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Note 11 - Construction Joint Ventures

6 Months Ended

Jun. 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 six months ended June 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 June 30, 2020, there was approximately $2.1 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $0.8 billion represented our share and the remaining $1.3 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 June 30, 2020, we were engaged in seven active CCJV projects with total contract values ranging from $0.7 million to $413.8 million and a combined total of $1.6 billion of which our share was $928.5 million. Our share of revenue remaining to be recognized on these CCJVs was $457.5 million and ranged between less than $0.1 million to $188.9 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 65.0%. During the three and six months ended June 30, 2020 total revenue from CCJVs was $86.0 million and $140.7 million, respectively, and during the three and six months ended June 30, 2019, total revenue from CCJVs was $76.5 million and $139.5 million, respectively. During the six months ended June 30, 2020 and 2019, CCJVs provided $19.8 million and used $5.3 million of operating cash flows, respectively.

Unconsolidated Construction Joint Ventures

As of June 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 $11.5 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 June 30, 2020, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $618.6 million and ranged from $1.2 million to $168.2 million.

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

As Restated

(in thousands)

June 30, 2020

December 31, 2019

June 30, 2019

Assets

Cash, cash equivalents and marketable securities
$ 213,285 $ 179,049 $ 225,163

Other current assets (1)
948,103 972,840 960,406

Noncurrent assets
185,866 207,584 214,238

Less partners’ interest
908,274 904,565 929,332

Granite’s interest (1),(2)
438,980 454,908 470,475

Liabilities

Current liabilities
515,113 581,199 530,654

Less partners’ interest and adjustments (3)
182,035 243,202 200,517

Granite’s interest
333,078 337,997 330,137

Equity in construction joint ventures (4)
$ 105,902 $ 116,911 $ 140,338

(1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets was $82.3 million, $81.9 million and $88.7 million related to performance guarantees as of June 30, 2020, December 31, 2019 and June 30, 2019, respectively.

(2) Included in this balance as of June 30, 2020, December 31, 2019 and June 30, 2019, was $80.9 million, $116.8 million and $114.1 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $18.0 million, $15.9 million and $15.1 million related to Granite’s share of estimated recovery of back charge claims as of June 30, 2020, December 31, 2019 and June 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 $77.6 million, $76.2 million and $79.9 million, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses, as of June 30, 2020, December 31, 2019 and June 30, 2019.

Three Months Ended June 30,

Six Months Ended June 30,

As Restated

As Restated

(in thousands) 2020 2019 2020 2019

Revenue

Total
$ 384,461 $ 436,071 $ 446,491 $ 852,005

Less partners’ interest and adjustments (1)
287,639 334,500 265,967 639,918

Granite’s interest
96,822 101,571 180,524 212,087

Cost of revenue

Total
356,755 456,484 585,215 867,969

Less partners’ interest and adjustments (1)
241,560 302,604 374,303 583,031

Granite’s interest
115,195 153,880 210,912 284,938

Granite’s interest in gross loss
$ (18,373 ) $ (52,309 ) $ (30,388 ) $ (72,851 )

(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 six months ended June 30, 2020, unconsolidated construction joint venture net income/(loss) was $27.5 million and $(138.5) million, respectively, of which our share was net loss of $(18.7) million and $(30.5) million, respectively. During the three and six months ended June 30, 2019, unconsolidated net loss was $(18.9) million and $(13.7) million, respectively, of which our share was net loss of $(52.5) million and $(72.8) million, respectively. The differences between our share of the joint venture net loss when compared to the joint venture net income/(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 income/(loss) amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes.

Line Item Joint Ventures

As of June 30, 2020, we had four active line item joint venture construction projects with a total contract value of $327.8 million of which our portion was $182.8 million. As of June 30, 2020, our share of revenue remaining to be recognized on these line item joint ventures was $133.1 million. During the three and six months ended June 30, 2020, our portion of revenue from line item joint ventures was $18.4 million and $31.2 million, respectively. During the three and six months ended June 30, 2019, our portion of revenue from line item joint ventures was $11.8 million and $12.2 million, respectively.