GRANITE CONSTRUCTION INC 10-K

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We maintain an investment portfolio of various holdings, types and maturities. We purchase instruments that meet high credit quality standards, as specified in our investment policy. Our investment policy also limits the amount of credit exposure to any one issue, issuer or type of instrument. The portfolio and accompanying cash balances are targeted to an average maturity of no more than one year from the date the purchase is settled. On an ongoing basis we monitor credit ratings, financial condition and other factors that could affect the carrying amount of our investment portfolio.  Marketable securities, consisting of U.S. government and agency obligations, are classified as held-to-maturity and are stated at cost, adjusted for amortization of premiums and discounts to maturity. Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. We maintain our cash and cash equivalents and our marketable securities with several financial institutions. Given the short-term nature of certain investments, the related income is subject to the general level of interest rates in the United States at the time of maturity and reinvestment. We manage investment interest rate market risk primarily by managing portfolio maturity. The fair value of our long-term held-to-maturity investment portfolio may be affected by changes in interest rates. Operating in international markets involves exposure to possible volatile movements in currency exchange rates. Our Mountain operating group has international operations in Mexico and Canada. We also have affiliates that operate in Latin America (see Note 10 of “Notes to the Consolidated Financial Statements”). The majority of the customer contracts in Mexico are U.S. dollar-based, reducing the exposure to currency fluctuations. As of December 31, 2022, we do not have any outstanding foreign currency option contracts. If the volume of our international operations increases and foreign currency exchange rates change, the impact to our consolidated statements of operations could be significant and may affect year-to-year comparability of operating results. The impact from foreign currency transactions during 2022 ,  2021 and 2020 was immaterial. Due to the adoption of ASU 2020-06 (see Note 1 of "Notes to the Consolidated Financial Statements"), we did not record amortization of debt discount related to our 2.75% Convertible Notes during 2022 . As of December 31,   2022  and  2021 , the balance in long-term debt in our consolidated balance sheets of the 2.75% Convertible Notes, excluding debt issuance costs, and including  $ 14.8  million of amortized debt discount in 2021 , was $ 230.0  million and $ 207.4  million, respectively. As of December 31,   2021 , the remaining unamortized debt discount was  $ 22.6  million but was reduced to zero upon adoption of ASU 2020-06 on January 1,  2022 .  We may borrow on the Revolver, at our option, at either (a) the SOFR term rate plus a credit adjustment spread plus applicable margin ranging from 1.0% to 2.0%, or (b) a base rate plus an applicable margin ranging from 0.0% to 1.0%. The applicable margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly. As of December 31,   2022 , there was $ 50.0 million drawn under the Revolver. See Note 14 of “Notes to the Consolidated Financial Statements” for further discussion on the 2.75% Convertible Notes and Credit Agreement. The table below presents principal amounts due by year and related weighted average interest rates for our cash and cash equivalents, held-to-maturity investments and significant debt obligations, excluding debt issuance costs, as of December 31, 2022 (dollars in thousands):     2023     2024     2025     2026     2027     Thereafter     Total   Assets                                                         Cash, cash equivalents, held-to-maturity investments   $ 333,365     $ 26,569     $ —     $ —     $ —     $ —     $ 359,934   Weighted average interest rate     3.83 %     1.51 %     — %     — %     — %     — %     3.66 % Liabilities                                                         Fixed rate debt                                                         Credit Agreement Revolver Loan   $ —     $ —     $ —     $ —     $ 50,000     $ —     $ 50,000   Effective interest rate (1)     5.92 %     5.92 %     5.92 %     5.92 %     5.92 %     — %     5.92 % 2.75% Convertible Notes   $ —     $ 230,000     $ —     $ —     $ —     $ —     $ 230,000   Coupon rate     2.75 %     2.75 %     — %     — %     — %     — %     2.75 % (1) The effective interest rate was calculated using one-month SOFR plus 10 basis points plus the applicable margin. Future interest payments may differ from actual results.  The estimated fair value of our cash and cash equivalents approximates the principal amounts reflected above based on the generally short maturities of these financial instruments. The fair value of 2.75% Convertible Notes was approximately $281.4 million and $313.8 million as of December 31, 2022 and 2021, respectively.   34 Table of Contents