Note 10 - Construction Joint Ventures

6 Months Ended

Jun. 30, 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 and six months ended June 30, 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  June 30, 2021, there was approximately $1.0 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $0.4 billion represented our share and the remaining $0.6 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  June 30, 2021, we were engaged in nine active CCJV projects with total contract values ranging from $2.2 million to $437.5 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 $350.9 million and ranged from $1.0 million to $115.8 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 70.0%. During the three and six months ended June 30, 2021, total revenue from CCJVs was $114.9 million and $197.5 million, respectively, and during the three and six months ended June 30, 2020, total revenue from CCJVs was $86.0 million and $140.7 million, respectively. During the six months ended June 30, 2021 and 2020, CCJVs provided $19.4 million and $19.8 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As of  June 30, 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  June 30, 2021, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $297.0 million and ranged from $1.3 million to $61.4 million.

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

(in thousands)	June 30, 2021		December 31, 2020		June 30, 2020
Assets
Cash, cash equivalents and marketable securities	$	139,381	$	181,889	$	213,285
Other current assets (1)		795,440		767,803		948,103
Noncurrent assets		140,160		164,022		185,866
Less partners’ interest		716,678		751,125		908,274
Granite’s interest (1),(2)		358,303		362,589		438,980
Liabilities
Current liabilities		432,130		482,562		515,113
Less partners’ interest and adjustments (3)		235,649		226,308		182,035
Granite’s interest		196,481		256,254		333,078
Equity in construction joint ventures (4)	$	161,822	$	106,335	$	105,902

(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  June 30, 2021,  December 31, 2020 and  June 30, 2020 related to performance guarantees.

(2) Included in this balance as of June 30, 2021, December 31, 2020 and June 30, 2020, was $96.7 million, $88.7 million and $80.9 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $14.1 million, $13.1 million and $18.0 million as of  June 30, 2021,  December 31, 2020 and  June 30, 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 $33.6 million, $82.5 million and $77.6 million as of  June 30, 2021,  December 31, 2020 and June 30, 2020, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2021		2020			2021		2020
Revenue
Total	$	263,558	$	384,461		$	495,600	$	446,491
Less partners’ interest and adjustments (1)		176,657		287,639			328,977		265,967
Granite’s interest		86,901		96,822			166,623		180,524
Cost of revenue
Total		249,494		356,755			497,564		585,215
Less partners’ interest and adjustments (1)		169,041		241,560			337,775		374,303
Granite’s interest		80,453		115,195			159,789		210,912
Granite’s interest in gross profit (loss)	$	6,448	$	(18,373	)	$	6,834	$	(30,388	)

(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 and six months ended June 30, 2021, unconsolidated construction joint venture net income/(loss) was $13.8 million and $(2.2) million, respectively, of which our share was net income of $6.6 million and $7.0 million, respectively. During the three and six months ended June 30, 2020, unconsolidated net income/(loss) was $27.5 million and $(138.5) million, respectively, of which our share was net loss of $(18.7) million and $(30.5) million, respectively. The differences between our share of the joint venture net income/(loss) when compared to the joint venture net income/(loss) primarily resulted from differences between our estimated total revenue and cost of revenue when compared to that of our partners’ on five projects during both 2021 and 2020. The differences are due to timing differences from differing accounting policies and in public company quarterly reporting requirements. These joint venture net income/(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 June 30, 2021, we were engaged in three active line item joint venture construction projects with a total contract value of $280.2 million of which our portion was $172.2 million. As of  June 30, 2021, our share of revenue remaining to be recognized on these line item joint ventures was $61.2 million. During the three and six months ended June 30, 2021, our portion of revenue from line item joint ventures was $20.1 million and $28.7 million, respectively. During the three and six months ended June 30, 2020, our portion of revenue from line item joint ventures was $18.4 million and $31.2 million, respectively.