Construction and Line Item Joint Ventures

We participate in various construction joint venture partnerships and two limited liability company. 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, 2013, there was approximately $5.1 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.4 billion represented our share and the remaining $3.7 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 consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary, or because they are not VIEs and we hold the majority voting interest. 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 initial primary beneficiary analysis for one construction joint venture, we determined that decision making responsibility is shared between the venture partners. Therefore, this joint venture did not have an identifiable primary beneficiary partner and we continue to report the pro rata results. All other joint ventures were assigned one primary beneficiary partner.

We continually evaluate whether there are changes in the status of the VIE’s or changes to the primary beneficiary designation of the VIE. Based on our assessments during the six months ended June 30, 2013 and 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)	June 30, 2013		December 31, 2012		June 30, 2012
Cash and cash equivalents¹	$	63,806	$	105,865	$	67,685
Receivables, net	59,807		43,902		26,903
Other current assets	3,592		4,008		2,125
Total current assets	127,205		153,775		96,713
Property and equipment, net	34,891		41,114		6,919
Other noncurrent assets	1,253		1,700		—
Total assets²	$	163,349	$	196,589	$	103,632

Accounts payable	$	18,297	$	34,536	$	31,135
Billings in excess of costs and estimated earnings¹	72,094		72,490		17,979
Accrued expenses and other current liabilities	9,153		8,312		3,027
Total liabilities²	$	99,544	$	115,338	$	52,141

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 until distributed.

At June 30, 2013, we were engaged in four active consolidated construction joint venture projects with total contract values ranging from $0.4 million to $336.9 million. The total revenue remaining to be recognized on these consolidated joint ventures ranged from $0.4 million to $120.5 million. Our proportionate share of the equity in these joint ventures was between 51.0% and 65.0%. During the three and six months ended June 30, 2013, total revenue from consolidated construction joint ventures was $45.5 million and $88.7 million, respectively. During the three and six months ended June 30, 2012, total revenue from consolidated construction joint ventures was $55.0 million and $96.6 million, respectively. Total cash used in consolidated construction joint venture operations was $16.3 million and $1.9 million during the six months ended June 30, 2013 and 2012, 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 June 30, 2013, these unconsolidated joint ventures were engaged in twelve active construction projects with total contract values ranging from $40.3 million to $3.1 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0% to 50.0%. As of June 30, 2013, our share of the revenue remaining to be recognized on these unconsolidated joint ventures ranged from $0.3 million to $722.9 million.

As of June 30, 2013, one of our unconsolidated construction joint ventures was located in Canada and, therefore, the associated disclosures throughout this footnote include amounts that were translated from Canadian dollars to U.S. dollars using the spot rate in effect as of the reporting date for balance sheet items, or the average rate in effect during the reporting period for results of operations. The associated foreign currency translation adjustments did not have a material impact on the financial statements for any of the periods presented.

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



(in thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Assets:
Cash and cash equivalents¹	$	342,534	$	244,686	$	337,102
Other assets	439,812		301,412		300,744
Less partners’ interest	512,775		342,545		392,139
Granite’s interest	269,571		203,553		245,707
Liabilities:
Accounts payable	115,606		114,039		101,782
Billings in excess of costs and estimated earnings¹	262,259		161,268		265,883
Other liabilities	25,733		6,106		8,455
Less partners’ interest	282,521		183,432		238,234
Granite’s interest	121,077		97,981		137,886
Equity in construction joint ventures²	$	148,494	$	105,572	$	107,821

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. 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 until distributed.

²As of June 30, 2013 and December 31, 2012, this balance included $0.2 million of deficit in unconsolidated construction joint ventures that is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2013		2012		2013		2012
Revenue:
Total¹	$	259,255	$	284,095	$	484,558	$	489,926
Less partners’ interest^1,2	172,656		183,861		326,361		316,064
Granite’s interest	86,599		100,234		158,197		173,862
Cost of revenue:
Total¹	212,779		227,389		371,475		397,001
Less partners’ interest^1,2	141,659		150,091		248,980		259,331
Granite’s interest	71,120		77,298		122,495		137,670
Granite’s interest in gross profit	$	15,479	$	22,936	$	35,702	$	36,192

¹While Granite’s interest in revenue, cost of revenue and gross profit were correctly stated, total and partners’ interest for revenue and cost of revenue for the three and six month periods ended June 30, 2012 were inadvertently misstated in our Quarterly Report for the quarter ended June 30, 2012. Total revenue, partner’s interest in revenue, total cost of revenue and partners’ interest in cost of revenue reported were (in thousands): $663,536, $563,302, $544,838 and $467,540, respectively, for the three months ended June 30, 2012, and $869,368, $695,505, $714,450 and $576,780, respectively, for the six months ended June 30, 2012.

²Partners’ 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 include only our portion of these contracts in our condensed consolidated financial statements. As of June 30, 2013, we had five active line item joint venture construction projects with total contract values ranging from $42.2 million to $138.2 million of which our portion ranged from $25.1 million to $59.5 million. As of June 30, 2013, our share of revenue remaining to be recognized on these line item joint ventures ranged from $0.3 million to $23.8 million.