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Note 11 - Construction Joint Ventures

9 Months Ended

Sep. 30, 2020

Construction Joint Ventures [Text Block]

11. Construction Joint Ventures

We participate in various construction joint ventures. We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary. We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during the three and nine months ended September 30, 2020, we determined no change was required for existing joint ventures.

Due to the joint and several nature of the performance obligations under the related owner contracts, if any of 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). At September 30, 2020, there was approximately $1.8 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $0.7 billion represented our share and the remaining $1.1 billion represented our partners’ share. We are not able to estimate amounts that may be required beyond the remaining cost of the work to be performed. These costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees.

Consolidated Construction Joint Ventures (“CCJVs”)

At September 30, 2020, we were engaged in seven active CCJV projects with total contract values ranging from $26.1 million to $435.3 million and a combined total of $1.7 billion of which our share was $1.0 billion. Our share of revenue remaining to be recognized on these CCJVs was $451.3 million and ranged from $6.5 million to $173.8 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 65.0%. During the three and nine months ended September 30, 2020, total revenue from CCJVs was $79.2 million and $219.9 million, respectively, and during the three and nine months ended September 30, 2019, total revenue from CCJVs was $66.1 million and $205.6 million, respectively. During the nine months ended September 30, 2020 and 2019, CCJVs provided $17.0 million and used $19.0 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As of September 30, 2020, we were engaged in ten active unconsolidated joint venture projects with total contract values ranging from $12.1 million to $3.8 billion for a combined total of $11.6 billion of which our share was $3.4 billion. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 20.0% to 50.0%. As of September 30, 2020, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $538.0 million and ranged from $1.1 million to $141.1 million.

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

As Restated

(in thousands)

September 30, 2020

December 31, 2019

September 30, 2019

Assets

Cash, cash equivalents and marketable securities
$ 211,483 $ 179,049 $ 217,279

Other current assets (1)
874,396 972,840 863,182

Noncurrent assets
176,195 207,584 209,865

Less partners’ interest
849,213 904,565 858,235

Granite’s interest (1),(2)
412,861 454,908 432,091

Liabilities

Current liabilities
514,739 581,199 $ 542,278

Less partners’ interest and adjustments (3)
211,749 243,202 231,909

Granite’s interest
302,990 337,997 310,369

Equity in construction joint ventures (4)
$ 109,871 $ 116,911 $ 121,722

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets was $82.3 million as of September 30, 2020 and $81.9 million as of both December 31, 2019 and September 30, 2019, related to performance guarantees.

(2) Included in this balance as of September 30, 2020, December 31, 2019 and September 30, 2019, was $86.2 million, $116.8 million and $118.0 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $13.8 million, $15.9 million and $14.8 million related to Granite’s share of estimated recovery of back charge claims as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

(3) Partners’ interest and adjustments includes amounts to reconcile total net assets as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences.

(4) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $75.1 million, $76.2 million and $82.2 million as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses.

Three Months Ended September 30,

Nine Months Ended September 30,

As Restated

As Restated

(in thousands)

2020

2019

2020

2019

Revenue

Total
$ 293,733 $ 421,977 $ 740,224 $ 1,273,982

Less partners’ interest and adjustments (1)
206,032 309,937 471,999 949,855

Granite’s interest
87,701 112,040 268,225 324,127

Cost of revenue

Total
299,776 441,898 884,991 1,309,867

Less partners’ interest and adjustments (1)
203,932 308,764 578,235 891,795

Granite’s interest
95,844 133,134 306,756 418,072

Granite’s interest in gross loss
$ (8,143 ) $ (21,094 ) $ (38,531 ) $ (93,945 )

(1) Partners’ interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences.

During the three and nine months ended September 30, 2020, unconsolidated construction joint venture net loss was $(6.0) million and $(144.5) million, respectively, of which our share was $(8.0) million and $(38.5) million, respectively. The differences between our share of the joint venture net loss when compared to the joint venture net loss primarily resulted from differences between our estimated total revenue and cost of revenue when compared to that of our partners’ on five and four projects during 2020 and 2019, respectively. The differences are due to timing differences from varying accounting policies and in public company quarterly reporting requirements. These joint venture net loss amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.

Line Item Joint Ventures

As of September 30, 2020, we had four active line item joint venture construction projects with a total contract value of $318.0 million of which our portion was $188.5 million. As of September 30, 2020, our share of revenue remaining to be recognized on these line item joint ventures was $111.3 million. During the three and nine months ended September 30, 2020, our portion of revenue from line item joint ventures was $27.5 million and $58.7 million, respectively. During the three and nine months ended September 30, 2019, our portion of revenue from line item joint ventures was $9.1 million and $21.3 million, respectively.