GRANITE CONSTRUCTION INC 10-K

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We maintain an investment portfolio of various holdings, types and maturities. We purchase instruments that meet high credit quality standards, as specified in our investment policy. Our investment policy also limits the amount of credit exposure to any one issue, issuer or type of instrument. The portfolio and accompanying cash balances are targeted to an average maturity of no more than one year from the date the purchase is settled. On an ongoing basis we monitor credit ratings, financial condition and other factors that could affect the carrying amount of our investment portfolio.  Marketable securities, consisting of U.S. government and agency obligations, are classified as held-to-maturity and are stated at cost, adjusted for amortization of premiums and discounts to maturity. Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. We maintain our cash and cash equivalents and our marketable securities with several financial institutions. Given the short-term nature of certain investments, the related income is subject to the general level of interest rates in the United States at the time of maturity and reinvestment. We manage investment interest rate market risk primarily by managing portfolio maturity. The fair value of our long-term held-to-maturity investment portfolio may be affected by changes in interest rates. Our continuing operations do not have any material business transactions in foreign currencies. As of December 31, 2021 and 2020, the balance in long-term debt in our consolidated balance sheets of the 2.75% Convertible Notes, excluding debt issuance costs, including $14.8 million and $7.7 million, respectively, of amortized debt discount, was $207.4 million and $200.3 million, respectively. As of December 31, 2021 and 2020, the remaining unamortized debt discount was $22.6 million and $29.7 million, respectively. As of December 31, 2021 and 2020, a term loan of $123.8 million and $131.3 million, respectively, was outstanding under the Credit Agreement that had a variable interest rate of LIBOR plus an applicable margin, that we converted under a swap arrangement to a fixed rate of 2.76% plus the same applicable margin. The applicable margin is based on certain financial ratios calculated quarterly and can vary in future periods. The additional annual interest expense for each 25 basis point increase in the applicable margin would be immaterial. As of December 31, 2021, there was no amount drawn under the revolving portion of the Credit Agreement. See Note 14 of “Notes to the Consolidated Financial Statements” for further discussion on the 2.75% Convertible Notes and Credit Agreement. The table below presents principal amounts due by year and related weighted average interest rates for our cash and cash equivalents, held-to-maturity investments and significant debt obligations excluding debt issuance costs as of December 31, 2021 (dollars in thousands):     2022     2023     2024     2025     2026     Thereafter     Total   Assets                                                         Cash, cash equivalents, held-to-maturity investments   $ 395,647     $ —     $ 15,600     $ —     $ —     $ —     $ 411,247   Weighted average interest rate     0.08 %     — %     0.66 %     — %     — %     — %     0.10 % Liabilities                                                         Fixed rate debt                                                         2.75% Convertible Notes (1)   $ —     $ —     $ 230,000     $ —     $ —     $ —     $ 230,000   Interest rate     2.75 %     2.75 %     2.75 %     — %     — %     — %     2.75 % Credit Agreement - term loan   $ 7,500     $ 116,250     $ —     $ —     $ —     $ —     $ 123,750   Effective interest rate (2)     4.91 %     4.91 %     — %     — %     — %     — %     4.91 % (1) Debt issuance costs are excluded from the table. Included in the table is $22.6 million of unamortized debt discount related to the 2.75% Convertible Notes (as defined in Note 14 to “Notes to the Consolidated Financial Statements”). (2) The effective interest rate was calculated using three-month LIBOR plus the applicable margin, subject to a 75bp LIBOR floor. As forecasted LIBOR was below 75bps for remaining term loan periods, the 75bp LIBOR floor was utilized. Future interest payments may differ from actual results.  The estimated fair value of our cash and cash equivalents approximates the principal amounts reflected above based on the generally short maturities of these financial instruments. The fair value of the term loan under the Credit Agreement was approximately $124.6 million and $133.0 million as of December 31, 2021 and 2020, respectively. The fair value of 2.75% Convertible Notes was approximately $313.8 million and $248.4 million as of December 31, 2021 and 2020, respectively.   29 Table of Contents