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 December 31, 2011, there was approximately $1.7 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $725.3 million represented our share and the remaining $927.2 million represented our partners’ share. We are not able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.

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 VIEs as defined by 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 year ended December 31, 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 consolidated financial statements as follows (in thousands):



December 31,	2011		2010
Cash and cash equivalents¹	$	75,122	$	109,380
Other current assets²	33,750		50,344
Total current assets	108,872		159,724
Noncurrent assets	8,671		2,561
Total assets³	$	117,543	$	162,285

Accounts payable	$	38,193	$	33,078
Billings in excess of costs and estimated earnings¹	22,251		46,475
Accrued expenses and other current liabilities	5,129		11,633
Total current liabilities	65,573		91,186
Noncurrent liabilities	4		3
Total liabilities³	$	65,577	$	91,189

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 balance sheets 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 December 31, 2011, we were engaged in two active consolidated construction joint venture projects with total contract values of $233.1 million and $315.6 million. Our proportionate share of the equity in these joint ventures was 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 consolidated statements of operations and as a single line item on the consolidated balance sheets. As of December 31, 2011, these unconsolidated joint ventures were engaged in eight active construction projects with total contract values ranging from $57.7 million to $1.2 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0% to 49.0%. As of December 31, 2011, we had $2.9 million to $277.2 million of revenue remaining to be recognized on these unconsolidated joint ventures.

Following is summary financial information related to unconsolidated construction joint ventures (in thousands):



December 31,	2011		2010
Assets:
Cash and cash equivalents¹	$	338,681	$	318,408
Other assets	264,901		212,911
Less partners’ interest	364,979		324,485
Granite’s interest	238,603		206,834
Liabilities:
Accounts payable	85,075		72,658
Billings in excess of costs and estimated earnings¹	280,650		282,702
Other liabilities	8,595		8,893
Less partners’ interest	236,746		232,135
Granite’s interest	137,574		132,118
Equity in construction joint ventures	$	101,029	$	74,716

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.



Years Ended December 31,	2011		2010		2009
Revenue:
Total	$	938,867	$	604,209	$	420,190
Less partners’ interest¹	623,090		414,905		316,984
Granite’s interest	315,777		189,304		103,206
Cost of revenue:
Total	765,446		550,170		382,665
Less partners’ interest¹	519,340		372,774		287,244
Granite’s interest	246,106		177,396		95,421
Granite’s interest in gross profit	$	69,671	$	11,908	$	7,785

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 consolidated financial statements. As of December 31, 2011, we had three active line item joint venture construction projects with total contract values ranging from $54.1 million to $129.3 million of which our portions ranged from $21.2 million to $53.1 million. As of December 31, 2011, we had $6.7 million to $40.1 million of revenue remaining to be recognized on these line item joint ventures.