Note 10 - Construction Joint Ventures

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Construction Joint Ventures [Text Block]

10.  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 March 31, 2021, we determined no change was required for existing 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  March 31, 2021, there was approximately $1.3 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $0.5 billion represented our share and the remaining $0.8 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.

Consolidated Construction Joint Ventures (“CCJVs”)

At  March 31, 2021, we were engaged in nine active CCJV projects with total contract values ranging from $2.2 million to $437.4 million and a combined total of $1.8 billion of which our share was $1.0 billion. Our share of revenue remaining to be recognized on these CCJVs was $414.1 million and ranged from $1.2 million to $137.7 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 70.0%. During the three months ended March 31, 2021 and 2020, total revenue from CCJVs was $82.6 million and $54.7 million, respectively. During the three months ended March 31, 2021 and 2020, CCJVs provided $13.8 million and $17.1 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As of  March 31, 2021, we were engaged in ten active unconsolidated joint venture projects with total contract values ranging from $13.4 million to $3.8 billion for a combined total of $11.6 billion of which our share was $3.4 billion. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 20.0% to 50.0%. As of  March 31, 2021, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $381.0 million and ranged from $1.3 million to $87.5 million.

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

(in thousands)	March 31, 2021		December 31, 2020		March 31, 2020
Assets
Cash, cash equivalents and marketable securities	$	161,574	$	181,889	$	144,472
Other current assets (1)		768,127		767,803		821,399
Noncurrent assets		150,273		164,022		203,520
Less partners’ interest		719,634		751,125		785,876
Granite’s interest (1),(2)		360,340		362,589		383,515
Liabilities
Current liabilities		470,667		482,562		555,380
Less partners’ interest and adjustments (3)		241,250		226,308		289,165
Granite’s interest		229,417		256,254		266,215
Equity in construction joint ventures (4)	$	130,923	$	106,335	$	117,300

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets was $82.3 million as of both  March 31, 2021 and  December 31, 2020 and $81.9 million as of  March 31, 2020, related to performance guarantees.

(2) Included in this balance as of March 31, 2021, December 31, 2020 and March 31, 2020, was $95.4 million, $88.7 million and $117.1 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $12.9 million, $13.1 million and $18.2 million as of  March 31, 2021,  December 31, 2020 and  March 31, 2020, respectively, related to Granite’s share of estimated recovery of back charge claims.

(3) Partners’ 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 and estimates primarily related to contract forecast differences.

(4) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $55.6 million, $82.5 million and $73.2 million as of  March 31, 2021,  December 31, 2020 and March 31, 2020, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

	Three Months Ended March 31,
(in thousands)	2021		2020
Revenue
Total	$	232,042	$	62,030
Less partners’ interest and adjustments (1)		152,320		(21,672	)
Granite’s interest		79,722		83,702
Cost of revenue
Total		248,070		228,460
Less partners’ interest and adjustments (1)		168,734		132,743
Granite’s interest		79,336		95,717
Granite’s interest in gross profit (loss)	$	386	$	(12,015	)

(1) Partners’ 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 and estimates primarily related to contract forecast differences.

During the three months ended March 31, 2021 and 2020, unconsolidated construction joint venture net losses were $(16.0) million and $(166.0) million, respectively, of which our share was net income of $0.4 million and net loss of $(11.8) million, respectively. The differences between our share of the joint venture net income / loss when compared to the joint venture net losses primarily resulted from differences between our estimated total revenue and cost of revenue when compared to that of our partners’ on three and five projects during 2021 and 2020, respectively. The differences are due to timing differences from varying accounting policies and in public company quarterly reporting requirements. These joint venture net loss 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 March 31, 2021, we had four active line item joint venture construction projects with a total contract value of $297.3 million of which our portion was $187.9 million. As of  March 31, 2021, our share of revenue remaining to be recognized on these line item joint ventures was $79.5 million. During the three months ended March 31, 2021 and 2020 our portion of revenue from line item joint ventures was $8.6 million and $12.8 million, respectively.