Construction Joint Ventures

We participate in various construction 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 June 30, 2017, we determined no change to the primary beneficiary was required for existing construction joint ventures.

Due to the joint and several nature of the performance obligations under the related owner contracts, if any of the partners fail to perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide a performance guarantee). At June 30, 2017, there was approximately $5.5 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.8 billion represented our share and the remaining $3.7 billion represented our partners’ 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 our partners’ and/or other guarantees.

Consolidated Construction Joint Ventures (“CCJVs”)

At June 30, 2017, we were engaged in four active CCJV projects with total contract values ranging from $49.1 million to $267.4 million. Our share of revenue remaining to be recognized on these CCJVs ranged from $11.6 million to $147.3 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 65.0%. During the three and six months ended June 30, 2017, total revenue from CCJVs was $49.5 million and $85.0 million, respectively. 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 six months ended June 30, 2017 and 2016, CCJVs provided $19.2 million and $12.8 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As of June 30, 2017, we were engaged in eleven active unconsolidated joint venture projects with total contract values ranging from $79.4 million to $3.7 billion, for which there were three with contract values greater than $1.0 billion. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 20.0% to 50.0%. As of June 30, 2017, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures ranged from $1.3 million to $436.6 million.

As of June 30, 2017, December 31, 2016 and June 30, 2016, 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 following is summary financial information related to unconsolidated construction joint ventures:



(in thousands)	June 30, 2017		December 31, 2016		June 30, 2016
Assets:
Cash, cash equivalents and marketable securities	$	388,542	$	537,991	$	435,098
Other current assets¹	632,166		644,809		679,920
Noncurrent assets	230,633		207,240		216,722
Less partners’ interest	828,237		935,615		894,017
Granite’s interest^1,2	423,104		454,425		437,723
Liabilities:
Current liabilities	668,630		696,215		634,796
Less partners’ interest and adjustments³	460,052		472,324		434,371
Granite’s interest	208,578		223,891		200,425
Equity in construction joint ventures⁴	$	214,526	$	230,534	$	237,298

¹Included in this balance and in accrued and other current liabilities on our condensed consolidated balance sheets as of June 30, 2017, December 31, 2016 and June 30, 2016 was $88.9 million, $83.1 million and $76.8 million, respectively, related to performance guarantees.

²Included in this balance as of June 30, 2017, December 31, 2016 and June 30, 2016 was $81.7 million, $65.4 million and $57.8 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $9.8 million, $5.6 million and $4.3 million related to Granite’s share of estimated recovery of back charge claims as of June 30, 2017, December 31, 2016 and June 30, 2016, respectively.

³Partners’ interest and adjustments includes amounts to reconcile total liabilities as reported by our partners to Granite’s interest adjusted to reflect our accounting policies.

⁴As of June 30, 2017, December 31, 2016 and June 30, 2016 this balance included $15.9 million, $16.6 million and $8.2 million, respectively, of deficit in construction joint ventures that is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2017			2016			2017			2016
Revenue:
Total¹	$	515,983		$	475,879		$	967,304		$	970,046
Less partners’ interest and adjustments^1,2	376,332			346,863			700,162			694,771
Granite’s interest	139,651			129,016			267,142			275,275
Cost of revenue:
Total	498,932			479,113			941,922			940,610
Less partners’ interest and adjustments^1,2	349,557			347,661			666,552			671,702
Granite’s interest	149,375			131,452			275,370			268,908
Granite’s interest in gross (loss) profit	$	(9,724	)	$	(2,436	)	$	(8,228	)	$	6,367

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 June 30, 2016 were misstated in our Quarterly Report for the quarter ended June 30, 2016. Total revenue and revenue for partner’s interest and adjustments as reported was (in thousands): $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): $475,879 and $346,863, respectively, for the three months ended June 30, 2016 and are reflected in the table. 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.

During the three and six months ended June 30, 2017 unconsolidated construction joint venture net income was $17.6 million and $26.2 million, respectively, of which our share was net loss of $9.7 million and $8.2 million, respectively. The differences between our share of the joint venture net losses when compared to the joint venture net income primarily resulted from differences between our estimated total revenue and cost of revenue when compared to our partners’. 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. 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

As of June 30, 2017, we had two active line item joint venture construction projects with total contract values of $66.2 million and $74.7 million of which our portion was $44.7 million and $30.7 million, respectively. As of June 30, 2017, our share of revenue remaining to be recognized on these line item joint ventures was $7.3 million and $0.8 million, respectively. During the three and six months ended June 30, 2017 our portion of revenue from line item joint ventures was $6.8 million and $14.7 million, respectively. During the three and six months ended June 30, 2016, our portion of revenue from line item joint ventures was $9.6 million and $14.0 million, respectively.