Note 11 - Construction Joint Ventures

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Construction Joint Ventures [Text Block]

11.  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, 2022, 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 our 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, 2022, there was approximately $0.5 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $0.2 billion represented our share and the remaining $0.3 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, 2022, we were engaged in nine active CCJV projects with total contract values ranging from $12.0 million to $437.2 million for a combined total of $1.7 billion of which our share was $960.0 million. As of March 31, 2022, our share of revenue remaining to be recognized on these CCJVs was $227.2 million and ranged from $6.5 million to $68.4 million by project. Our proportionate share of the equity in these joint ventures was between 50.0% and 70.0%. During the three months ended March 31, 2022 and 2021, total revenue from CCJVs was $107.6 million and $82.6 million, respectively. During the three months ended March 31, 2022 and 2021, CCJVs provided $(7.6) million and $13.8 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As of  March 31, 2022, we were engaged in nine active unconsolidated joint venture projects with total contract values ranging from $13.9 million to $3.8 billion for a combined total of $10.7 billion of which our share was $3.0 billion. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 20.0% to 50.0%. As of  March 31, 2022, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $135.7 million and ranged from $1.3 million to $36.1 million by project.

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

(in thousands)	March 31, 2022		December 31, 2021		March 31, 2021
Assets
Cash, cash equivalents and marketable securities	$	157,869	$	182,891	$	161,574
Other current assets (1)		663,187		661,342		768,127
Noncurrent assets		92,153		103,579		150,273
Less partners’ interest		604,157		633,634		719,634
Granite’s interest (1),(2)	$	309,052	$	314,178	$	360,340
Liabilities
Current liabilities	$	263,213	$	307,674	$	470,667
Less partners’ interest and adjustments (3)		130,443		154,771		241,250
Granite’s interest	$	132,770	$	152,903	$	229,417
Equity in construction joint ventures (4)	$	176,282	$	161,275	$	130,923

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of  March 31, 2022,  December 31, 2021 and  March 31, 2021 was $82.1 million, $82.1 million and $82.3 million, respectively, related to performance guarantees.

(2) Included in this balance as of March 31, 2022, December 31, 2021 and March 31, 2021, was $107.5 million, $103.8 million and $95.4 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $2.9 million, $10.7 million and $12.9 million related to Granite’s share of estimated recovery of back charge claims as of  March 31, 2022,  December 31, 2021 and  March 31, 2021, respectively.

(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 $14.9 million, $28.6 million and $55.6 million as of  March 31, 2022,  December 31, 2021 and March 31, 2021, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

		Three Months Ended March 31,
(in thousands)	2022			2021
Revenue
Total	$	161,139		$	232,042
Less partners’ interest and adjustments (1)		111,484			152,320
Granite’s interest	$	49,655		$	79,722
Cost of revenue
Total	$	157,921		$	248,070
Less partners’ interest and adjustments (1)		104,652			168,734
Granite’s interest	$	53,269		$	79,336
Granite’s interest in gross profit (loss)		(3,614	)	$	386
Net Income (Loss)
Total	$	3,167		$	(16,003	)
Less partners’ interest and adjustments (1)		6,794			(16,421	)
Granite’s interest in net income (loss)	$	(3,627	)	$	418

(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 and/or actual differences.

During each of the three months ended March 31, 2022 and 2021, there was a material variance on one project between our estimated and/or actual total revenue and cost of revenue when compared to that of our partners’ due to timing of recognition from differing accounting policies and 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 March 31, 2022, we were engaged in three active line item joint venture construction projects with a total contract value of $339.2 million of which our portion was $221.4 million. As of  March 31, 2022, our share of revenue remaining to be recognized on these line item joint ventures was $64.9 million. During the three months ended March 31, 2022 and 2021, our portion of revenue from line item joint ventures was $6.4 million and $8.6 million, respectively.