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 March 31, 2012, there was approximately $2.2 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $0.8 billion represented our share and the remaining $1.4 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 three months ended March 31, 2012, 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)	March 31, 2012		December 31, 2011		March 31, 2011
Cash and cash equivalents¹	$	69,423	$	75,122	$	107,978
Other current assets	40,410		33,750		26,666
Total current assets	109,833		108,872		134,644
Noncurrent assets	7,516		8,671		6,686
Total assets²	$	117,349	$	117,543	$	141,330

Accounts payable	$	28,591	$	38,193	$	25,952
Billings in excess of costs and estimated earnings¹	24,827		22,251		40,413
Accrued expenses and other current liabilities	5,640		5,129		8,526
Total current liabilities	59,058		65,573		74,891
Noncurrent liabilities	28		4		1
Total liabilities²	$	59,086	$	65,577	$	74,892

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.

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 March 31, 2012, we were engaged in two active consolidated construction joint venture projects with total contract values of $235.9 million and $317.5 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 March 31, 2012, these unconsolidated joint ventures were engaged in nine active construction projects with total contract values ranging from $57.8 million to $1.2 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0% to 50.0%. As of March 31, 2012, revenue remaining to be recognized on these unconsolidated joint ventures ranged from $2.8 million to $242.2 million.

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



(in thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Assets:
Cash and cash equivalents¹	$	341,989	$	338,681	$	331,169
Other assets	236,712		264,901		204,066
Less partners’ interest	362,474		364,979		325,454
Granite’s interest	216,227		238,603		209,781
Liabilities:
Accounts payable	98,872		85,075		76,009
Billings in excess of costs and estimated earnings¹	240,043		280,650		278,132
Other liabilities	5,645		8,595		9,540
Less partners’ interest	220,284		236,746		232,673
Granite’s interest	124,276		137,574		131,008
Equity in construction joint ventures	$	91,951	$	101,029	$	78,773

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 March 31,
(in thousands)	2012		2011
Revenue:
Total	$	205,832	$	199,768
Less partners’ interest¹	132,203		126,346
Granite’s interest	73,629		73,422
Cost of revenue:
Total	169,612		150,880
Less partners’ interest¹	109,240		101,864
Granite’s interest	60,372		49,016
Granite’s interest in gross profit	$	13,257	$	24,406

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 March 31, 2012, we had four active line item joint venture construction projects with total contract values ranging from $52.1 million to $128.3 million of which our portions ranged from $21.4 million to $53.6 million. As of March 31, 2012, revenue remaining to be recognized on these line item joint ventures ranged from $6.8 million to $37.0 million.