Note 10 - Investments in Affiliates

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

10. Investments in Affiliates

Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for using the equity method of accounting, including investments in foreign affiliates, real estate entities and an asphalt terminal entity.

The foreign affiliates in which we are invested are engaged in mineral drilling services and the manufacture and supply of drilling equipment, parts and supplies in Latin America. The real estate entities were formed to accomplish specific real estate development projects in which our wholly owned subsidiary, Granite Land Company, participates with third-party partners. The asphalt terminal entity is a 50% interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant in Nevada.

We have determined that the real estate entities are not consolidated because although they are VIEs, we are not the primary beneficiary. We have determined that the foreign affiliates and the asphalt terminal entity are not consolidated because they are not VIEs and we do not hold the majority voting interest. As such, these entities are accounted for using the equity method.

Our investments in affiliates balance consists of equity method investments in the following types of entities (in thousands):

December 31,	2022			2021 (1)
Foreign	$	58,579	$	—
Real estate		8,517		9,619
Asphalt terminal		13,629		13,749
Total investments in affiliates	$	80,725	$	23,368

(1) These balances do not include amounts held for sale (see Note 2).

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis (in thousands):

December 31,	2022			2021 (1)
Current assets	$	194,210	$	34,374
Noncurrent assets		172,560		78,829
Total assets	$	366,770	$	113,203
Current liabilities	$	106,780	$	23,685
Long-term liabilities (2)		59,356		48,104
Total liabilities	$	166,136	$	71,789
Net assets	$	200,634	$	41,414
Granite’s share of net assets	$	80,725	$	23,368

(1) These balances do not include amounts held for sale (see Note 2).

(2) The balance primarily related to local bank debt for equipment purchases, working capital in our foreign affiliates and debt associated with our real estate investments. 

Of the $366.8 million in total assets as of December 31, 2022, we had investments in two real estate entities with total assets of $31.0 million and $40.2 million, our foreign affiliates had total assets of $264.6 million, and the asphalt terminal entity had total assets of $31.0 million. As of December 31, 2022 and 2021, all of the equity method investments in real estate affiliates were in residential real estate in Texas. As of December 31, 2022, our percent ownership in the real estate entities ranged from 10% to 25%. We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates ranged from 25% to 50% as of December 31, 2022.

The following table provides summarized statements of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands):

Years Ended December 31,	2022		2021		2020
Revenue	$	377,256	$	302,084	$	194,717
Gross profit	$	95,816	$	74,939	$	48,948
Income before taxes	$	60,513	$	38,261	$	28,471
Net income	$	47,331	$	33,864	$	24,073
Granite’s interest in affiliates’ net income	$	13,571	$	12,586	$	8,783

During 2020, the entities within our investments in foreign affiliates experienced a change in business climate from a rise in operating costs, resulting in increased prices and decreased demand. The corresponding decline in future operating cash flows resulted in the investments fair value to fall below the associated carrying amounts, which was considered to be other than temporary. Therefore, we recorded a non-cash impairment charge of $9.6 million during the year ended December 31, 2020.