Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” “Company” or “Granite”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted, although we believe the disclosures which are made are adequate to make the information presented not misleading. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at June 30, 2014 and 2013 and the results of our operations and cash flows for the periods presented. The December 31, 2013 condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.

We prepared the accompanying condensed consolidated financial statements on the same basis as our annual consolidated financial statements. Our operations are typically affected more by weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the full year.

Certain revisions and reclassifications have been made to historical financial data in our condensed consolidated financial statements as follows:

•

We have revised our condensed consolidated balance sheet as of June 30, 2013 and our condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 2013 to correct errors identified during the preparation of our 2013 Annual Report on Form 10-K. The errors primarily related to equipment-related costs of $1.7 million. The Company assessed the materiality of the errors individually and in the aggregate on the prior interim periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletin No. 99 and, based on an analysis of quantitative and qualitative factors, determined that the errors were not material to the Company’s condensed consolidated financial statements for the second quarter of 2013; therefore, these previously issued condensed consolidated financial statements can continue to be relied upon and an amendment of the previously filed Quarterly Report on Form 10-Q is not required. However, for comparability, the Company has revised its condensed consolidated balance sheet as of June 30, 2013 and its condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 2013 as presented herein to correct these errors.

•

Historically, cash flows used in or provided by unconsolidated construction joint ventures were presented as one line item within operating cash flows. To improve transparency in the related balances sheet accounts, we have now presented separately the significant activity. In addition, we reclassified $21.8 million related to performance guarantees for the six months ended June 30, 2013 out of equity in construction joint ventures and accrued expenses and other current liabilities, net to the non-cash supplemental table of the condensed consolidated statement of cash flows. These changes did not impact total cash used in or provided by operating, investing or financing activities.

The following tables set forth the impact of the accounting errors and reclassification adjustments on the previously reported condensed consolidated balance sheet as of June 30, 2013 and the condensed statements of operations and cash flows for the three and six months ended June 30, 2013 (in thousands):

Condensed Consolidated Balance Sheet



	June 30, 2013
		As Reported		Revisions			Revised
Total current assets		$	1,009,530	$	(364	)	$	1,009,166
Noncurrent assets		691,874		(372		)	$	691,502
Total assets		$	1,701,404	$	(736	)	$	1,700,668

Total current liabilities		$	534,856	$	655		$	535,511
Noncurrent liabilities		332,374		—			332,374
Total Granite Construction Incorporated shareholders’ equity		804,367		(1,299		)	803,068
Non-controlling interests		29,807		(92		)	29,715
Total liabilities and equity		$	1,701,404	$	(736	)	$	1,700,668

Condensed Consolidated Statements of Operations



	Three Months Ended June 30, 2013
	As Reported			Revisions			Revised
Total revenue	$	550,162		$	186		$	550,348
Total cost of revenue	498,965			1,787			500,752
Gross profit (loss)	51,197			(1,601		)	49,596
Selling, general and administrative expenses	46,454			335			46,789
Operating income (loss)	8,049			(1,936		)	6,113
Income (loss) before provision for income taxes	4,932			(1,936		)	2,996
Provision for (benefit from) income taxes	1,766			(552		)	1,214
Net Income (loss)	3,166			(1,384		)	1,782
Amount attributable to non-controlling interests	(448		)	85			(363		)
Net income (loss) attributable to Granite Construction Incorporated	$	2,718		$	(1,299	)	$	1,419

Net income (loss) per share attributable to common shareholders (see Note 12)
Basic	$	0.07		$	(0.03	)	$	0.04
Diluted	$	0.07		$	(0.03	)	$	0.04



	Six Months Ended June 30, 2013
		As Reported			Revisions			Revised
Total revenue		$	928,866		$	186		$	929,052
Total cost of revenue		847,613			1,787			849,400
Gross profit (loss)		81,253			(1,601		)	79,652
Selling, general and administrative expenses		103,615			335			103,950
Operating loss		(17,968		)	(1,936		)	(19,904		)
Loss before benefit from income taxes		(23,922		)	(1,936		)	(25,858		)
Benefit from income taxes		(7,261		)	(552		)	(7,813		)
Net loss		(16,661		)	(1,384		)	(18,045		)
Amount attributable to non-controlling interests		(2,603		)	85			(2,518		)
Net loss attributable to Granite Construction Incorporated		$	(19,264	)	$	(1,299	)	$	(20,563	)

Net loss per share attributable to common shareholders (see Note 12)
Basic		$	(0.50	)	$	(0.03	)	$	(0.53	)
Diluted		$	(0.50	)	$	(0.03	)	$	(0.53	)

Condensed Consolidated Statement of Cash Flows



	Six months ended June 30, 2013
	As Reported			Revisions			Reclassifications			Revised
Net Loss	$	(16,661	)	$	(1,384	)	$	—		$	(18,045	)
Depreciation, depletion and amortization	33,988			374			—			34,362
Equity in net income from unconsolidated joint ventures	—			—			(31,201		)	(31,201		)
Costs and estimated earnings in excess of billings, net	(24,873		)	1,335			(11,705		)	(35,243		)
Equity in construction joint ventures	(42,336		)	—			42,336			—
Contributions to unconsolidated construction joint ventures	—			—			(16,209		)	(16,209		)
Distributions from unconsolidated construction joint ventures	—			—			42,486			42,486
Other assets, net	(5,957		)	(562		)	—			(6,519		)
Accounts payable	(10,548		)	—			(1,176		)	(11,724		)
Accrued expenses and other current liabilities, net	29,825			237			(24,531		)	5,531
Total	$	(36,562	)	$	—		$	—		$	(36,562	)