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Note 3 - Restatement

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Accounting Changes and Error Corrections [Text Block]

3. Restatement

Restatement Background

As disclosed in our 2019 Annual Report on Form 10-K, in February 2020, the Audit/Compliance Committee of the Company’s Board of Directors, assisted by independent counsel, initiated an investigation of prior-period reporting for the Heavy Civil operating group, and the extent to which these matters affect the effectiveness of the Company’s internal control over financial reporting (the “Investigation”). The Investigation is now complete. We have restated our consolidated financial statements as of December 31, 2018, and for the years ended December 31, 2018 and 2017 and our unaudited quarterly financial information for the first three quarters in the year ended December 31, 2019 and for each of the quarters in the year ended December 31, 2018 in our Annual Report on Form 10-K for the year ended December 31, 2019 to correct misstatements associated with project forecasts in the Heavy Civil operating group (the “Investigation Adjustments”) discovered in connection with the independent Investigation. In addition to the Investigation Adjustments, we corrected additional identified out-of-period and uncorrected misstatements that were not material, individually or in the aggregate, to our consolidated financial statements (the “Other Adjustments”). We have reflected the impact of the restatement on our unaudited condensed consolidated financial information as of and for the three and nine months ended September 30, 2019 herein.

Description of Restatement Tables

We have presented below a reconciliation from the previously reported to the restated values as of and for the three and nine months ended September 30, 2019. The previously reported values were derived from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 filed on October 25, 2019 and are labeled as “As Previously Reported” in the following tables. The account balances labeled as “Investigation Adjustments” represent effects of adjustments resulting from the Investigation. The account balances labeled as “Other Adjustments” represent the effects of other adjustments, which related to revisions in estimates in projects primarily impacting revenue and cost of revenue in the Transportation segment as a result of out-of-period or uncorrected misstatements in previously filed financial statements that were not material, individually or in the aggregate, to those previously filed financial statements, balance sheet reclassifications and other immaterial adjustments.

The impacts to the condensed consolidated statements of shareholders’ equity and comprehensive income (loss) as a result of the restatement were due to the changes in net income (loss) for the three and nine months ended September 30, 2019. In addition, there was no impact to net cash used in investing and financing activities for the nine months ended September 30, 2019 as a result of the restatement.

The effects of the prior-period misstatements on our consolidated financial statements are as follows (in thousands, except per share data):

Consolidated Balance Sheet

September 30, 2019		*As Previously Reported*				*Investigation Adjustments*				*Other Adjustments*				*As Restated*
ASSETS
Current assets
Cash and cash equivalents		$	184,673			$	—			$	—			$	184,673
Short-term marketable securities			37,918				—				—				37,918
Receivables, net			700,387				10,569				2,016				712,972
Contract assets			233,925				(17,452	)			(10,066	)			206,407
Inventories			95,442				—				—				95,442
Equity in construction joint ventures			209,765				(10,351	)			4,540				203,954
Other current assets			42,698				9,019				208				51,925
Total current assets			1,504,808				(8,215	)			(3,302	)			1,493,291
Property and equipment, net			542,796				—				—				542,796
Long-term marketable securities			10,000				—				—				10,000
Investments in affiliates			84,914				—				—				84,914
Goodwill			264,112				—				—				264,112
Right of use assets			70,472				—				—				70,472
Deferred income taxes, net			38,443				(8,580	)			774				30,637
Other noncurrent assets			118,228				—				(1,790	)			116,438
Total assets		$	2,633,773			$	(16,795	)		$	(4,318	)		$	2,612,660

LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt		$	8,263			$	—			$	—			$	8,263
Accounts payable			399,528				—				215				399,743
Contract liabilities			106,010				9,025				(5,736	)			109,299
Accrued expenses and other current liabilities			342,040				12,031				5,150				359,221
Total current liabilities			855,841				21,056				(371	)			876,526
Long-term debt			394,841				—				—				394,841
Long-term lease liabilities			56,740				—				—				56,740
Deferred income taxes, net			4,652				—				—				4,652
Other long-term liabilities			58,433				—				—				58,433
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding			—				—				—				—
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding: 46,741,263 shares as of September 30, 2019			468				—				—				468
Additional paid-in capital			567,033				—				—				567,033
Accumulated other comprehensive loss			(3,282	)			—				—				(3,282	)
Retained earnings			656,487				(34,046	)			(2,751	)			619,690
Total Granite Construction Incorporated shareholders’ equity			1,220,706				(34,046	)			(2,751	)			1,183,909
Non-controlling interests			42,560				(3,805	)			(1,196	)			37,559
Total equity			1,263,266				(37,851	)			(3,947	)			1,221,468
Total liabilities and equity		$	2,633,773			$	(16,795	)		$	(4,318	)		$	2,612,660

Consolidated Statement of Operations

		*Three Months Ended September 30, 2019*																*Nine Months Ended September 30, 2019*
		*As Previously Reported*				*Investigation Adjustments*				*Other Adjustments*				*As Restated*				*As Reported*				*Investigation Adjustments*				*Other Adjustments*				*As Restated*
Revenue
Transportation		$	598,646			$	23,861			$	1,360			$	623,867			$	1,340,834			$	72,094			$	(5,351	)		$	1,407,577
Water			135,908				(1,771	)			267				134,404				347,994				(2,669	)			231				345,556
Specialty			224,457				—				287				224,744				540,234				—				(1,737	)			538,497
Materials			129,099				—				—				129,099				268,389				—				—				268,389
Total revenue			1,088,110				22,090				1,914				1,112,114				2,497,451				69,425				(6,857	)			2,560,019
Cost of revenue
Transportation			585,013				(8,245	)			234				577,002				1,405,830				(24,647	)			(4,622	)			1,376,561
Water			120,878				674				215				121,767				313,582				674				215				314,471
Specialty			186,158				—				—				186,158				464,858				—				—				464,858
Materials			104,629				—				—				104,629				233,675				—				—				233,675
Total cost of revenue			996,678				(7,571	)			449				989,556				2,417,945				(23,973	)			(4,407	)			2,389,565
Gross profit (loss)			91,432				29,661				1,465				122,558				79,506				93,398				(2,450	)			170,454
Selling, general and administrative expenses			73,424				—				—				73,424				224,577				—				—				224,577
Acquisition and integration expenses			2,744				—				—				2,744				15,244				—				(1,475	)			13,769
Gain on sales of property and equipment			(7,101	)			—				—				(7,101	)			(13,936	)			—				—				(13,936	)
Operating income (loss)			22,365				29,661				1,465				53,491				(146,379	)			93,398				(975	)			(53,956	)
Other (income) expense
Interest income			(1,713	)			—				—				(1,713	)			(6,257	)			—				—				(6,257	)
Interest expense			4,839				—				—				4,839				13,011				—				—				13,011
Equity in income of affiliates, net			(6,275	)			—				—				(6,275	)			(10,159	)			—				—				(10,159	)
Other income, net			127				—				—				127				(2,394	)			—				—				(2,394	)
Total other income			(3,022	)			—				—				(3,022	)			(5,799	)			—				—				(5,799	)
Income (loss) before provision for (benefit from) income taxes			25,387				29,661				1,465				56,513				(140,580	)			93,398				(975	)			(48,157	)
Provision for (benefit from) income taxes			3,474				7,898				375				11,747				(37,451	)			26,145				(210	)			(11,516	)
Net income (loss)			21,913				21,763				1,090				44,766				(103,129	)			67,253				(765	)			(36,641	)
Amount attributable to non-controlling interests			(1,425	)			2,660				(100	)			1,135				(8,793	)			4,060				563				(4,170	)
Net income (loss) attributable to Granite Construction Incorporated		$	20,488			$	24,423			$	990			$	45,901			$	(111,922	)		$	71,313			$	(202	)		$	(40,811	)

Net income (loss) income per share attributable to common shareholders
Basic		$	0.44			$	0.52			$	0.02			$	0.98			$	(2.39	)		$	1.52			$	(0.00	)		$	(0.87	)
Diluted		$	0.43			$	0.52			$	0.02			$	0.97			$	(2.39	)		$	1.52			$	(0.00	)		$	(0.87	)
Weighted average shares of common stock
Basic			46,788				46,788				46,788				46,788				46,771				46,771				46,771				46,771
Diluted			47,170				47,170				47,170				47,170				46,771				46,771				46,771				46,771

Consolidated Statement of Cash Flows

Nine Months Ended September 30, 2019		*As Previously Reported*				*Investigation Adjustments*				*Other Adjustments*				*As Restated*
Operating activities
Net (loss) income		$	(103,129	)		$	67,253			$	(765	)		$	(36,641	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation, depletion and amortization			92,700				—				—				92,700
Gain on sales of property and equipment			(13,936	)			—				—				(13,936	)
Deferred income taxes			(37,338	)			35,188				—				(2,150	)
Stock-based compensation			8,924				—				—				8,924
Equity in net loss (income) from unconsolidated joint ventures			173,008				(77,334	)			(2,400	)			93,274
Net income from affiliates			(10,159	)			—				—				(10,159	)
Other non-cash adjustments			4,630				—				—				4,630
Changes in assets and liabilities, net of the effects of an acquisition:
Receivables			(224,475	)			—				(1,083	)			(225,558	)
Contract assets, net			(13,276	)			(16,109	)			7,846				(21,539	)
Inventories			(6,178	)			—				—				(6,178	)
Contributions to unconsolidated construction joint ventures			(57,280	)			—				—				(57,280	)
Distributions from unconsolidated construction joint ventures and affiliates			13,181				—				—				13,181
Other assets, net			(1,141	)			(8,998	)			(251	)			(10,390	)
Accounts payable			148,739				—				(5,061	)			143,678
Accrued expenses and other current liabilities, net			(768	)			—				1,714				946
Net cash used in operating activities		$	(26,498	)		$	—			$	—			$	(26,498	)