DELIVERING
ON OUR PLAN
2022 Annual Report
GRANITE CONSTRUCTION AR22
WHY INVEST
IN GRANITE?
Progress towards 2024 Adjusted EBITDA Margin target
Transformed and growing CAP portfolio led by best
value projects and home market focus
Robust market environments beginning to benefit from
federal infrastructure bill opportunities
Vertical integration strategy led by materials assets in
home markets
Sustainable growth from both organic expansion and
strategic M&A
Strong balance sheet and liquidity providing flexibility
for growth and return of value to shareholders
See "Disclosure Regarding Forward-Looking Statements" in our Annual Report on Form 10-K included herein
for information with respect to forward-looking statements included in our 2022 Annual Report.
3
AR22 GRANITE CONSTRUCTION
ABOUT US
Granite is America’s Infrastructure Company™.
Incorporated since 1922, Granite (NYSE:GVA)
is one of the largest diversified construction
and construction materials companies in
the United States as well as a full-suite civil
construction provider. Granite’s Code of Conduct
and strong Core Values guide the company
and its employees to uphold the highest ethical
standards. Granite is an industry leader in
safety and an award-winning firm in quality
and sustainability.
1
1
GRANITE CONSTRUCTION AR22
OUR MARKETS
& CUSTOMERS
Granite serves public and private customers in diverse end markets:
Highways
and Roads
Airports
Industrial
Rail
Pavement
Preservation
Dams and Canals
Federal
Power
Commercial and
Residential
2
AR22 GRANITE CONSTRUCTION
Recognized for Excellence
Engineering News-
Record Ranks Granite #1
in Highways and Sanitary
& Storm Sewers in 2022
At Granite, we strive to deliver value
as a civil infrastructure provider and
materials producer. We are proud
of the work we have completed and
the recognition we’ve received.
#1
Highways
#2
Mining
#8
Water Supply
#10
Bridges
#14
Solar
#1
Sanitary & Storm Sewers
#7
Water Treatment
#9
Dams and Reservoirs
#10
Mass Transit & Rail
#32
Power
3
Granite serves customers in both public and
private sectors within our reportable business
segments: Construction and Materials. Our
expertise allows us to provide infrastructure
solutions in a range of markets as a diversified
civil contractor and materials producer.
Customers in our Construction segment
are predominantly in the public sector and
include federal agencies, state departments of
transportation, local transit authorities, county
and city public works departments, school
districts and developers, utilities, and private
owners of industrial, commercial, and residential
sites. Customers in our Materials segment
include our own construction projects and third-
party customers. Our third-party customers
include contractors, landscapers, manufacturers
of products requiring aggregate materials,
retailers, homeowners, farmers, and brokers.
The majority of both our public and private
customers are in the United States.
GRANITE CONSTRUCTION AR22
Kyle T. Larkin
President and CEO
Mike F. McNally
Board Chairman
DEAR
SHAREHOLDERS,
In 2022, we celebrated our 100-year anniversary, completed the safest
year in our history by minimizing both the frequency and severity
of incidents, and achieved our highest net income since 2008. We
also continued to build upon what we believe is an industry leading
sustainability program in the United States. Whether it is the physical
and mental safety of our people, inclusive diversity supporting all
employees of Granite, or caring for the environment through our focus
on reducing carbon emissions and developing innovative products to
reduce the use of petroleum-based components, our sustainability
program is a differentiator that makes us the employer of choice, as well
as the contractor of choice in a market where customers increasingly
emphasize the importance of sustainability in their selection criteria.
4
AR22 GRANITE CONSTRUCTION
Home Market
Market Intelligence
& Insight
Owner & Regulator
Relationships
Community
Engagement
Blended Project
Portfolio
Readily Available
Resources
Home Market Focus
We will focus on home markets where these attributes exist, among others.
In these markets, we believe we will succeed.
Simply stated, 2022 was a pivotal year for Granite.
We are entering 2023 as a transformed company
with high expectations to deliver significant gains
in financial performance by building upon the
foundation built over the last two years:
Granite does best when we work in our home
markets where we can leverage competitive
advantages. Our plan centers around building and
strengthening our home markets and leveraging our
vertical integration within these markets.
• We have returned to our core strengths as a civil
construction and materials provider diversified
through geography and client base,
• We are focused on winning the right work on bid
day with margins that appropriately reflect the
risk of the work, and
• We are focused on operational excellence to
realize those bid day margins throughout the
project’s life.
We have already seen impressive results as we
execute our plan and believe it will lead to the
increased profit margins and sustainable growth
that we expect.
A Granite home market is a geographic area where
we have:
• Strong relationships with stakeholders
and employees,
• Local insight and market intelligence, and
• Reliable access to resources.
Our home market workforce is also a significant
differentiator for Granite. The construction labor
market is as challenging as it has ever been,
however, we see this as an advantage. Other
companies may struggle to staff projects, but we
believe our reputation makes us the employer of
choice in our home markets.
5
GRANITE CONSTRUCTION AR22
We maintain our position as employer of choice
by investing in our people. We are laser-focused
on hiring, training, and retaining employees so
that we can sustainably grow our business in
this increased funding environment. Our highly
productive, trained, and local workforce is a
profound competitive advantage.
Vertical integration (VI) is another key differentiator
which allows us to maximize our profit while providing
additional value to customers. In most of our markets,
VI means owning or leasing aggregate or asphalt
resources. A fully developed VI model combines the
strength of our construction materials business with
our construction project acumen. VI ensures the
availability of high-quality materials without being
dependent on the capacity of other material suppliers
with competing priorities. VI allows us to reduce costs
by achieving tax savings and driving volumes through
our materials plants as we supply our projects. It
also promotes our efforts to be a leader in ESG as
6
WHY VERTICAL
INTEGRATION?
Compete in markets where owning
materials is necessary
Maximize productivity and scheduling
Ensure quality materials
Leverage lower production costs compared
to external pricing
Leverage dump and recycle logistics
Tax advantages
millings from projects are fed to our materials plants
to produce recycled asphalt.
We have and will continue to invest in strengthening
and growing our home markets through our
materials business, whether through capital
expenditures or business acquisitions. We are
making the most significant investments in
our materials business in many years. In 2022,
this included:
• Securing new aggregate sources,
• Starting work on several plant automation
projects, and
• Purchasing a liquid asphalt terminal.
Our new liquid asphalt terminal adds several new
capabilities. We can leverage the capacity afforded
by the asphalt terminal to lower liquid asphalt
AR22 GRANITE CONSTRUCTION
External AGG Sales
External HMA Sales
Aggregate Production
HMA Production
Construction Operations
Millings
Liquid Asphalt
RAP
Backhaul
costs through opportunistic purchases, limit the
likelihood of possible supply disruptions, and
reduce carbon emissions through innovative mix
designs. Regarding plant automation and upgrades,
improvements to our materials facilities permit us to
operate in an even more environmentally responsible
manner while lowering our cost of production and
improving the bottom line—a true sustainability
win-win. Investment in our construction materials
business is key to success in our home markets and
to achieving our adjusted EBITDA margin targets.
In some of our home markets, VI means something
different than investing in aggregates, such as
where aggregates are scarce or do not fit into the
home market thesis of the business. In these areas,
we look to vertically integrate by reducing costs in
our supply chain.
We enter 2023 with tangible excitement throughout
the company and a transformed committed
and awarded projects (CAP) portfolio. Over the
last two years, we have worked to de-risk our
CAP by procuring work in our home markets
that is consistent with our strategic plan margin
expectations. Although the majority of our
work is low bid work, 40% of our CAP at the
end of 2022 was a best value, or collaborative
contracting, procurement type. This type of work
is awarded based on a combination of price
and the contractor’s qualifications. Granite has
demonstrated, time and again, that we are a leader
in innovation, which allows us to work with owners
to mitigate risks during the design phase so that
we are in position to deliver higher quality on
more complex projects. This, in turn, increases the
value of the end product for the customer, while
frequently avoiding disputes and claims.
7
GRANITE CONSTRUCTION AR22
GRANITE CONSTRUCTION AR22
$3.6 - $3.9
$3.4 - $3.6
$3.3
9.0 - 11.0%
7.5 - 9.0%
6.4%
2.5%
FY 2022
FY 2023E
FY 2024E
FY 2022
FY 2023E1
FY 2024E1
● Net Income Margin
● Adjusted EBITDA Margin
REVENUE
($ in billions)
NET INCOME AND ADJUSTED EBITDA MARGIN
We believe that our industry is positioned for
growth. 2022 saw a strong funding environment,
even excluding the benefits from the Infrastructure
Investment and Jobs Act (IIJA). This environment,
which we expect to continue and strengthen further
as more IIJA-funded projects are released, allowed
us to build CAP during the year totaling $4.5 billion
while at the same time raising bid-day margins.
We are pursuing projects where we can leverage
available competitive advantages to meet our profit
margin expectations. These increased bid margins
in our CAP should be realized in the coming years as
the projects are constructed.
In 2023, we expect to take a significant step by
increasing our adjusted EBITDA margin to a range
of 7.5% to 9.0%. We have higher bid margins in CAP
and are laser-focused on project execution. We have
standardized processes and have implemented best
practices across our company in a way that Granite
has never done before.
There has never been a better time to be a Granite
stakeholder. We believe that we are on track for
achieving 9% to 11% adjusted EBITDA margin in
2024 and achieving our organic revenue growth
target of 6% to 8%. Our strategic goal targets are
clear, and our teams are focused on executing every
day to achieve success and deliver value to our
shareholders. Thank you for your interest in Granite
and thank you for your trust in our leadership.
Kyle T. Larkin
President and
Chief Executive Officer
Michael F. McNally
Board Chairman
1 The company does not provide the most directly comparable forward-looking GAAP measure of net income (loss) attributable to Granite Construction Incorporated
or a reconciliation of forward-looking adjusted EBITDA margin to the most directly comparable forward-looking GAAP measure of net income (loss) attributable to
Granite Construction Incorporated because the timing and amount of the excluded items are unreasonably difficult to fully and accurately estimate.
8
FORM 10-K
Granite Construction Incorporated
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Q
£
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-12911
Granite Construction Incorporated
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
77-0239383
(I.R.S. Employer Identification Number)
585 West Beach Street
Watsonville, California
(Address of principal executive offices)
95076
(Zip Code)
Registrant’s telephone number, including area code: (831) 724-1011
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, $0.01 par value
GVA
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ý No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ý No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ý Accelerated filer Non-accelerated filer Smaller reporting
company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ý
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. This checkbox has been left unanswered pending adoption
of the underlying rules.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). This checkbox has been left
unanswered pending adoption of the underlying rules.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No ý
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $1.3 billion as of June 30, 2022,
based upon the price at which the registrant’s common stock was last sold as reported on the New York Stock Exchange on such date.
At February 15, 2023, 43,744,536 shares of common stock, par value $0.01, of the registrant were outstanding.
Certain information called for by Part III is incorporated by reference to the definitive Proxy Statement for the 2023 Annual Meeting of Shareholders of
Granite Construction Incorporated, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2022.
DOCUMENTS INCORPORATED BY REFERENCE
INDEX
Disclosure Regarding Forward-Looking Statements
PART III
Item 10. Directors, Executive officers and Corporate
Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related
Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
45
45
45
45
45
PART IV
Item 15. Exhibits and Financial Statement Schedules
46
Explanatory Note
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5.
Market For Registrant’s Common Equity,
Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6.
[Reserved]
2
12
23
23
27
27
28
30
Item 7.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations 30
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure
Item 9A. Controls And Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that
Prevent Inspections
41
42
42
43
44
44
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Annual Report
on Form 10-K, and its officers or directors make statements that are not based on historical facts, including statements regarding
future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, targets, guidance, capital
expenditures, committed and awarded projects, and results, 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,” “target,” 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, targets, guidance, capital expenditures, committed and awarded projects, and results. These
expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that
may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are
beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial
condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more
specifically described in this 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 Annual Report on Form 10-K, and, except as
required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.
EXPLANATORY NOTE
This Annual Report on Form 10-K for the year ended December 31, 2022 (“Form 10-K”) includes the restatement of our unaudited
quarterly financial information for the first three quarters of the year ended December 31, 2022 (the “Restated Periods”). The
quarterly financial information has also been adjusted retrospectively to reclassify the results of the former Water and Mineral Services
businesses from discontinued operations to continuing operations for the periods ended March 31, 2022 and June 30, 2022.
The Audit/Compliance Committee of the Company’s Board of Directors, in consultation with the Company’s independent
registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), concluded that the Company’s previously issued
condensed consolidated financial statements and related disclosures for the Restated Periods should no longer be relied upon due
to errors contained in such interim financial statements.
As disclosed in the Supplementary Data included in Part IV, Item 15(a) of this Form 10-K, we are restating the Restated Periods to
correct (a) errors related to deferred taxes and the calculation of income tax expense in connection with the sale of the Company’s
trenchless and pipe rehabilitation services business (“Inliner”), which was completed in the first quarter of 2022 and was classified
within discontinued operations in the Company’s condensed consolidated statement of operations during the first and second
quarters of 2022 and (b) other immaterial errors, including certain errors that had previously been adjusted for as out of period
corrections.
As disclosed in Item 9A, as of December 31, 2022, management has determined that the Company did not maintain effective
internal control over financial reporting due to the existence of a material weakness. Management also concluded that the
Company’s disclosure controls and procedures were not effective as of December 31, 2022 due to the existence of the material
weakness. For additional information, see Item 9A of this Form 10-K.
We have not filed and do not intend to file amendments to our Quarterly Reports on Form 10-Q for the Restated Periods. 2022
comparative amounts presented in our 2023 Quarterly Reports on Form 10-Q will be changed retrospectively to reflect the
restatement and recast. Accordingly, investors should rely only on the financial information and other disclosures regarding the
Restated Periods in this Form 10-K or in future filings with the SEC (as applicable), and not on any previously issued or filed reports,
earnings releases or similar communications relating to the Restated Periods.
The impact of the restatement on the Restated Periods is described in the Supplementary Data included in Part IV, Item 15(a) of this
Form 10-K.
2022 Annual Report 1
PART I
Item 1. Business
Introduction
Granite Construction Company was incorporated in 1922. In 1990, Granite Construction Incorporated was formed as the
holding company for Granite Construction Company and its wholly-owned and consolidated subsidiaries and was incorporated
in Delaware. Unless otherwise indicated, the terms “we,” “us,” “our,” “Company” and “Granite” refer to Granite Construction
Incorporated and its wholly-owned and consolidated subsidiaries.
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.
Operating Structure
Our reportable segments are the same as our operating segments and correspond with how our chief operating decision maker,
or decision-making group (our “CODM”), regularly reviews financial information to allocate resources and assess performance. We
identified our CODM as our Chief Executive Officer and our Chief Operating Officer. Our reportable segments are: Construction and
Materials. The Construction segment focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines,
airports, marine ports, dams, reservoirs, aqueducts, infrastructure and site development for use by the general public and water-related
construction for municipal agencies, commercial water suppliers, industrial facilities and energy companies. It also provides construction of
various complex projects including infrastructure / site development, mining, public safety, tunnel, solar, battery storage and other power-
related projects. The Materials segment focuses on production of aggregates and asphalt production for internal use and for sale to third
parties. See Note 21 of “Notes to the Consolidated Financial Statements” for additional information about our reportable segments.
In addition to reportable segments, we also review our business by operating groups. In alphabetical order, our operating groups
are as follows:
• California, which is comprised of vertically integrated businesses in home markets across the state;
• Central, which includes the vertically integrated Arizona region and regional civil construction businesses in Illinois, Florida
and Texas. The Central group also includes the Federal division which performs civil construction across the continental
United States and Guam, and the Tunnel division; and
• Mountain, which is comprised of vertically integrated regional businesses in Alaska, Washington, Oregon, Utah and Nevada.
The Mountain Group also includes national businesses in the Industrial & Energy division, which primarily focuses on
commercial solar construction projects, Water Resources, which performs water well drilling and rehabilitation services and
Mineral Services, which performs mineral exploration services for mining clients.
Customers
Customers in our Construction segment are predominantly in the public sector and include certain federal agencies, state
departments of transportation, local transit authorities, county and city public works departments, school districts and developers,
utilities and private owners of industrial, commercial and residential sites. Customers of our Materials segment include internal
usage by our own construction projects, as well as third-party customers. Our third-party Materials segment customers include,
but are not limited to, contractors, landscapers, manufacturers of products requiring aggregate materials, retailers, homeowners,
farmers and brokers. The majority of both our public and private customers are located in the United States.
During the years ended December 31, 2022, 2021 and 2020, our largest volume customer, including both prime and
subcontractor arrangements, was the California Department of Transportation (“Caltrans”). Revenue recognized from contracts
with Caltrans during the years ended December 31, 2022, 2021 and 2020 represented $348.0 million (10.5% of total revenue),
$337.1 million (9.6% of total revenue) and $316.9 million (8.9% of total revenue), respectively, which was primarily in the
Construction segment. Other than Caltrans, none of our customers, including both prime and subcontractor arrangements, had
revenue that individually exceeded 10% of total revenue during the year ended December 31, 2022. None of our customers had
revenue that individually exceeded 10% of total revenue during the years ended December 31, 2021 and 2020.
2 Granite Construction Incorporated
Business Strategy
Granite exists to satisfy society’s needs for mobility, power, water and other essential services that sustain living conditions and
improve quality of life. Across our footprint of regional offices, we provide horizontal civil infrastructure construction services and
construction materials products to a diverse base of public, industrial and commercial clients. These clients benefit from our home
market strategy which includes local relationships, market intelligence and the resources and expertise of one of the oldest and
most respected U.S. contractors and materials producers.
Local market knowledge, relationships, and project management expertise, supported by the financial strength of a publicly traded
company with a strong balance sheet provide a sustainable competitive advantage. By diversifying our revenue channels across
geographies and clients, and by taking measured risks within our construction capabilities, we simultaneously grow our business
and mitigate risk. Supported by proven operating processes, functional support systems and financial governance processes, our
growing network of regional businesses focus on local market conditions, client relationships, employee development, workforce
capabilities and investment opportunities to drive growth and efficiency within their home markets.
Additionally, the following continue to be key objectives in our strategic plan:
Selective Bidding
We focus our resources on bidding jobs that meet our bidding criteria, which include analyzing the risk of a potential job relative
to: (1) available personnel to estimate and prepare the proposal as well as to effectively manage and build the project; (2) project
procurement methodology; (3) the competitive environment; (4) our experience with the type of work and the owner; (5) local
resources and partnerships; (6) equipment resources; and (7) the size, duration, complexity and expected profitability of the job.
Risk-Balanced Growth
We intend to grow our business by strategically adding to our client base within our current geographic markets and expanding
into new geographic areas both organically and through acquisitions. Growth opportunities are evaluated relative to their
incremental impact to the execution risk and profitability profile of our operating portfolio.
Vertical Integration
We own and lease aggregate reserves and own processing plants that are vertically integrated into our construction operations.
By ensuring the availability of these resources through strategic expansion and providing quality products, we believe we have a
competitive advantage in many of our markets, as well as a source of revenue and earnings from the sale of construction materials
to third parties. We also look for additional vertical integration opportunities that complement our existing construction and
materials businesses.
Diversification
To mitigate the risks inherent in the construction business as the result of general economic factors, we pursue projects: (1) in both
the public and private sectors; (2) in diverse end markets such as federal, rail, power, water and renewable energy; (3) for a wide
range of clients from the federal government to small municipalities and from large corporations to small private customers; (4) in
diverse geographic markets; (5) with procurement methods that include construction management/general contractor (“CM/GC”),
bid-build and design-build; (6) that are executed according to a fixed price, time and materials, cost reimbursable and fixed unit
price; and (7) of various size, duration and complexity.
Performance-Based Incentives
Our incentive compensation plans align with the key objectives outlined in our strategic plan. Managers are incentivized with cash
compensation and equity awards, payable upon the attainment of pre-established annual financial and non-financial metrics,
including capital efficiency and cash flow generation.
Code of Conduct and Core Values
We strive to maintain high ethical standards through an established Code of Conduct and a company-wide compliance program,
while always being guided by our core values which are integrity, safety, excellence, sustainability and inclusion.
Human Capital Resources
Employees
We believe our employees are our most valuable resource and are the primary factor in the successful implementation of our
business strategies. Significant resources are employed to attract, develop and retain extraordinary and diverse talent and fully
promote each employee’s capabilities. Our focus on inclusive diversity, talent development, talent acquisition, and succession
2022 Annual Report 3
planning has allowed us to build a bench of talented employees. Our managerial and supervisory personnel have an average
tenure of 11 years with Granite, which demonstrates our workforce’s strong dedication and great pride in our company.
On December 31, 2022, we employed approximately 2,000 salaried employees who work in project, functional and business unit
management, estimating and administrative capacities, plus approximately 1,800 hourly employees. These totals do not include
employees of unconsolidated joint ventures. The total number of hourly personnel is subject to the volume of construction in
progress and is seasonal. During 2022, the number of hourly employees ranged from approximately 1,800 to 3,800 and averaged
approximately 3,400. The majority of both our salaried and hourly personnel were located in the United States during 2022. As
of December 31, 2022, three of our wholly-owned subsidiaries, Granite Construction Company, Layne Christensen Company
and Granite Industrial, Inc., were parties to craft collective bargaining agreements in many areas in which they operate (see Note 16
of the “Notes to the Consolidated Financial Statements”).
Inclusive Diversity
Our culture is underpinned by our core values, including an unwavering commitment to inclusive diversity as exemplified by
strategies that address our guiding belief that diverse backgrounds, perspectives, and experiences enhance creativity and
innovation. We have established employee resource groups that serve employees from a variety of backgrounds, and we have
designated October as Inclusion month throughout our Company. We periodically conduct pay equity analyses to support
our commitment to pay equity, regardless of race, gender, ethnicity or sexual orientation.
We continued to execute on our inclusive diversity five-year strategic plan, which was established in 2020, with the following key goals:
•
•
•
•
increase representation of women throughout the organization from 13% in 2020 to 18% by 2025;
increase women in leadership from 14% in 2020 to 20% by 2025;
increase representation of persons of color in leadership throughout the organization from 15% in 2020 to 20%
by 2025; and
increase inclusion index survey results from 71% in 2020 to 80% by 2025.
In 2022 we continued to make progress towards our 2025 goals. Representation of women throughout the organization was
maintained at 13%, women in leadership increased to 19%, representation of persons of color in leadership rose to 18% and our
2022 inclusion index survey results increased to 74%.
We were also successful with our targeted talent acquisition plan focused on diverse colleges and universities. In 2022, we hired
195 interns from 65 colleges and universities. Of this, 52% were diverse.
Health and Safety
Employee safety is our greatest priority and safety is ultimately about people, not statistics. Safety is one of our core values and we
strive to continuously improve our safety program to better protect our people. We instill our culture of safety through relationship-
based safety training, shared knowledge, and engagement at every level of our organization. A core part of our mission will always
be to provide a safe and healthy work environment for all our employees.
Employee Development and Training
The development of our employees is critical to our success and is a key factor in our ability to attract and retain talent. Our
people are the foundation of our success, and we encourage every employee to actively participate in their own career growth
and development. We offer a wide variety of training opportunities to ensure our employees are supplementing their on-the-job
learning with in-person and online courses needed to promote performance and growth.
In 2022, our employees completed over 25,000 training courses and more than 250 employees ranging from emerging leaders to
senior leaders graduated from our multi-level leadership development program.
We have a robust talent and succession planning process and have established specialized programs to accelerate the development
of our talent pipeline for critical roles in general management, engineering, project management and operations. On an annual
basis, we conduct succession planning reviews with senior leaders focusing on our high performing and high potential talent,
diverse talent and succession for critical roles.
Employee Engagement
We routinely engage independent third parties to conduct cultural and employee engagement surveys. These include corporate
culture assessments, as well as real-time feedback on employee engagement and on employee well-being which includes physical,
emotional, social and financial health. In 2022, we conducted a company-wide engagement survey and the results reflected
improved engagement across each of our four key indices: trust, executive leadership, inclusive diversity and code of conduct.
4 Granite Construction Incorporated
Compensation and Benefits
Our compensation programs are designed to align the compensation of our employees with our financial and safety performance
and their individual performance to provide proper incentives to attract, retain and motivate employees to achieve superior
results. The structure of our compensation programs balances guaranteed base pay with incentive compensation opportunities.
Additionally, all employees are eligible for health insurance, physical, mental and financial wellness programs, paid and unpaid
leave, a retirement plan, life insurance and disability/accident coverage. We also offer a variety of voluntary benefits that allow
employees to select the options that meet their needs.
Environmental, Social and Governance Matters
Sustainability is one of our core values and we are committed to contributing to the development of a more sustainable future. We
are a participating member of the United Nations Global Compact. Our sustainability objectives encompass corporate social
responsibility, environmental stewardship, dependable governance and the creation of enduring economic value. We envision
Granite as the leading provider of sustainable infrastructure solutions, differentiated by our pursuit of social, environmental and
financial excellence.
To attain our objectives, we have a Sustainability department that develops, coordinates and communicates our environmental,
social and governance (“ESG”) initiatives across the Company. Our Board of Directors oversees our sustainability program,
including how we manage sustainability and ESG-related risks in conjunction with our overall Enterprise Risk Management process.
We utilize the Global Reporting Initiative and Sustainability Accounting Standards Board standards as frameworks to support
performance, tracking and reporting, and responsible business behavior. For climate-related issues, we also utilize the
recommendations from the Task Force on Climate-related Financial Disclosures. Within these frameworks, we have selected
industry-specific metrics that align with stakeholder expectations, are relevant to our business, and will have the most significant
impact. We publish annual Sustainability Reports, which update stakeholders on our ESG performance.
We are committed to addressing the effects of climate change and currently have a priority target to reduce scope 1 greenhouse
gas emissions by 25% by 2030 from a 2020 baseline. However, achievement of our sustainability commitments and targets is
subject to risks and uncertainties, many of which are outside of our control. See “Item 1A. Risk Factors” for additional information.
Our annual sustainability reports, along with additional information about our sustainability program, can be found on our website
at https://www.graniteconstruction.com/company/building-better-future-today. The information on our website and Granite’s
Sustainability Report are not incorporated into, and are not part of, this report.
Committed and Awarded Projects
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 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 also included in
other awards to the extent option exercise or task order issuance is probable, respectively. All CAP is in the Construction segment.
Substantially all of the contracts in CAP may be canceled or modified at the election of the customer; however, we have not been
materially adversely affected by contract cancellations or modifications in the past (see “Contract Provisions and Subcontracting”).
Many projects are added to CAP and completed within the same fiscal year and, therefore, may not be reflected in our beginning or
year-end CAP. Our CAP was $4.5 billion and $4.0 billion as of December 31, 2022 and 2021, respectively. Approximately $1.8 billion
of the December 31, 2022 CAP is expected to be completed during 2023.
2022 Annual Report 5
Competition and Market Trends
In both our Construction and Materials segments, we have competitors within the individual markets and geographic areas in
which we operate, ranging from small, local companies to larger regional, national and international companies. Although the
construction business is highly competitive, there are few, if any, companies which compete in all of our market areas. The degree
and type of competition is influenced by the type and scope of construction projects within the individual markets. One of our
significant competitive advantages is that we own and lease aggregate reserves and own processing plants that are vertically
integrated into our construction operations.
Factors influencing competitiveness in both of our segments include price, knowledge of local markets and conditions, financial
strength, reputation for quality, aggregate materials availability and machinery and equipment. Factors that also influence
competitiveness in our Construction segment are estimating abilities and project management.
Many of our Construction segment competitors have the ability to perform work in either the private or public sectors. When
opportunities for work in one sector are reduced, competitors tend to look for opportunities in the other sector. This migration has
the potential to reduce revenue growth and/or increase pressure on gross profit margins.
Capital requirements have not historically had a significant impact on our ability to compete in the marketplace. However,
because smaller projects within our Construction segment have not historically required large amounts of capital, the entry by
companies possessing acceptable qualifications into this market may be relatively easy. By contrast, larger projects typically require
larger amounts of capital that may make entry into the market by future competitors more difficult.
See “Current Economic Environment and Outlook” under “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations” for further information on current market trends.
Government Regulations
Our business is impacted by environmental, health and safety, government procurement, anti-bribery and other government
regulations and requirements. Below is a summary of some of the significant regulations that impact our business.
Environmental
Our operations are subject to various federal, state, local and foreign laws and regulations relating to the environment, including
those relating to: (i) the discharge of materials into the air, such as equipment-related emissions and crystalline silica dust at
our aggregate processing facilities; (ii) the discharge of materials into water and land; (iii) the handling and disposal of solid
and hazardous waste; (iv) the handling of underground storage tanks; and (v) the cleanup of properties affected by hazardous
substances. Certain environmental laws impose substantial penalties for non-compliance and others, such as the federal
Comprehensive Environmental Response, Compensation and Liability Act, impose strict, retroactive, joint and several liability
upon persons responsible for releases of hazardous substances. We continually evaluate whether we must take additional steps
at our locations to ensure compliance with environmental laws and whether we can operate in a more sustainable manner.
While compliance with applicable regulatory requirements has not materially adversely affected our operations in the past, there
can be no assurance that these requirements will not change, and that compliance will not adversely affect our operations in
the future.
Government Procurement
Approximately 70% of our construction-related revenue in 2022 was derived from contracts funded by federal, state and local
government agencies and authorities. Government contracts are subject to specific procurement regulations, contract provisions
and a variety of socioeconomic requirements relating to their formation, administration, performance and accounting and often
include express or implied certifications of compliance.
Our operations are subject to various statutes and executive orders including the Davis-Bacon Act (which regulates wages and
benefits), the Walsh-Healy Act (which prescribes a minimum wage and regulates overtime and working conditions), Executive
Order 11246 (which establishes equal employment opportunity and affirmative action requirements), Executive Order 14063
(which requires project labor agreements on federal construction projects over $35 million), the Drug-Free Workplace Act, the
Federal Acquisition Regulation and the Federal Civil False Claims Act. We are also subject to the rules and regulations promulgated
by OSHA and the Mine Safety and Health Administration. In addition, certain of our contracts with government agencies contain
minimum Disadvantaged Business Enterprise (“DBE”) participation clauses.
6 Granite Construction Incorporated
These laws and regulations affect how we transact business and, in some instances, impose additional costs on our business
operations, which may adversely affect our business, results of operations and financial condition. As further described in “Item 1A.
Risk Factors,” violation of specific laws and regulations could lead to fines, contract termination, debarment of contractors and/or
suspension of future contracts. Our government customers can also terminate, renegotiate or modify any of their contracts with us
at their convenience.
Anti-corruption and Bribery
We are subject to the Foreign Corrupt Practices Act (“FCPA”). The FCPA prohibits U.S. and other business entities from making
improper payments to foreign government officials, political parties or political party officials. We are also subject to the applicable
anti-corruption laws in the jurisdictions in which we operate, thus potentially exposing us to liability and potential penalties
in multiple jurisdictions. The anti-corruption provisions of the FCPA are enforced by the Department of Justice while other
state or federal agencies may seek recourse against us for issues related to the FCPA. In addition, the Securities and Exchange
Commission (“SEC”) requires strict compliance with certain accounting and internal control standards set forth under the FCPA.
Failure to comply with the FCPA and other laws can expose us and/or individual employees to potentially severe criminal and
civil penalties. Such penalties may have a material adverse effect on our business, results of operations and financial condition.
We devote resources to the development, maintenance, communication and enforcement of our Code of Conduct, our anti-
bribery compliance policies, our internal control processes and compliance related policies. We strive to conduct timely internal
investigations of potential violations and take appropriate action depending upon the outcome of the investigation.
Contract Provisions and Subcontracting
Contracts with our customers are primarily “fixed unit price” or “fixed price.” Under fixed unit price contracts, we are committed
to providing materials or services at fixed unit prices (for example, dollars per cubic yard of concrete placed or cubic yard of
earth excavated). The percentage of fixed unit price contracts in our unearned revenue was 72.7% and 53.3% at December 31,
2022 and 2021, respectively. While the fixed unit price contract shifts the risk of estimating the quantity of units required for a
particular project to the customer, any increase in our unit cost over the expected unit cost in the bid, whether due to inflation,
inefficiency, incorrect estimates or assumptions or other factors, is borne by us unless otherwise provided in the contract. Fixed
price contracts are priced on a lump-sum basis under which we bear the risk that we may not be able to perform the work for the
specified contract amount and any increase in our cost over budget, whether due to inflation, inefficiency, incorrect estimates or
assumptions or other factors, will reduce our profit on the project. The percentage of fixed price contracts in our unearned revenue
was 23.5% and 44.3% at December 31, 2022 and 2021, respectively. All other contract types represented 3.8% and 2.4% of our
unearned revenue at December 31, 2022 and 2021, respectively.
Within our Construction segment, we utilize several methods of project delivery including, but not limited to, bid-build, design-
build, CM/GC, construction management at-risk (“CMAR”) and progressive design-build. Unlike traditional bid-build projects
where owners first hire a design firm or design a project themselves and then put the project out to bid for construction, the
design portion of design-build projects is typically only partially complete when going out to bid. This project delivery method
expedites the bidding process for the owner and provides the owner with a single point of responsibility and a single contact for
both final design and construction. Under the CM/GC and CMAR delivery methods, we contract with owners to assist the owner
during the design phase of the contract with construction efficiencies and risk mitigation, with the understanding that we will
negotiate a contract on the construction phase when the collective design nears completion. The progressive design-build delivery
method is similar to CM/GC and CMAR; however, we are responsible for the design of the project and will subcontract with a
design firm, with the understanding that we will negotiate a contract that includes both the design and construction prices when
the collective design nears completion.
With the exception of contract change orders and affirmative claims, our construction contracts are primarily obtained through
competitive bidding in response to solicitations by both public agencies and private parties and on a negotiated basis as a result
of solicitations from private parties. Project owners use a variety of methods to make contractors aware of new projects, including
posting bidding opportunities on agency websites, disclosing long-term infrastructure plans, advertising and other general
solicitations. Our bidding activity is affected by such factors as the nature and volume of advertising and other solicitations, current
CAP, available personnel, current utilization of equipment and other resources and competitive considerations. Our contract review
process includes identifying risks and opportunities during the bidding process and managing these risks through mitigation efforts
such as contract negotiation, bid/no bid decisions, insurance and pricing. Contracts fitting certain criteria of size, duration and
complexity are reviewed by various levels of management and, in some cases, by our Board of Directors or a committee thereof.
Bidding activity, CAP and revenue resulting from the award of new contracts may vary significantly from period to period.
2022 Annual Report 7
There are a number of factors that can create variability in contract performance as compared to the original bid. Such factors can
positively or negatively impact costs and profitability and can create additional liability to the contractor. The most significant of
these include:
subcontractor costs, availability and/or performance issues;
• changes in costs of labor and/or materials;
•
• extended overhead and other costs due to owner, weather and other delays;
• changes in productivity expectations;
• changes from original design on design-build projects;
• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs;
• a change in the availability and proximity of equipment and materials;
• complexity in original design;
•
•
•
• costs associated with scope changes; and
•
length of time to complete the project;
the availability and skill level of workers in the geographic location of the project;
site conditions that differ from those assumed in the original bid;
the customer’s ability to properly administer the contract.
The ability to realize improvements on project profitability at times is more limited than the risk of lower profitability. For example,
design-build contracts carry additional risks such as those associated with design errors and estimating quantities and prices before
the project design is completed. We manage this additional risk by including contingencies in our bid amounts, obtaining errors
and omissions insurance and obtaining indemnifications from our design consultants where possible. However, there is no
guarantee that these risk management strategies will be successful.
Most of our contracts, including those with the government, provide for termination at the convenience of the contract owner,
with provisions to pay us for work performed through the date of termination. We have not been materially adversely affected
by these provisions in the past. Many of our contracts contain provisions that require us to pay liquidated damages if specified
completion schedule requirements are not met, and these amounts could be significant.
We act as prime contractor on most of our construction projects. We complete the majority of our projects with our own resources
and subcontract specialized activities such as electrical and mechanical work. As prime contractor, we are responsible for the
performance of the entire contract, including subcontract work. Thus, we may be subject to increased costs associated with
the failure of one or more subcontractors to perform as anticipated. Based on our analysis of their construction and financial
capabilities, among other criteria, we may require the subcontractor to furnish a bond or other type of security to guarantee their
performance and/or we retain payments, or some portion thereof, in accordance with contract terms until their performance is
complete. DBE regulations require us to use our good faith efforts to subcontract a specified portion of contract work done for
governmental agencies to certain types of disadvantaged contractors or suppliers. As with all of our subcontractors, some may not
be able to obtain surety bonds or other types of performance security.
Joint Ventures
We participate in various construction joint ventures with other construction companies of which we are a limited member (“joint
ventures”) typically for large, technically complex projects, including design-build projects, where it is necessary or desirable to
share expertise, risk and resources. Joint venture partners typically provide independently prepared estimates, shared equipment,
and often bring local knowledge and expertise. Generally, each construction joint venture is formed as a partnership or limited
liability company to accomplish a specific project and is jointly controlled by the joint venture partners. We select our joint venture
partners (“partner(s)”) based on our analysis of their construction and financial capabilities, expertise in the type of work to be
performed and past working relationships, among other criteria.
Under each joint venture agreement, one partner is designated as the sponsor. The sponsoring partner typically provides all
administrative, accounting and most of the project management support for the project and generally receives a fee from the joint
venture for these services. We have been designated as the sponsoring partner in certain of our current joint venture projects and
are a non-sponsoring partner in others. In alignment with our strategic plan and project bidding criteria, when entering into new
joint venture agreements, we generally insist on being the sponsoring partner.
We consolidate joint ventures if we determine that, through our participation, we have a variable interest and are the primary
beneficiary as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810,
Consolidation, and related standards. If we have determined that we are not the primary beneficiary of a joint venture but do
exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro
8 Granite Construction Incorporated
rata basis in revenue and cost of revenue in the consolidated statements of operations. We record the corresponding investment
balance in equity in construction joint ventures in the consolidated balance sheets except when a project is in a loss position, the
investment balance is recorded as a deficit in unconsolidated construction joint ventures and is included in accrued expenses and
other current liabilities in the consolidated balance sheets. We account for non-construction unconsolidated joint ventures under
the equity method of accounting in accordance with ASC Topic 323, Investments–Equity Method and Joint Ventures and include
our share of the operations in equity in income of affiliates in the consolidated statements of operations and in investment in
affiliates in the consolidated balance sheets.
We also participate in “line-item” joint venture agreements under which each partner is responsible for performing certain discrete
items of the total scope of contracted work. The revenue for each line-item joint venture partners’ discrete items of work is defined
in the contract with the project owner and each joint venture partner bears the profitability risk associated only with its own work.
There is not a single set of books and records for a line-item joint venture. Each partner accounts for its items of work individually
as it would for any self-performed contract. We account for our portion of these contracts as revenue and cost of revenue in the
consolidated statements of operations and in relevant balances in the consolidated balance sheets.
The agreements with our partner(s) for both construction joint ventures and line-item joint ventures define each partner’s
management role and financial responsibility in the project. The joint venture agreements typically provide that our interests in
any profits and assets, and our respective share in any losses and liabilities, that may result from the performance of the contracts
are limited to our stated percentage interest in the project. However, due to the joint and several nature of the performance
obligations under the related owner contracts, if any of the partners fail to perform, we and the remaining partners, if any, would
be responsible for performance of the outstanding work (i.e., we provide a performance guarantee). We estimate our liability for
performance guarantees for our unconsolidated and line-item joint ventures using estimated partner bond rates, which are Level
2 inputs, and include them in accrued expenses and other current liabilities with a corresponding increase in equity in construction
joint ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability
and corresponding asset are removed from the consolidated balance sheets upon completion and customer acceptance of the
project. Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure
of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could
incur should a partner fail to provide the services and resources that it had committed to provide in the agreement. We are not
able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be
offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.
At December 31, 2022, there was $246.4 million of remaining contract value on unconsolidated and line item construction
joint venture contracts, of which $110.9 million represented our share and is included in our CAP and the remaining $135.5
million represented our partners’ share. See Note 9 of “Notes to the Consolidated Financial Statements” for more information.
Insurance and Bonding
We maintain insurance coverage and limits consistent with industry practice and in alignment with our overall risk management
strategy. Policies include general and excess liability, property, pollution, professional, cyber security, executive risk, workers’
compensation and employer’s liability. Further, our policies are placed with insurers that we believe are financially stable, often in a
layered or quota share arrangement which reduces the likelihood of an interruption or impact to operations.
In connection with our business, we generally are required to provide various types of surety bonds that provide an additional
measure of security for our performance under certain public and private sector contracts. Our ability to obtain surety bonds
depends upon our capitalization, working capital, past performance, management expertise and external factors, including the
capacity of the overall surety market. Surety companies consider such factors in light of the amount of our CAP that we have
currently bonded and their current underwriting standards, which may change from time to time. The capacity of the surety
market is subject to market-based fluctuations driven primarily by the level of surety industry losses and the degree of surety
market consolidation. When the surety market capacity shrinks it results in higher premiums and increased difficulty obtaining
bonding, in particular for larger, more complex, multi-year projects throughout the market. To help mitigate this risk, we employ a
co-surety structure involving three sureties. Although we do not believe that fluctuations in surety market capacity have affected
our ability to grow our business, there is no assurance that it will not significantly affect our ability to obtain new contracts in the
future (see “Item 1A. Risk Factors”).
2022 Annual Report 9
Raw Materials
We purchase raw materials, including but not limited to, aggregate products, cement, diesel and gasoline fuel, liquid asphalt,
natural gas, propane, resin and steel from numerous sources. Our owned and leased aggregate reserves supply a portion of the
raw materials needed in our construction projects. The price and availability of raw materials may vary from year to year due to
market conditions and production capacities. In 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.
Equipment
At December 31, 2022 and 2021, we owned the following number of construction equipment and vehicles:
December 31,
Heavy construction equipment
Trucks, truck-tractors, trailers and vehicles
2022
2021
2,471 2,736
5,059 5,460
The number of construction equipment and vehicles as of December 31, 2021 includes those related to the businesses that were
classified as held for sale as of that date (see Note 1 and Note 2 of “Notes to Consolidated Financial Statements” for further
information). 1,103 pieces of construction equipment and 1,861 vehicles were classified as held for sale as of December 31, 2021.
During the first quarter of 2022, 393 pieces of heavy construction equipment and 720 vehicles were sold as part of the sale of one
of the held for sale businesses.
Our portfolio of equipment includes backhoes, barges, bulldozers, cranes, excavators, loaders, motor graders, pavers, rollers,
scrapers, trucks, drilling rigs and tunnel boring machines that are used in both of our segments. We pool certain equipment
to maximize utilization. We continually monitor and adjust our fleet size so that it is consistent with the size of our business,
considering both existing and expected future work. We lease or rent equipment to supplement our portfolio of equipment
in response to construction activity cycles. In 2022 and 2021, we purchased $73.9 million and $60.1 million, respectively, of
construction equipment and vehicles.
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, profitability and the required number of employees.
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 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 on the
SEC’s website, www.sec.gov.
Information About Executive Officers
Information regarding our executive officers as of February 1, 2023 is set forth below.
Name
Kyle T. Larkin
Elizabeth L. Curtis
James A. Radich
Brian A. Dowd
Michael G. Tatusko
Bradley J. Williams
Staci M. Woolsey
10 Granite Construction Incorporated
Age Position
51 President and Chief Executive Officer
56 Executive Vice President and Chief Financial Officer
64 Executive Vice President and Chief Operating Officer
59 Senior Vice President and Group Manager
58 Senior Vice President and Group Manager
62 Senior Vice President and Group Manager
46 Chief Accounting Officer
Mr. Larkin joined Granite in 1996, has served as President since September 2020 and as Chief Executive Officer since June 2021.
He also served as Executive Vice President and Chief Operating Officer from February 2020 to September 2020, Senior Vice
President and Manager of Construction and Materials Operations from 2019 to 2020, Senior Vice President and Group Manager
from 2017 to 2019, Vice President and Regional Manager in Nevada from 2014 to 2017 and President of Granite’s wholly-owned
subsidiary, Intermountain Slurry Seal, Inc. from 2011 to 2014. He served as Manager of Construction at the Reno area office from
2008 to 2011, Chief Estimator from 2004 to 2008 and Project Manager, Project Engineer and Estimator at Granite’s Nevada Branch
between 1996 and 2003. Mr. Larkin has also served as a director of our Board of Directors since June 2021 and has a term expiring
at the 2023 annual meeting. Mr. Larkin holds a B.S. in Construction Management from California Polytechnic State University, San
Luis Obispo and an M.B.A. from the University of Massachusetts, Amherst.
Ms. Curtis joined Granite in 2018 and has served as Executive Vice President and Chief Financial Officer since January 2021. She
also served as Chief Accounting Officer from October 2020 to January 2021, Vice President of Investor Relations from 2019 to
October 2020, and Vice President and Integration Management Officer from 2018 to 2019. Before joining Granite, Ms. Curtis
served as Vice President and Chief Accounting Officer for Layne Christensen Company (“Layne”) from 2016 to 2018. Prior to
joining Layne, Ms. Curtis worked for Cameron from 2009 to 2016 serving in positions of increasing responsibility and ultimately as
their Controller, in charge of external reporting, accounting policies, and internal controls from 2015 to 2016. Ms. Curtis began her
career in public accounting with Deloitte and graduated from Texas A&M University with B.S. degrees in Accounting and Finance
and is a Certified Public Accountant.
Mr. Radich first joined Granite in 1980 and rejoined the Company in 2011. He has served as Executive Vice President and Chief
Operating Officer since December 2020. He also served as Senior Vice President and Group Manager from January 2020 to
December 2020, as Vice President and Coastal Region Manager from 2014 to 2019 and Vice President of the Northern California
Region from 2011 to 2014. From 1993 to 2011 Mr. Radich was employed by Oldcastle Materials. Mr. Radich served Granite as Project
Engineer from 1980 to 1983, Project Manager from 1985 to 1990 for the Heavy Civil and Vertical Divisions and Chief Estimator from
1990 to 1993 in the Vertical Division. He received a B.S.C.E. from Santa Clara University and is a Registered Civil Engineer.
Mr. Dowd joined Granite in 1986 and has served as Senior Vice President and California Group Manager since January 2021. He
also served as Vice President and Regional Manager in Nevada from October 2017 to December 2020 and Vice President and Large
Projects Business Development Manager from 2013 to 2017. He served as California Group Business Development Manager from
2012 to 2013, Sacramento Valley Region Manager from 2007 to 2012, Vice President and Director of Human Resources from 2005
to 2007, Director of Employee Development from 2000 to 2005, San Diego Area Manager from 1994 to 2000, and Project Manager,
Estimator and Project Engineer at Granite’s Indio and Sacramento Branches between 1986 and 1994. Mr. Dowd holds a B.S. in Civil
Engineering from the University of California, Berkeley and is a Registered Engineer in the states of California and Nevada.
Mr. Tatusko joined Granite in 1991 and has served as Senior Vice President and Group Manager since January 2020. He served as
Vice President and Valley Region Manager from 2014 to 2019, Northern California Area Manager from 2012 to 2014, Design Build
Project Executive from 2010 to 2012, Group Construction Manager from 2007 to 2010, Arizona Operations Manager from 2005
to 2007, Arizona Construction Manager from 2001 to 2005, Plants Manager from 1999 to 2001, Estimator/Project Manager from
1995 to 1999 and Project Engineer from 1993 to 1995. Prior to joining Granite, he was employed at Oldcastle Tilcon from 1984 to
1991. Mr. Tatusko received a Construction Management degree from Southern Maine Tech.
Mr. Williams joined Granite in 1987 and has served as Senior Vice President and Group Manager since June 2022. He also served
as Regional Vice President from January 2015 to June 2022, as Large Project Executive from 2010 to 2015, as Operations Manager
in Southern California from 2009 to 2010, as Manager of Construction in Southern California from 2007 to 2009, as Construction
Manager in Sacramento from 2000 to 2007, as Senior Project Manager in Utah from 1998 to 2000, as Environmental Construction
Manager in California from 1994 to 1998, as Estimator/Project Manager in Santa Barbara from 1989 to 1994, and as Large Project
Engineer from 1987 to 1989. Mr. Williams holds a B.S. in Civil Engineering from Ohio Northern University.
Ms. Woolsey joined Granite in June 2021 and was appointed Chief Accounting Officer on January 1, 2022. Prior to this appointment
and since joining the Company in June 2021, Ms. Woolsey served in a non-officer role with accounting responsibilities and reported
directly to Ms. Curtis. Prior to joining the Company, Ms. Woolsey was the Vice President and Corporate Controller from December
2018 to August 2020 and Vice President, Corporate Controller and Chief Accounting Officer from August 2020 to June 2021 of
MDC Holdings, Inc. From February 2016 to December 2018, Ms. Woolsey was the Vice President and Controller of the Energy,
Infrastructure and Industrial Construction division of AECOM. Ms. Woolsey received a B.S. degree in Accounting from the University
of Idaho and is a Certified Public Accountant.
2022 Annual Report 11
Item 1A. Risk Factors
Set forth below and elsewhere in this report and in other documents we file with the SEC are various risks and uncertainties that
could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in
this report or otherwise adversely affect our business.
RISKS RELATED TO OUR BUSINESS
• Unfavorable economic conditions may have an adverse impact on our business. Volatility in the global financial
system, deterioration in general economic activity, inflation, rising interest rates, supply chain issues, the War in Ukraine,
other political, social or economic uncertainties, and fiscal, monetary and other policies that federal, state and local
governments may enact, including infrastructure spending or deficit reduction measures, may have an adverse impact on
our business, financial position, results of operations, cash flows and liquidity. In particular, low tax revenues, budget deficits,
financing constraints, including timing of long-term federal, state and local funding releases, and competing priorities could
negatively impact the ability of government agencies to fund existing or new infrastructure projects in the public sector.
These factors could have a material adverse effect on the financial market and economic conditions in the United States as
well as throughout the world, which may limit our ability and the ability of our customers to obtain financing and/or could
impair our ability to execute our strategy. In addition, levels of new commercial and residential construction projects could be
adversely affected by oversupply of existing inventories of commercial and residential properties, low property values and a
restrictive financing environment.
• We work in a highly competitive marketplace. We have multiple competitors in all the areas in which we work, and
some of our competitors are larger than we are and may have greater resources than we do. Government funding for
public works projects is limited, contributing to competition. An increase in competition may result in a decrease in new
awards, a decrease in profit margins, or both. In addition, should downturns in residential and commercial construction
activity occur, the competition for available public sector work would intensify, which could impact our revenue, CAP and
profit margins.
• Fixed price and fixed unit price contracts subject us to the risk of increased project cost. As more fully described in
“Contract Provisions and Subcontracting” under “Item 1. Business,” the profitability of our fixed price and fixed unit price
contracts can be adversely affected by a number of factors, including, among others, inflation, inefficiency and incorrect
estimates or assumptions, that can cause our actual costs to materially exceed the costs estimated at the time of our
original bid. This could result in reduced profits or a loss for that project and there could be a material adverse impact to our
business, results of operations and financial condition.
• Public health events, including health epidemics or pandemics or other contagious outbreaks, could negatively
impact our business, financial condition and results of operations. Our ability to perform work may be significantly
affected by public health events. If a public health epidemic or pandemic or other contagious outbreak, including COVID-19,
interferes with our ability, or that of our employees, contractors, suppliers, customers and other business partners to
perform our and their respective responsibilities and obligations relative to the conduct of our business, our operations may
be affected, which could have a material adverse effect on our business, results of operations and financial condition.
• We derive a substantial amount of our revenue from federal, state and local government agencies, and any
disruption in government funding or in our relationship with those agencies could adversely affect our business.
For the year ended December 31, 2022, approximately 70% of our construction revenue was funded by federal, state and
local government agencies and authorities. A significant amount of this revenue is derived under multi-year contracts, many
of which are appropriated on an annual basis. As a result, at the beginning of a project, the related contract may be only
partially funded, and additional funding is normally committed only as appropriations are made in each subsequent year. The
success and further development of our business depends, in large part, upon the continued funding of these government
programs, and upon our ability to obtain contracts and perform well under these programs. A significant reduction in
government spending, the absence of a bipartisan agreement on the federal government budget, a partial or full federal
government shutdown or a change in budgetary priorities could reduce demand for our services, cancel or delay projects
and have a material adverse effect on our business, results of operations and financial condition.
12 Granite Construction Incorporated
There are several additional factors that could cause government agencies or authorities to delay or cancel programs, to
reduce their orders under existing contracts, to exercise their rights to terminate contracts or not to exercise contract options
for renewals or extensions. Such factors, which include the following, could have a material adverse effect on our business,
financial condition and results of operations or the timing of contract payments from government agencies or authorities:
o the failure of the U.S. government to complete its budget and appropriations process before its fiscal year-end;
o changes in and delays or cancellations of government programs, procurements, requirements or appropriations;
o budget constraints or policy changes resulting in delay or curtailment of expenditures related to the services we provide;
o re-competes of government contracts;
o the timing and amount of tax revenue received by federal, state and local governments, and the overall level of
government expenditures;
o curtailment in the use of government contracting firms;
o delays associated with insufficient numbers of government staff to oversee contracts;
o the increasing preference by government agencies for contracting with small and disadvantaged businesses;
o competing political priorities and changes in the political climate regarding the funding or operation of the services
we provide;
o the adoption of new laws or regulations affecting our contracting relationships with the federal, state or local governments;
o unsatisfactory performance on government contracts by us or one of our subcontractors, negative government audits or
other events that may impair our relationship with federal, state or local governments;
o a dispute with or improper activity by any of our subcontractors; and
o general economic or political conditions.
• Our U.S. federal government contracts may give government agencies the right to modify, delay, curtail,
renegotiate or terminate existing contracts at their convenience at any time prior to their completion, which
could have a material adverse effect on our business, financial condition and results of operations. U.S. federal
government projects in which we participate as a contractor or subcontractor may extend for several years. Generally,
government contracts include the right to modify, delay, curtail, renegotiate or terminate contracts and subcontracts at the
government’s convenience any time prior to their completion. Any decision by a U.S. federal government client to modify,
delay, curtail, renegotiate or terminate our contracts at their convenience could have a material adverse effect on our
business, financial condition and results of operations.
• Our failure to win new contracts and renew existing contracts with private and public sector clients could have
a material adverse effect on our business, financial condition and results of operations. Our business depends on
our ability to win new contracts and renew existing contracts with private and public sector clients. Contract proposals and
negotiations are complex and frequently involve a lengthy bidding and selection process, which is affected by a number of
factors. These factors include market conditions, financing arrangements and required governmental approvals. If negative
market conditions arise, or if we fail to secure adequate financial arrangements or the required government approval, we
may not be able to pursue certain projects, which could have a material adverse effect on our business, financial condition
and results of operations.
• The timing of new contracts and termination of existing contracts may result in unpredictable fluctuations in
our cash flows and financial results. A substantial portion of our revenues are derived from project-based work that is
awarded through a competitive bid process. It is generally difficult to predict the timing and geographic distribution of the
projects that we will be awarded. The selection of, timing of, or failure to obtain projects, delays in awards of projects, the
re-bidding or termination of projects due to budget overruns, cancellations of projects or delays in completion of contracts
could result in the under-utilization of our assets, including our fleet of construction equipment, which could lower our
overall profitability and reduce our cash flows. Even if we are awarded contracts, we face additional risks that could affect
when, or whether, work will begin. This can present difficulty in matching workforce size and equipment location with
contract needs. In some cases, we may be required to bear the cost of a ready workforce and equipment that is larger
than necessary, which could have a material adverse effect on our business, financial condition and results of operations.
If an expected contract award or the related work release is delayed or not received, we could incur substantial costs
without receipt of any corresponding revenues. Moreover, construction projects for which our services are contracted may
require significant expenditures by us prior to receipt of relevant payments from the customer. Finally, the winding down or
completion of work on significant projects that were active in previous periods will reduce our revenue and earnings if such
significant projects have not been replaced in the current period.
2022 Annual Report 13
Many of our contracts may be canceled upon short notice, typically 30 to 90 days, even if we are not in default under the
contract, and we may be unsuccessful in replacing contracts, resulting in a decrease in our revenue, net income and liquidity.
Certain of our customers assign work to us on a project-by-project basis under master service agreements. Under these
agreements, our customers often have no obligation to assign a specific amount of work to us. Our operations could decline
significantly if the anticipated volume of work is not assigned to us or is canceled. Many of our contracts, including our
master service agreements, are open to competitive bidding at the expiration of their terms. There can be no assurance that
we will be the successful bidder on our existing contracts that come up for re-bid.
• Design-build contracts subject us to the risk of design errors and omissions. Design-build is a common method of
project delivery as it provides the owner with a single point of responsibility for both design and construction. We generally
subcontract design responsibility to architectural and engineering firms. However, in the event of a design error or omission
causing damages, there is risk that the subcontractor or their errors and omissions insurance would not be able to absorb
the liability. In this case we may be responsible, resulting in a potentially material adverse effect on our business, results of
operations and financial condition.
• Many of our contracts have penalties for late completion. In some instances, including many of our fixed price
contracts, we guarantee that we will complete a project by a certain date. If we subsequently fail to complete the project as
scheduled, we may be held responsible for costs resulting from the delay, generally in the form of contractually agreed-upon
liquidated damages. To the extent these events occur, the total cost of the project could exceed our original estimate and
we could experience reduced profits or a loss on that project and there could be a material adverse impact to our business,
results of operations and financial condition.
• Our failure to adequately recover on affirmative claims brought by us against project owners or other project
participants (e.g., back charges against subcontractors) for additional contract costs could have a negative
impact on our liquidity and future operations. In certain circumstances, we assert affirmative claims to which we believe
we are entitled against project owners, engineers, consultants, subcontractors or others involved in a project for additional
costs exceeding the contract price or for amounts not included in the original contract price. These types of affirmative
claims occur due to matters such as delays or changes from the initial project scope, both of which may result in additional
costs. Often, these affirmative claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to
accurately predict when and on what terms they will be fully resolved. For additional information, see “—Accounting for
our revenues and costs involve significant estimates” risk factor below. The potential gross profit impact of recoveries for
affirmative claims may be material in future periods when they, or a portion of them, become probable and estimable or
are settled. When these types of events occur, we use working capital to cover cost overruns pending the resolution of the
relevant affirmative claims and may incur additional costs when pursuing such potential recoveries. A failure to recover on
these types of affirmative claims promptly and fully could have a negative impact on our business, results of operations and
financial condition. In addition, while clients and subcontractors may be obligated to indemnify us against certain liabilities,
such third parties may refuse or be unable to pay us.
• Our financial position could be impacted by worse than anticipated results in our Central operating group. In
2020, we completed a strategic review of our former Heavy Civil operating group, which is now part of our Central
operating group, and have taken actions that we believe will be beneficial to us and our stockholders. However, the results
of our planned actions, and the timing of expected benefits, remain uncertain. Underperformance in our Central operating
group could have a material adverse effect on our business, results of operations and financial condition.
• Unavailability of insurance coverage could have a negative effect on our operations and results. We maintain
insurance coverage as part of our overall risk management strategy and pursuant to requirements to maintain specific
coverage that are contained in our financing agreements and in most of our construction contracts. Although we have been
able to obtain reasonably priced insurance coverage to meet our requirements in the past, there is no assurance that we
will be able to do so in the future, and our inability to obtain such coverage could have an adverse impact on our ability to
procure new work, which could have a material adverse effect on our business, results of operations and financial condition.
• An inability to obtain bonding could have a negative impact on our operations and results. As more fully described
in “Insurance and Bonding” under “Item 1. Business,” we generally are required to provide surety bonds securing our
performance under the majority of our public and private sector contracts. Our inability to obtain reasonably priced surety
bonds in the future and, while we monitor the financial health of our insurers and the insurance market, catastrophic events
could reduce available limits or the breadth of coverage, both of which could significantly affect our ability to be awarded
new contracts and could, therefore, have a material adverse effect on our business, results of operations and financial
condition.
14 Granite Construction Incorporated
• We use certain commodity products that are subject to significant price fluctuations. We are exposed to various
commodity price risks, including, but not limited to, diesel fuel, natural gas, propane, steel, cement and liquid asphalt arising
from transactions that are entered into in the normal course of business. We use petroleum-based products, such as fuels,
lubricants and liquid asphalt, to power or lubricate our equipment, operate our plants, and as a significant ingredient in the
asphaltic concrete we manufacture for sale to third parties and use in our asphalt paving construction projects. Although
we are partially protected by asphalt or fuel price escalation clauses in some of our contracts, many contracts provide no
such protection. We also use steel and other commodities in our construction projects that can be subject to significant
price fluctuations. In order to manage or reduce commodity price risk, we monitor the costs of these commodities at the
time of bid and price them into our contracts accordingly. Additionally, some of our contracts may include commodity
price escalation clauses which partially protect us from increasing prices. At times we enter into supply agreements or pre-
purchase commodities to secure pricing and use financial contracts to further manage a portion of the price risk. Significant
price fluctuations could have a material adverse effect on our business, results of operations and financial condition.
• Weather can significantly affect our revenues and profitability. Our ability to perform work is significantly affected by
weather conditions such as precipitation and temperature. Changes in weather conditions can cause delays and otherwise
significantly affect our project costs. The impact of weather conditions can result in variability in our quarterly revenues and
profitability, particularly in the first and fourth quarters of the year.
• Force majeure events, including natural disasters and terrorists’ actions, could negatively impact our business,
which may affect our financial condition, results of operations or cash flows. Force majeure or extraordinary events
beyond the control of the contracting parties, such as natural and man-made disasters, as well as terrorist actions, could
negatively impact the economies in which we operate. We typically negotiate contract language where we are allowed
certain relief from force majeure events in private client contracts and review and attempt to mitigate force majeure events
in both public and private client contracts. We remain obligated to perform our services after most extraordinary events
subject to relief that may be available pursuant to a force majeure clause. If we are not able to react quickly to force majeure
events, our operations may be affected, which could have a material adverse effect on our business, results of operations
and financial condition.
• Our CAP is subject to unexpected adjustments and cancellations and could be an uncertain indicator of our
future earnings. We cannot guarantee that the revenues projected in our CAP will be realized or, if realized, will be
profitable. Projects reflected in our CAP may be affected by project cancellations, scope adjustments, time extensions or
other changes. Such changes may adversely affect the revenue and profit we ultimately realize on these projects.
• Rising inflation and/or interest rates could have an adverse effect on our business, financial condition and results
of operations. Economic factors, including inflation and rising interest rates, could have a negative impact on our business.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs
through price increases. Our inability or failure to do so could have a material adverse effect on our financial position, results
of operations, cash flows and liquidity. In addition, increases in interest rates will result in higher interest expense related
to borrowings under our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), which could have a
material adverse effect on our business, results of operations and financial condition.
• As part of our growth strategy, we have made and may make future acquisitions, and acquisitions involve many
risks and uncertainties. These risks and uncertainties include:
o our ability to complete acquisitions in accordance with our expected plans, on terms and conditions acceptable to us or
our anticipated time frame, or at all;
o difficulties identifying all significant risks during our due diligence activities;
o that acquisitions involve significant costs and require the time and attention of our management, which may divert
management’s attention from ongoing operations;
o potential difficulties and increased costs associated with completion of any assumed construction projects;
o our ability to successfully manage or achieve the results we expect to experience from the acquisitions and that we may
lose key employees or customers of the acquired companies;
o assumption of liabilities of an acquired business, including liabilities that were unknown at the time the acquisition was
negotiated;
o difficulties related to integrating the operations and internal controls, assimilating personnel, services, and systems of an
acquired business and to assimilating marketing and other operational capabilities;
o increased burdens on our staff and on our administrative, internal control and operating systems, which may hinder our
legal and regulatory compliance activities;
2022 Annual Report 15
o if we issue additional equity securities, such issuances could have the effect of diluting our earnings per share as well as
our existing shareholders’ individual ownership percentages in the Company;
o the recording of goodwill or other non-amortizable intangible assets that will be subject to subsequent impairment
testing and potential impairment charges, as well as amortization expenses related to certain other intangible assets; and
o while we often obtain indemnification rights from the sellers of acquired businesses, such rights may be difficult to
enforce and the indemnitors may not have the ability to financially support the indemnity.
Failure to successfully manage and integrate acquisitions could harm our business, results of operations and financial
condition.
• As part of our strategy, we may make divestitures, and divestitures involve many risks and uncertainties. These
risks and uncertainties include:
o our ability to locate suitable acquirers for our divestitures;
o our ability to complete the divestitures in accordance with our expected plans or anticipated time frame, or at all;
o our ability to complete the divestitures on terms and conditions acceptable to us;
o difficulties separating the assets and personnel related to businesses that we expect to divest from the businesses we
expect to retain;
o that divestitures involve significant costs and require the time and attention of our management, which may divert
management’s attention from ongoing operations;
o our ability to successfully cause a buyer of a divested business to assume the liabilities of that business, or even if such
liabilities are assumed, we may have difficulties enforcing our rights, contractual or otherwise against the buyer;
o the need to obtain regulatory approvals and other third-party consents, which potentially could disrupt customer and
vendor relationships;
o potential additional tax obligations or the loss of tax benefits;
o the divestiture could negatively impact our profitability because of losses that may result from a sale, the loss of revenue
or a decrease in cash flows; and
o following the completion of a divestiture, we may have less diversity in our business and in the markets we serve as well
as our client base.
Failure to successfully manage divestitures may generate fewer benefits than expected and could harm our business, results
of operations and financial condition.
•
In connection with acquisitions or divestitures, we may become subject to liabilities. In connection with any
acquisitions, we may acquire liabilities or defects such as legal claims, including but not limited to third party liability and
other tort claims; claims for breach of contract; employment-related claims; environmental liabilities, conditions or damage;
permitting, regulatory or other compliance with law issues; or tax liabilities. If we acquire any of these liabilities, and they are
not adequately covered by insurance or an enforceable indemnity or similar agreement from a creditworthy counterparty, we
may be responsible for significant out-of-pocket expenditures. In connection with any divestitures, we may incur liabilities
for breaches of representations and warranties or failure to comply with operating covenants under any agreement for a
divestiture. We may also retain exposure on financial or performance guarantees, contractual, employment, pension and
severance obligations or other liabilities of the divested business and potential liabilities that may arise under law because
of the disposition or the subsequent failure of an acquiror. As a result, performance by the divested businesses or other
conditions outside of our control could have a material adverse effect on our business, financial condition and results of
operations. In addition, we may indemnify a counterparty in a divestiture for certain liabilities of the divested business
or operations subject to the divestiture transaction. These liabilities, if they materialize, could have a material adverse effect
on our business, results of operations and financial condition.
RISKS RELATED TO OUR HUMAN CAPITAL, JOINT VENTURES AND SUBCONTRACTORS
• Our success depends on attracting and retaining qualified personnel, joint venture partners and subcontractors
in a competitive environment. The success of our business is dependent on our ability to attract, develop and retain
qualified personnel, joint venture partners, advisors and subcontractors. Changes in general or local economic conditions and
the resulting impact on the labor market and on our joint venture partners may make it difficult to attract or retain qualified
individuals in the geographic areas where we perform our work. If we are unable to provide competitive compensation
packages, high-quality training programs and attractive work environments or to establish and maintain successful
partnerships, our reputation, relationships and/or ability to profitably execute our work could be adversely impacted.
16 Granite Construction Incorporated
• Failure to maintain safe work sites could result in significant losses. Construction and maintenance sites are
potentially dangerous workplaces and often put our employees and others in close proximity with mechanized equipment,
moving vehicles, chemical and manufacturing processes, and highly regulated materials. On many sites, we are responsible
for safety and, accordingly, must implement safety procedures. If we fail to implement these procedures or if the procedures
we implement are ineffective, we may suffer the loss of or injury to our employees, as well as expose ourselves to possible
litigation. Our failure to maintain adequate safety standards through our safety programs could result in reduced profitability
or the loss of projects or clients, and could have a material adverse impact on our financial position, results of operations,
cash flows and liquidity.
• Strikes or work stoppages could have a negative impact on our operations and results. We are party to collective
bargaining agreements covering a portion of our craft workforce. Although strikes or work stoppages have not had
a significant impact on our operations or results in the past, such labor actions could have a significant impact on our
operations and results if they occur in the future.
• Failure of our subcontractors to perform as anticipated could have a negative impact on our results. As further
described in “Contract Provisions and Subcontracting” under “Item 1. Business,” we subcontract portions of many of
our contracts to specialty subcontractors, but we are ultimately responsible for the successful completion of their work.
Although we seek to require bonding or other forms of guarantees, we are not always successful in obtaining those bonds
or guarantees from our higher-risk subcontractors. We may be responsible for the failures on the part of our subcontractors
to perform as anticipated, resulting in a potentially adverse impact on our cash flows and liquidity. In addition, the total costs
of a project could exceed our original estimates and we could experience reduced profits or a loss for that project, which
could have an adverse impact on our financial position, results of operations, cash flows and liquidity.
• Our joint venture contracts subject us to risks and uncertainties, some of which are outside of our control. As
further described in Note 1 of “Notes to the Consolidated Financial Statements” and in “Joint Ventures” under “Item 1.
Business,” we perform certain construction contracts as a limited or minority member of joint ventures. Participating in these
arrangements exposes us to risks and uncertainties, including the risk that if our partners fail to perform under joint and
several liability contracts, we could be liable for completion of the entire contract. In addition, if our partners are not able or
willing to provide their share of capital investment to fund the operations of the venture, there could be unanticipated costs
to complete the projects, financial penalties or liquidated damages. These situations could have a material adverse effect on
our financial position, results of operations, cash flows and liquidity.
To the extent we are not the controlling partner, we have limited control over many of the decisions made with respect to
the related construction projects. These joint ventures may not be subject to the same compliance requirements, including
those related to internal control over financial reporting. While we have controls to mitigate the risks associated with
reliance on their control environment and financial information, to the extent the controlling partner makes decisions that
negatively impact the joint venture or internal control problems arise within the joint venture, it could have a material
adverse impact on our business, financial position, results of operations, cash flows and liquidity.
• We may be unable to identify and contract with qualified DBE contractors to perform as subcontractors. Certain
of our government agency projects contain minimum DBE participation clauses. Although we have programs in place to
ensure compliance, if we fail to complete these projects with the minimum DBE participation, we may be held responsible
for breach of contract, which may include restrictions on our ability to bid on future projects as well as monetary damages.
To the extent we are responsible for monetary damages, the total costs of the project could exceed our original estimates,
we could experience reduced profits or a loss for that project and there could be a material adverse impact to our financial
position, results of operations, cash flows and liquidity.
• We may be required to contribute cash to meet our unfunded pension obligations in certain multi-employer
plans. As of December 31, 2022, three of our wholly-owned subsidiaries, Granite Construction Company, Layne
Christensen Company and Granite Industrial, Inc., participate in various domestic multi-employer pension plans on behalf of
union employees. Union employee benefits generally are based on a fixed amount for each year of service. We are required
to make contributions to the plans in amounts established under collective bargaining agreements. Pension expense is
recognized as contributions are made. The domestic pension plans are subject to the Employee Retirement Income Security
Act of 1974 (“ERISA”). Under ERISA, a contributor to a multi-employer plan may be liable, upon termination or withdrawal
from a plan, for its proportionate share of a plan’s unfunded vested liability. While we currently have no intention of
withdrawing from a plan and unfunded pension obligations have not significantly affected our operations in the past, there
can be no assurance that we will not be required to make material cash contributions to one or more of these plans to
satisfy certain underfunded benefit obligations in the future.
2022 Annual Report 17
RISKS RELATED TO THE RESTATEMENT
• We have restated our consolidated financial statements for certain prior periods, which has affected and may
continue to affect our business, results of operations and financial condition. This Form 10-K includes restated
unaudited quarterly financial information for the Restated Periods that corrects (a) errors related to deferred taxes and
the calculation of income tax expense in connection with the sale of Inliner and (b) other immaterial errors. For additional
information, see the Supplementary Data included in Part IV, Item 15(a) of this Form 10-K. Additionally, we previously
restated certain periods in 2019 and prior to correct misstatements associated with project forecasts in our former Heavy
Civil operating group, which is now part of our Central operating group. Taken collectively, such restatements:
o had and may continue to have the effect of eroding investor confidence in us and our financial reporting and accounting
practices and processes;
o negatively impacted and may continue to negatively impact the trading price of our common stock;
o diverted and may continue to divert management’s attention from the operation of our business;
o required that we incur significant expenses and may require that we incur significant additional expenses relating to any
litigation or regulatory examinations, investigations, proceedings or orders;
o may make it more difficult, expensive and time consuming for us to raise capital, if necessary, on acceptable terms, if at all;
o may make it more difficult to pursue transactions or implement business strategies that might otherwise be beneficial to
our business; and
o may negatively impact our reputation with our customers.
The occurrence or continued occurrence of any of the foregoing could have a material adverse effect on our business, results
of operations and financial condition.
• We have identified a material weakness in our internal control over financial reporting which could, if not
remediated, adversely impact the reliability of our financial statements, result in material misstatements in our
financial statements and cause current and potential stockholders to lose confidence in our financial reporting,
which in turn could adversely affect the trading price of our common stock. We have concluded that there is a
material weakness in our internal control over financial reporting. For additional information on the material weakness
identified and our remedial efforts, see “Item 9A, Controls and Procedures.” The material weakness resulted in the
restatement of our consolidated financial statements and related disclosures for the Restated Periods. Thus, management
has determined that our disclosure controls and procedures and internal control over financial reporting were not effective as
of December 31, 2022. Under Public Company Accounting Oversight Board standards, a material weakness is a deficiency,
or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
misstatement of our consolidated annual or interim financial statements will not be prevented or detected on a timely basis.
The existence of this issue could adversely affect us, our reputation or investor perceptions of us. We will take measures to
remediate the underlying cause of the material weakness noted above. As we continue to evaluate and work to remediate
the material weakness, we may determine to take additional measures to address the control deficiencies.
Although we plan to complete this remediation process as quickly as possible, we cannot provide any assurance as to when the
remediation process will be complete, and our measures may not prove to be successful in remediating the material weakness.
If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant
deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial
statements may contain misstatements and we could be required to restate our financial results. In addition, if we are unable to
successfully remediate the material weakness or if we are unable to produce accurate consolidated financial statements in the
future, our stock price, liquidity and access to the capital markets may be adversely affected and we may be unable to maintain
compliance with applicable stock exchange listing requirements and debt covenant requirements. Further, because of its inherent
limitations, even our remediated and effective internal control over financial reporting may not prevent or detect all misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in our conditions, or that the degree of compliance with our policies or procedures may deteriorate.
• We were involved in, and may in the future be subject to, litigation, regulatory examinations, investigations,
proceedings or orders as a result of or relating to the restatement of our financial statements and if any of these
are resolved adversely against us, it could harm our business, results of operations and financial condition. We
were involved in, and may in the future be subject to, litigation, regulatory examinations, investigations, proceedings or
orders, the assessment of civil monetary penalties, or equitable remedies, and the expenses associated with such matters as
a result of or relating to the restatement of our financial statements and reported material weaknesses. Our management
may be required to devote significant time and attention to these matters. If any of these matters are resolved adversely
against us, it could harm our business, results of operations and financial condition.
18 Granite Construction Incorporated
RISKS RELATED TO LEGAL, REGULATORY, ACCOUNTING AND TAX ISSUES
• Government contractors are subject to suspension or debarment from government contracting. Government
contracts expose us to a variety of risks that differ from those associated with private sector contracts. Various statutes to
which our operations are subject, including, among others, the Davis-Bacon Act (which regulates wages and benefits),
the Walsh-Healy Act (which prescribes a minimum wage and regulates overtime and working conditions), Executive Order
11246 (which establishes equal employment opportunity and affirmative action requirements) and the Drug-Free Workplace
Act, provide for mandatory suspension and/or debarment of contractors in certain circumstances involving statutory
violations. In addition, the Federal Acquisition Regulation and various state statutes provide for discretionary suspension and/
or debarment in certain circumstances that might call into question a contractor’s willingness or ability to act responsibly,
including as a result of being convicted of, or being found civilly liable for, fraud or a criminal offense in connection with
obtaining, attempting to obtain or performing a public contract or subcontract. The scope and duration of any suspension
or debarment may vary depending upon the facts and the statutory or regulatory grounds for debarment and could have a
material adverse effect on our financial position, results of operations, cash flows and liquidity.
• We are involved in lawsuits, legal proceedings and indemnity claims in the ordinary course of our business and
may in the future be subject to other litigation, legal proceedings and claims, and, if any of these are resolved
adversely against us, it could harm our business, financial condition and results of operations. Any litigation, other
legal proceedings or indemnity claim could result in an unfavorable judgment that may not be reversed upon appeal or in
payments of substantial monetary damages or fines, or we may decide to settle lawsuits on similarly unfavorable terms, any
of which could adversely affect our business, financial condition and results of operations. We could also suffer an adverse
impact on our reputation and a diversion of management’s attention and resources, which could have a material adverse
effect on our business, financial condition and results of operations.
• Government contracts generally have strict regulatory requirements. Approximately 70% of our construction-
related revenue in 2022 was derived from contracts funded by federal, state and local government agencies and authorities.
Government contracts are subject to specific procurement regulations, contract provisions and a variety of socioeconomic
requirements relating to their formation, administration, performance and accounting and often include express or implied
certifications of compliance. Claims for civil or criminal fraud may be brought for violations of regulations, requirements or
statutes. We may also be subject to qui tam litigation brought by private individuals on behalf of the government under the
Federal Civil False Claims Act, which could include claims for up to treble damages. Further, if we fail to comply with any
of the regulations, requirements or statutes or if we have a substantial number of accumulated Occupational Safety and
Health Administration, Mine Safety and Health Administration or other workplace safety violations, our existing government
contracts could be terminated and we could be suspended from government contracting or subcontracting, including
federally funded projects at the state level. Should one or more of these events occur, it could have a material adverse effect
on our financial position, results of operations, cash flows and liquidity.
• We are subject to environmental and other regulation. As more fully described in “Government Regulations” under
“Item 1. Business,” we are subject to a number of federal, state, local and foreign laws and regulations relating to the
environment, including the remediation of soil and groundwater contamination, emission and discharge of materials into
the environment and reclamation and closure of operations, workplace health and safety and a variety of socioeconomic
requirements and are required to obtain and maintain a number of environmental approvals, permits and financial
assurances. Noncompliance with such laws, regulations and permits can result in, among other things, substantial penalties,
or termination or suspension of government contracts or our operations as well as civil and criminal liability. In addition,
some environmental laws and regulations impose strict, joint and several liability and responsibility on present and former
owners, operators or users of facilities and sites, and entities that disposed or arranged for the disposal of hazardous
substances at a third-party site, for contamination at such facilities and sites, without regard to causation or knowledge of
contamination. We occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or
closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must
be remediated, and closures of facilities may trigger compliance requirements, including reclamation requirements, that
may not be applicable to operating facilities. While compliance with these laws and regulations has not materially adversely
affected our operations in the past, there can be no assurance that these requirements, laws or regulations will not change
and that compliance will not adversely affect our operations in the future. Furthermore, we cannot provide assurance that
existing or future circumstances or developments with respect to contamination will not require us to make significant
remediation or restoration expenditures.
2022 Annual Report 19
•
Increasing restrictions on securing aggregate reserves could negatively affect our future operations and results.
Tighter regulations and the finite nature of property containing suitable aggregate reserves are making it increasingly
challenging and costly to secure aggregate reserves. Although we have thus far been able to secure reserves to support our
business, our financial position, results of operations, cash flows and liquidity may be adversely affected by an increasingly
difficult permitting process.
• Accounting for our revenues and costs involves significant estimates. As further described in “Critical
Accounting Estimate” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” accounting for our contract-related revenues and costs, as well as other expenses, requires management to
make a variety of significant estimates and assumptions. These assumptions and estimates may change significantly in the
future and could result in the reversal of previously recognized revenue and profit. Such changes could have a material
adverse effect on our financial position and results of operations.
• A change in tax laws or regulations of any federal, state or international jurisdiction in which we operate could
increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows
and liquidity. We continue to assess the impact of various U.S. federal, state, local and international legislative proposals
that could result in a material increase to our U.S. federal, state, local and/or international taxes. We cannot predict whether
any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted,
or if modifications were to be made to certain existing regulations, the consequences could have a material adverse impact
on us, including increasing our tax burden, increasing our cost of tax compliance or otherwise adversely affecting our
financial position, results of operations, cash flows and liquidity.
• We may be exposed to liabilities under the FCPA and any determination that we or any of our subsidiaries has
violated the FCPA could have a material adverse effect on our business. The FCPA generally prohibits companies
and their affiliates from making improper payment to non-U.S. officials for the purpose of obtaining or retaining
business. Our internal policies, procedures and Code of Conduct mandate compliance with these anti-corruption laws.
However, we operate in some countries known to experience corruption. Despite our training and compliance programs,
we cannot provide assurance that our internal policies and procedures will always protect us from violation of such anti-
corruption laws committed by our affiliated entities or their respective officers, directors, employees and agents. We could
also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition
of participating in or curtailment of business operations in those jurisdictions and the seizure of certain of our assets.
Our customers in those jurisdictions could also seek to impose penalties or take other actions adverse to our interest. In
addition, we could face other third-party claims by, among others, our stockholders, debt holders or other interest holders
or constituents. Violations of FCPA laws, allegations of such violations and/or disclosure related to any relevant investigation
could have a material adverse impact on our financial position, results of operations, cash flows and liquidity for reasons
including, but not limited to, an adverse effect on our reputation, our ability to obtain new business or retain existing
business, to attract and retain employees, to access the capital markets and/or could give rise to an event of default under
the agreements governing our debt instruments.
RISKS RELATED TO INFORMATION TECHNOLOGY
• Changes to our outsourced software or infrastructure vendors as well as any sudden loss, breach of security,
disruption or unexpected data or vendor loss associated with our information technology systems could have
a material adverse effect on our business. We rely on third-party software and infrastructure to run critical accounting,
project management and financial information systems. If software or infrastructure vendors decide to discontinue further
development, integration or long-term maintenance support for our information systems, or there is any system interruption,
delay, breach of security, loss of data or loss of a vendor, we may need to migrate some or all of our accounting, project
management and financial information to other systems. These disruptions could increase our operational expense as well
as impact the management of our business operations, which could have a material adverse effect on our financial position,
results of operations, cash flows and liquidity.
• Cybersecurity attacks on or breaches of our information technology environment could result in business
interruptions, remediation costs and/or legal claims. We may be subject to cybersecurity attacks, including through
the use of ransomware and other forms of unauthorized access of our digital data with the intent to misappropriate
information, corrupt data or cause operational disruptions. If a failure of our safeguarding measures were to occur, or if
software or third-party vendors that support our information technology environment are compromised, it could have a
negative impact to our business and result in business interruptions, remediation costs and/or legal claims, which could have
a material adverse effect on our financial position, results of operations, cash flows and liquidity.
20 Granite Construction Incorporated
RISKS RELATED TO OUR CAPITAL STRUCTURE
• Failure to remain in compliance with covenants under our Credit Agreement, service our indebtedness, or fund our
other liquidity needs could adversely impact our business. Our failure to comply with any of the restrictive or financial
covenants would constitute an event of default under our Credit Agreement. Our failure to pay principal, interest or other
amounts when due or within the relevant grace period on our 2.75% Convertible Notes or our Credit Agreement would
constitute an event of default under the indenture governing our 2.75% Convertible Notes or the Credit Agreement. A default
under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) termination of such
facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) acceleration of amounts
owed under the Credit Agreement; and/or (v) foreclosure on any lien securing the obligations under such facility. A default
under the indenture governing our 2.75% Convertible Notes could result in acceleration of the maturity of the notes. If we are
unable to service our debt obligations as a result of rising interest rates or any other reason or fund our other liquidity needs,
we could be forced to curtail our operations, reorganize our capital structure (including through bankruptcy proceedings)
or liquidate some or all of our assets in a manner that could cause holders of our securities to experience a partial or total
loss of their investment in us. See definition of Credit Agreement and 2.75% Convertible Notes in Note 14 to “Notes to the
Consolidated Financial Statements.”
• Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our
business to pay our debt. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance
our indebtedness, including our 2.75% Convertible Notes and the obligations under our Credit Agreement, depends on our
future performance, which is subject to economic, financial, competitive and other factors beyond our control. Additionally,
borrowings under our Credit Agreement bear interest at a variable rate. As interest rates increase, our interest expense will
also increase if we continue to borrow or increase our borrowings under the credit facility. Our business may not continue
to generate sufficient cash flow from operations in the future to service our debt and make necessary capital expenditures.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets,
restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to
refinance our indebtedness will depend on the financial markets and our financial condition at such time. We may not be
able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on
our debt obligations.
• The convertible note hedge and warrant transactions may affect the value of our common stock. In connection
with our 2.75% Convertible Notes offering, we entered into convertible note hedge transactions with option counterparties.
We also entered into warrant transactions with the option counterparties. The convertible note hedge transactions are
expected generally to reduce the potential dilution to our common stock upon conversion of the 2.75% Convertible Notes
and/or offset any cash payments we elect to make in excess of the principal amount of converted notes, as the case may
be. However, the warrant transactions could separately have a dilutive effect on our common stock to the extent that the
market price per share of our common stock exceeds the strike price of the warrants ($53.44 per share) and we deliver
shares of our common stock upon exercise of such warrants instead of paying cash. Additionally, in connection with
establishing their initial hedge of the convertible note hedge and warrant transactions, the option counterparties may have
entered into various derivative transactions with respect to our common stock. The option counterparties may modify their
hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or
selling our common stock or other securities of ours in secondary market transactions. This activity could cause an increase
or a decrease in the market price of our common stock. The effect, if any, of these transactions and activities on the market
price of our common stock will depend in part on market conditions and cannot be ascertained at this time, but these
activities could adversely affect the market price of our common stock.
• We are subject to counterparty risk with respect to the convertible note hedge transactions. The option
counterparties are financial institutions, and we will be subject to the risk that one or more of such option counterparties
may default under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparties
is not, and will not be, secured by any collateral. If any option counterparty becomes subject to bankruptcy or other
insolvency proceedings with respect to such option counterparty’s obligations under the relevant convertible note hedge
transaction, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time
under such transaction. Our exposure will depend on many factors but, generally, an increase in our exposure will be
positively correlated to an increase in our common stock market price and in the volatility of the market price of our
common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and dilution
with respect to our common stock. While all option counterparties were deemed to be of suitable financial strength on
the transaction date, we can provide no assurance as to the financial stability or viability of any option counterparty.
2022 Annual Report 21
• The price of our common stock historically has been volatile. Our stock price may continue to be volatile and subject
to significant price and volume fluctuations in response to market and other factors, including the other factors discussed in
“Risks Factors;” variations in our quarterly operating results from our expectations or those of securities analysts or investors;
downward revisions in securities analysts’ estimates; and announcement by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments. In addition, the sale or the availability for sale of a large
number of shares of common stock in the public market may cause the price of our common stock to decline.
• Delaware law and our charter documents may impede or discourage a takeover, which could reduce potential
increases in the market price of our common stock. We are a Delaware corporation, and the anti-takeover provisions of
Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control
would be beneficial to our existing stockholders. In addition, our Board of Directors has the power, without stockholder
approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock. The ability
of our Board of Directors to create and issue a new series of preferred stock and certain provisions of Delaware law and
our certificate of incorporation and bylaws could impede a merger, takeover or other business combination involving us
or discourage a potential acquirer from making a tender offer for our common stock, which, under certain circumstances,
could reduce potential increases in the market price of our common stock.
RISKS RELATED TO CLIMATE CHANGE
• Physical, transition and regulatory risks related to climate change could have a material adverse impact on our
business, financial condition and results of operations. Physical risks related to climate change, such as changing sea
levels, temperature fluctuations, severe storms, and energy and technological disruptions, could cause delays and increases
in project costs, resulting in variability in our revenue and profitability, as well as potentially adverse impacts to our operating
results and financial condition. In addition, growing public concern about climate change has resulted in the increased
focus of local, state, regional, national and international regulatory bodies on greenhouse gas emissions and climate change
issues. Legislation to regulate greenhouse gas emissions has periodically been introduced in the U.S. Congress and in the
legislatures of various states in which we operate, and there has been a wide-ranging policy debate, both in the United States
and internationally, regarding the regulation of greenhouse gas emissions. Such policy changes, including any enactment of
increasingly stringent emissions or other environmental regulations, could increase the costs of projects for us and for our
clients and, in some cases, delay or even prevent a project from going forward, thereby potentially reducing demand for our
services. Consequently, this could have a material adverse effect on our business, financial condition and results of operations.
• We may be unable to achieve our sustainability commitments and targets which could result in the loss of
investors and customers and damage to our reputation. We are committed to advancing our environmental, social
and governance strategy. However, achievement of our sustainability commitments and targets is subject to risks and
uncertainties, many of which are outside of our control. These risks and uncertainties include, but are not limited to: our
ability to execute our operational strategies and achieve our goals within the currently projected costs and the expected
timeframes; the availability and cost of alternative fuels, availability of renewable energy; unforeseen design, operational
and technological difficulties; the outcome of research efforts and future technology developments; compliance with, and
changes or additions to, global and regional regulations, taxes, charges, mandates or requirements relating to greenhouse
gas emissions, carbon costs or climate-related goals; labor-related regulations and requirements that restrict or prohibit
our ability to impose requirements on third party contractors; adapting products to customer preferences and customer
acceptance of sustainable supply chain solutions; and the actions of competitors and competitive pressures.
Although we believe that our sustainability commitments and targets are achievable, there is no assurance that we will
be able to successfully implement our strategies and achieve our targets. Investors have recently increased their focus on
environmental, social and governance matters, including practices related to greenhouse gas emissions and climate change.
Additionally, an increasing percentage of the investment community considers sustainability factors in making investment
decisions. If we are unable to meet our commitments and targets and appropriately address sustainability enhancement, we
may lose investors, customers or partners, our stock price may be negatively impacted, our reputation may be negatively
affected and it may be more difficult for us to compete effectively, all of which could have an adverse effect on our business,
financial condition and results of operations, as well as on the price of our common stock.
22 Granite Construction Incorporated
The foregoing list is not all-inclusive. There can be no assurance that we have correctly identified and appropriately assessed
all factors affecting our business or that the publicly available and other information with respect to these matters is complete
and correct. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may
also adversely affect us. These developments could have material adverse effects on our business, financial condition, results of
operations and liquidity. For these reasons, the reader is cautioned not to place undue reliance on our forward-looking statements.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Quarry Properties
We own or lease quarry properties that contain mineral resources that we extract and process into construction materials.
As defined by the SEC, mineral resources are a concentration or occurrence of material of economic interest in or on the earth’s
crust in such form, grade or quality and quantity that there are reasonable prospects for economic extraction. A mineral resource
is a reasonable estimate of mineralization, taking into account relevant factors such as cut-off grade, likely mining dimensions,
location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part,
become economically extractable.
As defined by the SEC, mineral reserves are an estimate of tonnage and grade or quality of indicated and measured mineral
resources that, in the opinion of a qualified person, as defined by the SEC, can be the basis of an economically viable project. More
specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and
allowances for losses that may occur when the material is mined or extracted.
Our mineral resources and reserves are based on estimates made by qualified persons who are employees of the Company and
are based primarily on geological evidence, sampling and testing and appropriate modifying factors. Amounts presented in the
tables below are based on various assumptions to determine estimated economically mineable tons including site specific prices
for sand and gravel and hard rock between $5 - $15 per ton. The price per ton estimates use a saleable product (i.e., materials
that are ready for sale) as a point of reference and are escalated over time by the Producer’s Price Index for Construction Sand,
Gravel and Crushed Stone (product 1321). Pricing for aggregates tend to remain similar for long periods of time; therefore, we
use current pricing to estimate prices and we reassess at least annually to verify there have not been material changes. Changes to
the estimates and assumptions from those currently anticipated could have a material impact on the mineral resource and mineral
reserve estimates.
As of December 31, 2022, we had open pit quarry properties available for the extraction of sand, gravel and hard rock. Both of
our reportable segments use these quarry properties to extract and process sand, gravel and hard rock into construction material
for internal use and for sale to third parties. As of December 31, 2022, we had all the permits necessary to mine and process sand,
gravel and hard rock at our active quarry properties. As of December 31, 2022, no individual mining operation was considered
material to our business or financial condition. Aggregate annual production for all mining properties was 16.3 million tons,
16 million tons, and 14.3 million tons during the years ended December 31, 2022, 2021 and 2020, respectively. The following map
shows the approximate locations of our permitted quarry properties as of December 31, 2022:
2022 Annual Report 23
California, Utah and Washington are the states that individually comprise more than 10% of our total mining operations. The
following tables present information about our quarry properties as of December 31, 2022 (tons in millions):
State
California
Utah
Washington
All Other States
Total
Number of
Properties
31
9
28
15
83
Resources and Reserves for
Each Product Type (tons)
Sand & Gravel
471.0
103.5
48.8
52.6
675.9
Hard Rock
286.0
33.2
71.5
59.0
449.7
Percentage of Resources and
Reserves Owned and Leased
Leased(2)
Owned(1)
59%
72%
32%
89%
61%
41%
28%
68%
11%
39%
Acreage
10,381
1,333
5,651
3,674
21,039
(1)
(2)
Owned properties are properties we own or in which we have, or it is probable that we will have, a direct or indirect economic interest.
Leases are defined as properties where we operate, or it is probable we will operate, under a lease or other legal agreement that grants us
ownership or similar rights that authorize us, as principal, to sell or otherwise dispose of the mineral and includes properties that we sublease
and from which we receive royalties, which are both considered immaterial. Our leases have terms which range from month-to-month to
42 years with most including an option to renew.
The life cycle of mining sand, gravel and hard rock begins with exploration and continues through development and production.
After a sand, gravel and hard rock deposit has been identified through exploration, the mine is developed before production
begins. The following table presents the number of properties in each respective stage as of December 31, 2022 for all mining
properties:
State
California
Utah
Washington
All Other States
24 Granite Construction Incorporated
Exploration Development Production
20
8
17
12
8
1
10
3
3
—
1
—
Mineral Resources
The table below presents information on measured, indicated and inferred mineral resources. Estimates of measured mineral
resources are based on conclusive geological evidence, sampling and testing and may be converted to a proven mineral reserve
or to a probable mineral reserve. Estimates of indicated mineral resources are based on adequate geological evidence, sampling
and testing and may only be converted to a probable mineral reserve when sufficient evidence is identified including consideration
of modifying factors such as mining, processing, economic and environmental factors. Modifying factors are the factors that a
qualified person must apply to indicated and measured mineral resources and then evaluate to establish the economic viability
of mineral reserves. Estimates of inferred mineral resources have significant geological uncertainty based on limited geological
evidence, sampling and testing and therefore may not be converted to a mineral reserve.
As of December 31, 2022, our qualified persons estimated our measured, indicated and inferred resources to
be approximately 246.3 million tons with an average permitted life of approximately 16 years at present operating levels. As of
December 31, 2022, California, Utah and Washington were the only individual states that comprised more than 10% of our total
mining operations. The Wine Group and Aerojet North White Rock were the only mines that comprised 10% or more of our
combined measured and indicated mineral resources for sand and gravel and the Euer Ranch was the only mine that comprised
10% or more of our combined measured and indicated mineral resources for hard rock. The following table presents information
about our mineral resources at December 31, 2022 (tons in millions):
Measured Mineral
Resources
Indicated Mineral
Resources
Measured + Indicated
Mineral Resources
Inferred Mineral
Resources
Amount
(tons)
Grades/
qualities(1)
Amount
(tons)
Grades/
qualities(1)
Amount
(tons)
Grades/
qualities(1)
Amount
(tons)
Grades/
qualities(1)
Sand and Gravel:
California
The Wine Group
—
—
51.4
Sand and Gravel
Aerojet North White Rock
32.0
Sand and Gravel
All other California
Total California
Washington
All other states
Total
Hard Rock:
California
Euer Ranch
All other California
Total California
Utah
Washington
Total
Grand Total
—
32.0
—
0.6
32.6
71.7
9.9
81.6
9.6
—
91.2
123.8
—
—
—
Sand and Gravel
—
Hard Rock
Hard Rock
—
Hard Rock
—
—
—
—
35.1
86.5
3.0
—
89.5
—
—
—
—
—
—
89.5
—
Sand and Gravel
Sand and Gravel
—
—
—
—
—
—
—
—
—
51.4
32.0
35.1
Sand and Gravel
Sand and Gravel
Sand and Gravel
—
118.5
—
3.0
0.6
Sand and Gravel
Sand and Gravel
122.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Hard Rock
Hard Rock
—
Hard Rock
71.7
9.9
81.6
9.6
—
91.2
213.3
—
—
—
33.0 Hard Rock
33.0
33.0
—
—
(1)
The grade of product produced is contingent on market needs. Sites typically sell base products that range from low to high grades including
fill materials, base aggregates, hot mix aggregates and concrete aggregates.
Mineral Reserves
Mineral reserves are divided into proven and probable mineral reserves. Proven mineral reserves are the economically mineable part
of a measured mineral resource and can only result from the conversion of a measured mineral resource. Proven mineral resources
are determined by a qualified person through the testing of samples obtained from closely spaced subsurface drilling and/or
exposed pit faces, and are sufficiently understood so that quantity, quality and engineering conditions are known with sufficient
accuracy to be mined without the need for any further subsurface work. Probable mineral reserves are the economically mineable
part of an indicated, and in some cases, a measured mineral resource. Probable mineral reserves are determined through the
testing of samples obtained from subsurface drilling, but the sample points are too widely spaced to allow detailed prediction of
quantity, quality and engineering conditions. Additional subsurface work may be needed prior to mining the reserve.
The modifying factors applied in the conversion of measured and indicated mineral resources to proven and probable mineral
reserves during the year ended December 31, 2022 included various relevant technical and economic factors, including site
infrastructure, mine design and planning, processing plant and environmental compliance and permitting. The basis of determining
the modifying factors was a combination of historical experience mining aggregates and observation.
2022 Annual Report 25
As of December 31, 2022, our qualified persons estimated our proven and probable reserves to be approximately 879.3 million
tons with an average permitted life of approximately 28 years at present operating levels. Waste factors for proven and probable
reserves range up to 45% depending on the deposit type, market characteristics and extraction feasibility. As of December 31,
2022, California, Utah and Washington were the only individual states that comprised more than 10% of our total mining
operations, Coalinga and Grantsville were the only mines that comprised 10% or more of our mineral reserves for sand and gravel
and Handley Quarry was the only mine that comprised 10% or more of our mineral reserves for hard rock. The following table
presents information about mineral reserves at December 31, 2022 (tons in millions):
Sand and Gravel:
California
Coalinga
All other California
Total California
Utah
Grantsville
All other Utah
Total Utah
Washington
All other states
Total
Hard Rock:
California
Handley Quarry
All other California
Total California
Utah
Washington
All other states
Total
Grand Total
Proven Mineral Reserves
Probable Mineral Reserves
Total Mineral Reserves
Amount
(tons)
Grades/
qualities(1)
Amount
(tons)
Grades/
qualities(1)
Amount
(tons)
Grades/
qualities(1)
117.9
210.5
328.4
99.0
4.4
103.4
45.8
33.8
511.4
144.6
59.8
204.4
23.6
5.3
25.9
259.2
770.6
Sand and Gravel
Sand and Gravel
—
Sand and Gravel
Sand and Gravel
—
Sand and Gravel
Sand and Gravel
—
Hard Rock
Hard Rock
—
Hard Rock
Hard Rock
Hard Rock
—
—
—
24.1
24.1
—
0.1
0.1
—
18.2
42.4
—
—
—
—
33.2
33.1
66.3
108.7
—
Sand and Gravel
—
—
Sand and Gravel
—
—
Sand and Gravel
—
—
—
—
—
Hard Rock
Hard Rock
—
—
117.9
234.6
352.5
99.0
4.5
103.5
45.8
52.0
553.8
144.6
59.8
204.4
23.6
38.5
59.0
325.5
879.3
Sand and Gravel
Sand and Gravel
—
Sand and Gravel
Sand and Gravel
—
Sand and Gravel
Sand and Gravel
—
Hard Rock
Hard Rock
—
Hard Rock
Hard Rock
Hard Rock
—
—
(1)
The grade of product produced is contingent on market needs. Sites typically sell base products that range from low to high grades including
fill materials, base aggregates, hot mix aggregates and concrete aggregates.
Internal controls
Mining operations include risk in estimation of mineral reserves and mineral resources that could be impacted by unforeseen
geologic circumstances, changes in regulation or changes in sales and customers. The risk that these estimates would be
unreasonable based on the known information is mitigated by the following internal controls that we use in our exploration and
mineral resource and mineral reserve estimation efforts:
• quality control and quality assurance programs including management identifying the qualified person(s) with the
appropriate background and qualifications to prepare the information used for disclosure purposes;
• verification of analytical procedures including management reviewing the mineral resource and reserve report information
for completeness, accuracy and appropriateness, such as categorization, inclusion of technical, economic and operational
factors, discounted cash flow analysis inputs, assumptions and calculations, and mining, metallurgical, legal, environmental,
social and governmental modifying factors as well as comparison of estimates to historic production and prior period
estimates; and
review of disclosures to ensure compliance with requirements.
•
26 Granite Construction Incorporated
Plant Properties
We operate plants at our quarry sites to process aggregates into construction materials. Some of our sites may have more than one
crushing, concrete or asphalt processing plant. The following table presents the number of plants we owned as of the respective
dates:
December 31,
Aggregate crushing plants
Asphalt concrete plants
Cement concrete batch plants
Asphalt rubber plants
Lime slurry plants
These plants are used by both of our reportable segments.
Other Properties
2022
28
48
5
5
6
2021
29
49
5
5
6
The following table provides our estimate of certain information about other properties as of December 31, 2022:
Office and shop space (owned and leased)
The office and shop space is used by both of our reportable segments.
Item 3. Legal Proceedings
Land Area (acres)
1,216
Buildings (square feet)
1,465,857
The description of the matters set forth in Note 20 of “Notes to the Consolidated Financial Statements” is incorporated herein by
reference.
Item 4. Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17CFR 229.104) is included in Exhibit 95 to this
Annual Report on Form 10-K.
2022 Annual Report 27
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Our common stock trades on the New York Stock Exchange under the ticker symbol GVA. As of February 15, 2022,
43,744,536 shares of our common stock were outstanding and held by 653 shareholders of record. We have paid quarterly cash
dividends since the second quarter of 1990, and we expect to continue to do so.
The following table sets forth information regarding the repurchase of shares of our common stock during the three months ended
December 31, 2022:
Period
October 1, 2022 through October 31, 2022
November 1, 2022 through November 30, 2022
December 1, 2022 through December 31, 2022
Total number of
shares purchased(1)
Average price
paid per share
3,156
320
2,168
5,644
$27.40
$32.22
$35.64
$30.84
Total number of
shares purchased
as part of publicly
announced plans or
programs
Approximate dollar
value of shares
that may yet be
purchased under the
plans or programs(2)
$231,535,405
$231,535,405
$231,535,405
—
—
—
—
(1)
(2)
The number of shares purchased was in connection with employee tax withholding for restricted stock units vested under our equity incentive
plans.
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 specific timing and amount of any future purchases will vary based on market conditions,
securities law limitations and other factors.
28 Granite Construction Incorporated
Performance Graph
The following graph compares the cumulative five-year total return provided to Granite Construction Incorporated’s common
stockholders relative to the cumulative total returns of the S&P 500 index and the Dow Jones U.S. Heavy Construction index. The
Dow Jones U.S. Heavy Construction index includes the following companies: AECOM, EMCOR Group Inc., MDU Resources Group
Inc, MasTec Inc., Quanta Services Inc., Valmont Industries Inc. and WillScot Mobile Mini Holdings Corp. Certain of these companies
differ from Granite in that they derive more revenue and profit from non-U.S. operations and have customers in different markets.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all
dividends) from December 31, 2017 through December 31, 2022.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Granite Construction Incorporated, the S&P 500 Index
and the Dow Jones U.S. Heavy Construction Index
$250
$200
$150
$100
$50
$0
12/17
12/18
12/19
12/20
12/21
12/22
Granite Construction Incorporated
S&P 500
Dow Jones U.S. Heavy Construction
*$100 invested on 12/31/17 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
2022 Annual Report 29
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
General
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.
Our reportable segments are the same as our operating segments and correspond with how our chief operating decision maker,
or decision-making group (our “CODM”), regularly reviews financial information to allocate resources and assess performance. We
identified our CODM as our Chief Executive Officer and our Chief Operating Officer. Our reportable segments are: Construction
and Materials. The Construction segment focuses on construction and rehabilitation of roads, pavement preservation, bridges,
rail lines, airports, marine ports, dams, reservoirs, aqueducts, infrastructure and site development for use by the general public
and water-related construction for municipal agencies, commercial water suppliers, industrial facilities and energy companies. It
also provides construction of various complex projects including infrastructure / site development, mining, public safety, tunnel,
solar, battery storage and other power-related projects. The Materials segment focuses on production of aggregates and asphalt
production for internal use and for sale to third parties. See Note 21 of “Notes to the Consolidated Financial Statements” for
additional information about our reportable segments.
In addition to reportable segments, we also review our business by operating groups. In alphabetical order, our operating groups
are as follows:
• California, which is comprised of vertically integrated businesses in home markets across the state;
• Central, which includes the vertically integrated Arizona region and regional civil construction businesses in Illinois, Florida
and Texas. The Central group also includes the Federal division which performs civil construction across the continental
United States and Guam, and the Tunnel division; and
• Mountain, which is comprised of vertically integrated regional businesses in Alaska, Washington, Oregon, Utah and
Nevada. The Mountain Group also includes national businesses in the Industrial & Energy division, which primarily focuses on
commercial solar construction projects, Water Resources, which performs water well drilling and rehabilitation services and
Mineral Services, which performs mineral exploration services for mining clients.
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. A stagnant or declining economy will generally result in reduced demand for construction and construction materials
in the private sector. This reduced demand increases competition for private sector projects and will ultimately also increase
competition in the public sector as companies migrate from bidding on scarce private sector work to projects in the public sector.
In addition, a stagnant or declining economy tends to produce less tax revenue for public agencies, thereby decreasing a source of
funds available for spending on public infrastructure improvements. Some funding sources that have been specifically earmarked
for infrastructure spending, such as diesel and gasoline taxes, are not as directly affected by a stagnant or declining economy,
unless actual consumption is reduced or gasoline sales tax revenues decline consistent with fuel prices. However, even these
can be temporarily at risk as federal, state and local governments take actions to balance their budgets. Conversely, increased
levels of public funding as well as an expanding or robust economy will generally increase demand for our services and provide
opportunities for revenue growth and margin improvement.
Critical Accounting Estimate
The financial statements included in “Item 8. Financial Statements and Supplementary Data” have been prepared in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial
statements requires management to make estimates that affect the reported amounts of assets and liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. Our estimates and related judgments and assumptions are
continually evaluated based on available information and experiences; however, actual amounts could differ from those estimates.
30 Granite Construction Incorporated
We consider revenue recognition a critical accounting estimate. It involves significant management judgment and can
significantly affect our reported results of operations.
Revenue Recognition
Our revenue is primarily derived from construction contracts that can span several quarters or years in our Construction segment
and from sales of construction related materials in our Materials segment. We recognize revenue in accordance with ASC Topic 606,
Revenue from Contracts with Customers, and subsequently issued additional related ASUs. The accuracy of our revenue and profit
recognition in a given period depends on the accuracy of our estimates of the forecasted revenue and cost to complete each
project. Cost estimates for all of our significant projects use a detailed “bottom up” approach. There are a number of factors that
can contribute to changes in estimates of contract cost and profitability. The most significant of these include:
subcontractor costs, availability and/or performance issues;
• changes in costs of labor and/or materials;
•
• extended overhead and other costs due to owner, weather and other delays;
• changes in productivity expectations;
• changes from original design on design-build projects;
• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs;
• a change in the availability and proximity of equipment and materials;
• complexity in original design;
•
•
•
• costs associated with scope changes; and
•
length of time to complete the project;
the availability and skill level of workers in the geographic location of the project;
site conditions that differ from those assumed in the original bid;
the customer’s ability to properly administer the contract.
The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins
may cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in revenue and cost
estimates, particularly in our larger, more complex, multi-year projects have had, and in the future could have, a significant effect
on our profitability. Due to the number of factors that can contribute to changes in estimates of contract cost and profitability, the
sensitivity of reported amounts to the assumptions underlying the estimate’s calculation is not reasonably available or meaningful.
However, Note 3 of “Notes to the Consolidated Financial Statements” presents the impact material revisions in estimates had
on the periods covered by this report.
Current Economic Environment and Outlook
Funding for our public work projects, which accounts for approximately 70% of our portfolio, is dependent on federal, state,
regional and local revenues. At the federal level, the rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”)
has started with the appropriation of funds included in the 2022 federal spending bill enacted in March 2022. The five-year IIJA
provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in
incremental funding. 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 FY
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 and drive an increase in project lettings starting in 2023
and then more meaningfully in 2024 and beyond. We anticipate the impact to our financial statements to gradually grow in 2023
and beyond as funds are allocated first to quicker turn projects and then later to more complex larger projects.
At state, regional and local levels, voter-approved state and local transportation measures continue to support infrastructure
spending. While each market is unique, we see a strong funding environment at the state and local levels currently and we expect
that environment to improve with the impact of the IIJA. In California, our top revenue-generating state, a significant part of the
state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, which is a 10-year,
$54.2 billion program without any sunset provisions.
Over the recent years, inflation, supply chain and labor constraints have had a significant impact on the global economy including
the construction industry in the United States. While it is impossible to fully eliminate the impact of these factors, we have applied
proactive measures such as fixed forward purchase contracts of oil related inputs, energy surcharges, and adjustment of project
schedules for constraints related to construction materials such as concrete. While we actively work to mitigate the impacts of oil
price inflation, further price increases may adversely impact us in the future.
2022 Annual Report 31
Our Committed and Awarded Projects (“CAP”) continues to be strong with $4.5 billion at the end of the fourth quarter of 2022.
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.
Strategic Actions
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 at that time. This included: our trenchless and pipe rehabilitation services business (“Inliner”); our water supply,
treatment, delivery and maintenance business (“Water Resources”); and our mineral exploration drilling business (“Mineral
Services”). The sale of Inliner was completed on March 16, 2022 for a purchase price of $159.7 million, subject to certain
adjustments. As a result of the sale and post-closing adjustments, we received cash proceeds of $140.6 million and recognized a
gain of $1.8 million.
In September 2022, we announced our decision to retain the Water Resources and Mineral Services businesses that were previously
classified as held for sale and reported in discontinued operations. This change to our plan of sale was due to unfavorable market
conditions which undermined our efforts to secure an appropriate value for the businesses. In connection with the reclassification
of the WMS businesses from discontinued operations to continuing operations, the Consolidated Statements of Operations have
been revised to include Inliner through the date of sale, as well as the ongoing operations of Water Resources and Mineral Services
in the Mountain operating group for all periods presented. The Water Resources and Mineral Services businesses are included
in the Construction segment. Inliner had both Construction and Materials operations. See Note 1 and Note 2 of “Notes to the
Consolidated Financial Statements” for further information.
Litigation Matter
As further discussed in Note 20 of “Notes to the Consolidated Financial Statements,” our wholly owned subsidiary, Layne
Christensen Company (“Layne”), has been sued for $100 million relating to Layne’s work on the Salesforce Tower foundation. Layne
was a subcontractor on this project and potential liability for this project remained with Layne in connection with our acquisition of
Layne in June 2018. 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.”
Results of Operations
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.
Years Ended December 31,
(in thousands)
Total revenue
Gross profit
Selling, general and administrative expenses
Non-cash impairment charges (see Note 1 of “Notes to the Consolidated
2022
2021
2020
$ 3,301,256 $ 3,501,865 $ 3,562,459
$ 369,494 $ 362,645 $ 344,788
$ 272,610 $ 303,015 $ 316,284
Financial Statements”)
$
Other costs, net (see Note 1 of “Notes to the Consolidated Financial Statements”) $
Gain on sales of property and equipment, net (see Note 11 of “Notes to the
— $
24,120 $ 101,351 $
— $ 156,690
37,089
Consolidated Financial Statements”)
Operating income (loss)
Total other (income) expense, net
Amount attributable to non-controlling interests
Net income (loss) attributable to Granite Construction Incorporated
$
$
$
$
$
(12,617) $
85,381 $
(6,436) $
4,445 $
83,302 $
(66,439) $
(6,930)
24,718 $ (158,345)
8,118
21,064
10,096 $ (145,117)
2,591 $
7,682 $
32 Granite Construction Incorporated
Revenue
TOTAL REVENUE BY SEGMENT
Years Ended December 31,
(dollars in thousands)
Construction
Materials
Total
CONSTRUCTION REVENUE
Years Ended December 31,
(dollars in thousands)
California
Central
Mountain
Total
2022
2021
2020
$ 2,803,935
497,321
$ 3,301,256
85.0% $ 3,076,190
425,675
15.0
100.0% $ 3,501,865
87.8% $ 3,181,697
380,762
12.2
100.0% $ 3,562,459
89.4%
10.6
100.0%
2022
2021
2020
$ 811,623
851,779
1,140,533
$ 2,803,935
28.9% $ 822,448
1,058,448
30.4
1,195,294
40.7
100.0% $ 3,076,190
26.7% $ 928,193
1,145,725
34.4
1,107,779
38.9
100.0% $ 3,181,697
29.2%
36.0
34.8
100.0%
Construction revenue in 2022 decreased by $272.3 million, or 8.9%, compared to 2021 primarily due to 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 $54.8 million primarily due to the sale of Inliner which contributed $33 million in 2022 prior
to its sale compared to $206 million in 2021. This decrease was partially offset by increased revenue driven by higher beginning
CAP levels and stronger market conditions in the current year. California operating group revenue decreased $10.8 million in 2022,
mainly due to delays in project starts and less favorable weather conditions in the first quarter of 2022. During 2022 and 2021,
approximately 70% and 75%, respectively, of revenue earned in the Construction segment was from the public sector.
MATERIALS REVENUE
Years Ended December 31,
(dollars in thousands)
California
Central
Mountain
Total
2022
2021
2020
$ 273,314
46,531
177,476
$ 497,321
54.9% $ 242,552
33,270
149,853
100.0% $ 425,675
9.4
35.7
57.0% $ 222,021
25,181
133,560
100.0% $ 380,762
7.8
35.2
58.3%
6.6
35.1
100.0%
Materials revenue in 2022 increased by $71.6 million, or 16.8%, when compared to 2021 driven by price increases inclusive
of energy surcharges and overall market demands driving higher sales volumes of aggregates, slightly offset by decreased sales
volumes for asphalt.
Committed and Awarded Projects
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, respectively.
All CAP is in the Construction segment.
2022 Annual Report 33
December 31,
(dollars in thousands)
Unearned revenue
Other awards
Total
December 31,
(dollars in thousands)
California
Central
Mountain
Total
2022
2021(1)
$ 2,877,478
64.2% $ 2,595,085 64.7%
1,607,661
35.8
1,414,979 35.3
$ 4,485,139
100.0% $ 4,010,064 100.0%
2022
2021(1)
$ 1,747,163 39.0% $ 1,476,066 36.8%
1,661,613 37.0
1,585,309 39.5
1,076,363 24.0
948,689 23.7
$ 4,485,139 100.0% $ 4,010,064 100.0%
(1)
These balances do not include amounts held for sale (see Note 2 of “Notes to the Consolidated Financial Statements”). The unearned revenue
balance in CAP related to businesses held for sale at December 31, 2021 was $252.7 million and there was no balance for other awards.
CAP of $4.5 billion at December 31, 2022 was $475.1 million, or 11.8% higher than 2021 primarily due to higher CAP in all of
our operating groups due to higher award volume during the fourth quarter of 2022. Including CAP that was classified as held
for sale as of December 31, 2021 of $252.7 million and excluding CAP related to Inliner of $199.3 million as of December 31,
2021, which was sold during the first quarter of 2022, comparable CAP increased $421.7 million, or 10.4%, over the prior year.
Significant new additions to CAP during the fourth quarter of 2022 included a $174 million runway project in California, a $170
million highway project in Arizona, a $160 million CM/GC railway project in Illinois and $142 million for multiple road projects in
California.
Non-controlling partners’ share of CAP as of December 31, 2022 and 2021 was $85.0 million and $214.3 million, respectively.
At December 31, 2022 and 2021, five and three contracts with remaining CAP of $10 million or more per project had total
forecasted losses with remaining revenue of $134.2 million, or 3.0% of total CAP, and $204.2 million, or 5.1% of total CAP,
respectively. Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on
uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue.
Gross Profit
The following table presents gross profit by reportable segment for the respective periods:
Years Ended December 31,
(dollars in thousands)
Construction
Percent of segment revenue
Materials
Percent of segment revenue
Total gross profit
Percent of total revenue
2022
2021
2020
$ 303,881
$ 303,228
$ 280,169
10.8%
9.9%
8.8%
65,613
13.2
59,417
64,619
14.0
17.0
$ 369,494
$ 362,645
$ 344,788
11.2%
10.4%
9.7%
Construction gross profit for the year ended December 31, 2022 increased by $0.7 million, or 0.2%, when compared to
2021 primarily driven by strong performance in the vertically integrated businesses in the California and Mountain operating
groups. These increases were largely offset by decreases in the Central operating group related to negative net impacts from
revisions in estimates (see Note 3 of “Notes to the Consolidated Financial Statements”) as well as the impact of the sale of Inliner
in the first quarter of 2022.
Materials gross profit for the year ended December 31, 2022 increased by $6.2 million, or 10.4%, when compared to 2021 due to
higher revenue and greater volumes while gross profit margin decreased due to the impact of higher fuel and energy costs earlier
in the year. Although fuel and liquid asphalt costs increased in 2022 as compared to 2021, we implemented energy surcharges in
the second quarter of 2022 to cover these increases on new orders.
34 Granite Construction Incorporated
Selling, General and Administrative Expenses
The following table presents the components of selling, general and administrative expenses for the respective periods:
Years Ended December 31,
(dollars in thousands)
Selling
Salaries and related expenses
Incentive compensation
Restricted stock unit amortization
Other selling expenses
Total selling
General and administrative
Salaries and related expenses
Incentive compensation
Restricted stock unit amortization
Other general and administrative expenses
Total general and administrative
Total selling, general and administrative
Percent of revenue
Selling Expenses
2022
2021
2020
$ 57,921
4,316
1,277
8,627
72,141
$ 65,758
5,160
1,415
4,632
76,965
$ 69,530
5,297
1,280
9,661
85,768
103,161
12,108
5,084
80,116
200,469
$ 272,610
111,149
8,908
3,792
102,201
226,050
$ 303,015
111,188
10,519
3,408
105,401
230,516
$ 316,284
8.3%
8.7%
8.9%
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 salaries and related expenses for
2022 decreased by $7.8 million compared to 2021, primarily due to the sale of Inliner on March 16, 2022 as well as other cost
reduction efforts. This decrease was partially offset by an increase of $4.0 million in other selling expenses driven by increased
bidding activity in 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, changes in the fair market value of our
Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses. Total general and administrative expenses
for 2022 decreased by $25.6 million, or 11.3%, compared to 2021, primarily due to the sale of Inliner on March 16, 2022, as well
as decreases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is mostly offset in other
(income) expense, net, through our own company-owned life insurance policy. These decreases were partially offset by an increase
in incentive compensation due to improved financial performance.
Other Costs, net
The following table presents other costs for the respective periods:
Years Ended December 31,
(in thousands)
Other costs, net
2022
2021
2020
$ 24,120
$ 101,351
$ 37,089
Other costs for the year ended December 31, 2022 decreased by $77.2 million when compared to 2021 primarily due to the
securities litigation settlement charge of $66.0 million that occurred in 2021, settlement of the shareholder derivative lawsuit
and related receipt of $5.0 million in 2022 as well as decreases in non-recurring legal and accounting fees of $7.4 million, net
divestiture expenses of $8.0 million and personnel costs in connection with our operating group reorganization during 2021 of
$2.8 million. These decreases were partially offset by a $12.0 million charge for the resolution of the SEC investigation in 2022.
See Note 20 of “Notes to the Consolidated Financial Statements” for information related to settlements of certain legal matters
and investigations.
2022 Annual Report 35
Gain on Sales of Property and Equipment, net
The following table presents the gain on sales of property and equipment, net for the respective periods:
Years Ended December 31,
(in thousands)
Gain on sales of property and equipment, net
2022
2021
2020
$ (12,617)
$ (66,439)
$ (6,930)
Gain on sales of property and equipment, net for the year ended December 31, 2022 decreased by $53.8 million when compared
to 2021 due to fewer properties sold and lower gains per property sold in 2022. The properties sold were part of our ongoing
asset optimization plan. See Note 11 of “Notes to the Consolidated Financial Statements” for more information.
Other (Income) Expense
The following table presents the components of other (income) expense, net for the respective periods:
Years Ended December 31,
(in thousands)
Interest income
Interest expense
Equity in income of affiliates
Other income, net
Total other (income) expense, net
2022
2021
2020
$ (6,528)
12,624
(13,571)
1,039
$ (6,436)
$ (1,176)
20,739
(12,586)
(4,386)
$ 2,591
$ (3,096)
24,200
(8,783)
(4,203)
$ 8,118
Interest income for 2022 increased by $5.4 million when compared to 2021 primarily due to higher interest rates on our
investments. Interest expense for 2022 decreased by $8.1 million, or 39.1%, when compared to 2021 because we are no longer
recording the amortization of the debt discount on our 2.75% Convertible Notes due to the implementation of ASU 2020-06. Equity
in income of affiliates was relatively flat when compared to 2021. Other income, net decreased by $5.4 million primarily due to
increases in the fair market value of our company owned life insurance policy, which is mostly offset in general and administrative
expenses through our Non-Qualified Deferred Compensation plan liability.
Income Taxes
The following table presents the provision for (benefit from) income taxes for the respective periods:
Years Ended December 31,
(dollars in thousands)
Provision for (benefit from) income taxes
Effective tax rate
2022
2021
2020
$ 19,713 $
$ 12,960
14.1% 89.1%
(282)
0.2%
Our effective tax rate decreased from 89.1% to 14.1% when compared to 2021 primarily due to the tax benefit associated with
the reversal of net deferred tax liabilities related to businesses no longer held for sale and the release of valuation allowances
related to the utilization of capital loss carryforwards. The impacts of those items were partially offset by nondeductible goodwill
associated with the sale of Inliner and the impact of the relative change in income before income taxes to the provision for
income taxes.
Amount Attributable to Non-controlling Interests
The following table presents the amount attributable to non-controlling interests in consolidated subsidiaries for the respective
periods:
Years Ended December 31,
(in thousands)
Amount attributable to non-controlling interests
2022
2021
2020
$ 4,445
$ 7,682
$ 21,064
The amount attributable to non-controlling interests represents the non-controlling owners’ share of the net loss of our
consolidated construction joint ventures. The change during 2022 was primarily due to increased profits from new and existing
joint ventures, partially offset by a net negative impact from revisions in estimates on one project. (See Note 3 of “Notes to
the Consolidated Financial Statements”).
36 Granite Construction Incorporated
Prior Years Comparison (2021 to 2020)
Revenue
Construction revenue in 2021 decreased $105.5 million, or 3.3%, compared to 2020 primarily due to lower CAP in the
California operating group and inclement weather conditions in California near the end of 2021. Lower CAP was reflective of an
extended competitive bidding environment that existed through the first half of 2021. Additionally, the Central operating group
revenue decreased as we remain disciplined in our project bidding selection criteria and certain projects neared completion. These
decreases were partially offset by increases in the Mountain operating group primarily driven by increased demand for water supply
and maintenance services and mineral exploration, as well as lower activity levels in 2020 as a result of the COVID-19 pandemic
which caused delays in awarded projects and deferrals in bidding processes.
Materials revenue in 2021 increased $44.9 million, or 11.8%, when compared to 2020 from increased volumes in both aggregates
and asphalt sales combined with increased pricing in certain markets.
Gross Profit
Construction gross profit for the year ended December 31, 2021 increased by $23.1 million, or 8.2%, when compared to 2020
primarily due to a decrease in the negative net impact from revisions in estimates in our Central operating group (see Note 3 of
“Notes to the Consolidated Financial Statements”), and increased activity in water supply and maintenance services and mineral
exploration, partially offset by decreases in gross profit from our vertically-integrated businesses from an extended competitive
bidding environment.
Materials gross profit for the year ended December 31, 2021 decreased by $5.2 million, or 8.1%, when compared to 2020 driven
primarily by higher fuel and liquid asphalt costs in 2021 compared to 2020 combined with lower volumes in California due to
inclement weather during the fourth quarter of 2021.
Selling, General and Administrative Expenses
Selling expenses for 2021 decreased $8.8 million, or 10.3%, compared to 2020 primarily due to reduced estimating and
bidding activity following the implementation of our new project bidding selection criteria. General and administrative expenses
were relatively flat year over year.
Non-cash Impairment Charges
The change during 2021 was primarily due to goodwill impairment charges as well as an impairment in our investment in
affiliates in 2020.
Other Costs
Other costs for the year ended December 31, 2021 increased by $64.3 million when compared to 2020 primarily due to $66.0
million in net settlement charges incurred during 2021 as further described in Note 20 of “Notes to the Consolidated Financial
Statements.” Other costs also decreased by $13.5 million in 2021 due to a reduction in non-recurring legal and accounting fees.
The majority of these non-recurring fees related to the lawsuits discussed in Note 20 of “Notes to the Consolidated Financial
Statements.” This decrease in non-recurring legal and accounting fees was offset by increases of $3.3 million in personnel costs
incurred in connection with our operating group reorganization and $8.5 million of divestiture expenses related to the planned sale
of the businesses within our former WMS operating group during 2021.
Gain on Sales of Property and Equipment
Gain on Sales of Property and Equipment increased $59.5 million compared to 2020 primarily due to sales of properties in California
related to our ongoing asset optimization plan.
Other (Income) Expense
Interest income for 2021 decreased $1.9 million, or 62.0%, compared to 2020 primarily due to the settlement of two notes receivable.
Interest expense for 2021 decreased $3.5 million, or 14.3%, when compared to 2020 as no amount was drawn on the revolver in 2021
and due to a decrease in the effective interest rate on our credit facility. Equity in income of affiliates for 2021 increased $3.8 million, or
43.3%, compared to 2020 primarily due to an increase in income from our foreign affiliates, which was partially offset by a decrease in
income from a real estate investment entity.
2022 Annual Report 37
Income Taxes
Our tax rate increased from 0.2% to 89.1% when compared to 2020. The change in tax rate was due primarily to the tax expense
associated with the non-cash impairment charges in 2020 (see Note 1 of “Notes to the Consolidated Financial Statements”) and
the income tax expense associated with the held for sale classification of the assets and liabilities of the former WMS operating
group in 2021.
Amount Attributable to Non-controlling Interests
The change during 2021 was primarily due to a decrease in the net negative impact from revisions in estimates on two projects
(see Note 3 of “Notes to the Consolidated Financial Statements”).
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity under our credit
facility 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 and acquire assets or businesses that are complementary to our operations.
Our primary contractual obligations are as follows and are further discussed in the referenced “Notes to the Consolidated Financial
Statements:”
• Asset retirement obligations - see Note 11, Property and Equipment, net
• Long-term debt and the associated interest payments—see Note 14, Long-Term Debt
• Operating lease and royalty future minimum payments—see Note 15, Leases
• Non-Qualified Deferred Compensation Plan obligations—see Note 16, Employee Benefit Plans
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 believe our primary sources of liquidity, access to the 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 December 31, 2022, our cash and cash equivalents consisted of deposits and money market funds held with established
national financial institutions and marketable securities consisting primarily of U.S. Government and agency obligations and
corporate commercial paper.
At the end of the second quarter of 2022, we had $16.5 million of past due receivables and $27.1 million of contract retention
receivable from Brightline Trains Florida LLC (“Brightline”) and they were experiencing delays in securing additional funding at that
time. During the third quarter of 2022, Brightline obtained additional funding and paid their past due receivables balances. As of
December 31, 2022, we had $6.8 million of receivables and $28.4 million of contract retention receivable from Brightline
(see Note 6 of “Notes to the Consolidated Financial Statements”). $3.4 million of the receivables were past due as of
December 31, 2022 but were paid in January 2023. Brightline continues to experience challenges and delays in securing additional
funding. As of the date of this report, the remaining $3.4 million that was due in January is past due and $2.8 million has been
billed since December 31, 2022. The timing and probability of future payments may be affected and our liquidity impacted if
Brightline faces additional funding difficulties.
During the first half of 2022, we prepaid 100% of our outstanding term loan and replaced the Third Amended and Restated Credit
Agreement dated May 31, 2018 with the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) maturing
June 2, 2027. The Credit Agreement is a $350.0 million senior secured, five-year revolving credit facility (the “Revolver”). As of
December 31, 2022, the total unused availability under the Credit Agreement was $269.3 million, resulting from $30.7 million in
issued and outstanding letters of credit and $50.0 million drawn under the Revolver. See Note 14 of “Notes to the Consolidated
Financial Statements” for further discussion regarding the Revolver.
38 Granite Construction Incorporated
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:
December 31,
(in thousands)
Cash and cash equivalents excluding CCJVs
CCJV cash and cash equivalents(1)
Total consolidated cash and cash equivalents
Short-term and long-term marketable securities(2)
Total cash, cash equivalents and marketable securities
2022
2021
$ 191,444
102,547
293,991
65,943
$ 359,934
$ 302,864
92,783
395,647
15,600
$ 411,247
(1)
(2)
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.
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 $62.5 million and $54.4 million as of December 31, 2022 and 2021,
respectively. Excluded from the table above is:
• $40.4 million and $56.5 million as of December 31, 2022 and 2021, respectively, in Granite’s portion of unconsolidated
construction joint venture cash and cash equivalents and
• $16.5 million of cash and cash equivalents as of December 31, 2021 that was included in current assets held for sale.
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 year ended December 31, 2022, we had capital expenditures
of $121.6 million, compared to $94.8 million during 2021 for an increase of $26.8 million. The increase year over year is primarily
due to acquisitions of materials reserves in 2022. We currently anticipate 2023 capital expenditures to be between approximately
$100 million and $120 million.
Cash Flows
Years Ended December 31,
(in thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Operating activities
2022
2021
2020
$ 55,647 $ 21,931 $ 268,460
$ (11,000) $ (21,478) $ (41,262)
$ (164,311) $ (24,446) $ (57,658)
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 seasonal cycles, 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.
2022 Annual Report 39
Cash provided by operating activities of $55.6 million during 2022 represents a $33.7 million increase when compared to
2021. The change was primarily due to a $105.1 million increase in cash provided by net income after adjusting for non-cash
items and a $76.6 million decrease in cash provided by working capital. The decrease in cash provided by working capital was
primarily due to an increase in contract assets, largely due to unresolved disputed work, as well as increased retention balances
related to certain ongoing projects. This was partially offset by a decrease in receivables due to improvement in our billing and
collection timing.
Investing activities
Cash used in investing activities of $11.0 million during 2022 represents a $10.5 million decrease when compared to 2021. The
change was primarily due to proceeds from the sale of the Inliner business in March 2022, partially offset by a decrease in proceeds
from sales of property and equipment as well as increased purchases of marketable securities and property and equipment in the
current year.
Financing activities
Cash used in financing activities of $164.3 million during 2022 represents a $139.9 million increase when compared to 2021.
The change was primarily due to the prepayment of our term loan of $123.8 million in the first half of 2022 and repurchases
of common stock (inclusive of our accelerated share repurchase) of $70.9 million, partially offset by $50.0 million drawn on our
Revolver. The net debt paydown was completed at the time the Credit Agreement was entered (see Note 14 to “Notes to the
Consolidated Financial Statements” for further information), to bring our cash balance in line with projected cash needs for the
rest of 2022.
Derivatives
We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2
inputs. See Note 8 to “Notes to the 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 consolidated balance sheets based
on the cash proceeds. See Note 14 to “Notes to the Consolidated Financial Statements” for further information.
Surety Bonds and Real Estate Mortgages
We are generally required to provide various types of surety bonds that provide an additional measure of security for our
performance under certain public and private sector contracts. At December 31, 2022, approximately $2.5 billion of our
$4.5 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. The debt associated with our
unconsolidated non-construction entities is included in Note 10 of “Notes to the 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 December 31, 2022, the Consolidated
Leverage Ratio was 1.46, which did not exceed the maximum of 3.25. Our Consolidated Interest Coverage Ratio was 15.06, which
exceeded the minimum of 3.00.
40 Granite Construction Incorporated
Share Purchase Program
As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million of
our common stock at management’s discretion. In March 2022 we repurchased 611,000 shares under this authorization.
On May 2, 2022, we entered into an accelerated share repurchase transaction with Bank of Montreal. The Accelerated Share
Repurchase was entered into pursuant to the existing share repurchase program. On May 2, 2022, we paid $50.0 million to the
bank and received 80% of the notional amount, or $40.0 million, in shares using the closing price on the trade date. This equated
to approximately 1.32 million shares, which were immediately retired. On August 31, 2022, the reference period ended and on
September 2, 2022 we received an additional 0.37 million shares, which were immediately retired. The final share delivery was
based on the average of the daily volume-weighted average price of Granite’s common stock, less a discount, during the reference
period. The average price of all shares purchased under the Accelerated Share Repurchase was $29.63.
The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other
factors.
Recently Issued and Adopted Accounting Pronouncements
See Note 1 of “Notes to the Consolidated Financial Statements” under the caption Recently Issued and Adopted Accounting
Pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We maintain an investment portfolio of various holdings, types and maturities. We purchase instruments that meet high credit
quality standards, as specified in our investment policy. Our investment policy also limits the amount of credit exposure to any one
issue, issuer or type of instrument. The portfolio and accompanying cash balances are targeted to an average maturity of no more
than one year from the date the purchase is settled. On an ongoing basis we monitor credit ratings, financial condition and other
factors that could affect the carrying amount of our investment portfolio.
Marketable securities, consisting of U.S. government and agency obligations, are classified as held-to-maturity and are stated at
cost, adjusted for amortization of premiums and discounts to maturity.
Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents,
marketable securities, and accounts receivable. We maintain our cash and cash equivalents and our marketable securities with
several financial institutions.
Given the short-term nature of certain investments, the related income is subject to the general level of interest rates in the United
States at the time of maturity and reinvestment. We manage investment interest rate market risk primarily by managing portfolio
maturity. The fair value of our long-term held-to-maturity investment portfolio may be affected by changes in interest rates.
Operating in international markets involves exposure to possible volatile movements in currency exchange rates. Our Mountain
operating group has international operations in Mexico and Canada. We also have affiliates that operate in Latin America (see
Note 10 of “Notes to the Consolidated Financial Statements”). The majority of the customer contracts in Mexico are U.S. dollar-
based, reducing the exposure to currency fluctuations. As of December 31, 2022, we do not have any outstanding foreign
currency option contracts. If the volume of our international operations increases and foreign currency exchange rates change, the
impact to our consolidated statements of operations could be significant and may affect year-to-year comparability of operating
results. The impact from foreign currency transactions during 2022, 2021 and 2020 was immaterial.
Due to the adoption of ASU 2020-06 (see Note 1 of “Notes to the Consolidated Financial Statements”), we did not record
amortization of debt discount related to our 2.75% Convertible Notes during 2022. As of December 31, 2022 and 2021,
the balance in long-term debt in our consolidated balance sheets of the 2.75% Convertible Notes, excluding debt issuance
costs, and including $14.8 million of amortized debt discount in 2021, was $230.0 million and $207.4 million, respectively. As of
December 31, 2021, the remaining unamortized debt discount was $22.6 million but was reduced to zero upon adoption of ASU
2020-06 on January 1, 2022.
We may borrow on the Revolver, at our option, at either (a) the SOFR term rate plus a credit adjustment spread plus applicable
margin ranging from 1.0% to 2.0%, or (b) a base rate plus an applicable margin ranging from 0.0% to 1.0%. The applicable
margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly.
2022 Annual Report 41
As of December 31, 2022, there was $50.0 million drawn under the Revolver.
See Note 14 of “Notes to the Consolidated Financial Statements” for further discussion on the 2.75% Convertible Notes and
Credit Agreement.
The table below presents principal amounts due by year and related weighted average interest rates for our cash and cash
equivalents, held-to-maturity investments and significant debt obligations, excluding debt issuance costs, as of December 31,
2022 (dollars in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
Assets
Cash, cash equivalents,
held-to-maturity investments
Weighted average interest rate
Liabilities
Fixed rate debt
$333,365
$ 26,569
$ —
$
1.51% —% —%
$ —
3.83%
—
—%
$—
$359,934
—%
3.66%
Credit Agreement Revolver Loan $
Effective interest rate(1)
2.75% Convertible Notes
Coupon rate
$
—
$
5.92%
—
2.75%
—
$ —
$ —
$50,000
$—
$ 50,000
$230,000
5.92% 5.92% 5.92%
$
2.75% —% —%
$ —
$ —
5.92%
—
—%
—%
5.92%
$—
$230,000
—%
2.75%
(1)
The effective interest rate was calculated using one-month SOFR plus 10 basis points plus the applicable margin. Future interest payments may
differ from actual results.
The estimated fair value of our cash and cash equivalents approximates the principal amounts reflected above based on
the generally short maturities of these financial instruments. The fair value of 2.75% Convertible Notes was approximately
$281.4 million and $313.8 million as of December 31, 2022 and 2021, respectively.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements of Granite, the supplementary data and the independent registered public
accounting firm’s report are incorporated by reference from Part IV, Item 15(a)(1) and (2):
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
42 Granite Construction Incorporated
Item 9A. Controls and Procedures
As disclosed in the Explanatory Note and in Supplementary Data included in Part IV, Item 15(a) of this Form 10-K, we are restating
our unaudited quarterly financial information for the first three quarters of the year ended December 31, 2022 to correct (a) errors
related to deferred taxes and the calculation of income tax expense in connection with the sale of Inliner, which was completed in
the first quarter of 2022 and was classified within discontinued operations in the Company’s condensed consolidated statement of
operations during the first and second quarters of 2022 and (b) other immaterial errors, including certain errors that had previously
been adjusted for as out of period corrections. The errors were identified by management in connection with the preparation of
this Form 10-K- through our annual review control processes.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed by
us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SEC rules and forms and that information required to be disclosed by us in the reports we file or submit under the
Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial
officers, as appropriate to allow timely decisions regarding required disclosure. Our management, including our principal executive
and principal financial officers, have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of
the end of the period covered by this report and, based on their evaluation, our principal executive and principal financial officers
have concluded our disclosure controls and procedures were not effective as of December 31, 2022, due to the material weakness
in our internal control over financial reporting, as further described below.
In connection with our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022 and September 30,
2022, filed on April 28, 2022, July 28, 2022 and October 27, 2022, respectively, management evaluated the effectiveness of
the Company’s disclosure controls and procedures as of March 31, 2022, June 30, 2022 and September 30, 2022. Based upon
those evaluations, our principal executive and principal financial officers concluded that the Company’s disclosure controls and
procedures were effective as of those dates. Subsequent to those evaluations our principal executive and principal financial
officers re-evaluated the effectiveness of the Company’s disclosure controls and procedures and concluded that our disclosure
controls and procedures were not effective as of March 31, 2022, June 30, 2022 and September 30, 2022, because of the material
weakness described below.
Management nonetheless determined that the consolidated financial statements and related financial information included in this
Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented,
and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of
America (“U.S. GAAP”). Management’s determination is based on a number of factors, including, but not limited to, management’s
performance of extensive analysis and other post-closing procedures as of and for the year ended December 31, 2022.
Management’s Report on Internal Control Over Financial Reporting
Our management, including our principal executive and principal financial officers, is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d -15(f). Internal control over
financial reporting is defined as a process designed by, or under the supervision of, the issuer’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies and
procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the issuer; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
issuer’s assets that could have a material effect on the financial statements.
Our management, under the supervision and with the participation of our principal executive and principal financial officers,
has conducted an evaluation of the effectiveness of our internal control over financial reporting, using the criteria established
in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management determined, based upon the existence of the material weakness described
below, that we did not maintain effective internal control over financial reporting as of December 31, 2022.
2022 Annual Report 43
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected
on a timely basis.
We did not design an effective control to assess the impact of significant and unusual discrete items on the interim tax provision,
such as the divestiture of a business. This material weakness resulted in the misstatement of our income tax expense, other
costs, net and income tax payable, and in the restatement of the Company’s unaudited quarterly financial information for the
Restated Periods. Additionally, this material weakness could result in a misstatement of the aforementioned account balances
or disclosures that would result in a material misstatement to the interim consolidated financial statements that would not be
prevented or detected.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of our internal
control over financial reporting as of December 31, 2022. The report is included in Part IV, Item 15(a) of this Form 10-K under the
heading “Report of Independent Registered Public Accounting Firm.”
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting during the quarter ended December 31, 2022.
Remediation Plan
Management is committed to implementing changes to our internal control over financial reporting to ensure that the material
weakness is remediated. We have evaluated the impact of the material weakness and will implement the following changes:
• We will enhance our accounting for income tax controls on an interim basis to include specific activities to assess the
impacts of significant and unusual transactions, such as divestitures of a business.
• We will add additional reviews and approvals of the quarterly effective tax rate calculations with regard to significant and
unusual transactions to ensure such discrete tax items are appropriately identified and accounted for accurately within the
appropriate interim period.
While we believe that these actions will remediate the material weakness, we have not completed all of the corrective processes,
procedures and related evaluation or remediation that we believe are necessary. As we continue to evaluate and work to remediate
the material weakness, we may take additional measures to address the material weakness.
Until the remediation steps set forth above, including the efforts to implement the necessary control activities we identify, are fully
implemented and concluded to be operating effectively for a sufficient period of time, the material weakness described above will
not be considered remediated.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
None.
44 Granite Construction Incorporated
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement to be
filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement to be
filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement to be
filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director
Independence
The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement to be
filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K.
Item 14. Principal Accountant Fees and Services
The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement to be
filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K.
2022 Annual Report 45
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. Financial Statements. The following consolidated financial statements and related documents are filed as part of this report:
Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Supplementary Data
Page
F-1 to F-2
F-3
F-4
F-5
F-6
F-7
F-8 to F-33
F-34 to F-43
2. Financial Statement Schedules. Schedules are omitted because they are not required or applicable, or the required
information is included in the Financial Statements or related notes.
3. Exhibits. The Exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of, or furnished
with, this report.
46 Granite Construction Incorporated
INDEX TO 10-K EXHIBITS
Exhibit No.
Exhibit Description
2.1
2.2
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
*
*
*
*
*
*
***
***
***
***
***
***
***
***
***
***
*
*
*
*
Agreement and Plan of Merger by and among Granite Construction Incorporated, Layne Christensen
Company and Lowercase Merger Sub Incorporated, dated as of February 13, 2018 [Exhibit 2.1 to the
Company’s Form 8-K filed on February 14, 2018]
Purchase Agreement, dated February 2, 2022, by and among Layne Heavy Civil, Inc., Granite
Construction International, Granite Construction Incorporated, Inland Pipe Rehabilitation LLC and
1000097155 Ontario Inc. [Exhibit 2.1 to the Company’s Form 8-K filed on February 3, 2022]
Certificate of Incorporation of Granite Construction Incorporated, as amended [Exhibit 3.1.b to the
Company’s Form 10-Q for the quarter ended June 30, 2006]
Amended Bylaws of Granite Construction Incorporated [Exhibit 3.1 to the Company’s Form 8-K filed
on November 15, 2011]
Indenture (including Form of Note) with respect to Granite Construction Incorporated’s 2.75%
Convertible Senior Notes due 2024, dated November 1, 2019, by and between Granite Construction
Incorporated and Wilmington Trust, National Association, as trustee [Exhibit 4.1 to the Company’s
Form 8-K filed on November 1, 2019]
Description of Common Stock [Exhibit 4.2 to the Company’s Form 10-K for the year ended
December 31, 2019]
Key Management Deferred Compensation Plan II, as amended and restated [Exhibit 10.1 to the
Company’s Form 10-Q for the quarter ended March 31, 2010]
Form of Amended and Restated Director and Officer Indemnification Agreement [Exhibit 10.10 to the
Company’s Form 10-K for the year ended December 31, 2002]
Granite Construction Incorporated Annual Incentive Plan adopted by the Board of Directors on
March 30, 2022 [Exhibit 10.1 to the Company’s Form 8-K filed on April 1, 2022]
Form of Annual Incentive Plan Participation Agreement [Exhibit 10.2 to the Company’s Form 8-K filed
on April 1, 2022]
Granite Construction Incorporated Long Term Incentive Plan effective January 1, 2010, as amended
[Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2011]
Amendment No. 2 to the Granite Construction Incorporated Long Term Incentive Plan effective
January 1, 2012 [Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2011]
Granite Construction Incorporated 2012 Equity Incentive Plan [Exhibit 10.1 to the Company’s
Form 8-K filed on May 25, 2012]
Form of Non-Employee Director Restricted Stock Unit Agreement effective May 22, 2012 (2012 Equity
Incentive Plan) [Exhibit 10.2 to the Company’s Form 8-K filed on May 25, 2012]
Granite Construction Incorporated NEO LTIP Awards Form of Restricted Stock Unit Agreement
(Vesting on Date of Grant) (2012 Equity Incentive Plan) [Exhibit 10.30 to the Company’s Form 10-K
for the year ended December 31, 2012]
Granite Construction Incorporated Form of Restricted Stock Unit Agreement (3 Year Vesting Schedule)
(2012 Equity Incentive Plan) [Exhibit 10.31 to the Company’s Form 10-K for the year ended
December 31, 2012]
Fourth Amended and Restated Credit Agreement, dated June 2, 2022, by and among Granite
Construction Incorporated, Granite Construction Company, GILC Incorporated, Bank of America,
N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer, and the lenders
and other parties thereto [Exhibit 10.1 to the Company’s Form 8-K filed on June 6, 2022]
Fourth Amended and Restated Guaranty Agreement, dated June 2, 2022, by and among Granite
Construction Incorporated, the guarantors party thereto and Bank of America, N.A., as Administrative
Agent [Exhibit 10.2 to the Company’s Form 8-K filed on June 6, 2022]
Form of Bond Hedge Confirmation [Exhibit 10.1 to the Company’s Form 8-K filed on November 1, 2019]
Form of Warrant Confirmation [Exhibit 10.2 to the Company’s Form 8-K filed on November 1, 2019]
2022 Annual Report 47
10.15
10.16
10.17
10.18
10.20
10.21
10.22
10.23
10.24
10.25
21
23.1
31.1
31.2
32
95
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
***
***
***
***
***
***
***
***
*
*
†
†
†
†
††
†
†
†
†
†
†
†
†
Executive Retention and Severance Plan III and Participation Agreement [Exhibit 10.1 to the
Company’s Form 8-K filed on March 30, 2020]
Long Term Incentive Plan, effective January 1, 2020 [Exhibit 10.2 to the Company’s Form 8-K filed on
March 30, 2020]
LTIP Award Agreement (2020 Long Term Incentive Plan) [Exhibit 10.3 to the Company’s Form 8-K filed
on March 30, 2020]
Retirement and Transition Agreement dated October 20, 2020 by and between the Company and
Mr. Roberts [Exhibit 10.1 to the Company’s Form 8-K filed on October 23, 2020]
Granite Construction Incorporated 2021 Equity Incentive Plan [Exhibit 10.2 to the Company’s Form
8-K filed on June 4, 2021]
Form of Non-Employee Director Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit
10.3 to the Company’s Form 8-K filed on June 4, 2021]
Form of Employee Service Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan)
[Exhibit 10.4 to the Company’s Form 8-K filed on June 4, 2021]
Form of Employee TSR Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan)
[Exhibit 10.5 to the Company’s Form 8-K filed on June 4, 2021]
Stipulation and Agreement of Settlement, dated as of April 29, 2021 [Exhibit 10.1 to the Company’s
Form 8-K filed on April 30, 2021]
Notice of Pendency and Proposed Settlement of Actions [Exhibit 99.1 to the Company’s Form 8-K
filed on June 9, 2022]
List of Subsidiaries of Granite Construction Incorporated
Consent of PricewaterhouseCoopers LLP
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Mine Safety Disclosure
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema
Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31,
2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).
* Incorporated by reference
** Compensatory plan or management contract
† Filed herewith
†† Furnished herewith
48 Granite Construction Incorporated
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRANITE CONSTRUCTION INCORPORATED
By: /s/ Elizabeth L. Curtis
Elizabeth L. Curtis
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: February 21, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities indicated and on the dates indicated.
/s/ Michael F. McNally
Michael F. McNally, Chairman of the Board and Director
/s/ Kyle T. Larkin
Kyle T. Larkin, President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Elizabeth L. Curtis
Elizabeth L. Curtis, Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Staci M. Woolsey
Staci M. Woolsey, Chief Accounting Officer (Principal Accounting
Officer)
/s/ Louis E. Caldera
Louis E. Caldera, Director
/s/ Molly C. Campbell
Molly C. Campbell, Director
/s/ David C. Darnell
David C. Darnell, Director
/s/ Patricia D. Galloway
Patricia D. Galloway, Director
/s/ David H. Kelsey
David H. Kelsey, Director
/s/ Alan P. Krusi
Alan P. Krusi, Director
/s/ Jeffrey J. Lyash
Jeffrey J. Lyash, Director
/s/ Celeste B. Mastin
Celeste B. Mastin, Director
/s/ Laura M. Mullen
Laura M. Mullen, Director
/s/ Gaddi H. Vasquez
Gaddi H. Vasquez, Director
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
February 21, 2023
2022 Annual Report 49
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Granite Construction Incorporated
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Granite Construction Incorporated and its subsidiaries (the
“Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive
income (loss), of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control–
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control–Integrated Framework (2013) issued by the COSO because a
material weakness in internal control over financial reporting existed as of that date related to not designing an effective control to
assess the impact of significant and unusual discrete items on the interim tax provision, such as the divestiture of a business.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or
detected on a timely basis. The material weakness referred to above is described in Management’s Report on Internal Control Over
Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent
of audit tests applied in our audit of the 2022 consolidated financial statements, and our opinion regarding the effectiveness of the
Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in management’s report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial
statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
2022 Annual Report F-1
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts
or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition–Estimates of the forecasted revenue and costs to complete for multi-year fixed price contracts in
the construction segment
As described in Notes 1, 3, and 4 to the consolidated financial statements, the revenue for the construction segment for the year
ended December 31, 2022 was $2,802 million, a portion of which related to multi-year fixed price contracts. Revenue in the
construction segment is ordinarily recognized over time as control is transferred to the customers by measuring the progress toward
complete satisfaction of the performance obligation(s) using an input (i.e., cost to cost) method. Under the cost to cost method, costs
incurred to-date are generally the best depiction of transfer of control. The accuracy of the Company’s revenue and profit recognition in
a given period depends on the accuracy of management’s estimates of the forecasted revenue and cost to complete each project. Cost
estimates for all significant projects use a detailed bottom up approach in which there are a number of factors that can contribute to
changes in estimates of contract cost and profitability. Provisions for losses are recognized at the uncompleted performance obligation
level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance
obligation exceeds its estimated total revenue. The estimates of transaction price and costs to complete can vary significantly in the
normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. When the Company
experiences significant revisions in estimates, management undergoes a process that includes reviewing the nature of the changes
to ensure that no material amounts should have been recorded in a prior period rather than as a revision in estimate for the current
period. Management generally uses the cumulative catch-up method for changes to the transaction price that are part of a single
performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change.
The principal considerations for our determination that performing procedures relating to estimates of the forecasted revenue
and costs to complete for multi-year fixed price contracts in the construction segment, and revisions in those estimates, is a
critical audit matter are (i) the significant judgment by management in forecasting project revenue and costs to complete and
(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to
the estimates of forecasted revenue and costs to complete for multi-year fixed price contracts in the construction segment, and
revisions in those estimates.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process, including controls over estimates of forecasted revenue and costs to complete for multi-year fixed
price contracts in the construction segment, and revisions in those estimates. These procedures also included, among others, for
a sample of contracts, evaluating and testing management’s process for determining the estimates of forecasted revenue and
costs to complete, which included (i) assessing management’s ability to reasonably estimate the forecasted revenue and costs to
complete by evaluating management’s methodology and assessing the consistency of management’s approach over the life of
the contract and (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated forecasted
revenue and costs to complete.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
February 21, 2023
We have served as the Company’s auditor since 1982.
F-2 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
December 31,
ASSETS
Current assets
Cash and cash equivalents ($102,547 and $92,783 related to consolidated construction joint
ventures (“CCJVs”))
Short-term marketable securities
Receivables, net ($39,281 and $49,534 related to CCJVs)
Contract assets ($80,306 and $50,054 related to CCJVs)
Inventories
Equity in construction joint ventures
Other current assets ($5,694 and $8,091 related to CCJVs)
Current assets held for sale
Total current assets
Property and equipment, net ($7,834 and $14,920 related to CCJVs)
Long-term marketable securities
Investments in affiliates
Goodwill
Right of use assets
Deferred income taxes, net
Other noncurrent assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
Accounts payable ($57,534 and $55,012 related to CCJVs)
Contract liabilities ($62,675 and $69,328 related to CCJVs)
Accrued expenses and other current liabilities ($8,451 and $5,514 related to CCJVs)
Current liabilities held for sale
Total current liabilities
Long-term debt
Long-term lease liabilities
Deferred income taxes, net
Other long-term liabilities
Commitments and contingencies (see Note 20)
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding:
43,743,907 shares as of December 31, 2022 and 45,840,260 shares as of December 31, 2021
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total Granite Construction Incorporated shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
The accompanying notes are an integral part of these consolidated financial statements.
2022
2021
$ 293,991
39,374
463,987
241,916
86,809
183,808
37,411
—
1,347,296
509,210
26,569
80,725
73,703
49,079
22,208
59,143
$ 2,167,933
$ 395,647
—
464,588
145,437
61,965
189,911
177,210
392,641
1,827,399
433,504
15,600
23,368
53,715
49,312
24,141
67,888
$ 2,494,927
$
1,447
334,392
173,286
288,469
—
797,594
286,934
32,170
1,891
64,199
$
8,727
324,313
200,041
452,829
83,408
1,069,318
331,191
32,928
1,856
64,071
—
—
437
470,407
788
481,384
953,016
32,129
985,145
$ 2,167,933
458
559,752
(3,359)
410,831
967,682
27,881
995,563
$ 2,494,927
2022 Annual Report F-3
GRANITE CONSTRUCTION INCORPORATED
Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
Years Ended December 31,
Revenue
Construction
Materials
Total revenue
Cost of revenue
Construction
Materials
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Non-cash impairment charges (see Note 1)
Other costs, net (See Note 1)
Gain on sales of property and equipment, net (see Note 11)
Operating income (loss)
Other (income) expense
Interest income
Interest expense
Equity in income of affiliates, net
Other (income) expense, net
Total other (income) expense, net
Income (loss) before income taxes
Provision for (benefit from) income taxes
Net income (loss)
Amount attributable to non-controlling interests
2022
2021
2020
$ 2,803,935 $ 3,076,190 $ 3,181,697
380,762
3,562,459
497,321
3,301,256
425,675
3,501,865
2,500,054
431,708
2,931,762
369,494
272,610
—
2,772,962
366,258
3,139,220
362,645
303,015
—
24,120
(12,617)
85,381
101,351
(66,439)
24,718
2,901,528
316,143
3,217,671
344,788
316,284
156,690
37,089
(6,930)
(158,345)
(6,528)
12,624
(13,571)
1,039
(6,436)
91,817
12,960
78,857
4,445
83,302 $
(1,176)
20,739
(12,586)
(4,386)
2,591
22,127
19,713
2,414
7,682
(3,096)
24,200
(8,783)
(4,203)
8,118
(166,463)
(282)
(166,181)
21,064
10,096 $ (145,117)
Net income (loss) attributable to Granite Construction Incorporated $
Net income per share attributable to common shareholders (see Note 18):
Basic earnings (loss) per share
Diluted earnings (loss) per share
Weighted average shares outstanding:
Basic
Diluted
$
$
1.87 $
1.70 $
0.22 $
0.21 $
(3.18)
(3.18)
44,485
52,326
45,788
47,599
45,614
45,614
The accompanying notes are an integral part of these consolidated financial statements.
F-4 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Years Ended December 31,
Net income (loss)
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on cash flow hedges, net of tax
Less: reclassification for net gains included in interest expense, net of tax
Net change
Foreign currency translation adjustments, net
Other comprehensive income (loss), net of tax
Comprehensive income (loss), net of tax
Non-controlling interests in comprehensive income, net of tax
Comprehensive income (loss) attributable to Granite Construction Incorporated,
net of tax
The accompanying notes are an integral part of these consolidated financial statements.
2022
2020
$ 78,857 $ 2,414 $ (166,181)
2021
$
275 $
(108) $
3,042
2,131
$ 3,317 $ 2,023 $
(4,155)
1,816
(2,339)
(51)
$ 4,147 $ 1,676 $
(2,390)
$ 83,004 $ 4,090 $ (168,571)
21,064
7,682
4,445
(347)
830
$ 87,449 $ 11,772 $ (147,507)
2022 Annual Report F-5
GRANITE CONSTRUCTION INCORPORATED
Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
Outstanding
Shares
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total Granite
Shareholders’
Equity
Non-
controlling
Interests
Total
Equity
Balances at December 31, 2019
45,503,805 $
456 $ 549,307 $
(2,645) $ 594,353 $ 1,141,471 $
36,945 $ 1,178,416
Net loss
Other comprehensive loss
RSUs vested
Common stock purchased for employee
—
—
191,171
—
—
2
—
—
(2)
—
(145,117)
(145,117)
(21,064)
(166,181)
(2,390)
—
—
—
(2,390)
—
—
—
(2,390)
—
tax withholding for vested RSUs
(60,604)
(1)
(884)
—
—
(885)
—
(885)
Dividends on common stock
($0.52 per share)
Effect of adopting ASC Topic 326
Transactions with non-controlling
interests, net
Stock-based compensation expense
and other
—
—
—
—
—
—
—
—
(23,734)
(23,734)
(366)
(366)
—
—
(23,734)
(366)
—
—
—
—
—
—
65
65
34,169
—
6,986
—
(301)
6,685
—
6,685
Balances at December 31, 2020
45,668,541
457 555,407
(5,035)
424,835
975,664
15,946
991,610
Net income (loss)
Other comprehensive income
RSUs vested
Common stock purchased for employee
—
—
235,234
—
—
2
—
—
(2)
—
10,096
10,096
(7,682)
1,676
—
—
—
1,676
—
—
—
2,414
1,676
—
tax withholding for vested RSUs
(68,580)
(1)
(2,729)
—
—
(2,730)
—
(2,730)
Dividends on common stock
($0.52 per share)
Transactions with non-controlling
interests, net
Stock-based compensation expense
and other
—
—
—
—
(23,826)
(23,826)
—
(23,826)
—
—
—
—
—
—
19,617
19,617
5,065
—
7,076
—
(274)
6,802
—
6,802
Balances at December 31, 2021
45,840,260
458 559,752
(3,359)
410,831
967,682
27,881
995,563
Cumulative effect of newly adopted
accounting standard (see Note 1)
—
—
(26,961)
—
10,543
(16,418)
—
(16,418)
Balances at January 1, 2022
45,840,260
458 532,791
(3,359)
421,374
951,264
27,881
979,145
Net income (loss)
Other comprehensive income
—
—
—
—
—
—
Repurchases of common stock(1)
(2,376,020)
(24)
(70,877)
RSUs vested
262,748
3
(3)
—
83,302
83,302
(4,445)
78,857
4,147
—
—
—
—
—
4,147
(70,901)
—
—
—
—
4,147
(70,901)
—
Dividends on common stock
($0.52 per share)
Transactions with non-controlling
interests, net
Stock-based compensation expense
and other
—
—
—
—
(23,292)
(23,292)
—
(23,292)
—
—
—
—
—
—
8,693
8,693
16,919
—
8,496
—
—
8,496
—
8,496
Balances at December 31, 2022
43,743,907 $
437 $ 470,407 $
788 $ 481,384 $
953,016 $
32,129 $
985,145
(1)
This amount represents employee tax withholding for RSUs vested under our 2012 and 2021 Equity Incentive Plans and stock repurchased,
including shares purchased in connection with the accelerated share repurchase in 2022 (see Note 1) under the Board-approved repurchase plan.
The accompanying notes are an integral part of these consolidated financial statements.
F-6 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31,
Operating activities
Net income
2022
2021
2020
$ 78,857 $
2,414 $ (166,181)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization
82,569
109,050
112,958
Amortization related to long-term debt (see Note 14)
Gain on sales of property and equipment, net (see Note 11)
Deferred income taxes
Stock-based compensation
Equity in net loss from unconsolidated joint ventures
Net income from affiliates
Non-cash impairment charges (see Note 1)
Other non-cash adjustments
Changes in assets and liabilities:
Receivables
Contract assets, net
Inventories
Contributions to unconsolidated construction joint ventures
2,366
9,448
(12,617)
(66,439)
5,447
7,765
19,676
16,600
6,407
765
(13,571)
(12,586)
8,693
(6,930)
8,817
6,377
51,486
(8,783)
—
222
—
156,690
—
1,729
59,623
(11,317)
6,840
(113,410)
12,046
123,670
(14,307)
774
5,136
(53,787)
(61,780)
(50,878)
Distributions from unconsolidated construction joint ventures and affiliates
19,223
22,004
11,065
Deposit for legal settlement (see Note 20)
Other assets, net
Accounts payable
Accrual for legal settlement (see Note 20)
Accrued expenses and other liabilities, net
Net cash provided by operating activities
Investing activities
Purchases of marketable securities
Maturities of marketable securities
Proceeds from called marketable securities
Purchases of property and equipment
Proceeds from sales of property and equipment
Proceeds from the sale of business (see Note 2)
Issuance of notes receivable
Collection of notes receivable
Net cash used in investing activities
Financing activities
Proceeds from long-term debt
Debt principal repayments
Cash dividends paid
Repurchases of common stock (See Note 17)
Contributions from non-controlling partners
Distributions to non-controlling partners
Other financing activities, net
Net cash used in financing activities
129,000
(129,000)
—
16,868
(11,969)
(1,035)
(9,778)
7,396
(40,999)
(129,000)
129,000
—
(19,499)
(882)
49,805
$ 55,647 $ 21,931 $ 268,460
(94,104)
(10,000)
45,000
6
—
—
(9,996)
10,000
24,996
(121,612)
(94,810)
(93,253)
26,064
94,802
16,702
140,576
—
(7,560)
(20,400)
630
8,930
5,000
5,289
—
$ (11,000) $ (21,478) $ (41,262)
50,000
—
(125,164)
(8,922)
(23,271)
(23,804)
(70,898)
(2,730)
50,000
(83,433)
(23,712)
(885)
13,150
20,126
11,875
(8,567)
(9,514)
(11,810)
439
398
307
$ (164,311) $ (24,446) $ (57,658)
2022 Annual Report F-7
GRANITE CONSTRUCTION INCORPORATED
Consolidated Statements of Cash Flows (Continued)
(in thousands)
Years Ended December 31,
2022
2021
2020
Net increase (decrease) in cash, cash equivalents and restricted cash
(119,664)
(23,993)
169,540
Cash, cash equivalents and $1,512, $1,512 and $5,835 in restricted cash at beginning
of period
413,655
437,648
268,108
Cash, cash equivalents and $0, $1,512 and $1,512 in restricted cash at end of period $ 293,991 $ 413,655 $ 437,648
Supplementary Information
Right of use assets obtained in exchange for lease obligations
$ 17,547 $ 23,379 $ 10,000
Cash paid during the period for:
Operating lease liabilities
Interest
Income taxes
Other non-cash operating activities:
Performance guarantees
Non-cash investing and financing activities:
RSUs issued, net of forfeitures
Dividends declared but not paid
Contributions from non-controlling partners
Accrued equipment purchases
$ 22,611 $ 23,203 $ 21,654
$ 11,511 $ 14,593 $ 18,753
$
3,768 $
2,066 $
2,805
$ (17,409) $
(167) $
350
$
$
$
$
8,694 $
8,299 $
5,687 $
5,959 $
4,110 $
9,006 $
5,745 $
(4,714) $
4,449
5,937
—
—
The accompanying notes are an integral part of these consolidated financial statements.
F-8 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Description of Business
Granite Construction Incorporated is one of the largest diversified infrastructure companies in the United States, engaged in
infrastructure projects including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges,
dams, power-related facilities, utilities, tunnels, water well drilling and other infrastructure-related projects, site preparation, mining
services and infrastructure services for commercial and industrial sites, railways, residential development, energy development, as
well as construction management professional services. Our operations have primary offices located in Alaska, Arizona, California,
Canada, Colorado, Florida, Guam, Illinois, Mexico, Nevada, Texas, Utah and Washington. Unless otherwise indicated, the terms
“we,” “us,” “our,” “Company” and “Granite” refer to Granite Construction Incorporated and its wholly-owned and consolidated
subsidiaries.
During the fourth quarter of 2021, we concluded that the assets and liabilities of our former Water and Mineral Services operating
group (“WMS”) met the criteria for classification as held for sale and the results of operations were presented as discontinued
operations. This included: our trenchless and pipe rehabilitation services business (“Inliner”); our water supply, treatment, delivery
and maintenance business (“Water Resources”); and our mineral exploration drilling business (“Mineral Services”). During
the first quarter of 2022, we completed the sale of Inliner. As discussed in more detail in Note 2, in the third quarter of 2022, we
determined that the remaining WMS businesses, Water Resources and Mineral Services, no longer met the criteria for classification
as held for sale, and therefore also no longer qualified for presentation as discontinued operations. This change to our plan of sale
was due to unfavorable market conditions which undermined our efforts to secure an appropriate value for the businesses. We
reclassified WMS from discontinued operations to continuing operations and it is reported within the Mountain operating group.
The operations of the remaining WMS businesses fall within the Construction segment. Prior periods presented in the consolidated
statements of operations have been conformed to the current period presentation. The assets and liabilities of WMS met the
criteria for classification as held for sale as of December 31, 2021, therefore our consolidated balance sheet continues to reflect
these assets and liabilities as held for sale as of that date.
In alphabetical order, our business operating groups are as follows:
• California, which is comprised of vertically integrated businesses in home markets across the state;
• Central, which includes the vertically integrated Arizona region and regional civil construction businesses in Illinois, Florida
and Texas. The Central group also includes the Federal division which performs civil construction across the continental
United States and Guam, and the Tunnel division; and
• Mountain, which is comprised of vertically integrated regional businesses in Alaska, Washington, Oregon, Utah and Nevada.
The Mountain Group also includes national businesses in the Industrial & Energy division, which primarily focuses on
commercial solar construction projects, Water Resources, which performs water well drilling and rehabilitation services and
Mineral Services, which performs mineral exploration services for mining clients.
Principles of Consolidation
The consolidated financial statements include the accounts of Granite Construction Incorporated and its wholly-owned and
consolidated subsidiaries. All material inter-company transactions and accounts have been eliminated. Additionally, we participate
in various construction joint ventures of which we are a limited member (“joint ventures”). Generally, each construction joint
venture is formed to accomplish a specific project and is jointly controlled by the joint venture partners. The joint venture
agreements typically provide that our interests in any profits and assets and our respective share in any losses and liabilities that
may result from the performance of the contracts are limited to our stated percentage interest in the project. However, due
to the joint and several nature of the performance obligations under the related owner contracts, if any of the partners fail to
perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide a
performance guarantee). Under our joint venture contractual arrangements, we provide capital to these joint ventures in return for
an ownership interest. In addition, partners dedicate resources to the joint ventures necessary to complete the contracts and are
reimbursed for their cost. The operational risks of each construction joint venture are passed along to the joint venture members.
As we absorb our share of these risks, our investment in each venture is exposed to potential gains and losses. We consolidate
joint ventures if we determine that through our participation we have a variable interest and are the primary beneficiary as defined
by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and
2022 Annual Report F-9
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
related standards. The factors we use to determine the primary beneficiary of a variable interest entity (“VIE”) may include the
decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity
investment in relation to that of our partners. Although not applicable for any of the years presented, if we determine that the
power to direct the significant activities is shared equally by two or more joint venture parties, then there is no primary beneficiary
and no party consolidates the VIE.
If we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for
our share of the operations of the unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue
in the consolidated statements of operations. We record the corresponding investment balance in equity in construction joint
ventures in the consolidated balance sheets except when a project is in a loss position, the investment balance is recorded as
a deficit in unconsolidated construction joint ventures and is included in accrued expenses and other current liabilities in the
consolidated balance sheets. Our investment in unconsolidated construction joint ventures could extend beyond one year and
is within the normal operating cycle of the associated construction projects. We account for non-construction unconsolidated
joint ventures under the equity method of accounting in accordance with ASC Topic 323, Investments - Equity Method and Joint
Ventures, and include our share of the operations in equity in income of affiliates in the consolidated statements of operations and
in investment in affiliates in the consolidated balance sheets.
We also participate in “line-item” joint venture agreements under which each partner is responsible for performing certain discrete
items of the total scope of contracted work. The revenue for each line-item joint venture partners’ discrete items of work is defined
in the contract with the project owner and each joint venture partner bears the profitability risk associated only with its own work.
There is not a single set of books and records for a line-item joint venture. Each partner accounts for its items of work individually
as it would for any self-performed contract. We account for our portion of these contracts as revenue and cost of revenue in the
consolidated statements of operations and in relevant balances in the consolidated balance sheets.
Use of Estimates in the Preparation of Financial Statements
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates that affect
the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences;
however, actual amounts could differ from those estimates.
Revenue Recognition:
Our revenue is primarily derived from construction contracts that can span several quarters or years in our Construction
segment and from sales of construction related materials in our Materials segment. We recognize revenue in accordance with ASC
Topic 606, Revenue from Contracts with Customers, and subsequently issued additional related Accounting Standards Updates
(“ASU”s) (“Topic 606”). Topic 606 provides for a five-step model for recognizing revenue from contracts with customers as follows:
1. Identify the contract
2. Identify performance obligations
3. Determine the transaction price
4. Allocate the transaction price
5. Recognize revenue
Generally, our contracts contain one performance obligation. Contracts with customers in our Materials segment are typically
defined by our customary business practices and are valued at the contractual selling price per unit. Our customary business
practices are for the delivery of a separately identifiable good at a point in time which is typically when delivery to the customer
occurs. Contracts in our Construction segment may contain multiple distinct promises or multiple contracts within a master
agreement (e.g., contracts that cross multiple locations/geographies and task orders), which we review at contract inception to
determine if they represent multiple performance obligations or multiple separate contracts. This review consists of determining
if promises or groups of promises are distinct within the context of the contract, including whether contracts are physically
contiguous, contain task orders, purchase or sales orders, termination clauses and/or elements not related to design and/or build.
F-10 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods and
services to the customer. The contractual consideration from customers of our Construction segment may include both fixed
amounts and variable amounts (e.g., bonuses/incentives or penalties/liquidated damages) to the extent that a significant reversal
of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently
resolved (i.e., probable and estimable). When a contract has a single performance obligation, the entire transaction price is
attributed to that performance obligation. When a contract has more than one performance obligation, the transaction price is
allocated to each performance obligation based on estimated relative standalone selling prices of the goods or services at the
inception of the contract, which typically is determined using cost plus an appropriate margin.
Subsequent to the inception of a contract in our Construction segment, the transaction price could change for various reasons,
including executed or unapproved change orders, and unresolved contract modifications and/or affirmative claims. Changes that
are accounted for as an adjustment to existing performance obligations are allocated on the same basis at contract inception.
Otherwise, changes are accounted for as separate performance obligation(s) and the separate transaction price is allocated as
discussed above.
Changes are made to the transaction price from unapproved change orders to the extent the amount can be reasonably estimated
and recovery is probable.
On certain projects we have submitted and have pending unresolved contract modifications and/or affirmative claims (“affirmative
claims”) to recover additional costs and the associated profit, if applicable, to which the Company believes it is entitled under the
terms of contracts with customers, subcontractors, vendors or others. The owners or their authorized representatives and/or other
third parties may be in partial or full agreement with the modifications or affirmative claims, or may have rejected or disagree
entirely or partially as to such entitlement.
Changes are made to the transaction price from affirmative claims with customers to the extent that additional revenue on a claim
settlement with a customer is probable and estimable. A reduction to costs related to affirmative claims with non-customers with
whom we have a contractual arrangement (“back charges”) is recognized when the estimated recovery is probable and estimable.
Recognizing affirmative claims and back charge recoveries requires significant judgments of certain factors including, but not
limited to, dispute resolution developments and outcomes, anticipated negotiation results, and the cost of resolving such matters.
Generally, performance obligations related to contracts in our Construction segment are satisfied over time because our
performance typically creates or enhances an asset that the customer controls as the asset is created or enhanced. We recognize
revenue as performance obligations are satisfied and control of the promised good and/or service is transferred to the customer.
Revenue in our Construction segment is ordinarily recognized over time as control is transferred to the customers by measuring the
progress toward complete satisfaction of the performance obligation(s) using an input (i.e., “cost to cost”) method. Under the cost
to cost method, costs incurred to-date are generally the best depiction of transfer of control.
All contract costs, including those associated with affirmative claims, change orders and back charges, are recorded as incurred
and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Contract costs consist of
direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment
expense (primarily depreciation, fuel, maintenance and repairs).
The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the forecasted
revenue and cost to complete each project. Cost estimates for all of our significant projects use a detailed “bottom up”
approach. There are a number of factors that can contribute to revisions in estimates of contract cost and profitability. The most
significant of these include:
subcontractor costs, availability and/or performance issues;
• changes in costs of labor and/or materials;
•
• extended overhead and other costs due to owner, weather and other delays;
• changes in productivity expectations;
• changes from original design on design-build projects;
• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs;
• a change in the availability and proximity of equipment and materials;
2022 Annual Report F-11
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
length of time to complete the project;
the availability and skill level of workers in the geographic location of the project;
site conditions that differ from those assumed in the original bid;
• complexity in original design;
•
•
•
• costs associated with scope changes; and
•
the customer’s ability to properly administer the contract.
The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may
cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in revenue and cost estimates,
particularly in our larger, more complex, multi-year projects have had, and can in future periods have, a significant effect on our
profitability.
All state and federal government contracts and many of our other contracts provide for termination of the contract at the
convenience of the party contracting with us, with provisions to pay us for work performed through the date of termination
including demobilization cost.
Costs to obtain our contracts (“pre-bid costs”) that are not expected to be recovered from the customer are expensed as incurred
and included in selling, general and administrative expenses in our consolidated statements of operations. Although unusual, pre-
bid costs that are explicitly chargeable to the customer even if the contract is not obtained are included in accounts receivable in
our consolidated balance sheets when we are notified that we are not the low bidder with a corresponding reduction to selling,
general and administrative expenses in our consolidated statements of operations.
Unearned Revenue
Unearned revenue represents the aggregate amount of the transaction price allocated to unsatisfied or partially unsatisfied
performance obligations at the end of a reporting period. We generally include a project in our unearned revenue at the time a
contract is awarded, the contract has been executed and to the extent we believe funding is probable. Certain contracts contain
contract options that are exercisable at the option of our customers without requiring us to go through an additional competitive
bidding process or contain task orders related to master contracts under which we perform work only when the customer
awards specific task orders to us. Contract options and task orders are included in unearned revenue when exercised or issued,
respectively. As of December 31, 2022 and 2021, unearned revenue was $2.9 billion and $2.6 billion, respectively. Approximately
$1.8 billion of the December 31, 2022 unearned revenue is expected to be recognized within the next twelve months and the
remaining amount will be recognized thereafter. Substantially all of the contracts in our unearned revenue may be canceled or
modified at the election of the customer; however, we have not been materially adversely affected by contract cancellations or
modifications in the past. Many projects are added to unearned revenue and completed within the same fiscal quarter or year and,
therefore, may not be reflected in our beginning or ending unearned revenue.
Balance Sheet Classifications
Prepaid expenses and amounts receivable and payable under construction contracts (principally retentions) that may exist over the
duration of the contract and could extend beyond one year are included in current assets and liabilities. A one-year time period is
used as the basis for classifying all other current assets and liabilities. Included in other current assets on the consolidated balance
sheets as of December 31, 2021 was the $129.0 million deposit for the securities litigation settlement discussed in Note 20.
Cash and Cash Equivalents
Cash equivalents are securities having maturities of three months or less from the date of purchase. Our access to joint venture
cash may be limited by the provisions of the joint venture agreements.
Contract Assets
Our contract assets include costs and estimated earnings in excess of billings as well as amounts due under contractual retention
provisions. Costs and estimated earnings in excess of billings represent amounts earned and reimbursable under contracts, including
customer affirmative claim recovery estimates, and have a conditional right for billing and payment such as achievement of
milestones or completion of the project. Generally, with the exception of customer affirmative claims, such unbilled amounts will
become billable according to the contract terms and generally will be billed and collected over the next twelve months. Settlement
with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year.
F-12 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Based on our historical experience, we generally consider the collection risk related to billable amounts to be low. However, when
events or conditions indicate that it is probable that the amounts become unbillable, the transaction price and associated contract
asset is reduced. Certain contracts in our Construction segment include retention provisions to provide assurance to our customers
that we will perform in accordance with the contract terms and are not considered a financing benefit under ASC Topic 606. The
balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the
project work or products by the customer.
Marketable Securities
We determine the classification of our marketable securities at the time of purchase and re-evaluate these determinations at each
balance sheet date. Our marketable securities are fixed income marketable securities and are classified as held-to-maturity as we
have the positive intent and ability to hold the securities to maturity. Held-to-maturity investments are stated at amortized cost
and are periodically assessed for other-than-temporary impairment. Amortized cost of debt securities is adjusted for amortization
of premiums and accretion of discounts to maturity and is included in interest income. The cost of securities redeemed or called is
based on the specific identification method.
Derivative Instruments
We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2
inputs. To receive hedge accounting treatment, derivative instruments that are designated as cash flow hedges must be highly
effective in offsetting changes to expected future cash flows on hedged transactions. We formally document our hedge
relationships at inception, including identification of the hedging instruments and the hedged items, our risk management
objectives and strategies for undertaking the hedge transaction, and the initial quantitative assessment of the hedging instrument’s
effectiveness in offsetting changes in the fair value of the hedged items. The effective portion of the gain or loss on cash flow
hedges is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to the
consolidated statements of operations when the periodic hedged cash flows are settled. Adjustments to fair value on derivative
instruments that are not part of a designated hedging relationship are reported through the consolidated statements of
operations. We do not enter into derivative instruments for speculative or trading purposes.
The derivative transactions related to the 2.75% Convertible Notes (as defined in Note 14) were recorded to equity in our
consolidated balance sheets based on the cash proceeds and will not be remeasured as long as they continue to meet the
conditions for equity classification.
Fair Value of Financial Assets and Liabilities
We measure and disclose certain financial assets and liabilities at fair value. ASC Topic 820, Fair Value Measurements and
Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820 describes three levels of inputs that
may be used to measure fair value:
Level 1–Quoted prices in active markets for identical assets or liabilities.
Level 2–Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3–Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities.
We utilize the active market approach to measure fair value for our financial assets and liabilities. We report separately each class
of assets and liabilities measured at fair value on a recurring basis and include assets and liabilities that are disclosed but not
recorded at fair value in the fair value hierarchy.
2022 Annual Report F-13
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Allowance for Credit Losses
Financial assets, which potentially subject us to credit losses, consist primarily of short and long-term marketable securities,
receivables, contract assets and long-term notes receivables included in other noncurrent assets in our consolidated balance sheets.
We measure expected credit losses of financial assets based on historical loss and other information available to management using
a loss rate method applied to asset groups with categorically similar risk characteristics. These expected credit losses are recorded
to an allowance for credit losses valuation account that is deducted from receivables and contract assets to present the net amount
expected to be collected on the financial asset in the consolidated balance sheets.
Concentrations of Credit Risk
Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents,
marketable securities, accounts receivable and contract assets. We maintain our cash and cash equivalents and our marketable
securities with several financial institutions. We invest with high credit quality financial institutions and, by policy, limit the amount
of credit exposure to any one financial institution. During the years ended December 31, 2022, 2021 and 2020, our largest volume
customer, including both prime and subcontractor arrangements, was the California Department of Transportation (“Caltrans”).
Revenue recognized from contracts with Caltrans during the years ended December 31, 2022, 2021 and 2020 represented $348.0
million (10.5% of total revenue), $337.1 million (9.6% of total revenue) and $316.9 million (8.9% of total revenue), respectively,
which was primarily in the Construction segment. Other than Caltrans, none of our customers, including both prime and
subcontractor arrangements, had revenue that individually exceeded 10% of total revenue during the year ended December 31,
2022. None of our customers had revenue that individually exceeded 10% of total revenue during the years ended December 31,
2021 and 2020.
The majority of our receivables are from customers concentrated in the United States. None of our customers had a receivable
balance in excess of 10% of our total net receivables as of December 31, 2022 and 2021. Certain construction contracts include
retention provisions that were included in contract assets as of December 31, 2022 and 2021 in our consolidated balance sheets.
The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance
of the project work or products by the owners. The majority of the December 31, 2022 contract retention balance disclosed in
Note 6 is expected to be collected within one year. We perform ongoing credit evaluations of our customers and generally do not
require collateral, although the law provides us the ability to file mechanics’ liens on real property improved for private customers
in the event of non-payment by such customers.
Foreign Currency Transactions and Translation
We have operations in Mexico and Canada which involve exposure to possible volatile movements in foreign currency exchange
rates. We account for foreign currency exchange transactions and translation in accordance with ASC Topic 830, Foreign
Currency Matters. In Mexico, most of our customer contracts and a significant portion of our costs are denominated in U.S.
dollars; therefore, the functional currency is U.S. dollars. In Canada, the functional currency is the local currency. Foreign currency
transactions are remeasured into the functional currency with gains and losses included in other income, net in the consolidated
statements of operations. The impact from foreign currency transactions was immaterial for 2022, 2021 and 2020. Assets and
liabilities in functional currency are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Revenues and
expenses are translated into U.S. dollars at average foreign currency exchange rates prevailing during the reporting periods. The
translation adjustments from functional currency to U.S. dollars are reported in accumulated other comprehensive income (loss) on
the consolidated balance sheets.
Inventories
Inventories relating to our operations consist primarily of quarry products, contract-specific materials and water well drilling
materials, supplies, as well as mineral extraction and drilling supplies located in the U.S. and Mexico. Cost of inventories are valued
at the lower of average cost or net realizable value. We reserve quarry products based on estimated quantities of materials on hand
in excess of approximately one year of demand.
Investments in Affiliates
Each investment accounted for under the equity method of accounting is reviewed for impairment in accordance with ASC Topic
323, Investments–Equity Method and Joint Ventures. We account for our share of the operating results of the equity method
investments in equity in income from affiliates, net in the consolidated statements of operations and as a single line item in the
F-14 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
consolidated balance sheets as investments in affiliates. Our investments in affiliates include foreign entities, real estate entities
and an asphalt terminal entity. These investments are evaluated for impairment using the other-than-temporary impairment model,
which requires an impairment charge to be recognized if our investment’s carrying amount exceeds its fair value, and the decline
in fair value is deemed to be other than temporary. Recoverability is measured by comparison of carrying amounts to future
undiscounted cash flows the investments are expected to generate. Events or changes in circumstances, which would cause us to
review undiscounted future cash flows include, but are not limited to:
significant adverse changes in legal factors or the business climate and
•
• current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated
with the use of the asset.
In addition, events or changes in circumstances specifically related to our real estate entities, include:
significant decreases in the market price of the asset;
•
• accumulation of costs significantly in excess of the amount originally expected for the acquisition, development or
construction of the asset; and
significant changes to the development or business plans of a project.
•
Future undiscounted cash flows and fair value assessments for our foreign entities and for the asphalt terminal entity are estimated
based on market conditions and the political climate. Future undiscounted cash flows and fair value assessments for our real estate
entities are estimated based on entitlement status, market conditions, cost of construction, debt load, development schedules,
status of joint venture partners and other factors applicable to the specific project. Fair value is estimated based on the expected
future cash flows attributable to the asset or group of assets and on other assumptions that market participants would use in
determining fair value, such as market discount rates, transaction prices for other comparable assets, and other market data. Our
estimates of cash flows may differ from actual cash flows due to, among other things, fluctuations in interest rates, decisions made
by jurisdictional agencies, economic conditions, or changes to our business operations.
During the year ended December 31, 2020, the entities within our investments in foreign affiliates experienced other than
temporary declines in fair value, which resulted in a non-cash impairment charge of $9.6 million.
Property and Equipment
Property and equipment are stated at cost. Depreciation for construction and other equipment is primarily provided using
accelerated methods over lives ranging from three to ten years, and the straight-line method over lives from two to twenty
years for the remaining depreciable assets. We believe that accelerated methods best approximate the service provided by the
construction and other equipment. Depletion of quarry property is based on the usage of depletable reserves. We frequently
sell property and equipment that has reached the end of its useful life or no longer meets our needs, including depleted quarry
property. At the time that an asset or an asset group meets the held for sale criteria as defined by ASC Topic 360, Property, Plant,
and Equipment, depreciation is discontinued and we write it down to fair value less cost to sell, if the fair value is below the
carrying value. Fair value is estimated by a variety of factors including, but not limited to, market comparative data, historical
sales prices, broker quotes and third-party valuations. If material, such property is separately disclosed in the consolidated balance
sheets, otherwise it is held in property and equipment until sold. The cost and accumulated depreciation or depletion of property
sold or retired is removed from the consolidated balance sheets and the resulting gains or losses, if any, are reflected in operating
income in the consolidated statements of operations for the period. In the case that we abandon an asset, an amount equal to the
carrying amount of the asset, less salvage value, if any, will be recognized as expense in the period that the asset was abandoned.
Repairs and maintenance are expensed as incurred.
Costs related to the development of internal-use software during the preliminary project and post-implementation stages are
expensed as incurred. Costs incurred during the application development stage are capitalized. These costs consist primarily of
software, hardware and consulting fees, as well as salaries and related costs. Amounts capitalized are reported as a component of
office furniture and equipment within property and equipment in the consolidated balance sheets. Capitalized software costs are
depreciated using the straight-line method over the estimated useful life of the related software, which ranges from three to seven
years. During the years ended December 31, 2022, 2021 and 2020, we capitalized $11.4 million, $12.0 million and $7.4 million,
respectively, of internal-use software development and related hardware costs.
2022 Annual Report F-15
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Long-lived Assets
We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or
changes in circumstances indicate the carrying amount of an asset group may not be recoverable. Recoverability of these asset
groups is measured by comparison of their carrying amounts to the future undiscounted cash flows the asset groups are expected
to generate. If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by
which the carrying amount of the asset group exceeds fair value. We group construction and plant equipment assets at the lowest
level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. When an individual asset
or group of assets is determined to no longer contribute to its vertically integrated construction and plant equipment asset group,
it is assessed for impairment independently.
As of December 31, 2022, amortizable intangible assets, which primarily include permits and customer relationships, are being
amortized over remaining terms from two to fifteen years. All intangible assets are amortized on a straight-line basis except for
customer relationships which will are amortized on a double declining basis.
Goodwill
As of December 31, 2022, we had five reporting units in which goodwill was recorded as follows:
• Central Group Construction
• Central Group Materials
• Mountain Group Construction
• Mountain Group Materials
• California Group Construction
We perform our goodwill impairment tests annually as of November 1 and more frequently when events and circumstances occur
that indicate a possible impairment of goodwill. Examples of such events or circumstances include, but are not limited to, the
following:
• a significant adverse change in the business climate;
• a significant adverse change in legal factors or an adverse action or assessment by a regulator;
• a more likely than not expectation that a segment or a significant portion thereof will be sold; or
•
the testing for recoverability of a significant asset group within the segment.
In accordance with ASC Topic 350, Intangibles – Goodwill and Other, we can elect to perform a qualitative assessment to test
a reporting unit’s goodwill for impairment or perform a quantitative impairment test. Based on a qualitative assessment, if we
determine that the fair value of a reporting unit is more likely than not to be less than its carrying amount, the quantitative
impairment test will be performed.
In performing the quantitative goodwill impairment tests, we calculate the estimated fair value of the reporting unit in which
the goodwill is recorded using the discounted cash flows and market multiple methods. The estimated fair value is compared to
the carrying amount of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired. If the fair value of the reporting unit is less than its carrying amount,
goodwill is impaired and the excess of the reporting unit’s carrying amount over the fair value is recognized as a non-cash
impairment charge.
Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected
future cash flows, revenue and margin growth rates, and appropriate benchmark companies. The cash flows used in our 2022
discounted cash flow model were based on five-year financial forecasts developed internally by management adjusted for market
participant-based assumptions. Our discount rate assumptions are based on an assessment of the equity cost of capital and
appropriate capital structure for our reporting units. To assess for reasonableness, we compare the estimated fair values of the
reporting units to our current market capitalization.
For our 2022 annual goodwill impairment test, we elected to perform a qualitative assessment of the Central Group Materials,
Mountain Group Construction, Mountain Group Materials and California Group Construction reporting units and we determined
that it was more likely than not that the fair values were greater than the carrying amounts; therefore, no quantitative goodwill
F-16 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
impairment test was performed for these reporting units. Factors we considered in our qualitative assessment were macroeconomic
conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key
personnel, changes in strategy, changes in customers and changes in the composition or carrying amount of the reporting unit’s
net assets. A quantitative impairment test was conducted for the Central Group Construction reporting unit, and we concluded
that goodwill was not impaired. The assessment indicated that the estimated fair value of the reporting unit exceeded its carrying
amount (i.e., headroom) by over 80%.
In the third quarter of 2022, in connection with our decision to retain the Water Resources and Mineral Services businesses, we
performed impairment tests on the goodwill balances that had been previously held for sale. We concluded that goodwill was
not impaired and therefore it was reclassified as held and used at its carrying amount before being classified as held for sale. The
assessment indicated the estimated fair value exceeded its carrying amount by approximately 40%. At December 31, 2022, the
goodwill associated with Water Resources and Mineral Services was included within the Mountain Group Construction reporting unit.
For our 2021 annual goodwill impairment test, we conducted quantitative impairment tests based on the operating structure in
place at November 1, 2021. Due to changes in our reporting structure and resulting changes to our reporting units in 2021, we
conducted impairment tests immediately before and after the reorganization, which was effective December 1, 2021. Based on the
results of the tests performed, we concluded that goodwill was not impaired at either date since the estimated fair value of each
reporting unit exceeded its respective carrying amount.
During the year ended December 31, 2020, our goodwill impairment tests resulted in a total impairment charge of $147.1 million,
which is included in Non-cash impairment charges in the consolidated statements of operations.
Right of use Assets and Lease Liabilities
A lease contract conveys the right to use an underlying asset for a period of time in exchange for consideration. At inception, we
determine whether a contract contains a lease by determining if there is an identified asset and if the contract conveys the right to
control the use of the identified asset in exchange for consideration over a period of time.
At lease commencement, we measure and record a lease liability equal to the present value of the remaining lease payments,
generally discounted using the borrowing rate on our secured debt as the implicit rate is not readily determinable on many of our
leases. We use a quarterly maturity discount rate if it is not materially different than the discount rates applied to each of the leases
in the portfolio.
On the lease commencement date, the amount of the right of use assets consists of the following:
the amount of the initial measurement of the lease liability;
•
• any lease payments made at or before the commencement date, minus any lease incentives received; and
• any initial direct costs incurred.
On a quarterly basis, we determine if subcontractor, vendor or service provider agreements contain embedded leases by assessing if
an asset is explicitly or implicitly specified in the agreement and the counterparty has the right to substitute the asset. Most of our
lease contracts do not have the option to extend or renew. We assess the option for individual leases, and we generally consider
the base term to be the term of lease contracts. Lease contracts may contain non-lease components for which we elected to
include both the lease and non-lease components as a single component and account for it as a lease.
Contract Liabilities
Our contract liabilities consist of billings in excess of costs and estimated earnings, net of the related contract retention and
provisions for losses. Billings in excess of costs and estimated earnings are billings to customers on contracts in advance of work
performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be
earned over the next twelve months. Provisions for losses are recognized in the consolidated statements of operations at the
uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the
estimated total cost of a performance obligation exceeds its estimated total revenue.
2022 Annual Report F-17
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Asset Retirement Obligations
We account for the costs related to legal obligations to reclaim aggregate mining sites and other facilities by recording our
estimated asset retirement obligation at fair value using Level 3 inputs, capitalizing the estimated liability as part of the related
asset’s carrying amount and allocating it to expense over the asset’s useful life.
Warranties
Many of our construction contracts contain warranty provisions covering defects in equipment, materials, design or workmanship
that generally run for less than two years after our customer accepts the contract. Because of the nature of our projects, including
contract owner inspections of the work both during construction and prior to acceptance, we have not experienced material
warranty costs for these short-term warranties and, therefore, do not believe an accrual for these costs is necessary. Certain
construction contracts carry longer warranty periods, ranging from two to ten years, for which we have accrued an estimate of
warranty cost. The warranty liability is estimated based on our experience with the type of work and any known risks relative to the
project and was not material as of December 31, 2022 and 2021.
Accrued Insurance Costs
We carry insurance policies to cover various risks, including general liability, automobile liability, workers compensation and
employee medical expenses under which we are liable to reimburse the insurance company for certain losses. The amounts for
which we are liable range from the first $0.5 million to $1.5 million per occurrence. We accrue for probable losses, both reported
and unreported, that are reasonably estimable using actuarial methods based on historic trends, modified, if necessary, by recent
events. The establishment of accruals for estimated losses associated with our insurance policies are based on actuarial studies
that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends
involving claim payment patterns, pending levels of unpaid claims, claim severity, frequency patterns and changing regulatory and
legal environments. Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the
ultimate liability and could have an effect on our operating results and financial position.
Surety Bonds
We generally are required to provide various types of surety bonds that provide an additional measure of security for our
performance under certain public and private sector contracts. Performance bonds do not have stated expiration dates; rather, we
are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding
capacity to support our current and future level of contracting requires that we maintain cash and working capital balances
satisfactory to our sureties.
Performance Guarantees
The agreements with our joint venture partners (“partner(s)”) for both construction joint ventures and line item joint ventures
define each partner’s management role and financial responsibility in the project. The amount of operational exposure is generally
limited to our stated ownership interest. However, due to the joint and several nature of the performance obligations under
the related owner contracts, if any of the partners fail to perform, we and the remaining partners, if any, would be responsible
for performance of the outstanding work (i.e., we provide a performance guarantee). We estimate our liability for performance
guarantees for our unconsolidated and line item joint ventures using estimated partner bond rates, which are Level 2 inputs,
and include them in accrued expenses and other current liabilities with a corresponding increase in equity in construction joint
ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability and
corresponding asset are removed from the consolidated balance sheets upon completion and customer acceptance of the project.
Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure of a
partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur
should a partner fail to provide the services and resources that it had committed to provide in the agreement. We are not able to
estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by
billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.
Contingencies
We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if the potential loss
from any asserted or un-asserted claim or legal proceeding is considered probable and the amount can be reasonably estimated.
If a potential loss is considered probable but only a range of loss can be determined, the low-end of the range is recorded. These
F-18 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
accruals represent management’s best estimate of probable loss. Disclosure is also provided when it is reasonably possible and
estimable that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded.
Significant judgment is required in both the determination of probability of loss and the determination as to whether an exposure
is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available
at the time. As additional information becomes available, we reassess the potential liability related to claims and litigation and may
revise our estimates. We expense associated legal costs as they are incurred. See Note 20 for additional information.
Stock-Based Compensation
We measure and recognize compensation expense, net of forfeitures, over the requisite vesting periods for all stock-based
payment awards made and we recognize forfeitures as they occur. Stock-based compensation is included in selling, general and
administrative expenses and cost of revenue on our consolidated statements of operations.
Other Costs
Other costs, net in the consolidated statements of operations include net costs related to settlements of certain legal matters and
investigations, all discussed further in Note 20, as well as net divestiture costs, a gain on sale of a business in 2022 and personnel
costs incurred in connection with our operating group reorganization during 2021.
Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences
and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and liabilities in the consolidated financial statements and
their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment. Disproportionate income tax effects which are stranded
in accumulated other comprehensive income will be released using the item-by-item approach.
We report a liability in accrued expenses and other current liabilities and in other long-term liabilities in the consolidated balance
sheets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We
recognize interest and penalties, if any, related to unrecognized tax benefits in interest expense and other income, net in the
consolidated statements of operations.
Computation of Earnings per Share
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the
period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and dilutive
potential common shares outstanding during the period. Dilutive potential common shares include common share equivalents
under the equity incentive plans and common share equivalents issuable under our 2.75% Convertible Notes using the if-
converted method. Dilutive potential common shares also include common share equivalents issuable under the terms of our
warrants assuming the share price of our common stock was in excess of $53.44, the exercise price of warrants. See Note 14 for
further discussion related to the 2.75% Convertible Notes and warrants.
Convertible Notes
U.S. GAAP requires certain convertible debt instruments that may be settled in cash on conversion to be separately accounted for
into liability and equity components in a manner that reflects the issuer’s non-convertible debt borrowing rate. Third party offering
costs are allocated to the liability and equity components based on allocation of proceeds to those components and are recorded
net of the associated balances on the consolidated balance sheets and are generally amortized to interest expense through the
maturity date of the debt. Therefore, cash received from the issuance of the 2.75% Convertible Notes (as defined in Note 14) was
separated into liability and equity components on the consolidated balance sheets at the time of issuance based on the fair value
of a similar liability that does not have an associated convertible feature. The difference between the principal amount and the
liability component on the issuance date has been recorded to interest expense using an effective interest rate of 6.62% over the
expected life of the 2.75% Convertible Notes. Debt discounts are recorded to the liability component through the maturity date of
the debt.
2022 Annual Report F-19
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Recently Issued and Adopted Accounting Pronouncements
We closely monitor all ASUs issued by the FASB and other authoritative guidance. There are currently no recently issued accounting
pronouncements that are expected to have a material impact on our financial statements.
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments resulting in
accounting for convertible debt instruments as a single liability measured at its amortized cost and ASU 2020-06 is applicable to
our 2.75% convertible senior notes due 2024. In addition, ASU 2020-06 requires the application of the if-converted method for
calculating diluted earnings per share and eliminates the treasury stock method for convertible debt. We adopted ASU 2020-06
effective January 1, 2022, using the modified retrospective transition approach under which financial results reported in prior
periods were not adjusted. Upon adoption, we recorded a net cumulative increase to debt of approximately $22.0 million and to
deferred tax assets of $5.6 million, offset by a decrease to additional paid-in capital and retained earnings of $16.4 million
(See Note 14 for details).
In March 2020, the FASB issued ASU 2020-04, which provides optional guidance to ease the potential burden in accounting for the
effects of the transition away from LIBOR and other reference rates. Also, in January 2021, the FASB issued ASU 2021-01, which
provided clarification guidance to ASU 2020-04. We adopted these ASUs during the quarter ended June 30, 2022, in conjunction
with entering into our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) (see Note 14), which replaced the
London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) administered by the Federal Reserve
Bank of New York for purposes of setting floating interest rates. In December 2022, the FASB issued ASU 2022-06, which extends
the period of time preparers can utilize the reference rate reform relief guidance established in ASU 2020-04. The adoption of these
ASUs did not have a material impact on our consolidated financial statements.
2. Assets and Liabilities Held for Sale
As discussed in Note 1, during the fourth quarter of 2021, we concluded the assets and liabilities of our former WMS businesses
met the criteria for classification as held for sale. This included: Inliner, Water Resources and Mineral Services. We concluded the
planned disposal activities represented a strategic shift that would have a major effect on our operations and financial results and
qualified for presentation as discontinued operations in accordance with ASC Topic 205-20, Presentation of financial statements -
Discontinued operations. Additionally, beginning December 31, 2021, in accordance with ASC 360, Property, Plant, and
Equipment, we ceased recording depreciation and amortization for WMS property, plant and equipment, finite-lived intangible
assets and right of use lease assets.
During the first quarter of 2022, we completed the sale of Inliner to Inland Pipe Rehabilitation LLC (“IPR”) and 1000097155
Ontario Inc. (“Ontario” and together with IPR, the “Purchasers”), investment affiliates of J.F. Lehman & Company, for a purchase
price of $159.7 million, subject to certain adjustments. As a result of the sale and post-closing adjustments, we received cash
proceeds of $140.6 million and recognized a gain of $1.8 million. This gain is included in Other costs, net in the consolidated
statements of operations for the year ended December 31, 2022.
In the third quarter of 2022, we announced our decision to retain the Water Resources and Mineral Services businesses. This
change to our plan of sale was due to unfavorable market conditions which undermined our efforts to secure an appropriate value
for the businesses. As a result, we have reclassified WMS from discontinued operations to continuing operations for all periods
presented. At the time of the change, we recorded an entry to adjust for depreciation and amortization that would have been
recognized if the unsold businesses had been continually classified as held and used from the beginning of the year. The assets and
liabilities of WMS met the criteria for classification as held for sale as of December 31, 2021, therefore our consolidated balance
sheet continues to reflect these assets and liabilities as held for sale as of that date.
F-20 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
The following table presents summarized balance sheet information of assets and liabilities held for sale:
(in thousands)
Cash and cash equivalents
Receivables, net
Contract assets
Inventories
Other current assets
Property and equipment, net
Investments in affiliates
Goodwill
Right of use assets
Other noncurrent assets
Total assets classified as held for sale
Accounts payable
Contract liabilities
Other current liabilities
Long-term lease liabilities
Other long-term liabilities
Total liabilities classified as held for sale
3. Revisions in Estimates
$
December 31,
2021
16,496
102,208
41,340
19,625
1,781
70,912
48,675
63,063
12,365
16,176
392,641
37,997
7,129
27,764
8,352
2,166
83,408
$
$
$
Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each
project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and
evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete may result in the reversal
of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated
or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges may be recorded in
future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions
in estimates.
When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes
to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates
for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction
price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety
in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be
required to revise our estimates in the future.
In our review of these changes for the years ended December 31, 2022, 2021 and 2020, we did not identify any material amounts
that should have been recorded in a prior period.
The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact
of $5.0 million or more on gross profit were net decreases of $80.1 million, $70.6 million and $143.4 million for the years ended
December 31, 2022, 2021 and 2020, respectively. The projects are summarized as follows (dollars in millions except per share data):
2022 Annual Report F-21
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Increases
Years Ended December 31,
Number of projects with upward estimate changes
Range of increase in gross profit from each project, net
Increase to project profitability, net
Increase to net income/decrease to net loss
Amounts attributable to non-controlling interests
Increase to net income/decrease to net loss attributable to Granite
Construction Incorporated
Increase to net income/decrease to net loss per diluted share attributable
to common shareholders
2022
2
2021
2
$ 5.4–6.8 $ 6.2–9.2 $
15.4 $
$
11.4
$
$
—
$
12.1 $
$
9.7
2.7
$
7.0 $
11.4
$
0.13 $
0.24 $
2020
—
—
—
—
—
—
—
The increases during the year ended December 31, 2022 were due to production at a higher rate than anticipated and a decrease
in estimated cost from mitigated risks. The increases during the year ended December 31, 2021 were due to production at a
higher rate than anticipated and a decrease in estimated cost from mitigated risks as well as settlement of outstanding customer
affirmative claims. There were no amounts attributable to non-controlling interests for 2021.
Decreases
Years Ended December 31,
Number of projects with downward estimate changes
Range of reduction in gross profit from each project, net
Decrease to project profitability, net
Decrease to net income/increase to net loss
Amounts attributable to non-controlling interests
Decrease to net income/increase to net loss attributable to Granite
Construction Incorporated
Decrease to net income/increase to net loss per diluted share attributable
2021
6
2022
8
2020
7
$ 5.6–32.2 $ 5.3–34.6 $ 6.7–49.9
143.4
$
114.7
$
31.9
$
92.2 $
74.1 $
21.7 $
86.0 $
69.1 $
20.5 $
$
52.4 $
48.6 $
82.9
to common shareholders
$
1.00 $
1.02 $
1.79
The decreases during the year ended December 31, 2022 were due to additional costs related to extended project duration,
increased labor and materials costs, and disputed work being performed where there are ongoing legal claims. The decreases
during the year ended December 31, 2021 were primarily due to additional costs from acceleration of work coupled with lower
productivity and higher costs than originally anticipated, unfavorable weather and extended project duration. The decreases during
the year ended December 31, 2020, were due to increases in design, production, weather-related and labor contingency costs.
4. Disaggregation of Revenue
We disaggregate our revenue based on our reportable segments and operating groups as it is the format that is regularly reviewed
by management. Our reportable segments are: Construction and Materials. In alphabetical order, our operating groups are:
California, Central and Mountain. In connection with the reclassification of the WMS businesses from discontinued operations to
continuing operations, the Consolidated Statements of Operations have been revised to include Inliner, through the date of sale
and Water Resources and Mineral Services in the Mountain operating group for all periods presented (see Note 2). The following
tables present our disaggregated revenue (in thousands):
Years ended December 31,
2022
California
Central
Mountain
Total
F-22 Granite Construction Incorporated
Construction Materials
Total
$ 811,623 $ 273,314 $ 1,084,937
898,310
1,140,533 177,476 1,318,009
$ 2,803,935 $ 497,321 $ 3,301,256
851,779 46,531
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
2021
California
Central
Mountain
Total
2020
California
Central
Mountain
Total
Construction Materials
Total
$ 822,448 $ 242,552 $ 1,065,000
1,058,448 33,270 1,091,718
1,195,294 149,853 1,345,147
$ 3,076,190 $ 425,675 $ 3,501,865
Construction Materials
Total
$ 928,193 $ 222,021 $ 1,150,214
1,145,725 25,181 1,170,906
1,107,779 133,560 1,241,339
$ 3,181,697 $ 380,762 $ 3,562,459
5. Unearned Revenue
The following table presents our unearned revenue as of the respective periods:
(in thousands)
California
Central
Mountain
Total
(1)
These balances do not include amounts held for sale (see Note 2).
6. Contract Assets and Liabilities
$
December 31,
2022
945,971 $
December 31,
2021(1)
771,759
1,444,983 1,334,901
488,425
$ 2,877,478 $ 2,595,085
486,524
As a result of changes in contract transaction price related to performance obligations that were satisfied or partially satisfied prior
to the end of the periods we recognized revenue of $182.8 million, $153.9 million and $176.1 million during the years ended
December 31, 2022, 2021 and 2020, respectively. The changes in contract transaction price were from items such as executed or
estimated change orders and unresolved contract modifications and claims.
As of December 31, 2022 and 2021, the aggregate claim recovery estimates included in contract asset and liability balances were
approximately $75.8 million and $35.5 million, respectively.
The components of the contract asset balances as of the respective dates were as follows (in thousands):
December 31,
Costs in excess of billings and estimated earnings
Contract retention
Total contract assets
(1)
These balances do not include amounts held for sale (see Note 2).
$
2022
80,357 $
161,559
$ 241,916 $
2021(1)
14,158
131,279
145,437
The increase in contract assets is primarily due to unresolved disputed work and increased retention balances related to certain ongoing
projects. As of December 31, 2022 and 2021, contract retention receivable from Brightline Trains Florida LLC represented 11.7%, and
17.2%, respectively, of total contract assets. No other contract retention receivable individually exceeded 10% of total contract assets
at any of the presented dates. The majority of the contract retention balance is expected to be collected within one year.
2022 Annual Report F-23
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
As work is performed, revenue is recognized and the corresponding contract liabilities are reduced. During the years ended
December 31, 2022 and 2021 and 2020, we recognized revenue of $223.7 million, $176.2 million and $110.9 million,
respectively, that was included in the contract liability balances at December 31, 2021, 2020 and 2019, respectively.
The components of the contract liability balances as of the respective dates were as follows (in thousands):
December 31,
Billings in excess of costs and estimated earnings, net of retention
Provisions for losses
Total contract liabilities
(1)
These balances do not include amounts held for sale (see Note 2).
2022
2021(1)
$ 152,294 $ 169,542
20,992 30,499
$ 173,286 $ 200,041
The decrease in contract liabilities is primarily due to revenue recognized in excess of billings as well as reductions in provisions for
losses as certain loss projects progress towards completion.
7. Receivables, net
Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to
payment as of the end of the applicable period and generally do not bear interest. The following table presents major categories of
receivables (in thousands):
December 31,
Contracts completed and in progress:
Billed
Unbilled
Total contracts completed and in progress
Materials sales
Other
Total gross receivables
Less: allowance for credit losses
Total net receivables
2022
2021(1)
$ 220,809 $ 236,053
120,348
126,371
341,157
362,424
52,182
43,746
71,790
59,496
465,129
465,666
1,142
1,078
$ 463,987 $ 464,588
(1)
These balances do not include amounts held for sale (see Note 2).
Included in other receivables at December 31, 2022 and 2021 were items such as estimated recovery from back charge claims,
notes receivable, fuel tax refunds and income tax refunds. Other receivables at December 31, 2022 and 2021 and also included
$24.9 million and $20.4 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated
joint ventures that bears interest at prime plus 3.0% per annum. No receivable individually exceeded 10% of total net receivables
at any of these dates.
F-24 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
8. Fair Value Measurement
The following tables summarize significant assets and liabilities measured at fair value in the consolidated balance sheets on a
recurring basis for each of the fair value levels (in thousands):
December 31, 2022
Cash equivalents
Money market funds
Other current assets
Commodity swap
Total assets
December 31, 2021(1)
Cash equivalents
Money market funds
Total assets
Accrued and other current liabilities
Interest rate swap
Total liabilities
(1) These balances do not include amounts held for sale (see Note 2).
Interest Rate Swaps
Fair Value Measurement at Reporting Date Using
Level 1
Level 2
Level 3
Total
$99,806
$ —
$—
$99,806
—
$99,806
121
$ 121
—
$—
121
$99,927
$65,233
$65,233
$ —
$ —
$—
$—
$65,233
$65,233
$ —
$ —
$3,514
$3,514
$—
$—
$ 3,514
$ 3,514
In connection with entering into the Third Amended and Restated Credit Agreement in May 2018, we entered into two interest
rate swaps with a combined initial notional amount of $150.0 million and an effective date of May 2018 and a maturity date of
May 2023.
During the second quarter of 2022, we terminated the entirety of our floating-to-fixed interest rate swaps in connection with the
prepayments of our term loan (see Note 14). The impact to interest expense in the consolidated statements of operations was $2.2
million for the year ended December 31, 2022.
Commodity Swaps
In December 2022, we entered into a commodity swap designed as a cash flow hedge for crude oil with a notional amount of
$7.0 million and a maturity date of October 31, 2023. In December 2021, we entered into two commodity swaps designed as cash
flow hedges for crude oil covering the period from April 2022 to October 2022 with a total notional amount of $8.1 million. The
financial statement impact of these swaps during the year ended December 31, 2022 was a realized gain of $4.1 million and an
unrealized gain of $0.4 million. The financial statement impact during the year ended December 31, 2021 was immaterial.
2022 Annual Report F-25
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Other Assets and Liabilities
The carrying values and estimated fair values of our financial instruments that are not required to be recorded at fair value in the
consolidated balance sheets were as follows (in thousands):
December 31,
Assets:
2022
2021
Fair Value
Hierarchy
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Held-to-maturity marketable securities(1)
Liabilities (including current maturities):
2.75% Convertible Notes(2),(3)
Level 1 $ 65,943 $ 64,584 $ 15,600 $ 15,459
Level 2 $ 230,000 $ 281,365 $ 207,354 $ 313,785
Third Amended and Restated Credit Agreement–term loan(2)
Level 3 $
— $
— $ 123,750 $ 124,598
Fourth Amended and Restated Credit Agreement–revolver(2)
Level 3 $ 50,000 $ 49,536 $
— $
—
(1)
(2)
(3)
All marketable securities were classified as held-to-maturity and consisted of U.S. Government and agency obligations as of December 31, 2022
and 2021.
The fair value of the 2.75% Convertible Notes is based on the median price of the notes in an active market as of December 31, 2022 and
2021. The fair value of the Credit Agreement term loan and revolver are based on borrowing rates available to us for long-term loans with
similar terms, average maturities, and credit risk. See Note 14 for definitions of, and more information about the 2.75% Convertible Notes and
Credit Agreement.
Excluded from carrying value is $22.6 million of debt discount as of December 31, 2021, related to the 2.75% Convertible Notes (see Note 14).
There is no debt discount in 2022 due to the adoption of ASU 2020-06.
The carrying value of marketable securities approximates their fair value as determined by market quotes. Rates currently available
to us for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. The carrying value
of receivables and other amounts arising out of normal contract activities, including retentions, which may be settled beyond one
year, is estimated to approximate fair value.
At least annually, we measure certain nonfinancial assets and liabilities at fair value on a nonrecurring basis. As of December 31,
2022 and 2021, the nonfinancial assets and liabilities included our asset retirement and reclamation obligations, as well as assets
and corresponding liabilities associated with performance guarantees. Asset retirement and reclamation obligations were measured
using Level 3 inputs and performance guarantees were measured using Level 2 inputs.
Asset retirement and reclamation obligations were initially measured using internal discounted cash flow calculations based upon our
estimates of future retirement costs. To determine the fair value of the obligation, we estimate the cost for a third-party to perform
the legally required reclamation including a reasonable profit margin. This cost is then increased for future estimated inflation based
on the estimated years to complete and discounted to fair value using present value techniques with a credit-adjusted, risk-free rate.
In estimating the settlement date, we evaluate the current facts and conditions to determine the most likely settlement date. We
review reclamation obligations at least annually for a revision to the cost or a change in the estimated settlement date. Additionally,
reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a
change in the estimated settlement date. See Note 11 for details of the asset retirement obligation balances.
We estimate our liability for performance guarantees for our unconsolidated construction joint ventures and line item joint ventures
using estimated partner bond rates, which are Level 2 inputs, and include them in accrued expenses and other current liabilities
(see Note 13) with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. See Note 1
for further discussion on performance guarantees.
During the years ended December 31, 2022 and 2021, we had no material nonfinancial asset and liability fair value adjustments.
F-26 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
9. Construction Joint Ventures
We participate in various construction joint ventures. As discussed in Note 1, we have determined that certain of these joint
ventures are consolidated because they are VIEs and we are the primary beneficiary. We continually evaluate whether there are
changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during
the years ended December 31, 2022, 2021 and 2020, we determined no change was required for existing joint ventures.
Due to the joint and several nature of the performance obligations under the related owner contracts, if any of the partners fail to
perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide
a performance guarantee). At December 31, 2022, there was $246.4 million of remaining contract value on unconsolidated and
line item construction joint venture contracts of which $110.9 million represented our share and the remaining $135.5 million
represented our partners’ share. We are not able to estimate amounts that may be required beyond the remaining cost of the work
to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other
guarantees. See Note 13 for disclosure of the performance guarantee amounts recorded in the consolidated balance sheets and
Note 1 for additional discussion regarding performance guarantees.
Consolidated Construction Joint Ventures
At December 31, 2022, we were engaged in ten active CCJV projects with total contract values ranging from $2.5 million to
$433.4 million for a combined total of $1.8 billion of which our share was $1.0 billion. As of December 31, 2022, our share of
revenue remaining to be recognized on these CCJVs was $120.0 million and ranged from $1.3 million to $24.6 million by project.
Our proportionate share of the equity in these joint ventures was between 50.0% and 70.0%. During the years ended December 31,
2022, 2021 and 2020, total revenue from CCJVs was $437.1 million, $405.1 million and $312.5 million, respectively. During the
years ended December 31, 2022, 2021 and 2020, CCJVs used $5.7 million, $4.1 million and $3.0 million of operating cash flows,
respectively.
Unconsolidated Construction Joint Ventures
As discussed in Note 1, where we have determined we are not the primary beneficiary of a joint venture but do exercise significant
influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue
and cost of revenue in the consolidated statements of operations and in equity in construction joint ventures or accrued expenses
and other current liabilities in the consolidated balance sheets.
As of December 31, 2022, we were engaged in seven active unconsolidated joint venture projects with total contract values
ranging from $12.3 million to $3.8 billion for a combined total of $8.9 billion of which our share was $2.6 billion. Our
proportionate share of the equity in these unconsolidated joint ventures ranged from 23.0% to 50.0%. As of December 31, 2022,
our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $73.4 million and
ranged from $0.2 million to $34.6 million by project.
2022 Annual Report F-27
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
The following is summary financial information related to unconsolidated construction joint ventures (in thousands):
December 31,
Assets
Cash, cash equivalents and marketable securities
Other current assets(1)
Noncurrent assets
Less partners’ interest
Granite’s interest(1),(2)
Liabilities
Current liabilities
Less partners’ interest and adjustments(3)
Granite’s interest
Equity in construction joint ventures(4)
2022
2021
$ 130,635 $ 182,891
661,342
$ 681,221
103,579
$ 76,204
$ 604,741
633,634
$ 283,319 $ 314,178
$ 244,411 $ 307,674
$ 130,911
154,771
$ 113,500 $ 152,903
$ 169,819 $ 161,275
(1)
(2)
(3)
(4)
Included in this balance and in accrued and other current liabilities on the consolidated balance sheets as of December 31, 2022 and 2021 was
$64.7 million and $82.1 million, respectively, related to performance guarantees (see Note 13).
Included in this balance as of December 31, 2022 and 2021 was $104.3 million and $103.8 million, respectively, related to Granite’s share of
estimated cost recovery of customer affirmative claims. In addition, this balance included $2.7 million and $10.7 million related to Granite’s
share of estimated recovery of back charge claims as of December 31, 2022 and 2021, respectively.
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.
Included in this balance and in accrued expenses and other current liabilities on the consolidated balance sheets was $14.0 million and
$28.6 million as of December 31, 2022 and 2021, respectively, related to deficits in unconsolidated construction joint ventures which includes
provisions for losses.
Years Ended December 31,
Revenue
Total
Less partners’ interest and adjustments(1)
Granite’s interest
Cost of revenue
Total
Less partners’ interest and adjustments(1)
Granite’s interest
Granite’s interest in gross profit (loss)
Net Income (Loss)
Total
Less partners’ interest and adjustments(1)
Granite’s interest in net income (loss)(2)
2022
2021
2020
$ 330,835 $ 820,586 $ 918,716
559,480
$ 120,157 $ 294,064 $ 359,236
210,678 526,522
238,699 540,854
$ 378,237 $ 835,899 $ 1,193,358
782,683
$ 139,538 $ 295,045 $ 410,675
(51,439)
$ (19,381) $
(981) $
$ (47,904) $ (15,533) $ (274,410)
(222,924)
(51,486)
(28,228)
$ (19,676) $
(14,765)
(768) $
(1)
(2)
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.
These joint ventures net income (loss) amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to
the extent the applicable states have joint venture level taxes.
As of December 31, 2022, we were engaged in three active line item joint venture construction projects with a total contract
value of $327.7 million of which our portion was $206.7 million. As of December 31, 2022, our share of revenue remaining to be
recognized on these line item joint ventures was $37.5 million. During the years ended December 31, 2022, 2021 and 2020, our
portion of revenue from line item joint ventures was $35.4 million, $67.8 million and $80.8 million, respectively.
F-28 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
10. Investments in Affiliates
Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for
using the equity method of accounting, including investments in foreign affiliates, real estate entities and an asphalt terminal entity.
The foreign affiliates in which we are invested are engaged in mineral drilling services and the manufacture and supply of drilling
equipment, parts and supplies in Latin America. The real estate entities were formed to accomplish specific real estate development
projects in which our wholly owned subsidiary, Granite Land Company, participates with third-party partners. The asphalt terminal
entity is a 50% interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant
in Nevada.
We have determined that the real estate entities are not consolidated because although they are VIEs, we are not the primary
beneficiary. We have determined that the foreign affiliates and the asphalt terminal entity are not consolidated because they are
not VIEs and we do not hold the majority voting interest. As such, these entities are accounted for using the equity method.
Our investments in affiliates balance consists of equity method investments in the following types of entities (in thousands):
December 31,
Foreign
Real estate
Asphalt terminal
Total investments in affiliates
2022
58,579 $
8,517
13,629
80,725 $
2021(1)
—
9,619
13,749
23,368
$
$
(1)
These balances do not include amounts held for sale (see Note 2).
The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a
combined basis (in thousands):
December 31,
Current assets
Noncurrent assets
Total assets
Current liabilities
Long-term liabilities(2)
Total liabilities
Net assets
Granite’s share of net assets
2022
172,560
$ 194,210 $
2021(1)
34,374
78,829
$ 366,770 $ 113,203
23,685
$ 106,780 $
48,104
71,789
41,414
23,368
$ 166,136 $
$ 200,634 $
80,725 $
$
59,356
(1)
(2)
These balances do not include amounts held for sale (see Note 2).
The balance primarily related to local bank debt for equipment purchases, working capital in our foreign affiliates and debt associated with our
real estate investments.
Of the $366.8 million in total assets as of December 31, 2022, we had investments in two real estate entities with total assets of
$31.0 million and $40.2 million, our foreign affiliates had total assets of $264.6 million, and the asphalt terminal entity had total
assets of $31.0 million. As of December 31, 2022 and 2021, all of the equity method investments in real estate affiliates were in
residential real estate in Texas. As of December 31, 2022, our percent ownership in the real estate entities ranged from 10% to
25%. We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from
25% to 50% as of December 31, 2022.
2022 Annual Report F-29
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
The following table provides summarized statements of operations information for our affiliates accounted for under the equity
method on a combined basis (in thousands):
Years Ended December 31,
Revenue
Gross profit
Income before taxes
Net income
Granite’s interest in affiliates’ net income
2022
2021
2020
$ 377,256 $ 302,084 $ 194,717
48,948
$
28,471
$
24,073
$
8,783
$
95,816 $
60,513 $
47,331 $
13,571 $
74,939 $
38,261 $
33,864 $
12,586 $
During 2020, the entities within our investments in foreign affiliates experienced a change in business climate from a rise in
operating costs, resulting in increased prices and decreased demand. The corresponding decline in future operating cash flows
resulted in the investments fair value to fall below the associated carrying amounts, which was considered to be other than
temporary. Therefore, we recorded a non-cash impairment charge of $9.6 million during the year ended December 31, 2020.
11. Property and Equipment, net
The following table presents the major classes of assets and total accumulated depreciation and depletion (in thousands):
December 31,
Equipment and vehicles
Quarry property
Land and land improvements
Buildings and leasehold improvements
Office furniture and equipment
Property and equipment
Less: accumulated depreciation and depletion
Property and equipment, net
2022
2021(1)
$ 994,602 $ 870,672
191,982
108,518
96,180
75,043
1,342,395
908,891
$ 509,210 $ 433,504
219,843
105,733
103,658
82,465
1,506,301
997,091
(1) These balances do not include amounts held for sale (see Note 2).
Depreciation and depletion expense primarily included in cost of revenue in our consolidated statements of operations was
$79.5 million, $97.7 million and $98.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.
During 2021, we completed sale-leaseback transactions for three properties in California. The sale of these properties resulted
in a $49.5 million gain on sales of property and equipment in the consolidated statements of operations for the year ended
December 31, 2021.
As discussed in Note 1, we have asset retirement obligations, which are liabilities associated with our legally required obligations to
reclaim owned and leased quarry property and related facilities. As of December 31, 2022 and 2021, $1.8 million and $1.7 million,
respectively, of our asset retirement obligations were included in accrued expenses and other current liabilities and $27.4 million
and $23.3 million, respectively, were included in other long-term liabilities in the consolidated balance sheets. Of the amount
included in other long-term liabilities as of December 31, 2022, $11.9 million is expected to be settled by 2027 and the remaining
is expected to be settled thereafter.
The following table summarizes the asset retirement obligation balances for the periods presented (in thousands):
Years Ended December 31,
Beginning balance
Revisions to estimates
Liabilities settled
Accretion
Ending balance
F-30 Granite Construction Incorporated
2022
24,950 $
4,904
(2,015)
1,351
29,190 $
2021
23,853
1,596
(1,708)
1,209
24,950
$
$
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
12. Intangible Assets
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets primarily consist of goodwill. The following table presents the goodwill balance by reportable
segment (in thousands):
December 31,
Construction
Materials
Total goodwill
(1) These balances do not include amounts held for sale (see Note 2).
Amortized Intangible Assets
2022
2021(1)
$ 71,757 $ 51,769
1,946
$ 73,703 $ 53,715
1,946
As of December 31, 2022 and 2021, amortized intangible assets included in other noncurrent assets in the consolidated balance
sheets were $9.1 million and $9.5 million, respectively, net of accumulated amortization of $24.1 million and $14.5 million,
respectively, primarily related to permits.
The net amortization expense related to amortized intangible assets for each of the years ended December 31, 2022, 2021
and 2020 was $2.0 million, $10.1 million and $13.5 million, respectively, and was primarily included in cost of revenue in the
consolidated statements of operations. Amortization expense based on the amortized intangible assets balance at December
31, 2022 is expected to be $1.2 in 2023 and 2024, $1.1 in 2025, $1.0 million in 2026, $0.6 million in 2027 and $4.0 million
thereafter.
13. Accrued Expenses and Other Current Liabilities (in thousands):
December 31,
Accrued insurance
Deficits in unconsolidated construction joint ventures (see Note 9)
Payroll and related employee benefits
Performance guarantees (see Note 1)
Accrued legal settlement (see Note 20)
Other
Total
(1)
These balances do not include amounts held for sale (see Note 2).
2022
2021(1)
$ 78,427 $ 76,999
28,636
87,460
82,112
129,000
48,622
$ 288,469 $ 452,829
13,989
80,910
64,703
—
50,440
The decrease in performance guarantees in the current year is due to receiving customer acceptance on two unconsolidated
construction joint ventures during the year.
Other includes short-term lease liability, dividends payable, warranty reserves, asset retirement obligations, remediation reserves
and other miscellaneous accruals, none of which are greater than 5% of total current liabilities.
2022 Annual Report F-31
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
14. Long-Term Debt (in thousands):
December 31,
2.75% Convertible Notes
Third Amended and Restated Credit Agreement - term loan
Fourth Amended and Restated Credit Agreement - revolver
Debt issuance costs and other
Total debt
Less current maturities
Total long-term debt
2022
2021
$ 230,000 $ 207,354
123,750
—
—
50,000
8,814
8,381
$ 288,381 $ 339,918
8,727
$ 286,934 $ 331,191
1,447
The aggregate minimum principal maturities of long-term debt related to balances at December 31, 2022 excluding debt issuance
costs, and including current maturities are as follows: $1.4 million in 2023; $231.5 million in 2024; $1.1 million in 2025; $6.8
million in 2026 and $50.0 million in 2027.
Credit Agreement
During the first half of 2022, we prepaid 100% of our outstanding term loan and replaced the Third Amended and Restated Credit
Agreement dated May 31, 2018 with the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) maturing
June 2, 2027. The Credit Agreement is a $350.0 million senior secured, five-year revolving facility (the “Revolver”), including an
accordion feature allowing us to increase borrowings up to the greater of (a) $200.0 million and (b) 100% of twelve-month trailing
EBITDA, subject to lender approval. The Credit Agreement includes a $150.0 million sublimit for letters of credit ($75.0 million for
financial letters of credit) and a $20.0 million sublimit for swingline loans.
We may borrow on the Revolver, at our option, at either (a) the SOFR term rate plus a credit adjustment spread plus applicable
margin ranging from 1.0% to 2.0%, or (b) a base rate plus an applicable margin ranging from 0.0% to 1.0%. The applicable
margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly. As of December 31,
2022, the total unused availability under the Credit Agreement was $269.3 million, resulting from $30.7 million in issued and
outstanding letters of credit and $50.0 million drawn under the Revolver. The letters of credit had expiration dates between
April 2023 and December 2026. As of December 31, 2022, the applicable rate was 1.8% for loans under the Credit Agreement
bearing interest based on SOFR and 0.8% for loans bearing interest at the base rate. Accordingly, the effective interest rates at
December 31, 2022 for SOFR and base rate loans were 6.2% and 8.3%, respectively.
The amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The
financial covenants include a maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) of 3.25 to 1.00 and a
minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of 3.00 to 1.00. As of December 31, 2022,
the Consolidated Leverage Ratio was 1.46, which did not exceed the maximum of 3.25. Our Consolidated Interest Coverage Ratio
was 15.06, which was above the minimum of 3.00.
Convertible Notes
As of December 31, 2022, the 2.75% Convertible Notes comprised our only convertible debt instrument. The 2.75% Convertible
Notes were issued in November 2019 in an aggregate principal amount of $230.0 million, with an interest rate of 2.75% and
a maturity date of November 1, 2024, unless earlier converted, redeemed or repurchased. The 2.75% Convertible Notes are
convertible at the option of the holders prior to May 1, 2024 only during certain periods and upon the occurrence of certain
events. After May 1, 2024, the 2.75% Convertible Notes will be convertible at the option of the holders at any time until the
second scheduled trading day immediately preceding the maturity date. The conversion rate applicable to the 2.75% Convertible
Notes is 31.7776 shares of Granite common stock per $1,000 principal amount of 2.75% Convertible Notes, which is equivalent
to a conversion price of approximately $31.47 per share of Granite common stock. Upon conversion, we will pay or deliver shares
of Granite common stock or a combination of cash and shares of Granite common stock, at our election. In addition, upon
the occurrence of a “make-whole fundamental change” as defined in the indenture governing the 2.75% Convertible Notes,
(the “Indenture”) we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 2.75%
Convertible Notes in connection with such a make-whole fundamental change.
F-32 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
We have the option to redeem for cash all or any portion of the 2.75% Convertible Notes if the last reported sale price of our
common stock is equal to or greater than 130% of the conversion price for a specified period of time. Upon the occurrence of a
“fundamental change” as defined in the Indenture, holders may require us to repurchase for cash all or any portion of their 2.75%
Convertible Notes at a price equal to 100% of the principal amount plus any accrued and unpaid interest. In addition, as described
in the Indenture, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the
2.75% Convertible Notes becoming due and payable immediately.
As of December 31, 2022 and 2021, the balance in long-term debt in our consolidated balance sheets of the 2.75% Convertible
Notes, excluding debt issuance costs, including $- million and $14.8 million, respectively, of amortized debt discount, was
$230.0 million and $207.4 million, respectively. As of December 31, 2022 and 2021, the remaining unamortized debt discount
was $- million and $22.6 million, respectively.
Effective January 1, 2022, we adopted ASU 2020-06 (see Note 1), which updated our accounting for the 2.75% Convertible
Notes. During the year ended December 31, 2022, we did not record amortization of the debt discount due to the implementation
of ASU 2020-06, and during the years ended December 31, 2021 and 2020, we recorded $7.1 million and $6.6 million,
respectively, of amortization of the debt discount. During the years ended December 31, 2022, 2021 and 2020, we recorded
$2.5 million, $3.2 million, and $4.3 million, respectively, of amortization related to debt issuance costs.
Real Estate Indebtedness
Our unconsolidated investments in real estate entities are subject to mortgage indebtedness. This indebtedness is non-recourse to
Granite but is recourse to the real estate entity. The terms of this indebtedness are typically renegotiated to reflect the evolving nature
of the real estate project as it progresses through acquisition, entitlement and development. Modification of these terms may include
changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. This debt is non-recourse to Granite, but
it is recourse to the affiliates. The debt associated with our unconsolidated non-construction entities is disclosed in Note 10.
Covenants and Events of Default
Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial
covenants described below. Our failure to comply with these covenants would constitute an event of default under the Credit
Agreement. Additionally, our failure to pay principal, interest or other amounts when due or within the relevant grace period on
our 2.75% Convertible Notes or our Credit Agreement would constitute an event of default under the indenture governing our
2.75% Convertible Notes or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being
entitled to borrow under such facility; (ii) termination of such facility; (iii) the requirement that any letters of credit under such
facility be cash collateralized; (iv) acceleration of amounts owed under the Credit Agreement; and/or (v) foreclosure on any lien
securing the obligations under such facility. A default under the indenture governing our 2.75% Convertible Notes could result in
acceleration of the maturity of the notes.
The most significant financial covenants under the terms of our Credit Agreement require the maintenance of a minimum Consolidated
Interest Coverage Ratio and a maximum Consolidated Leverage Ratio. As of December 31, 2022, the Consolidated Leverage Ratio was
1.46, which did not exceed the maximum of 3.25. Our Consolidated Interest Coverage Ratio was 15.06, which exceeded the minimum
of 3.00. As of December 31, 2022, we were in compliance with all covenants contained in the Credit Agreement. We are not aware of
any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.
15. Leases
We have leases for office and shop space, as well as for equipment primarily utilized in our construction projects. As of
December 31, 2022, our lease contracts were primarily classified as operating leases and had terms ranging from month-to-month
to 23 years. As of December 31, 2022 and 2021, right of use assets and long term lease liabilities were separately presented and
short term lease liabilities of $18.6 million and $18.8 million, respectively, were included in accrued expenses and other current
liabilities in our consolidated balance sheets. As of December 31, 2022, we had no lease contracts that had not yet commenced
but created significant rights and obligations. Lease expense was $21.9 million, $22.9 million and $21.7 million for the years ended
December 31, 2022, 2021 and 2020, respectively.
2022 Annual Report F-33
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
As of December 31, 2022 and 2021 our weighted-average remaining lease term was 4.28 years and 3.72 years, respectively, and
the weighted-average discount rate was 3.85% and 3.58%, respectively.
As of December 31, 2022, the lease liability is equal to the present value of the remaining lease payments, discounted using the
incremental borrowing rate on our secured debt, using one maturity discount rate that is updated quarterly, as it is not materially
different than the discount rates applied to each of the leases in the portfolio.
The following table summarizes the maturities of our undiscounted lease liabilities outstanding as of December 31, 2022
(in thousands):
2023
2024
2025
2026
2027
2028 through 2036
Total future minimum lease payments
Less imputed interest
Total
Royalties
$ 22,798
20,110
12,822
7,244
5,564
9,743
$ 78,281
(27,449)
$ 50,832
Excluded from the table above are minimum royalty requirements under all contracts, primarily quarry property, in effect at
December 31, 2022 which are payable as follows: $2.1 million in 2023; $1.6 million in 2024; $1 million in 2025; $0.9 million in
2026; $0.6 million in 2027; and $3.8 million thereafter.
16. Employee Benefit Plans
Profit Sharing and 401(k) Plan
The Profit Sharing and 401(k) Plan (the “401(k) Plan”) is a defined contribution plan covering all employees except employees
covered by collective bargaining agreements and certain employees of our CCJVs. Our 401(k) matching contributions can be up to
6% of an employee’s gross pay at the discretion of the Board of Directors. Our 401(k) matching contributions to the 401(k) Plan
for the years ended December 31, 2022, 2021 and 2020 were $17.7 million, $19.1 million and $17.6 million, respectively. Profit
sharing contributions from the Company may be made to the 401(k) Plan in an amount determined by the Board of Directors. We
made no profit sharing contributions during the years ended December 31, 2022, 2021 and 2020.
Non-Qualified Deferred Compensation Plan
We offer a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to a select group of our highly compensated employees
and non-employee directors. The NQDC Plan provides participants the opportunity to defer payment of certain compensation as
defined in the NQDC Plan. Our NQDC Plan obligations are funded through a Rabbi Trust which was fully funded as of December
31, 2022. The assets held by the Rabbi Trust at December 31, 2022 and 2021 are substantially in the form of Company-owned life
insurance and are included in other noncurrent assets in the consolidated balance sheets. As of December 31, 2022, there were 63
active participants in the NQDC Plan. NQDC Plan obligations were $23.1 million and $32.7 million as of December 31, 2022 and
2021, respectively, and were primarily included in other long-term liabilities in the consolidated balance sheets. In addition, we had
supplemental retirement benefits of $3.7 million and $4.9 million in other long-term liabilities in the consolidated balance sheets as
of December 31, 2022 and 2021, respectively.
F-34 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Multi-employer Pension Plans
As of December 31, 2022, three of our wholly-owned subsidiaries, Granite Construction Company, Layne Christensen Company
and Granite Industrial, Inc. contribute to various multi-employer pension plans on behalf of union employees. The risks of
participating in these multiemployer plans are different from single-employer plans in the following aspects:
• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other
•
•
participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
If we chose to stop participating in some of the multi-employer plans, we may be required to pay those plans an amount
based on the underfunded status of the plan, referred to as a withdrawal liability.
The following table presents our participation in these plans (dollars in thousands):
Pension
Protection
Act (“PPA”)
Certified Zone
Status(1)
2022
2021
Pension Plan
Employer
Identification
Number
95-6032478 Yellow Yellow
91-6028570 Green Green
FIP/RP Status
Pending/
Implemented(2)
Contributions
2022
2021
2020
Surcharge
Imposed
Yes
No
$ 4,768 $ 5,266 $ 5,239
5,204 4,744 3,658
No
No
94-6090764 Yellow Yellow
Yes
9,783 10,095 10,001
No
Pension Trust Fund
Operating
Engineers Pension
Trust Fund
Locals 302 and 612
IUOE-Employers
Construction
Industry Retirement
Plan
Pension Trust Fund
for Operating
Engineers
Expiration
Date of
Collective
Bargaining
Agreement(3)
6/30/2025
3/31/2023
5/31/2024
5/31/2025
3/31/2023
6/30/2023
9/30/2023
1/31/2024
6/30/2024
10/31/2024
3/31/2025
All other funds
(53 as of
December 31,
2022)
18,270 21,517 20,572
Total contributions: $ 38,025 $ 41,622 $ 39,470
(1)
(2)
(3)
The most recent PPA zone status available in 2022 and 2021 is for the plan’s year-end during 2021 and 2020, respectively. The zone status
is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are
generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency
in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded, and plans in the green zone
are at least 80 percent funded.
The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”)
is either pending or has been implemented.
Lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. Pension trust funds with a range of
expiration dates have various collective bargaining agreements.
Based upon the most recently available annual reports, our contribution to each of the individually significant plans listed in the
table above was less than 5% of each plan’s total contributions. We currently have no intention of withdrawing from any of the
multi-employer pension plans in which we participate that would result in a significant withdrawal liability. In addition, we do not
have any significant future obligations or funding requirements related to these plans other than the ongoing contributions that
are paid as hours are worked by plan participants.
2022 Annual Report F-35
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
17. Shareholders’ Equity
Stock-based Compensation
On June 2, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”), which replaced the
Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”) and no further awards may be granted under the 2012 Plan.
The 2021 Plan provides for the issuance of restricted stock, RSUs and stock options to eligible employees and to members of our
Board of Directors. A total of 2,689,909 shares of our common stock were reserved for issuance under the 2021 Plan of which
2,121,419 remained available as of December 31, 2022. During the years ended December 31, 2022, 2021 and 2020, we did not
grant any stock options or restricted stock awards and as of December 31, 2022, there were no stock options or restricted stock
awards outstanding.
Restricted Stock Units
RSUs are issued for compensatory purposes. RSU stock compensation cost is measured at our common stock’s fair value based on
the market price at the date of grant. We recognize stock compensation cost only for RSUs that we estimate will ultimately vest.
We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust stock
compensation cost based on changes in those estimates over time.
RSU stock compensation cost is recognized ratably over the shorter of the vesting period (generally ranging from immediate
vesting to three years) or the period from grant date to the first maturity date after the holder reaches age 62 and has completed
certain specified years of service, when all RSUs become fully vested. Vesting of RSUs is not subject to any market or performance
conditions and vesting provisions are at the discretion of the Compensation Committee. A recipient of RSUs may not sell or
otherwise transfer unvested RSUs and, in the event a recipient’s employment or board service is terminated prior to the end of the
vesting period, any unvested RSUs are surrendered to us, subject to limited exceptions.
A summary of the changes in our RSUs during the years ended December 31, 2022, 2021 and 2020 is as follows (shares in
thousands):
Years Ended December 31,
2022
2021
2020
Outstanding, beginning balance
Granted
Vested
Forfeited
Outstanding, ending balance
Weighted-
Average
Grant-Date
Fair Value
Weighted-
Average
Grant-Date
Fair Value
RSUs
553
311
(263)
(33)
568
per RSU RSUs
$30.09
31.70
28.98
28.21
$31.64
601
254
(235)
(67)
553
per RSU
$24.96
40.34
28.77
22.50
$30.09
RSUs
387
462
(190)
(58)
601
Weighted-
Average
Grant-Date
Fair Value
per RSU
$43.99
12.89
34.36
24.76
$24.96
Compensation cost related to RSUs was $7.5 million ($5.6 million net of statutory tax rate), $6.6 million ($4.9 million net of
statutory tax rate), and $6.4 million ($4.7 million net of statutory tax rate) for the years ended December 31, 2022, 2021 and
2020, respectively. The grant date fair value of RSUs vested during the years ended December 31, 2022, 2021 and 2020 was
$7.6 million, $6.8 million and $6.5 million, respectively. As of December 31, 2022, there was $8.2 million of unrecognized
compensation cost related to RSUs which will be recognized over a remaining weighted-average period of 1.4 years.
401(k) Plan
As of December 31, 2022, the 401(k) Plan owned 1,021,194 shares of our common stock. Dividends on shares held by the 401(k)
Plan are charged to retained earnings and all shares held by the 401(k) Plan are treated as outstanding in computing our earnings
per share.
F-36 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Share Purchase Program
As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million
of our common stock at management’s discretion (the “2022 authorization”). The specific timing and amount of any future
repurchases will vary based on market conditions, securities law limitations and other factors. As of December 31, 2022, $231.5
million of the 2022 authorization remained available with purchases of 611,000 shares for $18.5 million in March 2022, 1,320,568
shares for $40 million in May 2022 and 366,785 shares for $10 million in September 2022.
18. Weighted Average Shares Outstanding and Net Income (Loss)
Per Share
The following table presents a reconciliation of the weighted average shares of common stock used in calculating basic and diluted
net income (loss) per share as well as the calculation of basic and diluted net income (loss) per share.
Years Ended December 31,
Numerator
Net income (loss) attributable to common shareholders for basic earnings per share
Add: Interest expense related to 2.75% Convertible Notes(1)
Net income (loss) attributable to common shareholders for diluted earnings per share
Denominator
Weighted average common shares outstanding, basic
Add: Dilutive effect of RSUs(2)
Add: Dilutive effect of 2.75% Convertible Notes(1)(3)
Weighted average common shares outstanding, diluted
Net income (loss) per share, basic
Net income (loss) per share, diluted
2022
2021
2020
$83,302 $10,096 $ (145,117)
—
$89,192 $10,096 $ (145,117)
5,890
—
44,485
532
7,309
52,326
45,788
533
1,279
47,599
$
$
1.87 $
1.70 $
0.22 $
0.21 $
45,614
—
—
45,614
(3.18)
(3.18)
(1)
(2)
(3)
Beginning in 2022, with the adoption of ASU 2020-06, we have applied the if-converted method for calculating diluted earnings per share
(see Note 1).
Due to the net losses for the year ended December 31, 2020, RSUs representing approximately 589,000 shares, respectively, have been
excluded from the number of shares used in calculating diluted net income (loss) per share, as their inclusion would be antidilutive.
The number of shares used in calculating diluted net income per share for the year ended December 31, 2020, excluded potential dilution from
the 2.75% Convertible Notes converting into shares of common stock since the average stock price did not exceed $31.47. (See Note 14 for
further details).
19. Income Taxes
The following is a summary of the income (loss) before income taxes (in thousands):
Years Ended December 31,
Domestic
Foreign
Total income (loss) before income taxes
2022
2021
2020
$97,235 $13,531 $ (176,448)
9,985
$91,817 $22,127 $ (166,463)
(5,418)
8,596
2022 Annual Report F-37
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
The following is a summary of the provision for (benefit from) income taxes (in thousands):
Years Ended December 31,
Federal:
Current
Deferred
Total federal
State:
Current
Deferred
Total state
Foreign:
Current
Deferred
Total foreign
Total provision for (benefit from) income taxes
2022
2021
2020
$
255 $ 1,382 $ (9,017)
7,941
(1,076)
15,022
16,404
10,326
10,581
5,721
(1,691)
4,030
(935)
2,652
1,717
(443)
2,052
1,609
1,951
(3,602)
(1,651)
136
(951)
(815)
$12,960 $19,713 $ (282)
2,663
(1,071)
1,592
The following is a reconciliation of our provision for (benefit from) income taxes based on the Federal statutory tax rate to our
effective tax rate (dollars in thousands):
Years Ended December 31,
Federal statutory tax
State taxes, net of federal tax benefit
Foreign taxes
Percentage depletion deduction
Non-controlling interests
Non-cash impairment charges
Nondeductible expenses
Company-owned life insurance
Stock-based compensation
Changes in uncertain tax positions
Valuation allowance
Assets held for sale
Gain on sale of business
Nondeductible goodwill disposal
Provision to return adjustments
Other
Total
2022
$ 19,282
2,761
(2,695)
(1,062)
933
—
3,744
902
(330)
(54)
(3,212)
(14,427)
—
8,212
(1,102)
8
$ 12,960
21.0%
3.0
(2.9)
(1.2)
1.0
—
4.1
1.0
(0.4)
(0.1)
(3.5)
(15.7)
—
9.0
(1.2)
—
14.1%
$
2021
4,647
1,912
1,912
(1,015)
1,613
—
1,398
(736)
(664)
—
(518)
10,089
—
—
1,153
(78)
$ 19,713
21.0%
8.6
8.6
(4.6)
7.3
—
6.3
(3.3)
(3.0)
—
(2.3)
45.6
—
—
5.2
(0.3)
89.1%
2020
$ (34,957)
1,696
(1,374)
(1,096)
4,423
32,905
1,073
—
—
(1,781)
4,197
—
(3,827)
—
—
(1,541)
(282)
$
21.0%
(1.0)
0.8
0.7
(2.7)
(19.8)
(0.6)
—
—
1.1
(2.5)
—
2.3
—
—
0.9
0.2%
The majority of the variance from the statutory tax rate in 2022 is due to the tax benefit associated with the reversal of net
deferred tax liabilities related to businesses no longer held for sale and the release of valuation allowances related to the utilization
of capital loss carryforwards. These were partially offset by nondeductible goodwill associated with the sale of Inliner and the
impact of the relative change in income before income taxes to the provision for income taxes.
F-38 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
The following is a summary of the deferred tax assets and liabilities (in thousands):
December 31,
Long-term deferred tax assets:
Receivables
Insurance
Deferred compensation
Accrued compensation
Other accrued liabilities
Contract income recognition
Lease liabilities
Net operating loss carryforwards
Valuation allowance
Other
Total long-term deferred tax assets
Long-term deferred tax liabilities:
Property and equipment
Right of use assets
Total long-term deferred tax liabilities
Net long-term deferred tax assets
2022
2021
$
2,818 $
12,575
9,432
3,354
1,536
16,181
12,572
41,388
(19,919)
6,504
86,441
3,173
14,334
11,133
3,792
1,088
11,453
16,351
59,760
(26,533)
8,440
102,991
53,921
12,202
66,123
64,915
15,791
80,706
$ 20,318 $ 22,285
The following is a summary of the net operating loss carryforwards at December 31, 2022 (in thousands):
Federal net operating loss carryforwards
State net operating loss carryforwards
Foreign tax loss carryforwards
Total net operating loss carryforwards at December 31, 2022
Expiration Gross Carryforward
$ 90,073
$196,507
$ 45,895
N/A
2023-2041
2023-2041
Tax Effected
Carryforward
$18,915
9,996
12,477
$41,388
The federal, state and foreign net operating loss carryforwards above included unrecognized tax benefits taken in prior years and
the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC
Topic 740, Income Taxes. The federal and state net operating loss acquired during the Layne acquisition are subject to Internal
Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused. As we expect to use
the federal net operating loss carryforwards prior to expiration we believe that is more likely than not that these deferred tax assets
will be realized and no valuation allowance was deemed necessary. We have provided a valuation allowance on the net operating
loss deferred tax asset or the net deferred tax assets for certain foreign, state and local jurisdictions because we do not believe it is
more likely than not that they will be realized.
The following is a summary of the change in valuation allowance (in thousands):
December 31,
Beginning balance
Additions (deductions), net
Ending balance
2022
2021
$ 26,533 $ 29,547
(3,014)
$ 19,919 $ 26,533
(6,614)
The change in the valuation allowance is mainly due to the utilization of various state net operating losses as well as the release of
valuation allowances related to the utilization of capital loss carryforwards.
2022 Annual Report F-39
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
We intend to indefinitely reinvest certain earnings of our foreign subsidiaries and affiliates. There are generally no federal income
taxes on dividends from foreign subsidiaries therefore we would only be subject to other taxes, such as withholding and local
taxes, upon distribution of these earnings. Of the $55.0 million of accumulated undistributed earnings that we consider indefinitely
reinvested as of December 31, 2022, it is not practicable to determine the amount of taxes that would be payable upon remittance
of these earnings. Deferred foreign withholding taxes have been provided on undistributed earnings of certain foreign subsidiaries
and foreign affiliates where the earnings are not considered to be invested indefinitely.
Uncertain tax positions
We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state
taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial
position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2017. With few exceptions, as of
December 31, 2022, we are no longer subject to state examinations by taxing authorities for years before 2017.
We file income tax returns in foreign jurisdictions where we operate. The returns are subject to examination which may be ongoing
at any point in time and tax liabilities are recorded based on estimates of additional taxes which will be due upon settlement of
those examinations. The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no
longer subject to examinations by taxing authorities for years before 2016.
We had approximately $22.8 million and $22.7 million of total gross unrecognized tax benefits as of December 31, 2022 and
2021, respectively. There were approximately $5.5 million of unrecognized tax benefits that would affect the effective tax rate in
any future period at both December 31, 2022 and 2021. It is reasonably possible that our unrecognized tax benefit could decrease
by approximately $1.5 million in 2023, of which $1.3 million would impact our effective tax rate in 2023. The decrease relates to
anticipated statute expirations and anticipated resolution of outstanding unrecognized tax benefits.
The following is a tabular reconciliation of unrecognized tax benefits (in thousands) the balance of which is included in other long-
term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets:
December 31,
Beginning balance
Gross increases – current period tax positions
Gross decreases – current period tax positions
Gross increases – prior period tax positions
Gross decreases – prior period tax positions
Settlements with taxing authorities/lapse of statute of limitations
Reclassification of balances from (to) held for sale
Ending balance
20. Contingencies—Legal Proceedings
2021
2022
2020
$ 22,724 $ 23,320 $ 27,303
(1,590)
—
—
(608)
(1,785)
—
$ 22,756 $ 22,724 $ 23,320
—
—
—
(426)
(60)
518
—
—
—
(9)
(69)
(518)
Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable
and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. It is possible that
future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record
new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be
material to our financial condition, results of operations and/or cash flows in any particular reporting period. In addition, disclosure
is required when a material loss is probable but not reasonably estimable, a material loss is reasonably possible but not probable, or
when it is reasonably possible that the amount of a loss will exceed the amount recorded.
The total liabilities recorded as of December 31, 2022 and 2021, were $0 and $129 million, respectively. The total range of possible
loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded
for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated
financial statements if they become probable and the reasonably estimable amount is determined.
F-40 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Ordinary Course Legal Proceedings
In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things,
liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the
various outcomes of which often cannot be predicted with certainty. For information on our accounting policies regarding affirmative
claims and back charges that we are party to in the ordinary course of business, see Note 1. We and our affiliates are also subject to
government inquiries in the ordinary course of business seeking information concerning our compliance with government construction
contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty.
Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other
claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable
to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be
terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could
be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to
resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.
Securities Litigation and Derivative Lawsuits
On August 13, 2019, a securities class action was filed in the United States District Court for the Northern District of California
against the Company, James H. Roberts, our former President and Chief Executive Officer, and Jigisha Desai, our former Senior
Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer. An amended complaint was filed
on February 20, 2020 that, among other things, added Laurel Krzeminski, our former Chief Financial Officer, as a defendant. The
amended complaint was brought on behalf of an alleged class of persons or entities that acquired our common stock between
April 30, 2018 and October 24, 2019, and alleged claims arising under Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934 and Rule 10b-5 thereunder. After the filing of the amended complaint, this case was re-titled Police Retirement System
of St. Louis v. Granite Construction Incorporated, et. al. The amended complaint sought damages based on allegations that the
defendants made false and/or misleading statements and failed to disclose material adverse facts in the Company’s SEC filings
about its business, operations and prospects. On January 21, 2021, the court granted the plaintiff’s motion for class certification.
On October 23, 2019, a putative class action lawsuit, titled Nasseri v. Granite Construction Incorporated, et. al., was filed in the
Superior Court of California, County of Santa Cruz against the Company, James H. Roberts, our former President and Chief
Executive Officer, Laurel Krzeminski, our former Chief Financial Officer, and the then-serving Board of Directors on behalf of
persons who acquired shares of Company common stock in the Company’s June 2018 merger with Layne Christensen Company
(“Layne”). The complaint asserted causes of action under the Securities Act of 1933 and alleged that the registration statement
and prospectus were negligently prepared and included materially false and misleading statements and failed to disclose facts
required to be disclosed and seeks monetary damages based on the allegations.
On April 29, 2021, we entered into a stipulation of settlement (the “Settlement Agreement”) to settle Police Retirement System
of St. Louis v. Granite Construction Incorporated, et al. The Settlement Agreement also settled claims alleged in Nasseri v. Granite
Construction Incorporated, et al.
Under the Settlement Agreement, the Company agreed to pay or cause to be paid a total of $129 million in cash, $63 million of
which was paid through insurance proceeds, to a settlement fund that would pay all settlement fees and expenses, attorneys’
fees and expenses, and cash payments to members of the settlement class. The settlement class agreed to release us, the other
defendants named in the lawsuits and certain of their respective related parties from any and all claims, rights, causes of action,
liabilities, actions, suits, damages or demands of any kind whatsoever, that relate in any way to the purchase, acquisition, holding,
sale or disposition of our common stock during the period between February 17, 2017 and October 24, 2019 that arose out of
or are based upon or related to the facts alleged or the claims or allegations set forth in Police Retirement System of St. Louis v.
Granite Construction Incorporated, et al. or relate in any way to any alleged violation of the Securities Act of 1933, the Securities
Exchange Act of 1934, or any other state, federal or foreign jurisdiction’s securities or other laws, any alleged misstatement,
omission or disclosure (including in financial statements) or other alleged securities-related wrongdoing or misconduct, including all
claims alleged in Nasseri v. Granite Construction Incorporated, et al. The Settlement Agreement contained no admission of liability,
wrongdoing or responsibility by any of the parties. As a result of entering into the Settlement Agreement, we recorded a pre-tax
charge of approximately $66 million in the quarter ended March 31, 2021.
2022 Annual Report F-41
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
On October 6, 2021, the court issued an order granting preliminary approval of the settlement and, pursuant to the terms of
the Settlement Agreement, $129 million was paid to the settlement escrow account. $66 million was paid by the Company
and $63 million was paid through insurance proceeds. The total $129 million was included in the consolidated balance sheet
as of December 31, 2021 as an accrued liability and as a deposit in other current assets. Members of the settlement class had
the opportunity to object to the settlement at a fairness hearing held by the court to determine whether the settlement should
be finally approved and whether the proposed order and final judgment should be entered. The fairness hearing occurred on
February 24, 2022. On March 17, 2022, the court granted final approval of the settlement, granted the request for attorneys’
fees by class representative’s counsel, granted in part and denied in part the request for attorneys’ fees by the plaintiff in Nasseri v.
Granite Construction Incorporated, et al., and entered final judgment. On April 29, 2022, the Superior Court granted the request
by plaintiff in Nasseri v. Granite Construction Incorporated, et al. that the Nasseri case be dismissed with prejudice in light of the
final approval of the settlement. On December 15, 2022, the court approved the plaintiffs’ application to release payments to the
class from the settlement fund. As a result, we removed the accrued liability and deposit from our consolidated balance sheet as of
December 31, 2022.
On May 6, 2020, a stockholder derivative lawsuit, titled English v. Roberts, et al., was filed in the United States District Court for
the Northern District of California against James H. Roberts, our former President and Chief Executive Officer, Jigisha Desai, our
former Senior Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer, Laurel Krzeminski,
our former Chief Financial Officer, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting
claims for breach of fiduciary duty, unjust enrichment, and violations of the Securities Exchange Act of 1934 that allegedly occurred
between April 30, 2018 and October 24, 2019. The lawsuit alleged that the individual defendants each knowingly inflated the
Company’s revenue, income, and margins in violation of U.S. GAAP, which caused the results during the relevant periods to be
materially false and misleading. The complaint sought monetary damages and corporate governance reforms.
On May 12, 2021, a stockholder derivative lawsuit, titled Davydov v. Roberts, et al., was filed in the Delaware Court of Chancery
against James H. Roberts, Jigisha Desai, Laurel Krzeminski, Craig Hall, our Senior Vice President, General Counsel, Corporate
Compliance Officer, and Secretary, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting
claims for breach of fiduciary duty, unjust enrichment, and aiding and abetting breach of fiduciary duty that allegedly occurred
between April 30, 2018 and October 24, 2019. The lawsuit alleged that the individual defendants each knowingly inflated the
Company’s revenue, income, and margins in violation of U.S. GAAP, which caused the results during the relevant periods to be
materially false and misleading. The complaint sought monetary damages and corporate governance reforms.
On April 14, 2022, the parties in Davydov v. Roberts et al., the plaintiff in English v. Roberts et al., and the Company entered into
a Stipulation of Compromise and Settlement providing that (i) defendants will cause insurers to pay $7.5 million, which amount,
less court-awarded attorneys’ fees and expenses, will be paid to the Company, (ii) the Company shall implement agreed upon
corporate governance provisions within 30 days of final approval of the settlement, and (iii) all claims that were asserted or could
have been asserted against the defendants or their related persons in Davydov v. Roberts, et al., English v. Roberts, et al., or
any other proceeding on behalf of the Davydov plaintiff, the English plaintiff, the Company or any Granite stockholder, will be
released. On April 14, 2022, the plaintiff in Davydov v. Roberts, et al. filed the Stipulation of Compromise and Settlement and a
proposed scheduling order for a hearing in the Delaware Court of Chancery for review of the settlement. The Delaware Court of
Chancery held a fairness hearing concerning its review of the settlement on July 12, 2022. On July 27, 2022, the Court in Davydov
v. Roberts, et al. entered an order and final judgment approving the terms of the Stipulation of Compromise and Settlement
and dismissed the case with prejudice. On July 28, 2022, the Court in English v. Roberts, et al. entered a stipulation and order
of dismissal that dismissed the case with prejudice. The Company received a payment of $5.0 million for the settlement, which
was net of court-awarded attorneys’ fees and expenses, that was recorded in Other costs, net on the Consolidated Statement of
Operations for the year ended December 31, 2022.
As of December 31, 2022 and December 31, 2021 (other than the Settlement Agreement charge described above), we did not
record any liability related to the above matters because we concluded such liabilities were resolved or not probable and the
amounts of such liabilities were not reasonably estimable.
F-42 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
Other Matters
In connection with our prior disclosure of the Audit/Compliance Committee’s independent investigation of prior-period reporting
for the former Heavy Civil operating group and the extent to which those matters affected the effectiveness of the Company’s
internal control over financial reporting (the “Investigation”), we voluntarily contacted the San Francisco office of the SEC Division
of Enforcement regarding the Investigation. The SEC issued subpoenas for documents in connection with the accounting issues
identified in the Investigation. We produced documents to the SEC and fully cooperated with the SEC in its investigation. In the
second quarter of 2022, we recorded a $12 million charge for the expected resolution of this investigation which was reflected in
Other costs, net in the Consolidated Statement of Operations for the year ended December 31, 2022.
During the third quarter of 2022, we reached a settlement with the SEC. Under the terms of the settlement, we, without admitting
or denying any allegations made by the SEC, agreed to pay a civil penalty of $12 million and to be enjoined from violating specified
provisions of the federal securities laws and rules promulgated thereunder. On August 25, 2022, the SEC filed a complaint against
us, along with our consent to the entry of judgment in the United States District Court for the Northern District of California, and
requested entry of judgment. Judgment concluding and resolving this matter in its entirety was entered on September 9, 2022,
and on September 16, 2022, we paid the $12 million penalty.
Our wholly-owned subsidiary, Layne, was a subcontractor on the foundation for the Salesforce Tower office building in San
Francisco in 2013 and 2014. Certain anomalies were discovered in March 2014 in the foundation’s structural concrete, which
were remediated by the general contractor during 2015. Layne assigned any insurance claims it may have had under the project’s
builder’s risk insurance policy to the general contractor. During 2014, the project owner and the general contractor submitted a
claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages. The claim was denied by the
builder’s risk insurers. The project owner and the general contractor subsequently filed a legal proceeding against the insurers
seeking coverage under the builder’s risk insurance policy, which proceeding was then transferred by agreement to arbitration. On
July 20, 2021, we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures
undertaken by the general contractor of the Salesforce Tower and related damages. Although we were not a party to this legal
proceeding, we believe, based on court filings and developments in the arbitration, that the project owner and the general
contractor asserted a claim for damages against the project’s builder’s risk insurers for an amount in excess of $100 million.
On February 3, 2022, a lawsuit titled Steadfast Insurance Company (“Steadfast”), a subrogee of Clark/Hathaway Dinwiddie, a Joint
Venture (“CHDJV”) v. Layne Christensen Company (“Layne”), was filed in the Superior Court of the State of California, County of San
Francisco, seeking damages of approximately $70 million for costs incurred by Steadfast on behalf of CHDJV to cure Layne’s allegedly
defective work on the foundation of the Salesforce Tower. On February 4, 2022, CHDJV submitted an arbitration demand with the
American Arbitration Association against Granite Construction Incorporated seeking to recover approximately $30 million for costs
incurred by CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. CHDJV subsequently dismissed
Granite and added Layne as a respondent to the arbitration. On March 8, 2022, we filed a motion to dismiss the CHDJV arbitration.
On April 8, 2022, we filed a demurrer seeking to dismiss the Steadfast lawsuit. On May 6, 2022, CHDJV consolidated its claims with
those of Steadfast and joined as a plaintiff in the Steadfast lawsuit, and on May 16, 2022, the arbitration was stayed. On June 14,
2022, we filed a demurrer to the amended complaint seeking to dismiss the claims of both Steadfast and CHDJV. On August 24,
2022, the court overruled our demurrer. We believe Layne has multiple defenses and counterclaims to the claims at issue. Layne
intends to vigorously defend against the claims and prosecute its counterclaims, but we cannot provide assurance that Layne will be
successful in these efforts. We do not believe it is probable this matter will result in a material loss, however, if we are unsuccessful,
we believe the range of reasonably possible loss upon final resolution of this matter could be up to approximately $100 million.
21. Reportable Segment Information
Our reportable segments are the same as our operating segments and correspond with how our CODM regularly reviews financial
information to allocate resources and assess performance. Our reportable segments are: Construction and Materials.
The Construction segment focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports,
marine ports, dams, reservoirs, aqueducts, infrastructure and site development for use by the general public and water-related
construction for municipal agencies, commercial water suppliers, industrial facilities and energy companies. It also provides
construction of various complex projects including infrastructure / site development, mining, public safety, tunnel, solar, battery
2022 Annual Report F-43
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
storage and other power-related projects. The Materials segment focuses on production of aggregates and asphalt production for
internal use and for sale to third parties.
As discussed in Note 2, we have reclassified WMS from discontinued operations to continuing operations for all periods presented.
The Water Resources and Mineral Services businesses are included in the Construction segment. Inliner, which was sold in the first
quarter of 2022, had both Construction and Materials operations.
The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see
Note 1). We evaluate segment performance based on gross profit, and do not include selling, general and administrative expenses
or non-operating income or expense. Segment assets include property and equipment, intangibles, goodwill, inventory and equity
in construction joint ventures.
Summarized segment information is as follows (in thousands, except per share data):
Years Ended December 31,
2022
Total revenue from reportable segments
Elimination of intersegment revenue
Revenue from external customers
Gross profit
Depreciation, depletion and amortization
Segment assets as of period end(1)
2021
Total revenue from reportable segments
Elimination of intersegment revenue
Revenue from external customers
Gross profit
Depreciation, depletion and amortization
Segment assets as of period end(1)
2020
Total revenue from reportable segments
Elimination of intersegment revenue
Revenue from external customers
Gross profit
Depreciation, depletion and amortization
Construction
Materials
Total
$ 2,803,935 $
—
$ 2,803,935 $
303,881 $
$
41,836 $
$
432,868 $
$
671,428 $ 3,475,363
(174,107) $ (174,107)
497,321 $ 3,301,256
369,494
68,336
797,204
65,613 $
26,500 $
364,336 $
$ 3,076,190 $
—
$ 3,076,190 $
303,228 $
$
71,106 $
$
358,561 $
$
587,600 $ 3,663,790
(161,925) $ (161,925)
425,675 $ 3,501,865
362,645
97,236
691,650
59,417 $
26,130 $
333,089 $
$ 3,181,697 $
—
$ 3,181,697 $
280,169 $
$
79,597 $
$
548,439 $ 3,730,136
(167,677) $ (167,677)
380,762 $ 3,562,459
344,788
102,151
64,619 $
22,554 $
(1)
These balances do not include amounts held for sale (see Note 2).
As of December 31, 2022, 2021 and 2020 segment assets included $4.7 million, $10.3 million and $12.4 million, respectively, of
property and equipment located in foreign countries (primarily Mexico). During the years ended December 31, 2022, 2021 and
2020 less than 5% of our revenue was derived from foreign operations.
A reconciliation of segment gross profit to consolidated income (loss) before income taxes is as follows (in thousands, except per
share data):
Years Ended December 31,
Total gross profit from reportable segments
Selling, general and administrative expenses
Non-cash impairment charges
Other costs, net
Gain on sales of property and equipment (see Note 11)
Total other (income) expense, net
Income (loss) before income taxes
F-44 Granite Construction Incorporated
2022
2021
2020
$ 369,494 $ 362,645 $ 344,788
316,284
156,690
37,089
(6,930)
8,118
$ 91,817 $ 22,127 $ (166,463)
272,610
—
24,120
(12,617)
(6,436)
303,015
—
101,351
(66,439)
2,591
GRANITE CONSTRUCTION INCORPORATED
Notes to the Consolidated Financial Statements (Continued)
A reconciliation of segment assets to consolidated total assets is as follows (in thousands):
December 31,
Total assets for reportable segments
Assets not allocated to segments:
Cash and cash equivalents
Receivables, net
Other current assets, excluding segment assets
Current assets held for sale
Property and equipment, net, excluding segment assets
Short-term and long-term marketable securities
Investments in affiliates
Right of use assets
Deferred income taxes, net
Other noncurrent assets, excluding segment assets
Consolidated total assets
2022
2021
797,204 $ 691,650
$
293,991
463,987
280,014
—
64,851
65,943
80,725
49,079
22,209
49,930
395,647
464,588
323,051
392,641
56,658
15,600
23,368
49,312
24,141
58,271
$ 2,167,933 $ 2,494,927
2022 Annual Report F-45
GRANITE CONSTRUCTION INCORPORATED
Supplementary Data – Restatement and Recast of Quarterly Financial
Information
Quarterly Financial Data
The following tables set forth selected unaudited quarterly financial information for the years ended December 31, 2022 and
2021. This unaudited quarterly financial information has been recast to remove the effect of discontinued operations as well as to
correct the errors described below. See Note 2 for more information regarding discontinued operations and assets held for sale.
This information has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of
management, contains all adjustments necessary for a fair statement thereof. Net income (loss) per share calculations are based on
the weighted average common shares outstanding for each period presented. Accordingly, the sum of the quarterly net income
(loss) per share amounts may not equal the per share amount reported for the year.
Quarterly Financial Data
(unaudited - dollars in thousands, except per share data)
Quarters Ended
Revenue
Gross profit
As a percent of revenue
Net income (loss)
Net income (loss) attributable to Granite
Net income (loss) per share attributable to
common shareholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
December 31, 2022
$789,213
$ 96,781
As Restated
September 30, 2022
$ 1,008,910
$ 115,055
As Restated and Recast
June 30, 2022
$849,247
$ 97,566
March 31, 2022
$653,886
$ 60,092
12.3%
$ 19,176
$ 22,052
$
$
0.50
0.46
$
$
$
$
11.4%
11.5%
9.2%
65,198
69,302
$ 19,578
$ 18,681
$ (25,095)
$ (26,733)
1.58
1.36
$
$
0.42
0.39
$
$
(0.58)
(0.58)
Quarters Ended
Revenue
Gross profit
As a percent of revenue
Net income (loss)
Net income (loss) attributable to Granite
Net income (loss) per share attributable to
common shareholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
As Recast
December 31, 2021
$805,651
$ 62,446
September 30, 2021
$ 1,062,129
$ 119,935
June 30, 2021
$964,172
$116,946
March 31, 2021
$669,913
$ 63,318
7.8%
11.3%
12.1%
9.5%
$ (20,433)
$ (13,213)
$
$
(0.29)
(0.29)
$
$
$
$
32,423
35,043
$ 55,747
$ 54,461
$ (65,323)
$ (66,195)
0.76
0.73
$
$
1.19
1.14
$
$
(1.45)
(1.45)
Restatement and Recast of Previously Issued Unaudited Condensed Consolidated
Financial Statements
In connection with the preparation of this Form 10-K, we identified errors related to deferred taxes and the calculation of income
tax expense of $12.3 million in connection with the sale of Inliner, which was completed in the first quarter of 2022 and was
classified within discontinued operations in the Company’s condensed consolidated financial statements during the first and
second quarters of 2022 and in Other costs, net and Provision for income taxes during the third quarter of 2022. We have restated
herein our previously issued unaudited condensed consolidated statements of operations and condensed consolidated balance
sheets for each interim period within the nine months ended September 30, 2022. The restated financial information also includes
adjustments to correct other immaterial errors in the first three quarters of 2022, including certain errors (primarily in revenue
and cost of revenue, including the associated tax impact) that had previously been adjusted for as out of period corrections in the
period identified.
F-46 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Supplementary Data – Restatement and Recast of Quarterly Financial
Information (Continued)
The impacts to the condensed consolidated statements of shareholders’ equity and comprehensive (loss) income as a result
of the restatement were due to changes in net income during the each of the interim periods within the nine months ended
September 30, 2022. We have not included restated condensed consolidated statements of cash flows herein as Net cash provided
by (used in) operating activities in each of these interim periods is unchanged by the restatements. The errors offset within
operating activities and none of the errors involved investing or financing activities.
The following tables represent our restated unaudited condensed consolidated statements of operations and condensed
consolidated balance sheets for each interim period within the nine months ended September 30, 2022. 2022 comparative amounts
presented in our 2023 Quarterly Reports on Form 10-Q will be changed retrospectively to reflect the restatement and recast.
There is no impact to the results reported in the 2022 annual financial statements as the errors originated and are being
corrected within the annual period. There was no impact to any previously reported annual periods or quarterly results within
those annual periods.
We have presented below a reconciliation from the previously reported to the restated amounts for the quarters ended September 30,
2022, June 30, 2022 and March 31, 2022. The amounts labeled “As Previously Reported” were derived from our Quarterly Reports
on Form 10-Q filed on October 27, 2022, July 28, 2022 and April 28, 2022, respectively. As discussed in Note 2, in September
2022, we announced our decision to retain the Water Resources and Mineral Services (“WMS”) businesses that were previously
classified as held for sale and reported in discontinued operations. In connection with the reclassification of the WMS businesses
from discontinued operations to continuing operations, the condensed consolidated statements of income for the periods ended
June 30, 2022 and March 31, 2022, as previously reported, have been recast to include Inliner through the date of sale, as well as
the ongoing operations of Water Resources and Mineral Services in continuing operations.
The effects of the prior-period errors and the recast of our WMS businesses as continuing operations on our condensed
consolidated financial statements are as follows:
2022 Annual Report F-47
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Statements of Operations
(Unaudited - in thousands, except per share data)
As Restated
As Restated and Recast
September 30, 2022
June 30, 2022
March 31, 2022
Three
months
ended
Nine
months
Three
months
ended
ended
Six
months
ended
$ 847,371 $ 2,138,858 $ 713,221 $ 1,291,487 $
373,185 136,026
211,646
1,008,910 2,512,043 849,247 1,503,133
161,539
754,354 1,907,110 632,969 1,152,756
139,501
192,719
332,220 118,712
893,855 2,239,330 751,681 1,345,475
157,658
115,055
130,241
61,795
22,891
(490)
(9,513)
(949)
14,039
54,699
272,713
192,036
22,401
(10,462)
68,738
97,566
60,121
16,612
(8,915)
29,748
(1,894)
2,519
(3,491)
77
(2,789)
57,488
(7,710)
65,198
4,104
(3,246)
10,003
(9,656)
4,646
1,747
66,991
7,310
59,681
1,569
(782)
3,899
(4,876)
3,261
1,502
28,246
8,668
19,578
(897)
(1,352)
7,484
(6,165)
4,569
4,536
9,503
15,020
(5,517)
(2,535)
Three
months
ended
578,266
75,620
653,886
519,787
74,007
593,794
60,092
70,120
6,279
(598)
(15,709)
(570)
3,585
(1,289)
1,308
3,034
(18,743)
6,352
(25,095)
(1,638)
$
69,302 $
61,250 $
18,681 $
(8,052) $
(26,733)
$
$
1.58 $
1.36 $
1.37 $
1.25 $
0.42 $
0.39 $
(0.18) $
(0.18) $
43,973
51,863
44,739
52,613
44,534
52,295
45,128
45,128
(0.58)
(0.58)
45,730
45,730
Revenue
Construction
Materials
Total revenue
Cost of revenue
Construction
Materials
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Other costs, net
Gain on sales of property and equipment, net
Operating income (loss)
Other (income) expense
Interest income
Interest expense
Equity in income of affiliates
Other income, net
Total other (income) expense, net
Income (loss) before income taxes
Provision for (benefit from) income taxes
Net income (loss)
Amount attributable to non-controlling interests
Net income (loss) attributable to
Granite Construction Incorporated
Net income per share attributable to common
shareholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
Weighted average shares outstanding:
Basic
Diluted
F-48 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Balance Sheets
(Unaudited - in thousands)
As Restated
September 30,
2022
June 30,
2022
March 31,
2022
ASSETS
Current assets
Cash and cash equivalents
Short-term marketable securities
Receivables, net
Contract asset
Inventories
Equity in construction joint ventures
Other current assets
Current assets held for sale
Total current assets
Property and equipment, net
Long-term marketable securities
Investment in affiliates
Goodwill
Right of use assets
Deferred income taxes, net
Other noncurrent assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
Accounts payable
Contract liabilities
Accrued Expenses and other current liabilities
Current liabilities held for sale
Total current liabilities
Long-term debt
Lease liabilities
Other long-term liabilities
Commitments and contingencies
Equity
Preferred stock
Common stock
Additional Paid In Capital
Accumulated other comprehensive income
Retained Earnings
Total Granite Construction Incorporated shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
39,873
618,144
237,407
81,296
185,343
157,231
—
$ 255,084 $ 175,022 $
45,000
527,277
190,187
78,634
187,028
160,923
222,779
360,911
14,953
380,502
172,641
74,356
191,183
167,679
211,639
1,574,378 1,586,850 1,573,864
450,250
21,775
22,987
53,715
48,920
25,880
65,888
$ 2,402,652 $ 2,284,906 $ 2,263,279
464,593
21,675
23,203
53,715
45,404
25,458
64,008
500,827
21,575
78,663
73,704
49,590
45,650
58,265
$
1,438 $
398,285
191,037
461,266
—
1,429 $
331,728
179,322
440,899
46,706
1,052,026 1,000,084
286,801
31,182
61,868
286,872
32,701
60,664
8,735
285,390
160,994
438,441
42,106
935,666
290,549
32,682
62,493
—
437
468,662
535
465,134
934,768
35,621
970,389
—
454
515,262
1,573
388,756
906,045
35,844
941,889
$ 2,402,652 $ 2,284,906 $ 2,263,279
—
441
467,159
2,388
401,667
871,655
33,316
904,971
2022 Annual Report F-49
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Statements of Operations
(Unaudited - in thousands, except per share data)
Revenue
Construction
Materials
Total revenue
Cost of revenue
Construction
Materials
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Other costs, net
Gain on sales of property and equipment, net
Operating income
Other (income) expense
Interest income
Interest expense
Equity in income of affiliates
Other income, net
Total other (income), net
Income before income taxes
Provision for (benefit from) income taxes
Net income
Amount attributable to non-controlling interests
Net income attributable to Granite Construction Incorporated
Net income per share attributable to common shareholders
Basic earnings per share
Diluted earnings per share
Weighted average shares outstanding:
Basic
Diluted
Three months ended September 30, 2022
As
Previously
Reported
Restatement
Impacts
As
Restated
$ 848,267
161,539
1,009,806
$ (896) $ 847,371
161,539
1,008,910
—
(896)
749,938
139,501
889,439
120,367
61,795
(490)
(949)
60,011
(1,894)
2,519
(3,491)
77
(2,789)
62,800
(6,489)
69,289
4,104
73,393
4,416
—
4,416
(5,312)
—
—
—
(5,312)
—
—
—
—
—
(5,312)
(1,221)
(4,091)
—
$ (4,091) $
754,354
139,501
893,855
115,055
61,795
(490)
(949)
54,699
(1,894)
2,519
(3,491)
77
(2,789)
57,488
(7,710)
65,198
4,104
69,302
1.67
1.44
$ (0.09) $
$ (0.08) $
1.58
1.36
43,973
51,863
—
—
43,973
51,863
$
$
$
F-50 Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Statements of Operations
(Unaudited - in thousands, except per share data)
Revenue
Construction
Materials
Total revenue
Cost of revenue
Construction
Materials
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Other costs, net
Gain on sales of property and equipment, net
Operating income
Other (income) expense
Interest income
Interest expense
Equity in income of affiliates
Other income, net
Total other expense, net
Income before income taxes
Provision for (benefit from) income taxes
Net income
Amount attributable to non-controlling interests
Net income attributable to Granite Construction Incorporated
Net income per share attributable to common shareholders
Basic earnings per share
Diluted earnings per share
Weighted average shares outstanding:
Basic
Diluted
Nine months ended September 30, 2022
As Previously
Restatement
Reported
Impacts As Restated
$ 2,141,009
373,185
2,514,194
$ (2,151) $ 2,138,858
373,185
(2,151) 2,512,043
—
1,903,949
332,220
2,236,169
278,025
192,036
19,445
(10,462)
77,006
—
3,161 1,907,110
332,220
3,161 2,239,330
272,713
(5,312)
192,036
—
22,401
2,956
(10,462)
—
68,738
(8,268)
(3,246)
10,003
(9,656)
4,646
1,747
75,259
(777)
76,036
1,569
77,605
—
—
—
—
—
(8,268)
8,087
(16,355)
—
$ (16,355) $
(3,246)
10,003
(9,656)
4,646
1,747
66,991
7,310
59,681
1,569
61,250
1.73
1.56
$
$
(0.36) $
(0.31) $
1.37
1.25
44,739
52,613
—
—
44,739
52,613
$
$
$
2022 Annual Report F-51
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Statements of Operations
(Unaudited - in thousands, except per share data)
Revenue
Construction
Materials
Total revenue
Cost of revenue
Construction
Materials
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Other costs, net
Gain on sales of property and equipment, net
Operating income
Other (income) expense
Interest income
Interest expense
Equity in income of affiliates
Other income, net
Total other expense, net
Income (loss) from continuing operations
before income taxes
Provision for (benefit from) income taxes on
continuing operations
Net income (loss) from continuing
operations
Net Income (loss) from discontinued
operations
Net income
Amount attributable to non-controlling interests
Net income (loss) attributable to Granite Construction
Three months ended June 30, 2022
As Previously
Reported
Restatement
Impacts
As Restated
Discontinued
Operations
Reclassification
Impacts
As Restated
and Recast
$ 632,260
136,026
768,286
$ (1,893)
—
(1,893)
$ 630,367
136,026
766,393
$ 82,854 $ 713,221
136,026
849,247
—
82,854
571,094
118,712
689,806
78,480
53,162
20,177
(385)
5,526
(6,018)
—
(6,018)
4,125
—
—
—
4,125
(782)
3,896
(541)
3,357
5,930
—
—
—
—
—
565,076
118,712
683,788
82,605
53,162
20,177
(385)
9,651
(782)
3,896
(541)
3,357
5,930
67,893
—
67,893
14,961
6,959
(3,565)
(8,530)
20,097
632,969
118,712
751,681
97,566
60,121
16,612
(8,915)
29,748
—
3
(4,335)
(96)
(4,428)
(782)
3,899
(4,876)
3,261
1,502
(404)
4,125
3,721
24,525
28,246
2,549
911
3,460
5,208
8,668
(2,953)
3,214
261
19,317
19,578
19,521
16,568
583
(204)
3,010
(1,480)
19,317
19,578
(897)
(19,317)
—
—
—
19,578
(897)
Incorporated from continuing operations
(2,370)
1,734
(636)
19,317
18,681
Net income attributable to Granite Construction
Incorporated from discontinued operations
Net income attributable to Granite
19,521
(204)
19,317
(19,317)
—
Construction Incorporated
$ 17,151
$ 1,530
$ 18,681
Net income (loss) per share attributable to
common shareholders
Basic continuing operations per share
Basic discontinued operations per share
Basic earnings per share
Diluted continuing operations per share
Diluted discontinued operations per share
Diluted earnings per share
Weighted average shares outstanding:
Basic
Diluted
F-52 Granite Construction Incorporated
$
$
$
$
(0.05)
0.44
0.39
(0.05)
0.44
0.39
$
$
$
$
0.04
(0.01)
0.03
0.04
(0.01)
0.03
$
$
$
$
(0.01)
0.43
0.42
(0.01)
0.43
0.42
$
$
$
$
$
— $ 18,681
0.43 $
(0.43)
— $
0.40 $
(0.43)
(0.03) $
0.42
—
0.42
0.39
—
0.39
44,534
44,534
—
—
44,534
44,534
—
—
44,534
52,295
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Statements of Operations
(Unaudited - in thousands, except per share data)
Revenue
Construction
Materials
Total revenue
Cost of revenue
Construction
Materials
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Other costs, net
Gain on sales of property and equipment, net
Operating income (loss)
Other (income) expense
Interest income
Interest expense
Equity in income of affiliates
Other income, net
Total other expense, net
Six months ended June 30, 2022
As Previously
Reported
Restatement
Impacts As Restated
Discontinued
Operations
Reclassification
Impacts
As Restated
and Recast
$
$ 1,107,195
208,677
1,315,872
— $ 1,107,195
—
208,677
— 1,315,872
$184,292 $ 1,291,487
211,646
187,261 1,503,133
2,969
997,837
189,780
1,187,617
128,255
111,663
28,391
(717)
(11,082)
(1,405)
7,471
(235)
4,739
10,570
997,837
—
—
189,780
— 1,187,617
128,255
—
111,663
—
28,391
—
—
(717)
(11,082)
—
—
—
—
—
—
(1,405)
7,471
(235)
4,739
10,570
2,939
154,919 1,152,756
192,719
157,858 1,345,475
157,658
29,403
130,241
18,578
22,891
(5,500)
(9,513)
(8,796)
14,039
25,121
53
13
(5,930)
(170)
(6,034)
(1,352)
7,484
(6,165)
4,569
4,536
Income (loss) from continuing operations
before income taxes
(21,652)
—
(21,652)
31,155
9,503
Provision for (benefit from) income taxes on
continuing operations
Net (loss) from continuing operations
Net Income from discontinued operations
Net income (loss)
Amount attributable to non-controlling interests
Net (loss) attributable to Granite Construction
Incorporated from continuing operations
Net income attributable to Granite Construction
Incorporated from discontinued operations
Net income (loss) attributable to
(2,782)
(18,870)
25,617
6,747
(2,535)
(48)
48
(12,312)
(12,264)
—
(2,830)
(18,822)
13,305
(5,517)
(2,535)
17,850
13,305
(13,305)
—
—
15,020
(5,517)
—
(5,517)
(2,535)
(21,405)
48
(21,357)
13,305
(8,052)
25,617
(12,312)
13,305
(13,305)
—
Granite Construction Incorporated $
4,212
$ (12,264) $
(8,052)
Net income (loss) per share attributable
to common shareholders
Basic continuing operations per share
Basic discontinued operations per share
Basic earnings (loss) per share
Diluted continuing operations per share
Diluted discontinued operations per share
Diluted earnings (loss) per share
Weighted average shares outstanding:
Basic
Diluted
$
$
$
$
(0.47)
0.57
0.10
(0.47)
0.57
0.10
$
$
$
$
— $
(0.28)
(0.28) $
— $
(0.28)
(0.28) $
(0.47)
0.29
(0.18)
(0.47)
0.29
(0.18)
$
$
$
$
$
— $
(8,052)
0.29 $
(0.29)
— $
0.29 $
(0.29)
— $
(0.18)
—
(0.18)
(0.18)
—
(0.18)
45,128
45,128
—
—
45,128
45,128
—
—
45,128
45,128
2022 Annual Report F-53
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Statements of Operations
(Unaudited - in thousands, except per share data)
Three months ended March 31, 2022
As Previously
Reported
Restatement
Impacts As Restated
Discontinued
Operations
Reclassification
Impacts
As Restated
and Recast
$ 474,935
72,651
547,586
$ 1,893 $ 476,828
72,651
549,479
—
1,893
$ 101,438 $ 578,266
75,620
653,886
2,969
104,407
426,743
71,068
497,811
49,775
58,501
8,214
(332)
(16,608)
(623)
3,575
306
1,382
4,640
6,019
—
6,019
(4,126)
—
—
—
(4,126)
432,762
71,068
503,830
45,649
58,501
8,214
(332)
(20,734)
—
—
—
—
—
(623)
3,575
306
1,382
4,640
87,025
2,939
89,964
14,443
11,619
(1,935)
(266)
5,025
53
10
(1,595)
(74)
(1,606)
519,787
74,007
593,794
60,092
70,120
6,279
(598)
(15,709)
(570)
3,585
(1,289)
1,308
3,034
(21,248)
(4,126)
(25,374)
6,631
(18,743)
(5,331)
(15,917)
(958)
(3,168)
(6,289)
(19,085)
12,641
(6,010)
6,352
(25,095)
6,096
(9,821)
(3,118)
(12,106)
(15,274)
1,480
(6,010)
(25,095)
(1,638)
6,010
—
—
—
(25,095)
(1,638)
(19,035)
(1,688)
(20,723)
(6,010)
(26,733)
$
$
$
$
(0.42)
0.13
(0.29)
(0.42)
0.13
(0.29)
$
$
$
$
(0.03) $
(0.26)
(0.29) $
(0.03) $
(0.26)
(0.29) $
(0.45)
(0.13)
(0.58)
(0.45)
(0.13)
(0.58)
$
$
$
$
$
— $ (26,733)
(0.13) $
0.13
— $
(0.13) $
0.13
— $
(0.58)
—
(0.58)
(0.58)
—
(0.58)
45,730
45,730
—
—
45,730
45,730
—
—
45,730
45,730
Revenue
Construction
Materials
Total revenue
Cost of revenue
Construction
Materials
Total cost of revenue
Gross profit
Selling, general and administrative expenses
Other costs, net
Gain on sales of property and equipment, net
Operating loss
Other (income) expense
Interest income
Interest expense
Equity in income (loss) of affiliates
Other income, net
Total other expense, net
Loss from continuing operations
before income taxes
Provision for (benefit from) income taxes on
continuing operations
Net loss from continuing operations
Net Income (loss) from discontinued
operations
Net (loss)
Amount attributable to non-controlling interests
Net loss attributable to Granite Construction
Incorporated from continuing operations
Net income (loss) attributable to Granite Construction
Net income (loss) per share attributable to
common shareholders
Basic continuing operations per share
Basic discontinued operations per share
Basic loss per share
Diluted continuing operations per share
Diluted discontinued operations per share
Diluted loss per share
Weighted average shares outstanding:
Basic
Diluted
F-54 Granite Construction Incorporated
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)
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Balance Sheets
(Unaudited - in thousands, except share and per share data)
September 30, 2022
As Previously
Reported
Restatement
Impacts
As Restated
ASSETS
Current assets
Cash and cash equivalents
Short-term marketable securities
Receivables, net
Contract asset
Inventories
Equity in construction joint ventures
Other current assets
Total current assets
Property and equipment, net
Long-term marketable securities
Investment in affiliates
Goodwill
Right of use assets
Deferred income taxes, net
Other noncurrent assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
Accounts payable
Contract liabilities
Accrued Expenses and other current liabilities
Total current liabilities
Long-term debt
Lease liabilities
Other long-term liabilities
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares,
none outstanding
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and
outstanding: 43,723,658 shares as of September 30, 2022
Additional Paid In Capital
Accumulated other comprehensive income
Retained Earnings
Total Granite Construction Incorporated shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
$
255,084
39,873
618,144
241,238
81,296
186,824
157,231
1,579,690
500,827
21,575
78,663
73,704
49,590
45,650
58,265
$ 2,407,964
$
1,438
398,285
191,037
450,223
1,040,983
286,872
32,701
60,664
$
$
—
—
—
(3,831)
—
(1,481)
—
(5,312)
—
—
—
—
—
—
—
$ (5,312)
$
—
—
—
11,043
11,043
—
—
—
255,084
39,873
618,144
237,407
81,296
185,343
157,231
1,574,378
500,827
21,575
78,663
73,704
49,590
45,650
58,265
$ 2,402,652
$
1,438
398,285
191,037
461,266
1,052,026
286,872
32,701
60,664
—
—
—
437
468,662
535
481,489
951,123
35,621
986,744
$ 2,407,964
—
—
—
(16,355)
(16,355)
—
(16,355)
$ (5,312)
437
468,662
535
465,134
934,768
35,621
970,389
$ 2,402,652
2022 Annual Report F-55
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Balance Sheets
(Unaudited - in thousands, except share and per share data)
As Previously
Reported
June 30, 2022
Restatement
Impacts
As Restated
ASSETS
Current assets
Cash and cash equivalents
Short-term marketable securities
Receivables, net
Contract asset
Inventories
Equity in construction joint ventures
Other current assets
Current assets held for sale
Total current assets
Property and equipment, net
Long-term marketable securities
Investment in affiliates
Goodwill
Right of use assets
Deferred income taxes, net
Other noncurrent assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
Accounts payable
Contract liabilities
Accrued Expenses and other current liabilities
Current liabilities held for sale
Total current liabilities
Long-term debt
Lease liabilities
Other long-term liabilities
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares,
none outstanding
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and
outstanding: 44,078,469 shares as of June 30, 2022
Additional Paid In Capital
Accumulated other comprehensive income
Retained Earnings
Total Granite Construction Incorporated shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
F-56 Granite Construction Incorporated
$
175,022
45,000
527,277
190,187
78,634
187,028
167,349
222,779
1,593,276
464,593
21,675
23,203
53,715
45,404
25,458
64,008
$ 2,291,332
$
1,429
331,728
179,322
435,061
46,706
994,246
286,801
31,182
61,868
$
$
—
—
—
—
—
—
(6,426)
—
(6,426)
—
—
—
—
—
—
—
$ (6,426)
175,022
45,000
527,277
190,187
78,634
187,028
160,923
222,779
1,586,850
464,593
21,675
23,203
53,715
45,404
25,458
64,008
$ 2,284,906
$
—
—
—
5,838
—
5,838
—
—
—
$
1,429
331,728
179,322
440,899
46,706
1,000,084
286,801
31,182
61,868
—
—
—
441
467,159
2,388
413,931
883,919
33,316
917,235
$ 2,291,332
—
—
—
(12,264)
(12,264)
—
(12,264)
$ (6,426)
441
467,159
2,388
401,667
871,655
33,316
904,971
$ 2,284,906
GRANITE CONSTRUCTION INCORPORATED
Condensed Consolidated Balance Sheets
(Unaudited - in thousands, except share and per share data)
March 31, 2022
As Previously
Reported
Restatement
Impacts
As Restated
ASSETS
Current assets
Cash and cash equivalents
Short-term marketable securities
Receivables, net
Contract asset
Inventories
Equity in construction joint ventures
Other current assets
Current assets held for sale
Total current assets
Property and equipment, net
Long-term marketable securities
Investment in affiliates
Goodwill
Right of use assets
Deferred income taxes, net
Other noncurrent assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
Accounts payable
Contract liabilities
Accrued Expenses and other current liabilities
Current liabilities held for sale
Total current liabilities
Long-term debt
Lease liabilities
Other long-term liabilities
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and
outstanding: 45,364,137 shares as of March 31, 2022
Additional Paid In Capital
Accumulated other comprehensive income
Retained Earnings
Total Granite Construction Incorporated shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
$
360,911
14,953
380,502
180,023
74,356
191,183
179,024
211,774
1,592,726
450,250
21,775
22,987
53,715
48,920
25,880
65,888
$ 2,282,141
$
8,735
285,390
165,358
439,525
40,246
939,254
290,549
32,682
62,493
$
$
—
—
—
(7,382)
—
—
(11,345)
(135)
(18,862)
—
—
—
—
—
—
—
$ (18,862)
360,911
14,953
380,502
172,641
74,356
191,183
167,679
211,639
1,573,864
450,250
21,775
22,987
53,715
48,920
25,880
65,888
$ 2,263,279
$
—
—
(4,364)
(1,084)
1,860
(3,588)
—
—
—
$
8,735
285,390
160,994
438,441
42,106
935,666
290,549
32,682
62,493
—
—
—
454
515,262
1,573
402,550
919,839
37,324
957,163
$ 2,282,141
—
—
—
(13,794)
(13,794)
(1,480)
(15,274)
$ (18,862)
454
515,262
1,573
388,756
906,045
35,844
941,889
$ 2,263,279
2022 Annual Report F-57
NON-GAAP FINANCIAL
INFORMATION
Granite Construction Incorporated
GRANITE CONSTRUCTION INCORPORATED
Non-GAAP Financial Information
The tables below contain financial information calculated other than in accordance with U.S. generally accepted accounting
principles (“U.S. GAAP”). Specifically, management believes that non-GAAP financial measures such as EBITDA and EBITDA
margin are useful in evaluating operating performance and are regularly used by securities analysts, institutional investors and
other interested parties, and that such supplemental measures facilitate comparisons between companies that have different
capital and financing structures and/or tax rates. We are also providing adjusted EBITDA and adjusted EBITDA margin, non-GAAP
measures, to indicate the impact of Other costs, net, which include net costs related to settlements of certain legal matters and
investigations, net of divestiture costs, a gain on sale of a business in 2022 and certain gains on sales of property.
Management believes that these additional non-GAAP financial measures facilitate comparisons between industry peer companies
and management uses these non-GAAP financial measures in evaluating the Company’s performance. However, the reader is
cautioned that any non-GAAP financial measures provided by the Company are provided in addition to, and not as alternatives
for, the Company’s reported results prepared in accordance with U.S. GAAP. Items that may have a significant impact on the
Company’s financial position, results of operations and cash flows must be considered when assessing the Company’s actual
financial condition and performance regardless of whether these items are included in non-GAAP financial measures. The methods
used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies
to compute similar measures. As a result, any non-GAAP financial measures provided by the Company may not be comparable to
similar measures provided by other companies.
GRANITE CONSTRUCTION INCORPORATED EBITDA(1)
(Unaudited - dollars in thousands)
EBITDA:
Net income (loss) attributable to Granite Construction Incorporated
Net income margin(3)
Depreciation, depletion and amortization expense(2)
Provision for income taxes
Interest (income) expense, net
EBITDA(1)
EBITDA margin(1)(3)
ADJUSTED EBITDA:
Other costs, net
Gain on sales of property
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)(3)
Year Ended
December 31, 2022
$ 83,302
2.5%
83,618
12,960
6,096
$ 185,976
5.6%
$ 24,120
—
$ 210,096
6.4%
(1)
(2)
(3)
We define EBITDA as U.S. GAAP net income attributable to Granite Construction Incorporated, adjusted for net interest expense, taxes and
depreciation, depletion and amortization. Adjusted EBITDA and adjusted EBITDA margin exclude the impact of Other costs, net, and certain
gains on sale of property as described above.
Amount includes the sum of depreciation, depletion and amortization which are classified as cost of revenue and selling, general and
administrative expenses in the consolidated statements of operations.
Represents Net income (loss) attributable to Granite Construction Incorporated, EBITDA or adjusted EBITDA divided by revenue for the
respective period.
Granite Construction Incorporated
BOARD OF DIRECTORS
OFFICERS
Michael F. McNally
Chairman of the Board
Retired President and Chief Executive Officer
Skanska USA Inc.
Kyle T. Larkin
President and Chief Executive Officer
Granite Construction Incorporated
Louis E. Caldera
Former Secretary of the Army
Department of Defense
Molly C. Campbell
Infrastructure Advisor
U.S. Treasury, Office of Technical Assistance
David C. Darnell
Retired Vice Chairman
Global Wealth & Investment Management
Bank of America Corporation
Patricia D. Galloway
Chairman
Pegasus Global Holdings, Inc.
David H. Kelsey
Retired Chief Financial Officer
Verdezyne, Inc.
Alan P. Krusi
Retired President, Strategic Development
AECOM Technology Corporation
Jeffrey J. Lyash
President and Chief Executive Officer
Tennessee Valley Authority
Celeste B. Mastin
President and Chief Executive Officer
H.B. Fuller Company
Laura M. Mullen
Retired Partner
KPMG LLP
Gaddi H. Vasquez
Retired Senior Vice President
of Government Affairs
Edison International and
Southern California Edison
Kyle T. Larkin
President and Chief Executive Officer
Elizabeth L. Curtis
Executive Vice President and
Chief Financial Officer
James A. Radich
Executive Vice President and
Chief Operating Officer
Timothy W. Gruber
Senior Vice President of Human Resources
M. Craig Hall
Senior Vice President, General Counsel,
Corporate Compliance Officer and Secretary
Brian R. Dowd
Senior Vice President and Group Manager
Kenneth B. Olson
Senior Vice President of Corporate Finance,
Treasurer and Assistant Financial Officer
Michael G. Tatusko
Senior Vice President and Group Manager
Bradley J. Williams
Senior Vice President and Group Manager
Staci M. Woolsey
Chief Accounting Officer and
Assistant Financial Officer
Michael W. Barker
Vice President, Investor Relations
Nicholas B. Blackburn
Vice President, Tax
ANNUAL MEETING OF SHAREHOLDERS
Granite’s Annual Meeting of Shareholders will
be held virtually at 10:30 a.m. PDT on June
8, 2023. Proxy materials are available on our
website at investor.graniteconstruction.com or
upon written request to:
Investor Relations
Granite Construction Incorporated
Box 50085
Watsonville, CA 95077-5085
ELECTRONIC DEPOSIT OF DIVIDENDS
Registered holders may have their quarterly
dividends deposited to their checking
or savings account free of charge. Call
Computershare at (877) 520-8549 for U.S.
residents, or (781) 575-2879 for non-U.S.
residents to enroll.
FORM 10-K
A copy of the Company’s Annual Report on
Form 10-K, which is filed with the Securities and
Exchange Commission, is available free of charge
on our website or upon written request to:
Investor Relations
Granite Construction Incorporated
Box 50085
Watsonville, CA 95077-5085
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers LLP
1000 Louisiana Street, Suite 5800
Houston, TX 77002
REGISTRAR AND TRANSFER AGENT
Computershare
150 Royall St, Suite 101
Canton, MA 02021
Call Computershare at (877) 520-8549
for U.S. residents, or (781) 575-2879 for
non-U.S. residents.
SHAREHOLDER INQUIRIES
Michael W. Barker
Vice President, Investor Relations
(831) 768-4365
Mike.Barker@gcinc.com
CERTIFICATIONS
Granite’s Chief Executive Officer (CEO) and
Chief Financial Officer (CFO) have each
submitted certifications concerning the
accuracy of financial and other information
in Granite’s Annual Report on Form 10-K as
required by Section 302(a) of the Sarbanes-
Oxley Act of 2002.
After our 2023 Annual Meeting of Shareholders,
we intend to file with the New York Stock
Exchange (NYSE) the CEO certification
regarding our compliance with the NYSE’s
corporate governance listing standards as
required by NYSE Rule 303A.12(a). Last year’s
certification was approved on June 14, 2022.
Granite Construction Incorporated
585 West Beach Street
Watsonville, CA 95076
graniteconstruction.com
© 2023 Granite Construction Incorporated. All rights reserved.
FSC LOGO