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 September 30, 2011, there was approximately $1.7 billion of construction revenue to be recognized on unconsolidated and line item 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 contracts 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.

Based on our primary beneficiary assessment during the nine months ended September 30, 2011, we determined no change was required to the accounting for existing construction joint ventures.

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)	September 30, 2011		December 31, 2010		September 30, 2010
Cash and cash equivalents¹	$	65,350	$	109,380	$	103,367
Other current assets²	31,215		50,344		44,351
Total current assets	96,565		159,724		147,718
Noncurrent assets	9,821		2,561		894
Total assets³	$	106,386	$	162,285	$	148,612

Accounts payable	$	36,660	$	33,078	$	33,934
Billings in excess of costs and estimated earnings¹	17,116		46,475		63,783
Accrued expenses and other current liabilities	5,997		11,633		11,195
Total current liabilities	59,773		91,186		108,912
Noncurrent liabilities	33		3		5
Total liabilities³	$	59,806	$	91,189	$	108,917

¹The volume and stage of completion of contracts from our consolidated construction joint ventures may cause fluctuations in cash and cash equivalents as well as billings in excess of costs and estimated earnings between periods.

²Prior 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.

³The 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 September 30, 2011, we were engaged in two active consolidated construction joint venture projects with total contract values of $227.6 million and $312.1 million. Our proportionate share of the equity in these joint ventures was 45.0% and 60.0%, respectively.

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 September 30, 2011, these unconsolidated joint ventures were engaged in nine 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 49.0%. As of September 30, 2011, we had between $2.4 million and $196.1 million of revenue per project remaining to be recognized on these unconsolidated joint ventures.

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



(in thousands)	September 30, 2011		December 31, 2010		September 30, 2010
Assets:
Cash and cash equivalents¹	$	356,399	$	318,408	$	273,173
Other assets	265,549		212,911		192,606
Less partners’ interest	378,523		324,485		287,616
Granite’s interest	243,425		206,834		178,163
Liabilities:
Accounts payable	85,602		72,658		49,767
Billings in excess of costs and estimated earnings¹	302,039		282,702		211,822
Other liabilities	9,460		8,893		13,837
Less partners’ interest	251,091		232,135		177,759
Granite’s interest	146,010		132,118		97,667
Equity in construction joint ventures	$	97,415	$	74,716	$	80,496

¹The volume and stage of completion of contracts from our unconsolidated construction joint ventures may cause fluctuations in cash and cash equivalents as well as billings in excess of costs and estimated earnings between periods.



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2011		2010		2011		2010
Revenue:
Total	$	243,654	$	168,981	$	667,920	$	427,379
Less partners’ interest¹	158,079		120,790		448,357		300,425
Granite’s interest	85,575		48,191		219,563		126,954
Cost of revenue:
Total	212,485		157,932		546,495		386,316
Less partners’ interest¹	140,506		111,578		370,865		261,508
Granite’s interest	71,979		46,354		175,630		124,808
Granite’s interest in gross profit	$	13,596	$	1,837	$	43,933	$	2,146

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 September 30, 2011, we had four active line item joint venture construction projects with total contract values between $52.9 million and $154.9 million of which our portions were between $21.1 million and $71.3 million. As of September 30, 2011, we had between $0.9 million and $43.8 million of revenue per project remaining to be recognized on these line item joint venture