GRANITE CONSTRUCTION INC
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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For the quarterly period ended
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the transition period from ___________ to ___________ | |||||
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Commission File Number:
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| State of Incorporation: | I.R.S. Employer Identification Number: | ||||
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Address of principal executive offices:
(
831
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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 | ||||||
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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.
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Accelerated filer
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Non-accelerated filer
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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 April 25, 2025.
| Class | Outstanding | |||||||
| Common stock, $0.01 par value |
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TABLE OF CONTENTS
| EXHIBIT 101.INS | |||||
| EXHIBIT 101.SCH | |||||
| EXHIBIT 101.CAL | |||||
| EXHIBIT 101.DEF | |||||
| EXHIBIT 101.LAB | |||||
| EXHIBIT 101.PRE | |||||
| EXHIBIT 104 | |||||
2
PART
I.
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
| March 31, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
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Cash and cash equivalents ($
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$ |
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$ |
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| Short-term marketable securities |
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Receivables, net ($
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Contract assets ($
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| Inventories |
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| Equity in construction joint ventures |
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Other current assets ($
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| Total current assets |
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Property and equipment, net ($
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| Long-term marketable securities |
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| Investments in affiliates |
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| Goodwill |
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| Intangible assets |
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| Right of use assets |
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| Other noncurrent assets |
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| Total assets | $ |
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$ |
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| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Current maturities of long-term debt | $ |
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$ |
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Accounts payable ($
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Contract liabilities ($
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Accrued expenses and other current liabilities ($
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| Total current liabilities |
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| Long-term debt |
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| Long-term lease liabilities |
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| Deferred income taxes, net |
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| Other long-term liabilities |
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Commitments and contingencies (see Note 17)
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| Equity | |||||||||||
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Preferred stock, $
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Common stock, $
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| Additional paid-in capital |
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| Accumulated other comprehensive income (loss) |
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(
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| Retained earnings |
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| Total Granite Construction Incorporated shareholders’ equity |
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| Non-controlling interests |
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| Total equity |
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| Total liabilities and equity | $ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenue | $ |
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$ |
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| Cost of revenue |
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| Gross profit |
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| Selling, general and administrative expenses |
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| Other costs, net |
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| Gain on sales of property and equipment, net |
(
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(
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| Operating loss |
(
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(
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| Other (income) expense | |||||||||||
| Interest income |
(
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(
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| Interest expense |
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| Equity in income of affiliates, net |
(
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(
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| Other income, net |
(
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(
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| Total other (income) expense, net |
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(
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| Loss before income taxes |
(
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(
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| Benefit from income taxes |
(
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(
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| Net loss |
(
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(
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| Amount attributable to non-controlling interests |
(
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(
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| Net loss attributable to Granite Construction Incorporated | $ |
(
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$ |
(
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| Net loss per share attributable to common shareholders (see Note 15): | |||||||||||
| Basic | $ |
(
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$ |
(
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| Diluted | $ |
(
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$ |
(
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| Weighted average shares outstanding: | |||||||||||
| Basic |
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| Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited - in thousands)
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net loss | $ |
(
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$ |
(
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| Other comprehensive income, net of tax | |||||||||||
| Net unrealized gain on cash flow hedges, net of tax | $ |
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$ |
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| Less: reclassification for net gains included in interest expense, net of tax |
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| Net change | $ |
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$ |
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| Foreign currency translation adjustments, net |
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(
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| Other comprehensive income, net of tax | $ |
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$ |
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| Comprehensive loss, net of tax | $ |
(
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$ |
(
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| Non-controlling interests in comprehensive loss, net of tax |
(
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(
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| Comprehensive loss attributable to Granite Construction Incorporated, net of tax | $ |
(
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$ |
(
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
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 | ||||||||||||||||||||||||||||||||||||||||
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Balances at December 31, 2024
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$ |
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$ |
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$ |
(
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$ |
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$ |
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$ |
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$ |
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| Net loss | — | — | — | — |
(
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(
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(
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| Other comprehensive income | — | — | — |
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— |
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— |
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| Repurchases of common stock (1) |
(
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(
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(
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— | — |
(
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— |
(
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| RSUs vested |
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(
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— | — | — | — |
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Dividends on common stock ($
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— | — |
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— |
(
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(
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— |
(
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| Transactions with non-controlling interests | — | — | — | — | — | — |
(
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(
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| Stock-based compensation expense and other |
(
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— |
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— | — |
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— |
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Balances at March 31, 2025
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balances at December 31, 2023
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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| Net loss | — | — | — | — |
(
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(
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(
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| Other comprehensive income | — | — | — |
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— |
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— |
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| Repurchases of common stock (1) |
(
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(
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(
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— | — |
(
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— |
(
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| RSUs vested |
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(
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— | — | — | — |
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Dividends on common stock ($
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— | — |
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— |
(
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(
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— |
(
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| Transactions with non-controlling interests | — | — | — | — | — | — |
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| Stock-based compensation expense and other |
(
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— |
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— | — |
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— |
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Balances at March 31, 2024
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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(1)
Represents shares withheld related to employee taxes for RSUs vested under our equity incentive plans in 2025 and 2024, as well as 200 shares repurchased under our share repurchase program in 2025.
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(
Unaudited - in thousands
)
| Three Months Ended March 31, | 2025 | 2024 | |||||||||
| Operating activities | |||||||||||
| Net loss | $ |
(
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$ |
(
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| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation, depletion and amortization |
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| Amortization related to long-term debt |
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| Gain on sales of property and equipment, net |
(
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(
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| Stock-based compensation |
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| Equity in net income from unconsolidated construction joint ventures |
(
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(
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| Net income from affiliates |
(
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(
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| Other non-cash adjustments |
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(
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| Changes in assets and liabilities: | |||||||||||
| Receivables |
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| Contract assets, net |
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(
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| Inventories |
(
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(
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| Contributions to unconsolidated construction joint ventures |
(
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(
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| Distributions from unconsolidated construction joint ventures and affiliates |
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| Other assets, net |
(
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(
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| Accounts payable |
(
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(
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| Accrued expenses and other liabilities, net |
(
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(
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| Net cash provided by operating activities | $ |
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$ |
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| Investing activities | |||||||||||
| Purchases of marketable securities |
(
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| Maturities of marketable securities |
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| Purchases of property and equipment |
(
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(
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| Proceeds from sales of property and equipment |
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| Cash paid for purchase price adjustments on business acquisition |
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(
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| Other investing activities |
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| Net cash used in investing activities | $ |
(
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$ |
(
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| Financing activities | |||||||||||
| Debt principal repayments |
(
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(
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| Cash dividends paid |
(
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(
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| Repurchases of common stock |
(
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(
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| Contributions from non-controlling partners |
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| Distributions to non-controlling partners |
(
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(
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| Other financing activities, net |
(
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(
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| Net cash used in financing activities | $ |
(
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$ |
(
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| Net decrease in cash and cash equivalents |
(
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(
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| Cash and cash equivalents at beginning of period |
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| Cash and cash equivalents at end of period | $ |
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$ |
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| Supplementary Information | |||||||||||
| Right of use assets obtained in exchange for lease obligations | $ |
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$ |
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| Cash paid during the period for: | |||||||||||
| Operating lease liabilities | $ |
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$ |
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| Interest | $ |
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$ |
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| Income taxes | $ |
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$ |
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| Non-cash investing and financing activities: | |||||||||||
| RSUs issued, net of forfeitures | $ |
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$ |
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| Dividends declared but not paid | $ |
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$ |
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| Contributions from non-controlling partners | $ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
General
Basis of Presentation:
The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission, are unaudited and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (“Annual Report”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at March 31, 2025 and the results of our operations and cash flows for the periods presented. The December 31, 2024 condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP.
Seasonality:
Our operations are typically affected more by weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations for the three months ended March 31, 2025 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 Financial Accounting Standards Board ("FASB") and other authoritative guidance.
Recently Issued Accounting Pronouncements:
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments intended to improve the effectiveness of income tax disclosures. These new disclosure requirements are effective prospectively commencing with our annual report for the year ending December 31, 2025. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.
Recently Adopted Accounting Pronouncements:
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. Adoption of this ASU did not have a material impact on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07,
Segment Reporting—Improvements to Reportable Segment Disclosures
, which enhances the disclosures regarding an entity’s reportable segments and addresses requests from investors and other allocators of capital for additional, more detailed information about a reportable segment’s expenses. We adopted this ASU retrospectively for the year ended December 31, 2024 and quarterly periods thereafter. See Note 18 for more information.
No other new accounting pronouncements were recently issued or adopted in the three months ended March 31, 2025 that had or are expected to have a material impact on our financial statements.
3.
Acquisition
Dickerson & Bowen, Inc.
On August 9, 2024, we completed the acquisition of Dickerson & Bowen, Inc. ("D&B") for $
125.5
million in cash, subject to customary closing adjustments. D&B is an aggregates, asphalt and highway construction company serving central and southern Mississippi which expands our footprint in that region. D&B’s customers are in both the public and private
8
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
sectors. We have accounted for this transaction in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations (“ASC 805”).
D&B's results have been included in the Construction and Materials segments since the acquisition date. Revenue and gross profit attributable to D&B for the three months ended March 31, 2025 were $
15.6
million and $
2.1
million, respectively.
Preliminary Purchase Price Allocation
In accordance with ASC 805, the preliminary purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair values as of August 9, 2024. These estimates are subject to revision, which may result in adjustments to the values disclosed below. There are certain provisional estimates that are subject to finalization such as deferred taxes. As we continue to integrate the acquired business, we may obtain additional information which may result in revisions to preliminary valuation assumptions, estimates and the resulting fair values presented herein. We expect to finalize these amounts within 12 months from the acquisition date.
For the purpose of the preliminary purchase price allocation, the contractual purchase price has been adjusted to exclude $
4
million in cash acquired and include closing adjustments, resulting in an updated purchase price of $
121.2
million. The tangible and identifiable intangible assets acquired, net of liabilities assumed, were $
25.2
million and $
27.9
million, respectively. This generated acquired goodwill of $
68.1
million, none of which is tax deductible. The most significant assets acquired were $
38.1
million of property and equipment and an $
18.2
million customer relationships intangible asset.
4.
Revisions in Estimates
Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.
When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.
In our review of these changes for the three months ended March 31, 2025 and 2024, 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
March 31, |
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| 2025 | 2024 | |||||||||||||||||||
| Number of projects with upward estimate changes |
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| Increase in gross profit, net | $ |
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$ |
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| Increase to project profitability, net | $ |
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$ |
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| Decrease to net loss | $ |
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$ |
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| Decrease to net loss attributable to Granite Construction Incorporated | $ |
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$ |
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| Decrease to net loss per diluted share attributable to common shareholders | $ |
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$ |
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The increase during the three months ended March 31, 2025 was due to a change in the estimated amount of probable recovery on an outstanding claim and the increase during the three months ended March 31, 2024 was due to changes in
9
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
the estimated transaction price related to contract modifications resulting from revisions to project work plans, permitting and scheduling. None of the increases above had an impact on non-controlling interest.
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 March 31, | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Number of projects with downward estimate changes |
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| Reduction in gross profit, net | $ |
|
$ |
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| Decrease to project profitability, net | $ |
|
$ |
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| Increase to net loss | $ |
|
$ |
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| Increase to net loss attributable to Granite Construction Incorporated | $ |
|
$ |
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| Increase to net loss per diluted share attributable to common shareholders | $ |
|
$ |
|
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The decreases during the three months ended March 31, 2025 and 2024 were due to additional costs related to changes in project duration, lower productivity than originally anticipated and increased labor and materials costs. None of the decreases above had any impact on non-controlling interest.
5.
Disaggregation of Revenue
In addition to disaggregating revenue by reportable segment (see Note 18), we further disaggregate Construction segment revenue by customer type and Materials segment revenue by product line. We believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
Construction Segment Disaggregation by Customer Type
Customers in our Construction segment are predominantly in the public sector which includes certain federal agencies, state departments of transportation, local transit authorities, county and city public works departments and school districts. Our private sector customers include, but are not limited to, developers, utilities and private owners of industrial, commercial and residential sites.
Materials Segment Disaggregation by Product Line
The Materials segment focuses primarily on production of aggregates, recycled materials, asphalt concrete and liquid asphalt. In the first quarter of 2025, we began disaggregating Materials segment revenue by product line. We categorize aggregates and recycled materials as Aggregates and asphalt concrete and liquid asphalt as Asphalt in the table below. Other includes immaterial amounts of revenue from products and services that are not considered to be core product lines.
The following table presents our revenue disaggregated by reportable segment, by customer type for our Construction segment and product line for our Materials segment:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
|
Construction segment revenue:
|
|||||||||||
| Public | $ |
|
$ |
|
|||||||
| Private |
|
|
|||||||||
| Total Construction segment revenue | $ |
|
$ |
|
|||||||
|
Materials segment revenue:
|
|||||||||||
| Aggregates | $ |
|
$ |
|
|||||||
| Asphalt |
|
|
|||||||||
| Other |
|
|
|||||||||
| Total Materials segment revenue | $ |
|
$ |
|
|||||||
| Total revenue | $ |
|
$ |
|
|||||||
10
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
6.
Unearned Revenue
The following table presents our unearned revenue disaggregated by customer type as of the respective periods:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Public | $ |
|
$ |
|
|||||||
| Private |
|
|
|||||||||
| Total | $ |
|
$ |
|
|||||||
All unearned revenue is in the Construction segment. Approximately $
2.8
billion of the March 31, 2025 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 $
49.5
million and $
84.3
million during the three months ended March 31, 2025 and 2024, respectively. The changes in contract transaction price for the three months ended March 31, 2025 and 2024 were from items such as executed or estimated change orders and unresolved contract modifications and claims.
As of March 31, 2025 and December 31, 2024, the aggregate claim recovery estimates included in contract asset and liability balances were $
44.9
million and $
46.6
million, respectively.
The components of the contract asset balances as of the respective dates were as follows:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Costs in excess of billings and estimated earnings | $ |
|
$ |
|
|||||||
| Contract retention |
|
|
|||||||||
| Total contract assets | $ |
|
$ |
|
|||||||
As of March 31, 2025 and December 31, 2024, no contract retention receivables individually exceeded 10% of total contract assets. The December 31, 2024 contract retention balance included $
29.2
million from Brightline Trains Florida LLC, all of which was collected in the first quarter of 2025. 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 $
207.8
million and $
198.3
million during the three months ended March 31, 2025 and 2024, respectively, that was included in the contract liability balances at December 31, 2024 and 2023, respectively.
The components of the contract liability balances as of the respective dates were as follows:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Billings in excess of costs and estimated earnings, net of retention | $ |
|
$ |
|
|||||||
| Provisions for losses |
|
|
|||||||||
| Total contract liabilities | $ |
|
$ |
|
|||||||
11
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
8.
Receivables, net
Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest.
The following table presents major categories of receivables:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Contracts completed and in progress: | |||||||||||
| Billed | $ |
|
$ |
|
|||||||
| Unbilled |
|
|
|||||||||
| Total contracts completed and in progress |
|
|
|||||||||
| Materials sales |
|
|
|||||||||
| Other |
|
|
|||||||||
| Total gross receivables |
|
|
|||||||||
| Less: allowance for credit losses |
|
|
|||||||||
| Total net receivables | $ |
|
$ |
|
|||||||
Included in other receivables at March 31, 2025 and December 31, 2024 were items such as estimated recovery from back charge claims, notes receivable and income and other tax refunds receivable. Other receivables at March 31, 2025 and December 31, 2024 also included $
25.0
million of working capital contributions in the form of a loan to a partner in one of our unconsolidated construction joint ventures, plus accrued interest. None of our customers had a receivable balance in excess of
10
% of our total net receivables as of March 31, 2025 or December 31, 2024.
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 measurement levels (in thousands):
| Fair Value Measurement at Reporting Date Using | |||||||||||||||||||||||
| March 31, 2025 | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market funds | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Accrued and other current liabilities | |||||||||||||||||||||||
| Heating oil swaps | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total liabilities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market funds | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total assets | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Accrued and other current liabilities | |||||||||||||||||||||||
| Heating oil swaps | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Diesel collars |
|
|
|
|
|||||||||||||||||||
| Total liabilities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Commodity Derivatives
We have entered into collar contracts and commodity swaps to reduce our price exposure on diesel consumption and heating oil consumption, respectively. The collars and swaps were not designated as hedges and will be treated as a mark-to-market derivative instruments through their maturity dates. The collar contracts matured on March 31, 2025. The financial statement impact of the collar contracts and commodity swaps for the three months ended March 31, 2025 and 2024 was
immaterial
.
12
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Other Assets and Liabilities
The carrying values and estimated fair values of financial instruments that are not required to be recorded at fair value in the condensed consolidated balance sheets were as follows:
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||
| (in thousands) | Fair Value Hierarchy | Carrying Value |
Fair
Value |
Carrying Value |
Fair
Value |
||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Held-to-maturity marketable securities (1) | |||||||||||||||||||||||||||||
| Corporate notes and bonds | Level 1 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||
| U.S. Government and agency obligations | Level 1 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||
| Commercial paper | Level 1 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||
| Municipal notes and bonds | Level 1 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||
| Liabilities (including current maturities): | |||||||||||||||||||||||||||||
|
|
Level 2 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||
|
|
Level 2 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||
(1) All marketable securities were classified as held-to-maturity as of the periods presented. Of the above balances, $
43.7
million and $
7.3
million were short-term marketable securities on our condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, respectively and $
90.3
million were long-term marketable securities on our condensed consolidated balance sheets as of March 31, 2025. Our long-term securities have varying maturities between one and three years.
(
2) The fair values of our
3.25
% convertible senior notes due 2030 (the "
3.25
% Convertible Notes") and our
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. See
Note 14
for more information about our convertible notes.
During the three months ended March 31, 2025 and 2024, we had no material nonfinancial asset and liability fair value adjustments.
10.
Construction Joint Ventures
We participate in various construction joint ventures. We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary. We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during the three months ended March 31, 2025, 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). 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”)
As of March 31, 2025, we were engaged in
nine
active CCJV projects. Our proportionate share of the equity in these joint ventures was between
50.0
% and
70.0
%. During the three months ended March 31, 2025 and 2024, total revenue from CCJVs was $
74.6
million and $
71.6
million, respectively. During the three months ended March 31, 2025 and 2024, CCJVs provided $
59.6
million and $
5.8
million of operating cash flows, respectively. As of March 31, 2025, our share of revenue remaining to be recognized on these CCJVs was $
369.2
million and ranged from $
1.1
million to $
188.9
million by project.
Unconsolidated Construction Joint Ventures
As of March 31, 2025, we were engaged in
three
active unconsolidated construction joint venture projects. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from
30.0
% to
50.0
%. As of March 31, 2025, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $
21.8
million and ranged from $
0.5
million to $
18.6
million by project.
13
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following is summary financial information related to unconsolidated construction joint ventures:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Assets | |||||||||||
| Cash, cash equivalents and marketable securities | $ |
|
$ |
|
|||||||
| Other current assets (1) |
|
|
|||||||||
| Noncurrent assets |
|
|
|||||||||
| Less: partners’ interest |
|
|
|||||||||
| Granite’s interest (1),(2) | $ |
|
$ |
|
|||||||
| Liabilities | |||||||||||
| Current liabilities | $ |
|
$ |
|
|||||||
| Less: partners’ interest and adjustments (3) |
|
|
|||||||||
| Granite’s interest | $ |
|
$ |
|
|||||||
| Equity in construction joint ventures (4) | $ |
|
$ |
|
|||||||
(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 was $
55.5
million related to performance guarantees (see Note 13).
(2) Included in this balance as of March 31, 2025 and December 31, 2024 was $
66.9
million related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $
1.7
million related to Granite’s share of estimated recovery of back charge claims as of March 31, 2025 and December 31, 2024.
(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 $
2.9
million and $
3.7
million as of March 31, 2025 and December 31, 2024, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.
| Three Months Ended March 31, | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Revenue | ||||||||||||||
| Total | $ |
|
$ |
|
||||||||||
| Less: partners’ interest and adjustments (1) |
(
|
(
|
||||||||||||
| Granite’s interest | $ |
|
$ |
|
||||||||||
| Cost of revenue | ||||||||||||||
| Total | $ |
|
$ |
|
||||||||||
| Less: partners’ interest and adjustments (1) |
|
|
||||||||||||
| Granite’s interest | $ |
|
$ |
|
||||||||||
| Granite’s interest in gross profit | $ |
|
$ |
|
||||||||||
| Net Income (Loss) | ||||||||||||||
| Total | $ |
(
|
$ |
(
|
||||||||||
| Less: partners’ interest and adjustments (1) |
(
|
(
|
||||||||||||
| Granite’s interest in net income (2) | $ |
|
$ |
|
||||||||||
(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 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.
14
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
11.
Investments in Affiliates
Our investments in affiliates balance consists of equity method investments in the following types of entities:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Foreign | $ |
|
$ |
|
|||||||
| Real estate |
|
|
|||||||||
| Asphalt terminal |
|
|
|||||||||
| Total investments in affiliates | $ |
|
$ |
|
|||||||
The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Current assets | $ |
|
$ |
|
|||||||
| Noncurrent assets |
|
|
|||||||||
| Total assets | $ |
|
$ |
|
|||||||
| Current liabilities | $ |
|
$ |
|
|||||||
| Long-term liabilities (1) |
|
|
|||||||||
| Total liabilities | $ |
|
$ |
|
|||||||
| Net assets | $ |
|
$ |
|
|||||||
| Granite’s share of net assets | $ |
|
$ |
|
|||||||
(1)
This balance is primarily related to local bank debt for equipment purchases and debt associated with our real estate ventures.
Affiliate assets as of March 31, 2025 included $
249.2
million of foreign affiliate assets, $
39.2
million of assets in real estate ventures and $
35.6
million of assets in the asphalt terminal entity.
12.
Property and Equipment, net
Balances of major classes of assets and total accumulated depreciation and depletion are included in property and equipment, net in the condensed consolidated balance sheets as follows:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Equipment and vehicles | $ |
|
$ |
|
|||||||
| Quarry property |
|
|
|||||||||
| Land and land improvements |
|
|
|||||||||
| Buildings and leasehold improvements |
|
|
|||||||||
| Office furniture and equipment |
|
|
|||||||||
| Property and equipment | $ |
|
$ |
|
|||||||
| Less: accumulated depreciation and depletion |
|
|
|||||||||
| Property and equipment, net | $ |
|
$ |
|
|||||||
13.
Accrued Expenses and Other Current Liabilities
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Accrued insurance | $ |
|
$ |
|
|||||||
| Payroll and related employee benefits |
|
|
|||||||||
| Performance guarantees |
|
|
|||||||||
| Short-term lease liabilities |
|
|
|||||||||
| Other |
|
|
|||||||||
| Total | $ |
|
$ |
|
|||||||
15
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Other includes deficits in unconsolidated construction joint ventures, dividends payable, taxes payable, interest payable, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, none of which were greater than 5% of total current liabilities at any of the presented dates.
14.
Long-Term Debt and Credit Arrangements
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
|
|
$ |
|
$ |
|
|||||||
|
|
|
|
|||||||||
| Debt issuance costs and other |
(
|
(
|
|||||||||
| Total debt | $ |
|
$ |
|
|||||||
| Less: current maturities |
|
|
|||||||||
| Total long-term debt | $ |
|
$ |
|
|||||||
Credit Agreement
In June 2022, we entered into the Fourth Amended and Restated Credit Agreement (the "Credit Agreement") which matures on June 2, 2027. The Credit Agreement consists of a $
350.0
million senior secured,
five-year
revolving credit facility (the “Revolver”), including an accordion feature allowing us to increase borrowings up to the greater of (a) $
200.0
million and (b)
100
% of twelve-month trailing consolidated EBITDA, subject to lender approval. The Credit Agreement includes a $
150.0
million sublimit for letters of credit ($
75.0
million for financial letters of credit) and a $
20.0
million sublimit for swingline loans.
We may borrow on the Revolver, at our option, at either (a) the Secured Overnight Financing Rate (“SOFR”) term rate plus a credit adjustment spread plus applicable margin ranging from
1.0
% to
2.0
%, or (b) a base rate plus an applicable margin ranging from
zero
to
1.0
%. The applicable margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly. As of March 31, 2025, the total unused availability under the Credit Agreement was $
330.4
million, resulting from $
19.6
million in issued and outstanding letters of credit and
no
amount drawn under the Revolver. The letters of credit had expiration dates between June 2025 and November 2025.
On June 11, 2024, we issued $
373.8
million aggregate principal amount of our
3.25
% Convertible Notes. The
3.25
% Convertible Notes bear interest at a rate of
3.25
% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2024. The
3.25
% Convertible Notes mature on June 15, 2030, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding December 15, 2029, the
3.25
% Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the
3.25
% 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 their maturity date.
The
3.25
% Convertible Notes have an initial conversion rate of 12.8398 shares of our common stock per $1,000 principal amount of the
3.25
% Convertible Notes, which is equivalent to an initial conversion price of approximately $
77.88
per share of our common stock, subject to adjustment if certain events occur. Upon conversion, we will settle the principal amount of the
3.25
% Convertible Notes in cash, and any conversion premium in excess of the principal amount in cash, or a combination of cash and shares of common stock, at our election.
In addition, upon the occurrence of a “fundamental change” as defined in the indenture governing the
3.25
% Convertible Notes, holders may require us to repurchase for cash all or any portion of their
3.25
% Convertible Notes at a fundamental change repurchase price equal to
100
% of the principal amount of the
3.25
% 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
3.25
% Convertible Notes occur prior to the maturity date of the
3.25
% 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
3.25
% Convertible Notes in connection with such event or notice of redemption.
We will not be able to redeem the
3.25
% Convertible Notes prior to June 21, 2027. On or after June 21, 2027, we will be able to redeem for cash all or any portion of the
3.25
% Convertible Notes, at our option, if the last reported sale price of Granite’s 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
3.25
% Convertible Notes to be redeemed, plus accrued but
16
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
unpaid interest to, but excluding, the redemption date. The indenture governing the
3.25
% Convertible Notes contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding
3.25
% Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25% in aggregate principal amount of the
3.25
% Convertible Notes then outstanding may declare the
3.25
% Convertible Notes due and payable immediately.
2024 Capped Call Transactions
In June 2024, we entered into privately negotiated capped call transactions in connection with the offering of the
3.25
% Convertible Notes (the "2024 capped call transactions"). The 2024 capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the
3.25
% Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted
3.25
% Convertible Notes, as the case may be. If, however, the market price per share of our common stock, as measured under the terms of the 2024 capped call transactions, exceeds the cap price of $
119.82
of the 2024 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 2024 capped call transactions.
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. The indenture governing the
3.75
% Convertible Notes contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding
3.75
% Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least
25
% in aggregate principal amount of the
3.75
% Convertible Notes then outstanding may declare the
3.75
% Convertible Notes due and payable immediately.
2023 Capped Call Transactions
In May 2023, we entered into capped call transactions (the "2023 capped call transactions") in connection with the offering of the
3.75
% Convertible Notes. The 2023 capped call transactions are expected generally to reduce the potential dilution to our common stock upon conversion of the
3.75
% Convertible Notes and/or offset any cash payments we are 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 our common stock, as measured under the terms of the 2023 capped call transactions, exceeds the cap price of $
79.83
of the 2023 capped call transactions, there would nevertheless be dilution and/or there would not be an
17
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the 2023 capped call transactions.
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
3.25
% 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
3.25
% Convertible Notes, our
3.75
% Convertible Notes or our Credit Agreement would constitute an event of default under the
3.25
% Convertible Notes indenture, the
3.75
% Convertible Notes indenture or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) acceleration of amounts owed under the Credit Agreement; and/or (v) foreclosure on any collateral securing the obligations under such facility. A default under the
3.25
% 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 March 31, 2025, we were in compliance with all covenants contained in the Credit Agreement. We are not aware of any non-compliance by any of our unconsolidated real estate ventures with the covenants contained in their debt agreements.
Debt Issuance Costs
15.
Weighted Average Shares Outstanding and Net Loss Per Share
The following table presents a reconciliation of the weighted average shares of common stock used in calculating basic and diluted net loss per share as well as the calculation of basic and diluted net loss per share:
| Three Months Ended March 31, | |||||||||||
| (in thousands, except per share amounts) | 2025 | 2024 | |||||||||
| Numerator | |||||||||||
| Net loss attributable to common shareholders | $ |
(
|
$ |
(
|
|||||||
| Denominator | |||||||||||
| Weighted average common shares outstanding, basic |
|
|
|||||||||
| Weighted average common shares outstanding, diluted |
|
|
|||||||||
| Net loss per share, basic | $ |
(
|
$ |
(
|
|||||||
| Net loss per share, diluted | $ |
(
|
$ |
(
|
|||||||
Due to net losses for the three months ended March 31, 2025 and 2024, both the unvested RSUs representing
585,000
and
573,000
shares, respectively, and the potential dilution from the convertible notes converting into
8,427,000
and
9,099,000
shares, respectively, of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive. In connection with the issuance of the
3.25
% Convertible Notes and
3.75
% Convertible Notes, we entered into the 2024 capped call transactions and 2023 capped call transactions, respectively, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.
18
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
16.
Income Taxes
The following table presents the benefit from income taxes for the respective periods:
| Three Months Ended March 31, | |||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||
| Benefit from income taxes | $ |
(
|
$ |
(
|
|||||||
| Effective tax rate |
|
% |
|
% | |||||||
Our effective tax rate for the three months ended March 31, 2025 is higher than the prior period because of an increase in the estimated annual effective tax rate combined with an increase in year-to-date discrete benefit associated with lapsed RSU awards. The estimated annual effective tax rate is higher than the prior period primarily due to changes in the estimated state tax liability and equity earnings of subsidiaries.
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. Disclosure is required when a material loss is probable but not reasonably estimable, a material loss is reasonably possible but not probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded. The total liabilities recorded in our condensed consolidated balance sheets for legal proceedings and government inquiries were
immaterial
as of March 31, 2025 and December 31, 2024.
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.
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.
18.
Reportable Segment Information
We manage our operations under
two
reportable segments, Construction and Materials, which are distinguished by differences in business activities. 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 CODM evaluates segment performance and makes business decisions based on operating income, which excludes non-operating income or expense. Segment assets include property and equipment, intangibles, goodwill, inventory and equity in construction joint ventures.
19
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Summarized segment information is as follows (in thousands):
| Three Months Ended March 31, | Construction | Materials | Total | ||||||||||||||
| 2025 | |||||||||||||||||
| Total revenue from reportable segments | $ |
|
$ |
|
$ |
|
|||||||||||
| Elimination of intersegment revenue |
|
(
|
(
|
||||||||||||||
| Revenue |
|
|
|
||||||||||||||
| Cost of revenue |
|
|
|
||||||||||||||
| Gross profit (loss) |
|
(
|
|
||||||||||||||
| Selling, general and administrative expenses |
|
|
|
||||||||||||||
| Gain on sales of property and equipment, net |
(
|
(
|
(
|
||||||||||||||
| Operating income (loss) from reportable segments | $ |
|
$ |
(
|
$ |
|
|||||||||||
| Depreciation, depletion and amortization | $ |
|
$ |
|
$ |
|
|||||||||||
| Segment assets as of period end | $ |
|
$ |
|
$ |
|
|||||||||||
| 2024 | |||||||||||||||||
| Total revenue from reportable segments | $ |
|
$ |
|
$ |
|
|||||||||||
| Elimination of intersegment revenue |
|
(
|
(
|
||||||||||||||
| Revenue |
|
|
|
||||||||||||||
| Cost of revenue |
|
|
|
||||||||||||||
| Gross profit (loss) |
|
(
|
|
||||||||||||||
| Selling, general and administrative expenses |
|
|
|
||||||||||||||
| Gain on sales of property and equipment, net |
(
|
(
|
(
|
||||||||||||||
| Operating income (loss) from reportable segments | $ |
|
$ |
(
|
$ |
|
|||||||||||
| Depreciation, depletion and amortization | $ |
|
$ |
|
$ |
|
|||||||||||
| Segment assets as of period end | $ |
|
$ |
|
$ |
|
|||||||||||
A reconciliation of operating income from reportable segments to consolidated loss before income taxes is as follows:
|
Three Months Ended
March 31, |
|||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Total operating income from reportable segments | $ |
|
$ |
|
|||||||
| Corporate selling, general and administrative expenses |
|
|
|||||||||
| Corporate loss on sales of property and equipment, net |
|
|
|||||||||
| Other costs, net |
|
|
|||||||||
| Total operating loss |
(
|
(
|
|||||||||
| Total other (income) expense, net |
|
(
|
|||||||||
| Loss before income taxes | $ |
(
|
$ |
(
|
|||||||
20
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, 2024 (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, vertically integrated civil contractors and construction materials producers 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. We own and lease aggregate reserves and own processing plants that are vertically integrated into our construction operations and we also produce construction materials for sale to third parties.
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 account for approximately 80% of our portfolio, is dependent on federal, state, regional and local revenues. At the federal level, the continued rollout of the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) has increased federal highway, bridge and transit funding to its highest level in more than six decades with $550 billion in incremental funding over five years. The increased multi-year spending commitment has improved the programming visibility for state and local governments and has driven an increase in project lettings that started in 2023, continued in 2024 and we believe will carry into 2025 and beyond.
At state, regional and local levels, voter-approved state and local transportation measures continue to support infrastructure spending. While each market is unique, we see a strong funding environment at the state and local levels aided by the IIJA. In California, our top revenue-generating state, despite overall budgetary concerns, a significant part of the state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, a 10-year, $54.2 billion program, which may only be used for transportation-related purposes, without any sunset provisions.
21
Over the last several years, inflation, supply chain and labor constraints have had a significant impact on the global economy including Granite and others in the construction industry in the United States. Recently, concerns over tariffs have been a major source of uncertainty in the economy. To date, we have not experienced a material financial impact due to tariffs. It is impossible to fully mitigate the potential impacts of the foregoing macro-economic factors and they may negatively impact us in the future. However, where practicable, we have applied proactive measures to mitigate these macro-economic factors, 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.
Our Committed and Awarded Projects (“CAP”) balance continues to be strong with $5.7 billion at the end of the first quarter of 2025. Our CAP is supported by a positive public funding environment and resilient private market which we believe will provide further opportunities for continued CAP growth.
Acquisition
As previously disclosed, we acquired Dickerson & Bowen, Inc. ("D&B") on August 9, 2024. D&B is an aggregates, asphalt, and highway construction company serving central and southern Mississippi. The results of operations of D&B are included in our consolidated financial statements from the date of acquisition, which impacts comparability to the applicable prior periods. See Note 3 of “Notes to the Condensed Consolidated Financial Statements” for further information.
Results of Operations
Our operations are typically affected more by inclement weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year.
The following table presents a financial summary for the three months ended March 31, 2025 and 2024:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Total revenue | $ | 699,547 | $ | 672,275 | |||||||
| Gross profit | $ | 83,849 | $ | 54,285 | |||||||
| Selling, general and administrative expenses | $ | 115,911 | $ | 87,993 | |||||||
| Other costs, net | $ | 9,426 | $ | 11,010 | |||||||
| Operating loss | $ | (39,751) | $ | (43,300) | |||||||
| Total other (income) expense, net | $ | 332 | $ | (4,332) | |||||||
| Amount attributable to non-controlling interests | $ | (5,329) | $ | (1,541) | |||||||
| Net loss attributable to Granite Construction Incorporated | $ | (33,656) | $ | (30,983) | |||||||
Revenue
Total Revenue by Segment
| Three Months Ended March 31, | |||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||||||||||||||
| Construction | $ | 614,618 | 87.9 | % | $ | 595,213 | 88.5 | % | |||||||||||||||
| Materials | 84,929 | 12.1 | 77,062 | 11.5 | |||||||||||||||||||
| Total | $ | 699,547 | 100.0 | % | $ | 672,275 | 100.0 | % | |||||||||||||||
22
Construction Revenue
| Three Months Ended March 31, | |||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||||||||||||||
| Public | $ | 395,885 | 64.4 | % | $ | 419,816 | 70.5 | % | |||||||||||||||
| Private | 218,733 | 35.6 | 175,397 | 29.5 | |||||||||||||||||||
| Total | $ | 614,618 | 100.0 | % | $ | 595,213 | 100.0 | % | |||||||||||||||
Construction revenue for the three months ended March 31, 2025 increased by $19.4 million, or 3.3%, when compared to 2024. This increase was primarily due to several new projects ramping up in the current year as well as favorable weather conditions in early 2025. Additionally, D&B contributed $10.1 million of construction revenue during the three months ended March 31, 2025.
Materials Revenue
| Three Months Ended March 31, | |||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||||||||||||||
| Aggregates | $ | 40,402 | 47.6 | % | $ | 36,089 | 46.8 | % | |||||||||||||||
| Asphalt | 43,982 | 51.8 | 40,813 | 53.0 | |||||||||||||||||||
| Other | 545 | 0.6 | 160 | 0.2 | |||||||||||||||||||
| Total | $ | 84,929 | 100.0 | % | $ | 77,062 | 100.0 | % | |||||||||||||||
Materials revenue for the three months ended March 31, 2025 was $84.9 million, an increase of $7.9 million, or 10.2%, when compared to the three months ended March 31, 2024. This increase was primarily driven by $5.6 million of revenue from D&B, as well as higher aggregates and asphalt volumes and higher aggregates 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 contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed.
Other awards include the general construction portion of construction management/general contractor (“CM/GC”) contracts and awarded contracts with unexercised contract options or unissued task orders. The general construction portion of CM/GC contracts are included in other awards to the extent contract execution and funding is probable. Contracts with unexercised contract options or unissued task orders are included in other awards to the extent option exercise or task order issuance is probable. All CAP is in the Construction segment.
| (dollars in thousands) | March 31, 2025 | December 31, 2024 | |||||||||||||||||||||
| Unearned revenue | $ | 3,833,875 | 66.8 | % | $ | 3,584,378 | 67.7 | % | |||||||||||||||
| Other awards | 1,906,140 | 33.2 | 1,711,689 | 32.3 | |||||||||||||||||||
| Total | $ | 5,740,015 | 100.0 | % | $ | 5,296,067 | 100.0 | % | |||||||||||||||
| (dollars in thousands) | March 31, 2025 | December 31, 2024 | |||||||||||||||||||||
|
Customer type:
|
|||||||||||||||||||||||
| Public | $ | 4,623,668 | 80.6 | % | $ | 4,120,821 | 77.8 | % | |||||||||||||||
| Private | 1,116,347 | 19.4 | 1,175,246 | 22.2 | |||||||||||||||||||
| Total | $ | 5,740,015 | 100.0 | % | $ | 5,296,067 | 100.0 | % | |||||||||||||||
CAP of $5.7 billion at March 31, 2025 was $443.9 million or 8.4% higher than at December 31, 2024. Significant additions to CAP during the three months ended March 31, 2025 included $173 million for three highway projects in California,
23
$167 million for two federal projects, a $138 million bridge project in Illinois, an $80 million highway project in Texas, and $78 million for a bridge project in California, all of which are for customers in the public sector.
Non-controlling partners’ share of CAP as of March 31, 2025 and December 31, 2024 was $334.7 million and $331.1 million, respectively.
At March 31, 2025, one contract with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $57.7 million, or 1.0%, of total CAP. Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue.
Gross Profit
The following table presents gross profit (loss) by reportable segment for the respective periods:
| Three Months Ended March 31, | |||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||
| Construction | $ | 85,438 | $ | 56,828 | |||||||
| Percent of segment revenue | 13.9 | % | 9.5 | % | |||||||
| Materials | (1,589) | (2,543) | |||||||||
| Percent of segment revenue | (1.9) | % | (3.3) | % | |||||||
| Total gross profit | $ | 83,849 | $ | 54,285 | |||||||
| Percent of total revenue | 12.0 | % | 8.1 | % | |||||||
Construction gross profit for the three months ended March 31, 2025 increased by $28.6 million, or 50.3%, when compared to 2024 primarily due to higher revenue and improved project execution across our project portfolio resulting in net increases from revisions in estimates in the current period compared to net decreases in the prior period. 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."
Materials gross loss for the three months ended March 31, 2025 decreased by $1.0 million, or 37.5%, when compared to 2024. The decreased loss was primarily due to the newly acquired D&B business.
Selling, General and Administrative Expenses
The following table presents the components of selling, general and administrative expenses for the respective periods:
|
Three Months Ended
March 31, |
|||||||||||
| 2025 | 2024 | ||||||||||
| (dollars in thousands) | |||||||||||
| Salaries and related expenses | $ | 55,416 | $ | 46,048 | |||||||
| Stock-based compensation | 30,053 | 12,352 | |||||||||
| Other selling, general and administrative expenses | 30,442 | 29,593 | |||||||||
| Total selling, general and administrative expenses | $ | 115,911 | $ | 87,993 | |||||||
| Percent of revenue | 16.6 | % | 13.1 | % | |||||||
Selling, general and administrative ("SG&A") 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, materials facility permits, and costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions. Other SG&A expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, changes in the fair market value of our non-qualified deferred compensation plan liability and other miscellaneous expenses. SG&A 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. SG&A expenses for the three months ended March 31, 2025 increased $27.9 million compared to 2024, primarily due to a $17.7 million increase in stock-based compensation due to improved financial performance, as well as higher salaries and related expenses due to increased labor costs.
24
Other Costs, net
The following table presents other costs, net for the respective periods:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Other costs, net | $ | 9,426 | $ | 11,010 | |||||||
Other costs, net mainly consist of costs related to the defense of a former Company officer in his ongoing civil litigation with the Securities and Exchange Commission, and remained fairly consistent with the prior year.
Other Income, net
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Interest income | $ | (6,268) | $ | (6,702) | |||||||
| Interest expense | 7,757 | 8,083 | |||||||||
| Equity in income of affiliates, net | (1,094) | (3,970) | |||||||||
| Other income, net | (63) | (1,743) | |||||||||
| Total other (income) expense, net | $ | 332 | $ | (4,332) | |||||||
During the three months ended March 31, 2025, total other income, net decreased $4.7 million compared to prior year. This decrease was primarily due to a decrease of $2.9 million in Equity in income of affiliates, net due to reduced net income of our affiliates and a $1.7 million decrease from Other income, net primarily due to lower gains on investments held within the rabbi trust related to our non-qualified deferred compensation plan obligations. The fluctuations in these investments mostly offset variances in our non-qualified deferred compensation plan expense in SG&A.
Income Taxes
The following table presents the benefit from income taxes for the respective periods:
| Three Months Ended March 31, | |||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||
| Benefit from income taxes | $ | (11,756) | $ | (9,526) | |||||||
| Effective tax rate | 29.3 | % | 24.4 | % | |||||||
We calculate our income tax provision or benefit at the end of each interim period by estimating our annual effective tax rate, applying that rate to our income or loss before taxes and adjusting for discrete items not included in our estimate of the annual effective tax rate. 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 March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Amount attributable to non-controlling interests | $ | (5,329) | $ | (1,541) | |||||||
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. During the three months ended March 31, 2025 the increase was primarily due to the impact of new joint venture projects.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity under our credit facility and cash generated from operations. We may also from time-to-time issue and sell equity, debt or hybrid securities
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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 long-term debt.
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. See Note 3 of “Notes to the Condensed Consolidated Financial Statements” for information on our most recent acquisition.
We believe our primary sources of liquidity will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, cash dividend payments and other liquidity requirements associated with our existing operations for the next twelve months. We also believe our primary sources of liquidity, access to debt and equity capital markets and cash expected to be generated from operations will be sufficient to meet our long-term requirements and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.
As of March 31, 2025, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting of commercial paper, corporate notes and bonds, Municipal notes and bonds and U.S. Government and agency obligations.
As of March 31, 2025, the total unused availability under our Credit Agreement was $330.4 million, resulting from $19.6 million in issued and outstanding letters of credit and nothing drawn under the Revolver. See Note 14 of “Notes to the Condensed Consolidated Financial Statements.”
In evaluating our liquidity position and needs, we also consider cash and cash equivalents held by our consolidated construction joint ventures (“CCJVs”). The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, as of the respective dates:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Cash and cash equivalents excluding CCJVs | $ | 214,264 | $ | 404,436 | |||||||
| CCJV cash and cash equivalents (1) | 164,810 | 173,894 | |||||||||
| Total consolidated cash and cash equivalents | 379,074 | 578,330 | |||||||||
| Short-term marketable securities (2) | 43,708 | 7,311 | |||||||||
| Long-term marketable securities (2) | 90,295 | — | |||||||||
| Total cash, cash equivalents and marketable securities | $ | 513,077 | $ | 585,641 | |||||||
(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 commercial paper, corporate notes and bonds, Municipal notes and bonds and U.S. Government and agency obligations as of March 31, 2025 and U.S. Government and agency obligations as of December 31, 2024.
Granite’s portion of CCJV cash and cash equivalents was $101.4 million and $106.0 million as of March 31, 2025 and December 31, 2024, respectively. Excluded from the table above is $34.5 million and $28.7 million as of March 31, 2025 and December 31, 2024, respectively, of Granite’s portion of unconsolidated construction joint venture cash and cash equivalents.
Capital Expenditures
Major capital expenditures are typically for aggregate and asphalt production facilities, aggregate reserves, construction equipment, buildings and leasehold improvements and investments in our information technology systems. The timing and amount of such expenditures can vary based on the progress of planned capital projects, the type and size of construction projects, changes in business outlook and other factors. During the three months ended March 31, 2025, we had capital expenditures of $32.2 million, compared to $27.9 million during the three months ended March 31, 2024. We currently anticipate 2025 capital expenditures to be approximately $140 million to $160 million, including approximately $50 million in planned strategic materials investments.
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Cash Flows
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 3,647 | $ | 24,073 | |||||||
| Investing activities | $ | (156,310) | $ | (10,762) | |||||||
| Financing activities | $ | (46,593) | $ | (109,222) | |||||||
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 construction work 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 construction 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 $3.6 million for the three months ended March 31, 2025 represents a $20.4 million decrease in cash provided by operating activities when compared to the same period of 2024. The change was primarily attributable to a $33.3 million decrease in cash provided by working capital, which includes receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities. Additionally, distributions from, net of contributions to, unconsolidated construction joint ventures and affiliates decreased $13.4 million when compared to the same period of 2024. Partially offsetting this was an increase in net income after adjusting for non-cash items of $26.3 million.
Investing activities
Cash used in investing activities of $156.3 million for the three months ended March 31, 2025 represents a $145.5 million increase in cash used in investing activities when compared to the same period of 2024. The change was primarily due to $134.7 million in purchases of marketable securities along with $12.9 million less in maturities of marketable securities. There was also $4.3 million more in property and equipment purchases compared to the same period in 2024. Partially offsetting these increases was $6.1 million in cash paid for purchase price adjustments on an acquisition in 2024 that did not occur in 2025.
Financing activities
Cash used in financing activities of $46.6 million for the three months ended March 31, 2025 represents a $62.6 million decrease in cash used in financing activities when compared to the same period of 2024. The change was primarily due to repayment of the balance drawn on our revolving credit facility in 2024, which had $100.0 million outstanding as of December 31, 2023. See Note 14 of the “Notes to the Condensed Consolidated Financial Statements” for further information about our credit facility. This decrease was partially offset by an increase in distributions to non-controlling partners, net of contributions, of $31.5 million and a $7.8 million increase in repurchases of common stock.
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 capped call transactions related to the
3.75
% Convertible Notes and
3.25
% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds. See Note 14 to “Notes to the Condensed Consolidated Financial Statements” for further information.
Surety Bonds and Real Estate Mortgages
We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At March 31, 2025, approximately $3.6 billion of our $5.7 billion CAP was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds when the obligations of the underlying contract have been fulfilled. The ability to maintain bonding capacity requires that we maintain cash and working capital balances satisfactory to our sureties.
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Our investments in real estate ventures are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate venture. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement, development and leasing. Modification of these terms may include changes in loan-to-value ratios requiring the real estate venture to repay portions of the debt. Our equity method investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases. This debt is non-recourse to Granite, but it is recourse to the affiliates. The debt associated with our equity method investments is included in Note 11 of “Notes to the Condensed Consolidated Financial Statements.”
Covenants and Events of Default
Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with these covenants would constitute an event of default under the Credit Agreement. Additionally, the 3.25% 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 3.25% Convertible Notes, our 3.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 3.25% Convertible Notes indenture, the 3.75% Convertible Notes indenture or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) acceleration of amounts owed under the Credit Agreement; and/or (v) foreclosure on any collateral securing the obligations under such facility. A default under the 3.25% 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 March 31, 2025, 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 200 shares repurchased under the 2022 authorization in the three months ended March 31, 2025 and $189.5 million remained available under the 2022 authorization as of March 31, 2025.
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 except as disclosed in Note 9 of “Notes to the Condensed Consolidated Financial Statements” regarding diversification of our investment portfolio.
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 March 31, 2025. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, 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 Securities and Exchange Commission 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.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 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 March 31, 2025:
| 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) | |||||||||||||||||||
| January 1, 2025 through January 31, 2025 | 1,805 | $ | 87.77 | 200 | $ | 189,528,083 | |||||||||||||||||
| February 1, 2025 through February 28, 2025 | 749 | $ | 86.71 | — | $ | 189,528,083 | |||||||||||||||||
| March 1, 2025 through March 31, 2025 | 195,666 | $ | 76.77 | — | $ | 189,528,083 | |||||||||||||||||
| 198,220 | $ | 76.91 | 200 | ||||||||||||||||||||
(1)
Excluding the 200 shares that were purchased as a part of our publicly announced plan, all shares purchased during the period were 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 March 31, 2025, 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
| 31.1 | † | |||||||||||||
| 31.2 | † | |||||||||||||
| 32 | †† | |||||||||||||
| 95 | † | |||||||||||||
| 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: | May 1, 2025 | By: |
/s/ Staci M. Woolsey
|
||||||||||||||
|
Staci M. Woolsey
|
|||||||||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||||||||
| (Duly Authorized Officer and Principal Financial Officer) | |||||||||||||||||
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TABLE OF CONTENTS
Part I. Financial InformationprintItem 1. Financial StatementsprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 2. Management S Discussion and Analysis Of Financial Condition andprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II. Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities, Use Of Proceeds, and Issuer Purchases Of Equity SecuritiesprintItem 4. Mine Safety DisclosuresprintItem 5. Other InformationprintItem 6. Exhibitsprint