EDGAR 10-K Filing

Company CIK: 861459
Filing Year: 2022
Filename: 861459_10-K_2022_0001437749-22-004482.json

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ITEM 1. BUSINESS
Item 1. BUSINESS
Introduction
Granite Construction Company was incorporated in 1922. In 1990, Granite Construction Incorporated was formed as the holding company for Granite Construction Company and its wholly-owned and consolidated subsidiaries and was incorporated in Delaware. Unless otherwise indicated, the terms “we,” “us,” “our,” “Company” and “Granite” refer to Granite Construction Incorporated and its wholly-owned and consolidated subsidiaries.
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.
New Strategic Plan
During the fourth quarter of 2021, the Company updated its strategy to focus on its core business capabilities, to leverage its current geographic based home markets in the civil construction and materials business and to target expansion based upon that combined strategy. Through our strategic analysis, we determined that the end markets and geographic structure of the former Water and Mineral Services operating group (“WMS”) did not align with the Company’s new strategy and the Board of Directors approved a plan to sell these businesses within the next twelve months. As a result of these actions, we classified WMS as held-for-sale in the consolidated balance sheets and as discontinued operations in the consolidated statements of operations as of and for the year ended December 31, 2021 and applied these changes retrospectively for all other periods presented. See Note 2 of “Notes to the Consolidated Financial Statements” for WMS financial information, which has been excluded from all other disclosures unless explicitly stated otherwise.
On February 2, 2022, we entered into a purchase agreement with Inland Pipe Rehabilitation LLC (“IPR”) and 1000097155 Ontario Inc. (“Ontario” and together with IPR, the “Purchasers”), investment affiliates of J.F. Lehman & Company. Per the terms of that agreement, the Company agreed to sell our trenchless and pipe rehabilitation services business (“Inliner”), a portion of WMS, to the Purchasers, for a purchase price of $159.7 million. The sale has been unanimously approved by the Company’s Board of Directors and is subject to customary covenants and closing conditions. The transaction is expected to close in the first half of 2022. The water supply, treatment, delivery and maintenance business (“Water Resources”) and mineral exploration drilling business (“Mineral Services”), which represent the remainder of WMS, are expected to be sold within the next twelve months.
Operating Structure
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 defined as follows:
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California;
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Central (formerly Heavy Civil, Federal and Midwest operating groups), which primarily includes offices in Arizona (formerly in the Northwest operating group), Colorado, Florida, Illinois, Texas and Guam; and
• Mountain (formerly Northwest), which primarily includes offices in Alaska, Nevada, Utah and Washington.
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: 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. Our Construction segment focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports, marine ports, dams, reservoirs, aqueducts, infrastructure and site development for use by the general public and water-related construction for municipal agencies, commercial water suppliers, industrial facilities and energy companies. It also provides construction of various complex projects including infrastructure / site development, mining, public safety, tunnel, solar and other power-related projects. The Materials segment focuses on production of aggregates and asphalt production for internal use and for sale to third parties. See Note 21 of “Notes to the Consolidated Financial Statements” for additional information about our reportable segments.
Customers
Customers in our Construction segment are predominantly in the public sector and include certain federal agencies, state departments of transportation, local transit authorities, county and city public works departments, school districts and developers, utilities and private owners of industrial, commercial and residential sites. Customers of our Materials segment include internal usage by our own construction projects, as well as third-party customers. Our third-party Materials segment customers include, but are not limited to, contractors, landscapers, manufacturers of products requiring aggregate materials, retailers, homeowners, farmers and brokers. The majority of both our public and private customers are located in the United States.
During the years ended December 31, 2021, 2020 and 2019, our largest volume customer, including both prime and subcontractor arrangements, was the California Department of Transportation (“Caltrans”). Revenue recognized from contracts with Caltrans during the years ended December 31, 2021, 2020 and 2019 represented $337.1 million (11.2% of total revenue from continuing operations), $316.9 million (10.1% of total revenue from continuing operations) and $226.2 million (7.8% of total revenue from continuing operations), respectively, which was primarily in the Construction segment. Other than Caltrans, none of our customers, including both prime and subcontractor arrangements, had revenue that individually exceeded 10% of total revenue during the years ended December 31, 2021 and 2020 and none of our customers had revenue that individually exceeded 10% of total revenue during the year ended December 31, 2019.
Business Strategy
Granite exists to satisfy society’s needs for mobility, power, water and essential services that sustain living conditions and improve quality of life. Across our footprint of regional offices, Granite teams provide horizontal civil infrastructure construction services and construction materials products to a diverse base of public, industrial and commercial clients. These clients benefit from our local relationships, market intelligence and the resources and expertise of one of the oldest and most respected U.S. contractors and materials producers.
Local market knowledge, relationships, and project management expertise, supported by the financial strength of a publicly traded company with a strong balance sheet provide Granite a sustainable competitive advantage. By diversifying our revenue channels across geographies and clients, and by taking measured risks within our construction capabilities, we simultaneously grow our business and mitigate risk. Supported by proven operating processes, functional support systems and financial governance processes, our growing network of regional businesses focus on local market conditions, client relationships, employee development, workforce capabilities and investment opportunities to drive growth and efficiency within their home markets.
Additionally, the following continue to be key objectives in our new strategic plan:
Selective Bidding: We focus our resources on bidding jobs that meet our bidding criteria, which include analyzing the risk of a potential job relative to: (1) available personnel to estimate and prepare the proposal as well as to effectively manage and build the project; (2) project procurement methodology; (3) the competitive environment; (4) our experience with the type of work and the owner; (5) local resources and partnerships; (6) equipment resources; and (7) the size, duration, complexity and expected profitability of the job
Risk-Balanced Growth: We intend to grow our business by strategically adding to our client base within our current geographic markets and expanding into new geographic areas both organically and through acquisitions. Growth opportunities are evaluated relative to their incremental impact to the execution risk and profitability profile of our operating portfolio.
Vertical Integration: We own and lease aggregate reserves and own processing plants that are vertically integrated into our construction operations. By ensuring availability of these resources through strategic expansion and providing quality products, we believe we have a competitive advantage in many of our markets, as well as a source of revenue and earnings from the sale of construction materials to third parties.
Diversification: To mitigate the risks inherent in the construction business as the result of general economic factors, we pursue projects: (1) in both the public and private sectors; (2) in diverse end markets such as federal, rail, power and renewable energy; (3) for a wide range of clients from the federal government to small municipalities and from large corporations to small private customers; (4) in diverse geographic markets; (5) with procurement methods that include construction management/general contractor (“CM/GC”), design-build and bid-build; (6) that are executed according to a fixed price, time and materials, cost reimbursable and fixed unit price; and (7) of various size, duration and complexity.
Performance-Based Incentives: In 2022, we revised our incentive compensation plans to align with the key objectives outlined in our new strategic plan. Managers are incentivized with cash compensation and equity awards, payable upon the attainment of pre-established annual financial and non-financial metrics, including capital efficiency and cash flow generation.
Code of Conduct and Core Values: We strive to maintain high ethical standards through an established Code of Conduct and a company-wide compliance program, while always being guided by our core values. During 2021, we refreshed our core values, with renewed emphasis on Integrity, Safety, Excellence, Sustainability and Inclusion. We also launched monthly, company-wide campaigns emphasizing the importance of the core values to Granite.
Human Capital Resources
Employees: We believe our employees are our most valuable resource and are the primary factor in the successful implementation of our business strategies, including our new strategic plan. Significant resources are employed to attract, develop and retain extraordinary and diverse talent and fully promote each employee’s capabilities. We believe our workforce possesses strong dedication and great pride in our company demonstrated by our managerial and supervisory personnel having an average tenure of 11 years with Granite. Successful execution of our new strategy is dependent on attracting, developing, and retaining key employees who represent our core values in the communities we serve. Our focus on inclusive diversity, talent development, talent acquisition, and succession planning has allowed us to build our bench throughout the Company on many levels.
On December 31, 2021, our continuing operations employed approximately 1,900 salaried employees who work in project, functional and business unit management, estimating and administrative capacities plus approximately 1,400 hourly employees. These totals do not include employees of unconsolidated joint ventures. The total number of hourly personnel is subject to the volume of construction in progress and is seasonal. During 2021, the number of hourly employees in our continuing operations ranged from approximately 1,400 to 3,300 and averaged approximately 2,800. The majority of both our salaried and hourly personnel were located in the United States during 2021. As of December 31, 2021, three of our wholly-owned subsidiaries within our continuing operations, Granite Construction Company, Granite Construction Northeast, Inc. and Granite Industrial, Inc., were parties to craft collective bargaining agreements in many areas in which they operate (see Note 16 of the “Notes to the Consolidated Financial Statements”).
Inclusive Diversity: Our culture is driven by our core values, including an unwavering commitment to inclusive diversity. This stems from our guiding belief that diverse backgrounds, perspectives, and experiences enhance creativity and innovation. In 2021, we established Employee Resource Groups that serve employees from a variety of backgrounds. We added Inclusion as one of our refreshed core values and designated October as Inclusion month throughout our Company.
We continued to execute our inclusive diversity strategy with the following key goals:
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increase the representation of women throughout the entire organization from 13% in 2021 to 18% by 2025;
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increase women in leadership from 15% in 2021 to 20% by 2025;
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increase persons of color in leadership from 17% in 2021 to 20% by 2025; and
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increase Inclusion Index based on Kincentric 2021 Survey Data from 70% in 2021 to 80% by 2025.
We have been successful with our targeted talent acquisition plan that focused on diverse colleges and universities as exemplified by 56% of our 220 interns in 2021 being diverse (women and persons of color).
Granite is committed to pay equity, regardless of race, gender, ethnicity or sexual orientation, and annually conducts a pay equity analysis.
Employee Development and Training: The development of employees is critical to Granite’s success and is a key factor in our ability to attract and retain talent. Our people are the foundation of our success, and we encourage every employee to actively participate in their own career growth and development. Granite offers a wide variety of training opportunities to ensure our employees are supplementing their on-the-job learning with classroom and online courses needed to promote performance and growth. Through Granite University, these training topics range from soft skills to job-specific technical skills and from formal instructor-led programs to self-guided online learning. Our programs are targeted toward specific employee populations including new employees, new engineers, managers and current and emerging leaders.
In 2021, our employees completed over 40,000 training courses and more than 100 employees ranging from emerging leaders to senior leaders graduated from our multi-level leadership development program. The COVID-19 pandemic required Granite to convert many live programs to a virtual instructor-led format. We have successfully delivered over 100 classes in this virtual format in addition to ongoing in-person and self-paced online learning.
We have a robust talent and succession planning process and have established specialized programs to accelerate the development of our talent pipeline for critical roles in general management, engineering, project management, and operations. On an annual basis, we conduct group succession planning reviews with senior leaders focusing on our high performing and high potential talent, diverse talent and succession for critical roles.
Employee Engagement: We measure organizational culture and engagement to build on the competencies that are important for our future success. At least annually, we engage independent third parties to conduct employee engagement surveys. These include corporate culture assessments, as well as real-time feedback on employee engagement and on employee well-being which includes physical, emotional, social and financial health.
Compensation and Benefits: Granite’s compensation programs are designed to align the compensation of our employees with Granite’s performance and to provide proper incentives to attract, retain and motivate employees to achieve superior results. The structure of our compensation programs balances guaranteed base pay with incentive compensation opportunities.
Specifically:
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we provide wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location;
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we engage nationally recognized compensation and benefits consulting firms to independently evaluate the effectiveness of our executive compensation and benefit programs and to provide benchmarking against our peers. We align our executives’ long-term equity compensation with our shareholders’ interests by linking realizable pay to stock performance;
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annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion; and
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all employees are eligible for health and wellness insurance, paid and unpaid leave, a retirement plan, life insurance and disability/accident coverage. We also offer a variety of voluntary benefits that allow employees to select the options that meet their needs, including telemedicine, paid parental leave, prescription savings solutions, a personalized health wellness program, pet insurance and a financial wellness program.
Environmental, Social and Governance Matters
Sustainability is one of our refreshed core values and we are committed to contributing to the development of a more sustainable future. Our sustainability objectives encompass corporate social responsibility, environmental stewardship, responsible governance and long-term financial prosperity. We envision Granite as the leading provider of sustainable infrastructure solutions, differentiated by our pursuit of social, environmental, and financial excellence.
To obtain our objectives, we have a Sustainability department that coordinates and communicates our environmental, social and governance (“ESG”) initiatives across the Company and we participate in the United Nations Global Compact. Our Board of Directors oversees our sustainability program, including how we manage sustainability and ESG-related risks in conjunction with our overall Enterprise Risk Management process.
We are committed to addressing the effects of climate change, and currently have a priority target to reduce scope 1 greenhouse gas emissions by 25% by 2030 from a 2020 baseline. We use the Global Reporting Initiative and Sustainability Accounting Standards Board standards as frameworks to support performance, tracking and reporting and responsible business behavior. Within these frameworks, we have selected industry-specific metrics that align with stakeholder expectations, are relevant to our business and will have the most significant impact.
Additional information about the sustainability program and Granite’s annual Sustainability Report can be found on our website at https://www.graniteconstruction.com/company/building-better-future-today. The information on our website and Granite’s Sustainability Report are not incorporated into, and are not part of, this report.
Committed and Awarded Projects
Effective during the three months ended June 30, 2021, on a retroactive basis, we renamed contract backlog to Committed and Awarded Projects (“CAP”) and added the general construction portion of CM/GC contracts. This is the same presentation used in our quarterly reports, earnings calls and press releases. Prior period amounts have been revised to reflect this change. In line with the revised reportable segments, all CAP is now in the Construction segment.
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 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, respectively.
Substantially all of the contracts in CAP may be canceled or modified at the election of the customer; however, we have not been materially adversely affected by contract cancellations or modifications in the past (see “Contract Provisions and Subcontracting”). Many projects are added to CAP and completed within the same fiscal year and, therefore, may not be reflected in our beginning or year-end CAP. CAP by segment is presented in “Committed and Awarded Projects” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our CAP from continuing operations was $4.0 billion at both December 31, 2021 and 2020. Approximately $2.0 billion of the December 31, 2021 CAP from continuing operations is expected to be completed during 2022.
Competition and Market Trends
In both our Construction and Materials segments, we have competitors within the individual markets and geographic areas in which we operate, ranging from small, local companies to larger regional, national and international companies. Although the construction business is highly competitive, there are few, if any, companies which compete in all of our market areas. The degree and type of competition is influenced by the type and scope of construction projects within the individual markets. One of our significant competitive advantages is that we own and/or have long-term leases for quarries where we mine aggregates.
Factors influencing competitiveness in both of our segments include price, knowledge of local markets and conditions, financial strength, reputation for quality, aggregate materials availability and machinery and equipment. Factors that also influence competitiveness in our Construction segment are estimating abilities and project management.
Many of our Construction segment competitors have the ability to perform work in either the private or public sectors. When opportunities for work in one sector are reduced, competitors tend to look for opportunities in the other sector. This migration has the potential to reduce revenue growth and/or increase pressure on gross profit margins.
Capital requirements have not historically had a significant impact on our ability to compete in the marketplace. However, because smaller projects within our Construction segment have not historically required large amounts of capital, the entry by companies possessing acceptable qualifications into this market may be relatively easy. By contrast, larger projects typically require larger amounts of capital that may make entry into the market by future competitors more difficult.
See “Current Economic Environment and Outlook” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information on current market trends.
Government Regulations
Our business is impacted by environmental, health and safety, government procurement, anti-bribery and other government regulations and requirements. Below is a summary of some of the significant regulations that impact our business.
Environmental: Our operations are subject to various federal, state, local and foreign laws and regulations relating to the environment, including those relating to: (i) the discharge of materials into the air, such as equipment-related emissions and crystalline silica dust at our aggregate processing facilities; (ii) the discharge of materials into water and land; (iii) the handling and disposal of solid and hazardous waste; (iv) the handling of underground storage tanks; and (v) the cleanup of properties affected by hazardous substances. Certain environmental laws impose substantial penalties for non-compliance and others, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, impose strict, retroactive, joint and several liability upon persons responsible for releases of hazardous substances. We continually evaluate whether we must take additional steps at our locations to ensure compliance with environmental laws and whether we can operate in a more sustainable manner. While compliance with applicable regulatory requirements has not materially adversely affected our operations in the past, there can be no assurance that these requirements will not change, and that compliance will not adversely affect our operations in the future.
Government Procurement: Approximately 75% of our construction-related revenue from continuing operations in 2021 was derived from contracts funded by federal, state and local government agencies and authorities. Government contracts are subject to specific procurement regulations, contract provisions and a variety of socioeconomic requirements relating to their formation, administration, performance and accounting and often include express or implied certifications of compliance.
Our operations are subject to various statutes and executive orders including the Davis-Bacon Act (which regulates wages and benefits), the Walsh-Healy Act (which prescribes a minimum wage and regulates overtime and working conditions), Executive Order 11246 (which establishes equal employment opportunity and affirmative action requirements), Executive Order 14063 (which requires project labor agreements on federal construction projects over $35 million), the Drug-Free Workplace Act, the Federal Acquisition Regulation and the Federal Civil False Claims Act. We are also subject to the rules and regulations promulgated by the Occupational Safety and Health Administration and the Mine Safety and Health Administration. In addition, certain contracts within our government agency projects contain minimum Disadvantaged Business Enterprise (“DBE”) participation clauses.
These laws and regulations affect how we transact business and, in some instances, impose additional costs on our business operations, which may adversely affect our business, results of operations and financial condition. As further described in “Item 1A. Risk Factors,” violation of specific laws and regulations could lead to fines, contract termination, debarment of contractors and/or suspension of future contracts. Our government customers can also terminate, renegotiate or modify any of their contracts with us at their convenience.
Anti-corruption and Bribery: We are subject to the Foreign Corrupt Practices Act (“FCPA”). The FCPA prohibits U.S. and other business entities from making improper payments to foreign government officials, political parties or political party officials. We are also subject to the applicable anti-corruption laws in the jurisdictions in which we operate, thus potentially exposing us to liability and potential penalties in multiple jurisdictions. The anti-corruption provisions of the FCPA are enforced by the Department of Justice while other state or federal agencies may seek recourse against the Company for issues related to FCPA. In addition, the Securities and Exchange Commission (“SEC”) requires strict compliance with certain accounting and internal control standards set forth under the FCPA. Failure to comply with the FCPA and other laws can expose us and/or individual employees to potentially severe criminal and civil penalties. Such penalties may have a material adverse effect on our business, results of operations and financial condition. We devote resources to the development, maintenance, communication and enforcement of our Code of Conduct, our anti-bribery compliance policies, our internal control processes and compliance related policies. We strive to conduct timely internal investigations of potential violations and take appropriate action depending upon the outcome of the investigation.
Contract Provisions and Subcontracting
Contracts with our customers are primarily “fixed unit price” or “fixed price.” Under fixed unit price contracts, we are committed to providing materials or services at fixed unit prices (for example, dollars per cubic yard of concrete placed or cubic yard of earth excavated). The percentage of fixed unit price contracts in our unearned revenue from continuing operations was 53.3% and 42.6% at December 31, 2021 and 2020, respectively. While the fixed unit price contract shifts the risk of estimating the quantity of units required for a particular project to the customer, any increase in our unit cost over the expected unit cost in the bid, whether due to inflation, inefficiency, incorrect estimates or other factors, is borne by us unless otherwise provided in the contract. Fixed price contracts are priced on a lump-sum basis under which we bear the risk that we may not be able to perform the work for the specified contract amount. The percentage of fixed price contracts in our unearned revenue from continuing operations was 44.3% and 54.8% at December 31, 2021 and 2020, respectively. All other contract types represented 2.4% and 2.6% of our unearned revenue from continuing operations at December 31, 2021 and 2020, respectively.
Within our Construction segment, we utilize several methods of project delivery including, but not limited to, bid-build, design-build, CM/GC, construction management at-risk (“CMAR”) and progressive design-build. Unlike traditional bid-build projects where owners first hire a design firm or design a project themselves and then put the project out to bid for construction, the design portion of design-build projects is typically only partially complete when going out to bid. This project delivery method expedites the bidding process for the owner and provides the owner with a single point of responsibility and a single contact for both final design and construction. Under the CM/GC and CMAR delivery methods, we contract with owners to assist the owner during the design phase of the contract with construction efficiencies and risk mitigation, with the understanding that we will negotiate a contract on the construction phase when the collective design nears completion. The progressive design-build delivery method is similar to CM/GC and CMAR; however, we are responsible for the design of the project and will subcontract with a design firm, with the understanding that we will negotiate a contract that includes both the design and construction prices when the collective design nears completion.
With the exception of contract change orders and affirmative claims, which are typically sole-source, our construction contracts are primarily obtained through competitive bidding in response to solicitations by both public agencies and private parties and on a negotiated basis as a result of solicitations from private parties. Project owners use a variety of methods to make contractors aware of new projects, including posting bidding opportunities on agency websites, disclosing long-term infrastructure plans, advertising and other general solicitations. Our bidding activity is affected by such factors as the nature and volume of advertising and other solicitations, current CAP, available personnel, current utilization of equipment and other resources and competitive considerations. Our contract review process includes identifying risks and opportunities during the bidding process and managing these risks through mitigation efforts such as contract negotiation, bid/no bid decisions, insurance and pricing. Contracts fitting certain criteria of size and complexity are reviewed by various levels of management and, in some cases, by our Board of Directors or a committee thereof. Bidding activity, CAP and revenue resulting from the award of new contracts may vary significantly from period to period.
There are a number of factors that can create variability in contract performance as compared to the original bid. Such factors can positively or negatively impact costs and profitability and can create additional liability to the contractor. The most significant of these include:
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changes in costs of labor and/or materials;
• subcontractor costs, availability and/or performance issues;
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extended overhead and other costs due to owner, weather and other delays;
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changes in productivity expectations;
• changes from original design on design-build projects;
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our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs;
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a change in the availability and proximity of equipment and materials;
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complexity in original design;
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length of time to complete the project;
• the availability and skill level of workers in the geographic location of the project;
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site conditions that differ from those assumed in the original bid;
• costs associated with scope changes; and
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the customer’s ability to properly administer the contract.
The ability to realize improvements on project profitability at times is more limited than the risk of lower profitability. For example, design-build contracts carry additional risks such as those associated with design errors and estimating quantities and prices before the project design is completed. We manage this additional risk by including contingencies in our bid amounts, obtaining errors and omissions insurance and obtaining indemnifications from our design consultants where possible. However, there is no guarantee that these risk management strategies will always be successful.
Most of our contracts, including those with the government, provide for termination at the convenience of the contract owner, with provisions to pay us for work performed through the date of termination. We have not been materially adversely affected by these provisions in the past. Many of our contracts contain provisions that require us to pay liquidated damages if specified completion schedule requirements are not met, and these amounts could be significant.
We act as prime contractor on most of our construction projects. We complete the majority of our projects with our own resources and subcontract specialized activities such as electrical and mechanical work. As prime contractor, we are responsible for the performance of the entire contract, including subcontract work. Thus, we may be subject to increased costs associated with the failure of one or more subcontractors to perform as anticipated. Based on our analysis of their construction and financial capabilities, among other criteria, we typically require the subcontractor to furnish a bond or other type of security to guarantee their performance and/or we retain payments, or some portion thereof, in accordance with contract terms until their performance is complete. DBE regulations require us to use our good faith efforts to subcontract a specified portion of contract work done for governmental agencies to certain types of disadvantaged contractors or suppliers. As with all of our subcontractors, some may not be able to obtain surety bonds or other types of performance security.
Joint Ventures
We participate in various construction joint ventures with other construction companies of which we are a limited member (“joint ventures”) typically for large, technically complex projects, including design-build projects, where it is necessary or desirable to share expertise, risk and resources. Joint venture partners typically provide independently prepared estimates, shared financing and equipment, and often bring local knowledge and expertise. Generally, each construction joint venture is formed as a partnership or limited liability company to accomplish a specific project and is jointly controlled by the joint venture partners. We select our joint venture partners (“partner(s)”) based on our analysis of their construction and financial capabilities, expertise in the type of work to be performed and past working relationships, among other criteria. The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities, that may result from the performance of the contracts are limited to our stated percentage interest in the project.
Under each joint venture agreement, one partner is designated as the sponsor. The sponsoring partner typically provides all administrative, accounting and most of the project management support for the project and generally receives a fee from the joint venture for these services. We have been designated as the sponsoring partner in certain of our current joint venture projects and are a non-sponsoring partner in others. In alignment with our new strategic plan and project bidding criteria, when entering into new joint venture agreements, we insist on being the sponsoring partner.
We consolidate joint ventures if we determine that through our participation we have a variable interest and are the primary beneficiary as defined by FASB ASC Topic 810, Consolidation, and related standards. If we have determined that we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations. We record the corresponding investment balance in equity in construction joint ventures in the consolidated balance sheets except when a project is in a loss position, the investment balance is recorded as a deficit in unconsolidated construction joint ventures and is included in accrued expenses and other current liabilities in the consolidated balance sheets. We account for non-construction unconsolidated joint ventures under the equity method of accounting in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures and include our share of the operations in equity in income of affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets.
We also participate in “line-item” joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work. The revenue for each line-item joint venture partners’ discrete items of work is defined in the contract with the project owner and each joint venture partner bears the profitability risk associated only with its own work. There is not a single set of books and records for a line-item joint venture. Each partner accounts for its items of work individually as it would for any self-performed contract. We account for our portion of these contracts as revenue and cost of revenue in the consolidated statements of operations and in relevant balances in the consolidated balance sheets.
The agreements with our partner(s) for both construction joint ventures and line-item joint ventures define each partner’s management role and financial responsibility in the project. The amount of operational exposure is generally limited to our stated ownership interest. However, due to the joint and several nature of the performance obligations under the related owner contracts, if any of the partners fail to perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide a performance guarantee). We estimate our liability for performance guarantees for our unconsolidated and line-item joint ventures using estimated partner bond rates, which are Level 2 inputs, and include them in accrued expenses and other current liabilities with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability and corresponding asset are removed from the consolidated balance sheets upon completion and customer acceptance of the project. Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the agreement. We are not able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.
At December 31, 2021, there was $0.7 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts, of which $0.3 billion represented our share and is included in our CAP and the remaining $0.4 billion represented our partners’ share. See Note 9 of “Notes to the Consolidated Financial Statements” for more information.
Insurance and Bonding
We maintain insurance coverage and limits consistent with industry practice and in alignment with our overall risk management strategy. Policies include general and excess liability, property, pollution, professional, cyber security, executive risk, workers’ compensation and employer’s liability. Further, our policies are placed with financially stable insurers, often in a layered or quota share arrangement which reduces the likelihood of an interruption or impact to operations.
In connection with our business, we generally are required to provide various types of surety bonds that provide an additional measure of security for our performance under certain public and private sector contracts. Our ability to obtain surety bonds depends upon our capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of our CAP that we have currently bonded and their current underwriting standards, which may change from time to time. The capacity of the surety market is subject to market-based fluctuations driven primarily by the level of surety industry losses and the degree of surety market consolidation. When the surety market capacity shrinks it results in higher premiums and increased difficulty obtaining bonding, in particular for larger, more complex, multi-year projects throughout the market. To help mitigate this risk, we employ a co-surety structure involving three sureties. Although we do not believe that fluctuations in surety market capacity have affected our ability to grow our business, there is no assurance that it will not significantly affect our ability to obtain new contracts in the future (see “Item 1A. Risk Factors”).
Raw Materials
We purchase raw materials, including but not limited to, aggregate products, cement, diesel and gasoline fuel, liquid asphalt, natural gas, propane, resin and steel from numerous sources. Our owned and leased aggregate reserves supply a portion of the raw materials needed in our construction projects. The price and availability of raw materials may vary from year to year due to market conditions and production capacities. We do not foresee a lack of availability of any raw materials over the next twelve months from the date of this filing.
Equipment
At December 31, 2021 and 2020, we owned the following number of construction equipment and vehicles (excluding discontinued operations):
December 31,
Heavy construction equipment
1,633
1,558
Trucks, truck-tractors, trailers and vehicles
3,599
3,769
Our portfolio of equipment includes backhoes, barges, bulldozers, cranes, excavators, loaders, motor graders, pavers, rollers, scrapers, trucks and tunnel boring machines that are used in both of our segments. We pool certain equipment to maximize utilization. We continually monitor and adjust our fleet size so that it is consistent with the size of our business, considering both existing and expected future work. We lease or rent equipment to supplement our portfolio of equipment in response to construction activity cycles. In 2021 and 2020, we purchased $49.3 million and $39.7 million, respectively, of construction equipment and vehicles for continuing operations.
Seasonality
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, profitability and the required number of employees.
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 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 on the SEC’s website, www.sec.gov.
Information About Executive Officers
Information regarding our executive officers as of February 1, 2022 is set forth below.
Name
Age
Position
Kyle T. Larkin
President and Chief Executive Officer
Elizabeth L. Curtis
Executive Vice President and Chief Financial Officer
James A. Radich
Executive Vice President and Chief Operating Officer
James D. Richards
Senior Vice President and Group Manager
Michael G. Tatusko
Senior Vice President and Group Manager
Brian A. Dowd
Senior Vice President and Group Manager
Staci M. Woolsey
Chief Accounting Officer
Mr. Larkin joined Granite in 1996, has served as President since September 2020 and as Chief Executive Officer since June 2021. He also served as Executive Vice President and Chief Operating Officer from February 2020 to September 2020, Senior Vice President and Manager of Construction and Materials Operations from 2019 to 2020, Senior Vice President and Group Manager from 2017 to 2019, Vice President and Regional Manager in Nevada from 2014 to 2017 and President of Granite’s wholly-owned subsidiary, Intermountain Slurry Seal, Inc. from 2011 to 2014. He served as Manager of Construction at the Reno area office from 2008 to 2011, Chief Estimator from 2004 to 2008 and Project Manager, Project Engineer and Estimator at Granite’s Nevada Branch between 1996 and 2003. Mr. Larkin has also served as a director of our Board of Directors since June 2021. Mr. Larkin holds a B.S. in Construction Management from California Polytechnic State University, San Luis Obispo and an M.B.A. from the University of Massachusetts, Amherst.
Ms. Curtis joined Granite in 2018 and has served as Executive Vice President and Chief Financial Officer since January 2021. She also served as Chief Accounting Officer from October 2020 to January 2021, Vice President of Investor Relations from 2019 to October 2020, and Vice President and Integration Management Officer from 2018 to 2019. Before joining Granite, Ms. Curtis served as Vice President and Chief Accounting Officer for Layne Christensen Company (“Layne”) from 2016 to 2018. Prior to joining Layne, Ms. Curtis worked for Cameron from 2009 to 2016 serving in positions of increasing responsibility and ultimately as their Controller, in charge of external reporting, accounting policies, and internal controls from 2015 to 2016. Ms. Curtis began her career in public accounting with Deloitte and graduated from Texas A&M University with B.S. degrees in Accounting and Finance and is a Certified Public Accountant.
Mr. Radich first joined Granite in 1980 and rejoined the Company in 2011. He has served as Executive Vice President and Chief Operating Officer since December 2020. He also served as Senior Vice President and Group Manager from January 2020 to December 2020, as Vice President and Coastal Region Manager from 2014 to 2019 and Vice President of the Northern California Region from 2011 to 2014. From 1993 to 2011 Mr. Radich was employed by Oldcastle Materials. Mr. Radich served Granite as Project Engineer from 1980 to 1983, Project Manager from 1985 to 1990 for the Heavy Civil and Vertical Divisions and Chief Estimator from 1990 to 1993 in the Vertical Division. He received a B.S.C.E. from Santa Clara University and is a Registered Civil Engineer.
Mr. Richards joined Granite in 1992 and has served as Senior Vice President and Group Manager since 2013, Arizona Region Manager from 2006 to 2012, Arizona Region Chief Estimator from 2000 through 2006, Estimator/Project Manager from 1996 to 2000, Regional Equipment Manager from 1993 to 1996 and Project Engineer from 1992 into 1993. Prior to joining Granite, he served as a U.S. Army Officer. Mr. Richards received a B.S. in Civil Engineering from New Mexico State University.
Mr. Tatusko joined Granite in 1991 and has served as Senior Vice President and Group Manager since January 2020. He served as Vice President and Valley Region Manager from 2014 to 2019, Northern California Area Manager from 2012 to 2014, Design Build Project Executive from 2010 to 2012, Group Construction Manager from 2007 to 2010, Arizona Operations Manager from 2005 to 2007, Arizona Construction Manager from 2001 to 2005, Plants Manager from 1999 to 2001, Estimator/Project Manager from 1995 to 1999 and Project Engineer from 1993 to 1995. Prior to joining Granite, he was employed at Oldcastle Tilcon from 1984 to 1991. Mr. Tatusko received a Construction Management degree from Southern Maine Tech.
Mr. Dowd joined Granite in 1986 and has served as Senior Vice President and California Group Manager since January 2021. He also served as Vice President and Regional Manager in Nevada from October 2017 to December 2020 and Vice President and Large Projects Business Development Manager from 2013 to 2017. He served as California Group Business Development Manager from 2012 to 2013, Sacramento Valley Region Manager from 2007 to 2012, Vice President and Director of Human Resources from 2005 to 2007, Director of Employee Development from 2000 to 2005, San Diego Area Manager from 1994 to 2000, and Project Manager, Estimator and Project Engineer at Granite's Indio and Sacramento Branches between 1986 and 1994. Mr. Dowd holds a B.S. in Civil Engineering from the University of California, Berkeley and is a Registered Engineer in the states of California and Nevada.
Ms. Woolsey joined Granite in June 2021 and was appointed Chief Accounting Officer on January 1, 2022. Prior to this appointment and since joining the Company in June 2021, Ms. Woolsey served in a non-officer role with accounting responsibilities and reported directly to Ms. Curtis. Prior to joining the Company, Ms. Woolsey was the Vice President and Corporate Controller from December 2018 to August 2020 and Vice President, Corporate Controller and Chief Accounting Officer from August 2020 to June 2021 of MDC Holdings, Inc. From February 2016 to December 2018, Ms. Woolsey was the Vice President and Controller of the Energy, Infrastructure and Industrial Construction division of AECOM. Ms. Woolsey received a B.S. degree in Accounting from the University of Idaho and is a Certified Public Accountant.

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ITEM 1A. RISK FACTORS
Item 1A. RISK FACTORS
Set forth below and elsewhere in this report and in other documents we file with the SEC are various risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report or otherwise adversely affect our business.
RISKS RELATED TO OUR INVESTIGATION, RESTATEMENT AND MATERIAL WEAKNESSES
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We restated our consolidated financial statements for several prior periods and failed to timely file our Annual and Quarterly Reports with the SEC, which has affected and may continue to affect investor confidence, our stock price and our reputation with our customers. It may also result in additional stockholder litigation and may reduce customer confidence in our ability to complete new contract opportunities. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, we restated our consolidated financial statements for the years ended December 31, 2018 and 2017 and unaudited quarterly financial information for the first three quarters of the year ended December 31, 2019 and for each of the quarters in the year ended December 31, 2018 to correct misstatements associated with project forecasts in our former Heavy Civil operating group, which is now part of our Central operating group, discovered in connection with the independent investigation (the “Investigation”) of the Audit/Compliance Committee (the “Audit Committee”) of our Board of Directors. As a result of the Investigation and restatement process, we failed to timely file our Annual and Quarterly Reports with the SEC. Such Investigation, restatement and failure to timely file our Annual and Quarterly Reports with the SEC:
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had and may continue to have the effect of eroding investor confidence in us and our financial reporting and accounting practices and processes;
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negatively impacted and may continue to negatively impact the trading price of our common stock;
• required that we incur significant expenses related to the Investigation, restatement and remediation of the deficiencies in our internal control over financial reporting and may require that we incur significant additional expenses relating to any additional stockholder litigation;
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may result in additional stockholder litigation;
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may make it more difficult, expensive and time consuming for us to raise capital, if necessary, on acceptable terms, if at all;
• may make it more difficult to pursue transactions or implement business strategies that might otherwise be beneficial to our business;
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may negatively impact our reputation with our customers; and
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may cause customers to place new orders with other companies.
The occurrence or continued occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
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We identified material weaknesses in our internal control over financial reporting in our Annual Reports on Form 10-K for the years ended December 31, 2019 and 2020, which have been remediated. If we identify material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately and timely report our financial results, investors may lose confidence in us and the market price of our common stock may decrease. As disclosed in our Annual Reports on Form 10-K for the years ended December 31, 2019 and 2020, we identified control deficiencies that constituted material weaknesses, either individually or in the aggregate, and since 2020, Company management, with the assistance of outside consultants, has reviewed and revised our internal control over financial reporting in response to the material weaknesses. Management has now concluded that these material weaknesses have been remediated.
We may not be able to accurately and timely report our financial results and/or we may not be able to detect errors on a timely basis if in the future we: (1) identify one or more material weaknesses in our internal control over financial reporting; (2) are unable to successfully remediate any future material weaknesses; (3) are unable to comply with the requirements of Section 404 in a timely manner; or (4) are unable to assert, or our independent registered public accounting firm is unable to attest, that our internal control over financial reporting is effective. This could result in: (i) our financial statements being materially misstated; (ii) investors losing confidence in the accuracy and completeness of our financial reports; (iii) the market price of our common stock decreasing (iv) our liquidity and access to the capital markets being adversely affected; and (v) our inability to maintain compliance with applicable stock exchange listing requirements and debt covenants requirements. We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources and could result in fines, penalties, trading suspensions or other remedies.
Further, because of its inherent limitations, even our remediated and effective internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in our conditions, or that the degree of compliance with our policies or procedures may deteriorate.
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We are involved in, and may in the future be subject to, litigation and regulatory examinations, investigations, proceedings or orders as a result of or relating to our restatement and our failure to timely file our Annual and Quarterly Reports with the SEC and if any of these are resolved adversely against us, it could harm our business, financial condition and results of operations. We are currently the subject of securities class action litigation and derivative lawsuits. Additionally, in connection with our disclosure of the Audit Committee’s independent Investigation, we voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding that Investigation. Since contacting the SEC, we have produced documents to the SEC regarding the accounting issues identified during the independent Investigation and will continue to cooperate with the SEC in its investigation. The SEC’s investigation is ongoing and was not resolved when the Audit Committee completed the Investigation or when the Company’s Annual Reports on Form 10-K for the years ended December 31, 2019 and 2020 were filed. The restatement and our failure to timely file our Annual and Quarterly Reports with the SEC, as well as our previously reported material weaknesses in internal control over financial reporting, may subject us to additional litigation and regulatory examinations, investigations, proceedings or orders, the assessment of civil monetary penalties, and other equitable remedies. Our management has devoted and may continue to be required to devote significant time and attention to these matters. If any of these matters are resolved adversely against us, it could harm our business, financial condition and results of operations. Additionally, while we cannot estimate our potential exposure to these matters at this time, we have already expended significant amounts investigating the claims underlying and defending these matters and expect to continue to need to expend significant amounts to conclude these matters.
RISKS RELATED TO OUR BUSINESS
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Public health events, including health epidemics or pandemics or other contagious outbreaks, could negatively impact our business, financial condition and results of operations. Our ability to perform work may be significantly affected by public health events. If a public health epidemic or pandemic or other contagious outbreak, including COVID-19, interferes with our ability, or that of our employees, contractors, suppliers, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business, our operations may be affected, which could have a material adverse effect on our business, financial condition and results of operations.
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Unfavorable economic conditions may have an adverse impact on our business. Volatility in the global financial system, deterioration in general economic activity, and fiscal, monetary and other policies that federal, state and local governments may enact, including infrastructure spending or deficit reduction measures, may have an adverse impact on our business, financial position, results of operations, cash flows and liquidity. In particular, low tax revenues, budget deficits, financing constraints, including timing of long-term federal, state and local funding releases, and competing priorities could negatively impact the ability of government agencies to fund existing or new infrastructure projects in the public sector. These factors could have a material adverse effect on the financial market and economic conditions in the United States as well as throughout the world, which may limit our ability and the ability of our customers to obtain financing and/or could impair our ability to execute our strategy. In addition, levels of new commercial and residential construction projects could be adversely affected by oversupply of existing inventories of commercial and residential properties, low property values and a restrictive financing environment.
• We work in a highly competitive marketplace. We have multiple competitors in all of the areas in which we work, and some of our competitors are larger than we are and may have greater resources than we do. Government funding for public works projects is limited, contributing to competition. An increase in competition may result in a decrease in new awards, a decrease in profit margins, or both. In addition, should downturns in residential and commercial construction activity occur, the competition for available public sector work would intensify, which could impact our revenue, CAP and profit margins.
• Our financial position could be impacted by worse than anticipated results in our former Heavy Civil operating group, which is now part of our Central operating group. We completed our previously announced strategic review of our former Heavy Civil operating group, which is now part of our Central operating group, and have taken actions that we believe will be beneficial to us and our stockholders. However, the results of our planned actions, and the timing of expected benefits, remain uncertain. In addition, it is possible that we may elect to undertake additional actions related to our Central operating group. Our results of operations, cash flows and liquidity could be materially impacted by underperformance in our Central operating group.
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Fixed price and fixed unit price contracts subject us to the risk of increased project cost. As more fully described in “Contract Provisions and Subcontracting” under “Item 1. Business,” the profitability of our fixed price and fixed unit price contracts can be adversely affected by a number of factors that can cause our actual costs to materially exceed the costs estimated at the time of our original bid. This could result in reduced profits or a loss for that project and there could be a material adverse impact to our financial position, results of operations, cash flows and liquidity.
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As part of our growth strategy, we have made and may make future acquisitions, and acquisitions involve many risks and uncertainties. These risks and uncertainties include:
• our ability to complete acquisitions in accordance with our expected plans, on terms and conditions acceptable to us or our anticipated time frame, or at all;
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difficulties identifying all significant risks during our due diligence activities;
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that acquisitions involve significant costs and require the time and attention of our management, which may divert management’s attention from ongoing operations;
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potential difficulties and increased costs associated with completion of any assumed construction projects;
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our ability to successfully manage or achieve the results we expect to experience from the acquisitions and that we may lose key employees or customers of the acquired companies;
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assumption of liabilities of an acquired business, including liabilities that were unknown at the time the acquisition was negotiated;
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difficulties related to integrating the operations and internal controls, assimilating personnel, services, and systems of an acquired business and to assimilating marketing and other operational capabilities;
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increased burdens on our staff and on our administrative, internal control and operating systems, which may hinder our legal and regulatory compliance activities;
• if we issue additional equity securities, such issuances could have the effect of diluting our earnings per share as well as our existing shareholders’ individual ownership percentages in the Company;
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the recording of goodwill or other non-amortizable intangible assets that will be subject to subsequent impairment testing and potential impairment charges, as well as amortization expenses related to certain other intangible assets; and
• while we often obtain indemnification rights from the sellers of acquired businesses, such rights may be difficult to enforce and the indemnitors may not have the ability to financially support the indemnity.
Failure to successfully manage and integrate acquisitions could harm our business, financial condition and results of operations.
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As part of our strategy, we may make divestitures, and divestitures involve many risks and uncertainties. These risks and uncertainties include:
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our ability to locate suitable acquirors for our divestitures;
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our ability to complete the divestitures in accordance with our expected plans or anticipated time frame, or at all;
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our ability to complete the divestitures on terms and conditions acceptable to us;
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difficulties separating the assets and personnel related to businesses that we expect to divest from the businesses we expect to retain;
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that divestitures involve significant costs and require the time and attention of our management, which may divert management’s attention from ongoing operations;
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our ability to successfully cause a buyer of a divested business to assume the liabilities of that business, or even if such liabilities are assumed, we may have difficulties enforcing our rights, contractual or otherwise against the buyer;
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the need to obtain regulatory approvals and other third-party consents, which potentially could disrupt customer and vendor relationships;
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potential additional tax obligations or the loss of tax benefits;
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the divestiture could negatively impact our profitability because of losses that may result from a sale, the loss of revenue or a decrease in cash flows; and
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following the completion of a divestiture, we may have less diversity in our business and in the markets we serve as well as our client base.
Failure to successfully manage divestitures may generate fewer benefits than expected and could harm our business, financial condition and results of operations.
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In connection with acquisitions or divestitures, we may become subject to liabilities. In connection with any acquisitions, we may acquire liabilities or defects such as legal claims, including but not limited to third party liability and other tort claims; claims for breach of contract; employment-related claims; environmental liabilities, conditions or damage; permitting, regulatory or other compliance with law issues; or tax liabilities. If we acquire any of these liabilities, and they are not adequately covered by insurance or an enforceable indemnity or similar agreement from a creditworthy counterparty, we may be responsible for significant out-of-pocket expenditures. In connection with any divestitures, we may incur liabilities for breaches of representations and warranties or failure to comply with operating covenants under any agreement for a divestiture. We may also retain exposure on financial or performance guarantees, contractual, employment, pension and severance obligations or other liabilities of the divested business and potential liabilities that may arise under law because of the disposition or the subsequent failure of an acquiror. As a result, performance by the divested businesses or other conditions outside of our control could have a material adverse effect on our business, financial condition and results of operations. In addition, we may indemnify a counterparty in a divestiture for certain liabilities of the divested business or operations subject to the divestiture transaction. These liabilities, if they materialize, could have a material adverse effect on our business, financial condition and results of operations.
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Design-build contracts subject us to the risk of design errors and omissions. Design-build is a common method of project delivery as it provides the owner with a single point of responsibility for both design and construction. We generally subcontract design responsibility to architectural and engineering firms. However, in the event of a design error or omission causing damages, there is risk that the subcontractor or their errors and omissions insurance would not be able to absorb the liability. In this case we may be responsible, resulting in a potentially material adverse effect on our financial position, results of operations, cash flows and liquidity.
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Many of our contracts have penalties for late completion. In some instances, including many of our fixed price contracts, we guarantee that we will complete a project by a certain date. If we subsequently fail to complete the project as scheduled, we may be held responsible for costs resulting from the delay, generally in the form of contractually agreed-upon liquidated damages. To the extent these events occur, the total cost of the project could exceed our original estimate and we could experience reduced profits or a loss on that project and there could be a material adverse impact to our financial position, results of operations, cash flows and liquidity.
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Our failure to adequately recover on affirmative claims brought by us against project owners or other project participants (e.g., back charges against subcontractors) for additional contract costs could have a negative impact on our liquidity and future operations. In certain circumstances, we assert affirmative claims to which we believe Granite is entitled against project owners, engineers, consultants, subcontractors or others involved in a project for additional costs exceeding the contract price or for amounts not included in the original contract price. These types of affirmative claims occur due to matters such as delays or changes from the initial project scope, both of which may result in additional costs. Often, these affirmative claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately predict when and on what terms they will be fully resolved. The potential gross profit impact of recoveries for affirmative claims may be material in future periods when they, or a portion of them, become probable and estimable or are settled. When these types of events occur, we use working capital to cover cost overruns pending the resolution of the relevant affirmative claims and may incur additional costs when pursuing such potential recoveries. A failure to recover on these types of affirmative claims promptly and fully could have a negative impact on our financial position, results of operations, cash flows and liquidity. In addition, while clients and subcontractors may be obligated to indemnify us against certain liabilities, such third parties may refuse or be unable to pay us.
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Unavailability of insurance coverage could have a negative effect on our operations and results. We maintain insurance coverage as part of our overall risk management strategy and pursuant to requirements to maintain specific coverage that are contained in our financing agreements and in most of our construction contracts. Although we have been able to obtain reasonably priced insurance coverage to meet our requirements in the past, there is no assurance that we will be able to do so in the future, and our inability to obtain such coverage could have an adverse impact on our ability to procure new work, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
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An inability to obtain bonding could have a negative impact on our operations and results. As more fully described in “Insurance and Bonding” under “Item 1. Business,” we generally are required to provide surety bonds securing our performance under the majority of our public and private sector contracts. Our inability to obtain reasonably priced surety bonds in the future and, while we monitor the financial health of our insurers and the insurance market, catastrophic events could reduce available limits or the breadth of coverage, both of which could significantly affect our ability to be awarded new contracts and could, therefore, have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
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We use certain commodity products that are subject to significant price fluctuations. We are exposed to various commodity price risks, including, but not limited to, diesel fuel, natural gas, propane, steel, cement and liquid asphalt arising from transactions that are entered into in the normal course of business. We use petroleum based products, such as fuels, lubricants and liquid asphalt, to power or lubricate our equipment, operate our plants, and as a significant ingredient in the asphaltic concrete we manufacture for sale to third parties and use in our asphalt paving construction projects. Although we are partially protected by asphalt or fuel price escalation clauses in some of our contracts, many contracts provide no such protection. We also use steel and other commodities in our construction projects that can be subject to significant price fluctuations. In order to manage or reduce commodity price risk, we monitor the costs of these commodities at the time of bid and price them into our contracts accordingly. Additionally, some of our contracts may include commodity price escalation clauses which partially protect us from increasing prices. At times we enter into supply agreements or pre-purchase commodities to secure pricing and may use financial contracts to further manage price risk. Significant price fluctuations could have a material adverse effect on financial position, results of operations, cash flows and liquidity
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Weather can significantly affect our revenues and profitability. Our ability to perform work is significantly affected by weather conditions such as precipitation and temperature. Changes in weather conditions can cause delays and otherwise significantly affect our project costs. The impact of weather conditions can result in variability in our quarterly revenues and profitability, particularly in the first and fourth quarters of the year.
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Force majeure events, including natural disasters and terrorists' actions, could negatively impact our business, which may affect our financial condition, results of operations or cash flows. Force majeure or extraordinary events beyond the control of the contracting parties, such as natural and man-made disasters, as well as terrorist actions, could negatively impact the economies in which we operate. We typically negotiate contract language where we are allowed certain relief from force majeure events in private client contracts and review and attempt to mitigate force majeure events in both public and private client contracts. We remain obligated to perform our services after most extraordinary events subject to relief that may be available pursuant to a force majeure clause. If we are not able to react quickly to force majeure events, our operations may be affected, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
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Our CAP is subject to unexpected adjustments and cancellations and could be an uncertain indicator of our future earnings. We cannot guarantee that the revenues projected in our CAP will be realized or, if realized, will be profitable. Projects reflected in our CAP may be affected by project cancellations, scope adjustments, time extensions or other changes. Such changes may adversely affect the revenue and profit we ultimately realize on these projects.
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Rising inflation and/or interest rates could have an adverse effect on our business, financial condition and results of operations. Economic factors, including inflation and fluctuations in interest rates, could have a negative impact on our business. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
RISKS RELATED TO OUR WORKFORCE, JOINT VENTURES AND SUBCONTRACTORS
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Our success depends on attracting and retaining qualified personnel, joint venture partners and subcontractors in a competitive environment. The success of our business is dependent on our ability to attract, develop and retain qualified personnel, joint venture partners, advisors and subcontractors. Changes in general or local economic conditions and the resulting impact on the labor market and on our joint venture partners may make it difficult to attract or retain qualified individuals in the geographic areas where we perform our work. If we are unable to provide competitive compensation packages, high-quality training programs and attractive work environments or to establish and maintain successful partnerships, our reputation, relationships and/or ability to profitably execute our work could be adversely impacted.
• Failure to maintain safe work sites could result in significant losses. Construction and maintenance sites are potentially dangerous workplaces and often put our employees and others in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. On many sites, we are responsible for safety and, accordingly, must implement safety procedures. If we fail to implement these procedures or if the procedures we implement are ineffective, we may suffer the loss of or injury to our employees, as well as expose ourselves to possible litigation. Our failure to maintain adequate safety standards through our safety programs could result in reduced profitability or the loss of projects or clients, and could have a material adverse impact on our financial position, results of operations, cash flows and liquidity.
• Strikes or work stoppages could have a negative impact on our operations and results. We are party to collective bargaining agreements covering a portion of our craft workforce. Although strikes or work stoppages have not had a significant impact on our operations or results in the past, such labor actions could have a significant impact on our operations and results if they occur in the future.
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Failure of our subcontractors to perform as anticipated could have a negative impact on our results. As further described in “Contract Provisions and Subcontracting” under “Item 1. Business,” we subcontract portions of many of our contracts to specialty subcontractors, but we are ultimately responsible for the successful completion of their work. Although we seek to require bonding or other forms of guarantees, we are not always successful in obtaining those bonds or guarantees from our higher-risk subcontractors. We may be responsible for the failures on the part of our subcontractors to perform as anticipated, resulting in a potentially adverse impact on our cash flows and liquidity. In addition, the total costs of a project could exceed our original estimates and we could experience reduced profits or a loss for that project, which could have an adverse impact on our financial position, results of operations, cash flows and liquidity.
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Our joint venture contracts subject us to risks and uncertainties, some of which are outside of our control. As further described in Note 1 of “Notes to the Consolidated Financial Statements” and in “Joint Ventures” under “Item 1. Business,” we perform certain construction contracts as a limited or minority member of joint ventures. Participating in these arrangements exposes us to risks and uncertainties, including the risk that if our partners fail to perform under joint and several liability contracts, we could be liable for completion of the entire contract. In addition, if our partners are not able or willing to provide their share of capital investment to fund the operations of the venture, there could be unanticipated costs to complete the projects, financial penalties or liquidated damages. These situations could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
To the extent we are not the controlling partner, we have limited control over many of the decisions made with respect to the related construction projects. These joint ventures may not be subject to the same compliance requirements, including those related to internal control over financial reporting. While we have controls to mitigate the risks associated with reliance on their control environment and financial information, to the extent the controlling partner makes decisions that negatively impact the joint venture or internal control problems arise within the joint venture, it could have a material adverse impact on our business, financial position, results of operations, cash flows and liquidity.
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We may be unable to identify and contract with qualified DBE contractors to perform as subcontractors. Certain of our government agency projects contain minimum DBE participation clauses. Although we have programs in place to ensure compliance, if we fail to complete these projects with the minimum DBE participation, we may be held responsible for breach of contract, which may include restrictions on our ability to bid on future projects as well as monetary damages. To the extent we are responsible for monetary damages, the total costs of the project could exceed our original estimates, we could experience reduced profits or a loss for that project and there could be a material adverse impact to our financial position, results of operations, cash flows and liquidity.
•
We may be required to contribute cash to meet our unfunded pension obligations in certain multi-employer plans. As of December 31, 2021, three of our wholly-owned subsidiaries within our continuing operations, Granite Construction Company, Granite Construction Northeast, Inc. and Granite Industrial, Inc. participate in various domestic multi-employer pension plans on behalf of union employees. Union employee benefits generally are based on a fixed amount for each year of service. We are required to make contributions to the plans in amounts established under collective bargaining agreements. Pension expense is recognized as contributions are made. The domestic pension plans are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). Under ERISA, a contributor to a multi-employer plan may be liable, upon termination or withdrawal from a plan, for its proportionate share of a plan’s unfunded vested liability. While we currently have no intention of withdrawing from a plan and unfunded pension obligations have not significantly affected our operations in the past, there can be no assurance that we will not be required to make material cash contributions to one or more of these plans to satisfy certain underfunded benefit obligations in the future.
RISKS RELATED TO LEGAL, REGULATORY, ACCOUNTING AND TAX ISSUES
• Government contractors are subject to suspension or debarment from government contracting. Government contracts expose us to a variety of risks that differ from those associated with private sector contracts. Various statutes to which our operations are subject, including, among others, the Davis-Bacon Act (which regulates wages and benefits), the Walsh-Healy Act (which prescribes a minimum wage and regulates overtime and working conditions), Executive Order 11246 (which establishes equal employment opportunity and affirmative action requirements) and the Drug-Free Workplace Act, provide for mandatory suspension and/or debarment of contractors in certain circumstances involving statutory violations. In addition, the Federal Acquisition Regulation and various state statutes provide for discretionary suspension and/or debarment in certain circumstances that might call into question a contractor’s willingness or ability to act responsibly, including as a result of being convicted of, or being found civilly liable for, fraud or a criminal offense in connection with obtaining, attempting to obtain or performing a public contract or subcontract. The scope and duration of any suspension or debarment may vary depending upon the facts and the statutory or regulatory grounds for debarment and could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
• 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. Any litigation or other legal proceedings could result in an unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle lawsuits on similarly unfavorable terms, either of which could adversely affect our business, financial condition and results of operations. We could also suffer an adverse impact on our reputation and a diversion of management's attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.
• Government contracts generally have strict regulatory requirements. Approximately 75% of our construction-related revenue from continuing operations in 2021 was derived from contracts funded by federal, state and local government agencies and authorities. Government contracts are subject to specific procurement regulations, contract provisions and a variety of socioeconomic requirements relating to their formation, administration, performance and accounting and often include express or implied certifications of compliance. Claims for civil or criminal fraud may be brought for violations of regulations, requirements or statutes. We may also be subject to qui tam litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, which could include claims for up to treble damages. Further, if we fail to comply with any of the regulations, requirements or statutes or if we have a substantial number of accumulated Occupational Safety and Health Administration, Mine Safety and Health Administration or other workplace safety violations, our existing government contracts could be terminated and we could be suspended from government contracting or subcontracting, including federally funded projects at the state level. Should one or more of these events occur, it could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
• We are subject to environmental and other regulation. As more fully described in “Government Regulations” under “Item 1. Business,” we are subject to a number of federal, state, local and foreign laws and regulations relating to the environment, including the remediation of soil and groundwater contamination, emission and discharge of materials into the environment and reclamation and closure of operations, workplace health and safety and a variety of socioeconomic requirements and are required to obtain and maintain a number of environmental approvals, permits and financial assurances. Noncompliance with such laws, regulations and permits can result in, among other things, substantial penalties, or termination or suspension of government contracts or our operations as well as civil and criminal liability. In addition, some environmental laws and regulations impose strict, joint and several liability and responsibility on present and former owners, operators or users of facilities and sites, and entities that disposed or arranged for the disposal of hazardous substances at a third-party site, for contamination at such facilities and sites, without regard to causation or knowledge of contamination. We occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities may trigger compliance requirements, including reclamation requirements, that may not be applicable to operating facilities. While compliance with these laws and regulations has not materially adversely affected our operations in the past, there can be no assurance that these requirements, laws or regulations will not change and that compliance will not adversely affect our operations in the future. Furthermore, we cannot provide assurance that existing or future circumstances or developments with respect to contamination will not require us to make significant remediation or restoration expenditures.
•
Increasing restrictions on securing aggregate reserves could negatively affect our future operations and results. Tighter regulations and the finite nature of property containing suitable aggregate reserves are making it increasingly challenging and costly to secure aggregate reserves. Although we have thus far been able to secure reserves to support our business, our financial position, results of operations, cash flows and liquidity may be adversely affected by an increasingly difficult permitting process.
•
Accounting for our revenues and costs involves significant estimates. As further described in “Critical Accounting Policies and Estimates” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” accounting for our contract-related revenues and costs, as well as other expenses, requires management to make a variety of significant estimates and assumptions. These assumptions and estimates may change significantly in the future and could result in the reversal of previously recognized revenue and profit. Such changes could have a material adverse effect on our financial position and results of operations.
•
A change in tax laws or regulations of any federal, state or international jurisdiction in which we operate could increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows and liquidity. We continue to assess the impact of various U.S. federal, state, local and international legislative proposals that could result in a material increase to our U.S. federal, state, local and/or international taxes. We cannot predict whether any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted, or if modifications were to be made to certain existing regulations, the consequences could have a material adverse impact on us, including increasing our tax burden, increasing our cost of tax compliance or otherwise adversely affecting our financial position, results of operations, cash flows and liquidity.
•
We may be exposed to liabilities under the FCPA and any determination that we or any of our subsidiaries has violated the FCPA could have a material adverse effect on our business. The FCPA generally prohibits companies and their affiliates from making improper payment to non-U.S. officials for the purpose of obtaining or retaining business. Our internal policies, procedures and Code of Conduct mandate compliance with these anti-corruption laws. However, we operate in some countries known to experience corruption. Despite our training and compliance programs, we cannot provide assurance that our internal policies and procedures will always protect us from violation of such anti-corruption laws committed by our affiliated entities or their respective officers, directors, employees and agents. We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of participating in or curtailment of business operations in those jurisdictions and the seizure of certain of our assets. Our customers in those jurisdictions could also seek to impose penalties or take other actions adverse to our interest. In addition, we could face other third-party claims by, among others, our stockholders, debt holders or other interest holders or constituents. Violations of FCPA laws, allegations of such violations and/or disclosure related to any relevant investigation could have a material adverse impact on our financial position, results of operations, cash flows and liquidity for reasons including, but not limited to, an adverse effect on our reputation, our ability to obtain new business or retain existing business, to attract and retain employees, to access the capital markets and/or could give rise to an event of default under the agreements governing our debt instruments.
RISKS RELATED TO INFORMATION TECHNOLOGY
• Changes to our outsourced software or infrastructure vendors as well as any sudden loss, breach of security, disruption or unexpected data or vendor loss associated with our information technology systems could have a material adverse effect on our business. We rely on third-party software and infrastructure to run critical accounting, project management and financial information systems. If software or infrastructure vendors decide to discontinue further development, integration or long-term maintenance support for our information systems, or there is any system interruption, delay, breach of security, loss of data or loss of a vendor, we may need to migrate some or all of our accounting, project management and financial information to other systems. Despite business continuity plans, these disruptions could increase our operational expense as well as impact the management of our business operations, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
• Cybersecurity attacks on or breaches of our information technology environment could result in business interruptions, remediation costs and/or legal claims. To protect confidential customer, vendor, financial and employee information, we employ information security measures, including cybersecurity training for all employees, that secure our information systems from cybersecurity attacks or breaches. Even with these measures, we may be subject to unauthorized access of digital data with the intent to misappropriate information, corrupt data or cause operational disruptions. If a failure of our safeguarding measures were to occur, or if software or third-party vendors that support our information technology environment are compromised, it could have a negative impact to our business and result in business interruptions, remediation costs and/or legal claims, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.
RISKS RELATED TO OUR CAPITAL STRUCTURE
• Failure to remain in compliance with covenants under our Credit Agreement, service our indebtedness, or fund our other liquidity needs could adversely impact our business. Our failure to comply with any of the restrictive or financial covenants would constitute an event of default under our Credit Agreement. 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 indenture governing our 2.75% Convertible Notes 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 indenture governing our 2.75% Convertible Notes could result in acceleration of the maturity of the notes. If we are unable to service our debt obligations or fund our other liquidity needs, we could be forced to curtail our operations, reorganize our capital structure (including through bankruptcy proceedings) or liquidate some or all of our assets in a manner that could cause holders of our securities to experience a partial or total loss of their investment in us. See definition of Credit Agreement and 2.75% Convertible Notes in Note 14 to “Notes to the Consolidated Financial Statements.”
•
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including our 2.75% Convertible Notes and the obligations under our Credit Agreement, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate sufficient cash flow from operations in the future to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the financial markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
•
The convertible note hedge and warrant transactions may affect the value of our common stock. In connection with our 2.75% Convertible Notes offering, we entered into convertible note hedge transactions with option counterparties. We also entered into warrant transactions with the option counterparties. The convertible note hedge transactions are expected generally to reduce the potential dilution to our common stock upon conversion of the 2.75% Convertible Notes and/or offset any cash payments we elect to make in excess of the principal amount of converted notes, as the case may be. However, the warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants ($53.44 per share) and we deliver shares of our common stock upon exercise of such warrants instead of paying cash. Additionally, in connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the option counterparties may have entered into various derivative transactions with respect to our common stock. The option counterparties may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions. This activity could cause an increase or a decrease in the market price of our common stock. The effect, if any, of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time, but these activities could adversely affect the market price of our common stock.
•
We are subject to counterparty risk with respect to the convertible note hedge transactions. The option counterparties are financial institutions, and we will be subject to the risk that one or more of such option counterparties may default under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparties is not, and will not be, secured by any collateral. If any option counterparty becomes subject to bankruptcy or other insolvency proceedings with respect to such option counterparty’s obligations under the relevant convertible note hedge transaction, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under such transaction. Our exposure will depend on many factors but, generally, an increase in our exposure will be positively correlated to an increase in our common stock market price and in the volatility of the market price of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and dilution with respect to our common stock. While all option counterparties were deemed to be of suitable financial strength on the transaction date, we can provide no assurance as to the financial stability or viability of any option counterparty.
•
The price of our common stock historically has been volatile. Our stock price may continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including the other factors discussed in “Risks Factors;” variations in our quarterly operating results from our expectations or those of securities analysts or investors; downward revisions in securities analysts’ estimates; and announcement by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments. In addition, the sale or the availability for sale of a large number of shares of common stock in the public market may cause the price of our common stock to decline.
•
Delaware law and our charter documents may impede or discourage a takeover, which could reduce the market price of our common stock. We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. In addition, our Board of Directors has the power, without stockholder approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock. The ability of our Board of Directors to create and issue a new series of preferred stock and certain provisions of Delaware law and our certificate of incorporation and bylaws could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock.
The foregoing list is not all-inclusive. There can be no assurance that we have correctly identified and appropriately assessed all factors affecting our business or that the publicly available and other information with respect to these matters is complete and correct. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect us. These developments could have material adverse effects on our business, financial condition, results of operations and liquidity. For these reasons, the reader is cautioned not to place undue reliance on our forward-looking statements.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
Item 2. PROPERTIES
Quarry Properties
In October 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to modernize the property disclosure requirements for mining registrants. We are subject to the new rules beginning with our year ended December 31, 2021. We own or lease quarry properties that contain mineral resources that we extract and process into construction materials.
As defined by the SEC, mineral resources are a concentration or occurrence of material of economic interest in or on the earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for economic extraction. A mineral resource is a reasonable estimate of mineralization, taking into account relevant factors such as cut-off grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable.
As defined by the SEC, mineral reserves are an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of a qualified person, as defined by the SEC, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted.
Our mineral resources and reserves are based on estimates made by qualified persons who are employees of the Company and are based primarily on geological evidence, sampling and testing and appropriate modifying factors. Amounts presented in the tables below are based on various assumptions to determine estimated economically mineable tons including site specific prices for sand and gravel and hard rock between $5 - $15 per ton. The price per ton estimates use a saleable product (i.e., materials that are ready for sale) as a point of reference and are escalated over time by the Producer’s Price Index for Construction Sand, Gravel and Crushed Stone (product 1321). Pricing for aggregates tend to remain similar for long periods of time; therefore, we use current pricing to estimate prices and we reassess at least annually to verify there have not been material changes. Changes to the estimates and assumptions from those currently anticipated could have a material impact on the mineral resource and mineral reserve estimates.
As of December 31, 2021, we had open pit quarry properties available for the extraction of sand, gravel and hard rock. Both of our reportable segments use these quarry properties to extract and process sand, gravel and hard rock into construction material for internal use and for sale to third parties. As of December 31, 2021, we had all the permits necessary to mine and process sand, gravel and hard rock at our active quarry properties. As of December 31, 2021, no individual mining operation was considered material to our business or financial condition. Aggregate annual production for all mining properties was 16 million tons, 14.3 million tons, and 12.5 million tons during the years ended December 31, 2021, 2020 and 2019, respectively. The following map shows the approximate locations of our permitted quarry properties as of December 31, 2021:
California is the only state that comprises more than 10% of our total mining operations. The following tables present information about our quarry properties as of December 31, 2021, separated between California and non-California properties (tons in millions):
Resources and Reserves for Each Product Type (tons)
Percentage of Resources and Reserves Owned and Leased
State
Number of Properties
Sand & Gravel
Hard Rock
Owned(1)
Leased(2)
Acreage
California
462.3
286.9
%
%
10,431
Non-California
105.0
141.6
%
%
9,951
(1) Owned properties are properties we own or in which we have, or it is probable that we will have, a direct or indirect economic interest.
(2) Leases are defined as properties where we operate, or it is probable we will operate, under a lease or other legal agreement that grants us ownership or similar rights that authorize us, as principal, to sell or otherwise dispose of the mineral and includes properties that we sublease and from which we receive royalties, which are both considered immaterial. Our leases have terms which range from month-to-month to 42 years with most including an option to renew.
The life cycle of mining sand, gravel and hard rock begins with exploration and continues through development and production. After a sand, gravel and hard rock deposit has been identified through exploration, the mine is developed before production begins. The following table presents the number of properties in each respective stage as of December 31, 2021 for all mining properties:
State
Exploration
Development
Production
California
Non-California
Mineral Resources
The table below presents information on measured, indicated and inferred mineral resources. Estimates of measured mineral resources are based on conclusive geological evidence, sampling and testing and may be converted to a proven mineral reserve or to a probable mineral reserve. Estimates of indicated mineral resources are based on adequate geological evidence, sampling and testing and may only be converted to a probable mineral reserve when sufficient evidence is identified including consideration of modifying factors such as mining, processing, economic and environmental factors. Estimates of inferred mineral resources have significant geological uncertainty based on limited geological evidence, sampling and testing and therefore may not be converted to a mineral reserve.
As of December 31, 2021, our qualified persons estimated our measured, indicated and inferred resources to be approximately 230.7 million tons with an average permitted life of approximately 16 years at present operating levels. As of December 31, 2021, California was the only individual state that comprised more than 10% of our total mining operations. The Wine Group and Aerojet North White Rock were the only mines that comprised 10% or more of our combined measured and indicated mineral resources for sand and gravel and the Euer Ranch was the only mine that comprised 10% or more of our combined measured and indicated mineral resources for hard rock. The following table presents information about our mineral resources at December 31, 2021 (tons in millions):
Measured Mineral Resources
Indicated Mineral Resources
Measured + Indicated Mineral Resources
Inferred Mineral Resources
Amount (tons)
Grades / qualities (1)
Amount (tons)
Grades / qualities (1)
Amount (tons)
Grades / qualities (1)
Amount (tons)
Grades / qualities (1)
Sand and Gravel:
California
The Wine Group
-
-
51.4
Sand and Gravel
51.4
Sand and Gravel
-
-
Aerojet North White Rock
32.0
Sand and Gravel
-
-
32.0
Sand and Gravel
-
-
All other California
-
-
19.5
Sand and Gravel
19.5
Sand and Gravel
-
-
Total California
32.0
70.9
102.9
-
Non-California
0.6
Sand and Gravel
3.0
Sand and Gravel
3.6
Sand and Gravel
-
-
Total
32.6
73.9
106.5
-
Hard Rock:
California
Euer Ranch
71.7
Hard Rock
-
-
71.7
Hard Rock
-
-
All other California
9.9
Hard Rock
-
-
9.9
Hard Rock
-
-
Total California
81.6
-
81.6
-
Non-California
9.6
Hard Rock
-
-
9.6
Hard Rock
33.0
Hard Rock
Total
91.2
-
91.2
33.0
Grand Total
123.8
73.9
197.7
33.0
(1) The grade of product produced is contingent on market needs. Sites typically sell base products that range from low to high grades including fill materials, base aggregates, hot mix aggregates and concrete aggregates.
Mineral Reserves
Mineral reserves are divided into proven and probable mineral reserves. Proven mineral reserves are the economically mineable part of a measured mineral resource and can only result from the conversion of a measured mineral resource. Proven mineral resources are determined by a qualified person through the testing of samples obtained from closely spaced subsurface drilling and/or exposed pit faces, and are sufficiently understood so that quantity, quality and engineering conditions are known with sufficient accuracy to be mined without the need for any further subsurface work. Probable mineral reserves are the economically mineable part of an indicated, and in some cases, a measured mineral resource. Probable mineral reserves are determined through the testing of samples obtained from subsurface drilling but the sample points are too widely spaced to allow detailed prediction of quantity, quality and engineering conditions. Additional subsurface work may be needed prior to mining the reserve.
Modifying factors are the factors that a qualified person must apply to indicated and measured mineral resources and then evaluate in order to establish the economic viability of mineral reserves. The modifying factors applied in the conversion of measured and indicated mineral resources to proven and probable mineral reserves during the year ended December 31, 2021 included various relevant technical and economic factors, including site infrastructure, mine design and planning, processing plant and environmental compliance and permitting. The basis of determining the modifying factors was a combination of historical experience mining aggregates and observation.
As of December 31, 2021, our qualified persons estimated our proven and probable reserves to be approximately 765.1 million tons with an average permitted life of approximately 19 years at present operating levels. Waste factors for proven and probable reserves range up to 45% depending on the deposit type, market characteristics and extraction feasibility. As of December 31, 2021, California was the only individual state that comprised more than 10% of our total mining operations, Coalinga was the only mine that comprised 10% or more of our mineral reserves for sand and gravel and Handley Quarry was the only mine that comprised 10% or more of our mineral reserves for hard rock. The following table presents information about mineral reserves at December 31, 2021 (tons in millions):
Proven Mineral Reserves
Probable Mineral Reserves
Total Mineral Reserves
Amount (tons)
Grades / qualities (1)
Amount (tons)
Grades / qualities (1)
Amount (tons)
Grades / qualities (1)
Sand and Gravel:
California
Coalinga
119.1
Sand and Gravel
-
-
119.1
Sand and Gravel
All other California
214.5
Sand and Gravel
25.8
Sand and Gravel
240.3
Sand and Gravel
Total California
333.6
25.8
359.4
Non-California
84.0
Sand and Gravel
17.4
Sand and Gravel
101.4
Sand and Gravel
Total
417.6
43.2
460.8
Hard Rock:
California
Handley Quarry
144.8
Hard Rock
-
-
144.8
Hard Rock
All other California
60.5
Hard Rock
-
-
60.5
Hard Rock
Total California
205.3
-
205.3
Non-California
56.6
Hard Rock
42.4
Hard Rock
99.0
Hard Rock
Total
261.9
42.4
304.3
Grand Total
679.5
85.6
765.1
(1) The grade of product produced is contingent on market needs. Sites typically sell base products that range from low to high grades including fill materials, base aggregates, hot mix aggregates and concrete aggregates.
Internal controls
Mining operations include risk in estimation of mineral reserves and mineral resources that could be impacted by unforeseen geologic circumstances, changes in regulation or changes in sales and customers. The risk that these estimates would be unreasonable based on the known information is mitigated by the following internal controls that we use in our exploration and mineral resource and mineral reserve estimation efforts:
•
quality control and quality assurance programs including management identifying the qualified person(s) with the appropriate background and qualifications to prepare the information used for disclosure purposes;
•
verification of analytical procedures including management reviewing the mineral resource and reserve report information for completeness, accuracy and appropriateness, such as categorization, inclusion of technical, economic and operational factors, discounted cash flow analysis inputs, assumptions and calculations, and mining, metallurgical, legal, environmental, social and governmental modifying factors as well as comparison of estimates to historic production and prior period estimates; and
•
review of disclosures to ensure compliance with requirements.
Plant Properties
We operate plants at our quarry sites to process aggregates into construction materials. Some of our sites may have more than one crushing, concrete or asphalt processing plant. The following table presents the number of plants we owned as of the respective dates for continuing operations:
December 31,
Aggregate crushing plants
Asphalt concrete plants
Cement concrete batch plants
Asphalt rubber plants
Lime slurry plants
These plants are used by both of our reportable segments.
Other Properties
The following table provides our estimate of certain information about other properties for continuing operations as of December 31, 2021:
Land Area (acres)
Buildings (square feet)
Office and shop space (owned and leased)
1,128
904,379
The office and shop space is used by both of our reportable segments.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. LEGAL PROCEEDINGS
The description of the matters set forth in Note 20 of “Notes to the Consolidated Financial Statements” is incorporated herein by reference.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. 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 Annual Report on Form 10-K.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the New York Stock Exchange under the ticker symbol GVA. As of February 18, 2022, 45,875,355 shares of our common stock were outstanding and held by 675 shareholders of record. We have paid quarterly cash dividends since the second quarter of 1990, and we expect to continue to do so.
The following table sets forth information regarding the repurchase of shares of our common stock during the three months ended December 31, 2021:
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)
October 1, 2021 through October 31, 2021
$ 38.36
-
$ 157,165,044
November 1, 2021 through November 30, 2021
$ 37.14
-
$ 157,165,044
December 1, 2021 through December 31, 2021
2,387
$ 38.76
-
$ 157,165,044
3,297
$ 38.51
-
(1) On June 2, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan, which replaced the Amended and Restated 2012 Equity Incentive Plan. The number of shares purchased is in connection with employee tax withholding for restricted stock units vested under our 2012 and 2021 Equity Incentive Plans.
(2) As announced on April 29, 2016, on April 7, 2016, the Board of Directors authorized us to purchase up to $200.0 million of our common stock at management's discretion (the “2016 authorization”). As part of the 2016 authorization, we established a share repurchase program to facilitate common stock repurchases. We did not purchase shares under the share purchase plan in any of the periods presented. As of December 31, 2021, $157.2 million of the 2016 authorization remained available. 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”). The 2022 authorization replaced the 2016 authorization, including the amount available for repurchase, and no further repurchases will take place under the 2016 authorization. The specific timing and amount of any future purchases will vary based on market conditions, securities law limitations and other factors.
Performance Graph
The following graph compares the cumulative five-year total return provided to Granite Construction Incorporated’s common stockholders relative to the cumulative total returns of the S&P 500 index and the Dow Jones U.S. Heavy Construction index. The Dow Jones U.S. Heavy Construction index includes the following companies: AECOM, Emcor Group Inc., Mastec Inc., Quanta Services Inc., Valmont Industries Inc. and WillScot Mobile Mini Holdings Corp. Certain of these companies differ from Granite in that they derive more revenue and profit from non-U.S. operations and have customers in different markets. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2016 through December 31, 2021.
December 31,
Granite Construction Incorporated
$ 100.00
$ 116.44
$ 74.76
$ 52.11
$ 51.75
$ 75.96
S&P 500
$ 100.00
$ 121.83
$ 116.49
$ 153.17
$ 181.35
$ 233.41
Dow Jones U.S. Heavy Construction
$ 100.00
$ 105.37
$ 77.85
$ 104.44
$ 126.81
$ 189.88

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. RESERVED

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
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, the Company updated its strategy to focus on its core business capabilities, to leverage its current geographic based home markets in the civil construction and materials business and to target expansion based upon that combined strategy. Through our strategic analysis, we determined that the end markets and geographic structure of the former Water and Mineral Services operating group (“WMS”) did not align with the Company’s new strategy and the Board of Directors approved a plan to sell these businesses within the next twelve months. As a result of these actions, we classified WMS as held-for-sale in the consolidated balance sheets and as discontinued operations in the consolidated statements of operations as of and for the year ended December 31, 2021 and applied these changes retrospectively for all other periods presented. See Note 2 of “Notes to the Consolidated Financial Statements” for WMS financial information, which has been excluded from all other disclosures unless explicitly stated otherwise.
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 defined as follows:
•
California;
•
Central (formerly Heavy Civil, Federal and Midwest operating groups), which primarily includes offices in Arizona (formerly in the Northwest operating group), Colorado, Florida, Illinois, Texas and Guam; and
• Mountain (formerly Northwest), which primarily includes offices in Alaska, Nevada, Utah and Washington.
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 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: 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. Our Construction segment focuses on construction and rehabilitation of roads, pavement preservation, bridges, rail lines, airports, marine ports, dams, reservoirs, aqueducts, infrastructure and site development for use by the general public and water-related construction for municipal agencies, commercial water suppliers, industrial facilities and energy companies. It also provides construction of various complex projects including infrastructure / site development, mining, public safety, tunnel, solar and other power projects. The Materials segment focuses on production of aggregates and asphalt production for internal use and for sale to third parties. See Note 21 of “Notes to the Consolidated Financial Statements” for additional information about our reportable segments.
On February 2, 2022, we entered into a purchase agreement with Inland Pipe Rehabilitation LLC (“IPR”) and 1000097155 Ontario Inc. (“Ontario” and together with IPR, the “Purchasers”), investment affiliates of J.F. Lehman & Company. Per the terms of that agreement, the Company agreed to sell our trenchless and pipe rehabilitation services business (“Inliner”), a portion of WMS, to the Purchasers, for a purchase price of $159.7 million. The sale has been unanimously approved by the Company’s Board of Directors and is subject to customary covenants and closing conditions. The transaction is expected to close in the first half of 2022. The water supply, treatment, delivery and maintenance business (“Water Resources”) and mineral exploration drilling business (“Mineral Services”), which represent the remainder of WMS, are expected to be sold within the next twelve months. See Note 2 of “Notes to the Consolidated Financial Statements” for additional information.
The five primary economic drivers of our business are (i) the overall health of the U.S. economy; (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. A stagnant or declining economy will generally result in reduced demand for construction and construction materials in the private sector. This reduced demand increases competition for private sector projects and will ultimately also increase competition in the public sector as companies migrate from bidding on scarce private sector work to projects in the public sector. In addition, a stagnant or declining economy tends to produce less tax revenue for public agencies, thereby decreasing a source of funds available for spending on public infrastructure improvements. Some funding sources that have been specifically earmarked for infrastructure spending, such as diesel and gasoline taxes, are not as directly affected by a stagnant or declining economy, unless actual consumption is reduced or gasoline sales tax revenues decline consistent with fuel prices. However, even these can be temporarily at risk as federal, state and local governments take actions to balance their budgets. Conversely, increased levels of public funding as well as an expanding or robust economy will generally increase demand for our services and provide opportunities for revenue growth and margin improvement.
Critical Accounting Policies and Estimates
The financial statements included in “Item 8. Financial Statements and Supplementary Data” have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences; however, actual amounts could differ from those estimates.
The following are accounting policies and estimates that involve significant management judgment and can have significant effects on the Company’s reported results of operations.
Revenue Recognition
Our revenue is primarily derived from construction contracts that can span several quarters or years in our Construction segment and from sales of construction related materials in our Materials segment. We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, and subsequently issued additional related ASUs. The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the forecasted revenue and cost to complete each project. Cost estimates for all of our significant projects use a detailed “bottom up” approach. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include:
•
changes in costs of labor and/or materials;
• subcontractor costs, availability and/or performance issues;
• extended overhead and other costs due to owner, weather and other delays;
•
changes in productivity expectations;
•
changes from original design on design-build projects;
•
our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs;
•
a change in the availability and proximity of equipment and materials;
•
complexity in original design;
•
length of time to complete the project;
•
the availability and skill level of workers in the geographic location of the project;
•
site conditions that differ from those assumed in the original bid;
•
costs associated with scope changes; and
•
the customer’s ability to properly administer the contract.
The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in revenue and cost estimates, particularly in our larger, more complex, multi-year projects have had, and in the future could have, a significant effect on our profitability. Due to the number of factors that can contribute to changes in estimates of contract cost and profitability, the sensitivity of reported amounts to the assumptions underlying the estimate’s calculation is not reasonably available or meaningful. However, Note 3 of “Notes to the Consolidated Financial Statements” presents the impact material revisions in estimates had on the periods covered by this report.
Goodwill
We perform our goodwill impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill. Examples of such events or circumstances include, but are not limited to, the following:
•
a significant adverse change in the business climate;
•
a significant adverse change in legal factors or an adverse action or assessment by a regulator;
•
a more likely than not expectation that a segment or a significant portion thereof will be sold; or
•
the testing for recoverability of a significant asset group within the segment.
In accordance with U.S. GAAP, we can elect to perform a qualitative assessment to test a reporting unit’s goodwill for impairment or perform a quantitative impairment test. Based on a qualitative assessment, if we determine that the fair value of a reporting unit is more likely than not to be less than its carrying amount, a quantitative impairment test will be performed.
In performing a quantitative goodwill impairment test, we calculate the estimated fair value of the reporting unit using the discounted cash flow and market multiple methods. The estimated fair value is compared to the carrying amount of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying amount over the fair value is recognized as a non-cash impairment charge.
Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows, revenue and margin growth rates, and appropriate benchmark companies. The cash flows used in our 2021 discounted cash flow model were based on five-year financial forecasts developed internally by management adjusted for market participant-based assumptions. Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units. To assess for reasonableness, we compare the estimated fair values of the reporting units to our current market capitalization. Material assumptions used in the impairment analysis included the weighted average cost of capital percent and terminal growth rates.
Accrued Insurance Costs
We carry insurance policies to cover various risks, including general liability, automobile liability, workers compensation and employee medical expenses under which we are liable to reimburse the insurance company for certain losses. The amounts for which we are liable range from the first $0.5 million to $1.5 million per occurrence. We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends, modified, if necessary, by recent events. The establishment of accruals for estimated losses associated with our insurance policies are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, claim severity, frequency patterns and changing regulatory and legal environments. Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position. A 10% increase in both the claim frequency and the average cost per claim used to estimate the accruals would result in an increase in our accrued insurance and an associated increase in expense of approximately $7.4 million. A 10% decrease in both the claim frequency and the average cost per claim would result in a decrease in our accrued insurance and an associated reduction in expense of approximately $6.7 million.
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, President Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act (“IIJA”) on November 15, 2021. 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 incremental funding. We believe 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.
At state, regional and local levels, voter-approved state and local transportation measures continue to support infrastructure spending. In the November 2021 elections, voters in 17 states approved 89% of state and local ballot initiatives that will provide an additional $6.9 billion in one-time and recurring revenue for transportation improvements. 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. Revenue collected through SB-1 is on track to increase over the next five years and supports our growth in the state.
Over the past year, segments of the construction industry were adversely affected by inflation as well as supply chain and labor constraints. Inflation has impacted the cost of inputs such as oil related items, concrete and steel. We continually monitor the expected movement of our construction input costs and apply strategies to mitigate the impacts including adjusting the pricing of our contracts. One of the most significant impacts to our results of operations has been the increase over the last year of oil prices through our use of diesel fuel and liquid asphalt. 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. During 2021, we saw increased interest in best-value or alternative delivery procurement work by state departments of transportation, such as California and Utah, along with other state agencies. This shift in delivery procurement methodology creates a delay in certain project bookings and project start times in the short term, but we believe will give us the opportunity for larger future work with more sustainable margins and less inherent risk.
While we are encouraged by the growth outlook, the COVID-19 pandemic continues to create uncertainties to the economy and the normal cadence of project bids, and could adversely impact our operations and financial results in future periods.
Strategic Actions
The divestiture of the WMS businesses reflect our new strategy to focus on our core civil construction and materials business by using the sale proceeds to invest in these two core 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. We enter the 2022 fiscal year with a strong balance sheet and liquidity providing flexibility to invest to strengthen and expand our home market footprint.
Litigation Matter
As further discussed in Note 20 of “Notes to the Consolidated Financial Statements,” in early February 2022, our wholly-owned subsidiary, Layne Christensen Company (“Layne”), was sued for $70 million and Granite received an arbitration demand for $30 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 “Item 1A. Risk Factors - In connection with acquisitions or divestitures, we may become subject to liabilities” and “Item 1A. Risk Factors - 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” for additional information.
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.
Years Ended December 31,
(in thousands)
Total revenue
$ 3,010,053
$ 3,128,879
$ 2,914,877
Gross profit
$ 305,556
$ 304,653
$ 189,785
Selling, general and administrative expenses
$ 243,083
$ 252,879
$ 238,147
Other costs (see Note 1 of “Notes to the Consolidated Financial Statements”)
$ 95,155
$ 36,964
$ 6,735
Gain on sales of property and equipment, net (see Note 11 of “Notes to the Consolidated Financial Statements”)
$ (33,781 )
$ (4,925 )
$ (13,373 )
Operating income (loss)
$ 1,099
$ 19,735
$ (41,724 )
Total other (income) expense, net
$ 10,595
$ 11,590
$ (1,500 )
Net income (loss) from continuing operations
$ (8,259 )
$ (1,782 )
$ (27,936 )
Net income (loss) from discontinued operations (see Note 2 of “Notes to the Consolidated Financial Statements”)
$ 10,673
$ (164,399 )
$ (28,766 )
Amount attributable to non-controlling interests from continuing operations
$ 7,682
$ 21,064
$ (3,489 )
Net income (loss) attributable to Granite Construction Incorporated
$ 10,096
$ (145,117 )
$ (60,191 )
Revenue
Total Revenue by Segment
Years Ended December 31,
(dollars in thousands)
Construction
$ 2,602,306
86.5 %
$ 2,764,094
88.3 %
$ 2,575,791
88.4 %
Materials
407,747
13.5
364,785
11.7
339,086
11.6
Total
$ 3,010,053
100.0 %
$ 3,128,879
100.0 %
$ 2,914,877
100.0 %
Construction Revenue
Years Ended December 31,
(dollars in thousands)
California
$ 822,448
31.6 %
$ 928,193
33.5 %
$ 787,259
30.6 %
Central
1,058,448
40.7
1,145,725
41.5
1,056,385
41.0
Mountain
721,410
27.7
690,176
25.0
732,147
28.4
Total
$ 2,602,306
100.0 %
$ 2,764,094
100.0 %
$ 2,575,791
100.0 %
Construction revenue in 2021 decreased by $161.8 million, or 5.9%, compared to 2020 primarily due to lower CAP in the California operating group and inclement weather conditions in California near the end of 2021. Lower CAP was reflective of an extended competitive bidding environment that existed through the first half of 2021. Additionally, the Central operating group revenue decreased as we remain disciplined in our project bidding selection criteria and certain projects neared completion. During 2021 and 2020, the majority of revenue earned in the Construction segment was from the public sector.
Materials Revenue
Years Ended December 31,
(dollars in thousands)
California
$ 242,552
59.4 %
$ 222,021
60.9 %
$ 198,465
58.6 %
Central
33,270
8.2
25,181
6.9
23,830
7.0
Mountain
131,925
32.4
117,583
32.2
116,791
34.4
Total
$ 407,747
100.0 %
$ 364,785
100.0 %
$ 339,086
100.0 %
Materials revenue in 2021 increased by $43.0 million, or 11.8%, when compared to 2020 from increased volumes in both aggregates and asphalt sales combined with increased pricing in certain markets.
Committed and Awarded Projects
Effective during the three months ended June 30, 2021, on a retroactive basis, we renamed contract backlog to CAP and added the general construction portion of construction management/general contractor (“CM/GC”) contracts. This is the same presentation used in our quarterly reports, earnings calls and press releases. Prior period amounts have been revised to reflect this change. In line with the revised reportable segments, all CAP is now in the Construction segment.
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 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, respectively.
December 31,
(dollars in thousands)
Unearned revenue
$ 2,595,085
64.7 %
$ 2,810,827
69.8 %
Other awards
1,414,979
35.3
1,214,658
30.2
Total
$ 4,010,064
100.0 %
$ 4,025,485
100.0 %
December 31,
(dollars in thousands)
California
$ 1,476,066
36.8 %
$ 1,354,776
33.7 %
Central
1,585,309
39.5
1,943,622
48.2
Mountain
948,689
23.7
727,087
18.1
Total
$ 4,010,064
100.0 %
$ 4,025,485
100.0 %
CAP of $4.0 billion at December 31, 2021 was $15.4 million, or 0.4%, lower than 2020 primarily due to lower CAP in the Central operating group as we made progress on existing projects and maintained our new project bidding selection criteria. This decrease was partially offset by increased bidding activity in 2021 in our vertically-integrated businesses. Significant new additions to CAP during the fourth quarter of 2021 included a $160 million CM/GC project in Utah and a $90 million CM/GC highway improvement project in Northern California.
Non-controlling partners’ share of CAP as of December 31, 2021 and 2020 was $214.3 million and $310.6 million, respectively.
At December 31, 2021 and 2020, three and four contracts had total forecasted losses with remaining revenue of $204.2 million, or 5.1% of total CAP, and $423.0 million, or 10.5% of total CAP, respectively. Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue.
Gross Profit
The following table presents gross profit by reportable segment for the respective periods:
Years Ended December 31,
(dollars in thousands)
Construction
$ 248,350
$ 241,444
$ 146,472
Percent of segment revenue
9.5 %
8.7 %
5.7 %
Materials
57,206
63,209
43,313
Percent of segment revenue
14.0
17.3
12.8
Total gross profit
$ 305,556
$ 304,653
$ 189,785
Percent of total revenue
10.2 %
9.7 %
6.5 %
Construction gross profit for the year ended December 31, 2021 increased by $6.9 million, or 2.9%, when compared to 2020 primarily due to a decrease in the negative net impact from revisions in estimates in our Central operating group (see Note 3 of “Notes to the Consolidated Financial Statements”), partially offset by decreases in gross profit from our vertically-integrated businesses from an extended competitive bidding environment.
Materials gross profit for the year ended December 31, 2021 decreased by $6.0 million, or 9.5%, when compared to 2020 driven primarily by higher fuel and liquid asphalt costs in 2021 compared to 2020 combined with lower volumes in California due to inclement weather during the fourth quarter of 2021.
Selling, General and Administrative Expenses
The following table presents the components of selling, general and administrative expenses for the respective periods:
Years Ended December 31,
(dollars in thousands)
Selling
Salaries and related expenses
$ 56,264
$ 60,162
$ 52,142
Incentive compensation
4,729
4,949
4,302
Restricted stock unit amortization
1,363
1,244
1,766
Other selling expenses
3,398
8,630
10,069
Total selling
65,754
74,985
68,279
General and administrative
Salaries and related expenses
88,210
88,998
78,628
Incentive compensation
7,909
10,399
7,189
Restricted stock unit amortization
3,090
2,942
5,734
Other general and administrative expenses
78,120
75,555
78,317
Total general and administrative
177,329
177,894
169,868
Total selling, general and administrative
$ 243,083
$ 252,879
$ 238,147
Percent of revenue
8.1 %
8.1 %
8.2 %
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 2021 decreased by $9.2 million, or 12.3%, compared to 2020, primarily due to reduced estimating and bidding activity following the implementation of our new project bidding selection criteria.
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, changes in the fair market value of our Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses. Total general and administrative expenses remained largely unchanged for 2021 when compared to 2020.
Other Costs
The following table presents other costs for the respective periods:
Years Ended December 31,
(dollars in thousands)
Other costs
$ 95,155
$ 36,964
$ 6,735
Other costs for the year ended December 31, 2021 increased by $58.2 million when compared to 2020 primarily due to $66 million in net settlement charges incurred during 2021 as further described in Note 20 of “Notes to the Consolidated Financial Statements.” Other costs also included $21.6 million and $35.6 million for the years ended December 31, 2021 and 2020, respectively, of non-recurring legal and accounting fees. The majority of these non-recurring fees related to the lawsuits discussed in Note 20 of “Notes to the Consolidated Financial Statements” and to the Investigation undertaken by the Audit Committee discussed in “Item 1A. Risk Factors.” The remaining other costs includes personnel costs incurred in connection with our operating group reorganization during 2021 and integration expenses incurred in 2020 and 2019 related to the Layne acquisition that occurred in 2018.
Gain on Sales of Property and Equipment, net
The following table presents the gain on sales of property and equipment, net for the respective periods:
Years Ended December 31,
(dollars in thousands)
Gain on sales of property and equipment, net
$ (33,781 )
$ (4,925 )
$ (13,373 )
Gain on sales of property and equipment, net for the year ended December 31, 2021 increased by $28.9 million when compared to 2020 primarily due to the sale of property in California as part of our ongoing asset optimization plan. See Note 11 of “Notes to the Consolidated Financial Statements” for more information.
Other (Income) Expense
The following table presents the components of other (income) expense, net for the respective periods:
Years Ended December 31,
(in thousands)
Interest income
$ (1,178 )
$ (3,017 )
$ (7,256 )
Interest expense
20,282
23,866
18,052
Equity in income of affiliates
(3,465 )
(5,191 )
(6,991 )
Other income, net
(5,044 )
(4,068 )
(5,305 )
Total other (income) expense, net
$ 10,595
$ 11,590
$ (1,500 )
Interest income for 2021 decreased by $1.8 million, or 61.0%, when compared to 2020 primarily due to the settlement of two notes receivable; one in 2020 and the other during the first quarter of 2021. Interest expense for 2021 decreased by $3.6 million, or 15.0%, when compared to 2020 as no amount was drawn on the revolver in 2021 and due to a decrease in the effective interest rate on our credit facility. Equity in income of affiliates for 2021 decreased by $1.7 million, or 33.2%, when compared to 2020 primarily due to a decrease in income from a real estate investment entity.
Income Taxes
The following table presents the provision for (benefit from) income taxes on continuing operations for the respective periods:
Years Ended December 31,
(dollars in thousands)
Provision for (benefit from) income taxes on continuing operations
$ (1,237 )
$ 9,927
$ (12,288 )
Effective tax rate
13.0 %
121.9 %
30.5 %
Our tax rate decreased from 121.9% to 13.0% when compared to 2020 primarily due to the impact of non-controlling interest and the valuation allowance on capital losses recorded in 2020 relative to the insignificant income before provision for income taxes in 2020.
Amount Attributable to Non-controlling Interests
The following table presents the income amount attributable to non-controlling interests in consolidated subsidiaries for the respective periods:
Years Ended December 31,
(in thousands)
Amount attributable to non-controlling interests
$ 7,682
$ 21,064
$ (3,489 )
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 change during 2021 was primarily due to a net negative impact from revisions in estimates on two projects (See Note 3 of “Notes to the Consolidated Financial Statements”).
Net Income (Loss) from Discontinued Operations
Net income from discontinued operations for the year ended December 31, 2021 increased $175.1 million when compared to 2020 primarily due to goodwill impairment charges in 2020.
Prior Years Comparison (2020 to 2019)
Revenue: Construction revenue in 2020 increased $188.3 million, or 7.3%, compared to 2019 primarily from increases in the California operating group due to beginning the year with higher CAP, new awards and favorable weather in 2020. Increases were also due to the Central operating group beginning the year with higher CAP. The increases were partially offset by decreases in the Mountain operating group due to a decline in new awards in 2020 and beginning the year with lower CAP.
Materials revenue in 2020 increased $25.7 million, or 7.6%, when compared to 2019 primarily due to an increase in revenue in the California operating group from increased volume from improved weather conditions in 2020.
Gross Profit: Construction gross profit for the year ended December 31, 2020 increased by $95.0 million, or 64.8%, when compared to 2019 primarily due to a decrease in net negative impact from revisions in estimates related to the Central operating group.
Materials gross profit for the year ended December 31, 2020 increased by $19.9 million, or 45.9%, when compared to 2019 driven by an increase in volume from favorable weather during 2020 resulting in lower per unit fixed costs.
Selling, General and Administrative Expenses: Selling expenses for 2020 increased $6.7 million, or 9.8%, compared to 2019 primarily due to an increase in salaries and related expenses from increased bidding activities. General and administrative expenses for 2020 increased $8.0 million, or 4.7%, compared to 2019 primarily due to increases in salaries and related expenses from an increase in employee benefits and compensation.
Other Costs: Other costs for the year ended December 30, 2020 increased by $30.2 million when compared to 2019 primarily due to an increase in legal, accounting and investigation fees related to the lawsuits as discussed in Note 20 of “Notes to the Consolidated Financial Statements” and to the Investigation undertaken by the Audit Committee as discussed in “Item 1A. Risk Factors.”
Other (Income) Expense: Interest income for 2020 decreased $4.2 million, or 58.4%, compared to 2019 primarily due to a decrease in interest rates associated with our marketable securities and cash equivalents. Interest expense for 2020 increased $5.8 million, or 32.2%, when compared to 2019 primarily due to interest on the $230.0 million convertible senior notes that were issued in November 2019. Equity in income of affiliates for 2020 decreased $1.8 million, or 25.7%, compared to 2019 primarily due to a decrease in income from a real estate investment entity. Other income, net for 2020 decreased $1.2 million, or 23.3%, primarily due to changes in the fair market values of our Non-Qualified Deferred Compensation plan assets.
Income Taxes: Our tax rate increased by 91.4% from 30.5% to 121.9% when compared to 2019 primarily due to the impact of non-controlling interest and the valuation allowance on capital losses recorded in 2020 relative to the insignificant income before provision for income taxes in 2020.
Amount Attributable to Non-controlling Interests: The change during 2020 was primarily due to a net negative impact from revisions in estimates on one project in the Central operating group.
Net Income (Loss) from Discontinued Operations: Net loss from discontinued operations for the year ended December 31, 2020 increased $135.6 million when compared to 2019 due to goodwill impairment charges in 2020.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, 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 and acquire assets or businesses that are complementary to our operations.
Our primary contractual obligations are as follows and are further discussed in the referenced “Notes to the Consolidated Financial Statements:”
• Asset retirement obligations - see Note 11, Property and Equipment, net
• Long-term debt and the associated interest payments - see Note 14, Long-Term Debt
• Operating lease and royalty future minimum payments - see Note 15, Leases
• Non-Qualified Deferred Compensation Plan obligations - see Note 16, Employee Benefit Plans
We believe our cash and cash equivalents, available borrowing capacity and cash expected to be generated from operations 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 believe our cash and cash equivalents, investments, available borrowing capacity, access to the 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 December 31, 2021, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisted of U.S. Government and agency obligations. Our credit facility consists of a term loan and a revolving credit facility. Of the $275.0 million revolving credit facility, $232.0 million was available for borrowing at December 31, 2021. See Note 14 of “Notes to the Consolidated Financial Statements” for further discussion regarding the revolving credit facility.
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:
December 31,
Cash and cash equivalents excluding CCJVs
$ 302,864
$ 350,473
CCJV cash and cash equivalents (1)
92,783
74,819
Total consolidated cash and cash equivalents
395,647
425,292
Short-term and long-term marketable securities (2)
15,600
5,200
Total cash, cash equivalents and marketable securities
$ 411,247
$ 430,492
(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 as of all periods presented.
Granite’s portion of CCJV cash and cash equivalents was $54.4 million and $42.6 million as of December 31, 2021 and 2020, respectively. Excluded from the table above is:
• $56.5 million and $58.9 million as of December 31, 2021 and 2020, respectively, in Granite’s portion of unconsolidated construction joint venture cash and cash equivalents and
• $16.5 million and $10.8 million of cash and cash equivalents as of December 31, 2021 and 2020, respectively, that is included in current assets held-for-sale.
Capital Expenditures
During the year ended December 31, 2021, we had capital expenditures of $94.8 million, including $12.0 million related to discontinued operations, compared to $93.3 million, including $16.7 million related to discontinued operations, during 2020. Major capital expenditures are typically for aggregate and asphalt production facilities, aggregate reserves, construction equipment, buildings and leasehold improvements and investments in our information technology systems. The timing and amount of such expenditures can vary based on the progress of planned capital projects, the type and size of construction projects, changes in business outlook and other factors. We currently anticipate 2022 capital expenditures for continuing operations to be between approximately $100 million and $115 million.
Cash Flows
Years Ended December 31,
(in thousands)
Net cash provided by (used in):
Operating activities
$ 21,931
$ 268,460
$ 111,438
Investing activities
$ (21,478 )
$ (41,262 )
$ (40,322 )
Financing activities
$ (24,446 )
$ (57,658 )
$ (81,637 )
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 seasonal cycles, 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.
Cash provided by operating activities of $21.9 million during 2021 represents a $246.5 million decrease when compared to 2020. The change was primarily due to a $99.2 million decrease in cash provided by net income (including $66 million in net securities litigation settlement charges discussed below) after adjusting for non-cash items and a $147.4 million decrease in cash provided by working capital. The decrease in cash provided by working capital was primarily due to a decrease in cash provided by contract assets, net from payment timing differences as well as decreases from CCJVs.
Related to the securities litigation settlement, the settlement amount of $129.0 million, including the amount remitted by insurance, was paid into a settlement escrow fund in October 2021. The funds are expected to be released from escrow when the case is no longer subject to further appeal or other review. The amount paid by the Company of $66 million was included in cash provided by operating activities on the consolidated statements of cash flows for the year ended December 31, 2021. See Note 20 of “Notes to the Consolidated Financial Statements.”
Investing activities
Cash used in investing activities of $21.5 million during 2021 represents a $19.8 million decrease when compared to 2020 primarily due to proceeds from the sale of three properties in California during 2021, partially offset by a decrease in maturities and proceeds from the sale of marketable securities and the issuance of a note receivable, net of collections.
Financing activities
Cash used in financing activities of $24.4 million during 2021 represents a $33.2 million decrease when compared to 2020. The change was primarily due to a decrease in debt principal repayments, partially offset by a decrease in proceeds from debt.
Derivatives
We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2 inputs. See Note 8 to “Notes to the Consolidated Financial Statements” for further information. The hedge option and warrant derivative transactions, related to the $230.0 million convertible senior notes that were issued in November 2019, were recorded to equity on our consolidated balance sheets based on the cash proceeds. See Note 14 to “Notes to the Consolidated Financial Statements” for further information.
Surety Bonds and Real Estate Mortgages
We generally are required to provide various types of surety bonds that provide an additional measure of security for our performance under certain public and private sector contracts. At December 31, 2021, approximately $2.3 billion of our $4.0 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 10 of “Notes to the Consolidated Financial Statements.”
Covenants and Events of Default
Our Third Amended and Restated Credit Agreement dated May 18, 2021, as subsequently amended (the “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 $230.0 million principal amount of convertible senior notes that were issued in November 2019 at an interest rate of 2.75% per annum and are payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020 (the “2.75% Convertible Notes”) is 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 December 31, 2021, the Consolidated Leverage Ratio was 2.39, which did not exceed the maximum of 3.00. Our Consolidated Interest Coverage Ratio was 6.69, which exceeded the minimum of 4.00.
Share Purchase Program
As announced on April 29, 2016, on April 7, 2016, the Board of Directors authorized us to repurchase up to $200.0 million of our common stock at management’s discretion (the “2016 authorization”). As part of the 2016 authorization, we established a plan to facilitate common stock repurchases. We did not purchase shares under the share purchase plan in 2021 or 2020. As of December 31, 2021, $157.2 million of the 2016 authorization remained available. 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”). The 2022 authorization replaced the 2016 authorization, including the amount available for repurchase, and no further repurchases will take place under the 2016 authorization. The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors.
Recently Issued Accounting Pronouncements
See Note 1 of “Notes to the Consolidated Financial Statements” under the caption Recently Issued Accounting Pronouncements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We maintain an investment portfolio of various holdings, types and maturities. We purchase instruments that meet high credit quality standards, as specified in our investment policy. Our investment policy also limits the amount of credit exposure to any one issue, issuer or type of instrument. The portfolio and accompanying cash balances are targeted to an average maturity of no more than one year from the date the purchase is settled. On an ongoing basis we monitor credit ratings, financial condition and other factors that could affect the carrying amount of our investment portfolio.
Marketable securities, consisting of U.S. government and agency obligations, are classified as held-to-maturity and are stated at cost, adjusted for amortization of premiums and discounts to maturity.
Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. We maintain our cash and cash equivalents and our marketable securities with several financial institutions.
Given the short-term nature of certain investments, the related income is subject to the general level of interest rates in the United States at the time of maturity and reinvestment. We manage investment interest rate market risk primarily by managing portfolio maturity. The fair value of our long-term held-to-maturity investment portfolio may be affected by changes in interest rates. Our continuing operations do not have any material business transactions in foreign currencies.
As of December 31, 2021 and 2020, the balance in long-term debt in our consolidated balance sheets of the 2.75% Convertible Notes, excluding debt issuance costs, including $14.8 million and $7.7 million, respectively, of amortized debt discount, was $207.4 million and $200.3 million, respectively. As of December 31, 2021 and 2020, the remaining unamortized debt discount was $22.6 million and $29.7 million, respectively.
As of December 31, 2021 and 2020, a term loan of $123.8 million and $131.3 million, respectively, was outstanding under the Credit Agreement that had a variable interest rate of LIBOR plus an applicable margin, that we converted under a swap arrangement to a fixed rate of 2.76% plus the same applicable margin. The applicable margin is based on certain financial ratios calculated quarterly and can vary in future periods. The additional annual interest expense for each 25 basis point increase in the applicable margin would be immaterial.
As of December 31, 2021, there was no amount drawn under the revolving portion of the Credit Agreement.
See Note 14 of “Notes to the Consolidated Financial Statements” for further discussion on the 2.75% Convertible Notes and Credit Agreement.
The table below presents principal amounts due by year and related weighted average interest rates for our cash and cash equivalents, held-to-maturity investments and significant debt obligations excluding debt issuance costs as of December 31, 2021 (dollars in thousands):
Thereafter
Total
Assets
Cash, cash equivalents, held-to-maturity investments
$ 395,647
$ -
$ 15,600
$ -
$ -
$ -
$ 411,247
Weighted average interest rate
0.08 %
- %
0.66 %
- %
- %
- %
0.10 %
Liabilities
Fixed rate debt
2.75% Convertible Notes (1)
$ -
$ -
$ 230,000
$ -
$ -
$ -
$ 230,000
Interest rate
2.75 %
2.75 %
2.75 %
- %
- %
- %
2.75 %
Credit Agreement - term loan
$ 7,500
$ 116,250
$ -
$ -
$ -
$ -
$ 123,750
Effective interest rate (2)
4.91 %
4.91 %
- %
- %
- %
- %
4.91 %
(1) Debt issuance costs are excluded from the table. Included in the table is $22.6 million of unamortized debt discount related to the 2.75% Convertible Notes (as defined in Note 14 to “Notes to the Consolidated Financial Statements”).
(2) The effective interest rate was calculated using three-month LIBOR plus the applicable margin, subject to a 75bp LIBOR floor. As forecasted LIBOR was below 75bps for remaining term loan periods, the 75bp LIBOR floor was utilized. Future interest payments may differ from actual results.
The estimated fair value of our cash and cash equivalents approximates the principal amounts reflected above based on the generally short maturities of these financial instruments. The fair value of the term loan under the Credit Agreement was approximately $124.6 million and $133.0 million as of December 31, 2021 and 2020, respectively. The fair value of 2.75% Convertible Notes was approximately $313.8 million and $248.4 million as of December 31, 2021 and 2020, respectively.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of Granite, the supplementary data and the independent registered public accounting firm’s report are incorporated by reference from Part IV, Item 15(1) and (2):
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Quarterly Financial Data (unaudited)

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Exchange Act, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2021, the end of the period covered by this report.
Management’s Report on Internal Control Over Financial Reporting
Our management, including our principal executive and principal financial officers, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.
Our management, under the supervision and with the participation of our principal executive and principal financial officers, has conducted an evaluation of the effectiveness of our internal control over financial reporting, using the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2021. Their report is included in “Item 15. Exhibits and Financial Statement Schedules” under the heading “Report of Independent Registered Public Accounting Firm.”
Remediation of Prior Year Material Weaknesses
As disclosed in our Annual Reports on Form 10-K for the years ended December 31, 2019 and 2020, we identified control deficiencies that constituted material weaknesses, either individually or in the aggregate, and since 2020, Company management, with the assistance of outside consultants, has reviewed and revised our internal control over financial reporting in response to the material weaknesses. The actions we took to remediate the material weaknesses included the following:
• we implemented oversight, training and communication programs to reinforce: (1) our ethical standards and Code of Conduct across the Company, which emphasized, among other things, the purpose and availability of the anonymous whistleblower hotline, (2) the responsibilities and obligations of public company officers, (3) our cost forecasting processes and policies, including proper and contemporaneous documentation to support cost forecast adjustments, (4) the principles and requirements of each cost forecasting control and (5) reporting communication protocols for internal audit reports;
• we implemented additional internal controls related to cost forecasts including reviews from individuals who are independent of the operating group; and
• we took appropriate personnel actions, including separations, dismissals and changes in leadership and/or responsibilities and implemented other organizational changes, including changes in reporting structures.
Management has concluded that the material weaknesses described in our Annual Reports on Form 10-K for the years ended December 31, 2019 and 2020 have been remediated because the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that the controls operated effectively.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended December 31, 2021.

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ITEM 9B. OTHER INFORMATION
Item 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
For information regarding our Directors, we direct you to the section entitled “Proposal 1 - Election and Ratification of Directors” in the Proxy Statement. For information regarding our Audit/Compliance Committee and our Audit/Compliance Committee’s financial expert, we direct you to the section entitled “Information about the Board of Directors and Corporate Governance - Committees of the Board - Audit/Compliance Committee” in the Proxy Statement. For information regarding our Code of Conduct, we direct you to the section entitled “Information about the Board of Directors and Corporate Governance - Code of Conduct” in the Proxy Statement. Information regarding our executive officers is contained in the section entitled “Executive Officers of the Registrant,” in Part I, Item I of this report. This information is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. EXECUTIVE COMPENSATION
For information regarding our Executive Compensation, we direct you to the section captioned “Executive and Director Compensation and Other Matters” in the Proxy Statement. This information is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
This information is located in the sections captioned “Stock Ownership of Certain Beneficial Owners Management” and “Equity Compensation Plan Information” in the Proxy Statement. This information is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
You will find this information in the sections captioned “Transactions with Related Persons” and “Information about the Board of Directors and Corporate Governance - Director Independence” in the Proxy Statement. This information is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
You will find this information in the section captioned “Independent Registered Public Accountants - Principal Accountant Fees and Services” in the Proxy Statement. This information is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
1. Financial Statements. The following consolidated financial statements and related documents are filed as part of this report:
Financial Statements
Page
Report of Independent Registered Public Accounting Firm
to
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
to
Quarterly Financial Data (unaudited)
2. Financial Statement Schedules. Schedules are omitted because they are not required or applicable, or the required information is included in the Financial Statements or related notes.
3. Exhibits. The Exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of, or furnished with, this report.
INDEX TO 10-K EXHIBITS
Exhibit
No.
Exhibit Description
2.1
*
Agreement and Plan of Merger by and among Granite Construction Incorporated, Layne Christensen Company and Lowercase Merger Sub Incorporated, dated as of February 13, 2018 [Exhibit 2.1 to the Company’s Form 8-K filed on February 14, 2018]
3.1
*
Certificate of Incorporation of Granite Construction Incorporated, as amended [Exhibit 3.1.b to the Company’s Form 10-Q for the quarter ended June 30, 2006]
3.2
*
Amended Bylaws of Granite Construction Incorporated [Exhibit 3.1 to the Company’s Form 8-K filed on November 15, 2011]
4.1
*
Indenture (including Form of Note) with respect to Granite Construction Incorporated’s 2.75% Convertible Senior Notes due 2024, dated November 1, 2019, by and between Granite Construction Incorporated and Wilmington Trust, National Association, as trustee [Exhibit 4.1 to the Company’s Form 8-K filed on November 1, 2019]
4.2
*
Description of Common Stock [Exhibit 4.2 to the Company’s Form 10-K for the year ended December 31, 2019]
10.1
***
Key Management Deferred Compensation Plan II, as amended and restated [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2010]
10.2
***
Form of Amended and Restated Director and Officer Indemnification Agreement [Exhibit 10.10 to the Company’s Form 10-K for the year ended December 31, 2002]
10.3
***
Granite Construction Incorporated Annual Incentive Plan effective January 1, 2010, as amended [Exhibit 10.22 to the Company’s Form 10-K for the year ended December 31, 2011]
10.4
***
Amendment No. 2 to the Granite Construction Incorporated Annual Incentive Plan effective January 1, 2012 [Exhibit 10.23 to the Company’s Form 10-K for the year ended December 31, 2011]
10.5
***
Granite Construction Incorporated Long Term Incentive Plan effective January 1, 2010, as amended [Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2011]
10.6
***
Amendment No. 2 to the Granite Construction Incorporated Long Term Incentive Plan effective January 1, 2012 [Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2011]
10.7
***
Granite Construction Incorporated 2012 Equity Incentive Plan [Exhibit 10.1 to the Company’s Form 8-K filed on May 25, 2012]
10.8
***
Form of Non-Employee Director Restricted Stock Unit Agreement effective May 22, 2012 (2012 Equity Incentive Plan) [Exhibit 10.2 to the Company’s Form 8-K filed on May 25, 2012]
10.9
***
Granite Construction Incorporated NEO LTIP Awards Form of Restricted Stock Unit Agreement (Vesting on Date of Grant) (2012 Equity Incentive Plan) [Exhibit 10.30 to the Company's Form 10-K for the year ended December 31, 2012]
10.10
***
Granite Construction Incorporated Form of Restricted Stock Unit Agreement (3 Year Vesting Schedule) (2012 Equity Incentive Plan) [Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 2012]
10.11
*
Third Amended and Restated Credit Agreement, dated May 31, 2018 by and among Granite Construction Incorporated, Granite Construction Company, GILC Incorporated, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender, and L/C Issuer [Exhibit 10.1 to the Company’s Form 8-K filed on June 5, 2018]
10.12
*
Third Amended and Restated Guaranty Agreement, dated May 31, 2018, by and among Granite Construction Incorporated, the guarantors party thereto and Bank of America, N.A., as Administrative Agent [Exhibit 10.2 to the Company’s Form 8-K filed on June 5, 2018]
10.13
*
Amendment No 1 to Third Amended and Restated Credit Agreement, dated July 29, 2019, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Exhibit 10.1 to the Company’s Form 8-K filed on August 2, 2019]
10.14
*
Amendment No. 2 to Third Amended and Restated Credit Agreement, dated October 29, 2019, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Exhibit 10.1 to the Company’s Form 8-K filed on October 30, 2019]
10.15
*
Form of Bond Hedge Confirmation [Exhibit 10.1 to the Company’s Form 8-K filed on November 1, 2019]
10.16
*
Form of Warrant Confirmation [Exhibit 10.2 to the Company’s Form 8-K filed on November 1, 2019]
10.17
*
Amendment No. 3 to Third Amended and Restated Credit Agreement, dated March 26, 2020, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2020]
10.18
***
Executive Retention and Severance Plan III and Participation Agreement [Exhibit 10.1 to the Company's Form 8-K filed on March 30, 2020]
10.19
***
Long Term Incentive Plan, effective January 1, 2020 [Exhibit 10.2 to the Company's Form 8-K filed on March 30, 2020]
10.20
***
LTIP Award Agreement (2020 Long Term Incentive Plan) [Exhibit 10.3 to the Company's Form 8-K filed on March 30, 2020]
10.21
*
Amendment No. 4 to Third Amended and Restated Credit Agreement, dated June 19, 2020, by and among the Company, Granite Construction Company, and GILC Incorporated, as borrowers, Bank of America, N.A., as Administrative Agent, and the lenders party thereto [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended June 30, 2020]
10.22
***
Retirement and Transition Agreement dated October 20, 2020 by and between the Company and Mr. Roberts [Exhibit 10.1 to the Company’s Form 8-K filed on October 23, 2020]
10.23
*
Amendment No. 5 to Third Amended and Restated Credit Agreement, dated November 12, 2020, by and among the Company and certain subsidiaries of the Company, each as borrowers, the guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent [Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2020]
10.24
*
Amendment No. 6 to Third Amended and Restated Credit Agreement, dated February 19, 2021, by and among the Company and certain subsidiaries of the Company, each as borrowers, the guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2021]
10.25
*
Stipulation and Agreement of Settlement, dated as of April 29, 2021 [Exhibit 10.1 to the Company’s Form 8-K filed on April 30, 2021]
10.26
***
Granite Construction Incorporated 2021 Equity Incentive Plan [Exhibit 10.2 to the Company’s Form 8-K filed on June 4, 2021]
10.27
***
Form of Non-Employee Director Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.3 to the Company’s Form 8-K filed on June 4, 2021]
10.28
***
Form of Employee Service Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.4 to the Company’s Form 8-K filed on June 4, 2021]
10.29
***
Form of Employee TSR Award Restricted Stock Unit Agreement (2021 Equity Incentive Plan) [Exhibit 10.5 to the Company’s Form 8-K filed on June 4, 2021]
10.30
***
Separation and Transition Agreement, dated November 14, 2021 by and between the Company and Ms. Desai [Exhibit 10.1 to the Company’s Form 8-K filed on November 15, 2021]
Exhibit No.
Exhibit Description
†
List of Subsidiaries of Granite Construction Incorporated
23.1
†
Consent of PricewaterhouseCoopers LLP
31.1
†
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
†
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
††
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
†
Mine Safety Disclosure
101.INS
†
Inline XBRL Instance Document
101.SCH
†
Inline XBRL Taxonomy Extension Schema
101.CAL
†
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF
†
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB
†
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
†
Inline XBRL Taxonomy Extension Presentation Linkbase
†
The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL (included within the Exhibit 101 attachments).
* Incorporated by reference
** Compensatory plan or management contract
† Filed herewith
†† Furnished herewith