UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended |
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ___________ to ___________ | |
| Commission File Number: |
GRANITE CONSTRUCTION INCORPORATED
| State of Incorporation: | I.R.S. Employer Identification Number: |
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Address of principal executive offices:
(
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 22, 2022.
| Class |
| Outstanding |
| Common stock, $0.01 par value |
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Item 1. |
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Condensed Consolidated Balance Sheets as of June 30, 2022, December 31, 2021 and June 30, 2021 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. | |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 4. |
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Item 6. |
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| EXHIBIT 95 | ||
| EXHIBIT 101.INS |
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| EXHIBIT 101.SCH |
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| EXHIBIT 101.CAL |
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| EXHIBIT 101.DEF |
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| EXHIBIT 101.LAB |
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| EXHIBIT 101.PRE |
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| EXHIBIT 104 |
| Item 1. |
FINANCIAL STATEMENTS |
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
| June 30, 2022 | December 31, 2021 | June 30, 2021 | ||||||||||
| ASSETS | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents ($, $ and $ related to consolidated construction joint ventures (“CCJVs”)) | $ | $ | $ | |||||||||
| Short-term marketable securities | ||||||||||||
| Receivables, net ($, $ and $ related to CCJVs) | ||||||||||||
| Contract assets ($, $ and $ related to CCJVs) | ||||||||||||
| Inventories | ||||||||||||
| Equity in construction joint ventures | ||||||||||||
| Other current assets ($, $ and $ related to CCJVs) | ||||||||||||
| Current assets held-for-sale | ||||||||||||
| Total current assets | ||||||||||||
| Property and equipment, net ($, $ and $ related to CCJVs) | ||||||||||||
| Long-term marketable securities | ||||||||||||
| Investments in affiliates | ||||||||||||
| Goodwill | ||||||||||||
| Right of use assets | ||||||||||||
| Deferred income taxes, net | ||||||||||||
| Other noncurrent assets | ||||||||||||
| Noncurrent assets held-for-sale | — | |||||||||||
| Total assets | $ | $ | $ | |||||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities | ||||||||||||
| Current maturities of long-term debt | $ | $ | $ | |||||||||
| Accounts payable ($, $ and $ related to CCJVs) | ||||||||||||
| Contract liabilities ($, $ and $ related to CCJVs) | ||||||||||||
| Accrued expenses and other current liabilities ($, $ and $ related to CCJVs) | ||||||||||||
| Current liabilities held-for-sale | ||||||||||||
| Total current liabilities | ||||||||||||
| Long-term debt | ||||||||||||
| Long-term lease liabilities | ||||||||||||
| Other long-term liabilities | ||||||||||||
| Long-term liabilities held-for-sale | — | |||||||||||
| Commitments and contingencies (see Note 18) | ||||||||||||
| Equity | ||||||||||||
| Preferred stock, $ par value, authorized shares, outstanding | ||||||||||||
| Common stock, $ par value, authorized shares; issued and outstanding: shares as of June 30, 2022, shares as of December 31, 2021 and shares as of June 30, 2021 | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ( | ) | ||||||||
| Retained earnings | ||||||||||||
| Total Granite Construction Incorporated shareholders’ equity | ||||||||||||
| Non-controlling interests | ||||||||||||
| Total equity | ||||||||||||
| Total liabilities and equity | $ | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Construction | $ | $ | $ | $ | ||||||||||||
| Materials | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Construction | ||||||||||||||||
| Materials | ||||||||||||||||
| Total cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Other costs (see Note 7) | ||||||||||||||||
| Gain on sales of property and equipment, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||||||||||
| Other (income) expense | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Equity in income of affiliates, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) expense, net | ( | ) | ( | ) | ||||||||||||
| Total other expense, net | ||||||||||||||||
| Income (loss) from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for (benefit from) income taxes on continuing operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income from discontinued operations | ||||||||||||||||
| Net income (loss) | ( | ) | ||||||||||||||
| Amount attributable to non-controlling interests from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) attributable to Granite Construction Incorporated from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income attributable to Granite Construction Incorporated from discontinued operations | ||||||||||||||||
| Net income (loss) attributable to Granite Construction Incorporated | $ | $ | $ | $ | ( | ) | ||||||||||
| Net income (loss) per share attributable to common shareholders (see Note 16): | ||||||||||||||||
| Basic continuing operations per share | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Basic discontinued operations per share | ||||||||||||||||
| Basic earnings (loss) per share | $ | $ | $ | $ | ( | ) | ||||||||||
| Diluted continuing operations per share | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Diluted discontinued operations per share | ||||||||||||||||
| Diluted earnings (loss) per share | $ | $ | $ | $ | ( | ) | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited - in thousands)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2022 |
2021 |
2022 |
2021 |
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| Net income (loss) |
$ | $ | $ | $ | ( |
) | ||||||||||
| Other comprehensive income (loss), net of tax: |
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| Net unrealized gain (loss) on cash flow hedges |
$ | ( |
) | $ | $ | $ | ||||||||||
| Less: reclassification for net gains included in interest expense |
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| Net change |
$ | $ | $ | $ | ||||||||||||
| Foreign currency translation adjustments, net |
( |
) | ( |
) | ||||||||||||
| Other comprehensive income |
$ | $ | $ | $ | ||||||||||||
| Comprehensive income (loss) |
$ | $ | $ | $ | ( |
) | ||||||||||
| Non-controlling interests in comprehensive (income) loss |
( |
) | ( |
) | ( |
) | ||||||||||
| Comprehensive income (loss) attributable to Granite Construction Incorporated |
$ | $ | $ | $ | ( |
) | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited - in thousands, except share data)
| Outstanding Shares | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Granite Shareholders’ Equity | Non-controlling Interests | Total Equity | |||||||||||||||||||||||||
| Balances at March 31, 2022 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Net income (loss) | — | ( | ) | |||||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||
| Repurchases of common stock (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Restricted stock units (“RSUs”) vested | ||||||||||||||||||||||||||||||||
| Dividends on common stock ($ per share) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Transactions with non-controlling interests | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock-based compensation expense and other | ||||||||||||||||||||||||||||||||
| Balances at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Balances at March 31, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||
| Repurchases of common stock (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| RSUs vested | ||||||||||||||||||||||||||||||||
| Dividends on common stock ($ per share) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Transactions with non-controlling interests | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense and other | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balances at June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
| Balances at December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
| Cumulative effect of newly adopted accounting standard (see Note 2) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balances at January 1, 2022 | ( | ) | ||||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||
| Repurchases of common stock (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| RSUs vested | ( | ) | ||||||||||||||||||||||||||||||
| Dividends on common stock ($ per share) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Transactions with non-controlling interests | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense and other | ||||||||||||||||||||||||||||||||
| Balances at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Balances at December 31, 2020 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||
| Repurchases of common stock (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| RSUs vested | ( | ) | ||||||||||||||||||||||||||||||
| Dividends on common stock ($ per share) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Transactions with non-controlling interests | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense and other | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balances at June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
| Six Months Ended June 30, | 2022 | 2021 | ||||||
| Operating activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation, depletion and amortization | ||||||||
| Amortization related to long-term debt (see Note 15) | ||||||||
| Gain on sale of discontinued operations (see Note 3) | ( | ) | ||||||
| Gain on sales of property and equipment, net | ( | ) | ( | ) | ||||
| Deferred income taxes | ||||||||
| Stock-based compensation | ||||||||
| Equity in net (income) loss from unconsolidated joint ventures | ( | ) | ||||||
| Net loss from affiliates | ( | ) | ( | ) | ||||
| Other non-cash adjustments | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Deposit/insurance receivable for legal settlement (see Note 18) | ( | ) | ||||||
| Receivables | ( | ) | ( | ) | ||||
| Contract assets, net | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Contributions to unconsolidated construction joint ventures | ( | ) | ( | ) | ||||
| Distributions from unconsolidated construction joint ventures and affiliates | ||||||||
| Other assets, net | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrual for expected resolution of SEC investigation (see Note 18) | ||||||||
| Accrual for legal settlement (see Note 18) | ||||||||
| Accrued expenses and other liabilities, net | ( | ) | ||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Investing activities | ||||||||
| Purchases of marketable securities | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sales of property and equipment | ||||||||
| Proceeds from the sale of discontinued operations (see Note 3) | ||||||||
| Issuance of notes receivable | ( | ) | ||||||
| Collection of notes receivable | ||||||||
| Net cash provided by investing activities | $ | $ | ||||||
| Financing activities | ||||||||
| Proceeds from long-term debt | ||||||||
| Debt principal repayments | ( | ) | ( | ) | ||||
| Cash dividends paid | ( | ) | ( | ) | ||||
| Repurchases of common stock (See Note 1) | ( | ) | ( | ) | ||||
| Contributions from non-controlling partners | ||||||||
| Distributions to non-controlling partners | ( | ) | ( | ) | ||||
| Other financing activities, net | ( | ) | ||||||
| Net cash used in financing activities | $ | ( | ) | $ | ( | ) | ||
| Net decrease in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and $ in restricted cash at beginning of each period | ||||||||
| Cash, cash equivalents and $ and $ in restricted cash at end of each period | $ | $ | ||||||
| Less: Cash, cash equivalents and $ and $ in restricted cash included in current assets held-for-sale at end of each period | ||||||||
| Cash and cash equivalents of continuing operations at end of period | $ | $ | ||||||
| Supplementary Information | ||||||||
| Right of use assets obtained in exchange for lease obligations | $ | $ | ||||||
| Cash paid for operating lease liabilities | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| RSUs issued, net of forfeitures | $ | $ | ||||||
| Dividends declared but not paid | $ | $ | ||||||
| Contributions from non-controlling partners | $ | $ | ||||||
| Accrued equipment purchases | $ | ( | ) | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), are unaudited and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at June 30, 2022 and 2021 and the results of our operations and cash flows for the periods presented. The December 31, 2021 condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.
We prepared the accompanying condensed consolidated financial statements on the same basis as our annual consolidated financial statements, except for the adoptions of Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2022, ASUs 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), on June 30, 2022, the impacts of which are described in Note 2.
Out-of-period Adjustments: In the second quarter of 2022, we recorded immaterial out-of-period adjustments which resulted in a net $
Stock Purchase Programs: On May 2, 2022, we entered into an accelerated share repurchase agreement (“Accelerated Share Repurchase”) with Bank of Montreal. The Accelerated Share Repurchase was entered into pursuant to the existing share repurchase program. On May 2, 2022, we paid $
As discussed in more detail in Note 3, we concluded that our former Water and Mineral Services operating group (“WMS”) met the criteria for held for sale during the fourth quarter of 2021 and met the criteria for discontinued operation classification. As a result, WMS is presented in the condensed consolidated statements of operations as discontinued operations for all periods presented. Current and non-current assets and liabilities of these businesses are presented in the condensed consolidated balance sheets as assets and liabilities held for sale.
Our operations are typically affected more by weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.
2. Recently Issued and Adopted Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, which provides optional guidance to ease the potential burden in accounting for the effects of the transition away from LIBOR and other reference rates. Also, in January 2021, the FASB issued ASU 2021-01, which provided clarification guidance to ASU 2020-04. We adopted these ASUs during the quarter ended June 30, 2022, in conjunction with entering into our Fourth Amended and Restated Credit Agreement (see Note 15), which replaced the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate ("SOFR") administered by the Federal Reserve Bank of New York for purposes of interest rate calculation. The adoption of these ASUs did not have a material impact on our condensed consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments resulting in accounting for convertible debt instruments as a single liability measured at its amortized cost and ASU 2020-06 is applicable to our
As of June 30, 2022, the 2.75% Convertible Notes comprised our only convertible debt instrument. The 2.75% Convertible Notes were issued in November 2019 in an aggregate principal amount of $
The conversion rate applicable to the 2.75% Convertible Notes is
On or after November 7, 2022, we have the option to redeem for cash all or any portion of the 2.75% Convertible Notes if the last reported sale price of our common stock is equal to or greater than
In connection with the adoption of ASU 2020-06, we implemented the following accounting policy as of January 1, 2022:
Computation of Earnings per Share: Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares include common share equivalents issued under the terms of the 2012 and 2021 Equity Incentive Plans and common share equivalents issuable under our 2.75% Convertible Notes using the if-converted method. Dilutive potential common shares also include common share equivalents issuable under the terms of our warrants assuming the share price of our common stock was in excess of $
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. Discontinued Operations
During the fourth quarter of 2021, our Board of Directors approved a plan to sell the businesses in WMS within the next twelve months. This includes: our trenchless and pipe rehabilitation services business (“Inliner”); our water supply, treatment, delivery and maintenance business (“Water Resources”); and our mineral exploration drilling business (“Mineral Services”). After consideration of the relevant facts, we concluded the assets and liabilities of our WMS businesses met the criteria for classification as held for sale. We concluded the proposed disposal activities represented a strategic shift that would have a major effect on our operations and financial results and qualified for presentation as discontinued operations in accordance with FASB Accounting Standards Codification (“ASC”) Topic 205-20, Presentation of financial statements - Discontinued operations. Accordingly, the financial results of these businesses are presented in the condensed consolidated statement of operations as discontinued operations for all periods presented. Current and non-current assets and liabilities of these businesses not sold as of the balance sheet date are presented in the condensed consolidated balance sheets as assets and liabilities held for sale for all periods presented.
On March 16, 2022, we completed the sale of Inliner to Inland Pipe Rehabilitation LLC (“IPR”) and 1000097155 Ontario Inc. (“Ontario” and together with IPR, the “Purchasers”), investment affiliates of J.F. Lehman & Company, for a purchase price of $
The following table presents summarized balance sheet information of assets and liabilities held-for-sale:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Receivables, net | ||||||||||||
| Contract assets | ||||||||||||
| Inventories | ||||||||||||
| Other current assets | ||||||||||||
| Property and equipment, net | ||||||||||||
| Investments in affiliates | ||||||||||||
| Goodwill | ||||||||||||
| Right of use assets | ||||||||||||
| Other noncurrent assets | ||||||||||||
| Total assets classified as held-for-sale | $ | $ | $ | |||||||||
| Accounts payable | $ | $ | $ | |||||||||
| Contract liabilities | ||||||||||||
| Other current liabilities | ||||||||||||
| Long-term lease liabilities | ||||||||||||
| Other long-term liabilities | ||||||||||||
| Total liabilities classified as held-for-sale | $ | $ | $ | |||||||||
The following table represents summarized statements of operations information of discontinued operations (in thousands):
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Other costs | ( | ) | ( | ) | ||||||||||||
| Gain on sale of discontinued operations | ( | ) | ||||||||||||||
| Gain on sales of property and equipment, net (1), (2) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating income | ||||||||||||||||
| Other income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income from discontinued operations before income taxes | ||||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income from discontinued operations | $ | $ | $ | $ | ||||||||||||
(1) In June 2021, we completed a sale-leaseback transaction for two properties in California. The sale of these properties resulted in a reduction in net property and equipment of $
(2) In June 2022, we completed a sale-leaseback transaction on a property in Arizona. The sale of this property resulted in a reduction in net property and equipment of $
As required per ASC Topic 205-20, Presentation of financial statements - Discontinued operations, components included in the condensed consolidated statement of cash flows for the discontinued operations are as follows (in thousands):
| Six months ended June 30, | 2022 | 2021 | ||||||
| Depreciation, depletion and amortization (1) | $ | $ | ||||||
| Gain on sale of discontinued operations | $ | $ | ||||||
| Gain on sale of property and equipment | $ | $ | ||||||
| Purchases of property and equipment | $ | $ | ||||||
| Proceeds from sales of property and equipment | $ | $ | ||||||
| Proceeds from sale of discontinued operations | $ | $ | ||||||
(1) In accordance with ASC Topic 360, Property, Plant, and Equipment, we ceased recording depreciation and amortization for WMS property, plant and equipment, finite-lived tangible assets and right-of-use lease assets as of December 31, 2021.
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
4. Revisions in Estimates
Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.
When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.
In our review of these changes for the three and six months ended June 30, 2022 and 2021, we did not identify any material amounts that should have been recorded in a prior period.
There were no increases from revisions in estimates, which individually had an impact of $
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Number of projects with downward estimate changes | ||||||||||||||||
| Range of reduction in gross profit from each project, net | $ | $ | $ | $ | ||||||||||||
| Decrease to project profitability | $ | $ | $ | $ | ||||||||||||
| Decrease to net income/increase to net loss from continuing operations | $ | $ | $ | $ | ||||||||||||
| Amounts attributable to non-controlling interests | $ | $ | $ | $ | ||||||||||||
| Decrease to net income/increase to net loss attributable to Granite Construction Incorporated from continuing operations | $ | $ | $ | $ | ||||||||||||
| Decrease to net income/increase to net loss per diluted share attributable to common shareholders from continuing operations | $ | $ | $ | $ | ||||||||||||
The decreases during the three and six months ended June 30, 2022 were due to additional costs related to extended project duration, increased labor and materials costs, and disputed work being performed where there are ongoing legal claims. The decreases during the six months ended June 30, 2021 were due to additional costs from acceleration of work coupled with lower productivity than originally anticipated and weather impacts.
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. Disaggregation of Revenue
We disaggregate our revenue based on our reportable segments (see Note 19) and operating groups as these are the formats that are regularly reviewed by management. Our reportable segments are: Construction and Materials. In alphabetical order, our operating groups from continuing operations are: California, Central and Mountain. The following tables present our disaggregated revenue from continuing operations by operating group (in thousands):
Three Months Ended June 30,
| 2022 | Construction | Materials | Total | |||||||||
| California | $ | $ | $ | |||||||||
| Central | ||||||||||||
| Mountain | ||||||||||||
| Total | $ | $ | $ | |||||||||
| 2021 | Construction | Materials | Total | |||||||||
| California | $ | $ | $ | |||||||||
| Central | ||||||||||||
| Mountain | ||||||||||||
| Total | $ | $ | $ | |||||||||
Six months ended June 30,
| 2022 | Construction | Materials | Total | |||||||||
| California | $ | $ | $ | |||||||||
| Central | ||||||||||||
| Mountain | ||||||||||||
| Total | $ | $ | $ | |||||||||
| 2021 | Construction | Materials | Total | |||||||||
| California | $ | $ | $ | |||||||||
| Central | ||||||||||||
| Mountain | ||||||||||||
| Total | $ | $ | $ | |||||||||
6. Unearned Revenue
The following table presents our unearned revenue from continuing operations as of the respective periods:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| California | $ | $ | $ | |||||||||
| Central | ||||||||||||
| Mountain | ||||||||||||
| Total | $ | $ | $ | |||||||||
All unearned revenue is in the Construction segment. Approximately $
7. Other Costs
Other costs included in the condensed consolidated statements of operations for the three and six months ended June 30, 2022 primarily consisted of $
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
8. Contract Assets and Liabilities
As a result of changes in contract transaction price related to performance obligations that were satisfied or partially satisfied prior to the end of the periods, we recognized revenue of $
As of June 30, 2022, December 31, 2021 and June 30, 2021, the aggregate claim recovery estimates included in contract asset balances were $
The components of the contract asset balances as of the respective dates were as follows:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Costs in excess of billings and estimated earnings | $ | $ | $ | |||||||||
| Contract retention | ||||||||||||
| Total contract assets | $ | $ | $ |
As of June 30, 2022, December 31, 2021 and June 30, 2021, contract retention receivable from Brightline Trains Florida LLC represented
As work is performed, revenue is recognized and the corresponding contract liabilities are reduced. We recognized revenue of $
The components of the contract liability balances as of the respective dates were as follows:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Billings in excess of costs and estimated earnings, net of retention | $ | $ | $ | |||||||||
| Provisions for losses | ||||||||||||
| Total contract liabilities | $ | $ | $ |
9. Receivables, net
Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest. The following table presents major categories of receivables:
| (in thousands) |
June 30, 2022 |
December 31, 2021 |
June 30, 2021 |
|||||||||
| Contracts completed and in progress: |
||||||||||||
| Billed |
$ | $ | $ | |||||||||
| Unbilled |
||||||||||||
| Total contracts completed and in progress |
||||||||||||
| Materials sales |
||||||||||||
| Other |
||||||||||||
| Total gross receivables |
||||||||||||
| Less: allowance for credit losses |
||||||||||||
| Total net receivables |
$ | $ | $ | |||||||||
Included in other receivables at June 30, 2022, December 31, 2021 and June 30, 2021, were items such as estimated recovery from back charge claims, notes receivable, insurance receivable, fuel tax refunds and income tax refunds. Other receivables at June 30, 2022 and December 31, 2021 also included $
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
10. Fair Value Measurement
The following tables summarize significant assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands):
| Fair Value Measurement at Reporting Date Using | ||||||||||||||||
| June 30, 2022 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Cash equivalents | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Other current assets | ||||||||||||||||
| Commodity swap | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| December 31, 2021 | ||||||||||||||||
| Cash equivalents | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Accrued and other current liabilities | ||||||||||||||||
| Interest rate swap | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ |
| June 30, 2021 | ||||||||||||||||
| Cash equivalents | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Other current assets | ||||||||||||||||
| Commodity swap | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Accrued and other current liabilities | ||||||||||||||||
| Interest rate swap | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ |
Interest Rate Swaps
In connection with entering into the Third Amended and Restated Credit Agreement, we entered into two amortizing interest rate swaps with a combined initial notional amount of $
During the six months ended June 30, 2022, we terminated the entirety of our floating-to-fixed interest rate swaps in connection with the prepayments of our term loan (see Note 15). The impact to interest expense on the condensed consolidated statements of operations was $
Commodity Swaps
As of June 30, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Other Assets and Liabilities
The carrying values and estimated fair values of financial instruments that are not required to be recorded at fair value in the condensed consolidated balance sheets were as follows:
| June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||||||||||||||||
| (in thousands) | Fair Value Hierarchy | Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||
| Assets: | |||||||||||||||||||||||||
| Held-to-maturity marketable securities (1) | Level 1 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Liabilities (including current maturities): | |||||||||||||||||||||||||
| 2.75% Convertible Notes (2),(3) | Level 2 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Third Amended and Restated Credit Agreement - term loan (2) | Level 3 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Fourth Amended and Restated Credit Agreement - revolver (2) | Level 3 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
(1) All marketable securities as of June 30, 2022, December 31, 2021 and June 30, 2021 were classified as held-to-maturity and consisted of U.S. Government and agency obligations and corporate commercial paper maturing in two months to three years.
(2) The fair value of the Convertible Notes is based on the median price of the notes in an active market. The fair value of the Third Amended and Restated Credit Agreement and Fourth Amended and Restated Credit Agreement is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk. See Note 15 for more information about the 2.75% Convertible Notes, the Third Amended and Restated Credit Agreement and Fourth Amended and Restated Credit Agreement.
(3) Excluded from the carrying value is debt discount of $
During the three and six months ended June 30, 2022 and 2021, we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.
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 and six months ended June 30, 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 June 30, 2022, there was approximately $
Consolidated Construction Joint Ventures (“CCJVs”)
At June 30, 2022, we were engaged in active CCJV projects with total contract values ranging from $
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Unconsolidated Construction Joint Ventures
As of June 30, 2022, we were engaged in
The following is summary financial information related to unconsolidated construction joint ventures:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Assets | ||||||||||||
| Cash, cash equivalents and marketable securities | $ | $ | $ | |||||||||
| Other current assets (1) | ||||||||||||
| Noncurrent assets | ||||||||||||
| Less partners’ interest | ||||||||||||
| Granite’s interest (1),(2) | $ | $ | $ | |||||||||
| Liabilities | ||||||||||||
| Current liabilities | $ | $ | $ | |||||||||
| Less partners’ interest and adjustments (3) | ||||||||||||
| Granite’s interest | $ | $ | $ | |||||||||
| Equity in construction joint ventures (4) | $ | $ | $ | |||||||||
(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of June 30, 2022, December 31, 2021 and June 30, 2021 was $
(2) Included in this balance as of June 30, 2022, December 31, 2021 and June 30, 2021, was $
(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 $
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenue | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Less partners’ interest and adjustments (1) | ||||||||||||||||
| Granite’s interest | $ | $ | ||||||||||||||
| Cost of revenue | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
| Less partners’ interest and adjustments (1) | ||||||||||||||||
| Granite’s interest | $ | $ | ||||||||||||||
| Granite’s interest in gross profit (loss) | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Net Income (Loss) | ||||||||||||||||
| Total | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
| Less partners’ interest and adjustments (1) | ( | ) | ||||||||||||||
| Granite’s interest in net income (loss) (2) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
(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.
(2) 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.
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
12. Investments in Affiliates
Our investments in affiliates balance consists of equity method investments in the following types of entities:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Real estate | $ | $ | $ | |||||||||
| Asphalt terminal | ||||||||||||
| Total investments in affiliates | $ | $ | $ | |||||||||
The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Current assets | $ | $ | $ | |||||||||
| Noncurrent assets | ||||||||||||
| Total assets | $ | $ | $ | |||||||||
| Current liabilities | $ | $ | $ | |||||||||
| Long-term liabilities (1) | ||||||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Net assets | $ | $ | $ | |||||||||
| Granite’s share of net assets | $ | $ | $ | |||||||||
(1) This balance is primarily related to local bank debt for equipment purchases and debt associated with our real estate investments.
Of the $
13. Property and Equipment, net
Balances of major classes of assets and total accumulated depreciation and depletion are included in property and equipment, net in the condensed consolidated balance sheets as follows:
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Equipment and vehicles | $ | $ | $ | |||||||||
| Quarry property | ||||||||||||
| Land and land improvements | ||||||||||||
| Buildings and leasehold improvements | ||||||||||||
| Office furniture and equipment | ||||||||||||
| Property and equipment | ||||||||||||
| Less: accumulated depreciation and depletion | ||||||||||||
| Property and equipment, net | $ | $ | $ | |||||||||
14. Accrued Expenses and Other Current Liabilities
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| Accrued insurance | $ | $ | $ | |||||||||
| Deficits in unconsolidated construction joint ventures | ||||||||||||
| Payroll and related employee benefits | ||||||||||||
| Performance guarantees | ||||||||||||
| Accrual for expected resolution of SEC investigation (see Note 18) | ||||||||||||
| Accrued legal settlement (see Note 18) | ||||||||||||
| Other | ||||||||||||
| Total | $ | $ | $ | |||||||||
Other includes short-term lease liabilities, dividends payable, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, none of which are greater than 5% of total current liabilities.
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
15. Long-Term Debt and Credit Arrangements
| (in thousands) | June 30, 2022 | December 31, 2021 | June 30, 2021 | |||||||||
| 2.75% Convertible Notes | $ | $ | $ | |||||||||
| Third Amended and Restated Credit Agreement - term loan | ||||||||||||
| Fourth Amended and Restated Credit Agreement - revolver | ||||||||||||
| Debt issuance costs and other | ||||||||||||
| Total debt | $ | $ | $ | |||||||||
| Less current maturities | ||||||||||||
| Total long-term debt | $ | $ | $ | |||||||||
During the six months ended June 30, 2022, we prepaid
We may borrow on the Revolver, at our option, at either (a) the SOFR term rate plus a credit adjustment spread plus applicable margin ranging from
The amended Credit Agreement contains certain affirmative and restrictive covenants, and customary events of default. The financial covenants include a maximum Consolidated Leverage Ratio of
Effective January 1, 2022, we adopted ASU 2020-06 (see Note 2), which updated our accounting for the 2.75% Convertible Notes.
During the three and six months ended June 30, 2022, we did record amortization of the debt discount due to the implementation of ASU 2020-06, and during the three and six months ended June 30, 2021, we recorded $
16. Weighted Average Shares Outstanding and Net Income (Loss) Per Share
The following table presents a reconciliation of the weighted average shares of common stock used in calculating basic and diluted net income (loss) per share as well as the calculation of basic and diluted net income (loss) per share:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in thousands, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Numerator (basic and diluted) | ||||||||||||||||
| Net income (loss) from continuing operations allocated to common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Net income from discontinued operations allocated to common shareholders | $ | $ | ||||||||||||||
| Net income (loss) allocated to common shareholders | $ | $ | $ | $ | ( | ) | ||||||||||
| Denominator | ||||||||||||||||
| Weighted average common shares outstanding, basic | ||||||||||||||||
| Dilutive effect of RSUs and convertible notes | ||||||||||||||||
| Dilutive effect of 2.75% Convertible Notes | ||||||||||||||||
| Weighted average common shares outstanding, diluted | ||||||||||||||||
| Basic: |
||||||||||||||||
| Net income (loss) from continuing operations per share |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
| Net income from discontinued operations per share |
||||||||||||||||
| Net income (loss) per share |
$ | $ | $ | $ | ( |
) | ||||||||||
| Diluted: |
||||||||||||||||
| Net income (loss) from continuing operations per share |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
| Net income from discontinued operations per share |
||||||||||||||||
| Net income (loss) per share |
$ | $ | $ | $ | ( |
) |
Due to the net loss from continuing operations for the three months ended June 30, 2022 and the six months ended June 30, 2022 and 2021, RSUs representing
17. Income Taxes
The following table presents the provision for (benefit from) income taxes on continuing operations for the respective periods:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Provision for (benefit from) income taxes on continuing operations | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Effective tax rate | ( | %) | % | % | % | |||||||||||
Our effective tax rate for the three and six months ended June 30, 2022 was lower than the prior year primarily due to a $
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
18. Contingencies - Legal Proceedings
Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. It is possible that future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not previously have been reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any reporting period. Disclosure of loss contingencies is provided when a material loss is probable but not reasonably estimable, a material loss is reasonably possible but not probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded. The total range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and reasonably estimable.
The total liabilities for legal proceedings recorded as of June 30, 2022 and December 31, 2021 were $
Ordinary Course Legal Proceedings
In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which often cannot be predicted with certainty. For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note 1 of our Annual Report. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty.
Some of the matters in which we or our joint ventures and affiliates are involved may include compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not considered probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.
Securities Litigation and Derivative Lawsuits
On August 13, 2019, a securities class action was filed in the United States District Court for the Northern District of California against the Company, James H. Roberts, our former President and Chief Executive Officer, and Jigisha Desai, our former Senior Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer. An amended complaint was filed on February 20, 2020 that, among other things, added Laurel Krzeminski, our former Chief Financial Officer, as a defendant. The amended complaint was brought on behalf of an alleged class of persons or entities that acquired our common stock between April 30, 2018 and October 24, 2019, and alleged claims arising under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. After the filing of the amended complaint, this case was re-titled Police Retirement System of St. Louis v. Granite Construction Incorporated, et. al. The amended complaint sought damages based on allegations that the defendants made false and/or misleading statements and failed to disclose material adverse facts in the Company’s SEC filings about its business, operations and prospects. On May 20, 2020, the court denied, in part, our motion to dismiss the amended complaint. On January 21, 2021, the court granted the plaintiff’s motion for class certification.
On October 23, 2019, a putative class action lawsuit, titled Nasseri v. Granite Construction Incorporated, et. al., was filed in the Superior Court of California, County of Santa Cruz against the Company, James H. Roberts, our former President and Chief Executive Officer, Laurel Krzeminski, our former Chief Financial Officer, and the then-serving Board of Directors on behalf of persons who acquired shares of Company common stock in the Company’s June 2018 merger with Layne Christensen Company (“Layne”). The complaint asserted causes of action under the Securities Act of 1933 and alleged that the registration statement and prospectus were negligently prepared and included materially false and misleading statements and failed to disclose facts required to be disclosed and seeks monetary damages based on the allegations. On August 10, 2020, the court sustained our demurrer dismissing the complaint with leave to amend. On September 16, 2020, the plaintiff filed an amended complaint. We filed a demurrer seeking to dismiss the amended complaint. On April 9, 2021, the court entered an order overruling our demurrer seeking to dismiss the amended complaint. On May 14, 2021, the plaintiff filed a motion for class certification.
On April 29, 2021, we entered into a stipulation of settlement (the “Settlement Agreement”) to settle Police Retirement System of St. Louis v. Granite Construction Incorporated, et al. The Settlement Agreement also settled claims alleged in Nasseri v. Granite Construction Incorporated, et al. As a result of entering into the Settlement Agreement, we recorded a pre-tax charge of approximately $
Under the Settlement Agreement, the Company agreed to pay or cause to be paid a total of $
On April 30, 2021, the class representative in Police Retirement System of St. Louis v. Granite Construction Incorporated, et al. filed a motion for preliminary approval of the settlement. The plaintiff in Nasseri v. Granite Construction Incorporated, et al. was permitted to intervene, although the court denied the plaintiff's application to be appointed as additional lead plaintiff. On October 6, 2021, the court issued an order granting preliminary approval of the settlement and, pursuant to the terms of the Settlement Agreement, $
On May 6, 2020, a stockholder derivative lawsuit, titled English v. Roberts, et al., was filed in the United States District Court for the Northern District of California against James H. Roberts, our former President and Chief Executive Officer, Jigisha Desai, our former Senior Vice President and Chief Financial Officer and Executive Vice President and Chief Strategy Officer, Laurel Krzeminski, our former Chief Financial Officer, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting claims for breach of fiduciary duty, unjust enrichment, and violations of the Securities Exchange Act of 1934 that allegedly occurred between April 30, 2018 and October 24, 2019. The lawsuit alleges that the individual defendants each knowingly inflated the Company’s revenue, income, and margins in violation of U.S. GAAP, which caused the results during the relevant periods to be materially false and misleading. The complaint seeks monetary damages and corporate governance reforms. Pursuant to court order, this action was stayed until the court's entry of final judgment on March 17, 2022 in the putative securities class action lawsuit filed in the Northern District of California.
On May 12, 2021, a stockholder derivative lawsuit, titled Davydov v. Roberts, et al., was filed in the Delaware Court of Chancery against James H. Roberts, Jigisha Desai, Laurel Krzeminski, Craig Hall, our Senior Vice President, General Counsel, Corporate Compliance Officer, and Secretary, and our then-current Board of Directors, and the Company, as a nominal defendant, asserting claims for breach of fiduciary duty, unjust enrichment, and aiding and abetting breach of fiduciary duty that allegedly occurred between April 30, 2018 and October 24, 2019. The lawsuit alleges that the individual defendants each knowingly inflated the Company’s revenue, income, and margins in violation of U.S. GAAP, which caused the results during the relevant periods to be materially false and misleading. The complaint seeks monetary damages and corporate governance reforms.
On April 14, 2022, the parties in Davydov v. Roberts et al., the plaintiff in English v. Roberts et al., and the Company entered into a Stipulation of Compromise and Settlement that, if approved by the court in Davydov and not subject to termination under its terms, provides that (i) defendants will cause insurers to pay $
As of June 30, 2022, December 31, 2021 and June 30, 2021, other than the Settlement Agreement charge described above, we did not record any liability related to the above matters because we concluded such liabilities were not probable and the amounts of such liabilities were not reasonably estimable.
Other Matters
In connection with our prior disclosure of the Audit/Compliance Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group and the extent to which those matters affected the effectiveness of the Company’s internal control over financial reporting (the “Investigation”), we voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the Investigation. The SEC has issued subpoenas for documents in connection with the accounting issues identified in the Investigation. We have produced documents to the SEC and cooperated with the SEC in its investigation.
Based upon our current estimate for the expected resolution of the SEC’s investigation, we recorded a $
Our wholly-owned subsidiary, Layne, was a subcontractor on the foundation for the Salesforce Tower office building in San Francisco in 2013 and 2014. Certain anomalies were discovered in March 2014 in the foundation’s structural concrete, which were remediated by the general contractor during 2015. Layne assigned any insurance claims it may have had under the project’s builder’s risk insurance policy to the general contractor. During 2014, the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages. The claim was denied by the builder’s risk insurers. The project owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy, which proceeding was then transferred by agreement to arbitration. On July 20, 2021, we were informed of an arbitration award denying insurance coverage for claims related to the remedial measures undertaken by the general contractor of the Salesforce Tower and related damages.
On February 3, 2022, a lawsuit titled Steadfast Insurance Company (“Steadfast”), a subrogee of Clark/Hathaway Dinwiddie, a Joint Venture (“CHDJV”) v. Layne Christensen Company (“Layne”) was filed in the Superior Court of the State of California, County of San Francisco, seeking damages of approximately $
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
19. Reportable Segment Information
During the fourth quarter of 2021, we updated our strategy to focus on our core business capabilities, to leverage our current geographic based home markets in the civil construction and materials business and to target expansion based upon that combined strategy. In addition, we revised the financial information our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews to allocate resources and assess our performance. This change is consistent with our new strategic plan and better aligns with our continuing civil construction and materials business. Our CODM now regularly reviews financial information regarding our two primary product lines, construction and materials as well as our operating groups. We identified our CODM as our Chief Executive Officer and our Chief Operating Officer.
As a result of these changes, in accordance with FASB ASC Topic 280, Segment Reporting, our reportable segments, which are the same as our operating segments, were changed to: Construction and Materials. The Construction segment replaces the previous Transportation, Water and Specialty reportable segments, with the composition of our Materials segment for our continuing operations remaining unchanged. These changes have been applied retrospectively for all periods presented.
Summarized segment information is as follows:
| Three months ended June 30, |
Construction | Materials | Total | |||||||||
| 2022 |
||||||||||||
| Total revenue from reportable segments |
$ | $ | $ | |||||||||
| Elimination of intersegment revenue |
( |
) | ( |
) | ||||||||
| Revenue from external customers |
$ | $ | $ | |||||||||
| Gross profit |
$ | $ | $ | |||||||||
| Depreciation, depletion and amortization |
$ | $ | $ |
| 2021 |
||||||||||||
| Total revenue from reportable segments |
$ | $ | $ | |||||||||
| Elimination of intersegment revenue |
( |
) | ( |
) | ||||||||
| Revenue from external customers |
$ | $ | $ | |||||||||
| Gross profit |
$ | $ | $ | |||||||||
| Depreciation, depletion and amortization |
$ | $ | $ |
| Six months ended June 30, |
Construction |
Materials |
Total |
|||||||||
| 2022 |
||||||||||||
| Total revenue from reportable segments |
$ | $ | $ | |||||||||
| Elimination of intersegment revenue |
$ | ( |
) | ( |
) | |||||||
| Revenue from external customers |
$ | $ | $ | |||||||||
| Gross profit |
$ | $ | $ | |||||||||
| Depreciation, depletion and amortization |
$ | $ | $ | |||||||||
| Segment assets |
$ | $ | $ | |||||||||
| 2021 |
||||||||||||
| Total revenue from reportable segments |
$ | $ | $ | |||||||||
| Elimination of intersegment revenue |
$ | $ | ( |
) | ( |
) | ||||||
| Revenue from external customers |
$ | $ | $ | |||||||||
| Gross profit |
$ | $ | $ | |||||||||
| Depreciation, depletion and amortization |
$ | $ | $ | |||||||||
| Segment assets |
$ | $ | $ |
A reconciliation of segment gross profit from continuing operations to consolidated income (loss) from continuing operations before provision for (benefit from) income taxes is as follows:
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Total gross profit from continuing operations |
$ | $ | $ | $ | ||||||||||||
| Selling, general and administrative expenses |
||||||||||||||||
| Other costs (see Note 7) |
||||||||||||||||
| Gain on sales of property and equipment |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other expense, net |
||||||||||||||||
| Income (loss) from continuing operations before income taxes |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (our "Annual Report") and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein.
Forward-Looking Disclosure
From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results, strategic actions, the final settlement of the Accelerated Share Repurchase, the expected resolution of the SEC investigation and the sales of the Water Resources and Mineral Services businesses, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,” “outlook,” “assumes,” “believes,” “expects,” “estimates,” “anticipates,” “intends,” “plans,” “appears,” “may,” “will,” “should,” “could,” “would,” “continue,” and the negatives thereof or other comparable terminology or by the context in which they are made. In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, and results. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under “Item 1A. Risk Factors.” Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.
Overview
We deliver infrastructure solutions for public and private clients primarily in the United States. We are one of the largest diversified infrastructure companies in the United States. Within the public sector, we primarily concentrate on infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels and other infrastructure-related projects. Within the private sector, we perform site preparation, mining services and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as provide construction management professional services.
During the fourth quarter of 2021, we updated our strategy to focus on our core business capabilities, to leverage our current geographic based home markets in the civil construction and materials business and to target expansion based upon that combined strategy. Also related to our new strategic plan, during the fourth quarter of 2021, we reorganized our operating groups to improve operating efficiencies and better position the Company for long-term growth. In alphabetical order, our continuing business operating groups are California, Central and Mountain.
In addition, we revised the financial information our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews to allocate resources and assess our performance. This change is consistent with our strategic plan update and better aligns with our continuing civil construction and materials business. Our CODM now regularly reviews financial information regarding our two primary product lines, construction and materials, as well as our operating groups. We identified our CODM as our Chief Executive Officer and our Chief Operating Officer.
As a result of these changes, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, our reportable segments, which are the same as our operating segments, were changed to two reportable segments: Construction and Materials (see Note 19 of “Notes to the Condensed Consolidated Financial Statements”).
The five primary economic drivers of our business are (i) the overall health of the U.S. economy including access to resources (labor, supplies and subcontractors); (ii) federal, state and local public funding levels; (iii) population growth resulting in public and private development; (iv) the need to build, replace or repair aging infrastructure; and (v) the pricing of certain commodity related products. Changes in these drivers can either reduce our revenues and/or gross profit margins or provide opportunities for revenue growth and gross profit margin improvement.
Current Economic Environment and Outlook
Funding for our public work projects, which accounts for approximately 75% of our portfolio, is dependent on federal, state, regional and local revenues. At the federal level, the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) was enacted in November 2021 with the appropriation of funds included in the 2022 federal spending bill passed by the Administration in March 2022. The five-year IIJA provides the largest increase in federal highway, bridge and transit funding in more than six decades and includes $550 billion in related incremental funding. We continue to believe that the increased multi-year spending commitment will improve the programming visibility for state and local governments and bring meaningful impact to project lettings starting in late 2022 and then growing in 2023 and beyond. We anticipate the impact to our financial statements to gradually grow in 2023 and beyond as funds are allocated first to quicker turn projects and then later to more complex larger projects.
At state, regional and local levels, voter-approved state and local transportation measures continue to support infrastructure spending. While each market is unique, we see a strong funding environment at the state and local levels currently and we expect that environment to improve with the impact of the IIJA. In California, our top revenue-generating state, a significant part of the state infrastructure spend is funded through Senate Bill 1 (“SB-1”), the Road Repair and Accountability Act of 2017, which is a 10-year, $54.2 billion program without any sunset provisions. Revenue collected through SB-1 is on track to increase over the next five years and supports our expected growth in the state.
Over the last year, inflation, supply chain and labor constraints have had a significant impact on the global economy including the construction industry in the United States. While it is impossible to fully eliminate the impact of these factors, we have applied proactive measures such as fixed forward purchase contracts of oil related inputs and adjustment of project schedules for constraints related to construction materials such as concrete. In June 2022, we completed the purchase of a liquid asphalt terminal in California. The facility provides 170,000 barrels of liquid asphalt storage to address oil price volatility and allows Granite to expand into new, more sustainable product offerings such as asphalt modified with recycled materials. While we actively work to mitigate the impacts of oil price inflation, further price increases may adversely impact us in the future.
Granite’s Committed and Awarded Projects (“CAP”) continues to be strong with an increase from the first quarter of $278.9 million to $4.2 billion at the end of the second quarter. We believe the environments in our key markets are strong and will continue to grow as funding from IIJA is allocated for projects beginning in the second half of 2022.
Strategic Actions
The planned divestitures of the businesses in our former Water and Mineral Services operating group (“WMS”) reflect our new strategy to focus on our core civil construction and materials businesses by using sale proceeds to invest in these two businesses. The divestitures also create opportunities to streamline operational support functions, improve overhead efficiency and better leverage efficiencies of scale. The current and projected strong demand for civil construction supports the decision to grow our vertically integrated business. Through our newly reorganized operational structure, our focus is to pursue opportunities in markets where our operating groups’ presence, capabilities and resources provide strategic advantages, with improved and consistent margin expectations. The sale of our trenchless and pipe rehabilitation services business (“Inliner”) was completed on March 16, 2022 for a purchase price of $159.7 million, subject to certain adjustments. As a result of the sale, we received cash proceeds of $142.6 million based on preliminary post-closing adjustments and we recognized a gain of $6.2 million. The process to sell the remaining two businesses in the former WMS operating group is proceeding as planned with completion anticipated by the end of the year.
Litigation and SEC Matters
As further discussed in Note 18 of “Notes to the Condensed Consolidated Financial Statements,” our wholly owned subsidiary, Layne Christensen Company (“Layne”), has been sued for $100 million relating to Layne’s work on the Salesforce Tower foundation. Layne was a subcontractor on this project and potential liability for this project remained with Layne in connection with our acquisition of Layne in June 2018. See Note 18 and "In connection with acquisitions or divestitures, we may become subject to liabilities” and "We are involved in lawsuits and legal proceedings in the ordinary course of our business and may in the future be subject to other litigation and legal proceedings, and, if any of these are resolved adversely against us, it could harm our business, financial condition and results of operations” in Item 1A. Risk Factors in our Annual Report for additional information.
Additionally, as further discussed in Note 18 of “Notes to the Condensed Consolidated Financial Statements,” we accrued $12 million relating to the expected resolution of the SEC investigation.
Results of Operations
Our operations are typically affected more by weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year.
The following table presents a financial summary for the three and six months ended June 30, 2022 and 2021:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
| Total revenue |
$ | 768,286 | $ | 834,671 | $ | 1,315,872 | $ | 1,401,003 | ||||||||
| Gross profit |
$ | 78,480 | $ | 98,232 | $ | 128,255 | $ | 151,944 | ||||||||
| Selling, general and administrative expenses |
$ | 53,162 | $ | 58,628 | $ | 111,663 | $ | 119,789 | ||||||||
| Other costs (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”) |
$ | 20,177 | $ | 5,868 | $ | 28,391 | $ | 80,177 | ||||||||
| Operating income (loss) |
$ | 5,526 | $ | 34,788 | $ | (11,082 | ) | $ | (44,725 | ) | ||||||
| Total other expense, net |
$ | 5,930 | $ | 933 | $ | 10,570 | $ | 5,578 | ||||||||
| Net income (loss) from continuing operations |
$ | (2,953 | ) | $ | 26,145 | $ | (18,870 | ) | $ | (36,256 | ) | |||||
| Net income from discontinued operations (see Note 3 of "Notes to the Condensed Consolidated Financial Statements") |
$ | 19,521 | $ | 29,602 | $ | 25,617 | $ | 26,680 | ||||||||
| Amount attributable to non-controlling interests from continuing operations |
$ | 583 | $ | (1,286 | ) | $ | (2,535 | ) | $ | (2,158 | ) | |||||
| Net income (loss) attributable to Granite Construction Incorporated |
$ | 17,151 | $ | 54,461 | $ | 4,212 | $ | (11,734 | ) | |||||||
Revenue
Total Revenue by Segment
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
| (dollars in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||||||||||||||
| Construction |
$ | 632,260 | 82.3 | % | $ | 713,425 | 85.5 | % | $ | 1,107,195 | 84.2 | % | $ | 1,220,396 | 87.1 | % | ||||||||||||||||
| Materials |
136,026 | 17.7 | 121,246 | 14.5 | 208,677 | 15.8 | 180,607 | 12.9 | ||||||||||||||||||||||||
| Total |
$ | 768,286 | 100.0 | % | $ | 834,671 | 100.0 | % | $ | 1,315,872 | 100.0 | % | $ | 1,401,003 | 100.0 | % | ||||||||||||||||
Construction Revenue
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
| (dollars in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||||||||||||||
| California |
$ | 199,357 | 31.5 | % | $ | 228,631 | 32.0 | % | $ | 343,744 | 31.0 | % | $ | 387,897 | 31.7 | % | ||||||||||||||||
| Central |
207,406 | 32.8 | 287,994 | 40.4 | 431,499 | 39.0 | 541,287 | 44.4 | ||||||||||||||||||||||||
| Mountain |
225,497 | 35.7 | 196,800 | 27.6 | 331,952 | 30.0 | 291,212 | 23.9 | ||||||||||||||||||||||||
| Total |
$ | 632,260 | 100.0 | % | $ | 713,425 | 100.0 | % | $ | 1,107,195 | 100.0 | % | $ | 1,220,396 | 100.0 | % | ||||||||||||||||
Construction revenue for the three and six months ended June 30, 2022 decreased by $81.2 million and $113.2 million, or 11.4% and 9.3%, respectively, when compared to 2021. These decreases were primarily driven by the wind down of several large projects in the Central operating group, as well as delayed project awards, slower progress on existing projects due to supply chain disruptions in the current year and less favorable weather conditions in the first quarter of 2022 in the California operating group. These decreases were partially offset by increased revenue in the Mountain operating group. During the three and six months ended June 30, 2022 and 2021, the majority of revenue earned in the Construction segment was from the public sector.
Materials Revenue
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
| (dollars in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||||||||||||||
| California |
$ | 71,572 | 52.6 | % | $ | 70,490 | 58.2 | % | $ | 117,259 | 56.2 | % | $ | 112,446 | 62.2 | % | ||||||||||||||||
| Central |
13,901 | 10.2 | 10,720 | 8.8 | 24,263 | 11.6 | 19,100 | 10.6 | ||||||||||||||||||||||||
| Mountain |
50,553 | 37.2 | 40,036 | 33.0 | 67,155 | 32.2 | 49,061 | 27.2 | ||||||||||||||||||||||||
| Total |
$ | 136,026 | 100.0 | % | $ | 121,246 | 100.0 | % | $ | 208,677 | 100.0 | % | $ | 180,607 | 100.0 | % | ||||||||||||||||
Materials revenue for the three and six months ended June 30, 2022 increased by $14.8 million and $28.1 million, or 12.2% and 15.5%, respectively, when compared to 2021 driven by overall market demands driving higher sales volumes with both aggregates and asphalt, and in the second quarter of 2022 we implemented energy surcharges to cover cost increases.
Committed and Awarded Projects
CAP consists of two components: (1) unearned revenue and (2) other awards. Unearned revenue includes the revenue we expect to record in the future on executed contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. We generally include a project in unearned revenue at the time a contract is awarded, the contract has been executed and to the extent we believe funding is probable. Contract options and task orders are included in unearned revenue when exercised or issued, respectively. Certain government contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed.
Other awards include the general construction portion of construction management/general contractor (“CM/GC”) contracts and awarded contracts with unexercised contract options or unissued task orders. The general construction portion of CM/GC contracts are included in other awards to the extent contract execution and funding is probable. Contracts with unexercised contract options or unissued task orders are included in other awards to the extent option exercise or task order issuance is probable. In line with the revised reportable segments, all CAP is now in the Construction segment.
| (dollars in thousands) |
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||||||||
| Unearned revenue |
$ | 2,884,876 | 68.5 | % | $ | 2,491,537 | 63.3 | % | $ | 3,298,971 | 78.9 | % | ||||||||||||
| Other awards |
1,328,784 | 31.5 | 1,443,190 | 36.7 | 882,125 | 21.1 | ||||||||||||||||||
| Total |
$ | 4,213,660 | 100.0 | % | $ | 3,934,727 | 100.0 | % | $ | 4,181,096 | 100.0 | % | ||||||||||||
| (dollars in thousands) |
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||||||||
| California |
$ | 1,629,765 | 38.7 | % | $ | 1,480,950 | 37.7 | % | $ | 1,358,018 | 32.5 | % | ||||||||||||
| Central |
1,518,970 | 36.0 | 1,426,255 | 36.2 | 1,919,386 | 45.9 | ||||||||||||||||||
| Mountain |
1,064,925 | 25.3 | 1,027,522 | 26.1 | 903,692 | 21.6 | ||||||||||||||||||
| Total |
$ | 4,213,660 | 100.0 | % | $ | 3,934,727 | 100.0 | % | $ | 4,181,096 | 100.0 | % | ||||||||||||
CAP of $4.2 billion at June 30, 2022 increased $0.3 billion when compared to March 31, 2022. Significant new awards during the three months ended June 30, 2022 included a $200 million award for street work in Illinois, a $55 million road improvement project in Alaska, $38 million for rehabilitation, construction improvements and bridge replacement projects in California, a $36 million infrastructure project in Guam, a $15 million restoration project in California, a $13 million resurfacing project in Alaska and a $10 million highway median fill project in California.
Non-controlling partners’ share of CAP as of June 30, 2022, December 31, 2021 and June 30, 2021 was $165.2 million, $214.3 million and $273.6 million, respectively. At June 30, 2022, six contracts had total forecasted losses with remaining revenue of $178.5 million, or 4.2%, of total CAP.
Gross Profit
The following table presents gross profit by reportable segment for the respective periods:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (dollars in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
| Construction |
$ | 61,166 | $ | 76,267 | $ | 109,358 | $ | 129,036 | ||||||||
| Percent of segment revenue |
9.7 | % | 10.7 | % | 9.9 | % |
10.6 | % |
||||||||
| Materials |
17,314 | 21,965 | 18,897 | 22,908 | ||||||||||||
| Percent of segment revenue |
12.7 | 18.1 | 9.1 | 12.7 | ||||||||||||
| Total gross profit |
$ | 78,480 | $ | 98,232 | $ | 128,255 | $ | 151,944 | ||||||||
| Percent of total revenue |
10.2 | % | 11.8 | % | 9.7 | % |
10.8 | % |
||||||||
Construction gross profit for the three and six months ended June 30, 2022 decreased by $15.1 million and $19.7, or 19.8% and 15.3%, respectively, when compared to 2021 primarily due to an increase in the negative net impact from revisions in estimates in our Central operating group (see Note 4 of "Notes to the Consolidated Financial Statements").
Materials gross profit for the three and six months ended June 30, 2022 decreased by $4.7 million and $4.0 million, or 21.2% and 17.5%, respectively, when compared to 2021 primarily due to lower asphalt volumes in California and overall higher fuel costs. Although we implemented energy surcharges in the second quarter of 2022 to cover increased fuel costs, contracts we had in place without energy surcharge clauses or prior to our surcharge taking effect are still being burned through at the lower sales price.
Selling, General and Administrative Expenses
The following table presents the components of selling, general and administrative expenses for the respective periods:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (dollars in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
| Selling |
||||||||||||||||
| Salaries and related expenses |
$ | 12,802 | $ | 15,044 | $ | 27,950 | $ | 30,668 | ||||||||
| Restricted stock unit amortization |
213 | 338 | 846 | 991 | ||||||||||||
| Other selling expenses |
2,923 | (92 | ) | 4,398 | 974 | |||||||||||
| Total selling |
15,938 | 15,290 | 33,194 | 32,633 | ||||||||||||
| General and administrative |
||||||||||||||||
| Salaries and related expenses |
21,469 | 21,949 | 45,614 | 45,227 | ||||||||||||
| Restricted stock unit amortization |
1,106 | 798 | 2,761 | 1,863 | ||||||||||||
| Other general and administrative expenses |
14,649 | 20,591 | 30,094 | 40,066 | ||||||||||||
| Total general and administrative |
37,224 | 43,338 | 78,469 | 87,156 | ||||||||||||
| Total selling, general and administrative |
$ | 53,162 | $ | 58,628 | $ | 111,663 | $ | 119,789 | ||||||||
| Percent of revenue |
6.9 | % | 7.0 | % | 8.5 | % |
8.6 | % |
||||||||
Selling Expenses
Selling expenses include the costs for estimating and bidding including offsetting customer reimbursements for portions of our selling/bid submission expenses (i.e., stipends), business development and materials facility permits. Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses. Selling expenses for the three and six months ended June 30, 2022 remained relatively unchanged when compared to 2021.
General and Administrative Expenses
General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions. Other general and administrative expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, incentive compensation, changes in the fair market value of our Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses. Total general and administrative expenses for the three months ended June 30, 2022 decreased by $6.1 million, or 14.1%, and for the six months ended June 30, 2022 decreased by $8.7 million, or 10.0%, when compared to 2021, primarily due to decreases in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is offset in other (income) expense, net, through our own company-owned life insurance policy.
Other Costs
The following table presents other costs for the respective periods:
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| (in thousands) |
2022 |
2021 |
2022 |
2021 |
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| Other costs |
$ | 20,177 | $ | 5,868 | $ | 28,391 | $ | 80,177 | ||||||||
Other costs (see Note 7 of “Notes to the Condensed Consolidated Financial Statements”) for the three and six months ended June 30, 2022 increased $14.3 million and decreased $51.8 million when compared to 2021, respectively. The three months ended June 30, 2022 includes an accrual of $12 million for the expected resolution of the SEC investigation. The six months ended June 30, 2021 includes a $66 million legal settlement charge.
Income Taxes
The following table presents the provision for (benefit from) income taxes on continuing operations for the respective periods:
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| (dollars in thousands) |
2022 |
2021 |
2022 |
2021 |
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| Provision for (benefit from) income taxes on continuing operations |
$ | 2,549 | $ | 7,710 | $ | (2,782 | ) | $ | (14,047 | ) | ||||||
| Effective tax rate |
(630.9 | %) | 22.8 | % | 12.8 | % | 27.9 | % | ||||||||
We calculate our income tax provision for continuing operations at the end of each interim period by estimating our annual effective tax rate and applying that rate to our loss before benefit from income taxes. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs. See Note 17 of “Notes to the Condensed Consolidated Financial Statements” for more information.
Amount Attributable to Non-controlling Interests
The following table presents the amount attributable to non-controlling interests in consolidated subsidiaries for the respective periods:
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| (in thousands) |
2022 |
2021 |
2022 |
2021 |
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| Amount attributable to non-controlling interests |
$ | 583 | $ | (1,286 | ) | $ | (2,535 | ) | $ | (2,158 | ) | |||||
The amount attributable to non-controlling interests represents the non-controlling owners’ share of the income or loss of our consolidated construction joint ventures. The amounts for the three and six months ended June 30, 2022 decreased $1.9 million and increased $0.4 million, respectively, primarily due to impacts from revisions in estimates.
Net Income (Loss) from Discontinued Operations
Net income (loss) from discontinued operations for the three and six months ended June 30, 2022 decreased $10.1 million and $1.1 million, respectively, when compared to the same periods in 2021 primarily due to lower gains on sales of property in the current year and removal of Inliner's results due to the sale of Inliner in March 2022. These decreases were partially offset by the gain on sale of Inliner during the six months ended June 30, 2022 as well as ceasing depreciation and amortization on property, plant and equipment, finite-lived intangible assets and right-of-use lease assets in 2022 due to the classification of these assets as held-for-sale beginning December 31, 2021 (see Note 3 of “Notes to the Condensed Consolidated Financial Statements”).
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity and cash generated from operations. We may also from time-to-time issue and sell equity, debt or hybrid securities or engage in other capital markets transactions or sell one or more business units, divisions or assets including the WMS businesses.
Our material cash requirements include paying the costs and expenses associated with our operations, servicing outstanding indebtedness, making capital expenditures and paying dividends on our capital stock. We may also from time to time prepay or repurchase outstanding indebtedness, repurchase shares of our common stock or acquire assets or businesses that are complementary to our operations.
We believe our primary sources of liquidity will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, cash dividend payments and other liquidity requirements associated with our existing operations for the next twelve months. We also believe our primary sources of liquidity, access to debt and equity capital markets, proceeds from the sales of the WMS businesses and cash expected to be generated from operations will be sufficient to meet our long-term requirements and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.
As of June 30, 2022, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting primarily of U.S. Government and agency obligations and corporate commercial paper.
As of June 30, 2022, we had $19.9 million of receivables and $27.1 million of contract retention receivable from Brightline Trains Florida LLC (“Brightline”) (see Note 8 of “Notes to the Condensed Consolidated Financial Statements”). Brightline is currently experiencing delays in securing additional funding, and as a result, $16.5 million of the receivable balance was past due as of June 30, 2022. We did not deem these balances uncollectible as of June 30, 2022, however we have taken steps to mitigate the risk of non-payment and preserve our rights under our contract with Brightline. We received $6.0 million from Brightline on July 1, 2022, however the timing and probability of future payments is uncertain and if Brightline does not pay the outstanding balances, our liquidity could decrease.
During the six months ended June 30, 2022, we prepaid 100% of our outstanding term loan and replaced the Third Amended and Restated Credit Agreement dated May 31, 2018 with the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) maturing June 2, 2027. The Credit Agreement is a $350.0 million senior secured, five-year revolving facility (the “Revolver”). As of June 30, 2022, the total unused availability under the Credit Agreement was $267.1 million, resulting from $32.9 million in issued and outstanding letters of credit and $50.0 million drawn under the Revolver. See Note 15 of “Notes to the Condensed Consolidated Financial Statements” for further discussion regarding the Revolver.
In evaluating our liquidity position and needs, we also consider cash and cash equivalents held by our consolidated construction joint ventures (“CCJVs”). The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, for continuing operations as of the respective dates:
| (in thousands) |
June 30, 2022 |
December 31, 2021 |
June 30, 2021 |
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| Cash and cash equivalents excluding CCJVs |
$ | 97,079 | $ | 302,864 | $ | 269,766 | ||||||
| CCJV cash and cash equivalents (1) |
77,943 | 92,783 | 107,854 | |||||||||
| Total consolidated cash and cash equivalents |
175,022 | 395,647 | 377,620 | |||||||||
| Short-term and long-term marketable securities (2) |
66,675 | 15,600 | 10,850 | |||||||||
| Total cash, cash equivalents and marketable securities |
$ | 241,697 | $ | 411,247 | $ | 388,470 | ||||||
(1) The volume and stage of completion of contracts from our CCJVs may cause fluctuations in joint venture cash and cash equivalents between periods. The assets of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.
(2) All marketable securities were classified as held-to-maturity and consisted of U.S. and agency obligations and corporate commercial paper as of all periods presented.
Granite’s portion of CCJV cash and cash equivalents was $45.8 million, $54.4 million and $62.3 million as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively. Excluded from the table above is:
| • | $45.1 million, $56.5 million and $47.5 million as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents | |
| • | $8.6 million, $16.5 million and $15.6 million as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively, that is included in current assets held-for-sale |
Capital Expenditures
Cash Flows
| Six months ended June 30, |
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| (in thousands) |
2022 |
2021 |
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| Net cash provided by (used in): |
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| Operating activities |
$ | (103,278 | ) | $ | (31,004 | ) | ||
| Investing activities |
$ | 30,317 | $ | 1,661 | ||||
| Financing activities |
$ | (157,055 | ) | $ | (13,612 | ) | ||
Operating activities.
As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts. Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the work that we perform, including claim and back charge settlements. Our working capital assets result from both public and private sector projects. Customers in the private sector can be slower paying than those in the public sector; however, private sector projects generally have higher gross profit as a percentage of revenue. While we typically invoice our customers on a monthly basis, our contracts frequently provide for retention that is a specified percentage withheld from each payment by our customers until the contract is completed and the work accepted by the customer.
Related to the litigation settlements discussed in Note 18 of “Notes to the Condensed Consolidated Financial Statements,” we have separately presented the $129 million liability and the associated $63 million insurance receivable in the condensed consolidated statement of cash flows for the six months ended June 30, 2021. The insurance receivable was collected and the liability was paid to the Court in October 2021; therefore, the impact on operating cash flow occurred in the fourth quarter of 2021 and there was no impact during the six months ended June 30, 2022 and 2021.
Investing activities
Cash provided by investing activities of $30.3 million for the six months ended June 30, 2022 represents a $28.7 million increase when compared to 2021. The change was primarily due to proceeds from the sale of the Inliner business, partially offset by purchases of marketable securities and property and equipment and a decrease in proceeds from sales of property and equipment.
Financing activities
Cash used in financing activities of $157.1 million for the six months ended June 30, 2022 represents a $143.4 million increase when compared to 2021. The change was primarily due to the prepayment of our term loan of $124.7 million and repurchases of common stock (inclusive of our accelerated share repurchase) of $70.4 million, partially offset by $50.0 million drawn on our Revolver. The net debt paydown was undertaken at the time the Credit Agreement was entered (see Note 15 to “Notes to the Condensed Consolidated Financial Statements” for further information), to bring our cash balance in line with projected cash needs for the second half of 2022.
Derivatives
We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheets at fair value using Level 2 inputs. See Note 10 to “Notes to the Condensed Consolidated Financial Statements” for further information. The hedge option and warrant derivative transactions related to the 2.75% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds.
Surety Bonds and Real Estate Mortgages
We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At June 30, 2022, approximately $2.5 billion of our $4.2 billion CAP was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties.
Our investments in real estate affiliates are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate entities. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. The debt associated with our unconsolidated non-construction entities is included in Note 12 of “Notes to the Condensed Consolidated Financial Statements.”
Covenants and Events of Default
Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with these covenants would constitute an event of default under the Credit Agreement. Additionally, the 2.75% Convertible Notes are governed by the terms and conditions of the indenture. Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 2.75% Convertible Notes indenture or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) acceleration of amounts owed under the Credit Agreement; and/or (v) foreclosure on any lien securing the obligations under such facility. A default under the 2.75% Convertible Notes indenture could result in acceleration of the maturity of the notes.
The most significant financial covenants under the terms of our Credit Agreement require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio. As of June 30, 2022, the Consolidated Leverage Ratio was 2.57, which did not exceed the maximum of 3.25. Our Consolidated Interest Coverage Ratio was 6.53, which was above the minimum of 3.00.
Share Repurchase Program
As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million of our common stock at management’s discretion (the “2022 authorization”).
On May 2, 2022, we entered into an accelerated share repurchase transaction with Bank of Montreal. We paid $50.0 million to the bank and received 80% of the notional amount, or $40.0 million, in shares using the closing price on the trade date. This equated to approximately 1.32 million shares, which were immediately retired. The final number of shares to be repurchased under the accelerated share repurchase will be based on the average of the daily volume-weighted average price of Granite’s common stock, less a discount, during the term of the accelerated share repurchase; final settlement is expected to occur in the third quarter of 2022.
Website Access
Our website address is www.graniteconstruction.com. On our website we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The information on our website is not incorporated into, and is not part of, this report. These reports, and any amendments to them, are also available at the website of the SEC, www.sec.gov.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
There has been no material change in our exposure to market risk from what was previously disclosed in our Annual Report.
| CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| LEGAL PROCEEDINGS |
The description of the matters set forth in Part I, Item I of this Report under Note 18 of “Notes to the Condensed Consolidated Financial Statements” is incorporated herein by reference.
| RISK FACTORS |
There have been no material changes in the risk factors previously disclosed in “Item 1A. Risk Factors” in our Annual Report.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The following table sets forth information regarding the repurchase of shares of our common stock during the three months ended June 30, 2022:
| Period |
Total number of shares purchased (1) |
Average price paid per share |
Total number of shares purchased as part of publicly announced plans or programs |
Approximate dollar value of shares that may yet be purchased under the plans or programs (2) |
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| April 1, 2022 through April 30, 2022 |
203 | $31.51 | — | $281,535,405 | ||||||||||||
| May 1, 2022 through May 31, 2022 |
1,320,568 | $30.29 | 1,320,568 | $241,535,405 | ||||||||||||
| June 1, 2022 through June 30, 2022 |
4,935 | $32.11 | — | $241,535,405 | ||||||||||||
| 1,325,706 | $30.30 | 1,320,568 | ||||||||||||||
(1) Includes 203 and 4,935 shares purchased during April and June, respectively, in connection with employee tax withholding for restricted stock units vested under our equity incentive plans.
(2) As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million of our common stock at management’s discretion (the “2022 authorization”). In May 2022, we purchased approximately 1.32 million shares under the 2022 authorization in the accelerated share repurchase. As of June 30, 2022, $241.5 million of the 2022 authorization remained available; however, approximately $10 million of this amount is restricted for the accelerated share repurchase. The specific timing and amount of any future purchases will vary based on market conditions, securities law limitations and other factors.
| MINE SAFETY DISCLOSURES |
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17CFR 229.104) is included in Exhibit 95 to this Quarterly Report on Form 10-Q.
| EXHIBITS |
| 10.1 | * | Fourth Amended and Restated Credit Agreement, dated June 2, 2022, by and among Granite Construction Incorporated, Granite Construction Company, GILC Incorporated, Bank of America, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer, and the lenders and other parties thereto [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 6, 2022]. |
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| 10.2 | * | Fourth Amended and Restated Guaranty Agreement, dated June 2, 2022, by and among Granite Construction Incorporated, the guarantors party thereto and Bank of America, N.A., as Administrative Agent [Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 6, 2022]. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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GRANITE CONSTRUCTION INCORPORATED |
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| Date: |
July 28, 2022 |
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/s/ Elizabeth L. Curtis |
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Elizabeth L. Curtis |
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Executive Vice President and Chief Financial Officer |
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(Duly Authorized Officer and Principal Financial Officer) |