Note 3 - Restatement

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Accounting Changes and Error Corrections [Text Block]

3.  Restatement

Restatement Background

As disclosed in our 2019 Annual Report on Form 10-K, in February 2020, the Audit/Compliance Committee of the Company’s Board of Directors, assisted by independent counsel, initiated an investigation of prior-period reporting for the Heavy Civil operating group, and the extent to which these matters affect the effectiveness of the Company’s internal control over financial reporting (the “Investigation”). The Investigation is now complete. We have restated our consolidated financial statements as of December 31, 2018, and for the years ended December 31, 2018 and 2017 and our unaudited quarterly financial information for the first three quarters in the year ended December 31, 2019 and for each of the quarters in the year ended December 31, 2018 in our Annual Report on Form 10-K for the year ended December 31, 2019 to correct misstatements associated with project forecasts in the Heavy Civil operating group (the “Investigation Adjustments”) discovered in connection with the independent Investigation. In addition to the Investigation Adjustments, we corrected additional identified out-of-period and uncorrected misstatements that were not material, individually or in the aggregate, to our consolidated financial statements (the “Other Adjustments”). We have reflected the impact of the restatement on our unaudited condensed consolidated financial information as of and for the three and six months ended June 30, 2019 herein.

Description of Restatement Tables

We have presented below a reconciliation from the previously reported to the restated values as of and for the three and six months ended June 30, 2019. The previously reported values were derived from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 filed on August 6, 2019 and are labeled as “As Previously Reported” in the following tables. The account balances labeled as “Investigation Adjustments” represent effects of adjustments resulting from the Investigation. The account balances labeled as “Other Adjustments” represent the effects of other adjustments, which related to revisions in estimates in projects primarily impacting revenue and cost of revenue in the Transportation segment as a result of out-of-period or uncorrected misstatements in previously filed financial statements that were not material, individually or in the aggregate, to those previously filed financial statements, balance sheet reclassifications and other immaterial adjustments.

The impacts to the condensed consolidated statements of shareholders’ equity and comprehensive (loss) income as a result of the restatement were due to the changes in net income for the three and six months ended June 30, 2019. In addition, there was no impact to net cash used in investing and financing activities for the six months ended June 30, 2019 as a result of the restatement.

The effects of the prior-period misstatements on our consolidated financial statements are as follows (in thousands, except per share data):

Consolidated Balance Sheet

June 30, 2019	As Previously Reported			Investigation Adjustments			Other Adjustments			As Restated
ASSETS
Current assets
Cash and cash equivalents	$	144,958		$	—		$	—		$	144,958
Short-term marketable securities		41,037			—			—			41,037
Receivables, net		551,958			10,567			2,018			564,543
Contract assets		257,650			(30,286	)		(2,975	)		224,389
Inventories		102,163			—			(477	)		101,686
Equity in construction joint ventures		241,786			(18,401	)		(3,138	)		220,247
Other current assets		63,056			16,919			585			80,560
Total current assets		1,402,608			(21,201	)		(3,987	)		1,377,420
Property and equipment, net		557,118			—			1,260			558,378
Long-term marketable securities		20,000			—			—			20,000
Investments in affiliates		82,109			—			—			82,109
Goodwill		264,107			—			—			264,107
Right of use assets		73,439			—			—			73,439
Deferred income taxes, net		36,055			(8,580	)		774			28,249
Other noncurrent assets		122,705			—			(1,790	)		120,915
Total assets	$	2,558,141		$	(29,781	)	$	(3,743	)	$	2,524,617
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	48,397		$	—		$	—		$	48,397
Accounts payable		303,128			—			(477	)		302,651
Contract liabilities		119,289			9,154			—			128,443
Accrued expenses and other current liabilities		339,047			21,184			—			360,231
Total current liabilities		809,861			30,338			(477	)		839,722
Long-term debt		366,896			—			—			366,896
Long-term lease liabilities		60,868			—			—			60,868
Deferred income taxes, net		4,680			—			—			4,680
Other long-term liabilities		58,268			—			—			58,268
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding		—			—			—			—
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding: 46,838,199 shares as of June 30, 2019		468			—			—			468
Additional paid-in capital		568,264			—			—			568,264
Accumulated other comprehensive (loss) income		(3,448	)		—			1,261			(2,187	)
Retained earnings		642,124			(58,719	)		(3,485	)		579,920
Total Granite Construction Incorporated shareholders’ equity		1,207,408			(58,719	)		(2,224	)		1,146,465
Non-controlling interests		50,160			(1,400	)		(1,042	)		47,718
Total equity		1,257,568			(60,119	)		(3,266	)		1,194,183
Total liabilities and equity	$	2,558,141		$	(29,781	)	$	(3,743	)	$	2,524,617

Consolidated Statement of Operations

	Three Months Ended June 30, 2019												Six Months Ended June 30, 2019
	As Previously Reported			Investigation Adjustments			Other Adjustments			As Restated			As Reported			Investigation Adjustments			Other Adjustments			As Restated
Revenue
Transportation	$	403,978		$	76,255		$	1,513		$	481,746		$	742,188		$	48,233		$	(6,711	)	$	783,710
Water		112,831			(728	)		(33	)		112,070			212,086			(898	)		(36	)		211,152
Specialty		175,084			—			(455	)		174,629			315,777			—			(2,024	)		313,753
Materials		97,647			—			—			97,647			139,290			—			—			139,290
Total revenue		789,540			75,527			1,025			866,092			1,409,341			47,335			(8,771	)		1,447,905
Cost of revenue
Transportation		503,857			(22,610	)		—			481,247			820,817			(16,402	)		(4,856	)		799,559
Water		101,568			—			—			101,568			192,704			—			—			192,704
Specialty		152,874			—			—			152,874			278,700			—			—			278,700
Materials		83,645			—			—			83,645			129,046			—			—			129,046
Total cost of revenue		841,944			(22,610	)		—			819,334			1,421,267			(16,402	)		(4,856	)		1,400,009
Gross (loss) profit		(52,404	)		98,137			1,025			46,758			(11,926	)		63,737			(3,915	)		47,896
Selling, general and administrative expenses		69,998			—			1,000			70,998			151,153			—			—			151,153
Acquisition and integration expenses		9,177			—			—			9,177			12,500			—			(1,475	)		11,025
Gain on sales of property and equipment		(4,935	)		—			—			(4,935	)		(6,835	)		—			—			(6,835	)
Operating loss		(126,644	)		98,137			25			(28,482	)		(168,744	)		63,737			(2,440	)		(107,447	)
Other (income) expense
Interest income		(1,728	)		—			—			(1,728	)		(4,544	)		—			—			(4,544	)
Interest expense		4,158			—			—			4,158			8,172			—			—			8,172
Equity in income of affiliates, net		(2,594	)		—			—			(2,594	)		(3,884	)		—			—			(3,884	)
Other income, net		(759	)		—			—			(759	)		(2,521	)		—			—			(2,521	)
Total other income		(923	)		—			—			(923	)		(2,777	)		—			—			(2,777	)
Loss before benefit from income taxes		(125,721	)		98,137			25			(27,559	)		(165,967	)		63,737			(2,440	)		(104,670	)
Benefit from income taxes		(31,760	)		25,874			(27	)		(5,913	)		(40,925	)		18,247			(585	)		(23,263	)
Net loss		(93,961	)		72,263			52			(21,646	)		(125,042	)		45,490			(1,855	)		(81,407	)
Amount attributable to non-controlling interests		(3,875	)		1,341			(62	)		(2,596	)		(7,368	)		1,400			663			(5,305	)
Net loss attributable to Granite Construction Incorporated	$	(97,836	)	$	73,604		$	(10	)	$	(24,242	)	$	(132,410	)	$	46,890		$	(1,192	)	$	(86,712	)
Net loss per share attributable to common shareholders
Basic	$	(2.09	)	$	1.57		$	(0.00	)	$	(0.52	)	$	(2.83	)	$	1.00		$	(0.03	)	$	(1.85	)
Diluted	$	(2.09	)	$	1.57		$	(0.00	)	$	(0.52	)	$	(2.83	)	$	1.00		$	(0.03	)	$	(1.85	)
Weighted average shares of common stock
Basic		46,824			46,824			46,824			46,824			46,762			46,762			46,762			46,762
Diluted		46,824			46,824			46,824			46,824			46,762			46,762			46,762			46,762

Consolidated Statement of Cash Flows

Six Months Ended June 30, 2019	As Previously Reported			Investigation Adjustments			Other Adjustments			As Restated
Operating activities
Net loss	$	(125,042	)	$	45,490		$	(1,855	)	$	(81,407	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization		61,747			—			—			61,747
Gain on sales of property and equipment, net		(6,835	)		—			—			(6,835	)
Deferred income taxes		(35,192	)		35,189			—			(3	)
Stock-based compensation		7,221			—			—			7,221
Equity in net loss from unconsolidated joint ventures		105,834			(60,073	)		27,074			72,835
Net income from affiliates		(3,884	)		—			—			(3,884	)
Other non-cash adjustments		4,630			—			—			4,630
Changes in assets and liabilities:
Receivables		(78,081	)		—			(1,009	)		(79,090	)
Contract assets, net		(23,775	)		(3,687	)		7,036			(20,426	)
Inventories		(12,905	)		—			576			(12,329	)
Contributions to unconsolidated construction joint ventures		(45,500	)		—			—			(45,500	)
Distributions from unconsolidated construction joint ventures		830			—			—			830
Other assets, net		(15,361	)		(16,919	)		(505	)		(32,785	)
Accounts payable		48,230			—			(5,753	)		42,477
Accrued expenses and other current liabilities, net		24,568			—			(25,564	)		(996	)
Net cash used in operating activities	$	(93,515	)	$	—		$	—		$	(93,515	)