GRANITE CONSTRUCTION INC 10-Q

Item 1. FINANCIAL STATEMENTS   GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands, except share and per share data)     March 31, 2023     December 31, 2022   ASSETS                 Current assets                 Cash and cash equivalents ($ 112,340 and $ 102,547 related to consolidated construction joint ventures (“CCJVs”))   $ 199,751     $ 293,991   Short-term marketable securities     39,754       39,374   Receivables, net ($ 25,488 and $ 39,281 related to CCJVs)     397,231       463,987   Contract assets ($ 86,027 and $ 80,306 related to CCJVs)     288,146       241,916   Inventories     97,893       86,809   Equity in construction joint ventures     182,063       183,808   Other current assets ($3,145 and $5,694 related to CCJVs)     41,397       37,411   Total current assets     1,246,235       1,347,296   Property and equipment, net ($ 7,540 and $ 7,834 related to CCJVs)     531,457       509,210   Long-term marketable securities     16,575       26,569   Investments in affiliates     83,335       80,725   Goodwill     73,703       73,703   Right of use assets     43,886       49,079   Deferred income taxes, net     22,080       22,208   Other noncurrent assets     60,116       59,143   Total assets   $ 2,077,387     $ 2,167,933                     LIABILITIES AND EQUITY                 Current liabilities                 Current maturities of long-term debt   $ 1,456     $ 1,447   Accounts payable ($ 43,009 and $ 57,534 related to CCJVs)     295,125       334,392   Contract liabilities ($ 46,943 and $ 62,675 related to CCJVs)     160,245       173,286   Accrued expenses and other current liabilities ($ 7,570 and $ 8,451 related to CCJVs)     266,541       288,469   Total current liabilities     723,367       797,594   Long-term debt     287,000       286,934   Long-term lease liabilities     27,934       32,170   Deferred income taxes, net     1,678       1,891   Other long-term liabilities     64,997       64,199   Commitments and contingencies (see Note 17)                     Equity                 Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding     —       —   Common stock, $ 0.01 par value, authorized 150,000,000 shares; issued and outstanding: 43,880,224 shares as of March 31, 2023 and 43,743,907 shares as of December 31, 2022     439       437   Additional paid-in capital     471,782       470,407   Accumulated other comprehensive income     653       788   Retained earnings     452,583       481,384   Total Granite Construction Incorporated shareholders’ equity     925,457       953,016   Non-controlling interests     46,954       32,129   Total equity     972,411       985,145   Total liabilities and equity   $ 2,077,387     $ 2,167,933   The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data)         As Restated and Recast Three Months Ended March 31,   2023     2022   Revenue                 Construction   $ 503,416     $ 578,266   Materials     56,652       75,620   Total revenue     560,068       653,886   Cost of revenue                 Construction     466,711       519,787   Materials     60,998       74,007   Total cost of revenue     527,709       593,794   Gross profit     32,359       60,092   Selling, general and administrative expenses     73,122       70,120   Other costs, net     4,523       6,279   Gain on sales of property and equipment, net     ( 2,037 )     ( 598 ) Operating loss     ( 43,249 )     ( 15,709 ) Other (income) expense                 Interest income     ( 3,762 )     ( 570 ) Interest expense     2,891       3,585   Equity in income of affiliates, net     ( 5,187 )     ( 1,289 ) Other (income) expense, net     ( 1,950 )     1,308   Total other (income) expense, net     ( 8,008 )     3,034   Loss before income taxes     ( 35,241 )     ( 18,743 ) Provision for (benefit from) income taxes     ( 9,469 )     6,352   Net loss     ( 25,772 )     ( 25,095 ) Amount attributable to non-controlling interests     2,749       ( 1,638 ) Net loss attributable to Granite Construction Incorporated   $ ( 23,023 )   $ ( 26,733 )                   Net loss per share attributable to common shareholders (see Note 15):                 Basic   $ ( 0.53 )   $ ( 0.58 ) Diluted   $ ( 0.53 )   $ ( 0.58 ) Weighted average shares outstanding:                 Basic     43,764       45,730   Diluted     43,764       45,730   The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited - in thousands)         As Restated   Three Months Ended March 31,   2023     2022   Net loss   $ ( 25,772 )   $ ( 25,095 ) Other comprehensive income (loss), net of tax:                 Net unrealized gain (loss) on cash flow hedges, net of tax   $ ( 192 )   $ 2,436   Less: reclassification for net gains included in interest expense, net of tax     —       1,760   Net change   $ ( 192 )   $ 4,196   Foreign currency translation adjustments, net     57       736   Other comprehensive income (loss), net of tax   $ ( 135 )   $ 4,932   Comprehensive loss, net of tax   $ ( 25,907 )   $ ( 20,163 ) Non-controlling interests in comprehensive income, net of tax     2,749       ( 1,638 ) Comprehensive loss attributable to Granite Construction Incorporated, net of tax   $ ( 23,158 )   $ ( 21,801 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited - in thousands, except share data)     Outstanding Shares     Common Stock     Additional Paid-In Capital     Accumulated Other Comprehensive Income (Loss)     Retained Earnings     Total Granite Shareholders’ Equity     Non-controlling Interests     Total Equity   Balances at December 31, 2022     43,743,907     $ 437     $ 470,407     $ 788     $ 481,384     $ 953,016     $ 32,129     $ 985,145   Net loss     —       —       —       —       ( 23,023 )     ( 23,023 )     ( 2,749 )     ( 25,772 ) Other comprehensive loss     —       —       —       ( 135 )     —       ( 135 )     —       ( 135 ) Repurchases of common stock (1)     ( 87,260 )     —       ( 3,523 )     —       —       ( 3,523 )     —       ( 3,523 ) RSUs vested     223,967       2       ( 2 )     —       —       —       —       —   Dividends on common stock ($ 0.13 per share)     —       —       74       —       ( 5,778 )     ( 5,704 )     —       ( 5,704 ) Transactions with non-controlling interests     —       —       —       —       —       —       17,574       17,574   Stock-based compensation expense and other     ( 390 )     —       4,826       —       —       4,826       —       4,826   Balances at March 31, 2023     43,880,224     $ 439     $ 471,782     $ 653     $ 452,583     $ 925,457     $ 46,954     $ 972,411                                                                     Balances at December 31, 2021     45,840,260     $ 458     $ 559,752     $ ( 3,359 )   $ 410,831     $ 967,682     $ 27,881     $ 995,563   Cumulative effect of newly adopted accounting standard     —       —       ( 26,961 )     —       10,543       ( 16,418 )     —       ( 16,418 ) Balances at January 1, 2022     45,840,260       458       532,791       ( 3,359 )     421,374       951,264       27,881       979,145   Net income (loss) (as restated)     —       —       —       —       ( 26,733 )     ( 26,733 )     1,638       ( 25,095 ) Other comprehensive income     —       —       —       4,932       —       4,932       —       4,932   Repurchases of common stock (1)     ( 665,880 )     ( 6 )     ( 20,206 )     —       —       ( 20,212 )     —       ( 20,212 ) RSUs vested     190,170       2       ( 2 )     —       —       —       —       —   Dividends on common stock ($ 0.13 per share)     —       —       69       —       ( 5,885 )     ( 5,816 )     —       ( 5,816 ) Transactions with non-controlling interests     —       —       —       —       —       —       6,325       6,325   Stock-based compensation expense and other     ( 413 )     —       2,610       —       —       2,610       —       2,610   Balances at March 31, 2022 (as restated)     45,364,137     $ 454     $ 515,262     $ 1,573     $ 388,756     $ 906,045     $ 35,844     $ 941,889   (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. 7 Table of Contents     GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ( Unaudited - in thousands )         As Restated   Three Months Ended March 31,     2023       2022   Operating activities                 Net loss   $ ( 25,772 )   $ ( 25,095 ) Adjustments to reconcile net loss to net cash used in operating activities:                 Depreciation, depletion and amortization     19,733       16,737   Amortization related to long-term debt     472       652   Gain on sale of business     —       ( 3,278 ) Gain on sales of property and equipment, net     ( 2,037 )     ( 598 ) Deferred income taxes     —       2,545   Stock-based compensation     4,828       2,614   Equity in net (income) loss from unconsolidated joint ventures     ( 911 )     3,627   Net income from affiliates     ( 5,187 )     ( 1,289 ) Other non-cash adjustments     ( 151 )     ( 299 ) Changes in assets and liabilities:                 Receivables     66,800       85,957   Contract assets, net     ( 59,307 )     ( 69,819 ) Inventories     ( 11,083 )     ( 13,805 ) Contributions to unconsolidated construction joint ventures     ( 3,350 )     ( 12,840 ) Distributions from unconsolidated construction joint ventures and affiliates     2,478       250   Other assets, net     ( 5,724 )     9,652   Accounts payable     ( 42,955 )     ( 44,028 ) Accrued expenses and other liabilities, net     ( 14,522 )     ( 1,163 ) Net cash used in operating activities   $ ( 76,688 )   $ ( 50,180 ) Investing activities                 Purchases of marketable securities     —       ( 19,940 ) Maturities of marketable securities     10,000       —   Purchases of property and equipment     ( 40,461 )     ( 31,269 ) Proceeds from sales of property and equipment     4,518       2,483   Proceeds from company owned life insurance     1,545       —   Proceeds from the sale of business     —       142,571   Issuance of notes receivable     —       ( 4,560 ) Collection of notes receivable     62       111   Net cash provided by (used in) investing activities   $ ( 24,336 )   $ 89,396   Financing activities                 Debt principal repayments     ( 256 )     ( 63,059 ) Cash dividends paid     ( 5,687 )     ( 5,959 ) Repurchases of common stock     ( 3,523 )     ( 20,212 ) Contributions from non-controlling partners     17,600       6,325   Distributions to non-controlling partners     ( 1,350 )     —   Other financing activities, net     —       1   Net cash provided by (used in) financing activities   $ 6,784     $ ( 82,904 ) Net decrease in cash, cash equivalents and restricted cash     ( 94,240 )     ( 43,688 ) Cash, cash equivalents and $ 0 and $ 1,512 in restricted cash at beginning of period     293,991       413,655   Cash, cash equivalents and $ 0 and $ 1,512 in restricted cash at end of period   $ 199,751     $ 369,967                     Supplementary Information                 Right of use assets obtained in exchange for lease obligations   $ 3,388     $ 3,502   Cash paid during the period for:                 Operating lease liabilities   $ 5,824     $ 5,862   Interest   $ 1,012     $ 2,090   Income taxes   $ 166     $ 2   Other non-cash operating activities:                 Performance guarantees   $ ( 6,513 )   $ —   Non-cash investing and financing activities:                 RSUs issued, net of forfeitures   $ 9,552     $ 6,606   Dividends declared but not paid   $ 5,704     $ 5,897   Contributions from non-controlling partners   $ 1,324     $ —   Accrued equipment purchases   $ 3,693     $ 5,511   The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)   1.   General Basis of Presentation:  The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), are unaudited and should be read in conjunction with our Annual Report on Form 10 -K for the year ended  December 31, 2022  (“Annual Report”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at  March 31, 2023  and  2022  and the results of our operations and cash flows for the periods presented. The  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. GAAP. 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.   2.   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. 9 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   3.  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  2022. 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  first   three  quarters of  2022,  including certain errors (primarily in revenue and cost of revenue, including the associated tax impact) that had previously been adjusted for as out of period corrections in the 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. This included: our trenchless and pipe rehabilitation services business (“Inliner”); our water supply, treatment, delivery and maintenance business (“Water Resources”); and our mineral exploration drilling business (“Mineral Services”). During the first quarter of 2022, we completed the sale of Inliner. 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): 10 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) Table of Contents   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   Revenue                                         Construction   $ 474,935     $ 1,893     $ 476,828     $ 101,438     $ 578,266   Materials     72,651       -       72,651       2,969       75,620   Total revenue     547,586       1,893       549,479       104,407       653,886   Cost of revenue                                         Construction     426,743       6,019       432,762       87,025       519,787   Materials     71,068       -       71,068       2,939       74,007   Total cost of revenue     497,811       6,019       503,830       89,964       593,794   Gross profit     49,775       ( 4,126 )     45,649       14,443       60,092   Selling, general and administrative expenses     58,501       -       58,501       11,619       70,120   Other costs, net     8,214       -       8,214       ( 1,935 )     6,279   Gain on sales of property and equipment, net     ( 332 )     -       ( 332 )     ( 266 )     ( 598 ) Operating loss     ( 16,608 )     ( 4,126 )     ( 20,734 )     5,025       ( 15,709 ) Other (income) expense                                         Interest income     ( 623 )     -       ( 623 )     53       ( 570 ) Interest expense     3,575       -       3,575       10       3,585   Equity in income (loss) of affiliates     306       -       306       ( 1,595 )     ( 1,289 ) Other income, net     1,382       -       1,382       ( 74 )     1,308   Total other expense, net     4,640       -       4,640       ( 1,606 )     3,034   Loss from continuing operations before income taxes     ( 21,248 )     ( 4,126 )     ( 25,374 )     6,631       ( 18,743 ) Provision for (benefit from) income taxes on continuing operations     ( 5,331 )     ( 958 )     ( 6,289 )     12,641       6,352   Net loss from continuing operations     ( 15,917 )     ( 3,168 )     ( 19,085 )     ( 6,010 )     ( 25,095 ) Net Income (loss) from discontinued operations     6,096       ( 12,106 )     ( 6,010 )     6,010       -   Net loss     ( 9,821 )     ( 15,274 )     ( 25,095 )     -       ( 25,095 ) Amount attributable to non-controlling interests     ( 3,118 )     1,480       ( 1,638 )     -       ( 1,638 ) Net loss attributable to Granite Construction Incorporated from continuing operations     ( 19,035 )     ( 1,688 )     ( 20,723 )     ( 6,010 )     ( 26,733 ) Net income (loss) attributable to Granite Construction Incorporated from discontinued operations     6,096       ( 12,106 )     ( 6,010 )     6,010       -   Net loss attributable to Granite Construction Incorporated   $ ( 12,939 )   $ ( 13,794 )   $ ( 26,733 )   $ -     $ ( 26,733 )                                           Net income (loss) per share attributable to common shareholders                                         Basic continuing operations per share   $ ( 0.42 )   $ ( 0.03 )   $ ( 0.45 )   $ ( 0.13 )   $ ( 0.58 ) Basic discontinued operations per share     0.13       ( 0.26 )     ( 0.13 )     0.13       -   Basic loss per share   $ ( 0.29 )   $ ( 0.29 )   $ ( 0.58 )   $ -     $ ( 0.58 )                                           Diluted continuing operations per share   $ ( 0.42 )   $ ( 0.03 )   $ ( 0.45 )   $ ( 0.13 )   $ ( 0.58 ) Diluted discontinued operations per share     0.13       ( 0.26 )     ( 0.13 )     0.13       -   Diluted loss per share   $ ( 0.29 )   $ ( 0.29 )   $ ( 0.58 )   $ -     $ ( 0.58 ) Weighted average shares outstanding:                                         Basic     45,730       -       45,730       -       45,730   Diluted     45,730       -       45,730       -       45,730     11 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three months ended March 31, 2022   As Previously Reported     Restatement Impacts     As Restated   Operating activities                         Net loss   $ ( 9,821 )   $ ( 15,274 )   $ ( 25,095 ) Adjustments to reconcile net loss to net cash used in operating activities:                         Depreciation, depletion and amortization     16,737       -       16,737   Amortization related to long-term debt     652       -       652   Gain on sale of business     ( 6,234 )     2,956       ( 3,278 ) Gain on sales of property and equipment, net     ( 598 )     -       ( 598 ) Deferred income taxes     2,545       -       2,545   Stock-based compensation     2,614       -       2,614   Equity in net loss from unconsolidated joint ventures     3,627       -       3,627   Net income from affiliates     ( 1,289 )     -       ( 1,289 ) Other non-cash adjustments     ( 299 )     -       ( 299 ) Changes in assets and liabilities:                         Receivables     85,957       -       85,957   Contract assets, net     ( 72,632 )     2,813       ( 69,819 ) Inventories     ( 13,805 )     -       ( 13,805 ) Contributions to unconsolidated construction joint ventures     ( 12,840 )     -       ( 12,840 ) Distributions from unconsolidated construction joint ventures and affiliates     250       -       250   Other assets, net     1,264       8,388       9,652   Accounts payable     ( 44,028 )     -       ( 44,028 ) Accrued expenses and other liabilities, net     ( 2,280 )     1,117       ( 1,163 ) Net cash used in operating activities   $ ( 50,180 )   $ -     $ ( 50,180 )   12 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   4.   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 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,   2023   Number of projects with downward estimate changes     2   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   $ 5.7   Decrease to net income/increase to net loss attributable to Granite Construction Incorporated   $ 7.5   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.  13 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   5.   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, 2023   Construction     Materials     Total   California   $ 148,947     $ 30,138     $ 179,085   Central     171,002       11,556       182,558   Mountain     183,467       14,958       198,425   Total   $ 503,416     $ 56,652     $ 560,068     2022 (As Restated and Recast)   Construction     Materials     Total   California   $ 146,309     $ 45,687     $ 191,996   Central     219,894       10,362       230,256   Mountain     212,063       19,571       231,634   Total   $ 578,266     $ 75,620     $ 653,886       6.   Unearned Revenue The following table presents our unearned revenue as of the respective periods: (in thousands)   March 31, 2023     December 31, 2022   California   $ 1,011,489     $ 945,971   Central     1,437,759       1,444,983   Mountain     714,320       486,524   Total   $ 3,163,568     $ 2,877,478   All unearned revenue is in the Construction segment. Approximately $ 2.1  billion of the  March 31, 2023  u nearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter. 14 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   7.   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 $ 44.2  million and $ 35.2 million during the  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. As of  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)   March 31, 2023     December 31, 2022   Costs in excess of billings and estimated earnings   $ 125,918     $ 80,357   Contract retention     162,228       161,559   Total contract assets   $ 288,146     $ 241,916   As of  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. The majority of the contract retention balance is expected to be collected within one year. As work is performed, revenue is recognized and the corresponding contract liabilities are reduced. We recognized revenue of $ 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. The components of the contract liability balances as of the respective dates were as follows: (in thousands)   March 31, 2023     December 31, 2022   Billings in excess of costs and estimated earnings, net of retention   $ 141,702     $ 152,294   Provisions for losses     18,543       20,992   Total contract liabilities   $ 160,245     $ 173,286     8.  Receivables, net  Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest.   The following table presents major categories of receivables: (in thousands)   March 31, 2023     December 31, 2022   Contracts completed and in progress:                 Billed   $ 190,635     $ 220,809   Unbilled     108,931       120,348   Total contracts completed and in progress     299,566       341,157   Materials sales     31,955       52,182   Other     66,807       71,790   Total gross receivables     398,328       465,129   Less: allowance for credit losses     1,097       1,142   Total net receivables   $ 397,231     $ 463,987   Included in other receivables at  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 . 15 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   9.   Fair Value Measurement The following tables summarize significant assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands):     Fair Value Measurement at Reporting Date Using   March 31, 2023   Level 1     Level 2     Level 3     Total   Cash equivalents                                 Money market funds   $ 42,821     $ —     $ —     $ 42,821   Total assets   $ 42,821     $ —     $ —     $ 42,821   Accrued and other current liabilities                                 Diesel collars   $ —     $ 934     $ —     $ 934   Commodity swaps     —       138       —       138   Total liabilities   $ —     $ 1,072     $ —     $ 1,072     December 31, 2022                                 Cash equivalents                                 Money market funds   $ 99,806     $ —     $ —     $ 99,806   Other current assets                                 Commodity swaps     —       121       —       121   Total assets   $ 99,806     $ 121     $ —     $ 99,927       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. 16 Table of Contents   GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) Other Assets and Liabilities The carrying values and estimated fair values of financial instruments that are not required to be recorded at fair value in the condensed consolidated balance sheets were as follows:       March 31, 2023     December 31, 2022   (in thousands) Fair Value Hierarchy   Carrying Value     Fair Value     Carrying Value     Fair Value   Assets:                                   Held-to-maturity marketable securities (1) Level 1   $ 56,329     $ 55,272     $ 65,943     $ 64,584   Liabilities (including current maturities):                                   2.75 % Convertible Notes (2) Level 2   $ 230,000     $ 311,880     $ 230,000     $ 281,365   Credit Agreement - revolver (2) Level 3   $ 50,000     $ 49,110     $ 50,000     $ 49,536     ( 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.   10.   Construction Joint Ventures We participate in various construction joint ventures. We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary. We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during the  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). At  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’ share. We are not able to estimate amounts that may be required beyond the current remaining forecasted cost of the work to be performed. These forecasted costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees. See Note 13  for disclosure of the performance guarantee amounts recorded in the condensed consolidated balance sheets. Consolidated Construction Joint Ventures (“CCJVs”) At  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  50.0 % and  70.0 %. During the  three months ended March 31, 2023  and 2022 , total revenue from CCJVs was $ 61.3  million and $ 104.3  million, respectively. During the  three months ended March 31, 2023  and 2022 , CCJVs used $ 24.8  million and $ 7.6  million of operating cash flows, respectively.  17 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) Unconsolidated Construction Joint Ventures As of  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 %. As of  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)   March 31, 2023     December 31, 2022   Assets                 Cash, cash equivalents and marketable securities   $ 110,403     $ 130,635   Other current assets (1)     689,945       681,221   Noncurrent assets     71,603       76,204   Less partners’ interest     596,487       604,741   Granite’s interest (1),(2)   $ 275,464     $ 283,319   Liabilities                 Current liabilities   $ 236,063     $ 244,411   Less partners’ interest and adjustments (3)     128,166       130,911   Granite’s interest   $ 107,897     $ 113,500   Equity in construction joint ventures (4)   $ 167,567     $ 169,819   ( 1 ) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of  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 $ 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)     2023       2022   Revenue                 Total   $ 38,174     $ 161,139   Less partners’ interest and adjustments (1)     23,329       111,484   Granite’s interest   $ 14,845     $ 49,655   Cost of revenue                 Total   $ 44,371     $ 157,921   Less partners’ interest and adjustments (1)     30,404       104,652   Granite’s interest     13,967       53,269   Granite’s interest in gross profit (loss)   $ 878     $ ( 3,614 ) Net Income (Loss)                 Total   $ ( 5,654 )   $ 3,167   Less partners’ interest and adjustments (1)     ( 6,565 )     6,794   Granite’s interest in net income (loss) (2)   $ 911     $ ( 3,627 )   ( 1 ) Partners’ interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast and/or actual differences. ( 2 ) These joint venture net income/(loss) amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes. 18 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   11.   Investments in Affiliates Our investments in affiliates balance consists of equity method investments in the following types of entities: (in thousands)   March 31, 2023     December 31, 2022   Foreign   $ 61,919     $ 58,579   Real estate     8,022       8,517   Asphalt terminal     13,394       13,629   Total investments in affiliates   $ 83,335     $ 80,725   The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis: (in thousands)   March 31, 2023     December 31, 2022   Current assets   $ 197,485     $ 194,210   Noncurrent assets     176,039       172,560   Total assets   $ 373,524     $ 366,770   Current liabilities   $ 102,546     $ 106,780   Long-term liabilities (1)     62,881       59,356   Total liabilities   $ 165,427     $ 166,136   Net assets   $ 208,097     $ 200,634   Granite’s share of net assets   $ 83,335     $ 80,725   ( 1 ) This balance is primarily related to local bank debt for equipment purchases and debt associated with our real estate investments. 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  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  25 %. We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from 25 % to 50 % as of March 31, 2023 . 19 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   12.   Property and Equipment, net Balances of major classes of assets and total accumulated depreciation and depletion are included in property and equipment, net in the condensed consolidated balance sheets as follows: (in thousands)   March 31, 2023     December 31, 2022   Equipment and vehicles   $ 1,016,327     $ 994,602   Quarry property     226,682       219,843   Land and land improvements     107,816       105,733   Buildings and leasehold improvements     105,190       103,658   Office furniture and equipment     83,860       82,465   Property and equipment     1,539,875       1,506,301   Less: accumulated depreciation and depletion     1,008,418       997,091   Property and equipment, net   $ 531,457     $ 509,210         13.  Accrued Expenses and Other Current Liabilities (in thousands)     March 31, 2023       December 31, 2022   Accrued insurance   $ 84,156     $ 78,427   Deficits in unconsolidated construction joint ventures     14,496       13,989   Payroll and related employee benefits     63,072       80,910   Performance guarantees     58,190       64,703   Short-term lease liabilities     17,552       18,662   Other     29,075       31,778   Total   $ 266,541     $ 288,469   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. 20 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   14.   Long-Term Debt and Credit Arrangements (in thousands)   March 31, 2023     December 31, 2022   2.75 % Convertible Notes   $ 230,000     $ 230,000   Credit Agreement - revolver     50,000       50,000   Other, net of debt issuance costs     8,456       8,381   Total debt   $ 288,456     $ 288,381   Less current maturities     1,456       1,447   Total long-term debt   $ 287,000     $ 286,934   I n June 2022, we entered into the Credit Agreement which matures on 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 consolidated EBITDA, subject to lender approval. The Credit Agreement includes a $ 150.0 million sublimit for letters of credit ($ 75.0 million for financial letters of credit) and a $ 20.0 million sublimit for swingline loans. As of  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  March 31, 2023  for SOFR and base rate loans were  6.41 %  and 8.50 % , respectively. 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  1.00.   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 was above the minimum of 3.00 . As of March 31, 2023 and December 31, 2022,  the  2.75%  Convertible Notes comprised our only convertible debt instrument. The  2.75%  Convertible Notes were issued in  November 2019  in an aggregate principal amount of $ 230.0  million, with an interest rate of  2.75 % and a maturity date of  November 1, 2024,  unless earlier converted, redeemed or repurchased. The  2.75%  Convertible Notes are convertible at the option of the holders prior to  May 1, 2024  only during certain periods and upon the occurrence of certain events. After  May 1, 2024,  the  2.75%  Convertible Notes will be convertible at the option of the holders at any time until the  second  scheduled trading day immediately preceding the maturity date. The conversion rate applicable to the  2.75%  Convertible Notes is  31.7776  shares of Granite common stock per  $1,000  principal amount of  2.75%  Convertible Notes, which is equivalent to a conversion price of approximately $ 31.47  per share of Granite common stock. Upon conversion, we will pay or deliver shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election. In addition, upon the occurrence of a “make-whole fundamental change” as defined in the indenture governing the  2.75%  Convertible Notes, (the “Indenture”) we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its  2.75%  Convertible Notes in connection with such a make-whole fundamental change. We have the option to redeem for cash all or any portion of the  2.75%  Convertible Notes if the last reported sale price of our common stock is equal to or greater than  130 % of the conversion price for a specified period of time. Upon the occurrence of a “fundamental change” as defined in the Indenture, holders  may  require us to repurchase for cash all or any portion of their  2.75%  Convertible Notes at a price equal to  100 % of the principal amount plus any accrued and unpaid interest. In addition, as described in the Indenture, certain events of default including, but  not  limited to, bankruptcy, insolvency or reorganization,  may  result in the  2.75%  Convertible Notes becoming due and payable immediately. During both the three months ended March 31, 2023  and  2022 , we recorded $ 0.3 million  of amortization related to debt issuance costs. 21 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   15.  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,               As Restated   (in thousands, except per share amounts)   2023     2022   Numerator (basic and diluted)                 Net loss attributable to common shareholders   $ ( 23,023 )   $ ( 26,733 ) Denominator                 Weighted average common shares outstanding, basic     43,764       45,730   Weighted average common shares outstanding, diluted     43,764       45,730                     Net loss per share, basic   $ ( 0.53 )   $ ( 0.58 ) Net loss per share, diluted   $ ( 0.53 )   $ ( 0.58 ) 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.   16.  Income Taxes The following table presents the provision for (benefit from) income taxes for the respective periods:     Three Months Ended March 31,                 As Restated and Recast   (dollars in thousands)   2023     2022   Provision for (benefit from) income taxes   $ ( 9,469 )   $ 6,352   Effective tax rate     26.9 %     ( 33.9 %) 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. 22 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   17.  Contingencies - Legal Proceedings Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. It is possible that future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record new accruals that we did  not  originally believe to be probable or that could  not  be reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period. In addition, disclosure is required when a material loss is probable but  not  reasonably estimable, a material loss is reasonably possible but  not  probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded. The total liabilities recorded as of  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 In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which often cannot be predicted with certainty. For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note  1 of our Annual Report. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty. Some of the matters in which we or our joint ventures and affiliates are involved  may  involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are  not  probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings  may  be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed. 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  2014.  Certain anomalies were discovered in  March 2014  in the foundation’s structural concrete, which were remediated by the general contractor during  2015.  Layne assigned any insurance claims it  may  have had under the project’s builder’s risk insurance policy to the general contractor. During  2014,  the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages. The claim was denied by the builder’s risk insurers. The project owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy, which proceeding was then transferred by agreement to arbitration. On  July 20, 2021,  we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures undertaken by the general contractor of the Salesforce Tower and related damages. On  February 3, 2022 ,  a lawsuit titled  Steadfast Insurance Company ( “ Steadfast ” ), a subrogee of Clark/Hathaway Dinwiddie, a Joint Venture ( “ CHDJV ” ) v. Layne Christensen Company ( “ Layne ” ) , was filed in the Superior Court of the State of California, County of San Francisco, seeking damages of approximately $ 70  million for costs incurred by Steadfast on behalf of CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. On  February 4, 2022,  CHDJV submitted an arbitration demand with the American Arbitration Association against Granite Construction Incorporated seeking to recover approximately $ 30  million for costs incurred by CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. CHDJV subsequently dismissed Granite and added Layne as a respondent to the arbitration. On  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. We do  not  believe it is probable this matter will result in a material loss, however, if we are unsuccessful, we believe the range of reasonably possible loss upon final resolution of this matter could be up to approximately $ 100  million. 23 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited)   18.   Reportable Segment Information 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. Summarized segment information is as follows (in thousands): Three months ended March 31,     Construction       Materials       Total   2023                         Total revenue from reportable segments   $ 503,416     $ 71,920     $ 575,336   Elimination of intersegment revenue     —       ( 15,268 )     ( 15,268 ) Revenue from external customers   $ 503,416     $ 56,652     $ 560,068   Gross profit (loss)   $ 36,705     $ ( 4,346 )   $ 32,359   Depreciation, depletion and amortization   $ 9,755     $ 6,122     $ 15,877   Segment assets as of period end   $ 430,045     $ 390,741     $ 820,786     2022 (As Restated and Recast)                         Total revenue from reportable segments   $ 578,266     $ 95,304     $ 673,570   Elimination of intersegment revenue     —       ( 19,684 )     ( 19,684 ) Revenue from external customers   $ 578,266     $ 75,620     $ 653,886   Gross profit   $ 58,479     $ 1,613     $ 60,092   Depreciation, depletion and amortization   $ 7,794     $ 6,333     $ 14,127   Segment assets as of period end   $ 363,029     $ 354,420     $ 717,449   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,   2023     2022   Total gross profit from reportable segments   $ 32,359     $ 60,092   Selling, general and administrative expenses     73,122       70,120   Other costs, net     4,523       6,279   Gain on sales of property and equipment     ( 2,037 )     ( 598 ) Total other (income) expense, net     ( 8,008 )     3,034   Loss before income taxes   $ ( 35,241 )   $ ( 18,743 )   24 Table of Contents     Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Annual Report") and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein. Forward-Looking Disclosure From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results and strategic actions, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,” “outlook,” “assumes,” “believes,” “expects,” “estimates,” “anticipates,” “intends,” “plans,” “appears,” “may,” “will,” “should,” “could,” “would,” “continue,” and the negatives thereof or other comparable terminology or by the context in which they are made. In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results, and strategic actions. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under “Item 1A. Risk Factors.” Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason . Overview 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 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. economy including access to resources (labor, supplies and subcontractors); (ii) federal, state and local public funding levels; (iii) population growth resulting in public and private development; (iv) the need to build, replace or repair aging infrastructure; and (v) the pricing of certain commodity related products. Changes in these drivers can either reduce our revenues and/or gross profit margins or provide opportunities for revenue growth and gross profit margin improvement. Current Economic Environment and Outlook 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. While each market is unique, we see a strong funding environment at the state and local levels currently and we expect that environment to improve with the impact of the IIJA. In California, our top revenue-generating state, a significant part of the state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, which is a 10-year, $54.2 billion program without any sunset provisions. 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 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 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. 25 Table of Contents Results of Operations Our operations are typically affected more by inclement weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year. The following table presents a financial summary for the three months ended March 31, 2023 and 2022:     Three Months Ended March 31,             As Restated and Recast   (in thousands)     2023       2022   Total revenue   $ 560,068     $ 653,886   Gross profit   $ 32,359     $ 60,092   Selling, general and administrative expenses   $ 73,122     $ 70,120   Operating loss   $ (43,249 )   $ (15,709 ) Amount attributable to non-controlling interests   $ 2,749     $ (1,638 ) Net loss attributable to Granite Construction Incorporated   $ (23,023 )   $ (26,733 )   Revenue Total Revenue by Segment     Three Months Ended March 31,                         As Restated and Recast (dollars in thousands)   2023     2022   Construction   $ 503,416       89.9 %   $ 578,266       88.4 % Materials     56,652       10.1       75,620       11.6   Total   $ 560,068       100.0 %   $ 653,886       100.0 % Construction Revenue     Three Months Ended March 31,                         As Restated and Recast (dollars in thousands)   2023     2022   California   $ 148,947       29.6 %   $ 146,309       25.3 % Central     171,002       34.0       219,894       38.0   Mountain     183,467       36.4       212,063       36.7   Total   $ 503,416       100.0 %   $ 578,266       100.0 % 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 March 31,                         As Recast (dollars in thousands)   2023     2022   California   $ 30,138       53.2 %   $ 45,687       60.4 % Central     11,556       20.4       10,362       13.7   Mountain     14,958       26.4       19,571       25.9   Total   $ 56,652       100.0 %   $ 75,620       100.0 % 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.  26 Table of Contents     Committed and Awarded Projects CAP consists of two components: (1) unearned revenue and (2) other awards. Unearned revenue includes the revenue we expect to record in the future on executed contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. We generally include a project in unearned revenue at the time a contract is awarded, the contract has been executed and to the extent we believe funding is probable. Contract options and task orders are included in unearned revenue when exercised or issued, respectively. Certain government contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed. Other awards include the general construction portion of construction management/general contractor (“CM/GC”) contracts and awarded contracts with unexercised contract options or unissued task orders. The general construction portion of CM/GC contracts are included in other awards to the extent contract execution and funding is probable. Contracts with unexercised contract options or unissued task orders are included in other awards to the extent option exercise or task order issuance is probable. All CAP is in the Construction segment. (dollars in thousands)   March 31, 2023     December 31, 2022   Unearned revenue   $ 3,163,568       62.0 %   $ 2,877,478       64.2 % Other awards     1,940,385       38.0       1,607,661       35.8   Total   $ 5,103,953       100.0 %   $ 4,485,139       100.0 %   (dollars in thousands)   March 31, 2023     December 31, 2022   California   $ 1,913,634       37.5 %   $ 1,747,163       39.0 % Central     1,750,375       34.3       1,661,613       37.0   Mountain     1,439,944       28.2       1,076,363       24.0   Total   $ 5,103,953       100.0 %   $ 4,485,139       100.0 % 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 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.   Gross Profit The following table presents gross profit by reportable segment for the respective periods:     Three Months Ended March 31,               As Restated and Recast   (dollars in thousands)   2023     2022   Construction   $ 36,705     $ 58,479   Percent of segment revenue     7.3 %     10.1 % Materials     (4,346 )     1,613   Percent of segment revenue     (7.7 )%     2.1 % Total gross profit   $ 32,359     $ 60,092   Percent of total revenue     5.8 %     9.2 % 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. 27 Table of Contents   Selling, General and Administrative Expenses The following table presents the components of selling, general and administrative expenses for the respective periods:     Three Months Ended March 31,                 As Recast   (dollars in thousands)   2023     2022   Selling                 Salaries and related expenses   $ 16,362     $ 17,314   Restricted stock unit amortization     829       643   Other selling expenses     1,439       1,743   Total selling     18,630       19,700   General and administrative                 Salaries and related expenses     26,365       29,647   Restricted stock unit amortization     4,713       1,941   Other general and administrative expenses     23,414       18,832   Total general and administrative     54,492       50,420   Total selling, general and administrative   $ 73,122     $ 70,120   Percent of revenue     13.1 %     10.7 % Selling Expenses Selling expenses include the costs for estimating and bidding including offsetting customer reimbursements for portions of our selling/bid submission expenses (i.e., stipends), business development and materials facility permits. Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses. Selling expenses for the three months ended March 31, 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 General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions. Other general and administrative expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, incentive compensation, changes in the fair market value of our Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses. Total general and administrative expenses for the three months ended March 31, 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. 28 Table of Contents   Income Taxes The following table presents the provision for (benefit from) income taxes for the respective periods:     Three Months Ended March 31,                 As Restated and Recast   (dollars in thousands)   2023     2022   Provision for (benefit from) income taxes   $ (9,469 )   $ 6,352   Effective tax rate     26.9 %     (33.9 %) 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 March 31,                 As Restated   (in thousands)   2023     2022   Amount attributable to non-controlling interests   $ 2,749     $ (1,638 ) The amount attributable to non-controlling interests represents the non-controlling owners’ 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”). 29 Table of Contents 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 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. We may also from time to time prepay or repurchase outstanding indebtedness, repurchase shares of our common stock or acquire assets or businesses that are complementary to our operations. We believe our primary sources of liquidity will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, cash dividend payments and other liquidity requirements associated with our existing operations for the next twelve months. We also believe our primary sources of liquidity, access to debt and equity capital markets and cash expected to be generated from operations will be sufficient to meet our long-term requirements and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us. As of March 31, 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”. 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”). The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, as of the respective dates: (in thousands)   March 31, 2023     December 31, 2022   Cash and cash equivalents excluding CCJVs   $ 87,411     $ 191,444   CCJV cash and cash equivalents (1)     112,340       102,547   Total consolidated cash and cash equivalents     199,751       293,991   Short-term and long-term marketable securities (2)     56,329       65,943   Total cash, cash equivalents and marketable securities   $ 256,080     $ 359,934   (1) The volume and stage of completion of contracts from our CCJVs may cause fluctuations in joint venture cash and cash equivalents between periods. The assets of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed. (2) All marketable securities were classified as held-to-maturity and consisted of U.S. and agency obligations and corporate commercial paper as of all periods presented. 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 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 $ 100 million and $ 120 million.   30 Table of Contents Cash Flows     Three months ended March 31,               As Restated   (in thousands)     2023       2022   Net cash provided by (used in):                 Operating activities   $ (76,688 )   $ (50,180 ) Investing activities   $ (24,336 )   $ 89,396   Financing activities   $ 6,784     $ (82,904 ) 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. Our working capital assets result from both public and private sector projects. Customers in the private sector can be slower paying than those in the public sector; however, private sector projects generally have higher gross profit as a percentage of revenue. 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 $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 $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 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 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. 31 Table of Contents Derivatives We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheets at fair value using Level 2 inputs. See Note 9 to “Notes to the Condensed Consolidated Financial Statements” for further information. The hedge option and warrant derivative transactions related to the 2.75% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds. Surety Bonds and Real Estate Mortgages We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At March 31, 2023, approximatel y $2.6 billion of our $5.1 billion CAP was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties. Our investments in real estate affiliates are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate entities. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. Our unconsolidated investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases and working capital. This debt is non-recourse to Granite, but it is recourse to the affiliates. The debt associated with our unconsolidated non-construction entities is included in Note 11 of “Notes to the Condensed Consolidated Financial Statements.” Covenants and Events of Default Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with these covenants would constitute an event of default under the Credit Agreement. Additionally, the 2.75% Convertible Notes are governed by the terms and conditions of the indenture. Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 2.75% Convertible Notes indenture or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) acceleration of amounts owed under the Credit Agreement; and/or (v) foreclosure on any lien securing the obligations under such facility. A default under the 2.75% Convertible Notes indenture could result in acceleration of the maturity of the notes. The most significant financial covenants under the terms of our Credit Agreement require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio. As of 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”). In March 2022, we repurchased 611,000 shares under this authorization. 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. Website Access Our website address is www.graniteconstruction.com. On our website we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The information on our website is not incorporated into, and is not part of, this report. These reports, and any amendments to them, are also available at the website of the SEC, www.sec.gov. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in our exposure to market risk from what was previously disclosed in our Annual Report. 32 Table of Contents