GVA 10-Q Quarterly Report Sept. 30, 2023

GRANITE CONSTRUCTION INC

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gva-20230930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the quarterly period ended September 30, 2023


o			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 INC ORPORATED


State of Incorporation:			I.R.S. Employer Identification Number:
Delaware			77-0239383

Address of principal executive offices:

585 W. Beach Street

Watsonville , California 95076

( 831 ) 724-1011

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	GVA	New York Stock Exchange

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. x Yes o 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). x Yes o 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 x

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of October 25, 2023.


Class						Outstanding
Common stock, $0.01 par value						43,933,314

Table of Contents

TABLE OF CONTENTS


EXPLANATORY NOTE
PART I. FINANCIAL INFORMATION
Item 1.			Financial Statements (unaudited)
			Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022
			Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022
			Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and 2022
			Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022
			Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022
			Notes to the Condensed Consolidated Financial Statements
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.			Quantitative and Qualitative Disclosures About Market Risk
Item 4.			Controls and Procedures
PART II. OTHER INFORMATION
Item 1.			Legal Proceedings
Item 1A.			Risk Factors
Item 2.			Unregistered Sales of Equity Securities , Use of Proceeds , and Issuer P urchases of Equi ty Securities
Item 4.			Mine Safety Disclosures
Item 5.			Other Information
Item 6.			Exhibits
SIGNATURES
EXHIBIT 10 .1
EXHIBIT 10 .2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32
EXHIBIT 95
EXHIBIT 101.INS
EXHIBIT 101.SCH
EXHIBIT 101.CAL
EXHIBIT 101.DEF
EXHIBIT 101.LAB
EXHIBIT 101.PRE
EXHIBIT 104

Table of Contents

EXPLANATORY NOTE

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 filed on February 21, 2023, the restatement of our unaudited quarterly financial information for the first three quarters in the year ended December 31, 2022 is necessary to correct for (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 (b) other immaterial errors, including certain errors that had previously been adjusted for as out of period corrections.

We have reflected the impact of the restatement on our unaudited condensed consolidated financial information as of and for the three and nine months ended September 30, 2022 herein. See Note 3 of “Notes to the Condensed Consolidated Financial Statements” for additional information.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	September 30, 2023		December 31, 2022
ASSETS
Current assets
Cash and cash equivalents ($ 118,653 and $ 102,547 related to consolidated construction joint ventures (“CCJVs”))	$	292,124	$	293,991
Short-term marketable securities	31,278		39,374
Receivables, net ($ 75,172 and $ 39,281 related to CCJVs)	743,091		463,987
Contract assets ($ 73,675 and $ 80,306 related to CCJVs)	282,280		241,916
Inventories	92,131		86,809
Equity in construction joint ventures	206,669		183,808
Other current assets ($ 4,000 and $ 5,694 related to CCJVs)	47,477		37,411
Total current assets	1,695,050		1,347,296
Property and equipment, net ($ 7,714 and $ 7,834 related to CCJVs)	569,722		509,210
Long-term marketable securities	5,750		26,569
Investments in affiliates	91,101		80,725
Goodwill	74,264		73,703
Right of use assets	56,874		49,079
Deferred income taxes, net	29,043		22,208
Other noncurrent assets	58,517		59,143
Total assets	$	2,580,321	$	2,167,933

LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	1,475	$	1,447
Accounts payable ($ 65,645 and $ 57,534 related to CCJVs)	477,031		334,392
Contract liabilities ($ 59,148 and $ 62,675 related to CCJVs)	221,983		173,286
Accrued expenses and other current liabilities ($ 5,344 and $ 8,451 related to CCJVs)	355,987		288,469
Total current liabilities	1,056,476		797,594
Long-term debt	403,785		286,934
Long-term lease liabilities	42,198		32,170
Deferred income taxes, net	3,812		1,891
Other long-term liabilities	67,473		64,199
Commitments and contingencies (see Note 17)
Equity
Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding	—		—
Common stock, $ 0.01 par value, authorized 150,000,000 shares; issued and outstanding: 43,926,576 shares as of September 30, 2023 and 43,743,907 shares as of December 31, 2022	439		437
Additional paid-in capital	472,379		470,407
Accumulated other comprehensive income	894		788
Retained earnings	481,636		481,384
Total Granite Construction Incorporated shareholders’ equity	955,348		953,016
Non-controlling interests	51,229		32,129
Total equity	1,006,577		985,145
Total liabilities and equity	$	2,580,321	$	2,167,933

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

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		As Restated		2023		As Restated
			2022				2022
Revenue
Construction	$	945,698	$	847,371	$	2,198,527	$	2,138,858
Materials	171,122		161,539		376,913		373,185
Total revenue	1,116,820		1,008,910		2,575,440		2,512,043
Cost of revenue
Construction	808,536		754,354		1,945,506		1,907,110
Materials	141,641		139,501		327,846		332,220
Total cost of revenue	950,177		893,855		2,273,352		2,239,330
Gross profit	166,643		115,055		302,088		272,713
Selling, general and administrative expenses	74,794		61,795		212,479		192,036
Other costs, net	19,843		( 490 )		37,973		22,401
Gain on sales of property and equipment, net	( 1,812 )		( 949 )		( 7,793 )		( 10,462 )
Operating income	73,818		54,699		59,429		68,738
Other (income) expense
Loss on debt extinguishment	—		—		51,052		—
Interest income	( 4,293 )		( 1,894 )		( 11,287 )		( 3,246 )
Interest expense	4,877		2,519		11,899		10,003
Equity in income of affiliates, net	( 7,147 )		( 3,491 )		( 19,378 )		( 9,656 )
Other (income) expense, net	462		77		( 2,713 )		4,646
Total other (income) expense, net	( 6,101 )		( 2,789 )		29,573		1,747
Income before income taxes	79,919		57,488		29,856		66,991
Provision for (benefit from) income taxes	22,423		( 7,710 )		21,978		7,310
Net income	57,496		65,198		7,878		59,681
Amount attributable to non-controlling interests	128		4,104		9,723		1,569
Net income attributable to Granite Construction Incorporated	$	57,624	$	69,302	$	17,601	$	61,250

Net income per share attributable to common shareholders (see Note 15):
Basic	$	1.31	$	1.58	$	0.40	$	1.37
Diluted	$	1.13	$	1.36	$	0.40	$	1.25
Weighted average shares outstanding:
Basic	43,924		43,973		43,861		44,739
Diluted	53,612		51,863		44,447		52,613

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

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited - in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		As Restated		2023		As Restated
			2022				2022
Net income	$	57,496	$	65,198	$	7,878	$	59,681
Other comprehensive income (loss), net of tax
Net unrealized gain (loss) on cash flow hedges, net of tax	$	883	$	( 1,906 )	$	325	$	153
Less: reclassification for net gains (losses) included in interest expense, net of tax	( 362 )		—		( 250 )		3,042
Net change	$	521	$	( 1,906 )	$	75	$	3,195
Foreign currency translation adjustments, net	( 422 )		53		31		699
Other comprehensive income (loss), net of tax	$	99	$	( 1,853 )	$	106	$	3,894
Comprehensive income, net of tax	$	57,595	$	63,345	$	7,984	$	63,575
Non-controlling interests in comprehensive income, net of tax	128		4,104		9,723		1,569
Comprehensive income attributable to Granite Construction Incorporated, net of tax	$	57,723	$	67,449	$	17,707	$	65,144

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

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - in thousands, except share data)


	Outstanding Shares	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Granite Shareholders’ Equity		Non-controlling Interests		Total Equity
Balances at June 30, 2023	43,918,798	$	439	$	470,511	$	795	$	429,797	$	901,542	$	39,908	$	941,450
Net income	—	—		—		—		57,624		57,624		( 128 )		57,496
Other comprehensive income	—	—		—		99		—		99		—		99
Repurchases of common stock (1)	( 3,334 )	—		( 134 )		—		—		( 134 )		—		( 134 )
Restricted stock units (“RSUs”) vested	11,166	—		—		—		—		—		—		—
Dividends on common stock ($ 0.13 per share)	—	—		76		—		( 5,785 )		( 5,709 )		—		( 5,709 )




Transactions with non-controlling interests	—	—		—		—		—		—		11,449		11,449
Stock-based compensation expense and other	( 54 )	—		1,926		—		—		1,926		—		1,926
Balances at September 30, 2023	43,926,576	$	439	$	472,379	$	894	$	481,636	$	955,348	$	51,229	$	1,006,577

Balances at June 30, 2022 (as restated)	44,078,469	$	441	$	467,159	$	2,388	$	401,667	$	871,655	$	33,316	$	904,971
Net income (as restated)	—	—		—		—		69,302		69,302		( 4,104 )		65,198
Other comprehensive loss	—	—		—		( 1,853 )		—		( 1,853 )		—		( 1,853 )
Repurchases of common stock (1)	( 378,790 )	( 4 )		( 346 )		—		—		( 350 )		—		( 350 )
RSUs vested	23,994	—		—		—		—		—		—		—
Dividends on common stock ($ 0.13 per share)	—	—		74		—		( 5,759 )		( 5,685 )		—		( 5,685 )
Transactions with non-controlling interests	—	—		—		—		—		—		6,409		6,409
Stock-based compensation expense and other	( 15 )	—		1,775		—		( 76 )		1,699		—		1,699
Balances at September 30, 2022 (as restated)	43,723,658	$	437	$	468,662	$	535	$	465,134	$	934,768	$	35,621	$	970,389

(1) During the three months ended September 30, 2023 and 2022, there were 3,334 shares and 9,641 shares, respectively, withheld related to employee taxes for restricted stock units ("RSUs") vested under our equity incentive plans. During the three months ended September 30, 2022, we also repurchased 366,785 shares under the Board approved share repurchase program.

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

Table of Contents

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - in thousands, except share data)


	Outstanding Shares	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Granite Shareholders’ Equity		Non-controlling Interests		Total Equity
Balances at December 31, 2022	43,743,907	$	437	$	470,407	$	788	$	481,384	$	953,016	$	32,129	$	985,145
Net income	—	—		—		—		17,601		17,601		( 9,723 )		7,878
Other comprehensive income	—	—		—		106		—		106		—		106
Repurchases of common stock (1)	( 96,936 )	( 1 )		( 3,900 )		—		—		( 3,901 )		—		( 3,901 )


RSUs vested	272,528	3		( 3 )		—		—		—		—		—
Dividends on common stock ($ 0.13 per share per quarter)	—	—		226		—		( 17,349 )		( 17,123 )		—		( 17,123 )
Capped call transactions	—	—		( 39,379 )		—		—		( 39,379 )		—		( 39,379 )
Redemption of warrants	—	—		( 13,201 )		—		—		( 13,201 )		—		( 13,201 )
Common stock issued in debt extinguishment	1,390,500	14		49,321		—		—		49,335		—		49,335
Exercise of bond hedge	( 1,390,516 )	( 14 )		14		—		—		—		—		—
Transactions with non-controlling interests	—	—		—		—		—		—		28,823		28,823
Stock-based compensation expense and other	7,093	—		8,894		—		—		8,894		—		8,894
Balances at September 30, 2023	43,926,576	$	439	$	472,379	$	894	$	481,636	$	955,348	$	51,229	$	1,006,577

Balances at December 31, 2021	45,840,260	$	458	$	559,752	$	( 3,359 )	$	410,831	$	967,682	$	27,881	$	995,563
Cumulative effect of newly adopted accounting standard	—	—		( 26,961 )		—		10,543		( 16,418 )		—		( 16,418 )
Balances at January 1, 2022	45,840,260	458		532,791		( 3,359 )		421,374		951,264		27,881		979,145
Net income (as restated)	—	—		—		—		61,250		61,250		( 1,569 )		59,681
Other comprehensive income	—	—		—		3,894		—		3,894		—		3,894
Repurchases of common stock (1)	( 2,370,376 )	( 23 )		( 70,703 )		—		—		( 70,726 )		—		( 70,726 )
RSUs vested	244,760	2		( 2 )		—		—		—		—		—
Dividends on common stock ($ 0.13 per share per quarter)	—	—		218		—		( 17,490 )		( 17,272 )		—		( 17,272 )
Transactions with non-controlling interests	—	—		—		—		—		—		9,309		9,309
Stock-based compensation expense and other	9,014	—		6,358		—		—		6,358		—		6,358
Balances at September 30, 2022 (as restated)	43,723,658	$	437	$	468,662	$	535	$	465,134	$	934,768	$	35,621	$	970,389

(1) During the nine months ended September 30, 2023 and 2022, there were 96,936 shares and 69,659 shares, respectively, withheld related to employee taxes for RSUs vested under our equity incentive plans. During the nine months ended September 30, 2022, we also repurchased 2,298,353 shares under the Board approved share repurchase program.

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

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

( Unaudited - in thousands )


Nine Months Ended September 30,	2023		As Restated
			2022
Operating activities
Net income	$	7,878	$	59,681
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion and amortization	65,298		61,714
Amortization related to long-term debt	1,689		1,901
Non-cash loss on debt extinguishment	51,052		—
Gain on sale of business	—		( 3,278 )
Gain on sales of property and equipment, net	( 7,793 )		( 10,462 )
Deferred income taxes	1,542		( 17,819 )
Stock-based compensation	8,630		6,151
Equity in net (income) loss from unconsolidated joint ventures	( 4,535 )		25,066
Net income from affiliates	( 19,378 )		( 9,656 )
Other non-cash adjustments	5,659		38
Changes in assets and liabilities:
Receivables	( 286,262 )		( 94,233 )
Contract assets, net	8,315		( 91,102 )
Inventories	( 3,421 )		( 8,795 )
Contributions to unconsolidated construction joint ventures	( 18,310 )		( 44,667 )
Distributions from unconsolidated construction joint ventures and affiliates	8,903		7,960
Other assets, net	( 6,705 )		27,633
Accounts payable	144,721		60,973
Accrued expenses and other liabilities, net	76,915		14,264
Net cash provided by (used in) operating activities	$	34,198	$	( 14,631 )
Investing activities
Purchases of marketable securities	( 9,740 )		( 59,810 )
Maturities of marketable securities	40,000		15,000
Purchases of property and equipment	( 108,963 )		( 97,753 )
Proceeds from sales of property and equipment	14,613		21,110
Proceeds from company owned life insurance	1,545		—
Proceeds from the sale of business	—		142,571
Acquisition of business	( 26,933 )		—
Issuance of notes receivable	—		( 7,560 )
Collection of notes receivable	208		316
Net cash provided by (used in) investing activities	$	( 89,270 )	$	13,874
Financing activities
Proceeds from long-term debt	55,000		50,000
Debt principal repayments	( 304,851 )		( 124,911 )
Capped call transactions	( 53,035 )		—
Redemption of warrants	( 13,201 )		—
Proceeds from issuance of 3.75 % Convertible Notes	373,750		—
Debt issuance costs	( 10,024 )		—
Cash dividends paid	( 17,101 )		( 17,587 )
Repurchases of common stock	( 3,900 )		( 70,724 )
Contributions from non-controlling partners	35,400		11,925
Distributions to non-controlling partners	( 9,100 )		( 6,725 )
Other financing activities, net	267		208
Net cash provided by (used in) financing activities	$	53,205	$	( 157,814 )
Net decrease in cash, cash equivalents and restricted cash	( 1,867 )		( 158,571 )
Cash, cash equivalents and $ 0 and $ 1,512 in restricted cash at beginning of period	293,991		413,655
Cash, cash equivalents and $ 0 in restricted cash at end of period	$	292,124	$	255,084

Supplementary Information

Table of Contents


Right of use assets obtained in exchange for lease obligations	$	28,546	$	12,898
Cash paid during the period for:
Operating lease liabilities	$	16,461	$	17,135
Interest	$	6,473	$	7,397
Income taxes	$	7,324	$	1,780
Other non-cash operating activities:
Performance guarantees	$	( 6,513 )	$	( 4,678 )
Deferred taxes related to capped call transactions	$	13,656	$	—
Non-cash investing and financing activities:
RSUs issued, net of forfeitures	$	11,447	$	8,258
Dividends declared but not paid	$	5,710	$	5,685
Contributions from non-controlling partners	$	2,523	$	4,109
Accrued equipment purchases	$	( 2,204 )	$	897

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

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1. General

Basis of Presentation: The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), are unaudited and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at September 30, 2023 and the results of our operations and cash flows for the periods presented. The December 31, 2022 condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP.

Acquisition : On April 24, 2023, we completed the purchase of Coast Mountain Resources (2020) Ltd. (“CMR”) for approximately $ 26.9 million in cash, subject to certain adjustments. CMR is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land. CMR results are reported in the Materials segment. This acquisition did not have a material impact on our financial statements.

In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 805, Business Combinations , the total purchase price and assumed liabilities were allocated based on their estimated fair values as of April 24, 2023. The tangible assets acquired and liabilities assumed were approximately $ 29.2 million and $ 7.1 million, respectively, resulting in acquired goodwill of $ 4.8 million. The tangible assets balance consists primarily of equipment, vehicles and the right-to-mine which are reported in Property and equipment, net. The estimated allocation is subject to revision during the measurement period, which may result in adjustments to the values presented herein. We expect to finalize these amounts within 12 months from the acquisition date.

Impairment charges: During the third quarter of 2023, we made the decision to wind down our international Mineral Services operations. We perform goodwill impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill. In response to this change in the business, we performed an interim goodwill impairment test on the Mountain Group Construction reporting unit, which resulted in a non-cash impairment charge. We also assessed the long-lived tangible assets and amortizable intangible assets associated with these Mineral Services operations. We recorded a total of $ 4.5 million of non-cash impairment charges during the three and nine months ended September 30, 2023 related to the wind down of international Mineral Services operations, which are included in other costs on our condensed consolidated statement of operations.

Seasonality: Our operations are typically affected more by weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

2. Recently Issued and Adopted Accounting Pronouncements

We closely monitor all Accounting Standards Updates ("ASU") issued by the FASB and other authoritative guidance.

In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement , which requires that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value. This ASU is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. We plan to adopt this ASU in the first quarter of 2025 but do not expect the adoption to have a material impact on our consolidated financial statements.

No new accounting pronouncements were adopted in the nine months ended September 30, 2023 that had a material impact on our financial statements.

3. Restatement

Restatement Background

As disclosed in our Annual Report, we identified errors during the preparation of the Annual Report related to deferred taxes and the calculation of income tax expense of $ 12.3 million in connection with the sale of Inliner, which was completed in the first quarter of 2022 and was classified in Other costs, net and Provision for income taxes in our condensed consolidated financial statements. As a result, our previously issued unaudited quarterly financial information

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for each interim period within the nine months ended September 30, 2022 require restatement. The restated financial information also includes adjustments to correct other immaterial errors in the first three quarters of 2022, including certain errors (primarily in revenue and cost of revenue, as well as the associated tax impact) that had previously been adjusted for as out of period corrections in the periods identified.

Description of Restatement Tables

We have presented below a reconciliation from the previously reported to the restated amounts for the three and nine months ended September 30, 2022. The amounts labeled “As Previously Reported” were derived from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 filed on October 27, 2022.

The impacts to the condensed consolidated statements of shareholders’ equity and comprehensive income (loss) as a result of the restatement were due to the changes in net income for the three and nine months ended September 30, 2022. In addition, there was no impact to net cash provided by (used in) investing and financing activities for the nine months ended September 30, 2022 as a result of the restatement.

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


CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended September 30, 2022	As Previously Reported		Restatement Impacts		As Restated
Revenue
Construction	$	848,267	$	( 896 )	$	847,371
Materials	161,539		—		161,539
Total revenue	1,009,806		( 896 )		1,008,910
Cost of revenue
Construction	749,938		4,416		754,354
Materials	139,501		—		139,501
Total cost of revenue	889,439		4,416		893,855
Gross profit	120,367		( 5,312 )		115,055
Selling, general and administrative expenses	61,795		—		61,795
Other costs, net	( 490 )		—		( 490 )
Gain on sales of property and equipment, net	( 949 )		—		( 949 )
Operating income	60,011		( 5,312 )		54,699
Other (income) expense
Interest income	( 1,894 )		—		( 1,894 )
Interest expense	2,519		—		2,519
Equity in income of affiliates	( 3,491 )		—		( 3,491 )
Other expense, net	77		—		77
Total other (income), net	( 2,789 )		—		( 2,789 )
Income before income taxes	62,800		( 5,312 )		57,488
Benefit from income taxes	( 6,489 )		( 1,221 )		( 7,710 )
Net income	69,289		( 4,091 )		65,198
Amount attributable to non-controlling interests	4,104		—		4,104
Net income attributable to Granite Construction Incorporated	$	73,393	$	( 4,091 )	$	69,302

Net income per share attributable to common shareholders
Basic earnings per share	$	1.67	$	( 0.09 )	$	1.58
Diluted earnings per share	$	1.44	$	( 0.08 )	$	1.36
Weighted average shares outstanding:
Basic	43,973		—		43,973
Diluted	51,863		—		51,863

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Nine months ended September 30, 2022	As Previously Reported		Restatement Impacts		As Restated
Revenue
Construction	$	2,141,009	$	( 2,151 )	$	2,138,858
Materials	373,185		—		373,185
Total revenue	2,514,194		( 2,151 )		2,512,043
Cost of revenue
Construction	1,903,949		3,161		1,907,110
Materials	332,220		—		332,220
Total cost of revenue	2,236,169		3,161		2,239,330
Gross profit	278,025		( 5,312 )		272,713
Selling, general and administrative expenses	192,036		—		192,036
Other costs, net	19,445		2,956		22,401
Gain on sales of property and equipment, net	( 10,462 )		—		( 10,462 )
Operating income	77,006		( 8,268 )		68,738
Other (income) expense
Interest income	( 3,246 )		—		( 3,246 )
Interest expense	10,003		—		10,003
Equity in income of affiliates	( 9,656 )		—		( 9,656 )
Other expense, net	4,646		—		4,646
Total other expense, net	1,747		—		1,747
Income before income taxes	75,259		( 8,268 )		66,991
Provision for (benefit from) income taxes	( 777 )		8,087		7,310
Net income	76,036		( 16,355 )		59,681
Amount attributable to non-controlling interests	1,569		—		1,569
Net income attributable to Granite Construction Incorporated	$	77,605	$	( 16,355 )	$	61,250

Net income per share attributable to common shareholders
Basic earnings per share	$	1.73	$	( 0.36 )	$	1.37
Diluted earnings per share	$	1.56	$	( 0.31 )	$	1.25
Weighted average shares outstanding:
Basic	44,739		—		44,739
Diluted	52,613		—		52,613

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended September 30, 2022	As Previously Reported		Restatement Impacts		As Restated
Operating activities
Net income	$	76,036	$	( 16,355 )	$	59,681
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion and amortization	61,714		—		61,714
Amortization related to long-term debt	1,901		—		1,901
Gain on sale of business	( 6,234 )		2,956		( 3,278 )
Gain on sales of property and equipment, net	( 10,462 )		—		( 10,462 )
Deferred income taxes	( 17,819 )		—		( 17,819 )
Stock-based compensation	6,151		—		6,151
Equity in net loss from unconsolidated joint ventures	23,585		1,481		25,066
Net income from affiliates	( 9,656 )		—		( 9,656 )
Other non-cash adjustments	38		—		38
Changes in assets and liabilities:
Receivables	( 94,233 )		—		( 94,233 )
Contract assets, net	( 94,933 )		3,831		( 91,102 )
Inventories	( 8,795 )		—		( 8,795 )
Contributions to unconsolidated construction joint ventures	( 44,667 )		—		( 44,667 )
Distributions from unconsolidated construction joint ventures and affiliates	7,960		—		7,960
Other assets, net	30,589		( 2,956 )		27,633
Accounts payable	60,973		—		60,973
Accrued expenses and other liabilities, net	3,221		11,043		14,264
Net cash used in operating activities	$	( 14,631 )	$	—	$	( 14,631 )

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4. Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.

When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.

In our review of these changes for the three and nine months ended September 30, 2023 and 2022, we did not identify any material amounts that should have been recorded in a prior period.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
				As Restated				As Restated
		2023		2022		2023		2022
Number of projects with upward estimate changes		1		1		1		—

Increase to project profitability, net	$	8.6	$	6.6	$	8.1	$	—
Increase to net income/decrease to net loss	$	6.5	$	5.1	$	6.1	$	—
Amounts attributable to non-controlling interests	$	—	$	—	$	3.3	$	—
Increase to net income/decrease to net loss attributable to Granite Construction Incorporated	$	6.5	$	5.1	$	2.8	$	—
Increase to net income/decrease to net loss per diluted share attributable to common shareholders	$	0.12	$	0.10	$	0.06	$	—

The increases during the three months ended September 30, 2023 and September 30, 2022 were due to changes in the estimated amount of probable recovery on outstanding claims. The increase during the nine months ended September 30, 2023 was due to decreases in estimated costs from mitigated risks.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
								As Restated
		2023		2022		2023		2022
Number of projects with downward estimate changes		1		1		3		6
Range of reduction in gross profit from each project, net	$	8.4	$	15.2	$	5.3 - 40.5	$	5.7 - 21.2
Decrease to project profitability, net	$	8.4	$	15.2	$	51.1	$	64.6
Decrease to net income/increase to net loss	$	6.3	$	11.7	$	38.3	$	49.8
Amounts attributable to non-controlling interests	$	4.2	$	7.6	$	20.2	$	13.2
Decrease to net income/increase to net loss attributable to Granite Construction Incorporated	$	2.1	$	4.1	$	18.1	$	36.6
Decrease to net income/increase to net loss per diluted share attributable to common shareholders	$	0.04	$	0.08	$	0.41	$	0.70

The decreases during the three and nine months ended September 30, 2023 were due to additional costs related to changes in project durations, lower productivity than originally anticipated and increased labor and materials costs. The decreases during the three and nine months ended September 30, 2022 were due to additional costs related to extended project duration, increased labor and materials costs, and disputed work being performed where there were ongoing legal claims.

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5 . Disaggregation of Revenue

We disaggregate our revenue based on our reportable segments (see Note 18) and operating groups as these are the formats that are regularly reviewed by management. Our reportable segments are: Construction and Materials. In alphabetical order, our operating groups are: California, Central and Mountain. The following tables present our disaggregated revenue by operating group (in thousands):


Three Months Ended September 30,
2023	Construction		Materials		Total
California	$	317,244	$	83,867	$	401,111
Central	222,144		11,357		233,501
Mountain	406,310		75,898		482,208
Total	$	945,698	$	171,122	$	1,116,820


2022 (As Restated)	Construction		Materials		Total
California	$	262,972	$	85,173	$	348,145
Central	222,082		9,348		231,430
Mountain	362,317		67,018		429,335
Total	$	847,371	$	161,539	$	1,008,910


Nine Months Ended September 30,
2023	Construction		Materials		Total
California	$	699,093	$	191,221	$	890,314
Central	593,632		35,251		628,883
Mountain	905,802		150,441		1,056,243
Total	$	2,198,527	$	376,913	$	2,575,440


2022 (As Restated)	Construction		Materials		Total
California	$	606,716	$	202,371	$	809,087
Central	653,581		33,634		687,215
Mountain	878,561		137,180		1,015,741
Total	$	2,138,858	$	373,185	$	2,512,043

6 . Unearned Revenue

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


(in thousands)	September 30, 2023		December 31, 2022
California	$	1,423,845	$	945,971
Central	1,581,426		1,444,983
Mountain	959,478		486,524
Total	$	3,964,749	$	2,877,478

All unearned revenue is in the Construction segment. Approximately $ 2.5 billion of the September 30, 2023 unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

7. Contract Assets and Liabilities

As a result of changes in contract transaction price related to performance obligations that were satisfied or partially satisfied prior to the end of the periods, we recognized revenue of $ 41.6 million and $ 131.3 million during the three and nine months ended September 30, 2023 and $ 35.8 million and $ 150.4 million during the three and nine months ended September 30, 2022, respectively. The changes in contract transaction price for the three and nine months ended

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September 30, 2023 and 2022 were from items such as executed or estimated change orders and unresolved contract modifications and claims.

As of September 30, 2023 and December 31, 2022, the aggregate claim recovery estimates included in contract asset and liability balances were $ 71.6 million and $ 75.8 million, respectively.

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


(in thousands)	September 30, 2023		December 31, 2022
Costs in excess of billings and estimated earnings	$	130,570	$	80,357
Contract retention	151,710		161,559
Total contract assets	$	282,280	$	241,916

As of September 30, 2023 and December 31, 2022, contract retention receivable from Brightline Trains Florida LLC represented 10.3 % and 11.7 %, respectively, of total contract assets. No other contract retention receivable individually exceeded 10% of total contract assets at any of the presented dates. The majority of the contract retention balance is expected to be collected within one year.

As work is performed, revenue is recognized and the corresponding contract liabilities are reduced. We recognized revenue of $ 17.5 million and $ 188.6 million during the three and nine months ended September 30, 2023, respectively, and $ 10.7 million and $ 221.4 million during the three and nine months ended September 30, 2022, respectively, that was included in the contract liability balances at December 31, 2022 and 2021, respectively.

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


(in thousands)	September 30, 2023		December 31, 2022
Billings in excess of costs and estimated earnings, net of retention	$	205,288	$	152,294
Provisions for losses	16,695		20,992
Total contract liabilities	$	221,983	$	173,286

8. Receivables, net

Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest. The following table presents major categories of receivables:


(in thousands)	September 30, 2023		December 31, 2022
Contracts completed and in progress:
Billed	$	353,132	$	220,809
Unbilled	217,218		120,348
Total contracts completed and in progress	570,350		341,157
Materials sales	98,997		52,182
Other	75,259		71,790
Total gross receivables	744,606		465,129
Less: allowance for credit losses	1,515		1,142
Total net receivables	$	743,091	$	463,987

Included in other receivables at September 30, 2023 and December 31, 2022 were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds. Other receivables at September 30, 2023 and December 31, 2022 also included $ 24.9 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated joint ventures that bears interest at prime plus 3.0 % per annum. None of our customers had a receivable balance in excess of 10 % of our total net receivables as of September 30, 2023 or December 31, 2022.

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9. Fair Value Measurement

The following tables summarize significant assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands):


	Fair Value Measurement at Reporting Date Using
September 30, 2023	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	61,321	$	—	$	—	$	61,321
Other current assets
Diesel collars	$	—	$	335	$	—	$	335
Commodity swaps	—		223		—		223
Total assets	$	61,321	$	558	$	—	$	61,879


December 31, 2022
Cash equivalents
Money market funds	$	99,806	$	—	$	—	$	99,806
Other current assets
Commodity swaps	—		121		—		121
Total assets	$	99,806	$	121	$	—	$	99,927

Commodity Derivatives

As of September 30, 2023 and December 31, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $ 1.6 million and $ 7.0 million, respectively, all maturing by October 31, 2023. The realized and unrealized gains associated with commodity swaps for the three and nine months ended September 30, 2023 were immaterial . The financial statement impact for the three and nine months ended September 30, 2022 was a realized gain of $ 1.2 million and $ 4.0 million, respectively. In addition, for the three months ended September 30, 2022, the commodity swaps had an unrealized loss of $ 2.6 million, and for the nine months ended September 30, 2022, the commodity swaps had an immaterial unrealized gain.

In the first three quarters of 2023, we entered into collar contracts to reduce our price exposure on diesel consumption. The collars were not designated as hedges and will be treated as a mark-to-market derivative instruments through their maturity dates. The financial statement impact for the three months ended September 30, 2023 was an unrealized gain of $ 1.3 million. The unrealized gain for the nine months ended September 30, 2023 and the realized gain for the three and nine months ended September 30, 2023 were immaterial .

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Other Assets and Liabilities

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


		September 30, 2023				December 31, 2022
(in thousands)	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Held-to-maturity marketable securities (1)	Level 1	$	37,028	$	36,150	$	65,943	$	64,584
Liabilities (including current maturities):
3.75 % Convertible Notes (2)	Level 2	$	373,750	$	393,921	$	—	$	—
2.75 % Convertible Notes (2)	Level 2	$	31,338	$	40,659	$	230,000	$	281,365
Credit Agreement - Revolver (2)	Level 3	$	—	$	—	$	50,000	$	49,536

(1) All marketable securities as of September 30, 2023 and December 31, 2022 were classified as held-to-maturity and consisted of U.S. Government and agency obligations maturing in two months to two years.

(2) The fair values of our 2.75 % convertible senior notes due 2024 (the " 2.75 % Convertible Notes") and the 3.75 % convertible senior notes due 2028 (the " 3.75 % Convertible Notes") are based on the median price of the notes in an active market. The fair value of the Fourth Amended and Restated Credit Agreement, as amended (the "Credit Agreement"), is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk. See Note 14 for more information about the 2.75 % Convertible Notes, 3.75 % Convertible Notes and the Credit Agreement.

During the nine months ended September 30, 2023 and 2022, we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

10. Construction Joint Ventures

We participate in various construction joint ventures. We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary. We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during the three and nine months ended September 30, 2023, we determined no change was required for existing joint ventures.

Due to the joint and several nature of the performance obligations under the related owner contracts, if any of our partners fail to perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide a performance guarantee). At September 30, 2023, there was $ 204.4 million of remaining contract value on unconsolidated and line item construction joint venture contracts of which $ 96.7 million represented our share and the remaining $ 107.7 million represented our partners’ share. We are not able to estimate amounts that may be required beyond the current remaining forecasted cost of the work to be performed. These forecasted costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees. See Note 13 for disclosure of the performance guarantee amounts recorded in the condensed consolidated balance sheets.

Consolidated Construction Joint Ventures (“CCJVs”)

At September 30, 2023, we were engaged in ten active CCJV projects with total contract values ranging from $ 46.3 million to $ 428.5 million for a combined total of $ 2.0 billion of which our share was $ 1.2 billion. As of September 30, 2023, our share of revenue remaining to be recognized on these CCJVs was $ 395.3 million and ranged from $ 1.9 million to $ 148.6 million by project. Our proportionate share of the equity in these joint ventures was between 50.0 % and 70.0 %. During the three and nine months ended September 30, 2023, total revenue from CCJVs was $ 91.2 million and $ 223.3 million, respectively. During the three and nine months ended September 30, 2022, total revenue from CCJVs was $ 117.5 million and $ 344.5 million, respectively. During the nine months ended September 30, 2023 and 2022, CCJVs used $ 36.8 million and provided $ 4.7 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As of September 30, 2023, we were engaged in seven active unconsolidated joint venture projects with total contract values ranging from $ 5.8 million to $ 3.8 billion for a combined total of $ 7.9 billion of which our share was $ 2.3 billion. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 23.0 % to 50.0 %. As of September 30, 2023, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 57.9 million and ranged from $ 1.5 million to $ 33.7 million by project.

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


(in thousands)	September 30, 2023		December 31, 2022
Assets
Cash, cash equivalents and marketable securities	$	158,768	$	130,635
Other current assets (1)	684,667		681,221
Noncurrent assets	53,703		76,204
Less: partners’ interest	617,934		604,741
Granite’s interest (1),(2)	$	279,204	$	283,319
Liabilities
Current liabilities	$	206,414	$	244,411
Less: partners’ interest and adjustments (3)	119,875		130,911
Granite’s interest	$	86,539	$	113,500
Equity in construction joint ventures (4)	$	192,665	$	169,819

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 was $ 58.2 million and $ 64.7 million, respectively, related to performance guarantees (see Note 13).

(2) Included in this balance as of September 30, 2023 and December 31, 2022 was $ 85.9 million and $ 104.3 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $ 0.9 million and $ 2.7 million related to Granite’s share of estimated recovery of back charge claims as of September 30, 2023 and December 31, 2022, respectively.

(3) Partners’ interest and adjustments includes amounts to reconcile total net assets as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences.

(4) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $ 14.0 million as of both September 30, 2023 and December 31, 2022, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.


	Three Months Ended September 30,				Nine Months Ended September 30,
			As Restated				As Restated
(in thousands)	2023		2022		2023		2022
Revenue
Total	$	( 18,391 )	$	69,355	$	44,994	$	322,058
Less: partners’ interest and adjustments (1)	( 34,395 )		44,000		4,625		223,858
Granite’s interest	$	16,004	$	25,355	$	40,369	$	98,200
Cost of revenue
Total	$	( 10,607 )	$	81,694	$	74,328	$	332,777
Less: partners’ interest and adjustments (1)	( 18,143 )		48,401		38,173		209,950
Granite’s interest	$	7,536	$	33,293	$	36,155	$	122,827
Granite’s interest in gross profit (loss)	$	8,468	$	( 7,938 )	$	4,214	$	( 24,627 )
Net Income (Loss)
Total	$	( 7,514 )	$	( 11,945 )	$	( 27,742 )	$	( 11,649 )
Less: partners’ interest and adjustments (1)	( 16,054 )		( 4,106 )		( 32,277 )		13,418
Granite’s interest in net income (loss) (2)	$	8,540	$	( 7,839 )	$	4,535	$	( 25,067 )

(1) Partners’ interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast and/or actual differences.

(2) These joint venture net income (loss) amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.

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11. Investments in Affiliates

Our investments in affiliates balance consists of equity method investments in the following types of entities:


(in thousands)	September 30, 2023		December 31, 2022
Foreign	$	66,969	$	58,579
Real estate	7,489		8,517
Asphalt terminal	16,643		13,629
Total investments in affiliates	$	91,101	$	80,725

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


(in thousands)	September 30, 2023		December 31, 2022
Current assets	$	207,838	$	194,210
Noncurrent assets	163,121		172,560
Total assets	$	370,959	$	366,770
Current liabilities	$	90,889	$	106,780
Long-term liabilities (1)	58,202		59,356
Total liabilities	$	149,091	$	166,136
Net assets	$	221,868	$	200,634
Granite’s share of net assets	$	91,101	$	80,725

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

Of the $ 371.0 million of total affiliate assets as of September 30, 2023, we had investments in two real estate entities with total assets of $ 59.2 million, our foreign affiliates had total assets of $ 270.3 million and the asphalt terminal entity had total assets of $ 41.5 million. As of September 30, 2023 and December 31, 2022, all of the investments in real estate affiliates were in residential real estate in Texas. As of September 30, 2023, our percent ownership in the real estate entities ranged from 10 % to 25 %. We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from 25 % to 50 % as of September 30, 2023.

12. Property and Equipment, net

Balances of major classes of assets and total accumulated depreciation and depletion are included in property and equipment, net in the condensed consolidated balance sheets as follows:


(in thousands)	September 30, 2023		December 31, 2022
Equipment and vehicles	$	1,065,882	$	994,602
Quarry property	234,979		219,843
Land and land improvements	106,339		105,733
Buildings and leasehold improvements	105,554		103,658
Office furniture and equipment	88,472		82,465
Property and equipment	$	1,601,226	$	1,506,301
Less: accumulated depreciation and depletion	1,031,504		997,091
Property and equipment, net	$	569,722	$	509,210

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13. Accrued Expenses and Other Current Liabilities


(in thousands)	September 30, 2023		December 31, 2022
Accrued insurance	$	85,937	$	78,427
Deficits in unconsolidated construction joint ventures	14,004		13,989
Payroll and related employee benefits	99,750		80,910
Performance guarantees	58,190		64,703
Short-term lease liabilities	17,088		18,662
Other	81,018		31,778
Total	$	355,987	$	288,469

Other includes dividends payable, warranty reserves, asset retirement obligations, remediation reserves, legal accruals and other miscellaneous accruals, none of which were greater than 5% of total current liabilities at any of the presented dates.

14. Long-Term Debt and Credit Arrangements


(in thousands)	September 30, 2023		December 31, 2022
3.75 % Convertible Notes	$	373,750	$	—
2.75 % Convertible Notes	31,338		230,000
Credit Agreement - Revolver	—		50,000
Other, net of debt issuance costs	172		8,381
Total debt	$	405,260	$	288,381
Less: current maturities	1,475		1,447
Total long-term debt	$	403,785	$	286,934

3.75 % Convertible Notes

On May 11, 2023, we issued $ 373.8 million aggregate principal amount of our 3.75 % Convertible Notes. The 3.75 % Convertible Notes bear interest at a rate of 3.75 % per annum payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2023 and mature on May 15, 2028, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding November 15, 2027, the 3.75 % Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 3.75 % Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate applicable to the 3.75 % Convertible Notes is 21.6807 shares of Granite common stock per $1,000 principal amount of the 3.75 % Convertible Notes, which is equivalent to an initial conversion price of approximately $ 46.12 per share of Granite common stock, subject to adjustment if certain events occur. Upon conversion, we will pay or deliver, as the case may be, cash, 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 “fundamental change” as defined in the indenture governing the 3.75 % Convertible Notes, holders may require us to repurchase for cash all or any portion of their 3.75 % Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 3.75 % Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. If certain corporate events that constitute a “make-whole fundamental change” as set forth in the indenture governing the 3.75 % Convertible Notes occur prior to the maturity date of the 3.75 % Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 3.75 % Convertible Notes in connection with such event or notice of redemption.

We will not be able to redeem the 3.75 % Convertible Notes prior to May 20, 2026. On or after May 20, 2026, we have the option to redeem for cash all or any portion of the 3.75 % 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 at a redemption price equal to 100 % of the principal amount of the 3.75 % Convertible Notes to be redeemed, plus any accrued but unpaid interest to, but excluding, the redemption date. In addition, as described in the indenture governing the 3.75 % Convertible Notes, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the 3.75 % Convertible Notes becoming due and payable immediately.

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The net proceeds from the sale of the 3.75 % Convertible Notes were approximately $ 364.4 million, after deducting the initial purchasers’ discount. We used approximately $ 53.0 million of the net proceeds from the offering to pay the cost of the Capped Call Transactions (as described below). In addition, we used approximately $ 198.8 million of the net proceeds and issued 1,390,500 shares of Granite common stock in exchange for approximately $ 198.7 million aggregate principal amount of our 2.75 % Convertible Notes concurrent with the offering in separate and individually negotiated transactions. We also received 1,390,516 shares from bond option counterparties for the exercise of our bond hedge, corresponding to the portion of the 2.75 % Convertible Notes that were exchanged, and used approximately $ 13.2 million of the net proceeds to pay the cost of terminating the portion of the existing warrant transactions that correspond to the 2.75 % Convertible Notes exchanged.

Capped Call Transactions

In May 2023, we entered into capped call transactions (the "Capped Call Transactions") in connection with the offering of the 3.75 % Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to Granite’s common stock upon conversion of the 3.75 % Convertible Notes and/or offset any cash payments Granite is required to make in excess of the principal amount of converted 3.75 % Convertible Notes, as the case may be. If, however, the market price per share of Granite’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The cap price of the Capped Call Transactions will initially be $ 79.83 per share, which represents a premium of 125 % over the last reported sale price of Granite’s common stock of $ 35.48 per share on the New York Stock Exchange on May 8, 2023, and is subject to certain adjustments under the terms of the Capped Call Transactions.

2.75 % Convertible Notes

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 the close of business on the business day before 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 close of business on 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, as the case may be, cash, 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 prior to the maturity date of the 2.75 % Convertible Notes or if the Company delivers a notice of redemption, 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 or notice of redemption.

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 at a redemption price equal to 100 % of the principal amount of the 2.75 % Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Upon the occurrence of a “fundamental change” as defined in the indenture governing the 2.75 % Convertible Notes, 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 of the 2.75 % Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, as described in the indenture governing the 2.75 % Convertible Notes, 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.

At September 30, 2023, $ 31.3 million remained outstanding of our 2.75 % Convertible Notes.

Credit Agreement

In June 2022, we entered into the Credit Agreement which matures on June 2, 2027. The Credit Agreement is a $ 350.0 million senior secured, five-year revolving facility (the “Revolver”), including an accordion feature allowing us to increase borrowings up to the greater of (a) $ 200.0 million and (b) 100 % of twelve-month trailing consolidated EBITDA, subject to lender approval. The Credit Agreement includes a $ 150.0 million sublimit for letters of credit ($ 75.0 million for financial

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letters of credit) and a $ 20.0 million sublimit for swingline loans. In May 2023, we entered into Amendment No. 1 to the Credit Agreement (the "Amendment"). The Amendment amended the Credit Agreement to, among other things, permit the Company to exchange its 2.75 % Convertible Notes for cash and shares of its common stock and to clarify that (i) the issuance of the 3.75 % Convertible Notes was permitted under the terms of the Credit Agreement and (ii) that a Swap Contract (as defined in the Credit Agreement) does not include any Permitted Call Spread Transaction (as defined in the Credit Agreement).

As of September 30, 2023, the total unused availability under the Credit Agreement was $ 330.8 million, resulting from $ 19.2 million in issued and outstanding letters of credit and nothing drawn under the Revolver. The letters of credit had expiration dates between November 2023 and December 2026.

The Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants include a maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) and a minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement). As of September 30, 2023, we were in compliance with the covenants in the Credit Agreement.

Debt Issuance Costs

During the three and nine months ended September 30, 2023, we recorded $ 0.6 million and $ 3.0 million, respectively, of amortization related to debt issuance costs. This included $ 1.7 million of accelerated amortization of debt issuance costs associated with the 2.75 % Convertible Notes that were repaid and are included in the loss on debt extinguishment for the nine months ended September 30, 2023. We also capitalized $ 10.0 million in third party offering costs related to the issuance of the 3.75 % Convertible Notes for the nine months ended September 30, 2023. These debt issuance costs will be amortized over the expected life of the 3.75 % Convertible Notes.

During the three and nine months ended September 30, 2022, we recorded $ 0.3 million and $ 1.0 million, respectively, of amortization related to debt issuance costs.

15. Weighted Average Shares Outstanding and Net Income Per Share

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


	Three Months Ended September 30,				Nine Months Ended September 30,
			As Restated				As Restated
(in thousands, except per share amounts)	2023		2022		2023		2022
Numerator
Net income attributable to common shareholders for basic earnings per share	$	57,624	$	69,302	$	17,601	$	61,250
Add: Interest expense related to Convertible Notes	3,209		1,473		—		4,418
Net income attributable to common shareholders for diluted earnings per share	$	60,833	$	70,775	$	17,601	$	65,668
Denominator
Weighted average common shares outstanding, basic	43,924		43,973		43,861		44,739
Add: Dilutive effect of RSUs	589		581		586		565
Add: Dilutive effect of Convertible Notes	9,099		7,309		—		7,309
Weighted average common shares outstanding, diluted	53,612		51,863		44,447		52,613

Net income per share, basic	$	1.31	$	1.58	$	0.40	$	1.37
Net income per share, diluted	$	1.13	$	1.36	$	0.40	$	1.25

For the nine months ended September 30, 2023, interest expense related to convertible notes of $ 6.9 million and the potential dilution from the convertible notes converting into 9,099 shares of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been antidilutive. In connection with the issuance of the 3.75 % Convertible Notes in May 2023, we entered into Capped Calls Transactions, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.

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16. Income Taxes

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


	Three Months Ended September 30,						Nine Months Ended September 30,
				As Restated						As Restated
(dollars in thousands)	2023			2022			2023			2022
Provision for (benefit from) income taxes	$	22,423		$	( 7,710 )		$	21,978		$	7,310
Effective tax rate	28.1		%	( 13.4		%)	73.6		%	10.9		%

Our effective tax rate for the three months ended September 30, 2023 is higher than the prior year due to the tax benefit recognized in the prior year associated with the reversal of deferred tax liabilities related to the Water Resources and Mineral Services businesses no longer being held for sale and the release of valuation allowances related to the utilization of capital loss carryforwards.

Our effective tax rate for the nine months ended September 30, 2023 was higher than the prior year primarily due to a $ 49.3 million non-deductible expense associated with the refinancing of a portion of the Company's 2.75 % Convertible Notes in the second quarter of 2023, combined with the tax benefits recognized in the prior year for the items noted above, partially offset by non-deductible goodwill associated with the sale of Inliner. See Note 14 for more information regarding the convertible notes.

17. Contingencies - Legal Proceedings

Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. It is possible that future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period. In addition, disclosure is required when a material loss is probable but not reasonably estimable, a material loss is reasonably possible but not probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

The total liabilities for legal proceedings are recorded in accrued expenses and other current liabilities on the condensed consolidated balance sheet (see Note 13). The total range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

Ordinary Course Legal Proceedings

In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which often cannot be predicted with certainty. For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note 1 of our Annual Report. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

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Salesforce Tower Matter

Our wholly-owned subsidiary, Layne Christensen Company ("Layne"), was a subcontractor on the foundation for the Salesforce Tower office building in San Francisco in 2013 and 2014. Certain anomalies were discovered in March 2014 in the foundation’s structural concrete, which were remediated by the general contractor during 2015. Layne assigned any insurance claims it may have had under the project’s builder’s risk insurance policy to the general contractor. During 2014, the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages. The claim was denied by the builder’s risk insurers. The project owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy, which proceeding was then transferred by agreement to arbitration. On July 20, 2021, we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures undertaken by the general contractor of the Salesforce Tower and related damages.

On February 3, 2022, a lawsuit titled Steadfast Insurance Company (“Steadfast”), a subrogee of Clark/Hathaway Dinwiddie, a Joint Venture (“CHDJV”) v. Layne Christensen Company (“Layne”) , was filed in the Superior Court of the State of California, County of San Francisco, seeking damages of approximately $ 70 million for costs incurred by Steadfast on behalf of CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. On February 4, 2022, CHDJV submitted an arbitration demand with the American Arbitration Association against Granite Construction Incorporated seeking to recover approximately $ 30 million for costs incurred by CHDJV to cure Layne’s allegedly defective work on the foundation of the Salesforce Tower. CHDJV subsequently dismissed Granite and added Layne as a respondent to the arbitration. On May 6, 2022, CHDJV consolidated its claims with those of Steadfast and joined as a plaintiff in the Steadfast lawsuit, and on May 16, 2022, the arbitration was stayed. The parties attended mediation on August 4, 2023, and, on October 11, 2023, entered into a settlement agreement to resolve the matters in the Steadfast lawsuit and arbitration. Pursuant to the terms of the settlement agreement, Steadfast and CHDJV agreed to release the Company and Layne from any and all claims, rights, causes of action, liabilities, actions, suits, damages or demands of any kind whatsoever, that arose out of or are based upon or related to the facts alleged in the Steadfast lawsuit and arbitration. The settlement agreement contained no admission of liability, wrongdoing or responsibility by any of the parties. The settlement agreement provides for the dismissal of the Steadfast lawsuit and the arbitration following payment of the settlement amount, which is required by December 8, 2023. We have recorded a pre-tax charge of $ 20.0 million, net of estimated insurance recovery, which is reflected in other costs on the condensed consolidated statements of operations for the nine months ended September 30, 2023.

18. Reportable Segment Information

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

Summarized segment information is as follows (in thousands):


Three months ended September 30,	Construction		Materials		Total
2023
Total revenue from reportable segments	$	945,698	$	245,060	$	1,190,758
Elimination of intersegment revenue	—		( 73,938 )		( 73,938 )
Revenue from external customers	$	945,698	$	171,122	$	1,116,820
Gross profit	$	137,162	$	29,481	$	166,643
Depreciation, depletion and amortization	$	11,239	$	7,431	$	18,670

2022 (As Restated)
Total revenue from reportable segments	$	847,371	$	233,261	$	1,080,632
Elimination of intersegment revenue	—		( 71,722 )		( 71,722 )
Revenue from external customers	$	847,371	$	161,539	$	1,008,910
Gross profit	$	93,017	$	22,038	$	115,055
Depreciation, depletion and amortization	$	18,262	$	6,870	$	25,132

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Nine Months Ended September 30,	Construction		Materials		Total
2023
Total revenue from reportable segments	$	2,198,527	$	523,813	$	2,722,340
Elimination of intersegment revenue	—		( 146,900 )		( 146,900 )
Revenue from external customers	$	2,198,527	$	376,913	$	2,575,440
Gross profit	$	253,021	$	49,067	$	302,088
Depreciation, depletion and amortization	$	31,232	$	20,644	$	51,876
Segment assets as of period end	$	449,354	$	421,766	$	871,120
2022 (As Restated)
Total revenue from reportable segments	$	2,138,858	$	506,228	$	2,645,086
Elimination of intersegment revenue	—		( 133,043 )		( 133,043 )
Revenue from external customers	$	2,138,858	$	373,185	$	2,512,043
Gross profit	$	231,748	$	40,965	$	272,713
Depreciation, depletion and amortization	$	31,651	$	20,007	$	51,658
Segment assets as of period end	$	434,604	$	351,520	$	786,124

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


	Three Months Ended September 30,				Nine Months Ended September 30,
			As Restated				As Restated
(in thousands)	2023		2022		2023		2022
Total gross profit from reportable segments	$	166,643	$	115,055	$	302,088	$	272,713
Selling, general and administrative expenses	74,794		61,795		212,479		192,036
Other costs, net	19,843		( 490 )		37,973		22,401
Gain on sales of property and equipment, net	( 1,812 )		( 949 )		( 7,793 )		( 10,462 )
Total other (income) expense, net	( 6,101 )		( 2,789 )		29,573		1,747
Income before income taxes	$	79,919	$	57,488	$	29,856	$	66,991

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Annual Report") and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein.

Forward-Looking Disclosure

From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results and strategic actions, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,” “outlook,” “assumes,” “believes,” “expects,” “estimates,” “anticipates,” “intends,” “plans,” “appears,” “may,” “will,” “should,” “could,” “would,” “continue,” and the negatives thereof or other comparable terminology or by the context in which they are made. In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results, and strategic actions. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under “Item 1A. Risk Factors.” Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason .

Overview

We deliver infrastructure solutions for public and private clients primarily in the United States. We are one of the largest diversified infrastructure companies in the United States. Within the public sector, we primarily concentrate on infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels, water well drilling and other infrastructure-related projects. Within the private sector, we perform various services such as site preparation, mining services and infrastructure services for commercial and industrial sites, railways, residential development, energy development, as well as provide construction management professional services.

The five primary economic drivers of our business are (i) the overall health of the U.S. economy including access to resources (labor, supplies and subcontractors); (ii) federal, state and local public funding levels; (iii) population growth resulting in public and private development; (iv) the need to build, replace or repair aging infrastructure; and (v) the pricing of certain commodity related products. Changes in these drivers can either reduce our revenues and/or gross profit margins or provide opportunities for revenue growth and gross profit margin improvement.

Current Economic Environment and Outlook

Funding for our public work projects, which accounts for approximately 70% of our work, is dependent on federal, state, regional and local revenues. At the federal level, the rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) is ongoing with states receiving and allocating funds to projects. The five-year IIJA provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in incremental funding. In October 2022, the U.S. Department of Transportation announced that it released $59.9 billion in Fiscal Year 2023 apportionments directly to all 50 states, all of which is available for states to authorize following the passing of the Fiscal Year 2023 omnibus appropriations bill in December 2022. We continue to believe that the increased multi-year spending commitment will improve the programming visibility for state and local governments. We are seeing projects funded by the IIJA for bid and believe project lettings will continue to be elevated for the remainder of 2023 and in 2024 as IIJA funds are utilized.

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

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

Over the recent years, inflation, supply chain and labor constraints have had a significant impact on the global economy including the construction industry in the United States. While it is impossible to fully eliminate the impact of these factors, we have applied proactive measures such as fixed forward purchase contracts of oil related inputs, energy surcharges, and adjustment of project schedules for constraints related to construction materials such as concrete. While we actively work to mitigate the impacts of inflation, further price increases may adversely impact us in the future.

Our Committed and Awarded Projects (“CAP”) continue to be strong at $5.6 billion at the end of the third quarter of 2023. Our CAP is supported by a positive public funding environment and private market which we believe will provide further opportunities to continue to grow CAP.

Acquisition

On April 24, 2023, we completed the purchase of Coast Mountain Resources (2020) Ltd. (“CMR”) for approximately $26.9 million in cash, subject to certain adjustments. CMR is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land. CMR results are reported in the Materials segment. This acquisition is not expected to have a material impact on our results of operations.

Litigation Matter

As further discussed in Note 17 of “Notes to the Condensed Consolidated Financial Statements,” our wholly owned subsidiary, Layne Christensen Company (“Layne”), was sued relating to its work on the Salesforce Tower foundation. On October 11, 2023, the parties to the lawsuit and related arbitration proceeding entered into a settlement agreement to fully and finally resolve the matter. During the nine months ended September 30, 2023, we recorded a pre-tax charge of $20.0 million, net of estimated insurance recovery, which is reflected in other costs on the condensed consolidated statements of operations.

Results of Operations

Our operations are typically affected more by inclement weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year.

The following table presents a financial summary for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		As Restated		2023		As Restated
			2022				2022
Total revenue	$	1,116,820	$	1,008,910	$	2,575,440	$	2,512,043
Gross profit	$	166,643	$	115,055	$	302,088	$	272,713
Selling, general and administrative expenses	$	74,794	$	61,795	$	212,479	$	192,036
Other costs, net	$	19,843	$	(490)	$	37,973	$	22,401

Operating income	$	73,818	$	54,699	$	59,429	$	68,738
Total other (income) expense, net	$	(6,101)	$	(2,789)	$	29,573	$	1,747
Amount attributable to non-controlling interests	$	128	$	4,104	$	9,723	$	1,569
Net income attributable to Granite Construction Incorporated	$	57,624	$	69,302	$	17,601	$	61,250

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Revenue

Total Revenue by Segment


	Three Months Ended September 30,								Nine Months Ended September 30,
(dollars in thousands)	2023				As Restated				2023				As Restated
					2022								2022
Construction	$	945,698	84.7	%	$	847,371	84.0	%	$	2,198,527	85.4	%	$	2,138,858	85.1	%
Materials	171,122		15.3		161,539		16.0		376,913		14.6		373,185		14.9
Total	$	1,116,820	100.0	%	$	1,008,910	100.0	%	$	2,575,440	100.0	%	$	2,512,043	100.0	%

Construction Revenue


	Three Months Ended September 30,								Nine Months Ended September 30,
(dollars in thousands)	2023				As Restated				2023				As Restated
					2022								2022
California	$	317,244	33.5	%	$	262,972	31.0	%	$	699,093	31.8	%	$	606,716	28.4	%
Central	222,144		23.5		222,082		26.2		593,632		27.0		653,581		30.6
Mountain	406,310		43.0		362,317		42.8		905,802		41.2		878,561		41.0
Total	$	945,698	100.0	%	$	847,371	100.0	%	$	2,198,527	100.0	%	$	2,138,858	100.0	%

Construction revenue for the three months ended September 30, 2023 increased by $98.3 million, or 11.6%, when compared to 2022. Construction revenue from the California and Mountain operating groups increased $54.3 million and $44.0 million, respectively, which were driven by higher levels of CAP going into the quarter. The Central operating group's construction revenue was consistent with prior year. This was the result of increased revenue from new work in Texas, Arizona and Illinois, which offset the wind down of several large projects.

Construction revenue for the nine months ended September 30, 2023 increased by $59.7 million, or 2.8%, when compared to the nine months ended September 30, 2022. California operating group revenue increased $92.4 million despite the unfavorable weather conditions during the first half of the year, partly due to elevated work volume achieved once weather conditions improved as well as higher CAP levels to start the year. Mountain operating group revenue increased $27.2 million, which includes Inliner in the prior year that contributed $33.2 million prior to its sale in April 2022. The increase in revenue is primarily due to new work in Alaska, Nevada and the Pacific Northwest. Central operating group revenue decreased $59.9 million primarily due to the wind down of several large projects. This decrease was partially offset by increased revenue from new work in Texas, Arizona and Illinois.

During both the three and nine months ended September 30, 2023 and 2022, approximately 70% of revenue earned in the Construction segment was from the public sector.

Materials Revenue


	Three Months Ended September 30,								Nine Months Ended September 30,
(dollars in thousands)	2023				2022				2023				2022
California	$	83,867	49.0	%	$	85,173	52.7	%	$	191,221	50.7	%	$	202,371	54.2	%
Central	11,357		6.6		9,348		5.8		35,251		9.4		33,634		9.0
Mountain	75,898		44.4		67,018		41.5		150,441		39.9		137,180		36.8
Total	$	171,122	100.0	%	$	161,539	100.0	%	$	376,913	100.0	%	$	373,185	100.0	%

Materials revenue for the three and nine months ended September 30, 2023 increased by $9.6 million and $3.7 million, or 5.9% and 1.0%, when compared to the same periods in 2022 driven primarily by higher asphalt and aggregate sales prices.

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

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contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed.

Other awards include the general construction portion of construction management/general contractor (“CM/GC”) contracts and awarded contracts with unexercised contract options or unissued task orders. The general construction portion of CM/GC contracts are included in other awards to the extent contract execution and funding is probable. Contracts with unexercised contract options or unissued task orders are included in other awards to the extent option exercise or task order issuance is probable. All CAP is in the Construction segment.


(dollars in thousands)	September 30, 2023				June 30, 2023				December 31, 2022
Unearned revenue	$	3,964,749	71.0	%	$	3,392,506	62.4	%		$	2,877,478	64.2	%
Other awards	1,619,774		29.0		2,045,082		37.6			1,607,661		35.8
Total	$	5,584,523	100.0	%	$	5,437,588	100.0	%		$	4,485,139	100.0	%


(dollars in thousands)	September 30, 2023				June 30, 2023				December 31, 2022
California	$	2,345,294	42.0	%	$	2,345,611	43.2	%		$	1,747,163	39.0	%
Central	1,811,426		32.4		1,599,538		29.4			1,661,613		37.0
Mountain	1,427,803		25.6		1,492,439		27.4			1,076,363		24.0
Total	$	5,584,523	100.0	%	$	5,437,588	100.0	%		$	4,485,139	100.0	%

CAP of $5.6 billion at September 30, 2023 increased $146.9 million and $1.1 billion when compared to June 30, 2023 and December 31, 2022, respectively. Significant additions to CAP during the three months ended September 30, 2023 included a $205 million tunnel project in Ohio, $156 million for two highway projects in Texas, a $45 million highway project in Utah, and a $24 million highway project in California.

Non-controlling partners’ share of CAP as of September 30, 2023, June 30, 2023 and December 31, 2022 was $277.5 million, $129.6 million and $85.0 million, respectively.

At September 30, 2023, four contracts with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $94.4 million, or 1.7%, of total CAP.

Gross Profit

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


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2023			As Restated			2023			As Restated
				2022						2022
Construction	$	137,162		$	93,017		$	253,021		$	231,748
Percent of segment revenue	14.5		%	11.0		%	11.5		%	10.8		%
Materials	29,481			22,038			49,067			40,965
Percent of segment revenue	17.2		%	13.6		%	13.0		%	11.0		%
Total gross profit	$	166,643		$	115,055		$	302,088		$	272,713
Percent of total revenue	14.9		%	11.4		%	11.7		%	10.9		%

Construction gross profit for the three and nine months ended September 30, 2023 increased by $44.1 million and $21.3 million, or 47.5% and 9.2%, respectively, when compared to 2022 primarily due to higher revenue. In the three month period, a reduction in the negative net impact from revisions in estimates, mainly in our Central operating group, also contributed to the gross profit improvement. For further discussion of projects with revisions in estimates which individually had an impact of $5.0 million or more on gross profit, see Note 4 of "Notes to the Condensed Consolidated Financial Statements."

Increased depreciation expense during the three months ended September 30, 2022 also contributed to the favorable variance in gross profit during the three months ended September 30, 2023 when compared to the prior year. As previously disclosed, our former Water and Mineral Services operating group (“WMS”) was classified as held for sale throughout the first and second quarters of 2022, and therefore no depreciation expense was recorded for WMS assets during that period. Cost of revenue during the three months ended September 30, 2022 included $6.9 million of depreciation that would have

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been recognized in prior quarters if the unsold businesses had been continually classified as held and used from the beginning of the year.

Materials gross profit for the three and nine months ended September 30, 2023 increased by $7.4 million and $8.1 million, respectively, when compared to 2022. Higher sales prices for aggregates and asphalt were the primary driver of the gross profit improvement for the three and nine months ended September 30, 2023. Additionally, in 2023, oil and energy costs have normalized compared to the significant inflation in 2022 which negatively impacted materials gross profit margin in the prior year.

Selling, General and Administrative Expenses

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


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2023			2022			2023			2022
Selling
Salaries and related expenses	$	13,939		$	12,720		$	44,195		$	44,348
Stock-based compensation	231			194			1,303			1,052
Other selling expenses	3,246			2,839			6,482			7,820
Total selling	17,416			15,753			51,980			53,220
General and administrative
Salaries and related expenses	22,890			23,262			74,715			76,839
Stock-based compensation	1,136			1,068			7,104			4,175
Other general and administrative expenses	33,352			21,712			78,680			57,802
Total general and administrative	57,378			46,042			160,499			138,816
Total selling, general and administrative	$	74,794		$	61,795		$	212,479		$	192,036
Percent of revenue	6.7		%	6.1		%	8.3		%	7.6		%

Selling Expenses

Selling expenses include the costs for estimating and bidding including offsetting customer reimbursements for portions of our selling/bid submission expenses (i.e., stipends), business development and materials facility permits. Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses. Selling expenses for the three months ended September 30, 2023 increased by $1.7 million, or 10.6%, when compared to 2022, primarily due to increased selling salaries and related expenses, including incentive compensation due to improved financial performance. Selling expenses for the nine months ended September 30, 2023 decreased $1.2 million, or 2.3%, when compared to 2022, primarily due to reduced prebid costs in the current year and the sale of Inliner on March 16, 2022, partially offset by an increase in incentive compensation.

General and Administrative Expenses

General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions. Other general and administrative expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, incentive compensation, changes in the fair market value of our Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses. Total general and administrative expenses for the three and nine months ended September 30, 2023 increased by $11.3 million and $21.7 million, or 24.6% and 15.6%, respectively, primarily due to an increase in incentive compensation due to improved financial performance. The increase in the nine months ended September 30, 2023 was also attributable to stock-based compensation and increases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is mostly offset in Other (income) expense, net, through investments held within our own company-owned life insurance policy. The increases for the nine months ended September 30, 2023 were partially offset by the sale of Inliner in the first quarter of 2022.

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Other Costs, net

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Other costs, net	$	19,843	$	(490)	$	37,973	$	22,401

During the three and nine months ended September 30, 2023, Other costs, net increased $20.3 million and $15.6 million, respectively, compared to prior year. These increases were primarily due to the settlement of the Salesforce Tower matter (see Note 17 of “Notes to the Condensed Consolidated Financial Statements”) and non-cash impairment charges associated with the wind down of our international Mineral Services operations (see Note 1 of “Notes to the Condensed Consolidated Financial Statements”) in the current year. Also included in Other costs, net for the three and nine months ended September 30, 2023 and 2022 are non-recurring legal fees related to lawsuits, with the third quarter of last year also reflecting a $5 million settlement payment we received in connection with the shareholder derivative lawsuit.

Loss on Debt Extinguishment

In the second quarter of 2023, we issued 1,390,500 shares of Granite common stock and paid $198.8 million in cash in exchange for $198.7 million aggregate principal amount of our 2.75% Convertible Notes (the "Exchange Transaction") concurrent with the offering of the 3.75% Convertible Notes. As a result of the Exchange Transaction, we incurred a $51.1 million loss on debt extinguishment. Included in the loss on debt extinguishment is a $1.7 million charge for the acceleration of the amortization of debt issuance costs associated with the 2.75% Convertible Notes that were redeemed early.

Income Taxes

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


	Three Months Ended September 30,						Nine Months Ended September 30,
				As Restated						As Restated
(dollars in thousands)	2023			2022			2023			2022
Provision for (benefit from) income taxes	$	22,423		$	(7,710)		$	21,978		$	7,310
Effective tax rate	28.1		%	(13.4		%)	73.6		%	10.9		%

We calculate our income tax provision (benefit) at the end of each interim period by estimating our annual effective tax rate and applying that rate to our income or loss before tax. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs. See Note 16 of "Notes to the Condensed Consolidated Financial Statements" for more information.

Amount Attributable to Non-controlling Interests

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Amount attributable to non-controlling interests	$	128	$	4,104	$	9,723	$	1,569

The amount attributable to non-controlling interests represents the non-controlling owners’ share of the net income or loss of our consolidated construction joint ventures. The amounts for the three and nine months ended September 30, 2023 decreased $4.0 million and increased $8.2 million, respectively, primarily due to the impact from revisions in estimates (see Note 4 of “Notes to the Condensed Consolidated Financial Statements”).

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Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity and cash generated from operations. We may also from time-to-time issue and sell equity, debt or hybrid securities or engage in other capital markets transactions or sell one or more business units or assets. See Note 14 of the "Notes to the Condensed Consolidated Financial Statements" for information on our 3.75% Convertible Notes and our 2.75% Convertible Notes.

Our material cash requirements include paying the costs and expenses associated with our operations, servicing outstanding indebtedness, making capital expenditures and paying dividends on our capital stock. We may also from time to time prepay or repurchase outstanding indebtedness, repurchase shares of our common stock or acquire assets or businesses that are complementary to our operations.

We believe our primary sources of liquidity will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, cash dividend payments and other liquidity requirements associated with our existing operations for the next twelve months. We also believe our primary sources of liquidity, access to debt and equity capital markets and cash expected to be generated from operations will be sufficient to meet our long-term requirements and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.

As of September 30, 2023, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting primarily of U.S. Government and agency obligations. As of September 30, 2023, the total unused availability under our Credit Agreement was $330.8 million, resulting from $19.2 million in issued and outstanding letters of credit and nothing drawn under the Credit Agreement. See Note 14 of “Notes to the Condensed Consolidated Financial Statements.”

As of September 30, 2023, we had $1.9 million of receivables and $29.0 million of contract retention receivables from Brightline Trains Florida LLC ("Brightline") (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”). As of the date of this report, $1.8 million of the receivables are past due. Our project with Brightline is nearing completion and final payment, including the retention receivable, will be due to us no later than 40 days after all conditions of final completion are satisfied. We expect to achieve final completion in the fourth quarter of 2023; however, timing cannot be assured. Brightline has experienced delays in securing additional funding in the past, therefore the timing and probability of future payments may be affected, and our liquidity impacted if Brightline faces future funding difficulties.

In evaluating our liquidity position and needs, we also consider cash and cash equivalents held by our consolidated construction joint ventures (“CCJVs”). The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, as of the respective dates:


(in thousands)	September 30, 2023		December 31, 2022
Cash and cash equivalents excluding CCJVs	$	173,471	$	191,444
CCJV cash and cash equivalents (1)	118,653		102,547
Total consolidated cash and cash equivalents	292,124		293,991
Short-term and long-term marketable securities (2)	37,028		65,943
Total cash, cash equivalents and marketable securities	$	329,152	$	359,934

(1) The volume and stage of completion of contracts from our CCJVs may cause fluctuations in joint venture cash and cash equivalents between periods. The assets of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.

(2) All marketable securities were classified as held-to-maturity and consisted of U.S. Government and agency obligations as of September 30, 2023 and December 31, 2022.

Granite’s portion of CCJV cash and cash equivalents was $71.0 million and $62.5 million as of September 30, 2023 and December 31, 2022, respectively. Excluded from the table above is $44.4 million and $40.4 million as of September 30, 2023 and December 31, 2022, respectively, of Granite’s portion of unconsolidated construction joint venture cash and cash equivalents.

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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 nine months ended September 30, 2023, we had capital expenditures of $109.0 million, compared t o $97.8 mi llion, during the nine months ended September 30, 2022. The increase year over year is primarily due to acquisition of materials reserves in 2023. We currently anticipate 2023 capital expenditures to be approximately $120 million.

Cash Flows


	Nine Months Ended September 30,
(in thousands)	2023		2022
Net cash provided by (used in):
Operating activities	$	34,198	$	(14,631)
Investing activities	$	(89,270)	$	13,874
Financing activities	$	53,205	$	(157,814)

Operating activities

As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts. Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the work that we perform, including claim and back charge settlements. Our working capital assets result from both public and private sector projects. Customers in the private sector can be slower paying than those in the public sector; however, private sector projects generally have higher gross profit as a percentage of revenue. While we typically invoice our customers on a monthly basis, our contracts frequently provide for retention that is a specified percentage withheld from each payment by our customers until the contract is completed and the work accepted by the customer.

Cash provided by operating activities of $34.2 million for the nine months ended September 30, 2023 represents a $48.8 million increase in cash provided by operating activities when compared to the same period of 2022. The change was primarily attributable to net cash contributions to unconsolidated joint ventures and the timing of receipts and payments of working capital, which includes receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities. Contributions, net of distributions, to unconsolidated joint ventures and affiliates decreased $27.3 million and cash used in working capital decreased by $24.8 million.

Investing activities

Cash used in investing activities of $89.3 million for the nine months ended September 30, 2023 represents a $103.1 million increase in cash used in investing activities when compared to the same period of 2022. The change was primarily due to proceeds of $142.6 million from the sale of the Inliner business in March 2022, partially offset by decreased cash used for marketable securities activity of $75.1 million, and $26.9 million used for the acquisition of CMR in the current year.

Financing activities

Cash provided by financing activities of $53.2 million for the nine months ended September 30, 2023 represents a $211.0 million increase in cash provided by financing activities when compared to the same period of 2022. The change was primarily due to the prepayment in the prior year of our term loan of $123.8 million, which did not recur this year. Also, net cash inflows related to our convertible bond transactions in the current year generated $98.8 million in cash. The year over year increase in cash provided by financing activities was also due to $66.8 million less cash used for repurchases of common stock and higher contributions from non-controlling partners, net of distributions, of $21.1 million. These increases were partially offset by a $100.0 million decrease in cash provided by our revolving credit facility. See Note 14 of the “Notes to the Condensed Consolidated Financial Statements” for further information about our long-term debt transactions and our credit facility.

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Derivatives

We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheets at fair value using Level 2 inputs. See Note 9 to “Notes to the Condensed Consolidated Financial Statements” for further information. The hedge option and warrant derivative transactions related to the 2.75% Convertible Notes and the Capped Call transactions related to the 3.75% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds.

Surety Bonds and Real Estate Mortgages

We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At September 30, 2023, approximately $3.5 billion of our $5.6 billion CAP was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties.

Our investments in real estate affiliates are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate entities. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. Our unconsolidated investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases and working capital. This debt is non-recourse to Granite, but it is recourse to the affiliates. The debt associated with our unconsolidated non-construction entities is included in Note 10 of “Notes to the Condensed Consolidated Financial Statements.”

Covenants and Events of Default

Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with these covenants would constitute an event of default under the Credit Agreement. Additionally, the 2.75% Convertible Notes and 3.75% Convertible Notes are governed by the terms and conditions of their respective indentures. Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75% Convertible Notes, our 3.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 2.75% Convertible Notes indenture, the 3.75% Convertible Note 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 or the 3.75% 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 September 30, 2023, we were in compliance with the covenants in the Credit Agreement.

Share Repurchase Program

As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million of our common stock at management’s discretion (the “2022 authorization”). There were no share repurchases under the 2022 authorization in the nine months ended September 30, 2023 and $231.5 million remained available as of September 30, 2023.

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

Website Access

Our website address is www.graniteconstruction.com. On our website we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The information on our website is not incorporated into, and is not part of, this report. These reports, and any amendments to them, are also available at the website of the SEC, www.sec.gov.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in our exposure to market risk from what was previously disclosed in our Annual Report.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2023, our disclosure controls and procedures were effective 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 Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The description of the matters set forth in Part I, Item I of this Report under Note 17 of “Notes to the Condensed Consolidated Financial Statements” is incorporated herein by reference.

Item 1A. RISK FACTORS

There have been no material changes in the risk factors previously disclosed in “Item 1A. Risk Factors” in our Annual Report.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth information regarding the repurchase of shares of our common stock during the three months ended September 30, 2023:


Period	Total number of shares purchased (1)	Average price paid per share		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)
July 1, 2023 through July 31, 2023	2,514	$	40.14	—	$	231,535,405
August 1, 2023 through August 31, 2023	204	$	42.42	—	$	231,535,405
September 1, 2023 through September 30, 2023	616	$	39.62	—	$	231,535,405
	3,334	$	40.18	—

(1) The number of shares purchased was in connection with employee tax withholding for restricted stock units vested under our equity incentive plans.

(2) 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.

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 Quarterly Report on Form 10-Q.

Item 5. OTHER INFORMATION

Trading Arrangements

During the three months ended September 30, 2023, none of the Company’s directors or “officers,” as defined in Rule 16a-1(f) of the Exchange Act, adopted , modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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Item 6. EXHIBITS

10.1

†

Amendment No. 1 to Executive Retention and Severance Plan III (As Amended and Restated by the Compensation Committee on March 31, 2021) dated October 1 6 , 2023

10.2

†

Amendment No. 7 to Key Management Deferred Compensation Plan II (As Amended and Restated by the Board of Directors Effective January 1, 2010) dated October 1 6 , 2023

31.1

†

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

†

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

††

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

101.INS

†

Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)

101.SCH

†

Inline XBRL Taxonomy Extension Schema

101.CAL

†

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

†

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB

†

Inline XBRL Taxonomy Extension Label Linkbase

101.PRE

†

Inline XBRL Taxonomy Extension Presentation Linkbase

104

†

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Incorporated by reference

†

Filed herewith

††

Furnished herewith

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SIGNATURES

Pursuant to the requirements 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

Date:

October 31, 2023

By:

/s/ Elizabeth L. Curtis

Elizabeth L. Curtis

Executive Vice President and Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 2. Management S Discussion and Analysis Of Financial Condition and Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities, Use Of Proceeds, and Issuer Purchases Of Equity Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

10.1 Amendment No. 1 to Executive Retention and Severance Plan III (As Amended and Restated by the Compensation Committee on March 31, 2021) dated October16, 2023 10.2 Amendment No. 7 to Key Management Deferred Compensation Plan II (As Amended and Restated by the Board of Directors Effective January 1, 2010) dated October16, 2023 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 95 Mine Safety Disclosure

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GVA 10-Q Quarter ended Sept. 30, 2023

Exhibits