GRANITE CONSTRUCTION INC [GVA] Filings

10-Q 1 gva20220331_10q.htm FORM 10-Q gva20220331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ___________ to ___________

	Commission File Number: 1-12911

GRANITE CONSTRUCTION INCORPORATED

State of Incorporation:	I.R.S. Employer Identification Number:
Delaware	77-0239383

Address of principal executive offices:

585 W. Beach Street

Watsonville, California 95076

(831) 724-1011

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	GVA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 22, 2022.

Class		Outstanding
Common stock, $0.01 par value		45,364,428

Table of Contents

Index

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of March 31, 2022, December 31, 2021 and March 31, 2021
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021
		Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2022 and 2021
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021
		Notes to the Condensed Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	Item 4.	Controls and Procedures
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 1A.	Risk Factors
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 4.	Mine Safety Disclosures
	Item 6.	Exhibits
SIGNATURES
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32
EXHIBIT 95
EXHIBIT 101.INS
EXHIBIT 101.SCH
EXHIBIT 101.CAL
EXHIBIT 101.DEF
EXHIBIT 101.LAB

EXHIBIT 101.PRE
EXHIBIT 104

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PART I. FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - in thousands, except share and per share data)

	*March 31, 2022*		*December 31, 2021*			*March 31, 2021*
ASSETS
Current assets
Cash and cash equivalents ($100,080, $92,783 and $110,486 related to consolidated construction joint ventures (“CCJVs”))	$	360,911	$	395,647		$	440,833
Short-term marketable securities		14,953		—			—
Receivables, net ($48,795, $49,534 and $32,539 related to CCJVs)		380,502		464,588			393,283
Contract assets ($63,952, $50,054 and $37,683 related to CCJVs)		180,023		145,437			144,780
Inventories		74,356		61,965			65,977
Equity in construction joint ventures		191,183		189,911			186,536
Other current assets ($6,841, $8,091 and $12,298 related to CCJVs)		179,024		177,210			59,938
Current assets held-for-sale		211,774		392,641			159,394
Total current assets		1,592,726		1,827,399			1,450,741
Property and equipment, net ($13,458, $14,920 and $22,457 related to CCJVs)		450,250		433,504			426,953
Long-term marketable securities		21,775		15,600			11,300
Investments in affiliates		22,987		23,368			27,760
Goodwill		53,715		53,715			53,715
Right of use assets		48,920		49,312			48,688
Deferred income taxes, net		25,880		24,141			40,306
Other noncurrent assets		65,888		67,888			69,291
Noncurrent assets held-for-sale		—		—			244,930
Total assets	$	2,282,141	$	2,494,927		$	2,373,684

LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	8,735	$	8,727		$	8,700
Accounts payable ($57,955, $55,012 and $52,217 related to CCJVs)		285,390		324,313			269,497
Contract liabilities ($55,085, $69,328 and $70,968 related to CCJVs)		165,358		200,041			153,633
Accrued expenses and other current liabilities ($7,535, $5,514 and $4,640 related to CCJVs)		439,525		452,829			499,827
Current liabilities held-for-sale		40,246		83,408			68,478
Total current liabilities		939,254		1,069,318			1,000,135
Long-term debt		290,549		331,191			331,647
Long-term lease liabilities		32,682		32,928			35,540
Other long-term liabilities		62,493		65,927			64,442
Long-term liabilities held-for-sale		—		—			10,725
Commitments and contingencies (see Note 18)
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: 45,364,137 shares as of March 31, 2022, 45,840,260 shares as of December 31, 2021 and 45,791,712 shares as of March 31, 2021		454		458			458
Additional paid-in capital		515,262		559,752			554,186
Accumulated other comprehensive income (loss)		1,573		(3,359	)		(3,714	)
Retained earnings		402,550		410,831			352,610
Total Granite Construction Incorporated shareholders’ equity		919,839		967,682			903,540
Non-controlling interests		37,324		27,881			27,655
Total equity		957,163		995,563			931,195
Total liabilities and equity	$	2,282,141	$	2,494,927		$	2,373,684

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share data)

Three Months Ended March 31,	*2022*			*2021*
Revenue
Construction	$	474,935		$	506,971
Materials		72,651			59,361
Total revenue		547,586			566,332
Cost of revenue
Construction		426,743			454,202
Materials		71,068			58,418
Total cost of revenue		497,811			512,620
Gross profit		49,775			53,712
Selling, general and administrative expenses		58,501			61,161
Other costs (see Note 7)		8,214			74,309
Gain on sales of property and equipment, net		(332	)		(2,245	)
Operating loss		(16,608	)		(79,513	)
Other (income) expense
Interest income		(623	)		(233	)
Interest expense		3,575			5,372
Equity in (income) loss of affiliates, net		306			(268	)
Other (income) expense, net		1,382			(226	)
Total other expense, net		4,640			4,645
Loss from continuing operations before benefit from income taxes		(21,248	)		(84,158	)
Benefit from income taxes on continuing operations		(5,331	)		(21,757	)
Net loss from continuing operations		(15,917	)		(62,401	)
Net income (loss) from discontinued operations		6,096			(2,922	)
Net loss		(9,821	)		(65,323	)
Amount attributable to non-controlling interests from continuing operations		(3,118	)		(872	)
Net loss attributable to Granite Construction Incorporated from continuing operations		(19,035	)		(63,273	)
Net income (loss) attributable to Granite Construction Incorporated from discontinued operations		6,096			(2,922	)
Net loss attributable to Granite Construction Incorporated	$	(12,939	)	$	(66,195	)

Net income (loss) per share attributable to common shareholders (see Note 16):
Basic continuing operations per share	$	(0.42	)	$	(1.38	)
Basic discontinued operations per share		0.13			(0.07	)
Basic loss per share	$	(0.29	)	$	(1.45	)

Diluted continuing operations per share	$	(0.42	)	$	(1.38	)
Diluted discontinued operations per share		0.13			(0.07	)
Diluted loss per share	$	(0.29	)	$	(1.45	)

Weighted average shares outstanding:
Basic		45,730			45,697
Diluted		45,730			45,697

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited - in thousands)

Three Months Ended March 31,	*2022*			*2021*
Net loss	$	(9,821	)	$	(65,323	)
Other comprehensive income, net of tax:
Net unrealized gain on cash flow hedges	$	2,436		$	934
Less: reclassification for net gains included in interest expense		1,760			610
Net change	$	4,196		$	1,544
Foreign currency translation adjustments, net		736			(225	)
Other comprehensive income	$	4,932		$	1,319
Comprehensive loss	$	(4,889	)	$	(64,004	)
Non-controlling interests in comprehensive income		(3,118	)		(872	)
Comprehensive loss attributable to Granite Construction Incorporated	$	(8,007	)	$	(64,876	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - in thousands, except share data)

	*Outstanding Shares*			*Common Stock*			*Additional Paid-In Capital*			*Accumulated Other Comprehensive Income (Loss)*			*Retained Earnings*			*Total Granite Shareholders’ Equity*			*Non-controlling Interests*		*Total Equity*
Balances at December 31, 2021	45,840,260		$	458		$	559,752		$	(3,359	)	$	410,831		$	967,682		$	27,881	$	995,563
Cumulative effect of newly adopted accounting standard (see Note 2)	—			—			(26,961	)		—		$	10,543		$	(16,418	)		—	$	(16,418	)
Balances at January 1, 2022	45,840,260			458			532,791			(3,359	)		421,374			951,264			27,881		979,145
Net income (loss)	—			—			—			—			(12,939	)		(12,939	)		3,118		(9,821	)
Other comprehensive income	—			—			—			4,932			—			4,932			—		4,932
Purchases of common stock (1)	(665,880	)		(6	)		(20,206	)		—			—			(20,212	)		—		(20,212	)
RSUs vested	190,170			2			(2	)		—			—			—			—		—
Dividends on common stock ($0.13 per share)	—			—			69			—			(5,885	)		(5,816	)		—		(5,816	)
Transactions with non-controlling interests	—			—			—			—			—			—			6,325		6,325
Stock-based compensation expense and other	(413	)		—			2,610			—			—			2,610			—		2,610
Balances at March 31, 2022	45,364,137		$	454		$	515,262		$	1,573		$	402,550		$	919,839		$	37,324	$	957,163

Balances at December 31, 2020	45,668,541		$	457		$	555,407		$	(5,035	)	$	424,835		$	975,664		$	15,946	$	991,610
Net loss	—			—			—			—			(66,195	)		(66,195	)		872		(65,323	)
Other comprehensive income	—			—			—			1,319			—			1,319			—		1,319
Purchases of common stock (1)	(57,618	)		(1	)		(2,298	)		—			—			(2,299	)		—		(2,299	)
RSUs vested	181,575			2			(2	)		—			—			—			—		—
Dividends on common stock ($0.13 per share)	—			—			—			—			(5,953	)		(5,953	)		—		(5,953	)
Transactions with non-controlling interests	—			—			—			—			—			—			10,837		10,837
Stock-based compensation expense and other	(786	)		—			1,079			2			(77	)		1,004			—		1,004
Balances at March 31, 2021	45,791,712		$	458		$	554,186		$	(3,714	)	$	352,610		$	903,540		$	27,655	$	931,195

(1) This amount represents shares purchased in connection with employee tax withholding for RSUs vested under our 2012 and 2021 Equity Incentive Plans and stock repurchased in 2022 under the Board-approved repurchase plan.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

Three Months Ended March 31,	*2022*			*2021*
Operating activities
Net loss	$	(9,821	)	$	(65,323	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization		16,737			24,581
Amortization related to long-term debt (see Note 15)		652			2,314
Gain on sale of discontinued operations (see Note 3)		(6,234	)		—
Gain on sales of property and equipment, net		(598	)		(2,554	)
Deferred income taxes		2,545			—
Stock-based compensation		2,614			1,065
Equity in net (income) loss from unconsolidated joint ventures		3,627			(418	)
Net income from affiliates		(1,289	)		(1,808	)
Other non-cash adjustments		(299	)		(573	)
Changes in assets and liabilities:
Deposit/insurance receivable for legal settlement (see Note 18)		—			(63,000	)
Receivables		85,957			123,749
Contract assets, net		(72,632	)		(33,432	)
Inventories		(13,805	)		(4,249	)
Contributions to unconsolidated construction joint ventures		(12,840	)		(22,180	)
Distributions from unconsolidated construction joint ventures and affiliates		250			1,684
Other assets, net		1,264			(21,116	)
Accounts payable		(44,028	)		(49,399	)
Accrual for legal settlement (see Note 18)		—			129,000
Accrued expenses and other liabilities, net		(2,280	)		19,746
Net cash provided by (used in) operating activities	$	(50,180	)	$	38,087
Investing activities
Purchases of marketable securities		(19,940	)		(5,000	)
Purchases of property and equipment		(31,269	)		(18,777	)
Proceeds from sales of property and equipment		2,483			3,004
Proceeds from the sale of discontinued operations (see Note 3)		142,571			—
Issuance of notes receivable		(4,560	)		—
Collection of notes receivable		111			4,470
Net cash provided by (used in) investing activities	$	89,396		$	(16,303	)
Financing activities
Debt principal repayments		(63,059	)		(2,150	)
Cash dividends paid		(5,959	)		(5,937	)
Repurchases of common stock		(20,212	)		(2,299	)
Contributions from non-controlling partners		6,325			8,361
Distributions to non-controlling partners		—			(2,902	)
Other financing activities, net		1			(65	)
Net cash used in financing activities	$	(82,904	)	$	(4,992	)
Net increase (decrease) in cash, cash equivalents and restricted cash		(43,688	)		16,792
Cash, cash equivalents and $1,512 in restricted cash at beginning of each period		413,655			437,648
Cash, cash equivalents and $1,512 in restricted cash at end of each period	$	369,967		$	454,440
Less: Cash, cash equivalents and $1,512 in restricted cash included in current assets held-for-sale at end of each period		9,056			13,607
Cash and cash equivalents of continuing operations at end of period	$	360,911		$	440,833

Supplementary Information
Right of use assets obtained in exchange for lease obligations	$	3,502		$	603
Cash paid for operating lease liabilities	$	5,862		$	5,457
Cash paid during the period for:
Interest	$	2,090		$	2,544
Income taxes	$	2		$	148
Non-cash investing and financing activities:
RSUs issued, net of forfeitures	$	6,606		$	(133	)
Dividends declared but not paid	$	5,897		$	5,953
Accrued equipment purchases	$	5,511		$	2,443

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), are unaudited and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at March 31, 2022 and 2021 and the results of our operations and cash flows for the periods presented. The December 31, 2021 condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.

We prepared the accompanying condensed consolidated financial statements on the same basis as our annual consolidated financial statements, except for the adoption of Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2022, the impact of which is described in Note 2.

Reclassifications: Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

As discussed in more detail in Note 3, we concluded that our former Water and Mineral Services operating group (“WMS”) met the criteria for held for sale during the fourth quarter of 2021 and met the criteria for discontinued operation classification. As a result, WMS is presented in the condensed consolidated statements of operations as discontinued operations for all periods presented. Current and non-current assets and liabilities of these businesses are presented in the condensed consolidated balance sheets as assets and liabilities held for sale.

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. Therefore, the results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.

2. Recently Issued and Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for the effects of the transition away from LIBOR and other reference rates. Also, in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which provided clarification guidance to ASU 2020-04. These ASUs are effective at our option beginning with our quarter ended March 31, 2020 through December 31, 2022, and we expect to adopt these ASUs in the second quarter of 2022. As our Third Amended and Restated Credit Agreement dated May 18, 2021, as subsequently amended (the “Credit Agreement”) currently incorporates the use of the secured overnight financing rate as an alternative to LIBOR, we do not expect the adoption of these ASUs to have a material impact on our condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments resulting in accounting for convertible debt instruments as a single liability measured at its amortized cost and ASU 2020-06 is applicable to our 2.75% convertible senior notes due 2024 (“2.75% Convertible Notes;” see Note 15 for further discussion on these notes). In addition, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and eliminates the treasury stock method for convertible debt. We adopted ASU 2020-06 effective January 1, 2022, using the modified retrospective transition approach under which financial results reported in prior periods were not adjusted. Upon adoption, we recorded a net cumulative increase to debt of approximately $22.0 million and to deferred tax assets of $5.6 million, offset by a decrease to additional paid-in capital and retained earnings of $16.4 million.

As of March 31, 2022, the 2.75% Convertible Notes comprised our only convertible debt instrument. 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 2024. The 2.75% Convertible Notes are convertible at the option of the holders prior to May 1, 2024 only during certain periods and upon the occurrence of certain events. After May 1, 2024, the 2.75% Convertible Notes will be convertible at the option of the holders at any time until October 30, 2024.

The conversion rate applicable to the 2.75% Convertible Notes is 31.7776 shares of Granite common stock per $1,000 principal amount of 2.75% Convertible Notes, which is equivalent to an initial conversion price of approximately $31.47 per share of Granite common stock. Upon conversion, we will pay or deliver 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 “make-whole fundamental change” as defined in the indenture governing the 2.75% Convertible Notes, (the “Indenture”) or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 2.75% Convertible Notes in connection with such a make-whole fundamental change or notice of redemption.

On or after November 7, 2022, we have the option to redeem for cash all or any portion of the 2.75% 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. Upon the occurrence of a “fundamental change” as defined in the Indenture, holders may require us to repurchase for cash all or any portion of their 2.75% Convertible Notes at a price equal to 100% of the principal amount plus any accrued and unpaid interest. In addition, as described in the Indenture, certain events of default including, but not limited to, bankruptcy, insolvency or reorganization, may result in the 2.75% Convertible Notes becoming due and payable immediately.

In connection with the adoption of ASU 2020-06, we implemented the following accounting policy as of January 1, 2022:

Computation of Earnings per Share: Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares include common share equivalents issued under the terms of the 2012 and 2021 Equity Incentive Plans and common share equivalents issuable under our 2.75% Convertible Notes using the if-converted method. Dilutive potential common shares also include common share equivalents issuable under the terms of our warrants assuming the share price of our common stock was in excess of $53.44, the exercise price of warrants.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

3. Discontinued Operations

During the fourth quarter of 2021, our Board of Directors approved a plan to sell the businesses in WMS within the next twelve months. This includes: our trenchless and pipe rehabilitation services business (“Inliner”); our water supply, treatment, delivery and maintenance business (“Water Resources”); and our mineral exploration drilling business (“Mineral Services”). After consideration of the relevant facts, we concluded the assets and liabilities of our WMS businesses met the criteria for classification as held for sale. We concluded the proposed disposal activities represented a strategic shift that would have a major effect on our operations and financial results and qualified for presentation as discontinued operations in accordance with FASB Accounting Standards Codification (“ASC”) Topic 205-20, Presentation of financial statements - Discontinued operations. Accordingly, the financial results of these businesses are presented in the condensed consolidated statement of operations as discontinued operations for all periods presented. Current and non-current assets and liabilities of these businesses not sold as of the balance sheet date are presented in the condensed consolidated balance sheets as assets and liabilities held for sale for all periods presented.

On March 16, 2022, we completed the sale of Inliner to Inland Pipe Rehabilitation LLC (“IPR”) and 1000097155 Ontario Inc. (“Ontario” and together with IPR, the “Purchasers”), investment affiliates of J.F. Lehman & Company, for a purchase price of $159.7 million, subject to certain adjustments. As a result of the sale, we received cash proceeds of $142.6 million based on preliminary post-closing adjustments and we recognized a gain of $6.2 million. The gain on sale was included in the net income from discontinued operations in the condensed consolidated statements of operations during the three months ended March 31, 2022. The Water Resources and Mineral Services businesses continued to meet the criteria for classification as held-for-sale and the financial results remain in discontinued operations as of March 31, 2022 and are expected to be sold within the next 12 months.

The following table presents summarized balance sheet information of assets and liabilities held-for-sale:

(in thousands)	*March 31, 2022*		*December 31, 2021*		*March 31, 2021*
Cash and cash equivalents	$	7,544	$	16,496	$	12,095
Receivables, net		54,652		102,208		81,877
Contract assets		16,700		41,340		40,440
Inventories		11,954		19,625		20,635
Other current assets		1,270		1,781		4,347
Property and equipment, net		40,490		70,912		101,220
Investments in affiliates		50,453		48,675		47,399
Goodwill		19,982		63,063		63,092
Right of use assets		4,839		12,365		8,362
Other noncurrent assets		3,890		16,176		24,857
Total assets classified as held-for-sale	$	211,774	$	392,641	$	404,324

Accounts payable	$	16,682	$	37,997	$	37,337
Contract liabilities		3,447		7,129		6,516
Other current liabilities		15,808		27,764		24,625
Long-term lease liabilities		2,641		8,352		6,167
Other long-term liabilities		1,668		2,166		4,558
Total liabilities classified as held-for-sale	$	40,246	$	83,408	$	79,203

The following table represents summarized statements of operations information of discontinued operations (in thousands):

Three Months Ended March 31,	*2022*			*2021*
Revenue	$	102,961		$	103,581
Cost of revenue		88,727			93,975
Gross profit		14,234			9,606
Selling, general and administrative expenses		11,618			14,568
Other costs		1,343			1,526
Gain on sale of discontinued operations		(6,234	)		—
Gain on sales of property and equipment, net		(266	)		(310	)
Operating income (loss)		7,773			(6,178	)
Other income, net		(1,608	)		(2,558	)
Income (loss) from discontinued operations before provision for (benefit from) income taxes		9,381			(3,620	)
Provision for (benefit from) income taxes		3,285			(698	)
Net income (loss) from discontinued operations	$	6,096		$	(2,922	)

As required per ASC Topic 205-20, Presentation of financial statements - Discontinued operation, components included in the condensed consolidated statement of cash flows for the discontinued operations are as follows (in thousands):


Three Months Ended March 31,	*2022*		*2021*
Depreciation, depletion and amortization (1)	$	—	$	10,059
Gain on sale of discontinued operations	$	6,234	$	—
Purchases of property and equipment	$	3,376	$	3,307
Proceeds from sale of discontinued operations	$	142,571	$	—

(1) - In accordance with ASC Topic 360, Property, Plant, and Equipment, we ceased recording depreciation and amortization for WMS property, plant and equipment, finite-lived tangible assets and right-of-use lease assets as of December 31, 2021.

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4. Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete may result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates.

When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future.

In our review of these changes for the three months ended March 31, 2022 and 2021, we did not identify any material amounts that should have been recorded in a prior period.

There were no increases or decreases from revisions in estimates, which individually had an impact of $5.0 million or more on gross profit for the three months ended March 31, 2022. During the three months ended March 31, 2021, there was one project with a decrease from revisions in estimates that had an impact to gross profit of $5.3 million, to net loss from continuing operations of $4.1 million and to diluted loss per share from continuing operations of $0.09. This decrease was due to additional costs from lower productivity than originally anticipated and weather impacts.

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5. Disaggregation of Revenue

We disaggregate our revenue based on our reportable segments (see Note 19) and operating groups as these are the formats that are regularly reviewed by management. Our reportable segments are: Construction and Materials. In alphabetical order, our operating groups from continuing operations are: California, Central and Mountain. The following tables present our disaggregated revenue from continuing operations by operating group (in thousands):

Three Months Ended March 31,

2022	*Construction*		*Materials*		*Total*
California	$	144,387	$	45,687	$	190,074
Central		224,093		10,362		234,455
Mountain		106,455		16,602		123,057
Total	$	474,935	$	72,651	$	547,586

2021	*Construction*		*Materials*		*Total*
California	$	159,266	$	41,956	$	201,222
Central		253,293		8,380		261,673
Mountain		94,412		9,025		103,437
Total	$	506,971	$	59,361	$	566,332

6. Unearned Revenue

The following table presents our unearned revenue from continuing operations as of the respective periods:

(in thousands)	*March 31, 2022*		*December 31, 2021*		*March 31, 2021*
California	$	768,013	$	771,759	$	834,815
Central		1,192,812		1,334,901		1,798,761
Mountain		530,712		488,425		537,976
Total	$	2,491,537	$	2,595,085	$	3,171,552

All unearned revenue is in the Construction segment. Approximately $ 2.0 billion of the March 31, 2022 unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter.

7. Other Costs

Other costs included in the condensed consolidated statements of operations for the quarter ended March 31, 2022 primarily consisted of non-recurring legal fees related to the lawsuits discussed in Note 18. Other costs included in the condensed consolidated statements of operations for the quarter ended March 31, 2021 primarily consisted of $66 million in net settlement charges incurred during 2021 as further described in Note 18 and non-recurring legal and accounting fees related to the Audit/Compliance Committee’s independent investigation of prior-period reporting for the former Heavy Civil operating group, which was completed in early 2021.

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8. Contract Assets and Liabilities

During the three months ended March 31, 2022 and 2021, we recognized revenue of $159.9 million and $139.2 million, respectively, that was included in the contract liability balances at December 31, 2021 and 2020, respectively.

As a result of changes in contract transaction price related to performance obligations that were satisfied or partially satisfied prior to the end of the periods, we recognized revenue of $41.1 million and $61.5 million during the three months ended March 31, 2022 and 2021, respectively. The changes in contract transaction price were from items such as executed or estimated change orders and unresolved contract modifications and claims.

As of March 31, 2022, December 31, 2021 and March 31, 2021, the aggregate claim recovery estimates included in contract asset balances were $38.6 million, $39.0 million and $38.9 million, respectively.

The components of the contract asset balances as of the respective dates were as follows:

(in thousands)		*March 31, 2022*		*December 31, 2021*		*March 31, 2021*
Costs in excess of billings and estimated earnings	$	45,393	$	14,158	$	39,410
Contract retention		134,630		131,279		105,370
Total contract assets	$	180,023	$	145,437	$	144,780

As of March 31, 2022, December 31, 2021 and March 31, 2021, contract retention receivable from Brightline Trains Florida LLC represented 14.6%, 17.2% and 13.5%, respectively, of total contract assets. No other contract retention receivable individually exceeded 10% of total contract assets at any of the presented dates. The majority of the contract retention balance is expected to be collected within one year.

The components of the contract liability balances as of the respective dates were as follows:

(in thousands)		*March 31, 2022*		*December 31, 2021*		*March 31, 2021*
Billings in excess of costs and estimated earnings, net of retention	$	142,065	$	169,542	$	126,850
Provisions for losses		23,293		30,499		26,783
Total contract liabilities	$	165,358	$	200,041	$	153,633

9. Receivables, net

Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest. The following table presents major categories of receivables:

(in thousands)	*March 31, 2022*		*December 31, 2021*		*March 31, 2021*
Contracts completed and in progress:
Billed	$	158,762	$	236,053	$	137,174
Unbilled		111,058		126,371		111,654
Total contracts completed and in progress		269,820		362,424		248,828
Materials sales		45,967		43,746		35,252
Other		65,520		59,496		110,487
Total gross receivables		381,307		465,666		394,567
Less: allowance for credit losses		805		1,078		1,284
Total net receivables	$	380,502	$	464,588	$	393,283

Included in other receivables at March 31, 2022, December 31, 2021 and March 31, 2021, were items such as estimated recovery from back charge claims, notes receivable, insurance receivable, fuel tax refunds and income tax refunds. Other receivables at March 31, 2022 and December 31, 2021 also included $24.9 million and $20.4 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated joint ventures that bears interest at prime plus 3.00% per annum. Other than the $63.0 million insurance receivable as of March 31, 2021 related to the settlement discussed in Note 18, no other receivable individually exceeded 10% of total net receivables at any of these dates.

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10. Fair Value Measurement

The following tables summarize significant assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands):

	Fair Value Measurement at Reporting Date Using
March 31, 2022	*Level 1*		*Level 2*		*Level 3*		*Total*
Cash equivalents
Money market funds	$	21,237	$	—	$	—	$	21,237
Other current assets
Commodity swap		—		3,047		—		3,047
Total assets	$	21,237	$	3,047	$	—	$	24,284
Accrued and other current liabilities
Interest rate swap	$	—	$	507	$	—	$	507
Total liabilities	$	—	$	507	$	—	$	507

December 31, 2021
Cash equivalents
Money market funds	$	65,233	$	—	$	—	$	65,233
Total assets	$	65,233	$	—	$	—	$	65,233
Accrued and other current liabilities
Interest rate swap	$	—	$	3,514	$	—	$	3,514
Total liabilities	$	—	$	3,514	$	—	$	3,514

March 31, 2021
Cash equivalents
Money market funds	$	42,488	$	—	$	—	$	42,488
Other current assets
Commodity swap		—		1,106		—		1,106
Total assets	$	42,488	$	1,106	$	—	$	43,594
Accrued and other current liabilities
Interest rate swap	$	—	$	6,535	$	—	$	6,535
Total liabilities	$	—	$	6,535	$	—	$	6,535

Interest Rate Swaps

In connection with entering into the Credit Agreement, we entered into two interest rate swaps with a combined initial notional amount of $150.0 million, an effective date of May 2018 and maturity dates in May 2023. The interest rate swaps were designated as cash flow hedges through the three months ended March 31, 2021 and de-designated as cash flow hedges during the three months ended June 30, 2021. The impact from the interest rate swap de-designation that was included in interest expense on the condensed consolidated statements of operations was $0.7 million for the three months ended March 31, 2022.

During the three months ended March 31, 2022, we terminated $60.9 million, or 50%, of the notional amount of our floating-to-fixed interest rate swaps in connection with the prepayment of the same amount of our term loan (see Note 15).

Commodity Swaps

As of March 31, 2022, we held commodity swaps for crude oil designated as cash flow hedges with a total outstanding notional amount of $17.9 million maturing by October 31, 2022. The financial statement impact during the three months ended March 31, 2022 was a realized gain of $0.4 million and an unrealized gain of $3.3 million. As of March 31, 2021, we held commodity swaps for crude oil that were designated as cash flow hedges, maturing in September and October 2021. The total commodity swap gain for these swaps was $1.0 million.

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Other Assets and Liabilities

The carrying values and estimated fair values of financial instruments that are not required to be recorded at fair value in the condensed consolidated balance sheets were as follows:

		*March 31, 2022*				*December 31, 2021*				*March 31, 2021*
(in thousands)	*Fair Value Hierarchy*	*Carrying Value*		*Fair Value*		*Carrying Value*		*Fair Value*		*Carrying Value*		*Fair Value*
Assets:
Held-to-maturity marketable securities (1)	Level 1	$	36,728	$	35,909	$	15,600	$	15,459	$	11,300	$	11,258
Liabilities (including current maturities):
2.75% Convertible Notes (2),(3)	Level 2	$	230,000	$	276,288	$	207,354	$	313,785	$	202,018	$	324,013
Credit Agreement - term loan (2)	Level 3	$	60,938	$	62,861	$	123,750	$	124,598	$	129,375	$	130,645

(1) All marketable securities as of March 31, 2022, December 31, 2021 and March 31, 2021 were classified as held-to-maturity and consisted of U.S. Government and agency obligations and corporate commercial paper maturing in three months to five years.

(2) The fair value of the 2.75% Convertible Notes is based on the median price of the notes in an active market. The fair value of the Credit Agreement is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk. See Note 15 for more information about the 2.75% Convertible Notes and the Credit Agreement.

(3) Excluded from the carrying value is debt discount of $22.6 million and $28.0 million as of December 31, 2021 and March 31, 2021, respectively, related to the 2.75% Convertible Notes (see Notes 2 and 15).

During the three months ended March 31, 2022 and 2021, we did not record any fair value adjustments related to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

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 months ended March 31, 2022, 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 our 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 March 31, 2022, there was approximately $0.5 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $0.2 billion represented our share and the remaining $0.3 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 March 31, 2022, we were engaged in nine active CCJV projects with total contract values ranging from $12.0 million to $437.2 million for a combined total of $1.7 billion of which our share was $960.0 million. As of March 31, 2022, our share of revenue remaining to be recognized on these CCJVs was $227.2 million and ranged from $6.5 million to $68.4 million by project. Our proportionate share of the equity in these joint ventures was between 50.0% and 70.0%. During the three months ended March 31, 2022 and 2021, total revenue from CCJVs was $107.6 million and $82.6 million, respectively. During the three months ended March 31, 2022 and 2021, CCJVs provided $(7.6) million and $13.8 million of operating cash flows, respectively.

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Unconsolidated Construction Joint Ventures

As of March 31, 2022, we were engaged in nine active unconsolidated joint venture projects with total contract values ranging from $13.9 million to $3.8 billion for a combined total of $10.7 billion of which our share was $3.0 billion. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 20.0% to 50.0%. As of March 31, 2022, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $135.7 million and ranged from $1.3 million to $36.1 million by project.

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

(in thousands)	*March 31, 2022*		*December 31, 2021*		*March 31, 2021*
Assets
Cash, cash equivalents and marketable securities	$	157,869	$	182,891	$	161,574
Other current assets (1)