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 September 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 nine months ended September 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 September 30, 2013 and our condensed consolidated statements of operations and cash flows for the three and nine months ended September 30, 2013 to correct errors identified during the preparation of our 2013 Annual Report on Form 10-K. For the quarter ended September 30, 2013, the pre-tax adjustments were primarily related to (i) an over-accrual of pre-bid costs which affected selling, general and administrative expenses and accrued and other current liabilities in the amount of $1.4 million and (ii) a revision in equipment-related costs, which affected cost of revenue and property and equipment in the amount of $1.6 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 three and nine months ended September 30, 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 September 30, 2013 and its condensed consolidated statements of operations and cash flows for the three and nine months ended September 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 $24.2 million related to performance guarantees for the nine months ended September 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 statements 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 correction of accounting errors and reclassification adjustments on the previously reported condensed consolidated balance sheet as of September 30, 2013 and the condensed consolidated statements of operations and cash flows for the three and nine months ended September 30, 2013 (in thousands):

Condensed Consolidated Balance Sheet



	September 30, 2013
		As Reported		Revisions			Revised
Total current assets		$	1,041,672	$	(368	)	$	1,041,304
Noncurrent assets		684,330		1,500			$	685,830
Total assets		$	1,726,002	$	1,132		$	1,727,134

Total current liabilities		$	565,522	$	439		$	565,961
Noncurrent liabilities		331,658		—			331,658
Total Granite Construction Incorporated shareholders’ equity		812,509		741			813,250
Non-controlling interests		16,313		(48		)	16,265
Total liabilities and equity		$	1,726,002	$	1,132		$	1,727,134

Condensed Consolidated Statements of Operations



	Three Months Ended September 30, 2013
	As Reported		Revisions			Revised
Total revenue	$	741,575	$	(1,823	)	$	739,752
Total cost of revenue	687,179		(3,287		)	683,892
Gross profit	54,396		1,464			55,860
Selling, general and administrative expenses	47,060		(1,533		)	45,527
Gain on sale of property and equipment	3,259		—			3,259
Operating income	10,595		2,997			13,592
Income before provision for income taxes	8,481		2,997			11,478
Provision for income taxes	4,026		920			4,946
Net income	4,455		2,077			6,532
Amount attributable to non-controlling interests	6,542		(37		)	6,505
Net income attributable to Granite Construction Incorporated	$	10,997	$	2,040		$	13,037

Net income per share attributable to common shareholders (see Note 12)
Basic	$	0.28	$	0.06		$	0.34
Diluted	$	0.28	$	0.05		$	0.33



	Nine Months Ended September 30, 2013
		As Reported			Revisions			Revised
Total revenue		$	1,670,441		$	(1,638	)	$	1,668,803
Total cost of revenue		1,534,791			(1,501		)	1,533,290
Gross profit		135,650			(137		)	135,513
Selling, general and administrative expenses		150,675			(1,198		)	149,477
Operating loss		(7,372		)	1,061			(6,311		)
Loss before benefit from income taxes		(15,440		)	1,061			(14,379		)
Benefit from income taxes		(3,235		)	368			(2,867		)
Net loss		(12,205		)	693			(11,512		)
Amount attributable to non-controlling interests		3,938			48			3,986
Net loss attributable to Granite Construction Incorporated		$	(8,267	)	$	741		$	(7,526	)

Net loss per share attributable to common shareholders (see Note 12)
Basic		$	(0.21	)	$	0.02		$	(0.19	)
Diluted		$	(0.21	)	$	0.02		$	(0.19	)

Condensed Consolidated Statement of Cash Flows



	Nine months ended September 30, 2013
	As Reported			Revisions			Reclassifications			Revised
Net loss	$	(12,205	)	$	693		$	—		$	(11,512	)
Depreciation, depletion and amortization	54,788			—			—			54,788
Non-cash restructuring, net	(23		)	—			23			—
Gain on sales of property and equipment	(7,653		)	—			—			(7,653		)
Stock-based compensation	10,645			—			—			10,645
Equity in net income from unconsolidated joint ventures	—			—			(51,826		)	(51,826		)
Receivables	(99,856		)	—			—			(99,856		)
Costs and estimated earnings in excess of billings, net	(1,707		)	137			(14,494		)	(16,064		)
Inventories	(1,882		)	—			—			(1,882		)
Equity in construction joint ventures	(54,672		)	—			54,672			—
Contributions to unconsolidated construction joint ventures	—			—			(28,514		)	(28,514		)
Distributions from unconsolidated construction joint ventures	—			—			68,033			68,033
Other assets, net	(5,165		)	368			(23		)	(4,820		)
Accounts payable	5,578			(1,198		)	(1,176		)	3,204
Accrued expenses and other current liabilities, net	47,637			—			(26,695		)	20,942
Net cash used in operating activities	$	(64,515	)	$	—		$	—		$	(64,515	)