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Long-term Debt and Credit Arrangements | 6 Months Ended
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Jun. 30, 2024
Debt Disclosure [Abstract] |
Long-Term Debt and Credit Arrangements | Long-Term Debt and Credit Arrangements
(in thousands) | June 30, 2024 |  | December 31, 2023
3.25% Convertible Notes | $ | 373,750 |  |  | $ | — |
3.75% Convertible Notes | 373,750 |  |  | 373,750 |
2.75% Convertible Notes | 420 |  |  | 31,338 |
Credit Agreement - Term Loan | — |  |  | 150,000 |
Credit Agreement - Revolver | — |  |  | 100,000 |
Debt issuance costs and other | (8,974) |  |  | (375) |
Total debt | $ | 738,946 |  |  | $ | 654,713 |
Less: current maturities | 1,510 |  |  | 39,932 |
Total long-term debt | $ | 737,436 |  |  | $ | 614,781 |
Credit Agreement In June 2022, we entered into the Credit Agreement which matures on June 2, 2027. The Credit Agreement consisted of a $350.0 million senior secured, five-year revolving credit facility (the “Revolver”), including an accordion feature allowing us to increase borrowings up to the greater of (a) $200.0 million and (b) 100% of twelve-month trailing consolidated EBITDA, subject to lender approval. The Credit Agreement includes a $150.0 million sublimit for letters of credit ($75.0 million for financial letters of credit) and a $20.0 million sublimit for swingline loans. In May 2023, we entered into Amendment No. 1 to the Credit Agreement ("Amendment No. 1"). Amendment No. 1 amended the Credit Agreement to, among other things, permit the Company to exchange its 2.75% Convertible Notes for cash and shares of its common stock and to clarify that (i) the issuance of the 3.75% Convertible Notes was permitted under the terms of the Credit Agreement and (ii) that a Swap Contract (as defined in the Credit Agreement) does not include any Permitted Call Spread Transaction (as defined in the Credit Agreement). In November 2023, we entered into Amendment No. 2 to the Credit Agreement ("Amendment No. 2") which amended the Credit Agreement to, among other things, provide for a $150.0 million senior secured term loan (the “Term Loan”), which was fully drawn on closing to fund the LRC/MSG acquisition. The Term Loan was scheduled to mature on June 2, 2027 and amortize 5% per year, payable in quarterly installments beginning in the first quarter of 2024. At March 31, 2024 there was $148.1 million outstanding on the Term Loan which was fully repaid with the net proceeds from our 3.25% Convertible Notes during the three months ended June 30, 2024. We may borrow on the Revolver, at our option, at either (a) the Secured Overnight Financing Rate (“SOFR”) term rate plus a credit adjustment spread plus applicable margin ranging from 1.0% to 2.0%, or (b) a base rate plus an applicable margin ranging from zero to 1.0%. The applicable margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly. As of June 30, 2024, the total unused availability under the Credit Agreement was $333.4 million, resulting from $16.6 million in issued and outstanding letters of credit and nothing drawn under the Revolver. The letters of credit had expiration dates between July 2024 and December 2027. 3.25% Convertible Notes On June 11, 2024, we issued $373.8 million aggregate principal amount of our 3.25% Convertible Notes. The 3.25% Convertible Notes bear interest at a rate of 3.25% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2024. The 3.25% Convertible Notes mature on June 15, 2030, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding December 15, 2029, the 3.25% Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 3.25% Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding their maturity date. The 3.25% Convertible Notes have an initial conversion rate of 12.8398 shares of Granite’s common stock per $1,000 principal amount of the 3.25% Convertible Notes, which is equivalent to an initial conversion price of approximately $77.88 per share of Granite’s common stock, subject to adjustment if certain events occur. Upon conversion, we will settle the principal amount of the 3.25% Convertible Notes in cash, and any conversion premium in excess of the principal amount in cash, or a combination of cash and shares of common stock, at our election. In addition, upon the occurrence of a “fundamental change” as defined in the indenture governing the 3.25% Convertible Notes, holders may require us to repurchase for cash all or any portion of their 3.25% Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 3.25% Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. If certain corporate events that constitute a “make-whole fundamental change” as set forth in the indenture governing the 3.25% Convertible Notes occur prior to the maturity date of the 3.25% Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 3.25% Convertible Notes in connection with such event or notice of redemption. We will not be able to redeem the 3.25% Convertible Notes prior to June 21, 2027. On or after June 21, 2027, we will be able to redeem for cash all or any portion of the 3.25% Convertible Notes, at our option, if the last reported sale price of Granite’s common stock is equal to or greater than 130% of the conversion price for a specified period of time at a redemption price equal to 100% of the principal amount of the 3.25% Convertible Notes to be redeemed, plus accrued but unpaid interest to, but excluding, the redemption date. The indenture governing the 3.25% Convertible Notes contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding 3.25% Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25% in aggregate principal amount of the 3.25% Convertible Notes then outstanding may declare the 3.25% Convertible Notes due and payable immediately. The net proceeds from the sale of the 3.25% Convertible Notes were approximately $365.0 million, after deducting the initial purchasers’ discount. We used approximately $46.0 million of the net proceeds from the 3.25% Convertible Notes offering to pay the cost of entering into capped call transactions in connection with the 3.25% Convertible Notes. In addition, we paid approximately $57.6 million of the net proceeds from the 3.25% Convertible Notes offering to repurchase approximately $30.2 million in aggregate principal amount of our 2.75% Convertible Notes in separate and individually negotiated transactions entered into concurrently with the pricing of the offering; repaid amounts outstanding under our Term Loan of $148.1 million; repurchased $13.3 million of shares under our authorized share repurchase program; with the remainder of the net proceeds available for general corporate purposes, which may include acquisitions. 2024 Capped Call Transactions In June 2024, we entered into privately negotiated capped call transactions in connection with the offering of the 3.25% Convertible Notes (the "2024 capped call transactions"). The 2024 capped call transactions are expected generally to reduce the potential dilution to Granite’s common stock upon any conversion of the 3.25% Convertible Notes and/or offset any cash payments Granite is required to make in excess of the principal amount of converted 3.25% Convertible Notes, as the case may be. If, however, the market price per share of Granite’s common stock, as measured under the terms of the 2024 capped call transactions, exceeds the cap price $119.82 of the 2024 capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the 2024 capped call transactions. 3.75% Convertible Notes On May 11, 2023, we issued $373.8 million aggregate principal amount of our 3.75% Convertible Notes. The 3.75% Convertible Notes bear interest at a rate of 3.75% per annum payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2023 and mature on May 15, 2028, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding November 15, 2027, the 3.75% Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 3.75% Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The initial conversion rate applicable to the 3.75% Convertible Notes is 21.6807 shares of Granite common stock per $1,000 principal amount of the 3.75% Convertible Notes, which is equivalent to an initial conversion price of approximately $46.12 per share of Granite common stock, subject to adjustment if certain events occur. Upon conversion, we will pay or deliver, as the case may be, cash, shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election. In addition, upon the occurrence of a “fundamental change” as defined in the indenture governing the 3.75% Convertible Notes, holders may require us to repurchase for cash all or any portion of their 3.75% Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 3.75% Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. If certain corporate events that constitute a “make-whole fundamental change” as set forth in the indenture governing the 3.75% Convertible Notes occur prior to the maturity date of the 3.75% Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 3.75% Convertible Notes in connection with such event or notice of redemption. We will not be able to redeem the 3.75% Convertible Notes prior to May 20, 2026. On or after May 20, 2026, we have the option to redeem for cash all or any portion of the 3.75% Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130% of the conversion price for a specified period of time at a redemption price equal to 100% of the principal amount of the 3.75% Convertible Notes to be redeemed, plus any accrued but unpaid interest to, but excluding, the redemption date. The indenture governing the 3.75% Convertible Notes contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding 3.75% Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25% in aggregate principal amount of the 3.75% Convertible Notes then outstanding may declare the 3.75% Convertible Notes due and payable immediately. The net proceeds from the sale of the 3.75% Convertible Notes were approximately $364.4 million, after deducting the initial purchasers’ discount. We used approximately $53.0 million of the net proceeds from the offering to pay the cost of the 2023 capped call transactions (as described below). In addition, we used approximately $198.8 million of the net proceeds and issued 1,390,500 shares of Granite common stock in exchange for approximately $198.7 million aggregate principal amount of our 2.75% Convertible Notes concurrent with the offering in separate and individually negotiated transactions (the "Exchange Transaction"). In connection with the Exchange Transaction, we entered into partial unwind agreements (the "Unwind Agreements") with certain financial institutions to unwind a portion of the convertible note hedge and warrant transactions entered into in connection with the offering of the 2.75% Convertible Notes. Pursuant to the Unwind Agreements, we received 1,390,516 shares of our common stock (and cash in lieu of any fractional shares) in respect of the unwind of the portion of the existing convertible note hedge transactions that correspond to the 2.75% Convertible Notes that were exchanged in the Exchange Transaction described above and paid $13.2 million in cash in respect of the unwind of the portion of the existing warrant transactions that correspond to the 2.75% Convertible Notes that were exchanged in the Exchange Transaction described above. 2023 Capped Call Transactions In May 2023, we entered into capped call transactions (the "2023 capped call transactions") in connection with the offering of the 3.75% Convertible Notes. The 2023 capped call transactions are expected generally to reduce the potential dilution to Granite’s common stock upon conversion of the 3.75% Convertible Notes and/or offset any cash payments Granite is required to make in excess of the principal amount of converted 3.75% Convertible Notes, as the case may be. If, however, the market price per share of Granite’s common stock, as measured under the terms of the 2023 capped call transactions, exceeds the cap price $79.83 of the 2023 capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the 2023 capped call transactions. 2.75% Convertible Notes The 2.75% Convertible Notes were issued in November 2019 in an aggregate principal amount of $230.0 million, with an interest rate of 2.75% and a maturity date of November 1, 2024, unless earlier converted, redeemed or repurchased. In June 2024, we called the 2.75% Convertible Notes for redemption and will redeem all outstanding aggregate principal amount of the 2.75% Convertible Notes on August 19, 2024. The redemption price per $1,000 principal amount of the 2.75% Convertible Notes is equal to $1,000 plus accrued and unpaid interest, if any, to, but excluding the redemption date. The 2.75% Convertible Notes may be converted, at the election of the holder of such notes, at any time before the close of business on August 15, 2024. The conversion rate for the 2.75% Convertible Notes is 31.7915 shares of Granite common stock per $1,000 principal amount of notes (which includes 0.0139 additional shares to which converting holders are entitled). With respect any 2.75% Convertible Note that is properly surrendered for conversion from and after the date of the redemption notice until the close of business on August 15, 2024, we have elected to settle such conversion by delivering cash of $1,000 per $1,000 principal amount of the 2.75% Convertible Notes and shares of our common stock in respect of the remainder of our conversion obligation in excess of the cash payment. The indenture governing the 2.75% Convertible Notes contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding 2.75% Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25% in aggregate principal amount of the 2.75% Convertible Notes then outstanding may declare the notes due and payable immediately. At June 30, 2024, $0.4 million remained outstanding of our 2.75% Convertible Notes. Covenants and Events of Default Our 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 2.75% Convertible Notes, 3.25% Convertible Notes and 3.75% Convertible Notes are governed by the terms and conditions of their respective indentures. Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75% Convertible Notes, our 3.25% Convertible Notes, our 3.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 2.75% Convertible Notes indenture, the 3.25% Convertible Notes indenture, the 3.75% 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 collateral securing the obligations under such facility. A default under the 2.75% Convertible Notes indenture, the 3.25% Convertible Notes indenture or the 3.75% 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 June 30, 2024, we were in compliance with all covenants contained in the Credit Agreement. We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements. Debt Issuance Costs During the three and six months ended June 30, 2024, we recorded $1.5 million and $2.1 million, respectively, of amortization related to debt issuance costs. We also capitalized $9.7 million in third party offering costs related to the issuance of the 3.25% Convertible Notes. These debt issuance costs will be amortized over the expected life of the 3.25% Convertible Notes. During the three and six months ended June 30, 2023, we recorded $2.1 million and $2.4 million, respectively, of amortization related to debt issuance costs. This included $1.7 million of accelerated amortization of debt issuance costs associated with the 2.75% Convertible Notes that were repaid and are included in the loss on debt extinguishment. We also capitalized $9.8 million in third party offering costs related to the issuance of the 3.75% Convertible Notes. These debt issuance costs will be amortized over the expected life of the 3.75% Convertible Notes.

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