Construction and Line Item Joint Ventures

We participate in various construction joint venture partnerships and a limited liability company of which we are a limited partner or member (“joint ventures”). 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.

The agreements with our joint venture partners and limited liability company members (“partners(s)”) for both construction joint ventures and line item joint ventures define each partner's management role and financial responsibility in the project. The amount of exposure is generally limited to our stated ownership interest. Due to the joint and several nature of the obligation under these agreements, if one of the partners fails to perform, we and the remaining partners would be responsible for performance of the outstanding work. Circumstances that could lead to a loss under these agreements 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 agreement.

At September 30, 2013, there was approximately $5.0 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 $3.6 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 venture partners. The associated 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 nine months ended September 30, 2013 and 2012, we determined no change was required 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, 2013		December 31, 2012		September 30, 2012
Cash and cash equivalents¹	$	57,133	$	105,865	$	74,020
Receivables, net	47,696		43,902		31,028
Other current assets	3,815		4,008		1,351
Total current assets	108,644		153,775		106,399
Property and equipment, net	28,194		41,114		6,661
Other noncurrent assets	—		1,700		—
Total assets²	$	136,838	$	196,589	$	113,060

Accounts payable	$	20,075	$	34,536	$	30,975
Billings in excess of costs and estimated earnings¹	70,518		72,490		13,955
Accrued expenses and other current liabilities	12,804		8,312		3,495
Total liabilities²	$	103,397	$	115,338	$	48,425

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 September 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 $0.3 million to $111.0 million. Our proportionate share of the equity in these joint ventures was between 51.0% and 65.0%. During the three and nine months ended September 30, 2013, total revenue from consolidated construction joint ventures was $42.4 million and $131.1 million, respectively. During the three and nine months ended September 30, 2012, total revenue from consolidated construction joint ventures was $77.4 million and $174.0 million, respectively. Total cash used in consolidated construction joint venture operations was $10.4 million and $16.1 million during the nine months ended September 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 September 30, 2013, these unconsolidated joint ventures were engaged in eleven active construction projects with total contract values ranging from $40.0 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 September 30, 2013, our share of the revenue remaining to be recognized on these unconsolidated joint ventures ranged from $0.2 million to $691.0 million.

As of September 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, and the average rate in effect during the reporting period for the results of operations. The associated foreign currency translation adjustments did not have a material impact on the consolidated financial statements for any of the dates or periods presented.

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



(in thousands)	September 30, 2013		December 31, 2012		September 30, 2012
Assets:
Cash and cash equivalents¹	$	412,506	$	244,686	$	304,065
Other assets	439,655		301,412		273,848
Less partners’ interest	557,857		342,545		353,165
Granite’s interest	294,304		203,553		224,748
Liabilities:
Accounts payable	127,695		114,039		94,788
Billings in excess of costs and estimated earnings¹	274,052		161,268		243,578
Other liabilities	68,379		5,873		8,299
Less partners’ interest	336,885		183,432		219,807
Granite’s interest	133,241		97,748		126,858
Equity in construction joint ventures	$	161,063	$	105,805	$	97,890

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.



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2013		2012		2013		2012
Revenue:
Total	$	363,523	$	286,308	$	848,082	$	776,235
Less partners’ interest¹	259,655		181,679		586,016		497,743
Granite’s interest	103,868		104,629		262,066		278,492
Cost of revenue:
Total	290,112		200,688		661,587		597,689
Less partners’ interest¹	203,804		129,840		452,784		389,171
Granite’s interest	86,308		70,848		208,803		208,518
Granite’s interest in gross profit	$	17,560	$	33,781	$	53,263	$	69,974

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 include only our portion of these contracts in our condensed consolidated financial statements. As of September 30, 2013, we had five active line item joint venture construction projects with total contract values ranging from $42.2 million to $138.6 million of which our portion ranged from $23.0 million to $60.8 million. As of September 30, 2013, our share of revenue remaining to be recognized on these line item joint ventures ranged from $0.1 million to $23.8 million.