Construction Joint Ventures

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

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 September 30, 2016, we determined no change to the primary beneficiary was required for existing construction joint ventures.

At September 30, 2016, there was approximately $5.4 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.7 billion represented our share and the remaining $3.7 billion represented the other members’ share. We are not able to estimate amounts, if any, 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.

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, costs in excess of billings and estimated earnings and property and equipment 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 estimated cost recovery of 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 September 30, 2016, we were engaged in five active CCJV projects with total contract values ranging from $46.5 million to $291.2 million. Our share of revenue remaining to be recognized on these CCJVs ranged from $7.7 million to $181.1 million. Our proportionate share of the equity in these joint ventures is between 50.0% and 65.0%. During the three and nine months ended September 30, 2016, total revenue from CCJVs was $24.8 million and $79.9 million, respectively. During the three and nine months ended September 30, 2015, total revenue from CCJVs was $14.0 million and $39.0 million, respectively. During the nine months ended September 30, 2016 and 2015, CCJVs provided $7.8 million and used $16.8 million of operating cash flows, 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, 2016, these unconsolidated construction joint ventures were engaged in twelve active projects with total contract values ranging from $78.5 million to $3.6 billion. Our proportionate share of the equity in these unconsolidated construction joint ventures ranges from 20.0% to 50.0%. As of September 30, 2016, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures ranged from $0.9 million to $527.6 million.

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



(in thousands)	September 30, 2016		December 31, 2015		September 30, 2015
Assets:
Cash and cash equivalents	$	509,644	$	439,871	$	460,668
Other assets	896,474		859,749		818,609
Less partners’ interest	942,183		881,183		875,629
Granite’s interest¹	463,935		418,437		403,648
Liabilities:
Accounts payable	271,348		218,790		228,695
Billings in excess of costs and estimated earnings	278,987		341,609		321,103
Other liabilities	106,286		89,901		88,905
Less partners’ interest	449,044		447,926		441,627
Granite’s interest¹	207,577		202,374		197,076
Equity in construction joint ventures^2,3	$	256,358	$	216,063	$	206,572

¹Included in this balance as of September 30, 2016, December 31, 2015 and September 30, 2015 was $62.5 million, $39.7 million and $34.9 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $5.9 million related to Granite’s share of estimated recovery of back charge claims as of September 30, 2016. There were no estimated recovery of back charge claims as of December 31, 2015 and September 30, 2015.

²As of September 30, 2016, December 31, 2015 and September 30, 2015 this balance included $6.8 million, $8.6 million and $13.1 million, respectively, of deficit in construction joint ventures that is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

³Included in this balance and in accrued and other current liabilities on our condensed consolidated balance sheets as of September 30, 2016, December 31, 2015 and September 30, 2015 was $83.1 million, $65.5 million and $65.1 million, respectively, related to performance guarantees.



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2016		2015 As Revised		2016		2015 As Revised
Revenue:
Total^1,3	$	550,296	$	485,639	$	1,520,342	$	1,395,190
Less partners’ interest and adjustments^1,2,3	390,775		337,889		1,085,546		973,989
Granite’s interest	159,521		147,750		434,796		421,201
Cost of revenue:
Total³	510,579		469,069		1,451,189		1,315,370
Less partners’ interest and adjustments^2,3	360,965		332,361		1,032,667		924,230
Granite’s interest	149,614		136,708		418,522		391,140
Granite’s interest in gross profit	$	9,907	$	11,042	$	16,274	$	30,061

¹While Granite’s interest in revenue, cost of revenue and gross profit were correctly stated, Total revenue and revenue for partners’ interest and adjustments for the three months ended March 31, 2016 and June 30, 2016 were misstated in our Quarterly Reports for the quarter ended March 31, 2016 and June 30, 2016. Total revenue and revenue for partner’s interest and adjustments as reported was (in thousands): $288,044 and $141,785, respectively, for the three months ended March 31, 2016 and was $682,002 and $552,986, respectively, for the three months ended June 30, 2016. Total revenue and revenue for partner’s interest and adjustments should have been (in thousands): $494,167 and $347,908, respectively, for the three months ended March 31, 2016 and $475,879 and $346,863, respectively, for the three months ended June 30, 2016. The misstatements did not have any impact on the consolidated financial statements in any period. We assessed the materiality of the errors in accordance with the SEC’s Staff Accounting Bulletin 99 and concluded that the errors were not material to either of these previously issued financial statements. Accordingly, we will revise our previously issued financial statements prospectively to correct these errors.

²Partners’ interest and adjustments 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 and estimates.

³While Granite’s interest in revenue, cost of revenue and gross profit were correctly stated, total and partners’ interest for revenue and cost of revenue for the three and nine month periods ended September 30, 2015 were misstated in our Quarterly Report for the quarter ended September 30, 2015 and have been revised. Total revenue, partner’s interest in revenue, total cost of revenue and partners’ interest in cost of revenue reported were (in thousands): $530,215, $382,465, $424,492 and $287,784, respectively, for the three months ended September 30, 2015, and $1,439,766, $1,018,565, $1,270,793 and $879,653, respectively, for the nine months ended September 30, 2015. The misstatements did not have an impact on the consolidated financial statements. We assessed the materiality of the errors in accordance with the SEC’s Staff Accounting Bulletin 99 and concluded that the errors were not material to the previously issued financial statements.

During the three and nine months ended September 30, 2016, unconsolidated construction joint venture net income was $38.7 million and $68.0 million, respectively, of which our share was $10.3 million and $15.9 million, respectively. During the three and nine months ended September 30, 2015, unconsolidated construction joint venture net income was $19.5 million and $86.9 million, respectively, of which our share was $11.1 million and $29.7 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 or cities 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 September 30, 2016, we had four 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 $28.3 million to $64.9 million. As of September 30, 2016, our share of revenue remaining to be recognized on these line item joint ventures ranged from $0.2 million to $23.6 million. During the three and nine months ended September 30, 2016, our portion of revenue from line item joint ventures was $9.5 million and $23.5 million, respectively. During the three and nine months ended September 30, 2015, our portion of revenue from line item joint ventures was $2.2 million and $18.0 million, respectively.