Construction Joint Ventures

We participate in various construction joint ventures (“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 December 31, 2017, there was $4.6 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.5 billion represented our share and the remaining $3.1 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’ corporate and/or other guarantees. See Note 10 for disclosure of the performance guarantee amounts recorded in the consolidated balance sheets and Note 1 for additional discussion.

Generally, each construction joint venture is formed to accomplish a specific project and is jointly controlled by the joint venture partners. The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities, that may result from the performance of the contracts are limited to our stated percentage interest in the project. Under our joint venture contractual arrangements, we provide capital to these joint ventures in return for an ownership interest. In addition, partners dedicate resources to the joint 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 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 years ended December 31, 2017, 2016 and 2015, 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, 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

At December 31, 2017, we were engaged in six active consolidated construction joint venture projects, with contract values ranging from $49.8 million to $409.6 million and a combined total of $1.2 billion. Our share of revenue remaining to be recognized on these consolidated joint ventures was $492.8 million and ranged from $4.9 million to $201.3 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 65.0%. During the years ended December 31, 2017, 2016 and 2015, total revenue from consolidated construction joint ventures was $185.5 million, $119.8 million and $54.4 million, respectively. During the years ended December 31, 2017 and 2016 consolidated construction joint ventures provided $36.9 million and $37.8 million, respectively, of operating cash flows and used $16.4 million during the year ended December 31, 2015.

Unconsolidated Construction Joint Ventures

As of December 31, 2017, we were engaged in eleven active unconsolidated joint venture projects with contract values ranging from $77.3 million to $3.7 billion and a combined total of $12.4 billion of which our share was $3.7 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0% to 50.0%. As of December 31, 2017, our share of the revenue remaining to be recognized on these unconsolidated joint ventures was $1.5 billion and ranged from $0.5 million to $365.0 million.

The following is summary financial information related to unconsolidated construction joint ventures (in thousands):



December 31,	2017		2016
Assets:
Cash, cash equivalents and marketable securities	$	289,940	$	537,991
Other current assets¹	812,577		644,809
Noncurrent assets	219,825		207,240
Less partners’ interest	869,782		935,615
Granite’s interest^1,2	452,560		454,425
Liabilities:
Current liabilities	682,832		696,215
Less partners’ interest and adjustments³	462,159		472,324
Granite’s interest	220,673		223,891
Equity in construction joint ventures⁴	$	231,887	$	230,534

¹Included in this balance and in accrued and other current liabilities on our consolidated balance sheets as of December 31, 2017 and 2016 was $88.6 million and $83.1 million, respectively, related to performance guarantees (see Note 10 of “Notes to the Consolidated Financial Statements”).

²Included in this balance as of December 31, 2017 and 2016 was $74.3 million and $65.4 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, the balances as of December 31, 2017 and 2016 included $11.8 million and $5.6 million, respectively, related to Granite’s share of estimated recovery of back charge claims.

³Partners’ interest and adjustments includes amounts to reconcile total net assets as reported by our partners to Granite’s interest adjusted to reflect our accounting policies primarily related to gross profit forecast differences.

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



Years Ended December 31,	2017			2016		2015
Revenue:
Total	$	2,057,336		$	1,958,158	$	1,924,544
Less partners’ interest and adjustments¹	1,469,550			1,387,532		1,341,334
Granite’s interest	587,786			570,626		583,210
Cost of revenue:
Total	1,995,915			1,915,376		1,819,257
Less partners’ interest and adjustments¹	1,394,347			1,360,459		1,279,954
Granite’s interest	601,568			554,917		539,303
Granite’s interest in gross (loss) profit	$	(13,782	)	$	15,709	$	43,907

¹Partners’ interest and adjustments includes 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 primarily related to gross profit forecast differences.

During the years ended December 31, 2017, 2016 and 2015, unconsolidated construction joint venture net income was $62.2 million, $41.8 million and $105.6 million, respectively, of which our share was net loss of $14.4 million and net income of $15.6 million and $43.4 million, respectively. The differences between our share of the joint venture net loss when compared to the joint venture net income during the year ended December 31, 2017 primarily resulted from differences between our estimated total revenue and cost of revenue when compared to that of our partners’ on four projects. 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 partner is responsible for performing certain discrete items of the total scope of contracted work. The revenue for each line item joint venture partners’ discrete items of work is defined in the contract with the project owner and each joint venture partner 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 partner accounts for its items of work individually as it would for any self-performed contract. We include only our portion of revenue and cost of revenue associated with these contracts in our consolidated financial statements. As of December 31, 2017, we had one active line item joint venture construction project with a total contract value of $66.2 million of which our portion was $49.0 million. As of December 31, 2017, our share of revenue remaining to be recognized on the line item joint venture was $1.4 million. During the years ended December 31, 2017, 2106 and 2015, our portion of revenue from line item joint ventures was $22.9 million, $35.0 million and $26.0 million, respectively.