Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of costs to complete each project. These estimates can vary in the normal course of business as projects progress and uncertainties are resolved. We do not recognize revenue on contract change orders or claims until we have a signed agreement; however, we do recognize costs as incurred and revisions to estimated total costs as soon as the obligation to perform is determined. Approved change orders and claims, as well as changes in related estimates of costs to complete, are considered revisions in estimates. We use the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates. Under this option, revisions in estimates are accounted for in their entirety in the period of change. As of March 31, 2012, we had no revisions in estimates that are reasonably certain to impact future periods.

Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, that individually had an impact of $1.0 million or more on gross profit was a net decrease of $0.2 million and a net increase of $1.0 million for the three months ended March 31, 2012 and 2011, respectively. The projects are summarized as follows:

Increases



	Three Months Ended March 31,
(dollars in millions)			2012		2011
Number of projects with upward estimate changes			2		1
Range of increase in gross profit from each project, net		$	1.0 - 1.8	$	1.0
Increase on project profitability		$	2.8	$	1.0

The increases during the three months ended March 31, 2012 were due to lower than anticipated costs and settlement of outstanding issues with contract owners. The increase during the three months ended March 31, 2011 was due to owner directed scope changes.

Decreases



	Three Months Ended March 31,
(dollars in millions)			2012		2011
Number of projects with downward estimate changes			1		—
Reduction in gross profit from each project, net		$	3.0	$	—
Decrease on project profitability		$	3.0	$	—

The decrease during the three months ended March 31, 2012 was due to lower productivity than originally anticipated.

Large Project Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, that individually had an impact of $1.0 million or more on gross profit were net increases of $4.4 million and $5.9 million for the three months ended March 31, 2012 and 2011, respectively. Amounts attributable to noncontrolling interests were $1.3 million and $0.4 million of the net increases for the three months ended March 31, 2012 and 2011, respectively. The projects are summarized as follows:

Increases



	Three Months Ended March 31,
(dollars in millions)			2012		2011
Number of projects with upward estimate changes			4		3
Range of increase in gross profit from each project, net		$	1.6 - 2.4	$	1.0 - 4.2
Increase on project profitability		$	8.1	$	8.8

The increases during the three months ended March 31, 2012 were due to owner directed scope changes and lower than anticipated construction costs. The increases during the three months ended March 31, 2011 were due to resolution of project uncertainties.

Decreases



	Three Months Ended March 31,
(dollars in millions)			2012		2011
Number of projects with downward estimate changes			2		1
Range of reduction in gross profit from each project, net		$	1.5 - 2.2	$	2.9
Decrease on project profitability		$	3.7	$	2.9

The downward estimate changes during the three months ended March 31, 2012 and 2011were due to lower productivity than anticipated.

Our wholly owned subsidiaries, Granite Construction Company (“GCCO”) and Granite Northwest, Inc., are members of a joint venture known as Yaquina River Constructors (“YRC”) which has been under contract with the Oregon Department of Transportation (“ODOT”) to construct a new road alignment of U.S. Highway 20 near Eddyville, Oregon. In addition to previous geologic landslide issues, unanticipated ground movement was observed at several hillsides beginning in 2010. YRC and ODOT have been in dispute regarding their respective responsibilities under the terms of the contract relative to the project revisions necessary on account of the unanticipated ground movement. In March 2012, YRC received a Notice of Default (the “Notice”) from ODOT which YRC believes was without merit. Subsequent to March 31, 2012, ODOT and YRC have reached a settlement that withdraws and rescinds the Notice and releases both parties from claims against the other. The settlement ends YRC’s responsibility to complete the project following limited site maintenance and demobilization work by YRC. The settlement does not have a material impact on the Company’s financial position or results of operations.