Note 11 - Investments in Affiliates

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

11. Investments in Affiliates

Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for using the equity method of accounting, including investments in foreign affiliates, real estate entities and an asphalt terminal entity.

The foreign affiliates in which we are invested are engaged in mineral drilling services and the manufacture and supply of drilling equipment, parts and supplies in Latin America. The real estate entities were formed to accomplish specific real estate development projects in which our wholly owned subsidiary, Granite Land Company, participates with third-party partners. The asphalt terminal entity is a 50% interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant in Nevada.

We have determined that the real estate entities are not consolidated because although they are VIEs, we are not the primary beneficiary. We have determined that the foreign affiliates and the asphalt terminal entity are not consolidated because they are not VIEs and we do not hold the majority voting interest. As such, these entities are accounted for using the equity method.

Our investments in affiliates balance consists of equity method investments in the following types of entities (in thousands):

December 31,	2019		2018
Foreign	$	55,335	$	55,715
Real estate		17,229		19,676
Asphalt terminal		11,612		8,963
Total investments in affiliates	$	84,176	$	84,354

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis (in thousands):

December 31,	2019		2018
Current assets	$	122,348	$	141,930
Noncurrent assets		165,331		170,172
Total assets		287,679		312,102
Current liabilities		48,322		55,816
Long-term liabilities (1)		61,078		63,098
Total liabilities		109,400		118,914
Net assets		178,279		193,188
Granite’s share of net assets	$	84,176	$	84,354

(1) The balance primarily related to local bank debt for equipment purchases and working capital in our foreign affiliates and debt associated with our real estate investments.

Of the $287.7 million in total assets as of December 31, 2019, we had investments in thirteen foreign entities with total assets ranging from $0.2 million to $65.2 million, three real estate entities with total assets ranging from $8.2 million to $36.1 million and the asphalt terminal entity had total assets of $25.7 million. We have direct and indirect investments in the foreign entities and our percent ownership ranged from 25% to 50% as of December 31, 2019. The equity method investments in real estate affiliates included $13.6 million and $16.3 million in residential real estate in Texas as of December 31, 2019 and 2018, respectively. Our percent ownership in the real estate entities ranged from 18% to 47%. The remaining balances were in commercial real estate in Texas.

The following table provides summarized statement of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands):

			As Restated
Years Ended December 31,	2019		2018		2017
Revenue	$	261,425	$	187,827	$	56,372
Gross profit		57,393		51,061		23,007
Income before taxes		35,391		37,454		17,154
Net income		30,584		31,612		17,154
Granite’s interest in affiliates’ net income		11,454		6,935		7,107

Subsequent investment in affiliates impairment charges 

During 2020, the entities within our investments in foreign affiliates experienced a change in business climate from a rise in operating costs, resulting in increased prices and decreased demand. The corresponding decline in future operating cash flows resulted in the investments fair value to fall below the associated carrying amounts, which was considered to be other than temporary. Therefore, we recorded a non-cash impairment charge of $9.6 million during the year ended December 31, 2020.