What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-07-28 compared with 2022-04-28 · 650 added, 407 removed, 1356 unchanged (44% of the section changed)

3 unchanged sentences

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

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Current assets

108 unchanged sentences

issued and outstanding:

45,364,137 shares as of March 31, 2022, 45,840,260 shares as of December 31, 2021 and 45,791,712 shares as of March 31, 2021

44,078,469 shares as of June 30, 2022, 45,840,260 shares as of December 31, 2021 and 45,818,719 shares as of June 30, 2021

Additional paid-in capital

27 unchanged sentences

(Unaudited - in thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,  

Six Months Ended June 30,  

$ 632,260  

2 unchanged sentences

$ 1,220,396  

136,026  

121,246  

208,677  

180,607  

Total revenue

1 unchanged sentence

834,671  

1,315,872  

1,401,003  

Cost of revenue

3 unchanged sentences

1,091,360  

118,712  

99,281  

189,780  

157,699  

Total cost of revenue

3 unchanged sentences

1,249,059  

78,480  

98,232  

128,255  

151,944  

Selling, general and administrative expenses

1 unchanged sentence

58,628  

111,663  

119,789  

Other costs (see Note 7)

20,177  

28,391  

80,177  

Gain on sales of property and equipment, net

( 385 )  

Operating loss

( 1,052 )  

( 717 )  

Operating income (loss)

34,788  

( 11,082 )  

Other (income) expense

1 unchanged sentence

( 782 )  

( 162 )  

( 1,405 )  

Interest expense

Equity in (income) loss of affiliates, net

10,874  

Equity in income of affiliates, net

( 541 )  

( 2,607 )  

( 235 )  

Other (income) expense, net

( 1,800 )  

Total other expense, net

Loss from continuing operations before benefit from income taxes

10,570  

Benefit from income taxes on continuing operations

Income (loss) from continuing operations before income taxes

( 404 )  

Net loss from continuing operations

33,855  

Net income (loss) from discontinued operations

( 21,652 )  

Provision for (benefit from) income taxes on continuing operations

( 2,782 )  

Net income (loss) from continuing operations

( 2,953 )  

26,145  

( 18,870 )  

Net income from discontinued operations

19,521  

29,602  

25,617  

26,680  

Net income (loss)

16,568  

55,747  

Amount attributable to non-controlling interests from continuing operations

( 1,286 )  

Net loss attributable to Granite Construction Incorporated from continuing operations

( 2,535 )  

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

Net loss attributable to Granite Construction Incorporated

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

( 2,370 )  

24,859  

( 21,405 )  

Net income attributable to Granite Construction Incorporated from discontinued operations

19,521  

29,602  

25,617  

26,680  

Net income (loss) attributable to Granite Construction Incorporated

$ 17,151  

$ 54,461  

$ 4,212  

Net income (loss) per share attributable to common shareholders (see Note 16):

1 unchanged sentence

$ ( 0.05 )  

$ 0.54  

$ ( 0.47 )  

Basic discontinued operations per share

Basic loss per share

Basic earnings (loss) per share

$ 0.39  

$ 1.19  

$ 0.10  

Diluted continuing operations per share

$ ( 0.05 )  

$ 0.52  

$ ( 0.47 )  

Diluted discontinued operations per share

Diluted loss per share

Diluted earnings (loss) per share

$ 0.39  

$ 1.14  

$ 0.10  

Weighted average shares outstanding:

3 unchanged sentences

45,748  

44,534  

47,798  

45,128  

45,748  

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

2 unchanged sentences

(Unaudited - in thousands)

Three Months Ended March 31,

$ ( 9,821 )  

Other comprehensive income, net of tax:

Net unrealized gain on cash flow hedges

$ 2,436  

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Other comprehensive income (loss), net of tax:

Net unrealized gain (loss) on cash flow hedges

reclassification for net gains included in interest expense

$ 4,196  

$ 1,544  

Foreign currency translation adjustments, net

Other comprehensive income

$ 4,932  

$ 1,319  

Comprehensive loss

$ ( 4,889 )  

Non-controlling interests in comprehensive income

( 3,118 )  

Comprehensive loss attributable to Granite Construction Incorporated

$ ( 8,007 )  

Comprehensive income (loss)

Non-controlling interests in comprehensive (income) loss

Comprehensive income (loss) attributable to Granite Construction Incorporated

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

11 unchanged sentences

Total Equity  

Balances at December 31, 2021

Balances at March 31, 2022

45,364,137  

5 unchanged sentences

$ 957,163  

Cumulative effect of newly adopted accounting standard (see Note 2)

Net income (loss)

17,151  

1 unchanged sentence

( 583 )  

Balances at January 1, 2022

16,568  

Other comprehensive income

Repurchases of common stock (1)

( 1,325,706 )  

2 unchanged sentences

( 50,164 )  

Restricted stock units (“RSUs”) vested

30,596  

Dividends on common stock ($ 0.13 per share)

( 5,846 )  

Net income (loss)

( 5,771 )  

Transactions with non-controlling interests

( 3,425 )  

Stock-based compensation expense and other

Balances at June 30, 2022

44,078,469  

$ 467,159  

$ 2,388  

$ 413,931  

$ 883,919  

$ 33,316  

$ 917,235  

Balances at March 31, 2021

45,791,712  

$ 554,186  

$ ( 3,714 )  

$ 352,610  

$ 903,540  

$ 27,655  

$ 931,195  

54,461  

55,747  

Other comprehensive income

Purchases of common stock (1)

Repurchases of common stock (1)

( 4,982 )  

8 unchanged sentences

( 54 )  

Balances at March 31, 2022

Balances at June 30, 2021

45,818,719  

13 unchanged sentences

$ 995,563  

Cumulative effect of newly adopted accounting standard (see Note 2)

( 26,961 )  

10,543  

( 16,418 )  

Balances at January 1, 2022

45,840,260  

532,791  

( 3,359 )  

421,374  

951,264  

27,881  

979,145  

Other comprehensive income

Purchases of common stock (1)

Repurchases of common stock (1)

( 1,991,586 )  

2 unchanged sentences

( 70,376 )  

220,766  

Dividends on common stock ($ 0.13 per share)

2 unchanged sentences

Transactions with non-controlling interests

Stock-based compensation expense and other

Balances at June 30, 2022

44,078,469  

$ 467,159  

$ 2,388  

$ 413,931  

$ 883,919  

$ 33,316  

$ 917,235  

Balances at December 31, 2020

45,668,541  

$ 555,407  

$ ( 5,035 )  

$ 424,835  

$ 975,664  

$ 15,946  

$ 991,610  

Net income (loss)

( 11,734 )  

Other comprehensive income

Repurchases of common stock (1)

( 62,600 )  

( 2,497 )  

( 2,498 )  

213,567  

Dividends on common stock ($ 0.13 per share)

( 11,909 )  

Transactions with non-controlling interests

14,754  

Stock-based compensation expense and other

1 unchanged sentence

( 131 )  

Balances at March 31, 2021

Balances at June 30, 2021

45,818,719  

5 unchanged sentences

$ 988,242  

(1) This amount represents shares purchased in connection with employee tax withholding for RSUs vested under our 2012 and 2021 Equity Incentive Plans and stock repurchased in 2022 under the Board-approved repurchase plan. 

(1) This amount represents employee tax withholding for RSUs vested under our 2012 and 2021 Equity Incentive Plans and stock repurchased in 2022 and 2021, including shares purchased in connection with the accelerated share repurchase in 2022 (see Note 1) under the Board-approved repurchase plan. 

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

2 unchanged sentences

( Unaudited - in thousands )

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

Net income (loss)

$ 6,747  

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

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

Depreciation, depletion and amortization

9 unchanged sentences

Equity in net (income) loss from unconsolidated joint ventures

Net income from affiliates

17,228  

Net loss from affiliates

( 6,165 )  

Other non-cash adjustments

3 unchanged sentences

( 69,114 )  

123,749  

Contract assets, net

5 unchanged sentences

Other assets, net

15,627  

Accounts payable

17,983  

Accrual for legal settlement (see Note 18)

26,056  

Accrued expenses and other liabilities, net

Accrual for expected resolution of SEC investigation (see Note 18)

12,000  

Accrual for legal settlement (see Note 18)

129,000  

Net cash provided by (used in) operating activities

Accrued expenses and other liabilities, net

( 5,484 )  

Net cash used in operating activities

$ ( 103,278 )  

5 unchanged sentences

Proceeds from sales of property and equipment

15,289  

48,517  

Proceeds from the sale of discontinued operations (see Note 3)

3 unchanged sentences

Collection of notes receivable

Net cash provided by (used in) investing activities

Net cash provided by investing activities

$ 30,317  

$ 1,661  

Financing activities

Proceeds from long-term debt

50,000  

Debt principal repayments

2 unchanged sentences

( 11,857 )  

Repurchases of common stock

Repurchases of common stock (See Note 1)

( 70,374 )  

Contributions from non-controlling partners

11,350  

Distributions to non-controlling partners

( 6,700 )  

Other financing activities, net

1 unchanged sentence

$ ( 157,055 )  

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

( 43,688 )  

Net decrease in cash, cash equivalents and restricted cash

( 230,016 )  

2 unchanged sentences

437,648  

Cash, cash equivalents and $ 1,512 in restricted cash at end of each period

Cash, cash equivalents and $ 0 and $ 1,512 in restricted cash at end of each period

$ 183,639  

$ 394,693  

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

Cash, cash equivalents and $ 0 and $ 1,512 in restricted cash included in current assets held-for-sale at end of each period

17,073  

5 unchanged sentences

$ 8,167  

$ 7,997  

Cash paid for operating lease liabilities

4 unchanged sentences

$ 8,078  

$ 1,553  

$ 1,817  

Non-cash investing and financing activities:

1 unchanged sentence

$ 7,688  

$ 7,554  

Dividends declared but not paid

1 unchanged sentence

$ 5,956  

Contributions from non-controlling partners

$ 3,274  

$ 9,240  

Accrued equipment purchases

13 unchanged sentences

Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at 

March 31, 2022  and 

June 30, 2022  and 

2021  and the results of our operations and cash flows for the periods presented.

December 31, 2021  condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements, but does not include all disclosures required by U.S.

We prepared the accompanying condensed consolidated financial statements on the same basis as our annual consolidated financial statements, except for the adoption of Accounting Standards Update (“ASU”) 

We prepared the accompanying condensed consolidated financial statements on the same basis as our annual consolidated financial statements, except for the adoptions of Accounting Standards Update (“ASU”) 

2020 - 06, Debt - Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging - Contracts in Entity ’

2 unchanged sentences

s Own Equity  (“ASU 2020 - 06”

) on January 1, 2022, the impact of which is described in Note 2.

Reclassifications:

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

) on January 1, 2022, ASUs 2020 - 04,  

Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting  (“ASU 2020 - 04”

) and 2021 - 01,  

Reference Rate Reform (Topic  

Scope (“ASU 2021 - 01”

), on June 30, 2022, 

the impacts of which are described in Note 2.

Out-of-period Adjustments:

 In the second quarter of 2022, we recorded immaterial out-of-period adjustments which resulted in a net $ 4.1 million increase to loss from continuing operations before income taxes for the three months ended June 30, 2022 with no net impact on the six months ended June 30, 2022.

Management has determined that these errors were not material to any of its previously issued financial statements.

Stock Purchase Programs:

 On May 2, 2022, we entered into an accelerated share repurchase agreement (“Accelerated Share Repurchase”) with Bank of Montreal.

The Accelerated Share Repurchase was entered into pursuant to the existing share repurchase program.

On May 2, 2022, we paid $ 50.0 million to the bank and received 80 % of the notional amount, or $ 40.0 million, in shares using the closing price on the trade date.

This equated to approximately 1.32 million shares, which were immediately retired. The final number of shares to be repurchased under the Accelerated Share Repurchase will be based on the average of the daily volume-weighted average price of Granite’s common stock, less a discount, during the term of the Accelerated Share Repurchase; final settlement is expected to occur in the third quarter of 2022.

The Accelerated Share Repurchase is primarily included in Additional paid-in capital on the Condensed Consolidated Balance Sheet as well as in Repurchases of common stock on the Condensed Consolidated Statement of Shareholders’

Equity and within Financing activities on the Condensed Consolidated Statement of Cash Flows.

As discussed in more detail in Note 3, we concluded that our former Water and Mineral Services operating group (“WMS”) met the criteria for held for sale during the fourth quarter of 2021 and met the criteria for discontinued operation classification.

2 unchanged sentences

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

Therefore, the results of operations for the three months ended 

March 31, 2022  are not necessarily indicative of the results to be expected for the full year.

Therefore, the results of operations for the three and six months ended 

June 30, 2022  are not necessarily indicative of the results to be expected for the full year.

Recently Issued and Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“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.

Also, in January 2021, the FASB issued ASU 2021 - 01,  

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 these ASUs in the second quarter of 2022.

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 condensed consolidated financial statements.

In August 2020, the FASB issued 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 and ASU 2020 - 06 is applicable to our 

2.75 % convertible senior notes due 2024 ( “2.75%  Convertible Notes;”

see Note 15  for further discussion on these notes).

2020 - 04,  

which provides optional guidance to ease the potential burden in accounting for the effects of the transition away from LIBOR and other reference rates.

Also, in January 2021, the FASB issued ASU 2021 - 01,  which provided clarification guidance to ASU 

We adopted these ASUs during the quarter ended June 30, 2022, in conjunction with entering into our Fourth Amended and Restated Credit Agreement (see Note 15 ), which replaced the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate ("SOFR") administered by the Federal Reserve Bank of New York for purposes of interest rate calculation.

The adoption of these ASUs did not have a material impact on our condensed consolidated financial statements.

In August 2020, the FASB issued 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 and ASU 2020 - 06 is applicable to our 2.75 % convertible senior notes due 2024 ( “2.75% Convertible Notes;”

see Note 15 for further discussion on these notes).

In addition, ASU 2020 - 06 requires the application of the if-converted method for calculating diluted earnings per share and eliminates the treasury stock method for convertible debt.

We adopted ASU 2020 - 06 effective January 1, 2022, using the modified retrospective transition approach under which financial results reported in prior periods were not adjusted. Upon adoption, we recorded a net cumulative increase to debt of approximately $ 22.0  million and to deferred tax assets of $ 5.6 million, offset by a decrease to additional paid-in capital and retained earnings of $ 16.4  million.

As of March 31, 2022, 

We adopted ASU 2020 - 06 effective January 1, 2022, using the modified retrospective transition approach under which financial results reported in prior periods were not adjusted.

Upon adoption, we recorded a net cumulative increase to debt of approximately $ 22.0 million and to deferred tax assets of $ 5.6 million, offset by a decrease to additional paid-in capital and retained earnings of $ 16.4 million.

As of June 30, 2022, 

2.75% Convertible Notes comprised our only convertible debt instrument.

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

 The 

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

2.75%  Convertible Notes are convertible at the option of the holders prior to 

8 unchanged sentences

$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.

2.75%  Convertible Notes, which is equivalent to a conversion price of approximately $ 31.47  per share of Granite common stock.

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

In addition, upon the occurrence of a “make-whole fundamental change” as defined in the indenture governing the 

2.75%  Convertible Notes, (the “Indenture”) or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 

2.75%  Convertible Notes in connection with such a make-whole fundamental change or notice of redemption.

2.75%  Convertible Notes, (the “Indenture”) we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 

2.75%  Convertible Notes in connection with such a make-whole fundamental change.

On or after 

38 unchanged sentences

The gain on sale was included in the net income from discontinued operations in the condensed consolidated statements of operations during the three months ended March 31, 2022.

The Water Resources and Mineral Services businesses continued to meet the criteria for classification as held-for-sale and the financial results remain in discontinued operations as of March 31, 2022 

and are expected to be sold within the next 12 months.

The Water Resources and Mineral Services businesses continued to meet the criteria for classification as held-for-sale and the financial results remain in discontinued operations as of June 30, 2022 

and are expected to be sold by the end of 2022.

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

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Cash and cash equivalents

27 unchanged sentences

12,365  

12,038  

Other noncurrent assets

21 unchanged sentences

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

Three Months Ended March 31,

For the three months ended June 30,

For the six months ended June 30,

$ 85,554  

$ 129,501  

$ 188,516  

$ 233,082  

Cost of revenue

2 unchanged sentences

159,113  

204,762  

15,168  

18,714  

29,403  

28,320  

Selling, general and administrative expenses

1 unchanged sentence

18,580  

30,008  

( 3,565 )  

( 2,223 )  

Gain on sale of discontinued operations

2 unchanged sentences

( 8,530 )  

Operating income (loss)

( 30,583 )  

( 8,796 )  

Operating income

20,303  

33,772  

28,076  

27,594  

Other income, net

( 4,426 )  

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

Provision for (benefit from) income taxes

Net income (loss) from discontinued operations

( 3,739 )  

As required per ASC Topic 205 - 20, Presentation of financial statements - Discontinued operation,  components included in the condensed consolidated statement of cash flows for the discontinued operations are as follows (in thousands):

Three Months Ended March 31,

( 6,034 )  

Income from discontinued operations before income taxes

24,729  

37,511  

34,110  

33,891  

Provision for income taxes

Net income from discontinued operations

$ 19,521  

$ 29,602  

$ 25,617  

$ 26,680  

( 1 ) In June 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.

( 2 ) In June 2022, we completed a sale-leaseback transaction on a property in Arizona.

The sale of this property resulted in a reduction in net property and equipment of $ 3.8 million and a $ 1.1 million addition to both right of use assets and lease liabilities on the held-for-sale balance sheets, as well as an $ 8.2 million gain on sales of property and equipment on the discontinued operations statements of operations.

As required per ASC Topic 205 - 20, Presentation of financial statements - Discontinued operations,  components included in the condensed consolidated statement of cash flows for the discontinued operations are as follows (in thousands):

Six months ended June 30,

Depreciation, depletion and amortization (1)

$ 20,239  

Gain on sale of discontinued operations

$ 6,234 $ —

$ 6,234  

Gain on sale of property and equipment

$ 8,796  

$ 30,893  

Purchases of property and equipment

$ 3,376 $ 3,307

$ 5,597  

$ 7,775  

Proceeds from sales of property and equipment

$ 12,697  

$ 44,287  

Proceeds from sale of discontinued operations

$ 142,571 $ —

$ 142,571  

( 1 ) In accordance with ASC Topic 

360, Property, Plant, and Equipment , we ceased recording 

depreciation and amortization for WMS property, plant and equipment, finite-lived tangible assets and right-of-use lease assets as of December 31, 2021.

360, Property, Plant, and Equipment , we ceased recording depreciation and amortization for WMS property, plant and equipment, finite-lived tangible assets and right-of-use lease assets as of December 31, 2021.

GRANITE CONSTRUCTION INCORPORATED

8 unchanged sentences

In our review of these changes for the 

three months ended March 31, 2022  and 2021 , we did 

three and six months ended June 30, 2022  and 2021 , we did 

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

There were no increases or decreases from revisions in estimates, which individually had an impact of $ 5.0 million or more on gross profit for the three months ended March 31, 2022.

During the three months ended March 31, 2021, there was one project with a decrease from revisions in estimates that had an impact to gross profit of $ 5.3 million, to net loss from continuing operations of $ 4.1 million and to diluted loss per share from continuing operations of $ 0.09 .

This decrease was due to additional costs from lower productivity than originally anticipated and weather impacts.

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):

Three Months Ended June 30,  

Six Months Ended June 30,  

Number of projects with downward estimate changes

Range of reduction in gross profit from each project, net

$ 5.7 - 7.6  

$ 5.6 - 10.6  

$ 5.3 - 6.1  

Decrease to project profitability

$ 25.2  

$ 35.6  

$ 11.4  

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

$ 19.3  

$ 27.3  

Amounts attributable to non-controlling interests

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

$ 16.3  

$ 24.2  

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

$ 0.37  

$ 0.54  

$ 0.14  

The decreases during the 

three and six months ended June 

30, 2022 were due to additional costs related to extended project duration, increased labor and materials costs, and disputed work being performed where there are ongoing legal claims.

The decreases during the six months ended June 30, 2021 were due to additional costs from acceleration of work coupled with lower productivity than originally anticipated and weather impacts.

GRANITE CONSTRUCTION INCORPORATED

6 unchanged sentences

California, Central and Mountain. The following tables present our disaggregated revenue from continuing operations by operating group (in thousands): 

Three Months Ended March 31,

Three Months Ended June 30,

$ 199,357  

20 unchanged sentences

$ 713,425  

$ 121,246  

$ 834,671  

Six months ended June 30,

$ 343,744  

$ 117,259  

$ 461,003  

431,499  

24,263  

455,762  

331,952  

67,155  

399,107  

$ 1,107,195  

$ 208,677  

$ 1,315,872  

$ 387,897  

$ 112,446  

$ 500,343  

541,287  

19,100  

560,387  

291,212  

49,061  

340,273  

$ 1,220,396  

$ 180,607  

$ 1,401,003  

Unearned Revenue

1 unchanged sentence

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

$ 873,322  

12 unchanged sentences

Approximately $ 2.4  billion of the 

March 31, 2022  unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

Other costs included in the condensed consolidated statements of operations for the quarter ended March 31, 2022 primarily consisted of non-recurring legal fees related to the lawsuits discussed in Note 18.

Other costs included in the condensed consolidated statements of operations for the quarter ended March 31, 2021 primarily consisted of $ 66 million in net settlement charges incurred during 2021 as further described in Note 18  and non-recurring legal and accounting fees related to the Audit/Compliance Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group, which was completed in early 2021.

June 30, 2022  unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

Other costs included in the condensed consolidated statements of operations for the three and six months ended June 30, 2022 primarily consisted of $ 12 million in accrued charges related to the expected resolution of the SEC investigation as further described in Note 18.

 Other costs also included $ 4.8 million and $ 10.6 million for the three and six months ended June 30, 2022, respectively, of non-recurring legal fees related to the lawsuits discussed in Note 18, and $ 2.9 million and $ 5.5 million, respectively, of costs related to strategic acquisition and divestiture costs.

Other costs for the six months ended June 30, 2021 primarily consisted of $ 66 million in net settlement charges as further described in Note 18.

 Other costs also included $ 6.2 million and $ 13.4 million for the three and six months ended June 30, 2021, respectively, of non-recurring legal and accounting fees related to the Audit/Compliance Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group, which was completed in early 2021.

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

Contract Assets and Liabilities

During the three months ended 

March 31, 2022 and 2021 , we recognized revenue of $ 159.9  million and $ 139.2  million, respectively, that was included in the contract liability balances at 

December 31, 2021  and 2020 , 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 $ 41.1  million and $ 61.5 million during the 

three months ended March 31, 2022  and 2021 , respectively. The changes in contract transaction price were from items such as executed or estimated change orders and unresolved contract modifications and claims.

March 31, 2022 , December 31, 2021  and March 31, 2021 , the aggregate claim recovery estimates included in contract asset balances were $ 38.6  million, $ 39.0  million and $ 38.9  million, respectively.

three and six months ended June 30, 2022 , respectively, and $ 39.4  million and $ 100.9  million during the three and six months ended 2021 , respectively. The changes in contract transaction price were from items such as executed or estimated change orders and unresolved contract modifications and claims.

June 30, 2022 , December 31, 2021  and June 30, 2021 , the aggregate claim recovery estimates included in contract asset balances were $ 59.1  million, $ 39.0  million and $ 47.7  million, respectively.

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

(in thousands)

March 31, 2022  

June 30, 2022  

December 31, 2021  

March 31, 2021  

June 30, 2021  

Costs in excess of billings and estimated earnings

10 unchanged sentences

$ 154,542  

March 31, 2022 , December 31, 2021  and March 31, 2021 , contract retention receivable from Brightline Trains Florida LLC represented 

June 30, 2022 , December 31, 2021  and June 30, 2021 , contract retention receivable from Brightline Trains Florida LLC represented 

14.2 %, 17.2 % and 14.0 %, respectively, of total contract assets.

No other contract retention receivable individually exceeded 10% 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. 

As work is performed, revenue is recognized and the corresponding contract liabilities are reduced.

We recognized revenue of $ 47.7  million and $ 207.6  million during the three and six months ended June 30, 2022 , respectively, and $ 28.4  and $ 167.6  during the three and six months ended 

June 30, 2021 , respectively, that was included in the contract liability balances at 

December 31, 2021  and 2020 , respectively.

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

(in thousands)

March 31, 2022  

June 30, 2022  

December 31, 2021  

March 31, 2021  

June 30, 2021  

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

14 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Contracts completed and in progress:

$ 158,762  

$ 236,053  

$ 137,174  

111,058  

126,371  

111,654  

Total contracts completed and in progress

269,820  

362,424  

248,828  

Materials sales

45,967  

43,746  

35,252  

65,520  

59,496  

110,487  

Total gross receivables

381,307  

465,666  

394,567  

allowance for credit losses

Total net receivables

$ 380,502  

$ 464,588  

$ 393,283  

Included in other receivables at 

March 31, 2022 , December 31, 2021  and March 31, 2021 , were items such as estimated recovery from back charge claims, notes receivable, insurance receivable, fuel tax refunds and income tax refunds. Other receivables at March 31, 2022  and December 31, 2021 also included $ 24.9 million and $ 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 prime plus 

3.00 % per annum. Other than the $ 63.0 million insurance receivable as of March 31, 2021 

related to the settlement discussed in Note 18, no other receivable individually exceeded 10 % of total net receivables at any of these dates.

June 30, 2022 , December 31, 2021  and June 30, 2021 , were items such as estimated recovery from back charge claims, notes receivable, insurance receivable, fuel tax refunds and income tax refunds. Other receivables at June 30, 2022  and December 31, 2021 also included $ 24.9 million and $ 20.4  million, respectively, of working capital contributions in the form of a loan to a partner in one of our unconsolidated joint ventures that bears interest at prime plus 

3.0 % per annum. Other than the $ 63.0 million insurance receivable recorded as of June 30, 2021 

related to the settlement discussed in Note 18, which was collected in October 2021 and is in a settlement escrow account included in Other current assets in the Condensed Consolidated Balance Sheets as of June 30, 2022, no other receivable individually exceeded 10 % of total net receivables at any of these dates.

GRANITE CONSTRUCTION INCORPORATED

3 unchanged sentences

Fair Value Measurement at Reporting Date Using

March 31, 2022

June 30, 2022

Cash equivalents

7 unchanged sentences

$ 4,968  

Accrued and other current liabilities

Interest rate swap

Total liabilities

December 31, 2021

12 unchanged sentences

$ 3,514  

March 31, 2021

June 30, 2021

Cash equivalents

15 unchanged sentences

Interest Rate Swaps

In connection with entering into the Credit Agreement, we entered into two interest rate swaps with a combined initial notional amount of $ 150.0 million, an effective date of May 2018 and maturity dates in 

The interest rate swaps were designated as cash flow hedges through the three months ended March 31, 2021 and de-designated as cash flow hedges during the three months ended June 30, 2021. 

The impact from the interest rate swap de-designation that was included in interest expense on the condensed consolidated statements of operations was $ 0.7 million for the three months ended March 31, 2022.

During the three months ended March 31, 2022, we terminated $ 60.9 million, or 50%, of the notional amount of our floating-to-fixed interest rate swaps in connection with the prepayment of the same amount of our term loan (see Note 15 ).

In connection with entering into the Third Amended and Restated Credit Agreement, we entered into two amortizing interest rate swaps with a combined initial notional amount of $ 150.0 million, with effective dates of May 2018 and maturity dates in 

The interest rate swaps were designated as cash flow hedges through the three months ended March 31, 2021 and de-designated as cash flow hedges during the three months ended June 30, 2021.

During the six months ended June 30, 2022, we terminated the entirety of our floating-to-fixed interest rate swaps in connection with the prepayments of our term loan (see Note 15 ). The impact to interest expense on the condensed consolidated statements of operations was $ 1.5  million and $ 2.2  million for the three and six months ended June 30, 2022 .

Commodity Swaps

As of March 31, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $ 17.9  million maturing by October 31, 2022.

The financial statement impact during the three months ended 

March 31, 2022 

was a realized gain of $ 0.4 million and an unrealized gain of $ 3.3 million.

As of March 31, 2021, we held commodity swaps for crude oil that were designated as cash flow hedges, maturing in September and October 2021.

As of June 30, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $ 15.0  million with a maturity date of 

October 31, 2022.

The financial statement impact for the three and six months ended June 30, 2022  was a realized gain of $ 2.4  million and $ 2.8 million, respectively.

In addition, for the three months ended June 30, 2022, 

the commodity swaps had an unrealized loss of $ 0.5  million, and for the six months ended June 30, 2022, the commodity swaps had an unrealized gain of $ 2.8  million.

As of June 30, 2021 , we held commodity swaps for crude oil that were designated as cash flow hedges with a total outstanding notional amount of $ 4.9 million that matured in 

October 2021.

The total commodity swap gain for these swaps was $ 1.0 million.

3 unchanged sentences

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

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

(in thousands)

18 unchanged sentences

$ 333,500  

Credit Agreement - term loan (2)

Third Amended and Restated Credit Agreement - term loan (2)

$ 123,750  

2 unchanged sentences

$ 128,639  

Fourth Amended and Restated Credit Agreement - revolver (2)

$ 50,000  

$ 50,056  

( 1 ) All marketable securities as of March 31, 2022, December 31, 2021 and March 31, 2021 

were classified as held-to-maturity and consisted of U.S. Government and agency obligations and corporate commercial paper maturing in three months to five years.

( 1 ) All marketable securities as of June 30, 2022 , 

December 31, 2021 and 

June 30, 2021 were classified as held-to-maturity and consisted of U.S. Government and agency obligations and corporate commercial paper maturing in two months to three years.

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

The fair value of the Credit Agreement is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

See Note 15  for more information about the 2.75% Convertible Notes and the Credit Agreement.

The fair value of the Third Amended and Restated Credit Agreement and Fourth Amended and Restated Credit Agreement is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

See Note 15  for more information about the 2.75% Convertible Notes, the Third Amended and Restated Credit Agreement and Fourth Amended and Restated Credit Agreement.

( 3 ) Excluded from the carrying value is debt discount of $ 22.6  million and $ 26.2  million as of 

December 31, 2021  and March 31, 2021 , respectively, related to the 2.75% Convertible Notes (see Notes 2 and 15 ).

During the three months ended March 31, 2022  and 2021 , we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

December 31, 2021  and June 30, 2021 , respectively, related to the 2.75% Convertible Notes (see Notes 2 and 15 ).

During the three and six months ended June 30, 2022  and 2021 , we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

Construction Joint Ventures

3 unchanged sentences

Based on our assessments during the 

three months ended March 31, 2022 , we determined no change was required for existing joint ventures.

three and six months ended June 30, 2022 , we determined no change was required for existing joint ventures.

Due to the joint and several nature of the performance obligations under the related owner contracts, if any of our partners fail to perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide a performance guarantee).

March 31, 2022 , there was approximately $ 0.5  billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $ 0.2  billion represented our share and the remaining $ 0.3  billion represented our partners’

June 30, 2022 , there was approximately $ 309.7  million of construction revenue to be recognized on unconsolidated construction joint venture contracts of which $ 110.3  million represented our share and the remaining $ 199.4  million represented our partners’

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

2 unchanged sentences

Consolidated Construction Joint Ventures (“CCJVs”)

March 31, 2022 , we were engaged in 

nine active CCJV projects with total contract values ranging from $ 12.0  million to $ 437.2  million for a combined total of $ 1.7  billion of which our share was $ 960.0  million.

As of March 31, 2022, our share of revenue remaining to be recognized on these CCJVs was $ 227.2  million and ranged from $ 6.5  million to $ 68.4  million by project.

June 30, 2022 , we were engaged in 

nine active CCJV projects with total contract values ranging from $ 12.1  million to $ 439.4  million for a combined total of $ 1.8  billion of which our share was $ 1.0 billion.

As of June 30, 2022 , our share of revenue remaining to be recognized on these CCJVs was $ 225.9  million and ranged from $ 4.7  million to $ 56.2  million by project.

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

1 unchanged sentence

During the 

three months ended March 31, 2022  and 2021 , total revenue from CCJVs was $ 107.6  million and $ 82.6 million, respectively.

three and six months ended June 30, 2022  and 2021 , total revenue from CCJVs was $ 119.4  million, $ 227.0  million, $ 114.9  million and $ 197.5  million, respectively.

During the 

three months ended March 31, 2022  and 2021 , CCJVs provided $( 7.6 ) million and $ 13.8  million of operating cash flows, respectively.

six months ended June 30, 2022 , CCJVs used $ 13.4  million of operating cash flows and during the six months ended June 30, 2021, CCJVs provided $ 19.4  million of operating cash flows, respectively.

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

Unconsolidated Construction Joint Ventures

March 31, 2022 , we were engaged in nine  active unconsolidated joint venture projects with total contract values ranging from $ 13.9  million to $ 3.8  billion for a combined total of $ 10.7  billion of which our share was $ 3.0  billion.

June 30, 2022 , we were engaged in eight  active unconsolidated joint venture projects with total contract values ranging from $ 12.3  million to $ 3.8  billion for a combined total of $ 9.7  billion of which our share was $ 2.7  billion.

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

March 31, 2022 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 135.7  million and ranged from $ 1.3  million to $ 36.1  million by project.

June 30, 2022 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 110.3  million and ranged from $ 1.1  million to $ 34.8  million by project.

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

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Cash, cash equivalents and marketable securities

36 unchanged sentences

( 1 ) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of 

March 31, 2022 , 

June 30, 2022 , 

December 31, 2021  and 

March 31, 2021  was $ 82.1  million, $ 82.1  million and $ 82.3  million, respectively, related to performance guarantees.

( 2 ) Included in this balance as of March 31, 2022 , December 31, 2021  and March 31, 2021 , was $ 107.5  million, $ 103.8  million and $ 95.4 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

June 30, 2021  was $ 77.4  million, $ 82.1  million and $ 82.3  million, respectively, related to performance guarantees.

( 2 ) Included in this balance as of June 30, 2022 , December 31, 2021  and June 30, 2021 , was $ 109.5  million, $ 103.8  million and $ 96.7 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 2.9  million, $ 10.7  million and $ 14.1  million related to Granite’s share of estimated recovery of back charge claims as of 

March 31, 2022 , 

June 30, 2022 , 

December 31, 2021  and 

March 31, 2021 , respectively.

June 30, 2021 , respectively.

( 3 ) Partners’

1 unchanged sentence

( 4 ) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $ 12.7  million, $ 28.6  million and $ 33.6  million as of 

March 31, 2022 , 

December 31, 2021  and March 31, 2021 , respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

Three Months Ended March 31,

June 30, 2022 , 

December 31, 2021  and June 30, 2021 , respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

1 unchanged sentence

$ 263,558  

$ 252,703  

$ 495,600  

Less partners’

2 unchanged sentences

176,657  

179,858  

328,977  

Granite’s interest

1 unchanged sentence

86,901  

$ 72,845  

$ 166,623  

Cost of revenue

1 unchanged sentence

249,494  

$ 251,083  

$ 497,564  

Less partners’

2 unchanged sentences

169,041  

161,549  

337,775  

Granite’s interest

1 unchanged sentence

80,453  

$ 89,534  

$ 159,789  

Granite’s interest in gross profit (loss)

$ ( 13,075 )  

$ 6,448  

( 16,689 )  

$ 6,834  

Net Income (Loss)

$ ( 2,871 )  

$ 13,813  

Less partners’

interest and adjustments (1)

10,730  

17,524  

Granite’s interest in net income (loss) (2)

$ ( 13,601 )  

$ 6,551  

$ ( 17,228 )  

$ 6,969  

( 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 and/or actual differences.

During each of the three months ended March 31, 

2022 and 2021 , there was a material variance on one  project 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.

( 2 ) These joint venture net income/(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

As of March 31, 2022 , we were engaged in 

three  active line item joint venture construction projects with a total contract value of $ 339.2 million of which our portion was $ 221.4  million.

March 31, 2022 , our share of revenue remaining to be recognized on these line item joint ventures was $ 64.9  million.

During the 

three months ended March 31, 2022  and 

our portion of revenue from line item joint ventures was $ 6.4  million and $ 8.6  million, respectively.

GRANITE CONSTRUCTION INCORPORATED

3 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

$ 9,619  

11 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Current assets

29 unchanged sentences

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

Of the $ 107.0  million of total affiliate assets as of March 31, 2022 , we had investments in 

Of the $ 110.5  million of total affiliate assets as of June 30, 2022 , we had investments in 

two  real estate entities with total assets of $ 77.4  million and the asphalt terminal entity had total assets of $ 33.1  million. As of 

March 31, 2022 , 

June 30, 2022 , 

December 31, 2021  and 

March 31, 2021 , all of the investments in real estate affiliates were in residential real estate in Texas.

As of March 31, 2022 , our percent ownership in the real estate entities ranged from 10 % to 

June 30, 2021 , all of the investments in real estate affiliates were in residential real estate in Texas.

As of June 30, 2022 , our percent ownership in the real estate entities ranged from 10 % to 

Property and Equipment, net

1 unchanged sentence

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Equipment and vehicles

32 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Accrued insurance

14 unchanged sentences

82,280  

Accrual for expected resolution of SEC investigation (see Note 18)

12,000  

Accrued legal settlement (see Note 18)

15 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

2.75% Convertible Notes

2 unchanged sentences

$ 203,771  

Credit Agreement - term loan

Third Amended and Restated Credit Agreement - term loan

123,750  

127,500  

Fourth Amended and Restated Credit Agreement - revolver

50,000  

8 unchanged sentences

$ 331,222  

During the three months ended March 31, 2022, $ 60.9 million of our term loan was repaid prior to its stated maturity.

As of each 

March 31, 2022 , December 31, 2021  and March 31, 2021 , $ 7.5  million of the term loan balance of the Credit Agreement was included in current maturities of long-term debt on the condensed consolidated balance sheets and the remaining $ 53.4  million, $ 116.3  million and $ 121.9  million, respectively, was included in long-term debt.

March 31, 2022 , the total unused availability under the Credit Agreement was $ 242.1  million resulting from $ 32.9  million in issued and outstanding letters of credit and no amount drawn under the revolving credit facility.

The letters of credit had expiration dates between June 2022  and 

December 2025 . 

As of March 31, 2022 , the Applicable Rate was 2.00 % for loans under the Credit Agreement bearing interest based on LIBOR and 1.00 % for loans bearing interest at the Base Rate.

During the six months ended June 

30, 2022 , we prepaid 100 % of our outstanding term loan and replaced the Third Amended and Restated Credit Agreement dated May 31, 2018 with the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) maturing June 2, 2027.

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

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

We may borrow on the Revolver, at our option, at either (a) the SOFR term rate plus a credit adjustment spread plus applicable margin ranging from 1.0 % to 2.0 %, or (b) a base rate plus an applicable margin ranging from 0.0 % to 1.0 %.

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

June 30, 2022 , the total unused availability under the Credit Agreement was $ 267.1  million, resulting from $ 32.9  million in issued and outstanding letters of credit and $ 50.0 million drawn under the Revolver.

The letters of credit had expiration dates between August 2022  and 

December 2025 . As of June 30, 2022 , the applicable rate was 1.8 % for loans under the Credit Agreement bearing interest based on SOFR and 0.8 % for loans bearing interest at the base rate.

Accordingly, the effective interest rates at 

March 31, 2022  for LIBOR and Base Rate loans were 

3.01 % and 4.50 %, respectively. We elected to use LIBOR for the term loan.

As of March 31, 2022 , the Consolidated Leverage Ratio (as defined in the Credit Agreement) was 2.58 , which did not exceed the maximum of 3.00 and the Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) was 6.07 , which was above the minimum of 4.00 .

Effective January 1, 2022, we implemented ASU 2020 - 06 (see Note 2 ), which updated our accounting for the 2.75% Convertible Notes.

As of March 31, 2022 , 

December 31, 2021  and March 31, 2021 , the carrying amount of the 2.75 % Convertible Notes was $ 230.0  million, $ 207.4  million and $ 202.0  million, respectively.

During the three months ended Mach 31, 2022, we did not record amortization of the debt discount due to the implementation of ASU 2020 - 06, and during the three months ended March 31, 

2021, we recorded $ 1.7  million of amortization of the debt discount.

During each of the three months ended March 31, 2022 and 

2021 , we recorded $ 0.3  million of amortization related to debt issuance costs.

June 30, 2022  for SOFR and base rate loans were 

3.4 % and 5.5 %, respectively.

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

The financial covenants include a maximum Consolidated Leverage Ratio of 3.25 to 

1.00 and a minimum Consolidated Interest Coverage Ratio (as defined in the amended Credit Agreement) of 3.00 to 1.00.

As of June 30, 2022 , the Consolidated Leverage Ratio was 2.57 , which did not exceed the maximum of 3.25 .

Our Consolidated Interest Coverage Ratio was 6.53 , which was above the minimum of 3.00 .

Effective January 1, 2022, we adopted ASU 2020 - 06 (see Note 2 ), which updated our accounting for the 2.75% Convertible Notes.

During the three and six months ended June 

30, 2022, we did not record amortization of the debt discount due to the implementation of ASU 2020 - 06, and during the three and six months ended June 30, 

2021, we recorded $ 1.8  million and $ 3.5  million, respectively, of amortization of the debt discount.

During the three and six months ended June 30, 2022 and 

2021 , we recorded $ 0.4  million, $ 0.7  million, $ 0.3  million and $ 0.6  million, respectively, of amortization related to debt issuance costs.

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

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except per share amounts)

Numerator (basic and diluted)

Net loss from continuing operations allocated to common shareholders

Net income (loss) from continuing operations allocated to common shareholders

$ ( 2,370 )  

Net income (loss) from discontinued operations allocated to common shareholders

Net loss allocated to common shareholders

$ 24,859  

$ ( 21,405 )  

Net income from discontinued operations allocated to common shareholders

19,521  

29,602  

$ 25,617  

$ 26,680  

Net income (loss) allocated to common shareholders

$ 17,151  

$ 54,461  

$ 4,212  

Weighted average common shares outstanding, basic

1 unchanged sentence

45,798  

45,128  

45,748  

Dilutive effect of RSUs and convertible notes

Dilutive effect of 2.75% Convertible Notes

Weighted average common shares outstanding, diluted

1 unchanged sentence

47,798  

Net loss from continuing operations per share

45,128  

Net income (loss) from discontinued operations per share

Net loss per share

45,748  

Net loss from continuing operations per share

Net income (loss) from continuing operations per share

Net income from discontinued operations per share

Net income (loss) per share

Net income (loss) from continuing operations per share

Net income from discontinued operations per share

Net income (loss) per share

Due to the net loss from continuing operations for the 

three months ended June 30, 2022  and the six months ended 

June 30, 2022  and 2021 , RSUs representing 

452,000 , 

Net income (loss) from discontinued operations per share

Net loss per share

493,000  and 

503,000  shares, respectively, and the potential dilution from the 2.75 % Convertible Notes converting into 

7,309,000 , 

Due to the net loss from continuing operations for the three months ended 

March 31, 2022  and 2021 , RSUs representing 554,000  and 

554,000 shares, respectively, and the potential dilution from the 2.75 % Convertible Notes converting into 

7,309,000 shares of common stock (see Note 1 ) for both periods have been excluded from the number of shares used in calculating diluted net loss per share, as their inclusion would have been antidilutive.

7,309,000  and 1,066,000  shares of common stock, respectively, (see Note 1 ) have been excluded from the number of shares used in calculating diluted net loss per share, as their inclusion would have been antidilutive.

 Income Taxes

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

Three Months Ended March 31,

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

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Benefit from income taxes on continuing operations

Provision for (benefit from) income taxes on continuing operations

$ 2,549  

$ 7,710  

$ ( 2,782 )  

Effective tax rate

( 630.9 %)  

22.8 %  

12.8 %  

Our effective tax rate for the 

three months ended March 31, 2022  was consistent with the same period in 

three and six months ended June 30, 2022  was lower than the prior year primarily due to a $ 12 million accrual related to the expected resolution of the SEC investigation discussed further in Note 18.

 The expected payment of $ 12 million is non-deductible for tax purposes and is recognized as a discrete adjustment in the current quarter.

The tax impact of this discrete adjustment relative to the small loss from continuing operations before income taxes results in the disproportionately large negative tax rate for the current quarter.

GRANITE CONSTRUCTION INCORPORATED

9 unchanged sentences

not  probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

The total liabilities for legal proceedings recorded as of March 31, 2022 and 

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 reasonably estimable.

The total liabilities for legal proceedings recorded as of June 30, 2022 and 

December 31, 2021 

1 unchanged sentence

The balance of the settlement escrow account is included in other current assets in the consolidated balance sheets.

March 31, 

2021, the total liabilities recorded for legal proceedings, net of insurance receivable, were $ 66.0 million. 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 reasonably estimable.

June 30, 

2021, the total liabilities recorded for legal proceedings, net of insurance receivable, were $ 66 million.

Additionally, as further discussed below, during the quarter ended June 30, 2022 , we accrued $ 12  million relating to the expected resolution of the SEC investigation.

Ordinary Course 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 often cannot be predicted with certainty.

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 

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 

1 of our Annual Report. 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 often cannot be predicted with certainty.

26 unchanged sentences

January 21, 2021, 

the court granted plaintiff’s motion for class certification. 

the court granted the plaintiff’s motion for class certification. 

October 23, 2019, 

52 unchanged sentences

Granite Construction Incorporated, et al.

requested that the Nasseri case be dismissed with prejudice in light of the final approval of the settlement. 

On April 15, 2022, the plaintiff in Nasseri v.

requested that the Nasseri case be dismissed with prejudice in light of the final approval of the settlement. On April 15, 2022, the plaintiff in Nasseri v.

Granite Construction Incorporated, et al.

27 unchanged sentences

, and the Company entered into a Stipulation of Compromise and Settlement that, if approved by the court in Davydov and not subject to termination under its terms, provides that (i) defendants will cause insurers to pay $ 7.5 million, which amount, less court-awarded attorneys’

fees and expenses, will be paid to the Company, (ii), the Company shall implement agreed upon corporate governance provisions within 30 days of final approval of the settlement, and (iii) all claims that were asserted or could have been asserted against the defendants or their related persons in Davydov v.

fees and expenses, will be paid to the Company, (ii) the Company shall implement agreed upon corporate governance provisions within 30 days of final approval of the settlement, and (iii) all claims that were asserted or could have been asserted against the defendants or their related persons in Davydov v.

Roberts, et al.

, or any other proceeding on behalf of the Davydov plaintiff, the English plaintiff, the Company or any Granite stockholder, will be released. 

On April 14, 2022, the plaintiff in Davydov v.

, or any other proceeding on behalf of the Davydov plaintiff, the English plaintiff, the Company or any Granite stockholder, will be released. On April 14, 2022, the plaintiff in Davydov v.

Roberts, et al.

filed the Stipulation of Compromise and Settlement and a proposed scheduling order for a hearing in the Delaware Court of Chancery for review of the settlement. 

The Court in English v.

filed the Stipulation of Compromise and Settlement and a proposed scheduling order for a hearing in the Delaware Court of Chancery for review of the settlement. The Court in English v.

Roberts, et al.

2 unchanged sentences

Roberts, et al.

As of March 31, 2022, 

 The Delaware Court of Chancery held a fairness hearing concerning its review of the settlement on July 12, 2022.

As of June 30, 2022, 

December 

2021 and March 31, 2021, 

2021 and June 30, 2021, 

other than the Settlement Agreement charge described above, we did 

5 unchanged sentences

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 continue to cooperate with the SEC in its investigation.

We have produced documents to the SEC and cooperated with the SEC in its investigation.

Based upon our current estimate for the expected resolution of the SEC’s investigation, we recorded a $ 12 million accrual in the second quarter of 2022, which is reflected in other costs in the condensed consolidated statements of operations for the three and six months ended June 30, 2022 and in accrued expenses and other current liabilities on the condensed consolidated balance sheet as of June 30, 2022.

We have not reached a final resolution of these matters with the SEC and we cannot predict when a settlement, if finally agreed, would become final, nor whether any of the proposed terms, including the penalty amount, may change in connection with a final resolution.

Our wholly-owned subsidiary, Layne, was a subcontractor on the foundation for the Salesforce Tower office building in San Francisco in 

14 unchanged sentences

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. On April 8, 2022, we filed a demurrer seeking to dismiss the Steadfast lawsuit.

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.

)  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.

CHDJV subsequently dismissed Granite and added Layne as a respondent to the arbitration.

On March 8, 2022, we filed a motion to dismiss the CHDJV arbitration. On April 8, 2022, we filed a demurrer seeking to dismiss the Steadfast lawsuit.

On May 6, 2022, CHDJV consolidated its claims with those of Steadfast and joined as a plaintiff in the Steadfast lawsuit, and on May 16, 2022, the arbitration was stayed. We believe Layne has multiple defenses and counterclaims to the claims at issue. Layne intends to vigorously defend against the claims and prosecute its counterclaims, but we cannot provide assurance that 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.

15 unchanged sentences

Summarized segment information is as follows:

Three months ended March 31,

Construction  

Materials  

Three months ended June 30,

Total revenue from reportable segments

$ 474,935  

$ 89,554  

$ 564,489  

Elimination of intersegment revenue

( 16,903 )  

Revenue from external customers

$ 474,935  

$ 72,651  

$ 547,586  

$ 48,192  

$ 1,583  

$ 49,775  

Depreciation, depletion and amortization

$ 7,794  

$ 6,333  

$ 14,127  

Total revenue from reportable segments

Elimination of intersegment revenue

Revenue from external customers

Depreciation, depletion and amortization

Six months ended June 30,

Total revenue from reportable segments

Elimination of intersegment revenue

Revenue from external customers

Depreciation, depletion and amortization

Segment assets

$ 363,029  

$ 354,420  

$ 717,449  

Total revenue from reportable segments

$ 506,971  

$ 70,452  

$ 577,423  

Elimination of intersegment revenue

( 11,091 )  

Revenue from external customers

$ 506,971  

$ 59,361  

$ 566,332  

$ 52,769  

$ 53,712  

Depreciation, depletion and amortization

$ 6,618  

$ 5,337  

$ 11,955  

Segment assets

$ 360,894  

$ 329,815  

$ 690,709  

A reconciliation of segment gross profit from continuing operations to consolidated loss from continuing operations before benefit from income taxes is as follows:

Three Months Ended March 31,

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:

Three months ended June 30,

Six months ended June 30,

Total gross profit from continuing operations

$ 49,775  

$ 53,712  

Selling, general and administrative expenses

58,501  

61,161  

Other costs (see Note 7)

74,309  

Gain on sales of property and equipment

( 332 )  

Total other expense, net

Loss from continuing operations before benefit from income taxes

$ ( 21,248 )  

Income (loss) from continuing operations before income taxes

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1 unchanged sentence

Forward-Looking Disclosure

From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, and results, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,”

From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results, strategic actions, the final settlement of the Accelerated Share Repurchase, the expected resolution of the SEC investigation and the sales of the Water Resources and Mineral Services businesses, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,”

“outlook,”

29 unchanged sentences

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

economy including access to resources (labor, supplies and subcontractors);

(ii) federal, state and local public funding levels;

5 unchanged sentences

Funding for our public work projects, which accounts for approximately 75% of our portfolio, is dependent on federal, state, regional and local revenues.

At the federal level, President Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) on November 15, 2021.

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

With the 2022 federal spending bill passed by Congress and signed by President Biden in March 2022, the first installment of IIJA can begin to be appropriated to infrastructure spending programs.

We believe the increased multi-year spending commitment will improve the programming visibility for state and local governments and bring meaningful impact to project lettings starting in late 2022 and then growing in 2023 and beyond.

At the federal level, the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) was enacted in November 2021 with the appropriation of funds included in the 2022 federal spending bill passed by the Administration in March 2022. The five-year IIJA provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in related incremental funding. We continue to believe that the increased multi-year spending commitment will improve the programming visibility for state and local governments and bring meaningful impact to project lettings starting in late 2022 and then growing in 2023 and beyond. We anticipate the impact to our financial statements to gradually grow in 2023 and beyond as funds are allocated first to quicker turn projects and then later to more complex larger projects.

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

In the November 2021 elections, voters in 17 states approved 89% of state and local ballot initiatives that will provide an additional $6.9 billion in one-time and recurring revenue for transportation improvements.

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

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

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

Revenue collected through SB-1 is on track to increase over the next five years and supports our expected growth in the state.

Over the past year, segments of the construction industry were adversely affected by inflation as well as supply chain and labor constraints. Inflation has impacted the cost of inputs such as oil related items, concrete and steel. We continually monitor the expected movement of our construction input costs and apply strategies to mitigate the impacts including adjusting the pricing of our contracts.

One of the most significant impacts to our results of operations has been the increase in price of diesel fuel and liquid asphalt. The conflict in Ukraine has further increased oil prices since late February 2022.

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

Granite’s Committed and Awarded Projects (“CAP”) continues to be strong.

During 2021, we saw increased interest in best-value or alternative delivery procurement work by state departments of transportation, such as California and Utah, along with other state agencies. This shift in delivery procurement methodology creates a delay in certain project bookings and project start times in the short term, but we believe will give us the opportunity for larger future work with more sustainable margins and less inherent risk. 

While we are encouraged by the growth outlook, the COVID-19 pandemic continues to create uncertainties to the economy and the normal cadence of project bids, and could adversely impact our operations and financial results in future periods.

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

While it is impossible to fully eliminate the impact of these factors, we have applied proactive measures such as fixed forward purchase contracts of oil related inputs and adjustment of project schedules for constraints related to construction materials such as concrete. In June 2022, we completed the purchase of a liquid asphalt terminal in California. The facility provides 170,000 barrels of liquid asphalt storage to address oil price volatility and allows Granite to expand into new, more sustainable product offerings such as asphalt modified with recycled materials. While we actively work to mitigate the impacts of oil price inflation, further price increases may adversely impact us in the future.

Granite’s Committed and Awarded Projects (“CAP”) continues to be strong with an increase from the first quarter of $278.9 million to $4.2 billion at the end of the second quarter.

We believe the environments in our key markets are strong and will continue to grow as funding from IIJA is allocated for projects beginning in the second half of 2022.

Strategic Actions

The planned divestitures of the businesses in our former Water and Mineral Services operating group (“WMS”) reflects our new strategy to focus on our core civil construction and materials businesses by using sale proceeds to invest in these two businesses.

The planned divestitures of the businesses in our former Water and Mineral Services operating group (“WMS”) reflect our new strategy to focus on our core civil construction and materials businesses by using sale proceeds to invest in these two businesses.

The divestitures also create opportunities to streamline operational support functions, improve overhead efficiency and better leverage efficiencies of scale.

2 unchanged sentences

presence, capabilities and resources provide strategic advantages, with improved and consistent margin expectations.

The sale of our trenchless and pipe rehabilitation services business (“Inliner”) was completed on March 16, 2022 for a purchase price of $159.7 million, and we received cash proceeds of $142.6 million based on preliminary post-closing adjustments (see Note 3 of “Notes to the Condensed Consolidated Financial Statements”).

We ended the first quarter of 2022 with a strong balance sheet and liquidity providing flexibility to invest to strengthen and expand our home market footprint.

Litigation Matter

The sale of our trenchless and pipe rehabilitation services business (“Inliner”) was completed on March 16, 2022 for a purchase price of $159.7 million, subject to certain adjustments.

As a result of the sale, we received cash proceeds of $142.6 million based on preliminary post-closing adjustments and we recognized a gain of $6.2 million. The process to sell the remaining two businesses in the former WMS operating group is proceeding as planned with completion anticipated by the end of the year. 

Litigation and SEC Matters

As further discussed in Note 18 of “Notes to the Condensed Consolidated Financial Statements,”

in early February 2022, our wholly-owned subsidiary, Layne Christensen Company (“Layne”), was sued for $70 million and Granite received an arbitration demand for $30 million relating to Layne’s work on the Salesforce Tower foundation.

Layne was a subcontractor on this project and potential liability for this project remained with Layne in connection with our acquisition of Layne in June 2018. 

See Note 18 and "In connection with acquisitions or divestitures, we may become subject to liabilities”

our wholly owned subsidiary, Layne Christensen Company (“Layne”), has been sued for $100 million relating to Layne’s work on the Salesforce Tower foundation.

Layne was a subcontractor on this project and potential liability for this project remained with Layne in connection with our acquisition of Layne in June 2018. See Note 18 and "In connection with acquisitions or divestitures, we may become subject to liabilities”

and "We are involved in lawsuits and legal proceedings in the ordinary course of our business and may in the future be subject to other litigation and legal proceedings, and, if any of these are resolved adversely against us, it could harm our business, financial condition and results of operations”

Risk Factors in our Annual Report for additional information.

Additionally, as further discussed in Note 18 of “Notes to the Condensed Consolidated Financial Statements,”

we accrued $12 million relating to the expected resolution of the SEC investigation.

Results of Operations

1 unchanged sentence

Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year.

The following table presents a financial summary for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following table presents a financial summary for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

2 unchanged sentences

Other costs (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”)

Operating loss

Operating income (loss)

Total other expense, net

Net loss from continuing operations

Net income (loss) from discontinued operations (see Note 3 of "Notes to the Condensed Consolidated Financial Statements")

Net income (loss) from continuing operations

Net income from discontinued operations (see Note 3 of "Notes to the Condensed Consolidated Financial Statements")

Amount attributable to non-controlling interests from continuing operations

Net loss attributable to Granite Construction Incorporated

Net income (loss) attributable to Granite Construction Incorporated

Total Revenue by Segment  

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Construction Revenue

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Construction revenue for the three months ended March 31, 2022 decreased by $32.0 million, or 6.3%, when compared to 2021.

These decreases were primarily driven by lower Committed and Awarded Projects (“CAP”) and progression on existing projects in the Central operating group and less favorable weather conditions in the current year in the California operating group.

These decreases were partially offset by increased revenue in the Mountain operating group. During the three months ended March 31, 2022 and 2021, the majority of revenue earned in the Construction segment was from the public sector.

Construction revenue for the three and six months ended June 30, 2022 decreased by $81.2 million and $113.2 million, or 11.4% and 9.3%, respectively, when compared to 2021.

These decreases were primarily driven by the wind down of several large projects in the Central operating group, as well as delayed project awards, slower progress on existing projects due to supply chain disruptions in the current year and less favorable weather conditions in the first quarter of 2022 in the California operating group.

These decreases were partially offset by increased revenue in the Mountain operating group. 

During the three and six months ended June 30, 2022 and 2021, the majority of revenue earned in the Construction segment was from the public sector.

Materials Revenue 

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Materials revenue for the three months ended March 31, 2022 increased by $13.3 million, or 22.4%, when compared to 2021 driven by increases in aggregate and asphalt volumes in all three operating groups.

Materials revenue for the three and six months ended June 30, 2022 increased by $14.8 million and $28.1 million, or 12.2% and 15.5%, respectively, when compared to 2021 driven by overall market demands driving higher sales volumes with both aggregates and asphalt, and in the second quarter of 2022 we implemented energy surcharges to cover cost increases.

Committed and Awarded Projects

Effective during the three months ended June 30, 2021, on a retroactive basis, we renamed contract backlog to CAP and added the general construction portion of construction management/general contractor (“CM/GC”) contracts.

This is the same presentation used in our quarterly reports, earnings calls and press releases.

Prior period amounts have been revised to reflect this change.

In line with the revised reportable segments, all CAP is now in the Construction segment.

CAP consists of two components:

4 unchanged sentences

Certain government contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed.

Other awards include the general construction portion of CM/GC contracts and awarded contracts with unexercised contract options or unissued task orders.

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

Other awards include the general construction portion of construction management/general contractor (“CM/GC”) contracts and awarded contracts with unexercised contract options or unissued task orders.

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

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

In line with the revised reportable segments, all CAP is now in the Construction segment.

(dollars in thousands)

March 31, 2022

December 31, 2021

June 30, 2022

March 31, 2022

June 30, 2021

Unearned revenue

(dollars in thousands)

March 31, 2022

December 31, 2021

June 30, 2022

March 31, 2022

CAP of $3.9 billion at March 31, 2022 remained relatively unchanged when compared to December 31, 2021.

Significant new awards during the three months ended March 31, 2022 included a $32 million highway realignment project in the California operating group, a $22 million train station track and platform expansion project in the California operating group and a $20 million road improvement contract in Arizona for the Central operating group.

June 30, 2021

CAP of $4.2 billion at June 30, 2022 increased $0.3 billion when compared to March 31, 2022.

Significant new awards during the three months ended June 30, 2022 included a $200 million award for street work in Illinois, a $55 million road improvement project in Alaska, $38 million for rehabilitation, construction improvements and bridge replacement projects in California, a $36 million infrastructure project in Guam, a $15 million restoration project in California, a $13 million resurfacing project in Alaska and a $10 million highway median fill project in California.

Non-controlling partners’

share of CAP as of March 31, 2022, December 31, 2021 and March 31, 2021 was $177.1 million, $214.3 million and $321.3 million, respectively.

At March 31, 2022, four contracts had total forecasted losses with remaining revenue of $176.4 million, or 4.5%, of total CAP.

share of CAP as of June 30, 2022, December 31, 2021 and June 30, 2021 was $165.2 million, $214.3 million and $273.6 million, respectively.

At June 30, 2022, six contracts had total forecasted losses with remaining revenue of $178.5 million, or 4.2%, of total CAP.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

3 unchanged sentences

Percent of total revenue

Construction gross profit for the three months ended March 31, 2022 decreased by $4.6 million, or 8.7%, when compared to 2021 primarily due to lower revenue and progression of lower margin work early in the year.

Materials gross profit for the three months ended March 31, 2022 increased by $0.6, or 67.9% when compared to 2021 due to increases in aggregate and asphalt volumes as well as price increases and oil price mitigation efforts such as bulk purchases and forward contracts that offset the impact of higher fuel and liquid asphalt costs.

Construction gross profit for the three and six months ended June 30, 2022 decreased by $15.1 million and $19.7, or 19.8% and 15.3%, respectively, when compared to 2021 primarily due to an increase in the negative net impact from revisions in estimates in our Central operating group (see Note 4 of "Notes to the Consolidated Financial Statements").

Materials gross profit for the three and six months ended June 30, 2022 decreased by $4.7 million and $4.0 million, or 21.2% and 17.5%, respectively, when compared to 2021 primarily due to lower asphalt volumes in California and overall higher fuel costs. Although we implemented energy surcharges in the second quarter of 2022 to cover increased fuel costs, contracts we had in place without energy surcharge clauses or prior to our surcharge taking effect are still being burned through at the lower sales price.

Selling, General and Administrative Expenses

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

13 unchanged sentences

Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses.

Selling expenses for the three months ended March 31, 2022 remained relatively unchanged when compared to 2021.

Selling expenses for the three and six months ended June 30, 2022 remained relatively unchanged when compared to 2021.

General and Administrative Expenses

1 unchanged sentence

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

Total general and administrative expenses for the three months ended March 31, 2022 decreased by $2.6 million, or 5.9%, when compared to 2021, primarily due to decreases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is offset in other (income) expense, net, through our own company-owned life insurance policy.

Total general and administrative expenses for the three months ended June 30, 2022 decreased by $6.1 million, or 14.1%, and for the six months ended June 30, 2022 decreased by $8.7 million, or 10.0%, when compared to 2021, primarily due to decreases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is offset in other (income) expense, net, through our own company-owned life insurance policy.

The following table presents other costs for the respective periods:

Three Months Ended March 31,

(dollars in thousands)

Other costs (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”) for the three months ended March 31, 2022 decreased $66 million when compared to 2021, primarily due to the legal settlement charge during the three months ended March 31, 2021.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Other costs (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”) for the three and six months ended June 30, 2022 increased $14.3 million and decreased $51.8 million when compared to 2021, respectively.

The three months ended June 30, 2022 includes an accrual of $12 million for the expected resolution of the SEC investigation.

The six months ended June 30, 2021 includes a $66 million legal settlement charge.

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

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

Benefit from income taxes on continuing operations

Provision for (benefit from) income taxes on continuing operations

Effective tax rate

4 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

1 unchanged sentence

The amount attributable to non-controlling interests represents the non-controlling owners’

share of the income or loss of our consolidated construction joint ventures. The amount for the three months ended March 31, 2022 increased $2.2 million, primarily due to net negative impacts from revisions in estimates on two projects in the prior year, neither of which had an impact of $5 million or more on gross profit.

share of the income or loss of our consolidated construction joint ventures. The amounts for the three and six months ended June 30, 2022 decreased $1.9 million and increased $0.4 million, respectively, primarily due to impacts from revisions in estimates.

Net Income (Loss) from Discontinued Operations

Net income (loss) from discontinued operations for the three months ended March 31, 2022 increased $9.0 million when compared to 2021 primarily due to the gain on sale of Inliner as well as ceasing depreciation and amortization on WMS property, plant and equipment, finite-lived intangible assets and right-of-use lease assets in the current year due to the classification of these assets as held-for-sale beginning December 31, 2021 (see Note 3 of “Notes to the Condensed Consolidated Financial Statements”).

Net income (loss) from discontinued operations for the three and six months ended June 30, 2022 decreased $10.1 million and $1.1 million, respectively, when compared to the same periods in 2021 primarily due to lower gains on sales of property in the current year and removal of Inliner's results due to the sale of Inliner in March 2022.

These decreases were partially offset by the gain on sale of Inliner during the six months ended June 30, 2022 as well as ceasing depreciation and amortization on property, plant and equipment, finite-lived intangible assets and right-of-use lease assets in 2022 due to the classification of these assets as held-for-sale beginning December 31, 2021 (see Note 3 of “Notes to the Condensed Consolidated Financial Statements”).

Liquidity and Capital Resources

4 unchanged sentences

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

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

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

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

As of March 31, 2022, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting primarily of U.S. Government and agency obligations and corporate commercial paper.

Our credit facility consists of a term loan and a revolving credit facility.

During the three months ended March 31, 2022, $60.9 million of the term loan was repaid prior to its stated maturity. Of the $275.0 million revolving credit facility capacity, $242.1 million was available for borrowing at March 31, 2022.

As of June 30, 2022, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting primarily of U.S. Government and agency obligations and corporate commercial paper.

As of June 30, 2022, we had $19.9 million of receivables and $27.1 million of contract retention receivable from Brightline Trains Florida LLC (“Brightline”) (see Note 8 of “Notes to the Condensed Consolidated Financial Statements”).

Brightline is currently experiencing delays in securing additional funding, and as a result, $16.5 million of the receivable balance was past due as of June 30, 2022. We did not deem these balances uncollectible as of June 30, 2022, however we have taken steps to mitigate the risk of non-payment and preserve our rights under our contract with Brightline. We received $6.0 million from Brightline on July 1, 2022, however the timing and probability of future payments is uncertain and if Brightline does not pay the outstanding balances, our liquidity could decrease. 

During the six months ended June 30, 2022, we prepaid 100% of our outstanding term loan and replaced the Third Amended and Restated Credit Agreement dated May 31, 2018 with the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) maturing June 2, 2027.

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

As of June 30, 2022, the total unused availability under the Credit Agreement was $267.1 million, resulting from $32.9 million in issued and outstanding letters of credit and $50.0 million drawn under the Revolver.

See Note 15 of “Notes to the Condensed Consolidated Financial Statements”

for further discussion regarding the credit agreement.

for further discussion regarding the Revolver.

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

1 unchanged sentence

(in thousands)

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

Cash and cash equivalents excluding CCJVs

8 unchanged sentences

and agency obligations and corporate commercial paper as of all periods presented.

Granite’s portion of CCJV cash and cash equivalents was $57.7 million, $54.4 million and $64.2 million as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. Excluded from the table above is:

Granite’s portion of CCJV cash and cash equivalents was $45.8 million, $54.4 million and $62.3 million as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively. Excluded from the table above is:

 •

$53.6 million, $56.5 million and $54.1 million as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents

$45.1 million, $56.5 million and $47.5 million as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents

 •

$7.5 million, $16.5 million and $12.1 million as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively, that is included in current assets held-for-sale

$8.6 million, $16.5 million and $15.6 million as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively, that is included in current assets held-for-sale

Capital Expenditures

During the 

three months ended March 31, 2022, we had capital expenditures of $

six months ended June 30, 2022, we had capital expenditures of $

73.2 million, including $

1 unchanged sentence

o $46.4 mi llion, including $

3.3 million related to discontinued operations during the three months ended March 31, 

7.8 million related to discontinued operations during the six months ended

June 30, 2021.

The increase year over year is primarily due to earlier procurement of equipment due to supply chain disruptions and acquisition of material reserves in 2022.

Major capital expenditures are typically for aggregate and asphalt production facilities, aggregate reserves, construction equipment, buildings and leasehold improvements and investments in our information technology systems.

1 unchanged sentence

We currently anticipate 2022 capital expenditures for continuing operations to be between approximately $100 million and $115 million.

Three months ended March 31,

Six months ended June 30,

(in thousands)

3 unchanged sentences

Financing activities

Operating activities

Operating activities. 

As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts. Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the work that we perform, including claim and back charge settlements.

3 unchanged sentences

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

Cash used in operating activities of $

50.2 million for the 

three months ended March 31, 2022 represents an $

88.3 million increase in cash used when compared to cash provided in the same period of 

2021. This change was primarily due to an increase in cash used of $

80.9 million due to changes in working capital (excluding the $66.0 million net decrease in working capital related to the securities litigation settlement), partially offset by a decrease in cash used of $

50.7 million (including the $66.0 million in net securities litigation settlement charges) due to lower net loss and adjustments for non-cash items and a decrease of $

7.9 million in contributions, net of distributions, to unconsolidated joint ventures and affiliates.

The decrease in cash used in working capital was primarily due to increases of receivables and contract assets, net.

Related to the securities litigation settlement discussed in Note 18 of “Notes to the Condensed Consolidated Financial Statements,”

we have separately presented the $129.0 million liability and the associated $63.0 million insurance receivable in the condensed consolidated statement of cash flows for the three months ended March 31, 2021.

The liability was paid and the receivable was collected in October 2021;

therefore, the impact on operating cash flow occurred in the fourth quarter of 2021 and there was no impact during the three months ended March 31, 2022 or 2021.

Cash used in operating activities of $

103.3 million for the

six months ended June 30, 2022 represents a $

72.3 million increase in cash used when compared to the same period of

The change was primarily attributable to the timing of receipts and payments of working capital, which includes receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities.

Cash used in working capital increased by $70.6 million.

Cash used in operating activities also increased $15.2 million due to a decrease in net income (loss), net of adjustments for non-cash items and the changes related to the accrual for the expected resolution of the SEC investigation and the litigation settlement described in Note 18.

These increases in net cash used were partially offset by a $13.5 million decrease in contributions, net of distributions, to unconsolidated joint ventures and affiliates.

Related to the litigation settlements discussed in Note 18 of “Notes to the Condensed Consolidated Financial Statements,”

we have separately presented the $129 million liability and the associated $63 million insurance receivable in the condensed consolidated statement of cash flows for the six months ended June 30, 2021.

The insurance receivable was collected and the liability was paid to the Court in October 2021;

therefore, the impact on operating cash flow occurred in the fourth quarter of 2021 and there was no impact during the six months ended June 30, 2022 and 2021.

Investing activities

Cash provided by investing activities of $89.4 million for the three months ended March 31, 2022 represents a $105.7 million increase when compared to 2021.

The change was primarily due to proceeds from the sale of the Inliner business.

Cash provided by investing activities of $30.3 million for the six months ended June 30, 2022 represents a $28.7 million increase when compared to 2021.

The change was primarily due to proceeds from the sale of the Inliner business, partially offset by purchases of marketable securities and property and equipment and a decrease in proceeds from sales of property and equipment.

Financing activities

Cash used in financing activities of $82.9 million for the three months ended March 31, 2022 represents a $77.9 million increase when compared to 2021.

The change was primarily due to the prepayment of $60.9 million of our term loan as well as repurchases of common stock of $20.2 million.

Cash used in financing activities of $157.1 million for the six months ended June 30, 2022 represents a $143.4 million increase when compared to 2021.

The change was primarily due to the prepayment of our term loan of $124.7 million and repurchases of common stock (inclusive of our accelerated share repurchase) of $70.4 million, partially offset by $50.0 million drawn on our Revolver. The net debt paydown was undertaken at the time the Credit Agreement was entered (see Note 15 to “Notes to the Condensed Consolidated Financial Statements”

for further information), to bring our cash balance in line with projected cash needs for the second half of 2022.

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

4 unchanged sentences

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

At March 31, 2022, approximatel y $2.2 billion of our $3.9 billion CAP was bonded.

At June 30, 2022, approximatel y $2.5 billion of our $4.2 billion CAP was bonded.

Performance bonds do not have stated expiration dates;

6 unchanged sentences

Covenants and Events of Default

Our Third Amended and Restated Credit Agreement dated May 18, 2021, as subsequently amended (the “Credit Agreement”) requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below.

Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below.

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

6 unchanged sentences

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

As of March 31, 2022, the Consolidated Leverage Ratio was 2.58, which did not exceed the maximum of 3.00.

As of June 30, 2022, the Consolidated Leverage Ratio was 2.57, which did not exceed the maximum of 3.25.

Our Consolidated Interest Coverage Ratio was 6.53, which was above the minimum of 3.00.

Share Repurchase 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 (the “2016 authorization”). As part of the 2016 authorization, we established a plan to facilitate common stock repurchases. 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.

During the three months ended March 31, 2022, we repurchased 611,000 shares under the 2022 authorization. As of March 31, 2022, $281.5 million of the authorization remained available.

The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors.

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”). 

On May 2, 2022, we entered into an accelerated share repurchase transaction with Bank of Montreal.

We paid $50.0 million to the bank and received 80% of the notional amount, or $40.0 million, in shares using the closing price on the trade date.

This equated to approximately 1.32 million shares, which were immediately retired. The final number of shares to be repurchased under the accelerated share repurchase will be based on the average of the daily volume-weighted average price of Granite’s common stock, less a discount, during the term of the accelerated share repurchase; final settlement is expected to occur in the third quarter of 2022.

Website Access

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements