GRANITE CONSTRUCTION INC 10-K

Item 9A. CONTROLS AND PROCEDURES As disclosed in the Explanatory Note and in Supplementary Data included in Part IV, Item 15(a) of this Form 10-K, we are restating our unaudited quarterly financial information for the first three quarters of the year ended December 31, 2022 to correct (a) errors related to deferred taxes and the calculation of income tax expense in connection with the sale of Inliner, which was completed in the first quarter of 2022 and was classified within discontinued operations in the Company’s condensed consolidated statement of operations during the first and second quarters of 2022 and (b) other immaterial errors, including certain errors that had previously been adjusted for as out of period corrections. The errors were identified by management in connection with the preparation of this Form 10-K- through our annual review control processes. Evaluation of Disclosure Controls and Procedures   Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, including our principal executive and principal financial officers, have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and, based on their evaluation, our principal executive and principal financial officers have concluded our disclosure controls and procedures were not effective as of December 31, 2022, due to the material weakness in our internal control over financial reporting, as further described below. In connection with our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022, filed on April 28, 2022, July 28, 2022 and October 27, 2022, respectively, management evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2022, June 30, 2022 and September 30, 2022. Based upon those evaluations, our principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective as of those dates. Subsequent to those evaluations our principal executive and principal financial officers re-evaluated the effectiveness of the Company’s disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective as of March 31, 2022, June 30, 2022 and September 30, 2022, because of the material weakness described below.  Management nonetheless determined that the consolidated financial statements and related financial information included in this Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management’s determination is based on a number of factors, including, but not limited to, management’s performance of extensive analysis and other post-closing procedures as of and for the year ended December 31, 2022. Management ’ s Report on Internal Control Over Financial Reporting Our management, including our principal executive and principal financial officers, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d -15(f). Internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. Our management, under the supervision and with the participation of our principal executive and principal financial officers, has conducted an evaluation of the effectiveness of our internal control over financial reporting, using the criteria established in  Internal Control-Integrated Framework  (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management determined, based upon the existence of the material weakness described below, that we did not maintain effective internal control over financial reporting as of December 31, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We did not design an effective control to assess the impact of significant and unusual discrete items on the interim tax provision, such as the divestiture of a business. This material weakness resulted in the misstatement of our income tax expense, other costs, net and income tax payable, and in the restatement of the Company's unaudited quarterly financial information for the Restated Periods. Additionally, this material weakness could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the interim consolidated financial statements that would not be prevented or detected. PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2022. The report is included in Part IV, Item 15(a) of this Form 10-K under the heading “Report of Independent Registered Public Accounting Firm.” Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended December 31, 2022. Remediation Plan Management is committed to implementing changes to our internal control over financial reporting to ensure that the material weakness is remediated. We have evaluated the impact of the material weakness and will implement the following changes:   • We will enhance our accounting for income tax controls on an interim basis to include specific activities to assess the impacts of significant and unusual transactions, such as divestitures of a business.   • We will add additional reviews and approvals of the quarterly effective tax rate calculations with regard to significant and unusual transactions to ensure such discrete tax items are appropriately identified and accounted for accurately within the appropriate interim period. While we believe that these actions will remediate the material weakness, we have not completed all of the corrective processes, procedures and related evaluation or remediation that we believe are necessary. As we continue to evaluate and work to remediate the material weakness, we may take additional measures to address the material weakness. Until the remediation steps set forth above, including the efforts to implement the necessary control activities we identify, are fully implemented and concluded to be operating effectively for a sufficient period of time, the material weakness described above will not be considered remediated. Item 9B. OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 35 Table of Contents   PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 11. EXECUTIVE COMPENSATION The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.   36 Table of Contents       PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: 1. Financial Statements. The following consolidated financial statements and related documents are filed as part of this report:     Financial Statements Page Report of Independent Registered Public Accounting Firm  (PCAOB ID 238 ) F-1 to F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Income (Loss) F-5 Consolidated Statements of Shareholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to the Consolidated Financial Statements F-8  to F-33 Supplementary Data F-34  to F-43 2. Financial Statement Schedules. Schedules are omitted because they are not required or applicable, or the required information is included in the Financial Statements or related notes. 3. Exhibits . The Exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of, or furnished with, this report.   37 Table of Contents   INDEX TO 10-K EXHIBITS   Exhibit No.   Exhibit Description 2.1 * Agreement and Plan of Merger by and among Granite Construction Incorporated, Layne Christensen Company and Lowercase Merger Sub Incorporated, dated as of February 13, 2018 [Exhibit 2.1 to the Company’s Form 8-K filed on February 14, 2018] 2.2 * Purchase Agreement, dated February 2, 2022, by and among Layne Heavy Civil, Inc., Granite Construction International, Granite Construction Incorporated, Inland Pipe Rehabilitation LLC and 1000097155 Ontario Inc. [Exhibit 2.1 to the Company’s Form 8-K filed on February 3, 2022] 3.1 *  Certificate of Incorporation of Granite Construction Incorporated, as amended [Exhibit 3.1.b to the Company’s Form 10-Q for the quarter ended June 30, 2006] 3.2  * Amended Bylaws of Granite Construction Incorporated [Exhibit 3.1 to the Company’s Form 8-K filed on November 15, 2011] 4.1 * Indenture (including Form of Note) with respect to Granite Construction Incorporated’s 2.75% Convertible Senior Notes due 2024, dated November 1, 2019, by and between Granite Construction Incorporated and Wilmington Trust, National Association, as trustee [Exhibit 4.1 to the Company’s Form 8-K filed on November 1, 2019] 4.2 * Description of Common Stock [Exhibit 4.2 to the Company’s Form 10-K for the year ended December 31, 2019] 10.1 *** Key Management Deferred Compensation Plan II, as amended and restated [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2010] 10.2 ***  Form of Amended and Restated Director and Officer Indemnification Agreement [Exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 2002] 10.3 *** Granite Construction Incorporated Annual Incentive Plan adopted by the Board of Directors on March 30, 2022 [Exhibit 10.1 to the Company’s Form 8-K filed on April 1, 2022] 10.4 *** Form of Annual Incentive Plan Participation Agreement [Exhibit 10.2 to the Company’s Form 8-K filed on April 1, 2022] 10.5 *** Granite Construction Incorporated Long Term Incentive Plan effective January 1, 2010, as amended [Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2011] 10.6 *** Amendment No. 2 to the Granite Construction Incorporated Long Term Incentive Plan effective January 1, 2012 [Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2011] 10.7 *** Granite Construction Incorporated 2012 Equity Incentive Plan [Exhibit 10.1 to the Company’s Form 8-K filed on May 25, 2012] 10.8 *** Form of Non-Employee Director Restricted Stock Unit Agreement effective May 22, 2012 (2012 Equity Incentive Plan) [Exhibit 10.2 to the Company’s Form 8-K filed on May 25, 2012] 10.9 *** Granite Construction Incorporated NEO LTIP Awards Form of Restricted Stock Unit Agreement (Vesting on Date of Grant) (2012 Equity Incentive Plan) [Exhibit 10.30 to the Company's Form 10-K for the year ended December 31, 2012] 10.10 *** Granite Construction Incorporated Form of Restricted Stock Unit Agreement (3 Year Vesting Schedule) (2012 Equity Incentive Plan) [Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 2012]   38 Table of Contents   10.11 * Fourth Amended and Restated Credit Agreement, dated June 2, 2022, by and among Granite Construction Incorporated, Granite Construction Company, GILC Incorporated, Bank of America, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer, and the lenders and other parties thereto [Exhibit 10.1 to the Company’s Form 8-K filed on June 6, 2022] 10.12 * Fourth Amended and Restated Guaranty Agreement, dated June 2, 2022, by and among Granite Construction Incorporated, the guarantors party thereto and Bank of America, N.A., as Administrative Agent [Exhibit 10.2 to the Company’s Form 8-K filed on June 6, 2022] 10.13 * Form of Bond Hedge Confirmation [Exhibit 10.1 to the Company’s Form 8-K filed on November 1, 2019] 10.14 * Form of Warrant Confirmation [Exhibit 10.2 to the Company’s Form 8-K filed on November 1, 2019] 10.15 *** Executive Retention and Severance Plan III and Participation Agreement [Exhibit 10.1 to the Company's Form 8-K filed on March 30, 2020] 10.16 *** Long Term Incentive Plan, effective January 1, 2020 [Exhibit 10.2 to the Company's Form 8-K filed on March 30, 2020] 10.17 *** LTIP Award Agreement (2020 Long Term Incentive Plan) [Exhibit 10.3 to the Company's Form 8-K filed on March 30, 2020] 10.18 *** Retirement and Transition Agreement dated October 20, 2020 by and between the Company and Mr. Roberts [Exhibit 10.1 to the Company’s Form 8-K filed on October 23, 2020] 10.20 *** Granite Construction Incorporated 2021 Equity Incentive Plan [Exhibit 10.2 to the Company’s Form 8-K filed on June 4, 2021] 10.21 *** Form of Non-Employee Director Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.3 to the Company’s Form 8-K filed on June 4, 2021] 10.22 *** Form of Employee Service Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.4 to the Company’s Form 8-K filed on June 4, 2021] 10.23 *** Form of Employee TSR Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.5 to the Company’s Form 8-K filed on June 4, 2021] 10.24 * Stipulation and Agreement of Settlement, dated as of April 29, 2021 [Exhibit 10.1 to the Company’s Form 8-K filed on April 30, 2021]   10.25 * Notice of Pendency and Proposed Settlement of Actions [Exhibit 99.1 to the Company's Form 8-K filed on June 9, 2022]   39 Table of Contents   Exhibit No.   Exhibit Description 21 † List of Subsidiaries of Granite Construction Incorporated 23.1 † Consent of PricewaterhouseCoopers LLP   31.1 † Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 † Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 †† Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 95 † Mine Safety Disclosure 101.INS  † Inline XBRL Instance Document  101.SCH  † Inline XBRL Taxonomy Extension Schema  101.CAL  † Inline XBRL Taxonomy Extension Calculation Linkbase  101.DEF  † Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB  † Inline XBRL Taxonomy Extension Label Linkbase  101.PRE † Inline XBRL Taxonomy Extension Presentation Linkbase  104 † The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).   * Incorporated by reference ** Compensatory plan or management contract † Filed herewith †† Furnished herewith     40 Table of Contents   SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.         GRANITE CONSTRUCTION INCORPORATED         By: /s/ Elizabeth L. Curtis     Elizabeth L. Curtis     Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: February 21, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated and on the dates indicated. /s/ Michael F. McNally   February 21, 2023 Michael F. McNally, Chairman of the Board and Director     /s/ Kyle T. Larkin   February 21, 2023 Kyle T. Larkin, President, Chief Executive Officer and Director (Principal Executive Officer)     /s/ Elizabeth L. Curtis   February 21, 2023 Elizabeth L. Curtis, Executive Vice President and Chief Financial Officer (Principal Financial Officer)     /s/ Staci M. Woolsey   February 21, 2023 Staci M. Woolsey, Chief Accounting Officer (Principal Accounting Officer)     /s/ Louis E. Caldera   February 21, 2023 Louis E. Caldera, Director     /s/ Molly C. Campbell   February 21, 2023 Molly C. Campbell, Director     /s/ David C. Darnell   February 21, 2023 David C. Darnell, Director     /s/ Patricia D. Galloway   February 21, 2023 Patricia D. Galloway, Director     /s/ David H. Kelsey   February 21, 2023 David H. Kelsey, Director     /s/ Alan P. Krusi   February 21, 2023 Alan P. Krusi, Director     /s/ Jeffrey J. Lyash   February 21, 2023 Jeffrey J. Lyash, Director     /s/ Celeste B. Mastin   February 21, 2023 Celeste B. Mastin, Director     /s/ Laura M. Mullen   February 21, 2023 Laura M. Mullen, Director     /s/ Gaddi H. Vasquez    February 21, 2023 Gaddi H. Vasquez, Director       41 Table of Contents       Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Granite Construction Incorporated Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Granite Construction Incorporated and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income (loss), of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to not designing an effective control to assess the impact of significant and unusual discrete items on the interim tax provision, such as the divestiture of a business. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management’s report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F-1 Table of Contents   Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition - Estimates of the forecasted revenue and costs to complete for multi-year fixed price contracts in the construction segment As described in Notes 1, 3, and 4 to the consolidated financial statements, the revenue for the construction segment for the year ended December 31, 2022 was $2,802 million, a portion of which related to multi-year fixed price contracts. Revenue in the construction segment is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., cost to cost) method. Under the cost to cost method, costs incurred to-date are generally the best depiction of transfer of control. The accuracy of the Company’s revenue and profit recognition in a given period depends on the accuracy of management’s estimates of the forecasted revenue and cost to complete each project. Cost estimates for all significant projects use a detailed bottom up approach in which there are a number of factors that can contribute to changes in estimates of contract cost and profitability. Provisions for losses are recognized at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue. The estimates of transaction price and costs to complete can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. When the Company experiences significant revisions in estimates, management undergoes a process that includes reviewing the nature of the changes to ensure that no material amounts should have been recorded in a prior period rather than as a revision in estimate for the current period. Management generally uses the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. The principal considerations for our determination that performing procedures relating to estimates of the forecasted revenue and costs to complete for multi-year fixed price contracts in the construction segment, and revisions in those estimates, is a critical audit matter are (i) the significant judgment by management in forecasting project revenue and costs to complete and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the estimates of forecasted revenue and costs to complete for multi-year fixed price contracts in the construction segment, and revisions in those estimates. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over estimates of forecasted revenue and costs to complete for multi-year fixed price contracts in the construction segment, and revisions in those estimates. These procedures also included, among others, for a sample of contracts, evaluating and testing management’s process for determining the estimates of forecasted revenue and costs to complete, which included (i) assessing management’s ability to reasonably estimate the forecasted revenue and costs to complete by evaluating management’s methodology and assessing the consistency of management’s approach over the life of the contract and (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated forecasted revenue and costs to complete. /s/ PricewaterhouseCoopers LLP Houston, Texas February 21, 2023 We have served as the Company’s auditor since 1982. F-2 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and per share data) December 31,     2022       2021   ASSETS                 Current assets                 Cash and cash equivalents ($ 102,547 and $ 92,783 related to consolidated construction joint ventures (“CCJVs”))   $ 293,991     $ 395,647   Short-term marketable securities     39,374       —   Receivables, net ($ 39,281 and $ 49,534 related to CCJVs)     463,987       464,588   Contract assets ($ 80,306 and $ 50,054 related to CCJVs)     241,916       145,437   Inventories     86,809       61,965   Equity in construction joint ventures     183,808       189,911   Other current assets ($ 5,694 and $ 8,091 related to CCJVs)     37,411       177,210   Current assets held for sale     —       392,641   Total current assets     1,347,296       1,827,399   Property and equipment, net ($ 7,834 and $ 14,920 related to CCJVs)     509,210       433,504   Long-term marketable securities     26,569       15,600   Investments in affiliates     80,725       23,368   Goodwill     73,703       53,715   Right of use assets     49,079       49,312   Deferred income taxes, net     22,208       24,141   Other noncurrent assets     59,143       67,888   Total assets   $ 2,167,933     $ 2,494,927                     LIABILITIES AND EQUITY                 Current liabilities                 Current maturities of long-term debt   $ 1,447     $ 8,727   Accounts payable ($ 57,534 and $ 55,012 related to CCJVs)     334,392       324,313   Contract liabilities ($ 62,675 and $ 69,328 related to CCJVs)     173,286       200,041   Accrued expenses and other current liabilities ($ 8,451 and $ 5,514 related to CCJVs)     288,469       452,829   Current liabilities held for sale     —       83,408   Total current liabilities     797,594       1,069,318   Long-term debt     286,934       331,191   Long-term lease liabilities     32,170       32,928   Deferred income taxes, net     1,891       1,856   Other long-term liabilities     64,199       64,071   Commitments and contingencies (see Note 20)                     Equity                 Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding     —       —   Common stock, $ 0.01 par value, authorized 150,000,000 shares; issued and outstanding: 43,743,907 shares as of December 31, 2022 and 45,840,260 shares as of December 31, 2021     437       458   Additional paid-in capital     470,407       559,752   Accumulated other comprehensive income (loss)     788       ( 3,359 ) Retained earnings     481,384       410,831   Total Granite Construction Incorporated shareholders’ equity     953,016       967,682   Non-controlling interests     32,129       27,881   Total equity     985,145       995,563   Total liabilities and equity   $ 2,167,933     $ 2,494,927   The accompanying notes are an integral part of these consolidated financial statements.   F-3 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except share and per share data)   Years Ended December 31,   2022     2021     2020   Revenue                         Construction   $ 2,803,935     $ 3,076,190     $ 3,181,697   Materials     497,321       425,675       380,762   Total revenue     3,301,256       3,501,865       3,562,459   Cost of revenue                         Construction     2,500,054       2,772,962       2,901,528   Materials     431,708       366,258       316,143   Total cost of revenue     2,931,762       3,139,220       3,217,671   Gross profit     369,494       362,645       344,788   Selling, general and administrative expenses     272,610       303,015       316,284   Non-cash impairment charges (see Note 1)     —       —       156,690   Other costs, net (See Note 1)     24,120       101,351       37,089   Gain on sales of property and equipment, net (see Note 11)     ( 12,617 )     ( 66,439 )     ( 6,930 ) Operating income (loss)     85,381       24,718       ( 158,345 ) Other (income) expense                         Interest income     ( 6,528 )     ( 1,176 )     ( 3,096 ) Interest expense     12,624       20,739       24,200   Equity in income of affiliates, net     ( 13,571 )     ( 12,586 )     ( 8,783 ) Other (income) expense, net     1,039       ( 4,386 )     ( 4,203 ) Total other (income) expense, net     ( 6,436 )     2,591       8,118   Income (loss) before income taxes     91,817       22,127       ( 166,463 ) Provision for (benefit from) income taxes     12,960       19,713       ( 282 ) Net income (loss)     78,857       2,414       ( 166,181 ) Amount attributable to non-controlling interests     4,445       7,682       21,064   Net income (loss) attributable to Granite Construction Incorporated   $ 83,302     $ 10,096     $ ( 145,117 )                           Net income per share attributable to common shareholders (see Note 18):                         Basic earnings (loss) per share   $ 1.87     $ 0.22     $ ( 3.18 ) Diluted earnings (loss) per share   $ 1.70     $ 0.21     $ ( 3.18 ) Weighted average shares outstanding:                         Basic     44,485       45,788       45,614   Diluted     52,326       47,599       45,614     The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years Ended December 31,     2022       2021       2020   Net income (loss)   $ 78,857     $ 2,414     $ ( 166,181 ) Other comprehensive income (loss), net of tax:                         Net unrealized gain (loss) on cash flow hedges, net of tax   $ 275     $ ( 108 )   $ ( 4,155 ) Less: reclassification for net gains included in interest expense, net of tax     3,042       2,131       1,816   Net change   $ 3,317     $ 2,023     $ ( 2,339 ) Foreign currency translation adjustments, net     830       ( 347 )     ( 51 ) Other comprehensive income (loss), net of tax   $ 4,147     $ 1,676     $ ( 2,390 ) Comprehensive income (loss), net of tax   $ 83,004     $ 4,090     $ ( 168,571 ) Non-controlling interests in comprehensive income, net of tax     4,445       7,682       21,064   Comprehensive income (loss) attributable to Granite Construction Incorporated, net of tax   $ 87,449     $ 11,772     $ ( 147,507 ) The accompanying notes are an integral part of these consolidated financial statements.   F-5 Table of Contents   GRANITE CONSTRUCTION INCORPORATED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands, except share data)     Outstanding Shares     Common Stock     Additional Paid-In Capital     Accumulated Other Comprehensive Income (Loss)     Retained Earnings     Total Granite Shareholders’ Equity     Non-controlling Interests     Total Equity   Balances at December 31, 2019     45,503,805     $ 456     $ 549,307     $ ( 2,645 )   $ 594,353     $ 1,141,471     $ 36,945     $ 1,178,416   Net loss     —       —       —       —       ( 145,117 )     ( 145,117 )     ( 21,064 )     ( 166,181 ) Other comprehensive loss     —       —       —       ( 2,390 )     —       ( 2,390 )     —       ( 2,390 ) RSUs vested     191,171       2       ( 2 )     —       —       —       —       —   Common stock purchased for employee tax withholding for vested RSUs     ( 60,604 )     ( 1 )     ( 884 )     —       —       ( 885 )     —       ( 885 ) Dividends on common stock ($ 0.52 per share)     —       —       —       —       ( 23,734 )     ( 23,734 )     —       ( 23,734 ) Effect of adopting ASC Topic 326     —       —       —       —       ( 366 )     ( 366 )     —       ( 366 ) Transactions with non-controlling interests, net     —       —       —       —       —       —       65       65   Stock-based compensation expense and other     34,169       —       6,986       —       ( 301 )     6,685       —       6,685   Balances at December 31, 2020     45,668,541       457       555,407       ( 5,035 )     424,835       975,664       15,946       991,610   Net income (loss)     —       —       —       —       10,096       10,096       ( 7,682 )     2,414   Other comprehensive income     —       —       —       1,676       —       1,676       —       1,676   RSUs vested     235,234       2       ( 2 )     —       —       —       —       —   Common stock purchased for employee tax withholding for vested RSUs     ( 68,580 )     ( 1 )     ( 2,729 )     —       —       ( 2,730 )     —       ( 2,730 ) Dividends on common stock ($ 0.52 per share)     —       —       —       —       ( 23,826 )     ( 23,826 )     —       ( 23,826 ) Transactions with non-controlling interests, net     —       —       —       —       —       —       19,617       19,617   Stock-based compensation expense and other     5,065       —       7,076       —       ( 274 )     6,802       —       6,802   Balances at December 31, 2021     45,840,260       458       559,752       ( 3,359 )     410,831       967,682       27,881       995,563   Cumulative effect of newly adopted accounting standard (see Note 1)     —       —       ( 26,961 )     —       10,543       ( 16,418 )     —       ( 16,418 ) Balances at January 1, 2022     45,840,260       458       532,791       ( 3,359 )     421,374       951,264       27,881       979,145   Net income (loss)     —       —       —       —       83,302       83,302       ( 4,445 )     78,857   Other comprehensive income     —       —       —       4,147       —       4,147       —       4,147   Repurchases of common stock (1)     ( 2,376,020 )     ( 24 )     ( 70,877 )     —       —       ( 70,901 )     —       ( 70,901 ) RSUs vested     262,748       3       ( 3 )     —       —       —       —       —   Dividends on common stock ($ 0.52 per share)     —       —       —       —       ( 23,292 )     ( 23,292 )     —       ( 23,292 ) Transactions with non-controlling interests, net     —       —       —       —       —       —       8,693       8,693   Stock-based compensation expense and other     16,919       —       8,496       —       —       8,496       —       8,496   Balances at December 31, 2022     43,743,907     $ 437     $ 470,407     $ 788     $ 481,384     $ 953,016     $ 32,129     $ 985,145   (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 consolidated financial statements. F-6 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS ( in thousands ) Years Ended December 31,   2022     2021     2020   Operating activities                         Net income   $ 78,857     $ 2,414     $ ( 166,181 ) Adjustments to reconcile net income to net cash provided by operating activities:                         Depreciation, depletion and amortization     82,569       109,050       112,958   Amortization related to long-term debt (see Note 14)     2,366       9,448       8,693   Gain on sales of property and equipment, net (see Note 11)     ( 12,617 )     ( 66,439 )     ( 6,930 ) Deferred income taxes     5,447       16,600       8,817   Stock-based compensation     7,765       6,407       6,377   Equity in net loss from unconsolidated joint ventures     19,676       765       51,486   Net income from affiliates     ( 13,571 )     ( 12,586 )     ( 8,783 ) Non-cash impairment charges (see Note 1)     —       —       156,690   Other non-cash adjustments     222       —       1,729   Changes in assets and liabilities:                         Receivables     59,623       ( 11,317 )     6,840   Contract assets, net     ( 113,410 )     12,046       123,670   Inventories     ( 14,307 )     774       5,136   Contributions to unconsolidated construction joint ventures     ( 53,787 )     ( 61,780 )     ( 50,878 ) Distributions from unconsolidated construction joint ventures and affiliates     19,223       22,004       11,065   Deposit for legal settlement (see Note 20)     129,000       ( 129,000 )     —   Other assets, net     16,868       ( 11,969 )     ( 1,035 ) Accounts payable     ( 9,778 )     7,396       ( 40,999 ) Accrual for legal settlement (see Note 20)     ( 129,000 )     129,000       —   Accrued expenses and other liabilities, net     ( 19,499 )     ( 882 )     49,805   Net cash provided by operating activities   $ 55,647     $ 21,931     $ 268,460   Investing activities                         Purchases of marketable securities     ( 94,104 )     ( 10,000 )     ( 9,996 ) Maturities of marketable securities     45,000       —       10,000   Proceeds from called marketable securities     6       —       24,996   Purchases of property and equipment     ( 121,612 )     ( 94,810 )     ( 93,253 ) Proceeds from sales of property and equipment     26,064       94,802       16,702   Proceeds from the sale of business (see Note 2)     140,576       —       5,000   Issuance of notes receivable     ( 7,560 )     ( 20,400 )     5,289   Collection of notes receivable     630       8,930       —   Net cash used in investing activities   $ ( 11,000 )   $ ( 21,478 )   $ ( 41,262 ) Financing activities                         Proceeds from long-term debt     50,000       —       50,000   Debt principal repayments     ( 125,164 )     ( 8,922 )     ( 83,433 ) Cash dividends paid     ( 23,271 )     ( 23,804 )     ( 23,712 ) Repurchases of common stock (See Note 17)     ( 70,898 )     ( 2,730 )     ( 885 ) Contributions from non-controlling partners     13,150       20,126       11,875   Distributions to non-controlling partners     ( 8,567 )     ( 9,514 )     ( 11,810 ) Other financing activities, net     439       398       307   Net cash used in financing activities   $ ( 164,311 )   $ ( 24,446 )   $ ( 57,658 ) Net increase (decrease) in cash, cash equivalents and restricted cash     ( 119,664 )     ( 23,993 )     169,540   Cash, cash equivalents and $ 1,512 , $ 1,512 and $ 5,835 in restricted cash at beginning of period     413,655       437,648       268,108   Cash, cash equivalents and $ 0 , $ 1,512 and $ 1,512 in restricted cash at end of period   $ 293,991     $ 413,655     $ 437,648                             Supplementary Information                         Right of use assets obtained in exchange for lease obligations   $ 17,547     $ 23,379     $ 10,000   Cash paid during the period for:                         Operating lease liabilities   $ 22,611     $ 23,203     $ 21,654   Interest   $ 11,511     $ 14,593     $ 18,753   Income taxes   $ 3,768     $ 2,066     $ 2,805   Other non-cash operating activities:                         Performance guarantees   $ ( 17,409 )   $ ( 167 )   $ 350   Non-cash investing and financing activities:                         RSUs issued, net of forfeitures   $ 8,694     $ 8,299     $ 4,449   Dividends declared but not paid   $ 5,687     $ 5,959     $ 5,937   Contributions from non-controlling partners   $ 4,110     $ 9,006     $ —   Accrued equipment purchases   $ 5,745     $ ( 4,714 )   $ —   The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS   1. Summary of Significant Accounting Policies Description of Business : Granite Construction Incorporated is one of the largest diversified infrastructure companies in the United States, engaged in infrastructure projects including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels, water well drilling and other infrastructure-related projects, site preparation, mining services and infrastructure services for commercial and industrial sites, railways, residential development, energy development, as well as construction management professional services. Our operations have primary offices located in Alaska, Arizona, California, Canada, Colorado, Florida, Guam, Illinois, Mexico, Nevada, Texas, Utah and Washington. Unless otherwise indicated, the terms “we,” “us,” “our,” “Company” and “Granite” refer to Granite Construction Incorporated and its wholly-owned and consolidated subsidiaries. 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  2,  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. 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. 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 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 consolidated balance sheet continues to reflect these assets and liabilities as held for sale as of that date. In alphabetical order, our business operating groups are as follows:   • California, which is comprised of vertically integrated businesses in home markets across the state;   • Central, which includes the vertically integrated Arizona region and regional civil construction businesses in Illinois, Florida and Texas. The Central group also includes the Federal division which performs civil construction across the continental United States and Guam, and the Tunnel division; and   • Mountain, which is comprised of vertically integrated regional businesses in Alaska, Washington, Oregon, Utah and Nevada. The Mountain Group also includes national businesses in the Industrial & Energy division, which primarily focuses on commercial solar construction projects, Water Resources, which performs water well drilling and rehabilitation services and Mineral Services, which performs mineral exploration services for mining clients. Principles of Consolidation : The consolidated financial statements include the accounts of Granite Construction Incorporated and its wholly-owned and consolidated subsidiaries. All material inter-company transactions and accounts have been eliminated. Additionally, we participate in various construction joint ventures of which we are a limited member (“joint ventures”). Generally, each construction joint venture is formed to accomplish a specific project and is jointly controlled by the joint venture partners. The joint venture agreements typically provide that our interests in any profits and assets and our respective share in any losses and liabilities that may result from the performance of the contracts are limited to our stated percentage interest in the project. However, due to the joint and several nature of the performance obligations under the related owner contracts, if any of the 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). Under our joint venture contractual arrangements, we provide capital to these joint ventures in return for an ownership interest. In addition, partners dedicate resources to the joint ventures necessary to complete the contracts and are reimbursed for their cost. The operational risks of each construction joint venture are passed along to the joint venture members. As we absorb our share of these risks, our investment in each venture is exposed to potential gains and losses. We consolidate joint ventures if we determine that through our participation we have a variable interest and are the primary beneficiary as defined by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 810, Consolidation , and related standards. The factors we use to determine the primary beneficiary of a variable interest entity (“VIE”) may include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners. Although not applicable for any of the years presented, if we determine that the power to direct the significant activities is shared equally by two or more joint venture parties, then there is no primary beneficiary and no party consolidates the VIE. If we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of the unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations. We record the corresponding investment balance in equity in construction joint ventures in the consolidated balance sheets except when a project is in a loss position, the investment balance is recorded as a deficit in unconsolidated construction joint ventures and is included in accrued expenses and other current liabilities in the consolidated balance sheets. Our investment in unconsolidated construction joint ventures could extend beyond one year and is within the normal operating cycle of the associated construction projects. We account for non-construction unconsolidated joint ventures under the equity method of accounting in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures, and include our share of the operations in equity in income of affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets. We also participate in “line-item” joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work. The revenue for each line-item joint venture partners’ discrete items of work is defined in the contract with the project owner and each joint venture partner bears the profitability risk associated only with its own work. There is not a single set of books and records for a line-item joint venture. Each partner accounts for its items of work individually as it would for any self-performed contract. We account for our portion of these contracts as revenue and cost of revenue in the consolidated statements of operations and in relevant balances in the consolidated balance sheets. Use of Estimates in the Preparation of Financial Statements : The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences; however, actual amounts could differ from those estimates.  Revenue Recognition: Our revenue is primarily derived from construction contracts that can span several quarters or years in our Construction segment and from sales of construction related materials in our Materials segment. We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers,  and subsequently issued additional related Accounting Standards Updates (“ASU”s) (“Topic 606” ). Topic 606 provides for a five -step model for recognizing revenue from contracts with customers as follows:   1. Identify the contract   2. Identify performance obligations   3. Determine the transaction price   4. Allocate the transaction price   5. Recognize revenue   F- 8 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Generally, our contracts contain one performance obligation. Contracts with customers in our Materials segment are typically defined by our customary business practices and are valued at the contractual selling price per unit. Our customary business practices are for the delivery of a separately identifiable good at a point in time which is typically when delivery to the customer occurs. Contracts in our Construction segment  may contain multiple distinct promises or multiple contracts within a master agreement (e.g., contracts that cross multiple locations/geographies and task orders), which we review at contract inception to determine if they represent multiple performance obligations or multiple separate contracts. This review consists of determining if promises or groups of promises are distinct within the context of the contract, including whether contracts are physically contiguous, contain task orders, purchase or sales orders, termination clauses and/or elements not related to design and/or build. The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods and services to the customer. The contractual consideration from customers of our Construction segment  may include both fixed amounts and variable amounts (e.g., bonuses/incentives or penalties/liquidated damages) to the extent that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved (i.e., probable and estimable). When a contract has a single performance obligation, the entire transaction price is attributed to that performance obligation. When a contract has more than one performance obligation, the transaction price is allocated to each performance obligation based on estimated relative standalone selling prices of the goods or services at the inception of the contract, which typically is determined using cost plus an appropriate margin. Subsequent to the inception of a contract in our Construction segment, the transaction price could change for various reasons, including executed or unapproved change orders, and unresolved contract modifications and/or affirmative claims. Changes that are accounted for as an adjustment to existing performance obligations are allocated on the same basis at contract inception. Otherwise, changes are accounted for as separate performance obligation(s) and the separate transaction price is allocated as discussed above. Changes are made to the transaction price from unapproved change orders to the extent the amount can be reasonably estimated and recovery is probable. On certain projects we have submitted and have pending unresolved contract modifications and/or affirmative claims (“affirmative claims”) to recover additional costs and the associated profit, if applicable, to which the Company believes it is entitled under the terms of contracts with customers, subcontractors, vendors or others. The owners or their authorized representatives and/or other third parties may be in partial or full agreement with the modifications or affirmative claims, or may have rejected or disagree entirely or partially as to such entitlement. Changes are made to the transaction price from affirmative claims with customers to the extent that additional revenue on a claim settlement with a customer is probable and estimable. A reduction to costs related to affirmative claims with non-customers with whom we have a contractual arrangement (“back charges”) is recognized when the estimated recovery is probable and estimable. Recognizing affirmative claims and back charge recoveries requires significant judgments of certain factors including, but not limited to, dispute resolution developments and outcomes, anticipated negotiation results, and the cost of resolving such matters. Generally, performance obligations related to contracts in our Construction segment are satisfied over time because our performance typically creates or enhances an asset that the customer controls as the asset is created or enhanced. We recognize revenue as performance obligations are satisfied and control of the promised good and/or service is transferred to the customer. Revenue in our Construction segment is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward complete satisfaction of the performance obligation(s) using an input (i.e., “cost to cost”) method. Under the cost to cost method, costs incurred to-date are generally the best depiction of transfer of control. All contract costs, including those associated with affirmative claims, change orders and back charges, are recorded as incurred and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs). F- 9 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the forecasted revenue and cost to complete each project. Cost estimates for all of our significant projects use a detailed “bottom up” approach. There are a number of factors that can contribute to revisions in estimates of contract cost and profitability. The most significant of these include:   • changes in costs of labor and/or materials;   • subcontractor costs, availability and/or performance issues;   • extended overhead and other costs due to owner, weather and other delays;   • changes in productivity expectations;   • changes from original design on design-build projects;   • our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs;   • a change in the availability and proximity of equipment and materials;   • complexity in original design;   • length of time to complete the project;   • the availability and skill level of workers in the geographic location of the project;   • site conditions that differ from those assumed in the original bid;   • costs associated with scope changes; and   • the customer’s ability to properly administer the contract. The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in revenue and cost estimates, particularly in our larger, more complex, multi-year projects have had, and can in future periods have, a significant effect on our profitability. All state and federal government contracts and many of our other contracts provide for termination of the contract at the convenience of the party contracting with us, with provisions to pay us for work performed through the date of termination including demobilization cost. Costs to obtain our contracts (“pre-bid costs”) that are not expected to be recovered from the customer are expensed as incurred and included in selling, general and administrative expenses in our consolidated statements of operations. Although unusual, pre-bid costs that are explicitly chargeable to the customer even if the contract is not obtained are included in accounts receivable in our consolidated balance sheets when we are notified that we are not the low bidder with a corresponding reduction to selling, general and administrative expenses in our consolidated statements of operations. Unearned Revenue: Unearned revenue represents the aggregate amount of the transaction price allocated to unsatisfied or partially unsatisfied performance obligations at the end of a reporting period. We generally include a project in our unearned revenue at the time a contract is awarded, the contract has been executed and to the extent we believe funding is probable. Certain contracts contain contract options that are exercisable at the option of our customers without requiring us to go through an additional competitive bidding process or contain task orders related to master contracts under which we perform work only when the customer awards specific task orders to us. Contract options and task orders are included in unearned revenue when exercised or issued, respectively. As of December 31,   2022 and 2021 , unearned revenue was $ 2.9  billion and $ 2.6  billion, respectively. Approximately $ 1.8  billion of the December 31,   2022  unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter. Substantially all of the contracts in our unearned revenue may be canceled or modified at the election of the customer; however, we have not been materially adversely affected by contract cancellations or modifications in the past. Many projects are added to unearned revenue and completed within the same fiscal quarter or year and, therefore, may not be reflected in our beginning or ending unearned revenue. Balance Sheet Classifications: Prepaid expenses and amounts receivable and payable under construction contracts (principally retentions) that may exist over the duration of the contract and could extend beyond one year are included in current assets and liabilities. A one -year time period is used as the basis for classifying all other current assets and liabilities. Included in other current assets on the consolidated balance sheets as of December 31,   2021  was the $ 129.0 million deposit for the securities litigation settlement discussed in Note 20. Cash and Cash Equivalents : Cash equivalents are securities having maturities of three months or less from the date of purchase. Our access to joint venture cash may be limited by the provisions of the joint venture agreements. Contract Assets: Our contract assets include costs and estimated earnings in excess of billings as well as amounts due under contractual retention provisions. Costs and estimated earnings in excess of billings represent amounts earned and reimbursable under contracts, including customer affirmative claim recovery estimates, and have a conditional right for billing and payment such as achievement of milestones or completion of the project. Generally, with the exception of customer affirmative claims, such unbilled amounts will become billable according to the contract terms and generally will be billed and collected over the next twelve months. Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year. Based on our historical experience, we generally consider the collection risk related to billable amounts to be low. However, when events or conditions indicate that it is probable that the amounts become unbillable, the transaction price and associated contract asset is reduced. Certain contracts in our Construction segment include retention provisions to provide assurance to our customers that we will perform in accordance with the contract terms and are not considered a financing benefit under ASC Topic 606. The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the customer. Marketable Securities : We determine the classification of our marketable securities at the time of purchase and re-evaluate these determinations at each balance sheet date. Our marketable securities are fixed income marketable securities and are classified as held-to-maturity as we have the positive intent and ability to hold the securities to maturity. Held-to-maturity investments are stated at amortized cost and are periodically assessed for other-than-temporary impairment. Amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity and is included in interest income. The cost of securities redeemed or called is based on the specific identification method. Derivative Instruments: We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2 inputs. To receive hedge accounting treatment, derivative instruments that are designated as cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. We formally document our hedge relationships at inception, including identification of the hedging instruments and the hedged items, our risk management objectives and strategies for undertaking the hedge transaction, and the initial quantitative assessment of the hedging instrument’s effectiveness in offsetting changes in the fair value of the hedged items. The effective portion of the gain or loss on cash flow hedges is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statements of operations when the periodic hedged cash flows are settled. Adjustments to fair value on derivative instruments that are  not  part of a designated hedging relationship are reported through the consolidated statements of operations. We do  not  enter into derivative instruments for speculative or trading purposes. The derivative transactions related to the 2.75 % Convertible Notes (as defined in Note 14 ) were recorded to equity in our consolidated balance sheets based on the cash proceeds and will not be remeasured as long as they continue to meet the conditions for equity classification.  F- 10 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Fair Value of Financial Assets and Liabilities:  We measure and disclose certain financial assets and liabilities at fair value. ASC Topic 820,   Fair Value Measurements and Disclosures,  defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820  describes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We utilize the active market approach to measure fair value for our financial assets and liabilities. We report separately each class of assets and liabilities measured at fair value on a recurring basis and include assets and liabilities that are disclosed but not recorded at fair value in the fair value hierarchy. Allowance for   Credit Losses:  Financial assets, which potentially subject us to credit losses, consist primarily of short and long-term marketable securities, receivables, contract assets and long-term notes receivables included in other noncurrent assets in our consolidated balance sheets. We measure expected credit losses of financial assets based on historical loss and other information available to management using a loss rate method applied to asset groups with categorically similar risk characteristics. These expected credit losses are recorded to an allowance for credit losses valuation account that is deducted from receivables and contract assets to present the net amount expected to be collected on the financial asset in the consolidated balance sheets. Concentrations of Credit Risk: Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, marketable securities, accounts receivable and contract assets. We maintain our cash and cash equivalents and our marketable securities with several financial institutions. We invest with high credit quality financial institutions and, by policy, limit the amount of credit exposure to any one financial institution. During the years ended December 31,   2022 , 2021 and 2020 , our largest volume customer, including both prime and subcontractor arrangements, was the California Department of Transportation (“Caltrans”). Revenue recognized from contracts with Caltrans during the years ended December 31,   2022 , 2021  and  2020 represented $ 348.0  million ( 10.5 %  of total revenue), $ 337.1  million ( 9.6 %  of total revenue) and $ 316.9  million ( 8.9 %  of total revenue), respectively, which was primarily in the Construction segment. Other than Caltrans, none of our customers, including both prime and subcontractor arrangements, had revenue that individually exceeded 10% of total revenue during the year ended  December 31,   2022 .  None of our customers had revenue that individually exceeded 10% of total revenue during the years ended  December 31,   2021 and 2020 . The majority of our receivables are from customers concentrated in the United States. None of our customers had a receivable balance in excess of 10% of our total net receivables as of  December 31,   2022  and  2021 . Certain construction contracts include retention provisions that were included in contract assets as of December 31,   2022  and  2021  in our consolidated balance sheets. The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the owners. The majority of the December 31,   2022 contract retention balance disclosed in Note 6 is expected to be collected within one year. We perform ongoing credit evaluations of our customers and generally do not require collateral, although the law provides us the ability to file mechanics’ liens on real property improved for private customers in the event of non-payment by such customers. Foreign Currency Transactions and Translation:  We have operations in Mexico and Canada which involve exposure to possible volatile movements in foreign currency exchange rates. We account for foreign currency exchange transactions and translation in accordance with ASC Topic 830,   Foreign Currency Matters . In Mexico, most of our customer contracts and a significant portion of our costs are denominated in U.S. dollars; therefore, the functional currency is U.S. dollars. In Canada, the functional currency is the local currency. Foreign currency transactions are remeasured into the functional currency with gains and losses included in other income, net in the consolidated statements of operations. The impact from foreign currency transactions was immaterial for 2022 , 2021  and  2020 . Assets and liabilities in functional currency are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated into U.S. dollars at average foreign currency exchange rates prevailing during the reporting periods. The translation adjustments from functional currency to U.S. dollars are reported in accumulated other comprehensive income (loss) on the consolidated balance sheets. Inventories:  Inventories relating to our operations consist primarily of quarry products, contract-specific materials and water well drilling materials, supplies, as well as mineral extraction and drilling supplies located in the U.S. and Mexico. Cost of inventories are valued at the lower of average cost or net realizable value . We reserve quarry products based on estimated quantities of materials on hand in excess of approximately one year of demand. Investments in Affiliates : Each investment accounted for under the equity method of accounting is reviewed for impairment in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures.  We account for our share of the operating results of the equity method investments in equity in income from affiliates, net in the consolidated statements of operations and as a single line item in the consolidated balance sheets as investments in affiliates. Our investments in affiliates include foreign entities, real estate entities and an asphalt terminal entity. These investments are evaluated for impairment using the other-than-temporary impairment model, which requires an impairment charge to be recognized if our investment’s carrying amount exceeds its fair value, and the decline in fair value is deemed to be other than temporary. Recoverability is measured by comparison of carrying amounts to future undiscounted cash flows the investments are expected to generate. Events or changes in circumstances, which would cause us to review undiscounted future cash flows include, but are not limited to:   • significant adverse changes in legal factors or the business climate and   • current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated with the use of the asset. In addition, events or changes in circumstances specifically related to our real estate entities, include:   • significant decreases in the market price of the asset;   • accumulation of costs significantly in excess of the amount originally expected for the acquisition, development or construction of the asset; and   • significant changes to the development or business plans of a project. Future undiscounted cash flows and fair value assessments for our foreign entities and for the asphalt terminal entity are estimated based on market conditions and the political climate. Future undiscounted cash flows and fair value assessments for our real estate entities are estimated based on entitlement status, market conditions, cost of construction, debt load, development schedules, status of joint venture partners and other factors applicable to the specific project. Fair value is estimated based on the expected future cash flows attributable to the asset or group of assets and on other assumptions that market participants would use in determining fair value, such as market discount rates, transaction prices for other comparable assets, and other market data. Our estimates of cash flows may differ from actual cash flows due to, among other things, fluctuations in interest rates, decisions made by jurisdictional agencies, economic conditions, or changes to our business operations.  During the year ended December 31, 2020, the entities within our investments in foreign affiliates experienced other than temporary declines in fair value, which resulted in a non-cash impairment charge of $ 9.6 million. Property and Equipment : Property and equipment are stated at cost. Depreciation for construction and other equipment is primarily provided using accelerated methods over lives ranging from three to ten years, and the straight-line method over lives from two  to twenty years for the remaining depreciable assets. We believe that accelerated methods best approximate the service provided by the construction and other equipment. Depletion of quarry property is based on the usage of depletable reserves. We frequently sell property and equipment that has reached the end of its useful life or no longer meets our needs, including depleted quarry property. At the time that an asset or an asset group meets the held for sale criteria as defined by ASC Topic 360, Property, Plant, and Equipment,  depreciation is discontinued and we write it down to fair value less cost to sell, if the fair value is below the carrying value. Fair value is estimated by a variety of factors including, but not limited to, market comparative data, historical sales prices, broker quotes and third -party valuations. If material, such property is separately disclosed in the consolidated balance sheets, otherwise it is held in property and equipment until sold. The cost and accumulated depreciation or depletion of property sold or retired is removed from the consolidated balance sheets and the resulting gains or losses, if any, are reflected in operating income in the consolidated statements of operations for the period. In the case that we abandon an asset, an amount equal to the carrying amount of the asset, less salvage value, if any, will be recognized as expense in the period that the asset was abandoned. Repairs and maintenance are expensed as incurred. Costs related to the development of internal-use software during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred during the application development stage are capitalized. These costs consist primarily of software, hardware and consulting fees, as well as salaries and related costs. Amounts capitalized are reported as a component of office furniture and equipment within property and equipment in the consolidated balance sheets. Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which ranges from three to seven years. During the years ended December 31,   2022 ,  2021  and  2020 , we capitalized $ 11.4  million, $ 12.0  million and $ 7.4  million, respectively, of internal-use software development and related hardware costs. Long-lived Assets: We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. Recoverability of these asset groups is measured by comparison of their carrying amounts to the future undiscounted cash flows the asset groups are expected to generate. If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by which the carrying amount of the asset group exceeds fair value. We group construction and plant equipment assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. When an individual asset or group of assets is determined to no longer contribute to its vertically integrated construction and plant equipment asset group, it is assessed for impairment independently. As of  December 31,   2022 , amortizable intangible assets, which primarily include permits and customer relationships, are being amortized over remaining terms from  two  to  fifteen  years. All intangible assets are amortized on a straight-line basis except for customer relationships which will are amortized on a double declining basis. F- 11 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Goodwill:  As of December 31, 2022, we had  five reporting units in which goodwill was recorded as follows:   • Central Group Construction   • Central Group Materials   • Mountain Group Construction   • Mountain Group Materials   • California Group Construction We perform our goodwill impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill. Examples of such events or circumstances include, but are not limited to, the following:    • a significant adverse change in the business climate;   • a significant adverse change in legal factors or an adverse action or assessment by a regulator;   • a more likely than not expectation that a segment or a significant portion thereof will be sold; or   • the testing for recoverability of a significant asset group within the segment. In accordance with ASC Topic 350, Intangibles – Goodwill and Other, we can elect to perform a qualitative assessment to test a reporting unit’s goodwill for impairment or perform a quantitative impairment test. Based on a qualitative assessment, if we determine that the fair value of a reporting unit is more likely than not to be less than its carrying amount, the quantitative impairment test will be performed. In performing the quantitative goodwill impairment tests, we calculate the estimated fair value of the reporting unit in which the goodwill is recorded using the discounted cash flows and market multiple methods. The estimated fair value is compared to the carrying amount of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying amount over the fair value is recognized as a non-cash impairment charge. Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows, revenue and margin growth rates, and appropriate benchmark companies. The cash flows used in our  2022  discounted cash flow model were based on five -year financial forecasts developed internally by management adjusted for market participant-based assumptions. Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units. To assess for reasonableness, we compare the estimated fair values of the reporting units to our current market capitalization. For our 2022 annual goodwill impairment test, we elected to perform a qualitative assessment of the Central Group Materials, Mountain Group Construction, Mountain Group Materials and California Group Construction reporting units and we determined that it was more likely than not that the fair values were greater than the carrying amounts; therefore, no quantitative goodwill impairment test was performed for these reporting units. Factors we considered in our qualitative assessment were macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers and changes in the composition or carrying amount of the reporting unit’s net assets. A quantitative impairment test was conducted for the Central Group Construction reporting unit, and we concluded that goodwill was not impaired. The assessment indicated that the estimated fair value of the reporting unit exceeded its carrying amount (i.e., headroom) by over 80 %. In the third quarter of 2022, in connection with our decision to retain the Water Resources and Mineral Services businesses, we performed impairment tests on the goodwill balances that had been previously held for sale. We concluded that goodwill was not impaired and therefore it was reclassified as held and used at its carrying amount before being classified as held for sale. The assessment indicated the estimated fair value exceeded its carrying amount by approximately 40 %. At December 31, 2022, the goodwill associated with Water Resources and Mineral Services was included within the Mountain Group Construction reporting unit. For our 2021 annual goodwill impairment test, we conducted quantitative impairment tests based on the operating structure in place at November 1, 2021. Due to changes in our reporting structure and resulting changes to our reporting units in 2021, we conducted impairment tests immediately before and after the reorganization, which was effective December 1, 2021. Based on the results of the tests performed, we concluded that goodwill was not impaired at either date since the estimated fair value of each reporting unit exceeded its respective carrying amount. During the year ended December 31, 2020, our goodwill impairment tests resulted in a total impairment charge of $ 147.1 million, which is included in Non-cash impairment charges in the consolidated statements of operations. F- 12 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Right of use Assets   and Lease Liabilities: A lease contract conveys the right to use an underlying asset for a period of time in exchange for consideration. At inception, we determine whether a contract contains a lease by determining if there is an identified asset and if the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time.  At lease commencement, we measure and record a lease liability equal to the present value of the remaining lease payments, generally discounted using the borrowing rate on our secured debt as the implicit rate is not readily determinable on many of our leases. We use a quarterly maturity discount rate if it is not materially different than the discount rates applied to each of the leases in the portfolio. On the lease commencement date, the amount of the right of use assets consists of the following:   • the amount of the initial measurement of the lease liability;   • any lease payments made at or before the commencement date, minus any lease incentives received; and   • any initial direct costs incurred. On a quarterly basis, we determine if subcontractor, vendor or service provider agreements contain embedded leases by assessing if an asset is explicitly or implicitly specified in the agreement and the counterparty has the right to substitute the asset. Most of our lease contracts do not have the option to extend or renew. We assess the option for individual leases, and we generally consider the base term to be the term of lease contracts. Lease contracts may contain non-lease components for which we elected to include both the lease and non-lease components as a single component and account for it as a lease. Contract Liabilities: Our contract liabilities consist of billings in excess of costs and estimated earnings, net of the related contract retention and provisions for losses. Billings in excess of costs and estimated earnings are billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months. Provisions for losses are recognized in the consolidated statements of operations at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue. Asset Retirement Obligations: We account for the costs related to legal obligations to reclaim aggregate mining sites and other facilities by recording our estimated asset retirement obligation at fair value using Level 3 inputs, capitalizing the estimated liability as part of the related asset’s carrying amount and allocating it to expense over the asset’s useful life. Warranties: Many of our construction contracts contain warranty provisions covering defects in equipment, materials, design or workmanship that generally run for less than two years after our customer accepts the contract. Because of the nature of our projects, including contract owner inspections of the work both during construction and prior to acceptance, we have not experienced material warranty costs for these short-term warranties and, therefore, do not believe an accrual for these costs is necessary. Certain construction contracts carry longer warranty periods, ranging from two to ten years, for which we have accrued an estimate of warranty cost. The warranty liability is estimated based on our experience with the type of work and any known risks relative to the project and was not material as of December 31,   2022 and 2021 .  Accrued Insurance Costs: We carry insurance policies to cover various risks, including general liability, automobile liability, workers compensation and employee medical expenses under which we are liable to reimburse the insurance company for certain losses. The amounts for which we are liable range from the first $ 0.5 million to $ 1.5 million per occurrence. We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends, modified, if necessary, by recent events. The establishment of accruals for estimated losses associated with our insurance policies are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, claim severity, frequency patterns and changing regulatory and legal environments. Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position. Surety Bonds : We generally are required to provide various types of surety bonds that provide an additional measure of security for our performance under certain public and private sector contracts. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties. Performance Guarantees:  The agreements with our joint venture partners (“partner(s)”) for both construction joint ventures and line item joint ventures define each partner’s management role and financial responsibility in the project. The amount of operational exposure is generally limited to our stated ownership interest. However, due to the joint and several nature of the performance obligations under the related owner contracts, if any of the 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). We estimate our liability for performance guarantees for our unconsolidated and line item joint ventures using estimated partner bond rates, which are Level 2 inputs, and include them in accrued expenses and other current liabilities with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability and corresponding asset are removed from the consolidated balance sheets upon completion and customer acceptance of the project. Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the agreement. We are not able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees. Contingencies: We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if the potential loss from any asserted or un-asserted claim or legal proceeding is considered probable and the amount can be reasonably estimated. If a potential loss is considered probable but only a range of loss can be determined, the low-end of the range is recorded. These accruals represent management’s best estimate of probable loss. Disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded. Significant judgment is required in both the determination of probability of loss and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to claims and litigation and may revise our estimates. We expense associated legal costs as they are incurred. See Note 20 for additional information. Stock-Based Compensation: We measure and recognize compensation expense, net of forfeitures, over the requisite vesting periods for all stock-based payment awards made and we recognize forfeitures as they occur. Stock-based compensation is included in selling, general and administrative expenses and cost of revenue on our consolidated statements of operations. F- 13 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Other Costs:  Other costs, net in the consolidated statements of operations include net costs related to settlements of certain legal matters and investigations, all discussed further in Note 20, as well as net divestiture costs, a gain on sale of a business in 2022 and personnel costs incurred in connection with our operating group reorganization during 2021. Income Taxes : Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities in the consolidated financial statements and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Disproportionate income tax effects which are stranded in accumulated other comprehensive income will be released using the item-by-item approach. We report a liability in accrued expenses and other current liabilities and in other long-term liabilities in the consolidated balance sheets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in interest expense and other income, net in the consolidated statements of operations. Computation of Earnings per Share : Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares include common share equivalents under the equity incentive plans and common share equivalents issuable under our 2.75% Convertible Notes using the if-converted method. Dilutive potential common shares also include common share equivalents issuable under the terms of our warrants assuming the share price of our common stock was in excess of $ 53.44 , the exercise price of warrants. See Note 14  for further discussion related to the 2.75% Convertible Notes and warrants. Convertible Notes : U.S. GAAP requires certain convertible debt instruments that may be settled in cash on conversion to be separately accounted for into liability and equity components in a manner that reflects the issuer’s non-convertible debt borrowing rate. Third party offering costs are allocated to the liability and equity components based on allocation of proceeds to those components and are recorded net of the associated balances on the consolidated balance sheets and are generally amortized to interest expense through the maturity date of the debt. Therefore, cash received from the issuance of the 2.75% Convertible Notes (as defined in Note 14 ) was separated into liability and equity components on the consolidated balance sheets at the time of issuance based on the fair value of a similar liability that does not have an associated convertible feature. The difference between the principal amount and the liability component on the issuance date has been recorded to interest expense using an effective interest rate of 6.62 % over the expected life of the 2.75% Convertible Notes. Debt discounts are recorded to the liability component through the maturity date of the debt. Recently Issued and Adopted Accounting Pronouncements:  We closely monitor all ASUs issued by the FASB and other authoritative guidance. There are currently no recently issued accounting pronouncements that are expected to have a material impact on our financial statements. In  August 2020 ,  the FASB issued ASU  2020 - 06 ,  which simplifies the accounting for convertible instruments resulting in accounting for convertible debt instruments as a single liability measured at its amortized cost and ASU 2020 - 06  is applicable to our  2.75% convertible senior notes due  2024. In addition, ASU  2020 - 06  requires the application of the if-converted method for calculating diluted earnings per share and eliminates the treasury stock method for convertible debt. We adopted ASU  2020 - 06  effective  January 1, 2022 ,  using the modified retrospective transition approach under which financial results reported in prior periods were  not  adjusted. Upon adoption, we recorded a net cumulative increase to debt of approximately $ 22.0  million and to deferred tax assets of $ 5.6  million, offset by a decrease to additional paid-in capital and retained earnings of $ 16.4  million (See Note 14 for details). In  March 2020,  the FASB issued ASU  2020 - 04,  which provides optional guidance to ease the potential burden in accounting for the effects of the transition away from LIBOR and other reference rates. Also, in  January 2021,  the FASB issued ASU  2021 - 01,  which provided clarification guidance to ASU  2020 - 04.  We adopted these ASUs during the quarter ended  June 30, 2022,  in conjunction with entering into our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) (see Note  14 ), 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 setting floating interest rates. In December 2022, the FASB issued ASU 2022 - 06, which extends the period of time preparers can utilize the reference rate reform relief guidance established in ASU 2020 - 04. The adoption of these ASUs did  not  have a material impact on our consolidated financial statements. F- 14 Table of Contents     2. Assets and Liabilities Held for Sale As discussed in Note 1, during the fourth quarter of 2021, we concluded the assets and liabilities of our former WMS businesses met the criteria for classification as held for sale. This included: Inliner, Water Resources and Mineral Services. We concluded the planned 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 ASC Topic 205 - 20, Presentation of financial statements - Discontinued operations . Additionally, beginning December 31, 2021, in accordance with ASC 360, Property, Plant, and Equipment , we ceased recording depreciation and amortization for WMS property, plant and equipment, finite-lived intangible assets and right of use lease assets. During the first quarter of 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. As a result of the sale and post-closing adjustments, we received cash proceeds of $ 140.6 million and recognized a gain of $ 1.8  million. This gain is included in Other costs, net in the consolidated statements of operations for the year ended December 31, 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. At the time of the change, we recorded an entry to adjust for depreciation and amortization that would have been recognized if the unsold businesses had been continually classified as held and used from the beginning of the year. The assets and liabilities of WMS met the criteria for classification as held for sale as of  December 31, 2021,  therefore our 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)   December 31, 2021   Cash and cash equivalents   $ 16,496   Receivables, net     102,208   Contract assets     41,340   Inventories     19,625   Other current assets     1,781   Property and equipment, net     70,912   Investments in affiliates     48,675   Goodwill     63,063   Right of use assets     12,365   Other noncurrent assets     16,176   Total assets classified as held for sale   $ 392,641             Accounts payable   $ 37,997   Contract liabilities     7,129   Other current liabilities     27,764   Long-term lease liabilities     8,352   Other long-term liabilities     2,166   Total liabilities classified as held for sale   $ 83,408     F- 15 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     3. Revisions in Estimates Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete  may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges  may  be recorded in future periods or  may  be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates. When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.  In our review of these changes for the years ended  December 31,   2022 ,  2021  and  2020 , we did  not  identify any material amounts that should have been recorded in a prior period. The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact of  $5.0 million or more on gross profit were net decreases of $ 80.1  million, $ 70.6  million and $ 143.4  million for the years ended  December 31,   2022 ,  2021  and 2020 , respectively. The projects are summarized as follows (dollars in millions except per share data): Increases                           Years Ended December 31,   2022     2021     2020   Number of projects with upward estimate changes     2       2       —   Range of increase in gross profit from each project, net   $ 5.4 - 6.8     $ 6.2 - 9.2     $ —   Increase to project profitability, net   $ 12.1     $ 15.4     $ —   Increase to net income/decrease to net loss   $ 9.7     $ 11.4     $ —   Amounts attributable to non-controlling interests   $ 2.7       —       —   Increase to net income/decrease to net loss attributable to Granite Construction Incorporated   $ 7.0     $ 11.4       —   Increase to net income/decrease to net loss per diluted share attributable to common shareholders   $ 0.13     $ 0.24     $ —   The increases during the year ended December 31,   2022  were due to production at a higher rate than anticipated and a decrease in estimated cost from mitigated risks. The increases during the year ended December 31, 2021 were due to production at a higher rate than anticipated and a decrease in estimated cost from mitigated risks as well as settlement of outstanding customer affirmative claims. There were no amounts attributable to non-controlling interests for 2021. Decreases                           Years Ended December 31,   2022     2021     2020   Number of projects with downward estimate changes     8       6       7   Range of reduction in gross profit from each project, net   $ 5.6 - 32.2     $ 5.3 - 34.6     $ 6.7 - 49.9   Decrease to project profitability, net   $ 92.2     $ 86.0     $ 143.4   Decrease to net income/increase to net loss   $ 74.1     $ 69.1     $ 114.7   Amounts attributable to non-controlling interests   $ 21.7     $ 20.5     $ 31.9   Decrease to net income/increase to net loss attributable to Granite Construction Incorporated   $ 52.4     $ 48.6     $ 82.9   Decrease to net income/increase to net loss per diluted share attributable to common shareholders   $ 1.00     $ 1.02     $ 1.79   The decreases during the year ended December 31,   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 year ended December 31,   2021  were primarily due to additional costs from acceleration of work coupled with lower productivity and higher costs than originally anticipated, unfavorable weather and extended project duration. The decreases during the year ended December 31, 2020, were due to increases in design, production, weather-related and labor contingency costs. F- 16 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     4. Disaggregation of Revenue We disaggregate our revenue based on our reportable segments and operating groups as it is the format that is regularly reviewed by management. Our reportable segments are: Construction and Materials. In alphabetical order, our operating groups are: California, Central and Mountain. In connection with the reclassification of the WMS businesses from discontinued operations to continuing operations, the Consolidated Statements of Operations have been revised to include Inliner, through the date of sale and Water Resources and Mineral Services in the Mountain operating group for all periods presented (see Note 2 ). The following tables present our disaggregated revenue (in thousands): Years ended December 31,                         2022   Construction     Materials     Total   California   $ 811,623     $ 273,314     $ 1,084,937   Central     851,779       46,531       898,310   Mountain     1,140,533       177,476       1,318,009   Total   $ 2,803,935     $ 497,321     $ 3,301,256                             2021   Construction     Materials     Total   California   $ 822,448     $ 242,552     $ 1,065,000   Central     1,058,448       33,270       1,091,718   Mountain     1,195,294       149,853       1,345,147   Total   $ 3,076,190     $ 425,675     $ 3,501,865                             2020   Construction     Materials     Total   California   $ 928,193     $ 222,021     $ 1,150,214   Central     1,145,725       25,181       1,170,906   Mountain     1,107,779       133,560       1,241,339   Total   $ 3,181,697     $ 380,762     $ 3,562,459     F- 17 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     5. Unearned Revenue The following table presents our unearned revenue as of the respective periods: (in thousands)   December 31, 2022     December 31, 2021 (1)   California   $ 945,971     $ 771,759   Central     1,444,983       1,334,901   Mountain     486,524       488,425   Total   $ 2,877,478     $ 2,595,085   ( 1 ) These balances do not include amounts held for sale (see Note 2 ).   6. Contract Assets and Liabilities 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 $ 182.8  million, $ 153.9  million and $ 176.1  million during the years ended December 31,   2022 ,  2021  and 2020 , respectively. The changes in contract transaction price were from items such as executed or estimated change orders and unresolved contract modifications and claims. As of December 31,   2022  and  2021 , the aggregate claim recovery estimates included in contract asset and liability balances were approximately $ 75.8  million and $ 35.5  million, respectively. The components of the contract asset balances as of the respective dates were as follows (in thousands): December 31,   2022       2021 (1)   Costs in excess of billings and estimated earnings   $ 80,357     $ 14,158   Contract retention     161,559       131,279   Total contract assets   $ 241,916     $ 145,437   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). The increase in contract assets is primarily due to unresolved disputed work and increased retention balances related to certain ongoing projects. As of  December 31,   2022  and  2021 , contract retention receivable from Brightline Trains Florida LLC represented  11.7 %, and  17.2 %, respectively, of total contract assets.  No other contract retention receivable individually exceeded 10%  of total contract assets at any of the presented dates. The majority of the contract retention balance is expected to be collected within one  year.   As work is performed, revenue is recognized and the corresponding contract liabilities are reduced. During the years ended December 31,   2022  and  2021  and 2020, we recognized revenue of $ 223.7  million, $ 176.2  million and $ 110.9  million, respectively, that was included in the contract liability balances at  December 31,  2021,   2020  and 2019, respectively.   The components of the contract liability balances as of the respective dates were as follows (in thousands): December 31,   2022       2021 (1)   Billings in excess of costs and estimated earnings, net of retention   $ 152,294     $ 169,542   Provisions for losses     20,992       30,499   Total contract liabilities   $ 173,286     $ 200,041   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). The decrease in contract liabilities is primarily due to revenue recognized in excess of billings as well as reductions in provisions for losses as certain loss projects progress towards completion. F- 18 Table of Contents     7. Receivables, net Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest. The following table presents major categories of receivables (in thousands): December 31,   2022     2021 (1)   Contracts completed and in progress:                 Billed   $ 220,809     $ 236,053   Unbilled     120,348       126,371   Total contracts completed and in progress     341,157       362,424   Materials sales     52,182       43,746   Other     71,790       59,496   Total gross receivables     465,129       465,666   Less: allowance for credit losses     1,142       1,078   Total net receivables   $ 463,987     $ 464,588   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). Included in other receivables at  December 31,   2022  and  2021  were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds. Other receivables at December 31,   2022  and  2021 and also included $ 24.9  million and $ 20.4  million of working capital contributions in the form of a loan to a partner in one of our unconsolidated joint ventures that bears interest at prime plus 3.0 % per annum.  No  receivable individually exceeded 10 % of total net receivables at any of these dates. F- 19 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     8. Fair Value Measurement The following tables summarize significant assets and liabilities measured at fair value in the consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands):     Fair Value Measurement at Reporting Date Using   December 31, 2022   Level 1     Level 2     Level 3     Total   Cash equivalents                                 Money market funds   $ 99,806     $ —     $ —     $ 99,806   Other current assets                                 Commodity swap     —       121       —       121   Total assets   $ 99,806     $ 121     $ —     $ 99,927   December 31, 2021 (1)                                 Cash equivalents                                 Money market funds   $ 65,233     $ —     $ —     $ 65,233   Total assets   $ 65,233     $ —     $ —     $ 65,233   Accrued and other current liabilities                                 Interest rate swap   $ —     $ 3,514     $ —     $ 3,514   Total liabilities   $ —     $ 3,514     $ —     $ 3,514   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). Interest Rate Swaps In connection with entering into the Third Amended and Restated Credit Agreement in May 2018, we entered into  two  interest rate swaps with a combined initial notional amount of $ 150.0  million and an effective date of  May 2018 and a maturity date of May 2023 .   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  14 ). The impact to interest expense in the consolidated statements of operations was $ 2.2  million for the year ended December 31, 2022. F- 20 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Commodity Swaps In December 2022, we entered into a commodity swap designed as a cash flow hedge for crude oil with a notional amount of $ 7.0  million and a maturity date of October 31, 2023.  In December 2021, we entered into two  commodity swaps designed as cash flow hedges for crude oil covering the period from April 2022 to October 2022  with a total notional amount of $ 8.1  million. The financial statement impact of these swaps during the year ended  December 31, 2022 was a realized gain of $ 4.1 million and an unrealized gain of $ 0.4  million. The financial statement impact during the year ended December 31, 2021 was immaterial.  Other Assets and Liabilities The carrying values and estimated fair values of our financial instruments that are not required to be recorded at fair value in the consolidated balance sheets were as follows (in thousands):  December 31,     2022     2021     Fair Value Hierarchy   Carrying Value     Fair Value     Carrying Value     Fair Value   Assets:                                   Held-to-maturity marketable securities (1) Level 1   $ 65,943     $ 64,584     $ 15,600     $ 15,459   Liabilities (including current maturities):                                   2.75% Convertible Notes (2),(3) Level 2   $ 230,000     $ 281,365     $ 207,354     $ 313,785   Third Amended and Restated Credit Agreement - term loan (2) Level 3   $ —     $ —     $ 123,750     $ 124,598   Fourth Amended and Restated Credit Agreement - revolver (2) Level 3   $ 50,000     $ 49,536     $ —     $ —   ( 1 ) All marketable securities were classified as held-to-maturity and consisted of U.S. Government and agency obligations as of  December 31, 2022  and  2021 . ( 2 ) The fair value of the 2.75 % Convertible Notes is based on the median price of the notes in an active market as of  December 31, 2022  and  2021 . The fair value of the Credit Agreement term loan and revolver are based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk. See Note 14  for definitions of, and more information about the 2.75% Convertible Notes and Credit Agreement. ( 3 ) Excluded from carrying value is $ 22.6  million of debt discount as of  December 31,   2021 , related to the  2.75%  Convertible Notes (see Note  14 ). There is no debt discount in 2022  due to the adoption of ASU 2020 - 06. The carrying value of marketable securities approximates their fair value as determined by market quotes. Rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. The carrying value of receivables and other amounts arising out of normal contract activities, including retentions, which may be settled beyond one year, is estimated to approximate fair value.  At least annually, we measure certain nonfinancial assets and liabilities at fair value on a nonrecurring basis. As of  December 31, 2022  and  2021 , the nonfinancial assets and liabilities included our asset retirement and reclamation obligations, as well as assets and corresponding liabilities associated with performance guarantees. Asset retirement and reclamation obligations were measured using Level 3 inputs and performance guarantees were measured using Level 2 inputs. Asset retirement and reclamation obligations were initially measured using internal discounted cash flow calculations based upon our estimates of future retirement costs. To determine the fair value of the obligation, we estimate the cost for a third -party to perform the legally required reclamation including a reasonable profit margin. This cost is then increased for future estimated inflation based on the estimated years to complete and discounted to fair value using present value techniques with a credit-adjusted, risk-free rate. In estimating the settlement date, we evaluate the current facts and conditions to determine the most likely settlement date. We review reclamation obligations at least annually for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date. See Note 11   for details of the asset retirement obligation balances. We estimate our liability for performance guarantees for our unconsolidated construction joint ventures and line item joint ventures using estimated partner bond rates, which are Level 2 inputs, and include them in accrued expenses and other current liabilities (see Note 13 ) with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. See Note 1 for further discussion on performance guarantees. During the years ended December 31, 2022  and 2021 , we had no material nonfinancial asset and liability fair value adjustments.   F- 21 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     9. Construction Joint Ventures We participate in various construction joint ventures. As discussed in Note 1,  we have determined that certain of these joint ventures are consolidated because they are VIEs and we are the primary beneficiary. We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during the years ended December 31,   2022 ,  2021  and  2020 , 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 the 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). At December 31,   2022 , there was $ 246.4  million of remaining contract value on unconsolidated and line item construction joint venture contracts of which $ 110.9  million represented our share and the remaining $ 135.5  million represented our partners’ share. We are not able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees. See Note 13 for disclosure of the performance guarantee amounts recorded in the consolidated balance sheets and Note 1 for additional discussion regarding performance guarantees. Consolidated Construction Joint Ventures At  December 31,   2022 , we were engaged in  ten  active CCJV projects with total contract values ranging from $ 2.5  million to $ 433.4  million for a combined total of $ 1.8  billion of which our share was $ 1.0  billion. As of December 31,   2022 , our share of revenue remaining to be recognized on these CCJVs was $ 120.0  million and ranged from $ 1.3  million to $ 24.6  million by project. Our proportionate share of the equity in these joint ventures was between  50.0 % and  70.0 %. During the years ended  December 31,   2022 ,  2021  and  2020 , total revenue from CCJVs was $ 437.1 million, $ 405.1 million and $ 312.5  million, respectively. During the years ended  December 31,   2022 ,  2021  and  2020 , CCJVs used $ 5.7  million, $ 4.1  million and $ 3.0  million of operating cash flows, respectively. Unconsolidated Construction Joint Ventures As discussed in Note 1, where we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations and in equity in construction joint ventures or accrued expenses and other current liabilities in the consolidated balance sheets. As of  December 31,   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 $ 2.6  billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 23.0 % to 50.0 %. As of December 31,   2022 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 73.4  million and ranged from $ 0.2  million to $ 34.6  million by project. The following is summary financial information related to unconsolidated construction joint ventures (in thousands): December 31,   2022     2021   Assets                 Cash, cash equivalents and marketable securities   $ 130,635     $ 182,891   Other current assets (1)   $ 681,221       661,342   Noncurrent assets   $ 76,204       103,579   Less partners’ interest   $ 604,741       633,634   Granite’s interest (1),(2)   $ 283,319     $ 314,178   Liabilities                 Current liabilities   $ 244,411     $ 307,674   Less partners’ interest and adjustments (3)   $ 130,911       154,771   Granite’s interest   $ 113,500     $ 152,903   Equity in construction joint ventures (4)   $ 169,819     $ 161,275   ( 1 ) I ncluded in this balance and in accrued and other current liabilities on the consolidated balance sheets as of December 31,   2022  and  2021 was $ 64.7   million and $ 82.1  million, respectively, related to performance guarantees (see Note 13 ). ( 2 )  Included in this balance as of December 31,   2022  and  2021  was $ 104.3  million and $ 103.8  million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $ 2.7  million and $ 10.7  million related to Granite’s share of estimated recovery of back charge claims as of December 31,   2022  and  2021 , respectively. ( 3 ) Partners’ interest and adjustments includes amounts to reconcile total net assets as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences. ( 4 ) Included in this balance and in accrued expenses and other current liabilities on the consolidated balance sheets was  $ 14.0  milli on and $ 28.6  million as of December 31,   2022  and  2021 , respectively, related to deficits in unconsolidated construction joint ventures which includes provisions for losses.   F- 22 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED   Years Ended December 31,   2022     2021     2020   Revenue                         Total   $ 330,835     $ 820,586     $ 918,716   Less partners’ interest and adjustments (1)     210,678       526,522       559,480   Granite’s interest   $ 120,157     $ 294,064     $ 359,236   Cost of revenue                         Total   $ 378,237     $ 835,899     $ 1,193,358   Less partners’ interest and adjustments (1)     238,699       540,854       782,683   Granite’s interest   $ 139,538     $ 295,045     $ 410,675   Granite’s interest in gross profit (loss)   $ ( 19,381 )   $ ( 981 )   $ ( 51,439 ) Net Income (Loss)                         Total   $ ( 47,904 )   $ ( 15,533 )   $ ( 274,410 ) Less partners’ interest and adjustments (1)     ( 28,228 )     ( 14,765 )     ( 222,924 ) Granite’s interest in net income (loss) (2)   $ ( 19,676 )   $ ( 768 )   $ ( 51,486 ) ( 1 ) Partners’ interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast and/or actual differences. ( 2 ) These joint ventures net income (loss) amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.   As of  December 31,   2022 , we were engaged in three  active line item joint venture construction projects with a total contract value of $ 327.7  million of which our portion was $ 206.7  million. As of  December 31,   2022 , our share of revenue remaining to be recognized on these line item joint ventures was $ 37.5  million. During the years ended  December 31,   2022 ,  2021  and  2020 , our portion of revenue from line item joint ventures was $ 35.4  million, $ 67.8  million and $ 80.8  million, respectively.   10. Investments in Affiliates Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for using the equity method of accounting, including investments in foreign affiliates, real estate entities and an asphalt terminal entity. The foreign affiliates in which we are invested are engaged in mineral drilling services and the manufacture and supply of drilling equipment, parts and supplies in Latin America. The real estate entities were formed to accomplish specific real estate development projects in which our wholly owned subsidiary, Granite Land Company, participates with  third -party partners. The asphalt terminal entity is a  50 % interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant in Nevada. We have determined that the real estate entities are  not  consolidated because although they are VIEs, we are  not  the primary beneficiary. We have determined that the foreign affiliates and the asphalt terminal entity are  not  consolidated because they are  not  VIEs and we do  not  hold the majority voting interest. As such, these entities are accounted for using the equity method. Our investments in affiliates balance consists of equity method investments in the following types of entities (in thousands):   December 31,   2022       2021 (1)   Foreign   $ 58,579     $ —   Real estate     8,517       9,619   Asphalt terminal     13,629       13,749   Total investments in affiliates   $ 80,725     $ 23,368   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). F- 23 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis (in thousands): December 31,   2022       2021 (1)   Current assets   $ 194,210     $ 34,374   Noncurrent assets     172,560       78,829   Total assets   $ 366,770     $ 113,203   Current liabilities   $ 106,780     $ 23,685   Long-term liabilities (2)     59,356       48,104   Total liabilities   $ 166,136     $ 71,789   Net assets   $ 200,634     $ 41,414   Granite’s share of net assets   $ 80,725     $ 23,368   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). ( 2 ) The balance primarily related to local bank debt for equipment purchases, working capital in our foreign affiliates and debt associated with our real estate investments.  Of the $ 366.8  million in total assets as of December 31,   2022 , we had investments in  two  real estate entities with total assets of $ 31.0  million and $ 40.2  million, our foreign affiliates had total assets of $ 264.6  million, and the asphalt terminal entity had total assets of $ 31.0  million. As of December 31,   2022  and 2021 , all of the equity method investments in real estate affiliates were in residential real estate in Texas. As of December 31,   2022 , our percent ownership in the real estate entities ranged from 10 % to 25 %. We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from 25 % to  50 % as of December 31, 2022. The following table provides summarized statements of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands): Years Ended December 31,   2022     2021     2020   Revenue   $ 377,256     $ 302,084     $ 194,717   Gross profit   $ 95,816     $ 74,939     $ 48,948   Income before taxes   $ 60,513     $ 38,261     $ 28,471   Net income   $ 47,331     $ 33,864     $ 24,073   Granite’s interest in affiliates’ net income   $ 13,571     $ 12,586     $ 8,783     During 2020,  the entities within our investments in foreign affiliates experienced a change in business climate from a rise in operating costs, resulting in increased prices and decreased demand. The corresponding decline in future operating cash flows resulted in the investments fair value to fall below the associated carrying amounts, which was considered to be other than temporary. Therefore, we recorded a non-cash impairment charge of $ 9.6  million during the year ended December 31, 2020.     F- 24 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 11. Property and Equipment, net The following table presents the major classes of assets and total accumulated depreciation and depletion (in thousands): December 31,   2022     2021 (1)   Equipment and vehicles   $ 994,602     $ 870,672   Quarry property     219,843       191,982   Land and land improvements     105,733       108,518   Buildings and leasehold improvements     103,658       96,180   Office furniture and equipment     82,465       75,043   Property and equipment     1,506,301       1,342,395   Less: accumulated depreciation and depletion     997,091       908,891   Property and equipment, net   $ 509,210     $ 433,504   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). Depreciation and depletion expense primarily included in cost of revenue in our consolidated statements of operations was $ 79.5  million, $ 97.7  million and $ 98.3  million for the years ended December 31,   2022 , 2021  and 2020 , respectively. During 2021, we completed sale-leaseback transactions for three properties in California. The sale of these properties resulted in a $ 49.5 million gain on sales of property and equipment in the consolidated statements of operations for the year ended December 31, 2021. As discussed in Note 1, we have asset retirement obligations, which are liabilities associated with our legally required obligations to reclaim owned and leased quarry property and related facilities. As of  December 31,   2022  and 2021 , $ 1.8  million and $ 1.7  million, respectively, of our asset retirement obligations were included in accrued expenses and other current liabilities and $ 27.4  million and $ 23.3  million, respectively, were included in other long-term liabilities in the consolidated balance sheets. Of the amount included in other long-term liabilities as of  December 31,   2022 , $ 11.9  million is expected to be settled by 2027 and the remaining is expected to be settled thereafter.  The following table summarizes the asset retirement obligation balances for the periods presented (in thousands): Years Ended December 31,   2022     2021   Beginning balance   $ 24,950     $ 23,853   Revisions to estimates     4,904       1,596   Liabilities settled     ( 2,015 )     ( 1,708 ) Accretion     1,351       1,209   Ending balance   $ 29,190     $ 24,950       12. Intangible Assets Indefinite-lived Intangible Assets Indefinite-lived intangible assets primarily consist of goodwill. The following table presents the goodwill balance by reportable segment (in thousands): December 31,   2022     2021(1)   Construction   $ 71,757     $ 51,769   Materials     1,946       1,946   Total goodwill   $ 73,703     $ 53,715   ( 1 ) These balances do not include amounts held for sale (see Note 2 ).   Amortized Intangible Assets As of December 31,   2022 and 2021 , amortized intangible assets included in other noncurrent assets in the consolidated balance sheets were $ 9.1  million and $ 9.5  million, respectively, net of accumulated amortization of $ 24.1  million and $ 14.5  million, respectively, primarily related to permits. The net amortization expense related to amortized intangible assets for each of the years ended December 31,   2022 , 2021  and 2020  was $ 2.0  million, $ 10.1  million and $ 13.5  million, respectively, and was primarily included in cost of revenue in the consolidated statements of operations. Amortization expense based on the amortized intangible assets balance at December 31,   2022  is expected to be $ 1.2  in 2023  and 2024 , $ 1.1  in 2025 , $ 1.0  million in  2026 , $ 0.6  million in  2027  and $ 4.0  million thereafter. F- 25 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     13. Accrued Expenses and Other Current Liabilities (in thousands) : December 31, 2022   2021(1)   Accrued insurance $ 78,427   $ 76,999   Deficits in unconsolidated construction joint ventures (see Note 9)   13,989     28,636   Payroll and related employee benefits   80,910     87,460   Performance guarantees (see Note 1)   64,703     82,112   Accrued legal settlement (see Note 20)   -     129,000   Other   50,440     48,622   Total $ 288,469   $ 452,829   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). The decrease in performance guarantees in the current year is due to receiving customer acceptance on two unconsolidated construction joint ventures during the year. Other includes short-term lease liability, dividends payable, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, none of which are greater than 5% of total current liabilities.   14. Long-Term Debt (in thousands): December 31,   2022     2021   2.75 % Convertible Notes   $ 230,000     $ 207,354   Third Amended and Restated Credit Agreement - term loan     —       123,750   Fourth Amended and Restated Credit Agreement - revolver     50,000       —   Debt issuance costs and other     8,381       8,814   Total debt   $ 288,381     $ 339,918   Less current maturities     1,447       8,727   Total long-term debt   $ 286,934     $ 331,191   The aggregate minimum principal maturities of long-term debt related to balances at December 31,   2022  excluding debt issuance costs, and including current maturities are as follows: $ 1.4  million in  2023 ; $ 231.5  million in 2024 ; $ 1.1  million in 2025 ; $ 6.8  million in 2026  and $ 50.0  million in  2027 . Credit Agreement 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. The Credit Agreement includes a $ 150.0  million sublimit for letters of credit ($ 75.0  million for financial letters of credit) and a $ 20.0  million sublimit for swingline loans. We  may  borrow on the Revolver, at our option, at either (a) the SOFR term rate plus a credit adjustment spread plus applicable margin ranging from  1.0 % to  2.0 %, or (b) a base rate plus an applicable margin ranging from  0.0 % to  1.0 %. The applicable margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly. As of  December 31,   2022 , the total unused availability under the Credit Agreement was $ 269.3  million, resulting from $ 30.7  million in issued and outstanding letters of credit and $ 50.0  million drawn under the Revolver. The letters of credit had expiration dates between  April 2023  and  December 2026 . As of  December 31,   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  December 31,   2022  for SOFR and base rate loans were  6.2 % and  8.3 %, 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 (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  December 31,   2022 , the Consolidated Leverage Ratio was  1.46 , which did  not  exceed the maximum of  3.25 . Our Consolidated Interest Coverage Ratio was  15.06 , which was above the minimum of  3.00 . Convertible Notes As of December 31, 2022, the 2.75% Convertible Notes comprised our only convertible debt instrument. The 2.75% Convertible Notes were issued in November 2019 in an aggregate principal amount of $ 230.0 million, with an interest rate of 2.75 % and a maturity date of November 1, 2024, unless earlier converted, redeemed or repurchased. The 2.75% Convertible Notes are convertible at the option of the holders prior to May 1, 2024 only during certain periods and upon the occurrence of certain events. After May 1, 2024, the 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 2.75% Convertible Notes is 31.7776 shares of Granite common stock per $1,000 principal amount of 2.75% Convertible Notes, which is equivalent to a conversion price of approximately $ 31.47 per share of Granite common stock. Upon conversion, we will pay or deliver shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election. In addition, upon the occurrence of a “make-whole fundamental change” as defined in the indenture governing the 2.75% Convertible Notes, (the “Indenture”) we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 2.75% Convertible Notes in connection with such a make-whole fundamental change. We have the option to redeem for cash all or any portion of the 2.75% Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time. Upon the occurrence of a “fundamental change” as defined in the Indenture, holders may require us to repurchase for cash all or any portion of their 2.75% Convertible Notes at a price equal to 100 % of the principal amount plus any accrued and unpaid interest. In addition, as described in the Indenture, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the 2.75% Convertible Notes becoming due and payable immediately. 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, including $- million and $ 14.8  million, respectively, of amortized debt discount, was $ 230.0  million and $ 207.4  million, respectively. As of December 31,   2022  and  2021 , the remaining unamortized debt discount was $- million and $ 22.6  million, respectively. Effective January 1, 2022,  we adopted ASU 2020 - 06  (see Note 1 ), which updated our accounting for the 2.75 % Convertible Notes. During the year ended  December 31,   2022 , we did  not  record amortization of the debt discount due to the implementation of ASU  2020 - 06 ,  and during the years ended  December 31,   2021  and 2020 , we recorded $ 7.1  million and $ 6.6  million, respectively, of amortization of the debt discount. During the years ended  December 31,   2022 ,  2021  and 2020 , we recorded $ 2.5  million, $ 3.2  million, and $ 4.3  million, respectively, of amortization related to debt issuance costs. F- 26 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Real Estate Indebtedness Our unconsolidated investments in real estate entities are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate entity. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate project as it progresses through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. This debt is non-recourse to Granite, but it is recourse to the affiliates. The debt associated with our unconsolidated non-construction entities is disclosed in Note 10. Covenants and Events of Default Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with these covenants would constitute an event of default under the Credit Agreement. Additionally, our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75% Convertible Notes or our Credit Agreement would constitute an event of default under the indenture governing our 2.75% Convertible Notes or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) acceleration of amounts owed under the Credit Agreement; and/or (v) foreclosure on any lien securing the obligations under such facility. A default under the indenture governing our 2.75% Convertible Notes could result in acceleration of the maturity of the notes. 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 December 31,   2022 , the Consolidated Leverage Ratio was 1.46 , which did not exceed the maximum of 3.25 . Our Consolidated Interest Coverage Ratio was 15.06 , which exceeded the minimum of 3.00 . As of December 31,   2022 , we were in compliance with all covenants contained in the  Credit Agreement . We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.     15. Leases We have leases for office and shop space, as well as for equipment primarily utilized in our construction projects. As of  December 31,   2022 , our lease contracts were primarily classified as operating leases and had terms ranging from month-to-month to  23  years. As of  December 31,   2022  and 2021 , right of use assets and long term lease liabilities were separately presented and short term lease liabilities of $ 18.6 million and $ 18.8  million, respectively, were included in accrued expenses and other current liabilities in our consolidated balance sheets. As of  December 31,   2022 , we had  no  lease contracts that had  not  yet commenced but created significant rights and obligations. Lease expense was $ 21.9  million, $ 22.9  million and $ 21.7  million for the years ended  December 31,   2022 ,  2021  and 2020 , respectively. As of  December 31,   2022  and  2021  our weighted-average remaining lease term was 4.28  years and 3.72  years, respectively, and the weighted-average discount rate was  3.85 % and 3.58 %, respectively. As of  December 31,   2022 , the lease liability is equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on our secured debt, using one  maturity discount rate that is updated quarterly, as it is  not  materially different than the discount rates applied to each of the leases in the portfolio. The following table summarizes the maturities of our undiscounted lease liabilities outstanding as of  December 31,   2022  (in thousands): 2023   $ 22,798   2024     20,110   2025     12,822   2026     7,244   2027     5,564   2028 through 2036     9,743   Total future minimum lease payments   $ 78,281   Less imputed interest     ( 27,449 ) Total   $ 50,832   Royalties Excluded from the table above are minimum royalty requirements under all contracts, primarily quarry property, in effect at December 31,   2022 which are payable as follows: $ 2.1  million in 2023 ; $ 1.6  million in 2024 ; $ 1  million in 2025 ; $ 0.9  million in 2026 ; $ 0.6  million in 2027 ; and $ 3.8  million thereafter.     16. Employee Benefit Plans Profit Sharing and 401 (k) Plan : The Profit Sharing and 401 (k) Plan (the “401 (k) Plan”) is a defined contribution plan covering all employees except employees covered by collective bargaining agreements and certain employees of our CCJVs. Our 401 (k) matching contributions can be up to 6 % of an employee’s gross pay at the discretion of the Board of Directors. Our 401 (k) matching contributions to the 401 (k) Plan for the years ended December 31,   2022 , 2021  and 2020  were $ 17.7  million, $ 19.1 million and $ 17.6 million, respectively. Profit sharing contributions from the Company may be made to the 401 (k) Plan in an amount determined by the Board of Directors. We made no profit sharing contributions during the years ended December 31,   2022 , 2021  and 2020 . Non-Qualified Deferred Compensation Plan : We offer a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to a select group of our highly compensated employees and non-employee directors. The NQDC Plan provides participants the opportunity to defer payment of certain compensation as defined in the NQDC Plan. Our NQDC Plan obligations are funded through a Rabbi Trust which was fully funded as of December 31,   2022 . The assets held by the Rabbi Trust at December 31,   2022  and  2021  are substantially in the form of Company-owned life insurance and are included in other noncurrent assets in the consolidated balance sheets. As of December 31,   2022 , there were 63 active participants in the NQDC Plan. NQDC Plan obligations were $ 23.1  million and $ 32.7 million as of  December 31,   2022  and  2021 , respectively, and were primarily included in other long-term liabilities in the consolidated balance sheets. In addition, we had supplemental retirement benefits of $ 3.7 million and $ 4.9  million in other long-term liabilities in the consolidated balance sheets as of December 31,   2022  and  2021 , respectively. F- 27 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Multi-employer Pension Plans : As of  December 31,   2022 , three of our wholly-owned subsidiaries, Granite Construction Company, Layne Christensen Company and Granite Industrial, Inc. contribute to various multi-employer pension plans on behalf of union employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:   • Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.   • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.   • If we chose to stop participating in some of the multi-employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The following table presents our participation in these plans (dollars in thousands):           Pension Protection Act (“PPA”) Certified Zone Status (1)     Contributions       Pension Trust Fund   Pension Plan Employer Identification Number   2022 2021 FIP / RP Status Pending / Implemented (2)   2022     2021     2020   Surcharge Imposed Expiration Date of Collective Bargaining Agreement (3) Operating Engineers Pension Trust Fund     95 - 6032478   Yellow Yellow Yes   $ 4,768     $ 5,266     $ 5,239   No 6/30/2025 Locals 302 and 612 IUOE-Employers Construction Industry Retirement Plan     91 - 6028570   Green Green No     5,204       4,744       3,658   No 3/31/2023 5/31/2024 5/31/2025 Pension Trust Fund for Operating Engineers     94 - 6090764   Yellow Yellow Yes     9,783       10,095       10,001   No 3/31/2023 6/30/2023 9/30/2023 1/31/2024 6/30/2024 10/31/2024 3/31/2025 All other funds (53 as of December 31, 2022)                   18,270       21,517       20,572                   Total contributions:   $ 38,025     $ 41,622     $ 39,470       ( 1 ) The most recent PPA zone status available in 2022 and 2021  is for the plan’s year-end during 2021  and 2020 , respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. ( 2 ) The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. ( 3 ) Lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. Pension trust funds with a range of expiration dates have various collective bargaining agreements.   Based upon the most recently available annual reports, our contribution to each of the individually significant plans listed in the table above was less than 5% of each plan’s total contributions. We currently have no intention of withdrawing from any of the multi-employer pension plans in which we participate that would result in a significant withdrawal liability. In addition, we do not have any significant future obligations or funding requirements related to these plans other than the ongoing contributions that are paid as hours are worked by plan participants.     17. Shareholders’ Equity Stock-based Compensation: On June 2, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”), which replaced the Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”) and no further awards may be granted under the 2012 Plan. The 2021 Plan provides for the issuance of restricted stock, RSUs and stock options to eligible employees and to members of our Board of Directors. A total of 2,689,909   shares of our  common stock were reserved for issuance under the 2021 Plan of wh ich 2,121,419  remained av ailable as of December 31,   2022 . During the years ended December 31,   2022 , 2021  and 2020 , we did not grant any stock options or restricted stock awards and as of  December 31,   2022 , there were no stock options or restricted stock awards outstanding. Restricted Stock Units: RSUs are issued for compensatory purposes. RSU stock compensation cost is measured at our common stock’s fair value based on the market price at the date of grant. We recognize stock compensation cost only for RSUs that we estimate will ultimately vest. We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust stock compensation cost based on changes in those estimates over time. RSU stock compensation cost is recognized ratably over the shorter of the vesting period (generally ranging from immediate vesting to three years) or the period from grant date to the first maturity date after the holder reaches age 62 and has completed certain specified years of service, when all RSUs become fully vested. Vesting of RSUs is not subject to any market or performance conditions and vesting provisions are at the discretion of the Compensation Committee. A recipient of RSUs  may not sell or otherwise transfer unvested RSUs and, in the event a recipient’s employment or board service is terminated prior to the end of the vesting period, any unvested RSUs are surrendered to us, subject to limited exceptions. A summary of the changes in our RSUs during the years ended  December 31,   2022 , 2021  and 2020  is as follows (shares in thousands): Years Ended December 31,   2022     2021     2020       RSUs     Weighted-Average Grant-Date Fair Value per RSU     RSUs     Weighted-Average Grant-Date Fair Value per RSU     RSUs     Weighted-Average Grant-Date Fair Value per RSU   Outstanding, beginning balance     553     $ 30.09       601     $ 24.96       387     $ 43.99   Granted     311       31.70       254       40.34       462       12.89   Vested     ( 263 )     28.98       ( 235 )     28.77       ( 190 )     34.36   Forfeited     ( 33 )     28.21       ( 67 )     22.50       ( 58 )     24.76   Outstanding, ending balance     568     $ 31.64       553     $ 30.09       601     $ 24.96   Compensation cost related to RSUs was $ 7.5  million ($ 5.6  million net of statutory tax rate), $ 6.6  million ($ 4.9  million net of statutory tax rate), and $ 6.4  million ($ 4.7  million net of statutory tax rate) for the years ended  December 31,   2022 , 2021  and 2020 , respectively. The grant date fair value of RSUs vested during the years ended  December 31,   2022 , 2021  and 2020  was $ 7.6  million, $ 6.8  million and $ 6.5  million, respectively. As of December 31,   2022 , there was $ 8.2  million of unrecognized compensation cost related to RSUs which will be recognized over a remaining weighted-average period of  1.4  years. 401 (k) Plan: As of December 31,   2022 , the 401 (k) Plan owned 1,021,194  shares of our common stock. Dividends on shares held by the 401 (k) Plan are charged to retained earnings and all shares held by the 401 (k) Plan are treated as outstanding in computing our earnings per share. Share Purchase Program:  As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $ 300.0 million of our common stock at management’s discretion (the “2022  authorization”). The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors. As of December 31,   2022 , $ 231.5 million of the 2022 authorization remained available with purchases of 611,000 shares for $ 18.5 million in March 2022,  1,320,568 shares for $ 40 million in May 2022 and 366,785 shares for $ 10 million in September 2022.   18. 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. Years Ended December 31,   2022     2021     2020   Numerator                         Net income (loss) attributable to common shareholders for basic earnings per share   $ 83,302     $ 10,096     $ ( 145,117 ) Add: Interest expense related to 2.75 % Convertible Notes (1)     5,890       -       -   Net income (loss) attributable to common shareholders for diluted earnings per share   $ 89,192     $ 10,096     $ ( 145,117 ) Denominator                         Weighted average common shares outstanding, basic     44,485       45,788       45,614   Add: Dilutive effect of RSUs (2)     532       533       —   Add: Dilutive effect of 2.75 % Convertible Notes (1)(3)     7,309       1,279       —   Weighted average common shares outstanding, diluted     52,326       47,599       45,614   Net income (loss) per share, basic   $ 1.87     $ 0.22     $ ( 3.18 ) Net income (loss) per share, diluted   $ 1.70     $ 0.21     $ ( 3.18 ) ( 1 ) 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 1 ).  ( 2 ) Due to the net losses for the year ended December 31,   2020, RSUs representing approximately  589,000  shares, respectively, have been excluded from the number of shares used in calculating diluted net income (loss) per share, as their inclusion would be antidilutive. ( 3 ) The number of shares used in calculating diluted net income per share for the year ended  December 31,   2020, excluded potential dilution from the 2.75 % Convertible Notes converting into shares of common stock since the average stock price did not exceed $ 31.47 .  (See Note 14  for further details).   19. Income Taxes The following is a summary of the income (loss) before income taxes (in thousands): Years Ended December 31,   2022     2021     2020   Domestic   $ 97,235     $ 13,531     $ ( 176,448 ) Foreign     ( 5,418 )     8,596       9,985   Total income (loss) before income taxes   $ 91,817     $ 22,127     $ ( 166,463 )   The following is a summary of the provision for (benefit from) income taxes (in thousands): Years Ended December 31,   2022     2021     2020   Federal:                         Current   $ 255     $ 1,382     $ ( 9,017 ) Deferred     10,326       15,022       7,941   Total federal     10,581       16,404       ( 1,076 ) State:                         Current     5,721       ( 935 )     ( 443 ) Deferred     ( 1,691 )     2,652       2,052   Total state     4,030       1,717       1,609   Foreign:                         Current     1,951       2,663       136   Deferred     ( 3,602 )     ( 1,071 )     ( 951 ) Total foreign     ( 1,651 )     1,592       ( 815 ) Total provision for (benefit from) income taxes   $ 12,960     $ 19,713     $ ( 282 )   F- 28 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The following is a reconciliation of our provision for (benefit from) income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands): Years Ended December 31,   2022     2021     2020   Federal statutory tax   $ 19,282       21.0 %   $ 4,647       21.0 %   $ ( 34,957 )     21.0 % State taxes, net of federal tax benefit     2,761       3.0       1,912       8.6       1,696       ( 1.0 ) Foreign taxes     ( 2,695 )     ( 2.9 )     1,912       8.6       ( 1,374 )     0.8   Percentage depletion deduction     ( 1,062 )     ( 1.2 )     ( 1,015 )     ( 4.6 )     ( 1,096 )     0.7   Non-controlling interests     933       1.0       1,613       7.3       4,423       ( 2.7 ) Non-cash impairment charges     —       —       —       —       32,905       ( 19.8 ) Nondeductible expenses     3,744       4.1       1,398       6.3       1,073       ( 0.6 ) Company-owned life insurance     902       1.0       ( 736 )     ( 3.3 )     —       —   Stock-based compensation     ( 330 )     ( 0.4 )     ( 664 )     ( 3.0 )     —       —   Changes in uncertain tax positions     ( 54 )     ( 0.1 )     —       —       ( 1,781 )     1.1   Valuation allowance     ( 3,212 )     ( 3.5 )     ( 518 )     ( 2.3 )     4,197       ( 2.5 ) Assets held for sale     ( 14,427 )     ( 15.7 )     10,089       45.6       —       —   Gain on sale of business     —       —       —       —       ( 3,827 )     2.3   Nondeductible goodwill disposal     8,212       9.0       —       —       —       —   Provision to return adjustments     ( 1,102 )     ( 1.2 )     1,153       5.2       —       —   Other     8       —       ( 78 )     ( 0.3 )     ( 1,541 )     0.9   Total   $ 12,960       14.1 %   $ 19,713       89.1 %   $ ( 282 )     0.2 % The majority of the variance from the statutory tax rate in 2022 is due to the tax benefit associated with the reversal of net deferred tax liabilities related to businesses no longer held for sale and the release of valuation allowances related to the utilization of capital loss carryforwards. These were partially offset by nondeductible goodwill associated with the sale of Inliner and the impact of the relative change in income before income taxes to the provision for income taxes. F- 29 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The following is a summary of the deferred tax assets and liabilities (in thousands): December 31,   2022     2021   Long-term deferred tax assets:                 Receivables   $ 2,818     $ 3,173   Insurance     12,575       14,334   Deferred compensation     9,432       11,133   Accrued compensation     3,354       3,792   Other accrued liabilities     1,536       1,088   Contract income recognition     16,181       11,453   Lease liabilities     12,572       16,351   Net operating loss carryforwards     41,388       59,760   Valuation allowance     ( 19,919 )     ( 26,533 ) Other     6,504       8,440   Total long-term deferred tax assets     86,441       102,991   Long-term deferred tax liabilities:                 Property and equipment     53,921       64,915   Right of use assets     12,202       15,791   Total long-term deferred tax liabilities     66,123       80,706   Net long-term deferred tax assets   $ 20,318     $ 22,285   The following is a summary of the net operating loss carryforwards at December 31,   2022  (in thousands):     Expiration     Gross Carryforward     Tax Effected Carryforward   Federal net operating loss carryforwards     N/A     $ 90,073     $ 18,915   State net operating loss carryforwards     2023 - 2041     $ 196,507       9,996   Foreign tax loss carryforwards     2023 - 2041     $ 45,895       12,477   Total net operating loss carryforwards at December 31, 2022     $ 41,388   The federal, state and foreign net operating loss carryforwards above included unrecognized tax benefits taken in prior years and the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes . The federal and state net operating loss acquired during the Layne acquisition are subject to Internal Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused. As we expect to use the federal net operating loss carryforwards prior to expiration we believe that is more likely than not that these deferred tax assets will be realized and no valuation allowance was deemed necessary. We have provided a valuation allowance on the net operating loss deferred tax asset or the net deferred tax assets for certain foreign, state and local jurisdictions because we do not believe it is more likely than not that they will be realized. The following is a summary of the change in valuation allowance (in thousands): December 31,   2022     2021   Beginning balance   $ 26,533     $ 29,547   Additions (deductions), net     ( 6,614 )     ( 3,014 ) Ending balance   $ 19,919     $ 26,533   The change in the valuation allowance is mainly due to the utilization of various state net operating losses as well as the release of valuation allowances related to the utilization of capital loss carryforwards. We intend to indefinitely reinvest certain earnings of our foreign subsidiaries and affiliates. There are generally no federal income taxes on dividends from foreign subsidiaries therefore we would only be subject to other taxes, such as withholding and local taxes, upon distribution of these earnings. Of the $ 55.0 million of accumulated undistributed earnings that we consider indefinitely reinvested as of December 31, 2022, it is not practicable to determine the amount of taxes that would be payable upon remittance of these earnings. Deferred foreign withholding taxes have been provided on undistributed earnings of certain foreign subsidiaries and foreign affiliates where the earnings are not considered to be invested indefinitely.   F- 30 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2017. With few exceptions, as of December 31,   2022 , we are no longer subject to state examinations by taxing authorities for years before 2017. We file income tax returns in foreign jurisdictions where we operate. The returns are subject to examination which may be ongoing at any point in time and tax liabilities are recorded based on estimates of additional taxes which will be due upon settlement of those examinations. The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no longer subject to examinations by taxing authorities for years before 2016. We had approximately $ 22.8  million and $ 22.7 million of total gross unrecognized tax benefits as of  December 31,   2022 and 2021 , respectively. There were approximately $ 5.5  million of unrecognized tax benefits that would affect the effective tax rate in any future period at both December 31,   2022 and 2021 . It is reasonably possible that our unrecognized tax benefit could decrease by approximately $ 1.5  million in 2023, of which $ 1.3  million would impact our effective tax rate in 2023. The decrease relates to anticipated statute expirations and anticipated resolution of outstanding unrecognized tax benefits. The following is a tabular reconciliation of unrecognized tax benefits (in thousands) the balance of which is included in other long-term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets: December 31,   2022     2021     2020   Beginning balance   $ 22,724     $ 23,320     $ 27,303   Gross increases – current period tax positions     —       —       ( 1,590 ) Gross decreases – current period tax positions     —       —       —   Gross increases – prior period tax positions     —       —       —   Gross decreases – prior period tax positions     ( 426 )     ( 9 )     ( 608 ) Settlements with taxing authorities/lapse of statute of limitations     ( 60 )     ( 69 )     ( 1,785 ) Reclassification of balances from (to) held for sale     518       ( 518 )     —   Ending balance   $ 22,756     $ 22,724     $ 23,320     F- 31 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     20. Contingencies - Legal Proceedings  Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. It is possible that future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record new accruals that we did  not  originally believe to be probable or that could  not  be reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period. In addition, disclosure is required when a material loss is probable but  not  reasonably estimable, a material loss is reasonably possible but  not  probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded. The total liabilities recorded as of  December 31, 2022 and 2021,  were $ 0 and $ 129  million, respectively. The total range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined. Ordinary Course Legal Proceedings In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which often cannot be predicted with certainty. For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note  1.  We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty. Some of the matters in which we or our joint ventures and affiliates are involved  may  involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are  not  probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings  may  be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed. Securities Litigation and Derivative Lawsuits On August 13, 2019, a securities class action was filed in the United States District Court for the Northern District of California against the Company, James H. Roberts, our former President and Chief Executive Officer, and Jigisha Desai, our former Senior Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer. An amended complaint was filed on February 20, 2020 that, among other things, added Laurel Krzeminski, our former Chief Financial Officer, as a defendant. The amended complaint was brought on behalf of an alleged class of persons or entities that acquired our common stock between April 30, 2018 and October 24, 2019, and alleged claims arising under Sections 10 (b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b - 5 thereunder. After the filing of the amended complaint, this case was re-titled Police Retirement System of St. Louis v. Granite Construction Incorporated, et. al. The amended complaint sought damages based on allegations that the defendants made false and/or misleading statements and failed to disclose material adverse facts in the Company’s SEC filings about its business, operations and prospects. On January 21, 2021, the court granted the plaintiff’s motion for class certification. On October 23, 2019, a putative class action lawsuit, titled Nasseri v. Granite Construction Incorporated, et. al. , was filed in the Superior Court of California, County of Santa Cruz against the Company, James H. Roberts, our former President and Chief Executive Officer, Laurel Krzeminski, our former Chief Financial Officer, and the then-serving Board of Directors on behalf of persons who acquired shares of Company common stock in the Company’s June 2018 merger with Layne Christensen Company (“Layne”). The complaint asserted causes of action under the Securities Act of 1933 and alleged that the registration statement and prospectus were negligently prepared and included materially false and misleading statements and failed to disclose facts required to be disclosed and seeks monetary damages based on the allegations. On April 29, 2021, we entered into a stipulation of settlement (the “Settlement Agreement”) to settle Police Retirement System of St. Louis v. Granite Construction Incorporated, et al. The Settlement Agreement also settled claims alleged in Nasseri v. Granite Construction Incorporated, et al. Under the Settlement Agreement, the Company agreed to pay or cause to be paid a total of $ 129 million in cash, $ 63 million of which was paid through insurance proceeds, to a settlement fund that would pay all settlement fees and expenses, attorneys’ fees and expenses, and cash payments to members of the settlement class. The settlement class agreed to release us, the other defendants named in the lawsuits and certain of their respective related parties from any and all claims, rights, causes of action, liabilities, actions, suits, damages or demands of any kind whatsoever, that relate in any way to the purchase, acquisition, holding, sale or disposition of our common stock during the period between February 17, 2017 and October 24, 2019 that arose out of or are based upon or related to the facts alleged or the claims or allegations set forth in Police Retirement System of St. Louis v. Granite Construction Incorporated, et al . or relate in any way to any alleged violation of the Securities Act of 1933, the Securities Exchange Act of 1934, or any other state, federal or foreign jurisdiction’s securities or other laws, any alleged misstatement, omission or disclosure (including in financial statements) or other alleged securities-related wrongdoing or misconduct, including all claims alleged in Nasseri v. Granite Construction Incorporated, et al . The Settlement Agreement contained no admission of liability, wrongdoing or responsibility by any of the parties. As a result of entering into the Settlement Agreement, we recorded a pre-tax charge of approximately $ 66 million in the quarter ended March 31, 2021. On October 6, 2021, the court issued an order granting preliminary approval of the settlement and, pursuant to the terms of the Settlement Agreement, $ 129 million was paid to the settlement escrow account. $ 66 million was paid by the Company and $ 63 million was paid through insurance proceeds. The total $ 129 million was included in the consolidated balance sheet as of December 31, 2021  as an accrued liability and as a deposit in other current assets. Members of the settlement class had the opportunity to object to the settlement at a fairness hearing held by the court to determine whether the settlement should be finally approved and whether the proposed order and final judgment should be entered. The fairness hearing occurred on February 24, 2022. On March 17, 2022, the court granted final approval of the settlement, granted the request for attorneys’ fees by class representative's counsel, granted in part and denied in part the request for attorneys’ fees by the plaintiff in Nasseri v. Granite Construction Incorporated, et al. , and entered final judgment. On April 29, 2022, the Superior Court granted the request by plaintiff in Nasseri v. Granite Construction Incorporated, et al . that the Nasseri case be dismissed with prejudice in light of the final approval of the settlement. On December 15, 2022, the court approved the plaintiffs’ application to release payments to the class from the settlement fund. As a result, we removed the accrued liability and deposit from our consolidated balance sheet as of December 31, 2022. On May 6, 2020, a stockholder derivative lawsuit, titled English v. Roberts, et al. , was filed in the United States District Court for the Northern District of California against James H. Roberts, our former President and Chief Executive Officer, Jigisha Desai, our former Senior Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer, Laurel Krzeminski, our former Chief Financial Officer, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting claims for breach of fiduciary duty, unjust enrichment, and violations of the Securities Exchange Act of 1934 that allegedly occurred between April 30, 2018 and October 24, 2019. The lawsuit alleged that the individual defendants each knowingly inflated the Company’s revenue, income, and margins in violation of U.S. GAAP, which caused the results during the relevant periods to be materially false and misleading. The complaint sought monetary damages and corporate governance reforms. On May 12, 2021, a stockholder derivative lawsuit, titled Davydov v. Roberts, et al. , was filed in the Delaware Court of Chancery against James H. Roberts, Jigisha Desai, Laurel Krzeminski, Craig Hall, our Senior Vice President, General Counsel, Corporate Compliance Officer, and Secretary, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting claims for breach of fiduciary duty, unjust enrichment, and aiding and abetting breach of fiduciary duty that allegedly occurred between April 30, 2018 and October 24, 2019. The lawsuit alleged that the individual defendants each knowingly inflated the Company’s revenue, income, and margins in violation of U.S. GAAP, which caused the results during the relevant periods to be materially false and misleading. The complaint sought monetary damages and corporate governance reforms. On April 14, 2022, the parties in Davydov v. Roberts et al. , the plaintiff in English v. Roberts et al. , 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. Roberts, et al. , English v. Roberts, et al. , or any other proceeding on behalf of the Davydov plaintiff, the English plaintiff, the Company or any Granite stockholder, will be released. On April 14, 2022, the plaintiff in Davydov v. Roberts, et al . filed the Stipulation of Compromise and Settlement and a proposed scheduling order for a hearing in the Delaware Court of Chancery for review of the settlement. The Delaware Court of Chancery held a fairness hearing concerning its review of the settlement on July 12, 2022. 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 Consolidated Statement of Operations for the year ended December 31, 2022. As of December 31, 2022 and December 31, 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. Other Matters In connection with our prior disclosure of the Audit/Compliance Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group and the extent to which those matters affected the effectiveness of the Company’s internal control over financial reporting (the “Investigation”), we voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the Investigation. The SEC 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 charge for the expected resolution of this investigation which was reflected in Other costs, net in the Consolidated Statement of Operations for the year ended December 31, 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  2013  and  2014.  Certain anomalies were discovered in  March 2014  in the foundation’s structural concrete, which were remediated by the general contractor during  2015.  Layne assigned any insurance claims it  may  have had under the project’s builder’s risk insurance policy to the general contractor. During  2014,  the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages. The claim was denied by the builder’s risk insurers. The project owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy, which proceeding was then transferred by agreement to arbitration. On July 20, 2021, we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures undertaken by the general contractor of the Salesforce Tower and related damages. Although we were  not  a party to this legal proceeding, we believe, based on court filings and developments in the arbitration, that the project owner and the general contractor asserted a claim for damages against the project’s builder’s risk insurers for an amount in excess of $ 100  million. On February 3, 2022, a lawsuit titled Steadfast Insurance Company ( “ Steadfast ” ), a subrogee of Clark/Hathaway Dinwiddie, a Joint Venture ( “ CHDJV ” ) v. Layne Christensen Company ( “ Layne ” ) , was filed in the Superior Court of the State of California, County of San Francisco, seeking damages of approximately $ 70 million for costs incurred by Steadfast on behalf of CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. On February 4, 2022, CHDJV submitted an arbitration demand with the American Arbitration Association against Granite Construction Incorporated seeking to recover approximately $ 30 million for costs incurred by CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. CHDJV subsequently dismissed Granite and added Layne as a respondent to the arbitration. On  March 8, 2022,  we filed a motion to dismiss the CHDJV arbitration. On  April 8, 2022,  we filed a demurrer seeking to dismiss the Steadfast lawsuit. On  May 6, 2022,  CHDJV consolidated its claims with those of Steadfast and joined as a plaintiff in the Steadfast lawsuit, and on  May 16, 2022,  the arbitration was stayed. 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. We do  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. F- 32 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED     21. Reportable Segment Information Our reportable segments are the same as our operating segments and correspond with how our CODM regularly reviews financial information to allocate resources and assess performance. Our reportable segments are: Construction and Materials. The Construction segment focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports, marine ports, dams, reservoirs, aqueducts, infrastructure and site development for use by the general public and water-related construction for municipal agencies, commercial water suppliers, industrial facilities and energy companies. It also provides construction of various complex projects including infrastructure / site development, mining, public safety, tunnel, solar, battery storage and other power-related projects. The Materials segment focuses on production of aggregates and asphalt production for internal use and for sale to third parties. As discussed in Note 2 ,  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, which was sold in the first quarter of 2022,  had both Construction and Materials operations. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1 ). We evaluate segment performance based on gross profit, and do not include selling, general and administrative expenses or non-operating income or expense. Segment assets include property and equipment, intangibles, goodwill, inventory and equity in construction joint ventures. Summarized segment information is as follows (in thousands, except per share data): Years Ended December 31,   Construction     Materials     Total   2022                         Total revenue from reportable segments   $ 2,803,935     $ 671,428     $ 3,475,363   Elimination of intersegment revenue     —       ( 174,107 )   $ ( 174,107 ) Revenue from external customers   $ 2,803,935     $ 497,321     $ 3,301,256   Gross profit   $ 303,881     $ 65,613     $ 369,494   Depreciation, depletion and amortization   $ 41,836     $ 26,500     $ 68,336   Segment assets as of period end (1)   $ 432,868     $ 364,336     $ 797,204   2021                         Total revenue from reportable segments   $ 3,076,190     $ 587,600     $ 3,663,790   Elimination of intersegment revenue     —       ( 161,925 )   $ ( 161,925 ) Revenue from external customers   $ 3,076,190     $ 425,675     $ 3,501,865   Gross profit   $ 303,228     $ 59,417     $ 362,645   Depreciation, depletion and amortization   $ 71,106     $ 26,130     $ 97,236   Segment assets as of period end (1)   $ 358,561     $ 333,089     $ 691,650   2020                         Total revenue from reportable segments   $ 3,181,697     $ 548,439     $ 3,730,136   Elimination of intersegment revenue     —       ( 167,677 )   $ ( 167,677 ) Revenue from external customers   $ 3,181,697     $ 380,762     $ 3,562,459   Gross profit   $ 280,169     $ 64,619     $ 344,788   Depreciation, depletion and amortization   $ 79,597     $ 22,554     $ 102,151   ( 1 ) These balances do not include amounts held for sale (see Note 2 ). As of  December 31, 2022 ,  2021  and  2020  segment assets included $ 4.7  million, $ 10.3  million and $ 12.4  million, respectively, of property and equipment located in foreign countries (primarily Mexico). During the years ended  December 31, 2022 ,  2021  and  2020  less than  5 % of our revenue was derived from foreign operations. A reconciliation of segment gross profit to consolidated income (loss) before income taxes is as follows (in thousands, except per share data): Years Ended December 31,   2022     2021     2020   Total gross profit from reportable segments   $ 369,494     $ 362,645     $ 344,788   Selling, general and administrative expenses     272,610       303,015       316,284   Non-cash impairment charges     —       —       156,690   Other costs, net     24,120       101,351       37,089   Gain on sales of property and equipment (see Note 11)     ( 12,617 )     ( 66,439 )     ( 6,930 ) Total other (income) expense, net     ( 6,436 )     2,591       8,118   Income (loss) before income taxes   $ 91,817     $ 22,127     $ ( 166,463 ) A reconciliation of segment assets to consolidated total assets is as follows (in thousands): December 31,   2022     2021   Total assets for reportable segments   $ 797,204     $ 691,650   Assets not allocated to segments:                 Cash and cash equivalents     293,991       395,647   Receivables, net     463,987       464,588   Other current assets, excluding segment assets     280,014       323,051   Current assets held for sale     -       392,641   Property and equipment, net, excluding segment assets     64,851       56,658   Short-term and long-term marketable securities     65,943       15,600   Investments in affiliates     80,725       23,368   Right of use assets     49,079       49,312   Deferred income taxes, net     22,209       24,141   Other noncurrent assets, excluding segment assets     49,930       58,271   Consolidated total assets   $ 2,167,933     $ 2,494,927     F-33 Table of Contents   Supplementary Data – Restatement and Recast of Quarterly Financial Information Quarterly Financial Data The following tables set forth selected unaudited quarterly financial information for the years ended  December 31, 2022  and 2021 .  This unaudited quarterly financial information has been recast to remove the effect of discontinued operations as well as to correct the errors described below. See Note  2  for more information regarding discontinued operations and assets held for sale .  This information has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, contains all adjustments necessary for a fair statement thereof. Net income (loss) per share calculations are based on the weighted average common shares outstanding for each period presented. Accordingly, the sum of the quarterly net income (loss) per share amounts  may  not  equal the per share amount reported for the year. QUARTERLY FINANCIAL DATA                                 (unaudited - dollars in thousands, except per share data)           As Restated   As Restated and Recast Quarters Ended   December 31, 2022     September 30, 2022     June 30, 2022     March 31, 2022   Revenue   $ 789,213     $ 1,008,910     $ 849,247     $ 653,886   Gross profit   $ 96,781     $ 115,055     $ 97,566     $ 60,092   As a percent of revenue     12.3 %     11.4 %     11.5 %     9.2 % Net income (loss)   $ 19,176     $ 65,198     $ 19,578     $ ( 25,095 ) Net income (loss) attributable to Granite   $ 22,052     $ 69,302     $ 18,681     $ ( 26,733 )                                   Net income (loss) per share attributable to common shareholders                                 Basic earnings (loss) per share   $ 0.50     $ 1.58     $ 0.42     $ ( 0.58 ) Diluted earnings (loss) per share   $ 0.46     $ 1.36     $ 0.39     $ ( 0.58 )       As Recast Quarters Ended   December 31, 2021     September 30, 2021     June 30, 2021     March 31, 2021   Revenue   $ 805,651     $ 1,062,129     $ 964,172     $ 669,913   Gross profit   $ 62,446     $ 119,935     $ 116,946     $ 63,318   As a percent of revenue     7.8 %     11.3 %     12.1 %     9.5 % Net income (loss)   $ ( 20,433 )   $ 32,423     $ 55,747     $ ( 65,323 ) Net income (loss) attributable to Granite   $ ( 13,213 )   $ 35,043     $ 54,461     $ ( 66,195 )                                   Net income (loss) per share attributable to common shareholders                                 Basic earnings (loss) per share   $ ( 0.29 )   $ 0.76     $ 1.19     $ ( 1.45 ) Diluted earnings (loss) per share   $ ( 0.29 )   $ 0.73     $ 1.14     $ ( 1.45 )     Restatement and Recast of Previously Issued Unaudited Condensed Consolidated Financial Statements In connection with the preparation of this Form 10 -K, we identified errors related to deferred taxes and the calculation of income tax expense of $ 12.3 million in connection with the sale of Inliner, which was completed in the first quarter of 2022 and was classified within discontinued operations in the Company's condensed consolidated financial statements during the first and second quarters of 2022 and in Other costs, net and Provision for income taxes during the third quarter of 2022. We have restated herein our previously issued unaudited condensed consolidated statements of operations and condensed consolidated balance sheets for each interim period within the nine months ended September 30, 2022. The restated financial information also includes adjustments to correct other immaterial errors in the first three quarters of 2022, including certain errors (primarily in revenue and cost of revenue, including the associated tax impact) that had previously been adjusted for as out of period corrections in the period identified. The impacts to the condensed consolidated statements of shareholders’ equity and comprehensive (loss) income as a result of the restatement were due to changes in net income during the each of the interim periods within the nine months ended September 30, 2022. We have not included restated condensed consolidated statements of cash flows herein as Net cash provided by (used in) operating activities in each of these interim periods is unchanged by the restatements. The errors offset within operating activities and none of the errors involved investing or financing activities. The following tables represent our restated unaudited condensed consolidated statements of operations and condensed consolidated balance sheets for each interim period within the nine months ended September 30, 2022. 2022 comparative amounts presented in our  2023  Quarterly Reports on Form 10 -Q will be changed retrospectively to reflect the restatement and recast. There is no impact to the results reported in the 2022 annual financial statements as the errors originated and are being corrected within the annual period. There was no impact to any previously reported annual periods or quarterly results within those annual periods. We have presented below a reconciliation from the previously reported to the restated amounts for the quarters ended September 30, 2022, June 30, 2022 and March 31, 2022. The amounts labeled “As Previously Reported” were derived from our Quarterly Reports on Form 10 -Q filed on October 27, 2022, July 28, 2022 and April 28, 2022, respectively. As discussed in Note 2, in September 2022, we announced our decision to retain the Water Resources and Mineral Services ("WMS") businesses that were previously classified as held for sale and reported in discontinued operations. In connection with the reclassification of the WMS businesses from discontinued operations to continuing operations, the condensed consolidated statements of income for the periods ended June 30, 2022 and March 31, 2022, as previously reported, have been recast to include Inliner through the date of sale, as well as the ongoing operations of Water Resources and Mineral Services in continuing operations. The effects of the prior-period errors and the recast of our WMS businesses as continuing operations on our condensed consolidated financial statements are as follows: GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data)     As Restated       As Restated and Recast       September 30, 2022     June 30, 2022     March 31, 2022       Three months ended     Nine months ended     Three months ended     Six months ended     Three months ended   Revenue                                         Construction   $ 847,371     $ 2,138,858     $ 713,221     $ 1,291,487     $ 578,266   Materials     161,539       373,185       136,026       211,646       75,620   Total revenue     1,008,910       2,512,043       849,247       1,503,133       653,886   Cost of revenue                                         Construction     754,354       1,907,110       632,969       1,152,756       519,787   Materials     139,501       332,220       118,712       192,719       74,007   Total cost of revenue     893,855       2,239,330       751,681       1,345,475       593,794   Gross profit     115,055       272,713       97,566       157,658       60,092   Selling, general and administrative expenses     61,795       192,036       60,121       130,241       70,120   Other costs, net     ( 490 )     22,401       16,612       22,891       6,279   Gain on sales of property and equipment, net     ( 949 )     ( 10,462 )     ( 8,915 )     ( 9,513 )     ( 598 ) Operating income (loss)     54,699       68,738       29,748       14,039       ( 15,709 ) Other (income) expense                                         Interest income     ( 1,894 )     ( 3,246 )     ( 782 )     ( 1,352 )     ( 570 ) Interest expense     2,519       10,003       3,899       7,484       3,585   Equity in income of affiliates     ( 3,491 )     ( 9,656 )     ( 4,876 )     ( 6,165 )     ( 1,289 ) Other income, net     77       4,646       3,261       4,569       1,308   Total other (income) expense, net     ( 2,789 )     1,747       1,502       4,536       3,034   Income (loss) before income taxes     57,488       66,991       28,246       9,503       ( 18,743 ) Provision for (benefit from) income taxes     ( 7,710 )     7,310       8,668       15,020       6,352   Net income (loss)     65,198       59,681       19,578       ( 5,517 )     ( 25,095 ) Amount attributable to non-controlling interests     4,104       1,569       ( 897 )     ( 2,535 )     ( 1,638 ) Net income (loss) attributable to Granite Construction Incorporated   $ 69,302     $ 61,250     $ 18,681     $ ( 8,052 )   $ ( 26,733 )                                           Net income per share attributable to common shareholders                                         Basic earnings (loss) per share   $ 1.58     $ 1.37     $ 0.42     $ ( 0.18 )   $ ( 0.58 ) Diluted earnings (loss) per share   $ 1.36     $ 1.25     $ 0.39     $ ( 0.18 )   $ ( 0.58 ) Weighted average shares outstanding:                                         Basic     43,973       44,739       44,534       45,128       45,730   Diluted     51,863       52,613       52,295       45,128       45,730     F- 34     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands)     As Restated       September 30, 2022     June 30, 2022     March 31, 2022   ASSETS                         Current assets                         Cash and cash equivalents   $ 255,084     $ 175,022     $ 360,911   Short-term marketable securities     39,873       45,000       14,953   Receivables, net     618,144       527,277       380,502   Contract asset     237,407       190,187       172,641   Inventories     81,296       78,634       74,356   Equity in construction joint ventures     185,343       187,028       191,183   Other current assets     157,231       160,923       167,679   Current assets held for sale     -       222,779       211,639   Total current assets     1,574,378       1,586,850       1,573,864   Property and equipment, net     500,827       464,593       450,250   Long-term marketable securities     21,575       21,675       21,775   Investment in affiliates     78,663       23,203       22,987   Goodwill     73,704       53,715       53,715   Right of use assets     49,590       45,404       48,920   Deferred income taxes, net     45,650       25,458       25,880   Other noncurrent assets     58,265       64,008       65,888   Total assets   $ 2,402,652     $ 2,284,906     $ 2,263,279                             LIABILITIES AND EQUITY                         Current liabilities                         Current maturities of long-term debt   $ 1,438     $ 1,429     $ 8,735   Accounts payable     398,285       331,728       285,390   Contract liabilities     191,037       179,322       160,994   Accrued Expenses and other current liabilities     461,266       440,899       438,441   Current liabilities held for sale     -       46,706       42,106   Total current liabilities     1,052,026       1,000,084       935,666   Long-term debt     286,872       286,801       290,549   Lease liabilities     32,701       31,182       32,682   Other long-term liabilities     60,664       61,868       62,493   Commitments and contingencies                               Equity                         Preferred stock     -       -       -   Common stock     437       441       454   Additional Paid In Capital     468,662       467,159       515,262   Accumulated other comprehensive income     535       2,388       1,573   Retained Earnings     465,134       401,667       388,756   Total Granite Construction Incorporated shareholders’ equity     934,768       871,655       906,045   Non-controlling interest     35,621       33,316       35,844   Total equity     970,389       904,971       941,889   Total liabilities and equity   $ 2,402,652     $ 2,284,906     $ 2,263,279     F- 35     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data)     Three months ended September 30, 2022       As Previously Reported     Restatement Impacts     As Restated   Revenue                         Construction   $ 848,267     $ ( 896 )   $ 847,371   Materials     161,539       -       161,539   Total revenue     1,009,806       ( 896 )     1,008,910   Cost of revenue                         Construction     749,938       4,416       754,354   Materials     139,501       -       139,501   Total cost of revenue     889,439       4,416       893,855   Gross profit     120,367       ( 5,312 )     115,055   Selling, general and administrative expenses     61,795       -       61,795   Other costs, net     ( 490 )     -       ( 490 ) Gain on sales of property and equipment, net     ( 949 )     -       ( 949 ) Operating income     60,011       ( 5,312 )     54,699   Other (income) expense                         Interest income     ( 1,894 )     -       ( 1,894 ) Interest expense     2,519       -       2,519   Equity in income of affiliates     ( 3,491 )     -       ( 3,491 ) Other income, net     77       -       77   Total other (income), net     ( 2,789 )     -       ( 2,789 ) Income before income taxes     62,800       ( 5,312 )     57,488   Provision for (benefit from) income taxes     ( 6,489 )     ( 1,221 )     ( 7,710 ) Net income     69,289       ( 4,091 )     65,198   Amount attributable to non-controlling interests     4,104       -       4,104   Net income attributable to Granite Construction Incorporated   $ 73,393     $ ( 4,091 )   $ 69,302                             Net income per share attributable to common shareholders                         Basic earnings per share   $ 1.67     $ ( 0.09 )   $ 1.58   Diluted earnings per share   $ 1.44     $ ( 0.08 )   $ 1.36   Weighted average shares outstanding:                         Basic     43,973       -       43,973   Diluted     51,863       -       51,863     F- 36     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data)     Nine months ended September 30, 2022       As Previously Reported     Restatement Impacts     As Restated   Revenue                         Construction   $ 2,141,009     $ ( 2,151 )   $ 2,138,858   Materials     373,185       -       373,185   Total revenue     2,514,194       ( 2,151 )     2,512,043   Cost of revenue                         Construction     1,903,949       3,161       1,907,110   Materials     332,220       -       332,220   Total cost of revenue     2,236,169       3,161       2,239,330   Gross profit     278,025       ( 5,312 )     272,713   Selling, general and administrative expenses     192,036       -       192,036   Other costs, net     19,445       2,956       22,401   Gain on sales of property and equipment, net     ( 10,462 )     -       ( 10,462 ) Operating income     77,006       ( 8,268 )     68,738   Other (income) expense                         Interest income     ( 3,246 )     -       ( 3,246 ) Interest expense     10,003       -       10,003   Equity in income of affiliates     ( 9,656 )     -       ( 9,656 ) Other income, net     4,646       -       4,646   Total other expense, net     1,747       -       1,747   Income before income taxes     75,259       ( 8,268 )     66,991   Provision for (benefit from) income taxes     ( 777 )     8,087       7,310   Net income     76,036       ( 16,355 )     59,681   Amount attributable to non-controlling interests     1,569       -       1,569   Net income attributable to Granite Construction Incorporated   $ 77,605     $ ( 16,355 )   $ 61,250                             Net income per share attributable to common shareholders                         Basic earnings per share   $ 1.73     $ ( 0.36 )   $ 1.37   Diluted earnings per share   $ 1.56     $ ( 0.31 )   $ 1.25   Weighted average shares outstanding:                         Basic     44,739       -       44,739   Diluted     52,613       -       52,613     F- 37     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data)     Three months ended June 30, 2022       As Previously Reported     Restatement Impacts     As Restated     Discontinued Operations Reclassification Impacts     As Restated and Recast   Revenue                                         Construction   $ 632,260     $ ( 1,893 )   $ 630,367     $ 82,854     $ 713,221   Materials     136,026       -       136,026       -       136,026   Total revenue     768,286       ( 1,893 )     766,393       82,854       849,247   Cost of revenue                                         Construction     571,094       ( 6,018 )     565,076       67,893       632,969   Materials     118,712       -       118,712       -       118,712   Total cost of revenue     689,806       ( 6,018 )     683,788       67,893       751,681   Gross profit     78,480       4,125       82,605       14,961       97,566   Selling, general and administrative expenses     53,162       -       53,162       6,959       60,121   Other costs, net     20,177       -       20,177       ( 3,565 )     16,612   Gain on sales of property and equipment, net     ( 385 )     -       ( 385 )     ( 8,530 )     ( 8,915 ) Operating income     5,526       4,125       9,651       20,097       29,748   Other (income) expense                                         Interest income     ( 782 )     -       ( 782 )     -       ( 782 ) Interest expense     3,896       -       3,896       3       3,899   Equity in income of affiliates     ( 541 )     -       ( 541 )     ( 4,335 )     ( 4,876 ) Other income, net     3,357       -       3,357       ( 96 )     3,261   Total other expense, net     5,930       -       5,930       ( 4,428 )     1,502   Income (loss) from continuing operations before income taxes     ( 404 )     4,125       3,721       24,525       28,246   Provision for (benefit from) income taxes on continuing operations     2,549       911       3,460       5,208       8,668   Net income (loss) from continuing operations     ( 2,953 )     3,214       261       19,317       19,578   Net Income (loss) from discontinued operations     19,521       ( 204 )     19,317       ( 19,317 )     -   Net income     16,568       3,010       19,578       -       19,578   Amount attributable to non-controlling interests     583       ( 1,480 )     ( 897 )     -       ( 897 ) Net income (loss) attributable to Granite Construction Incorporated from continuing operations     ( 2,370 )     1,734       ( 636 )     19,317       18,681   Net income attributable to Granite Construction Incorporated from discontinued operations     19,521       ( 204 )     19,317       ( 19,317 )     -   Net income attributable to Granite Construction Incorporated   $ 17,151     $ 1,530     $ 18,681     $ -     $ 18,681                                             Net income (loss) per share attributable to common shareholders                                         Basic continuing operations per share   $ ( 0.05 )   $ 0.04     $ ( 0.01 )   $ 0.43     $ 0.42   Basic discontinued operations per share     0.44       ( 0.01 )     0.43       ( 0.43 )     -   Basic earnings per share   $ 0.39     $ 0.03     $ 0.42     $ -     $ 0.42                                             Diluted continuing operations per share   $ ( 0.05 )   $ 0.04     $ ( 0.01 )   $ 0.40     $ 0.39   Diluted discontinued operations per share     0.44       ( 0.01 )     0.43       ( 0.43 )     -   Diluted earnings per share   $ 0.39     $ 0.03     $ 0.42     $ ( 0.03 )   $ 0.39   Weighted average shares outstanding:                                         Basic     44,534       -       44,534       -       44,534   Diluted     44,534       -       44,534       -       52,295   F- 38     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data)     Six months ended June 30, 2022       As Previously Reported     Restatement Impacts     As Restated     Discontinued Operations Reclassification Impacts     As Restated and Recast   Revenue                                         Construction   $ 1,107,195     $ -     $ 1,107,195     $ 184,292     $ 1,291,487   Materials     208,677       -       208,677       2,969       211,646   Total revenue     1,315,872       -       1,315,872       187,261       1,503,133   Cost of revenue                                         Construction     997,837       -       997,837       154,919       1,152,756   Materials     189,780       -       189,780       2,939       192,719   Total cost of revenue     1,187,617       -       1,187,617       157,858       1,345,475   Gross profit     128,255       -       128,255       29,403       157,658   Selling, general and administrative expenses     111,663       -       111,663       18,578       130,241   Other costs, net     28,391       -       28,391       ( 5,500 )     22,891   Gain on sales of property and equipment, net     ( 717 )     -       ( 717 )     ( 8,796 )     ( 9,513 ) Operating income (loss)     ( 11,082 )     -       ( 11,082 )     25,121       14,039   Other (income) expense                                         Interest income     ( 1,405 )     -       ( 1,405 )     53       ( 1,352 ) Interest expense     7,471       -       7,471       13       7,484   Equity in income of affiliates     ( 235 )     -       ( 235 )     ( 5,930 )     ( 6,165 ) Other income, net     4,739       -       4,739       ( 170 )     4,569   Total other expense, net     10,570       -       10,570       ( 6,034 )     4,536   Income (loss) from continuing operations before income taxes     ( 21,652 )     -       ( 21,652 )     31,155       9,503   Provision for (benefit from) income taxes on continuing operations     ( 2,782 )     ( 48 )     ( 2,830 )     17,850       15,020   Net (loss) from continuing operations     ( 18,870 )     48       ( 18,822 )     13,305       ( 5,517 ) Net Income from discontinued operations     25,617       ( 12,312 )     13,305       ( 13,305 )     -   Net income (loss)     6,747       ( 12,264 )     ( 5,517 )     -       ( 5,517 ) Amount attributable to non-controlling interests     ( 2,535 )     -       ( 2,535 )     -       ( 2,535 ) Net (loss) attributable to Granite Construction Incorporated from continuing operations     ( 21,405 )     48       ( 21,357 )     13,305       ( 8,052 ) Net income attributable to Granite Construction Incorporated from discontinued operations     25,617       ( 12,312 )     13,305       ( 13,305 )     -   Net income (loss) attributable to Granite Construction Incorporated   $ 4,212     $ ( 12,264 )   $ ( 8,052 )   $ -     $ ( 8,052 )                                           Net income (loss) per share attributable to common shareholders                                         Basic continuing operations per share   $ ( 0.47 )   $ -     $ ( 0.47 )   $ 0.29     $ ( 0.18 ) Basic discontinued operations per share     0.57       ( 0.28 )     0.29       ( 0.29 )     -   Basic earnings (loss) per share   $ 0.10     $ ( 0.28 )   $ ( 0.18 )   $ -     $ ( 0.18 )                                           Diluted continuing operations per share   $ ( 0.47 )   $ -     $ ( 0.47 )   $ 0.29     $ ( 0.18 ) Diluted discontinued operations per share     0.57       ( 0.28 )     0.29       ( 0.29 )     -   Diluted earnings (loss) per share   $ 0.10     $ ( 0.28 )   $ ( 0.18 )   $ -     $ ( 0.18 ) Weighted average shares outstanding:                                         Basic     45,128       -       45,128       -       45,128   Diluted     45,128       -       45,128       -       45,128   F- 39     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data)     Three months ended March 31, 2022       As Previously Reported     Restatement Impacts     As Restated     Discontinued Operations Reclassification Impacts     As Restated and Recast   Revenue                                         Construction   $ 474,935     $ 1,893     $ 476,828     $ 101,438     $ 578,266   Materials     72,651       -       72,651       2,969       75,620   Total revenue     547,586       1,893       549,479       104,407       653,886   Cost of revenue                                         Construction     426,743       6,019       432,762       87,025       519,787   Materials     71,068       -       71,068       2,939       74,007   Total cost of revenue     497,811       6,019       503,830       89,964       593,794   Gross profit     49,775       ( 4,126 )     45,649       14,443       60,092   Selling, general and administrative expenses     58,501       -       58,501       11,619       70,120   Other costs, net     8,214       -       8,214       ( 1,935 )     6,279   Gain on sales of property and equipment, net     ( 332 )     -       ( 332 )     ( 266 )     ( 598 ) Operating loss     ( 16,608 )     ( 4,126 )     ( 20,734 )     5,025       ( 15,709 ) Other (income) expense                                         Interest income     ( 623 )     -       ( 623 )     53       ( 570 ) Interest expense     3,575       -       3,575       10       3,585   Equity in income (loss) of affiliates     306       -       306       ( 1,595 )     ( 1,289 ) Other income, net     1,382       -       1,382       ( 74 )     1,308   Total other expense, net     4,640       -       4,640       ( 1,606 )     3,034   Loss from continuing operations before income taxes     ( 21,248 )     ( 4,126 )     ( 25,374 )     6,631       ( 18,743 ) Provision for (benefit from) income taxes on continuing operations     ( 5,331 )     ( 958 )     ( 6,289 )     12,641       6,352   Net loss from continuing operations     ( 15,917 )     ( 3,168 )     ( 19,085 )     ( 6,010 )     ( 25,095 ) Net Income (loss) from discontinued operations     6,096       ( 12,106 )     ( 6,010 )     6,010       -   Net (loss)     ( 9,821 )     ( 15,274 )     ( 25,095 )     -       ( 25,095 ) Amount attributable to non-controlling interests     ( 3,118 )     1,480       ( 1,638 )     -       ( 1,638 ) Net loss attributable to Granite Construction Incorporated from continuing operations     ( 19,035 )     ( 1,688 )     ( 20,723 )     ( 6,010 )     ( 26,733 ) Net income (loss) attributable to Granite Construction Incorporated from discontinued operations     6,096       ( 12,106 )     ( 6,010 )     6,010       -   Net loss attributable to Granite Construction Incorporated   $ ( 12,939 )   $ ( 13,794 )   $ ( 26,733 )   $ -     $ ( 26,733 )                                           Net income (loss) per share attributable to common shareholders                                         Basic continuing operations per share   $ ( 0.42 )   $ ( 0.03 )   $ ( 0.45 )   $ ( 0.13 )   $ ( 0.58 ) Basic discontinued operations per share     0.13       ( 0.26 )     ( 0.13 )     0.13       -   Basic loss per share   $ ( 0.29 )   $ ( 0.29 )   $ ( 0.58 )   $ -     $ ( 0.58 )                                           Diluted continuing operations per share   $ ( 0.42 )   $ ( 0.03 )   $ ( 0.45 )   $ ( 0.13 )   $ ( 0.58 ) Diluted discontinued operations per share     0.13       ( 0.26 )     ( 0.13 )     0.13       -   Diluted loss per share   $ ( 0.29 )   $ ( 0.29 )   $ ( 0.58 )   $ -     $ ( 0.58 ) Weighted average shares outstanding:                                         Basic     45,730       -       45,730       -       45,730   Diluted     45,730       -       45,730       -       45,730   F- 40     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands, except share and per share data)     September 30, 2022       As Previously Reported     Restatement Impacts     As Restated   ASSETS                         Current assets                         Cash and cash equivalents   $ 255,084     $ -     $ 255,084   Short-term marketable securities     39,873       -       39,873   Receivables, net     618,144       -       618,144   Contract asset     241,238       ( 3,831 )     237,407   Inventories     81,296       -       81,296   Equity in construction joint ventures     186,824       ( 1,481 )     185,343   Other current assets     157,231       -       157,231   Total current assets     1,579,690       ( 5,312 )     1,574,378   Property and equipment, net     500,827       -       500,827   Long-term marketable securities     21,575       -       21,575   Investment in affiliates     78,663       -       78,663   Goodwill     73,704       -       73,704   Right of use assets     49,590       -       49,590   Deferred income taxes, net     45,650       -       45,650   Other noncurrent assets     58,265       -       58,265   Total assets   $ 2,407,964     $ ( 5,312 )   $ 2,402,652                             LIABILITIES AND EQUITY                         Current liabilities                         Current maturities of long-term debt   $ 1,438     $ -     $ 1,438   Accounts payable     398,285       -       398,285   Contract liabilities     191,037       -       191,037   Accrued Expenses and other current liabilities     450,223       11,043       461,266   Total current liabilities     1,040,983       11,043       1,052,026   Long-term debt     286,872       -       286,872   Lease liabilities     32,701       -       32,701   Other long-term liabilities     60,664       -       60,664   Commitments and contingencies                               Equity                         Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding     -       -       -   Common stock, $ 0.01 par value, authorized 150,000,000 shares; issued and outstanding: 43,723,658 shares as of September 30, 2022     437       -       437   Additional Paid In Capital     468,662       -       468,662   Accumulated other comprehensive income     535       -       535   Retained Earnings     481,489       ( 16,355 )     465,134   Total Granite Construction Incorporated shareholders’ equity     951,123       ( 16,355 )     934,768   Non-controlling interest     35,621       -       35,621   Total equity     986,744       ( 16,355 )     970,389   Total liabilities and equity   $ 2,407,964     $ ( 5,312 )   $ 2,402,652   F- 41     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands, except share and per share data)     June 30, 2022       As Previously Reported     Restatement Impacts     As Restated   ASSETS                         Current assets                         Cash and cash equivalents   $ 175,022     $ -     $ 175,022   Short-term marketable securities     45,000       -       45,000   Receivables, net     527,277       -       527,277   Contract asset     190,187       -       190,187   Inventories     78,634       -       78,634   Equity in construction joint ventures     187,028       -       187,028   Other current assets     167,349       ( 6,426 )     160,923   Current assets held for sale     222,779       -       222,779   Total current assets     1,593,276       ( 6,426 )     1,586,850   Property and equipment, net     464,593       -       464,593   Long-term marketable securities     21,675       -       21,675   Investment in affiliates     23,203       -       23,203   Goodwill     53,715       -       53,715   Right of use assets     45,404       -       45,404   Deferred income taxes, net     25,458       -       25,458   Other noncurrent assets     64,008       -       64,008   Total assets   $ 2,291,332     $ ( 6,426 )   $ 2,284,906                             LIABILITIES AND EQUITY                         Current liabilities                         Current maturities of long-term debt   $ 1,429     $ -     $ 1,429   Accounts payable     331,728       -       331,728   Contract liabilities     179,322       -       179,322   Accrued Expenses and other current liabilities     435,061       5,838       440,899   Current liabilities held for sale     46,706       -       46,706   Total current liabilities     994,246       5,838       1,000,084   Long-term debt     286,801       -       286,801   Lease liabilities     31,182       -       31,182   Other long-term liabilities     61,868       -       61,868   Commitments and contingencies                               Equity                         Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding     -       -       -   Common stock, $ 0.01 par value, authorized 150,000,000 shares; issued and outstanding: 44,078,469 shares as of June 30, 2022     441       -       441   Additional Paid In Capital     467,159       -       467,159   Accumulated other comprehensive income     2,388       -       2,388   Retained Earnings     413,931       ( 12,264 )     401,667   Total Granite Construction Incorporated shareholders’ equity     883,919       ( 12,264 )     871,655   Non-controlling interest     33,316       -       33,316   Total equity     917,235       ( 12,264 )     904,971   Total liabilities and equity   $ 2,291,332     $ ( 6,426 )   $ 2,284,906   F- 42     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands, except share and per share data)     March 31, 2022       As Previously Reported     Restatement Impacts     As Restated   ASSETS                         Current assets                         Cash and cash equivalents   $ 360,911     $ -     $ 360,911   Short-term marketable securities     14,953       -       14,953   Receivables, net     380,502       -       380,502   Contract asset     180,023       ( 7,382 )     172,641   Inventories     74,356       -       74,356   Equity in construction joint ventures     191,183       -       191,183   Other current assets     179,024       ( 11,345 )     167,679   Current assets held for sale     211,774       (135 )     211,639   Total current assets     1,592,726       ( 18,862 )     1,573,864   Property and equipment, net     450,250       -       450,250   Long-term marketable securities     21,775       -       21,775   Investment in affiliates     22,987       -       22,987   Goodwill     53,715       -       53,715   Right of use assets     48,920       -       48,920   Deferred income taxes, net     25,880       -       25,880   Other noncurrent assets     65,888       -       65,888   Total assets   $ 2,282,141     $ ( 18,862 )   $ 2,263,279                             LIABILITIES AND EQUITY                         Current liabilities                         Current maturities of long-term debt   $ 8,735     $ -     $ 8,735   Accounts payable     285,390       -       285,390   Contract liabilities     165,358       ( 4,364 )     160,994   Accrued Expenses and other current liabilities     439,525       ( 1,084 )     438,441   Current liabilities held for sale     40,246       1,860       42,106   Total current liabilities     939,254       ( 3,588 )     935,666   Long-term debt     290,549       -       290,549   Lease liabilities     32,682       -       32,682   Other long-term liabilities     62,493       -       62,493   Commitments and contingencies                               Equity                         Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding     -       -       -   Common stock, $ 0.01 par value, authorized 150,000,000 shares; issued and outstanding: 45,364,137 shares as of March 31, 2022     454       -       454   Additional Paid In Capital     515,262       -       515,262   Accumulated other comprehensive income     1,573       -       1,573   Retained Earnings     402,550       ( 13,794 )     388,756   Total Granite Construction Incorporated shareholders’ equity     919,839       ( 13,794 )     906,045   Non-controlling interest     37,324       ( 1,480 )     35,844   Total equity     957,163       ( 15,274 )     941,889   Total liabilities and equity   $ 2,282,141     $ ( 18,862 )   $ 2,263,279   F-43