What changed in this filing

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Item 1. Financial Statements

2023-05-02 compared with 2022-10-27 · 534 added, 985 removed, 976 unchanged (61% of the section changed)

3 unchanged sentences

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

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

Current assets

2 unchanged sentences

$ 293,991  

$ 464,049  

Short-term marketable securities

39,754  

Receivables, net ($ 71,613 , $ 49,534 and $ 42,530 related to CCJVs)

39,374  

Receivables, net ($ 25,488 and $ 39,281 related to CCJVs)

397,231  

5 unchanged sentences

86,809  

61,965  

77,412  

Equity in construction joint ventures

1 unchanged sentence

183,808  

195,354  

Other current assets ($3,145 and $5,694 related to CCJVs)

1 unchanged sentence

37,411  

39,749  

Current assets held-for-sale

392,641  

Total current assets

1 unchanged sentence

1,347,296  

1,665,432  

Property and equipment, net ($ 7,540 and $ 7,834 related to CCJVs)

1 unchanged sentence

509,210  

510,658  

Long-term marketable securities

1 unchanged sentence

26,569  

10,600  

Investments in affiliates

3 unchanged sentences

73,703  

53,715  

116,788  

Right of use assets

1 unchanged sentence

49,079  

58,226  

Deferred income taxes, net

1 unchanged sentence

22,208  

41,228  

Other noncurrent assets

3 unchanged sentences

$ 2,167,933  

$ 2,494,927  

$ 2,561,756  

LIABILITIES AND EQUITY

3 unchanged sentences

$ 1,447  

$ 8,718  

Accounts payable ($ 43,009 and $ 57,534 related to CCJVs)

1 unchanged sentence

334,392  

397,152  

Contract liabilities ($ 46,943 and $ 62,675 related to CCJVs)

1 unchanged sentence

173,286  

195,267  

Accrued expenses and other current liabilities ($ 7,570 and $ 8,451 related to CCJVs)

1 unchanged sentence

288,469  

499,214  

Current liabilities held-for-sale

83,408  

Total current liabilities

1 unchanged sentence

797,594  

1,100,351  

Long-term debt

1 unchanged sentence

286,934  

331,192  

Long-term lease liabilities

1 unchanged sentence

32,170  

39,908  

Deferred income taxes, net

Other long-term liabilities

1 unchanged sentence

64,199  

67,951  

Commitments and contingencies (see Note 17)

2 unchanged sentences

issued and outstanding:

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

43,880,224 shares as of March 31, 2023 and 43,743,907 shares as of December 31, 2022

Additional paid-in capital

1 unchanged sentence

470,407  

558,121  

Accumulated other comprehensive income (loss)

( 3,359 )  

Accumulated other comprehensive income

Retained earnings

1 unchanged sentence

481,384  

430,074  

Total Granite Construction Incorporated shareholders’

1 unchanged sentence

953,016  

985,185  

Non-controlling interests

3 unchanged sentences

985,145  

995,563  

1,022,354  

Total liabilities and equity

1 unchanged sentence

$ 2,167,933  

$ 2,561,756  

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

2 unchanged sentences

(Unaudited - in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

As Restated and Recast

Three Months Ended March 31,

Total revenue

2 unchanged sentences

Selling, general and administrative expenses

Other costs, net (see Note 7)

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

Operating income

Other costs, net

Gain on sales of property and equipment, net

Operating loss

Other (income) expense

4 unchanged sentences

Total other (income) expense, net

Income before income taxes

Loss before income taxes

Provision for (benefit from) income taxes

Amount attributable to non-controlling interests

Net income attributable to Granite Construction Incorporated

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

Basic earnings per share

Diluted earnings per share

Net loss attributable to Granite Construction Incorporated

Net loss per share attributable to common shareholders (see Note 15):

Weighted average shares outstanding:

1 unchanged sentence

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited - in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Other comprehensive income (loss), net of tax:

3 unchanged sentences

Other comprehensive income (loss), net of tax

Comprehensive income, net of tax

Comprehensive loss, net of tax

Non-controlling interests in comprehensive income, net of tax

Comprehensive income attributable to Granite Construction Incorporated, net of tax

Comprehensive loss attributable to Granite Construction Incorporated, net of tax

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

11 unchanged sentences

Total Equity  

Balances at June 30, 2022

44,078,469  

$ 467,159  

Balances at December 31, 2022

43,743,907  

3 unchanged sentences

$ 32,129  

Net income (loss)

$ 985,145  

9 unchanged sentences

( 3,523 )  

Restricted stock units (“RSUs”) vested

223,967  

3 unchanged sentences

Transactions with non-controlling interests

Stock-based compensation expense and other

17,574  

Balances at September 30, 2022

43,723,658  

$ 468,662  

$ 481,489  

$ 951,123  

$ 35,621  

$ 986,744  

Balances at June 30, 2021

45,818,719  

$ 556,615  

$ ( 2,750 )  

$ 401,061  

$ 955,384  

$ 32,858  

$ 988,242  

Net income (loss)

35,043  

( 2,620 )  

32,423  

Other comprehensive loss

( 717 )  

Repurchases of common stock (1)

( 2,683 )  

( 105 )  

10,399  

Dividends on common stock ($ 0.13 per share)

( 5,958 )  

Transactions with non-controlling interests

Stock-based compensation expense and other

( 390 )  

( 72 )  

Balances at September 30, 2021

45,826,409  

Balances at March 31, 2023

43,880,224  

12 unchanged sentences

$ 995,563  

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

Cumulative effect of newly adopted accounting standard

( 26,961 )  

9 unchanged sentences

979,145  

Net income (loss)

77,605  

( 1,569 )  

76,036  

Other comprehensive income

Repurchases of common stock (1)

( 2,370,376 )  

( 23 )  

( 70,703 )  

( 70,726 )  

244,760  

Dividends on common stock ($ 0.13 per share)

( 17,490 )  

( 17,272 )  

Transactions with non-controlling interests

Stock-based compensation expense and other

Balances at September 30, 2022

43,723,658  

$ 468,662  

$ 481,489  

$ 951,123  

$ 35,621  

$ 986,744  

Balances at December 31, 2020

45,668,541  

$ 555,407  

$ ( 5,035 )  

$ 424,835  

$ 975,664  

$ 15,946  

$ 991,610  

Net income (loss)

23,309  

Net income (loss) (as restated)

( 26,733 )  

10 unchanged sentences

Transactions with non-controlling interests

21,685  

Stock-based compensation expense and other

( 413 )  

( 203 )  

Balances at September 30, 2021

Balances at March 31, 2022 (as restated)

45,364,137  

5 unchanged sentences

$ 941,889  

(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.

(1) This amount represents employee tax withholding for restricted stock units ("RSUs") vested under our equity incentive plans in 2022 and 2023 and stock repurchased in 2022 under the Board approved repurchase plan.

During the three months ended March 31, 2023 and 2022, there were 87,260 shares and 54,880 shares, respectively, withheld related to employee taxes for RSUs.

During the three months ended March 31, 2022, we also repurchased 611,000 shares under the share repurchase program.

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

2 unchanged sentences

( Unaudited - in thousands )

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

$ ( 25,772 )  

$ 22,847  

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation, depletion and amortization

1 unchanged sentence

16,737  

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

Gain on sale of business (see Note 3)

( 6,234 )  

Amortization related to long-term debt

Gain on sale of business

Gain on sales of property and equipment, net

1 unchanged sentence

Deferred income taxes

( 17,819 )  

Stock-based compensation

4 unchanged sentences

Other non-cash adjustments

( 151 )  

Changes in assets and liabilities:

Insurance receivable for legal settlement (see Note 18)

66,800  

85,957  

Contract assets, net

4 unchanged sentences

Distributions from unconsolidated construction joint ventures and affiliates

14,379  

Other assets, net

2 unchanged sentences

( 42,955 )  

47,223  

Accrual for legal settlement (see Note 18)

129,000  

Accrued expenses and other liabilities, net

( 14,522 )  

Net cash provided by (used in) operating activities

$ ( 14,631 )  

Net cash used in operating activities

$ ( 76,688 )  

1 unchanged sentence

Purchases of marketable securities

( 59,810 )  

Maturities of marketable securities

3 unchanged sentences

Proceeds from sales of property and equipment

21,110  

58,002  

Proceeds from the sale of business (see Note 3)

Proceeds from company owned life insurance

Proceeds from the sale of business

142,571  

Issuance of notes receivable

( 7,560 )  

Collection of notes receivable

1 unchanged sentence

$ ( 24,336 )  

Financing activities

Proceeds from long-term debt

$ 89,396  

Financing activities

Debt principal repayments

2 unchanged sentences

( 5,687 )  

Repurchases of common stock (See Note 1)

Repurchases of common stock

( 3,523 )  

1 unchanged sentence

17,600  

15,701  

Distributions to non-controlling partners

1 unchanged sentence

Other financing activities, net

Net cash used in financing activities

$ ( 157,814 )  

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

Net cash provided by (used in) financing activities

$ 6,784  

Net decrease in cash, cash equivalents and restricted cash

( 94,240 )  

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

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

293,991  

13 unchanged sentences

$ 2,090  

$ 1,780  

Other non-cash operating activities:

Performance guarantees

$ ( 6,513 )  

8 unchanged sentences

$ 1,324  

$ 9,006  

Accrued equipment purchases

$ 3,693  

$ 5,511  

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

10 unchanged sentences

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

September 30, 2022  and 

March 31, 2023  and 

2022  and the results of our operations and cash flows for the periods presented.

December 31, 2022  condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements but does not include all disclosures required by U.S.

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

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

s Own Equity (Subtopic 815 - 40 ):

Accounting for Convertible Instruments and Contracts in an Entity ’

s Own Equity  (“ASU 2020 - 06”

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

Reference Rate Reform (Topic 848 ):

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

) and 2021 - 01,  

Reference Rate Reform (Topic  

Scope (“ASU 2021 - 01”

), on June 30, 2022, 

the impacts of which are described in Note 2.

Stock Purchase Programs:

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

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

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

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

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

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

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

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

Discontinued Operations:

Seasonality: 

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

Therefore, the results of operations for the three months ended March 31, 2023  are not necessarily indicative of the results to be expected for the full year.

Subsequent Event:

On April 24, 2023, we completed the purchase of Coast Mountain Resources ( 2020 ) Ltd.

(“CMR”) for approximately $ 27 million, subject to certain adjustments.

CMR is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land.

This acquisition is not expected to have a material impact on our results of operations.

Recently Issued and Adopted Accounting Pronouncements

We closely monitor all Accounting Standards Updates issued by the Financial Accounting Standards Board and other authoritative guidance.

There are currently no recently issued accounting pronouncements that are expected to have a material impact on our financial statements.

No new accounting pronouncements were adopted in the three months ended March 31, 2023 that had a material impact on our financial statements.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

 Restatement and Recast

Restatement and Recast Background

As disclosed in our Annual Report, we identified errors during the preparation of the Annual Report 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 

As a result, our previously issued unaudited quarterly financial information for each interim period within the 

nine  months ended 

September 30, 2022 require restatement. The restated financial information also includes adjustments to correct other immaterial errors in the 

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 periods identified.

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.

3 unchanged sentences

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

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

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

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

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

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

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

Seasonality: 

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

Recently Issued and Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“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 

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

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

In August 2020, the FASB issued ASU 2020 - 06, which simplifies the accounting for convertible instruments resulting in accounting for convertible debt instruments as a single liability measured at its amortized cost and ASU 2020 - 06 is applicable to our 2.75 % convertible senior notes due 2024 ( “2.75% Convertible Notes;”

see Note 15 for further discussion on these notes).

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

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

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

As of September 

30, 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.

On or after 

November 

2022,  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 

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, 

result in the 

2.75%  Convertible Notes becoming due and payable immediately.

In connection with the adoption of ASU 2020 - 06, we implemented the following accounting policy as of January 1, 2022:

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 issued under the terms of the 

2012 and 2021  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.

During the first quarter of 2022, we completed the sale of Inliner. In 

September 2022, 

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

In connection with the reclassification of the WMS businesses from discontinued operations to continuing operations, the condensed consolidated statement of operations for the period ended March 31, 2022, 

as previously reported, has 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.

Description of Restatement and Recast Tables

We have presented below a reconciliation from the previously reported to the restated and recast amounts for the quarter ended 

March 31, 2022. 

The amounts labeled “As Previously Reported”

were derived from our Quarterly Report on Form 

10 -Q for the quarter ended March 31, 2022 filed on April 28, 2022.

The impacts to the condensed consolidated statements of shareholders’

equity and comprehensive income (loss) as a result of the restatement were due to the changes in net loss for the three months ended March 31, 2022.

In addition, there was no impact to net cash provided by (used in) investing and financing activities for the three months ended March 31, 2022 as a result of the restatement or recast.

The effects of the prior-period errors and the discontinued operations reclassification impacts on our condensed consolidated financial statements are as follows (in thousands, except per share data):

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

 Assets and Liabilities Held for Sale

As discussed in Note 1, during the 

fourth  quarter of 

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

twelve  months.

This included:

Inliner, Water Resources and Mineral Services.

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

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

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Three months ended March 31, 2022

As Previously Reported  

Restatement Impacts  

As Restated  

Discontinued Operations Reclassification Impacts  

As Restated and Recast  

$ 474,935  

Presentation of financial statements - Discontinued operations. 

Additionally, beginning December 31, 2021, in accordance with ASC Topic 360, Property, Plant, and Equipment , we ceased recording depreciation and amortization for WMS property, plant and equipment, finite-lived tangible assets and right-of-use lease assets.

During the first quarter of 2022 ,  we completed the sale of Inliner for a purchase price of $ 159.7 million, subject to certain adjustments.

As a result of the sale, we received cash proceeds of $ 142.6 million based on preliminary post-closing adjustments and we recognized a gain of $ 6.2  million.

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

September 30, 2022. 

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

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

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

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

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

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

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

(in thousands)

December 31, 2021

Cash and cash equivalents

$ 1,893  

Receivables, net

$ 476,828  

Contract assets

$ 101,438  

$ 578,266  

Other current assets

Property and equipment, net

72,651  

Investments in affiliates

72,651  

75,620  

Right of use assets

Total revenue

547,586  

Other noncurrent assets

549,479  

Total assets classified as held-for-sale

104,407  

Accounts payable

653,886  

Contract liabilities

Other current liabilities

Cost of revenue

426,743  

Long-term lease liabilities

Other long-term liabilities

Total liabilities classified as held-for-sale

432,762  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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 

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

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

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

Three months ended September 30,

Nine Months Ended September 30,

Number of projects with upward estimate changes

Increase in gross profit, net

Increase to project profitability, net

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

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

87,025  

519,787  

The increases during the 

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

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

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

Three Months Ended September 30,  

Nine Months Ended September 30,  

Number of projects with downward estimate changes

Range of reduction in gross profit from each project, net

71,068  

1 unchanged sentence

74,007  

Total cost of revenue

497,811  

Decrease to project profitability, net

503,830  

2 unchanged sentences

49,775  

Decrease to net income/increase to net loss

( 4,126 )  

2 unchanged sentences

60,092  

Amounts attributable to non-controlling interests

Selling, general and administrative expenses

58,501  

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

11,619  

70,120  

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

Other costs, net

( 1,935 )  

Gain on sales of property and equipment, net

( 332 )  

1 unchanged sentence

( 266 )  

The decreases during the 

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

The decreases during the three and 

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

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Disaggregation of Revenue

We disaggregate our revenue based on our reportable segments (see Note 19 ) and operating groups as these are the formats that are 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 Condensed Consolidated Statements of Operations have been revised to include Inliner through the date of sale, Water Resources and Mineral Services in the Mountain operating group for all periods presented (see Note 3 ).

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

Three Months Ended September 30,

Operating loss

( 16,608 )  

1 unchanged sentence

( 20,734 )  

Other (income) expense

Interest income

( 623 )  

Interest expense

Equity in income (loss) of affiliates

( 1,595 )  

Other income, net

( 74 )  

Total other expense, net

( 1,606 )  

Loss from continuing operations before income taxes

( 21,248 )  

1 unchanged sentence

( 25,374 )  

Provision for (benefit from) income taxes on continuing operations

( 5,331 )  

2 unchanged sentences

12,641  

Net loss from continuing operations

( 15,917 )  

2 unchanged sentences

( 6,010 )  

Net Income (loss) from discontinued operations

( 12,106 )  

1 unchanged sentence

( 9,821 )  

Nine months ended September 30,

( 15,274 )  

( 25,095 )  

Amount attributable to non-controlling interests

( 3,118 )  

( 1,638 )  

Net loss attributable to Granite Construction Incorporated from continuing operations

( 19,035 )  

2 unchanged sentences

( 6,010 )  

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

( 12,106 )  

( 6,010 )  

Net loss attributable to Granite Construction Incorporated

$ ( 12,939 )  

1 unchanged sentence

$ ( 26,733 )  

Net income (loss) per share attributable to common shareholders

Basic continuing operations per share

$ ( 0.42 )  

2 unchanged sentences

$ ( 0.13 )  

Basic discontinued operations per share

( 0.26 )  

( 0.13 )  

Basic loss per share

$ ( 0.29 )  

1 unchanged sentence

$ ( 0.58 )  

Diluted continuing operations per share

$ ( 0.42 )  

$ ( 0.03 )  

Unearned Revenue

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

(in thousands)

September 30, 2022

December 31, 2021

September 30, 2021

$ ( 0.45 )  

$ ( 0.13 )  

Diluted discontinued operations per share

( 0.26 )  

( 0.13 )  

Diluted loss per share

$ ( 0.29 )  

1 unchanged sentence

$ ( 0.58 )  

Weighted average shares outstanding:

45,730  

3 unchanged sentences

45,730  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Three months ended March 31, 2022

As Previously Reported

Restatement Impacts

Operating activities

$ ( 9,821 )  

$ ( 15,274 )  

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation, depletion and amortization

16,737  

Amortization related to long-term debt

Gain on sale of business

( 6,234 )  

Gain on sales of property and equipment, net

( 598 )  

Deferred income taxes

Stock-based compensation

Equity in net loss from unconsolidated joint ventures

Net income from affiliates

( 1,289 )  

Other non-cash adjustments

( 299 )  

Changes in assets and liabilities:

85,957  

Contract assets, net

( 72,632 )  

( 13,805 )  

Contributions to unconsolidated construction joint ventures

( 12,840 )  

Distributions from unconsolidated construction joint ventures and affiliates

Other assets, net

Accounts payable

( 44,028 )  

Accrued expenses and other liabilities, net

( 2,280 )  

Net cash used in operating activities

$ ( 50,180 )  

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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 our review of these changes for the 

three months ended March 31, 2023  and 2022 , we did 

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

There were 

no  increases from revisions in estimates, which individually had an impact of $ 5.0  million or more on gross profit for the 

three months ended March 31, 2023  and 2022 . 

There were 

no  decreases from revisions in estimates, which individually had an impact of $ 5.0  million or more on gross profit for the 

three months ended March 31, 2022 . 

The projects with decreases from revisions in estimates during the three months ended March 31, 2023, which individually had an impact of $ 5.0 million or more on gross profit, are summarized as follows (dollars in millions, except per share data):

Three Months Ended March 31,

Number of projects with downward estimate changes

Range of reduction in gross profit from each project, net

$ 6.2 - 11.4  

Decrease to project profitability, net

$ 17.6  

Decrease to net income/increase to net loss

$ 13.1  

Amounts attributable to non-controlling interests

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

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

$ 0.17  

The decreases during the 

three months ended March 31, 2023 were due to additional costs related to changes in project duration, increased labor and materials costs, lower productivity than originally anticipated and unfavorable weather. 

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Disaggregation of Revenue

We disaggregate our revenue based on our reportable segments (see Note 18 ) and operating groups as these are the formats that are regularly reviewed by management.

Our reportable segments are:

Construction and Materials.

In alphabetical order, our operating groups are:

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

Three Months Ended March 31,

$ 148,947  

$ 30,138  

$ 179,085  

171,002  

11,556  

182,558  

183,467  

14,958  

198,425  

$ 503,416  

$ 56,652  

$ 560,068  

2022 (As Restated and Recast)

$ 146,309  

$ 45,687  

$ 191,996  

219,894  

10,362  

230,256  

212,063  

19,571  

231,634  

$ 578,266  

$ 75,620  

$ 653,886  

Unearned Revenue

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

(in thousands)

March 31, 2023

December 31, 2022

$ 1,011,489  

$ 945,971  

1,437,759  

1,444,983  

714,320  

486,524  

$ 3,163,568  

$ 2,877,478  

All unearned revenue is in the Construction segment.

Approximately $ 2.1  billion of the 

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

Other Costs, net

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

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

March 31, 2023  u nearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

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 $ 40.4  million and $ 152.5  million during the 

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

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

three months ended March 31, 2023  and 2022 , respectively. The changes in contract transaction price for the 

three months ended March 31, 2023  and 2022 were from items such as executed or estimated change orders and unresolved contract modifications and claims.

March 31, 2023  and 

December 31, 2022 , the aggregate claim recovery estimates included in contract asset and liability balances were $ 74.0  million and $ 75.8  million, respectively.

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

(in thousands)

September 30, 2022  

December 31, 2021 (1)  

September 30, 2021  

March 31, 2023

December 31, 2022

Costs in excess of billings and estimated earnings

1 unchanged sentence

$ 80,357  

$ 61,815  

Contract retention

1 unchanged sentence

161,559  

142,231  

Total contract assets

1 unchanged sentence

$ 241,916  

$ 204,046  

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

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

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

March 31, 2023  and 

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

10.0 % and 

11.7 %, respectively, of total contract assets.

No other contract retention receivable individually exceeded 10% of total contract assets at any of the presented dates.

1 unchanged sentence

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

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

We recognized revenue of $ 123.0  million and $ 166.6  million during the three months ended March 31, 2023 , and 2022 , respectively, that was included in the contract liability balances at 

December 31, 2022  and 2021 , respectively.

1 unchanged sentence

(in thousands)

September 30, 2022  

December 31, 2021 (1)  

September 30, 2021  

March 31, 2023

December 31, 2022

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

1 unchanged sentence

$ 152,294  

$ 166,091  

Provisions for losses

1 unchanged sentence

20,992  

29,176  

Total contract liabilities

1 unchanged sentence

$ 173,286  

$ 195,267  

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

 Receivables, net 

2 unchanged sentences

(in thousands)

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

Contracts completed and in progress:

3 unchanged sentences

120,348  

126,371  

217,534  

Total contracts completed and in progress

1 unchanged sentence

341,157  

495,847  

Materials sales

3 unchanged sentences

71,790  

59,496  

110,302  

Total gross receivables

1 unchanged sentence

465,129  

686,506  

allowance for credit losses

2 unchanged sentences

$ 463,987  

$ 684,822  

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

Included in other receivables at 

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

3.0 % per annum. Other than the $ 63.0 million insurance receivable recorded as of September 30, 2021  related to the settlement discussed in Note 18, which was collected in October 2021 and is in a settlement escrow account included in Other current assets in the Condensed Consolidated Balance Sheets as of September 30, 2022 , no other receivable individually exceeded 10 % of total net receivables at any of these dates.

March 31, 2023  and 

December 31, 2022  were items such as estimated recovery from back charge claims, notes receivable, insurance receivable, fuel tax refunds and income tax refunds. Other receivables at March 31, 2023  and December 31, 2022 also included $ 24.9  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. 

None of our customers had a receivable balance in excess of 10 % of our total net receivables as of 

March 31, 2023  or 

December 31, 2022 .

GRANITE CONSTRUCTION INCORPORATED

3 unchanged sentences

Fair Value Measurement at Reporting Date Using

September 30, 2022

Cash equivalents

Money market funds

$ 76,752  

Other current assets

Commodity swap

( 43 )  

$ 76,752  

$ ( 43 )  

$ 76,709  

December 31, 2021

March 31, 2023

Cash equivalents

5 unchanged sentences

Accrued and other current liabilities

Interest rate swap

$ 3,514  

Diesel collars

Commodity swaps

Total liabilities

1 unchanged sentence

$ 1,072  

September 30, 2021

December 31, 2022

Cash equivalents

3 unchanged sentences

Other current assets

Restricted cash

$ 62,743  

Accrued and other current liabilities

Interest rate swap

$ 5,001  

Total liabilities

Commodity swaps

$ 99,806  

$ 99,927  

Interest Rate Swaps

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

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

Commodity Swaps

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

October 31, 2022.

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

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

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

October 2021.

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

Commodity Derivatives

As of March 31, 2023  and December 31, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $ 14.0  million and $ 7.0 million, respectively, all maturing by October 31, 2023.

The realized and unrealized losses associated with commodity swaps for the three months ended March 31, 2023  were immaterial.

The realized gain associated with commodity swaps for the three months ended March 31, 2022 was immaterial and the unrealized gain was $ 3.3 million.

During the three months ended March 31, 2023 , we entered into collar contracts to reduce our price exposure on diesel consumption.

The collars were not designated as hedges and will be treated as a mark-to-market derivative instruments through the 

September 

2024 maturity dates.

The financial statement impact for the three months ended March 31, 2023  was an unrealized loss of $ 0.9  million.

GRANITE CONSTRUCTION INCORPORATED

2 unchanged sentences

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

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

(in thousands)

2 unchanged sentences

Carrying Value

Held-to-maturity marketable securities (1)

3 unchanged sentences

$ 64,584  

$ 10,600  

$ 10,582  

Liabilities (including current maturities):

4 unchanged sentences

$ 281,365  

$ 205,543  

$ 326,025  

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

$ 123,750  

$ 124,598  

Credit Agreement - revolver (2)

$ 50,000  

$ 49,110  

Fourth Amended and Restated Credit Agreement - revolver (2)

$ 50,000  

$ 49,536  

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

December 31, 2021 and 

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

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

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

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

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

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

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

( 1 ) All marketable securities as of March 31, 2023  and 

December 31, 2022  were classified as held-to-maturity and consisted of U.S. Government and agency obligations and corporate commercial paper maturing in two months to three years.

( 2 ) The fair value of our 2.75 % convertible senior notes due 2024 (the "2.75% Convertible Notes") is based on the median price of the notes in an active market.

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

See Note 14  for more information about the 2.75% Convertible Notes and the Credit Agreement.

During the three months ended March 31, 2023  and 2022 , we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

Construction Joint Ventures

3 unchanged sentences

Based on our assessments during the 

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

three months ended March 31, 2023 , we determined no change was required for existing joint ventures.

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

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

March 31, 2023 , there was $ 245.2  million of remaining contract value on unconsolidated and line item construction joint venture contracts of which $ 109.4  million represented our share and the remaining $ 135.8  million represented our partners’

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

1 unchanged sentence

corporate and/or other guarantees.

See Note 13  for disclosure of the performance guarantee amounts recorded in the condensed consolidated balance sheets.

Consolidated Construction Joint Ventures (“CCJVs”)

September 30, 2022 , we were engaged in 

nine active CCJV projects with total contract values ranging from $ 12.0  million to $ 436.2  million for a combined total of $ 1.8  billion of which our share was $ 1.0 billion.

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

March 31, 2023 , we were engaged in 

eleven active CCJV projects with total contract values ranging from $ 6.1  million to $ 432.5  million for a combined total of $ 1.7  billion of which our share was $ 1.0 billion.

As of March 31, 2023 , our share of revenue remaining to be recognized on these CCJVs was $ 181.3  million and ranged from $ 0.9  million to $ 85.1  million by project.

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

1 unchanged sentence

During the 

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

three months ended March 31, 2023  and 2022 , total revenue from CCJVs was $ 61.3  million and $ 104.3  million, respectively.

During the 

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

three months ended March 31, 2023  and 2022 , CCJVs used $ 24.8  million and $ 7.6  million of operating cash flows, respectively. 

GRANITE CONSTRUCTION INCORPORATED

1 unchanged sentence

Unconsolidated Construction Joint Ventures

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

March 31, 2023 , 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 $ 7.9  billion of which our share was $ 2.3  billion.

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

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

March 31, 2023 , our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 72.4  million and ranged from $ 3.2  million to $ 34.4  million by project.

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

(in thousands)

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

Cash, cash equivalents and marketable securities

1 unchanged sentence

$ 130,635  

$ 159,187  

Other current assets (1)

1 unchanged sentence

681,221  

765,319  

Noncurrent assets

1 unchanged sentence

76,204  

111,981  

Less partners’

1 unchanged sentence

604,741  

692,226  

Granite’s interest (1),(2)

1 unchanged sentence

$ 283,319  

$ 344,261  

Current liabilities

1 unchanged sentence

$ 244,411  

$ 396,154  

Less partners’

2 unchanged sentences

130,911  

227,372  

Granite’s interest

1 unchanged sentence

$ 113,500  

$ 168,782  

Equity in construction joint ventures (4)

1 unchanged sentence

$ 169,819  

$ 175,479  

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

September 30, 2022 , 

December 31, 2021  and 

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

( 2 ) Included in this balance as of September 30, 2022 , December 31, 2021  and September 30, 2021 , was $ 95.8  million, $ 103.8  million and $ 101.9 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

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

September 30, 2022 , 

December 31, 2021  and 

September 30, 2021 , respectively.

March 31, 2023  and 

December 31, 2022  was $ 58.2  million and $ 64.7  million, respectively, related to performance guarantees (see Note 13 ).

( 2 ) Included in this balance as of March 31, 2023  and 

December 31, 2022  was $ 96.6  million and $ 104.3  million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims.

In addition, this balance included $ 2.6  million and $ 2.7  million related to Granite’s share of estimated recovery of back charge claims as of 

March 31, 2023  and 

December 31, 2022 , 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 our condensed consolidated balance sheets was $ 7.9  million, $ 28.6  million and $ 19.9  million as of 

September 30, 2022 , 

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

Three Months Ended September 30,

Nine Months Ended September 30,

( 4 ) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $ 14.5  million and $ 14.0  million as of 

March 31, 2023  and 

December 31, 2022 , respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

Three Months Ended March 31,

(in thousands)

1 unchanged sentence

$ 161,139  

$ 322,058  

$ 690,086  

Less partners’

2 unchanged sentences

111,484  

223,858  

442,182  

Granite’s interest

1 unchanged sentence

$ 49,655  

$ 98,200  

$ 247,904  

Cost of revenue

1 unchanged sentence

$ 157,921  

$ 332,777  

$ 701,350  

Less partners’

2 unchanged sentences

104,652  

211,431  

461,236  

Granite’s interest

1 unchanged sentence

53,269  

121,346  

240,114  

Granite’s interest in gross profit (loss)

$ ( 6,457 )  

$ ( 23,146 )  

$ 7,790  

Net Income (Loss)

1 unchanged sentence

$ 3,167  

$ ( 11,649 )  

Less partners’

1 unchanged sentence

( 6,565 )  

( 10,335 )  

11,936  

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

$ ( 6,357 )  

$ 1,056  

$ ( 23,585 )  

$ 8,027  

( 1 ) Partners’

6 unchanged sentences

(in thousands)

September 30, 2022

December 31, 2021 (1)

September 30, 2021

March 31, 2023

December 31, 2022  

$ 61,919  

3 unchanged sentences

13,629  

13,583  

Total investments in affiliates

1 unchanged sentence

$ 80,725  

$ 72,415  

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

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

(in thousands)

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

Current assets

1 unchanged sentence

$ 194,210  

$ 162,503  

Noncurrent assets

3 unchanged sentences

$ 366,770  

$ 113,203  

$ 324,203  

Current liabilities

1 unchanged sentence

$ 106,780  

$ 80,145  

Long-term liabilities (1)

1 unchanged sentence

59,356  

59,501  

Total liabilities

3 unchanged sentences

$ 200,634  

$ 41,414  

$ 184,557  

Granite’s share of net assets

1 unchanged sentence

$ 80,725  

$ 72,415  

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

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

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

Of the $ 373.5  million of total affiliate assets as of March 31, 2023 , we had investments in 

two  real estate entities with total assets of $ 73.3  million, our foreign affiliates had total assets of $ 269.7  million and the asphalt terminal entity had total assets of $ 30.5  million. As of 

September 30, 2022 , 

December 31, 2021  and 

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

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

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

March 31, 2023  and 

December 31, 2022 , all of the investments in real estate affiliates were in residential real estate in Texas.

As of March 31, 2023 , our percent ownership in the real estate entities ranged from 10 % to 

We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from 25 % to 50 % as of March 31, 2023 .

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Property and Equipment, net

1 unchanged sentence

(in thousands)

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

Equipment and vehicles

1 unchanged sentence

$ 994,602  

$ 997,560  

Quarry property

1 unchanged sentence

219,843  

188,838  

Land and land improvements

1 unchanged sentence

105,733  

126,130  

Buildings and leasehold improvements

1 unchanged sentence

103,658  

123,207  

Office furniture and equipment

1 unchanged sentence

82,465  

78,059  

Property and equipment

1 unchanged sentence

1,506,301  

1,513,794  

accumulated depreciation and depletion

1 unchanged sentence

997,091  

1,003,136  

Property and equipment, net

1 unchanged sentence

$ 509,210  

$ 510,658  

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

June 30, 2021, 

we completed a sale-leaseback transaction associated with 

two  properties in California.

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

 Accrued Expenses and Other Current Liabilities

(in thousands)

September 30, 2022

December 31, 2021 (1)

September 30, 2021

March 31, 2023  

December 31, 2022  

Accrued insurance

1 unchanged sentence

$ 78,427  

$ 72,516  

Deficits in unconsolidated construction joint ventures

4 unchanged sentences

80,910  

130,735  

Performance guarantees

1 unchanged sentence

64,703  

82,280  

Accrued legal settlement (see Note 18)

129,000  

Short-term lease liabilities

17,552  

4 unchanged sentences

$ 288,469  

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

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

The decrease in performance guarantees in the current year is due to receiving customer acceptance on two unconsolidated construction joint ventures during the three months ended March 31, 2023 .

Other includes dividends payable, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, 

none  of which were greater than 

5%  of total current liabilities at any of the presented dates.

GRANITE CONSTRUCTION INCORPORATED

2 unchanged sentences

(in thousands)

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

2.75 % Convertible Notes

1 unchanged sentence

$ 230,000  

$ 205,543  

Third Amended and Restated Credit Agreement - term loan

123,750  

125,625  

Fourth Amended and Restated Credit Agreement - revolver

Credit Agreement - revolver

50,000  

Debt issuance costs and other

50,000  

Other, net of debt issuance costs

$ 288,456  

4 unchanged sentences

$ 286,934  

$ 331,192  

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.

I n June 2022, we entered into the Credit Agreement which matures on June 2, 2027.

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.

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

The letters of credit had expiration dates between November 2022  and 

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

March 31, 2023 , the total unused availability under the Credit Agreement was $ 269.5  million, resulting from $ 30.5  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 March 31, 2023 , the applicable rate was 1.50 %  for loans under the Credit Agreement bearing interest based on the Secured Overnight Financing Rate ("SOFR") and 0.50 %  for loans bearing interest at the base rate.

Accordingly, the effective interest rates at 

September 30, 2022  for SOFR and base rate loans were 

March 31, 2023  for SOFR and base rate loans were 

6.41 %  and 8.50 % , 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 September 30, 2022 , the Consolidated Leverage Ratio was 1.89 , which did not exceed the maximum of 3.25 .

The 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 

As of March 31, 2023 , the Consolidated Leverage Ratio was 1.4 , which did not exceed the maximum of 3.25 .

Our Consolidated Interest Coverage Ratio was 15.7 , which was above the minimum of 3.00 .

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

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

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

2021 , we recorded $ 0.3  million, $ 1.0  million, $ 0.6  million and $ 1.8  million, respectively, of amortization related to debt issuance costs.

 Weighted Average Shares Outstanding and Net Income Per Share

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

Three Months Ended September 30,

Nine Months Ended September 30,

As of March 31, 2023 and December 31, 2022, 

2.75%  Convertible Notes comprised our only convertible debt instrument.

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.

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.

May 1, 2024, 

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

second  scheduled trading day immediately preceding the maturity date.

The conversion rate applicable to the 

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 

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, 

result in the 

2.75%  Convertible Notes becoming due and payable immediately.

During both the three months ended March 31, 2023  and 

2022 , we recorded $ 0.3 million 

of amortization related to debt issuance costs.

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

 Weighted Average Shares Outstanding and Net Loss Per Share

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

Three Months Ended March 31,

(in thousands, except per share amounts)

Net income attributable to common shareholders for basic earnings per share

$ 73,393  

$ 35,043  

$ 77,605  

$ 23,309  

Interest expense related to 2.75% Convertible Notes

Net income attributable to common shareholders for diluted earnings per share

$ 74,866  

$ 35,043  

$ 82,023  

Numerator (basic and diluted)

Net loss attributable to common shareholders

$ ( 23,023 )  

2 unchanged sentences

45,730  

44,739  

45,773  

Dilutive effect of RSUs

Dilutive effect of 2.75% Convertible Notes

Weighted average common shares outstanding, diluted

1 unchanged sentence

45,730  

52,613  

47,522  

Net income per share, basic

$ 1.67  

$ 0.76  

$ 1.73  

$ 0.51  

Net income per share, diluted

$ 1.44  

$ 0.73  

Net loss per share, basic

$ ( 0.53 )  

Net loss per share, diluted

$ ( 0.53 )  

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

Due to the net losses for the 

three months ended March 31, 2023 and 2022 , RSUs representing 

583,000 and 534,000  shares, respectively, and the potential dilution from the 2.75 % Convertible Notes converting into 

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

 Income Taxes

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

As Restated and Recast  

(dollars in thousands)

2 unchanged sentences

$ 6,352  

$ ( 777 )  

$ 2,068  

Effective tax rate

26.9 %  

21.5 %  

( 1.0 %)  

Our effective tax rates for the 

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

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

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

Our effective tax rate for the 

three months ended March 31, 2023  was higher than the same quarter in the prior year primarily due to non-deductible goodwill associated with the sale of Inliner in the first quarter of 2022.

GRANITE CONSTRUCTION INCORPORATED

4 unchanged sentences

not  originally believe to be probable or that could 

not previously have been reasonably estimated.

Such changes could be material to our financial condition, results of operations and/or cash flows in any reporting period.

Disclosure of loss contingencies is provided when a material loss is probable but 

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 range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and reasonably estimable.

The total liabilities for legal proceedings recorded as of 

September 30, 2022 and 

December 31, 2021 

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

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

The total liabilities recorded as of 

March 31, 2023  and 

December 31, 2022 related to legal proceedings were immaterial. 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

3 unchanged sentences

Some of the matters in which we or our joint ventures and affiliates are involved 

include 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  considered probable to be incurred or cannot currently be reasonably estimated.

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 

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

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 

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.

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.

May 20, 2020, 

the court denied, in part, our motion to dismiss the amended complaint. On 

January 21, 2021, 

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

October 23, 2019, 

a putative class action lawsuit, titled 

Granite Construction Incorporated, et.

, 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.

August 10, 2020, 

the court sustained our demurrer dismissing the complaint with leave to amend. On 

September 16, 2020, 

the plaintiff filed an amended complaint. We filed a demurrer seeking to dismiss the amended complaint. On 

April 9, 2021, 

the court entered an order overruling our demurrer seeking to dismiss the amended complaint.

May 14, 2021, 

the plaintiff filed a motion for class certification.

April 29, 2021, 

we entered into a stipulation of settlement (the “Settlement Agreement”) to settle 

Police Retirement System of St.

Granite Construction Incorporated, et al . The Settlement Agreement also settled claims alleged in 

Granite Construction Incorporated, et al . 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.

Under the Settlement Agreement, the Company agreed to pay or cause to be paid a total of $ 129  million in cash to a settlement fund that will be used to 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 

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.

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 

Granite Construction Incorporated, et al . The Settlement Agreement contained 

no  admission of liability, wrongdoing or responsibility by any of the parties.

April 30, 2021, 

the class representative in 

Police Retirement System of St.

Granite Construction Incorporated, et al.

 filed a motion for preliminary approval of the settlement.

The plaintiff in 

Granite Construction Incorporated, et al.

 was permitted to intervene, although the court denied the plaintiff's application to be appointed as additional lead plaintiff. 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 is included in the condensed consolidated balance sheet as deposits and an accrued liability. 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 

Granite Construction Incorporated, et al ., and entered final judgment.

On April 12, 2022, the plaintiff in Nasseri v.

Granite Construction Incorporated, et al.

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

Granite Construction Incorporated, et al.

filed a notice of appeal in Police Retirement System of St.

Granite Construction Incorporated, et al.

, naming Class Representative Police Retirement System of St.

Louis as appellee.

On September 8, 2022, the U.S.

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

Granite Construction Incorporated, et al.

May 6, 2020, 

a stockholder derivative lawsuit, titled 

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 

October 24, 2019. 

The lawsuit alleges 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 seeks monetary damages and corporate governance reforms. Pursuant to court order, this action was stayed until the court's entry of final judgment on March 17, 2022 in the putative securities class action lawsuit filed in the Northern District of California.

May 12, 2021, 

a stockholder derivative lawsuit, titled 

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 

October 24, 2019. 

The lawsuit alleges 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 seeks 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.

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

Roberts, et al.

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

Roberts, et al.

has entered the parties’

stipulation to stay that case in light of the settlement filed in Davydov v.

Roberts, et al.

 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 Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2022.

As of September 30, 2022 , 

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

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

not  reasonably estimable.

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 accrual for the expected resolution of this investigation which is reflected in other costs in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2022.

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

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

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

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

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

Salesforce Tower Matter

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

2013  and 

6 unchanged sentences

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. 

On February 3, 2022, a lawsuit titled Steadfast Insurance Company ( “

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.

February 3, 2022 ,  a lawsuit titled 

Steadfast Insurance Company ( “

Steadfast ”

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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.

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.

) , 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.

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. CHDJV has moved for summary adjudication on two potentially dispositive issues.

The hearing for these summary adjudication motions is scheduled for May 24, 2023.

Layne opposes these motions and believes it 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.

GRANITE CONSTRUCTION INCORPORATED

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Reportable Segment Information

During the 

fourth  quarter of 

2021, we updated our strategy to focus on our core business capabilities, to leverage our current geographic based home markets in the civil construction and materials business and to target expansion based upon that combined strategy.

In addition, we revised the financial information our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews to allocate resources and assess our performance. This change is consistent with our new strategic plan and better aligns with our continuing civil construction and materials business.

Our CODM now regularly reviews financial information regarding our 

two  primary product lines, construction and materials as well as our operating groups.

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

As a result of these changes, in accordance with FASB ASC Topic 

Segment Reporting , our reportable segments, which are the same as our operating segments, were changed to:

Our reportable segments are the same as our operating segments and correspond with how our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews financial information to allocate resources and assess performance.

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

Our reportable segments are:

Construction and Materials.

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

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

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

Inliner had both Construction and Materials operations.

Summarized segment information is as follows:

Three months ended September 30,

Summarized segment information is as follows (in thousands):

Three months ended March 31,

Construction  

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$ 560,068  

$ 98,329  

$ 22,038  

$ 120,367  

Depreciation, depletion and amortization

$ 10,082  

$ 6,870  

$ 16,952  

Total revenue from reportable segments

$ 924,454  

$ 201,419  

$ 1,125,873  

Elimination of intersegment revenue

( 63,744 )  

Revenue from external customers

$ 924,454  

$ 137,675  

$ 1,062,129  

$ 99,237  

$ 20,698  

$ 119,935  

Depreciation, depletion and amortization

$ 18,230  

$ 7,014  

$ 25,244  

Nine months ended September 30,

Total revenue from reportable segments

$ 2,141,009  

$ 506,228  

$ 2,647,237  

Elimination of intersegment revenue

$ ( 133,043 )  

Revenue from external customers

$ 2,141,009  

$ 373,185  

$ 2,514,194  

Gross profit (loss)

$ 36,705  

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$ 820,786  

2022 (As Restated and Recast)

Total revenue from reportable segments

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$ 717,449  

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

Three months ended September 30,

Nine months ended September 30,

A reconciliation of segment gross profit to consolidated loss before income taxes is as follows (in thousands):

As Restated and Recast  

Three Months Ended March 31,

Total gross profit from reportable segments

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$ 60,092  

$ 278,025  

$ 300,199  

Selling, general and administrative expenses

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70,120  

192,036  

227,400  

Other costs, net (see Note 7)

( 490 )  

19,445  

85,547  

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

( 949 )  

( 5,159 )  

Other costs, net

Gain on sales of property and equipment

( 2,037 )  

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( 8,008 )  

Income before income taxes

$ 62,800  

$ 41,327  

$ 75,259  

Loss before income taxes

$ ( 35,241 )  

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

We deliver infrastructure solutions for public and private clients.

We deliver infrastructure solutions for public and private clients primarily in the United States.

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

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

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

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

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

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

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

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

As a result of these changes, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, 

Segment Reporting , our reportable segments, which are the same as our operating segments, were changed to two reportable segments:

Construction and Materials (see Note 19 of “Notes to the Condensed Consolidated Financial Statements”).

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

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

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

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Current Economic Environment and Outlook

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

At the federal level, the rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) has started with the appropriation of funds included in the 2022 federal spending bill passed by the Administration in March 2022. The five-year IIJA provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in incremental funding. We continue to believe that the increased multi-year spending commitment will improve the programming visibility for state and local governments and bring impact to project lettings starting in 2023 and then more meaningfully in 2024 and beyond. We anticipate the impact to our financial statements to gradually grow in 2023 and beyond as funds are allocated first to quicker turn projects and then later to more complex larger projects.

Funding for our public work projects, which accounts for approximately 65% of our work, is dependent on federal, state, regional and local revenues.

At the federal level, the rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) is ongoing with states receiving and allocating funds to projects. The five-year IIJA provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in incremental funding. In October 2022, the U.S.

Department of Transportation announced that it released $59.9 billion in Fiscal Year 2023 apportionments directly to all 50 states, all of which is available for states to authorize following the passing of the Fiscal Year 2023 omnibus appropriations bill in December 2022.

We continue to believe that the increased multi-year spending commitment will improve the programming visibility for state and local governments. We are seeing projects funded by the IIJA for bid and believe there will be an increase in project lettings throughout 2023 and then more meaningfully in 2024 and beyond.

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

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

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

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

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

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

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

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

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

Strategic Actions

This included:

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

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

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

The sale of Inliner was completed on March 16, 2022 for a purchase price of $159.7 million, subject to certain adjustments.

As a result of the sale, we received cash proceeds of $142.6 million based on preliminary post-closing adjustments and we recognized a gain of $6.2 million. 

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

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

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

Inliner had both Construction and Materials operations.

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

for further information.

Litigation Matter 

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

Our Committed and Awarded Projects (“CAP”) continues to be strong at $5.1 billion at the end of the first quarter of 2023. Our CAP is supported by a positive public funding environment and resilient private market which we believe will provide further opportunities in 2023 to continue to grow CAP.

Subsequent Event

On April 24, 2023, we completed the purchase of Coast Mountain Resources (2020) Ltd.

(“CMR”) for approximately $27 million, subject to certain adjustments.

CMR is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land. This acquisition is not expected to have a material impact on our results of operations.

Litigation Matter

As further discussed in Note 17 of “Notes to the Condensed Consolidated Financial Statements,”

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

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

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

Risk Factors in our Annual Report for additional information.

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

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

For additional information, see “Item 1A.

Risk Factors - In connection with acquisitions or divestitures, we may become subject to liabilities”

and “Item 1A.

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

in our Annual Report.

Results of Operations

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

The following table presents a financial summary for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

As Restated and Recast

(in thousands)

1 unchanged sentence

Selling, general and administrative expenses

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

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

Operating income

Total other (income) expense, net

Operating loss

Amount attributable to non-controlling interests

Net income attributable to Granite Construction Incorporated

Total Revenue by Segment  

Three Months Ended September 30,

Nine Months Ended September 30,

Net loss attributable to Granite Construction Incorporated

Total Revenue by Segment

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

Construction Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

Construction revenue for the three and nine months ended September 30, 2022 decreased by $76.2 million and $228.8 million, or 8.2% and 9.7%, respectively, when compared to 2021.

These decreases were primarily driven by the wind down of several large projects in the Central operating group, as well as the sale of Inliner in the first quarter of 2022.

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

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

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

Construction revenue for the three months ended March 31, 2023 decreased by $74.9 million, or 12.9%, respectively, when compared to 2022.

This decrease was primarily driven by the wind down of several large projects in the Central operating group, as well as the sale of Inliner in the first quarter of 2022.

Revenue from the Mountain operating group decreased $28.6 million for the three months ended March 31, 2023 primarily due to the sale of Inliner which contributed $33.2 million in 2022 prior to its sale.

This decrease was partially offset by increased revenue driven by higher beginning CAP levels.

California operating group revenue increased $2.6 million during the three months ended March 31, 2023 despite the unfavorable weather conditions during the quarter, partly due to emergency work resulting from the weather.

During both the three months ended March 31, 2023 and 2022, approximately 65% of revenue earned in the Construction segment was from the public sector.

Materials Revenue 

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

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

Materials revenue for the three months ended March 31, 2023 decreased by $19.0 million, or 25.1%, when compared to 2022 driven by lower sales volumes in both asphalt and aggregates resulting from inclement weather during the first quarter of 2023.

Asphalt and aggregate sales volumes were down 39.4% and 20.6%, respectively, with the greatest decreases in the California operating group. 

Committed and Awarded Projects

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

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

All CAP is in the Construction segment.

(dollars in thousands)

September 30, 2022

June 30, 2022

September 30, 2021

March 31, 2023

December 31, 2022

Unearned revenue

(dollars in thousands)

September 30, 2022

June 30, 2022

September 30, 2021

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

March 31, 2023

December 31, 2022

CAP of $5.1 billion at March 31, 2023 increased $618.8 million when compared to December 31, 2022. Significant additions to CAP during the three months ended March 31, 2023 included $132 million related to middle-mile broadband infrastructure projects in California, $126 million for the construction of buildings and infrastructure in Guam, an $85 million bridge project in Alaska, a $65 million highway project in Alaska, a $58 million highway project in Nevada, a $46 million reclamation project in Utah and a $29 million highway project in California.

Non-controlling partners’

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

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

share of CAP as of March 31, 2023 and December 31, 2022 was $109.6 million and $85.0 million, respectively.

At March 31, 2023, four contracts with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $103.0 million, or 2.0%, of total CAP.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

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Percent of total revenue

Construction gross profit for the three and nine months ended September 30, 2022 decreased by $0.9 million and $18.4, or 0.9% and 7.2%, respectively, when compared to 2021 primarily due to an increase in the negative net impact from revisions in estimates in our Central operating group (see Note 4 of "Notes to the Consolidated Financial Statements").

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

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

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

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

Construction gross profit for the three months ended March 31, 2023 decreased by $21.8 million, or 37.2%, when compared to 2022 primarily due to an increase in the negative net impact from revisions in estimates, mainly in our Central operating group.

For further discussion of projects with revisions in estimates which individually had an impact of $5.0 million or more on gross profit, see Note 4 of "Notes to the Condensed Consolidated Financial Statements." Increased depreciation expense during the three months ended March 31, 2023 also contributed to the decrease in gross profit.

As previously disclosed, our former Water and Mineral Services operating group (“WMS”) was classified as held for sale throughout the first quarter of 2022, and therefore no depreciation expense was recorded for WMS assets during that period.

Materials gross profit for the three months ended March 31, 2023 decreased by $6.0 million when compared to 2022.

The decrease in materials revenue was due to inclement weather in the first quarter of 2023 which lowered sales volumes and negatively impacted gross profit during the three months ended March 31, 2023.

Selling, General and Administrative Expenses

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

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

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

Selling expenses for the three months ended March 31, 2023 decreased by $1.1 million, or 5.4%, when compared to 2022, primarily due to the sale of Inliner on March 16, 2022.

General and Administrative Expenses

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

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

Other Costs, net

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Other costs, net

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

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

Gain on Sales of Property and Equipment, net

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Gain on sales of property and equipment, net

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

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

Total general and administrative expenses for the three months ended March 31, 2023 increased by $4.1 million, or 8.1%, primarily due to increases in stock-based compensation expense and increases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is mostly offset in Other (income) expense, net, through our own company-owned life insurance policy.

These increases were partially offset by the sale of Inliner on March 16, 2022.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

As Restated and Recast

(dollars in thousands)

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Effective tax rate

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

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

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

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

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

Our effective tax rate for the three months ended March 31, 2023 was higher than the prior year primarily due to non-deductible goodwill associated with the sale of Inliner in the first quarter of 2022.

Amount Attributable to Non-controlling Interests

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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

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

share of the net income or loss of our consolidated construction joint ventures. The amounts for the three months ended March 31, 2023 increased $4.4 million primarily due to the negative impact from revisions in estimates on one project (see Note 4 of “Notes to the Condensed Consolidated Financial Statements”).

Liquidity and Capital Resources

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

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

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

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

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

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

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

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

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

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

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

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

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

As of March 31, 2023, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting primarily of U.S. Government and agency obligations and corporate commercial paper. As of March 31, 2023, the total unused availability under our Credit Agreement was $269.5 million, resulting from $30.5 million in issued and outstanding letters of credit and $50.0 million drawn under the Credit Agreement.

See Note 14 of “Notes to the Condensed Consolidated Financial Statements”.

for further discussion regarding the Revolver.

As of March 31, 2023, we had $4.8 million of receivables and $28.8 million of contract retention receivable from Brightline Trains Florida LLC ("Brightline") (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”).

As of the date of this report, $1.9 million of the Brightline receivables have been collected and the remaining $2.9 million are past due.

Brightline has experienced delays in securing additional funding in the past, therefore the timing and probability of future payments may be affected and our liquidity impacted if Brightline faces additional funding difficulties.

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

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(in thousands)

September 30, 2022

March 31, 2023

December 31, 2022

September 30, 2021

Cash and cash equivalents excluding CCJVs

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

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

 •

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

 •

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

Granite’s portion of CCJV cash and cash equivalents was $67.1 million and $62.5 million as of March 31, 2023 and December 31, 2022, respectively. Excluded from the table above is $34.4 million and $40.4 million as of March 31, 2023 and December 31, 2022, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents.

Capital Expenditures

During the 

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

97.8 million, compared t

o $73.0 mi llion, during the

nine months ended September 30, 2021.

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

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

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

During the 

three months ended March 31, 2023, we had capital expenditures of $

40.5 million, compared t

o $31.3 mi llion, during the

three months ended March 31, 2022.

The increase year over year is primarily due to acquisitions of materials reserves in 2023.

We currently anticipate 2023 capital expenditures to be between approximately $

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120 million.

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Financing activities

Operating activities. 

Operating activities

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

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

Cash used in operating activities of $

14.6 million for the

nine months ended September 30, 2022 represents a $

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

Cash used in operating activities of $76.7 million for the three months ended March 31, 2023 represents a $26.5 million increase in cash used when compared to the same period of 2022.

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

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

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

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

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

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

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

Cash used in working capital increased by $33.6 million.

This was partially offset by a decrease in contributions, net of distributions, of $11.7 million to unconsolidated joint ventures and affiliates.

Investing activities

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

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

Cash used in investing activities of $24.3 million for the three months ended March 31, 2023 represents a $113.7 million increase in cash used when compared to the same period of 2022.

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

Financing activities

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

The change was primarily due to the prepayment of our term loan of $123.8 million in the first half of 2022 and repurchases of common stock (inclusive of our accelerated share repurchase) of $70.7 million, partially offset by $50.0 million drawn on our Revolver. The net debt paydown was completed at the time the Credit Agreement was entered (see Note 15 to “Notes to the Condensed Consolidated Financial Statements”

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

Cash provided by financing activities of $6.8 million for the three months ended March 31, 2023 represents an $89.7 million increase in cash provided by financing activities when compared to the same period of 2022.

The change was primarily due to a $62.8 million decrease in debt principal repayments and a $16.7 million decrease in repurchases of common stock.

Contributions from non-controlling partners, net of distributions, increased $9.9 million in the current year.

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

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

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

At March 31, 2023, approximatel y $2.6 billion of our $5.1 billion CAP was bonded.

Performance bonds do not have stated expiration dates;

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

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

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

As of March 31, 2023, the Consolidated Leverage Ratio was 1.4, which did not exceed the maximum of 3.25.

Our Consolidated Interest Coverage Ratio was 15.7, which exceeded the minimum of 3.00.

Share Repurchase 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”). 

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

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

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

This equated to approximately 1.32 million shares, which were immediately retired. On August 31, 2022, the reference period ended and on September 2, 2022 we received an additional 0.37 million shares, which were immediately retired.

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

There were no share repurchases in the three months ended March 31, 2023.

As of March 31, 2023, $231.5 million of the 2022 authorization remained available.

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

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

What changed 10-Q

Item 1. Financial Statements