Construction and Line Item Joint Ventures

We participate in various construction joint venture partnerships. We also participate in various “line item” joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work.

Our agreements with our joint venture partners for both construction joint ventures and line item joint ventures provide that each party will pay for any losses it is responsible for under the joint venture agreement. Circumstances that could lead to a loss under our joint venture arrangements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the joint venture agreement. Due to the joint and several nature of the obligations under our joint venture arrangements, if one of our joint venture partners fails to perform, we and the remaining joint venture partners would be responsible for performance of the outstanding work.

At June 30, 2011, there was approximately $1.7 billion of construction revenue to be recognized on unconsolidated construction joint venture contracts of which $0.6 billion represented our share and the remaining $1.1 billion represented our partners’ share. We are not able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.

Construction Joint Ventures

Generally, each construction joint venture is formed to complete a specific contract and is jointly controlled by the joint venture partners. The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities resulting from the performance of the contract are limited to our stated percentage interest in the project. We have no significant commitments beyond completion of the contracts. Under our contractual arrangements, we provide capital to these joint ventures in return for an ownership interest. In addition, partners dedicate resources to the ventures necessary to complete the contracts and are reimbursed for their cost. The operational risks of each construction joint venture are passed along to the joint venture partners. As we absorb our share of these risks, our investment in each venture is exposed to potential losses.

We have determined that certain of these joint ventures are variable interest entities (“VIEs”) as defined by Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and related standards. To ascertain if we are required to consolidate the VIE, we continually evaluate whether we are the VIE’s primary beneficiary. The factors we consider in determining whether we are a VIE’s primary beneficiary include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners.

The adoption of the new consolidation requirements under ASC Topic 810 resulted in the consolidation of one construction joint venture in our consolidated financial statements on March 31, 2010 that was previously reported on a pro rata basis. This consolidation resulted in increases of $2.4 million in assets, $1.7 million in liabilities and $0.8 million in noncontrolling interests in our consolidated financial statements. Based on our ongoing primary beneficiary assessments, there were no other changes to our determinations of whether we are the VIE’s primary beneficiary for existing construction joint ventures during the six months ended June 30, 2011 and 2010.

Consolidated Construction Joint Ventures

The carrying amounts and classification of assets and liabilities of construction joint ventures we are required to consolidate are included in our condensed consolidated financial statements as follows:



(in thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Cash and cash equivalents	$	89,666	$	109,380	$	105,690
Other current assets¹	35,183		50,344		36,361
Total current assets	124,849		159,724		142,051
Noncurrent assets	11,012		2,561		829
Total assets²	$	135,861	$	162,285	$	142,880

Accounts payable	$	37,229	$	33,078	$	32,145
Billings in excess of costs and estimated earnings	41,386		46,475		66,706
Accrued expenses and other current liabilities	9,147		11,633		11,125
Total current liabilities	87,762		91,186		109,976
Noncurrent liabilities	—		3		505
Total liabilities²	$	87,762	$	91,189	$	110,481

¹Prior period amounts have been revised to conform to current year presentation. The revisions had no impact on the consolidated balances or on the accounting for consolidated construction joint ventures.

²The assets and liabilities of each joint venture relate solely to that joint venture. The decision to distribute joint venture cash and cash equivalents and assets must generally be made jointly by all of the partners and, accordingly, these cash and cash equivalents and assets generally are not available for the working capital needs of Granite.

At June 30, 2011, we were engaged in three active consolidated construction joint venture projects with total contract values ranging from $225.6 million to $480.4 million. Our proportionate share of the equity in these joint ventures was between 45.0% and 60.0%.

Unconsolidated Construction Joint Ventures

We account for our share of construction joint ventures that we are not required to consolidate on a pro rata basis in the condensed consolidated statements of operations and as a single line item on the condensed consolidated balance sheets. As of June 30, 2011, these unconsolidated joint ventures were engaged in seven active construction projects with total contract values ranging from $57.6 million to $975.4 million. Our proportionate share of the equity in these unconsolidated joint ventures was between 20.0% and 42.5%.

Following is summary financial information related to unconsolidated construction joint ventures:



(in thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Assets:
Total	$	588,152	$	531,319	$	412,165
Less partners’ interest	357,929		324,485		253,234
Granite’s interest	230,223		206,834		158,931
Liabilities:
Total	385,084		364,253		250,868
Less partners’ interest	242,514		232,135		164,508
Granite’s interest	142,570		132,118		86,360
Equity in construction joint ventures	$	87,653	$	74,716	$	72,571



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2011		2010		2011		2010
Revenue:
Total	$	224,498	$	136,592	$	424,266	$	258,398
Less partners’ interest¹	163,932		91,875		290,278		179,635
Granite’s interest	60,566		44,717		133,988		78,763
Cost of revenue:
Total	183,130		119,209		334,010		228,384
Less partners’ interest¹	128,495		75,442		230,359		149,929
Granite’s interest	54,635		43,767		103,651		78,455
Granite’s interest in gross profit	$	5,931	$	950	$	30,337	$	308

¹Partners’ interest represents 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.

Line Item Joint Ventures

The revenue for each line item joint venture partner’s discrete items of work is defined in the contract with the project owner and each venture partner bears the profitability risk associated with its own work. There is not a single set of books and records for a line item joint venture. Each partner accounts for its items of work individually as it would for any self-performed contract. We account for our portion of these contracts as project revenues and costs in our accounting system and include receivables and payables associated with our work in our condensed consolidated financial statements. As of June 30, 2011, we had four active line item joint venture construction projects with total contract values between $51.9 million and $152.7 million of which our portions were between $21.0 million and $70.0 million. As of June 30, 2011, we had between $6.5 million and $49.1 million of revenue per project remaining to be recognized on these line item joint ventures.