What changed in this filing

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Item 1. Financial Statements

2022-10-27 compared with 2022-07-28 · 552 added, 597 removed, 1409 unchanged (45% of the section changed)

3 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

June 30, 2021

September 30, 2021

Current assets

26 unchanged sentences

392,641  

184,267  

Total current assets

29 unchanged sentences

86,409  

Noncurrent assets held-for-sale

$ 2,407,964  

1 unchanged sentence

$ 2,561,756  

$ 2,478,898  

LIABILITIES AND EQUITY

18 unchanged sentences

83,408  

79,487  

Total current liabilities

14 unchanged sentences

67,951  

Long-term liabilities held-for-sale

10,576  

Commitments and contingencies (see Note 18)

2 unchanged sentences

issued and outstanding:

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

43,723,658 shares as of September 30, 2022, 45,840,260 shares as of December 31, 2021 and 45,826,409 shares as of September 30, 2021

Additional paid-in capital

27 unchanged sentences

(Unaudited - in thousands, except per share data)

Three Months Ended June 30,  

Six Months Ended June 30,  

$ 632,260  

$ 713,425  

$ 1,107,195  

$ 1,220,396  

136,026  

121,246  

208,677  

180,607  

Three Months Ended September 30,

Nine Months Ended September 30,

Total revenue

768,286  

834,671  

1,315,872  

1,401,003  

Cost of revenue

571,094  

637,158  

997,837  

1,091,360  

118,712  

99,281  

189,780  

157,699  

Total cost of revenue

689,806  

736,439  

1,187,617  

1,249,059  

78,480  

98,232  

128,255  

151,944  

Selling, general and administrative expenses

53,162  

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 )  

( 1,052 )  

( 717 )  

Operating income (loss)

34,788  

( 11,082 )  

Other costs, net (see Note 7)

Gain on sales of property and equipment, net (see Note 13)

Operating income

Other (income) expense

Interest income

( 782 )  

( 162 )  

( 1,405 )  

Interest expense

10,874  

Equity in income of affiliates, net

( 541 )  

( 2,607 )  

( 235 )  

Other (income) expense, net

( 1,800 )  

Total other expense, net

10,570  

Income (loss) from continuing operations before income taxes

( 404 )  

33,855  

( 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 )  

( 2,535 )  

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):

Basic continuing operations per share

$ ( 0.05 )  

$ 0.54  

$ ( 0.47 )  

Basic discontinued operations 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 earnings (loss) per share

$ 0.39  

$ 1.14  

$ 0.10  

Total other (income) expense, net

Income before income taxes

Provision for (benefit from) income taxes

Amount attributable to non-controlling interests

Net income attributable to Granite Construction Incorporated

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

Basic earnings per share

Diluted earnings per share

Weighted average shares outstanding:

44,534  

45,798  

45,128  

45,748  

44,534  

47,798  

45,128  

45,748  

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

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited - in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Three Months Ended September 30,

Nine Months Ended September 30,

Other comprehensive income (loss), net of tax:

Net unrealized gain (loss) on cash flow hedges

reclassification for net gains included in interest expense

Net unrealized gain (loss) on cash flow hedges, net of tax

reclassification for net gains included in interest expense, net of tax

Foreign currency translation adjustments, net

Other comprehensive income

Comprehensive income (loss)

Non-controlling interests in comprehensive (income) loss

Comprehensive income (loss) attributable to Granite Construction Incorporated

Other comprehensive income (loss), net of tax

Comprehensive income, net of tax

Non-controlling interests in comprehensive income, net of tax

Comprehensive income attributable to Granite Construction Incorporated, net of tax

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

11 unchanged sentences

Total Equity  

Balances at March 31, 2022

Balances at June 30, 2022

44,078,469  

10 unchanged sentences

69,289  

Other comprehensive income

Repurchases of common stock (1)

Other comprehensive loss

( 1,853 )  

Repurchases of common stock (1)

( 378,790 )  

( 346 )  

( 350 )  

Restricted stock units (“RSUs”) vested

4 unchanged sentences

Transactions with non-controlling interests

( 3,425 )  

Stock-based compensation expense and other

Balances at June 30, 2022

( 15 )  

( 76 )  

Balances at September 30, 2022

43,723,658  

3 unchanged sentences

$ 35,621  

Balances at March 31, 2021

$ 986,744  

Balances at June 30, 2021

45,818,719  

5 unchanged sentences

$ 988,242  

Net income (loss)

35,043  

Other comprehensive income

( 2,620 )  

32,423  

Other comprehensive loss

( 717 )  

Repurchases of common stock (1)

9 unchanged sentences

( 26 )  

Balances at June 30, 2021

( 72 )  

Balances at September 30, 2021

45,826,409  

4 unchanged sentences

$ 37,169  

$ 1,022,354  

Balances at December 31, 2021

18 unchanged sentences

979,145  

Net income (loss)

77,605  

( 1,569 )  

76,036  

Other comprehensive income

10 unchanged sentences

Stock-based compensation expense and other

Balances at June 30, 2022

44,078,469  

Balances at September 30, 2022

43,723,658  

15 unchanged sentences

23,309  

( 462 )  

22,847  

Other comprehensive income

13 unchanged sentences

( 203 )  

Balances at June 30, 2021

Balances at September 30, 2021

45,826,409  

5 unchanged sentences

$ 1,022,354  

(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. 

(1) This amount represents employee tax withholding for RSUs vested under our 2012 and 2021 Equity Incentive Plans and stock repurchased, 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 )

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

Net income (loss)

$ 76,036  

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

$ 22,847  

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

Depreciation, depletion and amortization

2 unchanged sentences

Amortization related to long-term debt (see Note 15)

Gain on sale of discontinued operations (see Note 3)

Gain on sale of business (see Note 3)

( 6,234 )  

2 unchanged sentences

Deferred income taxes

( 17,819 )  

Stock-based compensation

1 unchanged sentence

23,585  

Net loss from affiliates

Net income from affiliates

( 9,656 )  

Other non-cash adjustments

( 84 )  

Changes in assets and liabilities:

Deposit/insurance receivable for legal settlement (see Note 18)

Insurance receivable for legal settlement (see Note 18)

( 94,233 )  

5 unchanged sentences

Distributions from unconsolidated construction joint ventures and affiliates

14,379  

Other assets, net

3 unchanged sentences

47,223  

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

12,000  

Accrual for legal settlement (see Note 18)

2 unchanged sentences

28,694  

Net cash used in operating activities

Net cash provided by (used in) operating activities

$ ( 14,631 )  

$ 59,922  

Investing activities

1 unchanged sentence

( 59,810 )  

Maturities of marketable securities

15,000  

Purchases of property and equipment

3 unchanged sentences

58,002  

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

Proceeds from the sale of business (see Note 3)

142,571  

2 unchanged sentences

Collection of notes receivable

Net cash provided by investing activities

$ 30,317  

Net cash provided by (used in) investing activities

$ 13,874  

10 unchanged sentences

11,925  

15,701  

Distributions to non-controlling partners

3 unchanged sentences

$ ( 157,814 )  

Net decrease in cash, cash equivalents and restricted cash

( 230,016 )  

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

413,655  

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

( 158,571 )  

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

27,913  

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

413,655  

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

437,648  

Cash and cash equivalents of continuing operations at end of period

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

$ 255,084  

4 unchanged sentences

$ 13,731  

Cash paid for operating lease liabilities

Cash paid during the period for:

Operating lease liabilities

$ 17,135  

$ 16,967  

Cash paid during the period for:

$ 7,397  

13 unchanged sentences

Accrued equipment purchases

$ ( 5,149 )  

$ 3,024  

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

1 unchanged sentence

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

Basis of Presentation: 

The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,”

6 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 

June 30, 2022  and 

September 30, 2022  and 

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

13 unchanged sentences

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:

2 unchanged sentences

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.

This equated to approximately 1.32 million shares, which were immediately retired.

On August 31, 2022, the reference period ended and on September 2, 2022 Granite received an additional 0.37 million shares, which were immediately retired.

The final share delivery was based on the average of the daily volume-weighted average prices of Granite’s common stock, less a discount, during the reference period.

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.

As a result, WMS is presented in the condensed consolidated statements of operations as discontinued operations for all periods presented.

Current and non-current assets and liabilities of these businesses are presented in the condensed consolidated balance sheets as assets and liabilities held for sale.

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

Discontinued Operations:

During the fourth quarter of 2021, we concluded that the assets and liabilities of our former Water and Mineral Services operating group (“WMS”) met the criteria for classification as held for sale and the results of operations were presented as discontinued operations.

This included:

our trenchless and pipe rehabilitation services business (“Inliner”);

our water supply, treatment, delivery and maintenance business (“Water Resources”);

and our mineral exploration drilling business (“Mineral Services”).

During the first quarter of 2022, we completed the sale of Inliner. As discussed in more detail in Note 3, in the third quarter of 2022, we determined that the remaining WMS businesses, Water Resources and Mineral Services, 

no longer met the criteria for classification as held for sale, and therefore also no longer qualified for presentation as discontinued operations.

We reclassified WMS from discontinued operations to continuing operations and it is reported within the Mountain operating group.

The operations of the remaining WMS businesses fall within the Construction segment.

Prior periods presented in the condensed consolidated statements of operations have been conformed to the current period presentation.

The assets and liabilities of WMS met the criteria for classification as held for sale as of December 31, 2021, therefore our condensed consolidated balance sheet continues to reflect these assets and liabilities as held for sale as of that date.

Seasonality: 

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

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

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

Therefore, the results of operations for the three and nine months ended September 30, 2022  are not necessarily indicative of the results to be expected for the full year.

Recently Issued and Adopted Accounting Pronouncements

3 unchanged sentences

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.

4 unchanged sentences

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, 

As of September 

30, 2022,  the 

2.75% Convertible Notes comprised our only convertible debt instrument.

4 unchanged sentences

After May 1, 2024, the 

2.75%  Convertible Notes will be convertible at the option of the holders at any time until 

October 30, 2024.

2.75%  Convertible Notes will be convertible at the option of the holders at any time until the second scheduled trading day immediately preceding the maturity date.

The conversion rate applicable to the 

31 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

 Discontinued Operations

During the fourth quarter of 2021, our Board of Directors approved a plan to sell the businesses in WMS within the next twelve months.

This includes:

our trenchless and pipe rehabilitation services business (“Inliner”);

our water supply, treatment, delivery and maintenance business (“Water Resources”);

and our mineral exploration drilling business (“Mineral Services”).

After consideration of the relevant facts, we concluded the assets and liabilities of our WMS businesses met the criteria for classification as held for sale.

We concluded the proposed disposal activities represented a strategic shift that would have a major effect on our operations and financial results and qualified for presentation as discontinued operations in accordance with FASB Accounting Standards Codification (“ASC”) Topic 205 - 20, Presentation of financial statements - Discontinued operations .

Accordingly, the financial results of these businesses are presented in the condensed consolidated statement of operations as discontinued operations for all periods presented.

Current and non-current assets and liabilities of these businesses not sold as of the balance sheet date are presented in the condensed consolidated balance sheets as assets and liabilities held for sale for all periods presented.

On March 16, 2022, we completed the sale of Inliner to Inland Pipe Rehabilitation LLC (“IPR”) and 

1000097155 Ontario Inc.

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

Lehman & Company, for a purchase price of $ 159.7 million, subject to certain adjustments.

 Assets and Liabilities Held for Sale

As discussed in Note 1, during the 

fourth  quarter of 

2021 ,  our Board of Directors approved a plan to sell the businesses in WMS within the next 

twelve  months.

This included:

Inliner, Water Resources and Mineral Services.

After consideration of the relevant facts at the time, we concluded the assets and liabilities of our WMS businesses met the criteria for classification as held for sale.

205 - 20,  

Presentation of financial statements - Discontinued operations. 

Additionally, beginning December 31, 2021, 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.

During the first quarter of 2022 ,  we completed the sale of Inliner 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 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 June 30, 2022 

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

This gain is included in Other costs, net in the condensed consolidated statements of operations for the nine  months ended 

September 30, 2022. 

In the third quarter of 2022, we announced our decision to retain the Water Resources and Mineral Services businesses.

This change to our plan of sale was due to unfavorable market conditions which undermined our efforts to secure an appropriate value for the businesses.

As a result, we have reclassified WMS from discontinued operations to continuing operations for all periods presented.

We recorded $ 7.3  million of depreciation expense and $ 0.9 million of amortization expense in the three months ended September 30, 2022, 

to adjust for depreciation and amortization that would have been recognized in prior quarters if the unsold businesses had been continually classified as held and used from the beginning of the year.

$ 6.9 million is included in cost of revenue for the three months ended September 20, 2022, and the remainder is in selling, general and administrative expenses. The assets and liabilities of WMS met the criteria for classification as held for sale as of December 31, 2021, therefore our condensed consolidated balance sheet continues to reflect these assets and liabilities as held for sale as of that date.

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

(in thousands)

June 30, 2022

December 31, 2021

June 30, 2021

Cash and cash equivalents

$ 16,496  

$ 15,561  

Receivables, net

102,208  

103,024  

Contract assets

1 unchanged sentence

19,625  

39,941  

12,490  

19,625  

21,840  

Other current assets

1 unchanged sentence

70,912  

84,247  

Investments in affiliates

1 unchanged sentence

63,063  

50,309  

19,985  

63,063  

63,124  

Right of use assets

12,365  

12,038  

Other noncurrent assets

16,176  

20,410  

Total assets classified as held-for-sale

$ 392,641  

$ 414,395  

Accounts payable

$ 37,997  

$ 44,850  

Contract liabilities

1 unchanged sentence

27,764  

26,202  

Long-term lease liabilities

2 unchanged sentences

$ 83,408  

$ 90,063  

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

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

70,386  

110,787  

159,113  

204,762  

15,168  

18,714  

29,403  

28,320  

Selling, general and administrative expenses

15,440  

18,580  

30,008  

( 3,565 )  

( 2,223 )  

Gain on sale of discontinued operations

( 6,234 )  

Gain on sales of property and equipment, net (1), (2)

( 8,530 )  

( 30,583 )  

( 8,796 )  

Operating income

20,303  

33,772  

28,076  

27,594  

Other income, net

( 4,426 )  

( 3,739 )  

( 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  

Gain on sale of property and equipment

$ 8,796  

$ 30,893  

Purchases of property and equipment

$ 5,597  

$ 7,775  

Proceeds from sales of property and equipment

$ 12,697  

$ 44,287  

Proceeds from sale of discontinued operations

$ 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.

GRANITE CONSTRUCTION INCORPORATED

8 unchanged sentences

In our review of these changes for the 

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

three and nine months ended September 30, 2022  and 2021 , we did 

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

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,  

The projects with increases from revisions in estimates, which individually had an impact of $ 5.0 million or more on gross profit, are summarized as follows (dollars in millions, except per share data):

Three months ended September 30,

Nine Months Ended September 30,

Number of projects with upward estimate changes

Increase in gross profit, net

Increase to project profitability, net

Increase to net income/decrease to net loss attributable to Granite Construction Incorporated

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

$ 0.12  

$ 0.08  

The increases during the 

three and nine months ended September 30, 2022  were due to changes in the estimated amount of probable recovery on an outstanding claim.

There were no amounts attributable to non-controlling interests for any of the periods presented. 

Three Months Ended September 30,  

Nine Months Ended September 30,  

Number of projects with downward estimate changes

3 unchanged sentences

$ 5.7 - 21.2  

Decrease to project profitability

$ 5.5 - 16.2  

Decrease to project profitability, net

$ 15.2  

$ 16.6  

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

$ 63.2  

$ 48.2  

Decrease to net income/increase to net loss

$ 11.7  

$ 13.0  

$ 48.6  

$ 37.7  

Amounts attributable to non-controlling interests

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

$ 13.2  

$ 10.0  

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

Decrease to net income/increase to net loss attributable to Granite Construction Incorporated

$ 35.4  

$ 27.7  

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

$ 0.08  

$ 0.16  

$ 0.67  

$ 0.58  

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.

three and nine months ended September 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 three and 

nine months ended September 30, 2021  were due to additional costs from acceleration of work and extended project duration with lower productivity than originally anticipated and weather impacts.

GRANITE CONSTRUCTION INCORPORATED

4 unchanged sentences

Construction and Materials.

In alphabetical order, our operating groups from continuing operations are:

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

Three Months Ended June 30,

$ 199,357  

$ 71,572  

In alphabetical order, our operating groups are:

California, Central and Mountain. In connection with the reclassification of the WMS businesses from discontinued operations to continuing operations, the Condensed Consolidated Statements of Operations have been revised to include Inliner through the date of sale, Water Resources and Mineral Services in the Mountain operating group for all periods presented (see Note 3 ).

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

Three Months Ended September 30,

$ 263,252  

20 unchanged sentences

$ 1,062,129  

Six months ended June 30,

Nine months ended September 30,

$ 607,536  

23 unchanged sentences

Unearned Revenue

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

The following table presents our unearned revenue as of the respective periods:

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

June 30, 2021

September 30, 2021

$ 801,449  

12 unchanged sentences

Approximately $ 2.2  billion of the 

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.

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

Other Costs, net

Other costs, net in the condensed consolidated statements of operations include a legal settlement charge, non-recurring legal fees related to lawsuits and net costs relating to the resolution of the SEC investigation, all discussed further in Note 18, as well as strategic acquisition and divestiture expenses and a gain on sale of a business. During the three months ended September 30, 2022 , Other costs netted to $ 0.5  million of income due primarily to the settlement of the shareholder derivative lawsuit and related receipt of $ 5.0 million (see Note 18 ).

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

GRANITE CONSTRUCTION INCORPORATED

2 unchanged sentences

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 $ 40.4  million and $ 152.5  million during the 

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.

three and nine months ended September 30, 2022 , respectively, and $ 37.2  million and $ 153.6  million during the three and nine months ended September 30, 2021 , respectively. The changes in contract transaction price were from items such as executed or estimated change orders and unresolved contract modifications and claims.

September 30, 2022 , December 31, 2021  and September 30, 2021 , the aggregate claim recovery estimates included in contract asset balances were $ 69.6  million, $ 35.5  million and $ 40.4  million, respectively.

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

(in thousands)

June 30, 2022  

September 30, 2022  

December 31, 2021 (1)  

June 30, 2021  

September 30, 2021  

Costs in excess of billings and estimated earnings

10 unchanged sentences

$ 204,046  

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

(1) These balances do not include amounts held for sale (see Note 3).

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

11.5 %, 17.2 % and 11.5 %, respectively, of total contract assets.

2 unchanged sentences

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 

We recognized revenue of $ 12.7  million and $ 220.3  million during the three and nine months ended September 30, 2022 , respectively, and $ 5.8  and $ 181.4  million during the three and nine months ended September 30, 2021 , respectively, that was included in the contract liability balances at 

December 31, 2021  and 2020 , respectively.

1 unchanged sentence

(in thousands)

June 30, 2022  

September 30, 2022  

December 31, 2021 (1)  

June 30, 2021  

September 30, 2021  

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

10 unchanged sentences

$ 195,267  

(1) These balances do not include amounts held for sale (see Note 3).

 Receivables, net 

2 unchanged sentences

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021 (1)

June 30, 2021

September 30, 2021

Contracts completed and in progress:

$ 279,864  

$ 236,053  

$ 278,313  

177,299  

126,371  

217,534  

Total contracts completed and in progress

457,163  

362,424  

495,847  

Materials sales

87,870  

43,746  

80,357  

74,385  

59,496  

110,302  

Total gross receivables

619,418  

465,666  

686,506  

allowance for credit losses

Total net receivables

$ 618,144  

$ 464,588  

$ 684,822  

(1) These balances do not include amounts held for sale (see Note 3).

Included in other receivables at 

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.

September 30, 2022 , December 31, 2021  and September 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 September 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 September 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 September 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

June 30, 2022

September 30, 2022

Cash equivalents

7 unchanged sentences

$ ( 43 )  

$ 76,709  

December 31, 2021

12 unchanged sentences

$ 3,514  

June 30, 2021

September 30, 2021

Cash equivalents

3 unchanged sentences

Other current assets

Commodity swap

$ 23,489  

Restricted cash

$ 62,743  

8 unchanged sentences

Interest Rate Swaps

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 .

In connection with entering into the Third Amended and Restated Credit Agreement in May 2018, 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 

During the second quarter of 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 $ 2.2  million for the nine months ended September 30, 2022 .

Commodity Swaps

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 

As of September 30, 2022 , we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $ 1.5  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 

The financial statement impact for the three and nine months ended September 30, 2022  was a realized gain of $ 1.2  million and $ 4.0  million, respectively.

In addition, for the three months ended September 30, 2022 , the commodity swaps had an unrealized loss of $ 2.6 million, and for the nine months ended September 30, 2022 , the commodity swaps had an unrealized gain of $ 0.2 million.

As of September 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.

The total realized commodity swap gain for these swaps was $ 2.5 million.

GRANITE CONSTRUCTION INCORPORATED

2 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:

June 30, 2022

September 30, 2022

December 31, 2021

June 30, 2021

September 30, 2021

(in thousands)

26 unchanged sentences

$ 50,165  

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

( 1 ) All marketable securities as of September 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.

September 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.

2 unchanged sentences

( 3 ) Excluded from the carrying value is debt discount of $ 22.6  million and $ 24.5  million as of 

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.

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

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

three and nine months ended September 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).

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.

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

September 30, 2022 , there was approximately $ 242.2  million of construction revenue to be recognized on unconsolidated construction joint venture contracts of which $ 86.1  million represented our share and the remaining $ 156.1  million represented our partners’

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

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

corporate and/or other guarantees.

Consolidated Construction Joint Ventures (“CCJVs”)

June 30, 2022 , we were engaged in 

September 30, 2022 , we were engaged in 

nine active CCJV projects with total contract values ranging from $ 12.0  million to $ 436.2  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.

As of September 30, 2022 , our share of revenue remaining to be recognized on these CCJVs was $ 166.8  million and ranged from $ 3.0  million to $ 38.1  million by project.

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

1 unchanged sentence

During the 

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.

three and nine months ended September 30, 2022  and 2021 , total revenue from CCJVs was $ 117.5  million, $ 344.5  million, $ 117.4  million and $ 314.9  million, respectively.

During the 

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.

nine months ended September 30, 2022 , CCJVs provided $ 4.7  million of operating cash flows and during the nine months ended September 30, 2021 , CCJVs provided $ 17.5  million of operating cash flows, respectively.

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

Unconsolidated Construction Joint Ventures

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.

September 30, 2022 , we were engaged in seven  active unconsolidated joint venture projects with total contract values ranging from $ 12.3  million to $ 3.8  billion for a combined total of $ 8.9  billion of which our share was $ 2.5  billion.

Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 23.0 % to 50.0 %.

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.

September 30, 2022 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 86.1  million and ranged from $ 0.7  million to $ 34.6  million by project.

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

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

June 30, 2021

September 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 

June 30, 2022 , 

September 30, 2022 , 

December 31, 2021  and 

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.

September 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 September 30, 2022 , December 31, 2021  and September 30, 2021 , was $ 95.8  million, $ 103.8  million and $ 101.9 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 2.7  million, $ 10.7  million and $ 14.1  million related to Granite’s share of estimated recovery of back charge claims as of 

June 30, 2022 , 

September 30, 2022 , 

December 31, 2021  and 

June 30, 2021 , respectively.

September 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 $ 7.9  million, $ 28.6  million and $ 19.9  million as of 

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,

September 30, 2022 , 

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

34 unchanged sentences

$ 7,790  

$ 6,834  

Net Income (Loss)

1 unchanged sentence

$ ( 9,279 )  

$ ( 11,649 )  

Less partners’

2 unchanged sentences

( 10,335 )  

11,936  

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

11 unchanged sentences

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021 (1)

June 30, 2021

$ 9,619  

September 30, 2021

$ 55,851  

8 unchanged sentences

$ 72,415  

(1) These balances do not include amounts held for sale (see Note 3).

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis:

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021 (1)

June 30, 2021

September 30, 2021

Current assets

28 unchanged sentences

$ 72,415  

( 1 ) These balances do not include amounts held for sale (see Note 3 ).

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

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 

June 30, 2022 , 

Of the $ 357.1  million of total affiliate assets as of September 30, 2022 , we had investments in 

two  real estate entities with total assets of $ 72.6  million, our foreign affiliates had total assets of $ 251.0  million and the asphalt terminal entity had total assets of $ 33.5  million. As of 

September 30, 2022 , 

December 31, 2021  and 

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 

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

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

25 % and our percent ownership in foreign affiliates ranged from 25 % to 50 %.

Property and Equipment, net

1 unchanged sentence

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021 (1)

June 30, 2021

September 30, 2021

Equipment and vehicles

30 unchanged sentences

$ 510,658  

(1) These balances do not include amounts held for sale (see Note 3).

June 30, 2021, 

we completed a sale-leaseback transaction associated with 

two  properties in California.

Sale of these properties resulted in a reduction in net property and equipment of $ 11.1  million and a $ 2.4 million addition to right of use assets and lease liabilities on the condensed consolidated balance sheets, as well as a $ 29.7 million gain on sales of property and equipment on the condensed consolidated statements of operations.

 Accrued Expenses and Other Current Liabilities

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021 (1)

June 30, 2021

September 30, 2021

Accrued insurance

5 unchanged sentences

19,875  

33,608  

Payroll and related employee benefits

6 unchanged sentences

82,280  

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

12,000  

Accrued legal settlement (see Note 18)

8 unchanged sentences

$ 499,214  

Other includes short-term lease liabilities, dividends payable, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, 

none  of which are greater than 

5%  of total current liabilities.

(1) These balances do not include amounts held for sale (see Note 3)

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

GRANITE CONSTRUCTION INCORPORATED

2 unchanged sentences

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

June 30, 2021

September 30, 2021

2.75 % Convertible Notes

16 unchanged sentences

$ 331,192  

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.

During the first half of 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.

2 unchanged sentences

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.

September 30, 2022 , the total unused availability under the Credit Agreement was $ 267.0  million, resulting from $ 33.0  million in issued and outstanding letters of credit and $ 50.0 million drawn under the Revolver.

The letters of credit had expiration dates between November 2022  and 

December 2025 . As of September 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 

June 30, 2022  for SOFR and base rate loans were 

September 30, 2022  for SOFR and base rate loans were 

4.9 % and 7.0 %, 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 .

The financial covenants include a maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) of 3.25 to 

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

As of September 30, 2022 , the Consolidated Leverage Ratio was 1.89 , which did not exceed the maximum of 3.25 .

Our Consolidated Interest Coverage Ratio was 10.15 , 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 

During the three and nine months ended September 30, 2022 , we did not record amortization of the debt discount due to the implementation of ASU 2020 - 06, and during the three and nine months ended September 30, 2021 , we recorded $ 1.7  million and $ 5.2  million, respectively, of amortization of the debt discount.

During the three and nine months ended September 30, 2022  and 

2021 , we recorded $ 0.3  million, $ 1.0  million, $ 0.6  million and $ 1.8  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 June 30,

Six Months Ended June 30,

 Weighted Average Shares Outstanding and Net Income Per Share

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share amounts)

Numerator (basic and diluted)

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

$ ( 2,370 )  

$ 24,859  

Net income attributable to common shareholders for basic earnings per share

$ 73,393  

Net income from discontinued operations allocated to common shareholders

$ 35,043  

1 unchanged sentence

$ 23,309  

Interest expense related to 2.75% Convertible Notes

Net income attributable to common shareholders for diluted earnings per share

$ 74,866  

Net income (loss) allocated to common shareholders

$ 35,043  

6 unchanged sentences

45,773  

Dilutive effect of RSUs and convertible notes

Dilutive effect of RSUs

Dilutive effect of 2.75% Convertible Notes

4 unchanged sentences

47,522  

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 

Net income per share, basic

$ 1.67  

493,000  and 

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

$ 0.76  

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.

$ 1.73  

$ 0.51  

Net income per share, diluted

$ 1.44  

$ 0.73  

$ 1.56  

$ 0.49  

Beginning in 2022, with the adoption of ASU 2020-06, we have applied the if-converted method for calculating diluted earnings per share (see Note 2).

 Income Taxes

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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Provision for (benefit from) income taxes on continuing operations

Provision for (benefit from) income taxes

$ ( 6,489 )  

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$ ( 777 )  

$ 2,068  

Effective tax rate

2 unchanged sentences

( 1.0 %)  

Our effective tax rate for the 

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.

Our effective tax rates for the 

three and nine months ended September 30, 2022  were lower than the prior year primarily due to a tax benefit associated with the reversal of deferred tax liabilities related to the Water Resources and Mineral Services businesses no longer being held for sale and the release of valuation allowances related to the utilization of capital loss carryforwards.

The benefit for both items was recognized in the current quarter.

For additional information on assets and liabilities no longer held for sale see discussion in Note 1 and Note 3.

GRANITE CONSTRUCTION INCORPORATED

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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 

The total liabilities for legal proceedings recorded as of 

September 30, 2022 and 

December 31, 2021 

were $ 129  million, $ 63 million of which was paid through insurance proceeds, which have been fully funded into a settlement escrow account.

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

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.

were $ 129  million, $ 63 million of which was paid through insurance proceeds, which have been fully funded into a settlement escrow account. The balance of the settlement escrow account was included in other current assets in the consolidated balance sheets.

September 30, 2021 , the total liabilities recorded for legal proceedings, net of insurance receivable, were $ 66 million.

Ordinary Course Legal Proceedings

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Louis as appellee.

On September 8, 2022, the U.S.

Court of Appeals for the Ninth Circuit granted the request for voluntary dismissal of appeal filed by the plaintiff in Nasseri v.

Granite Construction Incorporated, et al.

May 6, 2020, 

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Roberts et al.

, 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’

, and the Company entered into a Stipulation of Compromise and Settlement providing 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.

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 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 June 30, 2021, 

other than the Settlement Agreement charge described above, we did 

not  record any liability related to the above matters because we concluded such liabilities were 

not  probable and the amounts of such liabilities were 

On July 27, 2022, the Court in Davydov v.

Roberts, et al.

entered an order and final judgment approving the terms of the Stipulation of Compromise and Settlement and dismissed the case with prejudice.

On July 28, 2022, the Court in English v.

Roberts, et al.

entered a stipulation and order of dismissal that dismissed the case with prejudice.

The Company received a payment of $ 5.0 million for the settlement which was net of court-awarded attorneys' fees and expenses that was recorded in Other costs, net on the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2022.

As of September 30, 2022 , 

December 31, 2021  and September 30, 2021 , other than the Settlement Agreement charge described above, we did 

not  record any liability related to the above matters because we concluded such liabilities were resolved or not  probable and the amounts of such liabilities were 

not  reasonably estimable.

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In connection with our prior disclosure of the Audit/Compliance Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group and the extent to which those matters affected the effectiveness of the Company’s internal control over financial reporting (the “Investigation”), we voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the Investigation.

The SEC has issued subpoenas for documents in connection with the accounting issues identified in the Investigation.

We have produced documents to the SEC and 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.

The SEC issued subpoenas for documents in connection with the accounting issues identified in the Investigation.

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

In the second quarter of 2022, we recorded a $ 12 million accrual for the expected resolution of this investigation which is reflected in other costs in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2022.

During the third quarter of 2022, we reached a settlement with the SEC.

Under the terms of the settlement, we, without admitting or denying any allegations made by the SEC, agreed to pay a civil penalty of $ 12 million and to be enjoined from violating specified provisions of the federal securities laws and rules promulgated thereunder.

On August 25, 2022, the SEC filed a complaint against us, along with our consent to the entry of judgment in the United States District Court for the Northern District of California, and requested entry of judgment.

Judgment concluding and resolving this matter in its entirety was entered on September 9, 2022, and on September 16, 2022, we paid the $ 12 million penalty.

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

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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.

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. On June 14, 2022, we filed a demurrer to the amended complaint seeking to dismiss the claims of both Steadfast and CHDJV.

On August 24, 2022, the court overruled our demurrer.

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.

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Construction and Materials.

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

These changes have been applied retrospectively for all periods presented.

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

These changes have been applied retrospectively for all periods presented. As discussed in Note 3, we have reclassified WMS from discontinued operations to continuing operations for all periods presented.

The Water Resources and Mineral Services businesses are included in the Construction segment.

Inliner had both Construction and Materials operations.

Summarized segment information is as follows:

Three months ended June 30,

Three months ended September 30,

Construction  

Materials  

Total revenue from reportable segments

$ 848,267  

$ 228,871  

$ 1,077,138  

Elimination of intersegment revenue

( 67,332 )  

Revenue from external customers

$ 848,267  

$ 161,539  

$ 1,009,806  

$ 98,329  

$ 22,038  

$ 120,367  

Depreciation, depletion and amortization

$ 10,082  

$ 6,870  

$ 16,952  

Total revenue from reportable segments

$ 924,454  

$ 201,419  

$ 1,125,873  

Elimination of intersegment revenue

( 63,744 )  

Revenue from external customers

$ 924,454  

$ 137,675  

$ 1,062,129  

$ 99,237  

$ 20,698  

$ 119,935  

Depreciation, depletion and amortization

Six months ended June 30,

$ 18,230  

$ 7,014  

$ 25,244  

Nine months ended September 30,

Total revenue from reportable segments

$ 2,141,009  

$ 506,228  

$ 2,647,237  

Elimination of intersegment revenue

$ ( 133,043 )  

Revenue from external customers

$ 2,141,009  

$ 373,185  

$ 2,514,194  

$ 237,060  

$ 40,965  

$ 278,025  

Depreciation, depletion and amortization

Segment assets

$ 31,651  

$ 20,007  

$ 51,658  

Segment assets as of period end

$ 434,604  

$ 351,520  

$ 786,124  

Total revenue from reportable segments

$ 2,369,848  

$ 457,409  

$ 2,827,257  

Elimination of intersegment revenue

$ ( 131,043 )  

Revenue from external customers

$ 2,369,848  

$ 326,366  

$ 2,696,214  

$ 255,443  

$ 44,756  

$ 300,199  

Depreciation, depletion and amortization

Segment assets

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

$ 53,166  

$ 19,329  

$ 72,495  

Segment assets as of period end

$ 513,406  

$ 355,936  

$ 869,342  

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

Three months ended September 30,

Nine months ended September 30,

Total gross profit from reportable segments

$ 120,367  

$ 119,935  

$ 278,025  

$ 300,199  

Selling, general and administrative expenses

Other costs (see Note 7)

Gain on sales of property and equipment

Total other expense, net

Income (loss) from continuing operations before income taxes

61,795  

77,603  

192,036  

227,400  

Other costs, net (see Note 7)

( 490 )  

19,445  

85,547  

Gain on sales of property and equipment (see Note 13)

( 949 )  

( 5,159 )  

( 10,462 )  

Total other (income) expense, net

( 2,789 )  

Income before income taxes

$ 62,800  

$ 41,327  

$ 75,259  

$ 24,915  

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

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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, 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,”

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 and strategic actions, 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,”

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and the negatives thereof or other comparable terminology or by the context in which they are made.

In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, and results. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under “Item 1A.

In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results, and strategic actions. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under “Item 1A.

Risk Factors.”

Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason .

We deliver infrastructure solutions for public and private clients primarily in the United States. We are one of the largest diversified infrastructure companies in the United States.

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

We deliver infrastructure solutions for public and private clients.

We are one of the largest diversified infrastructure companies in the United States.

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

During the fourth quarter of 2021, we updated our strategy to focus on our core business capabilities, to leverage our current geographic based home markets in the civil construction and materials business and to target expansion based upon that combined strategy. Also related to our new strategic plan, during the fourth quarter of 2021, we reorganized our operating groups to improve operating efficiencies and better position the Company for long-term growth.

In alphabetical order, our continuing business operating groups are California, Central and Mountain.

In alphabetical order, our operating groups are California, Central and Mountain.

In addition, we revised the financial information our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews to allocate resources and assess our performance.

This change is consistent with our strategic plan update and better aligns with our continuing civil construction and materials business. Our CODM now regularly reviews financial information regarding our two primary product lines, construction and materials, as well as our operating groups.

This change is consistent with our strategic plan update and better aligns with our civil construction and materials business. Our CODM now regularly reviews financial information regarding our two primary product lines, construction and materials, as well as our operating groups.

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

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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, 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 the federal level, the rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) has started 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 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 impact to project lettings starting in 2023 and then more meaningfully in 2024 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.

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.

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 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.

While it is impossible to fully eliminate the impact of these factors, we have applied proactive measures such as fixed forward purchase contracts of oil related inputs, energy surcharges, and adjustment of project schedules for constraints related to construction materials such as concrete.

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

Our Committed and Awarded Projects (“CAP”) continues to be strong with $4.1 billion at the end of the third quarter of 2022 including contributions from wins earlier in the year within the Central operating group as we continue to transform its project portfolio.

We believe the environments in our key markets are strong and will continue to grow as we see meaningful funding from IIJA for projects beginning in the mid to latter part of 2023.

Strategic Actions

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.

The current and projected strong demand for civil construction supports the decision to grow our vertically integrated business.

Through our newly reorganized operational structure, our focus is to pursue opportunities in markets where our operating groups’

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, 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

This included:

our trenchless and pipe rehabilitation services business (“Inliner”);

our water supply, treatment, delivery and maintenance business (“Water Resources”);

and our mineral exploration drilling business (“Mineral Services”).

The sale of 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. 

In September 2022, we announced our decision to retain the Water Resources and Mineral Services businesses that were previously classified as held for sale and reported in discontinued operations.

This change to our plan of sale was due to unfavorable market conditions which undermined our efforts to secure an appropriate value for the businesses. In connection with the reclassification of the WMS businesses from discontinued operations to continuing operations, the Condensed Consolidated Statements of Operations have been revised to include Inliner through the date of sale, Water Resources and Mineral Services in the Mountain operating group for all periods presented.

The Water Resources and Mineral Services businesses are included in the Construction segment.

Inliner had both Construction and Materials operations.

See Note 1 and Note 3 of “Notes to the Condensed Consolidated Financial Statements”

for further information.

Litigation Matter 

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

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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

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

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 and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Selling, general and administrative expenses

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

Operating income (loss)

Total other expense, net

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 income (loss) attributable to Granite Construction Incorporated

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

Gain on sales of property and equipment, net (see Note 13 of “Notes to the Consolidated Financial Statements”)

Operating income

Total other (income) expense, net

Amount attributable to non-controlling interests

Net income attributable to Granite Construction Incorporated

Total Revenue by Segment  

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Construction Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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.

Construction revenue for the three and nine months ended September 30, 2022 decreased by $76.2 million and $228.8 million, or 8.2% and 9.7%, 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 the sale of Inliner in the first quarter of 2022.

Comparable revenue from the Mountain operating group, which excludes revenue attributable to Inliner (which was sold on March 16, 2022) increased $38.4 million and $105.8 million, or 11.9% and 14.3%, for the three and nine months ended September 30, 2022, respectfully, due to higher beginning CAP levels including several new solar projects and driven by stronger market conditions in the current year.

California operating group revenue increased $19.5 million during the three months ended September 30, 2022 due to record high CAP levels at the beginning of the current quarter.

California operating group revenue decreased $24.1 million during the nine months ended September 30, 2022, mainly due to delayed project awards and slower progress on existing projects due to supply chain disruptions in the first half of the year and less favorable weather conditions in the first quarter of 2022. During the three and nine months ended September 30, 2022 and 2021, the majority of revenue earned in the Construction segment was from the public sector.

Materials Revenue 

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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.

Materials revenue for the three and nine months ended September 30, 2022 increased by $23.9 million and $46.8 million, or 17.3% and 14.3%, respectively, when compared to 2021 driven by price increases inclusive of energy surcharges and overall market demands driving higher sales volumes of aggregates, slightly offset by decreased sales volumes for asphalt.

Committed and Awarded Projects

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(dollars in thousands)

June 30, 2022

March 31, 2022

September 30, 2022

June 30, 2022

September 30, 2021

Unearned revenue

(dollars in thousands)

June 30, 2022

March 31, 2022

September 30, 2022

June 30, 2022

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.

September 30, 2021

CAP of $4.1 billion at September 30, 2022 decreased $0.1 billion when compared to June 30, 2022 due to progress on existing projects during our seasonally busiest quarter of the year. Significant new awards during the three months ended September 30, 2022 included $145 million for highway work in Texas, a $17 million dam project in California, $14 million for bridge work in Illinois, $12 million for raceway work in California, $11 million for bridge work in California and an $11 million bikeway project in California.

Non-controlling partners’

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.

share of CAP as of September 30, 2022, December 31, 2021 and September 30, 2021 was $118.4 million, $214.3 million and $230.1 million, respectively.

At September 30, 2022, six contracts had total forecasted losses with remaining revenue of $140.6 million, or 3.4%, of total CAP.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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Percent of total revenue

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.

Construction gross profit for the three and nine months ended September 30, 2022 decreased by $0.9 million and $18.4, or 0.9% and 7.2%, 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").

These decreases were partially offset by improved performance in the vertically integrated California and Mountain operating groups. 

Materials gross profit for the three and nine months ended September 30, 2022 increased by $1.3 million and decreased by $3.8 million, or an increase of 6.5% and a decrease of 8.5%, respectively, when compared to 2021.

The increase in materials revenue drove a gross profit increase during the three months ended September 30, 2022 while materials gross profit margin decreased due to the impact of higher energy costs.

Materials gross profit was down during the nine months ended September 30, 2022 primarily due to the impact of higher fuel and liquid asphalt costs. We implemented energy surcharges in the second quarter of 2022 to cover increased fuel costs, however contracts we had in place early in the year without energy surcharge clauses or prior to our surcharge taking effect were still being fulfilled into the third quarter 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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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 and six months ended June 30, 2022 remained relatively unchanged when compared to 2021.

Selling expenses for the three months ended September 30, 2022 decreased by $2.4 million, or 13.3%, and for the nine months ended September 30, 2022 decreased by $2.9 million, or 5.1%, when compared to 2021, primarily due to the sale of Inliner on March 16, 2022.

General and Administrative Expenses

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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 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 June 30,

Six Months Ended June 30,

Total general and administrative expenses for the three months ended September 30, 2022 decreased by $13.4 million, or 22.5%, primarily due to the sale of Inliner on March 16, 2022 and a decrease in incentive compensation expense. Total general and administrative expenses for the nine months ended September 30, 2022 decreased by $32.5 million, or 19.0%, when compared to 2021, also due to the sale of Inliner and a decrease in incentive compensation expense as well as decreases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is mostly offset in other (income) expense, net, through our own company-owned life insurance policy.

Other Costs, net

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

Three Months Ended September 30,

Nine Months Ended September 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,

Other costs, net

During the three months ended September 30, 2022, Other costs, net (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”) decreased $4.2 million due primarily to the settlement of the shareholder derivative lawsuit and related receipt of $5.0 million (see Note 18 of “Notes to the Condensed Consolidated Financial Statements”).

During the nine months ended September 30, 2022, Other costs, net decreased $66.1 million primarily due to the securities litigation settlement charge of $66 million that occurred in 2021 (see Note 18 of “Notes to the Condensed Consolidated Financial Statements”).

Gain on Sales of Property and Equipment, net

The following table presents the gain on sales of property and equipment, net for the respective periods:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Gain on sales of property and equipment, net

Gain on sales of property and equipment, net for the three and nine months ended September 30, 2022 decreased by $4.2 million and $28.9 million, respectively, compared to prior year.

The gain in the nine months ended September 30, 2021 includes the sale of certain properties in California. 

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

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

Provision for (benefit from) income taxes on continuing operations

Provision for (benefit from) income taxes

Effective tax rate

We calculate our income tax provision for continuing operations at the end of each interim period by estimating our annual effective tax rate and applying that rate to our loss before benefit from income taxes. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs.

See Note 17 of “Notes to the Condensed Consolidated Financial Statements”

for more information.

We calculate our income tax provision at the end of each interim period by estimating our annual effective tax rate and applying that rate to our net income before tax expense. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs.

Our effective tax rates for the three and nine months ended September 30, 2022 were lower than the prior year primarily due to a tax benefit associated with the reversal of deferred tax liabilities related to the Water Resources and Mineral Services businesses no longer being held for sale and the release of valuation allowances related to the utilization of capital loss carryforwards.

The benefit for both items was recognized in the current quarter.

For additional information on assets and liabilities no longer held for sale see discussion in Note 1 and Note 3 of “Notes to the Condensed Consolidated Financial Statements.”

Amount Attributable to Non-controlling Interests

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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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 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 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”).

share of the income or loss of our consolidated construction joint ventures. The amounts for the three and nine months ended September 30, 2022 increased $1.5 million and $1.1 million, respectively, primarily due to net negative impacts from revisions in estimates, partially offset by new joint venture contracts in 2022. 

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity and cash generated from operations.

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

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

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

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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 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.

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

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

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.

As of September 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.

At the end of the second quarter of 2022, we had $16.5 million of past due receivables and $27.1 million of contract retention receivable from Brightline Trains Florida LLC ("Brightline") and they were experiencing delays in securing additional funding at that time.

During the third quarter of 2022, Brightline obtained additional funding and paid their past due receivables balances.

As of September 30, 2022, we had $3.6 million of receivables and $27.8 million of contract retention receivable from Brightline (see Note 8 of “Notes to the Condensed Consolidated Financial Statements”).

These balances were current as of September 30, 2022, however because Brightline has experienced delays in securing additional funding in the past, the timing and probability of future payments may be affected and our liquidity impacted if Brightline faces additional funding difficulties.

During the first half of 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.

As of September 30, 2022, the total unused availability under the Credit Agreement was $267.0 million, resulting from $33.0 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”

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

The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, for continuing operations as of the respective dates:

The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, as of the respective dates:

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

June 30, 2021

September 30, 2021

Cash and cash equivalents excluding CCJVs

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

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:

Granite’s portion of CCJV cash and cash equivalents was $66.7 million, $54.4 million and $69.2 million as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively. Excluded from the table above is:

 •

$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

$47.3 million, $56.5 million and $48.0 million as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents;

 •

$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

$16.5 million as of December 31, 2021 that was included in current assets held-for-sale.

Capital Expenditures

During the 

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

73.2 million, including $

5.6 million related to discontinued operations, compared t

o $46.4 mi llion, including $

7.8 million related to discontinued operations during the six months ended

June 30, 2021.

nine months ended September 30, 2022, we had capital expenditures of $

97.8 million, compared t

o $73.0 mi llion, during the

nine months ended September 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.

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The timing and amount of such expenditures can vary based on the progress of planned capital projects, the type and size of construction projects, changes in business outlook and other factors.

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

Six months ended June 30,

We currently anticipate 2022 capital expenditures to be between approximately $

120 million and $

130 million.

Nine months ended September 30,

(in thousands)

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14.6 million for the

six months ended June 30, 2022 represents a $

nine months ended September 30, 2022 represents a $

74.6 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.

Cash used in working capital increased by $85.7 million. This increase in net cash used was partially offset by a $10.7 million decrease in contributions, net of distributions, to unconsolidated construction joint ventures and affiliates.

Our cash provided by net income, net of adjustments for non-cash items and the litigation settlement described in Note 18, was virtually unchanged when compared to the prior year. 

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.

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 nine months ended September 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.

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

Investing activities

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.

Cash provided by investing activities of $13.9 million for the nine months ended September 30, 2022 represents a $31.3 million increase when compared to 2021.

The change was primarily due to proceeds from the sale of the Inliner business in March 2022, partially offset by increased purchases of marketable securities and property and equipment and a decrease in proceeds from sales of property and equipment in the current year.

Financing activities

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.

Cash used in financing activities of $157.8 million for the nine months ended September 30, 2022 represents a $143.2 million increase when compared to 2021.

The change was primarily due to the prepayment of our term loan of $123.8 million in the first half of 2022 and repurchases of common stock (inclusive of our accelerated share repurchase) of $70.7 million, partially offset by $50.0 million drawn on our Revolver. The net debt paydown was completed 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 rest of 2022.

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

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

At September 30, 2022, approximatel y $2.3 billion of our $4.1 billion CAP was bonded.

Performance bonds do not have stated expiration dates;

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

Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. The debt associated with our unconsolidated non-construction entities is included in Note 12 of “Notes to the Condensed Consolidated Financial Statements.”

Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. Our unconsolidated investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases and working capital.

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

The debt associated with our unconsolidated non-construction entities is included in Note 12 of “Notes to the Condensed Consolidated Financial Statements.”

Covenants and Events of Default

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

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

As of September 30, 2022, the Consolidated Leverage Ratio was 1.89, which did not exceed the maximum of 3.25.

Our Consolidated Interest Coverage Ratio was 10.15, which was above the minimum of 3.00.

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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.

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. On August 31, 2022, the reference period ended and on September 2, 2022 we received an additional 0.37 million shares, which were immediately retired.

The final share delivery was based on the average of the daily volume-weighted average price of Granite's common stock, less a discount, during the reference period.

Website Access

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

What changed 10-Q

Item 1. Financial Statements