Construction Joint Ventures

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

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. 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.

At June 30, 2016, there was approximately $5.1 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.6 billion represented our share and the remaining $3.5 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 other members and/or other guarantors.

We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”), and we are the primary beneficiary. 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 June 30, 2016, we determined no change was required for existing construction joint ventures.

The volume and stage of completion of contracts from our consolidated and unconsolidated construction joint ventures may cause fluctuations in cash and cash equivalents and, for consolidated construction joint ventures, billings in excess of costs and estimated earnings and costs in excess of billings and estimated earnings between periods.

The assets and liabilities of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.

Consolidated Construction Joint Ventures (“CCJVs”)

At June 30, 2016, we were engaged in five active CCJV projects with total contract values ranging from $6.7 million to $290.9 million. Our share of revenue remaining to be recognized on these CCJVs ranged from $1.9 million to $181.6 million. Our proportionate share of the equity in these joint ventures is between 50.0% and 65.0%. During the three and six months ended June 30, 2016, total revenue from CCJVs was $33.0 million and $55.1 million, respectively. During the three and six months ended June 30, 2015, total revenue from CCJVs was $10.0 million and $25.0 million, respectively. During the six months ended June 30, 2016, CCJVs provided $12.8 million of operating cash flows and during the six months ended June 30, 2015, used $12.0 million of operating cash flows.

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, 2016, these unconsolidated joint ventures were engaged in eleven active projects with total contract values ranging from $80.2 million to $3.6 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranges from 20.0% to 50.0%. As of June 30, 2016, our share of the revenue remaining to be recognized on these unconsolidated joint ventures ranged from $0.3 million to $566.3 million.

The following is summary financial information related to unconsolidated construction joint ventures:



(in thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Assets:
Cash and cash equivalents	$	435,098	$	439,871	$	336,581
Other assets²	896,642		859,749		816,262
Less partners’ interest	894,017		881,183		771,875
Granite’s interest	437,723		418,437		380,968
Liabilities:
Accounts payable	254,954		218,790		216,663
Billings in excess of costs and estimated earnings²	277,900		341,609		276,982
Other liabilities	101,942		89,901		64,581
Less partners’ interest	434,371		447,926		385,506
Granite’s interest	200,425		202,374		172,720
Equity in construction joint ventures¹	$	237,298	$	216,063	$	208,248

¹As of June 30, 2016, December 31, 2015 and June 30, 2015 this balance included $8.2 million, $8.6 million and $0.8 million, respectively, of deficit in construction joint ventures that is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

²Included in these balances are amounts associated with estimated recovery of customer affirmative claims.



	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2016			2015		2016		2015
Revenue:
Total	$	682,002		$	466,144	$	970,046	$	909,551
Less partners’ interest and adjustments¹	552,986			327,980		694,771		636,100
Granite’s interest	129,016			138,164		275,275		273,451
Cost of revenue:
Total	479,113			436,230		940,610		846,301
Less partners’ interest and adjustments¹	347,661			305,822		671,702		591,869
Granite’s interest	131,452			130,408		268,908		254,432
Granite’s interest in gross (loss) profit	$	(2,436	)	$	7,756	$	6,367	$	19,019

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 June 30, 2016, unconsolidated construction joint venture net loss was $4.4 million of which our share was $2.9 million and during the six months ended June 30, 2016, unconsolidated construction joint venture net income was $29.3 million of which our share was $5.6 million. During the three and six months ended June 30, 2015, unconsolidated construction joint venture net income was $34.0 million and $67.4 million, respectively, of which our share was $7.3 million and $18.6 million, respectively. These joint venture net income amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.

Line Item Joint Ventures

We 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. 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 June 30, 2016, we had six active line item joint venture construction projects with total contract values ranging from $42.2 million to $87.8 million of which our portion ranged from $24.8 million to $64.9 million. As of June 30, 2016, our share of revenue remaining to be recognized on these line item joint ventures ranged from $0.1 million to $29.3 million.