavy-civil infrastructure projects including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water-related facilities, well drilling, utilities, tunnels, dams and other infrastructure-related projects, site preparation, mining services, and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as construction management professional services.

We have permanent offices located in Alaska, Arizona, California, Canada, Colorado, Florida, Guam, Illinois, Mexico, Nevada, Texas, Utah and Washington.

Granite Construction Incorporated is one of the largest diversified infrastructure companies in the United States, engaged in infrastructure projects including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels and other infrastructure-related projects, site preparation, mining services, and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as construction management professional services.

Our continuing operations have offices located in Alaska, Arizona, California, Colorado, Florida, Guam, Illinois, Nevada, Texas, Utah and Washington.

Unless otherwise indicated, the terms “we,”

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refer to Granite Construction Incorporated and its wholly-owned and consolidated subsidiaries.

During the fourth quarter of 2021, the Company updated its strategy to focus on its core business capabilities, to leverage its current geographic based home markets in the civil construction and materials business and to target expansion based upon that combined strategy.

Through our strategic analysis, it was determined that the end markets and geographic structure of the former Water and Mineral Services operating group (“WMS”) did not align with the Company’s new strategy and the Board of Directors approved a plan to sell these businesses within the next twelve months.

As a result of these actions, we classified WMS as held-for-sale in the consolidated balance sheets and as discontinued operations in the consolidated statements of operations as of and for the year ended December 31, 2021 and applied these changes retrospectively for all other periods presented.

See Note 2 for WMS financial information, which has been excluded from all other disclosures unless explicitly stated otherwise.

Also related to our new strategic plan, during the fourth quarter of 2021, we reorganized our operating groups to improve operating efficiencies and better position the Company for long-term growth.

In alphabetical order, our continuing business operating groups are defined as follows:

Central (formerly Heavy Civil, Federal and Midwest operating groups), which primarily includes offices in Arizona (formerly in the Northwest operating group), Colorado, Florida, Illinois, Texas and Guam;

Mountain (formerly Northwest), which primarily includes offices in Alaska, Nevada, Utah and Washington.

In addition, we revised the financial information our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews to allocate resources and assess our performance. This change is consistent with our new strategic plan and better aligns with our continuing civil construction and materials business.

Our CODM now regularly reviews financial information regarding our two primary product lines, construction and materials as well as our operating groups.

We identified our CODM as our Chief Executive Officer and our Chief Operating Officer.

As a result of these changes, in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting , our reportable segments, which are the same as our operating segments, were changed to:

Construction and Materials.

The Construction segment replaces the previous Transportation, Water and Specialty reportable segments, with the composition of our Materials segment for our continuing operations remaining unchanged.

These changes have been applied retrospectively for all periods presented.

See Note 21 for more information about our reportable segments.

Principles of Consolidation :

3 unchanged sentences

Generally, each construction joint venture is formed to accomplish a specific project and is jointly controlled by the joint venture partners.

The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities, that may result from the performance of the contracts are limited to our stated percentage interest in the project.

The joint venture agreements typically provide that our interests in any profits and assets and our respective share in any losses and liabilities that may result from the performance of the contracts are limited to our stated percentage interest in the project.

Under our joint venture contractual arrangements, we provide capital to these joint ventures in return for an ownership interest.

1 unchanged sentence

The operational risks of each construction joint venture are passed along to the joint venture members.

As we absorb our share of these risks, our investment in each venture is exposed to potential gains and losses. We consolidate these joint ventures where we have determined that through our participation we have a variable interest and are the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) ASC Topic 810, Consolidation , and related standards. The factors we use to determine the primary beneficiary of a variable interest entity (“VIE”) may include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners.

As we absorb our share of these risks, our investment in each venture is exposed to potential gains and losses. We consolidate joint ventures if we determine that through our participation we have a variable interest and are the primary beneficiary as defined by FASB ASC Topic 810, Consolidation , and related standards. The factors we use to determine the primary beneficiary of a variable interest entity (“VIE”) may include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners.

Although not applicable for any of the years presented, if we determine that the power to direct the significant activities is shared equally by two or more joint venture parties, then there is no primary beneficiary and no party consolidates the VIE.

Where we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations.

We record the corresponding investment balance in equity in construction joint ventures in the consolidated balance sheets except when a project is in loss position, the investment balance is recorded as a deficit in unconsolidated construction joint ventures and is included in accrued expenses and other current liabilities in the consolidated balance sheets. Our investment in unconsolidated construction joint ventures could extend beyond one year and is within the normal operating cycle of the associated construction projects.

We account for non-construction unconsolidated joint ventures under the equity method of accounting in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures, and include our share of the operations in equity in income from affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets.

We also participate in various “line item”

If we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations.

We record the corresponding investment balance in equity in construction joint ventures in the consolidated balance sheets except when a project is in a loss position, the investment balance is recorded as a deficit in unconsolidated construction joint ventures and is included in accrued expenses and other current liabilities in the consolidated balance sheets. Our investment in unconsolidated construction joint ventures could extend beyond one year and is within the normal operating cycle of the associated construction projects.

We account for non-construction unconsolidated joint ventures under the equity method of accounting in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures, and include our share of the operations in equity in income of affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets.

We also participate in “line item”

joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work.

The revenue for each line item joint venture partner's discrete items of work is defined in the contract with the project owner and each joint venture partner bears the profitability risk associated only with its own work.

The revenue for each line item joint venture partners’

discrete items of work is defined in the contract with the project owner and each joint venture partner bears the profitability risk associated only with its own work.

There is not a single set of books and records for a line item joint venture.

Each partner accounts for its items of work individually as it would for any self-performed contract.

We account for our portion of these contracts as revenues and cost of revenue in the consolidated statements of operations and in relevant balances in the consolidated balance sheets.

We account for our portion of these contracts as revenue and cost of revenue in the consolidated statements of operations and in relevant balances in the consolidated balance sheets.

Use of Estimates in the Preparation of Financial Statements :

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Revenue Recognition:

Our revenue is primarily derived from construction contracts that can span several quarters or years in our Transportation, Water and Specialty segments and from sales of construction related materials in our Materials segment. We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, 

Our revenue is primarily derived from construction contracts that can span several quarters or years in our Construction segment and from sales of construction related materials in our Materials segment. We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, 

and subsequently issued additional related Accounting Standards Updates (“ASU”s) (“Topic 606”

), which we adopted on January 1, 2018 using a modified retrospective transition approach.

Topic 606 provides for a five -step model for recognizing revenue from contracts with customers as follows:

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Our customary business practices are for the delivery of a separately identifiable good at a point in time which is typically when delivery to the customer occurs.

Contracts in our Transportation, Water and Specialty segments may contain multiple distinct promises or multiple contracts within a master agreement (e.g.

contracts that cross multiple locations/geographies and task orders), which we review at contract inception to determine if they represent multiple performance obligations or multiple separate contracts.

Contracts in our Construction segment 

may contain multiple distinct promises or multiple contracts within a master agreement (e.g., contracts that cross multiple locations/geographies and task orders), which we review at contract inception to determine if they represent multiple performance obligations or multiple separate contracts.

This review consists of determining if promises or groups of promises are distinct within the context of the contract, including whether contracts are physically contiguous, contain task orders, purchase or sales orders, termination clauses and/or elements not related to design and/or build.

The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods and services to the customer.

The contractual consideration from customers of our Transportation, Water and Specialty segments may include both fixed amounts and variable amounts (e.g.

bonuses/incentives or penalties/liquidated damages) to the extent that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved (i.e., probable and estimable).

The contractual consideration from customers of our Construction segment 

may include both fixed amounts and variable amounts (e.g., bonuses/incentives or penalties/liquidated damages) to the extent that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved (i.e., probable and estimable).

When a contract has a single performance obligation, the entire transaction price is attributed to that performance obligation.

When a contract has more than one performance obligation, the transaction price is allocated to each performance obligation based on estimated relative standalone selling prices of the goods or services at the inception of the contract, which typically is determined using cost plus an appropriate margin.

Subsequent to the inception of a contract in our Transportation, Water and Specialty segments, the transaction price could change for various reasons, including executed or unapproved change orders, and unresolved contract modifications and/or affirmative claims.

Subsequent to the inception of a contract in our Construction segment, the transaction price could change for various reasons, including executed or unapproved change orders, and unresolved contract modifications and/or affirmative claims.

Changes that are accounted for as an adjustment to existing performance obligations are allocated on the same basis at contract inception.

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Recognizing affirmative claims and back charge recoveries requires significant judgments of certain factors including, but not limited to, dispute resolution developments and outcomes, anticipated negotiation results, and the cost of resolving such matters.

Certain construction contracts in our Transportation, Water and Specialty segments include retention provisions to provide assurance to our customers that we will perform in accordance with the contract terms and are not considered a financing benefit.

The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the customer.

We have determined there are no significant financing components in our contracts during the years ended December 31,  

2020  and 

Typically, performance obligations related to contracts in our Transportation, Water and Specialty segments are satisfied over time because our performance typically creates or enhances an asset that the customer controls as the asset is created or enhanced.

Generally, performance obligations related to contracts in our Construction segment are satisfied over time because our performance typically creates or enhances an asset that the customer controls as the asset is created or enhanced.

We recognize revenue as performance obligations are satisfied and control of the promised good and/or service is transferred to the customer.

Revenue in our Transportation, Water and Specialty segments is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., “cost to cost”) method.

Revenue in our Construction segment is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., “cost to cost”) method.

Under the cost to cost method, costs incurred to-date are generally the best depiction of transfer of control.

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

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

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

The most significant of these include:

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As of December 31,  

2020 and 2019 , unearned revenue was $ 2.9 billion and $ 3.7 billion, respectively.

Approximately 

$2.1  billion of the December 

31, 2020  unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

2021 and 2020 , unearned revenue from continuing operations was $ 2.6 billion and $ 2.8 billion, respectively.

Approximately $ 2.0  billion of the December 

31, 2021  unearned revenue from continuing operations is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

Substantially all of the contracts in our unearned revenue may be canceled or modified at the election of the customer;

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Many projects are added to unearned revenue and completed within the same fiscal quarter or year and, therefore, may not be reflected in our beginning or ending unearned revenue.

Costs to mobilize equipment and labor to a job site prior to substantive work beginning (“mobilization costs”) are capitalized as incurred and amortized over the expected duration of the contract.

December 31,  

2020  and 

2019 , we had no capitalized mobilization costs.

Balance Sheet Classifications:

Prepaid expenses and amounts receivable and payable under construction contracts (principally retentions) that may exist over the duration of the contract and could extend beyond one year are included in current assets and liabilities.

A one -year time period is used as the basis for classifying all other current assets and liabilities.

Cash, Cash Equivalents and Restricted Cash :

A one -year time period is used as the basis for classifying all other current assets and liabilities. Included in other current assets on the consolidated balance sheets as of December 31, 2021 is the $ 129.0 million deposit for legal settlement discussed in Note 20.

Cash and Cash Equivalents :

Cash equivalents are securities having maturities of three months or less from the date of purchase.

Our access to joint venture cash may be limited by the provisions of the joint venture agreements.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Restricted cash consists of escrow funds and judicial deposits associated with tax related legal proceedings in Latin America.

The total balance as of December 31, 2020 

is included in other noncurrent assets in the consolidated balance sheets.

The table below presents changes in cash, cash equivalents and restricted cash on the consolidated statements of cash flows and a reconciliation to the amounts reported in the consolidated balance sheets (in thousands).

Year ended December 31,

Cash, cash equivalents and restricted cash, beginning of period

$ 268,108  

$ 278,629  

$ 233,711  

End of the period

Cash and cash equivalents

436,136  

262,273  

272,804  

Restricted cash

Total cash, cash equivalents and restricted cash, end of period

437,648  

268,108  

278,629  

Net increase (decrease) in cash, cash equivalents and restricted cash

$ 169,540  

$ ( 10,521 )  

$ 44,918  

Contract Assets:

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Based on our historical experience, we generally consider the collection risk related to billable amounts to be low.

When events or conditions indicate that it is probable that the amounts outstanding become unbillable, the transaction price and associated contract asset is reduced.

However, when events or conditions indicate that it is probable that the amounts become unbillable, the transaction price and associated contract asset is reduced. Certain contracts in our Construction segment include retention provisions to provide assurance to our customers that we will perform in accordance with the contract terms and are not considered a financing benefit under ASC Topic 606.

The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the customer.

Marketable Securities :

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We formally document our hedge relationships at inception, including identification of the hedging instruments and the hedged items, our risk management objectives and strategies for undertaking the hedge transaction, and the initial quantitative assessment of the hedging instrument’s effectiveness in offsetting changes in the fair value of the hedged items.

The effective portion of the gain or loss on cash flow hedges is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the consolidated statements of operations when the periodic hedged cash flows are settled. Adjustments to fair value on derivative instruments that do not qualify for hedge accounting treatment are reported through other income, net in the consolidated statements of operations.

We do not enter into derivative instruments for speculative or trading purposes.

The derivative transactions related to the 2.75 % Convertible Notes (as defined in Note 14 ) were recorded to equity on our consolidated balance sheets based on the cash proceeds and will not be remeasured as long as they continue to meet the conditions for equity classification.

Fair Value of Financial Assets and Liabilities:

 We measure and disclose certain financial assets and liabilities at fair value. ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The effective portion of the gain or loss on cash flow hedges is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statements of operations when the periodic hedged cash flows are settled. Adjustments to fair value on derivative instruments that are 

not  part of a designated hedging relationship are reported through the consolidated statements of operations. We do 

not  enter into derivative instruments for speculative or trading purposes.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Fair Value of Financial Assets and Liabilities: 

We measure and disclose certain financial assets and liabilities at fair value. ASC Topic 820,  

Fair Value Measurements and Disclosures,  defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

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We report separately each class of assets and liabilities measured at fair value on a recurring basis and include assets and liabilities that are disclosed but not recorded at fair value in the fair value hierarchy.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Allowance for  

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We measure expected credit losses of financial assets based on historical loss and other information available to management using a loss rate method applied to asset groups with categorically similar risk characteristics.

These expected credit losses are recorded to an allowance for credit losses valuation account that is deducted from receivables and contract assets to present the net amount expected to be collected on the financial asset on the consolidated balance sheet.

Concentrations of Credit Risk:

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We maintain our cash and cash equivalents and our marketable securities with several financial institutions.

We invest with high credit quality financial institutions and, by policy, limit the amount of credit exposure to any one financial institution.

None of our customers, including both prime and subcontractor arrangements, had revenue that individually exceeded 10% of total revenue during the years ended December 31,  

2020  and 

We invest with high credit quality financial institutions and, by policy, limit the amount of credit exposure to any one financial institution. During the years ended December 31, 2021, 2020 and 2019,  our largest volume customer, including both prime and subcontractor arrangements, was the California Department of Transportation (“Caltrans”).

Revenue recognized from contracts with Caltrans during the years ended December 31, 2021, 2020 and 2019 represented $ 337.1  million ( 11.2 % of total revenue from continuing operations), $ 316.9  million ( 10.1 % of total revenue from continuing operations) and $ 226.2  million ( 7.8 % of total revenue from continuing operations), respectively, which was primarily in the Construction segment.

Other than Caltrans, none of our customers, including both prime and subcontractor arrangements, had revenue that individually exceeded 10% of total revenue during the years ended 

December 31, 2021 and 

2020 and none of our customers had revenue that individually exceeded 10% of total revenue during the year ended 

December 31,  

The majority of our receivables are from customers concentrated in the United States.

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2021  and 

2019 , no contract retention receivable individually exceeded 15% of total contract assets at any of the presented dates.

The majority of the contract retention balance is expected to be collected within one year.

2020 , contract retention receivable from Virgin Trains USA Florida LLC represented 17.2 % and 13.2 %, respectively, of total contract assets.

No other contract retention receivable individually exceeded 10% at any of the presented dates.

The majority of the December 31, 2021 contract retention balance disclosed in Note 6 is expected to be collected within one year.

We perform ongoing credit evaluations of our customers and generally do not require collateral, although the law provides us the ability to file mechanics’

liens on real property improved for private customers in the event of non-payment by such customers.

Foreign Currency Transactions and Translation:

We have operations in Mexico and Canada which involve exposure to possible volatile movements in foreign currency exchange rates.

We account for foreign currency exchange transactions and translation in accordance with ASC Topic 830, Foreign Currency Matters.

In Mexico, most of our customer contracts and a significant portion of our costs are denominated in U.S.

therefore, the functional currency is U.S.

In Canada, the functional currency is the local currency.

Foreign currency transactions are remeasured into the functional currency with gains and losses included in other income, net in the consolidated statements of operations.

The impact from foreign currency transactions was immaterial for both 2020  and 2019 .

Assets and liabilities in functional currency are translated into U.S.

dollars at exchange rates prevailing at the balance sheet date.

Revenues and expenses are translated into U.S.

dollars at average foreign currency exchange rates prevailing during the reporting periods.

The translation adjustments from functional currency to U.S.

dollars are reported in accumulated other comprehensive loss on the consolidated balance sheets.

Inventories consist primarily of quarry products, contract-specific materials and, specifically related to our Water and Mineral Services operating group, water well drilling materials and sewer remediation materials that are located in the U.S.

as well as mineral extraction and drilling supplies located in the U.S.

Cost of inventories are valued at the lower of average cost or net realizable value .

 Inventories relating to our continuing operations consist primarily of quarry products that are valued at the lower of average cost or net realizable value .

We reserve quarry products based on estimated quantities of materials on hand in excess of approximately one year of demand.

December 31,  

2020  and 

2019 , inventory included $ 15.9  million and $ 17.7  million of supplies related to the Water and Mineral Services operating group.

Investments in Affiliates :

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We account for our share of the operating results of the equity method investments in equity in income from affiliates, net in the consolidated statements of operations and as a single line item in the consolidated balance sheets as investments in affiliates.

Our investments in affiliates include foreign entities, real estate entities and an asphalt terminal entity.

Our investments in affiliates include real estate entities and an asphalt terminal entity.

These investments are evaluated for impairment using the other-than-temporary impairment model, which requires an impairment charge to be recognized if our investment’s carrying amount exceeds its fair value, and the decline in fair value is deemed to be other than temporary.

Recoverability is measured by comparison of net book values to future undiscounted cash flows the investments are expected to generate.

Recoverability is measured by comparison of carrying amounts to future undiscounted cash flows the investments are expected to generate.

Events or changes in circumstances, which would cause us to review undiscounted future cash flows include, but are not limited to:

significant adverse changes in legal factors or the business climate;

significant adverse changes in legal factors or the business climate and

current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated with the use of the asset.

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significant changes to the development or business plans of a project.

Future undiscounted cash flows and fair value assessments for our foreign entities and the asphalt terminal entity are estimated based on market conditions and the political climate.

Future undiscounted cash flows and fair value assessments for our real estate entities are estimated based on entitlement status, market conditions, and cost of construction, debt load, development schedules, status of joint venture partners and other factors applicable to the specific project.

Future undiscounted cash flows and fair value assessments for the asphalt terminal entity are estimated based on market conditions and the political climate.

Future undiscounted cash flows and fair value assessments for our real estate entities are estimated based on entitlement status, market conditions, cost of construction, debt load, development schedules, status of joint venture partners and other factors applicable to the specific project.

Fair value is estimated based on the expected future cash flows attributable to the asset or group of assets and on other assumptions that market participants would use in determining fair value, such as market discount rates, transaction prices for other comparable assets, and other market data.

Our estimates of cash flows may differ from actual cash flows due to, among other things, fluctuations in interest rates, decisions made by jurisdictional agencies, economic conditions, or changes to our business operations.

Property and Equipment :

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We frequently sell property and equipment that has reached the end of its useful life or no longer meets our needs, including depleted quarry property.

At the time that an asset or an asset group meets the held-for-sale criteria as defined by ASC Topic 360, Property, Plant, and Equipment, we write it down to fair value less cost to sell, if the fair value is below the carrying value.

At the time that an asset or an asset group meets the held-for-sale criteria as defined by ASC Topic 360, Property, Plant, and Equipment,  depreciation is discontinued and we write it down to fair value less cost to sell, if the fair value is below the carrying value.

Fair value is estimated by a variety of factors including, but not limited to, market comparative data, historical sales prices, broker quotes and third -party valuations.

If material, such property is separately disclosed in the consolidated balance sheet, otherwise it is held in property and equipment until sold.

The cost and accumulated depreciation or depletion of property sold or retired is removed from the consolidated balance sheet and the resulting gains or losses, if any, are reflected in operating income on the consolidated statement of operations for the period.

If material, such property is separately disclosed in the consolidated balance sheets, otherwise it is held in property and equipment until sold.

The cost and accumulated depreciation or depletion of property sold or retired is removed from the consolidated balance sheets and the resulting gains or losses, if any, are reflected in operating income on the consolidated statements of operations for the period.

In the case that we abandon an asset, an amount equal to the carrying amount of the asset, less salvage value, if any, will be recognized as expense in the period that the asset was abandoned.

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These costs consist primarily of software, hardware and consulting fees, as well as salaries and related costs.

Amounts capitalized are reported as a component of office furniture and equipment within property and equipment in the consolidated balance sheet.

Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which range from three to seven years.

Amounts capitalized are reported as a component of office furniture and equipment within property and equipment in the consolidated balance sheets.

Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which ranges from three to seven years.

During the years ended December 31,  

2020  and 

2018 , we capitalized $ 7.4 million, $ 1.2 million and $ 4.4 million, respectively, of internal-use software development and related hardware costs.

2019 , we capitalized $ 12.0  million, $ 7.4  million and $ 1.2  million, respectively, of internal-use software development and related hardware costs.

Long-lived Assets:

We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate the net book value of an asset group may not be recoverable.

Recoverability of these asset groups is measured by comparison of their net book values to the future undiscounted cash flows the asset groups are expected to generate.

If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by which the net book value of the asset group exceeds fair value.

We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable.

Recoverability of these asset groups is measured by comparison of their carrying amounts to the future undiscounted cash flows the asset groups are expected to generate.

If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by which the carrying amount of the asset group exceeds fair value.

We group construction and plant equipment assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets.

When an individual asset or group of assets is determined to no longer contribute to its vertically integrated construction and plant equipment asset group, it is assessed for impairment independently.

As of December 31, 

2020, amortizable intangible assets, which include customer relationships, developed technologies, permits, trademarks/trade name, backlog, favorable contracts and covenants not to compete, are being amortized over remaining terms from one to seventeen  years.

December 31,  

2020 , amortizable intangible liabilities, which include unfavorable contracts, are being amortized over remaining terms of one  year.

All intangible assets and liabilities are amortized on a straight-line basis except for backlog, favorable contracts and unfavorable contracts which will be amortized as the associated projects progress, and customer relationships which will be amortized on a double declining basis.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

December 

31, 2020  and 2019, we had eight reporting units in which goodwill was recorded as follows:

Midwest Group Transportation

Midwest Group Specialty

Northwest Group Transportation

Northwest Group Materials

California Group Transportation

Water and Mineral Services Group Water

Water and Mineral Services Group Specialty

Water and Mineral Services Group Materials

 As a result of the changes in our reportable segments and operating groups, we reassessed our reporting units and have determined our continuing operations have 

five reporting units in which goodwill was recorded as follows:

Central Group Construction

Central Group Materials

Mountain Group Construction

Mountain Group Materials

California Group Construction

We determined our discontinued operations have 

two reporting units in which goodwill was recorded as follows:

WMS Construction

WMS Materials

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

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

a significant adverse change in legal factors or in the business climate;

an adverse action or assessment by a regulator;

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;

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Based on a qualitative assessment, if we determine that the fair value of a reporting unit is more likely than not to be less than its carrying amount, the quantitative impairment test will be performed.

In performing the quantitative goodwill impairment tests, 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. Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows, revenue and margin growth rates, and appropriate benchmark companies. The cash flows used in our 

The estimated fair value is compared to the carrying amount of the reporting unit, including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.

If the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying amount over the fair value is recognized as a non-cash impairment charge.

Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows, revenue and margin growth rates, and appropriate benchmark companies. The cash flows used in our 

2021  discounted cash flow model were based on five -year financial forecasts developed internally by management adjusted for market participant-based assumptions.

Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units.

To assess for reasonableness we compare the estimated fair values of the reporting units to our current market capitalization.

The estimated fair value is compared to the net book value of the reporting unit, including goodwill.

If the fair value of the reporting unit exceeds its net book value, goodwill of the reporting unit is considered not impaired.

If the fair value of the reporting unit is less than its net book value, goodwill is impaired and the excess of the reporting unit’s net book value over the fair value is recognized as a non-cash impairment charge.

During 2020, we performed two interim tests both of which resulted in impairment charges (See Note 12 ).

For our 2020 annual goodwill impairment test, we conducted quantitative impairment tests for all of our reporting units and concluded that 

no  additional impairment charge was required.

Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units. To assess for reasonableness, we compare the estimated fair values of the reporting units to our current market capitalization.

For our 2021 annual goodwill impairment test, we conducted quantitative impairment tests based on the operating structure in place at November 1.

Impairment tests were conducted for the Midwest Group Specialty and WMS Water, Specialty and Materials reporting units and concluded that goodwill was not impaired since the estimated fair value for each of those reporting units exceeded their respective carrying amounts.

The assessment for the Midwest Group Specialty as well as WMS Water and Specialty reporting units indicated that their estimated fair values exceeded their carrying amounts (i.e., headroom) by over 30%.

The assessment for the WMS Materials reporting unit indicated that its estimated fair value exceeded its carrying amount by 10% and the recent purchase and sale agreement for Inliner (see Note 2 ), which includes 100% of the WMS Materials reporting unit, supports its carrying value.

We elected to perform a qualitative assessment of the Midwest Group Transportation, Northwest Group Transportation, Northwest Group Materials and California Group Transportation reporting units and we determined that it was more likely than not that the fair values were greater than the carrying amounts;

therefore, no quantitative goodwill impairment test was performed for these reporting units.

Factors we considered in our qualitative assessment were macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers and changes in the composition or carrying amount of the reporting unit’s net assets.

Due to the changes in our reporting structure and the resulting changes to reporting units, we conducted impairment tests immediately before and after the reorganization, which was effective December 1.

Since there were no significant changes to the reporting units from the time of the annual impairment test, we conducted qualitative assessments before the changes on the Midwest Group Specialty and the WMS Water, Specialty and Materials reporting units.

We determined that it was more likely than not that the fair values were greater than the carrying amounts;

therefore, no quantitative goodwill impairment test was performed for these reporting units.

The changes in our reporting structure had no impact on the Central Group Materials, Mountain Group Materials, California Group Construction or the WMS Materials reporting units and there were no significant changes to these reporting units from the time of the annual impairment test;

therefore, no further goodwill impairment assessment was performed on these reporting units after the changes.

We performed quantitative impairment tests after the changes on the reporting units that were affected by the changes in our reporting structure, which were the Central Group Construction, Mountain Group Construction and WMS Construction reporting units.

We calculated the estimated fair value of these reporting units consistent with the annual impairment assessment using the discounted cash flows and market multiple methods as well as the consideration to be paid for Inliner under the purchase and sale agreement, which includes a substantial portion of the WMS Construction reporting unit.

These tests indicated that the estimated fair values of the reporting units exceeded their carrying amounts with headroom in excess of 30%.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Right of use Assets ( “

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Leases , and subsequently issued additional related ASUs (“Topic 842”

), which we adopted during our quarter ending March 31, 2019 using a modified retrospective transition approach.

), which we adopted during our quarter ended 

March 31, 2019 using a modified retrospective transition approach.

At lease commencement, we measure and record a lease liability equal to the present value of the remaining lease payments, generally discounted using the borrowing rate on our secured debt as the implicit rate is not readily determinable on many of our leases.

We use a quarterly maturity discount rate if it is not materially different than the discount rates applied to each of the leases in the portfolio.

On the lease commencement date, the amount of the ROU assets consist of the following:

On the lease commencement date, the amount of the ROU assets consists of the following:

the amount of the initial measurement of the lease liability;

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Provisions for losses are recognized in the consolidated statements of operations at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Asset Retirement Obligations:

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Accrued Insurance Costs:

We carry insurance policies to cover various risks, primarily general liability, automobile liability, workers compensation and employee medical expenses, under which we are liable to reimburse the insurance company for a portion of each claim paid.

The amounts for which we are liable for general liability and workers compensation generally range from the first $ 0.5 million to $ 1.0 million per occurrence.

We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends modified, if necessary, by recent events.

Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position up to $ 1.0 million per occurrence for general liability and workers compensation or $ 0.3 million for medical insurance.

We carry insurance policies to cover various risks, including general liability, automobile liability, workers compensation and employee medical expenses under which we are liable to reimburse the insurance company for certain losses. 

The amounts for which we are liable range from the first $ 0.5 million to $ 1.5 million per occurrence. We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends, modified, if necessary, by recent events.

The establishment of accruals for estimated losses associated with our insurance policies are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, claim severity, frequency patterns and changing regulatory and legal environments.

Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position.

Surety Bonds :

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At December 31,  

2020 , approximately $ 2.7 billion of our contract backlog was bonded.

2021 , approximately $ 2.3  billion of our $ 4.0 billion Committed and Awarded Projects were bonded.

Performance bonds do not have stated expiration dates;

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We expense associated legal costs as they are incurred.

See Note 20  for additional information.

See Note 20 for additional information.

Stock-Based Compensation:

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Other Costs: 

Other costs included on the consolidated statements of operations primarily consisted of $ 66  million in net settlement charges incurred during 2021  as further described in Note 20 .

 Other costs also included $ 21.6  million and $ 35.6  million for the years ended 

December 31, 2021 and 2020, respectively, of non-recurring legal and accounting fees.

The majority of these non-recurring fees related to the lawsuits discussed in Note 20 and to the Audit Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group, which was completed in early 2021.

 The remaining other costs includes personnel costs incurred in connection with our operating group reorganization during 2021 and integration expenses incurred in 2020 and 2019  related to the Layne Christensen Company (“Layne”) acquisition that occurred in 2018.

Income Taxes :

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Computation of Earnings per Share :

Basic net (loss) income per share is computed using the weighted-average number of common shares outstanding during the period.

Diluted net (loss) income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

Dilutive potential common shares include common share equivalents under the 2012 Equity Incentive Plan using the if-converted method.

Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

Dilutive potential common shares include common share equivalents under the 2012 and 2021  Equity Incentive Plans using the if-converted method.

Dilutive potential common shares also include common share equivalents related to our 2.75% Convertible Notes assuming the share price of our common stock was in excess of $ 31.47 per share and common share equivalents relating to our warrants assuming the share price of our common stock was in excess of $ 53.44 , the exercise price of warrants.

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Third party offering costs are allocated to the liability and equity components based on allocation of proceeds to those components, and are recorded net of the associated balances on the consolidated balance sheets and are generally amortized to interest expense through the maturity date of the debt. Therefore, cash received from the issuance of the 2.75% Convertible Notes (as defined in Note 14 ) was separated into liability and equity components on the consolidated balance sheets at the time of issuance based on the fair value of a similar liability that does not have an associated convertible feature.

The difference between the principal amount and the liability component on the issuance date will be recorded to interest expense using an effective interest rate of 6.62 % over the expected life of the 2.75% Convertible Notes.

Debt discounts that will be recorded to the liability component through the maturity date of the debt.

Reclassifications:

 Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

The reclassification included $ 1.4  million during 

2019  of amortization related to the 2.75% Convertible Notes previously included within total depreciation, depletion and amortization on the statements of cash flows .

 The reclassification had no impact on previously reported consolidated operating income or net income, on the consolidated balance sheets or on the statements of cash flows.

The difference between the principal amount and the liability component on the issuance date has been recorded to interest expense using an effective interest rate of 6.62 % over the expected life of the 2.75% Convertible Notes.

Debt discounts are recorded to the liability component through the maturity date of the debt.

Recently Issued Accounting Pronouncements:

In August 2020, the FASB issued ASU 2020 - 06,  

Debt —

Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging —

In October 2021, the FASB issued ASU 2021 - 08, Business Combinations (Topic 805 ) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which amended the current business combination accounting guidance in ASC 805 to require entities to apply Topic 606 in recognizing and measuring contract assets and contract liabilities acquired in a business combination.

The ASU is effective commencing with our quarter ending March 31, 2022 with early adoption permitted.

We early adopted this guidance in 2021;

however, this ASU did not impact the periods included in these consolidated financial statements and would be applicable only if we had a business combination and if the acquired entity had contract assets or liabilities.

August 2020, 

the FASB issued ASU 

2020 - 06 ,  

Debt -  

Debt with Conversion and Other Options (Subtopic  

470 - 20 ) and Derivatives and Hedging -  

Contracts in Entity ’

s Own Equity (Subtopic 815 - 40 ):

s Own Equity (Subtopic  

Accounting for Convertible Instruments and Contracts in an Entity ’

s Own Equity,  which simplifies the accounting for convertible instruments resulting in accounting for convertible debt instruments as a single liability measured at its amortized cost.

This change will also reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was bifurcated according to previously existing rules.

In addition, the ASU requires the application of the if-converted method for calculating diluted earnings per share and eliminates the treasury stock method.

The ASU is effective commencing with our quarter ended March 31, 2022, with early adoption permitted.

We are currently evaluating the impact of ASU 2020 - 06 on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020 - 04,  

Reference Rate Reform  

(Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional guidance to ease the potential burden in accounting for the effects of the transition away from LIBOR and other reference rates and in January 2021, the FASB issued ASU 2021 - 01, Reference Rate Reform (Topic 848 ):

Scope , which provided clarification guidance to ASU 2020 - 04.

These ASUs were effective commencing with our quarter ended March 31, 2020 through December 31, 2022.

Our credit Agreement (as defined in Note 14 below) includes the secured overnight financing rate (“SOFR”) as an alternative to LIBOR.

We expect to elect a SOFR alternative for the term loan portion of the Credit Agreement and make similar adjustments to our interest rate swap hedges during 2021.

 We do not expect this change to have a material impact on our consolidated financial statements.

Recently  

Adopted  

Accounting Pronouncements:

June 2016, 

the FASB issued ASU 

2016 - 13,  

Financial Instruments - Credit Losses (Topic  

Measurement of Credit Losses on Financial Instruments,  and in 

May 2019 

issued ASU 

s Own Equity  (“ASU 

2020 - 06”

) ,  which simplifies the accounting for convertible instruments resulting in accounting for convertible debt instruments as a single liability measured at its amortized cost.

This change will also reduce reported interest expense and increase reported net income as we issued a convertible instrument that was bifurcated according to previously existing rules.

In addition, the ASU requires the application of the if-converted method for calculating diluted earnings per share and eliminates the treasury stock method for convertible debt.

The ASU is effective commencing with our quarter ending 

March 31, 2022. 

We currently anticipate adopting this ASU using the modified retrospective transition approach.

Upon issuance of the 

2.75% convertible senior notes due 

2024  ( “2.75%  Convertible Notes”), cash received was separated into a $ 192.6  million debt component and a $ 37.4  million (less $ 9.5  million of taxes) equity component.

We have been increasing the debt component for the difference between the principal amount of $ 230.0 million and the $ 192.6  million (“debt discount”) with an offset to interest expense over the life of the loan using an effective interest rate.

Upon adoption of ASU 

2020 - 06 ,  the previously recorded equity component of the convertible instrument outstanding and debt issuance costs will be reclassified from equity to debt, net of tax, and the interest expense previously recorded from the amortization of the debt discount and debt issuance costs will be reversed through retained earnings with an offset to debt.

We expect the primary impact of this new standard will be to increase the carrying value of convertible debt by approximately $ 22 million, with an offsetting reduction in shareholders’

equity, and reduce reported interest expense in future periods.

In addition, using the if-converted method as compared to the treasury stock method may have a material impact to diluted earnings per share.

March 2020, 

the FASB issued ASU 

2020 - 04 ,  

Credit Losses (Topic  

Targeted Transition Relief  (collectively referred to as “Topic 

326  requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

We adopted Topic 

326  effective 

Reference Rate Reform  

(Topic  

Also, in 

January 2021, 

recognizing a net cumulative decrease to retained earnings of approximately $ 0.5  million. Topic 

326  was applicable to the following financial assets:

short and long-term marketable securities, receivables, contract assets and long-term notes receivables included in other noncurrent assets in our condensed consolidated balance sheets. We elected to estimate the expected credit losses using a loss rate method that was applied to groups of assets categorized based on similar risk characteristics.

The loss rate was based on historical losses and other information available to management.

To account for the measurement of expected credit losses an allowance for credit losses was required for receivables and contract assets and was 

not  required for any other applicable financial asset. As of December 31, 2020, 

$ 1.8  million was deducted primarily from receivables to present the net amount expected to be collected. The increase in the allowance since the initial adoption of Topic 

326  was due to additional credit risk exposure to our customers related to the COVID- 19  pandemic.

In August 2018, the FASB issued ASU No.

2018 - 13 , Fair Value Measurement (Topic 820 ):

Disclosure Framework —

Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements.

We adopted this ASU commencing with our quarter ending March 31, 2020 

and it did not  have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019 - 12 , Income Taxes (Topic 740 ):

Simplifying the Accounting for Income Taxes , which is expected to reduce cost and complexity related to accounting for income taxes.

We elected to early adopt this ASU commencing with our quarter ending March 31, 2020 

and it did not  have a material impact on our consolidated financial statements.

On June 14, 2018 ( “acquisition date”), we completed the acquisition of Layne for $ 349.8 million in a stock-for-stock merger. We paid $ 321.0 million of the purchase price with 5.6 million shares of Company common stock and $ 28.8 million in cash to settle all outstanding stock options, restricted stock awards and unvested performance shares of Layne.

In addition to issuances of Granite common stock and the settlement of various equity awards, we assumed $ 191.5 million in convertible notes at fair value. 

Layne operates as a wholly owned subsidiary of Granite Construction Incorporated and its results have been included in the Water and Mineral Services operating group in the Water, Specialty and Materials segments since the acquisition date.

Layne’s customers are in both the public and private sector.

We have accounted for this transaction in accordance with ASC Topic 805,  

Business Combinations  (“ASC 805”

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 the acquisition date as presented in the table below (in thousands).

There were no material measurement period adjustments during the year ended December 31, 

The amounts presented in the table below are considered final and no adjustments are expected in the future.

$ 2,995  

70,160  

Contract assets

44,947  

23,424  

Other current assets

Property and equipment

183,030  

Investments in affiliates

55,400  

Deferred income taxes

20,959  

Other noncurrent assets (including $5,906 of restricted cash)

17,868  

Total tangible assets

424,316  

Identifiable intangible assets

61,548  

Identifiable intangible liabilities

Accounts payable

38,321  

Contract liabilities

Accrued expenses and other current liabilities

47,583  

Long-term debt

191,500  

Other long-term liabilities

31,585  

Total liabilities assumed

323,643  

Total identifiable net assets acquired

162,221  

187,619  

Estimated purchase price

$ 349,840  

On April 3, 2018, we acquired LiquiForce, a privately-owned company which provides sewer lining rehabilitation services to public and private sector water and wastewater customers in both Canada and the U.S.

We acquired LiquiForce for $ 35.9 million in cash primarily borrowed under the Company’s Credit Agreement described more fully in Note 14.

The tangible and intangible assets acquired and liabilities assumed were $ 14.3 million, $ 10.9 million and $ 8.5 million, respectively, resulting in acquired goodwill of $ 19.3 million. LiquiForce results are reported in the Water and Mineral Services operating group in the Water segment.

In addition, on 

May 22, 2019, 

we acquired certain assets and equipment of Lametti & Sons, Inc.

a Minnesota-based company with expertise in cured-in-place pipe rehabilitation and trenchless renewal for $ 6.2  million in cash.

Intangible Assets

The following table lists the final purchase price allocation to amortized intangible assets and liabilities from the Layne and LiquiForce acquisitions (in thousands):

Average Useful

Lives (Years)

Customer relationships

$ 35,937  

$ 30,057  

Developed technologies

Trademarks/trade name

Favorable contracts, covenants not to compete and other

Intangible assets

$ 69,689  

$ 52,787  

Unfavorable contracts and leases

$ 7,000  

$ 2,274  

Intangible liabilities

$ 7,000  

$ 2,274  

The net amortization expense related to the acquired amortized intangible assets and liabilities for the year ended December 

31, 2018 was $ 12.2 million and was included in cost of revenue and selling, general and administrative expenses in the consolidated statements of operations.

All of the acquired intangible assets and liabilities are amortized on a straight-line basis except for backlog, favorable contracts and unfavorable contracts which are amortized as the associated projects progress, and customer relationships which will be amortized on a double declining basis. 

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets.

The factors that contributed to the recognition of goodwill from the acquisitions of Layne and LiquiForce include acquiring a workforce with capabilities in the global water management, construction and drilling markets, cost savings opportunities and synergies.

For the Layne acquisition, we recorded $ 125.7 million, $ 52.5 million, and $ 9.4 million of goodwill allocated to our Water, Materials and Specialty reportable segments, respectively.

For the LiquiForce acquisition, we recorded $ 19.2 million in goodwill that was allocated to our Water reportable segment.

The goodwill from both acquisitions is not expected to be deductible for income tax purposes.

Pro Forma Financial Information

The financial information in the table below summarizes the unaudited combined results of operations of Granite and Layne, on a pro forma basis, as though the companies had been combined as of January 1, 2017 ( unaudited, in thousands, except per share amounts).

The pro forma financial information is unaudited and 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, 2017.

Year Ended December 31,

$ 3,499,606  

62,480  

Net income attributable to Granite

51,526  

Basic net income per share attributable to common shareholders

Diluted net income per share attributable to common shareholders

These amounts have been calculated after applying Granite’s accounting policies and adjusting the results of Layne 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, 2017.

Acquisition and integration expenses related to Layne that were incurred during the year ended December 

31, 2018 are reflected in year ended December 

31, 2017 due to the assumed timing of the transaction.

The statutory tax rate of 26.0 % was used for 2018 for the pro forma adjustments.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project.

These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete 

may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate.

When we experience significant changes in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period.

For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. As discussed in Note 1, provisions for losses are recognized in the consolidated statements of operations for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a project exceeds its estimated total revenue.

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. 

Other than those identified in the 

2019  Annual Report on Form 

10 -K, we did 

not  identify any material amounts that should have been recorded in a prior period for the years ended December 31, 2019 and 2018.

 In our review of these changes for the year ended 

December 31, 2020, we did 

not  identify any material amounts that should have been recorded in a prior period. 

In the normal course of business, we have revisions in estimates, including estimated costs some of which are associated with unresolved affirmative claims and back charges.

The estimated or actual recovery related to these estimated costs may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.

There were no increases from revisions in estimates, which individually had an impact of $ 5.0 million or more on gross profit, for the periods presented.

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):

Years Ended December 31,  

Number of projects with downward estimate changes

Range of reduction in gross profit from each project, net

$ 6.7 - 49.9  

$ 5.5 - 52.6  

$ 6.4 - 49.6  

Decrease to project profitability

$ 143.4  

$ 214.1  

$ 104.6  

Decreases to net (loss) income

$ 106.5  

$ 158.9  

$ 77.7  

Decreases to diluted net (loss) income per share

$ 2.34  

$ 3.41  

the FASB issued ASU 

2021 - 01 ,  

The decreases during the year ended December 31,  

2020  were due to increases in design, production costs, weather-related and labor contingency costs.

The decreases during the years ended December 31,  

2019  and 2018  were due to increased project completion costs, schedule delays, lower productivity than originally anticipated, performance of a significant amount of unresolved disputed work, an unfavorable court ruling on a designer back charge claim and additional weather-related costs partially offset by an increase in estimated recovery from customer affirmative claims.

All decreases were in our Transportation segment except for:

Water segment:

decreases on three  projects with a range of reduction on gross profit of $ 7.1 million to $ 7.9 million for a combined total decrease to project profitability of $ 22.5 million during the year ended December 31, 

Specialty segment: decreases to project profitability of $ 19.7  million and $ 9.0  million on one  project during the years ended December 31, 2020 and 2019, respectively.

The amounts attributable to non-controlling interests were $ 31.9  million and $ 9.8 million of the net decreases for the years ended December 31,  

2020  and 

2019 , respectively. There were 

no  amounts attributable to non-controlling interests for the year ended 

Reference Rate Reform (Topic  

Scope , which provided clarification guidance to ASU 

 These ASUs are effective at our option beginning with our quarter ended 

March 31, 2020 

through 

December 31, 2022, 

and we expect to adopt in the 

second  quarter of 

 As our Third Amended and Restated Credit Agreement dated 

May 18, 2021, 

as subsequently amended (the “Credit Agreement”) currently incorporates the use of the secured overnight financing rate as an alternative to LIBOR, we do 

not  expect the adoption of these ASUs to have a material impact on our consolidated financial statements.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Disaggregation of Revenue

We disaggregate our revenue based on our reportable segments and operating groups as it is the format that is regularly reviewed by management.

Our reportable segments are:

Transportation, Water, Specialty and Materials.

In alphabetical order, our operating groups are:

(i) California;

(ii) Federal;

(iii) Heavy Civil;

(iv) Midwest;

(v) Northwest;

and (vi) Water and Mineral Services.

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

Transportation

$ 681,955  

$ 44,068  

$ 230,805  

$ 222,021  

$ 1,178,849  

Discontinued Operations and Held-for-Sale

As discussed in Note 1, during the fourth quarter of 2021, management determined that WMS no longer aligned with our new strategic plan, and our Board of Directors approved a plan to sell the associated businesses within the next twelve months.

This includes:

Inliner; our water supply, treatment, delivery and maintenance business (“Water Resources”); and our mineral exploration drilling business (“Mineral Services”).

This approval, in combination with previously existing facts and circumstances, resulted in the Company concluding that the assets and liabilities of WMS met the criteria for classification as held-for-sale. The Company concluded the planned disposal activities represented a strategic shift that will have a major effect on the Company’s operations and financial results and qualified for presentation as discontinued operations in accordance with ASC Topic 205 - 20, Presentation of financial statements - Discontinued operations . Additionally, beginning December 31, 2021, in accordance with ASC 360, Property, Plant, and Equipment , we ceased recording depreciation and amortization for WMS property, plant and equipment, finite-lived intangible assets and right of use lease assets.

On February 2, 2022, we entered into a purchase agreement with Inland Pipe Rehabilitation LLC (“IPR”) and 1000097155 Ontario Inc.

(“Ontario” and together with IPR, the “Purchasers”), investment affiliates of J.F.

Lehman & Company.

Per the terms of that agreement, the Company agreed to sell Inliner to the Purchasers for a purchase price of $ 159.7  million. The sale has been unanimously approved by the Company’s Board of Directors and is subject to customary covenants and closing conditions. The transaction is expected to close in the first half of 2022.

Water Resources and Mineral Services, which represent the remainder of WMS, are expected to be sold within the next twelve months.

The following table presents summarized balance sheet information of assets and liabilities held-for-sale (in thousands):

Cash and cash equivalents

$ 16,496  

$ 10,844  

Receivables, net

102,208  

103,254  

Contract assets

41,340  

2 unchanged sentences

19,891  

Other current assets

Property and equipment, net

70,912  

105,867  

Investments in affiliates

48,675  

1 unchanged sentence

63,063  

Water and Mineral Services

63,062  

Right of use assets

12,365  

Other noncurrent assets

16,176  

26,256  

Total assets classified as held-for-sale

$ 392,641  

$ 423,367  

Accounts payable

$ 37,997  

$ 37,813  

Contract liabilities

Other current liabilities

27,764  

Transportation

22,750  

Deferred income taxes, net

Long-term lease liabilities

Other long-term liabilities

Total liabilities classified as held-for-sale

$ 83,408  

$ 79,309  

The following table represents summarized statements of operations information of discontinued operations (in thousands):

Years Ended December 31,

$ 491,812  

1 unchanged sentence

$ 530,729  

Cost of revenue

434,723  

1 unchanged sentence

498,836  

Selling, general and administrative expenses

59,932  

1 unchanged sentence

69,834  

Non-cash impairment charges (1)

156,690  

Gain on sales of property and equipment, net (2)

( 32,658 )  

( 2,005 )  

Other (income) expense, net

( 8,004 )  

( 3,472 )  

Water and Mineral Services

Provision for (benefit from) income taxes

20,950  

( 10,209 )  

Net income (loss) from discontinued operations

$ 10,673  

$ ( 164,399 )  

( 1 ) During 

2020 ,  we performed 

two interim goodwill impairment tests.

The first was on the WMS Materials and WMS Specialty reporting units due to an adverse change in the business climate for these reporting units, including a modified relationship with a business partner, increased competition and market consolidation ,  exacerbated by economic disruption and market conditions associated with the COVID- 19  pandemic.

The goodwill impairment test resulted in a $ 14.8 million impairment charge during the three months ended March 31, 2020 associated with the WMS Materials reporting unit and no impairment charge related to the WMS Specialty reporting unit.

The second test was on the WMS Water and WMS Materials reporting units due to the continued impact from an adverse change in the business climate, including reduced market share due to loss of strategic personnel during the 

three  months ended 

September 30, 2020.

The goodwill impairment test resulted in an additional impairment charge of $ 117.9  million and $ 14.4  million associated with our WMS Water and WMS Materials reporting units, respectively, during the three months ended September 

 In addition, we recorded an impairment charge of $ 9.6  million during the year ended December 31, 2020 related to entities within investments in foreign affiliates related due to other than temporary adverse changes in the associated business climate.

( 2 ) During 2021,  we completed a sale-leaseback transaction for  

two  properties in California.

The sale of these properties resulted in a reduction in net property and equipment of $ 11.1  million and a $ 2.4  million addition to both right of use assets and lease liabilities on the held-for-sale balance sheets, as well as a $ 29.7  million gain on sales of property and equipment on the discontinued operations statements of operations.

The significant components included in the consolidated statement of cash flows for the discontinued operations are as follows (in thousands):

For the Year Ended December 31,

Depreciation, depletion and amortization

$ 39,556  

1 unchanged sentence

$ 55,865  

Non-cash impairment charges (1)

$ 156,690  

Purchases of property and equipment

$ ( 11,982 )  

Transportation

$ ( 16,657 )  

Proceeds from sales of property and equipment

$ 49,266  

1 unchanged sentence

$ 11,522  

( 1 ) During 

2020 the interim goodwill impairment tests resulted in impairment charges.

See further discussion in note ( 1 ) in the statements of operations table within this footnote.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project.

may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges 

be recorded in future periods or 

be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.

When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period.

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 years ended 

December 31, 2021 and 2020, we did 

not  identify any material amounts that should have been recorded in a prior period.

Other than those identified in the 

2019  Annual Report on Form 

10 -K, we did 

not  identify any material amounts that should have been recorded in a prior period for the year ended December 31, 

The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact of $ 5.0 million or more on gross profit were net decreases of $ 70.6  million, $ 143.5  million and $ 199.1  million for the years ended 

December 

31, 2021,  

2020  and 

2019, respectively.

The projects are summarized as follows (dollars in millions except per share data):

Years Ended December 31,

Number of projects with upward estimate changes

Range of increase in gross profit from each project, net

$ 6.2 - 9.2  

Increase to project profitability

$ 15.4  

Increase to net income/decrease to net loss attributable to Granite Construction Incorporated from continuing operations

$ 11.4  

Increase to net income/decrease to net loss per diluted share attributable to common shareholders from continuing operations

$ 0.25  

The increases during the year ended December 31,  

2021  were due to production at a higher rate than anticipated and a decrease in estimated cost from mitigated risks as well as settlement of outstanding customer affirmative claims. There were no amounts attributable to non-controlling interests for any of the periods presented.

Years Ended December 31,

Number of projects with downward estimate changes

Range of reduction in gross profit from each project, net

$ 5.3 - 34.6  

1 unchanged sentence

$ 5.5 - 52.6  

Decrease to project profitability

$ 86.0  

1 unchanged sentence

$ 199.1  

Decrease to net income/increase to net loss from continuing operations

$ 69.1  

$ 114.7  

Water and Mineral Services

$ 150.3  

Amounts attributable to non-controlling interests

$ 20.5  

$ 31.9  

Decrease to net income/increase to net loss attributable to Granite Construction Incorporated from continuing operations

$ 48.6  

1 unchanged sentence

$ 140.5  

Decrease to net income/increase to net loss per diluted share attributable to common shareholders from continuing operations (1)

$ 1.06  

1 unchanged sentence

$ 3.02  

( 1 ) The prior period amounts have been adjusted to correctly present the per share impact attributable to common shareholders.

The decreases during the year ended December 31,  

2021  were due primarily to additional costs from acceleration of work coupled with lower productivity and higher costs than originally anticipated, unfavorable weather and extended project duration.

The decreases during the year ended December 31,  

2020  were due to increases in design, production, weather-related and labor contingency costs.

The decreases during the year ended December 31, 2019 were due to increased project completion costs, schedule delays, lower productivity than originally anticipated, performance of a significant amount of unresolved disputed work, an unfavorable court ruling on a designer back charge claim and additional weather-related costs partially offset by an increase in estimated recovery from customer affirmative claims.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Unearned Revenue

The following tables present our unearned revenue as of the respective periods (in thousands):

December 31, 2020

Transportation

$ 618,429  

$ 38,716  

$ 141,786  

$ 798,931  

11,895  

77,886  

90,008  

913,430  

14,605  

216,487  

Disaggregation of Revenue

We disaggregate our revenue based on our reportable segments and operating groups as it is the format that is regularly reviewed by management.

Our reportable segments are:

Construction and Materials.

In alphabetical order, our operating groups from continuing operations are: California, Central and Mountain. The following tables present our disaggregated revenue (in thousands):

$ 822,448  

5 unchanged sentences

721,410  

Water and Mineral Services

131,925  

4 unchanged sentences

$ 928,193  

December 31, 2019

Transportation

$ 222,021  

15 unchanged sentences

1,080,215  

Water and Mineral Services

732,147  

4 unchanged sentences

$ 2,914,877  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Unearned Revenue

The following table presents our unearned revenue from continuing operations as of the respective periods (in thousands):

Contract Assets and Liabilities

During the years ended December 31,  

2019  and 2018, we recognized revenue of $ 118.2  million, $ 125.4  million and $ 105.9 million, respectively, that was included in the contract liability balances at 

2020  and 2019 , we recognized revenue of $ 176.2  million, $ 110.9  million and $ 116.1  million, respectively, that was included in the contract liability balances at 

December 31,  

2018  and 2017.

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 $ 173.5  million, $ 152.9  million and $ 151.0 million during the years ended December 31,  

2019  and 2018, 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 $ 153.9  million, $ 176.1  million and $ 152.1  million during the years ended December 31,  

2020  and 2019 , respectively. The changes in contract transaction price were from items such as executed or estimated change orders and unresolved contract modifications and claims.

3 unchanged sentences

The components of the contract asset balances as of the respective dates were as follows (in thousands):

December 31,  

Costs in excess of billings and estimated earnings

7 unchanged sentences

$ 132,097  

The following table summarizes changes in the contract asset balance for the periods presented (in thousands):

The following tables summarize changes in the contract asset balance for the periods presented (in thousands):

Balance at December 31, 2020

17 unchanged sentences

The components of the contract liability balances as of the respective dates were as follows (in thousands):

December 31,  

Billings in excess of costs and estimated earnings, net of retention

3 unchanged sentences

30,499  

27,137  

Total contract liabilities

8 unchanged sentences

13,975  

Change in provision for loss, net

1,790,446  

Change in provision for loss, net

Balance at December 31, 2021

7 unchanged sentences

Change in provision for loss, net

22,407  

Balance at December 31, 2020

1 unchanged sentence

Receivables, net

Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and do not bear interest.

Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest.

The following table presents major categories of receivables (in thousands):

December 31,  

Contracts completed and in progress:

$ 293,376  

$ 299,633  

148,159  

149,696  

Total contracts completed and in progress

441,535  

449,329  

Material sales

49,991  

42,936  

52,736  

55,526  

Total gross receivables

544,262  

547,791  

allowance for credit losses

Total net receivables

$ 540,812  

$ 547,417  

Included in other receivables at 

1 unchanged sentence

2021  and 

2019  were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds.

No such receivables individually exceeded 10% of total net receivables at any of these dates.

2020  were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds. Other receivables at December 31, 2021 also included $ 20.4 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated joint ventures that bears interest at 6.25 % per annum.

No  receivable individually exceeded 10 % of total net receivables at any of these dates.

GRANITE CONSTRUCTION INCORPORATED

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$ 65,233  

Other noncurrent assets

Restricted cash

$ 65,233  

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$ 70,483  

Other noncurrent assets

Restricted cash

$ 70,483  

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Interest Rate Swaps

In connection with the Third Amended and Restated Credit Agreement (as discussed further in Note 14 ) we entered into two interest rate swaps designated as cash flow hedges with an effective date of May 2018.

The two cash flow hedges had a combined initial notional amount of $ 150.0 million and mature in May 2023.

The interest rate swaps are designed to convert the interest rate on the term loan from a variable interest rate of LIBOR plus an applicable margin to a fixed rate of 2.76 % plus the same applicable margin. The interest rate swap is measured at fair value on the consolidated balance sheets using the income approach, which discounts the future net cash settlements expected under the derivative contracts to a present value.

In connection with the Third Amended and Restated Credit Agreement (as discussed further in Note 14 ), we entered into 

two  interest rate swaps with a combined initial notional amount of $ 150.0  million and an effective date of 

May 2018 that mature in 

 The interest rate swaps are designed to convert the interest rate on the term loan from a variable interest rate of LIBOR plus an applicable margin to a fixed rate of 

2.76 % plus the same applicable margin. The interest rate swaps are measured at fair value on the consolidated balance sheets using the income approach, which discounts the future net cash settlements expected under the derivative contracts to a present value.

These valuations primarily utilize indirectly observable inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.

As of December 31, 2020 and 2019, the estimated net amount of the existing losses that were reported in accumulated other comprehensive loss on the consolidated balance sheets that were expected to be reclassified into earnings within the next twelve months were $ 3.3 million and $ 1.4 million, respectively.

Commodity Swap

In April 2020, Granite entered into two commodity swaps for crude oil covering the period from May 2020 to October 2020 with a total notional value of $ 3.8 million. The commodity swaps were settled in October 2020, and gains or losses, including net periodic settlement amounts, were recorded in other income, net in our consolidated statements of operations.

In November 2020, Granite entered into a commodity swap for crude oil covering the period from March 2021 to September 2021 with an initial notional amount of $ 2.6 million. As of December 31, 2020, the commodity swap gain was immaterial.

The interest rate swaps were designated as cash flow hedges through the 

three  months ended 

March 31, 2021.

During the 

three  months ended 

June 30, 

2021,  we determined that the interest rate swaps were 

no  longer highly effective in offsetting changes to expected future cash flows on hedged transactions and were therefore de-designated as cash flow hedges.

As a result of this de-designation, the $ 5.4  million unrealized loss recorded to accumulated other comprehensive loss prior to de-designation will continue to be amortized to interest expense through the maturity date of 

May 2023. 

The impact from the interest rate swap de-designation that was included in interest expense on the consolidated statements of operations was immaterial for the year ended December 31, 2021 .

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Commodity Swaps

In December 2021, we entered into two commodity swaps designed as cash flow hedges for crude oil covering the period from April 2022 to October 2022 with a total notional value of $ 8.1  million.

The financial statement impact during the year ended 

December 31, 2021 was immaterial.

Other Assets and Liabilities

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

Fair Value Hierarchy  

Carrying Value

Held-to-maturity marketable securities (1) Level 1  

Held-to-maturity marketable securities (1)

$ 15,600  

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Liabilities (including current maturities):

Credit Agreement - term loan (2)

131,250  

133,030  

2.75% Convertible Notes (2),(3)

$ 207,354  

$ 313,785  

Credit Agreement - revolving credit facility (2)

$ 200,303  

$ 248,400  

2.75% Convertible Notes (2),(3) Level 2  

Credit Agreement - term loan (2)

$ 123,750  

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December 31, 2021  and 

( 2 ) The fair values of the 2019 Notes, Credit Agreement term loan and revolving credit facility are based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk. The fair value of the 2.75 % Convertible Notes is based on the median price of the notes in an active market as of 

( 2 ) The fair value of the 2.75% Convertible Notes is based on the median price of the notes in an active market as of 

December 31, 2021 and 2020.

See Note 14  for definitions of, and more information about the Credit Agreement and 2.75% Convertible Notes.

( 3 ) Excluded from carrying value is $ 29.7  million and $ 36.3 million debt discount as of  

The fair value of the Credit Agreement term loan is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk. See Note 14  for definitions of, and more information about the 2.75% Convertible Notes and Credit Agreement.

( 3 ) Excluded from carrying value is $ 22.6  million and $ 29.7  million of debt discount as of 

December 31, 2021  and 2020 , respectively, related to the 

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December 31, 2021  and 

2019 , the nonfinancial assets and liabilities included our asset retirement and reclamation obligations, as well as assets and corresponding liabilities associated with performance guarantees. Fair value for the asset retirement and reclamation obligations were measured using Level 3 inputs and those associated with performance guarantees were measured using Level 2 inputs.

2020 , the nonfinancial assets and liabilities included our asset retirement and reclamation obligations, as well as assets and corresponding liabilities associated with performance guarantees.

Asset retirement and reclamation obligations were measured using Level 3 inputs and performance guarantees were measured using Level 2 inputs.

Asset retirement and reclamation obligations were initially measured using internal discounted cash flow calculations based upon our estimates of future retirement costs.

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See Note 1 for further discussion on performance guarantees.

As disclosed in Note 12 ,  during the year ended December 31, 2020  we recorded fair value adjustments related to nonfinancial assets measured at fair value on a nonrecurring basis .

 During the year ended December 31, 2020 ,  we did 

not  record any fair value adjustments related to nonfinancial liabilities measured at fair value on a nonrecurring basis. During the year ended December 31, 

2019  we had no material nonfinancial asset and liability fair value adjustments.

During the years ended December 31, 

2021 and 2020, we had no material nonfinancial asset and liability fair value adjustments related to our continuing operations.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Construction Joint Ventures

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

These costs could be offset by billings to the customer or by proceeds from our partners’

corporate and/or other guarantees.

See Note 13  for disclosure of the performance guarantee amounts recorded in the consolidated balance sheets and Note 1 for additional discussion regarding performance guarantees.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

See Note 13 for disclosure of the performance guarantee amounts recorded in the consolidated balance sheets and Note 1 for additional discussion regarding performance guarantees.

Consolidated Construction Joint Ventures

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2021 , we were engaged in 

nine  active CCJV projects with total contract values ranging from $ 0.2  million to $ 434.1  million and a combined total of $ 1.7  billion.

Total revenue remaining to be recognized on these CCJVs was $ 711.9 million and ranged from $ 0.2 million to $ 253.0 million of which our share was $ 401.3  million and ranged from $ 0.1  million to $ 151.8  million.

eight  active CCJV projects with total contract values ranging from $ 2.3  million to $ 436.3  million for a combined total of $ 1.6  billion of which our share was $ 939.8  million.

As of December 31, 2021, our share of revenue remaining to be recognized on these CCJVs was $ 267.0  million and ranged from $ 0.6  million to $ 83.3  million by project.

Our proportionate share of the equity in these joint ventures was between 

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December 31,  

2020 and 2019, CCJVs used $ 3.0  million and $ 13.1  million of operating cash flows, respectively, and during the year ended 

December 31,  

2018, CCJVs provided $ 85.6  million of operating cash flows.

2020  and 

2019 , CCJVs used $ 4.1  million, $ 3.0  million and $ 13.1  million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As discussed in Note 1, where we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations and in equity in construction joint ventures in the consolidated balance sheets.

December 31,  

2021 , we were engaged in 

ten  active unconsolidated joint venture projects with total contract values ranging from $ 13.2  million to $ 3.8  billion and a combined total of $ 11.6  billion of which our share was $ 3.4  billion.

nine  active unconsolidated joint venture projects with total contract values ranging from $ 13.7  million to $ 3.8  billion for a combined total of $ 10.7  billion of which our share was $ 3.0  billion.

Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0 % to 50.0 %.

As of December 31,  

2020 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 452.7  million and ranged from $ 1.1  million to $ 106.8  million.

2021 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 180.2  million and ranged from $ 1.2  million to $ 43.2  million by project.

The following is summary financial information related to unconsolidated construction joint ventures (in thousands):

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$ 106,335  

( 1 ) I ncluded in this balance and in accrued and other current liabilities on our consolidated balance sheets as of December 31,  

( 1 ) I ncluded in this balance and in accrued and other current liabilities on the consolidated balance sheets as of December 31,  

2021  and 

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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 the consolidated balance sheets were amounts related to deficits in unconsolidated construction joint ventures which includes provisions for losses that wer e $ 82.5  milli on and $ 76.2  million as of December 31,  

( 4 ) Included in this balance and in accrued expenses and other current liabilities on the consolidated balance sheets was 

$ 28.6  milli on and $ 82.5  million as of December 31,  

2021  and 

2019 , respectively.

2020 , respectively, related to deficits in unconsolidated construction joint ventures which includes provisions for losses.

GRANITE CONSTRUCTION INCORPORATED

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$ ( 51,439 )  

$ ( 121,312 )

$ ( 15,533 )  

$ ( 274,410 )  

$ ( 422,457 )

Less partners’

interest and adjustments (1)

( 14,765 )  

( 222,924 )  

Granite’s interest in net loss

$ ( 768 )  

$ ( 51,486 )  

$ ( 120,611 )

( 1 ) Partners’

interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences.

During the years ended December 31,  

2020 , 2019  and 2018 , unconsolidated construction joint venture net losses were $( 274.4 ) million, $( 422.5 ) million and $( 240.3 ) million, respectively, of which our share were net losses of $( 51.5 ) million, $( 120.6 ) million and $( 44.6 ) million, respectively.

The differences between our share of the joint venture net loss during the years ended December 31,  

2020 , 2019  and 2018 , when compared to the joint venture net loss primarily resulted from differences between our estimated total revenue and cost of revenue when compared to that of our partners’

on a range of three to five  projects in each year.

The differences are due to timing differences from varying accounting policies and in public company quarterly reporting requirements. 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.

During each of the years ended December 31,  

2021 , and 

2020 , there was a material variance on one project and during the year ended December 31,  

2019  there were material variances on three  projects between our estimated and/or actual total revenue and cost of revenue when compared to that of our partners’ due to timing of recognition from differing accounting policies and public company quarterly reporting requirements. The joint venture net loss amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.

Line Item Joint Ventures

December 31,  

2020 , we had four  active line item joint venture construction projects with a total contract value of $ 318.0  million of which our portion was $ 187.9 million.

2021 , we were engaged in 

three  active line item joint venture construction projects with a total contract value of $ 337.1  million of which our portion was $ 221.0  million.

December 31,  

2020 , our share of revenue remaining to be recognized on these line item joint ventures was $ 88.1  million.

2021 , our share of revenue remaining to be recognized on these line item joint ventures was $ 70.9 million.

During the years ended 

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Investments in Affiliates

Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for using the equity method of accounting, including investments in foreign affiliates, real estate entities and an asphalt terminal entity.

The foreign affiliates in which we are invested are engaged in mineral drilling services and the manufacture and supply of drilling equipment, parts and supplies in Latin America.

Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for using the equity method of accounting, including investments in real estate entities and an asphalt terminal entity.

The real estate entities were formed to accomplish specific real estate development projects in which our wholly-owned subsidiary, Granite Land Company, participates with third -party partners. The asphalt terminal entity is a 50 % interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant in Nevada.

We have determined that the real estate entities are not consolidated because although they are VIEs, we are not the primary beneficiary.

We have determined that the foreign affiliates and the asphalt terminal entity are not consolidated because they are not VIEs and we do not hold the majority voting interest.

As such, these entities are accounted for using the equity method.

We have determined that the asphalt terminal entity is not consolidated because it is 

not VIE and we do not hold the majority voting interest.

As such, this entity is accounted for using the equity method.

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

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$ 12,777  

12,777  

17,229  

Asphalt terminal

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$ 27,637  

( 1 ) The balance primarily related to local bank debt for equipment purchases and working capital in our foreign affiliates and debt associated with our real estate investments. 

( 1 ) The balance primarily related to local bank debt for equipment purchases and debt associated with our real estate investments. 

Of the $ 113.2  million in total assets as of December 31,  

2020 , we had investments in thirteen  foreign entities with total assets ranging from $ 0.1 million to $ 72.4  million, two  real estate entities with total assets of $ 24.5  million and $ 42.9  million and the asphalt terminal entity had total assets of $ 32.9  million.

We have direct and indirect investments in the foreign entities and our percent ownership ranged from 25 % to 50 % as of December 31,  

2021 , we had investments in 

two  real estate entities with total assets of $ 30.0  million and $ 51.2  million and the asphalt terminal entity had total assets of $ 32.0  million.

As of December 31,  

2020  all of the equity method investments in real estate affiliates were in residential real estate in Texas.

As of December 31, 2019, $ 13.6  million was in residential real estate in Texas and the remaining balance was in commercial real estate in Texas.

2021  and 2020, all of the equity method investments in real estate affiliates were in residential real estate in Texas.

As of December 31,  

2021 , our percent ownership in the real estate entities ranged from 10 % to 25 %.

The following table provides summarized statement of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands):

The following table provides summarized statements of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands):

Years Ended December 31,

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$ 3,465  

2020 , the entities within our investments in foreign affiliates experienced a change in business climate from a rise in operating costs, resulting in increased prices and decreased demand.

The corresponding decline in future operating cash flows resulted in the investments fair value to fall below the associated carrying amounts, which was considered to be other than temporary.

Therefore, we recorded a non-cash impairment charge of $ 9.6  million during the year ended December 31,  

$ 5,191  

$ 6,991  

Property and Equipment, net

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$ 421,149  

Depreciation and depletion expense primarily included in cost of revenue in our consolidated statements of operations was $ 98.3  million, $ 101.9  million and $ 96.4  million for the years ended December 31,  

2020 , 2019  and 2018 , respectively. 

Depreciation and depletion expense from continuing operations primarily included in cost of revenue in our consolidated statements of operations was $ 67.1  million, $ 62.7  million and $ 63.7  million for the years ended December 31,  

2021 , 2020  and 2019 , respectively.

In December 

2021,  we completed a sale-leaseback transaction associated with a property in California.

The sale of this property resulted in a reduction in net property and equipment of $ 3.1  million and a $ 1.4 million addition to both right of use assets and lease liabilities on the consolidated balance sheets, as well as a $ 19.8  million gain on sales of property and equipment on the consolidated statements of operations.

As discussed in Note 1, we have asset retirement obligations, which are liabilities associated with our legally required obligations to reclaim owned and leased quarry property and related facilities.

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2021  and 2020 , $ 1.7  million and $ 6.0  million, respectively, of our asset retirement obligations were included in accrued expenses and other current liabilities and $ 23.3  million and $ 17.9  million, respectively, were included in other long-term liabilities in the consolidated balance sheets.

Of the amount included in other long-term liabilities as of 

December 31,  

2021 , $ 8.2  million is expected to be settled by 2027 and the remaining is expected to be settled thereafter. 

GRANITE CONSTRUCTION INCORPORATED

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The following table presents the goodwill balance by reportable segment (in thousands):

Transportation

$ 51,769  

30,780  

149,127  

40,860  

40,866  

25,339  

54,488  

Total goodwill

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$ 53,715  

The changes in the goodwill balance in our Water and Materials segments as of December 31, 2020 when compared to 

December 31, 

2019  were primarily from goodwill impairment charges recorded during the year ended December 31, 2020.

The change in the goodwill balance in our Specialty segment as of December 31, 2020 when compared to December 31, 2019 was related to foreign currency translation adjustments.

During 2020, we performed interim goodwill impairment tests on our Water and Mineral Services Group (“WMS”) Materials, WMS Water, WMS Specialty and Midwest Group Specialty reporting units which resulted in impairment charges.

Interim goodwill impairment tests were 

not  performed on our remaining reporting units as there was 

no  indication of a possible goodwill impairment. 

We performed the first interim impairment test as of March 31, 2020 on our WMS Materials and WMS Specialty reporting units due to an adverse change in the business climate for these reporting units, including a modified relationship with a business partner, increased competition and market consolidation ,  exasperated by economic disruption and market conditions associated with the COVID- 19  pandemic.

These factors led to reductions in the revenue and margin growth rates used in our quantitative goodwill tests.

The goodwill impairment test resulted in a $ 14.8  million impairment charge associated with our WMS Materials reporting unit and 

no  impairment charge associated with our WMS Specialty reporting unit as its estimated fair value exceeded its net book value (i.e., headroom) by nearly 

We performed the 

second  interim goodwill impairment test as of September 30, 2020 on our Midwest Group Specialty, WMS Water and WMS Materials reporting units due to the continued impact from an adverse change in the business climate, including reduced market share due to loss of strategic personnel .

 These factors led to reductions in the revenue and margin growth rates, and delays in the timing of future cash flows used in our quantitative goodwill tests.

The goodwill impairment test resulted in impairment charges of an additional $ 117.9  million and $ 14.4  million associated with our WMS Water and WMS Materials reporting units, respectively .

 The goodwill impairment test for the Midwest Group Specialty reporting unit indicated that its headroom by greater than 15%;

 therefore, 

no  impairment charge was recorded.

For our 2020 annual goodwill impairment test, we conducted quantitative impairment tests for all of our reporting units and concluded that 

no  additional impairment charge was required since the estimated fair value for each of the reporting units exceeded their respective net book values.

The annual goodwill assessment for the WMS Water and WMS Materials indicated that their estimated fair values exceeded their net book value, but not by a significant amount, as the estimated fair values align with the second  interim goodwill impairment test as of September 30, 2020.

The WMS Specialty and Northwest Materials reporting units had $ 9.4 million and $ 1.9  million, respectively, of goodwill balances as of December 31, 2020 and the annual goodwill assessment indicated headroom of 

12% and 3%, respectively.

Although unexpected, additional adverse changes in the business climate for the WMS Specialty reporting unit could result in an impairment in future periods.

There are no known potential events and/or changes in circumstances that could reasonably be expected to negatively affect the key assumptions used to estimate the Northwest Group Materials reporting unit fair value.

The headroom for all other reporting units was in excess of 50%.

Future developments that we are unable to anticipate 

require us to further revise the estimated future cash flows, which could adversely affect the fair value of our reporting units in future periods and result in additional impairment charges. The assumptions used in the goodwill impairment tests are classified as Level 

3  inputs.

Amortized Intangible Assets

The following is the breakdown of our amortized intangible assets that are included in other noncurrent assets in the consolidated balance sheets (in thousands):

December 31, 2020

Customer relationships

$ 37,319  

$ ( 21,415 )  

$ 15,904  

23,959  

( 13,474 )  

10,485  

( 8,381 )  

Developed technologies

( 5,869 )  

Trademarks/trade name

( 5,345 )  

Favorable contracts, covenants not to compete and other

( 1,771 )  

Intangible assets

89,247  

( 56,255 )  

32,992  

Unfavorable contracts

$ 6,700  

$ ( 6,655 )  

Intangible liabilities

( 6,655 )  

Total net amortized intangible assets

$ 82,547  

$ ( 49,600 )  

$ 32,947  

December 31, 2019

Customer relationships

$ 39,541  

$ ( 16,944 )  

$ 22,597  

23,959  

( 12,484 )  

11,475  

10,201  

( 9,247 )  

Developed technologies

( 3,752 )  

Trademarks/trade name

( 3,667 )  

Favorable contracts, covenants not to compete and other

( 4,795 )  

Intangible assets

97,946  

( 50,889 )  

47,057  

Liabilities  

Unfavorable contracts

$ 6,773  

$ ( 6,339 )  

Intangible liabilities

( 6,339 )  

Total net amortized intangible assets

$ 91,173  

$ ( 44,550 )  

$ 46,623  

The net amortization expense related to amortized intangible assets for the years ended December 31,  

2020 , 2019  and 2018  was $ 13.5  million, $ 18.9  million and $ 15.2  million, respectively, and was primarily included in cost of revenue and selling, general and administrative expenses in the consolidated statements of operations. In addition, during the year ended 

December 

31, 2019  the gross value and associated accumulated amortization was adjusted for fully amortized intangible assets that we no longer intend to use. Amortization expense based on the amortized intangible assets balance at December 31,  

2020  is expected to be recorded in the future as follows: $ 10.3  million in 

$ 6.2  million in 2022 ;

$ 4.4  million in 2023 ;

$ 4.1  million in 2024 ; $ 2.4  million in 2025 ;

and $ 5.5  million thereafter.

As of December 31, 2021 and 2020,  amortized intangible assets included in other noncurrent assets in the consolidated balance sheets consisted of $ 9.5  million and $ 10.6  million, respectively, net of accumulated amortization of $ 14.5  million and $ 13.5  million, respectively, related to permits for our continuing operations.

The net amortization expense for continuing operations related to amortized intangible assets for each of the years ended December 31,  

2021 , 2020  and 2019  was $ 1.0  million and was primarily included in cost of revenue in the consolidated statements of operations. Amortization expense based on the amortized intangible assets balance at December 31,  

2021  is expected to be $ 1.0  million in each year from 

2022  to 

2026  and $ 4.5  million thereafter.

GRANITE CONSTRUCTION INCORPORATED

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82,280  

Accrued legal settlement (see Note 20)

129,000  

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$ 452,829  

Other includes dividends payable, accrued legal reserves, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, none of which are greater than 5% of total current liabilities.

$ 381,747  

Other includes short-term lease liability, dividends payable, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, none of which are greater than 5% of total current liabilities.

Long-Term Debt (in thousands):

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131,250  

Credit Agreement - revolving credit facility

25,000  

Debt issuance costs and other

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The aggregate minimum principal maturities of long-term debt related to balances at December 31,  

2020  excluding debt issuance costs, including current maturities and the $ 29.7 million unamortized debt discount related to the 2.75 % Convertible Notes are as follows: $ 8.5  million in 2021 ;

2021  excluding debt issuance costs, including current maturities and the $ 22.6  million unamortized debt discount related to the 2.75 % Convertible Notes are as follows: $ 8.9  million in 

$ 117.7  million in 2023 ;

$ 117.3  million in 2023 ; $ 231.1  million in 2024 ; $ 1.1  million in 2025 ;

and $ 6.8  million in 

2026 and thereafter.

December 31, 

2018, senior notes payable in the amount of $ 40.0  million were due to a group of institutional holders and had an interest rate of 

6.11 % per annum ( “2019  Notes”).

December 31, 2018, all of the $ 40.0  million was included in current maturities of long-term debt on the consolidated balance sheets. On 

July 29, 2019, 

we called and redeemed the $ 40.0  million outstanding balance which was originally due in 

December 2019 .

$ 231.5  million in 2024 ; $ 1.1  million in 2025  and $ 6.8  million in 

Credit Agreement

Granite entered into the Third Amended and Restated Credit Agreement dated May 31, 2018 which provides for, among other things, (i) a $ 150.0 million term loan (all of which was drawn on May 31, 2018) and a $ 350.0 million revolving credit facility;

Granite entered into the Third Amended and Restated Credit Agreement dated May 31, 2018 which provides for, among other things, (i) a $ 150.0 million term loan and a $ 350.0 million revolving credit facility;

(ii) an increase to the revolving credit facility and/or term loan at the option of the Company, in an aggregate maximum amount up to $ 200.0 million subject to the lenders providing the additional commitments;

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There is an aggregate sublimit for letters of credit of $ 100.0 million and customary affirmative, restrictive and financial covenants.

On July 29, 2019, we entered into Amendment 

No.1  to the Third Amended and Restated Credit Agreement which, among other things, amended the definition of Consolidated EBITDA which is used in the Consolidated Leverage Ratio financial covenant calculation.

October 30, 2019, we entered into Amendment 

2  to the Third Amended and Restated Credit Agreement which, among other things, permitted the Company to issue the 2.75% Convertible Notes (as defined below), enter into the Hedge Option (as defined below) and execute the related warrant transaction.

On March 26, 2020, we entered into Amendment 

3  to the Third Amended and Restated Credit Agreement, which among other things, (i) reduced the revolving credit facility from $ 350.0 million to $ 275.0 million;

In 2019, we entered into two amendments which, among other things, (i) amended the definition of Consolidated EBITDA which is used in the Consolidated Leverage Ratio financial covenant calculation;

and (ii) permitted the Company to issue the 2.75% Convertible Notes (as defined below), enter into the Hedge Option (as defined below) and execute the related warrant transaction.

In 2020, we entered into three amendments which (i) reduced the revolving credit facility from $ 350.0 million to $ 275.0 million;

(ii) amended the definition of Applicable Rate from 2.00 % to 3.00 % for loans bearing interest based on LIBOR;

(iii) amended the definition of Consolidated EBITDA which is used in the Consolidated Leverage Ratio financial covenant calculation; (iv) modified certain financial covenants to allow for investments in certain large projects during the four fiscal quarters during 2020;

and (v) provided the Company additional time to deliver its annual and quarterly financial statements.

On June 19, 2020, we entered into Amendment 

4  to the Third Amended and Restated Credit Agreement, which, among other things, provided the Company additional time to deliver its annual and quarterly financial statements. 

On November 

12, 2020, we entered into Amendment 

5  to the Third Amended and Restated Credit Agreement, which, among other things, provided the Company additional time to deliver its annual and quarterly financial statements and provided for a reversion in the applicable rate from 3.00 % to the applicable rate table in the Credit Agreement upon filing of our Quarterly Report on Form 10 -Q for the quarter ending March 31, 2021.

(v) provided the Company additional time to deliver its annual and quarterly financial statements;

and (vi) provided for a reversion in the applicable rate from 3.00 % to the applicable rate table in the Credit Agreement upon filing of our Quarterly Report on Form 10 -Q for the quarter ending March 31, 2021.

On February 19, 2021, we entered into the Limited Waiver and Amendment No.

6 to the Third Amended and Restated Credit Agreement which waived any defaults or events of defaults that may have arisen in connection with the Company’s Restatement during the periods covered by the Restatement, the failure to comply with a financial covenant and any right of the lenders to collect interest at the default rate with respect to the waived defaults and events of default.

We refer to Third Amended and Restated Credit Agreement dated 

We refer to the Third Amended and Restated Credit Agreement dated 

May 31, 2018 and all subsequent amendments listed above as “Credit Agreement.” 

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As of December 31,  

2020 , the total unused availability under the Credit Agreement was $ 229.6 million resulting from $ 45.4 million in issued and outstanding letters of credit.

The letters of credit will expire between June 2021 and December 

2021 , the total unused availability under the Credit Agreement was $ 232.0 million resulting from $ 43.0 million in issued and outstanding letters of credit and no amount drawn under the revolving credit facility.

The letters of credit will expire between March 2022 and December 

During the year ended 

December 31,  

2020 , $ 50.0 million in draws were made under the revolving credit facility and as of December 31, 2020, none were outstanding.

As of December 31, 2019, the total availability under the Credit Agreement was $ 293.1 million resulting from $ 31.9 million in issued and outstanding letters of credit and $ 25.0 million in draws under the revolving credit facility.

2020, $ 50.0 million in draws were made under the revolving credit facility and none were outstanding as of December 31, 2020.

Borrowings under the Credit Agreement bear interest at LIBOR, subject to a 0.75 % floor or a base rate (at our option), plus an applicable margin based on the Consolidated Leverage Ratio (as defined in the Credit Agreement) calculated quarterly.

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December 31,  

2020  using three -month LIBOR and the base rate was 3.75 % and 5.25 %, respectively, and we elected to use LIBOR for the term loan.

2021  using three -month LIBOR and the base rate was 2.50 % and 4.00 %, respectively, and we elected to use LIBOR for the term loan. Using three -month LIBOR plus the applicable margin, future interest payments are expected to be $ 5.9 million in 2022 and $ 2.4 million 2023.

Convertible Notes

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1 of each year, beginning on May 

1, 2020  maturing on November 

1, 2020 and maturing on November 

1, 2024, unless earlier converted, redeemed or repurchased.

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Thereafter, the 2.75% Convertible Notes will be convertible at the option of the holders at any time until October 30, 2024. 

Future interest payments are expected to be $ 6.3 million each year through 2024.

The initial conversion rate applicable to the 2.75% Convertible Notes is 31.7776 shares of Granite common stock per $1,000 principal amount of 2.75% Convertible Notes, which is equivalent to an initial conversion price of approximately $ 31.47 per share of Granite common stock.

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The cash received from the issuance of the 

2.75% Convertible Notes was separated into a $ 192.6 million liability component and a $ 27.9  million (net of $ 9.5  million in taxes) equity component on the consolidated balance sheets at the time of issuance based on the fair value of a similar liability that does not have an associated convertible feature.

The difference between the principal amount and the $ 192.6 million (“debt discount”) will be recorded to interest expense using an effective interest rate of 6.62 % over the expected life of the 

2.75% Convertible Notes.

As of December 31,  

2020  and 2019, the carrying amount of the liability component was $ 200.3 million and $ 193.7  million, respectively. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. 

On October 

29, 2019, in connection with the offering of our 2.75% Convertible Notes, we entered into a purchased equity derivative instrument for $ 27.9 million (net of $ 9.5  million in taxes) to offset the potential common share dilution of any shares above $ 31.47  (“Hedge Option”) and sold warrants for $ 11.2  million to reduce the cost of the Hedge Option with potential common share dilution above $ 53.44 to offset the cost to the Company of the Hedge Option. The net costs incurred in connection with the Hedge Option and warrants were recorded as an increase to additional paid-in capital on our consolidated balance sheets. Issuance costs related to the 2.75% Convertible Notes are comprised of $ 37.4  million in debt discounts upon original issuance and $ 6.4 million in third party offering costs. During the years ended December 31, 

2020  and 2019, we recorded $ 6.6  million and $ 1.1 million, respectively, of amortization related to the debt discount to interest expense in our consolidated statement of operations.

As of December 31,  

2020  and 2019, $ 4.3  million and $ 5.4  million, respectively, of third party offering costs were included in the liability component and $ 1.0 million was included in the equity component.

2.75% Convertible Notes was separated into a $ 192.6 million liability component and a $ 37.4  million (less $ 9.5  million of taxes) equity component on the consolidated balance sheets at the time of issuance based on the fair value of a similar liability that does not have an associated convertible feature.

The $ 37.4 million difference between the principal amount and the $ 192.6 million (“debt discount”) will increase the debt balance over the expected life of the 2.75 % Convertible Notes.

The $ 6.4 million in third party offering costs (“debt issuance costs”) reduced the debt balance at original issuance and will increase the debt balance over the expected life of the 2.75% Convertible Notes. As of December 31,  

2021  and 2020, the carrying amount of the liability component was $ 207.4  million and $ 200.3  million, respectively, excluding $ 3.2  million and $ 4.3 million, respectively, of debt issuance costs, including $ 14.8  million and $ 7.7 million, respectively, of amortized debt discount.

As of December 31, 2021 and 2020, the remaining unamortized debt discount was $ 22.6  million and $ 29.7  million, respectively.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

The debt discount has been recorded to interest expense using an effective interest rate of 6.62 % over the expected life of the 

2.75% Convertible Notes.

2018, in connection with our acquisition of Layne, we assumed fair value of $ 69.9  million of convertible notes that had an interest rate of 

4.25 % per annum, payable semi-annually in arrears on 

November 15 ( “4.25%  Convertible Notes”).

4.25%  Convertible Notes had a maturity date of 

November 15, 2018 ,  unless earlier repurchased, redeemed or converted and were convertible at the option of the holders until the close of business on 

November 14, 2018 .

 Prior to maturity, $ 0.5  million par value of the convertible notes were converted and cash settled for $ 0.3  million consistent with the irrevocable cash settlement election invoked by Layne on 

May 14, 2018. 

The $ 69.0  million remaining par value was redeemed at par plus $ 1.5  million of accrued interest on 

November 15, 2018 .

The debt issuance costs have been recorded to interest expense over the expected life of the 

2.75% Convertible Notes.

Also in connection with our acquisition of Layne, we assumed convertible notes with a fair value of $ 121.6  million that had an interest rate of 

8.0 % per annum, payable semi-annually on 

November 1 ( “8.0%  Convertible Notes”).  As of 

December 31, 

2018, $ 30.7  million associated with the conversion feature of the 

8.0%  Convertible Notes was included in additional paid-in capital on the consolidated balance sheets.

8.0%  Convertible Notes had a maturity date of 

2018  (the 

“8.0%  Maturity Date”).

During the year ended 

December 31, 

2018 ,  $ 52.0  million of convertible notes were converted to 

1.2  million shares of Granite common stock at the election of the note holders.

The remaining $ 38.9  million of convertible notes, as well as $ 0.9  million of accrued interest as of the 

8.0%  Maturity Date, were redeemed in cash.

During the years ended December 31, 

2021  and 2020, we recorded $ 7.1  million and $ 6.6  million, respectively, of amortization related to the debt discount to interest expense in our consolidated statements of operations and $ 2.4  million and $ 2.1  million, respectively, of amortization related to debt issuance costs and fees to other (income) expense, net in our consolidated statements of operations.

Combined, the amortization of the debt discount and debt issuance costs were presented as amortization related to the 2.75% Convertible Notes on our consolidated statements of cash flows. 

On October 

29, 2019, in connection with the offering of our 2.75% Convertible Notes, we entered into a purchased equity derivative instrument for $ 37.4  million (less $ 9.5  million of taxes) to offset the potential common share dilution of any shares above $ 31.47  (“Hedge Option”) and sold warrants for $ 11.2  million to reduce the cost of the Hedge Option with potential common share dilution above $ 53.44 . The net costs incurred in connection with the Hedge Option and warrants were recorded as an increase to additional paid-in capital on our consolidated balance sheets. 

GRANITE CONSTRUCTION INCORPORATED

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The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate project as it progresses 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. 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.

Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. This debt is non-recourse to Granite, but it is recourse to the affiliates.

The debt associated with our unconsolidated non-construction entities is disclosed in Note 10.

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

We have leases for office and shop space, as well as for equipment primarily utilized in our construction projects.

Our continuing operations have leases for office and shop space, as well as for equipment primarily utilized in our construction projects.

December 31,  

2020 , our lease contracts were classified as operating leases and had terms ranging from month-to-month to 

2021 , our lease contracts were primarily classified as operating leases and had terms ranging from month-to-month to 

20  years.

December 31,  

2020 , ROU assets and long term lease liabilities were separately presented and short term lease liabilities of $ 19.0 million were included in accrued expenses and other current liabilities on our consolidated balance sheets.

2021  and 2020, ROU assets and long term lease liabilities were separately presented and short term lease liabilities of $ 18.8 million and $ 16.3  million, respectively, were included in accrued expenses and other current liabilities on our consolidated balance sheets.

December 31,  

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not  yet commenced but created significant rights and obligations.

Lease expense was $ 21.7  million and 18.9  million for the years ended 

Lease expense was $ 18.6  million, $ 17.9  million and $ 15.0  million for the years ended 

December 31,  

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December 31,  

2020 , our weighted-average remaining lease term was 5.1  years and the weighted-average discount rate was 

2021  and 

2020  our weighted-average remaining lease term was 3.72  years and 4.45  years, respectively, and the weighted-average discount rate was 

3.58 % and 3.88 %, respectively.

December 31,  

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not  materially different than the discount rates applied to each of the leases in the portfolio.

The following table summarizes our undiscounted lease liabilities outstanding as of 

The following table summarizes the maturities of our undiscounted lease liabilities outstanding as of 

December 31,  

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15,395  

13,014  

2027 through 2035

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$ 56,805  

imputed interest

Less imputed interest

$ 51,956  

Excluded from the table above are minimum royalty requirements under all contracts, primarily quarry property, in effect at

December 31,  

2020 which are payable as follows: $

3.1  million in

Excluded from the table above are minimum royalty requirements under all contracts, primarily quarry property, in effect at December 31,  

2021 which are payable as follows: $ 2.0  million in 2022 ;

$ 1.5  million in 2023 ;

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$ 0.7  million in 2026 ;

2.8  million thereafter.

and $ 2.3  million thereafter.

Employee Benefit Plans

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Each employee’s combined pre-tax 401 (k) and post-tax (Roth) contributions cannot exceed 50 % of their eligible pay or Internal Revenue Code annual contribution limits. Our 401 (k) matching contributions can be up to 6 % of an employee’s gross pay at the discretion of the Board of Directors.

Our 401 (k) matching contributions to the 401 (k) Plan for the years ended December 31,  

Our 401 (k) matching contributions to the 401 (k) Plan related to our continuing operations for the years ended December 31,  

2021 , 2020  and 2019  were $ 14.2  million, $ 13.3 million and $ 12.8 million, respectively. Profit sharing contributions from the Company may be made to the 401 (k) Plan in an amount determined by the Board of Directors. We made no profit sharing contributions during the years ended December 31,  

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2021 , there were 57 active participants in the NQDC Plan.

NQDC Plan obligations were $ 30.0 million and $ 26.6 million as of December 31,  

2020  and 

2019 , respectively, and were primarily included in other long-term liabilities on the consolidated balance sheets. In addition, with the acquisition of Layne we assumed liabilities related to supplemental retirement benefits of $5.3 million and $5.0 million that was included in other long-term liabilities on the consolidated balance sheets as of December 31, 

NQDC Plan obligations were $ 32.7  million and $ 30.0 million as of 

December 31,  

2021  and 

2019 , respectively.

2020 , respectively, and were primarily included in other long-term liabilities on the consolidated balance sheets. In addition, we had supplemental retirement benefits of $ 4.9  million and $5.3  million in other long-term liabilities on the consolidated balance sheets as of December 31, 

2021  and 2020, respectively.

GRANITE CONSTRUCTION INCORPORATED

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December 31,  

2020 , five of our wholly owned subsidiaries, Granite Construction Company, Granite Construction Northeast, Inc., Granite Industrial, Inc., Granite Inliner, LLC and Layne Christensen Company contribute to various multi-employer pension plans on behalf of union employees.

2021 , three of our wholly-owned subsidiaries within our continuing operations, Granite Construction Company, Granite Construction Northeast, Inc.

and Granite Industrial, Inc. contribute to various multi-employer pension plans on behalf of union employees.

The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

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The following table presents our participation in these plans (dollars in thousands):

Pension Protection Act (“PPA”) Certified Zone Status (1)  

Contributions

Pension Trust Fund

Pension Plan Employer Identification Number  

FIP / RP Status Pending / Implemented (2)  

Surcharge Imposed Expiration Date of Collective Bargaining Agreement (3)

Pension Plan Employer Identification Number

FIP / RP Status Pending / Implemented (2)

Surcharge Imposed

Expiration Date of Collective Bargaining Agreement (3)

Operating Engineers Pension Trust Fund

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$ 4,508  

Locals 302 and 612 IUOE-Employers Construction Industry Retirement Plan  

91 - 6028571  

Green Green No  

No 5/31/2021 5/31/2022 3/31/2023

5/31/2022 3/31/2023 5/31/2024

Pension Trust Fund for Operating Engineers Pension Plan

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Pension trust funds with a range of expiration dates have various collective bargaining agreements.

Expired collective bargaining agreements are under negotiation.

Based upon the most recently available annual reports, the Company’s contribution to each of the individually significant plans listed in the table above was less than 5% of each plan’s total contributions.

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Stock-based Compensation:

The 2012 Equity Incentive Plan provides for the issuance of restricted stock, RSUs and stock options to eligible employees and to members of our Board of Directors.

On June 2, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”), which replaced the Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”) and no further awards may be granted under the 2012 Plan.

The 2021 Plan provides for the issuance of restricted stock, RSUs and stock options to eligible employees and to members of our Board of Directors.

A total of 2,915,665  

shares of our  common stock have been reserved for issuance of wh ich 496,192  remained av ailable as of December 31,  

No  stock options or restricted stock were granted during the years ended December 31,  

2020 , 2019  and 2018 . There were no stock options or restricted stock outstanding as of December 31,  

shares of our  common stock have been reserved for issuance under the 2021 Plan of wh ich 2,321,541  remained av ailable as of December 31,  

During the years ended December 31,  

2021 , 2020  and 2019 , we did not grant any stock options or restricted stock awards and as of 

December 31,  

2021 , there were no stock options or restricted stock awards outstanding.

Restricted Stock Units:

RSUs are issued for services to be rendered and may not be sold, transferred or pledged for such a period as determined by our Compensation Committee.

RSUs are issued for compensatory purposes.

RSU stock compensation cost is measured at our common stock’s fair value based on the market price at the date of grant.

We recognize compensation cost only for RSUs that we estimate will ultimately vest.

We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust compensation cost based on changes in those estimates over time.

RSU compensation cost is recognized ratably over the shorter of the vesting period (generally three years) or the period from grant date to the first maturity date after the holder reaches age 62 and has completed certain specified years of service, when all RSUs become fully vested.

We recognize stock compensation cost only for RSUs that we estimate will ultimately vest.

We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust stock compensation cost based on changes in those estimates over time.

RSU stock compensation cost is recognized ratably over the shorter of the vesting period (generally ranging from immediate vesting to three years) or the period from grant date to the first maturity date after the holder reaches age 62 and has completed certain specified years of service, when all RSUs become fully vested.

Vesting of RSUs is not subject to any market or performance conditions and vesting provisions are at the discretion of the Compensation Committee.

An employee may not sell or otherwise transfer unvested RSUs and, in the event employment is terminated prior to the end of the vesting period, any unvested RSUs are surrendered to us.

We have no obligation to purchase these RSUs that are surrendered to us.

A recipient of RSUs 

may not sell or otherwise transfer unvested RSUs and, in the event a recipient’s employment or board service is terminated prior to the end of the vesting period, any unvested RSUs are surrendered to us, subject to limited exceptions.

A summary of the changes in our RSUs during the years ended 

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$ 43.99  

Compensation cost related to RSUs was $ 6.4  million ($ 4.7  million net of statutory tax rate), $ 10.2  million ($ 7.5  million net of statutory tax rate), and $ 14.8  million ($ 11.0  million net of statutory tax rate) for the years ended 

Compensation cost related to continuing operations RSUs was $ 6.1  million ($ 4.5  million net of statutory tax rate), $ 5.9  million ($ 4.4  million net of statutory tax rate), and $ 9.4  million ($ 7.0  million net of statutory tax rate) for the years ended 

December 31,  

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As of December 31,  

2020 , there was $ 5.4  million of unrecognized compensation cost related to RSUs which will be recognized over a remaining weighted-average period of 

2021 , there was $ 6.6  million of unrecognized compensation cost related to continuing operations RSUs which will be recognized over a remaining weighted-average period of 

1.4  years.

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Share Purchase Program:

As announced on April 29, 2016, on April 7, 2016, the Board of Directors authorized us to repurchase up to $ 200.0 million of our common stock at management’s discretion.

As part of this authorization we have established a plan to facilitate common stock repurchases.

As announced on April 29, 2016, on April 7, 2016, the Board of Directors authorized us to repurchase up to $ 200.0 million of our common stock at management’s discretion (the “2016 authorization”).

As part of the 2016 authorization, we established a plan to facilitate common stock repurchases.

We did not purchase shares under the share purchase program in any of the periods presented.

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2021 , $ 157.2  million of the 2016 authorization remained available.

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

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

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

Years Ended December 31,  

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”).

The 2022 authorization replaced the 2016 authorization, including the amount available for repurchase, and no further repurchases will take place under the 2016 authorization. The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors.

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 (in thousands except per share amounts):

Years Ended December 31,

Numerator (basic and diluted)

Net (loss) income allocated to common shareholders for basic calculation

Net income (loss) from continuing operations allocated to common shareholders

$ ( 577 )  

$ 19,282  

Weighted average common shares outstanding, basic

Net income (loss) from discontinued operations

10,673  

( 164,399 )  

Net income (loss) allocated to common shareholders

$ 10,096  

Dilutive effect of RSUs and convertible notes (1),(2)

Weighted average common shares outstanding, diluted

$ ( 145,117 )  

Weighted average common shares outstanding, basic

45,788  

45,614  

Net (loss) income per share, basic  

46,559  

Dilutive effect of RSUs and convertible notes (1)(2)

Weighted average common shares outstanding, diluted

45,788  

46,203  

Net (loss) income per share, diluted  

46,559  

Net income (loss) from continuing operations per share

$ ( 0.01 )  

$ 0.42  

( 1 ) Due to the net losses for the years ended December 31,  

2020  and 2019 , RSUs representing approximately 589,000 and 388,000  shares, respectively, have been excluded from the number of shares used in calculating diluted net loss per share, as their inclusion would be antidilutive.

( 2 ) As our average stock price since the issuance date of the 

2.75 % Convertible Notes was below $ 31.47  per share, the number of shares used in calculating diluted net loss per share for the year ended December 31,  

2020  did not include potential dilution from the 2.75% Convertible Notes  converting into shares of common stock 

(See Note 14  for further details).

The following is a summary of the (loss) income before (benefit from) provision for income taxes (in thousands):

Years Ended December 31,

Net income (loss) from discontinued operations per share

( 3.60 )  

Net income (loss) per share

$ 0.22  

$ ( 3.18 )  

Net income (loss) from continuing operations per share

$ ( 0.01 )  

Total (loss) income before (benefit from) provision for income taxes

$ 0.42  

Net income (loss) from discontinued operations per share

( 3.56 )  

Net income (loss) per share

$ 0.22  

The following is a summary of the benefit from income taxes (in thousands):

$ ( 3.14 )  

( 1 ) Due to the net losses from continuing operations for the years ended December 31,  

2021  and 2019, RSUs representing approximately 533,000  and 

388,000  shares, respectively, have been excluded from the number of shares used in calculating diluted net income (loss) per share, as their inclusion would be antidilutive.

( 2 ) The number of shares used in calculating diluted net income (loss) per share for the year ended December 31, 2021 

excluded the potential dilution from the 

2.75 % Convertible Notes converting into shares of common stock due to the net loss from continuing operations for the period.

The number of shares used in calculating diluted net income per share for the years ended 

December 31,  

2020 and 2019  excluded potential dilution from the 2.75% Convertible Notes converting into shares of common stock since the average stock price did not exceed $ 31.47 . 

(See Note 14  for further details).

The following is a summary of the income (loss) from continuing operations before provision for (benefit from) income taxes (in thousands):

Years Ended December 31,

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$ ( 292 )  

Total income (loss) from continuing operations before provision for (benefit from) income taxes

$ ( 9,496 )  

$ 8,145  

Total federal

The following is a summary of the provision for (benefit from) income taxes on continuing operations (in thousands):

Years Ended December 31,

$ ( 9,151 )  

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15,644  

Total federal

( 1,203 )  

( 947 )  

Current  

Deferred  

( 1,109 )  

( 569 )  

Total foreign  

( 1,516 )  

Total benefit from income taxes

Total foreign

Total provision for (benefit from) income taxes on continuing operations

$ ( 1,237 )  

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following is a reconciliation of our benefit from income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):

The following is a reconciliation of our provision for (benefit from) income taxes on continuing operations based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):

Years Ended December 31,

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( 10.2 )  

( 182 )  

Percentage depletion deduction

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( 13.7 )  

Non-controlling interests

( 932 )  

Non-controlling interests

( 17.0 )  

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( 13.7 )  

Company-owned life insurance

( 731 )  

Non-cash impairment charges  

( 591 )  

( 7.4 )  

Company-owned life insurance

( 870 )  

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( 923 )  

Capital loss expiration

Valuation allowance  

( 2.5 )  

Valuation allowance

Purchase price accounting

( 1,308 )  

Provision to return adjustments

( 7.4 )  

Gain/Loss on Sale of Entity

( 1,456 )  

Purchase Price Accounting  

( 18.2 )  

Tax Cuts and Jobs Act of 2017  

( 640 )  

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$ ( 12,288 )  

Provision for (benefit from) income taxes of $ 21.0 million, ($ 10.2 ) million and ($ 8.1 ) million were allocated to discontinued operations for the years ended December 31, 2021, 2020 and 2019, respectively.

The effective tax rates for discontinued operations were 66.2 %, 5.8 % and 21.9 % for the years ended December 31, 2021, 2020 and 2019, respectively.

The majority of the variance from the statutory tax rate in 2021 is due to the net deferred tax liability on basis differences on held for sale entities recorded in 2021 and the majority of the variance from the statutory tax rate in 2020 is due to the goodwill impairment and the investment in affiliates impairment recorded in 2020.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Following is a summary of the deferred tax assets and liabilities (in thousands):

The following is a summary of the deferred tax assets and liabilities (in thousands):

Long-term deferred tax assets:

11 unchanged sentences

15,638  

Lease liabilities  

16,351  

5 unchanged sentences

( 26,533 )  

10,531  

Total long-term deferred tax assets

5 unchanged sentences

46,153  

Right of use assets  

15,791  

8 unchanged sentences

2021  (in thousands):

Gross Carryforward  

Tax Effected Carryforward  

Gross Carryforward

Tax Effected Carryforward

Federal net operating loss carryforwards

15 unchanged sentences

$ 59,760  

The federal, state and foreign net operating loss carryforwards above included unrecognized tax benefits taken in prior years and the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC 740.

The federal and state net operating loss acquired during the Layne acquisition are subject to Internal Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused.

5 unchanged sentences

$ 25,271  

(Deductions) additions due to acquisitions

(Deductions) additions due to dispositions  

( 4,667 )  

Additions (deductions), net

( 3,014 )  

Ending balance

1 unchanged sentence

$ 29,547  

The addition to the valuation allowance is mainly due to the capital loss incurred in the U.S.

in 2020 which is expected to expire unused which is partially offset by deductions to the valuation allowance that are insignificant for the year ended December 31, 2020.

The deduction to the valuation allowance is mainly due to the revaluation of our net deferred tax assets related to various state and local jurisdictions which is partially offset by additions to the valuation allowance that are insignificant for the year ended December 31, 2021.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

We intend to indefinitely reinvest certain earnings of our foreign subsidiaries and affiliates.

There are generally no federal income taxes on dividends from foreign subsidiaries therefore we would only be subject to other taxes, such as withholding and local taxes, upon distribution of these earnings.

Of the $ 41.5  million of accumulated undistributed earnings that we consider indefinitely reinvested as of December 31, 2020, it is not practicable to determine the amount of taxes that would be payable upon remittance of these earnings.

Deferred foreign withholding taxes have been provided on undistributed earnings of certain foreign subsidiaries and foreign affiliates where the earnings are not considered to be invested indefinitely.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUE

Uncertain tax positions:

8 unchanged sentences

The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no longer subject to examinations by taxing authorities for years before 2014.

We had approximately $ 23.3 million and $ 27.3 million of total gross unrecognized tax benefits as of December 

31, 2020 and 2019, respectively.

There were approximately $ 6.0 million and $ 10.1 million of unrecognized tax benefits that would affect the effective tax rate in any future period at December 

31, 2020 and 2019, respectively.

We had approximately $ 22.7 million of total gross unrecognized tax benefits as of both December 

31, 2021 and 2020.

There were approximately $ 5.4 million of unrecognized tax benefits that would affect the effective tax rate in any future period at both December 

31, 2021 and 2020.

It is reasonably possible that our unrecognized tax benefit could decrease by approximately $ 1.8 million in 2022, of which $ 1.6 million would impact our effective tax rate in 2022.

6 unchanged sentences

Gross increases - acquisitions

20,153  

Gross decreases –

( 1,590 )  

Gross increases –

current period tax positions

Gross decreases –

4 unchanged sentences

prior period tax positions

( 608 )  

Settlements with taxing authorities/lapse of statute of limitations

( 1,700 )  

( 1,041 )  

Ending balance

2 unchanged sentences

$ 24,406  

We record interest on uncertain tax positions in interest expense and penalties in interest expense and other income, net in our consolidated statements of operations.

During the years ended

December 

2018, we recognized approximately

$ 0.4 million interest and penalty income,

$ 0.6 million interest and penalty expense and

$ 1.1 million interest and penalty income, respectively. 

Approximately $ 6.7 million and $ 8.8 million of accrued interest and penalties related to our uncertain tax position liability was included in other long-term liabilities and accrued expenses and other current liabilities in our consolidated balance sheets at December 

We record interest on uncertain tax positions in interest expense and penalties in other income, net in our consolidated statements of operations.

During the years ended December 

31, 2021, 2020 and 2019, we recognized approximately $ 0.4 million interest and penalty expense, $ 0.5 million interest and penalty income and $ 0.3 million interest and penalty expense, respectively.

Approximately $ 6.1 million and $ 5.8  million of accrued interest and penalties related to our uncertain tax position liability was included in other long-term liabilities and accrued expenses and other current liabilities in our consolidated balance sheets at December 

31, 2021 and 2020, respectively.

2 unchanged sentences

Contingencies - Legal Proceedings 

In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which cannot be predicted with certainty.

We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated.

In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed.

While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

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

Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period.

In addition to matters that are considered probable for which the loss can be reasonably estimated, disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets.

The aggregate liabilities recorded as of December 31, 2020 and 2019 related to these matters were immaterial.

The aggregate range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

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.

Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period.

In addition, 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 as of 

December 31, 2021 

were $ 129.0  million, $ 63 million of which was paid through insurance proceeds, which have been fully funded into a settlement escrow account.

The balance of the settlement escrow account is included in other current assets in the consolidated balance sheets. As of 

December 31, 

2020, total liabilities were immaterial.

The total range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

Ordinary Course Legal Proceedings

For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note 

Some of the matters in which we or our joint ventures and affiliates are involved 

involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are 

not  probable to be incurred or cannot currently be reasonably estimated.

be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

Securities Litigation and Derivative Lawsuits

August 13, 2019, 

a securities class action was filed in the United States District Court for the Northern District of California against the Company, James H.

Roberts, our former President and Chief Executive Officer, and Jigisha Desai, our former Senior Vice President and Chief Financial Officer and current Executive Vice President and Chief Strategy Officer.

An Amended Complaint was filed on February 20, 2020 that, among other things, added Laurel Krzeminski, our former Chief Financial Officer, as a defendant.

The amended complaint is brought on behalf of an alleged class of persons or entities that acquired our common stock between April 30, 2018 and October 24, 2019, and alleges claims arising under Sections 10 (b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b - 5 thereunder.

The Amended Complaint seeks damages based on allegations that in the Company’s SEC filings the defendants made false and/or misleading statements and failed to disclose material adverse facts about the Company’s business, operations and prospects.

On May 20, 2020, the Court denied, in part, the Defendants’

Motion to Dismiss the Amended Complaint. On January 21, 2021, the Court granted Plaintiff’s motion for class certification.

We are in the pretrial stages of the litigation, and we cannot predict the outcome or consequences of this case, which we intend to defend vigorously.

On October 23, 2019, a putative class action lawsuit was filed in the Superior Court of California, County of Santa Cruz against the Company, James H.

Roberts, our former President and Chief Executive Officer, Laurel Krzeminski, our former Chief Financial Officer, and the then-serving Board of Directors on behalf of persons who acquired shares of Company common stock in the Company’s June 2018 merger with Layne.

The complaint asserts causes of action under the Securities Act of 1933 and alleges that the registration statement and prospectus were negligently prepared and included materially false and misleading statements and failed to disclose facts required to be disclosed.

On August 10, 2020, the Court sustained our demurrer dismissing the complaint with leave to amend. On September 16, 2020, the plaintiff filed an amended complaint.

We have filed a demurrer seeking to dismiss the amended complaint.

We are in the preliminary stages of the litigation and, as a result, we cannot predict the outcome or consequences of the case, which we intend to defend vigorously.

May 6, 2020, a stockholder derivative lawsuit was filed in the United States District Court for the Northern District of California against James H.

Roberts, our former President and Chief Executive Officer, Jigisha Desai, our former Senior Vice President and Chief Financial Officer and current Executive Vice President and Chief Strategy Officer, Laurel Krzeminski, our former Chief Financial Officer, and our then-current Board of Directors (collectively, the “Individual Defendants”), and the Company, as a nominal defendant, asserting claims for breach of fiduciary duty, unjust enrichment, and violations of the Securities Exchange Act of 1934 that occurred between April 30, 2018 and October 24, 2019.

The lawsuit alleges that the Individual Defendants knowingly inflated the Company’s revenue, income, and margins in violation of U.S.

GAAP, which caused the results during the relevant periods to be materially false and misleading.

The complaint seeks monetary damages and corporate governance reforms.

The Court has ordered that the lawsuit in the derivative action be stayed until further order of the Court or until entry of a final judgment in the putative securities class action lawsuit filed in the United States District Court for the Northern District of California.

We are in the preliminary stages of the litigation and, as a result, we cannot predict the outcome or consequences of this case, which we intend to defend vigorously.

As of December 31,  

no liability related to above matters was recorded because we have concluded the amounts of such liabilities are not reasonably estimable.

In connection with our disclosure of the Audit Committee’s independent Investigation, we voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding that Investigation.

The SEC has issued us subpoenas for documents in connection with the independent Investigation.

We have produced documents to the SEC regarding the accounting issues identified during the independent Investigation and will continue to cooperate with the SEC in its investigation.

Roberts, our former President and Chief Executive Officer, and Jigisha Desai, our former Senior Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer. An amended complaint was filed on 

February 20, 2020 

that, among other things, added Laurel Krzeminski, our former Chief Financial Officer, as a defendant.

The amended complaint is brought on behalf of an alleged class of persons or entities that acquired our common stock between 

April 30, 2018 

October 24, 2019, 

and alleges claims arising under Sections 

10 (b) and 

20 (a) of the Securities Exchange Act of 

1934  and Rule 

10b - 5  thereunder.

After the filing of the amended complaint, this case was re-titled 

Police Retirement System of St.

Granite Construction Incorporated, et.

al . The amended complaint seeks damages based on allegations that the defendants made false and/or misleading statements and failed to disclose material adverse facts in the Company’s SEC filings about its business, operations and prospects.

May 20, 2020, 

the court denied, in part, our motion to dismiss the amended complaint. On 

January 21, 2021, 

the court granted plaintiff’s motion for class certification. 

October 23, 2019, 

a putative class action lawsuit, titled 

Granite Construction Incorporated, et.

, was filed in the Superior Court of California, County of Santa Cruz against the Company, James H.

Roberts, our former President and Chief Executive Officer, Laurel Krzeminski, our former Chief Financial Officer, and the then-serving Board of Directors on behalf of persons who acquired shares of Company common stock in the Company’s 

June 2018 

merger with Layne.

The complaint asserts causes of action under the Securities Act of 

1933  and alleges that the registration statement and prospectus were negligently prepared and included materially false and misleading statements and failed to disclose facts required to be disclosed and seeks monetary damages based on these allegations.

August 10, 2020, 

the court sustained our demurrer dismissing the complaint with leave to amend. On 

September 16, 2020, 

the plaintiff filed an amended complaint. We filed a demurrer seeking to dismiss the amended complaint. On 

April 9, 2021, 

the court entered an order overruling our demurrer seeking to dismiss the amended complaint.

May 14, 2021, 

the plaintiff filed a motion for class certification.

The hearing on the motion has been continued to 

March 25, 2022 

in light of the settlement proceedings in 

Police Retirement System of St.

Granite Construction Incorporated, et al . 

April 29, 2021, 

we entered into a stipulation of settlement (the “Settlement Agreement”) to settle 

Police Retirement System of St.

Granite Construction Incorporated, et al . The Settlement Agreement also settles claims alleged in 

Granite Construction Incorporated, et al . The settlement is subject to final court approval.

Under the Settlement Agreement, the Company agreed to pay or cause to be paid a total of $ 129.0  million in cash to a settlement fund that will be used to pay all settlement fees and expenses, attorneys’

fees and expenses, and cash payments to members of the settlement class.

The settlement class has agreed to release us, the other defendants named in the lawsuits and certain of their respective related parties from any and all claims, rights, causes of action, liabilities, actions, suits, damages or demands of any kind whatsoever, that relate in any way to the purchase, acquisition, holding, sale or disposition of our common stock during the period between 

February 17, 2017 

October 24, 2019 

that arose out of or are based upon or related to the facts alleged or the claims or allegations set forth in 

Police Retirement System of St.

Granite Construction Incorporated, et al.

 or relate in any way to any alleged violation of the Securities Act of 

1933,  the Securities Exchange Act of 

1934,  or any other state, federal or foreign jurisdiction’s securities or other laws, any alleged misstatement, omission or disclosure (including in financial statements) or other alleged securities-related wrongdoing or misconduct, including all claims alleged in 

Granite Construction Incorporated, et al . The Settlement Agreement contains 

no  admission of liability, wrongdoing or responsibility by any of the parties.

April 30, 2021, 

the class representative in 

Police Retirement System of St.

Granite Construction Incorporated, et al.

 filed a motion for preliminary approval of the settlement.

The plaintiff in 

Granite Construction Incorporated, et al.

 was permitted to intervene, although the court denied his application to be appointed as additional lead plaintiff. On 

October 6, 2021, 

the court issued an order granting preliminary approval of the settlement.

Pursuant to the terms of the Settlement Agreement, $ 129  million was paid to the settlement fund after preliminary approval in 

October 2021.

$ 66  million was paid by the Company and $ 63  million was paid through insurance proceeds into an escrow account.

The total $ 129  million is included in the balance sheet as deposits and an accrued liability. Members of the settlement class had the opportunity to object to the settlement at a fairness hearing held by the court to determine whether the settlement should be finally approved and whether the proposed order and final judgment should be entered.

The fairness hearing occurred on February 24, 2022 and the court took the motion for final approval of the settlement under submission. If the court approves the settlement, including the payment and release described above, and enters such order and final judgment, and such judgment is 

no  longer subject to further appeal or other review, the settlement fund will be disbursed in accordance with a plan of allocation approved by the court.

As a result of entering into the Settlement Agreement, we recorded a pre-tax charge of approximately $ 66  million in the quarter ended 

March 31, 2021.

May 6, 2020, 

a stockholder derivative lawsuit, titled 

Roberts, et al.

, was filed in the United States District Court for the Northern District of California against James H.

Roberts, our former President and Chief Executive Officer, Jigisha Desai, our former Senior Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer, Laurel Krzeminski, our former Chief Financial Officer, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting claims for breach of fiduciary duty, unjust enrichment, and violations of the Securities Exchange Act of 

1934  that allegedly occurred between 

April 30, 2018 

October 24, 2019. 

The lawsuit alleges that the individual defendants each knowingly inflated the Company’s revenue, income, and margins in violation of U.S.

GAAP, which caused the results during the relevant periods to be materially false and misleading. The complaint seeks monetary damages and corporate governance reforms. The court has ordered that the lawsuit in the derivative action be stayed until further order of the court or until entry of a final judgment in the putative securities class action lawsuit filed in the United States District Court for the Northern District of California.

May 12, 2021, 

a stockholder derivative lawsuit, titled 

Roberts, et al.

, was filed in the Delaware Court of Chancery against James H.

Roberts, Jigisha Desai, Laurel Krzeminski, Craig Hall, our Senior Vice President, General Counsel, Corporate Compliance Officer, and Secretary, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting claims for breach of fiduciary duty, unjust enrichment, and aiding and abetting breach of fiduciary duty that allegedly occurred between 

April 30, 2018 

October 24, 2019. 

The lawsuit alleges that the individual defendants each knowingly inflated the Company’s revenue, income, and margins in violation of U.S.

GAAP, which caused the results during the relevant periods to be materially false and misleading. The complaint seeks monetary damages and corporate governance reforms.

July 16, 2021, 

we filed a motion to dismiss the complaint.

We are in the preliminary stages of the litigation and, as a result, we cannot predict the outcome or consequences of these cases.

December 

2021,  other than the Settlement Agreement charge described above, we did 

not  record any liability related to the above matters because we concluded such liabilities were 

not  probable and the amounts of such liabilities were 

not  reasonably estimable.

Other Matters

In connection with our prior disclosure of the Audit/Compliance Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group and the extent to which those matters affected the effectiveness of the Company’s internal control over financial reporting (the “Investigation”), we voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the Investigation.

The SEC has issued subpoenas for documents in connection with the accounting issues identified in the Investigation.

We have produced documents to the SEC and will continue to cooperate with the SEC in its investigation.

Our wholly-owned subsidiary, Layne, was a subcontractor on the foundation for the Salesforce Tower office building in San Francisco in 

2013  and 

 Certain anomalies were discovered in 

March 2014 

in the foundation’s structural concrete, which were remediated by the general contractor during 

 Layne assigned any insurance claims it 

have had under the project’s builder’s risk insurance policy to the general contractor.

2014,  the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages.

The claim was denied by the builder’s risk insurers.

The project owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy, which proceeding was then transferred by agreement to arbitration. On July 20, 2021, we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures undertaken by the general contractor of the Salesforce Tower and related damages.

Although we were 

not  a party to this legal proceeding, we believe, based on court filings and developments in the arbitration, that the project owner and the general contractor asserted a claim for damages against the project’s builder’s risk insurers for an amount in excess of $ 100  million.

On February 3, 2022, a lawsuit titled Steadfast Insurance Company ( “

Steadfast ”

), a subrogee of Clark/Hathaway Dinwiddie, a Joint Venture ( “

CHDJV ”

Layne Christensen Company ( “

Layne ”

) , was filed in the Superior Court of the State of California, County of San Francisco, seeking damages of approximately $ 70 million for costs incurred by Steadfast on behalf of CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. 

On February 4, 2022, CHDJV submitted an arbitration demand with the American Arbitration Association against Granite Construction Incorporated seeking to recover approximately $ 30 million for costs incurred by CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. 

We believe Granite and Layne have multiple defenses and Layne has counterclaims to the claims at issue. 

Both companies intend to vigorously defend against the claims, and Layne intends to prosecute its counterclaims, but, we cannot provide assurance that Granite and Layne will be successful in these efforts.

not  believe it is probable this matter will result in a material loss, however if we are unsuccessful we believe the range of reasonably possible loss upon final resolution of this matter could be up to approximately $ 100 million.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Business Segment Information

Our reportable business segments are the same as our operating segments and correspond with how our chief operating decision maker (our President) regularly reviews financial information to allocate resources and assess performance. Our reportable business segments are:

Transportation, Water, Specialty and Materials. 

The Transportation segment focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports and marine ports for use mostly by the general public.

The Water segment focuses on water-related construction and water management solutions for municipal agencies, commercial water suppliers, industrial facilities and energy companies.

It also provides trenchless cured-in-place pipe for sanitary and storm water rehabilitation.

The Specialty segment focuses on construction of various complex projects including infrastructure/site development, mining, public safety, tunnel and power projects.

The Materials segment focuses on production of aggregates, asphalt and construction related materials as well as proprietary sanitary and storm water rehabilitation products including cured-in-place pipe felt and fiberglass-based lining tubes both for internal use and for sale to third parties.

Reportable Segment Information

As discussed in Note 1, our reportable segments for continuing operations are:

Construction and Materials.

The Construction segment focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports, marine ports, dams, reservoirs, aqueducts, infrastructure and site development for use by the general public and water-related construction for municipal agencies, commercial water suppliers, industrial facilities and energy companies. It also provides construction of various complex projects including infrastructure / site development, mining, public safety, tunnel, solar and other 

power-related projects.

The Materials segment focuses on production of aggregates and asphalt production for internal use and for sale to third parties.

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1 ).

We evaluate segment performance based on gross profit or loss, and do not include selling, general and administrative expenses or non-operating income or expense. Segment assets include property and equipment, intangibles, goodwill, inventory and equity in construction joint ventures.

Summarized segment information is as follows (in thousands):

We evaluate segment performance based on gross profit, and do not include selling, general and administrative expenses or non-operating income or expense. Segment assets include property and equipment, intangibles, goodwill, inventory and equity in construction joint ventures.

Summarized segment information for our continuing operations is as follows (in thousands):

Years Ended December 31,

Transportation

Total revenue from reportable segments

2 unchanged sentences

$ 3,154,854  

Elimination of intersegment revenue

( 144,801 )  

Revenue from external customers

$ 2,602,306  

$ 407,747  

$ 3,010,053  

$ 248,350  

$ 57,206  

$ 305,556  

Depreciation, depletion and amortization

$ 32,691  

$ 24,905  

$ 57,596  

Segment assets

$ 358,561  

$ 333,089  

$ 691,650  

Total revenue from reportable segments

$ 2,764,094  

$ 513,546  

$ 3,277,640  

Elimination of intersegment revenue

6 unchanged sentences

$ 63,209  

Gross (loss) profit

$ 304,653  

Depreciation, depletion and amortization

$ 33,155  

1 unchanged sentence

$ 54,353  

Segment assets

$ 371,479  

$ 316,164  

$ 687,643  

Total revenue from reportable segments

$ 2,575,791  

$ 490,098  

$ 3,065,889  

Elimination of intersegment revenue

( 151,012 )  

Revenue from external customers

$ 2,575,791  

$ 339,086  

$ 2,914,877  

$ 146,472  

$ 43,313  

$ 189,785  

Depreciation, depletion and amortization

2 unchanged sentences

$ 55,149  

A reconciliation of segment gross profit from continuing operations to consolidated income (loss) from continuing operations before provision for (benefit from) income taxes is as follows (in thousands):

Years Ended December 31,

Total gross profit from continuing operations

$ 305,556  

$ 304,653  

Segment assets

$ 189,785  

Selling, general and administrative expenses

243,083  

1 unchanged sentence

238,147  

Other costs (see Note 1)

95,155  

Total revenue from reportable segments

36,964  

Gain on sales of property and equipment (see Note 11)

( 33,781 )  

( 4,925 )  

Total other expense (income), net

10,595  

11,590  

Elimination of intersegment revenue

Income (loss) from continuing operations before provision for (benefit from) income taxes

$ ( 9,496 )  

Revenue from external customers

$ 8,145  

A reconciliation of segment assets to consolidated total assets is as follows (in thousands):

Total assets for reportable segments

$ 691,650  

$ 687,643  

Assets not allocated to segments:

Cash and cash equivalents

395,647  

425,292  

Receivables, net

464,588  

437,558  

Other current assets, excluding segment assets

323,051  

170,006  

Current assets held-for-sale

392,641  

Depreciation, depletion and amortization

171,263  

Property and equipment, net, excluding segment assets

56,658  

48,941  

Long-term marketable securities

15,600  

Investments in affiliates

23,368  

Segment assets

27,637  

Right of use assets

49,312  

52,987  

Deferred income taxes, net

24,141  

43,111  

Total revenue from reportable segments

Other noncurrent assets, excluding segment assets

58,271  

58,254  

Noncurrent assets held for sale

252,104  

Consolidated total assets

$ 2,494,927  

$ 2,379,996  

Elimination of intersegment revenue

The following table sets forth selected unaudited quarterly financial information for the years ended December 31, 2021 and 2020.

The following unaudited quarterly financial information has been adjusted retrospectively to give effect to the discontinued operations and assets held-for-sale reclassification.

See Note 2 for more information regarding discontinued operations and assets held-for-sale .

This information has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, contains all adjustments necessary for a fair statement thereof.

Net income (loss) per share calculations are based on the weighted average common shares outstanding for each period presented.

Accordingly, the sum of the quarterly net income (loss) per share amounts may not equal the per share amount reported for the year.

QUARTERLY FINANCIAL DATA

(unaudited - dollars in thousands, except per share data)

2021 Quarters Ended

September 30,

$ 683,196  

Revenue from external customers

$ 925,854  

5 unchanged sentences

$ 53,712  

As a percent of revenue

11.0 %  

11.8 %  

Net income (loss) from continuing operations

$ ( 406 )  

Depreciation, depletion and amortization

$ 28,403  

$ 26,145  

Net income (loss) from discontinued operations

$ ( 20,027 )  

1 unchanged sentence

$ 29,602  

Segment assets

Net income (loss)

$ ( 20,433 )  

1 unchanged sentence

$ 55,747  

Net income (loss) attributable to Granite from continuing operations

$ 6,814  

$ 31,023  

As of December 31,  

2019  and 2018 segment assets included $ 12.4  million, $ 14.7 million and $ 15.1  million, respectively, of property and equipment located in foreign countries (primarily Mexico).

During the years ended December 31,  

2019  and 2018 the majority of our revenue was derived in United States.

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

Years Ended December 31,  

Total gross profit from reportable segments

$ 24,859  

Net income (loss) attributable to Granite

$ ( 13,213 )  

$ 35,043  

Selling, general and administrative expenses

$ 54,461  

Per share data:

Continuing operations

$ 0.15  

$ 0.68  

Acquisition and integration expenses

$ 0.54  

Discontinued operations

( 0.44 )  

Non-cash impairment charges  

Net income (loss) per share

$ ( 0.29 )  

Gain on sales of property and equipment

$ 0.76  

$ 1.19  

Total other expense (income)

Continuing operations

$ 0.14  

(Loss) income before provision for (benefit from) income taxes

$ 0.65  

$ 0.52  

Discontinued operations

( 0.42 )  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

A reconciliation of segment assets to consolidated total assets is as follows (in thousands): 

Total assets for reportable segments

Net income (loss) per share

$ ( 0.28 )  

$ 0.73  

Assets not allocated to segments:

Cash and cash equivalents

$ 1.14  

2020 Quarters Ended

September 30,

$ 830,390  

Short-term and long-term marketable securities

$ 955,761  

Receivables, net

$ 811,866  

$ 530,862  

Other current assets, excluding segment assets

$ 93,319  

$ 113,015  

Property and equipment, net, excluding segment assets

$ 81,048  

$ 17,271  

Investments in affiliates

As a percent of revenue

11.2 %  

1 unchanged sentence

10.0 %  

Net income (loss) from continuing operations

$ 2,513  

Deferred income taxes, net

$ 32,665  

$ 3,645  

Other noncurrent assets, excluding segment assets

Net income (loss) from discontinued operations

$ 3,174  

$ ( 131,022 )  

Consolidated total assets

$ ( 4,618 )  

Net income (loss)

$ 5,687  

$ ( 98,357 )  

$ ( 973 )  

Net income (loss) attributable to Granite from continuing operations

$ 4,836  

$ 39,860  

$ 8,023  

Net income (loss) attributable to Granite

$ 8,010  

$ ( 91,162 )  

$ 3,405  

Per share data:

Continuing operations

$ 0.11  

$ 0.87  

$ 0.18  

Discontinued operations

( 2.87 )  

( 0.11 )  

Net income (loss) per share

$ 0.18  

$ ( 2.00 )  

$ 0.07  

Continuing operations

$ 0.10  

$ 0.86  

$ 0.17  

Discontinued operations

( 2.83 )  

( 0.10 )  

Net income (loss) per share

$ 0.17  

$ ( 1.97 )  

$ 0.07  

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 9A. Controls and Procedures