Construction and Line Item Joint Ventures

We participate in various construction joint ventures, partnerships and a limited liability company of which we are a limited member (“joint ventures”). We also participate in various “line item” joint venture agreements under which each member is responsible for performing certain discrete items of the total scope of contracted work.

Due to the joint and several nature of the performance obligations under the related owner contracts, if any of the members fail to perform, we and the other members would be responsible for performance of the outstanding work. At March 31, 2015, there was approximately $6.1 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.9 billion represented our share and the remaining $4.2 billion represented the other members’ 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 the other members and/or other guarantors.

Construction Joint Ventures

Generally, each construction joint venture is formed to complete a specific contract and is jointly controlled by the venture members. 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 venture. Under our contractual arrangements, we provide capital to these joint ventures in return for an ownership interest. In addition, members 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 members. As we absorb our share of these risks, our investment in each venture is exposed to potential gains and 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.

We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during the three months ended March 31, 2015, 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 on the condensed consolidated balance sheets as follows:



(in thousands)	March 31, 2015		December 31, 2014		March 31, 2014
Cash and cash equivalents¹	$	52,884	$	61,276	$	27,612
Receivables, net	39,711		36,781		39,014
Other current assets	2,510		1,746		4,624
Total current assets	95,105		99,803		71,250
Property and equipment, net	9,729		11,969		19,801
Total assets²	$	104,834	$	111,772	$	91,051

Accounts payable	$	14,960	$	18,009	$	22,136
Billings in excess of costs and estimated earnings¹	29,963		32,830		43,087
Accrued expenses and other current liabilities	1,530		2,714		7,074
Total liabilities²	$	46,453	$	53,553	$	72,297

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 and costs in excess of billings and estimated earnings between periods.

²The assets and liabilities of each consolidated 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 a majority of the members and, accordingly, these cash and cash equivalents and assets generally are not available for the working capital needs of Granite until distributed.

At March 31, 2015, we were engaged in two active consolidated construction joint venture projects with total contract values of $32.7 million and $284.7 million. Our share of revenue remaining to be recognized on these consolidated joint ventures was $0.1 million and $38.0 million. Our proportionate share of the equity in these joint ventures was 55.0% and 65.0%. During the three months ended March 31, 2015 and 2014, total revenue from consolidated construction joint ventures was $15.0 million and $32.1 million, respectively. Total operating cash flows used in consolidated construction joint ventures were $7.9 million and $22.5 million during the three months ended March 31, 2015 and 2014, 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 March 31, 2015, these unconsolidated joint ventures were engaged in eleven active projects with total contract values ranging from $73.0 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 March 31, 2015, our share of the revenue remaining to be recognized on these unconsolidated joint ventures ranged from $4.6 million to $663.4 million.

As of March 31, 2015, 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 condensed consolidated financial statements for any of the dates or periods presented.

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



(in thousands)	March 31, 2015		December 31, 2014		March 31, 2014
Assets:
Cash and cash equivalents¹	$	240,123	$	264,263	$	240,486
Other assets	721,618		573,898		581,842
Less partners’ interest	637,512		546,907		542,114
Granite’s interest	324,229		291,254		280,214
Liabilities:
Accounts payable	191,312		146,198		131,441
Billings in excess of costs and estimated earnings¹	171,187		156,604		189,979
Other liabilities	72,026		55,289		69,745
Less partners’ interest	304,422		251,412		278,996
Granite’s interest	130,103		106,679		112,169
Equity in construction joint ventures²	$	194,126	$	184,575	$	168,045

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 costs in excess of billings 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 March 31, 2015, this balance included $3.4 million of deficit in construction joint ventures that is included in accrued expenses and other current liabilities on the condensed consolidated balance sheet.



	Three Months Ended March 31,
(in thousands)	2015		2014
Revenue:
Total	$	443,407	$	349,167
Less partners’ interest and adjustments¹	308,120		259,857
Granite’s interest	135,287		89,310
Cost of revenue:
Total	410,071		297,461
Less partners’ interest and adjustments¹	286,047		210,906
Granite’s interest	124,024		86,555
Granite’s interest in gross profit	$	11,263	$	2,755

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.

During the three months ended March 31, 2015 and 2014, unconsolidated construction joint venture net income was $33.4 million and $51.0 million, respectively, of which our share was $11.3 million and $2.6 million, respectively. These net income amounts exclude our corporate overhead required to manage the joint ventures.

Line Item Joint Ventures

The revenue for each line item joint venture member’s discrete items of work is defined in the contract with the project owner and each venture member 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 member 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 March 31, 2015, we had three active line item joint venture construction projects with total contract values ranging from $42.7 million to $86.6 million of which our portion ranged from $29.1 million to $64.1 million. As of March 31, 2015, our share of revenue remaining to be recognized on these line item joint ventures ranged from $2.2 million to $22.4 million.